sv4
As filed with
the Securities and Exchange Commission on February 9,
2011
No. 333-
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Radio One, Inc.*
(Exact name of registrant as
specified in its charter)
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Delaware
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4832
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52-1166660
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer Identification
No.)
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5900 Princess Garden
Parkway
7th Floor
Lanham, Maryland 20706
Telephone: (301)
306-1111
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Alfred C.
Liggins, III
President and Chief Executive
Officer
Radio One, Inc.
7th Floor
Lanham, Maryland 20706
Telephone: (301)
306-1111
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies of all communications,
including communications sent to agent for service, should be
sent to:
Michael Plantamura
Vice President and General
Counsel
Radio One, Inc.
5th Floor
Lanham, Maryland 20706
Telephone: (301)
306-1111
and
Dennis M.
Myers, P.C.
Kirkland & Ellis
LLP
300 North LaSalle
Street
Chicago, Illinois
60654
(312) 862-2000
* The co-registrants listed on the next page are also included
in this
Form S-4
registration statement as additional registrants.
Approximate date of commencement of proposed sale of the
securities to the public: The exchange will occur
as soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
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If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender
Offer): o
Exchange Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender
Offer): o
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount
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Offering
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Registration
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Securities to be Registered
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to be Registered
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Price per Unit(1)
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Fee
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12.5%/15.0% Senior Subordinated Notes due 2016(1)
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$286,794,302
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100%
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$33,297
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Senior Subordinated Notes
Paid-in-Kind(2)
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$40,241,304
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100%
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$4,673
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Guarantees on Senior Subordinated Notes(3)
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(4)
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(1)
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Calculated in accordance with Rule 457(f) under the
Securities Act of 1933, as amended.
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(2)
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Pursuant to the indenture governing the 12.5%/15.0% Senior
Subordinated Notes due 2016 (Senior Subordinated
Notes), Radio One, Inc. may elect to issue additional
Senior Subordinated Notes in respect of interest due and payable
thereon to May 15, 2012. For purposes of calculating the
registration fee, the registrant estimates that up to
$40,241,304 in aggregate principal amount of Senior Subordinated
Notes may be issued in respect of interest thereon to
May 15, 2012.
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(3)
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Senior Subordinated Notes will be issued by Radio One, Inc. (the
Issuer) and guaranteed by certain of the
Issuers domestic subsidiaries. No separate consideration
will be received for the issuance of these guarantees.
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(4)
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Pursuant to Rule 457(n), no separate fee is payable with
respect to the guarantees being registered hereby.
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The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrants shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Table of
Additional Registrants
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I.R.S. Employer
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Exact Name of Additional Registrants*
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Jurisdiction of Formation
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Identification No.
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Bell Broadcasting Company
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Michigan
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38-1537987
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Blue Chip Broadcasting Licenses, Ltd.
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Ohio
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31-1402186
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Blue Chip Broadcasting, Ltd.
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Ohio
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31-1459349
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Charlotte Broadcasting, LLC
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Delaware
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52-1166660
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Community Connect Inc.
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Delaware
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13-3923078
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Community Connect, LLC
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Delaware
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52-1166660
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Distribution One, LLC
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Delaware
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52-1166660
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Hawes-Saunders Broadcast Properties, Inc.
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Delaware
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31-1313021
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Interactive One, Inc.
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Delaware
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30-0223248
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Interactive One, LLC
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Delaware
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30-0451522
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New Mableton Broadcasting Corporation
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Delaware
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58-2455006
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Radio One Cable Holdings, Inc.
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Delaware
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20-0966592
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Radio One Distribution Holdings, LLC
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Delaware
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52-1166660
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Radio One Licenses, LLC
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Delaware
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52-1166660
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Radio One Media Holdings, LLC
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Delaware
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20-2180640
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Radio One of Atlanta, LLC
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Delaware
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52-1166660
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Radio One of Boston Licenses, LLC
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Delaware
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52-2297366
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Radio One of Boston, Inc.
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Delaware
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52-2297366
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Radio One of Charlotte, LLC
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Delaware
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57-1103928
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Radio One of Detroit, LLC
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Delaware
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38-1537987
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Radio One of Indiana, L.P.
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Delaware
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52-2359338
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Radio One of Indiana, LLC
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Delaware
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52-1166660
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Radio One of North Carolina, LLC
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Delaware
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52-1166660
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Radio One of Texas II, LLC
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Delaware
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52-2359333
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ROA Licenses, LLC
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Delaware
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52-1166660
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Satellite One, L.L.C.
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Delaware
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52-1166660
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* |
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The address for each of the additional registrants is
c/o Radio
One, Inc., 5900 Princess Garden Parkway, 7th Floor, Lanham,
Maryland 20706,
(301) 306-1111.
The primary standard industrial classification number for each
of the additional registrants is 4832. The name, address,
including zip code of the agent for service for each of the
additional registrants is Michael Plantamura, Vice President and
General Counsel, Radio One, Inc., 5900 Princess Garden Parkway,
5th Floor, Lanham, Maryland 20706,
(301) 306-1111. |
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. The prospectus is not an offer to sell these
securities nor a solicitation of an offer to buy these
securities in any jurisdiction where the offer and sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
FEBRUARY 9, 2011
PRELIMINARY PROSPECTUS
Radio One, Inc.
Exchange Offer for up
to
$286,794,302
12.5%/15.0% Senior
Subordinated Notes due 2016
We are offering to
exchange:
up to $286,794,302 of our new
12.5%/15.0% Senior Subordinated Notes due 2016
(which we refer to as the
Exchange Notes)
for
a like amount of our
outstanding 12.5%/15.0 Senior Subordinated Notes due
2016
(which we refer to as the
Old Notes and, together with the Exchange Notes, the
Notes).
Material
Terms of Exchange Offer:
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The terms of the Exchange Notes to be issued in the exchange
offer are substantially identical to the Old Notes, except that
the transfer restrictions and registration rights relating to
the Old Notes will not apply to the Exchange Notes.
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The Exchange Notes will be unconditionally guaranteed on a
senior subordinated basis by each of our existing and future
direct and indirect domestic restricted subsidiaries (subject to
certain exceptions) and any other of our subsidiaries that
guarantee our senior credit facility.
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The exchange offer expires at 5:00 p.m., New York City
time,
on ,
2011, unless extended by us.
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There is no existing public market for the Old 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.
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You may withdraw your tender of Old Notes at any time before the
expiration of the exchange offer. We will exchange all of the
Old Notes that are validly tendered and not withdrawn.
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The exchange of Notes will not be a taxable event for
U.S. federal income tax purposes.
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The exchange offer is not subject to any condition, including
that it not violate applicable law or any applicable
interpretation of the Staff of the Securities and Exchange
Commission (the SEC).
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We will not receive any proceeds from the exchange offer.
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Each 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. The letter of transmittal states that by so
acknowledging and delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an underwriter
within the meaning of the Securities Act of 1933, as amended
(the Securities Act). This prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where the Old Notes were
acquired by the broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, for
a period of 180 days after the expiration date of the
exchange offer, we will make this prospectus available to any
broker-dealer in connection with any such resale. See Plan
of Distribution.
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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 12 of this prospectus.
We are not asking you for a proxy and you are requested not
to send us a proxy.
Neither the SEC nor any state securities commission has
approved the securities 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.
,
2011
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
different or additional information. If anyone provides you with
different or additional information, you should not rely on it.
You should assume that the information contained in this
prospectus is accurate as of the date on the front cover of this
prospectus. Our business, financial condition, results of
operations and prospects may have changed since then. We are not
making an offer to sell the securities offered by this
prospectus in any jurisdiction where the offer or sale is not
permitted.
TABLE OF
CONTENTS
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1
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12
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34
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41
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41
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42
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43
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45
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86
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87
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109
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116
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134
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136
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138
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141
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192
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199
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200
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200
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F-1
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In this prospectus, unless the context requires otherwise:
(i) Radio One, the Company,
we, us and our refer to
Radio One, Inc. and its subsidiaries; and
(ii) Issuer refers to Radio One, Inc.,
exclusive of its subsidiaries.
Radio One, Inc. is a Delaware corporation. Our principal
executive office is located at 5900 Princess Garden Parkway,
7th Floor, Lanham, Maryland 20706, and our telephone number
at that address is
(301) 306-1111.
Our website is located at www.radio-one.com. The information on,
or linked to, our website is not part of this prospectus.
NON-GAAP FINANCIAL
MEASURES
We believe that our financial statements and other financial
data contained in this prospectus have been prepared in a manner
that complies, in all material respects, with the regulations
published by the SEC and are consistent with current practice
with the exception of the presentation of certain non-GAAP
financial measures (as defined below), including EBITDA and
Adjusted EBITDA. SEC rules regulate the use in filings with the
SEC of non-GAAP financial measures such as EBITDA
and Adjusted EBITDA that are derived on the basis
of methodologies other than in accordance with accounting
principles generally accepted in the United States of America
(GAAP).
EBITDA and Adjusted EBITDA are not measurements of our financial
performance under GAAP and should not be considered as
alternatives to revenues, net earnings (loss) or any other
performance measures derived in accordance with GAAP, or as
alternatives to cash flow from operating activities as measures
of our liquidity. We present EBITDA and Adjusted EBITDA because
we consider these important supplemental measures of our
performance and believe they are frequently used by securities
analysts, investors and other interested parties in the
evaluation of high yield issuers, many of which
present EBITDA and Adjusted EBITDA when reporting their
operating results. Management uses EBITDA and Adjusted EBITDA as
internal measures of operating performance, to establish
operational goals, to allocate resources and to analyze business
trends and financial performance.
We define EBITDA as the sum of (1) net income (loss)
attributable to common stockholders, (2) depreciation and
amortization, (3) (benefit from) provision for income taxes and
(4) interest expense less interest income. Adjusted
EBITDA consists of net loss attributable to common stockholders
plus (1) depreciation and amortization, income taxes,
interest expense, income (loss) from discontinued operations,
net of tax, noncontrolling interest in (loss) income of
subsidiaries, impairment of long-lived assets, stock-based
compensation and other expense, net, less
(2) interest income, gain on retirement of debt and equity
in income (loss) of affiliated company. Our calculation of
EBITDA and Adjusted EBITDA may not be comparable to that
reported by other companies.
Our EBITDA and Adjusted EBITDA measures have limitations as
analytical tools, and you should not consider them in isolation,
or as a substitute for analysis of our results as reported under
GAAP. Some of these limitations are:
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they do not reflect our cash expenditures or future requirements
for capital commitments;
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they do not reflect changes in, or cash requirements for, our
working capital needs;
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they do not reflect the interest expense or cash requirements
necessary to service interest or principal payments on our debt;
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they do not reflect any cash income taxes that we may be
required to pay;
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they are not adjusted for all non-cash income or expense items
that are reflected in our statements of cash flows;
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they do not reflect the impact of earnings or charges resulting
from matters we consider not to be indicative of our ongoing
operations;
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assets are depreciated or amortized over differing estimated
useful lives and often have to be replaced in the future, and
these measures do not reflect any cash requirements for such
replacements; and
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other companies in our industry may calculate these measures
differently than we do, limiting their usefulness as comparative
measures.
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Because of these limitations, our EBITDA and Adjusted EBITDA
measures should not be considered as measures of discretionary
cash available to us to invest in the growth of our business or
as measures of cash that will be available to us to meet our
obligations. You should compensate for these limitations by
relying primarily on our GAAP results and using these non-GAAP
measures only supplementally to evaluate our performance. See
Selected Historical Consolidated Financial Data,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and historical
consolidated financial statements and accompanying notes
included elsewhere in this prospectus.
ii
CERTAIN
DEFINITIONS
We use the term local marketing agreement
(LMA) in various places in this prospectus. An LMA
is an agreement under which a Federal Communications Commission
(FCC) licensee of a radio station makes available,
for a fee, air time on its station to another party. The other
party provides programming to be broadcast during the airtime
and collects revenues from advertising it sells for broadcast
during that programming. In addition to entering into LMAs, we
will from time to time enter into management or consulting
agreements that provide us with the ability, as contractually
specified, to assist current owners in the management of radio
station assets that we have contracted to purchase, subject to
FCC approval. In such arrangements, we generally receive a
contractually specified management fee or consulting fee in
exchange for the services provided.
INDUSTRY
DATA
The industry and market data and other statistical information
contained in this prospectus are based on managements own
estimates, independent publications, government publications,
reports by market research firms or other published independent
sources, and, in each case, are believed by management to be
reasonable estimates. Although we believe these sources are
reliable, we have not independently verified the information.
None of the independent industry publications used in this
prospectus were prepared on our or our affiliates behalf
and none of the sources cited by us consented to the inclusion
of any data from its reports, nor have we sought their consent.
Unless otherwise indicated:
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we obtained total radio industry revenue levels from the Radio
Advertising Bureau (the RAB);
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we obtained audience share and ranking information from Arbitron
Inc. (Arbitron); and
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we derived historical market statistics and market revenue share
percentages from data published by Miller, Kaplan,
Arase & Co., LLP (Miller Kaplan), a public
accounting firm that specializes in serving the broadcasting
industry and BIA Financial Network, Inc. (BIA), a
media and telecommunications advisory services firm.
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WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-4
(Reg.
No. 333- )
with respect to the securities being offered hereby. This
prospectus does not contain all of the information contained in
the registration statement, including the exhibits and
schedules. You should refer to the registration statement,
including the exhibits and schedules, for further information
about us and the securities being offered hereby. Statements we
make in this prospectus about certain contracts or other
documents are not necessarily complete. When we make such
statements, we refer you to the copies of the contracts or
documents that are filed as exhibits to the registration
statement because those statements are qualified in all respects
by reference to those exhibits. As described below, the
registration statement, including exhibits and schedules, is on
file at the offices of the SEC and may be inspected without
charge.
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. You can inspect and copy
these reports, proxy statements and other information at the
Public Reference Room of the SEC, 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. You can obtain
copies of these materials from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. Our SEC filings will also be available to you on the
SECs website. The address of this site is
http://www.sec.gov.
You may also obtain a copy of the exchange offers
registration statement and other information that we file with
the SEC at no cost by calling us or writing to us at the
following address: Radio One, Inc., 5900 Princess Garden
Parkway, 7th Floor, Lanham, Maryland 20706,
(301) 306-1111,
Attention: Corporate Secretary.
iii
In order to obtain timely delivery of the documents, you must
request the information no later than five business days before
the expiration date of the exchange offer. The exchange offer
will expire at 5:00 p.m., New York City time,
on ,
2011.
FORWARD-LOOKING
STATEMENTS
Certain statements in this prospectus which are not statements
of historical fact constitute forward-looking
statements. Forward-looking statements give current
expectations or forecasts of future events. Words such as
anticipate, expect, intend,
plan, believe, seek,
estimate and other words and terms of similar
meaning in connection with discussions of future operating or
financial performance signify forward-looking statements. These
statements reflect our current views with respect to future
events and are based on assumptions and estimates, which are
subject to risks and uncertainties including those discussed
under the heading Risk Factors and elsewhere in this
prospectus. Accordingly, undue reliance should not be placed on
these forward-looking statements. Also, these forward-looking
statements represent our estimates and assumptions only as of
the date of this prospectus. We do not intend to update any of
these forward-looking statements to reflect circumstances or
events that occur after the statement is made and qualify all of
our forward-looking statements by these cautionary statements.
You should understand that various factors, in addition to those
discussed elsewhere in this prospectus, could affect our future
results and could cause results to differ materially from those
expressed in such forward-looking statements, including:
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the effects the global financial and economic downturn, credit
and equity market volatility and continued fluctuations in the
U.S. economy may continue to have on our business and
financial condition and the business and financial condition of
our advertisers;
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our high degree of leverage and potential inability to refinance
our debt given current market conditions;
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continued fluctuations in the economy could negatively impact
our ability to meet our cash needs and our ability to maintain
compliance with our debt covenants;
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fluctuations in the demand for advertising across our various
media given the current economic environment;
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our relationship with a significant customer has changed and we
no longer have a guaranteed level of revenue from that customer;
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risks associated with the implementation and execution of our
business diversification strategy;
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increased competition in our markets and in the radio
broadcasting and media industries;
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changes in media audience ratings and measurement technologies
and methodologies;
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regulation by the Federal Communications Commission
(FCC) relative to maintaining our broadcasting
licenses, enacting media ownership rules and enforcing of
indecency rules;
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changes in our key personnel and on-air talent;
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increases in the costs of our programming, including on-air
talent and content acquisitions costs;
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financial losses that may be incurred due to impairment charges
against our broadcasting licenses, goodwill and other intangible
assets, particularly in light of the current economic
environment;
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increased competition from new media and technologies;
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the impact of our acquisitions, dispositions and similar
transactions; and
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other factors mentioned in our filings with the SEC.
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iv
These factors and the other risk factors discussed in this
prospectus, including under the heading Risk
Factors, are not necessarily all of the important factors
that could cause our actual results to differ materially from
those expressed in any of our forward-looking statements. Other
important factors also could have material adverse effects on
our future results. Given these uncertainties, you should not
place undue reliance on our forward-looking statements. Please
see our periodic reports filed with the SEC for more information
on these risk factors and other factors that may influence our
business. The forward-looking statements included in this
prospectus are made only as of the date on the front cover of
this prospectus, and we expressly disclaim any obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law.
If there is a material change to the information included in
this prospectus, we will disclose such material change in the
information by means of a supplement or amendment, SEC filing or
press release.
v
SUMMARY
The following summary is qualified in its entirety by the
more detailed information included in this prospectus. Because
this is a summary, it may not contain all the information that
may be important to you. You should read the entire prospectus
before making an investment decision. Except as otherwise stated
or required by the context, the terms Issuer,
Radio One, we, us,
Company, our and our Company
refer to Radio One, Inc. and its consolidated subsidiaries.
OUR
COMPANY
Overview
Radio One is an urban-oriented, multi-media company that
primarily targets
African-American
and urban consumers. Our core business is our radio broadcasting
franchise that is the largest broadcasting operation that
primarily targets
African-American
and urban listeners. We currently own 53 broadcast stations
located in 16 urban markets in the U.S. While our
primary source of revenue is the sale of local and national
advertising for broadcast on our radio stations, our business
strategy is to operate the premier multi-media entertainment and
information content provider targeting
African-American
consumers. Thus, we have diversified our revenue streams by
making acquisitions and investments in other complementary media
properties. Our other media interests include our approximately
37% ownership interest in TV One, LLC (TV One), an
African-American
targeted cable television network that we invested in with an
affiliate of Comcast Corporation and other investors; our 53.5%
ownership interest in Reach Media, Inc. (Reach
Media), which operates the Tom Joyner Morning Show; our
ownership of Interactive One, LLC, an online platform serving
the
African-American
community through social content, news, information, and
entertainment, which operates a number of branded sites,
including News One, UrbanDaily, HelloBeautiful; and our
ownership of Community Connect, LLC (formerly Community Connect
Inc.) (CCI), an online social networking company,
which operates a number of branded websites, including
BlackPlanet, MiGente and Asian Avenue. Through our national
multi-media presence, we provide advertisers with a unique and
powerful delivery mechanism to the
African-American
and urban audience.
We are incorporated as a Delaware corporation. Our principal
executive offices are located at 5900 Princess Garden Parkway,
7th Floor, Lanham, Maryland 20706. Our telephone number is
(301) 306-1111
and our website is
http://www.radio-one.com.
We make our website content available for information purposes
only. Information on our website is not a part of this
prospectus and should not be relied upon for investment purposes.
TV
One
In July 2003, we entered into a joint venture agreement with an
affiliate of Comcast Corporation (the CC Investor)
and certain other investors to create TV One, a cable television
network featuring lifestyle, entertainment and news-related
programming targeted primarily towards
African-American
viewers. At that time, we committed to make a cumulative cash
investment of $74.0 million in TV One by December 31,
2006. As of April 30, 2007 and as of the date of this
prospectus, $60.3 million of this commitment had been
funded. No additional investment has been made since April 2007.
Since April 2007, the initial commitment period for funding the
capital committed has been extended on a quarterly basis, most
recently to April 1, 2011, and we expect that it will be
further extended in an amendment to TV Ones governing
agreements, due in part to TV Ones lower than anticipated
capital needs.
In December 2004, TV One entered into a distribution agreement
with DIRECTV, Inc. (DIRECTV) and certain affiliates
of DIRECTV became investors in TV One. As of September 30,
2010, we owned approximately 37% of the outstanding equity
interests of TV One on a fully-converted basis.
We entered into separate network services and advertising
services agreements with TV One in 2003. Under the network
services agreement, we are providing TV One with administrative
and operational support services and access to Radio One
personalities. This agreement was originally scheduled to expire
in January
1
2009, but was extended to January 2010 and has been further
extended to January 2011. Under the advertising services
agreement, we are providing a specified amount of advertising to
TV One. This agreement was also originally scheduled to expire
in January 2009, and has been extended to January 2011. In
consideration of providing these services, we have received
equity in TV One, and receive an annual cash fee of $500,000 for
providing services under the network services agreement.
Transactions
In connection with the issuance of $286,794,302 in aggregate
principal amount of the Old Notes on November 24, 2010, we
exchanged and then cancelled approximately $97.0 million of
$101.5 million in aggregate principal amount outstanding of
our
87/8% senior
subordinated notes due 2011 (the 2011 Notes) and
approximately $199.3 million of $200.0 million in
aggregate principal amount outstanding of our
63/8% senior
subordinated notes due 2013 (the 2013 Notes and
together with the 2011 Notes, the Existing Notes)
and entered into supplemental indentures in respect of each of
the Existing Notes which waived any and all existing defaults
and events of default that had arisen or may have arisen that
may be waived and eliminated substantially all of the covenants
in each indenture governing the Existing Notes, other than the
covenants to pay principal of and interest on the Existing Notes
when due, and eliminated or modified the related events of
default. We also entered into an amendment to our senior credit
facility which cured or waived all outstanding defaults or
events of default thereunder. See Description of Certain
Other Indebtedness.
Subsequently, all remaining outstanding 2011 Notes were
repurchased pursuant to the indenture governing the 2011 Notes,
effective as of December 24, 2010. Approximately
$0.75 million in aggregate principal amount of the 2013
Notes remain outstanding. Overdue interest and interest thereon
was paid to holders of the 2013 Notes on December 20, 2010,
thereby curing any default or event of default under the
indenture governing the 2013 Notes.
We refer to the transactions described above, collectively, as
the Transactions in this prospectus.
Recent
Developments
As of September 30, 2010, Radio One, Inc. had approximately
$698.6 million in broadcast licenses and
$137.5 million in goodwill, which collectively represented
approximately 80.1% of the Companys total assets. We are
required by Accounting Standards Codification (ASC)
350, Intangibles Goodwill and Other,
to test our goodwill and indefinite-lived intangible assets
for impairment at least annually, which we do during the fourth
quarter. Impairment is measured as the excess of the carrying
value of the goodwill or indefinite-lived intangible asset over
its fair value. Impairment may result from deterioration in our
performance, changes in anticipated future cash flows, changes
in business plans, adverse economic or market conditions,
adverse changes in applicable laws and regulations, or other
factors. The amount of any impairment must be expensed as a
charge to operations.
We are currently in the process of completing our impairment
testing for our reporting units. Our testing includes two steps.
The first step of the testing compares the fair value of the
reporting unit against the carrying value of the reporting unit.
For reporting units that fail step one, we must perform a
step two analysis which requires us to complete a
hypothetical purchase price allocation of the assets and
liabilities of the reporting unit. On a preliminary basis, based
on the results of step one, the carrying value exceeded the fair
value in three of our reporting units. We have not yet completed
our step two analysis to determine the extent of any
impairment we may have for these reporting units. The goodwill
carrying value for these reporting units is $30.5 million,
5.1 million and 2.9 million at September 30,
2010. We are also completing impairment testing for our FCC
licenses and for certain of our long-lived assets. The
preliminary results of our impairment testing for all of these
items indicate that we may need to record an impairment charge
of between $20.0 million and $40.0 million in
connection with our December 31, 2010 financial statements.
Fair values of FCC licenses and goodwill have been estimated
using the income approach, which involves a
10-year
model that incorporates several judgmental assumptions about
projected revenue growth, future operating margins, discount
rates and terminal values. There are inherent uncertainties
related to these assumptions and our judgment in applying them
to the impairment analysis. Changes in certain events or
circumstances could result in changes to our estimated fair
values, and may result in further write-downs to the carrying
values of these assets.
2
Summary
of Exchange Offer
On November 24, 2010, we issued $286,794,302 of our
12.5%/15.0% Senior Subordinated Notes due 2016 in a private
placement (the Private Placement), all of which are
eligible to be exchanged for Exchange Notes. We refer to these
notes as Old Notes in this prospectus.
Simultaneously with the Private Placement, we entered into a
registration rights agreement with the initial holders of the
Old Notes (the Registration Rights Agreement). Under
the Registration Rights Agreement, we are required to use our
reasonable best efforts to cause a registration statement for
substantially identical notes, which will be issued in exchange
for the Old Notes, to be filed with the SEC within 90 days
of the date of issuance of the Old Notes and to cause such
registration statement to become effective within 120 days
of the date of issuance of the Old Notes if the registration
statement is not reviewed by the SEC or 270 days of the
date of issuance of the Old Notes if the registration statement
is reviewed by the SEC. We refer to the notes to be registered
under this exchange offer registration statement as
Exchange Notes and collectively with the Old Notes,
we refer to them as the Notes in this prospectus.
You may exchange your Old Notes for Exchange Notes in this
exchange offer. You should read the discussion under the
headings Summary of Exchange Offer,
Exchange Offer and Description of Notes
for further information regarding the Exchange Notes.
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Securities Offered |
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$286,794,302 in aggregate principal amount of
12.5%/15.0% Senior Subordinated Notes due 2016. |
|
Exchange Offer |
|
We are offering to exchange the Old Notes for a like principal
amount at maturity of the Exchange Notes. Old Notes may be
exchanged in integral principal multiples of $1. The exchange
offer is being made pursuant to the Registration Rights
Agreement which grants the initial holders and any subsequent
holders of the Old Notes certain exchange and registration
rights. This exchange offer is intended to satisfy those
exchange and registration rights with respect to the Old Notes.
After the exchange offer is complete, you will no longer be
entitled to any exchange or registration rights with respect to
your Old Notes. |
|
Expiration Date; Withdrawal of Tender |
|
The exchange offer will expire 5:00 p.m., New York City
time,
on ,
2011, or a later time if we choose to extend this exchange offer
in our sole and absolute discretion. You may withdraw your
tender of Old Notes at any time prior to the expiration date.
All outstanding Old Notes that are validly tendered and not
validly withdrawn will be exchanged. Any Old Notes not accepted
by us for exchange for any reason will be returned to you at our
expense as promptly as possible after the expiration or
termination of the exchange offer. |
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Resales |
|
We believe that you can offer for resale, resell and otherwise
transfer the Exchange Notes without complying with the
registration and prospectus delivery requirements of the
Securities Act so long as: |
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you acquire the Exchange Notes in the ordinary
course of business;
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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;
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you are not an affiliate of ours; and
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you are not a broker-dealer.
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3
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If any of these conditions is not satisfied and you transfer any
Exchange Notes without delivering a proper prospectus or without
qualifying for a registration exemption, you may incur liability
under the Securities Act. We do not assume, or indemnify you
against, any such liability. |
|
Broker-Dealer |
|
Each broker-dealer acquiring Exchange Notes issued for its own
account in exchange for Old Notes, which it acquired through
market-making activities or other trading activities, must
acknowledge that it will deliver a proper prospectus when any
Exchange Notes issued in the exchange offer are transferred. A
broker-dealer may use this prospectus for an offer to resell, a
resale or other retransfer of the Exchange Notes issued in the
exchange offer. |
|
Conditions to the Exchange Offer |
|
Our obligation to accept for exchange, or to issue the Exchange
Notes in exchange for, any Old Notes is subject to certain
customary conditions. See Exchange Offer
Conditions to the Exchange Offer. |
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Procedures for Tendering Old Notes Held in the Form of
Book-Entry Interests |
|
The Old Notes were issued as global securities and were
deposited upon issuance with Wilmington Trust Company,
which issued uncertificated depositary interests in those
outstanding Old Notes, which represent a 100% interest in those
Old Notes, to The Depositary Trust Company
(DTC). |
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Beneficial interests in the outstanding Old Notes, which are
held by direct or indirect participants in DTC, are shown on,
and transfers of the Old Notes can only be made through, records
maintained in book-entry form by DTC. |
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You may tender your outstanding Old Notes by instructing your
broker or bank where you keep the Old Notes to tender them for
you. In some cases you may be asked to submit the letter of
transmittal that may accompany this prospectus. By tendering
your Old Notes you will be deemed to have acknowledged and
agreed to be bound by the terms set forth under Exchange
Offer. Your outstanding Old Notes may be tendered in
multiples of $1. |
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In order for your tender to be considered valid, the exchange
agent must receive a confirmation of book-entry transfer of your
outstanding Old Notes into the exchange agents account at
DTC, under the procedure described in this prospectus under the
heading Exchange Offer, on or before 5:00 p.m.,
New York City time, on the expiration date of the exchange offer. |
|
U.S. Federal Income Tax Considerations |
|
For a summary of the material U.S. federal income tax
consequences of the exchange offer, see Certain U.S.
Federal Income Tax Consequences. |
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Use Of Proceeds |
|
We will not receive any proceeds from the issuance of the
Exchange Notes in the exchange offer. |
|
Exchange Agent |
|
Wilmington Trust Company is serving as the exchange agent
for the exchange offer. |
4
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Shelf Registration Statement |
|
In limited circumstances, holders of Old Notes may require us to
register their Old Notes under a shelf registration statement. |
Consequences
of Not Exchanging Old Notes
If you do not exchange your Old Notes in the exchange offer,
your Old Notes will continue to be subject to the restrictions
on transfer currently applicable to the Old Notes. In general,
you may offer or sell your Old Notes only:
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if they are registered under the Securities Act and applicable
state securities laws;
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if they are offered or sold under an exemption from registration
under the Securities Act and applicable state securities
laws; or
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|
if they are offered or sold in a transaction not subject to the
Securities Act and applicable state securities laws.
|
We do not currently intend to register the Old Notes under the
Securities Act. Under some circumstances, however, holders of
the Old Notes, including holders who are not permitted to
participate in the exchange offer or who may not freely resell
Exchange Notes received in the exchange offer, may require us to
file, and to cause to become effective, a shelf registration
statement covering resales of Old Notes by these holders. For
more information regarding the consequences of not tendering
your Old Notes and our obligation to file a shelf registration
statement, see Exchange Offer Consequences of
Failure to Exchange and Description of
Notes Registration Rights; Special Interest.
5
Summary
of Terms of Exchange Notes
The form and terms of the Exchange Notes are the same as the
form and terms of the Old 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 special
interest provisions contained in the Old Notes. The Exchange
Notes represent the same debt as the Old Notes. All of the Old
Notes and the corresponding Exchange Notes are governed by the
same indenture. The following is a summary of some of the terms
of the Exchange Notes. For a more complete description, see
Description of Notes.
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Issuer |
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Radio One, Inc. |
|
Securities Offered |
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Up to $286,994,302 in aggregate principal amount of Exchange
Notes in connection with the exchange offer and additional
Exchange Notes issued in respect of interest payments on any
such Exchange Notes. |
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Maturity Date |
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May 24, 2016. |
|
Interest Rates and Payment Dates |
|
Interest on the Exchange Notes will be payable in cash, or at
our election, partially in cash and partially through the
issuance of additional Exchange Notes (a PIK
Election) on a quarterly basis in arrears on
February 15, May 15, August 15 and November 15,
commencing on February 15, 2011. We may make a PIK Election
only with respect to interest accruing up to but not including
May 15, 2012, and with respect to interest accruing from
and after May 15, 2012 such interest shall accrue at a rate
of 12.5% per annum and shall be payable in cash. A PIK Election
is currently in effect. |
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Interest on the Exchange 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 accrue for
each quarterly period at a rate of 12.5% per annum if the
interest for such quarterly period is paid fully in cash. In the
event of a PIK Election, including the PIK Election currently in
effect, the interest paid in cash and the interest
paid-in-kind
by issuance of additional Exchange Notes (PIK Notes)
will accrue for such quarterly period at 6.0% per annum and 9.0%
per annum, respectively. |
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In the absence of an election for any interest period, interest
on the Exchange Notes shall be payable according to the election
for the previous interest period; provided that interest
accruing from and after May 15, 2012 shall accrue at a rate
of 12.5% per annum and shall be payable in cash. |
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Optional Redemption |
|
We may redeem some or all of the Exchange Notes upon not less
than 30 nor more than 60 days notice, at the
redemption prices set forth under the caption Description
of Notes Optional Redemption plus accrued and
unpaid interest on the Exchange Notes redeemed to the applicable
redemption date. |
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Ranking |
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The Exchange Notes will be our senior subordinated obligations
and will rank: |
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senior to any of our and our guarantors future
debt that expressly provides that it is subordinated to the
Exchange Notes;
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6
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senior in right of payment to the Existing Notes and
to any of our and our guarantors existing and future
subordinated obligations; and
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junior to all of our and our guarantors
existing and future senior debt under our senior credit
facility, any other obligations under our senior credit facility
and all hedging obligations related thereto.
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As of December 31, 2010, there was approximately
$353.7 million of our senior debt outstanding under our
senior credit facility. |
|
Guarantees |
|
The Exchange Notes will be unconditionally guaranteed on a
senior subordinated basis by each of our existing and future
direct and indirect domestic restricted subsidiaries (other than
certain immaterial restricted subsidiaries and passive foreign
holding companies) and any other of our subsidiaries that
guarantee our Existing Credit Facility. If we cannot make
payments on the Exchange Notes when they are due, our guarantors
must make them instead. |
|
Asset Sale Offer |
|
If we or our restricted subsidiaries sell assets under certain
circumstances, we must offer to repurchase the Exchange Notes at
a repurchase price equal to 100% of the principal amount of the
Exchange Notes repurchased, plus accrued and unpaid interest, if
any, to the applicable repurchase date. See Description of
Notes Repurchase at the Option of
Holders Asset Sales. |
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Change of Control |
|
If we experience a change of control, we may be required to
offer to repurchase the Exchange Notes at the repurchase prices
set forth under the caption Description of
Notes Repurchase at the Option of
Holders Change of Control, plus accrued and
unpaid interest to the repurchase date, if any. |
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Certain Covenants |
|
The indenture governing the Notes contains covenants that will
limit our ability and the ability of our restricted subsidiaries
to, among other things: |
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incur additional indebtedness or issue disqualified
stock or preferred stock;
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pay dividends or make other distributions or
repurchase or redeem our stock or subordinated indebtedness or
make investments;
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sell assets and issue capital stock of restricted
subsidiaries;
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incur liens;
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enter into agreements restricting our
subsidiaries ability to pay dividends;
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enter into transactions with affiliates;
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engage in new lines of business;
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have any subsidiary other than Radio One Cable
Holdings, Inc. (ROCH) hold any equity interests in
TV One; and
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consolidate, merge or sell all or substantially all
of our assets.
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7
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These covenants are subject to important exceptions and
qualifications, which are described under the heading
Description of Notes Certain Covenants. |
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Trustee |
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Wilmington Trust Company. |
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Use of Proceeds |
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We will not receive any cash proceeds from the exchange offer.
Old Notes that are validly tendered and exchanged for Exchange
Notes pursuant to the exchange offer will be retired and
cancelled. |
You should refer to the section entitled Risk
Factors for an explanation of certain risks of
participating in the exchange offer.
8
Summary
Historical Consolidated Financial Data
We derived the following summary historical consolidated
financial data from our consolidated financial statements as of
and for the fiscal years ended December 31, 2005, 2006,
2007, 2008 and 2009. Ernst & Young LLPs report
on the consolidated financial statements for the year ended
December 31, 2009, which is included elsewhere in this
prospectus, included an explanatory paragraph which describes an
uncertainty about Radio One, Inc.s ability to continue as
a going concern. The uncertainty was due to certain violations
of our loan agreements, which ultimately could have resulted in
significant amounts of our outstanding debt becoming callable by
our lenders. These violations were cured as a part of the
Transactions. The summary historical financial and operating
data presented below as of and for the nine months ended
September 30, 2009 and 2010 has been derived from our
unaudited consolidated financial statements included elsewhere
in this prospectus. In the opinion of management, such unaudited
consolidated financial statements include all recurring
adjustments and normal accruals necessary for a fair statement
of such unaudited consolidated financial data. The results of
operations from these interim periods are not necessarily
indicative of the results to be expected for the full year or
any future periods.
The following summary historical financial and operating data
should be read in conjunction with Selected Historical
Consolidated Financial Data, Capitalization,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the historical
consolidated financial statements and accompanying notes
included elsewhere in this prospectus.
On July 22, 2010, management and the Audit Committee of the
Board of Directors of Radio One concluded that: (1) it was
necessary to restate our consolidated financial statements for
the years ended December 31, 2009, 2008 and 2007 and for
each quarterly financial reporting period from January 1,
2009 through March 31, 2010; and (2) our previously
filed consolidated financial statements and any related reports
of Ernst & Young LLP for these periods should no
longer be relied upon. The Company included its restated
consolidated financial statements for the years ended
December 31, 2009, 2008 and 2007 in the Annual Report on
Form 10-K/A
filed with the SEC on August 23, 2010. The Company included
its restated consolidated financial statements for the quarters
ended March 31, 2010, September 30, 2009,
June 30, 2009 and March 31, 2009 in Quarterly Reports
on
Forms 10-Q/A
that it filed with the SEC on August 23, 2010. All
financial information set forth below and the audited and
unaudited consolidated financial statements and accompanying
notes included elsewhere in this prospectus reflects these
restatements.
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Nine Months Ended
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September 30,
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Year Ended December 31,
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2010
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2009
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2009
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2008
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2007
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(As adjusted see note 1 below)
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(In thousands)
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Statement of Operations Data(1):
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Net revenue
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$
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208,703
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$
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204,835
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$
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272,092
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$
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313,443
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$
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316,398
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Programming and technical expenses including stock-based
compensation
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56,736
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56,856
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75,635
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79,304
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70,463
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Selling, general and administrative expenses including
stock-based compensation
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78,290
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68,828
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91,016
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103,108
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100,620
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Corporate selling, general and administrative expenses,
including stock-based compensation
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24,581
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16,048
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24,732
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36,356
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28,396
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Depreciation and amortization
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14,195
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15,804
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21,011
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19,022
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14,680
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Impairment of long-lived assets
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48,953
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65,937
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423,220
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211,051
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Operating income (loss)
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34,901
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(1,654
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)
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(6,239
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)
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(347,567
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)
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(108,812
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)
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Interest income
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|
95
|
|
|
|
98
|
|
|
|
144
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|
|
|
491
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|
1,242
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Interest expense(2)
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|
31,059
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|
|
|
29,036
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38,404
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59,689
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72,770
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Gain on retirement of debt
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1,221
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1,221
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74,017
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Equity in income (loss) of affiliated company
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3,832
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|
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3,294
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3,653
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(3,652
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)
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(15,836
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)
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Other expense, net
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2,934
|
|
|
|
96
|
|
|
|
104
|
|
|
|
316
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(As adjusted see note 1 below)
|
|
|
|
(In thousands)
|
|
|
Income (loss) before provision for (benefit from) income taxes,
noncontrolling interest in (loss) income of subsidiaries and
discontinued operations
|
|
|
4,835
|
|
|
|
(26,173
|
)
|
|
|
(39,729
|
)
|
|
|
(336,716
|
)
|
|
|
(196,466
|
)
|
Provision for (benefit from) income taxes
|
|
|
4,685
|
|
|
|
7,340
|
|
|
|
7,014
|
|
|
|
(45,183
|
)
|
|
|
54,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
150
|
|
|
|
(33,513
|
)
|
|
|
(46,743
|
)
|
|
|
(291,533
|
)
|
|
|
(250,549
|
)
|
(Loss) income from discontinued operations, net of tax
|
|
|
(205
|
)
|
|
|
(835
|
)
|
|
|
(1,815
|
)
|
|
|
(7,414
|
)
|
|
|
(137,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(55
|
)
|
|
|
(34,348
|
)
|
|
|
(48,558
|
)
|
|
|
(298,947
|
)
|
|
|
(387,590
|
)
|
Noncontrolling interest in income (loss) of subsidiaries
|
|
|
1,427
|
|
|
|
3,650
|
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
3,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss attributable to common stockholders
|
|
$
|
(1,482
|
)
|
|
$
|
(37,998
|
)
|
|
$
|
(52,887
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
(391,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,571
|
|
|
$
|
14,775
|
|
|
$
|
19,963
|
|
|
$
|
22,289
|
|
|
$
|
24,247
|
|
Intangible assets, net
|
|
|
872,794
|
|
|
|
889,121
|
|
|
|
871,221
|
|
|
|
944,858
|
|
|
|
1,310,168
|
|
Total assets
|
|
|
1,044,384
|
|
|
|
1,056,883
|
|
|
|
1,035,542
|
|
|
|
1,125,477
|
|
|
|
1,648,354
|
|
Total debt (including current portion)
|
|
|
653,138
|
|
|
|
659,037
|
|
|
|
653,534
|
|
|
|
675,362
|
|
|
|
815,504
|
|
Total liabilities
|
|
|
791,183
|
|
|
|
784,692
|
|
|
|
787,489
|
|
|
|
810,002
|
|
|
|
1,015,747
|
|
Redeemable noncontrolling interests
|
|
|
44,047
|
|
|
|
49,690
|
|
|
|
52,225
|
|
|
|
43,423
|
|
|
|
58,738
|
|
Total stockholders equity
|
|
|
209,154
|
|
|
|
222,501
|
|
|
|
195,828
|
|
|
|
272,052
|
|
|
|
573,870
|
|
Statement of Cash Flow Data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
16,775
|
|
|
$
|
21,864
|
|
|
$
|
45,443
|
|
|
$
|
13,832
|
|
|
$
|
44,014
|
|
Investing activities
|
|
|
(3,592
|
)
|
|
|
(3,640
|
)
|
|
|
(4,871
|
)
|
|
|
66,031
|
|
|
|
78,468
|
|
Financing activities
|
|
|
(11,575
|
)
|
|
|
(25,738
|
)
|
|
|
(42,898
|
)
|
|
|
(81,821
|
)
|
|
|
(130,641
|
)
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(3)
|
|
$
|
48,362
|
|
|
$
|
14,084
|
|
|
$
|
13,398
|
|
|
$
|
(269,907
|
)
|
|
$
|
(251,209
|
)
|
Adjusted EBITDA(3)
|
|
|
53,973
|
|
|
|
64,490
|
|
|
|
82,358
|
|
|
|
96,452
|
|
|
|
119,910
|
|
Cash interest expense(4)
|
|
|
28,510
|
|
|
|
33,346
|
|
|
|
36,568
|
|
|
|
68,611
|
|
|
|
70,798
|
|
Capital expenditures
|
|
|
3,251
|
|
|
|
3,368
|
|
|
|
4,528
|
|
|
|
12,597
|
|
|
|
10,203
|
|
|
|
|
(1) |
|
Year-to-year
comparisons are significantly affected by Radio Ones
acquisitions and dispositions during the periods covered.
Certain reclassifications associated with accounting for
discontinued operations have been made to prior year balances to
conform to the current year presentation. These
reclassifications had no effect on any other previously reported
net income or loss or any other statement of operations, balance
sheet or cash flow amounts. |
|
(2) |
|
Interest expense includes non-cash interest, such as the
accretion of principal, local marketing agreement
(LMA) fees, the amortization of discounts on debt
and the amortization of deferred financing costs. |
|
(3) |
|
Adjusted EBITDA consists of net loss
attributable to common stockholders plus (1) depreciation,
amortization, income taxes, interest expense, income (loss) from
discontinued operations, net of tax, noncontrolling interest in
(loss) income of subsidiaries, impairment of long-lived assets,
stock-based compensation and other expense, net, less
(2) interest income, gain on retirement of debt and equity
in income (loss) of affiliated company. Net income before
interest expense less interest income, income taxes, and
depreciation and amortization is commonly referred to in our
business as EBITDA. Adjusted EBITDA and EBITDA are
not measures of financial performance under generally accepted
accounting principles. We believe Adjusted EBITDA is often a
useful measure of a companys operating performance and is
a significant basis used by our management to measure the
operating performance of our business because Adjusted EBITDA
excludes charges for depreciation, amortization and interest
expense that have resulted from our acquisitions and debt
financing, our taxes, impairment charges, as well as our equity
in income |
10
|
|
|
|
|
(loss) of our affiliated company, gain on retirements of debt,
and any discontinued operations. Accordingly, we believe that
Adjusted EBITDA provides useful information about the operating
performance of our business, apart from the expenses associated
with our physical plant, capital structure or the results of our
affiliated company. Adjusted EBITDA is frequently used as one of
the bases for comparing businesses in our industry, although our
measure of Adjusted EBITDA may not be comparable to similarly
titled measures of other companies. Adjusted EBITDA and EBITDA
do not purport to represent operating income or cash flow from
operating activities, as those terms are defined under generally
accepted accounting principles, and should not be considered as
alternatives to those measurements as an indicator of our
performance. See Non-GAAP Financial Measures. A
reconciliation of net income to EBITDA and Adjusted EBITDA has
been provided below. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(1,482
|
)
|
|
$
|
(37,998
|
)
|
|
$
|
(52,887
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
(391,500
|
)
|
Plus: Depreciation and amortization
|
|
|
14,195
|
|
|
|
15,804
|
|
|
|
21,011
|
|
|
|
19,022
|
|
|
|
14,680
|
|
Plus: Provision for (benefit from) income taxes
|
|
|
4,685
|
|
|
|
7,340
|
|
|
|
7,014
|
|
|
|
(45,183
|
)
|
|
|
54,083
|
|
Plus: Interest expense
|
|
|
31,059
|
|
|
|
29,036
|
|
|
|
38,404
|
|
|
|
59,689
|
|
|
|
72,770
|
|
Less: Interest income
|
|
|
(95
|
)
|
|
|
(98
|
)
|
|
|
(144
|
)
|
|
|
(491
|
)
|
|
|
(1,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
48,362
|
|
|
$
|
14,084
|
|
|
$
|
13,398
|
|
|
$
|
(269,907
|
)
|
|
$
|
(251,209
|
)
|
Plus: Equity in (income) loss of affiliated company
|
|
|
(3,832
|
)
|
|
|
(3,294
|
)
|
|
|
(3,653
|
)
|
|
|
3,652
|
|
|
|
15,836
|
|
Plus: Noncontrolling interest in income of subsidiaries
|
|
|
1,427
|
|
|
|
3,650
|
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
3,910
|
|
Plus: Impairment of long-lived assets
|
|
|
|
|
|
|
48,953
|
|
|
|
65,937
|
|
|
|
423,220
|
|
|
|
211,051
|
|
Plus: Stock-based compensation
|
|
|
4,877
|
|
|
|
1,387
|
|
|
|
1,649
|
|
|
|
1,777
|
|
|
|
2,991
|
|
Plus: Other expense, net
|
|
|
2,934
|
|
|
|
96
|
|
|
|
104
|
|
|
|
316
|
|
|
|
290
|
|
Less: Gain on retirement of debt
|
|
|
|
|
|
|
(1,221
|
)
|
|
|
(1,221
|
)
|
|
|
(74,017
|
)
|
|
|
|
|
Less: Loss from discontinued operations, net of tax
|
|
|
205
|
|
|
|
835
|
|
|
|
1,815
|
|
|
|
7,414
|
|
|
|
137,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
53,973
|
|
|
$
|
64,490
|
|
|
$
|
82,358
|
|
|
$
|
96,452
|
|
|
$
|
119,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
Cash interest expense is calculated as interest expense less
non-cash interest, including the accretion of principal, LMA
fees, the amortization of discounts on debt and the amortization
of deferred financing costs for the indicated period. |
11
RISK
FACTORS
An investment in the Notes involves significant risks. You
should carefully consider the risks and uncertainties described
below and the other information included in this prospectus
before deciding to invest in the Notes. The risks and
uncertainties described below are not the only ones relating to
our business, financial condition or operating results or the
notes. Additional risks and uncertainties that are not currently
known to us or that we do not currently believe to be material
also could materially and adversely affect our business,
financial condition or operating results and the value of the
Notes. The occurrence of any of the following risks could
significantly harm our business, financial condition or
operating results or the Notes. In that case, you could lose
part or all of the value of your investment in the Notes.
Risks
Related to the Notes
Our
substantial level of indebtedness could adversely affect our
financial condition and prevent us from fulfilling our
obligations.
We have substantial indebtedness. As of December 31, 2010,
we had approximately $642.2 million of total indebtedness,
which included approximately $0.7 million related to our
2013 Notes and approximately $286.8 million related to our
Old Notes. As of September 30, 2010, we had approximately
$653.1 million of total indebtedness, which included
approximately $301.5 million related to our Existing Notes.
As of September 30, 2010, on a pro forma basis giving
effect to the Transactions, we would have had approximately
$646.2 million of total indebtedness. In addition, subject
to restrictions in our senior credit facility and the indenture
governing the Notes, we may incur additional indebtedness. The
high level of our indebtedness could have important consequences
to the holders of our Existing Notes, the Notes and other
indebtedness, including the following:
|
|
|
|
|
it may be more difficult for us to satisfy our obligations with
respect to the Notes, the senior credit facility and other
indebtedness;
|
|
|
|
our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes
may be impaired;
|
|
|
|
we must use a substantial portion of our cash flow from
operations to pay interest and principal on our indebtedness,
which will reduce the funds available to us for other purposes,
such as capital expenditures;
|
|
|
|
we may be limited in our ability to borrow additional funds;
|
|
|
|
we may have a higher level of indebtedness than some of our
competitors, which may put us at a competitive disadvantage and
reduce our flexibility in planning for, or responding to,
changing conditions in our industry, including increased
competition; and
|
|
|
|
we are more vulnerable to economic downturns and adverse
developments in our business.
|
We expect to obtain the money to pay our expenses and to pay the
principal and interest on the Notes, our senior credit facility
and other debt from cash flow from our operations, including our
interest in TV One via distributions that may be made by TV One.
Our ability to meet our expenses thus depends on our future
performance, which will be affected by financial, business,
economic and other factors. We will not be able to control many
of these factors, such as economic conditions in the markets
where we operate and pressure from competitors. Further, the TV
One distributions require the consent of third parties. While
these third parties did approve TV One distributions for the
fourth quarter of 2009 and the first, second, third and fourth
quarters of 2010, there is no assurance that such third-party
consents will be granted in the future. Our cash flow may not be
sufficient to allow us to pay principal and interest on our debt
and meet our other obligations. If we do not have enough
liquidity, we may be required to refinance all or part of our
existing debt, sell assets or borrow more money. We may not be
able to do so on terms acceptable to us, if at all. In addition,
the terms of existing or future debt agreements, including our
senior credit facility and the indenture governing the Notes may
restrict us from pursuing any of these alternatives.
12
Our
failure to comply with restrictive covenants contained in our
senior credit facility or the indenture governing the Notes
could lead to an event of default under such
instruments.
Our senior credit facility and the indenture governing the Notes
impose significant covenants on us. The agreement governing our
senior credit facility also requires us to achieve specified
financial and operating results and maintain compliance with
specified financial ratios and satisfy other financial condition
tests. Our ability to comply with these ratios may be affected
by events beyond our control. Our breach of any restrictive
covenants in the agreement governing our senior credit facility
or the indenture governing the Notes or our inability to comply
with the required financial ratios could result in a default
under the agreement governing our senior credit facility. If a
default occurs, the lenders under our senior credit facility may
elect to declare all borrowings outstanding, together with all
accrued interest and other fees, to be immediately due and
payable which would result in an event of default under the
Notes. The lenders would also have the right in these
circumstances to terminate any commitments they have to provide
further borrowings. If we are unable to repay outstanding
borrowings when due, the lenders under our senior credit
facility will also have the right to proceed against our
collateral, including our available cash and owned real
property, granted to them to secure the indebtedness. If the
indebtedness under our senior credit facility or the Notes were
to be accelerated, we cannot assure you that our assets would be
sufficient to repay in full that indebtedness and our other
indebtedness.
Despite
current anticipated indebtedness levels and restrictive
covenants, we may incur additional indebtedness in the
future.
Despite our current level of indebtedness, we may be able to
incur additional indebtedness, including additional secured or
unsecured indebtedness. Although our senior credit facility and
the indenture governing the Notes contain restrictions on our
ability to incur additional indebtedness, these restrictions are
subject to important exceptions and qualifications. If we or our
subsidiaries incur additional indebtedness which is permitted
under these agreements, the risks that we and they now face as a
result of our leverage could intensify. If our financial
condition or operating results deteriorate, our relations with
our creditors, including the holders of the Notes, the lenders
under our senior credit facility and our suppliers, may be
materially and adversely affected.
We may
be unable to repay or repurchase the Notes.
At maturity, the entire outstanding principal amount of the
Notes, together with accrued and unpaid interest, will become
due and payable. We may not have the funds to fulfill this
obligation or the ability to refinance this obligation. If the
maturity date occurs at a time when other arrangements prohibit
us from repaying the Notes, we would try to obtain waivers of
such prohibitions from the lenders thereunder, or we could
attempt to refinance the borrowings that contain the
restrictions. If we could not obtain the waivers or refinance
these borrowings, we would be unable to repay the Notes.
To
service our indebtedness, we will require a significant amount
of cash. Our ability to generate cash depends on many factors
beyond our control, and any failure to meet our debt service
obligations could harm our business, financial condition and
results of operations.
Our ability to make payments on and to refinance our
indebtedness, including the Notes, and to fund working capital
needs and planned capital expenditures will depend on our
ability to generate cash in the future. This, to a certain
extent, is subject to general economic, financial, competitive,
business, legislative, regulatory and other factors that are
beyond our control.
If our business does not generate sufficient cash flow from
operations or if future borrowings are not available to us in an
amount sufficient to enable us to pay our indebtedness,
including the Notes, or to fund our other liquidity needs, we
may need to refinance all or a portion of our indebtedness,
including the Notes, on or before the maturity thereof, reduce
or delay capital investments or seek to raise additional
capital, any of which could have a material adverse effect on
our operations. In addition, we may not be able to effect any of
these actions, if necessary, on commercially reasonable terms or
at all. Our ability to restructure or refinance
13
our indebtedness, including the Notes, will depend on the
condition of the capital markets and our financial condition at
such time. Any refinancing of our debt could be at higher
interest rates and may require us to comply with more onerous
covenants, which could further restrict our business operations.
The terms of existing or future debt instruments, including the
indenture governing the Notes offered hereby, may limit or
prevent us from taking any of these actions. In addition, any
failure to make scheduled payments of interest and principal on
our outstanding indebtedness would likely result in a reduction
of our credit rating, which could harm our ability to incur
additional indebtedness on commercially reasonable terms or at
all. Our inability to generate sufficient cash flow to satisfy
our debt service obligations, or to refinance or restructure our
obligations on commercially reasonable terms or at all, would
have an adverse effect, which could be material, on our
business, financial condition and results of operations, as well
as on our ability to satisfy our obligations in respect of the
Notes.
In addition, if we are unable to meet our debt service
obligations under the Notes, the holders of the Notes would have
the right following a cure period to cause the entire principal
amount of the Notes to become immediately due and payable. If
the amounts outstanding under these instruments are accelerated,
we cannot assure you that our assets will be sufficient to repay
in full the money owed to our debt holders, including holders of
the Notes.
Restrictive
covenants in our senior credit facility and the indenture
governing the Notes may limit our current and future operations,
particularly our ability to respond to changes in our business
or to pursue our business strategies.
Our senior credit facility and the indenture governing the Notes
contain, and any future indebtedness of ours may contain, a
number of restrictive covenants that impose significant
operating and financial restrictions, including restrictions on
our ability to take actions that we believe may be in our
interest. Our senior credit facility and the indenture governing
the Notes will, among other things, limit our ability to:
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incur additional indebtedness or issue preferred stock;
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pay dividends or make other distributions or repurchase or
redeem our stock or prepay or redeem certain indebtedness;
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sell assets and issue capital stock of restricted subsidiaries;
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incur liens;
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enter into agreements restricting our subsidiaries ability
to pay dividends;
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enter into transactions with affiliates;
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engage in new lines of business;
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consolidate, merge or sell our assets;
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make investments; and
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engage in certain intercompany matters.
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Also, the senior credit facility requires us to maintain
compliance with certain financial covenants at all times and a
minimum liquidity covenant that is tested weekly. Our ability to
comply with these ratios may be affected by events beyond our
control, and we cannot assure you that we will meet these ratios.
The restrictions contained in our senior credit facility and in
the indenture governing the Notes could adversely affect our
ability to:
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finance our operations;
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make needed capital expenditures;
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make strategic acquisitions or investments or enter into
alliances;
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withstand a future downturn in our business or the economy in
general;
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engage in business activities, including future opportunities,
that may be in our interest; and
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plan for or react to market conditions or otherwise execute our
business strategies.
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A breach of any of the restrictive covenants could, or our
inability to comply with the maintenance financial covenants
would, result in an event of default under our senior credit
facility. In each of 2006, 2007 and 2010, we were required
to enter into amendments to our senior credit facility to modify
or waive compliance with financial covenants thereunder. If,
when required, we are unable to repay or refinance our
indebtedness under, or amend the covenants contained in, our
senior credit facility, or if a default otherwise occurs that is
not cured or waived, the lenders under the senior credit
facility could elect to declare all borrowings outstanding,
together with accrued interest and other fees, to be immediately
due and payable or institute foreclosure proceedings against
those assets that secure the borrowings under our senior credit
facility. Should the outstanding obligations under our senior
credit facility be accelerated and become due and payable
because of our failure to comply with the applicable debt
covenants in the future, we would be required to search for
alternative measures to finance current and ongoing obligations
of our business. There can be no assurance that such financing
will be available on acceptable terms, if at all. Our ability to
obtain future financing or to sell assets could be adversely
affected because a very large majority of our assets have been
secured as collateral under our senior credit facility. In
addition, our financial results, our substantial indebtedness
and our credit ratings could adversely affect the availability
and terms of our financing. In addition, there are other
situations (including certain changes in the ownership and
voting interest in Radio One of our Chairperson and the CEO)
where our debt may be accelerated and we may be unable to repay
such debt. Any of these scenarios could adversely impact our
liquidity and results of operations.
Not
all of our subsidiaries are guarantors of the Notes and,
therefore, the Notes will be structurally subordinated in right
of payment to the indebtedness and other liabilities of our
existing and future subsidiaries that do not guarantee the
Notes. Your right to receive payments on the Notes could be
adversely affected if any of these non-guarantor subsidiaries
declare bankruptcy, liquidate or reorganize.
The guarantors of the Notes will include each of our existing
and future direct or indirect domestic restricted subsidiaries
(other than certain immaterial restricted subsidiaries and
passive foreign holding companies) and any other of our
subsidiaries that guarantee our senior credit facility. As a
result, any subsidiary that we properly designate as an
unrestricted subsidiary or as an immaterial subsidiary under the
Indenture, and any entity in which we control less than a
majority of the voting rights, will not provide guarantees of
the Notes. As of November 24, 2010, the issue date of the
Old Notes, Reach Media is an unrestricted subsidiary under the
indenture governing the Notes and, as a result, will not be
required to guarantee the Exchange Notes unless it becomes a
restricted subsidiary. In the event TV One becomes a subsidiary,
it will also be an unrestricted subsidiary under the indenture
governing the Notes, unless designated otherwise as a restricted
subsidiary.
The Notes guarantees will be structurally subordinated to all of
the liabilities of any of our subsidiaries that do not guarantee
the Notes and will be required to be paid before the holders of
the Notes have a claim, if any, against those subsidiaries and
their assets. Therefore, if there was a dissolution, bankruptcy,
liquidation or reorganization of any such subsidiary, the
holders would not receive any amounts with respect to the Notes
from the assets of such subsidiary until after the payment in
full of the claims of creditors, including trade creditors and
preferred stockholders, of such subsidiary.
The guarantors of the Notes are substantially the same
subsidiaries that guarantee the Existing Notes. We include
condensed consolidating financial information regarding our
guaranteeing subsidiaries in the notes to our financial
statements included elsewhere in this prospectus.
Our
ability to meet our obligations under our debt, in part, depends
on the earnings and cash flows of our subsidiaries and the
ability of our subsidiaries to pay dividends or advance or repay
funds to us.
We conduct a significant portion of our business operations
through our subsidiaries and joint ventures. In servicing
payments to be made on the Notes, we will rely, in part, on cash
flows from these subsidiaries and joint ventures, mainly
dividend payments. The ability of these subsidiaries and joint
ventures to make dividend
15
payments to our Company will be affected by, among other
factors, the obligations of these entities to their creditors,
requirements of corporate and other law, and restrictions
contained in agreements entered into by or relating to these
entities. For example, the joint venture agreement (and related
agreements) that created and governs TV One contains certain
limited conditions under which distributions may be made.
We may
be unable to repurchase the Notes upon a change of control or
asset sale.
Upon the occurrence of specified kinds of change of control
events, we will be required to offer to repurchase all
outstanding Notes at the repurchase prices set forth under the
caption Description of Notes Repurchase at the
Option of Holders Change of Control, together
with accrued and unpaid interest, if any, to the date of
repurchase.
However, it is possible that we will not have sufficient funds
when required under the indenture governing the Notes to make
the required repurchase of the Notes and restrictions under our
senior credit facility may not allow such repurchase. If we fail
to repurchase the Notes in that circumstance, we will be in
default under the indenture governing the Notes, and, in turn,
under our senior credit facility. If we are required to
repurchase a significant portion of the Notes, we may require
third party financing. We cannot be sure that we would be able
to obtain such third party financing on acceptable terms, or at
all.
One of the circumstances under which a change of control may
occur is upon the sale or disposition of all or substantially
all of our assets. However, the phrase all or
substantially all will likely be interpreted under
applicable state law and will be dependent upon particular facts
and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or disposition of
all or substantially all of our capital stock or
assets has occurred, in which case, the ability of a holder of
the Notes to obtain the benefit of an offer to repurchase all of
a portion of the Notes held by such holder may be impaired.
It is also possible that the events that constitute a change of
control may also be events of default under our senior credit
facility. These events may permit the lenders under our senior
credit facility to accelerate the indebtedness outstanding
thereunder.
The agreements governing our other indebtedness, including the
senior credit facility, and future agreements may contain
prohibitions of certain events, including events that would
constitute a change of control or an asset sale and including
repurchases of or other prepayments in respect of the Notes. The
exercise by the holders of the Notes of their right to require
us to repurchase the Notes pursuant to a change of control offer
or an asset sale offer could cause a default under these other
agreements, even if the change of control or asset sale, if
applicable, itself does not, due to the financial effect of such
repurchases on us. In the event a change of control offer or an
asset sale offer is required to be made at a time when we are
prohibited from repurchasing Notes, we could seek the consent of
our lenders under the senior credit facility to the repurchase
of Notes or could attempt to refinance the borrowings that
contain such prohibition. If we do not obtain such consent or
repay those borrowings, we will remain prohibited from
repurchasing the Notes. In that case, our failure to repurchase
tendered Notes would constitute an event of default under the
indenture governing the Notes which could, in turn, constitute a
default under the senior credit facility or the other
indebtedness. Finally, our ability to pay cash to the holders of
the Notes upon a repurchase may be limited by our then existing
financial resources.
We
must refinance existing indebtedness prior to the maturity of
the Notes and our failure to do so could have a material adverse
effect.
The senior credit facility is scheduled to mature on
June 30, 2012, before the final maturity of the Notes.
While we expect to refinance this indebtedness prior to or upon
maturity, we may not be able to refinance this indebtedness, or
refinancing may not be available on commercially reasonable
terms. The financial terms or covenants of any new credit
facility
and/or other
indebtedness may not be as favorable as those under our senior
credit facility. Our ability to complete a refinancing of the
loans under our senior credit facility prior to its respective
maturity is subject to a number of conditions beyond our
control. If we are unable to refinance the indebtedness under
our senior credit facility, our alternatives would consist of
negotiating an extension of our senior credit facility with the
lenders and seeking or raising new capital. If we were
unsuccessful, the
16
lenders under our senior credit facility could demand repayment
of the indebtedness owed to them on the relevant maturity date.
As a result, our ability to pay the principal of and interest on
the Notes would be adversely affected.
Your
ability to transfer the Notes may be limited by the absence of
an active trading market, and an active trading market for the
Notes may not develop.
The Notes are new issues of securities for which there is no
established public market. We do not intend to have the Notes
listed on a national securities exchange.
Therefore, an active market for the Notes may not develop, and
if a market for the Notes does develop, that market may not
continue. Historically, the market for non-investment grade debt
has been subject to disruptions that have caused substantial
volatility in the prices of securities similar to the Notes. The
market, if any, for the Notes may be subject to similar
disruptions, and any such disruptions may adversely affect the
prices at which you may sell your Notes.
The
trading prices for the Notes will be directly affected by many
factors, including our credit rating.
Credit rating agencies continually revise their ratings for
companies they follow, including us. Any ratings downgrade could
adversely affect the trading price of the Notes, or the trading
market for the Notes, to the extent a trading market for the
Notes develops. The condition of the financial and credit
markets and prevailing interest rates have fluctuated in the
past and are likely to fluctuate in the future and any
fluctuation may impact the trading price of the Notes.
Under
certain circumstances a court could cancel the Notes or the
related guarantees under fraudulent conveyance
laws.
Our issuance of the Notes and the related guarantees may be
subject to review under federal or state fraudulent transfer
law. If we become a debtor in a case under the
U.S. Bankruptcy Code or encounter other financial
difficulty, a court might avoid (that is, cancel) our
obligations under the Notes. The court might do so, if it found
that, when we issued the Notes, (a) we received less than
reasonably equivalent value or fair consideration; and
(b) we either: (1) were or were rendered insolvent;
(2) were left with inadequate capital to conduct our
business; or (3) believed or reasonably should have
believed that we would incur debts beyond our ability to pay.
The court could also avoid the Notes without regard to factors
(a) and (b) if it found that we issued the Notes with
actual intent to hinder, delay or defraud our creditors.
Similarly, if one of our guarantors becomes a debtor in a case
under the U.S. Bankruptcy Code or encounters other
financial difficulty, a court might cancel its guarantee if it
finds that when such guarantor issued its guarantee (or in some
jurisdictions, when payments became due under the guarantee),
factors (a) and (b) above applied to such guarantor,
such guarantor was a defendant in an action for money damages or
had a judgment for money damages docketed against it (if, in
either case, after final judgment the judgment is unsatisfied),
or if it found that such guarantor issued its guarantee with
actual intent to hinder, delay or defraud its creditors.
In addition, a court could avoid any payment by us or any
guarantor pursuant to the Notes or a guarantee, and require the
return of any payment to us or the guarantor, as the case may
be, or to a fund for the benefit of the creditors of us or the
guarantor. In addition, under the circumstances described above,
a court could subordinate rather than avoid obligations under
the Notes or the guarantees. If the court were to avoid any
guarantee, we cannot assure you that funds would be available to
pay the Notes from another guarantor or from any other source.
The test for determining solvency for purposes of the foregoing
will vary depending on the law of the jurisdiction being
applied. In general, a court would consider an entity insolvent
either if the sum of its existing debts exceeds the fair value
of all of its property, or its assets present fair
saleable value is less than the amount required to pay the
probable liability on its existing debts as they become due. For
this analysis, debts includes contingent and
unliquidated debts.
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The indenture governing the Notes limits the liability of each
guarantor on its guarantee to the maximum amount that such
guarantor can incur without risk that its guarantee will be
subject to avoidance as a fraudulent transfer. We cannot assure
you that this limitation will protect such guarantees from
fraudulent transfer challenges or, if it does, that the
remaining amount due and collectible under the guarantees would
suffice, if necessary, to pay the Notes in full when due.
If a court avoided our obligations under the Notes and the
obligations of all of the guarantors under their guarantees, you
would cease to be our creditor or creditor of the guarantors
with respect to such obligations and likely have no source from
which to recover amounts due under the Notes. Even if the
guarantee of a guarantor is not avoided as a fraudulent
transfer, a court may subordinate the guarantee to that
guarantors other debt. In that event, the guarantees would
be structurally subordinated to all of that guarantors
other debt.
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 and the guarantors existing and
future senior debt under our senior credit facility, any other
obligations under our senior credit facility and all hedging
obligations related thereto, but senior in right of payment to
the Existing Notes and any of our and our guarantors
existing and future subordinated obligations. 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 senior credit facility, or may incur in the future to
the extent of the value of the assets securing that debt.
In the event that we 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
Notes Subordination.
As of December 31, 2010, the Notes and the guarantees were
ranked junior to approximately $353.7 million of
indebtedness under our senior credit facility. See
Description of Notes Certain Covenants
and Description of Certain Other Indebtedness.
U.S.
Holders will be required to pay U.S. federal income tax on
original issue discount on the Notes.
The Old Notes were issued with original issue discount for
U.S. federal income tax purposes. Consequently, if you are
a U.S. Holder (as defined in Certain
U.S. Federal Income Tax Considerations herein) you
will be required to include such original issue discount in
gross income on a constant yield to maturity basis in advance of
the receipt of any cash payment to which such income is
attributable. You should read the discussion under the
Certain U.S. Federal Income Tax
Considerations Tax Consequences to
U.S. Holders Original Issue Discount for
further information about original issue discount on the Notes.
Risks
Related to the Old Notes
Holders
of Old Notes who fail to exchange their Old Notes in the
exchange offer will continue to be subject to restrictions on
transfer.
If you do not exchange your Old Notes for Exchange Notes in the
exchange offer, you will continue to be subject to the
restrictions on transfer applicable to the Old Notes. The
restrictions on transfer of your Old Notes arise because we
issued the Old Notes under exemptions from, or in transactions
not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, you may
only
18
offer or sell the Old Notes if they are registered under the
Securities Act and applicable state securities laws, or offered
and sold under an exemption from these requirements. We do not
plan to register the Old Notes under the Securities Act. For
further information regarding the consequences of failing to
tender your Old Notes in the exchange offer, see the discussion
below under the caption Exchange Offer
Consequences of Failure to Exchange.
You
must comply with the exchange offer procedures in order to
receive new, freely tradable Exchange Notes.
Delivery of Exchange Notes in exchange for Old Notes tendered
and accepted for exchange pursuant to the exchange offer will be
made only after timely receipt by the exchange agent of
book-entry transfer of Old Notes into the exchange agents
account at DTC, as depositary, including an agents message
(as defined herein). We are not required to notify you of
defects or irregularities in tenders of Old Notes for exchange.
Old Notes that are not tendered or that are tendered but we do
not accept for exchange will, following consummation of the
exchange offer, continue to be subject to the existing transfer
restrictions under the Securities Act and, upon consummation of
the exchange offer, certain registration and other rights under
the Registration Rights Agreement will terminate. See
Exchange Offer Procedures for Tendering Old
Notes and Exchange Offer Consequences of
Failure to Exchange.
Some
holders who exchange their Old Notes may be deemed to be
underwriters, and these holders will be required to comply with
the registration and prospectus delivery requirements in
connection with any resale transaction.
If you exchange your Old Notes in the exchange offer for the
purpose of participating in a distribution of the Exchange
Notes, you 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.
Risks
Related to the Nature and Operations of Our Business
Our
independent registered public accounting firm recently issued an
opinion expressing substantial doubt as to our ability to
continue as a going concern and, while the issues giving rise to
that opinion have been cured, a similar issue could
arise.
In their report dated August 23, 2010, which was included
elsewhere in this prospectus along with our audited financial
statements, our independent registered public accounting firm
issued an opinion expressing substantial doubt as to our ability
to continue as a going concern because certain covenant
violations under our credit agreements could have resulted in
significant portions of our outstanding debt becoming callable
by our lenders. These violations were cured as a part of the
Transactions. Our audited financial statements have been
prepared assuming that we will continue as a going concern
(which contemplates the realization of assets and discharge of
liabilities in the normal course of business for the foreseeable
future). Our senior credit facility, as amended and restated,
matures on June 30, 2012. Under GAAP, debt coming due
within one year must be classified as a current liability.
Therefore, unless we have refinanced our senior credit facility
prior to July 1, 2011, we may be required to reclassify the
senior credit facility as current indebtedness under GAAP. In
such an event, our independent registered public accounting firm
may once again express doubt as to our ability to continue as a
going concern. We are currently evaluating a number of
alternatives with respect to the upcoming maturity of our senior
credit facility. Our ability to consummate any such alternatives
will depend on prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors, some
of which may be beyond our control. Accordingly, there is no
assurance that the Company will successfully enter into any
definitive agreements for such financing alternatives.
Our
corporate debt rating has suffered downgrades in the past and we
could suffer further downgrades.
On a continuing basis, credit rating agencies such as
Moodys and S&P evaluate our debt. On
November 24, 2010, S&P raised the Companys
long-term corporate credit rating to CCC+ from
SD with a positive rating outlook. In addition,
S&P raised our issue-level rating on our senior secured
debt to B from
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CCC+. S&P also rated our Old Notes
CCC-, rated the remaining portion of our 2013 Notes
CCC- and affirmed a CCC- issue-level
rating on the remaining portion of our 2011 Notes.
S&Ps actions reflected our successful amendment of
our senior credit facility and the exchange offer for our
Existing Notes. S&P noted the transactions eliminated
near-term refinancing risk of our senior secured debt, which was
due to mature January 1, 2011 if we were unable to
refinance our 2011 Notes prior to that date. S&P further
noted that following the amendment, we were able to cure the
default on our 2013 Notes by paying defaulted interest resulting
from the August 15, 2010 nonpayment.
On June 17, 2010, Moodys placed on review the Company
and its debt for a possible upgrade. On August 18, 2010,
Moodys placed us on review for a possible downgrade on our
corporate family rating and probability of default rating. The
review was driven by our announcement that the lenders under our
Senior Credit Facility blocked our August 16, 2010 interest
payment on the 2013 Notes. The lenders under our Senior Credit
Facility had the ability to block the interest payment as we are
in violation of the total leverage covenant under our Senior
Credit Facility. On September 20, 2010, Moodys
repositioned our probability of default rating to Caa2/LD from
Caa2, following the expiration of the
30-day grace
period under the 2013 Notes.
On July 20, 2010, S&P revised our CCC+ corporate
credit rating outlook from positive to developing. Revision was
due to uncertainty surrounding the timing and structure of a
potential refinancing. On June 17, 2010 S&P revised
our CCC+ corporate credit rating outlook from negative to
positive. Revision was due to our announcement of potential
refinancing transactions and the proposed increase of our
ownership percentage in TV One. On August 24, 2010,
S&P lowered our corporate credit rating from CCC+ to SD and
lowered the issue-level rating on our 2013 Notes from CCC- to D.
On June 24, 2009, S&P lowered our corporate credit
rating to CCC+ from B- and the issue-level rating on our
$800.0 million secured credit facility to CCC+ from B-. On
March 3, 2009, S&P lowered our corporate credit rating
to B- from B and the issue-level rating on our
$800.0 million secured credit facility to B- from BB-.
While noting that our rating outlook was negative, the ratings
downgrade reflects concern over the Companys ability to
maintain compliance with financial covenants due to weak radio
advertising demand. On May 12, 2009, Moodys
downgraded our corporate family rating to Caa1 from B1. On
November 3, 2008, Moodys placed on review the Company
and its debt for a possible downgrade. The review was prompted
by heightened concerns that the radio broadcast sector will
likely face significant revenue and cash flow deterioration
given weakness in the U.S. economy.
Although reductions in our bond ratings may not have an
immediate impact on our cost of debt or liquidity, they may
impact our future cost of debt and liquidity. Increased debt
levels
and/or
decreased earnings could result in further downgrades in our
credit ratings, which, in turn, could impede our access to the
debt markets
and/or raise
our long-term debt borrowing rates. Our ability to use debt to
fund major new acquisitions or new business initiatives could
also be limited.
The
state and condition of the global financial markets and the U.S.
economy may have an unpredictable impact on our business and
financial condition.
The global equity and credit markets have recently been
experiencing unprecedented levels of volatility and disruption.
In some cases, the markets have produced downward pressure on
stock prices and limited credit capacity for certain companies
without regard to those companies underlying financial
strength. In addition, deterioration in the global and
U.S. economies has produced a drop in consumer confidence
and spending, which has impacted corporate profits and resulted
in cutbacks in advertising budgets. If the economic
deterioration
and/or
current levels of market disruption and volatility continue or
worsen, there can be no assurance that we will not experience a
further adverse effect, which may be material, on our business,
financial condition, results of operations and our ability to
access capital. For example, any worsening of the economy, a
continuation of market volatility or further weakness in
consumer spending could continue to adversely impact the overall
demand for advertising. Such a result could have a negative
effect on our revenues and results of operations. In addition,
our ability to access the capital markets may be severely
20
restricted at a time when we would like, or need, to do so,
which could have an impact on our flexibility to react to
changing economic and business conditions.
Any
worsening or deterioration of the economys ongoing gradual
recovery could negatively impact our ability to meet our cash
needs and our ability to maintain compliance with our debt
covenants.
We believe will be able to maintain compliance with the
covenants contained in our senior credit facility, as amended in
connection with the Transactions, for the foreseeable future.
This belief is based on our most recent revenue, operating
income and cash flow projections. Our projections, however, are
highly dependent on the continuation of the recently improving
economic and advertising environments, and any adverse
fluctuations, or other unforeseen circumstances, may negatively
impact our operations beyond those assumed by management. If
economic conditions do not continue to improve, or deteriorate,
or if other adverse factors outside our control arise, our
operations could be negatively impacted, which could prevent us
from maintaining compliance with our debt covenants. If it
appears that we could not meet our liquidity needs or that
noncompliance with debt covenants is likely, we would implement
several remedial measures, which could include further operating
cost and capital expenditure reductions and deferrals, seeking
our share of distributions from TV One to the extent not already
received (which requires the consent of third parties and cannot
be assured)
and/or
further de-leveraging actions, which may include repurchases of
discounted senior subordinated notes and other debt repayments,
subject to our available liquidity and contractual ability to
make such repurchases.
We
have incurred net losses over the past three years which could
continue into the future.
We have reported net losses in our consolidated statements of
operations over the past three years, due mostly in part to
recording non-cash impairment charges for write-downs to radio
broadcasting licenses and goodwill, net losses incurred for
discontinued operations and revenue declines caused by weakened
advertising demand resulting from the current economic crisis.
For the fiscal years ended December 31, 2009, 2008 and
2007, we experienced net losses of approximately
$52.9 million, $302.9 million, and
$391.5 million, respectively. These results have had a
negative impact on our financial condition and could be
exacerbated given the current economic climate. If these trends
continue in the future, it could have a material adverse affect
on our financial condition.
Our
revenue is substantially dependent on spending and allocation
decisions by advertisers, and seasonality and/or weakening
economic conditions may have an impact upon our
business.
Substantially all of our revenue is derived from sales of
advertisements and program sponsorships to local and national
advertisers. Cutbacks or changes in advertisers spending
priorities
and/or
allocations across different types of media may affect our
results. We do not obtain long-term commitments from our
advertisers and advertisers may cancel, reduce or postpone
advertisements without penalty, which could adversely affect our
revenue. Seasonal net revenue fluctuations are common in the
media industries and are due primarily to fluctuations in
advertising expenditures by local and national advertisers. In
addition, advertising revenues in even-numbered years tend to
benefit from advertising placed by candidates for political
offices. The effects of such seasonality, combined with the
severe structural changes that have occurred in the
U.S. economy, make it difficult to estimate future
operating results based on the previous results of any specific
quarter and may adversely affect operating results.
Advertising expenditures also tend to be cyclical and reflect
general economic conditions both nationally and locally. Because
we derive a substantial portion of our revenues from the sale of
advertising, a decline or delay in advertising expenditures
could reduce our revenues or hinder our ability to increase
these revenues. Advertising expenditures by companies in certain
sectors of the economy, including the automotive, financial,
entertainment and retail industries, represent a significant
portion of our advertising revenues. Structural changes (such as
the decreased number of automotive dealers and brands) and
business failures in these industries have affected our revenues
and continued structural changes, consolidation or business
failures in any of these industries could have significant
further impact on our revenues. Any political, economic, social
or technological change resulting in a significant reduction in
the advertising spending of these sectors could
21
adversely affect our advertising revenues or its ability to
increase such revenues. In addition, because many of the
products and services offered by our advertisers are largely
discretionary items, weakening economic conditions could reduce
the consumption of such products and services and, thus, reduce
advertising for such products and services. Changes in
advertisers spending priorities during economic cycles
(such as the current cycle) may also affect our results.
Disasters, acts of terrorism, political uncertainty or
hostilities also could lead to a reduction in advertising
expenditures as a result of uninterrupted news coverage and
economic uncertainty.
Pricing
for advertising may continue to face downward
pressure.
During 2009 and continuing into 2010, in response to weakness
and fluctuations in the economy, advertisers increasingly
purchased lower-priced inventory rather than higher-priced
inventory, and increasingly demanded lower pricing, in addition
to increasingly purchasing later and through advertising
inventory from third-party advertising networks. If advertisers
continue to demand lower-priced inventory
and/or
otherwise continue to put downward pressure on pricing, our
operating margins and ability to generate revenue could be
further adversely affected.
Our
success is dependant upon audience acceptance of our content,
particularly our radio programs, which is difficult to
predict.
Media and radio content production and distribution are
inherently risky businesses because the revenues derived from
the production and distribution of media content or a radio
program, and the licensing of rights to the intellectual
property associated with the content or program, depend
primarily upon their acceptance by the public, which is
difficult to predict. The commercial success of content or a
program also depends upon the quality and acceptance of other
competing programs released into the marketplace at or near the
same time, the availability of alternative forms of
entertainment and leisure time activities, general economic
conditions and other tangible and intangible factors, all of
which are difficult to predict. Finally, the costs of content
and programming may change significantly if new performance
royalties (such as those that have been proposed by members of
Congress from time to time) are imposed upon radio broadcasters
or internet operators and such changes could have a material
impact upon our business.
Ratings for broadcast stations and traffic or visitors on a
particular website are also factors that are weighed when
advertisers determine which outlets to use and in determining
the advertising rates that the outlet receives. Poor ratings or
traffic levels can lead to a reduction in pricing and
advertising revenues. For example, if there is an event causing
a change of programming at one of our stations, there could be
no assurance that any replacement programming would generate the
same level of ratings, revenues or profitability as the previous
programming. In addition, changes in ratings methodology and
technology could adversely impact our ratings and negatively
affect our advertising revenues.
Arbitron, the leading supplier of ratings data for
U.S. radio markets, has developed technology to passively
collect data for its ratings service. The Portable People
Metertm
(the
PPMtm)
is a small, pager-sized device that does not require any active
manipulation by the end user and is capable of automatically
measuring radio, television, Internet, satellite radio and
satellite television signals that are encoded for the service by
the broadcaster. Our Atlanta, Baltimore, Cincinnati, Cleveland,
Dallas, Detroit, Houston, Philadelphia, St. Louis and
Washington, DC market ratings are being measured by the
PPMtm.
In each market, there has been a compression in the relative
ratings of all stations in the market, enhancing the competitive
pressure within the market for advertising dollars. In addition,
ratings for certain stations when measured by the
PPMtm
as opposed to the traditional diary methodology can be
materially different.
PPMtm
based ratings are scheduled to be introduced in all of our other
markets, except Richmond. Due to its smaller market size,
Richmond will remain on the diary methodology. Because of the
competitive factors we face and the introduction of the
PPMtm,
we cannot assure investors that we will be able to maintain or
increase our current audience ratings and advertising revenue.
22
A
disproportionate share of our net revenue comes from radio
stations in a small number of geographic markets and from Reach
Media.
Within our core radio business, four of the 16 markets in which
we operate radio stations accounted for approximately 50.1% of
our radio station net revenue for the year ended
December 31, 2009. Revenue from the operations of Reach
Media, along with revenue from both the Houston and Washington,
DC markets accounted for approximately 40.8% of our total
consolidated net revenue for the year ended December 31,
2009. Adverse events or conditions (economic or otherwise) could
lead to declines in the contribution of Reach Media or to
declines in one or more of the significant contributing markets
(Houston, Washington, DC, Atlanta and Baltimore), which could
have a material adverse effect on our overall financial
performance and results of operations.
Our
relationship with a significant customer has changed and we no
longer have a guaranteed level of revenue from that
customer.
We have historically derived a significant portion of our net
revenue from a single customer, Radio Networks, LLC (Radio
Networks), a media representation firm which is owned by
Citadel. Prior to January 2010, Reach Media, a subsidiary of
which we own 53.5%, derived a substantial majority of its net
revenue from a sales representative agreement (the Sales
Representation Agreement) with Radio Networks. The Sales
Representation Agreement called for Radio Networks to act as
Reach Medias sales representative primarily for
advertising airing on over 106 affiliate radio stations
broadcasting the Tom Joyner Morning Show, and to also serve as
its sales representative for internet and events sales. The
Sales Representation Agreement provided for Radio Networks to
retain a portion of Reach Medias advertising revenues only
after satisfying certain minimum revenue guarantee obligations
to Reach Media. Further, but to a lesser extent, revenue for
Company owned radio stations was also generated from Radio
Networks for barter agreements whereby we provided advertising
time in exchange for programming content (the RN Barter
Revenue). Net revenue attributable to the Sales
Representation Agreement and the RN Barter Revenue began to
account for more than 10% of our total consolidated net revenues
as of the fiscal year ended December 31, 2006, and during
the years ended December 31, 2009, 2008 and 2007 accounted
for 11.9%, 10.6% and 10.8%, respectively, of our total
consolidated net revenues.
During the quarter ended September 30, 2009, Reach Media
and Citadel reached an agreement whereby the revenue guarantee
obligation to Reach Media for November and December 2009 was
reduced by $1.0 million each in exchange for prepayment of
the reduced revenue guarantee obligation for fourth quarter of
2009. Further, the Sales Representation Agreement expired in
accordance with its terms on December 31, 2009. Reach Media
continues to retain Radio Networks in a sales representation
capacity; however, Radio Networks is now compensated on a
commission basis and Reach Media does not benefit from any
guaranteed revenue under its current arrangement with Radio
Networks. Further, Reach Media has established its own sales
force that is primarily selling in-program advertising
inventory. However, there is no assurance that we will be able
to replace the lost guaranteed revenue with revenues from new or
other existing customers.
We may
lose audience share and advertising revenue to our
competitors.
Our radio stations and other media properties compete for
audiences and advertising revenue with other radio stations and
station groups and other media such as broadcast television,
newspapers, magazines, cable television, satellite television,
satellite radio, outdoor advertising, the internet and direct
mail. Adverse changes in audience ratings, internet traffic and
market shares could have a material adverse effect on our
revenue. Larger media companies with more financial resources
than we have may enter the markets in which we operate causing
competitive pressure. Further, other media and broadcast
companies may change their programming format or engage in
aggressive promotional campaigns to compete directly with our
media properties for audiences and advertisers. This competition
could result in lower ratings or traffic and, hence, lower
advertising revenue for us or cause us to increase promotion and
other expenses and, consequently, lower our earnings and cash
flow. Changes in population, demographics, audience tastes and
other factors beyond our control, including the impact of new
audience measurement technology, could also cause changes in
audience ratings or market share. Failure by us to respond
successfully to these changes could have an
23
adverse effect on our business and financial performance. We
cannot assure you that we will be able to maintain or increase
our current audience ratings and advertising revenue.
If we
are unable to successfully identify, acquire and integrate
businesses pursuant to our diversification strategy, our
business and prospects may be adversely impacted.
We are pursuing a strategy of acquiring and investing in other
forms of media that complement our core radio business in an
effort to grow and diversify our business and revenue streams.
This strategy depends on our ability to find suitable
opportunities and obtain acceptable financing. Negotiating
transactions and integrating an acquired business could result
in significant costs, including significant use of
managements time and resources.
Our diversification strategy partially depends on our ability to
identify attractive media properties at reasonable prices and to
divest properties that are no longer strategic to our business.
Further, entering new businesses may subject us to additional
risk factors. Some of the material risks that could hinder our
ability to implement this strategy include:
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inability to find buyers for media properties we target for sale
at attractive prices due to decreasing market prices for radio
stations or the inability to obtain credit in the current
economic environment;
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failure or delays in completing acquisitions or divestitures due
to difficulties in obtaining required regulatory approval,
including possible difficulties by the seller or buyer in
obtaining antitrust approval for acquisitions in markets where
we already own multiple stations or establishing compliance with
broadcast ownership rules;
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reduction in the number of suitable acquisition targets due to
increased competition for acquisitions;
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we may lose key employees of acquired companies or stations;
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difficulty in integrating operations and systems and managing a
diverse media business;
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failure of some acquisitions to prove profitable or generate
sufficient cash flow; and
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inability to finance acquisitions on acceptable terms, through
incurring debt or issuing stock.
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We can provide no assurance that our diversification strategy
will be successful.
Reach
Media noncontrolling interest shareholders put rights may
have an impact upon our business and indebtedness.
On February 28, 2012 and each anniversary thereafter, for a
30-day
period after each such date, the noncontrolling interest
shareholders of Reach Media have the right to require Reach
Media to purchase all or a portion of their shares at the then
current fair market value for such shares. The purchase price
for such shares may be paid in cash
and/or
registered Class D Common Stock of Radio One, at the
discretion of Radio One. If we chose to pay for the
noncontrolling interest in cash, our ability to fund business
operations, new acquisitions or new business initiatives could
be limited.
We
must respond to the rapid changes in technology, services and
standards in order to remain competitive.
Technological standards across our media properties are evolving
and new media technologies are emerging. We cannot assure you
that we will have the resources to acquire new technologies or
to introduce new services to compete with these new
technologies. Several new media technologies are being, or have
been, developed, including the following:
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satellite delivered digital audio radio service, which has
resulted in the introduction of several new satellite radio
services with sound quality equivalent to that of compact discs;
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audio programming by cable television systems, direct broadcast
satellite systems, internet content providers and other digital
audio broadcast formats; and
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digital audio and video content available for listening
and/or
viewing on the internet
and/or
available for downloading to portable devices (including audio
via Wi-Fi, mobile phones, smart phones, netbooks and similar
portable devices, WiMAX, the Internet and MP3 players).
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New media has resulted in fragmentation in the advertising
market, and we cannot predict the effect, if any, that
additional competition arising from new technologies may have on
the radio broadcasting industry, our multi-media business or on
our financial condition and results of operations, which may be
adversely affected if we are not able to adapt successfully to
these new media technologies.
The
loss of key personnel, including certain on-air talent, could
disrupt the management and operations of our
business.
Our business depends upon the continued efforts, abilities and
expertise of our executive officers and other key employees,
including certain on-air personalities. We believe that the
combination of skills and experience possessed by our executive
officers could be difficult to replace, and that the loss of one
or more of them could have a material adverse effect on us,
including the impairment of our ability to execute our business
strategy. In addition, several of our on-air personalities and
syndicated radio programs hosts have large loyal audiences in
their respective broadcast areas and may be significantly
responsible for the ranking of a station. The loss of such
on-air personalities could impact the ability of the station to
sell advertising and our ability to derive revenue from
syndicating programs hosted by them. We cannot be assured that
these individuals will remain with us or will retain their
current audiences or ratings.
As a
part of our diversification strategy, we have placed emphasis on
building our internet businesses. Failure to fulfill this
undertaking may adversely affect our brands and business
prospects.
Our diversification strategy depends to a significant degree
upon the development of our internet businesses. In order for
our internet businesses to grow and succeed over the long-term,
we must, among other things:
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significantly increase our online traffic and revenue;
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attract and retain a base of frequent visitors to our web sites;
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expand the content, products and tools we offer on our web sites;
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respond to competitive developments while maintaining a distinct
identity across each of our online brands;
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attract and retain talent for critical positions;
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maintain and form relationships with strategic partners to
attract more consumers;
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continue to develop and upgrade our technologies; and
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bring new product features to market in a timely manner.
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We cannot assure that we will be successful in achieving these
and other necessary objectives. If we are not successful in
achieving these objectives, our business, financial condition
and prospects could be adversely affected.
If our
interactive unit does not continue to develop and offer
compelling and differentiated content, products and services,
our advertising revenues could be adversely
affected.
In order to attract internet consumers and generate increased
activity on our internet properties, we believe that we must
offer compelling and differentiated content, products and
services. However, acquiring, developing and offering such
content, products and services may require significant costs and
time to develop, while consumer tastes may be difficult to
predict and are subject to rapid change. If we are unable to
provide content, products and services that are sufficiently
attractive to our internet users, we may not be able to generate
the increases in activity necessary to generate increased
advertising revenues. In addition, although
25
we have access to certain content provided by our other
businesses, we may be required to make substantial payments to
license such content. Many of our content arrangements with
third parties are non-exclusive, so competitors may be able to
offer similar or identical content. If we are not able to
acquire or develop compelling content and do so at reasonable
prices, or if other companies offer content that is similar to
that provided by our interactive unit, we may not be able to
attract and increase the engagement of internet consumers on our
internet properties.
Continued growth in our internet advertising business also
depends on our ability to continue offering a competitive and
distinctive range of advertising products and services for
advertisers and publishers and our ability to maintain or
increase prices for our advertising products and services.
Continuing to develop and improve these products and services
may require significant time and costs. If we cannot continue to
develop and improve its advertising products and services or if
prices for its advertising products and services decrease, our
internet advertising revenues could be adversely affected.
More
individuals are using devices other than personal and laptop
computers to access and use the internet, and if we cannot make
our products and services available and attractive to consumers
via these alternative devices, our internet advertising revenues
could be adversely affected.
Internet users are increasingly accessing and using the internet
through devices other than a personal or laptop computer, such
as personal digital assistants or mobile telephones, which
differ from computers with respect to memory, functionality,
resolution and screen size. In order for consumers to access and
use our products and services via these alternative devices, we
must ensure that our products and services are technologically
compatible with such devices. We also must secure arrangements
with device manufacturers and wireless carriers in order to have
placement and functionality on the alternative devices and to
more effectively reach consumers. If we cannot effectively make
our products and services available on alternative devices,
fewer internet consumers may access and use our products and
services and our advertising revenue may be negatively affected.
Unrelated
third parties may claim that we infringe on their rights based
on the nature and content of information posted on websites
maintained by us.
We host internet services that enable individuals to exchange
information, generate content, comment on our content, and
engage in various online activities. The law relating to the
liability of providers of these online services for activities
of their users is currently unsettled both within the
U.S. and internationally. While we monitor postings to such
websites, claims may be brought against us for defamation,
negligence, copyright or trademark infringement, unlawful
activity, tort, including personal injury, fraud, or other
theories based on the nature and content of information that may
be posted online or generated by our users. Our defense of such
actions could be costly and involve significant time and
attention of our management and other resources.
If we
are unable to protect our domain names, our reputation and
brands could be adversely affected.
We currently hold various domain name registrations relating to
our brands, including radio-one.com and interactiveone.com. The
registration and maintenance of domain names generally are
regulated by governmental agencies and their designees.
Governing bodies may establish additional top-level domains,
appoint additional domain name registrars or modify the
requirements for holding domain names. As a result, we may be
unable to register or maintain relevant domain names. We may be
unable, without significant cost or at all, to prevent third
parties from registering domain names that are similar to,
infringe upon or otherwise decrease the value of, our trademarks
and other proprietary rights. Failure to protect our domain
names could adversely affect our reputation and brands, and make
it more difficult for users to find our websites and our
services.
26
Future
asset impairment to the carrying values of our FCC licenses and
goodwill could adversely impact our results of operations and
net worth.
FCC licenses and goodwill totaled approximately
$836.2 million, or 80.7% of our total assets, at
December 31, 2009, and is primarily attributable to
accounting for acquisitions in past years. We are required by
Accounting Standards Codification (ASC) 350,
Intangibles Goodwill and Other,
to test our goodwill and indefinite-lived intangible assets for
impairment at least annually, which we have traditionally done
in the fourth quarter, or on an interim basis when events or
changes in circumstances suggest impairment may have occurred.
Impairment is measured as the excess of the carrying value of
the goodwill or indefinite-lived intangible asset over its fair
value. Impairment may result from deterioration in our
performance, changes in anticipated future cash flows, changes
in business plans, adverse economic or market conditions,
adverse changes in applicable laws and regulations, or other
factors. The amount of any impairment must be expensed as a
charge to operations. Fair values of FCC licenses and goodwill
have been estimated using the income approach, which involves a
10-year
model that incorporates several judgmental assumptions about
projected revenue growth, future operating margins, discount
rates and terminal values. There are inherent uncertainties
related to these assumptions and our judgment in applying them
to the impairment analysis.
As discussed in Note 6 to our audited financial statements
included elsewhere in this prospectus, the lingering economic
downturn and limited credit environment has weakened advertising
demand in general, and has led to declining radio and online
advertising, reduced growth expectations, deteriorating profits
and cash flows, debt downgrades and fewer sales transactions
with lower multiples. We performed interim testing as of
February 28, 2009 for all of our radio markets and as of
August 31, 2009 for two of our radio markets, Reach Media
and CCI. The outcome of our February 2009 interim testing was to
record impairment charges of approximately $49.0 million
against radio broadcasting licenses in 11 of our 16 markets
during the first quarter of 2009. The results of our August 2009
interim testing indicated carrying values for the two radio
markets tested, Reach Media and CCI, had not been impaired. The
results of our annual impairment testing in October 2009 were to
record additional impairment charges of approximately
$16.1 million against radio broadcasting licenses in seven
of our 16 radio markets and to impair the remaining goodwill of
$628,000 in another one of our markets for that same amount.
Similar to our August 2009 interim impairment testing, our
October 2009 annual impairment testing indicated the carrying
values for Reach Media and CCI had not been impaired. For the
years ended December 31, 2009, 2008 and 2007, we recorded
impairment charges against radio broadcasting licenses and
goodwill of approximately $65.6 million,
$420.2 million and $211.1 million, respectively.
Changes in certain events or circumstances could result in
changes to our estimated fair values, and may result in further
write-downs to the carrying values of these assets. Additional
impairment charges could adversely affect our financial results,
financial ratios and could limit our ability to obtain financing
in the future.
We
could incur adverse effects from our voluntary review of stock
option grants and resulting financial
restatements.
As described in the Explanatory Note and Note 2 to the
consolidated financial statements filed with our
Form 10-K
for the year ended December 31, 2006, we recorded
additional stock-based compensation expense and related tax
effects with regard to certain past stock option grants, and
restated certain previously filed financial statements included
in that
Form 10-K.
In February 2007, we received a letter of informal inquiry from
the SEC regarding the review of our stock option accounting.
While we have not heard further from the SEC on this matter to
date, should the SEC further inquire, we would fully cooperate
with the SECs inquiry. We are unable to predict whether a
formal inquiry will be initiated or what consequences any
further inquiry may have on us. We are unable to predict the
likelihood of or potential outcomes from litigation, regulatory
proceedings or government enforcement actions relating to our
past stock option practices. The resolution of these matters
could be time-consuming and expensive, further distract
management from other business concerns and harm our business.
Furthermore, if we were subject to adverse findings in
litigation, regulatory proceedings or government enforcement
actions, we could be required to pay damages or penalties or
have other remedies imposed, which could harm our business and
financial condition.
27
While we believe that we have made appropriate judgments in
determining the correct measurement dates for our historical
stock option grants, the SEC may disagree with the manner in
which we have accounted for and reported the financial impact.
Accordingly, there is a risk we may have to further restate
prior financial statements, amend prior filings with the SEC, or
take other actions not currently contemplated.
Risks
Related to Our Investment in TV One
A
decline in advertising expenditures could cause TV Ones
revenues and operating results to decline significantly in any
given period.
TV One derives substantial revenues from the sale of
advertising. A decline in the economic prospects of advertisers
or the economy in general could alter current or prospective
advertisers spending priorities. Disasters, acts of
terrorism, political uncertainty or hostilities could lead to a
reduction in advertising expenditures as a result of economic
uncertainty. Advertising expenditures may also be affected by
increasing competition for the leisure time of audiences. In
addition, advertising expenditures by companies in certain
sectors of the economy, including the automotive and financial
segments, represent a significant portion of TV Ones
advertising revenues. Any political, economic, social or
technological change resulting in a reduction in these
sectors advertising expenditures may adversely affect TV
Ones revenue. Advertisers willingness to purchase
advertising may also be affected by a decline in audience
ratings for TV Ones programming, the inability of TV One
to retain the rights to popular programming, increasing audience
fragmentation caused by the proliferation of new media formats,
including other cable networks, the internet and
video-on-demand
and the deployment of portable digital devices and new
technologies which allow consumers to time shift programming,
make and store digital copies and skip or fast-forward through
advertisements. Any reduction in advertising expenditures could
have an adverse effect on TV Ones revenues and results of
operations.
TV
Ones success is dependent upon audience acceptance of its
content, which is difficult to predict.
Television content production is inherently a risky business
because the revenues derived from the production and
distribution of a television program and the licensing of rights
to the associated intellectual property, depend primarily upon
their acceptance by the public, which is difficult to predict.
The commercial success of a television program also depends upon
the quality and acceptance of other competing programs in the
marketplace at or near the same time, the availability of
alternative forms of entertainment and leisure time activities,
general economic conditions and other tangible and intangible
factors, all of which are difficult to predict. Rating points
are also factors that are weighed when determining the
advertising rates that TV One receives. The use of new ratings
technologies and measurements could have an impact on TV
Ones program ratings. Poor ratings can lead to a reduction
in pricing and advertising spending. Consequently, low public
acceptance of TV Ones content may have an adverse effect
on TV Ones results of operations.
The
loss of affiliation agreements could materially adversely affect
TV Ones results of operations.
TV One is dependent upon the maintenance of affiliation
agreements with cable and direct broadcast distributors for its
revenues, and there can be no assurance that these agreements
will be renewed in the future on terms acceptable to such
programmers. The loss of one or more of these arrangements could
reduce the distribution of TV Ones programming services
and reduce revenues from subscriber fees and advertising, as
applicable. Further, the loss of favorable packaging,
positioning, pricing or other marketing opportunities with any
distributor could reduce revenues from subscriber fees. In
addition, consolidation among cable distributors and increased
vertical integration of such distributors into the cable or
broadcast network business have provided more leverage to these
distributors and could adversely affect TV Ones ability to
maintain or obtain distribution for its network programming on
favorable or commercially reasonable terms, or at all.
The
failure or destruction of satellites and transmitter facilities
that TV One depends upon to distribute its programming could
materially adversely affect TV Ones businesses and results
of operations.
TV One uses satellite systems to transmit its programming to
affiliates. The distribution facilities include uplinks,
communications satellites and downlinks. Transmissions may be
disrupted as a result of local disasters
28
including extreme weather that impair on-ground uplinks or
downlinks, or as a result of an impairment of a satellite.
Currently, there are a limited number of communications
satellites available for the transmission of programming. If a
disruption occurs, TV One may not be able to secure alternate
distribution facilities in a timely manner. Failure to secure
alternate distribution facilities in a timely manner could have
a material adverse effect on TV Ones businesses and
results of operations. In addition, TV One uses studio and
transmitter facilities that are subject to damage or
destruction. Failure to restore such facilities in a timely
manner could have a material adverse effect on TV Ones
businesses and results of operations.
TV
Ones operating results are subject to seasonal variations
and other factors.
TV Ones business has experienced and is expected to
continue to experience seasonality due to, among other things,
seasonal advertising patterns and seasonal influences on
peoples viewing habits. Typically, TV One revenue
from advertising increases in the fourth quarter. In addition,
advertising revenues in even-numbered years benefit from
advertising placed by candidates for political offices. The
effects of such seasonality make it difficult to estimate future
operating results based on the previous results of any specific
quarter and may adversely affect operating results.
Economic
conditions may adversely affect TV Ones businesses and
customers.
The U.S. has experienced a slowdown and volatility in its
economy. This downturn could lead to lower consumer and business
spending for TV Ones products and services, particularly
if customers, including advertisers, subscribers, licensees,
retailers, and other consumers of TV Ones offerings and
services, reduce demands for TV Ones products and
services. In addition, in unfavorable economic environments, TV
Ones customers may have difficulties obtaining capital at
adequate or historical levels to finance their ongoing business
and operations and may face insolvency, all of which could
impair their ability to make timely payments and continue
operations. TV One is unable to predict the duration and
severity of weakened economic conditions and such conditions and
resultant effects could adversely impact TV Ones
businesses, operating results, and financial condition.
Increased
programming and content costs may adversely affect TV Ones
profits.
TV One produces and acquires programming (including motion
pictures) and content and incurs costs for all types of creative
talent, including actors, authors, writers and producers as well
as marketing and distribution. An increase in any of these costs
may lead to decreased profitability.
Piracy
of TV Ones programming and other content, including
digital and internet piracy, may decrease revenue received from
the exploitation of TV Ones programming and other content
and adversely affect its businesses and
profitability.
Piracy of programming is prevalent in many parts of the world
and is made easier by the availability of digital copies of
content and technological advances allowing conversion of such
programming and other content into digital formats, which
facilitates the creation, transmission and sharing of high
quality unauthorized copies of TV Ones content. The
proliferation of unauthorized copies and piracy of these
products has an adverse effect on TV Ones businesses and
profitability because these products reduce the revenue that TV
One potentially could receive from the legitimate sale and
distribution of its products and services. In addition, if
piracy were to increase, it would have an adverse effect on TV
Ones businesses and profitability.
Changes
in U.S. communications laws or other regulations may have an
adverse effect on TV Ones business.
The television and distribution industries in the U.S. are
highly regulated by U.S. federal laws and regulations
issued and administered by various federal agencies, including
the FCC. The television broadcasting industry is subject to
extensive regulation by the FCC under the Communications Act.
The U.S. Congress and the FCC currently have under
consideration, and may in the future adopt, new laws,
regulations, and
29
policies regarding a wide variety of matters that could,
directly or indirectly, affect the operation of TV One. For
example, the FCC has initiated a proceeding to examine and
potentially regulate more closely embedded advertising such as
product placement and product integration. Enhanced restrictions
affecting these means of delivering advertising messages may
adversely affect TV Ones advertising revenues. Changes to
the media ownership and other FCC rules may affect the
competitive landscape in ways that could increase the
competition faced by TV One. Proposals have also been advanced
from time to time before the U.S. Congress and the FCC to
extend the program access rules (currently applicable only to
those cable program services which also own or are owned by
cable distribution systems) to all cable program services. TV
Ones ability to obtain the most favorable terms available
for its content could be adversely affected should such an
extension be enacted into law. TV One is unable to predict the
effect that any such laws, regulations or policies may have on
its operations.
Vigorous
enforcement or enhancement of FCC indecency and other program
content rules against the broadcast and cable industries could
have an adverse effect on TV Ones businesses and results
of operations.
The FCCs rules prohibit the broadcast of obscene material
at any time and indecent or profane material on television
broadcast stations between the hours of 6 a.m. and
10 p.m. Broadcasters risk violating the prohibition against
broadcasting indecent material because of the vagueness of the
FCCs indecency/profanity definition, coupled with the
spontaneity of live programming. The FCC vigorously enforces its
indecency rules against the broadcasting industry. The FCC has
stepped up its enforcement activities as they apply to indecency
and has threatened to initiate license revocation proceedings
against broadcast licensees for serious indecency
violations. The FCC has found on a number of occasions that the
content of television broadcasts has contained indecent
material. In such instances, the FCC issued fines or advisory
warnings to the offending broadcast licensees. Moreover, the FCC
has in some instances imposed separate fines against
broadcasters for each allegedly indecent utterance,
in contrast with its previous policy, which generally considered
all indecent words or phrases within a given program as
constituting a single violation. On July 13, 2010, the
United States Court of Appeals for the Second Circuit
(Second Circuit) issued a decision in which it
vacated the FCCs indecency policy pursuant to which any
broadcast of a single utterance of a fleeting
expletive would be deemed by the FCC to be presumptively
indecent. In this decision, the Second Circuit also called into
question the constitutionality of the FCCs indecency
policy generally. On August 25, 2010, the FCC filed a
petition for rehearing of the decision with the Second Circuit.
It is not possible to predict the outcome of the FCCs
appeal. It is also not possible to predict whether and, if so,
how the FCC will revise its indecency policy in response to the
Second Circuit decision, or the effect of such decision on TV
One. The fines for broadcasting indecent material are a maximum
of $325,000 per utterance. The determination of whether content
is indecent is inherently subjective and, as such, it can be
difficult to predict whether particular content could violate
indecency standards. The difficulty in predicting whether
individual programs, words or phrases may violate the FCCs
indecency rules adds significant uncertainty to TV Ones
ability to comply with the rules. Violation of the indecency
rules could lead to sanctions which may adversely affect TV
Ones business and results of operations. Some policymakers
support the extension of the indecency rules that are applicable
to
over-the-air
broadcasters to cover cable programming
and/or
attempts to increase enforcement of or otherwise expand existing
laws and rules. If such an extension, attempt to increase
enforcement or other expansion took place and was found to be
constitutional, some of TV Ones content could be subject
to additional regulation and might not be able to attract the
same subscription and viewership levels.
Our
President and Chief Executive Officer has an interest in TV One
that may conflict with your interests.
We have an employment agreement with our President and Chief
Executive Officer, Mr. Alfred C. Liggins, III. The
employment agreement provides, among other things, that in
recognition of Mr. Liggins contributions in founding
TV One on our behalf, he is eligible to receive an amount equal
to 8% of any dividends paid to us in respect of our investment
in TV One and 8% of the proceeds from our investment in
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TV One (the TV One Award). In both circumstances,
our obligation to pay any portion of the TV One Award is only
triggered after we recover the full amount of our cumulative
capital contributions to TV One. Mr. Liggins will only
receive the TV One Award upon the actual cash distributions or
distributions of marketable securities to us.
Mr. Liggins rights to the TV One Award (i) cease
if he is terminated for cause or he resigns without good reason
and (ii) expire at the end of the term of his employment
agreement (but similar rights could be included in the terms of
a new employment agreement). As a result of this arrangement,
the interest of Mr. Liggins with respect to TV One
may conflict with your interests as holders of the Exchange
Notes. For example, Mr. Liggins may seek to have Radio One
acquire additional equity interests in TV One using cash
generated from operations or additional borrowings under the
senior credit facility or have TV One itself pursue
acquisitions, joint ventures, financings or other transactions
that, in his judgment, could increase the amount of the TV One
Award by increasing the amount of our investment in TV One or
enhancing the equity value of TV One, even though such
transactions might involve risks to you as a holder of the
Exchange Notes.
Risks
Related to 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.
We are required to maintain radio broadcasting licenses issued
by the FCC. These licenses are ordinarily issued for a maximum
term of eight years and are renewable. Our radio broadcasting
licenses expire at various times, beginning October 1, 2011
through August 1, 2014. Interested third-parties may
challenge our renewal applications. In addition, we are subject
to extensive and changing regulation by the FCC with respect to
such matters as programming, indecency standards, technical
operations, employment and business practices. If we or any of
our significant stockholders, officers, or directors violate the
FCCs rules and regulations or the Communications Act of
1944, as amended (the Communications Act), or is
convicted of a felony, the FCC may commence a proceeding to
impose fines or sanctions upon us. Examples of possible
sanctions include the imposition of fines, the renewal of one or
more of our broadcasting licenses for a term of fewer than eight
years or the revocation of our broadcast licenses. 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.
There
is significant uncertainty regarding the FCCs media
ownership rules, and such rules could restrict our ability to
acquire radio stations.
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 FCCs media ownership rules remain in flux and subject
to further agency and court proceedings. On May 25, 2010,
the FCC instituted an inquiry as part of its 2010 quadrennial
review of its media ownership rules to seek public comment on
and evaluate such rules to determine whether any changes are
warranted. See the information contained in
Business Federal Regulation of Radio
Broadcasting.
In addition to the FCC media ownership rules, the outside media
interests of our officers and directors could limit our ability
to acquire stations. 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 our capital stock.
Increased
enforcement by the FCC of its indecency rules against the
broadcast industry could adversely affect our business
operations.
In 2004, the FCC indicated that it was enhancing its enforcement
efforts relating to the regulation of indecency. Congress has
increased the penalties for broadcasting indecent programming
and potentially subject
31
broadcasters to license revocation, renewal or qualification
proceedings in the event that they broadcast indecent material.
In addition, the FCCs heightened focus on the indecency
regulatory scheme, against the broadcast industry generally, may
encourage third parties to oppose our license renewal
applications or applications for consent to acquire broadcast
stations. The change in administration at the federal level
could foster a change in the FCCs enforcement posture. See
Vigorous enforcement or enhancement of FCC
indecency and other program content rules against the broadcast
and cable industries could have an adverse effect on TV
Ones businesses and results of operations above.
Changes
in current federal regulations could adversely affect our
business operations.
Congress and the FCC have considered, and may in the future
consider and adopt, new laws, regulations and policies that
could, directly or indirectly, affect the profitability of our
broadcast stations. In particular, Congress is considering a
revocation of radios exemption from paying royalties to
performing artists for use of their recordings (radio already
pays a royalty to songwriters, composers and publishers). In
addition, commercial radio broadcasters and entities
representing artists are negotiating agreements that could
result in broadcast stations paying royalties to artists. A
requirement to pay additional royalties could have an adverse
effect on our business operations and financial performance.
New or
changing federal, state or international privacy legislation or
regulation could hinder the growth of our internet
business.
A variety of federal and state laws govern the collection, use,
retention, sharing and security of consumer data that our
internet business uses to operate its services and to deliver
certain advertisements to its customers, as well as the
technologies used to collect such data. Not only are existing
privacy-related laws in these jurisdictions evolving and subject
to potentially disparate interpretation by governmental
entities, new legislative proposals affecting privacy are now
pending at both the federal and state level in the
U.S. Changes to the interpretation of existing law or the
adoption of new privacy-related requirements could hinder the
growth of our internet business. Also, a failure or perceived
failure to comply with such laws or requirements or with our own
policies and procedures could result in significant liabilities,
including a possible loss of consumer or investor confidence or
a loss of customers or advertisers.
Our
operation of various real properties and facilities could lead
to environmental liability.
As the owner, lessee or operator of various real properties and
facilities, we are subject to various federal, state and local
environmental laws and regulations. Historically, compliance
with these laws and regulations has not had a material adverse
effect on our business. There can be no assurance, however, that
compliance with existing or new environmental laws and
regulations will not require us to make significant expenditures
of funds.
Risks
Related to Our Corporate Governance Structure
Two
common stockholders have a majority voting interest in Radio One
and have the power to control matters on which our common
stockholders may vote, and their interests may conflict with
yours.
As of December 31, 2010, our Chairperson and her son, our
President and CEO, collectively held approximately 92% of the
outstanding voting power of our common stock. As a result, our
Chairperson and our CEO will control our management and policies
and most decisions involving or impacting upon Radio One,
including transactions involving a change of control, such as a
sale or merger. The interests of these stockholders may differ
from the interests of our other stockholders and our
debtholders. In addition, certain covenants in our debt
instruments require that our Chairperson and the CEO maintain a
specified ownership and voting interest in Radio One, and
prohibit other parties voting interests from exceeding
specified amounts. In addition, the TV One joint venture
agreement provides for adverse consequences to Radio One in the
event our Chairperson and CEO fail to maintain a specified
ownership and voting interest in us. Our Chairperson
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and the CEO have agreed to vote their shares together in
elections of members to the board of directors of Radio One.
Further, we are a controlled company under rules
governing the listing of our securities on the NASDAQ Stock
Market because more than 50% of our voting power is held by our
Chairperson and the CEO. Therefore, we are not subject to NASDAQ
Stock Market listing rules that would otherwise require us to
have: (i) a majority of independent directors on the board;
(ii) a compensation committee composed solely of
independent directors; (iii) a nominating committee
composed solely of independent directors; (iv) compensation
of our executive officers determined by a majority of the
independent directors or a compensation committee composed
solely of independent directors; and (v) director nominees
selected, or recommended for the boards selection, either
by a majority of the independent directors or a nominating
committee composed solely of independent directors. In
connection with recent legislation, the SEC must adopt, no later
than July 16, 2011, new rules regarding compensation
committee independence, which may impose additional requirements
to the definition of independence determined by the
applicable national exchanges.
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EXCHANGE
OFFER
Purpose
of the Exchange Offer
The exchange offer is designed to provide holders of Old Notes
with an opportunity to acquire Exchange Notes which, unlike the
Old Notes, will be freely transferable at all times, subject to
any restrictions on transfer imposed by state blue
sky laws and provided that the holder is not our affiliate
within the meaning of the Securities Act and represents that the
Exchange Notes are being acquired in the ordinary course of the
holders business and the holder is not engaged in, and
does not intend to engage in, a distribution of the Exchange
Notes.
The Old Notes were originally issued and sold on
November 24, 2010, to the initial holders pursuant to an
Amended and Restated Exchange Offer and Consent Solicitation
Statement and Offering Memorandum, dated November 5, 2010.
The Old Notes were issued and sold in a transaction not
registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act.
The Old Notes may not be reoffered, resold or transferred other
than (i) to us or our subsidiaries, (ii) to a
qualified institutional buyer in compliance with Rule 144A
promulgated under the Securities Act, (iii) outside the
United States to a
non-U.S. person
within the meaning of Regulation S under the Securities
Act, (iv) pursuant to the exemption from registration
provided by Rule 144 promulgated under the Securities Act
(if available), (v) in accordance with another exemption
from the registration requirements of the Securities Act or
(vi) pursuant to an effective registration statement under
the Securities Act.
In connection with the original issuance and sale of the Old
Notes, we entered into the Registration Rights Agreement,
pursuant to which we agreed to file with the SEC a registration
statement covering the exchange by us of the Exchange Notes for
the Old Notes, pursuant to the exchange offer. The Registration
Rights Agreement provides that we will file with the SEC an
exchange offer registration statement on an appropriate form
under the Securities Act and offer to holders of Old Notes who
are able to make certain representations the opportunity to
exchange their Old Notes for Exchange Notes.
Based on interpretations of the SEC staff set forth in no-action
letters issued to unrelated third parties, we believe that
Exchange Notes issued in the exchange offer in exchange for Old
Notes may be offered for resale, resold and otherwise
transferred by any Exchange Note holder without compliance with
the registration and prospectus delivery provisions of the
Securities Act, if:
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such holder is not an affiliate of ours within the
meaning of Rule 405 under the Securities Act;
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such Exchange Notes are acquired in the ordinary course of the
holders business; and
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the holder does not intend to participate in the distribution of
such Exchange Notes.
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Any holder who tenders in the exchange offer with the intention
of participating in any manner in a distribution of the Exchange
Notes:
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cannot rely on the position of the staff of the SEC set forth in
Exxon Capital Holdings Corporation or similar
interpretive letters; and
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must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction.
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If, as stated above, a holder cannot rely on the position of the
staff of the SEC set forth in Exxon Capital Holdings
Corporation or similar interpretive letters, any effective
registration statement used in connection with a secondary
resale transaction must contain the selling security holder
information required by Item 507 of
Regulation S-K
under the Securities Act.
We do not intend to seek our own interpretation regarding the
exchange offer, and we cannot assure you that the staff of the
SEC would make a similar determination with respect to the
Exchange Notes as it has in other interpretations to third
parties.
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Terms of
the Exchange Offer; Period for Tendering Outstanding Old
Notes
Upon the terms and subject to the conditions set forth in this
prospectus, we will accept any and all Old 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 principal amount of Exchange Notes in exchange for each
$1 principal amount of Old Notes accepted in the exchange offer.
Holders may tender some or all of their Old Notes pursuant to
the exchange offer.
The form and terms of the Exchange Notes are the same as the
form and terms of the outstanding Old Notes except that:
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the Exchange Notes will be registered under the Securities Act
and will not have legends restricting their transfer; and
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the Exchange Notes will not contain the registration rights and
special interest provisions contained in the outstanding Old
Notes.
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The Exchange Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture.
We intend to conduct the exchange offer in accordance with the
applicable requirements of the Securities Exchange Act of 1934,
as amended (the Exchange Act), and the rules and
regulations of the SEC.
We will be deemed to have accepted validly tendered Old Notes
when, as and if we have given oral (promptly confirmed in
writing) or written notice of our acceptance 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 Old Notes are not accepted for exchange because
of an invalid tender or the occurrence of specified other events
set forth in this prospectus, the certificates for any
unaccepted Old Notes will be promptly returned, without expense,
to the tendering holder.
Holders who tender Old Notes in the exchange offer will not be
required to pay brokerage commissions or fees or transfer taxes
with respect to the exchange of Old 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 and
Transfer taxes below.
The exchange offer will remain open for at least 20 full
business days. The term expiration date will mean
5:00 p.m., New York City time,
on ,
2011, 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.
To extend the exchange offer, prior to 9:00 a.m., New York
City time, on the next business day after the previously
scheduled expiration date, we will:
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notify the exchange agent of any extension by oral notice
(promptly confirmed in writing) or written notice, and
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issue a notice by press release or other public announcement.
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We reserve the right, in our sole discretion:
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if any of the conditions below under the heading
Conditions to the Exchange Offer shall have not been
satisfied, to delay accepting any Old Notes, to extend the
exchange offer, or to terminate the exchange offer, or
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to amend the terms of the exchange offer in any manner, provided
however, that if we amend the exchange offer to make a material
change, including the waiver of a material condition, we will
extend the exchange offer, if necessary, to keep the exchange
offer open for at least five business days after such amendment
or waiver; provided further, that if we amend the exchange offer
to change the percentage of Notes being exchanged or the
consideration being offered, we will extend the exchange
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offer, if necessary, to keep the exchange offer open for at
least ten business days after such amendment or waiver.
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If any termination or amendment occurs, we will notify the
exchange agent and will either issue a press release or give
oral or written notice to you as promptly as practicable.
Deemed
Representations
To participate in the exchange offer, we require that you
represent to us that:
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you or any other person acquiring Exchange Notes in exchange for
your Old Notes in the exchange offer is acquiring them in the
ordinary course of business;
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neither you nor any other person acquiring Exchange Notes in
exchange for your Old Notes in the exchange offer is engaging in
or intends to engage in (or has any arrangement or understanding
with any person to participate in) a distribution of the
Exchange Notes within the meaning of the federal securities laws;
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neither you nor any other person acquiring Exchange Notes in
exchange for your Old Notes has an arrangement or understanding
with any person to participate in the distribution of Exchange
Notes issued in the exchange offer;
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neither you nor any other person acquiring Exchange Notes in
exchange for your Old Notes is our affiliate as
defined under Rule 405 of the Securities Act;
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if you or another person acquiring Exchange Notes in exchange
for your Old Notes is a broker-dealer and you acquired the Old
Notes as a result of market-making activities or other trading
activities, you acknowledge that you will deliver a prospectus
meeting the requirements of the Securities Act in connection
with any resale of the Exchange Notes;
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you are not a broker-dealer tendering Old Notes directly
acquired from us for your own account; and
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you are not acting on behalf of any person or entity that could
not truthfully make those representations.
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BY TENDERING YOUR OLD NOTES YOU ARE DEEMED TO HAVE MADE
THESE REPRESENTATIONS.
Broker-dealers who cannot make the representations above cannot
use this exchange offer prospectus in connection with resales of
the Exchange Notes issued in the exchange offer.
If you are our affiliate, as defined under
Rule 405 of the Securities Act, if you are a broker-dealer
who acquired your Old Notes in the initial offering and not as a
result of market-making or trading activities, or if you are
engaged in or intend to engage in or have an arrangement or
understanding with any person to participate in a distribution
of Exchange Notes acquired in the exchange offer, you or that
person:
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may not rely on the applicable interpretations of the Staff of
the SEC and therefore may not participate in the exchange
offer; and
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must comply with the registration and prospectus delivery
requirements of the Securities Act or an exemption therefrom
when reselling the Old Notes.
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Procedures
for Tendering Old Notes
Since the Old Notes are represented by global book-entry notes,
DTC, as depositary, or its nominee is treated as the registered
holder of the Old Notes and will be the only entity that can
tender your Old Notes for Exchange Notes. Therefore, to tender
Old Notes subject to this exchange offer and to obtain Exchange
Notes, you must instruct the institution where you keep your Old
Notes to tender your Old Notes on your behalf so that they are
received on or prior to the expiration of this exchange offer.
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The letter of transmittal that may accompany this prospectus may
be used by you to give such instructions.
YOU SHOULD CONSULT YOUR ACCOUNT REPRESENTATIVE AT THE BROKER
OR BANK WHERE YOU KEEP YOUR OLD NOTES TO DETERMINE THE
PREFERRED PROCEDURE.
IF YOU WISH TO ACCEPT THIS EXCHANGE OFFER, PLEASE INSTRUCT
YOUR BROKER OR ACCOUNT REPRESENTATIVE IN TIME FOR YOUR OLD
NOTES TO BE TENDERED BEFORE THE 5:00 PM (NEW YORK CITY
TIME) DEADLINE
ON ,
2011.
You may tender some or all of your Old Notes in this exchange
offer.
When you tender your outstanding Old Notes and we accept them,
the tender will be a binding agreement between you and us as
described in this prospectus.
The method of delivery of outstanding Old Notes and all other
required documents to the exchange agent is at your election and
risk.
We will decide all questions about the validity, form,
eligibility, acceptance and withdrawal of tendered Old Notes,
and our determination will be final and binding on you. We
reserve the absolute right to:
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reject any and all tenders of any particular Old Note not
properly tendered;
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refuse to accept any Old Note if, in our judgment or the
judgment of our counsel, the acceptance would be
unlawful; and
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waive any defects or irregularities or conditions of the
exchange offer as to any particular Old Notes before the
expiration of the offer.
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Our interpretation of the terms and conditions of the exchange
offer will be final and binding on all parties. You must cure
any defects or irregularities in connection with tenders of Old
Notes as we will determine. Neither us, the exchange agent nor
any other person will incur any liability for failure to notify
you of any defect or irregularity with respect to your tender of
Old Notes. If we waive any terms or conditions with respect to a
noteholder, we will extend the same waiver to all noteholders
with respect to that term or condition being waived.
Procedures
for Brokers and Custodian Banks; DTC ATOP Account
In order to accept this exchange offer on behalf of a holder of
Old Notes you must submit or cause your DTC participant to
submit an Agents Message as described below.
The exchange agent, on our behalf will seek to establish an
Automated Tender Offer Program (ATOP) account with
respect to the outstanding Old Notes at DTC promptly after the
delivery of this prospectus. Any financial institution that is a
DTC participant, including your broker or bank, may make
book-entry tender of outstanding Old Notes by causing the
book-entry transfer of such Old Notes into our ATOP account in
accordance with DTCs procedures for such transfers.
Concurrently with the delivery of Old Notes, an Agents
Message in connection with such book-entry transfer must be
transmitted by DTC to, and received by, the exchange agent on or
prior to 5:00 pm, New York City Time on the expiration date. The
confirmation of a book entry transfer into the ATOP account as
described above is referred to herein as a Book-Entry
Confirmation.
The term Agents Message means a message
transmitted by the DTC participants to DTC, and thereafter
transmitted by DTC to the exchange agent, forming a part of the
Book-Entry Confirmation which states that DTC has received an
express acknowledgment from the participant in DTC described in
such Agents Message stating that such participant and
beneficial holder agree to be bound by the terms of this
exchange offer.
Each Agents Message must include the following information:
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Name of the beneficial owner tendering such Old Notes;
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Account number of the beneficial owner tendering such Old Notes;
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Principal amount of Old Notes tendered by such beneficial
owner; and
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A confirmation that the beneficial holder of the Old Notes
tendered has made the representations for our benefit set forth
under Deemed representations above.
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BY SENDING AN AGENTS MESSAGE THE DTC PARTICIPANT IS
DEEMED TO HAVE CERTIFIED THAT THE BENEFICIAL HOLDER FOR WHOM
NOTES ARE BEING TENDERED HAS BEEN PROVIDED WITH A COPY OF
THIS PROSPECTUS.
The delivery of Old Notes through DTC, and any transmission of
an Agents Message through ATOP, is at the election and
risk of the person tendering Old Notes. We will ask the exchange
agent to instruct DTC to promptly return those Old Notes that
were tendered through ATOP but were not accepted by us, if any,
to the DTC participant that tendered such Old Notes on behalf of
holders of the Old Notes.
Acceptance
of Outstanding Old Notes for Exchange; Delivery of Exchange
Notes
We will accept validly tendered Old Notes when the conditions to
the exchange offer have been satisfied or we have waived them.
We will have accepted your validly tendered Old Notes when we
have given oral (promptly confirmed in writing) or written
notice 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 we do not accept any tendered Old
Notes for exchange by book-entry transfer because of an invalid
tender or other valid reason, we will credit the Notes to an
account maintained with DTC promptly after the exchange offer
terminates or expires.
THE AGENTS MESSAGE MUST BE TRANSMITTED TO EXCHANGE AGENT
ON OR BEFORE 5:00 PM, NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
Withdrawal
Rights
You may withdraw your tender of outstanding notes at any time
before 5:00 p.m., New York City time, on the expiration
date.
For a withdrawal to be effective, you should contact your bank
or broker where your Old Notes are held and have them send an
ATOP notice of withdrawal so that it is received by the exchange
agent before 5:00 p.m., New York City time, on the
expiration date. Such notice of withdrawal must:
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specify the name of the person that tendered the Old Notes to be
withdrawn;
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identify the Old Notes to be withdrawn, including the CUSIP
number and principal amount at maturity of the Old Notes;
specify the name and number of an account at the DTC to which
your withdrawn Old Notes can be credited.
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We will decide all questions as to the validity, form and
eligibility of the notices and our determination will be final
and binding on all parties. Any tendered Old Notes that you
withdraw will not be considered to have been validly tendered.
We will promptly return any outstanding Old Notes that have been
tendered but not exchanged, or credit them to the DTC account.
You may re-tender properly withdrawn Old Notes by following one
of the procedures described above before the expiration date.
Conditions
to the Exchange Offer
Notwithstanding any other term of the exchange offer, we will
not be required to accept for exchange, or issue any Exchange
Notes for, any Old Notes, and may terminate or amend the
exchange offer before the expiration of the exchange offer, if:
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we determine that the exchange offer violates any law, statute,
rule, regulation or interpretation by the staff of the SEC or
any order of any governmental agency or court of competent
jurisdiction; or
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any action or proceeding is instituted or threatened in any
court or by or before any governmental agency relating to the
exchange offer which, in our judgment, could reasonably be
expected to impair our ability to proceed with the exchange
offer.
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The conditions listed above are for our sole benefit and may be
asserted by us regardless of the circumstances giving rise to
any of these conditions. We may waive these conditions in our
discretion in whole or in part at any time and from time to time
prior to the expiration date. The failure by us at any time to
exercise any of the above rights shall not be considered a
waiver of such right, and such right shall be considered an
ongoing right which may be asserted at any time and from time to
time.
Exchange
Agent
We have appointed Wilmington Trust Company as the exchange
agent for the exchange offer. You should direct questions,
requests for assistance, and requests for additional copies of
this prospectus and the letter of transmittal that may accompany
this prospectus to the exchange agent addressed as follows:
WILMINGTON
TRUST COMPANY, EXCHANGE AGENT
By
registered or certified mail, overnight delivery:
Rodney Square North
1100 North Market Street
Wilmington, DE
19890-1600
Attention: Patrick Healy
For Information or to Confirm Call:
(302) 636-6391
For facsimile transmission (for eligible institutions
only):
(302) 636-4149
Delivery to an address other than set forth above will not
constitute a valid delivery.
Fees and
Expenses
Wilmington Trust Company is acting as exchange agent on our
behalf. We will pay the exchange agent customary fees for its
services, reimburse the exchange agent for its reasonable costs
and expenses (including reasonable fees, costs and expenses of
its counsel) incurred in connection with the provisions of these
services and pay other registration expenses, including
registration and filing fees, fees and expenses of compliance
with federal securities and state blue sky securities laws,
printing expenses, messenger and delivery services and
telephone, fees and disbursements to our counsel, application
and filing fees and any fees and disbursements to our
independent certified public accountants. We will not make any
payment to brokers, dealers, or others soliciting acceptances of
the exchange offer except for reimbursement of mailing expenses.
Additional solicitations may be made by telephone, facsimile or
in person by our and our affiliates officers and employees.
Accounting
Treatment
The Exchange Notes will be recorded at the same carrying value
as the existing Old Notes, as reflected in our accounting
records on the date of exchange. Accordingly, we will recognize
no gain or loss for accounting purposes. The expenses of the
exchange offer will be capitalized and expensed over the term of
the Exchange Notes.
Transfer
Taxes
If you tender outstanding Old Notes for exchange you will not be
obligated to pay any transfer taxes. However, if you instruct us
to register Exchange Notes in the name of, or request that your
Old Notes not
39
tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder, you will be
responsible for paying any transfer tax owed.
YOU MAY SUFFER ADVERSE CONSEQUENCES IF YOU FAIL TO EXCHANGE
OUTSTANDING OLD NOTES.
If you do not tender your outstanding Old Notes, you will not
have any further registration rights, except for the rights
described in the Registration Rights Agreement and described
above, and your Old Notes will continue to be subject to the
provisions of the indenture governing the Old Notes regarding
transfer and exchange of the Old Notes and the restrictions on
transfer of the Old Notes imposed by the Securities Act and
states securities law when we complete the exchange offer. These
transfer restrictions are required because the Old Notes were
issued under an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, if you do not
tender your Old Notes in the exchange offer, your ability to
sell your Old Notes could be adversely affected. Once we have
completed the exchange offer, holders who have not tendered
notes will not continue to be entitled to any increase in
interest rate that the indenture governing the Old Notes
provides for if we do not complete the exchange offer.
Consequences
of Failure to Exchange
The Old Notes that are not exchanged for Exchange Notes pursuant
to the exchange offer will remain restricted securities.
Accordingly, the Old Notes may be resold only:
|
|
|
|
|
to us upon redemption thereof or otherwise;
|
|
|
|
so long as the outstanding securities are eligible for resale
pursuant to Rule 144A, to a person inside the United States
who 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;
|
|
|
|
outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities
Act; or
|
|
|
|
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.
|
Shelf
Registration
The Registration Rights Agreement also requires that we file a
shelf registration statement if:
|
|
|
|
|
we cannot file a registration statement for the exchange offer
because the exchange offer is not permitted by applicable law or
SEC policy;
|
|
|
|
a law or SEC policy prohibits a holder from participating in the
exchange offer;
|
|
|
|
a holder cannot resell the Exchange Notes it acquires in the
exchange offer without delivering a prospectus and this
prospectus is not appropriate or available for resales by the
holder; or
|
|
|
|
a holder is a broker-dealer and holds notes acquired directly
from us or one of our affiliates.
|
40
USE OF
PROCEEDS
This exchange offer is intended to satisfy our obligations under
the Registration Rights Agreement. We will not receive any cash
proceeds from the issuance of the Exchange Notes. The Old Notes
properly tendered and exchanged for Exchange Notes will be
retired and cancelled. Accordingly, no additional debt will
result from the exchange. We have agreed to bear the expense of
the exchange offer.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed
charges for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before provision for
(benefit from) income taxes(1)
|
|
$
|
4,835
|
|
|
$
|
(26,173
|
)
|
|
$
|
(39,729
|
)
|
|
$
|
(336,716
|
)
|
|
$
|
(196,466
|
)
|
|
$
|
38,499
|
|
|
$
|
54,751
|
|
Plus: fixed charges
|
|
|
31,577
|
|
|
|
29,521
|
|
|
|
39,050
|
|
|
|
60,401
|
|
|
|
73,730
|
|
|
|
73,877
|
|
|
|
63,664
|
|
Less: equity in income (loss) of affiliated company
|
|
|
3,832
|
|
|
|
3,294
|
|
|
|
3,653
|
|
|
|
(3,652
|
)
|
|
|
(15,836
|
)
|
|
|
(2,341
|
)
|
|
|
(1,846
|
)
|
Plus: dividends received from affiliated company
|
|
|
6,845
|
|
|
|
|
|
|
|
4,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,425
|
|
|
$
|
54
|
|
|
$
|
494
|
|
|
$
|
(272,663
|
)
|
|
$
|
(106,900
|
)
|
|
$
|
114,717
|
|
|
$
|
120,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
31,059
|
|
|
$
|
29,036
|
|
|
$
|
38,404
|
|
|
$
|
59,689
|
|
|
$
|
72,770
|
|
|
$
|
72,932
|
|
|
$
|
63,010
|
|
Estimate of the interest within operating leases(2)
|
|
|
518
|
|
|
|
485
|
|
|
|
646
|
|
|
|
712
|
|
|
|
960
|
|
|
|
945
|
|
|
|
654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
31,577
|
|
|
$
|
29,521
|
|
|
$
|
39,050
|
|
|
$
|
60,401
|
|
|
$
|
73,730
|
|
|
$
|
73,877
|
|
|
$
|
63,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges(3)(4)
|
|
|
1.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.55
|
|
|
|
1.89
|
|
|
|
|
(1) |
|
For purposes of calculating the ratio of earnings to fixed
charges, earnings represent income (loss) before income taxes
plus fixed charges. |
|
(2) |
|
For purposes of estimating interest within operating leases, an
interest rate equal to the three month LIBOR plus a spread of
2.25% at the end of each period presented was utilized. |
|
(3) |
|
Earnings were insufficient to cover fixed charges by
approximately $196.5 million, $336.7 million and
$39.7 million for the fiscal years 2007, 2008 and 2009,
respectively, and approximately $26.2 million for the nine
months ended September 30, 2009. |
|
(4) |
|
On a pro forma basis giving effect to the Transactions as if
they were completed at the beginning of our last fiscal year,
our earnings would be insufficient to cover fixed charges for
the fiscal year 2009 and the nine months ended
September 30, 2010 by approximately $70.1 million and
$13.6 million, respectively. |
41
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 2010 on an actual basis
and on a pro forma basis to give effect to the
Transactions. You should read this table together with
Selected Historical Consolidated Financial Data,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the historical
consolidated financial statements and accompanying notes
included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
|
(Dollars in thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash and cash equivalents
|
|
$
|
21,571
|
|
|
$
|
6,808
|
|
|
|
|
|
|
|
|
|
|
Debt (including current portion):
|
|
|
|
|
|
|
|
|
Senior Credit Facility:
|
|
|
|
|
|
|
|
|
Revolving credit facility
|
|
$
|
323,000
|
|
|
$
|
7,000
|
|
Term loan
|
|
|
27,628
|
|
|
|
|
|
New term loan B
|
|
|
|
|
|
|
323,000
|
|
New term loan A
|
|
|
|
|
|
|
27,628
|
|
Notes
|
|
|
|
|
|
|
286,794
|
|
Note payable
|
|
|
1,000
|
|
|
|
1,000
|
|
2011 Notes
|
|
|
101,510
|
|
|
|
|
|
2013 Notes
|
|
|
200,000
|
|
|
|
747
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
653,138
|
|
|
$
|
646,169
|
|
Stockholders equity(1)
|
|
|
209,154
|
|
|
|
215,800
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
862,292
|
|
|
$
|
861,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Pro forma stockholders equity assumes a gain on retirement
of debt due to early redemption of our 2013 Notes at 95% of face
value. |
42
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA
We derived the following selected historical consolidated
financial data from our consolidated financial statements as of
and for the fiscal years ended December 31, 2005, 2006,
2007, 2008 and 2009. Ernst & Young LLPs report
on the consolidated financial statements for the year ended
December 31, 2009, which is included elsewhere herein,
included an explanatory paragraph which describes an uncertainty
about Radio One, Inc.s ability to continue as a going
concern. The uncertainty was due to certain violations of our
loan agreements, which ultimately could have resulted in
significant amounts of our outstanding debt becoming callable by
our lenders. These violations were cured as a part of the
Transactions. The selected historical financial and operating
data presented below as of and for the nine months ended
September 30, 2009 and 2010 has been derived from our
unaudited consolidated financial statements included elsewhere
in this prospectus. In the opinion of management, such unaudited
consolidated financial statements include all recurring
adjustments and normal accruals necessary for a fair statement
of such unaudited consolidated financial data. The results of
operations from these interim periods are not necessarily
indicative of the results to be expected for the full year or
any future periods.
The following selected historical financial and operating data
should be read in conjunction with our Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the historical consolidated financial
statements and accompanying notes included elsewhere in this
prospectus.
On July 22, 2010, management and the Audit Committee of the
Board of Directors of Radio One concluded that: (1) it was
necessary to restate our consolidated financial statements for
the years ended December 31, 2009, 2008 and 2007 and for
each quarterly financial reporting period from January 1,
2009 through March 31, 2010; and (2) our previously
filed consolidated financial statements and any related reports
of Ernst & Young LLP for these periods should no
longer be relied upon. The Company included its restated
consolidated financial statements for the years ended
December 31, 2009, 2008 and 2007 in the Annual Report on
Form 10-K/A
filed with the SEC on August 23, 2010. The Company included
its restated consolidated financial statements for the quarters
ended March 31, 2010, September 30, 2009,
June 30, 2009 and March 31, 2009 in Quarterly Reports
on
Forms 10-Q/A
that it filed with the SEC on August 23, 2010. All
financial information set forth below and the audited and
unaudited consolidated financial statements and accompanying
notes included elsewhere in this prospectus reflects these
restatements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(As adjusted see note 1 below)
|
|
|
|
(In thousands)
|
|
|
Statements of Operations Data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
208,703
|
|
|
$
|
204,835
|
|
|
$
|
272,092
|
|
|
$
|
313,443
|
|
|
$
|
316,398
|
|
|
$
|
321,625
|
|
|
$
|
308,098
|
|
Programming and technical expenses including stock-based
compensation
|
|
|
56,736
|
|
|
|
56,856
|
|
|
|
75,635
|
|
|
|
79,304
|
|
|
|
70,463
|
|
|
|
68,818
|
|
|
|
57,810
|
|
Selling, general and administrative expenses including
stock-based compensation
|
|
|
78,290
|
|
|
|
68,828
|
|
|
|
91,016
|
|
|
|
103,108
|
|
|
|
100,620
|
|
|
|
98,016
|
|
|
|
92,898
|
|
Corporate selling, general and administrative expenses including
stock-based compensation
|
|
|
24,581
|
|
|
|
16,048
|
|
|
|
24,732
|
|
|
|
36,356
|
|
|
|
28,396
|
|
|
|
28,239
|
|
|
|
25,070
|
|
Depreciation and amortization
|
|
|
14,195
|
|
|
|
15,804
|
|
|
|
21,011
|
|
|
|
19,022
|
|
|
|
14,680
|
|
|
|
13,890
|
|
|
|
14,044
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
48,953
|
|
|
|
65,937
|
|
|
|
423,220
|
|
|
|
211,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
34,901
|
|
|
|
(1,654
|
)
|
|
|
(6,239
|
)
|
|
|
(347,567
|
)
|
|
|
(108,812
|
)
|
|
|
112,662
|
|
|
|
118,276
|
|
Interest income
|
|
|
95
|
|
|
|
98
|
|
|
|
144
|
|
|
|
491
|
|
|
|
1,242
|
|
|
|
1,393
|
|
|
|
1,428
|
|
Interest expense(2)
|
|
|
31,059
|
|
|
|
29,036
|
|
|
|
38,404
|
|
|
|
59,689
|
|
|
|
72,770
|
|
|
|
72,932
|
|
|
|
63,010
|
|
Gain on retirement of debt
|
|
|
|
|
|
|
1,221
|
|
|
|
1,221
|
|
|
|
74,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(As adjusted see note 1 below)
|
|
|
|
(In thousands)
|
|
|
Equity in income (loss) of affiliated company
|
|
|
3,832
|
|
|
|
3,294
|
|
|
|
3,653
|
|
|
|
(3,652
|
)
|
|
|
(15,836
|
)
|
|
|
(2,341
|
)
|
|
|
(1,846
|
)
|
Other expense, net
|
|
|
2,934
|
|
|
|
96
|
|
|
|
104
|
|
|
|
316
|
|
|
|
290
|
|
|
|
283
|
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes,
noncontrolling interest in (loss) income of subsidiaries and
discontinued operations
|
|
|
4,835
|
|
|
|
(26,173
|
)
|
|
|
(39,729
|
)
|
|
|
(336,716
|
)
|
|
|
(196,466
|
)
|
|
|
38,499
|
|
|
|
54,751
|
|
Provision for (benefit from) income taxes
|
|
|
4,685
|
|
|
|
7,340
|
|
|
|
7,014
|
|
|
|
(45,183
|
)
|
|
|
54,083
|
|
|
|
18,260
|
|
|
|
18,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
150
|
|
|
|
(33,513
|
)
|
|
|
(46,743
|
)
|
|
|
(291,533
|
)
|
|
|
(250,549
|
)
|
|
|
20,239
|
|
|
|
35,935
|
|
Loss (income) from discontinued operations, net of tax
|
|
|
(205
|
)
|
|
|
(835
|
)
|
|
|
(1,815
|
)
|
|
|
(7,414
|
)
|
|
|
(137,041
|
)
|
|
|
(23,965
|
)
|
|
|
14,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss) income
|
|
|
(55
|
)
|
|
|
(34,348
|
)
|
|
|
(48,558
|
)
|
|
|
(298,947
|
)
|
|
|
(387,590
|
)
|
|
|
(3,726
|
)
|
|
|
50,503
|
|
Noncontrolling interest in (loss) income of subsidiaries
|
|
|
1,427
|
|
|
|
3,650
|
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
3,910
|
|
|
|
3,004
|
|
|
|
1,868
|
|
Preferred stock dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss) income attributable to common
stockholders(3)
|
|
$
|
(1,482
|
)
|
|
$
|
(37,998
|
)
|
|
$
|
(52,887
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
(391,500
|
)
|
|
$
|
(6,730
|
)
|
|
$
|
45,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period)(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,571
|
|
|
$
|
14,775
|
|
|
$
|
19,963
|
|
|
$
|
22,289
|
|
|
$
|
24,247
|
|
|
$
|
32,406
|
|
|
$
|
19,081
|
|
Intangible assets, net
|
|
|
872,794
|
|
|
|
889,121
|
|
|
|
871,221
|
|
|
|
944,858
|
|
|
|
1,310,168
|
|
|
|
1,521,950
|
|
|
|
1,485,576
|
|
Total assets
|
|
|
1,044,384
|
|
|
|
1,056,883
|
|
|
|
1,035,542
|
|
|
|
1,125,477
|
|
|
|
1,648,354
|
|
|
|
2,195,210
|
|
|
|
2,201,380
|
|
Total debt (including current portion)
|
|
|
653,138
|
|
|
|
659,037
|
|
|
|
653,534
|
|
|
|
675,362
|
|
|
|
815,504
|
|
|
|
937,527
|
|
|
|
952,520
|
|
Total liabilities
|
|
|
791,183
|
|
|
|
784,692
|
|
|
|
787,489
|
|
|
|
810,002
|
|
|
|
1,015,747
|
|
|
|
1,176,963
|
|
|
|
1,178,834
|
|
Redeemable noncontrolling interests
|
|
|
44,047
|
|
|
|
49,690
|
|
|
|
52,225
|
|
|
|
43,423
|
|
|
|
58,738
|
|
|
|
54,360
|
|
|
|
53,612
|
|
Total stockholders equity
|
|
|
209,154
|
|
|
|
222,501
|
|
|
|
195,828
|
|
|
|
272,052
|
|
|
|
573,870
|
|
|
|
963,887
|
|
|
|
968,934
|
|
Statement of Cash Flow Data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
16,775
|
|
|
$
|
21,864
|
|
|
$
|
45,443
|
|
|
$
|
13,832
|
|
|
$
|
44,014
|
|
|
$
|
77,460
|
|
|
$
|
101,145
|
|
Investing activities
|
|
|
(3,592
|
)
|
|
|
(3,640
|
)
|
|
|
(4,871
|
)
|
|
|
66,031
|
|
|
|
78,468
|
|
|
|
(46,227
|
)
|
|
|
(28,301
|
)
|
Financing activities
|
|
|
(11,575
|
)
|
|
|
(25,738
|
)
|
|
|
(42,898
|
)
|
|
|
(81,821
|
)
|
|
|
(130,641
|
)
|
|
|
(17,908
|
)
|
|
|
(64,154
|
)
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest expense(2)
|
|
|
28,510
|
|
|
|
33,346
|
|
|
|
36,568
|
|
|
|
68,611
|
|
|
|
70,798
|
|
|
|
70,876
|
|
|
|
53,753
|
|
Capital expenditures
|
|
|
3,251
|
|
|
|
3,368
|
|
|
|
4,528
|
|
|
|
12,597
|
|
|
|
10,203
|
|
|
|
13,601
|
|
|
|
13,816
|
|
|
|
|
(1) |
|
Year-to-year
comparisons are significantly affected by Radio Ones
acquisitions and dispositions during the periods covered.
Certain reclassifications associated with accounting for
discontinued operations have been made to prior year and prior
quarter balances to conform to the current year presentation.
The reclassifications related to acquisitions and dispositions
had no effect on any other previously reported net income or
loss or any other statement of operations, balance sheet or cash
flow amounts. |
|
(2) |
|
Interest expense includes non-cash interest, such as the
accretion of principal, LMA fees, the amortization of discounts
on debt and the amortization of discounts on debt and the
amortization of deferred financing costs. |
|
(3) |
|
(Loss) income before (loss) income from discontinued operations
is the reported amount, less dividends paid on Radio Ones
preferred securities. |
44
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion summarizes the significant factors affecting
our consolidated operating results, financial condition and
liquidity for the three-year period ended December 31, 2009
and for the three and nine-month periods ended
September 30, 2010 and 2009. This discussion should be read
in conjunction with our consolidated financial statements and
accompanying notes included elsewhere in this prospectus as well
as the sections entitled Forward-Looking Statements
and Risk Factors in this prospectus.
Introduction
Revenue
We primarily derive revenue from the sale of advertising time
and program sponsorships to local and national advertisers on
our radio stations. Advertising revenue is affected primarily by
the advertising rates our radio stations are able to charge, as
well as the overall demand for radio advertising time in a
market. These rates are largely based upon a radio
stations audience share in the demographic groups targeted
by advertisers, the number of radio stations in the related
market, and the supply of, and demand for, radio advertising
time. Advertising rates are generally highest during morning and
afternoon commuting hours.
During the three and nine months ended September 30, 2010,
approximately 54.6% and 56.8%, respectively, of our net revenue
was generated from local advertising and approximately 35.5% and
35.6%, respectively, was generated from national advertising,
including network advertising. In comparison, during the three
and nine months ended September 30, 2009, approximately
54.4% and 56.0%, respectively, of our net revenue was generated
from local advertising and approximately 36.0% and 36.5%,
respectively, was generated from national advertising, including
network advertising. During the year ended December 31,
2009, approximately 56.2% of our net revenue was generated from
local advertising and approximately 37.3% was generated from
national advertising, including network advertising. In
comparison, during the year ended December 31, 2008,
approximately 56.6% of our net revenue was generated from local
advertising and approximately 37.1% was generated from national
advertising, including network advertising. National advertising
also includes advertising revenue generated from our internet
segments. The balance of revenue was generated from tower rental
income, ticket sales and revenue related to our sponsored
events, management fees and other revenue.
In the broadcasting industry, radio stations often utilize trade
or barter agreements to reduce cash expenses by exchanging
advertising time for goods or services. In order to maximize
cash revenue for our spot inventory, we closely monitor the use
of trade and barter agreements.
Community Connect, LLC (CCI), which the Company
acquired in 2008, currently generates the majority of the
Companys internet revenue and derives its revenue
principally from advertising services, including diversity
recruiting advertising. Advertising services include the sale of
banner and sponsorship advertisements. Advertising revenue is
recognized either as impressions (the number of times
advertisements appear in viewed pages) are delivered, when
click through purchases or leads are reported, or
ratably over the contract period, where applicable. CCI has a
diversity recruiting relationship with Monster, Inc.
(Monster). Monster posts job listings and
advertising on CCI websites and CCI earns revenue for displaying
the images on its websites.
In December 2006, the Company acquired certain net assets
(Giant Magazine) of Giant Magazine, LLC. Giant
Magazine ceased publication in December 2009 and the results of
its operations have been reclassified to discontinued operations.
In February 2005, the Company acquired approximately 51% of the
common stock of Reach Media for approximately $55.8 million
in cash and stock. A substantial portion of Reach Medias
revenue was generated from one customer under a sales
representation agreement with Radio Networks. The agreement
provided for an annual minimum guarantee in exchange for the
advertising inventory on Reach Medias 106 affiliate radio
stations broadcasting the nationally syndicated Tom Joyner
Morning Show. Radio Networks also served as
45
sales representative for Reach Medias Internet advertising
and special events. This agreement, which commenced in 2003,
expired on December 31, 2009.
In November 2009, Reach Media entered into a new sales
representation and redemption agreement (the Sales
Representation and Redemption Agreement) with
subsidiaries of Citadel Broadcasting Corporation
(Citadel). Under this agreement, Radio Networks will
serve as sales representative for certain portions of Reach
Medias advertising inventory for the period
January 1, 2010 through December 31, 2012.
Expenses
Our significant broadcast expenses are: (i) employee
salaries and commissions; (ii) programming expenses;
(iii) marketing and promotional expenses; (iv) rental
of premises for office facilities and studios; (v) rental
of transmission tower space; and (vi) music license royalty
fees. We strive to control these expenses by centralizing
certain functions such as finance, accounting, legal, human
resources and management information systems and, in certain
markets, the programming management function. We also use our
multiple stations, market presence and purchasing power to
negotiate favorable rates with certain vendors and national
representative selling agencies.
We generally incur marketing and promotional expenses to
increase our radio audiences. However, because Arbitron reports
ratings either monthly or quarterly, depending on the particular
market, any changed ratings and the effect on advertising
revenue tends to lag behind both the reporting of the ratings
and the incurrence of advertising and promotional expenditures.
In addition to salaries and commissions, major expenses for our
internet business include membership traffic acquisition costs,
software product design, post application software development
and maintenance, database and server support costs, the help
desk function, data center expenses connected with internet
service provider (ISP) hosting services and other
internet content delivery expenses.
Performance
Metrics
We monitor and evaluate the growth and operational performance
of our business using net income and the following key metrics
(the Performance Metrics):
(a) Net revenue: The performance of an
individual radio station or group of radio stations in a
particular market is customarily measured by its ability to
generate net revenue. Net revenue consists of gross revenue, net
of local and national agency and outside sales representative
commissions consistent with industry practice. Net revenue is
recognized in the period in which advertisements are broadcast.
Net revenue also includes advertising aired in exchange for
goods and services, which is recorded at fair value, revenue
from sponsored events and other revenue. Net revenue is
recognized for our online business as impressions are delivered,
as click-throughs are reported or ratably over
contract periods, where applicable.
(b) Station operating income: Net income
(loss) before depreciation and amortization, income taxes,
interest income, interest expense, equity in income of
affiliated company, noncontrolling interest in income (loss) of
subsidiaries, gain on retirement of debt, other expense,
corporate expenses, stock-based compensation expenses,
impairment of long-lived assets and gain or loss from
discontinued operations, net of tax, is commonly referred to in
our industry as station operating income. Station operating
income is not a measure of financial performance under generally
accepted accounting principles in the United States
(GAAP). Nevertheless, we believe station operating
income is often a useful measure of a broadcasting
companys operating performance and is a significant basis
used by our management to measure the operating performance of
our stations within the various markets. Station operating
income provides helpful information about our results of
operations, apart from expenses associated with our physical
plant, income taxes, investments, impairment charges, debt
financings and retirements, corporate overhead, stock-based
compensation and discontinued operations. Station operating
income is frequently used as a basis for comparing businesses in
our industry, although our measure of station operating income
may not be comparable to similarly titled measures of other
companies. Station operating income does not represent
46
operating loss or cash flow from operating activities, as those
terms are defined under GAAP, and should not be considered as an
alternative to those measurements as an indicator of our
performance.
(c) Station operating income
margin: Station operating income margin
represents station operating income as a percentage of net
revenue. Station operating income margin is not a measure of
financial performance under GAAP. Nevertheless, we believe that
station operating income margin is a useful measure of our
performance because it provides helpful information about our
profitability as a percentage of our net revenue.
Results
of Operations Three and Nine-Month Periods ended
September 30, 2009 and 2008
Summary
of Performance
The tables below provide a summary of our performance based on
Net Revenue and the Performance Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
see note 1 of our
|
|
|
|
|
|
see note 1 of our
|
|
|
|
|
|
|
consolidated
|
|
|
|
|
|
consolidated
|
|
|
|
|
|
|
financial
|
|
|
|
|
|
financial
|
|
|
|
|
|
|
statements)
|
|
|
|
|
|
statements)
|
|
|
|
(In thousands, except margin data)
|
|
|
Net revenue
|
|
$
|
74,491
|
|
|
$
|
74,651
|
|
|
$
|
208,703
|
|
|
$
|
204,835
|
|
Station operating income
|
|
|
28,314
|
|
|
|
32,693
|
|
|
|
74,510
|
|
|
|
79,524
|
|
Station operating income margin
|
|
|
38.0
|
%
|
|
|
43.8
|
%
|
|
|
35.7
|
%
|
|
|
38.8
|
%
|
Consolidated net income (loss) attributable to common
stockholders
|
|
|
1,038
|
|
|
|
14,226
|
|
|
|
(1,482
|
)
|
|
|
(37,998
|
)
|
The reconciliation of consolidated net income (loss) to station
operating income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
see note 1 of our
|
|
|
|
|
|
see note 1 of our
|
|
|
|
|
|
|
consolidated
|
|
|
|
|
|
consolidated
|
|
|
|
|
|
|
financial
|
|
|
|
|
|
financial
|
|
|
|
|
|
|
statements)
|
|
|
|
|
|
statements)
|
|
|
|
(In thousands)
|
|
|
Consolidated net income (loss) attributable to common
stockholders
|
|
$
|
1,038
|
|
|
$
|
14,226
|
|
|
$
|
(1,482
|
)
|
|
$
|
(37,998
|
)
|
Add back non-station operating income items included in net
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(28
|
)
|
|
|
(33
|
)
|
|
|
(95
|
)
|
|
|
(98
|
)
|
Interest expense
|
|
|
12,122
|
|
|
|
9,224
|
|
|
|
31,059
|
|
|
|
29,036
|
|
Provision for (benefit from) income taxes
|
|
|
4,760
|
|
|
|
(1,508
|
)
|
|
|
4,685
|
|
|
|
7,340
|
|
Corporate selling, general and administrative, excluding
non-cash and stock-based compensation
|
|
|
5,488
|
|
|
|
4,702
|
|
|
|
20,537
|
|
|
|
15,034
|
|
Stock-based compensation
|
|
|
908
|
|
|
|
302
|
|
|
|
4,877
|
|
|
|
1,387
|
|
Equity in income of affiliated company
|
|
|
(1,784
|
)
|
|
|
(1,397
|
)
|
|
|
(3,832
|
)
|
|
|
(3,294
|
)
|
Gain on retirement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,221
|
)
|
Other expense, net
|
|
|
50
|
|
|
|
38
|
|
|
|
2,934
|
|
|
|
96
|
|
Depreciation and amortization
|
|
|
4,625
|
|
|
|
5,337
|
|
|
|
14,195
|
|
|
|
15,804
|
|
Noncontrolling interests in income of subsidiaries
|
|
|
1,010
|
|
|
|
1,712
|
|
|
|
1,427
|
|
|
|
3,650
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,953
|
|
Loss from discontinued operations, net of tax
|
|
|
125
|
|
|
|
90
|
|
|
|
205
|
|
|
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Station operating income
|
|
$
|
28,314
|
|
|
$
|
32,693
|
|
|
$
|
74,510
|
|
|
$
|
79,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
Three
Months Ended September 30, 2010 Compared to Three Months
Ended September 30, 2009 (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009(1)
|
|
|
Increase/(Decrease)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
74,491
|
|
|
$
|
74,651
|
|
|
$
|
(160
|
)
|
|
|
(0.2
|
)%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, excluding stock-based compensation
|
|
|
18,811
|
|
|
|
17,994
|
|
|
|
817
|
|
|
|
4.5
|
|
Selling, general and administrative, excluding stock-based
compensation
|
|
|
27,366
|
|
|
|
23,964
|
|
|
|
3,402
|
|
|
|
14.2
|
|
Corporate selling, general and administrative, excluding
stock-based compensation
|
|
|
5,488
|
|
|
|
4,702
|
|
|
|
786
|
|
|
|
16.7
|
|
Stock-based compensation
|
|
|
908
|
|
|
|
302
|
|
|
|
606
|
|
|
|
200.7
|
|
Depreciation and amortization
|
|
|
4,625
|
|
|
|
5,337
|
|
|
|
(712
|
)
|
|
|
(13.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
57,198
|
|
|
|
52,299
|
|
|
|
4,899
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
17,293
|
|
|
|
22,352
|
|
|
|
(5,059
|
)
|
|
|
(22.6
|
)
|
Interest income
|
|
|
28
|
|
|
|
33
|
|
|
|
(5
|
)
|
|
|
(15.2
|
)
|
Interest expense
|
|
|
12,122
|
|
|
|
9,224
|
|
|
|
2,898
|
|
|
|
31.4
|
|
Equity in income of affiliated company
|
|
|
1,784
|
|
|
|
1,397
|
|
|
|
387
|
|
|
|
27.7
|
|
Other expense, net
|
|
|
50
|
|
|
|
38
|
|
|
|
12
|
|
|
|
31.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for (benefit from) income taxes,
noncontrolling interests in income of subsidiaries and
discontinued operations
|
|
|
6,933
|
|
|
|
14,520
|
|
|
|
(7,587
|
)
|
|
|
(52.3
|
)
|
Provision for (benefit from) income taxes
|
|
|
4,760
|
|
|
|
(1,508
|
)
|
|
|
6,268
|
|
|
|
(415.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
2,173
|
|
|
|
16,028
|
|
|
|
(13,855
|
)
|
|
|
(86.4
|
)
|
Loss from discontinued operations, net of tax
|
|
|
(125
|
)
|
|
|
(90
|
)
|
|
|
35
|
|
|
|
38.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
2,048
|
|
|
|
15,938
|
|
|
|
(13,890
|
)
|
|
|
(87.2
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
1,010
|
|
|
|
1,712
|
|
|
|
(702
|
)
|
|
|
(41.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income attributable to common stockholders
|
|
$
|
1,038
|
|
|
$
|
14,226
|
|
|
$
|
(13,188
|
)
|
|
|
(92.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain reclassifications associated with accounting for
discontinued operations have been made to the accompanying prior
period financial statements to conform to the current period
presentation. These reclassifications had no effect on
previously reported net income or loss, or any other previously
reported statements of operations, balance sheet or cash flow
amounts. |
Net
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
74,491
|
|
|
$
|
74,651
|
|
|
$
|
(160
|
)
|
|
|
(0.2
|
)%
|
During the three months ended September 30, 2010, we
recognized approximately $74.5 million in net revenue
compared to approximately $74.7 million during the same
period in 2009. These amounts are net of agency and outside
sales representative commissions, which were approximately
$8.3 million during the three months ended
September 30, 2010, compared to approximately
$7.8 million for the comparable period in 2009. Our radio
stations net revenue decreased 0.5% over the same period
in 2009. Based on reports prepared
48
by the independent accounting firm Miller, Kaplan,
Arase & Co., LLP (Miller Kaplan), the
markets we operate in grew 6.2% in total revenues, led by 9.7%
growth in national revenues and 4.0% growth in local revenues.
Our Charlotte, Columbus, Dallas, Detroit, Houston and
St. Louis markets experienced the most significant net
revenue growth, while our Baltimore, Cleveland and Washington,
DC markets experienced the largest declines. Excluding Reach
Media, net revenue for our radio division was flat versus the
comparable period one year ago. Reach Media net revenue declined
3.2% during the third quarter and was impacted by the
December 31, 2009 expiration of a sales representation
agreement with Citadel whereby a minimum level of revenue was
guaranteed over the term of the agreement. Effective
January 1, 2010, Reach Medias newly established sales
organization began selling its inventory on the Tom Joyner
Morning Show and under a new commission based sales
representation agreement with Citadel, which sells certain
inventory owned by Reach Media in connection with its 106 radio
station affiliate agreements. Net revenue for our internet
business, which includes CCI, continues to grow, and increased
23.5% for the three months ended September 30, 2010
compared to the same period in 2009.
Operating
expenses
Programming
and technical, excluding stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
18,811
|
|
|
$
|
17,994
|
|
|
$
|
817
|
|
|
|
4.5
|
%
|
Programming and technical expenses include expenses associated
with on-air talent and the management and maintenance of the
systems, tower facilities, and studios used in the creation,
distribution and broadcast of programming content on our radio
stations. Programming and technical expenses for radio also
include expenses associated with our programming research
activities and music royalties. For our internet business,
programming and technical expenses include software product
design, post-application software development and maintenance,
database and server support costs, the help desk function, data
center expenses connected with ISP hosting services and other
internet content delivery expenses. Our radio division incurred
most of the additional spending, primarily increased payroll and
bonus expenses, higher contract labor spending, and web service
fees. Increased programming and technical spending was partially
offset by lower music royalties.
Selling,
general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
27,366
|
|
|
$
|
23,964
|
|
|
$
|
3,402
|
|
|
|
14.2
|
%
|
Selling, general and administrative expenses include expenses
associated with our sales departments, offices and facilities
and personnel (outside of our corporate headquarters), marketing
and promotional expenses, special events and sponsorships and
back office expenses. Expenses to secure ratings data for our
radio stations and visitors data for our websites are also
included in selling, general and administrative expenses. In
addition, selling, general and administrative expenses for radio
and internet include expenses related to the advertising traffic
(scheduling and insertion) functions. Selling, general and
administrative expenses also include membership traffic
acquisition costs for our online business. Our radio division
incurred most of the increased spending, primarily higher
payroll, bonuses, commissions and national representation fees,
additional research spending with Arbitron Inc. due to
implementation of the Portable People
Metertm
(PPM) in certain markets, and increased bad debt
expense. A substantial portion of the increase was attributable
to the non-recurrence of vacation expense savings from scheduled
office closings and changes to the Companys vacation plan
in 2009.
Corporate
selling, general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
5,488
|
|
|
$
|
4,702
|
|
|
$
|
786
|
|
|
|
16.7
|
%
|
49
Corporate expenses consist of expenses associated with our
corporate headquarters and facilities, including personnel. The
increase in corporate expenses was primarily due to salaries and
related payroll expenses for recently lifted salary reductions,
payroll taxes, medical insurance and professional fees. In
addition, part of the increase was attributable to the
non-recurrence of vacation expense savings from scheduled office
closings and changes to the Companys vacation plan in 2009.
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
908
|
|
|
$
|
302
|
|
|
$
|
606
|
|
|
|
200.7
|
%
|
The increased stock-based compensation expense was due to the
implementation of a long-term incentive plan whereby officers
and certain key employees were granted a total of
3,250,000 shares of restricted stock in January of 2010.
Stock-based compensation requires measurement of compensation
costs for all stock-based awards at fair value on date of grant
and recognition of compensation over the service period for
awards expected to vest.
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
4,625
|
|
|
$
|
5,337
|
|
|
$
|
(712
|
)
|
|
|
(13.3
|
)%
|
The decrease in depreciation and amortization expense for the
three months ended September 30, 2010 was due primarily to
the completion of amortization for certain CCI intangible assets
and the completion of useful lives for certain assets.
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
12,122
|
|
|
$
|
9,224
|
|
|
$
|
2,898
|
|
|
|
31.4
|
%
|
The increase in interest expense for the three months ended
September 30, 2010 was due primarily to higher principal
balances and higher interest rates that took effect as a result
of both entering into the third amendment to our Credit
Agreement in March 2010 as well as continuing defaults under our
Credit Agreement that occurred or were existing as of each of
June 30, 2010, July 1, 2010 and September 30,
2010.
Equity
in income of affiliated company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
1,784
|
|
|
$
|
1,397
|
|
|
$
|
387
|
|
|
|
27.7
|
%
|
Equity in income of affiliated company primarily reflects our
estimated equity in the net income of TV One. The increase to
equity in income of affiliated company for the three months
ended September 30, 2010 was due primarily to additional
net income generated by TV One for the third quarter of 2010
versus the comparable period in 2009. The Companys share
of the net income is driven by TV Ones current capital
structure and the Companys percentage ownership of the
equity securities of TV One.
Provision
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
4,760
|
|
|
$
|
(1,508
|
)
|
|
$
|
6,268
|
|
|
|
415.6
|
%
|
50
For the three months ended September 30, 2010, the
provision for income taxes was $4.8 million compared to a
benefit from income taxes of approximately $1.5 million for
the same period in 2009. The provision for income taxes
increased primarily due to an increase in the deferred tax
liability (DTL) for indefinite-lived intangibles
and, to a lesser extent, a discrete income tax benefit in 2009
that did not recur in 2010. Income taxes decreased by $681,000
due to reduced pre-tax book income for Reach Media.
The Company continues to maintain a full valuation allowance for
entities other than Reach Media for its deferred tax assets
(DTAs), including the DTA associated with its net
operating loss carryforward. As a result, pre-tax book income
for the entities other than Reach Media does not generate any
tax expense. Instead, the tax expense for these entities is
based on the change in the DTL associated with certain
indefinite-lived intangibles, which increases as tax
amortization on these intangibles is recognized and decreases as
impairments for book purposes are recorded on these assets. For
the three months ended September 30, 2010 and 2009 the
change in the DTL resulted in a tax expense of approximately
$3.8 million and a tax benefit of approximately
$1.2 million, respectively.
The consolidated effective tax rate for the three months ended
September 30, 2010 and 2009 was 68.7% and (10.4%),
respectively.
Loss
from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
(125
|
)
|
|
$
|
(90
|
)
|
|
$
|
35
|
|
|
|
38.9
|
%
|
Included in the loss from discontinued operations, net of tax,
are the results from operations for radio station clusters sold
in Los Angeles, Miami, Augusta, Louisville, Dayton, Minneapolis
and a station in our Boston market
(WILD-FM).
Discontinued operations also include the results from operations
for Giant Magazine, which ceased publication in December 2009.
The loss from discontinued operations, net of tax, for the three
months ended September 30, 2010 and 2009 resulted from
legal and litigation expenses incurred as a result of ongoing
legal activity for certain of the sold stations. The loss from
discontinued operations, net of tax, also includes no tax
provision for the three months ended September 30, 2010 and
a benefit from income taxes of $92,000 for the three months
ended September 30, 2009.
Noncontrolling
interests in income of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase/(Decrease)
|
|
|
$
|
1,010
|
|
|
$
|
1,712
|
|
|
$
|
(702
|
)
|
|
|
(41.0
|
)%
|
The decrease in noncontrolling interests in income of
subsidiaries is due to lower net income generated by Reach Media
for the three months ended September 30, 2010 compared to
the same period in 2009.
Other
Data
Station
operating income
Station operating income decreased to approximately
$28.3 million for the three months ended September 30,
2010 compared to approximately $32.7 million for the
comparable period in 2009, a decrease of $4.4 million or
13.5%. This decrease was primarily due to increased expenses
with relatively flat revenues. Increased spending was primarily
due to payroll related expenses from lifted salary reductions,
bonuses, and commissions. Additionally, operating expenses
increased due to the non-recurrence of vacation savings from
2009 vacation plan changes and forced office closings. In
addition there were higher national representation fees,
additional research expenses, and increased bad debt expense in
2010 compared to the corresponding 2009 period.
51
Station
operating income margin
Station operating income margin decreased to 38.0% for the three
months ended September 30, 2010 from 43.8% for the
comparable period in 2009. The margin decrease was attributable
to a decrease in station operating income as described above.
Nine
Months Ended September 30, 2010, Compared to Nine Months
Ended September 30, 2009 (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009(1)
|
|
|
Increase/(Decrease)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
208,703
|
|
|
$
|
204,835
|
|
|
$
|
3,868
|
|
|
|
1.9
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, excluding stock-based compensation
|
|
|
56,736
|
|
|
|
56,768
|
|
|
|
(32
|
)
|
|
|
(0.1
|
)
|
Selling, general and administrative, excluding stock-based
compensation
|
|
|
77,457
|
|
|
|
68,543
|
|
|
|
8,914
|
|
|
|
13.0
|
|
Corporate selling, general and administrative, excluding
stock-based compensation
|
|
|
20,537
|
|
|
|
15,034
|
|
|
|
5,503
|
|
|
|
36.6
|
|
Stock-based compensation
|
|
|
4,877
|
|
|
|
1,387
|
|
|
|
3,490
|
|
|
|
251.6
|
|
Depreciation and amortization
|
|
|
14,195
|
|
|
|
15,804
|
|
|
|
(1,609
|
)
|
|
|
(10.2
|
)
|
Impairment of long-lived assets
|
|
|
|
|
|
|
48,953
|
|
|
|
(48,953
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
173,802
|
|
|
|
206,489
|
|
|
|
(32,687
|
)
|
|
|
(15.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
34,901
|
|
|
|
(1,654
|
)
|
|
|
36,555
|
|
|
|
2,210.1
|
|
Interest income
|
|
|
95
|
|
|
|
98
|
|
|
|
(3
|
)
|
|
|
(3.1
|
)
|
Interest expense
|
|
|
31,059
|
|
|
|
29,036
|
|
|
|
2,023
|
|
|
|
7.0
|
|
Gain on retirement of debt
|
|
|
|
|
|
|
1,221
|
|
|
|
(1,221
|
)
|
|
|
(100.0
|
)
|
Equity in income of affiliated company
|
|
|
3,832
|
|
|
|
3,294
|
|
|
|
538
|
|
|
|
16.3
|
|
Other expense, net
|
|
|
2,934
|
|
|
|
96
|
|
|
|
2,838
|
|
|
|
2,956.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes, noncontrolling
interests in income of subsidiaries and discontinued operations
|
|
|
4,835
|
|
|
|
(26,173
|
)
|
|
|
31,008
|
|
|
|
118.5
|
|
Provision for income taxes
|
|
|
4,685
|
|
|
|
7,340
|
|
|
|
(2,655
|
)
|
|
|
(36.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
150
|
|
|
|
(33,513
|
)
|
|
|
33,663
|
|
|
|
100.4
|
|
Loss from discontinued operations, net of tax
|
|
|
(205
|
)
|
|
|
(835
|
)
|
|
|
(630
|
)
|
|
|
(75.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(55
|
)
|
|
|
(34,348
|
)
|
|
|
(34,293
|
)
|
|
|
(99.8
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
1,427
|
|
|
|
3,650
|
|
|
|
(2,223
|
)
|
|
|
(60.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss attributable to common stockholders
|
|
$
|
(1,482
|
)
|
|
$
|
(37,998
|
)
|
|
$
|
(36,516
|
)
|
|
|
(96.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Certain reclassifications associated with accounting for
discontinued operations have been made to the accompanying prior
period financial statements to conform to the current period
presentation. These reclassifications had no effect on
previously reported net income or loss, or any other previously
reported statements of operations, balance sheet or cash flow
amounts. |
52
Net
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
208,703
|
|
|
$
|
204,835
|
|
|
$
|
3,868
|
|
|
|
1.9
|
%
|
During the nine months ended September 30, 2010, we
recognized approximately $208.7 million in net revenue
compared to approximately $204.8 million during the same
period in 2009. These amounts are net of agency and outside
sales representative commissions, which were approximately
$23.4 million during the nine months ended 2010, compared
to approximately $20.7 million during the same period in
2009. Our radio stations net revenue grew 3.5% for the
nine months ended September 30, 2010, and based on reports
prepared by Miller Kaplan, the markets we operate in increased
6.6% in total revenues, 16.7% in national revenues and 2.5% in
local revenues. Our Atlanta, Charlotte, Dallas, Detroit,
St. Louis and Houston markets experienced strong net
revenue growth, while our Baltimore, Cleveland and Washington,
DC markets declined. Reach Media net revenue declined 9.8% and
was impacted by the December 31, 2009 expiration of a sales
representation agreement with Citadel whereby a minimum level of
revenue was guaranteed over the term of the agreement. Effective
January 1, 2010, Reach Medias newly established sales
organization began selling its inventory on the Tom Joyner
Morning Show and under a new commission based sales
representation agreement with Citadel, which sells certain
inventory owned by Reach Media in connection with its 106 radio
station affiliate agreements. Net revenue for our internet
business, which includes CCI, increased 23.0% for the nine
months ended September 30, 2010 compared to the same period
in 2009.
Operating
expenses
Programming
and technical, excluding stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
56,736
|
|
|
$
|
56,768
|
|
|
$
|
(32
|
)
|
|
|
(0.1
|
)%
|
Programming and technical expenses include expenses associated
with on-air talent and the management and maintenance of the
systems, tower facilities, and studios used in the creation,
distribution and broadcast of programming content on our radio
stations. Programming and technical expenses for radio also
include expenses associated with our programming research
activities and music royalties. For our internet business,
programming and technical expenses include software product
design, post-application software development and maintenance,
database and server support costs, the help desk function, data
center expenses connected with ISP hosting services and other
internet content delivery expenses. Decreased programming and
technical expenses were driven by savings in contracted on-air
talent and music royalties, which more than offset increased
payroll related, equipment maintenance and broadcast rights
spending.
Selling,
general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
77,457
|
|
|
$
|
68,543
|
|
|
$
|
8,914
|
|
|
|
13.0
|
%
|
Selling, general and administrative expenses include expenses
associated with our sales departments, offices and facilities
and personnel (outside of our corporate headquarters), marketing
and promotional expenses, special events and sponsorships and
back office expenses. Expenses to secure ratings data for our
radio stations and visitors data for our websites are also
included in selling, general and administrative expenses. In
addition, selling, general and administrative expenses for radio
and internet include expenses related to the advertising traffic
(scheduling and insertion) functions. Selling, general and
administrative expenses also include membership traffic
acquisition costs for our online business. Our radio division
drove most of the increased spending, with additional salaries
for sales new hires, higher revenue variable expenses such as
commissions, bonuses and national representation fees,
additional research associated with PPM implementations and
additional travel and entertainment. In addition, increased
selling, general and
53
administrative expenses resulted from the non-recurrence of
vacation savings from forced office closings and changes to the
Companys vacation plan in 2009.
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
4,877
|
|
|
$
|
1,387
|
|
|
$
|
3,490
|
|
|
|
251.6
|
%
|
Increased stock-based compensation expense is due to a long-term
incentive plan whereby officers and certain key employees were
granted a total of 3,250,000 shares of restricted stock in
January of 2010. Stock-based compensation requires measurement
of compensation costs for all stock-based awards at fair value
on date of grant and recognition of compensation over the
service period for awards expected to vest.
Corporate
selling, general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
Increase/(Decrease)
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
$
|
20,537
|
|
|
$
|
15,034
|
|
|
$
|
5,503
|
|
|
|
36.6
|
%
|
Corporate expenses consist of expenses associated with our
corporate headquarters and facilities, including personnel. The
increase in corporate expenses during the nine months ended
September 30, 2010 is due to the recording of bonuses for
the nine months of 2010 compared to a reduction of bonuses
recorded for the same period in 2009. In addition, higher
spending also resulted from increased compensation expense for
the Chief Executive Officer in connection with the potential
payment for the TV One award element in his employment
Agreement. To a lesser extent, additional spending was also due
to increased salaries expense from recently lifted salary
reductions, higher travel and entertainment and increased bad
debt expense.
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
14,195
|
|
|
$
|
15,804
|
|
|
$
|
(1,609
|
)
|
|
|
(10.2
|
)%
|
The decrease in depreciation and amortization expense for the
nine months ended September 30, 2010 was due primarily to
the completion of amortization for certain CCI intangibles and
the completion of useful lives for certain assets.
Impairment
of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
|
|
|
$
|
48,953
|
|
|
$
|
(48,953
|
)
|
|
|
(100.0
|
)%
|
The impairment of long-lived assets charge of approximately
$49.0 million for the nine months ended September 30,
2009 reflects a non-cash charge recorded for the impairment of
radio broadcasting licenses in 11 of our 16 markets, namely
Charlotte, Cincinnati, Cleveland, Columbus, Dallas, Houston,
Indianapolis, Philadelphia, Raleigh-Durham, Richmond and
St. Louis. The impairment was caused by the then economic
downturn, and its adverse impact on radio advertising. Interim
impairment testing performed in February 2009 resulted in
impairment charges against radio broadcasting licenses in the
amount of approximately $49.0 million in 11 of our 16
markets, namely Charlotte, Cincinnati, Cleveland, Columbus,
Dallas, Houston, Indianapolis, Philadelphia, Raleigh-Durham,
Richmond and St. Louis. Since 2009, the improvement to the
economic environment and advertising industry has contributed to
stable valuations for certain long-lived assets and to the
non-recurrence of impairment for such assets for the first nine
months of 2010.
54
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
31,059
|
|
|
$
|
29,036
|
|
|
$
|
2,023
|
|
|
|
7.0
|
%
|
The increase in interest expense for the nine months ended
September 30, 2010 was due primarily to higher principal
balances and higher interest rates that took effect as a result
of entering into a third amendment to our Credit Agreement in
March 2010 as well as continuing defaults under our credit
agreement that occurred or were existing as of each of
June 30, 2010, July 1, 2010 and September 30,
2010. The third amendment waived a non-monetary technical
default to the Credit Agreement associated with not designating
certain subsidiaries as guarantors under our indentures
governing our senior subordinated notes and lowered the revolver
commitment under the Companys bank facilities from
$500.0 million to $400.0 million.
Gain
on retirement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
|
|
|
$
|
1,221
|
|
|
$
|
(1,221
|
)
|
|
|
(100.0
|
)%
|
The gain on retirement of debt resulted from the early
redemption of a portion of the Companys outstanding 2011
Notes. The gain for the nine months ended September 30,
2009 resulted from the early redemption of approximately
$2.4 million of the senior subordinated notes at an average
discount of 50.0%. As of September 30, 2010, a principal
amount of approximately $101.5 million remained outstanding
for the 2011 Notes.
Equity
in income of affiliated company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
3,832
|
|
|
$
|
3,294
|
|
|
$
|
538
|
|
|
|
16.3
|
%
|
Equity in income of affiliated company primarily reflects our
estimated equity in the net income of TV One. The increase to
equity in income of affiliated company for the nine months ended
September 30, 2010 was due primarily to additional net
income generated by TV One during 2010 versus 2009. The
Companys share of the net income is driven by TV
Ones current capital structure and the Companys
percentage ownership of the equity securities of TV One.
Other
expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
2,934
|
|
|
$
|
96
|
|
|
$
|
2,838
|
|
|
|
2,956.3
|
%
|
The other expense for the nine months ended September 30,
2010 was principally due to the write off of certain debt
financing and modification costs. A pro-rata portion of debt
issuance costs related to our Credit Agreement were written off
in connection with the lowering of the revolver commitment under
the Companys bank facilities from $500.0 million to
$400.0 million. The $100.0 million reduction to the
revolver commitment resulted from entering into a third
amendment to our Credit Agreement in March 2010. The third
amendment also waived a non-monetary technical default to the
Credit Agreement associated with not designating certain
subsidiaries as guarantors under our indentures governing our
senior subordinated notes. In addition, there were costs written
off in connection with the Companys offering of
Second-Priority Senior Secured Grid Notes (Second Lien
Notes). The majority of the net proceeds from the Second
Lien Notes were expected to fund the acquisition of additional
equity interests in TV One. However, the subscription offer to
holders of our Existing Notes for the Second Lien Notes ended in
July 2010 and the Company determined not to further extend this
subscription offer. The write off of the debt financing and
modification costs was
55
partially offset by the recording of the value of translator
equipment awarded to the Company as a result of a legal
settlement.
Provisions
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
4,685
|
|
|
$
|
7,340
|
|
|
$
|
(2,655
|
)
|
|
|
(36.2
|
)%
|
For the nine months ended September 30, 2010, the provision
for income taxes was approximately $4.7 million compared to
a provision of approximately $7.3 million for the same
period in 2009. Approximately $2.3 million of the decrease
is due to reduced pre-tax book income for Reach Media. The
remaining decrease in the income tax provision is attributable
to changes in the deferred tax liability (DTL) for
indefinite lived intangibles and, to lesser extent, a discrete
income tax benefit in 2009 that did recur in 2010.
The Company continues to maintain a full valuation allowance for
entities other than Reach Media for its deferred tax assets
(DTAs), including the DTA associated with its net
operating loss carryforward. As a result, pre-tax book income
for the entities other than Reach Media does not generate any
tax expense. Instead, the tax expense for these entities is
based on the change in the DTL associated with certain
indefinite-lived intangibles, which increases as tax
amortization on these intangibles is recognized and decreases as
impairments for book purposes are recorded on these assets. For
the nine months ended September 30, 2010 and 2009, tax
expense of approximately $3.8 million and approximately
$5.8 million was recognized for the change in the DTL,
respectively.
The consolidated effective tax rate for the nine months ended
September 30, 2010 and 2009 was 96.9% and (28.0%),
respectively.
Loss
from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
(205
|
)
|
|
$
|
(835
|
)
|
|
$
|
(630
|
)
|
|
|
(75.4
|
)%
|
Included in the loss from discontinued operations, net of tax,
are the results of operations for radio station clusters sold in
Los Angeles, Miami, Augusta, Louisville, Dayton, Minneapolis and
a station in our Boston market
(WILD-FM).
Discontinued operations also include the results from operations
for Giant Magazine, which ceased publication in December 2009.
The loss incurred for the nine months ended September 30,
2010 was due to legal and litigation spending from ongoing
litigation for certain previous sold stations. This spending was
partially offset by the assumption of Giant Magazines subscriber
liability by another publisher. The loss incurred for the nine
months ended September 30, 2009 resulted from operating
losses incurred by Giant Magazine in addition to legal and
litigation expenses as a result of ongoing legal activity for
certain station sales. The loss from discontinued operations,
net of tax, also includes no tax provision for the nine months
ended September 30, 2010 and a provision for income taxes
of $1,000 for the nine months ended September 30, 2009.
Noncontrolling
interests in income of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
2010
|
|
2009
|
|
|
|
|
|
$
|
1,427
|
|
|
$
|
3,650
|
|
|
$
|
(2,223
|
)
|
|
|
(60.0
|
)%
|
The decrease in noncontrolling interests in income of
subsidiaries is due to a decrease in Reach Medias net
income for the nine months ended September 30, 2010
compared to the same period in 2009.
56
Other
Data
Station
operating income
Station operating income decreased to approximately
$74.5 million for the nine months ended September 30,
2010 compared to approximately $79.5 million for the
comparable period in 2009, a decrease of $5.0 million or
6.3%. This decrease was primarily due to increased expenses
which more than offset the increase in revenues between periods.
Increased spending was primarily due to expenses that vary with
increased revenue, such as commissions, bonuses and sales
representation fees, the non-recurrence of vacation savings from
a 2009 vacation plan change and forced office closings,
increased salaries from new hires and contract labor costs, and
additional research expenses, broadcast rights, promotional
activities, trade spending and travel and entertainment.
Station
operating income margin
Station operating income margin decreased to 35.7% for the nine
months ended September 30, 2010 from 38.8% for the
comparable period in 2009. The margin decrease was primarily
attributable to a decrease in station operating income as
described above.
Results
of Operations Three-Year Period ended
December 31, 2009
Summary
of Performance
The table below provides a summary of our performance based on
Net Revenue and the Performance Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
(As adjusted see note 1 of our consolidated
financial statements)
|
|
|
(In thousands, except margin data)
|
|
Net revenue
|
|
$
|
272,092
|
|
|
$
|
313,443
|
|
|
$
|
316,398
|
|
Station operating income
|
|
|
105,850
|
|
|
|
131,731
|
|
|
|
147,238
|
|
Station operating income margin
|
|
|
38.9
|
%
|
|
|
42.0
|
%
|
|
|
46.5
|
%
|
Net loss
|
|
|
(52,887
|
)
|
|
|
(302,944
|
)
|
|
|
(391,500
|
)
|
57
The reconciliation of net loss to station operating income is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As adjusted see note 1 of our consolidated
financial statements)
|
|
|
|
(In thousands, except margin data)
|
|
|
Net loss as reported
|
|
$
|
(52,887
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
(391,500
|
)
|
Add back non-station operating income items included in net loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(144
|
)
|
|
|
(491
|
)
|
|
|
(1,242
|
)
|
Interest expense
|
|
|
38,404
|
|
|
|
59,689
|
|
|
|
72,770
|
|
Provision for (benefit from) income taxes
|
|
|
7,014
|
|
|
|
(45,183
|
)
|
|
|
54,083
|
|
Corporate selling, general and administrative, excluding
stock-based compensation
|
|
|
23,492
|
|
|
|
35,279
|
|
|
|
27,328
|
|
Stock-based compensation
|
|
|
1,649
|
|
|
|
1,777
|
|
|
|
2,991
|
|
Equity in (income) loss of affiliated company
|
|
|
(3,653
|
)
|
|
|
3,652
|
|
|
|
15,836
|
|
Gain on retirement of debt
|
|
|
( 1,221
|
)
|
|
|
(74,017
|
)
|
|
|
|
|
Other expense, net
|
|
|
104
|
|
|
|
316
|
|
|
|
290
|
|
Depreciation and amortization
|
|
|
21,011
|
|
|
|
19,022
|
|
|
|
14,680
|
|
Noncontrolling interests in income of subsidiaries
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
3,910
|
|
Impairment of long-lived assets
|
|
|
65,937
|
|
|
|
423,220
|
|
|
|
211,051
|
|
Loss from discontinued operations, net of tax
|
|
|
1,815
|
|
|
|
7,414
|
|
|
|
137,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Station operating income
|
|
$
|
105,850
|
|
|
$
|
131,731
|
|
|
$
|
147,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008 (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Increase/(Decrease)
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
see note 1 below)
|
|
|
|
|
|
|
|
|
Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
272,092
|
|
|
$
|
313,443
|
|
|
$
|
(41,351
|
)
|
|
|
(13.2
|
)%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, excluding stock-based compensation
|
|
|
75,547
|
|
|
|
79,117
|
|
|
|
(3,570
|
)
|
|
|
(4.5
|
)
|
Selling, general and administrative, excluding stock-based
compensation
|
|
|
90,695
|
|
|
|
102,595
|
|
|
|
(11,900
|
)
|
|
|
(11.6
|
)
|
Corporate selling, general and administrative, excluding
stock-based compensation
|
|
|
23,492
|
|
|
|
35,279
|
|
|
|
(11,787
|
)
|
|
|
(33.4
|
)
|
Stock-based compensation
|
|
|
1,649
|
|
|
|
1,777
|
|
|
|
(128
|
)
|
|
|
(7.2
|
)
|
Depreciation and amortization
|
|
|
21,011
|
|
|
|
19,022
|
|
|
|
1,989
|
|
|
|
10.5
|
|
Impairment of long-lived assets
|
|
|
65,937
|
|
|
|
423,220
|
|
|
|
(357,283
|
)
|
|
|
(84.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
278,331
|
|
|
|
661,010
|
|
|
|
(382,679
|
)
|
|
|
(57.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(6,239
|
)
|
|
|
(347,567
|
)
|
|
|
(341,328
|
)
|
|
|
(98.2
|
)
|
Interest income
|
|
|
144
|
|
|
|
491
|
|
|
|
(347
|
)
|
|
|
(70.7
|
)
|
Interest expense
|
|
|
38,404
|
|
|
|
59,689
|
|
|
|
(21,285
|
)
|
|
|
(35.7
|
)
|
Gain on retirement of debt
|
|
|
1,221
|
|
|
|
74,017
|
|
|
|
(72,796
|
)
|
|
|
(98.4
|
)
|
Equity in income (loss) of affiliated company
|
|
|
3,653
|
|
|
|
(3,652
|
)
|
|
|
7,305
|
|
|
|
200.0
|
|
Other expense, net
|
|
|
104
|
|
|
|
316
|
|
|
|
(212
|
)
|
|
|
(67.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for (benefit from) income taxes,
noncontrolling interests in income of subsidiaries and loss from
discontinued operations, net of tax
|
|
|
(39,729
|
)
|
|
|
(336,716
|
)
|
|
|
(296,987
|
)
|
|
|
(88.2
|
)
|
Provision for (benefit from) income taxes
|
|
|
7,014
|
|
|
|
(45,183
|
)
|
|
|
52,197
|
|
|
|
115.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(46,743
|
)
|
|
|
(291,533
|
)
|
|
|
(244,790
|
)
|
|
|
(84.0
|
)
|
Loss from discontinued operations, net of tax
|
|
|
(1,815
|
)
|
|
|
(7,414
|
)
|
|
|
(5,599
|
)
|
|
|
(75.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(48,558
|
)
|
|
|
(298,947
|
)
|
|
|
(250,389
|
)
|
|
|
(83.8
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
332
|
|
|
|
8.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss attributable to common stockholders
|
|
$
|
(52,887
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
(250,057
|
)
|
|
|
(82.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1 Certain reclassifications associated
with accounting for discontinued operations have been made to
prior year balances to conform to the current year presentation.
These reclassifications had no effect on any other previously
reported or consolidated net income or loss or any other
statement of operations, balance sheet or cash flow amounts.
Net
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
272,092
|
|
|
$
|
313,443
|
|
|
$
|
(41,351
|
)
|
|
|
(13.2
|
)%
|
During the year ended December 31, 2009, we recognized
approximately $272.1 million in net revenue compared to
approximately $313.4 million during the same period in
2008. These amounts are net of agency and outside sales
representative commissions, which were approximately
$28.4 million during the year ended December 31, 2009,
compared to approximately $34.6 million during the same
period in 2008. CCI, the social
59
online networking company acquired by the Company in 2008,
generated approximately $13.4 million in net revenue for
the year ended December 31, 2009, compared to approximately
$11.7 million from the April 2008 acquisition date through
December 31, 2008. Despite incremental revenue from CCI,
the decrease in net revenue was due primarily to the weak
economic environment which continued to weaken demand for
advertising in general. For our radio business, based on reports
prepared by the independent accounting firm Miller, Kaplan,
Arase & Co., LLP (Miller Kaplan), the
markets we operate in declined 18.2% in total revenues for the
year ended December 31, 2009, 17.4% in national revenues
and 20.5% in local revenues. While the Companys total
radio net revenue outperformed that of the markets in which we
operate, we nonetheless experienced considerable net revenue
declines in several of our markets, notably Atlanta, Baltimore,
Houston, Raleigh-Durham and Washington, DC. Excluding CCI, net
revenue declined 14.3% for the year ended December 31, 2009
compared to the same period in 2008.
Operating
expenses
Programming
and technical, excluding stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
75,547
|
|
|
$
|
79,117
|
|
|
$
|
(3,570
|
)
|
|
|
(4.5
|
)%
|
Programming and technical expenses include expenses associated
with on-air talent and the management and maintenance of the
systems, tower facilities, and studios used in the creation,
distribution and broadcast of programming content on our radio
stations. Programming and technical expenses for radio also
include expenses associated with our programming research
activities and music royalties. For our internet business,
programming and technical expenses include software product
design, post-application software development and maintenance,
database and server support costs, the help desk function, data
center expenses connected with ISP hosting services and other
internet content delivery expenses. Programming and technical
expenses for CCI, which was acquired in April 2008, grew from
approximately $5.5 million from April to December 2008, to
$6.3 million for the year ended December 31, 2009.
This increase was more than offset by several cost-cutting
initiatives in the radio segment, specifically compensation
savings from employee layoffs and salary reductions, contracted
on-air talent reductions and lower facilities spending.
Excluding CCIs expenses, programming and technical
expenses decreased 6.0% for the year ended December 31,
2009 compared to the same period in 2008.
Selling,
general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
90,695
|
|
|
$
|
102,595
|
|
|
$
|
(11,900
|
)
|
|
|
(11.6
|
)%
|
Selling, general and administrative expenses include expenses
associated with our sales departments, offices and facilities
and personnel (outside of our corporate headquarters), marketing
and promotional expenses, special events and sponsorships and
back office expenses. Expenses to secure ratings data for our
radio stations and visitors data for our websites are also
included in selling, general and administrative expenses. In
addition, selling, general and administrative expenses for radio
and internet include expenses related to the advertising traffic
(scheduling and insertion) functions. Selling, general and
administrative expenses also include membership traffic
acquisition costs for our online business. Our radio division
realized approximately $11.3 million in savings, primarily
in compensation, specifically less commissions and national
representative fees due to declining revenue, lower salary
expenses resulting from employee layoffs and salary cuts and
less bad debt expense as a result of fewer client bankruptcies.
Other radio division savings included less promotional expenses,
less travel and entertainment spending and vacation benefit
savings from scheduled office closings and changes to the
Companys vacation policy. Our online business, excluding
CCI, incurred less spending for traffic acquisition costs. These
savings more than offset increased research spending. Selling,
general and administrative expenses for CCI, which was acquired
in April 2008, increased to approximately $8.6 million for
the year ended 2009, from $5.7 million for the period April
through December 2008.
60
Excluding CCIs expenses, selling, general and
administrative expenses decreased 15.2% for the year ended
December 31, 2009 compared to the same period in 2008.
Corporate
selling, general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
23,492
|
|
|
$
|
35,279
|
|
|
$
|
(11,787
|
)
|
|
|
(33.4
|
)%
|
Corporate expenses consist of expenses associated with our
corporate headquarters and facilities, including personnel. The
decrease in corporate expenses during the year December 31,
2009 was primarily due to the non-recurrence of approximately
$10.2 million in compensation costs recorded in 2008
associated the Chief Executive Officers (CEO)
April 2008 employment agreement. Additional corporate selling,
general and administrative savings resulted from our
cost-cutting initiatives, specifically lower compensation due to
salary reductions, lower bonuses, less severance and vacation
savings from scheduled office closings and changes to the
Companys vacation policy. Reduced corporate selling,
general and administrative spending also resulted from lower
legal and professional expenses, reduced travel and
entertainment, lower bad debt expense and less public relations
spending. For the year ended December 31, 2009, the Company
incurred restructuring charges in the amount of $244,000 for
layoffs from the consolidation of its radio division business
offices, compared to restructuring charges of $485,000 for the
same period in 2008 stemming from Company-wide layoffs.
Excluding the approximately $10.2 million recorded for the
CEOs bonuses in 2008 and the restructuring charges for
both years, corporate selling, general and administrative
expenses decreased 6.9% for the year ended December 31,
2009 compared to the same period in 2008.
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
21,011
|
|
|
$
|
19,022
|
|
|
$
|
1,989
|
|
|
|
10.5
|
%
|
The increase in depreciation and amortization expense for the
year ended December 31, 2009 was due primarily to the April
2008 acquisition of CCI and the depreciation and amortization of
technology and intangible assets acquired, and to a lesser
extent, asset additions from our June 30, 2008 acquisition
of WPRS-FM,
new office facilities for our Charlotte market and studio
improvements for one of our syndicated shows.
Impairment
of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
65,937
|
|
|
$
|
423,220
|
|
|
$
|
(357,283
|
)
|
|
|
(84.4
|
)%
|
The decrease in impairment of long-lived assets for the year
ended December 31, 2009 was related to non-cash impairment
charges recorded to reduce the carrying value of radio
broadcasting licenses, goodwill and other intangible assets to
their estimated fair values. The 2009 impairments occurred in 11
of our 16 markets, namely in Charlotte, Cincinnati, Cleveland,
Columbus, Dallas, Houston, Indianapolis, Philadelphia,
Raleigh-Durham, Richmond and St. Louis. The 2008
impairments occurred in 12 markets and included the same markets
impaired in 2009, plus Detroit. The impairments were driven in
part by the economic downturn, slower radio industry and market
revenue growth and resulting deteriorating cash flows, declining
radio station transaction multiples and a higher cost of
capital. The recent and gradual decline in values for long-lived
assets such as licenses and other intangibles was neither unique
nor specific to our individual markets, as this trend has
impacted the valuations of the radio industry as a whole, and
has impacted other broadcast and traditional media companies as
well.
61
Interest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
144
|
|
|
$
|
491
|
|
|
$
|
(347
|
)
|
|
|
(70.7
|
)%
|
The decrease in interest income for the year ended
December 31, 2009 was due primarily to lower balances of
cash and cash equivalents and a decline in interest rates.
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
38,404
|
|
|
$
|
59,689
|
|
|
$
|
(21,285
|
)
|
|
|
(35.7
|
)%
|
The decrease in interest expense for the year ended
December 31, 2009 was due primarily to pay downs on
outstanding debt on the Companys credit facility, early
redemptions of the Companys 2011 Notes, and to a lesser
extent, more favorable rates, which were favorably impacted by
shifting outstanding principal debt from the term to the
revolver portion of the credit facility. The reduction is also
driven by the non-recurrence of local marketing agreement
(LMA) fees associated with the operation of
WPRS-FM
prior to our June 2008 acquisition. LMA fees are classified as
interest expense.
Gain
on retirement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
1,221
|
|
|
$
|
74,017
|
|
|
$
|
(72,796
|
)
|
|
|
(98.4
|
)%
|
The gain on retirement of debt for the year ended
December 31, 2009 was due to the redemption of the
Companys outstanding 2011 Notes at a discount. The gain
for the year ended December 31, 2009 resulted from the
early redemption of approximately $2.4 million of the 2011
Notes at an average discount of 50.0%. The gain for the year
ended December 31, 2008 was due to the early redemption of
approximately $196.1 million of the 2011 Notes at an
average discount of 38.4%. As of December 31, 2009, a
principal amount of approximately $101.5 million remained
outstanding on the 2011 Notes.
Equity
in income (loss) of affiliated company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
3,653
|
|
|
$
|
(3,652
|
)
|
|
$
|
7,305
|
|
|
|
200.0
|
%
|
Equity in income (loss) of affiliated company primarily reflects
our estimated equity in the net income or loss of TV One, LLC.
The change to equity in income of affiliated company for the
year ended December 31, 2009 was due primarily to net
income generated by TV One in 2009. This compares to equity in
loss of affiliated company for the year ended December 31,
2008, given TV Ones net loss in 2008. The Companys
share of the net income or loss is driven by TV Ones
current capital structure and the Companys ownership of
the equity securities of TV One that are currently absorbing its
net income or losses.
Provision
for (benefit from) income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
7,014
|
|
|
$
|
(45,183
|
)
|
|
$
|
52,197
|
|
|
|
115.5
|
%
|
During the year ended December 31, 2009, the provision for
income taxes increased to approximately $7.0 million
compared to a benefit of $45.2 million for the same period
in 2008. The tax benefit for the year ended December 31,
2008 related to an impairment of indefinite-lived intangibles
which reduced the deferred tax liability (DTL). The
impairment for the year ended December 31, 2009 was
significantly less than the
62
impairment in 2008; hence, the benefit from the reduction of the
DTL was significantly less for 2009. For the year ended
December 31, 2009, the tax provision consisted of
approximately $4.5 million for Reach Media and
$2.5 million for all other operations. The Company
continues to maintain a full valuation allowance for its net
deferred tax assets (DTAs).
The tax provisions and offsetting valuation allowances resulted
in effective tax rates of (17.7)% and 13.4% for the years ended
December 31, 2009 and 2008, respectively. The annual
effective tax rate for Radio One reflects the increase in DTLs
associated with the amortization of certain of the
Companys radio broadcasting licenses for tax purposes.
Loss
from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
(1,815
|
)
|
|
$
|
(7,414
|
)
|
|
$
|
(5,599
|
)
|
|
|
(75.5
|
)%
|
Included in the loss from discontinued operations, net of tax,
are the results of operations for station clusters sold in Los
Angeles, Miami, Augusta, Louisville, Dayton, Minneapolis and a
station in Boston
(WILD-FM).
Discontinued operations also includes the results of operations
for Giant Magazine, which ceased publication in December 2009.
The loss from discontinued operations, net of tax, for the year
ended December 31, 2008 resulted from a gain on the April
2008 closing on the sale of the assets of radio station
WMCU-AM,
located in the Miami metropolitan area, which was more than
offset by a loss on the May 2008 closing on the sale of the
assets of radio station
KRBV-FM,
located in the Los Angeles metropolitan area. Approximately
$5.1 million in impairment charges were recorded in 2008
based on the sale price of the Los Angeles station pursuant to
the asset purchase agreement. Net losses for Giant Magazine in
2009 and 2008 were approximately $2.0 million and
$3.3 million, respectively. The loss from discontinued
operations, net of tax, also includes a tax provision of $0 and
$84,000 for the years ended 2009 and 2008, respectively.
Noncontrolling
interests in income of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2009
|
|
2008
|
|
|
|
|
|
$
|
4,329
|
|
|
$
|
3,997
|
|
|
$
|
332
|
|
|
|
8.3
|
%
|
The increase in noncontrolling interests in income of
subsidiaries was due to additional net income for Reach Media
for the year ended December 31, 2009 compared to the same
period in 2008.
Other
Data
Station
operating income
Station operating income decreased to approximately
$105.9 million for the year ended December 31, 2009
compared to approximately $131.7 million for the year ended
December 31, 2008, a decrease of approximately
$25.8 million or 19.6%. This decrease was primarily due to
declines in both radio and online net revenue as a result of
weakened advertising demand given the economic downturn. The net
revenue decline was offset in part by a decrease in operating
expenses resulting from several cost-cutting initiatives
implemented by the Company.
Station
operating income margin
Station operating income margin decreased to 38.9% for the year
ended December 31, 2009 from 42.0% for the year ended
December 31, 2008. This decrease was primarily attributable
to a decline in net revenue and station operating income as
described above.
63
Year
Ended December 31, 2008 Compared to Year Ended
December 31, 2007 (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Increase/(Decrease)
|
|
|
|
(As adjusted see note 1 below)
|
|
|
|
|
|
|
|
|
Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
313,443
|
|
|
$
|
316,398
|
|
|
$
|
(2,955
|
)
|
|
|
(0.9
|
)%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, excluding stock-based compensation
|
|
|
79,117
|
|
|
|
69,984
|
|
|
|
9,133
|
|
|
|
13.1
|
|
Selling, general and administrative, excluding stock-based
compensation
|
|
|
102,595
|
|
|
|
99,176
|
|
|
|
3,419
|
|
|
|
3.4
|
|
Corporate selling, general and administrative, excluding
stock-based compensation
|
|
|
35,279
|
|
|
|
27,328
|
|
|
|
7,951
|
|
|
|
29.1
|
|
Stock-based compensation
|
|
|
1,777
|
|
|
|
2,991
|
|
|
|
(1,214
|
)
|
|
|
(40.6
|
)
|
Depreciation and amortization
|
|
|
19,022
|
|
|
|
14,680
|
|
|
|
4,342
|
|
|
|
29.6
|
|
Impairment of long-lived assets
|
|
|
423,220
|
|
|
|
211,051
|
|
|
|
212,169
|
|
|
|
100.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
661,010
|
|
|
|
425,210
|
|
|
|
235,800
|
|
|
|
55.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(347,567
|
)
|
|
|
(108,812
|
)
|
|
|
238,755
|
|
|
|
219.4
|
|
Interest income
|
|
|
491
|
|
|
|
1,242
|
|
|
|
(751
|
)
|
|
|
(60.5
|
)
|
Interest expense
|
|
|
59,689
|
|
|
|
72,770
|
|
|
|
(13,081
|
)
|
|
|
(18.0
|
)
|
Gain on retirement of debt
|
|
|
74,017
|
|
|
|
|
|
|
|
74,017
|
|
|
|
|
|
Equity in income (loss) of affiliated company
|
|
|
(3,652
|
)
|
|
|
(15,836
|
)
|
|
|
(12,184
|
)
|
|
|
(76.9
|
)
|
Other expense, net
|
|
|
316
|
|
|
|
290
|
|
|
|
26
|
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before (benefit from) provisions for income taxes,
noncontrolling interests in income of subsidiaries and loss from
discontinued operations, net of tax
|
|
|
(336,716
|
)
|
|
|
(196,466
|
)
|
|
|
140,250
|
|
|
|
71.4
|
|
(Benefit from) provision for income taxes
|
|
|
(45,183
|
)
|
|
|
54,083
|
|
|
|
(99,266
|
)
|
|
|
(183.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(291,533
|
)
|
|
|
(250,549
|
)
|
|
|
40,984
|
|
|
|
16.4
|
|
Loss from discontinued operations, net of tax
|
|
|
(7,414
|
)
|
|
|
(137,041
|
)
|
|
|
(129,627
|
)
|
|
|
(94.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(298,947
|
)
|
|
|
(387,590
|
)
|
|
|
(88,643
|
)
|
|
|
(22.9
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
3,997
|
|
|
|
3,910
|
|
|
|
87
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss attributable to common stockholders
|
|
$
|
(302,944
|
)
|
|
$
|
(391,500
|
)
|
|
$
|
(88,556
|
)
|
|
|
(22.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1 Certain reclassifications associated
with accounting for discontinued operations have been made to
prior year balances to conform to the current year presentation.
These reclassifications had no effect on any other previously
reported or consolidated net income or loss or any other
statement of operations, balance sheet or cash flow amounts.
Additionally, the 2007 financial data reflects the correction of
an error to increase the equity in loss of affiliated company by
approximately $4.4 million.
Net
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
313,443
|
|
|
$
|
316,398
|
|
|
$
|
(2,955
|
)
|
|
|
(0.9
|
)%
|
For the year ended December 31, 2008 we recognized
approximately $313.4 million in net revenue compared to
approximately $316.4 million during the same period in
2007. These amounts are net of agency and outside sales
representative commissions, which were approximately
$34.6 million in 2008, compared to
64
approximately $37.0 million in 2007. Declines in net
revenue in our radio markets more than offset an increase in net
revenue of approximately $11.7 million generated by CCI, an
online social networking company, which was acquired by the
Company in April 2008. For our radio business, based on reports
prepared by Miller Kaplan, the markets in which we operate
declined 8.8% in total revenues, 10.9% in national revenues and
9.6% in local revenues for the year ended December 31,
2008. Consistent with the markets we operate in, we also
experienced a decrease in net revenue, with national revenue
driving more of a decline. On a per market basis, we experienced
considerable revenue declines in our Atlanta, Houston and
Washington, DC markets, and more modest declines in our Dallas,
Detroit, Cleveland and Raleigh-Durham markets. We experienced
growth in net revenue in our Indianapolis and Philadelphia
markets, as well as increases in net revenue from a special
event, revenue from new syndicated programs and increased
internet revenue from our station websites. Reach Media had a
decline in net revenue due to TV licensing revenue which ended
in 2007, and less events revenue resulting from fewer events and
less sponsorships compared to 2007. Excluding the approximately
$11.7 million generated by CCI, net revenue declined 4.6%
for the year ended December 31, 2008 compared to the same
period in 2007.
Operating
expenses
Programming
and technical, excluding stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
79,117
|
|
|
$
|
69,984
|
|
|
$
|
9,133
|
|
|
|
13.1
|
%
|
Programming and technical expenses include expenses associated
with on-air talent and the management and maintenance of the
systems, tower facilities, and studios used in the creation,
distribution and broadcast of programming content on our radio
stations. Programming and technical expenses for radio also
include expenses associated with our programming research
activities and music royalties. For our internet business,
programming and technical expenses include software product
design, post application software development and maintenance,
database and server support costs, the help desk function, data
center expenses connected with ISP hosting services and other
internet content delivery expenses. Increased programming and
technical expenses were primarily due to approximately
$5.5 million in spending by CCI, which was acquired in
April 2008 and approximately $1.4 million more spent for
our broader internet initiative. Related to our radio business,
additional programming and technical spending was also driven by
additional staffing, in part for our web sites, higher on-air
talent expenses, mostly for our new syndicated radio shows,
additional tower related expenses and increased music royalties.
The increased radio programming and technical expenses were
offset in part from savings in research, savings from ceasing
our 401(k) match program and the absence of Reach TV
syndication. Excluding approximately $6.9 million in
increased spending for our internet initiative and CCIs
expenses, programming and technical expenses increased 3.2% for
the year ended December 31, 2008 compared to the same
period in 2007.
Selling,
general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
102,595
|
|
|
$
|
99,176
|
|
|
$
|
3,419
|
|
|
|
3.4
|
%
|
Selling, general and administrative expenses include expenses
associated with our sales departments, offices and facilities
and personnel (outside of our corporate headquarters), marketing
and promotional expenses, special events and sponsorships and
back office expenses. Expenses to secure ratings data for our
radio stations and visitors data for our websites are also
included in selling, general and administrative expenses. In
addition, selling, general and administrative expenses for radio
and internet also include expenses related to the advertising
traffic (scheduling and insertion) functions. Selling, general
and administrative expenses also include membership traffic
acquisition costs for our online business. Increased selling,
general and administrative expenses were primarily due to
approximately $5.7 million in spending by CCI, which was
acquired in April 2008. Another approximately $3.8 million
increase was due to additional spending on our
65
broader internet initiative, which includes $550,000 for costs
associated with a certain membership traffic agreement.
Increases in selling, general and administrative expenses for
our radio business were driven by approximately
$1.9 million in expenses for a large special event held in
2008, increased bad debt expense, driven in part by client
bankruptcies and higher ratings research associated with a new
contract with Arbitron Inc., which includes the new Portable
People
Metertm
(PPMtm)
technology. Along with our efforts on reducing expenses, these
increases were offset partially from savings associated with
less promotional spending, reduced travel and entertainment,
less legal and professional spending, savings from the
suspension of our 401(k) match program and less sponsored events
expenses. Our declining revenue performance also resulted in
less commissions and national representative fees. Excluding the
approximately $9.5 million in increased spending on our
internet initiative and CCIs spending, selling, general
and administrative expenses decreased 8.1% for the year ended
December 31, 2008 compared to the same period in 2007.
Excluding the approximately $11.3 million in increased
spending for the internet initiative, CCIs spending and
expenses for the large first quarter special event, selling,
general and administrative expenses decreased 9.9% for the year
ended December 31, 2008 compared to the same period in 2007.
Corporate
selling, general and administrative, excluding stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
35,279
|
|
|
$
|
27,328
|
|
|
$
|
7,951
|
|
|
|
29.1
|
%
|
Corporate selling, general and administrative expenses consist
of expenses associated with maintaining our corporate
headquarters and facilities, including personnel. During 2008,
increased corporate selling, general and administrative expenses
were primarily due to compensation costs associated with new
employment agreements for the CEO and its Founder and
Chairperson. Specifically, the increased compensation included
approximately $10.2 million in bonuses for the CEO, of
which approximately $5.8 million was for a signing and a
make whole bonus paid, and another approximately
$4.2 million was recorded, but not paid, for a bonus
associated with potential distribution proceeds from the
Companys investment in TV One. Increased corporate
selling, general and administrative expenses were also due to an
approximate $2.4 million retention bonus reduction recorded
in 2007 for the former Chief Financial Officer (Former
CFO), given his early departure in December 2007, a
$620,000 reduction in severance also recorded in 2007 for an
obligation that never materialized and additional bad debt
expense. In addition, during 2008, the Company incurred $485,000
in restructuring costs, mainly severance, associated with
layoffs in its radio division workforce. These increased
expenses were offset in part by approximately $2.4 million
less bonus expense, the absence of approximately
$2.7 million in spending for legal and professional fees
incurred in 2007 for the voluntary review of our historical
stock option grant practices, savings from the suspension of our
401(k) match program, reduced travel and entertainment, reduced
contract labor and consultant spending, less research expenses
and reduced recruiting expense. Normalizing for the impacts of
approximately $2.7 million for the stock options review,
$2.4 million for the reduction in the Former CFOs
retention bonus, the $620,000 severance reduction, the
approximate $10.2 million bonus for the CEOs new
employment agreement, and the $485,000 of restructuring costs,
corporate selling, general and administrative expenses decreased
10.9% for the year ended December 31, 2008 compared to the
same period in 2007.
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
1,777
|
|
|
$
|
2,991
|
|
|
$
|
(1,214
|
)
|
|
|
(40.6
|
)%
|
Stock-based compensation consists of expenses associated with
our January 1, 2006 adoption of ASC 718,
Compensation Stock Compensation.
ASC 718 eliminated accounting for share-based payments
based on Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees, and requires measurement of compensation cost
for all stock-based awards at fair value on date of grant and
recognition of compensation over the service period for awards
expected to vest. The decrease in stock-based compensation for
the year ended December 31, 2008 was primarily due to a
decline in the fair value of awards
66
issued in 2008 due to a significant decline in the
Companys stock price, cancellations and forfeitures for
former employees and the completion of the vesting period for
certain stock options. The decrease was offset in part due to
expense for additional stock options and restricted stock awards
associated with new employment agreements for the CEO, the
Founder and Chairperson and the CFO.
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
19,022
|
|
|
$
|
14,680
|
|
|
$
|
4,342
|
|
|
|
29.6
|
%
|
The increase in depreciation and amortization expense for the
year ended December 31, 2008 was due primarily to the April
2008 acquisition of CCI, which accounted for approximately
$3.5 million of the increase. Approximately
$2.5 million of the increase attributable to CCI is driven
by amortization of assets acquired as part of the CCI
acquisition, mainly brand assets, advertiser relationships and a
favorable office space sublease, and another approximately
$1.0 million is due to additional depreciation. Additional
depreciation and amortization expense for capital expenditures
made subsequent to December 31, 2007 and assets purchased
as part of the June 2008 acquisition of
WPRS-FM were
offset partially by a decline in amortization expense associated
with certain affiliate agreements acquired as part of our
February 2005 purchase of 51% of Reach Media.
Impairment
of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
423,220
|
|
|
$
|
211,051
|
|
|
$
|
212,169
|
|
|
|
100.5
|
%
|
The increase in impairment of long-lived assets for the year
ended December 31, 2008 was related to non-cash impairment
charges recorded to reduce the carrying value of radio
broadcasting licenses, goodwill and other intangible assets to
their estimated fair values. The 2008 impairments occurred in 12
of our 16 markets, namely in Charlotte, Cincinnati, Cleveland,
Columbus, Dallas, Detroit, Houston, Indianapolis, Philadelphia,
Raleigh-Durham, Richmond and St. Louis markets. Seven of
our markets were impaired in 2007, namely Boston, Cincinnati,
Cleveland, Columbus, Dallas, Houston and Philadelphia. The
impairments were driven in part by the economic downturn, slower
radio industry and market revenue growth and resulting
deteriorating cash flows, declining radio station transaction
multiples and a higher cost of capital. The recent and gradual
decline in values for long-lived assets such as licenses and
other intangibles were neither unique nor specific to our
individual markets, as this trend has impacted the valuations of
the radio industry as a whole, and has impacted other broadcast
and traditional media companies as well.
Interest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
491
|
|
|
$
|
1,242
|
|
|
$
|
(751
|
)
|
|
|
(60.5
|
)%
|
The decrease in interest income for the year ended
December 31, 2008 was due primarily to lower balances in
cash and cash equivalents, and a decline in interest rates.
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
59,689
|
|
|
$
|
72,770
|
|
|
$
|
(13,081
|
)
|
|
|
(18.0
|
)%
|
The decrease in interest expense for the year ended
December 31, 2008 was due primarily to a decline in
interest expense associated with debt pay downs and bond
redemptions, resulting in overall lower borrowings and lower
interest rates on the variable portion of our debt. Interest
expense savings was also driven by less
67
fees incurred with the operation of
WPRS-FM
pursuant to LMA, which began in April 2007. LMA fees are
classified as interest expense. We closed on the purchase of the
assets of
WPRS-FM in
June 2008 for approximately $38.0 million in cash.
Equity
in loss of affiliated company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
(3,652
|
)
|
|
$
|
(15,836
|
)
|
|
$
|
(12,184
|
)
|
|
|
(76.9
|
)%
|
Equity in loss of affiliated company primarily reflects our
estimated equity in the net loss of TV One. The decreased loss
for the year ended December 31, 2008 was due primarily to
smaller net losses generated by TV One, thus contributing to a
decrease in our share of those losses. The Companys share
of those losses is driven by TV Ones current capital
structure and the Companys ownership levels in the equity
securities of TV One that are currently absorbing its net
losses. An adjustment was made to equity in loss of affiliated
company for the year ended December 31, 2007 to correct for
a change in TV Ones capital structure. Pursuant to Staff
Accounting Bulletin (SAB) 99,
Materiality and SAB 108, Considering the
Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements, we
increased the previously reported equity in loss of affiliated
company for the year ended December 31, 2007 by
approximately $4.4 million.
(Benefit
from) provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
(45,183
|
)
|
|
$
|
54,083
|
|
|
$
|
(99,266
|
)
|
|
|
(183.5
|
)%
|
During the year ended December 31, 2008, the benefit from
income taxes increased to approximately $45.2 million,
compared to a provision for taxes of approximately
$54.1 million for the same period in 2007. The increase in
the benefit from income taxes was primarily due to the increase
in pre-tax losses for the year ended December 31, 2008
compared to 2007, and the impact of DTLs reversing due to
indefinite-lived asset impairment charges recorded in 2008. In
addition, the provision for income taxes in 2007 was primarily
driven by the recording of a full valuation allowance for most
of the Companys DTAs, including its net operating loss
(NOLs) carryforwards. In 2007, except for DTAs in
historically profitable filing jurisdictions, the Company
recorded a full valuation allowance for its DTAs, including
NOLs, as it was determined that more likely than not, the DTAs
would not be realized. As such, the benefit from income taxes
for 2008 was also offset partially by recording a full valuation
allowance against the additional NOLs generated from the tax
deductible amortization of indefinite-lived assets, as well as
recording a full valuation against DTAs created by the
indefinite-lived asset impairment charges recorded in the
current year. The current year tax benefit and offsetting
valuation allowances resulted in an effective tax rate for the
years December 31, 2008 and 2007 of 13.4% and (27.5%),
respectively.
Loss
from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Increase/(Decrease)
|
2008
|
|
2007
|
|
|
|
|
|
$
|
(7,414
|
)
|
|
$
|
(137,041
|
)
|
|
$
|
(129,627
|
)
|
|
|
(94.6
|
)%
|
Included in the loss from discontinued operations, net of tax,
are the results of operations for station clusters sold in Los
Angeles, Miami, Augusta, Louisville, Dayton, Minneapolis and a
station in Boston
(WILD-FM).
Discontinued operations also includes the results of operations
for Giant Magazine, which ceased publication in December 2009.
During the year ended December 2008, we sold our Los Angeles
station for approximately $137.5 million in cash, and
recorded a loss, net of tax of approximately $6.1 million,
and we sold our Miami station for approximately
$12.3 million in cash, and recorded a gain, net of tax of
approximately $3.2 million. In August 2007 we closed on the
sale of our Minneapolis station for approximately
$28.0 million in cash and recorded a loss on the sale of
$713,000, net of tax. In September of
68
2007, we closed on the sale of our Dayton stations and five of
the six stations in our Louisville market for approximately
$76.0 million in cash, and recorded a gain on the sale, net
of tax of approximately $1.9 million. The loss from
discontinued operations, net of tax, includes a tax provision of
$84,000 for the year ended December 31, 2008 compared to a
benefit from taxes of approximately $75.0 million for the
same period in 2007.
Other
Data
Station
operating income
Station operating income decreased to approximately
$131.7 million for the year ended December 31, 2008,
compared to approximately $147.2 million for the year ended
December 31, 2007, a decrease of approximately
$15.5 million, or 10.5%. This decrease was primarily due to
declines in revenue similar to those in the radio industry and
increases in station operating expenses related to the
consolidation of the operating results of CCI, which was
acquired in April 2008, spending on our internet initiative
which was launched in mid-year 2007, higher on-air talent
expenses, mainly for new syndication shows, additional staffing
for internet websites, increased music royalties, higher tower
related expenses, a restructuring charge for the radio division
layoffs and additional ratings research costs. These increased
expenses more than offset savings for employee bonuses,
marketing and promotional spending, events expenses, travel and
entertainment, legal and professional fees and expense savings
from ceasing our 401(k) match program.
Station
operating income margin
Station operating income margin decreased to 42.0% for the year
ended December 31, 2008 from 46.5% for the year ended
December 31, 2007. This decrease was primarily attributable
to a decline in net revenue combined with decreased station
operating income as described above.
LIQUIDITY
AND CAPITAL RESOURCES
Our primary source of liquidity is cash provided by operations
and, to the extent necessary, borrowings available under our
senior credit facility and other debt or equity financing.
Pre-Transactions
Liquidity and Capital Resources
In June 2005, the Company entered into its senior credit
agreement (the Credit Agreement) with a syndicate of
banks. Simultaneous with entering into the Credit Agreement, the
Company borrowed $437.5 million to retire all outstanding
obligations under its previous credit agreement. The Credit
Agreement was amended in April 2006, September 2007 and March
2010 to modify certain financial covenants and other provisions.
Prior to the Transactions, the Credit Agreement expires the
earlier of (a) six months prior to the scheduled maturity
date of the 2011 Notes (January 1, 2011) (unless the 2011
Notes have been repurchased or refinanced prior to such date) or
(b) June 30, 2012. Under the terms of the third
amendment described below, the total amount available under the
Credit Agreement, as in effect on September 30, 2010, was
$700.0 million, consisting of a $400.0 million
revolving facility and a $300.0 million term loan facility.
Borrowings under the senior credit facility were subject to
compliance with certain provisions including, but not limited
to, financial covenants. The Company could use proceeds from the
senior credit facility for working capital, capital expenditures
made in the ordinary course of business, its common stock
repurchase program, permitted direct and indirect investments
and other lawful corporate purposes.
The Credit Agreement was classified as a current liability in
the September 30, 2010 consolidated balance sheet based on
the fact that the Credit Agreement expired January 1, 2011,
until such time that the 2011 Notes had been refinanced or
repurchased prior to January 1, 2011. After giving effect
to the Transactions, the maturity date of the Amended and
Restated Credit Agreement (which replaced the Credit Agreement)
is June 30, 2012 and the Amended and Restated Credit
Agreement is not classified as a current liability.
During the quarter ended March 31, 2010, we noted that
certain of our subsidiaries identified as guarantors in our
financial statements did not have requisite guarantees filed
with the trustee as required under
69
the terms of the indentures governing the 2011 Notes and the
2013 Notes (the Non-Joinder of Certain
Subsidiaries). The Non-Joinder of Certain Subsidiaries
caused a non-monetary, technical default under the terms of the
relevant indentures at December 31, 2009, causing a
non-monetary, technical cross-default at December 31, 2009
under the terms of our Credit Agreement. We have since joined
the relevant subsidiaries as guarantors under the relevant
indentures (the Joinder). Further, on March 30,
2010, we entered into a third amendment (the Third
Amendment) to the Credit Agreement. The Third Amendment
provides for, among other things: (i) a $100.0 million
revolver commitment reduction (from $500.0 million to
$400.0 million) under the bank facilities; (ii) a 1.0%
floor with respect to any loan bearing interest at a rate
determined by reference to the adjusted LIBOR;
(iii) certain additional collateral requirements;
(iv) certain limitations on the use of proceeds from the
revolving loan commitments; (v) the addition of Interactive
One, LLC as a guarantor of the loans under the Credit Agreement
and under the notes governed by the Companys 2001 and 2005
senior subordinated debt documents; (vi) the waiver of the
technical cross-defaults that existed as of December 31,
2009 and through the date of the amendment arising due to the
Non-Joinder of Certain Subsidiaries; and (vii) the payment
of certain fees and expenses of the lenders in connection with
their diligence in connection with the amendment.
In May 2010, based on our fiscal year end excess cash flow
calculation, we made a $5.0 million term loan principal
prepayment for the year ended December 31, 2009. No excess
cash calculation was required and, therefore, no payment was
required for the year ended December 31, 2008. In March
2009 and May 2009, we made prepayments of
$70.0 million and $31.5 million, respectively, on the
term loan facility based on its excess proceeds calculation,
which included asset acquisition and disposition activity for
the twelve month period ended May 31, 2008. These
prepayments were funded with $70.0 million and
$31.5 million in loan proceeds from the revolving facility
in March 2009 and May 2009, respectively.
The Credit Agreement, as of September 30, 2010, contained
certain affirmative and negative covenants that the Company must
comply with, including:
(a) maintaining an interest coverage ratio of no less than:
|
|
|
|
|
1.90 to 1.00 from January 1, 2006 to September 13,
2007;
|
|
|
|
1.60 to 1.00 from September 14, 2007 to June 30, 2008;
|
|
|
|
1.75 to 1.00 from July 1, 2008 to December 31, 2009;
|
|
|
|
2.00 to 1.00 from January 1, 2010 to December 31,
2010; and
|
|
|
|
2.25 to 1.00 from January 1, 2011 and thereafter;
|
(b) maintaining a total leverage ratio of no greater than:
|
|
|
|
|
7.00 to 1.00 beginning April 1, 2006 to September 13,
2007;
|
|
|
|
7.75 to 1.00 beginning September 14, 2007 to March 31,
2008;
|
|
|
|
7.50 to 1.00 beginning April 1, 2008 to September 30,
2008;
|
|
|
|
7.25 to 1.00 beginning October 1, 2008 to June 30,
2010;
|
|
|
|
6.50 to 1.00 beginning July 1, 2010 to September 30,
2011; and
|
|
|
|
6.00 to 1.00 beginning October 1, 2011 and thereafter;
|
(c) maintaining a senior leverage ratio of no greater than:
|
|
|
|
|
5.00 to 1.00 beginning June 13, 2005 to September 30,
2006;
|
|
|
|
4.50 to 1.00 beginning October 1, 2006 to
September 30, 2007; and
|
|
|
|
4.00 to 1.00 beginning October 1, 2007 and
thereafter; and
|
70
(d) limitations on:
|
|
|
|
|
liens;
|
|
|
|
sale of assets;
|
|
|
|
payment of dividends; and
|
|
|
|
mergers.
|
As of September 30, 2010, approximate ratios calculated in
accordance with the Credit Agreement, as in effect as of that
date, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
2010
|
|
Covenant Limit
|
|
Cushion/(Deficit)
|
|
PF LTM Covenant EBITDA (in millions)
|
|
$
|
86.6
|
|
|
|
|
|
|
|
|
|
PF LTM Interest Expense (in millions)
|
|
$
|
40.4
|
|
|
|
|
|
|
|
|
|
Senior Debt (in millions)
|
|
$
|
351.5
|
|
|
|
|
|
|
|
|
|
Total Debt (in millions)
|
|
$
|
653.6
|
|
|
|
|
|
|
|
|
|
Senior Secured Leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Debt/Covenant EBITDA
|
|
|
4.06
|
x
|
|
|
4.00
|
x
|
|
|
(.06
|
)x
|
Total Leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt/Covenant EBITDA
|
|
|
7.55
|
x
|
|
|
6.50
|
x
|
|
|
(1.05
|
)x
|
Interest Coverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenant EBITDA/Interest Expense
|
|
|
2.14
|
x
|
|
|
2.00
|
x
|
|
|
0.14
|
x
|
PF Pro forma
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM Last twelve months
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Earnings before interest, taxes, depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
As of each of June 30, 2010, July 1, 2010 and
September 30, 2010, we were not in compliance with the
terms of our Credit Agreement. More specifically, (i) as of
June 30, 2010, we failed to maintain a then required total
leverage ratio of 7.25 to 1.00, (ii) as of July 1,
2010, as a result of a step down of the total leverage ratio
from no greater than 7.25 to 1.00 to no greater than 6.50 to
1.00 effective for the period July 1, 2010 to
September 30, 2011, we failed to maintain the requisite
total leverage ratio, (iii) as of September 30, 2010,
we failed to meet our current total leverage ratio requirement
of 6.50 to 1.00 and our senior leverage ratio requirement of
4.00 to 1.00, and (iv) as of each of June 30, 2010 and
September 30, 2010, we failed to meet certain hedging
obligations; specifically, we failed to maintain a ratio of at
least 50% fixed rate debt to floating rate debt. On
July 15, 2010, the Company and its subsidiaries entered
into a forbearance agreement (the Forbearance
Agreement) with Wells Fargo Bank, N.A. (successor by
merger to Wachovia Bank, National Association), as
administrative agent (the Agent), and financial
institutions constituting the majority of outstanding loans and
commitments (the Required Lenders) under our Credit
Agreement, relating to the defaults and events of default
existing as of June 30, 2010 and July 1, 2010. On
August 13, 2010, we entered into an amendment to the
Forbearance Agreement (the Forbearance Agreement
Amendment) that, among other things, extended the
termination date of the Forbearance Agreement to
September 10, 2010, unless terminated earlier by its terms,
and provided additional forbearance related to the then
anticipated default caused by an opinion of Ernst &
Young LLP expressing substantial doubt about the Companys
ability to continue as a going concern as issued in connection
with the August 23, 2010 restatement of our financial
statements. Under the Forbearance Agreement and the Forbearance
Agreement Amendment, the Agent and the Required Lenders
maintained the right to deliver payment blockage
notices to the trustees for the holders of the 2011 Notes
and/or the
2013 Notes.
On August 5, 2010, the Agent delivered a payment blockage
notice to the trustee under the indenture governing our 2013
Notes. As a result, neither we nor any of our guaranteeing
subsidiaries could make any payment or distribution of any kind
or character in respect of obligations under the 2013 Notes,
including the
71
interest payment that was scheduled to be made on
August 16, 2010. The
30-day grace
period for the nonpayment of interest before such nonpayment
constituted an event of default under the indenture governing
the 2013 Notes expired on September 15, 2010. While the
trustee or holders of at least 25% in principal amount of the
then outstanding 2013 Notes could declare the principal amount,
and accrued and unpaid interest, on all outstanding 2013 Notes
to be due and payable immediately as a result of such event of
default, no such remedies were sought as we continue to
negotiate the terms of the amended exchange offer and a new
support agreement with the members of a ad hoc group of holders
of our Existing Notes in connection with the Transactions. The
event of default under the indenture governing the 2013 Notes
also constitutes an event of default under our Credit Agreement.
While the Forbearance Agreement Amendment expired by its terms
on September 10, 2010, we and the Agent continued to
negotiate the terms of a credit facility amendment (the
Credit Agreement Amendment), and the Agent and the
lenders did not exercise additional remedies under the Credit
Agreement.
Post-Transactions
Liquidity and Capital Resources
In connection with the Transactions, on November 24, 2010,
we exchanged for approximately $287.0 million in aggregate
principal amount of Old Notes and then cancelled approximately
$97.0 million of $101.5 million in aggregate principal
amount outstanding of our 2011 Notes and approximately
$199.3 million of $200.0 million in aggregate
principal amount outstanding of our 2013 Notes for approximately
$287.0 in aggregate principal amount of our Old Notes. We also
entered into the Credit Agreement Amendment, which among other
things waived or cured all defaults or events of default under
the Credit Agreement. See Description of Certain Other
Indebtedness.
As of September 30, 2010, the Company had outstanding
approximately $350.6 million on its senior credit facility.
During the three and nine-months ended September 30, 2010,
the Company repaid, net of borrowings, approximately
$3.9 million and $396,000, respectively.
As of November 24, 2010, after giving effect to the Credit
Agreement Amendment, the Company had outstanding approximately
$353.1 million on its credit facility. The Credit Agreement
Amendment, which amends and restates the Credit Agreement (as so
amended and restated, the Amended and Restated Credit
Agreement), among other things, replaced the existing
amount of outstanding revolving loans with a $323.0 million
term loan and provided for three tranches of revolving loans,
including a $20.0 million revolver to be used for working
capital, capital expenditures, investments, and other lawful
corporate purposes, a $5.1 million revolver to be used
solely to redeem or repurchase and retire the 2011 Notes, and a
$13.7 million revolver to be used solely to fund a capital
call with respect to TV One.
Under the terms of the Amended and Restated Credit Agreement,
interest on both alternate base rate loans and LIBOR loans is
payable monthly. The LIBOR interest rate floor is 1.00% and the
alternate base rate is equal to the greater of the prime rate,
the Federal Funds Effective Rate plus 0.50% and the LIBO Rate
for a one-month period plus 1.00%. Interest payable on
(i) LIBOR loans will be at LIBOR plus 6.25% and
(ii) alternate base rate loans will be at alternate base
rate plus 5.25% (and, in each case, may be permanently increased
if the Company exceeds certain senior leverage ratio levels,
tested quarterly beginning June 30, 2011). The interest
rate paid in excess of LIBOR could be as high as 7.25% during
the last quarter prior to maturity if the Company exceeds the
senior leverage ratio levels on each test date.
The Amended and Restated Credit Agreement provides for
maintenance of the following maximum fixed charge coverage ratio
as of the last day of each fiscal quarter:
|
|
|
Effective Period
|
|
Ratio
|
|
November 24, 2010 to December 30, 2010
|
|
1.05 to 1.00
|
December 31, 2010 to June 30, 2012
|
|
1.07 to 1.00
|
72
The Amended and Restated Credit Agreement also provides for
maintenance of the following maximum total leverage ratios
(subject to certain adjustments if subordinated debt is issued
or any portion of the $13.7 million revolver is used to
fund a TV One capital call):
|
|
|
Effective Period
|
|
Ratio
|
|
November 24, 2010 to December 30, 2010
|
|
9.35 to 1.00
|
December 31, 2010 to December 30, 2011
|
|
9.00 to 1.00
|
December 31, 2011 and thereafter
|
|
9.25 to 1.00
|
The Amended and Restated Credit Agreement also provides for
maintenance of the following maximum senior leverage ratios
(subject to certain adjustments if any portion of the
$13.7 million revolver is used to fund a TV One capital
call):
|
|
|
Beginning
|
|
No Greater Than
|
|
November 24, 2010 to December 30, 2010
|
|
5.25 to 1.00
|
December 31, 2010 to March 30, 2011
|
|
5.00 to 1.00
|
March 31, 2011 to September 29, 2011
|
|
4.75 to 1.00
|
September 30, 2011 to December 30, 2011
|
|
4.50 to 1.00
|
December 31, 2011 and thereafter
|
|
4.75 to 1.00
|
The Amended Credit Facility provides for maintenance of average
weekly availability at any time during any period set forth
below:
|
|
|
|
|
Average Weekly
|
Beginning
|
|
Availability no Less Than
|
|
November 24, 2010 through and including June 30, 2011
|
|
$10,000,000
|
July 1, 2011 and thereafter
|
|
$15,000,000
|
Since November 24, 2010, and as of December 31, 2010,
the Company has been in compliance with all of its financial
covenants under the Credit Agreement Amendment.
On December 24, 2010, all remaining outstanding 2011 Notes
were repurchased pursuant to the indenture governing the 2011
Notes. We incurred approximately $4.5 million in borrowings
under the Amended and Restated Credit Agreement in connection
with such repurchase. Approximately $0.75 million in
aggregate principal amount of the 2013 Notes remain outstanding.
Overdue interest and interest was paid to holders of the 2013
Notes on December 20, 2010, thereby curing any default or
event of default under the indenture governing the 2013 Notes or
the 2013 Notes.
As a result of our repurchase and refinancing of the 2011 Notes,
the expiration of the Amended and Restated Credit Agreement is
June 30, 2012.
Our ability to meet our debt service obligations and reduce our
total debt is subject to general economic conditions and to
financial, business and other factors, including factors beyond
our control. In the next 12 months, our principal liquidity
requirements will be for working capital, continued business
development, strategic investment opportunities and for general
corporate purposes, including capital expenditures. The Company
continually projects its anticipated cash needs, which include,
but are not limited to, its operating needs, capital
requirements, any TV One capital funding commitment and
principal and interest payments on its indebtedness.
Managements most recent revenue, operating income and cash
flow projections considered the recent gradual improvement in
both the economy and advertising environment, and the
projections compare more favorably to prior periods during which
the economic downturn persisted.
Managements projections are dependent on the continuation
of the recently improving economic and advertising environments,
and any adverse fluctuations, or other unforeseen circumstances,
may negatively impact the Companys operations beyond those
assumed. Management considered the risks that the current
economic conditions may have on its liquidity projections, as
well as the Companys ability to meet its debt covenant
requirements. If economic conditions deteriorate unexpectedly or
do not continue to rebound, or if other adverse factors outside
the Companys control arise, our operations could be
negatively impacted. If it
73
appears that we could not meet our liquidity needs or that
noncompliance with debt covenants is likely to result, the
Company would implement several remedial measures, which could
include further operating cost and capital expenditure
reductions and deferrals, seeking its share of distributions
from TV One and further de-leveraging actions, which may include
repurchases of discounted senior subordinated notes and other
debt repayments, subject to our available liquidity to make such
repurchases. It should be noted that the TV One distributions
require the consent of third-parties and there is no assurance
that such third-party consents would be granted. These third
parties did approve TV One distributions for the fourth quarter
of 2009, as well as for the first, second, third quarters and
fourth quarters of 2010.
The Amended and Restated Credit Agreement continues to require
the Company from time to time to protect itself from interest
rate fluctuations using interest rate hedge agreements. As a
result, the Company maintains a fixed rate swap agreement
designed to mitigate its exposure to higher floating interest
rates. The swap agreement requires that we pay a fixed rate of
interest on the notional amount to a bank and that the bank pays
to us a variable rate equal to three-month LIBOR. As of
September 30, 2010, we had one swap agreement in place for
a total notional amount of $25.0 million, and the period
remaining on this swap agreement is 20.5 months.
Our credit exposure under the swap agreement is limited to the
cost of replacing an agreement in the event of non-performance
by our counter-party; however, we do not anticipate
non-performance. The swap agreement is tied to the three-month
LIBOR, which may fluctuate significantly on a daily basis. The
valuation of the swap agreement is affected by the change in the
three-month LIBOR and the remaining term of the agreement. Any
increase in the three-month LIBOR results in a more favorable
valuation, while a decrease results in a less favorable
valuation.
The following table summarizes the interest rates in effect with
respect to our debt as of September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Applicable
|
Type of Debt
|
|
Outstanding
|
|
Interest Rate
|
|
|
(In millions)
|
|
|
|
Senior bank term debt (swap matures June 16, 2012)(1)
|
|
$
|
25.0
|
|
|
|
10.68
|
%
|
Senior bank term and revolving debt (subject to variable
interest rates)(2)
|
|
$
|
325.6
|
|
|
|
6.50
|
%
|
Note payable (fixed rate)
|
|
$
|
1.0
|
|
|
|
7.00
|
%
|
87/8% Senior
Subordinated Notes (fixed rate)
|
|
$
|
101.5
|
|
|
|
8.88
|
%
|
63/8
Senior Subordinated Notes (fixed rate)
|
|
$
|
200.0
|
|
|
|
6.38
|
%
|
|
|
|
(1) |
|
A total of $25.0 million is subject to a fixed rate swap
agreement that became effective in June 2005. Under our fixed
rate swap agreement, we pay a fixed rate plus a spread based on
our leverage ratio, as defined in our Credit Agreement. That
spread is currently set at 3.25% and is incorporated into the
applicable interest rates set forth above. |
|
(2) |
|
Subject to variable Prime Rate plus a spread currently set at
3.25% and incorporated into the applicable interest rate set
forth above. This tranche is not covered by a swap agreement
described in footnote (1). |
The indentures governing our Existing Notes and our Old Notes
require that we comply with certain financial covenants limiting
our ability to incur additional debt. Such terms also place
restrictions on us with respect to the sale of assets, liens,
investments, dividends, debt repayments, capital expenditures,
transactions with affiliates, consolidation and mergers, and the
issuance of equity interests, among other things. As of
November 24, 2010 and in connection with the Transactions,
we and the trustee under the indentures governing our Existing
Notes entered into supplemental indentures which waived any and
all existing defaults and events of default that had arisen or
may have arisen that may be waived and eliminated substantially
all of the covenants in each indenture other than the covenants
to pay principal of and interest on the Existing Notes when due,
and eliminated or modified the related events of default. Our
Amended and Restated Credit Agreement also requires compliance
with financial tests based on financial position and results of
operations, including a leverage ratio, an interest coverage
ratio and a fixed charge coverage ratio, all of which could
74
effectively limit our ability to borrow under the Amended and
Restated Credit Agreement or to otherwise raise funds in the
debt market.
Reach Media issued a $1.0 million promissory note payable
in November 2009 to Radio Networks, a subsidiary of Citadel. The
note was issued in connection with Reach Media entering into a
new sales representation agreement with Radio Networks. The note
bears interest at 7.0% per annum, which is payable quarterly,
and the entire principal amount is due on December 31, 2011.
The following table provides a comparison of our statements of
cash flows for the nine months ended September 30, 2010 and
2009:
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Applicable
|
Type of Debt
|
|
Outstanding
|
|
Interest Rate
|
|
|
(In thousands)
|
|
Net cash flows provided from operating activities
|
|
$
|
16,755
|
|
|
$
|
21,864
|
|
Net cash flows used in investing activities
|
|
$
|
(3,592
|
)
|
|
$
|
(3,640
|
)
|
Net cash flows used in financing activities
|
|
$
|
(11,575
|
)
|
|
$
|
(25,738
|
)
|
Net cash flows provided by operating activities were
approximately $16.8 million and $21.9 million for the
nine months ended September 30, 2010 and 2009,
respectively. Cash flow from operating activities for the nine
months ended September 30, 2010 decreased from the prior
year primarily due to changes in operating assets and
liabilities, consisting primarily of a decrease in cash flows
from the change in accounts receivable offset by cash dividends
received from the investment in TV One.
Net cash flows used in investing activities were approximately
$3.6 million for both of the nine month periods ended
September 30, 2010 and 2009. Capital expenditures,
including digital tower and transmitter upgrades, and deposits
for station equipment and purchases were approximately
$3.6 million for both of the nine month periods ended
September 30, 2010 and 2009.
Net cash flows used in financing activities were approximately
$11.6 million and $25.7 million for the nine months
ended September 30, 2010 and 2009, respectively. During the
nine months ended September 30, 2010 and 2009, the Company
borrowed approximately $12.0 million and
$111.5 million, respectively, from its credit facility and
repaid approximately $12.4 million and $125.2 million,
respectively, in outstanding debt. During the nine months ended
September 30, 2010, we capitalized approximately
$11.2 million of costs associated with our efforts to
refinance our existing indebtedness. During the nine months
ended September 30, 2009, we repurchased approximately
$1.2 million of our 2011 Notes. In addition, during nine
months ended September 30, 2009, we repurchased
approximately $10.7 million of our Class A and
Class D Common Stock.
Credit
Rating Agencies
On a continuing basis, credit rating agencies such as
Moodys and S&P evaluate our debt. On
November 24, 2010, S&P raised the Companys
long-term corporate credit rating to CCC+ from
SD with a positive rating outlook. In addition,
S&P raised our issue-level rating on our senior secured
debt to B from CCC+. S&P also rated
our Old Notes CCC-, rated the remaining portion of
our 2013 Notes CCC- and affirmed a CCC-
issue-level rating on the remaining portion of our 2011 Notes.
S&Ps actions reflected our successful amendment of
our senior credit facility and the exchange offer for our
Existing Notes. S&P noted the transactions eliminated
near-term refinancing risk of our senior secured debt, which was
due to mature January 1, 2011 if we were unable to
refinance our 2011 Notes prior to that date. S&P further
noted that following the amendment, we were able to cure the
default on our 2013 Notes by paying defaulted interest resulting
from the August 15, 2010 nonpayment.
On September 20, 2010, Moodys repositioned our
probability of default rating to Caa2/LD from Caa2, following
the expiration of the
30-day grace
period under the 2013 Notes. On August 18, 2010,
Moodys placed us on review for a possible downgrade on our
corporate family rating and probability of default rating. The
review was driven by our announcement that the lenders under our
Senior Credit Facility blocked our August 16, 2010 interest
payment on the 2013 Notes. The lenders under our Senior Credit
Facility had the
75
ability to block the interest payment as we are in violation of
the total leverage covenant under our Senior Credit Facility. On
June 17, 2010, Moodys placed on review the Company
and its debt for a possible upgrade.
On August 24, 2010, S&P lowered our corporate credit
rating from CCC+ to SD and lowered the issue-level rating on our
2013 Notes from CCC- to D. On July 20, 2010, S&P
revised our CCC+ corporate credit rating outlook from positive
to developing. Revision was due to uncertainty surrounding the
timing and structure of a potential refinancing. On
June 17, 2010 S&P revised our CCC+ corporate credit
rating outlook from negative to positive. Revision was due to
our announcement of potential refinancing transactions and the
proposed increase of our ownership percentage in TV One.
On June 24, 2009, S&P lowered our corporate credit
rating to CCC+ from B- and the issue-level rating on our
$800.0 million secured credit facility to CCC+ from B-. On
March 3, 2009, S&P lowered our corporate credit rating
to B- from B and the issue-level rating on our
$800.0 million secured credit facility to B- from BB-.
While noting that our rating outlook was negative, the ratings
downgrade reflects concern over the Companys ability to
maintain compliance with financial covenants due to weak radio
advertising demand. On May 12, 2009, Moodys
downgraded our corporate family rating to Caa1 from B1. On
November 3, 2008, Moodys placed on review the Company
and its debt for a possible downgrade. The review was prompted
by heightened concerns that the radio broadcast sector will
likely face significant revenue and cash flow deterioration
given weakness in the U.S. economy.
On September 10, 2008, Moodys downgraded our
corporate family rating to B2 from B1 and our
$800.0 million secured credit facility ($500.0 million
revolver, $300.0 million term loan) to Ba3 from Ba2. In
addition, Moodys downgraded our Existing Notes to Caa1
from B3. While noting that our rating outlook was stable, the
ratings downgrade reflected the Companys operating
performance, weaker than previously expected credit metrics and
limited borrowing capacity under financial covenants.
Although reductions in our bond ratings may not have an
immediate impact on our cost of debt or liquidity, they may
impact our future cost of debt and liquidity. Increased debt
levels
and/or
decreased earnings could result in further downgrades in our
credit ratings, which, in turn, could impede our access to the
debt markets
and/or raise
our long-term debt borrowing rates. Our ability to use debt to
fund major new acquisitions or new business initiatives could
also be limited.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our significant accounting policies are described in
Note 1 Organization and Summary of Significant
Accounting Policies of the consolidated financial statements
included elsewhere in this prospectus. We prepare our
consolidated financial statements in conformity with accounting
principles generally accepted in the United States, which
require us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the year. Actual results could differ from those
estimates.
Stock-Based
Compensation
The Company accounts for stock-based compensation in accordance
with ASC 718, Compensation Stock
Compensation. Under the provisions of ASC 718,
stock-based compensation cost is estimated at the grant date
based on the awards fair value as calculated by the
Black-Scholes (BSM) valuation option-pricing model
and is recognized as expense ratably over the requisite service
period. The BSM incorporates various highly subjective
assumptions including expected stock price volatility, for which
historical data is heavily relied upon, expected life of options
granted, forfeiture rates and interest rates. If any of the
assumptions used in the BSM model change significantly,
stock-based compensation expense may differ materially in the
future from that previously recorded.
76
Goodwill
and Radio Broadcasting Licenses
Impairment
Testing
We have made several radio station acquisitions in the past for
which a significant portion of the purchase price was allocated
to goodwill and radio broadcasting licenses. Goodwill exists
whenever the purchase price exceeds the fair value of tangible
and identifiable intangible net assets acquired in business
combinations. As of September 30, 2010, we had
approximately $698.6 million in broadcast licenses and
$137.5 million in goodwill, which totaled
$836.1 million, and represented approximately 80.1% of our
total assets. Therefore, we believe estimating the fair value of
goodwill and radio broadcasting licenses is a critical
accounting estimate because of the significance of their
carrying values in relation to our total assets. We did not
record any impairment charges for the three or nine month
periods ended September 30, 2010, and we recorded
impairment charges against radio broadcasting licenses of
approximately $49.0 million for the nine months ended
September 30, 2009. The relative improvements to the
economic environment, credit markets and advertising industry
compared to 2009 have contributed to more stable valuations of
these assets.
Effective January 1, 2002, in accordance with ASC 350,
Intangibles Goodwill and Other, we
discontinued amortizing radio broadcasting licenses and goodwill
and instead, began testing for impairment annually, or when
events or changes in circumstances or other conditions suggest
impairment may have occurred. Our annual impairment testing is
performed for assets owned as of October 1. Impairment
exists when the carrying value of these assets exceeds its
respective fair value. When the carrying value exceeds fair
value, an impairment amount is charged to operations for the
excess.
Valuation
of Broadcasting Licenses
We utilize the services of a third-party valuation firm to
provide independent analysis when evaluating the fair value of
our radio broadcasting licenses and reporting units, including
goodwill. The testing for radio broadcasting licenses is
performed at the unit of accounting level as determined by
ASC 350, Intangibles Goodwill and
Other. In our case, each unit of accounting is a
clustering of radio stations into one geographical market. We
use the income approach to value broadcasting licenses, which
involves a
10-year
model that incorporates several variables, including, but not
limited to: (i) estimated discounted cash flows of a
hypothetical market participant; (ii) estimated radio
market revenue and growth projections; (iii) estimated
market share and revenue for the hypothetical participant;
(iv) likely media competition within the market;
(v) estimated
start-up
costs and losses incurred in the early years;
(vi) estimated profit margins and cash flows based on
market size and station type; (vii) anticipated capital
expenditures; (viii) probable future terminal values;
(ix) an effective tax rate assumption; and (x) a
discount rate based on the weighted-average cost of capital for
the radio broadcast industry. In calculating the discount rate,
we considered: (i) the cost of equity, which includes
estimates of the risk-free return, the long-term market return,
small stock risk premiums and industry beta; (ii) the cost
of debt, which includes estimates for corporate borrowing rates
and tax rates; and (iii) estimated average percentages of
equity and debt in capital structures. Economic conditions
appear to have stabilized and the radio advertising industry
experienced recovery since our last annual assessment of radio
broadcasting licenses; hence, no triggering events have occurred
requiring the Company to reassess license valuations since our
annual assessment. Since our October 2009 annual assessment, we
have not made any changes to the methodology for valuing
broadcasting licenses.
Valuation
of Goodwill
The impairment testing of goodwill is performed at the reporting
unit level. As of September 30, 2010, we had and currently
have 20 reporting units, which were comprised of our 16 radio
markets and four other business divisions. In testing for the
impairment of goodwill, with the assistance of a third-party
valuation firm, we also use the income approach method. The
approach involves a
10-year
model with similar variables as described above, except that the
discounted cash flows are generally based on the Companys
estimated and projected market share and operational performance
for its owned radio markets or other business divisions. We
follow a two-step process to evaluate if a potential impairment
exists for goodwill. The first step of the process involves
estimating the fair value of each reporting unit. If the
reporting units fair value is less than
77
its carrying value, a second step is performed as per the
guidance of
ASC 805-10,
Business Combinations, to allocate the fair value of
the reporting unit to the individual assets and liabilities of
the reporting unit in order to determine the implied fair value
of the reporting units goodwill as of the impairment
assessment date. Any excess of the carrying value of the
goodwill over the implied fair value of the goodwill is written
off as a charge to operations. Since our October 2009 annual
assessment, we have not made any changes to the methodology of
valuing or allocating goodwill when determining the carrying
values of the radio markets, Reach Media or CCI.
In May, February and August of 2010, the Company performed
interim impairment testing on the valuation of goodwill
associated with Reach Media. Reach Media net revenues and cash
flows declined for three quarters of 2010 and full year internal
projections were revised below those assumed for Year 1
(2010) in our 2009 annual impairment test. The revenues
declined following the December 31, 2009 expiration of a
sales representation agreement with Citadel Broadcasting
Corporation (Citadel) whereby a minimum level of
revenue was guaranteed over the term of the agreement. Effective
January 1, 2010, Reach Medias newly established sales
organization began selling its inventory on the Tom Joyner
Morning Show and under a new commission-based sales
representation agreement with Citadel, which sells certain
inventory owned by Reach Media in connection with its 105 radio
station affiliate agreements. Management revised its internal
projections for Reach Media by lowering the Year 1 revenue
growth rate to 2.5% in August 2010, versus 16.5% previously
assumed in our October 2009 annual assessment. Given the
relative improvement in the credit markets since late 2009, the
discount rate was lowered from 14.0% for the annual assessment
to 13.5% for both the February and May 2010 assessments and
again lowered to 13.0% for the August 2010 assessment.
Below are key assumptions used in the income approach model for
estimating the fair value for Reach Media for the annual October
2009, and interim February, May and August 2010 impairment
tests. When compared to the discount rate of 9.5% to 10.5% used
for assessing radio market reporting units, the higher discount
rate used in this assessment reflects a premium for a riskier
and broader media business, with a heavier concentration and
significantly higher amount of programming content related
intangible assets that are highly dependent on the on-air
personality Tom Joyner. As a result of the May, February and
August 2010 interim assessments, the Company concluded no
impairment to the carrying value of Reach Media had occurred.
|
|
|
|
|
|
|
|
|
|
|
October 1,
|
|
February 28,
|
|
May 31,
|
|
August 31,
|
Reach Media Goodwill (Reporting Unit Within the Radio
Broadcasting Segment)
|
|
2009
|
|
2010
|
|
2010
|
|
2010
|
|
|
(In millions)
|
|
Pre-tax impairment charge
|
|
$
|
|
$
|
|
$
|
|
$
|
Discount Rate
|
|
14.0
|
|
13.5%
|
|
13.5%
|
|
13.0%
|
2010 (Year 1) Revenue Growth Rate
|
|
16.5%(a)
|
|
8.5%
|
|
2.5%
|
|
2.5%
|
Long-term Revenue Growth Rate Range (Years 6 10)
|
|
2.5% - 3.0%
|
|
2.5% -3.0%
|
|
2.5% - 2.9%
|
|
2.5% - 3.3%
|
Operating Profit Margin Range
|
|
27.2% - 35.3%
|
|
22.7% - 31.4%
|
|
23.3% - 31.5%
|
|
25.5% - 31.2%
|
|
|
|
(a) |
|
The Year 1 revenue growth rate is driven by the September 2009
amendment of Reach Medias sales representation agreement
with Citadel, whereby the guaranteed revenue paid to Reach Media
by Citadel was reduced by $2.0 million in the fourth
quarter of 2009, the final quarter for the term of the
agreement. Effective January 2010, Reach Media and Citadel
became parties to a commission based sales representation
agreement, whereby Citadel sells
out-of-show
inventory for the Tom Joyner Morning Show. Reach Media now sells
all in-show inventory. |
As part of our annual testing, when arriving at the estimated
fair values for radio broadcasting licenses and goodwill, we
also performed a reasonableness test by comparing our overall
average implied multiple based on our cash flow projections and
fair values to recently completed sales transactions, and by
comparing our fair value estimates to the market capitalization
of the Company. The results of these comparisons confirmed that
the fair value estimates resulting from our annual assessment
for 2009 were reasonable.
78
Sensitivity
Analysis
We believe both the estimates and assumptions we utilized when
assessing the potential for impairment are individually and in
aggregate reasonable; however, our estimates and assumptions are
highly judgmental in nature. Further, there are inherent
uncertainties related to these estimates and assumptions and our
judgment in applying them to the impairment analysis. While we
believe we have made reasonable estimates and assumptions to
calculate the fair values, changes in any one estimate,
assumption or a combination of estimates and assumptions, or
changes in certain events or circumstances (including
uncontrollable events and circumstances resulting from
deterioration in the economy or credit markets) could require us
to assess recoverability of broadcasting licenses and goodwill
at times other than our annual October 1 assessments, and could
result in changes to our estimated fair values and further
write-downs to the carrying values of these assets. Impairment
charges are non-cash in nature, and as with past impairment
charges, any future impairment charges will not impact our cash
needs or liquidity or our bank covenant compliance.
As of September 30, 2010, we had a total goodwill carrying
value of approximately $137.5 million across 12 of our 20
reporting units. The below table indicates the long-term cash
flow growth rates assumed in our most recent impairment testing
and the long-term cash flow growth/decline rates that would
result in additional goodwill impairment. For two of the
reporting units, given each of their significant fair value over
carrying value excess, any future goodwill impairment is not
likely. However, should our estimates and assumptions for
assessing the fair values of the remaining ten reporting units
with goodwill worsen to reflect the below or lower cash flow
growth/decline rates, additional goodwill impairments may be
warranted in the future.
|
|
|
|
|
|
|
|
|
|
|
Long-Term Cash Flow
|
|
|
Long-Term Cash Flow
|
|
Growth/Decline Rate That
|
Reporting Unit
|
|
Growth Rate Used
|
|
Would Result in Impairment(a)
|
|
2
|
|
|
2.5
|
%
|
|
Impairment not likely
|
16
|
|
|
2.5
|
%
|
|
Impairment not likely
|
12
|
|
|
2.0
|
%
|
|
1.1%
|
10
|
|
|
2.5
|
%
|
|
1.1%
|
7
|
|
|
1.5
|
%
|
|
0.8%
|
5
|
|
|
1.5
|
%
|
|
(0.1)%
|
1
|
|
|
2.0
|
%
|
|
(0.2)%
|
13
|
|
|
2.0
|
%
|
|
(2.0)%
|
11
|
|
|
1.5
|
%
|
|
(5.5)%
|
6
|
|
|
1.5
|
%
|
|
(6.9)%
|
19
|
|
|
2.5
|
%
|
|
(6.25)%
|
18
|
|
|
3.5
|
%
|
|
(25.0)%
|
|
|
|
(a) |
|
The long-term cash flow growth/decline rate that would result in
additional goodwill impairment applies only to further goodwill
impairment and not to any future license impairment that would
result from lowering the long-term cash flow growth rates used. |
Several of the radio broadcasting licenses in our units of
accounting have no or limited excess of fair values over their
respective carrying values. The Company last measured the fair
value of its licenses as of October 1, 2009 in connection
with its 2009 annual impairment test. Economic conditions have
improved and radio advertising has rebounded since our 2009
annual assessment and no subsequent triggering events have
occurred requiring the Company to update the valuation since
then. Should our estimates, assumptions, or events or
circumstances for any upcoming valuations worsen in the units
with no or limited fair value cushion, additional license
impairments may be needed in the future.
In addition to assessing the fair value of Reach Media as of
August 2010, we performed a sensitivity analysis showing the
impact resulting from: (i) a 1% or 100 basis point
decrease in Reach Media growth rates; (ii) a 1% or
100 basis point decrease in cash flow margins;
(iii) both a .5% or 50 basis point and a 1% or
100 basis point increase in the discount rate; and
(iv) both a 5% and 10% reduction in the fair values of
Reach
79
Media. A hypothetical change in a 1% decrease in growth rates, a
1% decrease in cash flow margins, or a .5% increase in the
discount rate, did not result in any impairment. A 1% increase
in the discount rate, a 5% reduction in fair value and a 10%
reduction of fair value could yield impairment charges of
approximately $1.8 million, $264,000, and
$3.1 million, respectively.
Impairment
of Intangible Assets Excluding Goodwill and Radio Broadcasting
Licenses
Intangible assets, excluding goodwill and radio broadcasting
licenses, are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset
or group of assets may not be fully recoverable. These events or
changes in circumstances may include a significant deterioration
of operating results, changes in business plans, or changes in
anticipated future cash flows. If an impairment indicator is
present, we will evaluate recoverability by a comparison of the
carrying amount of the assets to future undiscounted net cash
flows expected to be generated by the assets. Assets are grouped
at the lowest level for which there is identifiable cash flows
that are largely independent of the cash flows generated by
other asset groups. If the assets are impaired, the impairment
is measured by the amount by which the carrying amount exceeds
the fair value of the assets determined by estimates of
discounted cash flows. The discount rate used in any estimate of
discounted cash flows would be the rate required for a similar
investment of like risk. There were no impairment triggering
events for these assets for the three or nine month periods
ended September 30, 2010 and 2009.
Allowance
for Doubtful Accounts
We must make estimates of the uncollectability of our accounts
receivable. We specifically review historical write-off activity
by market, large customer concentrations, customer credit
worthiness and changes in our customer payment terms when
evaluating the adequacy of the allowance for doubtful accounts.
In the past four years, including the quarter ended
September 30, 2010, our historical bad debt results have
averaged approximately 5.3% of our outstanding trade receivables
and have been a reliable method to estimate future allowances.
If the financial condition of our customers or markets were to
deteriorate, adversely affecting their ability to make payments,
additional allowances could be required.
Revenue
Recognition
We recognize revenue for broadcast advertising when the
commercial is broadcast and we report revenue net of agency and
outside sales representative commissions in accordance with
ASC 605, Revenue Recognition. When
applicable, agency and outside sales representative commissions
are calculated based on a stated percentage applied to gross
billing. Generally, advertisers remit the gross billing amount
to the agency or outside sales representative, and the agency or
outside sales representative remits the gross billing, less
their commission, to us.
Our online business recognizes its advertising revenue as
impressions (the number of times advertisements appear in viewed
pages) are delivered, when click through purchases
or leads are reported, or ratably over the contract period,
where applicable.
Equity
Accounting
We account for our investment in TV One under the equity method
of accounting in accordance with ASC 323,
Investments Equity Method and Joint
Ventures. We have recorded our investment at cost and
have adjusted the carrying amount of the investment to recognize
the change in Radio Ones claim on the net assets of TV One
resulting from net income or losses of TV One as well as other
capital transactions of TV One using a hypothetical liquidation
at book value approach. We will review the realizability of the
investment if conditions are present or events occur to suggest
that an impairment of the investment may exist. We have
determined that although TV One is a variable interest entity
(as defined under ASC 810, Consolidation) the
Company is not the primary beneficiary of TV One. The power to
direct the activities that most significantly impact the
economic performance of TV One is shared amongst multiple
unrelated parties, so that no one party has a controlling
financial interest in TV One.
80
Contingencies
and Litigation
We regularly evaluate our exposure relating to any contingencies
or litigation and record a liability when available information
indicates that a liability is probable and estimable. We also
disclose significant matters that are reasonably possible to
result in a loss, or are probable but for which an estimate of
the liability is not currently available. To the extent actual
contingencies and litigation outcomes differ from amounts
previously recorded, additional amounts may need to be reflected.
Estimate
of Effective Tax Rates
We estimate the provision for income taxes, income tax
liabilities, deferred tax assets and liabilities, and any
valuation allowances in accordance with ASC 740,
Income Taxes, as it relates to accounting for
income taxes in interim periods. We estimate effective tax rates
based on local tax laws and statutory rates, apportionment
factors, taxable income for our filing jurisdictions and
disallowable items, among other factors. Audits by the Internal
Revenue Service or state and local tax authorities could yield
different interpretations from our own, and differences between
taxes recorded and taxes owed per our filed returns could cause
us to record additional taxes.
To address the exposures of unrecognized tax positions, in
January 2007, we adopted ASC 740 pertaining to the
accounting for uncertainty in income taxes, which recognizes the
impact of a tax position in the financial statements if it is
more likely than not that the position would be sustained on
audit based on the technical merits of the position. As of
September 30, 2010, we had approximately $6.3 million
in unrecognized tax benefits. Future outcomes of our tax
positions may be more or less than the currently recorded
liability, which could result in recording additional taxes, or
reversing some portion of the liability, and recognizing a tax
benefit once it is determined the liability is either inadequate
or no longer necessary as potential issues get resolved, or as
statutes of limitations in various tax jurisdictions close.
Realizability
of Deferred Tax Balances
Except for DTAs that may be benefited by future reversing
deferred tax liabilities (DTLs) and DTAs related to
Reach Media, the Company maintains a full valuation allowance
for its DTAs, mainly NOLs, as it was determined that more likely
than not, the DTAs would not be realized. The Company reached
this determination based on its then cumulative loss position
and the uncertainty of future taxable income. Consistent with
that prior realizability assessment, the Company has recorded a
full valuation allowance for additional NOLs generated from the
tax deductible amortization of indefinite-lived assets, as well
as DTAs created by impairment charges. For remaining DTAs that
are not fully reserved, we believe that these assets will be
realized; however, if we do not generate the projected levels of
future taxable income in those specific jurisdictions, an
additional valuation allowance may need to be recorded in the
future.
Redeemable
Noncontrolling Interests
Noncontrolling interests in subsidiaries that are redeemable
outside of the Companys control for cash or other assets
are classified as mezzanine equity and measured at the greater
of estimated redemption value at the end of each reporting
period or the historical cost basis of the noncontrolling
interests adjusted for cumulative earnings allocations. The
resulting increases or decreases in the estimated redemption
amount are affected by corresponding charges against retained
earnings, or in the absence of retained earnings, additional
paid-in-capital.
Fair
Value Measurements
The Company has accounted for an award called for in the
CEOs employment agreement (the Employment
Agreement) as a derivative instrument in accordance with
ASC 815, Derivatives and Hedging. According to
the Employment Agreement, which was executed in April 2008, the
CEO is eligible to receive an award amount equal to 8% of any
proceeds from distributions or other liquidity events in excess
of the return of the Companys aggregate investment in TV
One. The Companys obligation to pay the award will be
triggered only after the Companys recovery of the
aggregate amount of its capital contribution in TV
81
One and only upon actual receipt of distributions of cash or
marketable securities or proceeds from a liquidity event with
respect to the Companys membership interest in TV One. The
CEO was fully vested in the award upon execution of the
agreement, and the award lapses upon expiration of the
Employment Agreement in April 2011, or earlier, if the CEO
voluntarily leaves the Company or is terminated for cause.
The Company reassessed the estimated fair value of the award as
of September 30, 2010 at approximately $5.7 million
and, accordingly, recorded compensation expense and a liability
for that amount. The fair value of the award as of
December 31, 2009 was approximately $4.7 million. The
fair valuation incorporated a number of assumptions and
estimates, including but not limited to TV Ones future
financial projections, probability factors and the likelihood of
various scenarios that would trigger payment of the award. As
the Company will measure changes in the fair value of this award
at each reporting period as warranted by certain circumstances,
different estimates or assumptions may result in a change to the
fair value of the award amount previously recorded.
With the assistance of a third-party valuation firm, the Company
assesses the fair value of the redeemable noncontrolling
interest in Reach Media as of the end of each reporting period.
The fair value of the redeemable noncontrolling interest as of
September 30, 2010 was approximately $44.0 million.
The determination of fair value incorporated a number of
assumptions and estimates including, but not limited to,
forecasted operating results, discount rates and a terminal
value. Different estimates and assumptions may result in a
change to the fair value of the redeemable noncontrolling
interest amount previously recorded.
RECENT
ACCOUNTING PRONOUNCEMENTS
In December 2009, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU)
2009-17
Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities, which amends
the guidance on variable interest entities (VIE) in
ASC 810, Consolidation. Effective
January 1, 2010, the new guidance requires more qualitative
than quantitative analyses to determine the primary beneficiary
of a VIE, requires continuous assessments of whether an
enterprise is the primary beneficiary of a VIE, amends certain
guidance for determining whether an entity is a VIE and requires
additional year-end and interim disclosures. Under the new
guidance, a VIE must be consolidated if the enterprise has both
(a) the power to direct the activities of the VIE that most
significantly impact the entitys economic performance, and
(b) the obligation to absorb losses or the right to receive
benefits from the VIE that could potentially be significant to
the VIE. This new accounting guidance became effective for our
Company upon adoption on January 1, 2010, and is being
applied prospectively. The application of the new guidance did
not result in any changes in the Companys accounting for
its investment in TV One. The Company updated its footnote
disclosure in Note 5 Investment in
Affiliated Company to comply with the disclosure
requirements.
In June 2009, the FASB issued ASC 105, Generally
Accepted Accounting Principles, which establishes the
ASC as the source of authoritative non-SEC U.S. generally
accepted accounting principles (GAAP) for
non-governmental entities. ASC 105 is effective for
financial statements issued for interim and annual periods
ending after September 15, 2009. The adoption of
ASC 105 did not have a material impact on the
Companys consolidated financial statements.
In May 2009, the FASB issued ASC 855, Subsequent
Events, which addresses accounting and disclosure
requirements related to subsequent events. It requires
management to evaluate subsequent events through the date the
financial statements are either issued or available to be
issued. In February 2010, the FASB issued ASU
2010-09,
which amends ASC 855 to remove all requirements for SEC
filers to disclose the date through which subsequent events are
considered. The amendment became effective upon issuance. The
Company has provided the required disclosures regarding
subsequent events in Note 15 Subsequent
Events.
The provisions under ASC 825, Financial
Instruments, requiring disclosures about fair value of
financial instruments for interim reporting periods of publicly
traded companies, as well as in annual financial statements
became effective for the Company during the quarter ended
June 30, 2009. The additional disclosures required under
ASC 825 are included in Note 1
Organization and Summary of Significant Accounting
Policies.
82
Effective January 1, 2009, the provisions under
ASC 350, Intangibles Goodwill and
Other, related to the determination of the useful life
of intangible assets and requiring additional disclosures
related to renewing or extending the terms of recognized
intangible assets became effective for the Company. The adoption
of these provisions did not have a material effect on the
Companys consolidated financial statements.
Effective January 1, 2009, the Company adopted an
accounting standard update from the Emerging Issues Task Force
(EITF) consensus regarding the accounting for
contingent consideration agreements of an equity method
investment and the requirement for the investor to recognize its
share of any impairment charges recorded by the investee. This
update to ASC 323, Investments Equity
Method and Joint Ventures, requires the investor to
record share issuances by the investee as if it has sold a
portion of its investment with any resulting gain or loss being
reflected in earnings. The adoption of this update did not have
any impact on the Companys consolidated financial
statements.
CAPITAL
AND COMMERCIAL COMMITMENTS
Radio
Broadcasting Licenses
Each of the Companys radio stations operates pursuant to
one or more licenses issued by the Federal Communications
Commission that have a maximum term of eight years prior to
renewal. The Companys radio broadcasting licenses expire
at various times through August 1, 2014. Although the
Company may apply to renew its radio broadcasting licenses,
third parties may challenge the Companys renewal
applications. The Company is not aware of any facts or
circumstances that would prevent the Company from having its
current licenses renewed.
TV One
Cable Network
Pursuant to a limited liability company agreement dated
July 18, 2003, the Company and certain other investors
formed TV One for the purpose of developing and distributing a
new television programming service. At that time, we committed
to make a cumulative cash investment in TV One of
$74.0 million, of which $60.3 million had been funded
as of April 30, 2007, with no additional funding investment
made since then. Since December 31, 2006, the initial four
year commitment period for funding the capital has been extended
on a quarterly basis due in part to TV Ones lower than
anticipated capital needs during the initial commitment period.
Currently, the commitment period has been extended to
April 1, 2011, and we anticipate further extension based
upon TV Ones cash flow and anticipated capital needs.
Indebtedness
Pre-Transactions
Indebtedness
The total amount available under our prior Credit Agreement with
a syndicate of banks was $700.0 million, consisting of a
$400.0 million revolving facility and a $300.0 million
term loan facility. As of September 30, 2010, we had
approximately $350.6 million in debt outstanding under the
Credit Agreement which expired the earlier of (a) six
months prior to the scheduled maturity date of the 2011 Notes
(January 1, 2011) (unless the 2011 Notes were repurchased
or refinanced prior to such date) or (b) June 30,
2012. We also had outstanding $200.0 million in 2013 Notes
and $101.5 million in 2011 Notes. Reach Media issued a
$1.0 million promissory note payable in November 2009 to a
subsidiary of Citadel. The note was issued in connection with
Reach Media reacquiring Citadels noncontrolling stock
ownership in Reach Media as well as entering into a new sales
representation agreement with Radio Networks. The note bears
interest at 7.0% per annum, which is payable quarterly, and the
entire principal amount is due on December 31, 2011. See
Liquidity and Capital Resources.
Post-Transactions
Indebtedness
The total amount available under our Amended and Restated Credit
Agreement with a syndicate of banks is $361.8 million,
consisting of a $323.0 million term loan and providing for
three tranches of revolving loans, including a
$20.0 million revolver to be used for working capital,
capital expenditures, investments, and other
83
lawful corporate purposes, a $5.1 million revolver to be
used solely to redeem or repurchase and retire the 2011 Notes,
and a $13.7 million revolver to be used solely to fund a
capital call with respect to TV One. As of December 31,
2010, we had approximately $353.7 million in debt
outstanding under the Amended and Restated Credit Agreement
which expires June 30, 2012. We also have outstanding
$286.8 million in aggregate principal amount of Old Notes.
Reach Media issued a $1.0 million promissory note payable
in November 2009 to a subsidiary of Citadel. The note was issued
in connection with Reach Media reacquiring Citadels
noncontrolling stock ownership in Reach Media as well as
entering into a new sales representation agreement with Radio
Networks. The note bears interest at 7.0% per annum, which is
payable quarterly, and the entire principal amount is due on
December 31, 2011. See Liquidity and Capital
Resources.
Royalty
Agreements
Effective December 31, 2009, our radio music license
agreements with the two largest performance rights
organizations, American Society of Composers, Authors and
Publishers (ASCAP) and Broadcast Music Inc.
(BMI), expired. The Radio Music License Committee
(RMLC), which negotiates music licensing fees for
most of the radio industry with ASCAP and BMI, has reached
agreement an with these organizations on a temporary fee
schedule that reflects a provisional discount of 7.0% against
2009 fee levels. The temporary fee reductions became effective
in January 2010. Absent an agreement on long-term fees between
the RMLC and ASCAP and BMI, the U.S. District Court in New
York has the authority to make an interim and permanent fee
ruling for the new contract period. In May 2010 and June 2010,
the U.S. District Courts judge charged with
determining the licenses fees ruled to further reduce interim
fees paid to ASCAP and BMI, respectively, down approximately
another 11.0% from the previous temporary fees negotiated with
the RMLC.
The Company has entered into other fixed and variable fee music
license agreements with other performance rights organizations,
which expire as late as December 2015. In connection with these
agreements, the Company incurred approximately $2.8 million
and $8.7 million for the three and nine month periods ended
September 30, 2010, respectively, and approximately
$3.1 million and $9.3 million, respectively, for the
three and nine month periods ended September 30, 2009.
Lease
obligations
We have non-cancelable operating leases for office space, studio
space, broadcast towers and transmitter facilities that expire
over the next 20 years.
Operating
Contracts and Agreements
We have other operating contracts and agreements including
employment contracts, on-air talent contracts, severance
obligations, retention bonuses, consulting agreements, equipment
rental agreements, programming related agreements, and other
general operating agreements that expire over the next four
years.
Reach
Media Noncontrolling Interest Shareholders Put
Rights
Beginning on February 28, 2012, the noncontrolling interest
shareholders of Reach Media have an annual right to require
Reach Media to purchase all or a portion of their shares at the
then current fair market value for such shares. Beginning in
2012, this annual right can be exercised for a
30-day
period beginning February 28th. The purchase price for such
shares may be paid in cash
and/or
registered Class D Common Stock of Radio One, at the
discretion of Radio One.
84
Contractual
Obligations Schedule
The following table represents our scheduled contractual
obligations as of September 30, 2010:
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Payments Due by Period
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2015 and
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Contractual Obligations
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2010
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2011
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2012
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2013
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|
|
2014
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Beyond
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Total
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|
(In thousands)
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87/8% Senior
Subordinated Notes(1)
|
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$
|
4,518
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|
|
$
|
110,519
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|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
115,037
|
|
63/8% Senior
Subordinated Notes(1)
|
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|
6,396
|
|
|
|
12,750
|
|
|
|
12,750
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|
|
|
206,375
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|
|
|
|
|
|
|
|
|
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|
238,271
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|
Credit facilities(2)
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|
10,411
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|
|
|
347,737
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|
1,056
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|
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|
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|
359,204
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|
Note payable(3)
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18
|
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|
1,070
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,088
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|
Other operating contracts/agreements(4)
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|
17,189
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|
|
|
32,603
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|
|
|
26,733
|
|
|
|
12,166
|
|
|
|
11,302
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|
|
|
|
|
|
|
99,993
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|
Operating lease obligations
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|
|
2,283
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|
|
|
8,145
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|
|
|
5,979
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|
|
|
4,510
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|
|
$
|
3,625
|
|
|
|
11,564
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|
|
|
36,106
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|
|
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|
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|
|
|
|
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Total
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$
|
40,815
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|
|
$
|
512,824
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|
|
$
|
46,518
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|
|
$
|
223,051
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|
|
$
|
14,927
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|
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$
|
11,564
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|
|
$
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849,699
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(1) |
|
Includes interest obligations based on current effective
interest rate on senior subordinated notes outstanding as of
September 30, 2010. The Senior Subordinated Notes are
classified as current in the accompanying consolidated balance
sheets at September 30, 2010 and December 31, 2009 as
these obligations may become callable due to the termination of
the Forbearance Agreement amendment on September 10, 2010. |
|
(2) |
|
Includes interest obligations based on current effective
interest rate and projected interest expense on credit
facilities outstanding as of September 30, 2010. The Credit
facilities are classified as current in the accompanying
consolidated balance sheets at September 30, 2010 and
December 31, 2009 as these obligations may become callable
due to the termination of the Forbearance Agreement amendment on
September 10, 2010. |
|
(3) |
|
Represents a $1.0 million promissory note payable issued in
November 2009 by Reach Media to a subsidiary of Citadel. The
note was issued in connection with Reach Media reacquiring
Citadels noncontrolling interest in Reach Media as well as
entering into a new sales representation agreement with Radio
Networks. The note bears interest at 7.0% per annum, which is
payable quarterly, and the entire principal amount is due on
December 31, 2011. |
|
(4) |
|
Includes employment contracts, severance obligations, on-air
talent contracts, consulting agreements, equipment rental
agreements, programming related agreements, and other general
operating agreements. |
Reflected in the obligations above, as of September 30,
2010, we had a swap agreement in place for a total notional
amount of $25.0 million. The period remaining on the swap
agreement is 20.5 months. If we terminate our interest swap
agreement before it expires, we will be required to pay early
termination fees. Our credit exposure under the agreement is
limited to the cost of replacing an agreement in the event of
non-performance by our counter-party; however, we do not
anticipate non-performance.
Other
Contingencies
The Company has been named as a defendant in several legal
actions arising in the ordinary course of business. It is
managements opinion, after consultation with its legal
counsel, that the outcome of these claims will not have a
material adverse effect on the Companys financial position
or results of operations.
Off-Balance
Sheet Arrangements
As of September 30, 2010, we had three standby letters of
credit totaling $610,000 in connection with our annual insurance
policy renewals. In addition we had a letter of credit of
$295,000 in connection with a contract we assumed as part of the
acquisition of CCI as well as a letter of credit of $500,000 for
Reach Media in connection with an upcoming event.
85
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2010, our exposure related to market
risk had not changed materially since December 31, 2009.
Both the term loan facility and the revolving facility under a
credit agreement entered into by the Company in June 13,
2005 with a syndicate of banks bear interest, at our option, at
a rate equal to either the London Interbank Offered Rate
(LIBOR) plus a spread that ranges from 0.625% to
2.25%, or the prime rate plus a spread of up to 2.25%, depending
on our leverage ratio. We also pay a commitment fee that varies
depending on certain financial covenants and the amount of
unused commitment, up to a maximum of 0.375% per annum on the
unused commitment of the revolving facility. We are exposed to
interest rate volatility with respect to this variable rate
debt. If the borrowing rates under LIBOR were to increase one
percentage point above the current rates at December 31,
2009, our interest expense on the revolving credit facility
would increase approximately $3.0 million on an annual
basis, including any interest expense associated with the use of
derivative rate hedging instruments as described above.
Under the terms of our Credit Agreement, we have entered into
fixed rate swap agreements to mitigate our exposure to higher
floating interest rates. These swap agreements require that we
pay a fixed rate of interest on the notional amount to a bank
and that the bank pays to us a variable rate equal to three
month LIBOR. As of December 31, 2009, we had two swap
agreements in place for a total notional amount of
$50.0 million, and the periods remaining on these swap
agreements range in duration from 5.5 to 29.5 months. All
of the swap agreements are tied to the three-month LIBOR, which
may fluctuate significantly on a daily basis. The valuation of
each of these swap agreements is affected by the change in the
three-month LIBOR and the remaining term of the agreement. Any
increase in the three-month LIBOR results in a more favorable
valuation, while a decrease in the three-month LIBOR results in
a less favorable valuation.
We estimated the net fair value of these instruments as of
December 31, 2009 to be a payable of approximately
$2.1 million. The fair value of the interest rate swap
agreements is an estimate of the net amount that we would have
paid on December 31, 2009 if the agreements were
transferred to other parties or cancelled by us. The fair value
is estimated by obtaining quotations from the financial
institutions which are parties to our swap agreement contracts.
The determination of the estimated fair value of our fixed-rate
debt is subject to the effects of interest rate risk. The
estimated fair value of our 2013 Notes and 2011 Notes at
December 31, 2009 were approximately $142.0 million
and $78.2 million, respectively, and the carrying amounts
were $200.0 million and $101.5 million, respectively.
The estimated fair value of our 2013 Notes and 2011 Notes at
December 31, 2008 were approximately $60.0 and
$52.0 million, respectively, and the carrying amounts were
$200.0 million and $104.0 million, respectively.
The effect of a hypothetical one percentage point decrease in
expected current interest rate yield would be to increase the
estimated fair value of our 2013 Notes from approximately
$142.0 million to $160.0 million at December 31,
2009. The effect of a hypothetical one percentage point decrease
in expected current interest rate yield would be to increase the
estimated fair value of our 2011 Notes from approximately
$78.2 million to $85.6 million at December 31,
2009.
After giving effect to the Transactions, the 2011 Notes were
exchanged or otherwise repurchased or refinanced and
approximately $0.75 million of the 2013 Notes remain
outstanding. The estimated fair value at December 31, 2010
of the 2013 Notes and the Old Notes were approximately
$67 million and $278.2 million, respectively, and the
carrying amounts were $747,000 and $286.8 million,
respectively. The effect of a hypothetical one percentage point
decrease in expected current interest rate yield would be to
increase the estimated fair value of our 2013 Notes from
approximately $.67 million to $.78 million at
December 31, 2010. The effect of a hypothetical one
percentage point decrease in expected current interest rate
yield would be to increase the estimated fair value of our Old
Notes from approximately $278.2 million to
$297.5 million at December 31, 2010.
86
DESCRIPTION
OF OUR BUSINESS
Radio One is an urban-oriented, multi-media company that
primarily targets
African-American
consumers. We are incorporated as a Delaware corporation. Our
core business is our radio broadcasting franchise that is the
largest broadcasting operation that primarily targets
African-American
and urban listeners. We currently own 53 broadcast stations
located in 16 urban markets in the United States. While our
primary source of revenue is the sale of local and national
advertising for broadcast on our radio stations, our strategy is
to operate the premier multi-media entertainment and information
content provider targeting
African-American
consumers. Thus, we have diversified our revenue streams by
making acquisitions and investments in other complementary media
properties. Our other media interests include our approximately
37% ownership interest in TV One, an
African-American
targeted cable television network that we invested in with an
affiliate of Comcast Corporation and other investors; our 53.5%
ownership interest in Reach Media, Inc. (Reach
Media), which operates the Tom Joyner Morning Show; our
ownership of Interactive One, LLC (Interactive One),
an online platform serving the
African-American
community through social content, news, information, and
entertainment, which operates a number of branded sites,
including NewsOne, UrbanDaily, HelloBeautiful; and our ownership
of Community Connect, LLC (formerly Community Connect Inc.)
(CCI), an online social networking company, which
operates a number of branded websites, including BlackPlanet,
MiGente and Asian Avenue. Through our national multi-media
presence, we provide advertisers with a unique and powerful
delivery mechanism to the
African-American
audience.
In December 2009, the Company ceased publication of Giant
Magazine. The remaining assets and liabilities of this
publication have been classified as discontinued operations as
of December 31, 2009 and 2008, and the publications
results of operations for the years ended December 31,
2009, 2008 and 2007, have been classified as discontinued
operations in the accompanying consolidated financial statements.
As part of our consolidated financial statements, consistent
with our financial reporting structure and how the Company
currently manages its businesses, we have provided selected
financial information on the Companys two reportable
segments: (i) Radio Broadcasting; and (ii) Internet.
See Note 19 Segment Information in the notes
accompanying our audited consolidated financial statements
included elsewhere in this prospectus.
Acquisitions
In June 2008, the Company purchased the assets of
WPRS-FM, a
radio station located in the Washington, DC metropolitan area,
for $38.0 million in cash. From April 2007 and until
closing, the station had been operated under an LMA, and the
results of its operations were included in the Companys
consolidated financial statements. The station was consolidated
with the Companys existing Washington, DC operations in
April 2007.
In April 2008, the Company acquired CCI for $38.0 million
in cash. CCI is an online social networking company operating
branded websites including BlackPlanet, MiGente, and AsianAvenue.
Dispositions
Between December 2006 and May 2008, the Company sold the assets
of 20 radio stations in seven markets for approximately
$287.9 million in cash. These dispositions were consistent
with the Companys strategic plan to divest itself of
non-core radio assets.
Los Angeles Station: In May 2008, the Company
sold the assets of its radio station
KRBV-FM,
located in the Los Angeles metropolitan area, to Bonneville
International Corporation (Bonneville) for
approximately $137.5 million in cash. Bonneville began
operating the station under an LMA on April 8, 2008.
Miami Station: In April 2008, the Company sold
the assets of its radio station
WMCU-AM
(formerly
WTPS-AM),
located in the Miami metropolitan area, to Salem Communications
Holding Corporation (Salem) for approximately
$12.3 million in cash. Salem began operating the station
under an LMA effective October 18, 2007.
87
Augusta Stations: In December 2007, the
Company sold the assets of its five radio stations in the
Augusta metropolitan area to Perry Broadcasting Company for
approximately $3.1 million in cash.
Louisville Station: In November 2007, the
Company sold the assets of its radio station
WLRX-FM in
the Louisville metropolitan area to WAY FM Media Group, Inc. for
approximately $1.0 million in cash.
Dayton and Louisville Stations: In September
2007, the Company sold the assets of its five radio stations in
the Dayton metropolitan area and five of its six radio stations
in the Louisville metropolitan area to Main Line Broadcasting,
LLC for approximately $76.0 million in cash.
Minneapolis Station: In August 2007, the
Company sold the assets of its radio station
KTTB-FM in
the Minneapolis metropolitan area to Northern Lights
Broadcasting, LLC for approximately $28.0 million in cash.
Our
Stations and Markets
The table below provides information about our radio stations
and the markets in which we operated as of December 31,
2010.
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Radio One
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Entire
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Market Data
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Audience
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Ranking by
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Four Book
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Size of
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Average
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African-
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(Ending Fall
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Estimated
|
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American
|
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Estimated Fall 2010 Metro
|
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2010)
|
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2008 Annual
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Population
|
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Population Persons 12+(c)
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Number of Stations
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Audience
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Radio
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Persons
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African-
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Market
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FM
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AM
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Share(a)
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Revenue(b)
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12+(c)
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|
Total
|
|
|
American%
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions)
|
|
|
|
|
|
(millions)
|
|
|
|
|
|
Atlanta(1)
|
|
|
4
|
|
|
|
|
|
|
|
13.7
|
|
|
|
398.5
|
|
|
|
2
|
|
|
|
4.5
|
|
|
|
31.1
|
%
|
Washington, DC(1)
|
|
|
3
|
|
|
|
2
|
|
|
|
12.6
|
|
|
|
365.1
|
|
|
|
4
|
|
|
|
4.4
|
|
|
|
26.4
|
%
|
Philadelphia(1)
|
|
|
3
|
|
|
|
|
|
|
|
8.3
|
|
|
|
301.4
|
|
|
|
5
|
|
|
|
4.5
|
|
|
|
20.5
|
%
|
Detroit(1)
|
|
|
2
|
|
|
|
1
|
|
|
|
7.5
|
|
|
|
225.3
|
|
|
|
6
|
|
|
|
3.8
|
|
|
|
21.9
|
%
|
Houston(1)
|
|
|
3
|
|
|
|
|
|
|
|
15.3
|
|
|
|
383.8
|
|
|
|
7
|
|
|
|
4.9
|
|
|
|
16.7
|
%
|
Dallas(1)
|
|
|
2
|
|
|
|
|
|
|
|
5.2
|
|
|
|
416.3
|
|
|
|
9
|
|
|
|
5.3
|
|
|
|
14.3
|
%
|
Baltimore(2)
|
|
|
2
|
|
|
|
2
|
|
|
|
15.7
|
|
|
|
147.6
|
|
|
|
11
|
|
|
|
2.3
|
|
|
|
28.4
|
%
|
St. Louis(2)
|
|
|
2
|
|
|
|
|
|
|
|
10.0
|
|
|
|
139.7
|
|
|
|
16
|
|
|
|
2.3
|
|
|
|
18.2
|
%
|
Charlotte(3)
|
|
|
2
|
|
|
|
|
|
|
|
6.0
|
|
|
|
114.5
|
|
|
|
15
|
|
|
|
2.0
|
|
|
|
20.8
|
%
|
Cleveland(4)
|
|
|
2
|
|
|
|
2
|
|
|
|
13.5
|
|
|
|
108.4
|
|
|
|
18
|
|
|
|
1.8
|
|
|
|
18.9
|
%
|
Richmond(3)
|
|
|
4
|
|
|
|
1
|
|
|
|
20.4
|
|
|
|
60.9
|
|
|
|
20
|
|
|
|
1.0
|
|
|
|
29.3
|
%
|
Raleigh-Durham(3)
|
|
|
4
|
|
|
|
|
|
|
|
20.5
|
|
|
|
84.8
|
|
|
|
19
|
|
|
|
1.3
|
|
|
|
21.3
|
%
|
Boston(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
310.5
|
|
|
|
21
|
|
|
|
4.0
|
|
|
|
6.6
|
%
|
Cincinnati(4)
|
|
|
2
|
|
|
|
1
|
|
|
|
8.9
|
|
|
|
123.1
|
|
|
|
28
|
|
|
|
1.8
|
|
|
|
12.3
|
%
|
Columbus(3)
|
|
|
3
|
|
|
|
|
|
|
|
13.3
|
|
|
|
102.9
|
|
|
|
29
|
|
|
|
1.5
|
|
|
|
14.4
|
%
|
Indianapolis(3)(6)
|
|
|
3
|
|
|
|
1
|
|
|
|
19.1
|
|
|
|
93.6
|
|
|
|
30
|
|
|
|
1.4
|
|
|
|
14.8
|
%
|
Total
|
|
|
41
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The four book average and rank is measured using the
12 month Portable People
Metertm
(PPMtm)
methodology. |
|
(2) |
|
The four book average is measured using a two book diary and a
two book (six months)
PPMtm
average. |
|
(3) |
|
The four book average and rank is measured using the four book
diary average. |
|
(4) |
|
We do not subscribe to Arbitron for our Boston market. |
88
WDNI-CD (formerly WDNI-LP), the low power television station
that we acquired in Indianapolis in June 2000, is not included
in this table.
|
|
(a) |
Audience share data are for the 12+ demographic and derived from
the Arbitron Survey four book averages ending with the Fall 2010
Arbitron Survey.
|
|
|
(b) |
2008 estimated annual radio revenues are from BIA Financials
Investing in Radio Market Report, 2008 Yearbook. The BIA
Financials Investing in Radio Market Report, 2009 Yearbook
which would include the 2009 estimated annual radio revenues was
not available at the date of this information.
|
|
|
(c) |
Population estimates are from the Arbitron Radio Market Report,
Fall 2010.
|
The
African-American
Market Opportunity
We believe that urban-oriented media primarily targeting
African-Americans
continues as an attractive opportunity for the following reasons:
Steady
African-American
Population Growth. From April 2000 to July 2009,
the
African-American
population grew 9.8%, in line with a 9.7% overall population
growth rate, and accounted for 12.9% of total population growth
by July 2009. The
African-American
population is expected to grow to approximately
42.1 million by the end of 2015, a 5.5% increase from 2010.
African-Americans
are expected to make up 12.9% of total population growth during
the period from 2010 through 2015 (Source: U.S. Census
Bureau, 2008 and 2009, Projections of the Population by
Sex, Race, and Hispanic Origin for the United States: 2010 to
2050). According to the U.S. Census, the average
African-American
population is nearly five years younger than the total
U.S. population average. As a result, urban formats, in
general, tend to skew younger than formats targeted to the
general market population. As of December 2010, the
African-American
population represents almost 13% of the total
U.S. population. The
African-American
consumer market represents an attractive customer segment in
many states.
High
African-American
Geographic Concentration. An analysis of the
African-American
population shows a high degree of geographic concentration. A
recent study shows that while the five most populous
U.S. markets are home to 21.0% of the overall
U.S. population, 27.0% of the total
African-American
population resides in those same markets. Expanding the analysis
to the 20 most populous U.S. markets, 45.0% of the overall
U.S. population resides within these markets, with 57% of
the total
African-American
population residing within them. (Source: Markets Within
Markets, Cable Advertising Bureau (CAB) Race,
Relevance and Revenue, June 2007). The practical implication of
these findings is that a multi-media strategy within these
pockets of geographic concentration can have a much
proportionately meaningful reach towards the
African-American
population than towards non-African-American
U.S. populations.
Higher
African-American
Income Growth. The economic status of
African-Americans
improved at an above-average rate over the past two decades.
African-American
buying power was estimated at $913 billion in 2008, up from
$590 billion in 2000 and is expected to increase to $1.2
trillion by 2013, up by 210.0% in 22 years. (Source:
The Multicultural Economy 2008, Selig Center for
Economic Growth, Terry College of Business, The University of
Georgia, January 2009). In addition,
African-American
consumers tend to have a different consumption profile than do
non-African-Americans. A report published by the CAB notes those
products and services for which
African-American
households spent more or a higher proportion of their money than
non-African-Americans. These products and services included
apparel and accessories, appliances, consumer electronics, food,
personal care products, telephone service and transportation.
Such findings imply that utilities, telecom firms, clothing and
grocers would greatly benefit from marketing directly to
African-American
consumers. This is particularly true in those states (including
the District of Columbia) where
African-American
buying power represents the largest share of total buying power
within such states, such as the District of Columbia (31.1%),
Maryland (22.0%), Georgia (20.5%), North Carolina (14.5%) and
Virginia (13.1%). (Source: Black Buying Power, CAB
Race, Relevance and Revenue, June 2007).
Growing Influence of
African-American
Culture. We believe that there continues to be an
ongoing urbanization of many facets of American
society as evidenced by the influence of
African-American
culture in the areas of politics, music, film, fashion, sports
and urban-oriented television shows and networks. We
89
believe that many companies from a broad range of industries
have embraced this urbanization trend in their products as well
as in their advertising messages. As noted in one recent study,
The influence of
African-American
youth culture is no accident. The black population is among the
youngest in the nation, with 56.1% under age 35 in 2009,
and nearly 30% under age 18. (Source: African
Americans Online, eMarketer, March 2009).
Growth in Advertising Targeting the
African-American
Market. We continue to believe that large
corporate advertisers are becoming more focused on reaching
minority consumers in the United States. The
African-American
community is considered an emerging growth market within a
mature domestic market. Spending on
African-American
media declined 7.3%, according to figures by The Nielsen
Company. While the decline was consistent with the trend in
overall advertising, the drop was not as severe as the general
market. In February 2010, Nielsen reported that ad spending in
general fell nine percent in 2009, despite significant increases
in Cable TV. The decline in spending on
African-American
media was consistent with decreased spending in network
television and national magazines. Increased spending on cable
television helped balance out the losses. Advertisers spent 35%
more on
African-American
cable in 2009 that in 2008. Radio continued to earn the most
revenue among
African-American
media in 2009. Advertisers spent $748 million on the medium
last year. (Source: Multicultural Ad Spending Declines in
2009, but Less than Overall Ad Market, NielsenWire,
March 12, 2010). We believe many large corporations are
expanding their commitment to ethnic advertising. The companies
that successfully market to the
African-American
audience have focused on building brand relationships.
Advertisers are making an effort to fully understand
African-American
consumers, and to relate to them with messages that are relevant
to their community. These advertisers are accomplishing this by
visibly and consistently engaging the
African-American
consumer, involving themselves with the interests of the
African-American
consumer and increasing
African-American
brand loyalty.
Significant and Growing Internet Usage among
African-Americans
with Limited Targeted Online Content
Offerings. African-Americans
are becoming significant users of the internet. The same factors
driving increases in
African-American
buying power, such as improvements in education, income and
employment, are also increasing
African-American
internet usage. One study estimates that 23.7 million
African-Americans
will make up 11.2% of all U.S. internet users in 2013, up
from 9.9% in 2008. (Source: African Americans
Online, eMarketer, March 2009). This represents a 24%
increase from 2008 versus a 15% increase for the general
population and an 11% increase among white internet users.
According to another national study among more than 7,000
African American adults, the internet represents 32% of daily
media exposure for
African-Americans
and the typical amount of time spent online is 4 hours and
21 minutes per day, a figure that is 10% higher when compared to
all U.S. adults. (Source: The Media Audit National
Report 2010). Additionally, the growth of internet
penetration and high-speed internet penetration in
African-American
households is expected to remain above that of the general
population. We believe that there is no company that dominates
the
African-American
market online, and the lack of any strong competitive presence
presents a significant opportunity for us to build an online
business that is highly scalable.
The Results of our Black America Study
(www.blackamericastudy.com). In addition to
relying on third-party research and our own experience, from
time to time we conduct or commission our own proprietary
research. In early 2008, we released the groundbreaking
Black America Study. This national study, conducted
by Yankelovich, a leader in consumer research for over
50 years, is one of the largest segmentation research
studies ever done of Blacks and
African-Americans.
This study helps us to better understand the motivations of our
core demographic by segmenting the large and growing
African-American
audience so that we can highlight the diversity that exists in
Black America. This enhanced understanding helps us identify new
opportunities to serve the
African-American
community and assists us in helping advertisers and marketers
reach Black America more effectively.
The study includes insight into the feelings of
African-Americans
about their future, past and present, as well as, details on
their relationship with media, advertising and technology. The
wealth of quantifiable information about our listeners, viewers,
readers and visitors provides valuable marketing and programming
applications for us. This allows us to ensure that our content
best reflects our audience and, in turn, allows for companies,
organizations and individuals to effectively reach this vital
community.
90
Business
Strategy
Radio Station Portfolio Optimization. Within
our core radio business, our portfolio management strategy is to
make select acquisitions of radio stations, primarily in markets
where we already have a presence, and to divest stations which
are no longer strategic in nature. We may divest stations that
do not have an urban format or stations located in smaller
markets or markets where the
African-American
population is smaller, on a relative basis, than other markets
in which we operate. However, we are continually looking for
opportunities to upgrade existing radio stations by
strengthening their signals to reach a larger number of
potential listeners.
Investment in Complementary Businesses. We
continue to invest in complementary businesses in the media and
entertainment industry. The primary focus of these investments
will be on businesses that provide entertainment and information
content to
African-American
consumers. Most recently, in April 2008, we acquired CCI, an
online social networking company that hosts the website
BlackPlanet. BlackPlanet has been integrated into our online
operations, which now include the largest social networking site
primarily targeted at
African-Americans.
This integration is consistent with our operating strategy of
becoming a multi-media entertainment and information content
provider to
African-American
consumers. We believe that our unique position as a diversified
media company focused on the
African-American
consumer provides us with a competitive advantage in these new
businesses.
Top 50
African-American
Radio Markets in the United States
The table below notes the top 50
African-American
radio markets in the United States. The bold text indicates
markets where we own radio stations. Population estimates are
for 2009 and are based upon data provided by Arbitron.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
African-
|
|
|
|
|
|
|
Americans as a
|
|
|
|
|
African-American
|
|
Percentage of the
|
|
|
|
|
Population
|
|
Overall Population
|
Rank
|
|
Market
|
|
(Persons 12+)
|
|
(Persons 12+)
|
|
|
|
|
(In thousands)
|
|
|
|
|
1
|
|
|
New York, NY
|
|
|
2,674
|
|
|
|
17.0
|
%
|
|
2
|
|
|
Atlanta, GA
|
|
|
1,392
|
|
|
|
31.1
|
|
|
3
|
|
|
Chicago, IL
|
|
|
1,366
|
|
|
|
17.3
|
|
|
4
|
|
|
Washington, DC
|
|
|
1,158
|
|
|
|
26.4
|
|
|
5
|
|
|
Philadelphia, PA
|
|
|
917
|
|
|
|
20.5
|
|
|
6
|
|
|
Detroit, MI
|
|
|
837
|
|
|
|
21.9
|
|
|
7
|
|
|
Houston-Galveston, TX
|
|
|
823
|
|
|
|
16.7
|
|
|
8
|
|
|
Los Angeles, CA
|
|
|
807
|
|
|
|
7.3
|
|
|
9
|
|
|
Dallas-Ft. Worth, TX
|
|
|
760
|
|
|
|
14.3
|
|
|
10
|
|
|
Miami-Ft. Lauderdale-Hollywood, FL
|
|
|
716
|
|
|
|
19.6
|
|
|
11
|
|
|
Baltimore, MD
|
|
|
651
|
|
|
|
28.4
|
|
|
12
|
|
|
Memphis, TN
|
|
|
477
|
|
|
|
43.9
|
|
|
13
|
|
|
San Francisco, CA
|
|
|
436
|
|
|
|
7.0
|
|
|
14
|
|
|
Norfolk-Virginia Beach-Newport News, VA
|
|
|
427
|
|
|
|
31.6
|
|
|
15
|
|
|
Charlotte-Gastonia-Rock Hill, NC
|
|
|
425
|
|
|
|
20.8
|
|
|
16
|
|
|
St. Louis, MO
|
|
|
422
|
|
|
|
18.2
|
|
|
17
|
|
|
New Orleans, LA
|
|
|
343
|
|
|
|
33.8
|
|
|
18
|
|
|
Cleveland, OH
|
|
|
335
|
|
|
|
18.9
|
|
|
19
|
|
|
Raleigh-Durham, NC
|
|
|
291
|
|
|
|
21.3
|
|
|
20
|
|
|
Richmond, VA
|
|
|
281
|
|
|
|
29.3
|
|
|
21
|
|
|
Boston, MA
|
|
|
270
|
|
|
|
6.6
|
|
|
22
|
|
|
Tampa-St. Petersburg-Clearwater, FL
|
|
|
260
|
|
|
|
10.9
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
African-
|
|
|
|
|
|
|
Americans as a
|
|
|
|
|
African-American
|
|
Percentage of the
|
|
|
|
|
Population
|
|
Overall Population
|
Rank
|
|
Market
|
|
(Persons 12+)
|
|
(Persons 12+)
|
|
|
|
|
(In thousands)
|
|
|
|
|
23
|
|
|
Birmingham, AL
|
|
|
254
|
|
|
|
28.2
|
|
|
24
|
|
|
Greensboro-Winston-Salem-High Point, NC
|
|
|
252
|
|
|
|
20.8
|
|
|
25
|
|
|
Jacksonville, FL
|
|
|
246
|
|
|
|
21.4
|
|
|
26
|
|
|
Orlando, FL
|
|
|
238
|
|
|
|
15.6
|
|
|
27
|
|
|
Nassau-Suffolk (Long Island), NY
|
|
|
226
|
|
|
|
9.1
|
|
|
28
|
|
|
Cincinnati, OH
|
|
|
221
|
|
|
|
12.3
|
|
|
29
|
|
|
Columbus, OH
|
|
|
213
|
|
|
|
14.4
|
|
|
30
|
|
|
Indianapolis, IN
|
|
|
209
|
|
|
|
14.8
|
|
|
31
|
|
|
Kansas City, KS
|
|
|
208
|
|
|
|
12.4
|
|
|
32
|
|
|
Milwaukee-Racine, WI
|
|
|
207
|
|
|
|
14.2
|
|
|
33
|
|
|
Nashville, TN
|
|
|
201
|
|
|
|
15.7
|
|
|
34
|
|
|
Seattle-Tacoma, WA
|
|
|
192
|
|
|
|
5.6
|
|
|
35
|
|
|
Baton Rouge, LA
|
|
|
191
|
|
|
|
33.0
|
|
|
36
|
|
|
Middlesex-Somerset-Union, NJ
|
|
|
185
|
|
|
|
13.3
|
|
|
37
|
|
|
Jackson, MS
|
|
|
185
|
|
|
|
46.1
|
|
|
38
|
|
|
Minneapolis-St. Paul, MN
|
|
|
184
|
|
|
|
6.7
|
|
|
39
|
|
|
Columbia, SC
|
|
|
175
|
|
|
|
32.3
|
|
|
40
|
|
|
Riverside-San Bernardino, CA
|
|
|
170
|
|
|
|
9.1
|
|
|
41
|
|
|
Pittsburgh, PA
|
|
|
167
|
|
|
|
8.4
|
|
|
42
|
|
|
West Palm Beach-Boca Raton, FL
|
|
|
165
|
|
|
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14.8
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|
43
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|
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Phoenix, AZ
|
|
|
159
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|
|
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4.8
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|
|
44
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|
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Las Vegas, NV
|
|
|
157
|
|
|
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10.0
|
|
|
45
|
|
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Charleston, SC
|
|
|
153
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|
|
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27.1
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|
|
46
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|
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Greenville-Spartanburg, SC
|
|
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150
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|
|
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16.7
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|
|
47
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|
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Augusta, GA
|
|
|
148
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|
|
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34.0
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|
|
48
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|
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Sacramento, CA
|
|
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141
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|
|
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14.1
|
|
|
49
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|
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Louisville, KY
|
|
|
137
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|
|
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14.1
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|
|
50
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|
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Greenville-New Bern-Jacksonville
|
|
|
132
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|
|
|
24.1
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Multi-Media
Operating Strategy
To maximize net revenue and station operating income at our
radio stations, we strive to achieve the largest audience share
of
African-American
listeners in each market, convert these audience share ratings
to advertising revenue, and control operating expenses.
Complementing our core radio franchise are our cable and online
media interests. Through our national presence across our
various media, we provide our customers with a multi-media
advertising platform that is a unique and powerful delivery
mechanism toward
African-Americans
and other urban consumers. We believe that as we continue to
diversify into other media, the strength and effectiveness of
this unique platform will become even more compelling. The
success of our strategy relies on the following:
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market research, targeted programming and marketing;
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ownership and syndication of programming content;
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radio station clustering, programming segmentation and sales
bundling;
|
92
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strategic and coordinated sales, marketing and special event
efforts;
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strong management and performance-based incentives; and
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significant community involvement.
|
Market
Research, Targeted Programming and Marketing
We use market research to tailor the programming, marketing and
promotion of our radio stations and the content of our
complementary media to maximize audience share. We also use our
research to reinforce and refine our current programming and
content, to identify unserved or underserved markets or segments
within the
African-American
population and to determine whether to acquire new media
properties or reprogram one of our existing media properties to
target those markets or segments.
We also seek to reinforce our targeted programming and content
by creating a distinct and marketable identity for each of our
media properties. To achieve this objective, in addition to our
significant community involvement discussed below, we employ and
promote distinct, high-profile personalities across our media
properties, many of whom have strong ties to the
African-American
community and the local communities in which a broadcasting
property is located.
Ownership
and Syndication of Programming Content
To diversify our revenue base beyond the markets in which we
physically operate, we seek to develop or acquire proprietary
African-American
targeted content. We distribute this content in a variety of
ways, utilizing our own network of multi-media distribution
assets or through distribution assets owned by others. If we
distribute content through others, we are paid for providing
this content or we receive advertising inventory which we
monetize through our advertising sales. To date, our programming
content efforts have included our investment in TV One and its
related programming, our 53.5% ownership of Reach Media, the
acquisition and development of our interactive brands including
BlackPlanet, NewsOne, TheUrbanDaily and HelloBeautiful and the
development and distribution of several syndicated radio shows,
including the Russ Parr Morning Show, the
Yolanda Adams Morning Show, the Rickey Smiley
Morning Show, CoCo Brother Live, CoCo
Brothers Spirit program, Bishop T.D.
Jakes Empowering Moments, the Reverend
Al Sharpton Show, and the Warren Ballentine
Show.
Radio
Station Clustering, Programming Segmentation and Sales
Bundling
We strive to build clusters of radio stations in our markets,
with each radio station targeting different demographic segments
of the
African-American
population. This clustering and programming segmentation
strategy allows us to achieve greater penetration within the
distinct segments of our overall target market. In a similar
fashion, we have multiple online brands including BlackPlanet,
NewsOne, TheUrbanDaily and HelloBeautiful. Each of these brands
focuses upon a different segment of
African-American
online users. With our radio station clusters and multiple
online brands, we are able to direct advertisers to specific
audiences within the urban communities in which we are located
or to bundle the radio stations and brands for advertising sales
purposes when advantageous.
We believe there are several potential benefits that result from
operating multiple radio stations within the same market as well
as operating multiple online brands. First, each additional
radio station in a market and online brand provides us with a
larger percentage of the prime advertising time available for
sale within that market and among online users. Second, the more
stations we program and brands we operate, the greater the
market share we can achieve in our target demographic groups
through the use of segmented programming and content delivery.
Third, we are often able to consolidate sales, promotional,
technical support and business functions across stations and
brands to produce substantial cost savings. Finally, the
purchase of additional radio stations in an existing market and
the development of additional online brands allow us to take
advantage of our market expertise and leverage our existing
relationships with advertisers.
93
Strategic
and Coordinated Sales, Marketing and Special Event
Efforts
We have assembled an effective, highly trained sales staff
responsible for converting our broadcast and online audience
shares into revenue. We operate with a focused, sales-oriented
culture, which rewards aggressive selling efforts through a
commission and bonus compensation structure. We hire and deploy
large teams of sales professionals for each of our media
properties or media clusters, and we provide these teams with
the resources necessary to compete effectively in the markets in
which we operate. We utilize various sales strategies to sell
and market our properties on a stand-alone basis, in combination
with other properties within a given market, and across our
various media properties, where appropriate.
We have created a national platform of radio stations in some of
the largest
African-American
consumer markets. This platform reaches approximately
20 million listeners weekly, more than that of any other
radio broadcaster primarily targeting
African-Americans.
Given the high degree of geographic concentration among the
African-American
population, national advertisers find advertising on our radio
stations an efficient and cost-effective way to reach this
target audience. Through our corporate sales department, we
bundle and sell our platform of radio stations to national
advertisers, thereby enhancing our revenue generating
opportunities, expanding our base of advertisers, creating
greater demand for our advertising time inventory and increasing
the capacity utilization of our inventory and making our sales
efforts more efficient. We have also created a dedicated online
sales force as part of our interactive unit. The units
national team focuses on helping marketers reach our online
audience of approximately 4 million unique visitors per
month. Our leading advertising products, custom marketing
solutions, and integrated inventory opportunities, provide our
advertising customers a unique vehicle to reach online
African-American
consumers at scale. To allow marketers to reach our audience
across all of our platforms (radio, television and online) in an
efficient way, in 2008, we launched One Solution, a
cross-platform/brand sales and marketing effort which allows top
tier advertisers to take full advantage of our complete suite of
offerings through a one-stop shop approach that reaches 82% of
African-Americans
in the United States.
In order to create advertising loyalty, we strive to be the
recognized expert in marketing to the
African-American
consumer in the markets in which we operate. We believe that we
have achieved this recognition by focusing on serving the
African-American
consumer and by creating innovative advertising campaigns and
promotional tie-ins with our advertising clients and sponsoring
numerous entertainment events each year. In these events,
advertisers buy sponsorships, signage, booth space
and/or
broadcast promotions to sell a variety of goods and services to
African-American
consumers. As we expand our presence in our existing markets and
into new markets, we may increase the number of events and the
number of markets in which we host events based upon our
evaluation of the financial viability and economic benefits of
the events.
Strong
Management and Performance-Based Incentives
We focus on hiring and retaining highly motivated and talented
individuals in each functional area of our organization who can
effectively help us implement our growth and operating
strategies. Our management team is comprised of a diverse group
of individuals who bring significant expertise to their
functional areas. To enhance the quality of our management in
the areas of sales and programming, general managers, sales
managers and program directors have significant portions of
their compensation tied to the achievement of certain
performance goals. General Managers compensation is based
partially on increasing market share and achieving station
operating income benchmarks, which creates an incentive for
management to focus on both sales growth and profitability.
Additionally, sales managers and sales personnel have incentive
packages based on sales goals, and program directors and on-air
talent have incentive packages focused on maximizing ratings in
specific target segments. Our One Solution sales approach seeks
to drive incremental revenue and value across all of our media
properties and includes performance based incentives for our
sales team.
Significant
Community Involvement
We believe our active involvement and significant relationships
in the
African-American
community across each of our brands and in each of our markets
provide a competitive advantage in targeting
African-American
audiences and significantly improve the marketability of our
advertising to businesses that
94
are targeting such communities. We believe that a media
propertys image should reflect the lifestyle and
viewpoints of the target demographic group it serves. Due to our
fundamental understanding of the
African-American
community, we are well positioned to identify music and musical
styles, as well as political and social trends and issues, early
in their evolution. This understanding is integrated into
significant aspects of our operations across all of our media
properties and enables us to create enhanced awareness and name
recognition in the marketplace. In addition, we believe our
approach to community involvement leads to increased
effectiveness in developing and updating our programming formats
and online brands and content which in turn leads to greater
listenership and users of our online properties, driving higher
ratings and online traffic over the long-term.
Our Radio
Station Portfolio
The following table sets forth selected information about our
portfolio of radio stations as of December 31, 2009. Market
population data and revenue rank data are from BIA Financials
Investing in Radio Market Report, 2009 Fourth Edition. Audience
share and audience rank data are based on Arbitron Survey four
book averages ending with the Fall 2009 Arbitron Survey unless
otherwise noted. As used in this table, n/a means
not applicable or not available and (t) means tied
with one or more radio stations. We do not subscribe to Arbitron
for our Boston market.
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Four Book Average
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Audience
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Audience
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Market Rank
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Target
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Audience
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Audience
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Share
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Rank
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2010
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2009
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Age
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Share
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Rank
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in Target
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in Target
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Metro
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Radio
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Year
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Demo-
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in 12+ Demo-
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in 12+ Demo-
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Demo-
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Demo-
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Market
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Population
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Revenue
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Acquired
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Format
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graphic
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graphic
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graphic
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graphic
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graphic
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Atlanta(1)
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7
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6
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WPZE-FM(a)
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Contemporary
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2004
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Inspirational
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25-54
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5.7
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4
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(t)
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5.8
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3
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WHTA-FM
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2002
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Urban Contemporary
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18-34
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4.0
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9
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(t)
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7.7
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2
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WAMJ-FM(b)
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1999
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Urban AC
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25-54
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4.0
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9
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(5)
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4.9
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6
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(t)
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WUMJ-FM(c)
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1999
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Urban AC
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25-54
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*
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*
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*
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*
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Washington, DC(1)
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9
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7
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WKYS-FM
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1995
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Urban Contemporary
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18-34
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3.6
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8
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(t)
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8.6
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2
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WMMJ-FM
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1987
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Urban AC
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25-54
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5.3
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6
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4.7
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5
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Contemporary
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WPRS-FM
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2008
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Inspirational
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25-54
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3.3
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15
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3.6
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13
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(t)
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WYCB-AM
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1998
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Gospel
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25-54
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0.2
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38
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(t)
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0.2
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47
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(t)
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WOL-AM
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1980
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News/Talk
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35-64
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0.2
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38
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(t)
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0.1
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37
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(t)
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Philadelphia(1)
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8
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10
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Contemporary
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WPPZ-FM
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1997
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Inspirational
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25-54
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2.5
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18
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5.2
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7
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WPHI-FM
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2000
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Urban Contemporary
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18-34
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2.4
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19
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(t)
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2.5
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18
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WRNB-FM
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2004
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Urban AC
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25-54
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3.4
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13
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(t)
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3.7
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1
|
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Detroit(1)
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11
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13
|
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WHTD-FM
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1998
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Urban Contemporary
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18-34
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2.8
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19
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5.5
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|
7
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WDMK-FM
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1998
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Urban AC
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25-54
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4.1
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13
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4.1
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12
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WCHB-AM
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1998
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News/Talk
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35-64
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0.6
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30
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(t)
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0.3
|
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33
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(t)
|
Houston(1)
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6
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8
|
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KMJQ-FM
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2000
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Urban AC
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25-54
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6.1
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3
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(t)
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6.1
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3
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KBXX-FM
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2000
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Urban Contemporary
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18-34
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6.3
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2
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10.2
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1
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KROI-FM
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Contemporary
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|
|
2004
|
|
|
Inspirational
|
|
|
25-54
|
|
|
|
2.9
|
|
|
|
17
|
|
|
|
3.3
|
|
|
|
15
|
(t)
|
Dallas(1)
|
|
|
5
|
|
|
|
4
|
|
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KBFB-FM
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|
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2000
|
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|
Urban Contemporary
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18-34
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|
|
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3.0
|
|
|
|
12
|
(t)
|
|
|
4.5
|
|
|
|
6
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|
KSOC-FM
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|
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|
|
|
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|
2001
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
2.2
|
|
|
|
19
|
|
|
|
2.5
|
|
|
|
19
|
|
Baltimore(1)
|
|
|
22
|
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|
20
|
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95
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Four Book Average
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Audience
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|
|
Audience
|
|
|
|
Market Rank
|
|
|
|
|
|
|
|
Target
|
|
|
Audience
|
|
|
Audience
|
|
|
Share
|
|
|
Rank
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
Age
|
|
|
Share
|
|
|
Rank
|
|
|
in Target
|
|
|
in Target
|
|
|
|
Metro
|
|
|
Radio
|
|
|
Year
|
|
|
|
|
Demo-
|
|
|
in 12+ Demo-
|
|
|
in 12+ Demo-
|
|
|
Demo-
|
|
|
Demo-
|
|
Market
|
|
Population
|
|
|
Revenue
|
|
|
Acquired
|
|
|
Format
|
|
graphic
|
|
|
graphic
|
|
|
graphic
|
|
|
graphic
|
|
|
graphic
|
|
|
WERQ-FM
|
|
|
|
|
|
|
|
|
|
|
1993
|
|
|
Urban Contemporary
|
|
|
18-34
|
|
|
|
7.7
|
|
|
|
1
|
|
|
|
15.5
|
|
|
|
1
|
|
WWIN-FM
|
|
|
|
|
|
|
|
|
|
|
1992
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
8.3
|
|
|
|
2
|
(t)
|
|
|
8.2
|
|
|
|
2
|
|
WOLB-AM
|
|
|
|
|
|
|
|
|
|
|
1993
|
|
|
News/Talk
|
|
|
35-64
|
|
|
|
0.2
|
|
|
|
43
|
(t)
|
|
|
0.2
|
|
|
|
46
|
(t)
|
WWIN-AM
|
|
|
|
|
|
|
|
|
|
|
1992
|
|
|
Gospel
|
|
|
35-64
|
|
|
|
0.4
|
|
|
|
34
|
(t)
|
|
|
0.5
|
|
|
|
33
|
(t)
|
St. Louis(1)
|
|
|
21
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WFUN-FM
|
|
|
|
|
|
|
|
|
|
|
1999
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
4.1
|
|
|
|
13
|
|
|
|
4.0
|
|
|
|
12
|
|
WHHL-FM
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
Urban Contemporary
|
|
|
18-34
|
|
|
|
5.9
|
|
|
|
5
|
|
|
|
11.6
|
|
|
|
2
|
|
Cleveland(1)
|
|
|
29
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WENZ-FM
|
|
|
|
|
|
|
|
|
|
|
1999
|
|
|
Urban Contemporary
|
|
|
18-34
|
|
|
|
5.5
|
|
|
|
8
|
|
|
|
9.5
|
|
|
|
2
|
|
WERE-AM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
News/Talk
|
|
|
35-64
|
|
|
|
0.2
|
|
|
|
28
|
(t)
|
|
|
0.3
|
|
|
|
27
|
(t)
|
WZAK-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
7.0
|
|
|
|
4
|
|
|
|
6.9
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contemporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WJMO-AM
|
|
|
|
|
|
|
|
|
|
|
1999
|
|
|
Inspirational
|
|
|
25-54
|
|
|
|
0.8
|
|
|
|
23
|
|
|
|
1.0
|
|
|
|
20
|
(t)
|
Charlotte(2)
|
|
|
24
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WQNC-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
2.3
|
|
|
|
17
|
|
|
|
2.9
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contemporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WPZS-FM
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
Inspirational
|
|
|
25-54
|
|
|
|
3.7
|
|
|
|
13
|
|
|
|
3.5
|
|
|
|
13
|
|
Richmond(3)
|
|
|
55
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WCDX-FM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
Urban Contemporary
|
|
|
18-34
|
|
|
|
5.8
|
|
|
|
6
|
|
|
|
11.0
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contemporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WPZZ-FM
|
|
|
|
|
|
|
|
|
|
|
1999
|
|
|
Inspirational
|
|
|
25-54
|
|
|
|
5.2
|
|
|
|
8
|
|
|
|
5.1
|
|
|
|
7
|
|
WKJS-FM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
9.4
|
|
|
|
1
|
|
|
|
10.0
|
|
|
|
1
|
|
WKJM-FM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
**
|
|
|
|
**
|
|
|
|
**
|
|
|
|
**
|
|
WTPS-AM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
News/Talk
|
|
|
35-64
|
|
|
|
0.0
|
|
|
|
|
|
|
|
0.0
|
|
|
|
|
|
Raleigh-Durham(2)
|
|
|
42
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WQOK-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Urban Contemporary
|
|
|
18-34
|
|
|
|
7.0
|
|
|
|
6
|
|
|
|
13.4
|
|
|
|
2
|
|
WFXK-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
***
|
|
|
|
***
|
|
|
|
***
|
|
|
|
***
|
|
WFXC-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
7.5
|
|
|
|
3
|
|
|
|
7.5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contemporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WNNL-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Inspirational
|
|
|
25-54
|
|
|
|
6.0
|
|
|
|
8
|
|
|
|
5.6
|
|
|
|
10.0
|
|
Columbus(2)
|
|
|
36
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WCKX-FM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
Urban Contemporary
|
|
|
18-34
|
|
|
|
6.5
|
|
|
|
9
|
|
|
|
12.5
|
|
|
|
2
|
|
WXMG-FM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
R&B/Oldies
|
|
|
25-54
|
|
|
|
5.3
|
|
|
|
6
|
|
|
|
4.5
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contemporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WJYD-FM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
Inspirational
|
|
|
25-54
|
|
|
|
1.5
|
|
|
|
21
|
|
|
|
1.5
|
|
|
|
18
|
|
Cincinnati(1)
|
|
|
28
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WIZF-FM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
Urban Contemporary
|
|
|
18-34
|
|
|
|
4.3
|
|
|
|
11
|
|
|
|
7.1
|
|
|
|
6
|
(t)
|
WMOJ-FM
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
3.8
|
|
|
|
12
|
|
|
|
4.2
|
|
|
|
12
|
|
WDBZ-AM
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
News/Talk
|
|
|
35-64
|
|
|
|
0.8
|
|
|
|
24
|
|
|
|
0.9
|
|
|
|
23
|
(t)
|
Indianapolis(2)(4)
|
|
|
39
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHHH-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Rhythmic CHR
|
|
|
18-34
|
|
|
|
5.7
|
|
|
|
10
|
|
|
|
11.2
|
|
|
|
3
|
|
WTLC-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Urban AC
|
|
|
25-54
|
|
|
|
6.3
|
|
|
|
4
|
|
|
|
6.1
|
|
|
|
7
|
(t)
|
WNOU-FM
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
Pop/CHR
|
|
|
18-34
|
|
|
|
4.7
|
|
|
|
7
|
(t)
|
|
|
8.7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contemporary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTLC-AM
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
Inspirational
|
|
|
25-54
|
|
|
|
2.4
|
|
|
|
15
|
|
|
|
1.8
|
|
|
|
18
|
|
AC refers to Adult Contemporary
CHR refers to Contemporary Hit Radio
96
R&B refers to Rhythm and Blues
Pop refers to Popular Music
* Simulcast with
WAMJ-FM
** Simulcast with
WKJS-FM
|
|
*** |
Simulcast with
WFXC-FM
|
(a) WPZE-FM
effective February 20, 2009 (formerly
WAMJ-FM).
(b) WAMJ-FM
effective February 27, 2009 (formerly
WJZZ-FM).
(c) WUMJ-FM
effective February 20, 2009 (formerly
WPZE-FM).
(1) The four book average and rank is measured using the
12 month
PPMtm
methodology.
(2) The four book average is measured using a two book
diary and a two book (six months)
PPMtm
average.
(3) The four book average and rank is measured using the
four book diary average.
|
|
(4) |
WDNI-CD (formerly WDNI-LP), the low power television station
that we acquired in Indianapolis in June 2000, is not included
in this table.
|
Radio
Advertising Revenue
For the year ended December 31, 2009, approximately 82.0%
of our net revenue was generated from the sale of advertising in
our core radio business. Substantially all net revenue generated
from our radio franchise is generated from the sale of local,
national and network advertising. Local sales are made by the
sales staff located in our markets. National sales are made
primarily by Katz Communications, Inc. (Katz), a
firm specializing in radio advertising sales on the national
level. Katz is paid agency commissions on the advertising sold.
Network sales are made by third-party sales representatives in
exchange for commercial inventory made available to them.
Approximately 56.2% of our net revenue for the year ended
December 31, 2009 was generated from the sale of local
advertising and 37.3% from sales to national advertisers,
including network advertising. The balance of net revenue
generated from our radio franchise is primarily derived from
tower rental income, ticket sales and revenue related to Radio
One sponsored events, management fees and other revenue.
Advertising rates charged by radio stations are based primarily
on:
|
|
|
|
|
a radio stations audience share within the demographic
groups targeted by the advertisers;
|
|
|
|
the number of radio stations in the market competing for the
same demographic groups; and
|
|
|
|
the supply and demand for radio advertising time.
|
A radio stations listenership is measured by diary ratings
surveys or the
PPMtm
system, both of which estimate the number of listeners tuned to
a radio station and the time they spend listening to that radio
station. Ratings are used by advertisers to evaluate whether to
advertise on our radio stations, and are used by us to chart
audience growth, set advertising rates and adjust programming.
Advertising rates are generally highest during the morning and
afternoon commuting hours.
Strategic
Diversification and Other Sources of Revenue
We have expanded our operations to include other media forms
that are complementary to our core radio business. Since 2008,
we have owned and operated CCI, an online social networking
company that hosts the website BlackPlanet, the largest social
networking site primarily targeted at
African-Americans.
CCI currently generates the majority of the Companys
internet revenue, and derives such revenue principally from
advertising services, including advertising aimed at diversity
recruiting. Advertising services include the sale of banner and
sponsorship advertisements. Advertising revenue is recognized
either as impressions (the number of times advertisements appear
in viewed pages) are delivered, when click through
purchases or leads are reported, or ratably over the contract
period, where applicable. CCI has a diversity recruiting
relationship with Monster, Inc. (Monster). Monster
posts job listings and advertising on CCIs websites and
CCI earns revenue for displaying the images on its websites.
97
CCI is a part of our broader interactive unit, Interactive One,
which also includes the online brands NewsOne, TheUrbanDaily,
Elev8 and HelloBeautiful. Similar to CCI, these web properties
primarily derive their revenue from advertising services.
Revenue is recognized either as impressions are delivered, when
click through purchases or leads are reported, or
ratably over the contract, where applicable.
In February 2005, we acquired 51% of the common stock of Reach
Media, which operates The Tom Joyner Morning Show and related
businesses. Reach Media primarily derives its revenue from the
sale of advertising inventory in connection with its syndication
agreements. Mr. Joyner is a leading nationally syndicated
radio personality. As of December 31, 2010, The Tom Joyner
Morning Show was broadcast on 106 affiliate stations across
the United States and is a top-rated morning show in many of the
markets in which it is broadcast. Reach Media provides
programming content for TV One and operates
www.BlackAmericaWeb.com, an
African-American
targeted website. Reach Media also operates the Tom Joyner
Family Reunion and various other special event-related
activities. Prior to 2010, Reach Media used an outside sales
representative, Citadel Broadcasting Corporation
(Citadel), to sell both in-show and outside
advertising inventory. Prior to 2010, Citadel also held a
noncontrolling ownership interest in Reach. In November 2009, a
new agreement was executed (the New Sales Representation
Agreement) to replace the old agreement which expired on
December 31, 2009. Under the New Sales Representation
Agreement, effective January 2010, Citadel began selling
advertising inventory for the Tom Joyner Morning Show only
outside of the show and on a non-exclusive basis. In addition to
these outside sales efforts, Reach Media has expanded its
internal sales force to sell in-show advertising inventory,
event sponsorships and BlackAmericaWeb.com advertising. As an
inducement for Reach Media to enter into the New Sales
Representation Agreement, Citadel returned its noncontrolling
ownership interest in Reach Media back to Reach Media. As a
result of classifying these shares as treasury stock, this
transaction effectively increased Radio Ones common stock
interest in Reach Media to 53.5%. In exchange for the return of
the ownership interest, Reach Media issued a $1.0 million
promissory note payable to Radio Networks, a subsidiary of
Citadel, due in December 2011.
In July 2003, we entered into a joint venture agreement with an
affiliate of Comcast Corporation (the CC Investor)
and certain other investors to create TV One, a cable television
network featuring lifestyle, entertainment and news-related
programming targeted primarily towards
African-American
viewers. At that time, we committed to make a cumulative cash
investment of $74.0 million in TV One by December 31,
2006. As of April 30, 2007 and as of the date of this
prospectus, $60.3 million of this commitment had been
funded. No additional investment has been made since April 2007.
Since April 2007, the initial commitment period for funding the
capital committed has been extended on a quarterly basis, most
recently to April 1, 2011, and we expect that it will be
further extended in an amendment to TV Ones governing
agreements, due in part to TV Ones lower than anticipated
capital needs.
In December 2004, TV One entered into a distribution agreement
with DIRECTV, Inc. (DIRECTV) and certain affiliates
of DIRECTV became investors in TV One. As of September 30,
2010, we owned approximately 37% of the outstanding equity
interests of TV One on a fully-converted basis.
We entered into separate network services and advertising
services agreements with TV One in 2003. Under the network
services agreement, we are providing TV One with administrative
and operational support services and access to Radio One
personalities. This agreement was originally scheduled to expire
in January 2009, but was extended to January 2010 and has been
further extended to January 2011. Under the advertising services
agreement, we are providing a specified amount of advertising to
TV One. This agreement was also originally scheduled to expire
in January 2009, and has been extended to January 2011. In
consideration of providing these services, we have received
equity in TV One, and receive an annual cash fee of $500,000 for
providing services under the network services agreement.
We have launched websites that simultaneously stream radio
station content for each of our radio stations, and we derive
revenue from the sale of advertisements on those websites. We
generally encourage our web advertisers to run simultaneous
radio campaigns and use mentions in our radio airtime to promote
our websites. By providing streaming, we have been able to
broaden our listener reach, particularly to office
hour listeners. We believe streaming has had a positive
impact on our radio stations reach to listeners. In
98
addition, our station websites link to our other online
properties operated by Interactive One acting as traffic sources
for these online brands.
In December 2006, we acquired certain assets constituting Giant
Magazine, an urban-themed music and lifestyle magazine. In
December 2009, we discontinued publication of the magazine.
However, we continue to retain the Giant brand as part of our
interactive unit at the website Giantlife.com.
Future opportunities could include investments in, or
acquisitions of, companies in diverse media businesses, music
production and distribution, movie distribution, internet-based
services, and distribution of our content through emerging
distribution systems such as the internet, cellular phones,
personal digital assistants, digital entertainment devices and
the home entertainment market.
Competition
The media industry is highly competitive and we face intense
competition in both our core radio franchise and in our
complementary media properties, including our interactive unit.
Our media properties compete for audiences and advertising
revenue with other radio stations and with other media such as
broadcast and cable television, the internet, satellite radio,
newspapers, magazines, direct mail and outdoor advertising, some
of which may be controlled by horizontally-integrated companies.
Audience ratings and advertising revenue are subject to change
and any adverse change in a market could adversely affect our
net revenue in that market. 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
media companies which are larger and have more resources may
also enter or increase their presence in markets or segments in
which we operate. Although we believe our media properties are
well positioned to compete, we cannot assure that our properties
will maintain or increase their current ratings, market share or
advertising revenue.
The radio broadcasting industry is subject to rapid
technological change, evolving industry standards and the
emergence of new media technologies, which may impact our
business. 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, or have been, developed including the
following:
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satellite delivered digital audio radio service with expansive
choice, high sound quality and availability on portable devices
and in automobiles;
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audio programming by cable television systems and direct
broadcast satellite systems; and
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digital audio and video content available for listening
and/or
viewing on the internet
and/or
available for downloading to portable devices.
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Along with most other public radio companies, we have invested
in iBiquity, a developer of digital audio broadcast technology.
We committed by the end of 2009 to convert most of our analog
broadcast radio stations to in-band, on-channel digital radio
broadcasts, which could provide multi-channel, multi-format
digital radio services in the same bandwidth currently occupied
by traditional AM and FM radio services. However, we cannot
assure you that these arrangements will be successful or enable
us to adapt effectively to these new media technologies. As of
December 31, 2010, we had converted 48 stations to digital
broadcast.
Our interactive unit competes for the time and attention of
internet users and, thus, advertisers and advertising revenues
with a wide range of internet companies such as
Yahoo!tm
Inc.,
Googletm
and
Microsofttm,
social networking sites such as
MySpacetm
and
Facebooktm
and traditional media companies, which are increasingly offering
their own internet products and services. The internet is
dynamic and rapidly evolving, and new and popular competitors,
such as social networking sites, frequently emerge
and/or are
fragmented by new and evolving technologies.
Antitrust
Regulation
The agencies responsible for enforcing the federal antitrust
laws, the Federal Trade Commission (FTC) and the
Department of Justice (DOJ), may investigate
acquisitions. The DOJ has challenged a number of
99
media property transactions. Some of those challenges ultimately
resulted in consent decrees requiring, among other things,
divestitures of certain media properties. We cannot predict the
outcome of any specific DOJ or FTC review of a particular
acquisition.
For acquisitions meeting certain size thresholds, the
Hart-Scott-Rodino
Act requires the parties to file Notification and Report Forms
concerning antitrust issues with the DOJ and the FTC and to
observe specified waiting period requirements before completing
the acquisition. If the investigating agency raises substantive
issues in connection with a proposed transaction, the parties
involved frequently engage in lengthy discussions
and/or
negotiations with the investigating agency to address 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. All
acquisitions, regardless of whether they are required to be
reported under the
Hart-Scott-Rodino
Act, may be investigated by the DOJ or the FTC under the
antitrust laws before or after completion. In addition, private
parties may under certain circumstances bring legal action to
challenge an acquisition under the antitrust laws. The DOJ 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. The DOJ has established certain revenue and audience share
concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional
antitrust scrutiny. The DOJ has also investigated transactions
that do not meet or exceed these benchmarks and has cleared
transactions that do exceed these benchmarks.
Federal
Regulation of Radio Broadcasting
The radio broadcasting industry is subject to extensive and
changing regulation by the Federal Communications Commission
(FCC) of ownership, programming, technical
operations, employment and other business practices. The FCC
regulates radio broadcast stations pursuant to the
Communications Act (the Communications Act) of 1934,
as amended. The Communications Act permits the operation of
radio broadcast stations only in accordance with a license
issued by the FCC upon a finding that the grant of a license
would serve the public interest, convenience and necessity.
Among other things, the FCC:
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assigns frequency bands for radio broadcasting;
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determines the particular frequencies, locations, operating
power, interference standards and other technical parameters of
radio broadcast stations;
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issues, renews, revokes and modifies radio broadcast station
licenses;
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imposes annual regulatory fees and application processing fees
to recover its administrative costs;
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establishes technical requirements for certain transmitting
equipment to restrict harmful emissions;
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adopts and implements regulations and policies that affect the
ownership, operation, program content and employment and
business practices of radio broadcast stations; and
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has the power to impose penalties, including monetary
forfeitures, for violations of its rules and the Communications
Act.
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The Communications Act prohibits the assignment of an FCC
license, or transfer of control of an FCC licensee, without
the prior approval of the FCC. In determining whether to grant
or renew a radio broadcast license or consent to assignment or
transfer of a license, the FCC considers a number of factors,
including restrictions on foreign ownership, compliance with FCC
media ownership limits and other FCC rules, the character
and other qualifications of the licensee (or proposed licensee)
and compliance with the Anti-Drug Abuse Act of 1988. A
licensees failure to comply with the requirements of the
Communications Act or FCC rules and policies may result in the
imposition of sanctions, including admonishment, fines, the
grant of a license renewal of less than a full eight-year term
or with conditions, denial of a license renewal application, the
revocation of an FCC license
and/or the
denial of FCC consent to acquire additional broadcast properties.
100
Congress, the FCC and, in some cases, local jurisdictions, are
considering and may in the future adopt new laws, regulations
and policies that could affect the operation, ownership and
profitability of our radio stations, result in the loss of
audience share and advertising revenue for our radio broadcast
stations or affect our ability to acquire additional radio
broadcast stations or finance such acquisitions. Such matters
include or may include:
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changes to the license authorization and renewal process;
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proposals to improve record keeping, including enhanced
disclosure of stations efforts to serve the public
interest;
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proposals to impose spectrum use or other fees on FCC licensees;
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changes to rules relating to political broadcasting including
proposals to grant free air time to candidates, and other
changes regarding political and non-political program content,
funding, political advertising rates, and sponsorship
disclosures;
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proposals to restrict or prohibit the advertising of beer, wine
and other alcoholic beverages;
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proposals regarding the regulation of the broadcast of indecent
or violent content;
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proposals to increase the actions stations must take to
demonstrate service to their local communities;
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technical and frequency allocation matters, including increased
protection of low power FM stations from interference by
full-service stations;
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changes in broadcast multiple ownership, foreign ownership,
cross-ownership and ownership attribution policies;
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changes to allow satellite radio operators to insert local
content into their programming service;
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service and technical rules for digital radio, including
possible additional public interest requirements for terrestrial
digital audio broadcasters;
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legislation that would provide for the payment of royalties to
artists and musicians whose music is played on terrestrial radio
stations;
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changes to allow telephone companies to deliver audio and video
programming to homes in their service areas; and
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proposals to alter provisions of the tax laws affecting
broadcast operations and acquisitions.
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The FCC also has adopted procedures for the auction of broadcast
spectrum in circumstances where two or more parties have filed
mutually exclusive applications for authority to construct new
stations or certain major changes in existing stations. Such
procedures may limit our efforts to modify or expand the
broadcast signals of our stations.
We cannot predict what changes, if any, might be adopted or
considered in the future, or what impact, if any, the
implementation of any particular proposals or changes might have
on our business.
FCC License Grants and Renewals. In making
licensing determinations, the FCC considers an applicants
legal, technical, financial and other qualifications. The FCC
grants radio broadcast station licenses for specific periods of
time and, upon application, may renew them for additional terms.
A station may continue to operate beyond the expiration date of
its license if a timely filed license renewal application is
pending. Under the Communications Act, radio broadcast station
licenses may be granted for a maximum term of eight years.
Generally, the FCC renews radio broadcast licenses without a
hearing upon a finding that:
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the radio station has served the public interest, convenience
and necessity;
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there have been no serious violations by the licensee of the
Communications Act or FCC rules and regulations; and
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101
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there have been no other violations by the licensee of the
Communications Act or FCC rules and regulations which, taken
together, indicate a pattern of abuse.
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After considering these factors and any petitions to deny a
license renewal application (which may lead to a hearing), the
FCC may grant the license renewal application with or without
conditions, including renewal for a term less than the maximum
otherwise permitted. Historically, our licenses have been
renewed without any conditions or sanctions imposed; however,
there can be no assurance that the licenses of each of our
stations will be renewed for a full term without conditions or
sanctions.
Types of FCC Broadcast Licenses. The FCC
classifies each AM and FM radio station. An AM radio station
operates on either a clear channel, regional channel or local
channel. A clear channel serves wide areas, particularly at
night. A regional channel serves primarily a principal
population center and the contiguous rural areas. A local
channel serves primarily a community and the suburban and rural
areas immediately contiguous to it. Class A, B and C radio
stations each operate unlimited time. Class A radio
stations render primary and secondary service over an extended
area. Class B radio stations render service only over a
primary service area. Class C radio stations render service
only over a primary service area that may be reduced as a
consequence of interference. Class D radio stations operate
either daytime hours only, during limited times only, or
unlimited time with low nighttime power.
FM class designations depend upon the geographic zone in which
the transmitter of the FM radio station is located. The minimum
and maximum facilities requirements for an FM radio station are
determined by its class. In general, commercial FM radio
stations are classified as follows, in order of increasing power
and antenna height: Class A, B1, C3, B, C2, C1, C0 and C.
The FCC has adopted a rule subjecting Class C FM stations
that do not satisfy a certain antenna height requirement to an
involuntary downgrade in class to Class C0 under certain
circumstances.
Radio Ones Licenses. The following table
sets forth information with respect to each of our radio
stations. A broadcast stations market may be different
from its community of license. The coverage of an AM radio
station is chiefly a function of the power of the radio
stations transmitter, less dissipative power losses and
any directional antenna adjustments. For FM radio stations,
signal coverage area is chiefly a function of the ERP of the
radio stations antenna and the HAAT of the radio
stations antenna. ERP refers to the effective
radiated power of an FM radio station. HAAT refers
to the antenna height above average terrain of an FM radio
station.
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Antenna
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ERP (FM)
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Height
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Power
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(AM)
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(AM)
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HAAT
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Station
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Year of
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in
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(FM)
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Operating
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Expiration Date
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Market
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Call Letters
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Acquisition
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FCC Class
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Kilowatts
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in Meters
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Frequency
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of FCC License
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Atlanta
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WUMJ-FM
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(1)
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1999
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C3
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7.9
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175.0
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97.5 MHz
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4/1/2012
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WAMJ-FM
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(2)
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1999
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C3
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21.5
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110.0
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107.5 MHz
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4/1/2012
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WHTA-FM
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2002
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C2
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27.0
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176.0
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107.9 MHz
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4/1/2012
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WPZE-FM
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(3)
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2004
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A
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3.0
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143.0
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102.5 MHz
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4/1/2012
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Washington, DC
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WOL-AM
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1980
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C
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.37
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103.0
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1450 kHz
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10/1/2011
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WMMJ-FM
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1987
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A
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2.9
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146.0
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102.3 MHz
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10/1/2011
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WKYS-FM
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1995
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B
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24.5
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215.0
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93.9 MHz
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10/1/2011
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WPRS-FM
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2008
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B
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20.0
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244.0
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104.1 MHz
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10/1/2011
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WYCB-AM
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1998
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C
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1.0
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103.0
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1340 kHz
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10/1/2011
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Philadelphia
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WPPZ-FM
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(4)
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1997
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A
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0.27
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338.0
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103.9 MHz
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8/1/2014
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WPHI-FM
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2000
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B
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17.0
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263.0
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100.3 MHz
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8/1/2014
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WRNB-FM
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2004
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A
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0.78
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276.0
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107.9 MHz
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6/1/2014
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Detroit
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WDMK-FM
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1998
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B
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20.0
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221.0
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105.9 MHz
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10/1/2012
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WCHB-AM
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1998
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B
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50.0
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49.3
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1200 kHz
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10/1/2012
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WHTD-FM
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1998
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B
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50.0
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152.0
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102.7 MHz
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10/1/2012
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102
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Antenna
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ERP (FM)
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Height
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Power
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(AM)
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(AM)
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HAAT
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Station
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Year of
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in
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(FM)
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Operating
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Expiration Date
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Market
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Call Letters
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Acquisition
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FCC Class
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Kilowatts
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in Meters
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Frequency
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of FCC License
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Houston
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KMJQ-FM
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2000
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C
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100.0
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524.0
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102.1 MHz
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8/1/2013
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KBXX-FM
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2000
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C
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100.0
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585.0
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97.9 MHz
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8/1/2013
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KROI-FM
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2004
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C1
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21.36
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526.0
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92.1 MHz
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8/1/2013
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Dallas
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KBFB-FM
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2000
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C
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99.0
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574.0
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97.9 MHz
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8/1/2013
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KSOC-FM
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2001
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C
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100.0
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591.0
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94.5 MHz
|
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8/1/2013
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Baltimore
|
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WWIN-AM
|
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1992
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C
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0.5
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86.9
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1400 kHz
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10/1/2011
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WWIN-FM
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1992
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A
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3.0
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91.0
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95.9 MHz
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10/1/2011
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WOLB-AM
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1993
|
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D
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0.25
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86.9
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1010 kHz
|
|
|
|
10/1/2011
|
|
|
|
|
WERQ-FM
|
|
|
|
1993
|
|
|
|
B
|
|
|
|
37.0
|
|
|
|
174.0
|
|
|
|
92.3 MHz
|
|
|
|
10/1/2011
|
|
St. Louis
|
|
|
WFUN-FM
|
|
|
|
1999
|
|
|
|
C3
|
|
|
|
24.5
|
|
|
|
102.0
|
|
|
|
95.5 MHz
|
|
|
|
12/1/2012
|
|
|
|
|
WHHL-FM
|
|
|
|
2006
|
|
|
|
C2
|
|
|
|
50.0
|
|
|
|
140.0
|
|
|
|
104.1 MHz
|
|
|
|
2/1/2013
|
|
Cleveland
|
|
|
WJMO-AM
|
|
|
|
1999
|
|
|
|
B
|
|
|
|
5.0
|
|
|
|
128.1
|
|
|
|
1300 kHz
|
|
|
|
10/1/2012
|
|
|
|
|
WENZ-FM
|
|
|
|
1999
|
|
|
|
B
|
|
|
|
16.0
|
|
|
|
272.0
|
|
|
|
107.9 MHz
|
|
|
|
10/1/2012
|
|
|
|
|
WZAK-FM
|
|
|
|
2000
|
|
|
|
B
|
|
|
|
27.5
|
|
|
|
189.0
|
|
|
|
93.1 MHz
|
|
|
|
10/1/2012
|
|
|
|
|
WERE-AM
|
|
|
|
2000
|
|
|
|
C
|
|
|
|
1.0
|
|
|
|
106.7
|
|
|
|
1490 kHz
|
|
|
|
10/1/2012
|
|
Charlotte
|
|
|
WQNC-FM
|
|
|
|
2000
|
|
|
|
A
|
|
|
|
6.0
|
|
|
|
100.0
|
|
|
|
92.7 MHz
|
|
|
|
12/1/2011
|
|
|
|
|
WPZS-FM
|
|
|
|
2004
|
|
|
|
A
|
|
|
|
6.0
|
|
|
|
100.0
|
|
|
|
100.9 MHz
|
|
|
|
12/1/2011
|
|
Richmond
|
|
|
WPZZ-FM
|
|
|
|
1999
|
|
|
|
C1
|
|
|
|
100.0
|
|
|
|
299.0
|
|
|
|
104.7 MHz
|
|
|
|
10/1/2011
|
|
|
|
|
WCDX-FM
|
|
|
|
2001
|
|
|
|
B1
|
|
|
|
4.5
|
|
|
|
235.0
|
|
|
|
92.1 MHz
|
|
|
|
10/1/2011
|
|
|
|
|
WKJM-FM
|
|
|
|
2001
|
|
|
|
A
|
|
|
|
6.0
|
|
|
|
100.0
|
|
|
|
99.3 MHz
|
|
|
|
10/1/2011
|
|
|
|
|
WKJS-FM
|
|
|
|
2001
|
|
|
|
A
|
|
|
|
2.3
|
|
|
|
162.0
|
|
|
|
105.7 MHz
|
|
|
|
10/1/2011
|
|
|
|
|
WTPS-AM
|
|
|
|
2001
|
|
|
|
C
|
|
|
|
1.0
|
|
|
|
121.9
|
|
|
|
1240 kHz
|
|
|
|
10/1/2011
|
|
Raleigh-Durham
|
|
|
WQOK-FM
|
|
|
|
2000
|
|
|
|
C2
|
|
|
|
50.0
|
|
|
|
146.0
|
|
|
|
97.5 MHz
|
|
|
|
12/1/2011
|
|
|
|
|
WFXK-FM
|
|
|
|
2000
|
|
|
|
C1
|
|
|
|
100.0
|
|
|
|
299.0
|
|
|
|
104.3 MHz
|
|
|
|
12/1/2011
|
|
|
|
|
WFXC-FM
|
|
|
|
2000
|
|
|
|
C3
|
|
|
|
8.0
|
|
|
|
146.0
|
|
|
|
107.1 MHz
|
|
|
|
12/1/2011
|
|
|
|
|
WNNL-FM
|
|
|
|
2000
|
|
|
|
C3
|
|
|
|
7.9
|
|
|
|
176.0
|
|
|
|
103.9 MHz
|
|
|
|
12/1/2011
|
|
Boston
|
|
|
WILD-AM
|
|
|
|
2001
|
|
|
|
D
|
|
|
|
4.8
|
|
|
|
59.6
|
|
|
|
1090 kHz
|
|
|
|
4/1/2014
|
|
Columbus
|
|
|
WCKX-FM
|
|
|
|
2001
|
|
|
|
A
|
|
|
|
1.9
|
|
|
|
126.0
|
|
|
|
107.5 MHz
|
|
|
|
10/1/2012
|
|
|
|
|
WXMG-FM
|
|
|
|
2001
|
|
|
|
A
|
|
|
|
2.6
|
|
|
|
154.0
|
|
|
|
98.9 MHz
|
|
|
|
10/1/2012
|
|
|
|
|
WJYD-FM
|
|
|
|
2001
|
|
|
|
A
|
|
|
|
6.0
|
|
|
|
100.0
|
|
|
|
106.3 MHz
|
|
|
|
10/1/2012
|
|
Cincinnati
|
|
|
WIZF-FM
|
|
|
|
2001
|
|
|
|
A
|
|
|
|
2.5
|
|
|
|
155.0
|
|
|
|
101.1 MHz
|
|
|
|
8/1/2012
|
|
|
|
|
WDBZ-AM
|
|
|
|
2007
|
|
|
|
C
|
|
|
|
1.0
|
|
|
|
60.7
|
|
|
|
1230 kHz
|
|
|
|
10/1/2012
|
|
|
|
|
WMOJ-FM
|
|
|
|
2006
|
|
|
|
A
|
|
|
|
3.1
|
|
|
|
141.0
|
|
|
|
100.3 MHz
|
|
|
|
10/1/2012
|
|
Indianapolis(A)
|
|
|
WHHH-FM
|
|
|
|
2000
|
|
|
|
A
|
|
|
|
3.3
|
|
|
|
87.0
|
|
|
|
96.3 MHz
|
|
|
|
8/1/2012
|
|
|
|
|
WTLC-FM
|
|
|
|
2000
|
|
|
|
A
|
|
|
|
6.0
|
|
|
|
99.0
|
|
|
|
106.7 MHz
|
|
|
|
8/1/2012
|
|
|
|
|
WNOU-FM
|
|
|
|
2000
|
|
|
|
A
|
|
|
|
6.0
|
|
|
|
100.0
|
|
|
|
100.9 MHz
|
|
|
|
8/1/2012
|
|
|
|
|
WTLC-AM
|
|
|
|
2001
|
|
|
|
B
|
|
|
|
5.0
|
|
|
|
140.0
|
|
|
|
1310 kHz
|
|
|
|
8/1/2012
|
|
|
|
|
(1) |
|
WUMJ-FM
effective February 20, 2009 (formerly
WPZE-FM). |
|
(2) |
|
WAMJ-FM
effective February 27, 2009 (formerly
WJZZ-FM). |
|
(3) |
|
WPZE-FM
effective February 20, 2009 (formerly
WAMJ-FM). |
103
|
|
|
(4) |
|
WPPZ-FM
operates with facilities equivalent to 3kW at 100 meters. |
|
|
(A) |
WDNI-CD (formerly WDNI-LP), the low power television station
that we acquired in Indianapolis in June 2000, is not included
in this table.
|
To obtain the FCCs prior consent to assign or transfer
control of a broadcast license, an appropriate application must
be filed with the FCC. If the assignment or transfer involves a
substantial change in ownership or control of the licensee, for
example, the transfer or acquisition of more than 50% of the
voting stock, the applicant must give public notice and the
application is subject to a
30-day
period for public comment. During this time, interested parties
may file petitions with the FCC to deny the application.
Informal objections may be filed any time until the FCC acts
upon the application. If the FCC grants an assignment or
transfer application, administrative procedures provide for
petitions seeking reconsideration or full FCC review of the
grant. The Communications Act also permits the appeal of a
contested grant to a federal court in certain instances.
Under the Communications Act, a broadcast license may not be
granted to or held by any persons who are not U.S. citizens
or by any corporation that has more than 20% of its capital
stock owned or voted by
non-U.S. citizens
or entities or their representatives, by foreign governments or
their representatives, or by
non-U.S.
corporations. The Communications Act prohibits indirect foreign
ownership through a parent company of the licensee of more than
25% if the FCC determines the public interest will be served by
the refusal or revocation of such license. The FCC has
interpreted this provision of the Communications Act to require
an affirmative public interest finding before a broadcast
license may be granted to or held by any such entity, and the
FCC has made such an affirmative finding only in limited
circumstances. Since we serve as a holding company for
subsidiaries that serve as licensees for our stations, we are
effectively restricted from having more than one-fourth of our
stock owned or voted directly or indirectly by
non-U.S. citizens
or their representatives, foreign governments, representatives
of foreign governments or foreign business entities.
The FCC generally applies its media ownership limits to
attributable interests. The interests of officers,
directors and those who directly or indirectly hold five percent
or more of the total outstanding voting stock of a corporation
that holds a broadcast license are generally deemed attributable
interests, as are any limited partnership or limited liability
company interests that are not properly insulated
from management activities. Passive investors that hold stock
for investment purposes only may hold attributable interests
with the ownership of 20% or more of the voting stock of the
licensee corporation. An entity with one or more radio stations
in a market that enters into a local marketing agreement or a
time brokerage agreement with another radio station in the same
market obtains an attributable interest in the brokered radio
station, if the brokering station supplies more than 15% of the
brokered radio stations weekly broadcast hours. Similarly,
a radio station licensees right under a joint sales
agreement (JSA) to sell more than 15% per week of
the advertising time on another radio station in the same market
constitutes an attributable ownership interest in such station
for purposes of the FCCs ownership rules. Debt
instruments, non-voting stock, unexercised options and warrants,
minority voting interests in corporations having a single
majority shareholder and limited partnership or limited
liability company membership interests where the interest holder
is not materially involved in the media-related
activities of the partnership or limited liability company
generally do not subject their holders to attribution unless
such interests implicate the FCCs equity-debt-plus (or
EDP) rule. Under the EDP rule, a major programming
supplier or a same-market media entity will have an attributable
interest in a station if the supplier or same-market media
entity also holds debt or equity, or both, in the station that
is greater than 33% of the value of the stations total
debt plus equity. For purposes of the EDP rule, equity includes
all stock, whether voting or nonvoting, and interests held by
limited partners or limited liability company members that are
not materially involved. A major programming supplier is any
supplier that provides more than 15% of the stations
weekly programming hours. The FCC has adopted revisions to the
EDP rule to promote diversification of broadcast ownership,
allowing the 33% EDP benchmark to be exceeded in certain
circumstances that would enable an eligible entity
(as defined by the FCC) to acquire a broadcast station.
104
The Communications Act and FCC rules generally restrict
ownership, operation or control of, or the common holding of
attributable interests in:
|
|
|
|
|
radio broadcast stations above certain numerical limits serving
the same local market;
|
|
|
|
radio broadcast stations combined with television broadcast
stations above certain numerical limits serving the same local
market (radio/television cross ownership); and
|
|
|
|
a radio broadcast station and an
English-language
daily newspaper serving the same local market
(newspaper/broadcast cross-ownership), although in late 2007 the
FCC adopted a revised rule that would allow a degree of
same-market newspaper/broadcast cross-ownership based on certain
presumptions, criteria and limitations.
|
The media ownership rules are subject to periodic review by the
FCC. In 2003, the FCC adopted new rules to modify ownership
limits, to change the way a local radio market is defined and to
make JSAs involving more than 15% of a same-market radio
stations advertising sales attributable under
the ownership limits. The FCC grandfathered existing
combinations of radio stations that would not comply with the
modified rules. However, the FCC ruled that such noncompliant
combinations could not be sold intact except to certain
eligible entities, which the agency defined as
entities qualifying as a small business consistent with Small
Business Administration standards. The 2003 rules were
challenged in court and the Third Circuit stayed their
implementation, among other things, on the basis that the FCC
did not adequately justify its radio ownership limits.
Subsequently, the Third Circuit partially lifted its stay to
allow the new local market definition, JSA attribution rule and
grandfathering rules to go into effect. The FCC currently is
applying such revisions to pending and new applications.
The numerical limits on radio stations that one entity may own
in a local market are as follows:
|
|
|
|
|
in a radio market with 45 or more commercial radio stations, a
party may own, operate or control up to eight commercial radio
stations, not more than five of which are in the same service
(AM or FM);
|
|
|
|
in a radio market with 30 to 44 commercial radio stations, a
party may own, operate or control up to seven commercial radio
stations, not more than four of which are in the same service
(AM or FM);
|
|
|
|
in a radio market with 15 to 29 commercial radio stations, a
party may own, operate or control up to six commercial radio
stations, not more than four of which are in the same service
(AM or FM); and
|
|
|
|
in a radio market with 14 or fewer commercial radio stations, a
party may own, operate or control up to five commercial radio
stations, not more than three of which are in the same service
(AM or FM), except that a party may not own, operate, or control
more than 50% of the radio stations in such market.
|
To apply these tiers, the FCC currently relies on Arbitron Metro
Survey Areas, where they exist. In other areas, the FCC relies
on a contour-overlap methodology. Under this approach, the FCC
uses one overlapping contour methodology for defining a local
radio market and counting the number of stations that the
applicant controls or proposes to control in that market, and it
employs a separate overlapping contour methodology for
determining the number of operating commercial radio stations in
the market for determining compliance with the local radio
ownership caps. For radio stations located outside Arbitron
Metro Survey Areas, the FCC is undertaking a rulemaking to
determine how to define local radio markets in areas located
outside Arbitron Metro Survey Areas. The market definition used
by the FCC in applying its ownership rules may not be the same
as that used for purposes of the
Hart-Scott-Rodino
Act.
In its 2003 media ownership decision, the FCC adopted new
cross-media limits to replace the former newspaper-broadcast and
radio-television cross-ownership rules. These provisions were
remanded by the Third Circuit for further FCC consideration and
are currently subject to a judicial stay. In 2006, the FCC
commenced a new rule making proceeding which addressed the next
periodic review and issues on remand from the Third Circuit. At
an open meeting on December 18, 2007, the FCC adopted a
decision in that proceeding. It revised the newspaper/broadcast
cross-ownership rule to allow a degree of same-market
newspaper/broadcast ownership based on certain presumptions,
criteria and limitations. It made no changes to the currently
effective local
105
radio ownership rules (as modified in 2003) or the
radio/television cross-ownership rule (as modified in 1999). The
FCCs 2007 decision is the subject of a request for
reconsideration and various court appeals. Moreover, the
FCCs next periodic review of its media ownership rules is
scheduled for 2010.
The attribution and media ownership rules limit the number of
radio stations we may acquire or own in any particular market
and may limit the prospective buyers of any stations we want to
sell. The FCCs rules could affect our business in a number
of ways, including, but not limited to, the following:
|
|
|
|
|
enforcement of a more narrow market definition based upon
Arbitron markets could have an adverse effect on our ability to
accumulate stations in a given area or to sell a group of
stations in a local market to a single entity;
|
|
|
|
restricting the assignment and transfer of control of radio
combinations that exceed the new ownership limits as a result of
the revised local market definitions could adversely affect our
ability to buy or sell a group of stations in a local market
from or to a single entity; and
|
|
|
|
in general terms, future changes in the way the FCC defines
radio markets or in the numerical station caps could limit our
ability to acquire new stations in certain markets, our ability
to operate stations pursuant to certain agreements, and our
ability to improve the coverage contours of our existing
stations.
|
Programming and Operations. The Communications
Act requires broadcasters to serve the public
interest by presenting programming in response to
community problems, needs and interests and maintaining records
demonstrating its responsiveness. The FCC considers complaints
from listeners about a broadcast stations programming, and
the station is required to maintain letters and emails it
receives from the public regarding station operation on public
file for three years. In November 2007, the FCC adopted rules
establishing a standardized form for reporting information on a
television stations public interest programming and
requiring television broadcasters to post the new form, as well
as other documents in their public inspection files, on station
websites. The FCC is considering whether to adopt similar rules
for radio stations. Moreover, the FCC has proposed rules
designed to increase local programming content and diversity,
including renewal application processing guidelines for
locally-oriented programming and a requirement that broadcasters
establish advisory boards in the communities where they own
stations. Stations also must follow FCC rules and policies
regulating political advertising, obscene or indecent
programming, sponsorship identification, contests and lotteries
and technical operation, including limits on human exposure to
radio frequency radiation.
The FCCs rules prohibit a broadcast licensee from
simulcasting more than 25% of its programming on another radio
station in the same broadcast service (that is, AM/AM or FM/FM).
The simulcasting restriction applies if the licensee owns both
radio broadcast stations or owns one and programs the other
through a local marketing agreement, and only if the contours of
the radio stations overlap in a certain manner.
The FCC requires that licensees not discriminate in hiring
practices on the basis of race, color, religion, national origin
or gender. It also requires stations with at least five
full-time employees to disseminate information about all
full-time job openings and undertake outreach initiatives from
an FCC list of activities such as participation in job fairs,
internships or scholarship programs. The FCC is considering
whether to apply these recruitment requirements to part-time
employment positions. Stations must retain records of their
outreach efforts and keep an annual Equal Employment Opportunity
(EEO) report in their public inspection files and
post an electronic version on their websites. Radio stations
with more than 10 full-time employees must file certain EEO
reports with the FCC midway through their license term.
From time to time, complaints may be filed against any of our
radio stations alleging violations of these or other rules. In
addition, the FCC may conduct audits or inspections to ensure
and verify licensee compliance with FCC rules and regulations.
Failure to observe these or other rules and regulations can
result in the imposition of various sanctions, including fines
or conditions, the grant of short (less than the
maximum eight year) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the
revocation of a license.
106
Employees
As of December 31, 2010, we employed 867 full-time
employees and 385 part-time employees. Our employees are
not unionized; however, some of our employees were at one point
covered by collective bargaining agreements that we assumed in
connection with certain of our station acquisitions. We have not
experienced any work stoppages and believe relations with our
employees are satisfactory.
Properties
The types of properties required to support each of our radio
stations include offices, studios and transmitter/antenna sites.
Our other media properties, such as Interactive One and CCI,
generally only require office space. We typically lease our
studio and office space with lease terms ranging from five to
10 years in length. A stations studios are generally
housed with its offices in business districts. We generally
consider our facilities to be suitable and of adequate size for
our current and intended purposes. We lease a majority of our
main transmitter/antenna sites and associated broadcast towers
and, when negotiating a lease for such sites, we try to obtain a
lengthy lease term with options to renew. In general, we do not
anticipate difficulties in renewing facility or
transmitter/antenna site leases, or in leasing additional space
or sites, if required.
We own substantially all of our equipment, consisting
principally of transmitting antennae, transmitters, studio
equipment and general office equipment. The towers, antennae and
other transmission equipment used by our stations are generally
in good condition, although opportunities to upgrade facilities
are periodically reviewed. The tangible personal property owned
by us and the real property owned or leased by us are subject to
security interests under our senior credit facility.
Legal
Proceedings
In November 2001, Radio One and certain of its officers and
directors were named as defendants in a class action shareholder
complaint filed in the United States District Court for the
Southern District of New York, captioned, In re Radio One,
Inc. Initial Public Offering Securities Litigation, Case
No. 01-CV-10160.
Similar complaints were filed in the same court against hundreds
of other public companies (Issuers) that conducted initial
public offerings of their common stock in the late 1990s
(the IPO Cases). In the complaint filed against
Radio One (as amended), the plaintiffs claimed that Radio One,
certain of its officers and directors, and the underwriters of
certain of its public offerings violated Section 11 of the
Securities Act. The plaintiffs claim was based on
allegations that Radio Ones registration statement and
prospectus failed to disclose material facts regarding the
compensation to be received by the underwriters, and the stock
allocation practices of the underwriters. The complaint also
contains a claim for violation of Section 10(b) of the
Securities Exchange Act of 1934 based on allegations that these
omissions constituted a deceit on investors. The plaintiffs seek
unspecified monetary damages and other relief.
In July 2002, Radio One joined in a global motion, filed by the
Issuers, to dismiss the IPO Lawsuits. In October 2002, the court
entered an order dismissing the Companys named officers
and directors from the IPO Lawsuits without prejudice,
pursuant to an agreement tolling the statute of limitations with
respect to Radio Ones officers and directors until
September 30, 2003. In February 2003, the court issued a
decision denying the motion to dismiss the Section 11 and
Section 10(b) claims against Radio One and most of the
Issuers.
In July 2003, a Special Litigation Committee of Radio Ones
board of directors approved in principle a tentative settlement
with the plaintiffs. The proposed settlement would have provided
for the dismissal with prejudice of all claims against the
participating Issuers and their officers and directors in the
IPO Cases and the assignment to plaintiffs of certain potential
claims that the Issuers may have against their underwriters. In
September 2003, in connection with the proposed settlement,
Radio Ones named officers and directors extended the
tolling agreement so that it would not expire prior to any
settlement being finalized. In June 2004, Radio One executed a
final settlement agreement with the plaintiffs. In 2005, the
court issued a decision certifying a class action for settlement
purposes and granting preliminary approval of the settlement. On
February 24, 2006, the court dismissed litigation filed
against certain underwriters in connection with the claims to be
assigned to the plaintiffs under the settlement. On
April 24, 2006, the court held a Final Fairness
107
Hearing to determine whether to grant final approval of the
settlement. On December 5, 2006, the Second Circuit Court
of Appeals vacated the district courts earlier decision
certifying as class actions the six IPO Cases designated as
focus cases. Thereafter, the district court ordered
a stay of all proceedings in all of the IPO Cases pending the
outcome of plaintiffs petition to the Second Circuit for
rehearing en banc and resolution of the class certification
issue. On April 6, 2007, the Second Circuit denied
plaintiffs rehearing petition, but clarified that the
plaintiffs may seek to certify a more limited class in the
district court. Accordingly, the settlement was terminated
pursuant to stipulation of the parties and did not receive final
approval.
Plaintiffs filed amended complaints in the six focus
cases on or about August 14, 2007. Radio One is not a
defendant in the focus cases. In September 2007, Radio
Ones named officers and directors again extended the
tolling agreement with plaintiffs. On or about
September 27, 2007, plaintiffs moved to certify the classes
alleged in the focus cases and to appoint class
representatives and class counsel in those cases. The focus
cases issuers filed motions to dismiss the claims against them
in November 2007 and an opposition to plaintiffs motion
for the class certification in December 2007. On March 16,
2008, the district court denied the motions to dismiss in the
focus cases. In August 2008, the parties to the IPO Cases began
mediation toward a global settlement of the IPO Cases. In
September 2008, Radio Ones board of directors approved in
principle participation in a tentative settlement with the
plaintiffs. On October 2, 2008, the plaintiffs withdrew
their class certification motion. In April 2009, a global
settlement was reached in the IPO Cases and submitted to the
district court for approval. On June 9, 2009, the court
granted preliminary approval of the proposed settlement and
ordered that notice of the settlement be published and mailed to
class members. On September 10, 2009, the court held a
Final Fairness Hearing. On October 6, 2009, the court
certified the settlement class in each IPO Case and granted
final approval of the settlement. On or about October 23,
2009, three shareholders filed a Petition for Permission To
Appeal Class Certification Order, challenging the
courts certification of the settlement classes. Beginning
on October 29, 2009, a number of shareholders also filed
direct appeals, objecting to final approval of the settlement.
If the settlement is affirmed on appeal, the settlement will
result in the dismissal of all claims against Radio One and its
officers and directors with prejudice, and our pro rata share of
the settlement fund will be fully funded by insurance.
Radio One is involved from time to time in various routine legal
and administrative proceedings and threatened legal and
administrative proceedings incidental to the ordinary course of
our business. Radio One believes the resolution of such matters
will not have a material adverse effect on its business,
financial condition or results of operations.
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DIRECTORS,
OFFICERS AND CORPORATE GOVERNANCE
Our current directors and executive officers are:
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Catherine L. Hughes
Chairperson of the Board
and Secretary Director since 1980
Age: 63
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Ms. Hughes has been Chairperson of the Board and Secretary
of Radio One since 1980, and was Chief Executive Officer of
Radio One from 1980 to 1997. Since 1980, Ms. Hughes has
worked in various capacities for Radio One including President,
General Manager, General Sales Manager and talk show host. She
began her career in radio as General Sales Manager of
WHUR-FM, the
Howard University-owned, urban-contemporary radio station.
Ms. Hughes is the mother of Mr. Liggins, Radio
Ones Chief Executive Officer, Treasurer, President and a
Director. Over the last 5 years, Ms. Hughes has sat on
the boards of directors of numerous organizations including
Broadcast Music, Inc. and Piney Woods High School. During that
period, she has also sat on an advisory board for Wal-Mart
Stores, Inc., a publicly held company. Ms. Hughes
qualifications to serve as a director include her being the
founder of Radio One, her over 30 years of operational
experience with the Company and her unique status within the
African-American
community. Her service on other boards of directors and advisory
boards is also beneficial to Radio One.
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Alfred C. Liggins, III
Chief Executive Officer,
President and Treasurer
Director since 1989
Age: 46
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Mr. Liggins has been Chief Executive Officer
(CEO) of Radio One since 1997 and President since
1989. Mr. Liggins joined Radio One in 1985 as an account
manager at
WOL-AM. In
1987, he was promoted to General Sales Manager and promoted
again in 1988 to General Manager overseeing Radio Ones
Washington, DC operations. After becoming President,
Mr. Liggins engineered Radio Ones expansion into new
markets. Mr. Liggins is a graduate of the Wharton School of
Business Executive MBA Program. Mr. Liggins is the son of
Ms. Hughes, Radio Ones Chairperson, Secretary and a
Director. Over the last 5 years, Mr. Liggins has sat
on the boards of directors of numerous organizations including
the Apollo Theater Foundation, Reach Media, The Boys &
Girls Clubs of America, The Ibiquity Corporation, the National
Association of Black Owned Broadcasters and the National
Association of Broadcasters. Mr. Liggins
qualifications to serve as a director include his over
25 years of operational experience with the Company in
various capacities and his nationally recognized expertise in
the entertainment and media industries.
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Geoffrey Armstrong
Director since 2001
Age: 53
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Mr. Armstrong is currently Chief Executive Officer of 310
Partners, a private investment firm. From March 1999 through
September 2000, Mr. Armstrong was the Chief Financial
Officer of AMFM, Inc., which was publicly traded on the
New York Stock Exchange until it was purchased by Clear
Channel Communications in September 2000. Prior to that, he was
Chief Operating Officer and a director of Capstar Broadcasting
Corporation, which merged with AMFM, Inc. Mr. Armstrong was
a founder of SFX Broadcasting, which went public in 1993, and
subsequently served as Chief Financial Officer, Chief Operating
Officer, and a director until the company was sold in 1998.
Since November 2003, Mr. Armstrong has also been a director
of Nexstar Broadcasting Group, Inc., a publicly held company.
Mr. Armstrongs qualifications to serve as a director
include his many years of senior management experience at
various public and private companies, including as a chief
financial officer and chief operating officer, and his ability
to provide insight into a number of areas including governance,
executive compensation and corporate finance.
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Ronald E. Blaylock
Director since 2002
Age: 50
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Mr. Blaylock has been the Founder and Managing Partner of
GenNx360 Capital Partners, a private equity buy out firm, since
2006. Mr. Blaylock was the Founder, Chairman and Chief
Executive Officer of Blaylock & Company, Inc., an
investment banking firm, and held senior management positions
with PaineWebber Group and Citicorp before launching
Blaylock & Company, Inc. in 1993. Mr. Blaylock is
also currently a director of CarMax, Inc. (2007 to present) and
W. R. Berkley Corporation (2001 to present).
Mr. Blaylocks founding and management of two
financial services companies has provided him with valuable
business, leadership and management experience. As a result,
Mr. Blaylock brings substantial financial expertise to the
board. In addition, Mr. Blaylocks experience on the
boards of directors of other public companies enables him to
bring other perspectives and experience to the board.
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Terry L. Jones
Director since 1995
Age: 63
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Mr. Jones is the Managing Member of the General Partner of
Syndicated Communications Venture Partners V, L.P. and the
Managing Member of Syncom Venture Management Co., LLC
(Syncom). Prior to joining Syncom in 1978, he was
co-founding stockholder and Vice President of Kiambere Savings
and Loan in Nairobi, and a Lecturer at the University of
Nairobi. He also worked as a Senior Electrical Engineer for
Westinghouse Aerospace and Litton Industries. He is a member of
the board of directors for several other Syncom portfolio
companies including Radio One, Inc. He formerly served on the
Board of the Southern African Enterprise Development Fund, a
presidential appointment, and is on the Board of Trustees of
Spellman College. Mr. Jones received a B.S. degree in
Electrical Engineering from Trinity College, an M.S. degree in
Electrical Engineering from George Washington University and a
Masters of Business Administration from Harvard University.
During the last 5 years, Mr. Jones has sat on the
boards of directors of TV One, Iridium Communications, Inc., a
publicly held company (Iridium), PKS Communications,
Inc., a publicly held company, Weather Decisions Technology,
Inc., V-me,
Inc., Syncom and Verified Identity Pass, Inc. He currently
serves on the board of directors of Iridium (2001 to present),
Syncom and Cyber Digital, Inc., a publicly held company.
Mr. Jones qualifications to serve as a director
include his knowledge of Radio One, his many years of senior
management experience at various public and private media
enterprises, and his ability to provide insight into a number of
areas including governance, executive compensation and corporate
finance.
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Brian W. McNeill
Director since 1995
Age: 54
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Mr. McNeill is a founder and Managing General Partner of
Alta Communications. He specializes in identifying and managing
investments in the traditional sectors of the media industry,
including radio and television broadcasting, outdoor advertising
and other advertising-based or cash flow-based businesses. Over
the last 5 years, Mr. McNeill has served on the board
of directors of some of the most significant companies in the
radio and television industries including Una Vez Mas,
Millennium Radio Group, LLC and NextMedia Investors LLC. He
joined Burr, Egan, Deleage & Co. as a general partner
in 1986, where he focused on the media and communications
industries. Previously, Mr. McNeill formed and managed the
Broadcasting Lending Division at the Bank of Boston. He received
an MBA from the Amos Tuck School of Business Administration at
Dartmouth College and graduated magna cum laude with a degree in
economics from the College of the Holy Cross.
Mr. McNeills qualifications to serve as a director
include his knowledge of Radio One, the media industry and the
financial markets, and his ability to provide input into a
number of areas including governance, executive compensation and
corporate finance. His service on the boards of directors of
various other media companies also is beneficial to Radio One.
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Doyle Mitchell, Jr.
Director since 2008
Age: 48
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B. Doyle Mitchell, Jr. is President and CEO of Industrial Bank,
N.A., headquartered in Washington, DC. He was elected to the
board of directors of Industrial Bank, N.A. in 1990 and has been
President since 1993. Mr. Mitchell currently serves on the
board of directors of the Federal City Council, the Luke C.
Moore Academy, Sewell Music Conservatory, Leadership Greater
Washington, the Washington Performing Arts Society, the Greater
Prince Georges Business Roundtable and the D.C. Chamber of
Commerce, of which he was Chairman in 2001, and is one of the
owners of the Washington Nationals Baseball Team.
Mr. Mitchells qualifications to serve as a director
include his knowledge of banking and finance, and his ability to
provide input into a number of areas including corporate finance
and his service to the audit committee. His service on the
boards of directors of various other entities also is beneficial
to Radio One.
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Peter D. Thompson
Executive Vice President and
Chief Financial Officer
Age: 46
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Mr. Thompson has been Chief Financial Officer
(CFO) of Radio One since February 2008.
Mr. Thompson joined the Company in October 2007, as the
Companys Executive Vice President of Business Development.
Prior to his employment with the Company, Mr. Thompson
worked on various business development projects for Radio One.
Prior to working with the Company, Mr. Thompson served as a
public accountant and spent 13 years at Universal Music in
the United Kingdom, including five years serving as CFO.
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Barry A. Mayo
President, Radio Division
Age: 58
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Mr. Mayo has been President of Radio Ones Radio
Division since August 2007. Prior to joining Radio One,
Mr. Mayo served as a consultant to the Company through his
firm Mayomedia, a media consulting firm specializing in urban
markets. Mr. Mayo has held numerous senior management
positions during his 30 plus years of experience in the
industry. He began as a program director and he helped create
one of the largest urban stations in the country,
WRKS-FM, in
New York. Three years after joining the programming staff at
WRKS-FM,
Mr. Mayo became Vice President and General Manager of that
station. In 1988, he and a group of partners founded Broadcast
Partners. While Mr. Mayo served as President, Broadcast
Partners grew into an eleven-station, publicly traded company
with stations in Dallas, New York, Chicago and Charlotte. In
1995, Mr. Mayo sold his share of Broadcast Partners and
founded Mayomedia. In 2003, he was recruited back to
New York to become the Senior Vice President and Market
Manager for Emmis Radio. He left Emmis Radio in 2006 to resume
his consulting career and began working with Radio One in July
2006 as a consultant.
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Linda J. Vilardo
Vice President, Assistant
Secretary and Chief
Administrative Officer
Age: 53
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Ms. Vilardo has been Chief Administrative Officer
(CAO) of Radio One since November 2004, Assistant
Secretary since April 1999, Vice President since February 2001,
and was General Counsel from January 1998 to January 2005. Prior
to joining Radio One, Ms. Vilardo was a partner in the
Washington, DC office of Davis Wright Tremaine LLP, where she
represented Radio One as outside counsel. From 1992 to 1997, she
was a shareholder of Roberts & Eckard, P.C., a
firm that she co-founded. Ms. Vilardo is a graduate of
Gettysburg College, the National Law Center at George Washington
University and the University of Glasgow.
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Board of
Directors
Currently, the board of directors is comprised of seven members,
five of whom are neither officers nor employees of Radio One.
The board held 9 meetings during the calendar year ended
December 31, 2010. Each of the seven directors attended
more than 75% of the aggregate number of meetings of the board
and committees thereof on which he or she served. It is the
policy of the Company that all members of the board of directors
attend annual meetings of the stockholders. All of the directors
attended the 2010 annual meeting of the stockholders of the
Company.
Board
Leadership Structure
Ms. Hughes has been Chairperson of the board of directors
since 1980. Since the appointment of Mr. Liggins as CEO in
1997, the roles of Chairperson of the board and CEO have been
separate. We believe it is the CEOs responsibility to run
the Company and the Chairpersons responsibility to run the
board of directors. By having Ms. Hughes serve as
chairperson of the board, Mr. Liggins is better able to
focus on running the day to day operations of the Company. We
believe this is particularly true in light of the current
operating environment. Further, bifurcating the roles enables
non-management directors to raise issues and concerns for board
consideration without immediately involving management. The
chairman or lead director also serves as a liaison between the
board and senior management and also provides further vision as
to the strategic direction of the Company. Finally, the board
has a third leadership position in the Chairmen of our Audit
Committee. As discussed below, our Audit Committee is comprises
of three independent directors. The audit committee is
responsible for oversight of the quality and integrity of the
accounting, auditing and reporting practices of Radio One and
for the Companys risk management. The Chair of the Audit
Committee effectively serves as a check on both the
Chairperson and the CEO by representing a strong outside
presence with significant financial and business experience.
Committees
of the Board of Directors
The board has a standing audit committee, compensation committee
and nominating committee.
Audit
Committee
The audit committee consists of D. Geoffrey Armstrong, Brian W.
McNeill and B. Doyle Mitchell, Jr. each of whom satisfy the
requirements for audit committee membership under the listing
standards of the NASDAQ Stock Market. Each of the audit
committee members is an independent director, as
that term is defined in Rule 5605(a)(2) of the NASDAQ
Listing Rules. The board of directors has determined that both
Mr. Armstrong and Mr. Mitchell qualify as audit
committee financial experts, as defined by
Item 401(h) of
Regulation S-K
of the Securities Act of 1933. The board has adopted a written
audit committee charter, which is available on our website at
www.radio-one.com/about/audit_committee.asp. The audit committee
met seven times and acted one time by unanimous written consent
during the calendar year ended December 31, 2010.
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The audit committee is responsible for oversight of the quality
and integrity of the accounting, auditing and reporting
practices of Radio One, and as part of this responsibility the
audit committee:
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selects our independent registered public accounting firm;
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reviews the services performed by our independent registered
public accounting firm, including non-audit services, if any;
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reviews the scope and results of the annual audit;
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reviews the adequacy of the system of internal accounting
controls and internal control over financial reporting;
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reviews and discusses the financial statements and accounting
policies with management and our independent registered public
accounting firm;
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reviews the performance and fees of our independent registered
public accounting firm;
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reviews the independence of our auditors;
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reviews the audit committee charter; and
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reviews related party transactions, if any.
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The audit committee also oversees Radio Ones risk policies
and processes relating to the financial statements and financial
reporting processes, as well as key credit liquidity risks,
market risks and compliance, and the guidelines, policies and
processes for monitoring and mitigating those risks.
Compensation
Committee
Our compensation committee consists of Terry L. Jones, Brian W.
McNeill and D. Geoffrey Armstrong. The compensation committee
held one formal meeting and acted once by written consent during
the calendar year ended December 31, 2010. The board has
adopted a written compensation committee charter. The functions
of the compensation committee include:
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reviewing and approving the salaries, bonuses and other
compensation of our executive officers, including stock option
or restricted stock grants;
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establishing and reviewing policies regarding executive officer
compensation and perquisites; and
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performing such other duties as shall from time to time be
delegated by the board.
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Nominating
Committee
Our nominating committee consists of Alfred C.
Liggins, III, Catherine L. Hughes, Terry L. Jones and Brian
W. McNeill. The nominating committee is responsible for
recommending the criteria for selection of board members and
assisting the board of directors in identifying candidates. The
nominating committee held one meeting during the calendar year
ended December 31, 2010. The nominating committee does not
have a charter.
The nominating committee reviews the qualifications of all
persons recommended by stockholders as nominees to the board of
directors to determine whether the recommended nominees will
make good candidates for consideration for membership on the
board. The nominating committee has not established specific
minimum qualifications for recommended nominees. However, as a
matter of practice, the nominating committee evaluates
recommended nominees for directors based on their integrity,
judgment, independence, financial and business acumen, relevant
experience, and their ability to act on behalf of all
stockholders, as well as meet the needs of the board of
directors, including the need to have diverse perspective. In
the consideration of diversity of perspective, the nominating
committee is most concerned with finding nominees that counter
any perceived weaknesses in board composition. Such weaknesses
may include weaknesses in perspective based upon race, sex,
skill sets and industry insight particularly as the Company
diversifies its business. Following such evaluation, the
nominating committee will make recommendations for director
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membership and review the recommendations with the board of
directors, which will decide whether to invite the candidate to
be a nominee for election to the board. The nominating committee
recommended to the board of directors that the incumbent
directors be nominated for re-election to the board at the 2010
annual meeting.
For a stockholder to submit a candidate for consideration to the
nominating committee, a stockholder must notify Radio Ones
Assistant Secretary. To make a recommendation for director
nomination in advance of the 2011 annual meeting of Radio One, a
stockholder must have notified Radio Ones Assistant
Secretary in writing no later than January 15, 2011, the
date that is expected to be approximately 120 days prior to
the mailing of the proxy statement for the 2011 annual meeting
of stockholders. Notices should have been sent to:
Assistant Secretary
Radio One, Inc.
5900 Princess Garden Parkway, 7th Floor
Lanham, MD 20706
All notices must include all information relating to the
stockholder and the proposed nominee that would be required to
be disclosed in a proxy statement or other filings required to
be made in connection with solicitations of proxies for
elections of directors under the proxy rules of the United
States Securities Exchange Commission.
Code of Ethics. We have adopted a code of
ethics that applies to all of our directors, officers (including
our principal financial officer and principal accounting
officer) and employees and meets the requirements of the SEC and
the NASDAQ Stock Market Rules. Our code of ethics can be found
on our website, www.radio-one.com. We will provide a paper copy
of our code of ethics, free of charge, upon request.
Communication
with the Board of Directors
Our stockholders may communicate directly with the board of
directors. All communications should be in written form and
directed to Radio Ones Assistant Secretary at the
following address:
Assistant Secretary
Radio One, Inc.
5900 Princess Garden Parkway, 7th Floor
Lanham, MD 20706
Communications should be enclosed in a sealed envelope that
prominently indicates that it is intended for Radio Ones
board of directors. Each communication intended for Radio
Ones board of directors and received by the Assistant
Secretary that is related to the operation of Radio One and is
relevant to the directors service on the board shall be
forwarded to the specified party following its clearance through
normal review and appropriate security procedures.
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EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The first part of the narrative below, entitled Compensation
Policies and Philosophy, discusses in detail our compensation
philosophy and practices. The second part of the Compensation
Discussion and Analysis, entitled 2010 Compensation Actions,
discusses compensation decisions and actions for our named
executives that occurred during calendar year 2010, including
certain actions with respect to fiscal year 2009. The
Companys compensation committee (for purposes of this
discussion, the Committee) is appointed by the board
of directors and has responsibility for establishing,
implementing and monitoring adherence to the Companys
compensation philosophy. The Committee oversees the compensation
of the Companys executive officers and determines the
compensation of the Chairperson and the CEO. The Committee
strives to ensure that the total compensation paid to the
Companys named executive officers is fair, reasonable and
competitive and provides an appropriate mix of different
compensation elements that find a balance between current versus
long-term compensation and cash versus equity incentive
compensation.
We are a controlled company under the NASDAQ listing
rule as more than 50% of our voting power is held by Catherine
L. Hughes, our Chairperson of the Board and Secretary, and
Alfred C. Liggins, III, our CEO and President. While we
were therefore not subject to NASDAQ rules that would require us
to have a compensation committee composed solely of independent
directors, during the year ended December 31, 2010, all of
the members of the Committee were independent directors.
Throughout this discussion, we refer to the individuals who
served during calendar year 2010 as the Companys
Chairperson, CEO, Chief Financial Officer (CFO),
Chief Administrative Officer (CAO) and
President-Radio Division (PRD), as the
Companys named executive officers.
Compensation
Policies and Philosophy
The overall objective of our compensation plan is to attract,
motivate, retain and reward the top-quality management that we
need in order to operate successfully and meet our strategic
objectives, including our diversification into a broader
multi-media company. To achieve this, we aim to provide a
compensation package that is competitive in the markets and
industries in which we compete for talent, that provides rewards
for achieving financial, operational and strategic performance
goals and aligns executives financial interests with those
of our shareholders.
We operate in the intensely competitive media industry, which is
characterized by rapidly changing technology, evolving industry
standards, frequent introduction of new media services, price
and cost competition, limited advertising dollars, and extensive
regulation. We face many aggressive and well-financed
competitors. In this environment, our success depends on
attracting and maintaining a leadership team with the integrity,
skills, and dedication needed to manage a dynamic organization
and the vision to anticipate and respond to future market
developments. We use our executive compensation program to help
us achieve this objective. Part of the compensation package,
principally the annual salary, benefits and perquisites, is
designed to enable us to assemble and retain a group of
executives who have the collective and individual experience and
abilities necessary to run our business to meet these
challenges. Other parts, principally the annual bonus
opportunity and the stock-based awards, are intended to focus
these executives on achieving financial results that enhance the
value of our stockholders investment. At the same time,
the compensation structure is flexible, so that we can meet the
changing needs of our business over time and reward executive
officers and managers based on the financial performance of
operations under their control.
Our compensation packages also take into account the economic
and general business conditions at the time in which
compensation decisions are made. While we may adjust and refine
our compensation packages as operating conditions change, we
believe it is important to maintain consistency in our
compensation philosophy and approach. We recognize that
value-creating performance by an executive or group of
executives does not always translate immediately into
appreciation of our stock price, particularly in periods of
industry transformation
and/or
general economic volatility. Management and the Committee are
aware of the impact that industry transformation and the general
economic volatility has had on the Companys stock price,
but the Committee intends to continue to reward management
performance based on its belief that over time
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strong operating performance, including performance in
diversifying the Companys multi-media platform will be
reflected through stock price appreciation. In the context of
industry decline, the Committee also believes that performance
as measured against the industry in general and relative to the
markets in which we operate should be given consideration. That
said, we believe that it is appropriate for certain components
of compensation to decline
and/or for
management to share in corporate-wide financial sacrifice in
challenging operating environments and during periods of
economic stress and reduced earnings.
Process
The Committee meets periodically throughout the year. In
addition, members of the Committee discuss compensation matters
with our CEO and CFO and among themselves informally outside of
meetings. The CEO may make recommendations to the Committee
concerning the amount and form of compensation to all named
executive officers. In establishing the compensation levels for
Radio Ones Chairperson and CEO in connection with their
April 2008 employment agreements, the Committee itself engaged
the services of Pearl Meyers & Partners, LLC
(Pearl Meyers), a nationally recognized compensation
consultant, and outside counsel to ensure compliance with its
fiduciary duties. In connection with the Chairpersons and
CEOs April 2008 employment agreements, the Committee
used its compensation consultant to provide advice in the
development and evaluation of compensation and the
Committees determinations of the Chairpersons and
CEOs compensation awards. The outside consultant, however,
is not consulted by the Committee on all executive compensation
issues or all aspects of any particular issue, but is used as
the Committee deems appropriate.
The Committee uses judgment and discretion rather than relying
solely on formulaic results. The Committee considers a number of
qualitative and quantitative factors, including the competitive
market for executives, the level and types of compensation paid
to executive officers in similar positions by comparable
companies, performance in the context of the economic
environment relative to other companies, vision and ability to
create further growth, the ability to lead others and an
evaluation of Radio Ones financial and operational
performance. We review the compensation paid to executives at
other radio broadcasting companies as a reference point for
determining the competitiveness of our executive compensation
and to determine a competitive range of compensation observed in
the marketplace. Generally speaking, our peer group of radio
broadcasting companies includes Citadel Broadcasting
Corporation, Emmis Communications Corp., Entercom Communications
Corp. and Saga Communications, Inc. The major compensation
elements that may be examined in that analysis could include:
base salary; actual total cash compensation (base salary plus
annual bonus); and total direct compensation (base salary plus
annual bonus plus the expected value of long-term incentives).
In addition, given the diversity of our business, the Committee
may review the compensation practices at companies with which it
competes for talent, including television, cable, film, online,
software and other publicly held businesses with a scope and
complexity similar to ours. However, the Committee does not
attempt to benchmark or set each compensation element for its
named executive officers within a particular range or percentile
related to levels provided by industry peers. Rather, the
Committee uses market comparisons as one factor in making
compensation decisions and to understand current compensation
trends and practices in the marketplace. Other factors
considered when making individual executive compensation
decisions include individual contribution and performance,
reporting structure, internal pay relationships, complexity and
importance of roles and responsibilities, leadership and growth
potential.
Principal
Components of Executive Compensation
We seek to achieve our compensation philosophy through three key
compensation elements:
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base salary;
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a performance-based annual bonus (that constitutes the
short-term incentive element of our program), which may be paid
in cash, restricted stock shares or a combination of
these; and
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grants of long-term, equity-based compensation (that constitute
the long-term incentive element of our program), such as stock
options
and/or
restricted stock shares, which may be subject to time-based
and/or
performance-based vesting requirements.
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The Committee believes that this three-part approach is
consistent with programs adopted by similarly situated
companies, allows us to stay competitive in our industry and
best serves the interests of our stockholders by linking
significant components of executive compensation to company
performance. The approach enables us to meet the requirements of
the competitive environment in which we operate, while ensuring
that named executive officers are compensated in a manner that
advances both the short and long-term interests of our
stockholders. Under this approach, compensation for our named
executive officers involves a high proportion of pay that is
at risk, namely, the annual bonus and the value of
stock options and restricted stock units. Stock options
and/or
restricted stock units relate a significant portion of each
named executive officers long-term remuneration directly
to the stock price appreciation realized by our stockholders.
Base salary. Our objective with respect to
base salary is to pay our executives compensation that is
competitive in the marketplace and reflects the level of
responsibility and performance of the executive, the
executives experience and tenure, the scope and complexity
of the position, the compensation of the executive compared to
the compensation of our other key salaried employees, the
compensation paid for comparable positions by other companies in
the radio broadcast industry, and the performance of our Company.
Non-Equity Incentive Plan Compensation. Our
executives are eligible to receive an annual bonus intended to
provide financial incentives for performance and to align the
goals and performance of the executive to our overall
objectives. The Committee has significant flexibility in
awarding cash bonuses. The Committee may consider, among other
things,
year-to-year
revenue growth compared to that of the radio industry in general
or the markets in which we operate, same station revenue,
operating performance versus our business plan, acquisitions and
divestitures, employee retention, sales and operating
initiatives, and stock price performance compared to the
industry peer group. Bonus recommendations for named executive
officers other than the CEO are proposed by the CEO, reviewed,
revised when appropriate, and approved by the Committee. The
Committee establishes the bonus level for the CEO.
Long-term Incentives. We believe that equity
ownership by Company executives provides incentive to build
stockholder value, aligns the interests of the executives with
the interests of stockholders and serves as motivation for
long-term performance. The Companys equity incentive
compensation program is designed to recognize scope of
responsibilities, reward demonstrated performance and
leadership, align the interests of the named executive with
those of our shareholders and retain key employees. We believe
that providing grants of stock options
and/or
restricted stock shares effectively focuses the named executives
on delivering long-term value to our shareholders because
options only have value to the extent the price of our stock on
the date of exercise exceeds the stock price on the grant date,
and shares of restricted stock reward and retain the named
executive officer by offering them the opportunity to receive
shares of stock on the date the restrictions lapse so long as
they continue to be employed by the Company. Until May 5,
2009, stock awards were made pursuant to the Radio One Amended
and Restated 1999 Stock Option and Restricted Stock Grant Plan,
which was approved by our stockholders (as amended, the
1999 Stock Plan). The 1999 Stock Plan expired by its
terms on May 5, 2009. At our 2009 annual stockholders
meeting held December 16, 2009, our stockholders adopted
the Radio One 2009 Stock Option and Restricted Stock Grant Plan
(the 2009 Stock Plan).
Under the 2009 Stock Plan, the Committee can award stock options
or grant restricted stock to any executive officer or other
eligible participants under the plan, on its own initiative or
at the recommendation of management. The Committee determines
the number of incentive awards granted to our named executive
officers on an individual, discretionary basis. The level of
long-term incentive compensation generally is determined with
consideration given to total compensation provided to named
executive officers, publicly available market data on total
compensation packages, the value of long-term incentive grants
at peer companies, total stockholder return, stockholder
dilution and input from the CEO. In accordance with our Stock
Plan Administration Procedures, as approved by the Committee,
the grant date and pricing date for awards approved by the
Committee to named executive officers (other than a company wide
grant) is the next monthly grant date immediately following the
meeting of the Committee at which the awards were approved.
Under our Stock Plan Administration Procedures, monthly grant
dates are generally defined as the fifth day of each month, or
the next NASDAQ trading day in the event the fifth day is not a
business day. For example, if the Committee approved an award at
any time between January 5, 2010 and February 4, 2010,
the applicable
118
monthly grant date would be February 5, 2010, and, thus,
the grant date and pricing date would be February 5, 2010.
If the Committee approved an award at any time between
February 5, 2010 and March 4, 2010, the applicable
monthly grant date would be March 5, 2010, and, thus, the
grant date and pricing date would be March 5, 2010.
However, it is also our practice in granting options or stock
awards to wait for the release of any material non-public
information and settlement of that information in the
marketplace. Thus, for example, if the Committee approved an
award at any time between January 5, 2010 and
February 4, 2010, and, it was determined that material
non-public information existed, the grant date for the awards
would be delayed until March 5, 2010, assuming the
information in question was communicated to the marketplace
prior to such date.
When authorized by the Committee to do so, the CEO or CFO may
make stock option awards or restricted stock grants to new
hires, contractors or consultants and to existing employees on
promotion or other change in employee status, in accordance with
the Committees delegation of authority. Historically, we
have utilized stock options as our primary means of providing
long-term incentive compensation. Statement of Accounting
Standards Codification (ASC) 718,
Compensation Stock Compensation, sets
forth accounting requirements for share-based compensation to
employees using a fair-value based method.
2010
Compensation Actions
Base
Salary
In January 2009, the CEO directed the CFO, CAO and the PRD (the
Executive Officer Response Team) to determine
appropriate actions to take to provide for the Companys
continued covenant compliance and operational performance given
the severity of the decline in the economic environment and the
resulting impact upon the Companys operations. The
Executive Officer Response Team, in consultation with other
Company executives, determined that the Company should implement
a variety of cost savings initiatives in response to the
deteriorating economic conditions and as a preemptive measure in
response to potential further economic decline. The Executive
Officer Response Team recommended, among other actions:
(i) Company-wide salary reductions; (ii) a use
it or lose it vacation policy; and (ii) mandatory
vacation through office closings in order to provide expense
savings and financial flexibility to the Company. The Executive
Officer Response Team made this recommendation to the CEO,
including a recommendation that all named executive officers
participate in the salary reduction program. The CEO adopted the
recommendation and reported to the Committee that all named
executive officers would accept salary cuts of seven percent.
Thus, without action by the Committee, each of the named
executive officers agreed to waive all contractual rights to any
automatic salary increase for 2009 and instead accepted seven
percent salary reductions (the 2009 Salary
Reductions) from their 2008 compensation levels until such
time as it was determined that such reductions were no longer
necessary based on the financial status of the Company.
Effective April 1, 2010, the 2009 Salary Reductions were
lifted for all Company staff, including each of the named
executive officers, except for the PRD, whose salary was
reinstated January 1, 2010 as a part of his new employment
agreement as described below.
2009
and 2010 Non-Equity Incentive Plan Compensation
This cash-based element of compensation provides executives an
incentive and a reward for achieving meaningful near-term
performance objectives. The Committee believes that it is
important for the Company to meet its performance goals in order
to pay cash bonuses to the named executive officers as a group,
but that it is also important to retain flexibility to allocate
the bonus pool among individuals. During the quarter ended
December 31, 2009, the Company accrued monies for certain
corporate bonuses, including bonus amounts that would be paid to
the named executive officers, typically in March of the year
following such accrual (e.g., bonus amounts accrued in and for
fiscal year 2009, would normally be paid in March 2010).
However, in February 2010, given continued uncertainty about the
economy and the pace of recovery in the advertising industry
generally and the radio sector in particular, the non-executive
members of the board of directors determined that it was in the
best interests of the Company to defer payment of any 2009
corporate bonuses, including bonus amounts that would be paid to
the named executive officers (the 2009 Executive
Bonuses), for a period not to extend beyond
December 31, 2010. At the time, the non-executive members
of the board of directors retained the Committees full
discretion to allocate payments to individual named executive
officers. On December 21, 2010, the Committee met to make
determinations with respect to the 2009 Executive
119
Bonuses as well as to consider executive bonuses for the
calendar year ending December 31, 2010 (the 2010
Executive Bonuses). What follows below is a discussion of
the considerations for each of the 2009 Executive Bonuses and
the 2010 Executive Bonuses.
2009
Individual Performance Criteria
Our CEO provides input into the compensation discussion and
makes recommendations to the Committee for annual compensation
changes and bonuses for the named executive officers and the
appropriateness of additional long-term incentive compensation.
The CEO considers each executive officers performance
during the year, including accomplishments, areas of strength,
and areas for development. The CEO bases his evaluation on his
knowledge of each executive officers performance. The CEO
also reviews comparable compensation data and makes a
recommendation to the committee on base salary,
performance-based annual bonus, and equity awards for each
executive officer. The Companys Vice President of Human
Resources may be asked to review the market compensation data to
assist with compensation recommendations. Performance criteria
were established for certain other named executive officers as
follows for 2009:
Performance Criteria for the Chairperson. The
Chairpersons employment agreement provides for an annual
cash bonus at the discretion of the board up to a maximum of
$250,000. In exercising its discretion whether or not to pay the
Chairperson such bonus, the Committee generally considers the
Companys overall performance for a given fiscal year and
the Chairpersons contributions to the success of the
Company.
Performance Criteria for the CEO. The
Committee establishes the bonus level for the CEO. Under the
terms of his employment agreement, the CEOs bonus award
may not in the aggregate exceed his annual base salary. The
CEOs bonus award has two components. The first component,
equaling 50% of the award, is based on the achievement of
pre-established individual and Company performance goals, as
determined by the Committee in consultation with the CEO (the
Performance Goals Portion). For calendar year 2009,
the elements and allocations of the Performance Goals Portion
were as follows: (i) Company consolidated performance as
measured by performance against each of budgeted revenue,
expenses and cash flow allocation equaled 15% (5%
per measure) or maximum payout of $73,500; (ii) radio
market performance against the top half of publicly reporting
radio companies allocation equaled 15% or maximum
payout of $73,500; (iii) balance sheet management measured
by compliance with bank covenants, resource allocation, asset
dispositions, stock buy backs and debt retirement
allocation equaled 20% or maximum payout of $98,000;
(iv) TV One performance measured by performance against
budgeted revenue and achievement of budgeted EBITDA allocation
equaled 25% (12.25% per measure) or maximum payout of $122,500;
and (v) interactive group performance measured by
performance against budgeted revenue, expenses and cash
flow allocation equaled 25% (8.33% per measure) or
maximum payout of $122,500. A discussion of thresholds and the
Committees observations in determining
Mr. Liggins performance-based bonus compensation is
included below in the Section titled 2009
Performance-Based Annual Bonus Decisions. In certain
instances where only target levels were established, the
applicable allocated portion of the performance portion was to
be credited on an all or nothing basis. Thus, if the
performance measure was missed, the CEO would not receive any
portion of the allocation toward his bonus payment. In other
instances bonus targets were established but a pro rata payout
was triggered so long as the Company attained 90% of the target.
For example, if a budgeted revenue target of $100 was
established and the Company achieved $95.60 of revenue, then the
CEO would receive 56% of his budgeted revenue allocation. If the
Company had achieved $96.50 of revenue, the CEO would receive
65% of his budgeted revenue allocation. In no case was the
threshold level less than 90% of the targeted level. The second
component, equaling the balance of the award, is determined at
the discretion of the Committee. In determining the amount of
the discretionary portion of the CEOs bonus, the Committee
may consider factors such as over-performance versus
all or any one of the pre-established individual and Company
performance goals under the Performance Goals Portion of the
bonus.
Performance Criteria for the CFO. Effective as
of January 1, 2009, the CFO was eligible to receive
discretionary bonus compensation in an amount to be determined
by the CEO at the conclusion of each fiscal year during which
(i) the CFO remains employed by Company and (ii) the
CFOs performance satisfies certain criteria as determined
by Companys CEO. For calendar year 2009, the CFOs
performance criteria was essentially the same as that of the
CEO. In addition, the CFO had the following goals:
(i) negotiate and
120
successfully close upon refinancing or amendment of the
Companys outstanding debt instruments; (ii) develop
strategy and plans for long-term financing needs;
(iii) monitor financial results of Interactive One and
track the division against the approved budget plan; and
(iv) execution on other directives from the board of
directors and CEO. A discussion of thresholds and the
Committees observations in determining
Mr. Thompsons performance-based bonus compensation is
included below in the Section titled 2009
Performance-Based Annual Bonus Decisions.
Performance Criteria for the PRD. Under his
employment agreement that was in effect during calendar year
2009, the PRDs bonus was also comprised of a performance
based portion and a discretionary portion. Each portion had a
maximum payout of $100,000. Performance metrics and allocations
for the PRDs discretionary performance bonus were as
follows for calendar year 2009: (i) Market share
growth allocation equaled 50% or payout of $50,000
upon attainment of goal; (ii) achievement of budgeted
operating profit allocation equaled 25% or payout of
$25,000 upon attainment of goal; and (iii) achievement of
budgeted expenses allocation equaled 25% or payout
of $25,000 upon attainment of goal. Other factors that could be
considered in the PRDs final bonus determination were:
(i) recruitment and retention of key talent and employees;
and (ii) execution on other directives from the board of
directors and CEO. A discussion of thresholds and the
Committees observations in determining
Mr. Mayos performance-based bonus compensation is
included below in the Section titled 2009
Performance-Based Annual Bonus Decisions. In certain
instances where specific thresholds were established, the
applicable allocated portion of the performance portion was to
be credited on an all or nothing basis. Thus, if the
performance measure was missed, the PRD would not receive any
portion of the allocation toward his bonus payment. In other
instances, thresholds and payouts may have been on a
sliding scale basis. The second component, equaling
the balance of the award, is determined at the discretion of the
Committee. In determining the amount of the discretionary
portion of the PRDs bonus, the Committee may consider
factors such as over-performance versus all or any
one of the pre-established individual and Company performance
goals under the performance portion of the bonus.
Performance Criteria for the CAO. The
CAOs employment agreement with the Company expired on
October 31, 2008 and the CAO is now employed by the Company
as an at-will employee. The CAO is entitled to
participate in all employee benefit programs generally offered
to the Companys employees. Further, the CAO receives a
discretionary bonus in an amount determined by the CEO. In
exercising its discretion whether or not to pay the CAO such
bonus, the Committee generally considers the Companys
overall performance for a given fiscal year and the CAOs
contributions to the success of the Company, including the
CAOs execution on any directives from the board of
directors and CEO.
2009
Performance-Based Annual Bonus Decisions
In making final 2009 performance-based annual bonus decisions,
the Committee considered named executive officer performance
against the applicable performance criteria. In considering the
above-described performance criteria for the Chairperson, CEO,
CFO, CAO and PRD, the Committee made the following observations
in determining performance-based bonus compensation:
(i) The Committee considered the Companys 2009
operating performance versus our 2009 business plan. In this
regard, the Committee recognized that while a number of the plan
objectives (or bonus thresholds) were not fully achieved, the
2009 advertising market remained weak, creating a difficult
operating environment. The Committee noted that in measuring the
Companys consolidated performance as measured by
performance targets, while none of the Companys budgeted
targets were met, actual achievement of the targets for budgeted
revenue, operating profit, expenses and cash flow was in excess
of 95%.
(ii) The Committee considered that for calendar year 2009,
the Company outperformed its markets by 150 basis points
leading to approximately $4.0 million in incremental
revenue.
(iii) The Committee considered that for 2009, despite
unprecedented market conditions, we were able to maintain
compliance with the financial covenants contained in our credit
facility. Specifically, as of December 31, 2009, the
Companys Senior Secured Leverage Ratio (as defined under
our senior credit
121
facility) was 3.88x versus a covenant maximum of 4.0x, the
Companys Total Leverage Ratio (as defined under our senior
credit facility) was 7.20x versus a covenant maximum of 7.25x
and the Companys Interest Coverage Ratio (as defined under
our senior credit facility) was 2.36x versus a covenant minimum
of 1.75x.
(iv) Consideration was given to balance sheet management in
light of the difficult economic conditions of 2009. It was noted
that the Company finished 2008 with total debt of approximately
$654.0 million, down from approximately $675.6 million
at year end 2008. The Committee also noted the Companys
repurchase of $2.5 million of Company debt at an average
discount of 50.0%. The Committee determined that these
opportunistic actions substantially increased the amount of
capacity that the Company had under its bank covenants.
(v) The Committee considered the Companys initiatives
to enhance shareholder value including our repurchase during
fiscal year 2009 of 27.7 million shares of Company stock
for approximately $19.7 million, at an average price per
share of $0.71.
(vi) With respect to the performance of TV One, the
Committee noted that while TV Ones budgeted revenue was
slightly below expectations, TV Ones budgeted EBITDA
surpassed budget.
(vii) With respect to the performance of Interactive One,
the Committee noted that while the division did not achieve its
budgeted revenue, expenses were approximately $5.6 million
better than budget and EBITDA surpassed the payout hurdle.
With respect to the discretionary portions of 2009 Executive
Bonuses, the Committee considered a number of non-performance
related factors, including but not limited to: (i) the
Companys successful completion on November 24, 2010
of: (x) the exchange of approximately $97.0 million of
$101.5 million in aggregate principal amount outstanding of
our 2011 Notes; (y) the exchange of approximately
$199.3 million of $200.0 million in aggregate
principal amount outstanding of our 2013 Notes; and (z) the
amendment and restatement of Companys senior credit
facility (collectively, the November 2010
Transactions); (ii) the Committees
determination with respect to executive bonuses for the calendar
year ended December 31, 2008, that given the extraordinary
effects of the then current global financial and economic
crisis, the unprecedented market conditions, overall operational
performance in 2008 and the continued uncertainty with respect
to operational performance in 2009, no 2008 executive bonuses
were paid despite the named executives having satisfied a number
of their performance criteria; (iii) hardship caused by the
delay in payment although the full amount of the 2009 Executive
Bonuses had been accrued but withheld throughout substantially
all of calendar year 2010; (iii) that the named executive
officers voluntarily implemented and participated in the 2009
Salary Reductions; and (iv) corporate cost saving measures
implemented to ensure continued covenant compliance and
operational performance and affecting the named executive
officers during calendar year 2009, including but not limited to
the Companys move to a use it or lose it
vacation policy and mandatory vacation through office closings
in order to provide expense savings and financial flexibility to
the Company. Finally, the Committee noted that the November 2010
Transactions provided the Company with future financial
flexibility and avoided default and maturities issues that had
prompted the non- executive members of the board of directors to
determine that it was in the best interests of the Company to
defer payment of any 2009 corporate bonuses, including the 2009
Executive Bonuses.
2010
Individual Performance Criteria
Performance Criteria for the Chairperson. For
calendar year 2010, the basis of the Chairperson bonus remained
discretionary, as discussed above.
Performance Criteria for the CEO. For calendar
year 2010, the elements and allocations of the CEOs
Performance Goals Portion were the same as for calendar year
2009, as discussed above.
Performance Criteria for the CFO. For calendar
year 2010, the elements and allocations of the CFOs
Performance Goals Portion were the same as for calendar year
2009, as discussed above.
122
Performance Criteria for the PRD. Under his
employment agreement that was in effect during calendar year
2010, the PRDs bonus was also comprised of a performance
based portion and a discretionary portion. Each portion had a
maximum payout of $100,000. Performance metrics and allocations
for the PRDs discretionary performance bonus were as
follows for calendar year 2010: (i) Market share
growth allocation equaled 50% or payout of $50,000
upon attainment of goal; (ii) achievement of budgeted
operating profit allocation equaled 20% or payout of
$20,000 upon attainment of goal; (iii) achievement of
budgeted expenses allocation equaled 10% or payout
of $10,000 upon attainment of goal; (iv) achievement of
budgeted net revenue for radio websites - allocation equaled 10%
or payout of $10,000 upon attainment of goal;
(v) achievement of increased traffic for radio
websites allocation equaled 10% or payout of $10,000
upon attainment of goal. Other factors that could be considered
in the PRDs final bonus determination were:
(i) recruitment and retention of key talent and employees;
and (ii) execution on other directives from the board of
directors and CEO. While in some instances specific thresholds
were not developed, a discussion of thresholds and the
Committees observations in determining
Mr. Mayos performance-based bonus compensation is
included below in the Section titled 2010
Performance-Based Annual Bonus Decisions. In certain
instances where specific thresholds were established, the
applicable allocated portion of the performance portion was to
be credited on an all or nothing basis. Thus, if the
performance measure was missed, the PRD would not receive any
portion of the allocation toward his bonus payment. In other
instances, thresholds and payouts may have been on a
sliding scale basis. The second component, equaling
the balance of the award, is determined at the discretion of the
Committee. In determining the amount of the discretionary
portion of the PRDs bonus, the Committee may consider
factors such as over-performance versus all or any
one of the pre-established individual and Company performance
goals under the performance portion of the bonus.
Performance Criteria for the CAO. For calendar
year 2010, the basis of the CAOs bonus remained
discretionary, as discussed above.
2010
Performance-Based Annual Bonus Decisions
As of the date of this prospectus, the Committee has not made
any determinations with respect to 2010 Executive Bonuses.
Long-term
Incentives
As noted above, the 2009 Stock Plan was approved by the
stockholders at the Companys annual meeting on
December 16, 2009. The 2009 Stock Plan succeeded the
Companys 1999 Stock Plan which had expired by its terms on
May 5, 2009. The terms of the 2009 Stock Plan were
substantially similar to the terms of the 1999 Stock Plan. On
December 16, 2009, the compensation committee and the
non-executive members of the board of directors reaffirmed a
decision of the compensation committee from May 21, 2009
and approved a long-term incentive plan (the 2009
LTIP) for certain key employees of the
Company. The purpose of the 2009 LTIP was to retain and incent
these key employees in light of sacrifices made as a
result of the cost savings initiatives described above in
response to the economic conditions in 2008 and 2009. These
sacrifices included not receiving performance-based bonuses in
2008, salary reductions and mandatory vacation through office
closings in order to provide expense savings and financial
flexibility to the Company. The 2009 LTIP was comprised of
3,250,000 shares of Class D Common Stock (the
LTIP Shares). On January 5, 2010, the LTIP
Shares were granted in the form of restricted stock and
allocated among 31 employees of the Company, including the
named executive officers. The named executive officers were
allocated LTIP Shares as follows: (i) the CEO
(1.0 million shares); (ii) the Chairperson
(300,000 shares); (iii) the CFO (225,000 shares);
(iv) the CAO (225,000 shares); and (v) the PRD
(130,000 shares). The remaining 1,370,000 shares were
allocated among 26 other key employees. All awards
vest in three installments of
331/3%
on: (i) June 5, 2010; (ii) June 5, 2011 and
(iii) June 5, 2012. The compensation committee and the
non-executive members of the board of directors approved a
shortened vesting period for the first installment as the
Company originally intended to implement the 2009 LTIP in June
2009. However, as the 2009 Stock Plan was not approved until
December 16, 2009, the compensation committee and the
non-executive members of the board of directors
123
thought it was inequitable to penalize the 2009 LTIP awardees
because of the delayed approval of the 2009 Stock
Plan.1
In accordance with the Companys Stock Plan Administration
Procedures (as described above), the grant date for the LTIP
Shares, including LTIP Shares granted to named executive
officers, was January 5, 2010. The closing price of shares
of the Companys Class D common stock on that date was
$3.17.
Employment
Agreements
Chairperson. Catherine L. Hughes, our founder,
serves as our Chairperson of the board of directors and
Secretary. Ms. Hughes three (3) year employment
agreement, dated April 16, 2008, provides for an annual
base salary of $750,000 that may be increased at the discretion
of the board. The employment agreement also provides for an
annual cash bonus at the discretion of the board up to a maximum
of $250,000. Ms. Hughes is also entitled to receive a
pro-rata portion of her bonus upon termination due to death or
disability. The Chairperson was paid a discretionary bonus of
$250,000 for fiscal year 2009. No determination as to the
Chairpersons 2010 bonus has been made as of the date of
this prospectus. Ms. Hughes also receives standard
retirement, welfare and fringe benefits, as well as vehicle and
wireless communication allowances and financial manager services.
In conjunction with her April 16, 2008 employment
agreement, the Chairperson was granted options to purchase
600,000 shares of Class D common stock as well as
150,000 restricted shares of Class D common stock. These
options and restricted shares were awarded under the 1999 Stock
Plan. Both grants will vest ratably annually over the life of
the three year employment agreement or alternatively, fully in
the event of a Change of Control of the Company (as defined in
the 1999 Stock Plan). The Committee determined the number of
incentive awards granted to the Chairperson in the manner
described above in the section titled Principal Components
of Executive Compensation, Long-term Incentives. In
accordance with the Companys Stock Plan Administration
Procedures, the grants to Ms. Hughes in connection with her
April 2008 employment agreement occurred on June 5, 2008.
The closing price of shares of the Companys Class D
common stock on that date was $1.41.
President and Chief Executive Officer. Alfred
C. Liggins, III is employed as our President and CEO and is
a member of the board of directors. Under the terms of his three
(3) year employment agreement dated April 16, 2008,
Mr. Liggins receives a base salary of $980,000 which is
subject to an annual increase at the discretion of the board of
directors. Mr. Liggins is also eligible for a bonus award
up to an amount equal to his base salary and comprised of two
components. The first component, equaling 50% of the award, is
based on the achievement of pre-established individual and
Company performance goals, as determined by the Committee in
consultation with Mr. Liggins. The second component,
equaling the balance of the award, is determined at the
discretion of the Committee. Mr. Liggins is also entitled
to receive a pro-rata portion of his bonus upon termination due
to death or disability. A discussion of the element and
allocations of the CEOs performance based bonus for fiscal
years 2009 and 2010 is included above in the Section titled
2009 and 2010 Non-Equity Incentive Plan
Compensation. The CEO was paid a performance-based bonus
of $980,000 for fiscal year 2009. No determination as to the
CEOs 2010 bonus has been made as of the date of this
prospectus.
In recognition of his contributions in founding TV One on behalf
of the Company, Mr. Liggins is also eligible to receive an
amount equal to 8% of any dividends paid in respect of the
Companys investment in TV One and 8% of the proceeds of
the Companys investment in TV One (the TV One
Award). In both events, the Companys obligation to
pay any portion of the TV One Award is only triggered after the
Companys recovery of the full amount of its cumulative
capital contributions to TV One. Mr. Liggins will only
receive the TV One Award upon actual cash distributions or
distributions of marketable securities. Mr. Liggins
rights to the TV One Award (i) cease if he is terminated
for cause or he resigns without good
1 The
annual stockholders meeting at which the new 2009 Stock Plan was
approved was delayed as a result of the Companys receipt
of certain comment letters from the SEC regarding certain
disclosures made in our
Form 10-K/A
for the year ended December 31, 2008.
124
reason and (ii) expire at the end of the term of his
employment agreement. Mr. Liggins also receives standard
retirement, welfare and fringe benefits, as well as vehicle and
wireless communication allowances and a personal assistant and
financial manager services.
In conjunction with his April 16, 2008 employment
agreement, the CEO was granted options to purchase
1,150,000 shares of Class D common stock as well as
300,000 restricted shares of Class D common stock. The
grants vest ratably annually over the life of the CEOs
three year employment agreement or alternatively, fully in the
event of a Change of Control of the Company (as defined in the
1999 Stock Plan). The Committee determined the number of
incentive awards granted to the CEO in the manner described
above in the section entitled Principal Components of
Executive Compensation, Long-term Incentives. In
accordance with the Companys Stock Plan Administration
Procedures, the grants to Mr. Liggins in connection with
his April 2008 employment agreement occurred on June 5,
2008. The closing price of shares of the Companys
Class D common stock on that date was $1.41.
Chief Financial Officer. Peter D. Thompson is
employed as Executive Vice President and CFO pursuant to a three
(3) year employment agreement dated February 2008 with the
Company. The employment agreement provides for a base salary of
$375,000 which is subject to an annual increase of not less than
3%. The agreement also provides for an annual discretionary cash
bonus in an amount not to exceed $75,000 in 2008 and,
thereafter, in an amount to be determined by the CEO.
Mr. Thompson is also entitled to receive a pro-rata portion
of his bonus upon termination due to death or disability. A
discussion of the element and allocations of the CFOs
performance based bonus for fiscal years 2009 and 2010 is
included above in the Section titled 2009 and 2010
Non-Equity Incentive Plan Compensation. The CFO was paid a
performance-based bonus of $200,000 for fiscal year 2009. No
determination as to the CFOs 2010 bonus has been made as
of the date of this prospectus. Mr. Thompson also receives
standard retirement, welfare and fringe benefits, as well as a
vehicle allowance.
On March 31, 2008, in connection with his appointment as
CFO, Mr. Thompson was granted 75,000 shares of
restricted stock and options for another 75,000 shares of
Class D common stock, all to vest ratably annually over the
three year term of the agreement. The Committee determined the
number of incentive awards granted to the CFO in the manner
described above in the section titled Principal Components
of Executive Compensation, Long-term Incentives. In
accordance with the Companys Stock Plan Administration
Procedures, the grants to Mr. Thompson in connection with
his March 2008 employment agreement occurred on June 5,
2008. The closing price of shares of the Companys
Class D common stock on that date was $1.41.
President, Radio Division. Until
August 5, 2009, Barry A. Mayo was employed as President,
Radio Division pursuant to an employment agreement with the
Company. The employment agreement provided for a base salary of
$500,000 which was subject to an annual increase of not less
than 3%. The employment agreement also provided for (i) a
quarterly bonus not to exceed $25,000 during each quarter
Mr. Mayo remained employed with the Company and satisfied
certain broadcast revenue flow goals established by the Company
and (ii) an annual cash bonus at the discretion of the
board of directors. Mr. Mayo was also entitled to receive a
pro-rata portion of his bonus upon termination due to death or
disability. A discussion of the PRDs performance based
bonus for fiscal years 2009 and 2010 is included above in the
Section titled 2009 and 2010 Non-Equity Incentive Plan
Compensation. Mr. Mayo received a total bonus of
$170,000 for fiscal year 2009. No determination as to the
PRDs 2010 bonus has been made as of the date of this
prospectus. Mr. Mayo also received standard retirement,
welfare and fringe benefits, as well as a vehicle allowance and
certain expenses related to his travel to the Companys
corporate headquarters.
Effective August 5, 2009, the Company entered into a new
employment agreement with Mr. Mayo, the term of which is
through June 6, 2012. The new employment agreement provides
for a base salary of $550,000 effective January 1, 2010,
which is subject to an annual increase of not less than 3%. The
employment agreement also provides for an annual bonus comprised
of (i) a cash bonus of up to $100,000 for achieving certain
objective metrics and (ii) a cash bonus of up to $100,000
to be paid at the discretion of the board of directors for
having achieved satisfactory operating results. Mr. Mayo is
also entitled to receive a pro-rata potion of the bonus upon
termination due to death or disability. Mr. Mayo also
receives standard
125
retirement, welfare and fringe benefits, as well, as a vehicle
allowance and certain expenses related to his travel to the
Companys corporate headquarters.
Chief Administrative Officer. Linda J. Vilardo
is employed as CAO, Vice President and Assistant Secretary of
the Company. Ms. Vilardos employment agreement with
the Company expired on October 31, 2008 and
Ms. Vilardo is now employed by the Company as an
at-will employee. Ms. Vilardo is entitled to
participate in all employee benefit programs generally offered
to the Companys employees. Ms. Vilardo received a
discretionary bonus of $200,000 for fiscal year 2009. No
determination as to Ms. Vilardos 2010 bonus has been
made as of the date of this prospectus. Ms. Vilardo also
receives standard retirement, welfare and fringe benefits.
Post-Termination
and Change in Control Benefits
Under the employment agreements that we have entered into with
Catherine L. Hughes, Alfred C. Liggins, Peter D. Thompson, and
Barry A. Mayo, each executives unvested equity awards will
become fully exercisable immediately upon a Change of
Control (as defined in the Companys 2009 Stock
Option and Restricted Stock Grant Plan). Under the terms of her
employment agreement, upon termination without cause or for good
reason within two years following a Change of Control,
Ms. Hughes will receive an amount equal to three times the
sum of (1) her annual base salary and (2) the average
of her last three annual incentive bonus payments, in a cash
lump sum within five days of such termination, a pro-rated
annual bonus for the year of termination, and continued welfare
benefits for three years, subject to all applicable federal,
state and local deductions. Similarly, under the terms of his
employment agreement, upon termination without cause or for good
reason within two years following a Change of Control
Mr. Liggins will receive an amount equal to three times the
sum of (1) his annual base salary and (2) the average
of his last three annual incentive bonus payments, in a cash
lump sum within five days of such termination, a pro-rated
annual bonus for the year of termination, and continued welfare
benefits for three years, subject to all applicable federal,
state and local deductions.
Please see the table titled Potential Payments upon
Termination or Change in Control for quantitative
information about the payments that might occur upon various
termination events.
Under Ms. Hughes and Mr. Liggins employment agreements
the terms cause and good reason are
defined generally as follows:
Cause means (i) the commission by the
executive of a felony, fraud, embezzlement or an act of serious,
criminal moral turpitude which, in case of any of the foregoing,
in the good faith judgment of the board of directors, is likely
to cause material harm to the business of the Company and the
Company affiliates, taken as a whole, provided, that in the
absence of a conviction or plea of nolo contendere, the Company
will have the burden of proving the commission of such act by
clear and convincing evidence, (ii) the commission of an
act by the executive constituting material financial dishonesty
against the Company or any Company affiliate, provided, that in
the absence of a conviction or plea of nolo contendere, the
Company will have the burden of proving the commission of such
act by a preponderance of the evidence, (iii) the repeated
refusal by the executive to use his reasonable and diligent
efforts to follow the lawful and reasonable directives of the
board of directors, or (iv) the executives willful
gross neglect in carrying out his material duties and
responsibilities under the agreement, provided, that unless the
board of directors reasonably determines that a breach described
in clause (iii) or (iv) is not curable, the executive
will, be given written notice of such breach and will be given
an opportunity to cure such breach to the reasonable
satisfaction of the board of directors within thirty
(30) days of receipt of such written notice.
Good Reason shall be deemed to exist if,
without the express written consent of the executive,
(a) the executives rate of annual base salary is
reduced, (b) the executive suffers a substantial reduction
in his title, duties or responsibilities, (c) the Company
fails to pay the executives annual base salary when due or
to pay any other material amount due to the executive hereunder
within five (5) days of written notice from the executive,
(d) the Company materially breaches the agreement and fails
to correct such breach within thirty (30) days after
receiving the executives demand that it remedy the breach,
or (e) the Company fails to obtain a satisfactory written
agreement from any successor to assume and agree to perform the
agreement, which
126
successor the executive reasonably concludes is capable of
performing the Companys financial obligations under this
Agreement.
The foregoing summaries of the definitions of cause
and good reason are qualified in their entirety by
reference to the actual terms of the employment agreements filed
with that certain
Form 8-K
filed April 18, 2008.
Under the terms of his employment agreement, in the event that
Mr. Thompson is terminated other than for cause, provided
Mr. Thompson executes a general liability release, the
Company will pay Mr. Thompson severance in an amount equal
to three (3) months base compensation, subject to all
applicable federal, state and local deductions.
Under the terms of his employment agreement, in the event that
Mr. Mayo is terminated other than for cause, provided
Mr. Mayo executes a general liability release, the Company
will pay Mr. Mayo severance in an amount equal to six
(6) months base compensation, subject to all
applicable federal, state and local deductions.
Other
Benefits and Perquisites
As part of our competitive compensation package to attract and
retain talented employees, we offer retirement, health and other
benefits to our employees. Our named executive officers
participate in the same benefit plans as our other salaried
employees. The only benefit programs offered to our named
executive officers either exclusively or with terms different
from those offered to other eligible employees are the following:
Deferred Compensation. We have a deferred
compensation plan that allows Catherine L. Hughes, our
Chairperson, to defer compensation on a voluntary, non-tax
qualified basis. Under the plan in effect during 2009 and 2010,
Ms. Hughes deferred $16,000 and $23,000, respectively, of
her base salary (and no amounts of bonus) until death,
disability, retirement or termination. The amount owed to her as
deferred compensation is an unfunded and unsecured general
obligation of our Company. Deferred amounts accrue interest
based upon the return earned on an investment account with a
designated brokerage firm established by Radio One. All deferred
amounts are payable in a lump sum 30 days after the date of
the event causing the distribution to be paid. No named
executive officer earns above-market or preferential earnings on
nonqualified deferred compensation.
Other Perquisites. We provide few perquisites
to our named executive officers. Currently, we provide or
reimburse executives for a company automobile, driver and
various administrative services including a financial manager
and a personal assistant.
We have set forth the incremental cost of providing these
benefits and perquisites to our named executives in the 2010
Summary Compensation Table in the All Other
Compensation column.
401(k)
Plan
We adopted a defined contribution 401(k) savings and retirement
plan effective October 1, 1994. In 2010, participants could
contribute up to $16,500 of their gross compensation, subject to
certain limitations. In 2011, participants may contribute up to
$16,500 of their gross compensation, subject to certain
limitations. Employees age 50 or older can make an
additional
catch-up
contribution of up to $5,500. Effective January 1, 2006, we
instituted a match of fifty cents for every dollar an employee
contributes up to 6% of the employees salary, subject to
certain limitations. However, effective January 1, 2008, we
indefinitely suspended the matching component of our 401(k)
savings and retirement plan.
Tax
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as
amended, imposes limitations upon the federal income tax
deductibility of compensation paid to certain named executive
officers. On June 4, 2008, the Internal Revenue Service
issued Notice
2008-4,
which defines the group of named executive officers who are
127
considered covered employees for purposes of Section 162(m)
of the Internal Revenue Code. The Notice specifically excludes
the chief financial officer from coverage under
Section 162(m) and provides that the only individuals who
will be considered covered employees are the chief executive
officer and the three highest compensated officers (other than
the chief executive officer or chief financial officer).
Previously, the chief executive officer and the four other
highest compensated officers were subject to
Section 162(m), and the chief financial officer was not
automatically excluded. Under the 162(m) limitations, we may
deduct up to $1,000,000 of compensation for such executive
officer in any one year or may deduct all compensation, even if
over $1,000,000, if we meet certain specified conditions (such
as certain performance-based compensation that has been approved
by stockholders). As the net cost of compensation, including its
deductibility, is weighed by the Committee against many factors
in determining executive compensation, the Committee may
determine that it is appropriate and in Radio Ones best
interest to authorize compensation that is not deductible,
whether by reason of Section 162(m) or otherwise.
Summary
Compensation Table
The following table sets forth the total compensation for each
of our named executive officers, for the years ended
December 31, 2010, 2009 and 2008:
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Non-
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Non-
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Equity
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qualified
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Incentive
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Deferred
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Stock
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Option
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Plan
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Compensation
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All Other
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Name and
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Salary
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Bonus(2)
|
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Awards(3)
|
|
Awards(3)
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Compensation
|
|
Earnings
|
|
Compensation
|
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Total
|
Principal Position
|
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Year
|
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$
|
|
$
|
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$
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$
|
|
$
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|
$
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|
$
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|
$
|
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Catherine L. Hughes
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2010
|
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721,688
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250,000
|
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551,196
|
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|
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129,624
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|
|
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0
|
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|
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23,000
|
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21,605
|
(4)
|
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1,697,113
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Chairperson
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2009
|
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713,423
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250,000
|
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|
|
15,503
|
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|
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28,505
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|
|
|
0
|
|
|
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16,000
|
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|
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30,111
|
(4)
|
|
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1,053,542
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|
|
|
|
2008
|
|
|
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709,795
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|
|
|
0
|
|
|
|
40,939
|
|
|
|
75,273
|
|
|
|
0
|
|
|
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24,000
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|
|
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29,626
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(4)
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879,633
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Alfred C. Liggins, III
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2010
|
|
|
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959,992
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|
|
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490,000
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|
|
|
1,743,321
|
|
|
|
264,374
|
|
|
|
490,000
|
|
|
|
0
|
|
|
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79,693
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(5)
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|
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4,027,360
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CEO
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2009
|
|
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934,267
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490,000
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31,006
|
|
|
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58,136
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|
|
|
490,000
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|
|
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0
|
|
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74,770
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(5)
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2,078,179
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2008
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846,271
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5,800,000
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81,878
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|
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153,521
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|
|
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0
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|
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|
0
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76,376
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(5)
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6,958,046
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Peter D. Thompson
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2010
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404,043
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100,000
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395,772
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|
|
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18,375
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|
|
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100,000
|
|
|
|
0
|
|
|
|
|
|
|
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1,018,190
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CFO(6)
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2009
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360,853
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100,000
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7,839
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|
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4,086
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|
|
100,000
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|
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0
|
|
|
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0
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572,778
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2008
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361,607
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20,000
|
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25,096
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13,082
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|
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0
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0
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6,000
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(7)
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425,785
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Barry A. Mayo
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2010
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546,458
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100,000
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208,303
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100,000
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0
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|
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0
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954,751
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President, Radio
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2009
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476,667
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100,000
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0
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0
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75,000
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|
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0
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0
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651,667
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Division(8)
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2008
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500,000
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|
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0
|
|
|
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101,389
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52,822
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5,000
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0
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0
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659,211
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Linda J. Vilardo
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2010
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440,409
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100,000
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360,522
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100,000
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0
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0
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1,000,931
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CAO(9)
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2009
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436,146
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100,000
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0
|
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0
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100,000
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|
|
0
|
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|
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0
|
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636,146
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|
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2008
|
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445,145
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0
|
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0
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0
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2,005,000
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0
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0
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2,450,145
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* |
|
Non-equity incentive plan compensation for 2010 has been
accrued, however the actual amounts to be paid to the named
executive officers have yet to be determined. Accrued amounts
for the named executive officers are as follows:
(1) Chairperson $250,000,
(2) CEO $980,000, (3) CFO
$200,000, (4) PRD $200,000 and
(5) CAO $200,000. Upon determination of the
amounts, if any, to be paid, such payments must be made no later
than December 31, 2011. |
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(1) |
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On January 5, 2010, LTIP Shares were granted in the form of
restricted stock and allocated among 31 employees of the
Company, including the named executive officers. The named
executive officers were allocated LTIP Shares as follows:
(i) the CEO (1.0 million shares); (ii) the
Chairperson (300,000 shares); (iii) the CFO
(225,000 shares); (iv) the CAO (225,000 shares);
and (v) the PRD (130,000 shares). The remaining
1,370,000 shares were allocated among 26 other
key employees. All awards vest in three installments
of
331/3%
on: (i) June 5, 2010; (ii) June 5, 2011 and
(iii) June 5, 2012. There were no stock awards or
option grants to executive officers during 2009. Ms. Hughes
was granted options to purchase 600,000 shares of
Class D common stock and 150,000 restricted shares of
Class D common stock upon execution of her new employment
agreement in April 2008. Mr. Liggins was granted options to
purchase 1,150,000 shares of Class D common stock,
300,000 restricted shares of Class D common stock and the
ability to receive an award amount equal to 8% of any proceeds
from distributions or other liquidity events in excess of the
return of the Companys aggregate investment in TV One upon |
128
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execution of his new employment agreement in April 2008.
Mr. Thompson was granted options to purchase
75,000 shares of Class D common stock and 75,000
restricted shares of Class D common stock upon execution of his
employment agreement in March 2008. Except for grants to Barry
Mayo, there were no stock awards, non-equity incentive plan
compensation or option grants to executive officers in 2007.
Mr. Mayo was granted options to purchase 50,000 shares
of Class D common stock and 50,000 shares of Class D
common stock upon his employment with the Company. The Company
does not provide a defined benefit pension plan and there were
no above-market or preferential earnings on deferred
compensation. |
|
(2) |
|
Reflects purely discretionary bonuses. These amounts were paid
in the year subsequent to being awarded. For 2008,
Mr. Liggins aggregate bonus amount includes
(i) a $1,000,000 signing bonus and (ii) a
make-whole bonus of $4,800,000, both paid in
connection with Mr. Liggins 2008 employment
agreement. Mr. Thompsons bonus amount includes a
$20,000 signing bonus paid in connection with his
2008 employment agreement |
|
(3) |
|
The dollar amount recognized for financial statement purposes in
accordance with Accounting Standards Codification
(ASC) 718, Compensation Stock
Compensation, for the fair value of options and restricted
stock granted. These values are based on assumptions described
in Note 11 to the Companys audited consolidated
financial statements included elsewhere in this prospectus and
in Note 11 and 12 to the Companys consolidated
financial statements in its 2008 and 2007 Annual Report on
Form 10-K/A
and
Form 10-K,
respectively. |
|
(4) |
|
For 2010, 2009 and 2008, for company automobile provided to
Ms. Hughes and financial services and administrative
support in the amounts of $3,278, $3,278, and $1,999 and $18,327
$26,833 and $27,626, respectively. |
|
(5) |
|
For 2010, 2009 and 2008, for financial services and
administrative support provided to Mr. Liggins in the
amounts of $79,673 $74,770, and $76,376, respectively. |
|
(6) |
|
Served as Executive Vice President of Business Development
through February 19, 2008 and began as CFO on
February 20, 2008. |
|
(7) |
|
For company automobile provided to Mr. Thompson. |
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(8) |
|
Began as President, Radio Division on August 6, 2007. |
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(9) |
|
Ms. Vilardos 2008 non-equity incentive plan
compensation amount includes a $2,005,000 retention bonus paid
in November 2008, pursuant to her previous employment agreement. |
The following table sets forth the 2010 grant of plan-based
awards.
2010
Grants of Plan Based Awards
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Grant
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Date
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Fair
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Value of
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Estimated Possible Payouts Under
|
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All
|
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Exercise
|
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Stock
|
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Non-Equity Incentive
|
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Estimated Future Payouts Under
|
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Other
|
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Price of
|
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and
|
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Plan Awards(1)
|
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Equity Incentive Plan Awards
|
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Stock
|
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All Other
|
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Option
|
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Option
|
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Grant
|
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Action
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Threshold
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Target
|
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Maximum
|
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Threshold
|
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Target
|
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Maximum
|
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Awards
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Option
|
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Awards
|
|
Awards
|
Name
|
|
Date
|
|
Date
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
#
|
|
Awards #
|
|
$
|
|
$
|
|
Alfred C. Liggins, III
|
|
|
1/1/2010
|
|
|
|
12/31/2010
|
|
|
|
|
|
|
|
490,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry A. Mayo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter D. Thompson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects the possible payout amounts of non-equity incentive
plan awards that could have been earned in 2010. See the Summary
Compensation Table for amounts actually earned in 2010 and paid
out in 2011. |
|
(2) |
|
Grant and action dates reflect performance period for non-equity
incentive plan award. |
129
The following table sets forth the number of shares of common
stock subject to exercisable and unexercisable stock options
held as of December 31, 2010. There were no option
exercises during 2009 and 2010 by the named executive officers.
No restricted stock awards and option grants were made in 2009.
Outstanding
Equity Awards at 2010 Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
Number
|
|
Market
|
|
Plan
|
|
Market or
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
of
|
|
Value of
|
|
Awards:
|
|
Payout
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares of
|
|
Shares of
|
|
Number of
|
|
Value of
|
|
|
Number of Securities
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Stock
|
|
Stock
|
|
Unearned
|
|
Unearned
|
|
|
Underlying
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
That Have
|
|
That Have
|
|
Shares That
|
|
Shares That
|
|
|
Unexercised Options
|
|
Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Not
|
|
Not
|
|
Have Not
|
|
Have Not
|
|
|
(#) Exercisable
|
|
Unexercisable
|
|
Options (#)
|
|
Price ($)
|
|
Date
|
|
Vested (#)
|
|
Vested ($)
|
|
Vested (#)
|
|
Vested ($)
|
Name
|
|
Class A
|
|
Class D
|
|
Class D
|
|
Class A or D
|
|
|
|
|
|
Class D
|
|
Class D
|
|
Class D
|
|
Class D
|
|
Catherine L. Hughes(1)
|
|
|
0
|
|
|
|
400,000
|
|
|
|
200,000
|
|
|
|
0
|
|
|
|
1.41
|
|
|
|
6/5/2018
|
|
|
|
250,000
|
|
|
|
280,000
|
|
|
|
0
|
|
|
|
0
|
|
Alfred C. Liggins, III(2)
|
|
|
0
|
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14.80
|
|
|
|
8/10/2014
|
|
|
|
766,666
|
|
|
|
858,666
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
766,666
|
|
|
|
383,333
|
|
|
|
0
|
|
|
|
1.41
|
|
|
|
6/5/2018
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Barry Mayo(3)
|
|
|
0
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4.05
|
|
|
|
8/6/2017
|
|
|
|
86,666
|
|
|
|
97,066
|
|
|
|
0
|
|
|
|
0
|
|
Peter D. Thompson(4)
|
|
|
0
|
|
|
|
50,000
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
1.41
|
|
|
|
6/5/2018
|
|
|
|
175,000
|
|
|
|
196,000
|
|
|
|
0
|
|
|
|
0
|
|
Linda J. Vilardo(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
168,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
200,000 options vest on April 15, 2011. 50,000 shares
vest on April 15, 2011, 100,000 shares vest on
June 5, 2011 and June 5, 2012. The Chairperson was
awarded 300,000 restricted shares of Class D common stock
on January 5, 2010. |
|
(2) |
|
383,333 options vest on April 15, 2011. 100,000 shares
vest on April 15, 2011, 333,333 shares vest on
June 5, 2011 and June 5, 2012. The CEO was awarded
1,000,000 restricted shares of Class D common stock on
January 5, 2010. |
|
(3) |
|
43,333 shares vest on June 5, 2011 and June 5,
2012. The PRD was awarded 130,000 restricted shares of
Class D common stock on January 5, 2010. |
|
(4) |
|
25,000 options vest on February 19, 2011.
25,000 shares vest on February 19, 2011,
75,000 shares vest on June 5, 2011 and June 5,
2012. The CFO was awarded 225,000 restricted shares of
Class D common stock on January 5, 2010 |
|
(5) |
|
75,000 shares vest on June 5, 2011 and June 5,
2012. The CAO was awarded 225,000 restricted shares of
Class D common stock on January 5, 2010. |
The following table sets forth the number of shares of stock
that have vested and the aggregate dollar value realized upon
vesting of stock for the named executive officers during the
year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
OPTION EXERCISES AND STOCK VESTED
|
|
|
2010 Stock Vested
|
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
Name
|
|
Acquired on Vesting #
|
|
on Vesting $
|
|
Catherine L. Hughes
|
|
|
150,000
|
|
|
|
617,500
|
|
Alfred C. Liggins, III
|
|
|
433,334
|
|
|
|
1,749,669
|
|
Barry A. Mayo
|
|
|
43,334
|
|
|
|
167,269
|
|
Peter D. Thompson
|
|
|
100,000
|
|
|
|
371,750
|
|
Linda J. Vilardo
|
|
|
75,000
|
|
|
|
289,500
|
|
130
The following table sets forth non-qualified deferred
compensation for our named executive officers in fiscal 2010.
Non-Qualified
Deferred Compensation 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
|
|
Aggregate
|
|
|
Contributions in
|
|
Contributions in
|
|
Earnings in Last
|
|
Aggregate
|
|
Balance at Last
|
Name
|
|
Last Fiscal Year
|
|
Last Fiscal Year
|
|
Fiscal Year
|
|
Withdrawals/Distributions
|
|
Fiscal YearEnd
|
|
Catherine L. Hughes
|
|
$
|
23,000
|
|
|
$
|
-0-
|
|
|
$
|
1,521
|
|
|
$
|
-0-
|
|
|
$
|
372,292
|
|
Alfred C. Liggins, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter D. Thompson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry A. Mayo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda J. Vilardo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the potential payments to
Ms. Hughes, Mr. Liggins, Mr. Thompson and
Mr. Mayo upon termination or change in control under their
respective employment agreements. For purposes of calculating
the potential payments set forth in the table below, we have
assumed that (i) the date of termination was
December 31, 2010, (ii) the payments are based upon
the terms of the employment agreement which was in effect on
December 31, 2010, and (iii) the stock price was
$1.12, the closing market price of our Class D common stock
on December 31, 2010, the last business day of the 2010
fiscal year. As Ms. Vilardos employment agreement
expired on October 31, 2008, Ms. Vilardo was no longer
entitled to any such payments as of December 31, 2010.
Potential
Payments upon Termination or Change of Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o
|
|
|
Termination for
|
|
|
|
|
|
|
Cause or Upon
|
|
|
Cause or
|
|
|
|
Resignation of
|
|
|
Change of Control
|
|
|
Resignation w/o
|
|
|
|
Officer Upon Change
|
|
|
or Resignation for
|
|
|
Good Reason, Death
|
|
|
|
in Control
|
|
|
Good Reason
|
|
|
or Disability
|
|
|
Executive Benefits and Payments Upon Termination for Catherine
L. Hughes
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary/Severance
|
|
$
|
2,250,000
|
|
|
$
|
750,000
|
|
|
|
n/a
|
|
Medical, Dental and Vision
|
|
|
n/a
|
|
|
|
6,900
|
|
|
|
n/a
|
|
Unvested Portion of Stock Awards
|
|
|
280,000
|
|
|
|
280,000
|
|
|
|
n/a
|
|
Deferred Compensation
|
|
|
372,292
|
|
|
$
|
372,292
|
|
|
|
372,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,902,292
|
|
|
$
|
1,409,192
|
|
|
$
|
372,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments Upon Termination for Alfred C.
Liggins
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary/Severance
|
|
$
|
2,940,000
|
|
|
$
|
980,000
|
|
|
|
n/a
|
|
Medical, Dental and Vision
|
|
|
n/a
|
|
|
|
11,100
|
|
|
|
n/a
|
|
Unvested Portion of Stock Awards
|
|
|
858,666
|
|
|
|
858,666
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,798,666
|
|
|
$
|
1,849,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments Upon Termination for Peter D.
Thompson
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary/Severance
|
|
$
|
n/a
|
|
|
$
|
93,750
|
|
|
|
n/a
|
|
Medical, Dental and Vision
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Unvested Portion of Stock Awards
|
|
|
196,000
|
|
|
|
196,000
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
196,000
|
|
|
$
|
289,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments Upon Termination for Barry A.
Mayo
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary/Severance
|
|
$
|
n/a
|
|
|
$
|
275,000
|
|
|
|
n/a
|
|
Medical, Dental and Vision
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Unvested Portion of Stock Awards
|
|
|
97,066
|
|
|
|
97,066
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
97,066
|
|
|
$
|
372,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131
|
|
|
(a) |
|
Mr. Thompsons employment agreement does not
explicitly provide for the immediate vesting of unvested stock
awards upon a Change of Control (as defined in the
Companys 2009 Stock Option and Restricted Stock Grant
Plan). However, in the event of a Change of Control, under the
terms of the Companys 2009 Stock Option and Restricted
Stock Grant Plan, the compensation committee may provide, in its
discretion, that any unvested portion of stock awards shall
become immediately vested. |
Directors
Fees
Our non-employee directors each typically receive an annual
retainer of $20,000 which is paid in equal installments on a
quarterly basis. In addition, they receive $1,000 for each board
meeting attended, and are reimbursed for all
out-of-pocket
expenses related to meetings attended. Non-employee directors
serving as chairperson of a committee of the board of directors
receive an extra $10,000 per annum. However, in 2009, due to the
economic crisis and corresponding effects on the Companys
operations, the non-employee directors were not paid a quarterly
retainer or any other amounts for service during the year except
for the first quarter of 2009. The balance of the 2009 fees and
all the 2010 fees were paid in December 2010. Pursuant to
the Companys Policy for Granting Stock Options and
Restricted Stock Awards, as adopted by the Committee, on an
annual basis on the grant date immediately after each annual
stockholders meeting, each non-employee directors also
receives an award of stock options in an amount as determined by
the Committee (the Non-Employee Director Annual
Award). The grant date for the Non-Employee Director
Annual Award is the fifth day of the month following the date of
the annual stockholder meeting. If the Committee does not make a
determination as to the size of the Non-Employee Director Annual
Award, each non-employee director automatically receives an
award of options to purchase that number of shares that would
have a fair market value of $25,000 on the grant date (the
Automatic Non-Employee Director Award). Under this
policy, for 2009, each of our non-officer directors received an
Automatic Non-Employee Director Award of options to purchase
7,886 shares of Class D common stock on
January 5, 2010. The number of shares was determined by
dividing $3.17, the closing share price of our Class D
common stock on January 5, 2010 into $25,000. Our officers
who serve as directors do not receive compensation for their
services as directors other than the compensation they receive
as officers of Radio One.
2010 Director
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or Paid
|
|
Option
|
|
Total
|
Name
|
|
in Cash $(1)
|
|
Awards $(2)
|
|
$
|
|
Terry L. Jones(3)
|
|
|
36,000
|
|
|
|
8,528
|
|
|
|
44,528
|
|
Brian W. McNeill(3)
|
|
|
26,000
|
|
|
|
8,528
|
|
|
|
34,528
|
|
B. Doyle Mitchell, Jr.(4)
|
|
|
26,000
|
|
|
|
8,528
|
|
|
|
34,528
|
|
D. Geoffrey Armstrong(3)
|
|
|
36,000
|
|
|
|
8,528
|
|
|
|
44,528
|
|
Ronald E. Blaylock(5)
|
|
|
25,000
|
|
|
|
8,528
|
|
|
|
33,528
|
|
|
|
|
(1) |
|
The dollar amount recognized for financial statement reporting
purposes in 2010 in accordance with ASC 718. |
|
(2) |
|
On December 16, 2009 each director was awarded options to
purchase 7,886 shares of Class D common stock. The
option award grant date was January 5, 2010. The number of
shares was determined by dividing $3.17, the closing share price
of our Class D common stock on January 5, 2010 into
$25,000. |
|
(3) |
|
55,616 options outstanding in the aggregate as of
December 31, 2010. |
|
(4) |
|
25,616 options outstanding in the aggregate as of
December 31, 2010. |
|
(5) |
|
50,616 options outstanding in the aggregate as of
December 31, 2010. |
132
Equity
Compensation Plan Information
The following table sets forth, as of December 31, 2010,
the number of shares of Class A and Class D common
stock that are issuable upon the exercise of stock options
outstanding under our 2009 Stock Plan and our 1999 Stock Plan,
as amended on May 26, 2004 to increase the shares of
Class D common stock available for issuance under the plan.
The 1999 Stock Plan, as amended, expired by its terms on
May 5, 2009 leaving no shares available for issuance under
that plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
Number of
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Securities to be
|
|
|
|
|
|
Under Equity
|
|
|
|
Issued Upon
|
|
|
Weighted-Average
|
|
|
Compensation Plans
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
(Excluding
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Securities
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Reflected in the
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
First Column)
|
|
|
Equity compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio One, Inc. Amended and Restated 1999 Stock Option and
Restricted Stock Grant Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Class D
|
|
|
4,289,092
|
|
|
$
|
9.40
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio One, Inc. 2009 Stock Option and Restricted Stock Grant Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Class D
|
|
|
39,430
|
|
|
$
|
3.17
|
|
|
|
5,050,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,328,522
|
|
|
$
|
9.31
|
|
|
|
5,050,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, which ended on
December 31, 2010, the compensation committee was comprised
of Terry L. Jones, D. Geoffrey Armstrong and Brian W. McNeill.
None of those members is or has been an officer or employee of
the Company, and no executive officer of the Company served on
the compensation committee or board of any entity that employed
any member of the Companys compensation committee or board
of directors.
COMPENSATION
COMMITTEE REPORT
Director Terry L. Jones was the Chairperson and directors Brian
W. McNeill and D. Geoffrey Armstrong served on the compensation
committee. The compensation committee has reviewed the
performance of the executive officers of Radio One, Inc. and
approved their 2010 compensation, including salary and cash and
equity bonus amounts. The compensation committee also has
reviewed and discussed the Compensation Discussion and Analysis
for the fiscal year ended December 31, 2010, with the
management of Radio One. Based on its review and discussion, the
compensation committee recommends to the board of directors that
this Compensation Discussion and Analysis be included in this
prospectus.
Respectfully submitted,
Compensation Committee:
Terry L. Jones, Chairman
Brian W. McNeill
D. Geoffrey Armstrong
133
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The Company has four classes of common stock, Class A,
Class B, Class C and Class D. Generally, except
as summarized below, the shares of each class are identical in
all respects and entitle the holders thereof to the same rights
and privileges. However, with respect to voting rights, each
share of Class A common stock entitles its holder to one
vote and each share of Class B common stock entitles its
holder to ten votes. The holders of Class C and
Class D common stock are not entitled to vote on any
matters. The holders of Class A common stock can convert
such shares into shares of Class C or Class D common
stock. Subject to certain limitations, the holders of
Class B common stock can convert such shares into shares of
Class A common stock. The holders of Class C common
stock can convert such shares into shares of Class A common
stock. The holders of Class D common stock have no such
conversion rights.
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of January 31,
2011 by:
|
|
|
|
|
each person (or group of affiliated persons) known by us to be
the beneficial owner of more than five percent of any class of
common stock;
|
|
|
|
each of the current executive officers named in the Summary
Compensation Table;
|
|
|
|
each of our directors and nominees for director; and
|
|
|
|
all of our directors and executive officers as a group.
|
In the case of persons other than our executive officers,
directors and nominees, such information is based solely upon a
review of the latest schedules 13D or 13G, as amended. Each
individual stockholder possesses sole voting and investment
power with respect to the shares listed, unless otherwise noted.
Information with respect to the beneficial ownership of the
shares has been provided by the stockholders. The number of
shares of stock includes all shares that may be acquired within
60 days of January 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Class C
|
|
Class D
|
|
|
|
|
|
|
Number
|
|
Percent
|
|
|
|
Percent
|
|
|
|
Percent
|
|
|
|
Percent
|
|
|
|
|
|
|
of
|
|
of
|
|
Number of
|
|
of
|
|
Number of
|
|
of
|
|
Number of
|
|
of
|
|
Economic
|
|
Voting
|
|
|
Shares
|
|
Class
|
|
Shares
|
|
Class
|
|
Shares
|
|
Class
|
|
Shares
|
|
Class
|
|
Interest
|
|
Interest
|
|
Catherine L. Hughes(1)(2)(3)(4)(6)
|
|
|
1,000
|
|
|
|
*
|
|
|
|
851,536
|
|
|
|
29.8
|
%
|
|
|
1,579,674
|
|
|
|
50.6
|
%
|
|
|
4,692,410
|
|
|
|
10.3
|
%
|
|
|
13.1
|
%
|
|
|
27.0
|
%
|
Alfred C. Liggins, III(1)(3)(4)(5)(6)
|
|
|
574,909
|
|
|
|
20.1
|
%
|
|
|
2,010,307
|
|
|
|
70.2
|
%
|
|
|
1,541,374
|
|
|
|
49.4
|
%
|
|
|
9,707,444
|
|
|
|
21.3
|
%
|
|
|
25.4
|
%
|
|
|
65.7
|
%
|
Barry A. Mayo(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,727
|
|
|
|
*
|
|
|
|
*
|
|
|
|
0.00
|
%
|
Linda J. Vilardo(8)
|
|
|
1,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,216
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
%
|
Terry L. Jones(9)
|
|
|
49,557
|
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
681,172
|
|
|
|
1.5
|
%
|
|
|
1.5
|
%
|
|
|
*
|
%
|
Brian W. McNeill(10)
|
|
|
26,434
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
869,165
|
|
|
|
1.9
|
%
|
|
|
1.9
|
%
|
|
|
*
|
%
|
D. Geoffrey Armstrong(11)
|
|
|
10,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186,460
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
%
|
Ronald E. Blaylock(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,730
|
|
|
|
*
|
|
|
|
*
|
|
|
|
0.00
|
%
|
B. Doyle Mitchell, Jr.(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,730
|
|
|
|
*
|
|
|
|
*
|
|
|
|
0.00
|
%
|
Peter D. Thompson(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,538
|
|
|
|
*
|
|
|
|
*
|
|
|
|
0.00
|
%
|
Dimensional Fund Advisors, L.P.(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,004,754
|
|
|
|
6.6
|
%
|
|
|
6.2
|
%
|
|
|
0.00
|
%
|
All Directors and Named Executives as a group (10 persons)
|
|
|
662,900
|
|
|
|
23.1
|
%
|
|
|
2,861,843
|
|
|
|
100.0
|
%
|
|
|
3,121,048
|
|
|
|
100.0
|
%
|
|
|
16,499,592
|
|
|
|
36.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Includes 31,211 shares of Class C common stock and
62,997 shares of Class D common stock held by
Hughes-Liggins & Company, L.L.C., the members of which
are the Catherine L. Hughes Revocable Trust, dated March 2,
1999, of which Ms. Hughes is the trustee and sole
beneficiary (the Hughes Revocable Trust), and the
Alfred C. Liggins, III Revocable Trust, dated March 2,
1999, of which Mr. Liggins is the trustee and sole
beneficiary (the Liggins Revocable Trust). The
address of Ms. Hughes and Mr. Liggins is 5900 Princess
Garden Parkway, 7th Floor, Lanham, MD 20706. |
134
|
|
|
(2) |
|
The shares of Class B common stock, 247,366 shares of
Class C common stock and 3,810,409 shares of
Class D common stock are held by the Hughes Revocable
Trust; 192,142 shares of Class C common stock and
286,875 shares of Class D common stock are held by the
Catherine L. Hughes Charitable Lead Annuity Trust, dated
March 2, 1999, of which Harold Malloy is trustee;
1,124,560 shares of Class C common stock are held by
the Catherine L. Hughes Dynastic Trust, dated March 2,
1999, of which Ms. Hughes is the trustee and sole
beneficiary. |
|
(3) |
|
The shares of Class A common stock and Class B common
stock are subject to a voting agreement between Ms. Hughes
and Mr. Liggins with respect to the election of Radio
Ones directors. |
|
(4) |
|
As of January 31, 2011, the combined economic and voting
interests of Ms. Hughes and Mr. Liggins were 38.6% and
92.7%, respectively. |
|
(5) |
|
The shares of Class B common stock, 605,313 shares of
Class C common stock, and 5,611,565 shares of
Class D common stock are held by the Liggins Revocable
Trust; and 920,456 shares of Class C common stock are
held by the Alfred C. Liggins, III Dynastic Trust dated
March 2, 1999, of which Mr. Liggins is the trustee and
sole beneficiary. |
|
(6) |
|
Ms. Hughes includes 400,000 shares of Class D
common stock obtainable upon the exercise of stock options.
Mr. Liggins includes 2,266,667 shares of Class D
common stock obtainable upon the exercise of stock options. |
|
(7) |
|
Includes 50,000 shares of Class D common stock
obtainable upon the exercise of stock options. |
|
(8) |
|
Includes 1,000 shares of Class A common stock. |
|
(9) |
|
Includes 47,730 shares of Class D common stock
obtainable upon the exercise of stock options and
300 shares of Class A common stock and 600 shares
of Class D common stock held by Mr. Jones as custodian
for his daughter. |
|
(10) |
|
Includes 47,730 shares of Class D common stock
obtainable upon the exercise of stock options. |
|
(11) |
|
Includes 47,730 shares of Class D common stock
obtainable upon the exercise of stock options. |
|
(12) |
|
Includes 42,730 shares of Class D common stock
obtainable upon the exercise of stock options. |
|
(13) |
|
Includes 17,730 shares of Class D common stock
obtainable upon the exercise of stock options. |
|
(14) |
|
Includes 50,000 shares of Class D common stock
obtainable upon the exercise of stock options. |
|
(15) |
|
The address of Dimensional Fund Advisors L.P. is 1299 Ocean
Avenue, Santa Monica, CA 90401. This information is based on a
Schedule 13G/A filed on February 10, 2010. |
135
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
We review all transactions and relationships in which Radio One
and our directors and executive officers or their immediate
family members are participants to determine whether such
persons have a direct or indirect material interest. In
addition, our code of ethics requires our directors, executive
officers and principal financial officers to report to the board
or the audit committee any situation that could be perceived as
a conflict of interest. Once a related person transaction has
been identified, the board of directors may appoint a special
committee of the board of directors to review and, if
appropriate, approve such transaction. The special committee
will consider the material facts, such as the nature of the
related persons interest in the transaction, the terms of
the transaction, the importance of the transaction to the
related person and to us, whether the transaction is on terms no
less favorable than terms generally available to an unaffiliated
third party under the same or similar circumstances, and other
matters it deems appropriate. As required under the SEC rules,
we disclose in the proxy statement related party transactions
that are directly or indirectly material to us or a related
person.
WDBZ-AM
Cincinnati Purchase from Blue Chip Communications,
Inc.
In July 2007, the Company closed on an agreement to acquire the
assets of
WDBZ-AM, a
radio station located in the Cincinnati metropolitan area, from
Blue Chip Communications, Inc. (Blue Chip) for
approximately $2.6 million in seller financing. The
financing was a 5.1% interest bearing loan payable monthly
through July 2008. The Company satisfied the loan in full in
July 2008. Blue Chip is owned by L. Ross Love, a former member
of the Companys board of directors. The transaction was
approved by a special committee of independent directors
appointed by the board of directors. Additionally, the Company
retained an independent valuation firm to provide a fair value
appraisal of the station. Prior to the closing, and since
October of 2001, the Company consolidated
WDBZ-AM
within its existing Cincinnati operations, and operated
WDBZ-AM
under a local management agreement for no annual fee, the
results of which were incorporated in the Companys
financial statements.
Music
One, Inc.
The Companys CEO and Chairperson own a music company
called Music One, Inc. (Music One). The Company
sometimes engages in promoting the recorded music product of
Music One. Based on the cross-promotional value received by the
Company, we believe that the provision of such promotion is
fair. During the three and twelve months ended December 31,
2010 and 2009, Radio One paid $0 and $6,000 and $1,500 and
$38,000, respectively, to or on behalf of Music One, primarily
for market talent event appearances, travel reimbursement and
sponsorships. For the three and twelve months ended
December 31, 2010 and 2009, the Company provided no
advertising services to Music One. There were no cash, trade or
no-charge orders placed by Music One for the three and twelve
months ended December 31, 2010 and 2009. As of
December 31, 2010, Music One owed Radio One $124,000 for
office space and administrative services provided in 2010, 2009,
2008 and 2007.
During the years ended December 31, 2010, 2009, 2008 and
2007, Radio One paid $6,000, $38,000, $151,000 and $69,000,
respectively, to or on behalf of Music One, primarily for market
talent event appearances, travel reimbursement and sponsorships.
For the years ended December 31, 2010, 2009, 2008 and 2007,
the Company provided advertising to Music One in the amount of
$0, $0, $61,000 and $0, respectively. There were no cash, trade
or no-charge orders placed by Music One in 2010, 2009 or 2007.
As of December 31, 2010, Music One owed Radio One $124,000
for office space and administrative services provided in 2010,
2009, 2008 and 2007. In 2007, Music One paid to Radio One a
total of $169,000 for similar services provided during 2006 and
2005.
The office space and administrative support transactions between
Radio One and Music One are conducted at cost and all expenses
associated with the transactions are passed through at actual
costs. Costs associated with office space on behalf of Music One
are calculated based on square footage used by Music One,
multiplied by Radio Ones actual per square foot lease
costs for the appropriate time period. Administrative services
are calculated based on the approximate hours provided by each
Radio One employee to Music
136
One, multiplied by such employees applicable hourly rate
and related benefits allocation. Advertising spots are priced at
an average unit rate. Based on the cross-promotional nature of
the activities provided by Music One and received by the
Company, we believe that these methodologies of charging average
unit rates or passing through the actual costs incurred are fair
and reflect terms no more favorable than terms generally
available to a third-party. Since 2005, in no fiscal year has
the amount of any particular transaction exceeded $120,000.
Disclosure of the transactions was required under
Item 404(a) of
Regulation S-K
in 2006 as the value of the office space transactions were in
excess of $60,000. While disclosure of the office space
transactions were not required under Item 404(a) beginning
in 2007 (with the amendment increasing the threshold for
disclosure to $120,000), we opted for continued disclosure given
the related party nature of the transactions and the SECs
previous guidance that such transactions should be disclosed for
three years.
Executive
Officer Loans
In 2000, an officer of the Company, the former Chief Financial
Officer (Former CFO), purchased shares of the
Companys common stock. The Former CFO purchased
333,334 shares of the Companys Class A common
stock and 666,666 shares of the Companys Class D
common stock. The stock was purchased with the proceeds of a
full recourse loan from the Company in the amount of
approximately $7.0 million for the Former CFO.
In September 2005, the Former CFO repaid a portion of his loan.
The partial repayment of approximately $7.5 million was
effected using 300,000 shares of the Companys
Class A common stock and 230,000 shares of the
Companys Class D common stock owned by the Former
CFO. All shares transferred to the Company in satisfaction of
this loan have been retired. As of December 31, 2007, the
remaining principal and interest balance on the Former
CFOs loan was approximately $1.7 million, which
included accrued interest in the amount of $175,000. The Former
CFO was employed with the Company through December 31,
2007, and pursuant to an agreement with the Company, the loan
became due in full in July 2008. Pursuant to his employment
agreement, the Former CFO was eligible to receive a retention
bonus in the amount of approximately $3.1 million in cash
on July 1, 2008, for having remained employed with the
Company through December 31, 2007. The $3.1 million
retention bonus was a pro-rata portion of a $7.0 million
retention bonus called for in his employment agreement, had he
remained employed with the Company for ten years, and is based
on the number of days of employment between October 18,
2005 and December 31, 2007. In July 2008, the Former CFO
settled the remaining balance of the loan in full by offsetting
the loan with his after-tax proceeds from the $3.1 million
retention bonus, in addition to paying a cash amount of $34,000
to the Company.
As of December 31, 2007, the Company had an additional loan
outstanding to the Former CFO in the amount of $88,000. The loan
was due on demand and accrued interest at 5.6%, totaling an
amount of $53,000 as of December 31, 2007. In January 2008,
the Former CFO repaid the full remaining balance of the loan in
cash in the amount of $140,000.
Controlled
Company Exemption
We are a controlled company under rules governing
the listing of our securities on the NASDAQ Stock Market because
more than 50% of our voting power is held by Catherine L.
Hughes, our Chairperson of the Board and Secretary, and Alfred
C. Liggins, III, our CEO and President. See Security
Ownership of Beneficial Owners and Management above.
Therefore, we are not subject to NASDAQ Stock Market listing
rules that would otherwise require us to have (i) a
majority of independent directors on the board; (ii) a
compensation committee composed solely of independent directors;
(iii) a nominating committee composed solely of independent
directors; (iv) compensation of our executive officers
determined by a majority of the independent directors or a
compensation committee composed solely of independent directors;
and (v) director nominees selected, or recommended for the
boards selection, either by a majority of the independent
directors or a nominating committee composed solely of
independent directors. In connection with recent legislation,
the SEC must adopt, no later than July 16, 2011, new rules
regarding compensation committee independence, which may impose
additional requirements to the definition of
independence determined by the applicable national
exchanges.
137
DESCRIPTION
OF CERTAIN OTHER INDEBTEDNESS
Senior
Credit Facility
On November 24, 2010, the Company entered into an Amendment
and Restatement Agreement (the Amendment and Restatement
Agreement) by and among the Company, as Borrower, Wells
Fargo Bank, N.A., as successor by merger to Wachovia Bank,
National Association, as administrative agent (the
Administrative Agent), and the lenders party thereto
(the Consenting Lenders), which Amendment and
Restatement Agreement amended and restated in its entirety that
certain Credit Agreement, dated as of June 13, 2005 (the
Credit Agreement), by and among the Company, the
Administrative Agent, and the lenders from time to time party
thereto (the Credit Agreement, as amended by the Amendment and
Restatement Agreement, the Amended and Restated Credit
Agreement). The Amendment and Restatement Agreement, among
other things, replaced the existing amount of outstanding
revolving loans with a $323.0 million term loan (the
New Term Loan) and provided for three tranches of
revolving loans, including a $20.0 million revolver to be
used for working capital, capital expenditures, investments, and
other lawful corporate purposes, a $5.1 million revolver to
be used solely to redeem or repurchase and retire the 2011
Notes, and a $13.7 million revolver to be used solely to
fund a capital call with respect to TV One (the Credit
Facility).
Maturity. As the result of our repurchase or
refinancing of all 2011 Notes outstanding prior to
January 1, 2011, the Amended and Restated Credit Agreement
expires on June 30, 2012 (the Maturity Date).
Interest. Interest payments under the terms of
the Amended and Restated Credit Agreement are due based on the
type of loan selected. Interest on both alternate base rate
loans and LIBOR loans will be payable monthly. The LIBOR
interest rate floor is 1.00% and the alternate base rate is
equal to the greater of the prime rate, the Federal Funds
Effective Rate plus 0.50% and the LIBO Rate for a one-month
period plus 1.00%. Interest payable on (i) LIBOR loans will
be at LIBOR plus 6.25% and (ii) alternate base rate loans
will be at alternate base rate plus 5.25% (and, in each case,
may be permanently increased if the Company exceeds certain
senior leverage ratio levels, tested quarterly beginning
June 30, 2011). The interest rate paid in excess of LIBOR
could be as high as 7.25% during the last quarter prior to
maturity if the Company exceeds the senior leverage ratio levels
on each test date. Additionally, amortization payments of 1.00%
per annum on the New Term Loan must be paid in equal quarterly
installments beginning September 30, 2011, with the
remainder due at maturity on June 30, 2012.
Mandatory Prepayments and Commitment
Reduction. The Amended and Restated Credit
Agreement contains anti-cash hoarding provisions and provides
that (i) net asset sales proceeds repay secured debt
(subject to a de minimus floor), (ii) net debt
proceeds repay secured debt (with exceptions for subordinated
debt issued to fund a TV One capital call) and (iii) equity
issuance proceeds repay secured debt (with exceptions for equity
issued to fund a TV One capital call, to purchase the interests
of certain TV One financial investors or of management and to
fund certain put rights related to TV One).
Default Interest and Fees. Upon the occurrence
and during the continuance of a specified default, at the
direction of the Required Lenders, interest will accrue on
amounts outstanding (excluding letters of credit) at a rate of
the alternate base rate plus the applicable rate, if any, plus
2.0% per annum, provided, however, that with respect to a LIBOR
loan the default rate will be equal to the interest rate
(including any applicable rate) otherwise applicable to such
loan plus 2.0% per annum. In the case of stand-by letters of
credit, letter of credit fees will accrue at the otherwise
applicable interest rate plus 2.0% per annum.
Security and Guarantees. The Credit Facility
is secured by, among other things, perfected first priority
liens and security interest in, to and on substantially all of
the present and future property and assets of Radio One and each
of Radio Ones restricted subsidiaries including but not
limited to the following (in each case, subject to certain
exceptions): (1) equipment, inventory, accounts receivable,
instruments, general intangibles, intellectual property,
investments, deposit accounts and real property; and
(2) equity interests owned by Radio One or any other of its
restricted subsidiaries.
138
Covenants. The Credit Facility contains
covenants (subject to customary exceptions, qualifications and
materiality thresholds) which, among other things, limit:
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indebtedness (including guarantees and other contingent
obligations);
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liens;
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fundamental changes;
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the sale of assets;
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restricted payments and the payment of dividends;
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mergers and acquisitions, subject to permitted acquisitions,
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investments;
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transactions with affiliates;
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restricted subsidiary distributions;
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lines of business;
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sale or issuance of equity interests;
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material agreements;
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certain intercompany matters; and
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our relationship with Reach Media.
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Financial Covenants. The Amended and Restated
Credit Agreement provides for maintenance of the following
maximum fixed charge coverage ratio as of the last day of each
fiscal quarter:
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Effective Period
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Ratio
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November 24, 2010 to December 30, 2010
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1.05 to 1.00
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December 31, 2010 to June 30, 2012
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1.07 to 1.00
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The Amended and Restated Credit Agreement also provides for
maintenance of the following maximum total leverage ratios
(subject to certain adjustments if subordinated debt is issued
or any portion of the $13.7 million revolver is used to
fund a TV One capital call):
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Effective Period
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Ratio
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November 24, 2010 to December 30, 2010
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9.35 to 1.00
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December 31, 2010 to December 30, 2011
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9.00 to 1.00
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December 31, 2011 and thereafter
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9.25 to 1.00
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The Amended and Restated Credit Agreement also provides for
maintenance of the following maximum senior leverage ratios
(subject to certain adjustments if any portion of the
$13.7 million revolver is used to fund a TV One capital
call):
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Beginning
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No Greater Than
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November 24, 2010 to December 30, 2010
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5.25 to 1.00
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December 31, 2010 to March 30, 2011
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5.00 to 1.00
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March 31, 2011 to September 29, 2011
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4.75 to 1.00
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September 30, 2011 to December 30, 2011
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4.50 to 1.00
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December 31, 2011 and thereafter
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4.75 to 1.00
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139
The Amended Credit Facility provides for maintenance of average
weekly availability at any time during any period set forth
below:
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Average Weekly
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Beginning
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Availability no Less Than
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November 24, 2010 through and including June 30, 2011
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$10,000,000
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July 1, 2011 and thereafter
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$15,000,000
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Commitment and Amendment Fees. An unused
revolver commitment fee of 0.50% was paid on the then
outstanding revolver commitment concurrently with the closing of
the Amendment and Restatement Agreement. An upfront amendment
fee of 0.50% was also paid to approving lenders based upon their
pro rata portion of the aggregate commitments under the Amended
and Restated Credit Agreement.
2013
Notes
Approximately $0.75 million aggregate principal amount of
2013 Notes remain outstanding after the completion of the
Transactions. The 2013 Notes were issued pursuant to an
indenture, dated as of February 10, 2005, by and among
Radio One, The Bank of New York (formerly United States
Trust Company of New York), as trustee, and the
guarantors named therein.
The 2013 Notes mature on February 15, 2013. The 2013 Notes
carry interest at the rate of
63/8%
per annum, payable semi-annually on February 15 and August 15
each year.
The 2013 Notes rank: (i) senior to any of our and our
guarantors future debt that expressly provides that it is
subordinated to the 2013 Notes; (ii) junior to the Notes;
(iii) other than the Notes, on a parity with any of our and
our guarantors future unsecured senior subordinated
obligations that do not expressly provide that they are
subordinated to the 2013 Notes; and (iii) junior to all of
our and our guarantors existing and future senior debt.
The 2013 Notes are guaranteed on a senior subordinated basis by
each of our existing and future domestic restricted
subsidiaries, subject to certain exceptions.
We may redeem some or all of the 2013 Notes at a redemption
price equal to 100% of the principal amount, plus accrued and
unpaid interest.
If we experience specific kinds of changes in control, we must
offer to repurchase the 2013 Notes at a repurchase price of 101%
of the principal amount, plus accrued and unpaid interest.
On November 24, 2010, we, the guarantors signatory thereto
and Wilmington Trust Company, as successor trustee, entered
into a supplemental indenture to the indenture governing the
2013 Notes which waived any and all existing defaults and events
of default that had arisen or may have arisen under each such
indenture that may be waived and eliminated substantially all of
the covenants in each such indenture, other than the covenants
to pay principal of and interest on the 2013 Notes when due, and
eliminated or modified the related events of default. On
December 20, 2010, we paid defaulted interest and interest
thereon arising from the August 16, 2010 interest
nonpayment to the holders of the 2013 Notes as of a special
record date of December 10, 2010. As a result, there is no
default or event of default under the indenture governing the
2013 Notes or the 2013 Notes.
140
DESCRIPTION
OF NOTES
In this description, Company refers only to Radio
One, Inc. and not to any of its subsidiaries. The Company issued
the Old Notes and will issue the Exchange Notes under an
indenture, dated as of November 24, 2010 (the
Indenture), among the Company, as issuer, the
Guarantors and Wilmington Trust Company, as trustee (the
Trustee). The terms of the Exchange Notes offered in
exchange for the Old Notes will be substantially identical to
the terms of the Old Notes, except that the Exchange Notes are
registered under the Securities Act, and the transfer
restrictions, registration rights and related special interest
terms applicable to the Old Notes will not apply to the Exchange
Notes. As a result, we refer to the Exchange Notes, any PIK
Notes (as defined below) and the Old Notes collectively as
Notes for purposes of the following summary.
The statements under this caption relating to the Indenture and
the Notes are summaries and are not a complete description
thereof, and where reference is made to particular provisions,
such provisions, including the definitions of certain terms, are
qualified in their entirety by reference to all of the
provisions of the Indenture and the Notes and those terms made
part of the Indenture by the Trust Indenture Act. The
definitions of certain capitalized terms used in the following
summary are set forth under the caption
Certain Definitions. Certain defined
terms used in this description but not defined below under
Certain Definitions have the meanings
assigned to them in the Indenture and the Registration Rights
Agreement. Copies of the Indenture are available upon request
from the Company. We urge you to read those documents carefully
because they, and not the following description, govern your
rights as a holder.
The registered holder of a Note is treated as the owner of it
for all purposes. Only registered holders have rights under the
Indenture.
Brief
Description of the Notes and the Guarantees
The
Notes
The Notes are:
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general unsecured obligations of the Company;
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subordinated in right of payment to all existing and future
Senior Debt of the Company;
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senior in right of payment to all existing and future
Subordinated Obligations of the Company; and
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fully and unconditionally, jointly and severally, guaranteed by
the Guarantors as further described below.
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The
Guarantees
The Guarantees are:
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general unsecured obligations of each Guarantor;
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subordinated in right of payment to all existing and future
Senior Debt of each Guarantor; and
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senior in right of payment to all existing and any future
Subordinated Obligations of each Guarantor.
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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.
As of the date of the Indenture, all of the Companys
domestic Subsidiaries (other than Reach Media) will be
Restricted Subsidiaries and all of the
Companys domestic Restricted Subsidiaries were Guarantors;
provided that if, at any time, the Company, any of its
Restricted Subsidiaries
and/or any
Affiliated Entities become the Beneficial Owner of 80% or more
of the Equity Interests in Reach Media, then Reach Media (and
each of its Subsidiaries, if any) shall automatically become a
Restricted Subsidiary and shall thereafter become a Guarantor.
As of the date of the Indenture, TV One was not be a Subsidiary
of the Company, but in the
141
event it becomes a Subsidiary of the Company, subject to the
following proviso (i) it shall be an Unrestricted
Subsidiary and (ii) such designation shall not be subject
to the covenant described under the caption
Certain Covenants Designation of
Restricted and Unrestricted Subsidiaries; provided
that if, at any time, the Company, any of its Restricted
Subsidiaries
and/or any
Affiliate Entities become the Beneficial Owner of 90% or more of
the outstanding Equity Interests of TV One, then TV One (and
each of its Subsidiaries, if any) shall automatically become a
Restricted Subsidiary and shall thereafter become a Guarantor.
Notwithstanding the foregoing, under the circumstances described
below under the subheading Certain
Covenants Designation of Restricted and Unrestricted
Subsidiaries, the Company will be permitted to designate
certain of its Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be
subject to the restrictive covenants in the Indenture and will
not guarantee the Notes.
Principal,
Maturity and Interest
The Indenture provides for the issuance of up to $291,510,000 of
Old Notes thereunder in connection with the Transactions, any
additional Exchange Notes issued in connection with the
registered exchange offer and an unlimited amount of additional
Notes issued in respect of interest payments on any such Notes.
The Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 or integral multiples of
$1.00 in excess thereof. The Notes will mature on May 24,
2016. Additional Notes issued in respect of interest payments
(PIK Notes) will be issued in integral
multiples of $1.00.
Interest will be payable in cash, or at the Companys
election, partially in cash and partially in PIK Notes (a
PIK Election) on a quarterly basis in arrears
on February 15, May 15, August 15 and November 15 of
each year (each, an Interest Payment Date),
commencing on February 15, 2011. The Company will make each
interest payment to the Holders of record on the
February 1, May 1, August 1 and November 1 immediately
preceding the related Interest Payment Date.
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 accrue at a rate of 12.5%
per annum if the interest for such interest period is paid fully
in cash. In the event that the Company makes a PIK Election in
accordance with the Indenture, cash interest will accrue and be
paid for such interest period at a rate of 6.0% per annum and
interest
paid-in-kind
through the issuance of PIK Notes (the PIK
Interest) will accrue for such interest period at 9.0%
per annum; provided that the Company may make a PIK Election
only with respect to interest accruing up to but not including
May 15, 2012, and with respect to interest accruing from
and after May 15, 2012 such interest shall accrue at a rate
per annum of 12.5% and shall be payable in cash. A PIK Election
is currently in effect.
The Company must elect the form of interest payment with respect
to each interest period by delivering a written notice to the
Trustee and the Holders prior to the beginning of such interest
period. In the absence of such an election for any interest
period, interest on the Notes shall be payable according to the
election for the previous interest period; provided that
interest accruing from and after May 15, 2012 shall accrue
at a rate of 12.5% per annum and shall be payable in cash.
Additional interest may accrue on the Notes as liquidated
damages in certain circumstances described under
Registration Rights Agreement and shall be payable
in cash. During any period in which a payment default or an
Event of Default under clause (9) of the covenant described
under the caption Events of Default and
Remedies, has occurred and is continuing, interest on all
principal and overdue interest will accrue at a rate that is
2.0% higher than the cash interest rate on the Notes in each
interest period for which no PIK Election has been made and a
rate that is 2.0% higher than the total cash interest rate and
PIK Interest rate on the Notes in each interest period for which
a PIK Election has been made (such increased interest, the
Default Interest) and shall be payable in
cash. All references to interest in the Indenture
and this Description of Notes include any additional
interest that may be payable on the Notes, including, but not
limited to, any Default Interest and additional interest payable
pursuant to the Registration Rights Agreement. Interest on the
Notes will be computed on the basis of a
360-day year
comprised of twelve
30-day
months.
142
Methods
of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company,
the Company will pay all principal, cash interest and premium,
if any, on that Holders Notes in accordance with those
instructions. All other cash payments on Notes will be made at
the office or agency of the paying agent and registrar unless
the Company elects to make cash interest payments by check
mailed to the Holders at their address set forth in the register
of Holders.
The Company will make all principal, premium and cash interest
payments on each Note in global form registered in the name of
DTC or its nominee in immediately available funds to DTC or its
nominee, as the case may be, as the Holder of such global Note.
On each Interest Payment Date for which the Company has made a
PIK Election, the Company shall request the Trustee to, and the
Trustee shall upon the Companys request, authenticate and
deliver PIK Notes for original issuance to the Holders of the
Notes on the relevant record date, in an aggregate principal
amount necessary to pay the PIK Interest. With respect to PIK
Notes represented by one or more global notes registered in the
name of DTC or its nominee on the relevant record date, the
principal amount of such PIK Notes shall be increased by an
amount equal to the amount of PIK Interest for the applicable
interest period. Any PIK Note so issued will be dated as of the
applicable Interest Payment Date, will bear interest from and
after such date and will be issued with the designation
PIK on the face thereof. Notwithstanding anything to
the contrary in this description, the Company may not issue PIK
Notes in lieu of paying interest in cash if such interest is
default interest or is interest payable with respect to any
principal that is due and payable, whether at stated maturity,
upon redemption, repurchase or otherwise.
Paying
Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar.
The Company may change the paying agent or registrar without
prior notice to the Holders of the Notes, and the Company or any
of its Domestic Subsidiaries may act as paying agent.
Transfer
and Exchange
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Company or the trustee may require a Holder to
furnish appropriate endorsements and transfer documents in
connection with a transfer of Notes, and the Company may require
Holders to pay all taxes due on transfer. The Company is not
required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a
selection of Notes to be redeemed.
The Holder of a Note will be treated as the owner of it for all
purposes.
Guarantees
Initially, all of the Companys domestic Restricted
Subsidiaries will guarantee the Notes. The Guarantees will be
joint and several obligations of the Guarantors. Each Guarantee
will be subordinated to the prior payment in full of all Senior
Debt of that Guarantor and guarantees of that Guarantor of the
Companys Senior Debt. The obligations of each Guarantor
under its Guarantee will be limited as necessary to prevent that
Guarantee from constituting a fraudulent conveyance under
applicable law. See Risk Factors Risks Related
to the Notes Under certain circumstances a court
could cancel the Notes or the related guarantees under
fraudulent conveyance laws.
The Guarantee of a Guarantor will be automatically released in
accordance with the applicable provisions of the Indenture:
(1) in connection with any sale or other disposition of all
or substantially all of the properties or assets of such
Guarantor (including by way of merger or consolidation) other
than to the Company or another Guarantor, if the sale or other
disposition does not violate the provisions of the Indenture
described under the caption Repurchase at the
Option of Holders Asset Sales;
143
(2) in connection with any sale or other disposition of the
Capital Stock of such Guarantor (including by way of merger or
consolidation) other than to the Company or another Guarantor
such that such Guarantor ceases to constitute a Subsidiary, if
the sale or other disposition does not violate the provisions of
the Indenture described under the caption
Repurchase at the Option of
Holders Asset Sales;
(3) if the Company designates any Restricted Subsidiary
that is a Guarantor as an Unrestricted Subsidiary in accordance
with the provisions of the Indenture;
(4) in the case of any Subsidiary which after the date of
the Indenture is required to guarantee the Notes solely pursuant
to clause (2) of the covenant described below under the
caption Certain Covenants
Additional Guarantees, upon the release or discharge of
the guarantee incurred by such Subsidiary which resulted in the
obligation to guarantee the Notes; or
(5) upon Legal Defeasance or Covenant Defeasance with
respect to all Notes as described below under the caption
Legal Defeasance and Covenant Defeasance
or upon satisfaction and discharge of the Indenture as described
below under the caption Satisfaction and
Discharge.
Subordination
The payment of principal of, premium, if any, and interest,
including Special Interest, if any, on the Notes will be
subordinated to the prior payment in full in cash of all Senior
Debt of the Company, including Senior Debt incurred after the
date of the Indenture.
The holders of Senior Debt will be entitled to receive payment
in full in cash 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 or distribution of any kind or character
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 from the trust described under the caption
Legal Defeasance and Covenant
Defeasance) in the event of any distribution to creditors
of the Company or any Guarantor:
(1) in a liquidation or dissolution of the Company or such
Guarantor;
(2) in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or
such Guarantor or its property;
(3) in an assignment for the benefit of creditors of the
Company or such Guarantor; or
(4) in any marshaling of the Companys or such
Guarantors assets and liabilities.
Neither the Company nor any Guarantor may make any payment or
distribution of any kind or character 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 the caption Legal
Defeasance and Covenant Defeasance) and will not make any
deposit into such trust 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 (including, without
limitation, upon any acceleration of the maturity thereof)
occurs and is continuing; 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 the Company or
the holders or representatives 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
144
(2) in the case of a nonpayment default, upon the earlier
of (i) the date on which such nonpayment default is cured
or waived (so long as no other default exists),
(ii) 179 days after the date on which the applicable
Payment Blockage Notice is received, or (iii) 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, in each case, 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 nonpayment 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 the caption
Legal Defeasance and Covenant
Defeasance) 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 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.
The Company must promptly notify holders of Senior Debt if
payment of the Notes is accelerated because of an Event of
Default and the Company shall promptly notify the trustee and
the paying agent of any payment that has become due and payable
that, if made, would violate these subordination provisions;
provided that any failure to give such notice in each
case shall have no effect whatsoever on the subordination
provisions described herein.
As a result of the subordination provisions described above, in
the event of a bankruptcy, liquidation or reorganization of the
Company or any Guarantor, Holders of Notes may recover less
ratably than creditors of the Company or such Guarantor who are
holders of Senior Debt. See Risk Factors Risks
Related to the Notes.
Optional
Redemption
The Company may redeem all or a part of the Notes at any time or
from time to time 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 on the Notes redeemed, if any, to the
applicable redemption date, if redeemed during the periods
indicated below:
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Redemption Period
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Percentage
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Issue Date through and including May 31, 2011
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108
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%
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June 1, 2011 through and including December 31, 2011
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106
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%
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January 1, 2012 through and including December 31, 2012
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103
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%
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January 1, 2013 through and including December 31, 2013
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101.5
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%
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January 1, 2014 and thereafter
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100
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%
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Except as provided above, the Notes will not be redeemable at
the Companys option prior to their final maturity.
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 relevant 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 relevant Notes are not listed on any national
securities exchange, on a pro rata basis.
145
Notes or portions of Notes the trustee selects for redemption
will be in amounts of $1,000 or integral multiples of $1.00 in
excess thereof. 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 thereof
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 unless the Company
defaults in the payment thereof.
Mandatory
Redemption; Open Market Purchases
The Company is not required to make mandatory redemption or
sinking fund payments with respect to the Notes. However, under
certain circumstances, the Company may be required to offer to
purchase Notes as described under the caption
Repurchase at the Option of Holders. The
Company or its Affiliates may at any time and from time to time
purchase Notes in the open market or otherwise.
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 the Company to repurchase all or any part
(equal to $1,000 or integral multiples of $1.00 in excess
thereof) of that Holders Notes pursuant to an offer (the
Change of Control Offer) on the terms set
forth in the Indenture. In the Change of Control Offer, the
Company will offer a payment (the Change of Control
Payment) in cash equal to the percentage of the
aggregate principal amount of Notes to be repurchased plus
accrued and unpaid interest thereon, if any, to the date of
purchase (the Change of Control Purchase
Date), shown below for the monthly period in which the
Change of Control Purchase Date occurs:
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Redemption Period
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Percentage
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Issue Date through and including May 31, 2011
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108
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%
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June 1, 2011 through and including December 31, 2011
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106
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%
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January 1, 2012 through and including December 31, 2012
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103
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%
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January 1, 2013 through and including December 31, 2013
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101.5
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%
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January 1, 2014 and thereafter
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100
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%
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Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering
to repurchase Notes as of the Change of Control Purchase 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.
The Company will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent 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 provisions of the covenant described herein, the Company
will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under
this covenant by virtue of the Companys compliance with
such securities laws or regulations.
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On the Change of Control Purchase Date, the Company 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 so accepted together with an officers certificate
stating the aggregate principal amount of Notes or portions of
Notes being purchased by the Company.
The paying agent will promptly mail to each Holder of Notes
properly tendered and not withdrawn 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 integral multiples of $1.00 in excess thereof. The
Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of
Control Purchase Date.
If the Change of Control Purchase Date is on or after an
interest payment record date and on or before the related
Interest Payment Date, any accrued and unpaid interest will be
paid to the Person in whose name a Note is registered at the
close of business on such record date, and no other interest
will be payable to Holders who tender pursuant to the Change of
Control Offer.
Prior to complying with any of the provisions of this section
but in any event within 90 days following a Change of
Control, the Company will either pay all outstanding Senior Debt
or obtain the requisite consents, if any, under all the
agreements governing outstanding Senior Debt to permit the
repurchase of the Notes required by this section.
The provisions described above that require the Company 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. The provisions of the Indenture may not afford
Holders protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar
transaction affecting the Company that may adversely affect
Holders, if such transaction is not the type of transaction
included within the definition of Change of Control. A
transaction involving the management of the Company or its
Affiliates, or a transaction involving a recapitalization of the
Company, will result in a Change of Control only if it is the
type of transaction specified in such definition. The definition
of Change of Control may be amended or modified with the written
consent of a majority in aggregate principal amount of
outstanding Notes. See Amendment, Supplement
and Waiver.
The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Company and
purchases all Notes properly tendered and not withdrawn under
the Change of Control Offer.
Holders of Notes may not be entitled to require the Company to
purchase their Notes in certain circumstances involving a
significant change in the composition of the Companys
Board of Directors, including in connection with a proxy
contest, where the Companys Board of Directors initially
publicly opposes the election of a dissident slate of directors,
but subsequently approves such directors as Continuing Directors
for purposes of the Indenture. This may result in a change in
the composition of the Companys Board of Directors that,
but for such subsequent approval, would have otherwise
constituted a Change of Control requiring a Change of Control
Offer under the terms of the Indenture.
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 the Company and its Restricted
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 the Company to repurchase the Notes
as a result of a
147
sale, lease, transfer, conveyance or other disposition of less
than all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to another Person or group may be
uncertain.
Asset
Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (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 (measured as of the date of
the definitive agreement with respect to such Asset Sale) of the
assets or Equity Interests issued or sold or otherwise disposed
of; and
(2) at least 75% of the consideration received in the Asset
Sale by the Company or such Restricted Subsidiary is in the form
of cash or Cash Equivalents.
For purposes of this provision, each of the following will be
deemed to be cash:
(1) any liabilities, as shown on the Companys or such
Restricted Subsidiarys most recent balance sheet, of the
Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated
to the Notes or any Guarantee) that are assumed by the
transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted
Subsidiary from further liability; and
(2) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such
transferee that are converted within 90 days by the Company
or such Restricted Subsidiary into cash, to the extent of the
cash received in that conversion.
Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company (or the applicable Restricted
Subsidiary, as the case may be) may apply those Net Proceeds at
its option to any combination of the following:
(1) to repay, prepay, redeem or repurchase Senior Debt of
the Company or any Guarantor, provided that any related
loan commitment is permanently reduced in an amount equal to the
principal amount so repaid, prepaid, redeemed or repurchased;
(2) to acquire all or substantially all of the properties
or assets of a Permitted Business so long as such properties and
assets are acquired by the Company or a Restricted Subsidiary;
(3) to acquire a majority of the Voting Stock of one or
more other Persons primarily engaged in a Permitted Business, if
after giving effect to any such acquisition of Voting Stock,
such Person is or becomes a Restricted Subsidiary, or to finance
the TV One Investment described in clause (ii) of the
definition thereof;
(4) to make capital expenditures in a Permitted Business
owned by the Company or a Restricted Subsidiary; or
(5) to acquire other long-term assets that are used or
useful in a Permitted Business owned by the Company or a
Restricted Subsidiary.
Any Net Proceeds from an Asset Sale that are not applied or
invested as provided in this paragraph will constitute
Excess Proceeds.
Pending the final application of any Net Proceeds, the Company
or any such Restricted Subsidiary may temporarily reduce
revolving credit borrowings or otherwise invest the Net Proceeds
in any manner that is not prohibited by the Indenture.
On the 365th day after an Asset Sale (or, at the
Companys option, any earlier date), if the aggregate
amount of Excess Proceeds then exceeds $10.0 million, the
Company will make an offer (the Asset Sale
148
Offer) to all Holders of Notes and all holders of
other Indebtedness ranking 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 or assets, to purchase the maximum principal
amount of Notes and such other pari passu Indebtedness,
if applicable, that may be purchased out of the aggregate Excess
Proceeds. The offer price in any Asset Sale Offer will be equal
to 100% of principal amount plus accrued and unpaid interest, 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, the Company 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
aggregate amount of Excess Proceeds, the trustee will select the
Notes and the Company, or its agent, shall select 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.
If the Asset Sale Offer purchase date is on or after an interest
payment record date and on or before the related Interest
Payment Date, any accrued and unpaid interest will be paid to
the Person in whose name a Note is registered at the close of
business on such record date, and no other interest will be
payable to holders who tender Notes pursuant to the Asset Sale
Offer.
The Company will publicly announce the results of the Asset Sale
Offer on or as soon as commercially practicable after the date
such Asset Sale Offer is completed.
The exercise by Holders of Notes of their right to require the
Company to repurchase the Notes upon an Asset Sale could cause a
default under the Existing Credit Agreement if the Company is
then prohibited by the terms of such agreement from making the
Asset Sale Offer under the Indenture. In the event an Asset Sale
occurs at a time when the Company is prohibited under the
Existing Credit Agreement from purchasing Notes, the Company
could seek the consent of its lenders under such agreement to
the purchase of Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does
not obtain a consent or repay those borrowings, it will remain
prohibited from purchasing Notes. In that case, the
Companys failure to purchase tendered Notes could result
in an Event of Default under the Indenture, which could, in
turn, constitute a default under other indebtedness, including
the Existing Credit Agreement.
The Company will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection 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 covenant described herein, the
Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its
obligations under this covenant by virtue of the Companys
compliance with such securities laws or regulations.
Certain
Covenants
Restricted
Payments
The Company 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 the Companys or any of its
Restricted Subsidiaries Equity Interests (including,
without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the
Companys or any of its Restricted Subsidiaries
Equity Interests in their capacity as such (other than
(x) dividends or distributions payable in Equity Interests
(other than Disqualified Stock) or in the case of Preferred
Stock of the Company, an increase in the liquidation value
thereof or (y) payable to the Company or a Restricted
Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for
value any Equity Interests of the Company or any direct or
indirect parent of the Company, including in connection with any
merger or consolidation and including the exercise of any option
to exchange any Equity Interests (other than into Equity
Interests of the Company that are not Disqualified Stock);
149
(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value prior
to scheduled maturity or scheduled sinking fund payment, any
Subordinated Obligations (other than any Subordinated
Obligations owed to and held by the Company or any
Guarantor); or
(4) make any Investment other than a Permitted Investment
(all such payments and other actions set forth in
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) the Company would, both 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 Certain
Covenants Incurrence of Indebtedness and Issuance of
Disqualified Stock and Preferred Stock; and
(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the Issue Date (excluding
Restricted Payments permitted by clauses (2), (3), (4), (5),
(6), (7), (8) and (9) of the next succeeding
paragraph, but including Restricted Payments permitted by
clauses (1), (10), (11) and (12) of such paragraph),
is less than the sum, without duplication, of the following
(collectively, the Restricted Payments
Basket):
(a) 100% of the Consolidated Cash Flow of the Company (or,
if Consolidated Cash Flow for such period shall be a deficit,
minus 100% of such deficit) for the period (taken as one
accounting period) from the beginning of the Fiscal Quarter
following the Issue Date to the end of the Companys most
recently ended Fiscal Quarter for which internal financial
statements are available at the time of such Restricted Payment
less the product of 1.4 times the Consolidated Interest Expense
of the Company for the same period, plus
(b) 100% of the aggregate net cash proceeds received by the
Company since the Issue Date (i) as a contribution to its
common equity capital (other than from a Subsidiary of the
Company or, for so long as TV One remains a Designated Entity
but is not otherwise a Subsidiary, TV One) or (ii) from the
issue or sale of Equity Interests of the Company (other than
Disqualified Stock or Designated Preferred Stock) or from the
issue or sale of convertible or exchangeable Disqualified Stock
or convertible or exchangeable Designated Preferred Stock or
convertible or exchangeable debt securities of the Company that
have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock, Designated
Preferred Stock or debt securities) sold to a Subsidiary of the
Company or, for so long as TV One remains a Designated Entity
but is not otherwise a Subsidiary, TV One), plus
(c) an amount equal to the sum of (i) the net
reduction in Investments (other than Permitted Investments) made
by the Company or any Restricted Subsidiary after the Issue Date
in any Person resulting from principal payments, repurchases,
repayments or redemptions of such Investments by such Person,
proceeds realized on the sale of such Investments and proceeds
representing the return of capital (excluding dividends and
distributions on such Investments) or otherwise, in each case
received in cash by the Company or any Restricted Subsidiary and
(ii) in the event that the Company designates or
redesignates an Unrestricted Subsidiary to be a Restricted
Subsidiary, the portion (proportionate to the Companys
equity interest in such Subsidiary) of the Fair Market Value of
such Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that the foregoing sum shall not exceed, in the
case of any such Person or Unrestricted Subsidiary, the amount
of Investments (excluding Permitted Investments) made after the
Issue Date (and treated as a Restricted Payment) by the Company
or any Restricted Subsidiary in such Person or Unrestricted
Subsidiary; plus
150
(d) 100% of any dividends or other distributions received
in cash or Cash Equivalents by the Company or a Restricted
Subsidiary after the Issue Date from an Unrestricted Subsidiary
(other than Reach Media or, in the event that and for so long as
TV One remains an Unrestricted Subsidiary, TV One); provided
that such dividends have not been included in the
calculation of the Consolidated Net Income of the Company for
such period and shall not otherwise be required by the terms of
the Indenture to repay Indebtedness of the Company or any of its
Restricted Subsidiaries.
The preceding provisions will not prohibit the following
actions, provided that, in the case of clauses (4),
(7) and (11) no Default or Event of Default shall have
occurred and be continuing or result therefrom:
(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
preceding paragraph;
(2) the redemption, repurchase, retirement, defeasance or
other acquisition of (i) any Subordinated Obligations of
the Company or any Guarantor or (ii) at any time on or
after the date that is two and one-half years after the Issue
Date, of any Equity Interests of the Company, in each case
(a) in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Company or, for so long as TV One remains a Designated Entity
but is not otherwise a Subsidiary, TV One) of, Equity Interests
of the Company (other than Disqualified Stock or Designated
Preferred Stock) or (b) from the net cash proceeds of a
substantially concurrent cash contribution to the equity capital
of the Company or any Restricted Subsidiary (other than cash
from the Company, a Restricted Subsidiary, Reach Media or, for
so long as TV One remains a Designated Entity, TV One);
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 (b) of the definition of Restricted Payments
Basket;
(3) the defeasance, redemption, repurchase, retirement or
other acquisition Subordinated Obligations of the Company or any
Guarantor with the net cash proceeds from an incurrence of, or
in exchange for, Permitted Refinancing Indebtedness refinancing
such Indebtedness permitted to be incurred under the caption
Certain Covenants Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred
Stock;
(4) the payment of any dividend or distribution by a
Restricted Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis;
(5) the acquisition of Equity Interests by the Company in
connection with the exercise of stock options, warrants or other
convertible or exchangeable securities to the extent such Equity
Interests represent a portion of the exercise price of those
stock options, warrants or other convertible or exchangeable
securities by way of cashless exercise;
(6) the payment of cash in lieu of fractional shares of
Capital Stock in connection with any transaction otherwise
permitted under the Indenture;
(7) the declaration and payment of dividends on
Disqualified Stock of the Company or any of its Restricted
Subsidiaries or Designated Preferred Stock, in each case issued
in accordance with the covenant described under
Incurrence of Indebtedness and Issuance of
Disqualified Stock and Preferred Stock;
(8) the retirement of any shares of Disqualified Stock of
the Company by conversion into, or by exchange for, shares of
Disqualified Stock of the Company, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of other shares of
Disqualified Stock of the Company, provided that the
Disqualified Stock of the Company that replaces the retired
shares of Disqualified Stock of the Company 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 the Company;
151
(9) the repayment or repurchase of the Existing
Subordinated Notes in exchange for the Notes in connection with
the Transactions and any
87/8% Senior
Subordinated Notes that remain outstanding thereafter;
(10) upon the occurrence of a Change of Control or an Asset
Sale, the redemption, repurchase, retirement, defeasance or
other acquisition of any Subordinated Obligation of the Company
or any Guarantor to the extent required by the agreement
governing such Subordinated Obligation but only if the Company
shall have complied with the covenant described under
Repurchase at the Option of
Holders Change of Control or
Repurchase at the Option of
Holders Asset Sale, as the case may be, and
purchased all Notes validly tendered and not withdrawn pursuant
to the relevant offer prior to purchasing or repaying such
Subordinated Obligations;
(11) other Restricted Payments in an aggregate amount since
the Issue Date not to exceed $15.0 million; and
(12) the declaration and payment of a dividend or other
payment or distribution on account of the Companys Equity
Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the
Company), or the redemption, repurchase, retirement, defeasance
or other acquisition of any Equity Interests of the Company, in
each case in connection with a substantially concurrent Going
Private Transaction, (a) out of the net cash proceeds of a
substantially concurrent sale (other than to a Subsidiary of the
Company or, for so long as TV One remains a Designated Entity
but is not otherwise a Subsidiary, TV One) of Equity Interests
of the Company (other than Disqualified Stock or Designated
Preferred Stock) or (b) from the net cash proceeds of a
substantially concurrent cash contribution to the equity capital
of the Company (other than cash from the Company, a Restricted
Subsidiary, Reach Media or, for so long as TV One remains a
Designated Entity, TV One); provided that the amount of
any such net cash proceeds that are utilized for any such
dividend, other distribution, redemption, repurchase,
retirement, defeasance or other acquisition of the
Companys Equity Interests will be excluded from
clause (b) of the definition of Restricted Payments Basket.
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 the Company or such Restricted Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than five
Business Days after the date of making any Restricted Payment
under the first paragraph of this covenant, the Company will
deliver to the trustee an officers certificate stating
that such Restricted Payment is permitted and setting forth the
calculation of the Restricted Payments Basket prior to and after
giving effect to the Restricted Payment, together with a copy of
any fairness opinion or appraisal required by the Indenture;
provided that for purposes of determining compliance with
this covenant, in the event that a Restricted Payment (or
portion thereof) meets the criteria of more than one of the
categories of Restricted Payments described in clauses (1)
through (12) above on the date such Restricted Payment is
made, or is entitled to be incurred pursuant to the first
paragraph above, the Company will be entitled to classify such
Restricted Payment (or portion thereof) on the date such
Restricted Payment is made in or among any of these categories
and/or the
first paragraph thereof.
In the event that TV One becomes an Unrestricted Subsidiary and
for so long as TV One remains an Unrestricted Subsidiary under
the terms of the Indenture, any Investments made by TV One or
any of its Subsidiaries, if any, in any Radio One Securities or
in any Person who is not otherwise engaged in a TV One Permitted
Business (other than any Investments of the type permitted by
clauses (2), (3), (5), (7), (9) and (12) of the
definition of Permitted Investments) will be deemed to have been
made by the Company and will reduce the amount available (if
any) for Restricted Payments under the first paragraph above or
Restricted Payments permitted under clause (11) under the
second paragraph above, as elected by the Company. If such
Investment is not permitted to be made by the Company as of such
date, then the Company will be in default of such covenant.
152
Incurrence
of Indebtedness and Issuance of Disqualified Stock and Preferred
Stock
The Company will not, and will not permit any of its Restricted
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 or Designated Preferred Stock and will not
permit any of its Restricted Subsidiaries to issue any
Disqualified Stock or Preferred Stock; provided, however,
that the Company or any Guarantor (other than ROCH) may
incur Indebtedness (including Acquired Debt) or issue
Disqualified Stock or the Company may issue Designated Preferred
Stock, if, immediately after giving effect to the incurrence of
such Indebtedness or the issuance of such Disqualified Stock or
Designated Preferred Stock and the receipt and application of
proceeds therefrom, (a) the Leverage Ratio would be less
than or equal to 7.0 to 1.0 in the case of the incurrence of
Indebtedness or issuance of Disqualified Stock or Designated
Preferred Stock, (b) no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence
of the incurrence of such Indebtedness or issuance of
Disqualified Stock or Designated Preferred Stock and
(c) such Indebtedness (including (Acquired Debt)) or
Disqualified Stock or Designated Preferred Stock is subordinated
in right of payment to the Senior Debt on at least the same
terms as the Notes. The Company will not issue any Preferred
Stock (other than Designated Preferred Stock) that requires the
declaration or payment of dividends or other distributions while
any Notes are outstanding (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) or
an increase in the liquidation value thereof).
The first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness
(collectively, Permitted Debt):
(1) Indebtedness incurred by the Company or any Guarantor
pursuant to the Existing Credit Agreement in an aggregate
principal amount at any one time outstanding under this
clause (1) not to exceed an amount equal to
$415 million, less (a) the aggregate amount of all
principal repayments of revolving loans under the Existing
Credit Agreement that effect a corresponding permanent
commitment reduction thereunder from and after the Issue Date,
(b) all principal repayments or principal prepayments of
term loans or other non-revolving loans thereunder from and
after the Issue Date (including regularly scheduled amortization
payments under the term loan incurred under the Existing Credit
Agreement as of the Issue Date) and (c) the aggregate
amount of Net Proceeds from an Asset Sale used to finance any TV
One Investment described in clause (ii) of the definition
thereof, but, for the avoidance of doubt with respect to
clauses (a) and (b), excluding any repayment in connection
with any refinancing thereof under any agreement that satisfies
the definition of the Existing Credit Agreement to the extent of
the amount of the Indebtedness outstanding under this
clause (1) on the date thereof (plus all accrued interest
and the amount of all expenses and premiums incurred in
connection therewith);
(2) Indebtedness outstanding under the Notes and the
related Guarantees issued in connection with the Transactions,
the Notes and the related Guarantees issued in exchange therefor
pursuant to the Registration Rights Agreement and any PIK Notes;
(3) [Reserved];
(4) Indebtedness of the Company or any of its Restricted
Subsidiaries outstanding on the Issue Date (other than
clauses (1) and (2) above);
(5) Indebtedness incurred by the Company or any Restricted
Subsidiary (other than ROCH) 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 used in the business
of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing
Indebtedness incurred to refund, renew, refinance or replace,
defease, discharge or extend any Indebtedness incurred pursuant
to this clause (5), not to exceed $2.5 million at any time
outstanding;
(6) Permitted Refinancing Indebtedness incurred by the
Company or any of its Restricted Subsidiaries (other than ROCH
with respect to clauses (4), (13) or (14) hereof) in
exchange for, or the net proceeds
153
of which are used to refund, renew, refinance, defease,
discharge or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred
under clause (2), (4), (13) or (14) of this paragraph
or this clause (6); provided that a Restricted Subsidiary
that is not a Guarantor may not incur any Permitted Refinancing
Indebtedness under this clause (6) to refinance any
Indebtedness of the Company or a Guarantor;
(7) Permitted Refinancing Indebtedness incurred by the
Company or any Guarantor (other than ROCH) in exchange for, or
the net proceeds of which are used to refund, renew, refinance,
defease, discharge or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture
to be incurred under the first paragraph of this covenant or
this clause (7);
(8) intercompany Indebtedness between or among the Company
and any of its Restricted Subsidiaries (other than ROCH) and any
issuance of Preferred Stock by any Restricted Subsidiary to
another Restricted Subsidiary or the Company; provided,
however, that:
(a) if the Company or any Guarantor is the obligor on such
Indebtedness and the obligee is neither the Company nor a
Guarantor, then such Indebtedness must be expressly subordinated
to the prior payment in full in cash of the Exchange Claims;
(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness or Preferred
Stock being held by a Person other than the Company or a
Restricted Subsidiary of the Company; and (ii) any sale or
other transfer of any such Indebtedness or Preferred Stock to a
Person that is neither the Company nor a Restricted Subsidiary
of the Company will be deemed, in each case of clause (b)(i) and
clause (b)(ii), to constitute an incurrence of Indebtedness or
an issuance of Preferred Stock by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this
clause (8); and
(c) if any Guarantor is the issuer of such Preferred Stock,
then such Preferred Stock may only be issued to and held by the
Company or any Restricted Subsidiary that is also a Guarantor.
(9) Hedging Obligations incurred by the Company or any of
its Restricted Subsidiaries for the purpose of fixing or hedging
(x) interest rates with respect to any Indebtedness that is
permitted by the Indenture to be outstanding or
(y) currency exchange rate risk in the ordinary course of
business;
(10) the guarantee (a) by the Company of Indebtedness
of any Guarantor that was permitted to be incurred by another
provision of this covenant and (b) by any Guarantor (other
than ROCH with respect to clauses (4), (13) or
(14) hereof) of Indebtedness of the Company or any
Guarantor that was permitted to be incurred by another provision
of this covenant;
(11) Indebtedness of the Company or any of its Restricted
Subsidiaries arising from customary cash management services,
automated clearing house transfers, or the honoring by another
financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary
course of business, provided, however, that such
Indebtedness is extinguished within five Business Days of
incurrence;
(12) Non-Recourse Debt incurred by the Companys
Unrestricted Subsidiaries; 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 the
Company that was not permitted by this clause (12);
(13) Indebtedness by the Company or any of its Restricted
Subsidiaries in respect of bid, performance, surety and similar
bonds issued for the account of the Company and any of its
Restricted Subsidiaries in the ordinary course of business,
including guarantees and obligations of the Company and any of
its Restricted Subsidiaries with respect to letters of credit
supporting such obligations (in each case other than an
obligation for money borrowed);
(14) Indebtedness or Preferred Stock of a Restricted
Subsidiary incurred and outstanding on the date on which such
Restricted Subsidiary was acquired by, or merged into, the
Company or any Restricted
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Subsidiary (other than Indebtedness incurred (a) to provide
all or any portion of the funds utilized to consummate the
transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was
otherwise acquired by the Company or (b) otherwise in
connection with, or in contemplation of, such acquisition) in an
aggregate amount not to exceed $1.0 million at any time
outstanding for all such Restricted Subsidiaries;
(15) Indebtedness arising from agreements of the Company or
any of its Restricted Subsidiaries providing for
indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection
with the disposition of any business, assets or Capital Stock of
a Restricted Subsidiary otherwise permitted under the Indenture,
provided that the maximum aggregate liability in respect
of all such Indebtedness shall at no time exceed the gross
proceeds (including the Fair Market Value of non-cash proceeds)
actually received by the Company and its Restricted Subsidiaries
in connection with such disposition;
(16) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries in an aggregate principal amount at any
time outstanding not to exceed $8.0 million;
provided, such Indebtedness is subordinated in right of
payment to the Senior Debt on at least the same terms as the
Notes;
(17) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries in an aggregate principal amount at any
time outstanding not to exceed $2.0 million; and
(18) in the event TV One or its Subsidiaries become
Restricted Subsidiaries, Permitted TV One Indebtedness and any
refinancing thereof so long as such refinancing Indebtedness
continues to satisfy the conditions set forth in
clauses (i) and (ii) of the definition of Permitted TV
One Indebtedness.
For purposes of determining compliance with this
Incurrence of Indebtedness and Issuance of Disqualified
Stock and Preferred Stock covenant, (1) in the event
that an item of Indebtedness (including Acquired Debt) meets the
criteria of more than one of the categories of Permitted Debt
described in clauses (1) through (18) above, or is
entitled to be incurred pursuant to the first paragraph of this
covenant, the Company will classify such item of Indebtedness
(or portion thereof) on the date of incurrence and may later
classify (in whole or in part in its sole discretion) such item
of Indebtedness in any manner that complies with this covenant
and such item of Indebtedness will be treated as having been
incurred pursuant to only one of such categories; provided
that notwithstanding the foregoing (i) all Indebtedness
outstanding on or incurred after the Issue Date under the
Existing Credit Agreement shall only be permitted to be incurred
under clause (1) under the definition of Permitted Debt,
(ii) all Indebtedness incurred in one or more categories of
Permitted Debt and subsequently reclassified as incurred
pursuant to the first paragraph of this covenant shall be
subordinated in right of payment to the Senior Debt on at least
the same terms as the Notes and (iii) any refinancing of
Permitted TV One Indebtedness shall only be permitted to be
incurred under clause (18) of the definition of Permitted
Debt, in each case to the extent permitted under such clauses,
and may not later be reclassified and (2) for so long as TV
One remains a Designated Entity under the terms of the
Indenture, any Indebtedness incurred, or Preferred Stock issued,
by TV One or any of its Subsidiaries, if any (other than
Permitted TV One Indebtedness or Indebtedness in which the
Company or a Guarantor is the obligee or any Indebtedness of the
type permitted to be incurred by the Company pursuant to clauses
(8), (11), (13) and (15) of the definition of
Permitted Debt above), will be deemed to be indebtedness
incurred by the Company pursuant to clause (1) under the
definition of Permitted Debt above in an amount equal to the
aggregate principal amount of such Indebtedness and the
aggregate liquidation preference of such Preferred Stock, and
such Indebtedness and Preferred Stock will otherwise reduce the
amount of Indebtedness that the Company or any Guarantor can
incur under clause (1) under the definition of Permitted
Debt above on a
dollar-for-dollar
basis so long as such Indebtedness and Preferred Stock remain
outstanding. If such Indebtedness is not permitted to be
incurred by the Company as of such date under clause (1)
under the definition of Permitted Debt, then the Company will be
in default of such covenant. The limitations on the ability of
ROCH to incur Indebtedness under the first paragraph of this
covenant or clauses (5), (6), (7), (8) and (10) of the
definition of Permitted Debt shall be effective only for so long
as TV One remains a Designated Entity under the terms of the
Indenture.
Except with respect to Indebtedness incurred pursuant to the
first paragraph of this covenant or clause (16) of the
definition of Permitted Debt, and subject to clause (ii) of
the third paragraph of this covenant, the
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Company will not, and will not permit any Guarantor to, directly
or indirectly, incur any Indebtedness that is or purports to be
by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated or junior in right of payment to any
other Indebtedness of the Company or of such Guarantor, as the
case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made
expressly subordinate and junior in right of payment to the
Notes or the Guarantee of such Guarantor, to the same extent and
in the same manner as such Indebtedness is subordinated or
junior in right of payment to such other Indebtedness of the
Company or such Guarantor, as the case may be; provided
that the foregoing shall not apply to the terms of the Existing
Credit Agreement with respect to the relative rights between the
lenders under the revolving credit facility and the term loan
incurred thereunder. For purposes of the foregoing, no
Indebtedness of the Company or any Guarantor will be deemed to
be subordinated in right of payment to any other Indebtedness of
the Company or any Guarantor solely by virtue of being unsecured
or secured by a Permitted Lien or by virtue of the fact that the
holders of such Indebtedness have entered into intercreditor
agreements or other arrangements giving one or more of such
holders priority over the other holders in the collateral held
by them.
The accrual of interest or Preferred Stock dividends, the
accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms (including the
issuance of PIK Notes hereunder), the reclassification of
Preferred Stock as Indebtedness due to a change in accounting
principles, and the payment of dividends on Preferred Stock or
Disqualified Stock in the form of additional shares of the same
class of Preferred Stock or Disqualified Stock will not be
deemed to be an incurrence of Indebtedness or an issuance of
Preferred Stock or Disqualified Stock for purposes of this
covenant, but any such additional Indebtedness and issuances of
Preferred Stock or Disqualified Stock will be included in
subsequent calculations of the amount of outstanding
Indebtedness and Preferred Stock or Disqualified Stock for
purposes of calculating the Leverage Ratio of the Company.
Liens
The Company will not and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind
securing Indebtedness on any of their respective assets or
properties, except for Permitted Liens.
Dividend
and Other Payment Restrictions Affecting
Subsidiaries
The Company 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 the Company or any of its Restricted
Subsidiaries, or pay any Indebtedness or other obligations owed
to the Company or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company
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 as in effect on the Issue Date (including
agreements related to the Existing Credit Agreement) 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 not materially more restrictive,
taken as a whole, with respect to such dividend and other
payment restrictions than those contained in those agreements on
the Issue Date;
156
(2) the Indenture, the Notes and the Guarantees;
(3) applicable law, rule, regulation or order;
(4) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person,
or the property or assets of the Person (including proceeds
thereof), 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, licenses
and contracts 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 on that property of the nature
described in clause (3) of the preceding paragraph;
(7) Permitted Refinancing Indebtedness to effect a
refinancing of Indebtedness referred to in clauses (1) and
(4), and this clause (7); provided that the encumbrances
or restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are not materially more
restrictive, taken as a whole, in respect of any Restricted
Subsidiary, or the Company and its Restricted Subsidiaries,
taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced;
(8) agreements governing other Indebtedness of the Company
and one or more Restricted Subsidiaries permitted under the
Indenture; provided that the restrictions in the
agreements governing such Indebtedness are not materially more
restrictive, taken as a whole, in respect of any Restricted
Subsidiary, or the Company and its Restricted Subsidiaries,
taken as a whole, than those in the Indenture;
(9) any restriction on the sale or other disposition of
property or assets securing Indebtedness as a result of a
Permitted Lien on such property or assets;
(10) provisions with respect to the sale of assets or
properties (including any agreement for the sale or other
disposition of a Subsidiary not otherwise prohibited by the
Indenture that prohibits distributions by that Subsidiary)
imposed pursuant to an agreement entered into for the sale or
disposition of the assets or properties (whether by, asset sale,
stock sale or otherwise) pending the closing of such sale or
disposition;
(11) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course
of business or asset sale agreements, stock sale agreements and
other similar agreements entered into in compliance with the
terms of the Indenture;
(12) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the
ordinary course of business; and
(13) in the event TV One or its Subsidiaries become
Restricted Subsidiaries, agreements governing Permitted TV One
Indebtedness.
Merger,
Consolidation or Sale of Assets
The Company will not: (1) consolidate or merge with or into
another Person (whether or not the Company is the surviving
corporation); or (2) sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of the
properties or assets of the Company and its Restricted
Subsidiaries taken as a whole, in one or more related
transactions, to another Person, unless:
(a) either (i) the Company is the surviving
corporation or (ii) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer,
157
lease, conveyance or other disposition has been made (the
Surviving Entity) is a Person organized and
existing under the laws of the United States, any state thereof
or the District of Columbia;
(b) the Surviving Entity expressly assumes by a
supplemental indenture reasonably satisfactory to the trustee
all the obligations of the Company under the Notes, the
Indenture and the Registration Rights Agreement;
(c) immediately after giving effect to such transaction
(including, without limitation, giving effect to any
Indebtedness incurred and any Lien granted in connection with or
in respect of the transaction) no Default or Event of Default
shall have occurred and be continuing;
(d) except with respect to a transaction solely between the
Company and a Wholly Owned Restricted Subsidiary or a merger
between the Company and one of the Companys Affiliates
incorporated solely for the purpose of reincorporating in
another state of the United States or the District of Columbia,
immediately after giving effect to such transaction on a pro
forma basis (on the assumption that the transaction occurred on
the first day of the four-quarter period immediately prior to
consummation of the transaction with the appropriate adjustments
with respect to the transaction being included in such pro forma
calculations determined in accordance with
Regulation S-X
under the Securities Act), the Company (or the Surviving Entity
if the Company is not the continuing obligor under the
Indenture) (i) shall be able 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 Certain
Covenants Incurrence of Indebtedness and Issuance of
Disqualified Stock and Preferred Stock or (ii) if
such transaction is a Going Private Transaction, would have a
Leverage Ratio equal to or lower than the Companys
Leverage Ratio immediately prior to such transaction and the
other Person party to the Going Private Transaction is an entity
formed for the purpose of effecting the Going Private
Transaction that does not otherwise have any assets or
liabilities in excess of $5.0 million, individually or in
the aggregate, or otherwise conduct any operations prior to the
completion of the Going Private Transaction other than those
incurred in connection with or as a result of such Going Private
Transaction, including the financing thereof;
(e) each Guarantor (unless it is the Surviving Entity, in
which case clause (b) shall apply) shall have, by a
supplemental indenture, confirmed that its Guarantee shall apply
to the Surviving Entitys obligations in respect of the
Notes; and
(f) the Company shall have delivered to the trustee an
officers certificate and an opinion of counsel, each
stating that such consolidation, merger or disposition and any
such supplemental indenture comply with the Indenture.
Each Guarantor will not, and the Company will not permit a
Guarantor to, (1) merge or consolidate with or into another
Person (other than the Company or any other Guarantor), or
(2) sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties and assets
on a consolidated basis, in one or more related transactions, to
any Person (other than the Company or any other Guarantor)
unless:
(a) either (i) such Guarantor is the continuing Person
or (ii) the Person (if other than such Guarantor) formed by
or surviving such consolidation or merger or to which such sale,
assignment, transfer, lease, conveyance or other disposition has
been made is a Person organized and existing under the laws of
the United States, any state thereof or the District of Columbia
and expressly assumes by a supplemental indenture reasonably
satisfactory to the trustee all the obligations of such
Guarantor under the Notes and the Indenture;
(b) immediately after giving effect to such transaction
(including, without limitation, giving effect to any
Indebtedness incurred and any Lien granted in connection with or
in respect of the transaction), no Default or Event of Default
shall have occurred and be continuing; and
(c) such Guarantor shall have delivered to the trustee an
officers certificate and an opinion of counsel, each
stating that such consolidation, merger or disposition and any
such supplemental indenture comply with the Indenture.
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The provisions of this section with respect to Guarantors shall
not apply to any transaction (including any Asset Sale made in
accordance with the covenant described under
Repurchase at the Option of
Holders Asset Sales) with respect to any
Guarantor if the Guarantee of such Guarantor is released in
connection with such transaction in accordance with the
Indenture.
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, in certain circumstances there may be a degree of
uncertainty as to whether a particular transaction would involve
all or substantially all of the properties or assets
of a Person.
Transactions
with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, 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 of the Company (each, an
Affiliate Transaction), unless:
(1) the Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with a
Person who is not an Affiliate; and
(2) the Company delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $5.0 million, a Board Resolution certifying
that such Affiliate Transaction or series of related Affiliate
Transactions complies with this covenant and that such Affiliate
Transaction or series of related Affiliate Transactions has been
approved by a majority of the disinterested members of the Board
of Directors of the Company; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $10.0 million, the Company delivers to the
trustee a written opinion of an Independent Qualified Party that
such Affiliate Transaction or series of related Affiliate
Transactions is fair, from a financial point of view, to the
Company and its Restricted Subsidiaries, taken as a whole, or
that such Affiliate Transaction or series of related Affiliate
Transactions is not less favorable to the Company and its
Restricted Subsidiaries than could reasonably be expected to be
obtained at the time in an arms-length transaction with a
Person who is not an Affiliate.
For so long as TV One remains a Designated Entity under the
terms of the Indenture, the Company shall be required to comply
with the provisions of this paragraph set forth above with
respect to any event or circumstance that would otherwise
constitute an Affiliate Transaction under the
definition set forth above that is between or among TV One or
any of its Subsidiaries, if any, and any other Affiliate of the
Company (a TV One Affiliate Transaction);
provided that in each such case such standards shall
relate to TV One or the relevant Subsidiaries of TV One instead
of the Company and its Restricted Subsidiaries. If any TV One
Affiliate Transaction does not comply with the provisions of
this paragraph, then the Company will be in default of this
covenant.
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 or severance agreement or other employee
compensation agreement, arrangement or plan, or any amendment
thereto, entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent
with past practice and payments pursuant thereto;
(2) transactions solely between or among the Company
and/or its
Wholly Owned Restricted Subsidiaries;
159
(3) advances of expenses, payment of reasonable legal and
other fees to officers, directors, employees and consultants and
other indemnity payments or arrangements to officers, directors
and employees of the Company or any of its Restricted
Subsidiaries, in each case consistent with applicable charter,
bylaw or statutory provisions;
(4) the payment of reasonable and customary directors
fees and expenses to directors of the Company or its Restricted
Subsidiaries who are not otherwise Affiliates of the Company;
(5) sales or issuances of Equity Interests (other than
Disqualified Stock) of the Company;
(6) (a) any agreement in effect on the Issue Date, as
such agreement may be amended, modified or supplemented from
time to time, provided that any such amendment,
modification or supplement (taken as a whole) will not be more
disadvantageous to the Company in any material respect than such
agreement as it was in effect on the Issue Date or (b) any
transaction pursuant to any agreement referred to in the
immediately preceding clause (a);
(7) transactions between or among the Company or any of its
Restricted Subsidiaries and either TV One or Reach Media,
in either case with respect to transactions involving network,
syndication, advertising, back-office, technology support or
personnel services, in each case, entered into in the ordinary
course of the Companys business; and
(8) the making of Restricted Payments that are permitted by
the provisions of the Indenture described above under the
caption Certain Covenants
Restricted Payments and the making of Permitted
Investments permitted by clause (8) or clause (11) of
the definition thereof.
Notwithstanding anything in the Indenture to the contrary, any
transfer of any property or assets of, or Equity Interests in,
any Unrestricted Subsidiary or, for so long as TV One remains a
Designated Entity, TV One to any Principal, Related Party,
Permitted Group or Person of which more than 50% of the Voting
Stock is Beneficially Owned, directly or indirectly, by a
Principal or a Related Party or a Permitted Group must comply
with the covenants described under the captions Repurchase
at the Option of Holders Asset Sales and
Certain Covenants Transactions with
Affiliates as if such Unrestricted Subsidiary or, for so
long as TV One remains a Designated Entity, TV One were a
Restricted Subsidiary subject to such covenants.
Additional
Guarantees
The Company is obligated to cause (1) each Subsidiary that
becomes a Restricted Subsidiary after the Issue Date (other than
a Restricted Subsidiary that constitutes an Immaterial
Subsidiary or a Foreign Subsidiary) and (2) any Subsidiary
that guarantees Indebtedness under the Existing Credit Agreement
to guarantee the Notes and the Companys other Obligations
under the Indenture.
Designation
of Restricted and Unrestricted Subsidiaries
The Board of Directors of the Company may designate any
Restricted Subsidiary of the Company to be an Unrestricted
Subsidiary if no Default or Event of Default has occurred and is
continuing, or would result therefrom and immediately after
giving effect to such designation, the Company could incur $1.00
of additional Indebtedness pursuant to the first paragraph of
the covenant described above under the caption
Certain Covenants Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred
Stock. If a Restricted Subsidiary of the Company is
designated as an Unrestricted Subsidiary, the aggregate Fair
Market Value of all outstanding Investments owned by the Company
and its 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 Certain
Covenants Restricted Payments or Restricted
Payments permitted under clause (11) under the second
paragraph under such caption, as elected by the Company. That
designation will only be permitted if the Investment would be
permitted at that time and if the Subsidiary so designated
otherwise meets the definition of an Unrestricted Subsidiary.
Notwithstanding the foregoing, (i) the Company may not
designate ROCH as an Unrestricted Subsidiary at any time after
the Issue Date, (ii) the Company may not designate TV One
as an Unrestricted Subsidiary at any time after it has become a
Restricted
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Subsidiary (if ever) and (iii) no Subsidiary may be
designated as an Unrestricted Subsidiary unless it is also an
unrestricted subsidiary for purposes of the Existing
Credit Agreement.
The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the
Company if no Default or Event of Default has occurred and is
continuing at the time of such designation, or would result
therefrom; provided that such designation will be deemed
as of the date of such designation to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and the
creation, incurrence, assumption or otherwise causing to exist
any Lien of such Unrestricted Subsidiary and such designation
will only be permitted if (1) such Indebtedness is
permitted under the covenant described above under the caption
Certain Covenants Incurrence of
Indebtedness and Issuance of Disqualified Stock and 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) such Lien is permitted under the
covenant described above under the caption
Certain Covenants Liens.
Limitation
on Sales and Issuances of Equity Interests in Restricted
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise
dispose of any Equity Interests in any Restricted Subsidiary of
the Company to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company), unless either:
(1) each of the foregoing is satisfied:
(a) as a result of such transfer, conveyance, sale, lease
or other disposition or issuance such Restricted Subsidiary no
longer constitutes a Subsidiary;
(b) the Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the
covenant described above under the caption
Repurchase at the Option of
Holders Asset Sales; and
(c) immediately after giving effect to such transfer,
conveyance, sale, lease or other disposition, an Investment in
such Person remaining after giving effect thereto would have
been permitted to be made under the covenant described under the
caption Certain Covenants
Restricted Payments if made on the date of such transfer,
conveyance, sale, lease or other disposition; or
(2) the transfer, sale or disposition is pursuant to
security documents with respect to Indebtedness permitted to be
secured under the terms of the Indenture.
In addition, the Company will not permit any Wholly Owned
Restricted Subsidiary of the Company to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock
constituting directors qualifying shares) to any Person
(other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company) such that such Subsidiary no longer
constitutes a Wholly Owned Restricted Subsidiary.
Business
Activities
The Company will not, and will not permit any Restricted
Subsidiary or Reach Media to, engage in any business other than
a Permitted Business, except to such extent as would not be
material to the Company and its Restricted Subsidiaries taken as
a whole. For so long as TV One remains a Designated Entity under
the terms of the Indenture, ROCH shall not, directly or
indirectly, engage in any business or activity other than the
holding of Equity Interests of TV One. No License Subsidiary
shall (i) own or hold any assets other than Operating
Agreements and FCC Licenses and other Authorizations issued by
the FCC relating to Stations or engage in any business other
than the ownership (or holding) and maintenance of Operating
Agreements, FCC Licenses and other Authorizations issued by
the FCC or (ii) incur any Indebtedness (other than
guarantees of (A) the Existing Subordinated Notes,
(B) the Exchange Claims and (C) the Obligations under
the Existing Credit Agreement with respect to Hedging
Obligations and Indebtedness permitted pursuant to
clause (2) of the definition of the term Permitted
Debt. All License Subsidiaries must be Guarantors.
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ROCH
Ownership/TV One Ownership
For so long as TV One remains a Designated Entity under the
terms of the Indenture, the Company shall at all times
(1) maintain ROCH as a Wholly Owned Restricted Subsidiary
of the Company and (2) directly own all of the Equity
Interests of ROCH. For so long as TV One remains a Designated
Entity under the terms of the Indenture, the Company shall cause
all Equity Interests of TV One that are held on the Issue Date
or acquired by the Company or any of its Restricted Subsidiaries
to be held directly by ROCH subject to the covenants described
under Repurchase at the Option of Holders
Asset Sales and Certain
Covenants Merger, Consolidation or Sale of
Assets.
In the event TV One becomes a Subsidiary of the Company, and in
the event that ROCH transfers, conveys, sells, leases or
otherwise disposes of Equity Interests in TV One or TV One
issues additional Equity Interests in TV One such that, in
either case, TV One no longer constitutes a Subsidiary of the
Company, the aggregate Fair Market Value of all Equity Interests
owned by ROCH in TV One will be deemed to be an Investment made
as of that time and will reduce the amount available (if any)
for Restricted Payments under the first paragraph of the
covenant described above under the caption
Certain Covenants Restricted
Payments or Restricted Payments permitted under
clause (11) under the second paragraph under such caption,
as elected by the Company. If such Investment is not permitted
to be made by the Company as of such date under such covenant,
then the Company will be in default of such covenant.
Payments
for Consent
Neither the Company nor any of the Companys Subsidiaries
shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to
any Beneficial Owner or Holder of any Notes for or as an
inducement to any consent to any waiver, supplement or amendment
of any terms or provisions of the Indenture or the Notes, unless
such consideration is offered to be paid or agreed to be paid to
all Beneficial Owners and Holders of the Notes which so consent
in the time frame set forth in the solicitation documents
relating to such consent.
Reports
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, the Company shall file with the
Commission (subject to the next sentence) the annual reports,
quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) if the Company were so subject (the
Required Reports), such documents to be filed
with the Commission on or prior to the respective dates by which
the Company would have been required to file such documents if
the Company were so subject (the Required Filing
Dates); provided that any audited financial
statements contained in such reports shall be reported on by an
independent public accounting firm of recognized national
standing. If at any time the Company is not subject to
Section 13(a) or 15(d) of the Exchange Act for any reason,
the Company shall nevertheless continue to file the Required
Reports with the Commission by the applicable Required Filing
Date unless the Commission will not accept such a filing. The
Company agrees that it shall not take any action for the purpose
of causing the Commission not to accept any such filings;
provided that the foregoing shall not prohibit the Company from
filing a Form 15 with respect to any class of its common
stock following a Going Private Transaction. If notwithstanding
the foregoing, the Commission shall not accept the filing of a
Required Report for any reason, the Company shall post the
Required Report on its website by the applicable Required Filing
Date and such Required Report shall be publicly available.
The Company shall also in any event (1) on the earlier of
(a) each Required Filing Date and (b) the
90th day
after the end of each fiscal year, with respect to annual
reports, or the
45th day
after the end of each of the first three Fiscal Quarters of each
fiscal year, with respect to quarterly reports,
(i) transmit by mail to all Holders, as their names and
addresses appear in the security register, without cost to such
Holders, and (ii) file with the trustee, copies of the
Required Reports and (2) if the Commission will not accept
the filing of Required Reports by the Company, promptly upon
written request, supply copies of such documents to any
162
Holder at the Companys cost. Notwithstanding the
foregoing, for purposes of this paragraph, the Company shall be
deemed to have furnished such Required Reports to the Holders if:
(A) the Company has filed such reports with the Commission
via the Commissions Electronic Data Gathering, Analysis,
and Retrieval Filing System (EDGAR) and such reports are
publicly available; or
(B) the Company is not subject to Sections 13(a) or
15(d) of the Exchange Act, and the Commission will not accept
Required Reports for filing, and it has posted such Required
Reports on its website and such Required Reports are publicly
available.
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, and whether or not the Commission
will accept any Required Reports for filing, the Company shall
also hold a quarterly conference call to discuss the
consolidated financial results of the Company with the Holders
of the Notes. Such conference call shall not be later than ten
Business Days following each Required Filing Date. No fewer than
two days prior to the conference call, the Company shall issue a
press release to the appropriate wire service, announcing the
time, date and access details of such conference call.
Notwithstanding any of the foregoing, if the Company has
designated any of its Subsidiaries as Unrestricted Subsidiaries,
then the Companys quarterly and annual financial
information required by the preceding paragraphs will include a
reasonably detailed presentation, either on the face of the
financial statements or in the footnotes thereto, of the
financial condition and results of operations of the Company and
its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted
Subsidiaries of the Company.
The Company shall make available to any prospective purchaser of
Notes or beneficial owner of Notes in connection with any sale
of Notes the information required by Rule 144A(d)(4) under
the Securities Act so long as such Notes are not freely
transferable under the Securities Act.
Corporate
Existence
Subject to the covenants described under
Repurchase at the Option of
Holders Change of Control,
Repurchase at the Option of
Holders Assets Sales and
Certain Covenants Merger,
Consolidation or Sale of Assets, as the case may be, the
Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate
existence and the corporate, partnership, limited liability
company or other existence of each of its Restricted
Subsidiaries in accordance with the respective organizational
documents (as the same may be amended from time to time) of the
Company or any such Restricted Subsidiary and the rights
(charter and statutory), licenses (including FCC Licenses) and
franchises of the Company and its Restricted Subsidiaries;
provided that the Company shall not be required to
preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Restricted
Subsidiaries, if the loss thereof is not materially adverse to
the Holders.
Insurance
The Company shall, and shall cause each Restricted Subsidiary to
maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as
are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations.
Events of
Default and Remedies
Each of the following is an Event of Default:
(1) default in the payment in respect of the principal of
(or premium, if any, on) any Note at its maturity (whether at
Stated Maturity or upon repurchase, acceleration, optional
redemption or otherwise) whether or not prohibited by the
subordination provisions of the Indenture;
(2) default in the payment of any interest upon any Note
when it becomes due and payable, and continuance of such default
for a period of 30 days whether or not prohibited by the
subordination provisions of the Indenture;
163
(3) failure by the Company to perform or comply with the
Indenture provisions described under Certain
Covenants Merger Consolidation or Sale of
Assets;
(4) default in the performance or breach of any covenant or
agreement of the Company or any of its Restricted Subsidiaries
in the Indenture described under the captions
Repurchase at the Option of
Holders Asset Sales or
Repurchase at the Option of
Holders Change of Control and continuance of
such default or breach for a period of 30 consecutive days after
written notice thereof has been given to the Company by the
trustee or to the Company and the trustee by the Holders of at
least 25% in aggregate principal amount of the outstanding Notes
(other than the failure to purchase Notes under such provisions
which shall be an Event of Default described in clause (1)
above);
(5) default in the performance or breach of any covenant or
agreement of the Company or any of its Restricted Subsidiaries
in the Indenture (other than a default in performance or breach
of a covenant or agreement specifically dealt with in clauses
(1), (2), (3) or (4) above) and continuance of such
default or breach for a period of 60 consecutive days after
written notice thereof has been given to the Company by the
trustee or to the Company and the trustee by the Holders of at
least 25% in aggregate principal amount of the outstanding Notes;
(6) a default or defaults under any bonds, debentures,
notes or other evidences of Indebtedness for borrowed money
(other than the Notes) by the Company, any Restricted Subsidiary
or, for so long as TV One remains a Designated Entity, TV
One, whether such Indebtedness exists on the Issue Date or shall
thereafter be created, which default or defaults (a) are
caused by a failure to pay at final maturity principal of, or
interest or premium, if any, on such Indebtedness within the
applicable express grace period in respect of such Indebtedness
at the time of such default (a payment
default) or (b) have resulted in the acceleration
of the maturity of the principal amount of such Indebtedness
prior to its express maturity; and, in each case, the principal
amount of such Indebtedness, together with the principal amount
of any other Indebtedness with respect to which an event
described in clause (a) or (b) has occurred and is
continuing, aggregates $5.0 million or more;
(7) the entry against the Company, any Restricted
Subsidiary or, for so long as TV One remains a Designated
Entity, TV One, of a final judgment or final judgments for the
payment of money in an aggregate amount in excess of
$10.0 million which judgments remain undischarged,
unwaived, unstayed, uninsured, unbonded or unsatisfied for a
period of 60 consecutive days;
(8) except as permitted by the Indenture, any Guarantee
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 Guarantor shall deny or disaffirm its obligations
under its Guarantee; and
(9) certain events of bankruptcy, insolvency or
reorganization described in the Indenture with respect to the
Company, any of its Significant Subsidiaries, any group of
Subsidiaries of the Company that, taken as a whole, would
constitute a Significant Subsidiary, or, for so long as TV One
remains a Designated Entity, TV One, which in the case of an
involuntary bankruptcy filing continues for 60 consecutive days.
If an Event of Default (other than an Event of Default specified
in clause (9) above) occurs and is continuing, then and in
every such case the trustee or the Holders of not less than 25%
in aggregate principal amount of the outstanding Notes may
declare the principal of, premium, if any, and accrued and
unpaid interest on all of the outstanding Notes to be due and
payable immediately by a notice in writing to the Company (and
to the trustee if given by Holders); provided,
however, that after such acceleration, but before a
judgment or decree based on acceleration, the Holders of a
majority in aggregate principal amount of the outstanding Notes
may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment
of accelerated principal, premium, if any, or interest on the
Notes, have been cured or waived as provided in the Indenture.
In the event of a declaration of acceleration of the Notes
solely because an Event of Default described in clause (6)
above has occurred and is continuing, the declaration of
acceleration of the Notes shall be automatically rescinded and
annulled if the event of default or payment default triggering
such Event of Default pursuant to clause (6) above shall be
remedied or cured by the Company or a Restricted Subsidiary or
164
waived by the holders of the relevant Indebtedness within 20
Business Days after the declaration of acceleration with respect
thereto and if the rescission and annulment of the acceleration
of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction obtained by the trustee for the
payment of amounts due on the Notes. For further information as
to waiver of defaults, see Amendment,
Supplement and Waiver.
If any Event of Default specified in clause (9) above
occurs, the principal of, premium, if any, and accrued and
unpaid interest on the Notes then outstanding shall ipso
facto become immediately due and payable without any
declaration or other act on the part of the trustee or any
Holder.
The trustee may withhold from Holders notice of any Default
(except Default in payment of principal, premium, if any, and
interest) if the trustee determines that withholding notice is
in the interests of the Holders to do so.
No Holder of any Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to
the trustee written notice of a continuing Event of Default and
unless also the Holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request
to the trustee, and provided indemnity reasonably satisfactory
to the trustee, to institute such proceeding as the trustee, and
the trustee shall not have received from the Holders of a
majority in aggregate principal amount of the outstanding Notes
a direction inconsistent with such request and shall have failed
to institute such proceeding within 60 days. Such
limitations do not apply, however, to a suit instituted by a
Holder of a Note directly (as opposed to through the trustee)
for enforcement of payment of the principal, premium, if any, or
interest on such Note on or after the respective due dates
expressed in such Note.
The Company is required to furnish to the trustee annually a
statement as to the performance of certain obligations under the
Indenture and as to any default in such performance. The Company
also is required to notify the trustee if it becomes aware of
the occurrence of any Default or Event of Default.
In the case of (1) any Event of Default occurring by reason
of any willful action or inaction taken or not taken or on
behalf of the Company with the intention of avoiding payment of
the premium that the Company would have had to pay if the
Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture or (2) an
acceleration of the Obligations with respect to the Notes
automatically by operation of law or by the terms of the
Indenture or the Notes during any period in which a premium
would have been payable by the Company if the Company 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.
No
Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder or
other owner of Capital Stock of the Company or any Subsidiary of
the Company, as such, will have any liability for any
obligations of the Company or any Guarantor under the Notes, the
Indenture or the 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, and it is the view of the Commission that such a waiver is
against public policy.
Legal
Defeasance and Covenant Defeasance
The Company may at its option and, at any time, elect to have
all of its obligations discharged with respect to outstanding
Notes and all obligations of the Guarantors discharged with
respect to their Guarantees (Legal
Defeasance) except for:
(1) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, and interest or
premium, if any, on, such Notes when such payments are due from
the trust referred to below;
165
(2) the Companys 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 the Companys obligations in connection
therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time,
elect to have its obligations 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, insolvency or reorganization events) described under
Events of Default and Remedies will no
longer constitute an Event of Default with respect to the Notes.
If the Company exercises either its Legal Defeasance or Covenant
Defeasance option, each Guarantor will be released and relieved
of any obligations under its Guarantee and any Liens or other
security for the Notes (other than the trust) will be released.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) the Company 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, and interest and premium,
if any, on the outstanding Notes on the date of Stated Maturity
or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to
the date of Stated Maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company has
delivered to the trustee an opinion of counsel reasonably
acceptable to the trustee confirming that:
(a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling; or
(b) since the date of the Indenture, there has been a
change in the applicable federal income tax law,
in either case to the effect that, and based thereon such
opinion of counsel 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, the Company 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 and the grant of any Lien to secure such
borrowing);
(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 the Company or any of its Restricted
Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
166
(6) the Company must have delivered to the trustee an
opinion of counsel to the effect that after the 121st day
following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights
generally;
(7) such Legal Defeasance or Covenant Defeasance will not
cause the trustee to have a conflicting interest with respect to
any securities of the Company;
(8) the Company must deliver to the trustee an
officers certificate stating that the deposit was made by
the Company neither with the intent of preferring the Holders of
Notes over the other creditors of the Company or any Guarantor
nor with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or any Guarantor or
others; and
(9) the Company 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.
Amendment,
Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture, the Notes or the Guarantees may be amended or
supplemented with the consent of the Holders of 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 Event of Default or compliance with any
provision of the Indenture, the Notes or the Guarantees may be
waived with the consent of the Holders of 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).
Without the consent of each Holder affected, an amendment,
supplement 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 Stated Maturity
of any Note or alter the provisions with respect to the
redemption or repurchase of the Notes (other than provisions
relating to the covenants described above under the caption
Repurchase at the Option of Holders);
(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 premium, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders
of a majority in principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration);
(5) make any Note payable in currency 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, if any, on the Notes (other than as permitted in
clause (7) below);
(7) waive a redemption or repurchase 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);
(8) modify any Guarantee in a manner adverse to Holders of
the Notes or release any Guarantor from any of its obligations
under its Guarantee or the Indenture, except in accordance with
the terms of the Indenture;
(9) modify the ranking of the Notes or the Guarantees, in
any manner that would adversely affect the Holders; or
(10) make any change in the preceding amendment, supplement
and waiver provisions.
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Notwithstanding the preceding, without the consent of any Holder
of Notes, the Company, the Guarantors and the trustee may amend
or supplement the Indenture, the Notes or the Guarantees:
(1) to cure any ambiguity, omission, mistake, 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 the Companys or
a Guarantors obligations to Holders of Notes in the case
of a merger or consolidation or sale of all or substantially all
of the Companys or a Guarantors properties or assets
that is permitted under the Indenture;
(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
Holder; provided that any change to conform the Indenture
to this Description of Notes will not be deemed to
adversely affect the legal rights under the Indenture of any
Holder;
(5) to add any additional Guarantor or to evidence the
release of any Guarantor from its Guarantee, in each case as
provided in the Indenture;
(6) to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under
the Trust Indenture Act; or
(7) to evidence or provide for the acceptance of
appointment under the Indenture of a successor trustee.
Satisfaction
and Discharge
The Indenture will be discharged and will cease to be of further
effect as to all Notes issued thereunder (except as to surviving
rights of registration of transfer or exchange of the Notes and
as otherwise specified in the Indenture), 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 the Company, 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 the Company or any Guarantor
has irrevocably deposited or caused to be 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, if any, and accrued interest to the date of
Stated 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 instrument
(other than the Indenture) to which the Company or any of the
Guarantors is a party or by which the Company or any Guarantor
is bound;
(3) the Company and each Guarantor has paid or caused to be
paid all sums payable by it under the Indenture; and
(4) the Company has delivered irrevocable instructions to
the trustee under the Indenture to apply the deposited money
toward the payment of the Notes at Stated Maturity or the
redemption date, as the case may be.
168
In addition, the Company 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 the Company 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 (as
defined in the Trust Indenture Act) after a Default has
occurred and is continuing, it must eliminate such conflict
within 90 days, apply to the Commission for permission to
continue or resign.
The Holders of a majority in principal amount of the then
outstanding 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 or indemnity satisfactory to it against any loss,
liability or expense.
Governing
Law
The Indenture, the Notes, the Guarantees and the Registration
Rights Agreement will be governed by, and construed in
accordance with, the laws of the State of New York.
Additional
Information
Anyone who receives this prospectus may obtain a copy of the
Indenture and the Registration Rights Agreement without charge
by writing to the Company at 5900 Princess Garden Parkway, 7th
Floor, Lanham, Maryland 20706, Attn: Investor Relations or by
sending an email message to invest@radio-one.com.
Registration
Rights; Special Interest
On November 24, 2009, the Company and the Guarantors
entered into the Exchange and Registration Rights Agreement (the
Registration Rights Agreement) in connection with
the offer and sale of the Old Notes. The following description
is a summary of the material provisions of the Registration
Rights Agreement. It does not restate such agreement in its
entirety. A copy of the Registration Rights Agreement is
attached to our Current Report on
Form 8-K
filed December 1, 2010 and may also be obtained by
contacting our Investor Relations Department at the address or
email address set forth above under the caption Additional
Information. We urge you to read the Registration Rights
Agreement in its entirety because it, and not this description,
defines your registration rights as holders of the Exchange
Notes.
Pursuant to the Registration Rights Agreement, we agreed to use
our reasonable best efforts to file with the SEC and cause to
become effective a registration statement (the
Registration Statement) with respect to a registered
offer to exchange the Old Notes for registered notes guaranteed
by the Guarantors with terms identical in all material respects
to the Old Notes, except that the registered notes issued in
such exchange offer will not contain terms for specified
transfer restrictions or for special interest. Upon the
effectiveness of the Registration Statement, we will offer the
holders of Registrable Securities (as defined in the
Registration Rights Agreement) who are able to make certain
representations the opportunity to exchange their Registrable
Securities for such registered notes.
If:
(1) the Company and the guarantors are not permitted to
consummate the exchange offer because the exchange offer is not
available or would violate applicable law or the applicable
interpretations of the SEC, or the exchange offer is not
otherwise completed within 45 days after the effectiveness
of the Registration Statement; or
169
(2) any holder of Registrable Securities notifies us prior
to the 20th business day following completion of the
exchange offer that:
(a) it is prohibited by law or SEC policy from
participating in the exchange offer;
(b) it may not resell the registered exchange notes
acquired by it in the exchange offer to the public without
delivering a prospectus and the prospectus contained in the
Registration Statement with respect to the exchange offer is not
appropriate or available for such resales; or
(c) it is a broker-dealer and owns Registrable Securities
acquired directly from us or our affiliate
we will file with the SEC a Shelf Registration Statement (as
defined in the Registration Rights Agreement) to cover resales
of the Registrable Securities by the holders of the Registrable
Securities who satisfy certain conditions relating to the
provision of information in connection with the Shelf
Registration Statement (the Electing Holders).
For purposes of the preceding, Registrable
Securities means any Old Note until the earliest to occur
of:
(1) the date on which such Old Note has been exchanged for
an Exchange Note in the exchange offer and may be resold under
federal securities laws (provided that, during the 180 day
period following completion of an exchange offer, such Exchange
Notes included in a prospectus for use in connection with
resales by a broker-dealer shall be deemed to be a Registrable
Security until resale of such Exchange Notes);
(2) the date on which such Old Note has been sold or
otherwise transferred pursuant to a manner contemplated by an
effective Shelf Registration Statement;
(3) the date on which such Old Note is sold pursuant to
Rule 144 under the Securities Act under circumstances in
which any legend relating to restrictions on transferability
under the Securities Act is removed (or the restrictive CUSIP
number is redesignated as non-restrictive); or
(4) such Old Note ceases to be outstanding.
The Registration Rights Agreement provides that:
(1) we will file a Registration Statement with respect to a
registered exchange offer with the SEC and will use our
reasonable best efforts to cause the Registration Statement to
be declared effective by the SEC, on or prior to 120 days
after November 24, 2010 if such Registration Statement is
not reviewed by the SEC, or on or prior to 270 days after
November 24, 2010 if such Registration Statement is
reviewed by the SEC;
(2) unless the exchange offer would not be permitted by
applicable law or SEC policy, we will use our reasonable best
efforts to:
(a) commence the exchange offer within 10 business days
following the effective time of the Registration
Statement; and
(b) use our reasonable best efforts to issue on or prior to
45th business day after the date on which the Registration
Statement was declared effective by the SEC, Exchange Notes in
exchange for all Old Notes tendered prior thereto in the
exchange offer; and
(3) if obligated to file the Shelf Registration Statement,
we will file the Shelf Registration Statement with the SEC as
soon as reasonably practicable after such obligation arises and
use our reasonable best efforts to cause the Shelf Registration
Statement to be declared effective by the SEC on or prior to
120 days after such obligation arises if such Shelf
Registration Statement is not reviewed by the SEC, or on or
prior to 270 days after such obligation arises if such
Shelf Registration Statement is reviewed by the SEC.
Notwithstanding anything to the contrary, upon notice to the
Electing Holders, we may suspend the use or the effectiveness of
the Registration Statement, or extend the time period in which
it is required to file the
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Shelf Registration Statement, for up to 30 consecutive days and
up to 60 days in the aggregate, in each case in any
12-month
period (a Suspension Period) if our Board of
Directors determines that there is a valid business purpose for
suspension of the Shelf Registration Statement; provided that we
shall promptly notify the Electing Holders (as included in the
Registration Rights Agreement) when the Shelf Registration
Statement may once again be used or is effective.
The Registration Rights Agreement provides that, if:
(1) we fail to file any of the registration statements
required by the Registration Rights Agreement on or before the
date specified for such filing;
(2) any of such registration statements is not declared
effective by the SEC on or prior to the date specified for such
effectiveness (the Effectiveness Target Date);
(3) we fail to consummate the exchange offer within 45
business days of the effectiveness of the Registration
Statement; or
(4) the Registration Statement is declared effective but
thereafter is withdrawn by us or becomes subject to a stop order
issued pursuant to Section 8(d) of the Securities Act (each
such event referred to in clauses (1) through
(4) above, a Registration Default),
except as specifically permitted in the Registration Rights
Agreement, including, with respect to any Shelf Registration
Statement, during any applicable Suspension Period, then we will
pay special interest to each holder of entitled securities until
all Registration Defaults have been cured.
With respect to the first
90-day
period immediately following the occurrence of the first
Registration Default, special interest will be paid in an amount
equal to 0.25% per annum of the principal amount of entitled
securities outstanding. The amount of the special interest will
increase by an additional 0.25% per annum with respect to each
subsequent
90-day
period until all Registration Defaults have been cured, up to a
maximum amount of special interest for all Registration Defaults
of 1.0% per annum of the principal amount of the entitled
securities outstanding. The accrual of such special interest
will be the holders exclusive remedy under the
Registration Rights Agreement with respect to any Registration
Defaults thereunder.
We will pay all accrued special interest on the next scheduled
interest payment date to DTC or its nominee by wire transfer of
immediately available funds or by federal funds check and to
holders of certificated Old Notes by wire transfer to the
accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified.
Following the cure of all Registration Defaults, the accrual of
special interest will cease.
Holders of Registrable Securities will be required to make
certain representations to us (as described in the Registration
Rights Agreement) in order to participate in the exchange offer
and will be required to deliver certain information to be used
in connection with the Shelf Registration Statement and to
provide comments on the Shelf Registration Statement within the
time periods set forth in the Registration Rights Agreement in
order to have their Registrable Securities included in the Shelf
Registration Statement. As a condition to including any
Registrable Securities in a Shelf Registration Statement, a
holder will agree to indemnify the Company and the Guarantors
against certain losses arising out of information furnished by
such holder in writing for inclusion in any Shelf Registration
Statement. Holders of Registrable Securities will also be
required to suspend their use of the prospectus included in the
Shelf Registration Statement under certain circumstances upon
receipt of written notice to that effect from us.
Under existing interpretations of the Securities Act by the SEC
contained in several no-action letters to third parties, and
subject to the immediately following sentence, we believe that
the Exchange Notes received in an exchange offer would generally
be freely transferable by holders thereof after the exchange
offer without further registration under the Securities Act
(subject to certain representations required to be made by each
holder of Old Notes, as set forth below). However, any purchaser
of Old Notes who is an affiliate of the Company or
any Guarantor and any holder of Old Notes who intends to
participate in the exchange offer for the purpose of
distributing the Exchange Notes (i) will not be able to
rely on the interpretation of the staff of
171
the SEC, (ii) will not be able to tender its Old Notes in
the exchange offer and (iii) must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the
Old Notes unless such sale or transfer is made pursuant to an
exemption from such requirements.
As a condition to its participation in an exchange offer, each
holder of Registrable Securities must furnish us a written
representation to the effect that:
(1) it is not an affiliate of the Issuer, as
defined in Rule 405 of the Securities Act, or if it is such
an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act to
the extent applicable;
(2) it is not engaged in and does not intend to engage in,
and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes to be
issued in such exchange offer;
(3) it is acquiring such Exchange Notes in its ordinary
course of business;
(4) if it is a broker-dealer that holds Registrable
Securities that were acquired for its own account as a result of
market-making activities or other trading activities (other than
Registrable Securities acquired directly from the Issuer or any
of its affiliates), it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any
resales of the Exchange Notes received by it;
(5) if it is a broker-dealer, that it did not purchase the
Registrable Securities to be exchanged in the exchange offer
from us or any of its affiliates; and
(6) it is not acting on behalf of any person who could not
truthfully and completely make the representations contained in
the foregoing.
Book
Entry; Delivery and Form
The Exchange Notes will be initially represented by one or more
notes in registered global form without interest coupons (the
Global Notes). The Global Notes will be executed by
an officer of the Company by manual or facsimile signature. Upon
delivery of the Global Notes to the trustee by the Company for
authentication, together with a company order for the
authentication and delivery of the notes, the trustee in
accordance with the company order and the terms of the indenture
will authenticate and deliver the notes. The Global Notes will
be deposited 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
the credit to an account of a direct or indirect participant in
DTC as described below. We expect that, pursuant to procedures
established by DTC, (i) upon the issuance of the Global
Notes, DTC or its custodian will credit, on its internal system,
the principal amount at maturity of the individual beneficial
interests represented by such Global Notes to the respective
accounts of persons who have accounts with such depositary
(participants) and (ii) ownership of beneficial
interests in the Global Notes will be shown on, and the transfer
of such ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts
initially will be designated by or on behalf of the initial
purchasers and ownership of beneficial interests in the Global
Notes will be limited to participants or persons who hold
interests through participants. Holders may hold their interests
in the Global Notes directly through DTC if they are
participants in such system, or indirectly through organizations
that are participants in such system.
So long as DTC or its nominee is the registered owner or holder
of the notes, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the notes represented by
such Global Notes for all purposes under the indenture. No
beneficial owner of an interest in the Global Notes will be able
to transfer that interest except in accordance with DTCs
procedures, in addition to those provided for under the
indenture with respect to the notes.
Payments of the principal of, and premium (if any) and interest
on, the Global Notes will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. None of the
issuer, the trustee or any paying agent will have any
responsibility or liability for any aspect of the records
relating to or payments
172
made on account of beneficial ownership interests in the Global
Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment
of principal of, and premium (if any) and interest on the Global
Notes, will credit participants accounts with payments in
amounts proportionate to their respective beneficial interests
in the principal amount of the Global Notes as shown on the
records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the Global
Notes held through such participants will be governed by
standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in
the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the
ordinary way through DTCs
same-day
funds system in accordance with DTC rules and will be settled in
same-day
funds.
DTC has advised us that it will take any action permitted to be
taken by a holder of notes (including the presentation of notes
for exchange as described below) only at the direction of one or
more participants to whose account the DTC interests in the
Global Notes are credited and only in respect of such portion of
the aggregate principal amount of notes as to which such
participant or participants has or have given such direction.
DTC has advised us as follows: DTC is a limited-purpose trust
company organized under New York banking law, a banking
organization within the meaning of the New York banking
law, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform
Commercial Code and a clearing agency registered
pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds and provides asset servicing for issues of
U.S. and
non-U.S. equity,
corporate and municipal debt issues that participants deposit
with DTC. DTC also facilitates the post-trade settlement among
participants of sales and other securities transactions in
deposited securities through electronic computerized book-entry
transfers and pledges between participants accounts. This
eliminates the need for physical movement of securities
certificates. Participants include both U.S. and
non-U.S. securities
brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Access to the DTC
system is also available to indirect participants such as both
U.S. and
non-U.S. securities
brokers and dealers, banks, trust companies and clearing
corporations that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among
participants of DTC, it is under no obligation to perform such
procedures, and such procedures may be discontinued at any time.
None of us, the trustee or any paying agent will have any
responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the
rules and procedures governing their operations.
Certificated
Securities
A Global Note is exchangeable for certificated notes in fully
registered form without interest coupons (Certificated
Securities) only in the following limited circumstances:
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DTC notifies us that it is unwilling or unable to continue as
depositary for the Global Notes and we fail to appoint a
successor depositary within 90 days of such notice, or
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there shall have occurred and be continuing an event of default
with respect to the notes under the indenture and DTC shall have
requested the issuance of Certificated Securities.
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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 the notes will be
limited to such extent.
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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.
63/8% Senior
Subordinated Notes means the Companys
63/8% Senior
Subordinated Notes due 2013.
87/8% Senior
Subordinated Notes means the Companys
87/8% Senior
Subordinated Notes due 2011.
Acquired Debt means, with respect to any
specified Person:
(1) Indebtedness of any other Person existing at the time
such other Person was 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;
(2) Indebtedness assumed by the specified Person in
connection with the acquisition of assets from another
Person; and
(3) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
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.
Affiliate Entity means any Person who,
directly or indirectly, has the ability to elect one or more of
the members of the Board of Directors of the Company or any
Parent Company.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition of any
properties or assets (including, without limitation, by means of
a sale and leaseback transaction) outside the ordinary course of
business; provided that the disposition of all or
substantially all of the properties or assets of the Company and
its Restricted 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 covenant described under Repurchase at
the Option of Holders Asset Sales; and
(2) the issuance of Equity Interests in any of the
Companys Restricted Subsidiaries or the sale of Equity
Interests in any of its Subsidiaries or the sale by ROCH of any
Equity Interests of TV One (other than directors
qualifying shares, shares required by applicable law to be held
by a Person other than the Company or 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 properties or assets or Equity
Interests having a Fair Market Value of less than
$1.0 million;
(2) a transfer of assets by the Company to any Wholly Owned
Restricted Subsidiary or by any Restricted Subsidiary to the
Company or a Wholly Owned Restricted Subsidiary;
(3) an issuance or sale of Equity Interests by a Restricted
Subsidiary to the Company or to a Wholly Owned Restricted
Subsidiary;
(4) the sale, lease or other disposition of equipment,
inventory, accounts receivable or other properties or assets in
the ordinary course of business;
174
(5) the sale or other disposition of cash or Cash
Equivalents;
(6) the making of a Restricted Payment that is permitted by
the covenant described above under the caption
Certain Covenants Restricted
Payments or the making of a Permitted Investment;
(7) the sale and leaseback of any assets within
90 days of the acquisition thereof;
(8) a disposition of assets that are no longer used or
useful in the business of such entity;
(9) licensing of intellectual property in the ordinary
course of business;
(10) the creation or perfection of a Permitted Lien (but
not the sale or other disposition of the properties or assets
subject to such Lien);
(11) foreclosures on assets;
(12) Asset Swaps; and
(13) surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other
claims of any kind.
Asset Swap means any transfer of assets of
the Company or any Restricted Subsidiary to any Person other
than an Affiliate of the Company or such Restricted Subsidiary
in exchange for assets of such Person if:
(1) such exchange would qualify, whether in part or in
full, as a like- kind exchange pursuant to Section 1031 of
the Code; provided that nothing in this definition shall
require the Company or any Restricted Subsidiary to elect that
Section 1031 of the Code be applicable to any Asset Swap;
(2) the Fair Market Value of any property or assets
received is at least equal to the Fair Market Value of the
property or assets so transferred; and
(3) to the extent applicable, any boot or other
assets received by the Company or any Restricted Subsidiary is
directly related to,
and/or
consists of Equity Interests issued by a Person in, a Permitted
Business and any Net Proceeds from the disposition of such boot
or other assets are applied as required by the covenant
described under the caption Repurchase at the
Option of Holders Asset Sales.
Authorizations means all filings, recordings
and registrations with, and all validations or exemptions,
approvals, orders, authorizations, consents, Licenses,
certificates and permits from, the FCC.
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 Beneficially Owning
and Beneficially Owned have correlative meanings.
Board of Directors means:
(1) with respect to a corporation, the board of directors
of the corporation;
(2) with respect to a partnership or a limited liability
company, the board of directors or similar body of the general
partner or managers of such entity; and
(3) with respect to any other entity, the functional
equivalent of the foregoing,
or, in each case of clause (1), (2) and (3), other
than for purposes of the definition of Change of
Control, any duly authorized committee of such body.
Board Resolution means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
applicable Person to have been duly adopted by the Board of
Directors of such Person and to be in full force and effect on
the date of such certification, and delivered to the trustee.
175
Business Day means each day that is not a
Saturday, Sunday or other day on which banking institutions in
New York, New York are authorized or required by law to close.
Capital Lease Obligation means any obligation
under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the
capitalized amount of such obligations determined in accordance
with the GAAP; and the Stated Maturity thereof shall be the date
of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty. For
purposes of Certain Covenants
Liens, a Capital Lease Obligation shall be deemed secured
by a Lien on the property or assets (and proceeds thereof) being
leased.
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 of one
year or less and overnight bank deposits, in each case, with any
lender party to the Existing Credit Agreement or with any
domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of
B or better;
(4) repurchase obligations with a term of not more than
seven 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 the highest rating obtainable
from Moodys or S&P and in each case maturing within
nine months 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, lease, transfer,
conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the properties or assets of the
Company 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 or a Permitted Group;
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that more than 50% of the Voting Stock of the Company or any
Parent Company, measured by voting power, rather than number of
shares, is Beneficially Owned, directly or indirectly, by
176
any Person other than any Parent Company, the Principals and
their Related Parties or a Permitted Group; or
(4) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
Code means the Internal Revenue Code of 1986,
as amended from time to time.
Commission or SEC means
the Securities and Exchange Commission.
Communications Act means the Communications
Act of 1934, as amended, and the rules, regulations, orders,
decisions and published policies thereunder.
Consolidated Cash Flow means, with respect to
any specified Person for any period, without duplication, the
Consolidated Net Income of such Person:
(1) plus, in each case determined on a consolidated
basis in accordance with GAAP and only to the extent deducted in
determining Consolidated Net Income,
(a) Consolidated Income Tax Expense (other than income tax
expense (either positive or negative) attributable to
extraordinary gains (or losses));
(b) Consolidated Interest Expense;
(c) Consolidated Non-cash Charges;
(d) any expenses or charges related to the Transactions or
any equity offering (whether or not successful);
(e) any extraordinary or non-recurring charges, costs or
expenses; and
(f) interest incurred in connection with Investments in
discontinued operations;
(2) minus
(a) non-cash items increasing such Consolidated Net Income,
other than (i) the accrual of revenue in the ordinary
course of business and (ii) reversals of prior accruals or
reserves for cash items previously excluded in the calculation
of Consolidated Non-cash Charges; and
(b) barter revenues to the extent such barter revenues were
included in computing such Consolidated Net Income.
Consolidated Income Tax Expense means, with
respect to any Person for any period, the provision for federal,
state, local and foreign income taxes of such Person and its
Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
Consolidated Interest Expense means, with
respect to any Person for any period the interest expense of
such Person, its Restricted Subsidiaries and, for so long as TV
One remains a Designated Entity, the TV One Percentage of the
interest expense of TV One and its Subsidiaries, in each case
for such period as determined on a consolidated basis in
accordance with GAAP (whether paid or accrued and whether or not
capitalized), including without duplication:
(1) any amortization of debt discount;
(2) non-cash interest expense, including any interest paid
in kind by the issuance of additional Indebtedness;
(3) the net cost under Hedging Obligations (including any
amortization of discounts);
(4) the interest portion of any deferred payment obligation;
(5) all commissions, discounts and other fees and charges
owed with respect to letters of credit, bankers
acceptances, financing or similar activities (including, without
limitation, agency fees, commitment fees and similar fees);
177
(6) the interest component of Capital Lease Obligations;
(7) the interest expense on any Indebtedness guaranteed by
such Person and its Restricted Subsidiaries or secured by a Lien
on assets of the Company or any of its Restricted
Subsidiaries; and
(8) any cash dividends paid or payable on any Designated
Preferred Stock.
Consolidated Net Income means, with respect
to any Person, for any period, the net income (or loss) of such
Person and its Restricted Subsidiaries for such period on a
consolidated basis determined in accordance with GAAP;
provided that there shall be excluded therefrom:
(1) all extraordinary or unusual gains and extraordinary or
unusual losses (in each case, net of fees and expenses relating
to the transaction giving rise thereto), together with any
related provision for taxes on such gains and losses;
(2) the net income (but not loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity
method of accounting, except to the extent of the amount of
dividends or distributions paid in cash to the specified Person
or a Restricted Subsidiary of the Person;
(3) gains or losses in respect of any Asset Sales or sale
or other disposition of assets or Equity Interests outside the
ordinary course of business after the Issue Date by such Person
or one of its Restricted Subsidiaries (net of fees and expenses
relating to the transaction giving rise thereto), on an
after-tax basis;
(4) the net income (loss) from any operations disposed of
or discontinued after the Issue Date and any net gains or losses
on such disposition or discontinuance, on an after-tax basis;
(5) solely for purposes of the covenant described under the
caption Certain Covenants
Restricted Payments, the net income (but not loss) of any
Restricted Subsidiary of such Person to the extent the
declaration 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 regulations applicable to that Restricted
Subsidiary or its stockholders, partners or members, except to
the extent of any dividends or other distributions or payments
actually paid to such Person or any of its Restricted
Subsidiaries and not already included in the Consolidated Net
Income of such Person;
(6) any gain or loss realized as a result of the cumulative
effect of a change in accounting principles;
(7) any fees and expenses, including deferred finance
costs, paid in connection with the Transactions (including,
without limitation, ratings agency fees);
(8) non-cash compensation charges or expenses, including
those incurred in connection with any issuance of Equity
Interests;
(9) non-cash gains and losses attributable to movement in
the
mark-to-market
valuation of Hedging Obligations pursuant to Statement of
Financial Accounting Standards No. 133; and
(10) any net after-tax gains or losses attributable to the
early extinguishment of Indebtedness (in each case, net of fees
and expenses relating to the transaction giving rise thereto).
Consolidated Non-cash Charges means, with
respect to any Person for any period, the aggregate
depreciation, amortization (including, without limitation,
(i) amortization of goodwill, programming costs, barter
expenses and other intangibles and (ii) the effect of any
non-cash impairment charges incurred subsequent to the Issue
Date resulting from the application of Statement of Financial
Accounting Standards Nos. 141, 142 or 144 and any other non-cash
items resulting from any amortization,
write-up,
write-down or write-off of assets or liabilities (including
deferred financing costs and the effect of straight-lining of
rents as a result of purchase accounting adjustments) in
connection with any future acquisition, disposition, merger,
consolidation or similar transaction, but excluding amortization
of pre-paid cash expenses that were paid in a
178
prior period) and other non-cash charges and expenses of such
Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with
GAAP excluding any such charges which require an accrual of or a
reserve for cash charges for any future period).
Continuing Directors means, as of any date of
determination, any member of the Board of Directors of the
Company who:
(1) was a member of or nominated to such Board of Directors
on the Issue Date; or
(2) was nominated for election by either (a) one or
more of the Principals or (b) the Board of Directors of the
Company, a majority of whom were members of or nominated to the
Board of Directors of the Company on the Issue Date 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 the Company (determined by reference to
voting power and not number of shares held) or such directors.
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.
Designated Entity means TV One at all times
that the Company or any of its Restricted Subsidiaries is the
Beneficial Owner of at least 10% of the outstanding Equity
Interests of TV One and until such time as TV One becomes a
Restricted Subsidiary under the terms of the Indenture.
Designated Preferred Stock means Preferred
Stock of the Company (other than Disqualified Stock) that is
issued for cash (other than to a Restricted Subsidiary, Reach
Media or, for so long as TV One remains a Designated Entity, TV
One or an employee stock ownership plan or trust established by
the Company or any of its Subsidiaries or, for so long as TV One
remains a Designated Entity but is not otherwise a Subsidiary,
TV One) and is so designated as Designated Preferred Stock,
pursuant to an Officers Certificate executed by the
principal financial officer of the Company, on the issuance date
thereof, the cash proceeds of which are excluded from the
calculation of the Restricted Payments Basket.
Designated Senior Debt means any Indebtedness
outstanding under the Existing Credit Agreement.
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 that is 91 days
after the date on which the Notes mature or is convertible into
or exchangeable for debt securities at any time prior to the
date that is 91 days after the date on which the Notes
mature or otherwise cease to be outstanding. 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 the Company or a Restricted
Subsidiary to repurchase or redeem such Capital Stock upon the
occurrence of a change of control or an asset sale occurring
prior to the 91st day after the final maturity date of the
Notes will not constitute Disqualified Stock if the change of
control or asset sale provisions applicable to such Disqualified
Stock specifically provide that the Company or a Restricted
Subsidiary will not repurchase or redeem any such Capital Stock
unless such repurchase or redemption complies with the covenant
described above under the caption Certain
Covenants Restricted Payments.
The maximum fixed repurchase price of any Disqualified Stock
that does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Stock as if
such Disqualified Stock were repurchased on any date on which
Indebtedness shall be required to be determined pursuant to the
Indenture; provided, however, that, if such Disqualified
Stock is not then permitted to be repurchased, the repurchase
price shall be the book value of such Disqualified Stock.
DTC means The Depository Trust Company,
its nominees and successors.
DTV Investors means collectively DIRECTV
Programming Holdings I, Inc. and DIRECTV Programming
Holdings II, Inc.
and/or their
permitted transferees.
179
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
Exchange Act means the Securities Exchange
Act of 1934, as amended.
Exchange Claims means (1) Indebtedness
under the Notes and the Guarantees and (2) all other
Obligations related to the Indebtedness described in
clause (1) above.
Existing Credit Agreement means the Amended
and Restated Credit Agreement, dated as of the Issue Date, by
and among the Company, as Borrower, Wells Fargo Bank, N.A. (as
successor by merger to Wachovia Bank, National Association), as
Administrative Agent, and the lenders party thereto, which
amends and restates the Credit Agreement, dated as of
June 13, 2005, by and among the Company, as Borrower, Wells
Fargo Bank, N.A. (as successor by merger to Wachovia Bank,
National Association), as Administrative Agent, Bank of America,
N.A., as Syndication Agent, Credit Suisse, Merrill Lynch Capital
Corp. and SunTrust Bank, as Co-Documentation Agents, Wachovia
Capital Markets, LLC and Banc of America Securities LLC, as
Joint Lead Arrangers, and certain financial institutions named
therein, as lenders, including any related guarantees,
collateral documents, security agreements, mortgages,
instruments and other agreements executed in connection
therewith, as each may be amended, restated, modified,
supplemented, renewed, extended, refunded, replaced or
refinanced in whole or in part from time to time including upon
the Issue Date (including any increase in the amount of
available borrowings or obligations thereunder or addition of
Restricted Subsidiaries as additional borrowers or guarantors
thereunder) whether provided under one or more other credit
agreements, financing agreements or otherwise and whether by the
same or any other agent, lender or group of lenders; provided
that, so long as any Notes are outstanding, no such increase
may result in the principal amount of Indebtedness of the
Company under the Existing Credit Agreement exceeding the amount
specified in clause (1) of the definition of Permitted
Debt, as such amount is reduced from time to time in accordance
with such clause (1).
Existing Subordinated Notes means the
63/8% Senior
Subordinated Notes and the
87/8% Senior
Subordinated Notes.
Fair Market Value means, with respect to any
asset or property, the price which could be negotiated in an
arms-length transaction, between a willing seller and a
willing and able buyer, neither of whom is under undue pressure
or compulsion to complete the transaction. Fair Market Value
will be determined in good faith by the Board of Directors of
the Company, whose determination will be conclusive and
evidenced by a Board Resolution; provided, that the Board
of Directors shall be permitted to consider the circumstances
existing at the time; provided, further, however, that if
the Fair Market Value of the property or assets in question is
so determined to be in excess of $10.0 million, such
determination must be confirmed by an Independent Qualified
Party.
FCC means the Federal Communications
Commission (or any successor agency, commission, bureau,
department or other political subdivision of the United States
of America).
FCC License means any radio or television
broadcast service, community antenna relay service, broadcast
ancillary, earth station registration, business radio,
microwave, special safety radio service license or other
license, permit, authorization or certificate issued by the FCC
pursuant to the Communications Act.
Fiscal Quarter means each three-month period
beginning on January 1, April 1, July 1 and October 1
of each year.
Foreign Subsidiary means (i) a
Restricted Subsidiary that is organized and existing under the
laws of a jurisdiction other than the United States, any State
thereof or the District of Columbia; (ii) a Restricted
Subsidiary substantially all of whose assets consist, directly
or indirectly, of controlled foreign corporations
(within the meaning of Section 957 of the Code) (each, a
CFC); and (iii) a Restricted Subsidiary
that is treated as disregarded for U.S. federal income tax
purposes and owns more than 65% of the voting stock of either a
CFC or a Subsidiary described in the preceding clause (ii).
GAAP means generally accepted accounting
principles in the United States, consistently applied, as set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of
180
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession in the United
States, which are in effect as of the Issue Date.
Going Private Transaction means the initial
occurrence of any of the following after the Issue Date:
(a) a
Rule 13e-3
transaction (as that term is defined in
Rule 13e-3
of the Exchange Act) involving the Company, or (b) any
transaction that results in the Company being eligible to cease
filing reports under Section 13(a) or 15(d) of the Exchange
Act with the SEC; provided that any transaction described in
clause (a) or (b) is not a Change of Control.
Guarantee means a guarantee by a Guarantor of
the Companys payment Obligations under the Indenture and
on the Notes.
guarantee means, as applied to any
Indebtedness of another Person, (1) a guarantee (other than
by endorsement of negotiable instruments for collection in the
normal course of business), direct or indirect, in any manner,
of any part or all of such Indebtedness, (2) any direct or
indirect obligation, contingent, or otherwise, of a Person
guaranteeing or having the effect of guaranteeing the
Indebtedness of any other Person in any manner and (iii) an
agreement of a Person, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event
of non-performance) of all or any part of such Indebtedness of
another Person (and guarantee or
guaranteeing shall have meanings that correspond to
the foregoing).
Guarantor means (1) on the Issue Date,
each of the Companys domestic Restricted Subsidiaries and
(2) after the Issue Date each of the Companys
domestic Restricted Subsidiaries which becomes a Guarantor
pursuant to 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 incurred in
the normal course of business and not for speculative purposes
under:
(1) interest rate swap agreements (whether from fixed to
floating or from floating to fixed), interest rate cap
agreements and interest rate collar agreements entered into with
one of more financial institutions; and
(2) other agreements or arrangements designed to protect
such Person or any of its Subsidiaries against fluctuations in
interest rates, commodity prices or currency exchange rates.
Holder means a Person in whose name a Note is
registered in the security register.
Immaterial Subsidiary means, as of any date,
any Restricted Subsidiary (other than a Foreign Subsidiary)
whose total assets, together with all other domestic Restricted
Subsidiaries that are not Guarantors, as of that date, are less
than $5.0 million and whose total revenues, together with
all other domestic Restricted Subsidiaries that are not
Guarantors, for the most recent twelve-month period do not
exceed $5.0 million; provided that a Restricted
Subsidiary will not be considered to be an Immaterial Subsidiary
if it, directly or indirectly, guarantees or otherwise provides
direct credit support for any Indebtedness of the Company or any
Guarantor.
incur has the meaning set forth under
Certain Covenants Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred
Stock (and incurrence and
incurred shall have meanings that correspond
to the foregoing).
Indebtedness means, with respect to any
specified Person, without duplication,
(1) all obligations of such Person, whether or not
contingent, in respect of:
(a) the principal of and premium, if any, in respect of
outstanding (i) Indebtedness of such Person for money
borrowed and (ii) Indebtedness evidenced notes, debentures,
bonds or other similar instruments for the payment of which such
Person is responsible or liable;
(b) all Capital Lease Obligations of such Person;
181
(c) the deferred purchase price of property, which purchase
price is due more than six months after the date of taking
delivery of title to such property, including all obligations of
such Person for the deferred purchase price of property under
any title retention agreement, but excluding accrued expenses
and trade accounts payable or non-cash barter arrangements
arising in the ordinary course of business; and
(d) the reimbursement obligation of any obligor for the
principal amount of any letter of credit, bankers
acceptance or similar transaction (excluding obligations with
respect to letters of credit securing obligations (other than
obligations described in clauses (a) through
(c) above) entered into in the ordinary course of business
of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following
receipt by such Person of a demand for reimbursement following
payment on the letter of credit);
(2) all net obligations in respect of Hedging Obligations;
(3) all liabilities of others of the kind described in the
preceding clause (1) or (2) that such Person has
guaranteed or that are otherwise its legal liability;
(4) Indebtedness (as otherwise defined in this definition)
of another Person secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person, the
amount of such obligations being deemed to be the lesser of:
(a) the full amount of such obligations so secured; and
(b) the Fair Market Value of such asset; and
(5) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of, or
amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (1), (2),
(3), (4) or this clause (5), whether or not between or
among the same parties;
if and to the extent any of the preceding items (other than
letters of credit and Hedging Obligations) would appear as a
liability on the balance sheet of the specified Person prepared
in accordance with GAAP. Indebtedness shall be calculated
without giving effect to the effects of Statement of Financial
Accounting Standards No. 133 and related interpretations to
the extent such effects would otherwise increase or decrease an
amount of Indebtedness for any purpose under the indenture as a
result of accounting for any embedded derivatives created by the
terms of such Indebtedness.
For purposes of the foregoing:
(a) the amount outstanding at any time of any Indebtedness
issued with original issue discount is the principal amount of
such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as
determined in conformity with GAAP, but such Indebtedness shall
be deemed incurred only as of the date of original issuance
thereof;
(b) the amount of any Indebtedness described in
clause (3) of the preceding paragraph shall be the maximum
liability under any such Guarantee; and
(c) the amount of any other Indebtedness of any Person at
any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to
the obligations, of any contingent obligations at such date.
Notwithstanding the foregoing, in connection with the purchase
by the Company or any Restricted Subsidiary of any business, the
term Indebtedness will exclude (1) customary
indemnification obligations and (2) post-closing payment
adjustments to which the seller may become entitled to the
extent such payment is determined by a final closing balance
sheet or such payment is otherwise contingent; provided,
however, that, such amount would not be required to be
reflected on the face of a balance sheet prepared in accordance
with GAAP.
182
Independent Qualified Party means an
investment banking firm, accounting firm or appraisal firm of
national or regional standing; provided, however, that
such firm is not an Affiliate of the Company.
Investment means, with respect to any Person,
any direct or indirect advance, loan or other extension of
credit (including by way of guarantee or similar arrangement) or
capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for
the account or use of others) to another Person, or any purchase
or acquisition of Equity Interests, Indebtedness or other
similar instruments issued by, such other Person, together with
all items that are barter contributions or would be classified
as investments on a balance sheet of such Person prepared in
accordance with GAAP. If the Company or any Restricted
Subsidiary issues, sells or otherwise disposes of any Equity
Interests of a Restricted Subsidiary such that, after giving
effect thereto, such Person is no longer a Restricted
Subsidiary, any Investment by the Company or any Restricted
Subsidiary in such Person remaining after giving effect thereto
will be deemed to be a new Investment at such time. The
acquisition by the Company or any Restricted Subsidiary of a
Person that holds an Investment in a third Person will be deemed
to be an Investment by the Company or such Restricted Subsidiary
in such third Person at such time. Except as otherwise provided
for herein, the amount of an Investment shall be its Fair Market
Value at the time the Investment is made and without giving
effect to subsequent changes in value.
For purposes of the definition of Unrestricted
Subsidiary, the definition of Restricted
Payment and the covenant described under the caption
Certain Covenants Restricted
Payments, any property transferred to or from an
Unrestricted Subsidiary shall be valued at its Fair Market Value
at the time of such transfer.
Issue Date means the date on which Notes are
first issued under the Indenture.
Leverage Ratio means, as of any date of
determination (the Determination Date) the
ratio of (1) the aggregate outstanding amount of
Indebtedness of each of the Company, its Restricted Subsidiaries
and, for so long as TV One remains a Designated Entity, the TV
One Percentage of the aggregate outstanding amount of
Indebtedness of TV One and its Subsidiaries as of the last day
of the most recently ended Fiscal Quarter ending on or prior to
the Determination Date for which internal financial statements
are internally available as of such Determination Date,
determined on a consolidated basis in accordance with GAAP plus
the aggregate liquidation preference of all outstanding
Disqualified Stock of the Company and the Guarantors, Designated
Preferred Stock, and Preferred Stock of such Restricted
Subsidiaries and, for so long as TV One remains a Designated
Entity, TV One and its Subsidiaries (except Preferred Stock
issued to the Company or a Wholly Owned Restricted Subsidiary)
as of the last day of such Fiscal Quarter ending on or prior to
the Determination Date to (2) the aggregate Consolidated
Cash Flow of the Company for the last four full Fiscal Quarters
for which financial statements are internally available ending
on or prior to the Determination Date (the Reference
Period).
For purposes of this definition, the aggregate outstanding
principal amount of Indebtedness of the Company, its Restricted
Subsidiaries and, for so long as TV One remains a Designated
Entity, the TV One Percentage of the aggregate outstanding
principal amount of Indebtedness of TV One and its Subsidiaries
and the aggregate liquidation preference of all outstanding
Disqualified Stock of the Company and the Guarantors, Designated
Preferred Stock, and Preferred Stock of such Restricted
Subsidiaries and, for so long as TV One remains a Designated
Entity, TV One and its Subsidiaries for which such calculation
is made shall be determined on a pro forma basis as if the
Indebtedness, Disqualified Stock, Designated Preferred Stock 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
Disqualified Stock, Designated Preferred Stock 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 (a) the incurrence of
the Indebtedness and the issuance of the Disqualified Stock,
Designated Preferred Stock or Preferred Stock (and the
application of the proceeds therefrom) giving rise to the need
to make such calculation and any incurrence (and the application
of the proceeds therefrom) or repayment of other Indebtedness,
Disqualified Stock, Designated Preferred Stock or Preferred
Stock, at any time subsequent to the beginning of the Reference
Period and on or prior to the Determination Date, as if such
incurrence or issuance (and the application of the
183
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 (b) any acquisition, disposition or
Investment at any time on or subsequent to the first day of the
Reference Period and on or prior to the Determination Date, as
if such acquisition, disposition or Investment (including the
incurrence, assumption or liability for any such Indebtedness
and the issuance of such Disqualified Stock, Designated
Preferred Stock or 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. For purposes of this definition, whenever
pro forma effect is to be given to a transaction, the pro forma
calculations shall be made by a responsible financial officer of
the Company on a good faith basis and in accordance with
Regulation S-X
under the Securities Act. Furthermore, in calculating
Consolidated Interest Expense for purposes of the calculation of
Consolidated Cash Flow, (i) interest on Indebtedness
determined on a fluctuating basis as of the Determination Date
(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
Determination Date and (ii) notwithstanding (i) 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.
License means as to any Person, any license,
permit, certificate of need, authorization, certification,
accreditation, franchise, approval, or grant of rights by any
governmental authority or other Person necessary or appropriate
for such Person to own, maintain, or operate its business or
property, including FCC Licenses.
License Subsidiary means any Restricted
Subsidiary of the Company that is record owner of one or more
FCC Licenses.
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
other than a precautionary financing statement not intended as a
security agreement.
Moodys means Moodys Investors
Service, Inc. or any successor to the rating agency business
thereof.
Net Proceeds means the aggregate cash
proceeds received by the Company 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, without duplication:
(1) the direct costs relating to such Asset Sale,
including, without limitation, legal, accounting and investment
banking fees, and sales commissions, and any employee bonus or
relocation expenses incurred as a result of the Asset Sale;
(2) 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;
(3) amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt, secured by a Lien on the
properties or assets that were the subject of such Asset Sale,
or that by the terms of such Indebtedness or in order to obtain
the necessary consent to such Asset Sale or by applicable law be
repaid out of the proceeds from such Asset Sale;
(4) any reserve for adjustment in respect of the sale price
of such properties or assets established in accordance with GAAP
or satisfaction of indemnities or commitments in respect of such
Asset Sale;
(5) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Sale; and
184
(6) any portion of the purchase price from an Asset Sale
placed in escrow pursuant to the terms of such Asset Sale until
the termination of such escrow.
Non-Recourse Debt means Indebtedness:
(1) as to which neither the Company nor any of its
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;
(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 the Company or any
of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment of such other
Indebtedness to be accelerated or payable prior to its Stated
Maturity; and
(3) as to which the holders of such Indebtedness do not
otherwise have recourse to the stock or assets of the Company or
any of its Restricted Subsidiaries.
Obligations means any principal, premium, if
any, interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization,
whether or not a claim for post-filing interest is allowed in
such proceeding), penalties, fees, charges, expenses,
indemnifications, reimbursement obligations, damages,
guarantees, and other liabilities or amounts payable under the
documentation governing any Indebtedness or in respect thereto.
Operating Agreement means an Operating
Agreement as defined in the Existing Credit Agreement.
Parent Company means any Person that owns,
directly or indirectly, 100% of the outstanding Equity Interests
of the Company.
Permitted Business means any business engaged
in by the Company, its Restricted Subsidiaries or Reach Media as
of the Issue Date or any business reasonably related, ancillary,
supportive or complementary thereto (including, without
limitation, any media-related business), in each case, as
determined in good faith by the Board of Directors of the
Company.
Permitted Group means any investor that is a
Beneficial Owner of Voting Stock of the Company or any Parent
Company and that is also a party to a stockholders
agreement with any of the Principals or their Related Parties
and any group of investors that is deemed to be a
person (as that term is used in
Section 13(d)(3) of the Exchange Act) by virtue of any such
stockholders agreement; provided that the
Principals and their Related Parties continue to collectively
Beneficially Own, directly or indirectly, at all times more than
50% of the Voting Stock of the Company or Parent Company, as
applicable, and the ability to elect a majority of the members
of the Board of Directors of the Company or Parent Company
(without giving effect to any Voting Stock that may be deemed to
be beneficially owned by the Principals and their Related
Parties pursuant to
Rule 13d-3
or 13d-5
under the Exchange Act).
Permitted Investments means:
(1) any Investment in the Company or in a Wholly Owned
Restricted Subsidiary;
(2) Investments in existence on the Issue Date;
(3) any Investment in cash or Cash Equivalents;
(4) any Investment by the Company or any Restricted
Subsidiary in a Person, if as a result of such Investment:
(a) such Person becomes a Wholly Owned Restricted
Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its
properties or assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary;
185
(5) any Investment made in a Person to the extent such
Investment represents non-cash consideration received 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;
(6) any Investment in any Person solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of
the Company;
(7) notes and accounts receivable incurred in the ordinary
course of business and any Investments received in compromise of
such obligations, including pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or
insolvency of any trade creditor or customer;
(8) Hedging Obligations permitted to be incurred under the
covenant described above under the caption
Certain Covenants Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred
Stock;
(9) loans and advances (including for business travel and
relocation expenses) to employees of the Company or a Restricted
Subsidiary in the ordinary course of business in an amount not
to exceed $1.0 million in the aggregate at any one time
outstanding;
(10) guarantees by the Company or any Guarantor of
Indebtedness of the Company or a Guarantor otherwise permitted
by clause (10) of the definition of Permitted Debt;
(11) (a) any TV One Investment described in
clause (ii) of the definition thereof; or (b) any TV
One Investment (A) in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company or, for so long as TV One remains a
Designated Entity but is not otherwise a Subsidiary, TV One) of,
Equity Interests of the Company (other than Disqualified Stock)
or (B) from the net cash proceeds of a substantially
concurrent cash contribution to the equity capital of the
Company or any Restricted Subsidiary (other than cash from the
Company, a Restricted Subsidiary, Reach Media or, for so long as
TV One remains a Designated Entity, TV One); provided,
that in each case, no Default or Event of Default shall have
occurred and be continuing or result therefrom; and
provided, further, that the amount of any net cash
proceeds received pursuant to clause (B) that are utilized
for a TV One Investment will be excluded from clause (b) of
the definition of Restricted Payments Basket; and
(12) any Investment due to intercompany advances or
payables resulting from any of the transactions covered by
clause (7) of the covenant described under the caption
Certain Covenants Transactions
with Affiliates.
Permitted Junior Securities means:
(1) Equity Interests in the Company or, subject to the
provisions of the Existing 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 Guarantees are subordinated to Senior
Debt under the Indenture.
Permitted Liens means:
(1) Liens securing Indebtedness incurred pursuant to
clauses (1) or (9) of the definition of
Permitted Debt and all other Obligations related to
such Indebtedness;
(2) [Reserved];
(3) Liens in favor of the Company or the Guarantors;
(4) Liens on property or assets of a Person existing at the
time such Person is merged with or into or consolidated with the
Company or a Restricted Subsidiary or on property or assets
acquired by the Company or any Restricted Subsidiary (and in
each case not created or incurred in anticipation of such
transaction), including Liens securing Acquired Debt permitted
to be incurred pursuant to clause (14) of
186
the definition of Permitted Debt; provided
that such Liens are not extended to the property and assets
of the Company and its Restricted Subsidiaries other than the
property or assets acquired;
(5) Liens to secure Capital Lease Obligations, mortgage
financings or purchase money debt permitted to be incurred
pursuant to clause (5) of the definition of Permitted
Debt covering only the assets financed by or acquired with
such Indebtedness (and the proceeds thereof);
(6) 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;
(7) Liens existing on the Issue Date (other than Liens
permitted under clause (1) above);
(8) Liens arising from Uniform Commercial Code financing
statement filings regarding operating leases entered into by the
Company and its Restricted Subsidiaries in the ordinary course
of business;
(9) Liens securing Permitted Refinancing Indebtedness
incurred to refinance Indebtedness that was previously so
secured; provided that any such Lien is limited to all or
part of the same property or assets (plus improvements,
accessions, proceeds or dividends or distributions in respect
thereof) that secured (or, under the written arrangements under
which the original Lien arose, was required to secure and under
the Indenture was permitted to secure) the Indebtedness being
refinanced;
(10) any Lien incurred in the ordinary course of business
incidental to the conduct of the business of the Company or the
Restricted Subsidiaries or the ownership of their property
(including (a) easements, rights of way and similar
encumbrances or zoning or similar restrictions which do not
individually or in the aggregate materially adversely affect the
value of such property or materially impair the operation of the
business of the Company or any Subsidiary, (b) rights or
title of lessors under leases (other than Capital Lease
Obligations), (c) rights of collecting banks having rights
of setoff, revocation, refund or chargeback with respect to
money or instruments of the Company or the Restricted
Subsidiaries on deposit with or in the possession of such banks,
(d) Liens imposed by law for sums not yet due or the
validity of which are being contested in good faith by
appropriate proceedings, promptly instituted and diligently
conducted and which proceedings have the effect of preventing
the forfeiture or sale of the property or assets subject to any
such Lien, and for which adequate reserves have been established
to the extent required by GAAP, including Liens under
workers compensation or similar legislation and
mechanics, carriers, warehousemens,
materialmens, suppliers and vendors Liens,
(e) Liens arising under licensing agreements and
(f) Liens incurred to secure performance of obligations
with respect to statutory or regulatory requirements,
workers compensation, performance or
return-of-money
bonds, surety bonds or other obligations of a like nature and
incurred in a manner consistent with industry practice);
(11) Liens for taxes, assessments and governmental charges
not yet due or the validity of which are being contested in good
faith by appropriate proceedings, promptly instituted and
diligently conducted and which proceedings have the effect of
preventing the forfeiture or sale of the property or assets
subject to any such Lien, and for which adequate reserves have
been established to the extent required by GAAP as in effect at
such time;
(12) Liens securing judgments not constituting a Default or
an Event of Default;
(13) Liens incurred in the ordinary course of business of
the Company or any Restricted Subsidiary of the Company with
respect to Indebtedness that does not exceed $1.0 million
at any one time outstanding; and
(14) in the event TV One or its Subsidiaries become
Restricted Subsidiaries, Liens securing Permitted TV One
Indebtedness (and any refinancing thereof permitted in
clause (18) of the definition of Permitted Debt).
Permitted Refinancing Indebtedness means any
Indebtedness of the Company or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace,
187
defease or refund other Indebtedness of the Company or any of
its Restricted Subsidiaries incurred in compliance with the
Indenture (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 being 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 any other Indebtedness, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the holders
of such other Indebtedness on terms at least as favorable to the
holders of such other Indebtedness as those contained in the
documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is not incurred by a Restricted
Subsidiary of the Company if the Company is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; provided, however, that a
Restricted Subsidiary that is also a Guarantor may guarantee
Permitted Refinancing Indebtedness incurred by the Company,
whether or not such Restricted Subsidiary was an obligor or
guarantor of the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
Permitted TV One Indebtedness means
Indebtedness incurred or Preferred Stock issued by TV One or any
of its Subsidiaries, the net proceeds of which are used to
finance the acquisition of TV One Equity Interests resulting
from the exercise of certain put rights pursuant to
Section 12.2 of the TV One LLC Agreement of the Financial
Investor Members (as such term is defined in the TV One LLC
Agreement), the DTV Investors and the Class D Members (as
such term is defined in the TV One LLC Agreement) and any
payment obligations arising in connection with or as a result of
such acquisition; provided that: (i) the aggregate
principal amount at any time outstanding of such Indebtedness
plus the aggregate liquidation value at any time outstanding of
such Preferred Stock shall not exceed $120.0 million and
(ii) such Indebtedness at all times constitutes TV One
Non-Recourse Debt.
Person means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
Preferred Stock means, with respect to any
Person, Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person over
shares of Capital Stock of any other class of such Person.
Principal means Catherine L. Hughes and
Alfred C. Liggins, III.
Radio One Securities means any Equity
Interests or debt securities of the Company, any of its
Restricted Subsidiaries or any Affiliates (other than TV One or
any Subsidiary of TV One).
Reach Media means Reach Media, Inc., a
Delaware corporation, and any successor entity.
Registration Rights Agreement means the
registration rights agreement with respect to the registered
exchange offer for the Old Notes.
Related Party means:
(1) any 80% (or more) owned Subsidiary or immediate family
member of any Principal; or
(2) any trust, corporation, partnership or other entity,
the beneficiaries, stockholders, partners, owners or Persons
Beneficially Owning an 80% or more controlling interest of such
entit(ies) consists of any one or more Principals
and/or such
other Persons referred to in the immediately preceding clause
(1).
188
Restricted Subsidiary of a Person means any
Subsidiary of the referenced Person that has not been designated
as an Unrestricted Subsidiary in accordance with the Notes.
ROCH means Radio One Cable Holdings, Inc., a
Delaware corporation, and any successor entity.
Senior Debt means all Obligations with
respect to Indebtedness of the Company or any Guarantor
outstanding under the Existing Credit Agreement, in each case as
permitted to be incurred under clause (1) of the definition
of Permitted Debt and all Hedging Obligations with
respect thereto.
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 Issue Date.
S&P means Standard &
Poors Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor to its rating agency business.
Special Interest has the meaning set forth in
the Registration Rights Agreement.
Stated Maturity means, with respect to any
security, the date specified in such security as the fixed date
on which the final payment of principal of such security is due
and payable, including pursuant to any mandatory redemption
provision (but excluding any provisions providing for the
repurchase of such security at the option of the holder thereof
upon the happening of any contingency unless such contingency
has occurred).
Station means a radio station operated to
broadcast commercial radio programming over radio signals within
a specified geographic area.
Subordinated Obligation means, with respect
to a Person, any Indebtedness of such Person (whether
outstanding on the Issue Date or thereafter incurred) which is
subordinate or junior in right of payment to, in the case of the
Company, the Notes, or, in the case of a Guarantor, the
Guarantee of such Guarantor, pursuant to a written agreement to
that effect, including the Existing Subordinated Notes.
Subsidiary means, with respect to any
specified Person:
(1) any corporation, association or other business entity
(other than a partnership) of which more than 50% of the total
voting power of Voting Stock is at the time owned or controlled,
directly or through another Subsidiary, 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), or (c) as to which
such Person and its Subsidiaries are entitled to receive more
than 50% of the assets of such partnership upon its dissolution.
Transactions means, collectively, the
issuance of the Old Notes in exchange for the Existing
Subordinated Notes (including the payment of accrued interest
thereon) or otherwise to facilitate the completion of such
exchange offer and the transactions related thereto, including
the execution and delivery of the amendment to the Existing
Credit Agreement in connection therewith and the payment of fees
and expenses associated therewith.
TV One means TV One, LLC, a Delaware limited
liability company, and any successor entity (including by way of
merger, consolidation or transfer of all or substantially all of
the assets of TV One and its Subsidiaries, if any, taken as a
whole).
TV One Investment means: (i) the
acquisition by the Company or any of its Wholly Owned Restricted
Subsidiaries of Equity Interests of TV One and any payment
obligations arising in connection with or as a result of such
acquisition and (ii) the contribution of any property or
assets to the capital of TV One pursuant to the provisions of
the TV One LLC Agreement
and/or
arising in connection with or as a result of any transaction
described in clause (i) hereof in a net amount (after
giving effect to a substantially concurrent dividend by TV One)
not to exceed $13.7 million (and, in each case, any
reasonable related fees and
189
expenses); provided, that any such Equity Interests of TV
One, if not acquired by ROCH, shall be immediately contributed
to ROCH so long as TV One remains a Designated Entity under the
terms of the Indenture.
TV One LLC Agreement means the Second Amended
Limited Liability Company Operating Agreement of TV One, dated
as of December 28, 2004, as amended from time to time
through June 15, 2010.
TV One Non-Recourse Debt means Indebtedness:
(1) as to which neither the Company nor any of its
Restricted Subsidiaries (other than TV One and its 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;
(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 and the Senior Debt) of
the Company or any of its Restricted Subsidiaries (other than TV
One and its Subsidiaries) to declare a default on such other
Indebtedness or cause the payment of such other Indebtedness to
be accelerated or payable prior to its Stated Maturity; and
(3) as to which the holders of such Indebtedness do not
otherwise have recourse to the stock or assets of the Company or
any of its Restricted Subsidiaries (other than TV One and its
Subsidiaries or Equity Interests of TV One owned by ROCH).
TV One Percentage means the Companys
direct or indirect ownership percentage of the Equity Interests
of TV One.
TV One Permitted Business means any business
engaged in by TV One as of the Issue Date or any business
reasonably related, ancillary, supportive or complementary
thereto (including, without limitation, any media-related
business), in each case, as determined in good faith by the
Board of Directors of the Company.
Unrestricted Subsidiary means:
(1) as of the Issue Date, Reach Media (and each of its
respective Subsidiaries, if any);
(2) in the event TV One becomes a Subsidiary of the Company
on or after the Issue Date, TV One (and each of its
Subsidiaries, if any), unless TV One is otherwise designated as
a Restricted Subsidiary pursuant to the Indenture;
(3) any other Subsidiary of the Company that is designated
by the Board of Directors of the Company as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the
extent that such Subsidiary:
(a) has no Indebtedness other than Non-Recourse Debt;
(b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the
Company;
(c) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or
indirect obligation (i) to subscribe for additional Equity
Interests or (ii) to maintain or preserve such
Persons financial condition or to cause such Person to
achieve any specified levels of operating results; and
(d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries; and
(4) any Subsidiary of an Unrestricted Subsidiary;
190
provided that (i) in no event may ROCH be designated
as an Unrestricted Subsidiary, (ii) the Company may not
designate TV One as an Unrestricted Subsidiary at any time after
it has become a Restricted Subsidiary (if ever) and
(iii) no Subsidiary may be designated as an Unrestricted
Subsidiary unless it is also an unrestricted
subsidiary for purposes of the Existing Credit Agreement.
Any future designation of a Subsidiary of the Company as an
Unrestricted Subsidiary will be evidenced to the trustee by
filing with the trustee 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, at any time, (i) any Unrestricted
Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, (ii) the Company, any of its
Restricted Subsidiaries
and/or any
Affiliate Entities become the Beneficial Owner of 90% or more of
the outstanding Equity Interests of TV One or (iii) the
Company, any of its Restricted Subsidiaries
and/or any
Affiliated Entities become the Beneficial Owner of 80% or more
of the outstanding Equity Interests of Reach Media, then, in
each case, such Unrestricted Subsidiary will thereafter cease to
be an Unrestricted Subsidiary for all purposes of the Indenture,
including that any Indebtedness of such Subsidiary will be
deemed to be incurred by a Restricted Subsidiary of the Company
as of such date and any Lien of such Subsidiary will be deemed
to be incurred by a Restricted Subsidiary of the Company 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 Disqualified Stock
and Preferred Stock, or such Lien is not permitted to be
incurred as of such date under the covenant described under the
caption Certain Covenants
Liens, then in, in either case, the Company will be in
default of such covenant.
Voting Stock of any Person as of any date
means the Capital Stock of such Person that is at the time
entitled (without regard to the occurrence of any contingency)
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 means any
Restricted Subsidiary in which 90% or more of the outstanding
Equity Interests (other than directors qualifying shares
and shares issued to foreign nationals under applicable law) are
owned by the Company or another Wholly Owned Restricted
Subsidiary of the Company and any other outstanding Equity
Interests are owned by officers, directors or employees of such
Restricted Subsidiary (provided that with respect to Reach Media
in the event it ceases to be an Unrestricted Subsidiary, 80% or
more of the outstanding Equity Interests are owned by the
Company or another Wholly Owned Restricted Subsidiary of the
Company and any other outstanding Equity Interests are owned by
officers, directors or employees of Reach Media).
191
CERTAIN
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain
U.S. federal income tax considerations relating to the
exchange of unregistered Old Notes for registered Exchange Notes
pursuant to the exchange offer and the ownership and disposition
of the Exchange Notes.
This summary is based upon the Internal Revenue Code of 1986, as
amended (the Code), U.S. Treasury Regulations
(the Treasury Regulations), published administrative
interpretations of the Internal Revenue Service (the
IRS) and judicial decisions as of the date hereof,
all of which are subject to change or differing interpretations
at any time, possibly on a retroactive basis. We have not sought
any ruling from the IRS, nor have we sought an opinion from
counsel, with respect to the statements made and the conclusions
reached in the following summary. There can be no assurance that
the IRS will agree with these statements and conclusions, nor is
there any assurance that such statements and conclusions will be
sustained by a court if challenged by the IRS.
This summary does not discuss all aspects of U.S. federal
income taxation that may be important to a particular holder of
Old Notes or Exchange Notes (collectively, the
Notes) in light of their specific circumstances,
including investors subject to special tax rules, such as
financial institutions, banks, thrift institutions, personal
holding companies, insurance companies, broker-dealers,
tax-exempt organizations, regulated investment companies, real
estate investment trusts, retirement plans, individual
retirement accounts or other tax-deferred accounts, partnerships
and other pass-through entities (or investors therein) persons
who use or are required to use
mark-to-market
accounting for the Notes, investors that hold the Notes as part
of a straddle, hedge, conversion, constructive sale, or other
integrated transaction for U.S. federal income tax
purposes, former citizens or permanent residents of the U.S.,
persons subject to the alternative minimum tax or
U.S. persons that have a functional currency other than the
U.S. dollar, all of whom may be subject to tax rules that
differ significantly from those summarized below.
This summary also does not discuss any
non-U.S. tax
considerations, any state or local tax considerations, or any
U.S. federal tax considerations other than income tax
considerations (e.g., estate or gift tax considerations). This
summary assumes that holders of Notes hold them as capital
assets (generally, property held for investment) within
the meaning of section 1221 of the Code. This summary
assumes the Notes are and will be treated as debt
for U.S. federal income tax purposes.
This summary also does not discuss the tax treatment of
partnerships or other pass-through entities or persons who hold
the Notes through such entities. If an entity classified as a
partnership for U.S. federal income tax purposes is an
owner of the Notes, the U.S. federal income tax treatment
of a partner in the partnership will generally depend on the
status of the partner and the activities of the partnership.
For purposes of this summary, a U.S. Holder is
a beneficial owner of a Note that is for U.S. federal
income tax purposes (1) an individual who is a citizen or
resident of the United States, (2) a corporation (or other
entity treated as a corporation for U.S. federal income tax
purposes) created in, or organized under the laws of, the United
States, any state thereof or the District of Columbia,
(3) an estate the income of which is includible in gross
income for U.S. federal income tax purposes regardless of
its source, or (4) a trust if (i) a court within the
United States is able to exercise primary supervision over its
administration and one or more United States persons have the
authority to control all of its substantial decisions, or
(ii) certain other trusts that have made a valid election
to continue to be treated as a United States person. A
Non-U.S. Holder
is a beneficial owner of a Note that is, for U.S. federal
income tax purposes, an individual, corporation, estate or trust
that is not a U.S. Holder.
EACH HOLDER IS URGED TO CONSULT ITS TAX ADVISOR REGARDING THE
SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE AMENDED EXCHANGE OFFER.
Exchange
of Old Notes for Exchange Notes
The exchange of an Old Note for an Exchange Note pursuant to the
exchange offer (described under The Exchange Offer)
will not constitute a taxable exchange for U.S. federal
income tax purposes.
192
Consequently, a holder will not recognize any gain or loss upon
the receipt of an Exchange Note pursuant to the exchange offer.
The holding period for such an Exchange Note will include the
holding period for the Old Note exchanged pursuant to the
exchange offer, and the initial tax basis in such an Exchange
Note will be the same as the adjusted tax basis in the Old Note
as of the time of the exchange. The U.S. federal income tax
consequences of holding and disposing of an Exchange Note
received pursuant to the exchange offer generally will be the
same as the U.S. federal income tax consequences of holding
and disposing of an Old Note.
The following summary assumes that the exchange of the Old Notes
for the Exchange Notes pursuant to the exchange offer will not
be treated as a taxable exchange and that the Old Notes and the
Exchange Notes will be treated as the same security for
U.S. federal income tax purposes.
Certain
Additional Payments
It is possible that the IRS could assert that the additional
interest which we would have been obligated to pay if the
exchange offer registration statement were not filed or declared
effective within the applicable time periods was a contingent
payment for purposes of the original issue discount
(OID) rules. It is also possible that the IRS could
assert that the payment in excess of the face amount of any note
purchased by us at the holders election after a change of
control, as described above under the heading Description
of Notes Repurchase at the Option of
Holders Change of Control, is a contingent
payment for purposes of the OID rules. If any such payment is
treated as a contingent payment, the notes may be treated as
contingent payment debt instruments, in which case the timing
and amount of income inclusions and the character of income
recognized may be different from the consequences described
herein. The Treasury regulations regarding debt instruments that
provide for one or more contingent payments state that, for
purposes of determining whether a debt instrument is a
contingent payment debt instrument, remote or incidental
contingencies are ignored. We believe that the possibility of
our making any of the above payments was and is remote and,
accordingly, we will not treat the notes as contingent payment
debt instruments. Our treatment will be binding on all holders,
except a holder that discloses its differing treatment in a
statement attached to its timely filed U.S. federal income
tax return for the taxable year during which the note was
acquired. However, our treatment is not binding on the IRS. If
the IRS were to challenge our treatment, among other things, a
holder might be required to accrue income on the notes in excess
of stated interest. In any event, if we actually make any such
payment, the timing, amount and character of a holders
income, gain or loss with respect to the notes may be affected.
The remainder of this discussion assumes that the notes will not
be contingent payment debt instruments.
Tax
Considerations for U.S. Holders
This subsection describes the U.S. federal income tax
considerations for a U.S. Holder. If you are not a
U.S. Holder, this subsection does not apply to you and you
should refer to Tax Considerations for
Non-U.S. Holders
below.
Payments
of Stated Interest
You will generally be required to include qualified stated
interest in gross income as ordinary income at the time the
interest is received or accrued, according to your method of tax
accounting. The term qualified stated interest mean
stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least
annually at a single fixed rate, or, subject to certain
conditions, based on one or more interest indices.
Issue
Price
The issue price of the Exchange Notes will equal the
issue price of the Old Notes. The determination of the
issue price of Old Notes depends, in part, on
whether the notes that were surrendered in the Private Placement
(the Prior Notes) or the Old Notes were treated as
traded on an established market at any time during
the 60-day
period ending 30 days after the date the Old Notes were
issued. In general, a debt instrument (or the property exchanged
therefor) will be treated as traded on an established market if
(a) it is
193
listed on (i) a qualifying national securities exchange,
(ii) certain qualifying interdealer quotation systems, or
(iii) certain qualifying foreign securities exchanges,
(b) it appears on a system of general circulation that
provides a reasonable basis to determine fair market value, or
(c) the price quotations are readily available from
dealers, brokers or traders. The issue price of a debt
instrument that is traded on an established market or that is
issued for another debt instrument so traded would be the fair
market value of such debt instrument or such other debt
instrument, as the case may be, on the issue date as determined
by such trading. The issue price of a debt instrument that is
neither so traded nor issued for another debt instrument so
traded would be its stated principal amount.
Accordingly, if neither of the Prior Notes and the Old Notes
were publicly traded within the meaning of the
applicable Treasury Regulations, the issue price of
the Exchange Notes should equal their stated principal amount.
However, if the Prior Notes or Old Notes were treated as
publicly traded within the meaning of the applicable
Treasury Regulations, the issue price of the Old Notes would be
the fair market value, at the time of the exchange (or deemed
exchange, as applicable), (1) of the Old Notes if they are
treated as publicly traded or (2) of the Prior Notes if
they are treated as publicly traded and the Old Notes are not
treated as publicly traded. Although not free from doubt, the
Company intends to take the position that the Old Notes and the
Prior Notes are publicly traded.
Original
Issue Discount
Because interest on the Exchange Notes is not unconditionally
payable solely in cash at least annually, the Exchange Notes
will be considered to be issued with OID. Under the rules
governing OID, regardless of a U.S. Holders method of
accounting, a U.S. Holder will be required to accrue its
pro rata share of OID on the Exchange Notes on a constant yield
basis and include such accruals in gross income, whether or not
such U.S. Holder receives a payment of interest solely in
cash on the Exchange Notes on the scheduled interest payment
date. The amount of OID on the Exchange Notes is the difference
between their stated redemption price at maturity
(i.e., the sum of all payments to be made on the Exchange Notes
other than qualified stated interest, as defined
above) and their issue price (as defined above).
Because we have the option up to but not including May 15,
2012 to pay a combination of
payment-in-kind
(PIK) interest and cash instead of paying solely
cash, portions of the stated interest payments on the Exchange
Notes will not constitute qualified stated interest.
Additionally, we expect that the stated redemption price
at maturity on the Exchange Notes will exceed their
issue price by more than the de minimis threshold if
either the Old Notes or Prior Notes were treated as traded on an
established market.
To determine the amount of OID that a U.S. Holder must
include in income, we will assume, as provided in the Treasury
regulations, that we will make or not make elections to call the
Exchange Notes and to accrue, rather than pay, interest in a
manner that minimizes the yield on the Exchange Notes. These
assumptions are made solely for United States federal income tax
purposes and do not constitute a representation by us regarding
the actual amounts, or the timing of amounts, that will be paid
on the Exchange Notes. If the assumptions we make are
contrary to actual circumstances (a change in
circumstances), then solely for purposes of determining
the amount of OID on the Exchange Notes, the Exchange Notes will
be treated as retired and reissued on the date of the change in
circumstances for an amount equal to the adjusted issue
price of the Exchange Notes (as defined below).
The amount of OID that a U.S. Holder is required to include
in income is the sum of the daily portions of OID
with respect to the Exchange Notes for each day during the
taxable year in which the U.S. Holder is the beneficial
owner of the Exchange Notes. The daily portions of
OID in respect of the Exchange Notes are determined by
allocating to each day in an accrual period the
ratable portion of interest on the Exchange Notes that accrues
in the accrual period. The accrual
period for the Exchange Notes may be of any length and may
vary in length over the term of the Exchange Notes, provided
that each accrual period is no longer than one year
and that each scheduled payment of interest or principal occurs
on the first or final day of an accrual period.
The amount of OID on the Exchange Notes that accrues in an
accrual period is the product of the yield to
maturity on the Exchange Notes (determined on the basis of
compounding at the close of each
194
accrual period and adjusted to reflect the length of the accrual
period) and the adjusted issue price of the exchange
notes at the beginning of such accrual period, reduced by any
qualified stated interest allocable to the accrual period. The
yield to maturity on the Exchange Notes is the
discount rate that, when used in computing the present value of
all payments to be made under the notes, produces an amount
equal to their issue price. The adjusted issue price
of the Exchange Notes at the beginning of the first
accrual period will equal their issue
price (as described above) and for any accrual
periods thereafter will be (x) the sum of the
issue price of the Exchange Notes and any OID
previously accrued thereon minus (y) the amount of any
payments previously made on the Exchange Notes other than
payments of qualified stated interest.
If we in fact pay interest solely in cash on the Exchange Notes,
a U.S. Holder will not be required to adjust its OID
inclusions. Each payment made in cash under an Exchange Note
will be treated first as a payment of any accrued OID that has
not been allocated to prior payments and second as a payment of
principal. A U.S. Holder generally will not be required to
include separately in income cash payments received on the
Exchange Notes to the extent such payments constitute payments
of previously accrued OID or payments of principal. The issuance
of additional notes in respect of PIK interest is generally not
treated as a payment of interest. Instead, the Exchange Notes
and any additional notes issued in respect of PIK interest
thereon are treated as a single debt instrument under the OID
rules.
THE RULES REGARDING OID ARE COMPLEX AND THE
RULES DESCRIBED ABOVE MAY NOT APPLY IN ALL CASES.
ACCORDINGLY, U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN
INDEPENDENT TAX ADVISORS REGARDING THE APPLICATION OF THE OID
RULES TO THE EXCHANGE NOTES.
Applicable
High Yield Discount Obligations
The Exchange Notes may be treated, for U.S. federal income
tax purposes, as subject to the applicable high-yield discount
obligation (AHYDO) rules. The AHYDO rules apply to
debt issued by a corporation if the yield to maturity of a debt
instrument equals or exceeds the applicable federal rate
(AFR) plus five (5) percentage points,
(ii) the maturity date of the instrument is more than five
(5) years from the date of issue, and (iii) the
instrument has significant original issue discount.
In the event that the AHYDO rules apply to the Exchange Notes,
any OID deduction that we would otherwise be entitled to on the
Exchange Notes will be deferred until we pay such OID in cash or
other property. However, any OID deduction on the Exchange Notes
will be permanently disallowed to the extent the yield on the
Exchange Notes exceeds the applicable federal rate plus six
percentage points. To the extent an OID deduction is permanently
disallowed, the corresponding OID inclusion for certain
corporate U.S. Holders will be treated, for purposes of the
dividends received deduction, as a distribution in respect of
our stock, entitling such U.S. Holders to a dividends
received deduction to the extent provided under the Code.
Amortizable
Bond Premium
If you purchased an Old Note or Exchange Note for an amount that
is greater than the sum of all remaining payments on the note
other than qualified stated interest, you will be treated as
having purchased the note with amortizable bond
premium in an amount equal to such excess. Amortizable
bond premium on Old Notes should carry over to the Exchange
Notes received in exchange therefor. A U.S. Holder may
elect to amortize this premium using a constant yield method
over the remaining term of the Exchange Notes and generally may
offset interest income in respect of the Exchange Notes
otherwise required to be included in income by the amortized
amount of the premium for the taxable year. A U.S. Holder
that elects to amortize bond premium must reduce its tax basis
in its note by the amount of the premium amortized in any
taxable year. An election to amortize bond premium is binding
once made and applies to all bonds held by the U.S. Holder
at the beginning of the first taxable year to which this
election applies and to all bonds thereafter acquired. You are
urged to consult your own tax advisor concerning the computation
and amortization of any bond premium on your Exchange Notes.
195
Acquisition
Premium
If your adjusted tax basis in an Exchange Note (determined as
described above under Exchange of Old Notes for New
Notes), immediately after the exchange of an Old Note for
an Exchange Note, is greater than its issue price but is less
than or equal to its principal amount, the amount by which your
basis exceeds the issue price of the Exchange Notes will be
acquisition premium. In such case, the daily portion
of OID to be included with respect to the Exchange Notes will be
reduced by an amount equal to the daily portion of OID that you
would otherwise include in its gross income multiplied by a
fraction. The numerator of such fraction is the amount of
acquisition premium, and the denominator is the OID in the
Exchange Notes. Alternatively, you may elect to amortize
acquisition premium on a constant yield to maturity basis, as
described above in Tax Considerations for
U.S. Holders Original Issue Discount.
Market
Discount
If your initial tax basis in an Exchange Note is less than its
issue price, subject to a de minimis exception, you will
be treated as having acquired the note at a market
discount. Accrued market discount on Old Notes that has
not previously been included in income by a U.S. Holder
should carry over to the Exchange Notes received in exchange
therefor. Under the market discount rules, a U.S. Holder
generally will be required to treat any principal payment on, or
any gain realized on the sale, exchange, retirement or other
disposition of an Exchange Note as ordinary income to the extent
of the lesser of (i) the amount of such payment or realized
gain or (ii) the accrued market discount on the Exchange
Note that has not previously been included in income (including
any accrued but unrecognized market discount which was carried
over from an Old Note). For this purpose, market discount will
be considered to accrue ratably during the period from the date
of the U.S. Holders acquisition of the Note to the
maturity date of the Note, unless the U.S. Holder made an
election to accrue market discount on a constant yield basis. A
U.S. Holder may be required to defer the deduction of all
or a portion of the interest paid or accrued on any indebtedness
incurred or maintained to purchase or carry an Exchange Note
with market discount until the maturity date or certain earlier
dispositions. A U.S. Holder may elect to include market
discount in income currently as it accrues on either a ratable
or a constant yield basis, in which case the rules described
above regarding (1) the treatment as ordinary income of
gain upon the disposition of the note and (2) the deferral
of interest deductions will not apply. Currently included market
discount is generally treated as ordinary interest income for
U.S. federal income tax purposes. An election to include
market discount in income as it accrues will apply to all debt
instruments with market discount acquired by the
U.S. Holder on or after the first day of the taxable year
to which the election applies and may be revoked only with the
consent of the IRS.
Sale,
Exchange or Other Taxable Disposition of the Exchange
Notes
You will generally recognize gain or loss upon the sale,
exchange, redemption, repurchase or other taxable disposition of
the notes equal to the difference between (1) the amount of
cash proceeds and the fair market value of any property received
(other than amounts representing accrued but unpaid interest,
which, if not previously taxed, will be taxable as such) and
(2) your adjusted tax basis in the note. Your adjusted tax
basis in a note will, in general, be your cost for the note.
Subject to the market discount rules described above under the
heading Market Discount, any gain or
loss you recognize generally will be treated as a capital gain
or loss. The capital gain or loss generally will be long-term if
your holding period is more than one year at the time of sale,
exchange, redemption, repurchase or other taxable disposition
and will be short-term if your holding period is one year or
less. Long-term capital gains of individuals and other
non-corporate taxpayers are generally eligible for reduced rates
of taxation. The deductibility of capital losses is subject to
limitations.
Tax
Considerations for
Non-U.S.
Holders
This subsection describes the U.S. federal income tax
considerations for a
Non-U.S. Holder.
If you are not a
Non-U.S. Holder,
this subsection does not apply to you and you should refer to
Tax Considerations for U.S. Holders
above.
196
Payments
of Interest
Subject to the discussion below concerning backup withholding,
if you are a
Non-U.S. Holder,
you will generally not be subject to U.S. federal income
tax or the 30% U.S. federal withholding tax on interest
paid on the Notes (including any additional interest) so long as
that interest is not effectively connected with your conduct of
a trade or business within the United States (or, if an income
tax treaty applies, is not attributable to a permanent
establishment maintained by you in the United States), provided
that the interest qualifies for the portfolio interest
exemption. Interest you receive on the Exchange Notes will
generally qualify for the portfolio interest exemption if each
of the following requirements is satisfied:
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you do not (directly or indirectly, actually or constructively)
own 10% or more of the total combined voting power of all
classes of our stock that are entitled to vote;
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you are not a controlled foreign corporation, within the meaning
of the Code, that is actually or constructively related to us
through stock ownership;
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you are not a bank whose receipt of interest on a note is
described in Section 881(c)(3)(A) of the Code;
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such interest is not deemed to be contingent within the meaning
of the portfolio interest exemption provisions of the
Code; and
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you provide the applicable withholding agent with, appropriate
documentation (generally an IRS
Form W-8BEN
or applicable successor form) establishing that you are not a
U.S. person.
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Although not free from doubt, the Company believes that its
ability to pay PIK interest at specified times and in specified
amounts on the Exchange Notes should not be treated as
contingent interest within the meaning of the portfolio interest
exemption provisions of the Code. The certification requirement
for the portfolio interest exemption generally will be satisfied
if the
Non-U.S. Holder
provides the withholding agent with a statement on IRS
Form W-8BEN
(or suitable substitute form), together with all appropriate
attachments, signed under penalties of perjury, identifying the
Non-U.S. Holder
and stating, among other things, that the
Non-U.S. Holder
is not a United States person. Prospective
Non-U.S. Holders
should consult their tax advisors regarding alternative methods
for satisfying the certification requirement.
If you cannot satisfy the requirements described above, payments
of accrued but unpaid interest will be subject to the 30%
U.S. federal withholding tax (generally through withholding
by our paying agent), unless another exemption is applicable.
For example, an applicable income tax treaty may reduce or
eliminate such tax, in which event to claim the benefit of such
treaty you must provide the withholding agent with a properly
executed IRS
Form W-8BEN
(or suitable substitute form). Alternatively, an exemption
applies if the interest is U.S. trade or business income
and you provide the withholding agent with a properly executed
IRS
Form W-8ECI
(or suitable substitute form) or (in certain cases) IRS
Form W-8BEN
(or suitable substitute form).
Sale,
Exchange or Other Taxable Disposition of the Notes
Subject to the discussion of backup withholding below, you will
generally not be subject to U.S. federal income or
withholding tax on any gain recognized on the sale, exchange,
redemption, repurchase or other taxable disposition of a note,
unless:
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that gain is effectively connected with the conduct by you of a
trade or business within the United States (and if an income tax
treaty applies, such gain is attributable to a permanent
establishment maintained by you in the United States); or
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if you are an individual
non-U.S. holder,
you are present in the United States for at least 183 days
in the taxable year of such sale, exchange, redemption,
repurchase or disposition and certain other conditions are met.
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If you are described in the first bullet point above, you will
be required to pay U.S. federal income tax on any gain
derived from the sale generally in the same manner as if you
were a U.S. Holder unless an applicable income tax treaty
provides otherwise, and if you are a foreign corporation, you
may also be required to pay an
197
additional branch profits tax at a 30% rate (or a lower rate if
so specified by an applicable income tax treaty). If you are
described in the second bullet point above, you will generally
be subject to U.S. federal income tax at a rate of 30% on
the amount by which your capital gains allocable to
U.S. sources, including gain from such sale, exchange,
redemption, repurchase or disposition, exceed capital losses
allocable to U.S. sources, except as otherwise required by
an applicable income tax treaty, even though you are not
considered a resident of the U.S.
To the extent that the amount realized on any sale, exchange,
redemption, repurchase or other taxable disposition of notes is
attributable to accrued but unpaid interest on the note, this
amount generally will be treated in the same manner as payments
of interest as described under the heading
Payments of Interest above.
Interest
or Gain Effectively Connected with a U.S. Trade or
Business
If you are engaged in a trade or business in the United States
and interest on a note or gain recognized from the sale,
exchange, redemption, repurchase or other taxable disposition of
a note is effectively connected with the conduct of that trade
or business (and, if an income tax treaty applies, is
attributable to a permanent establishment maintained by you in
the United States), you will generally be subject to
U.S. federal income tax (but not the 30% U.S. federal
withholding tax if you provide an IRS
Form W-8ECI
with respect to interest as described above) on that interest or
gain on a net income basis in the same manner as if you were a
U.S. person as defined under the Code. In addition, if you
are a foreign corporation, you may be subject to a branch
profits tax equal to 30% (or lower applicable income tax
treaty rate) of your earnings and profits for the taxable year,
subject to adjustments, that are effectively connected with your
conduct of a trade or business in the United States. For this
purpose, interest and gain effectively connected with your trade
or business in the United States will be included in the
earnings and profits of a foreign corporation.
Backup
Withholding and Information Reporting
Under certain circumstances a U.S. Holder or a
Non-U.S. Holder
may be subject to information reporting and withholding
(including backup withholding of U.S. federal income tax,
currently at a rate of 28%) with respect to payments of interest
or proceeds from a sale or exchange of the Notes. Backup
withholding generally will not apply to a Holder that is a
corporation or other exempt entity and demonstrates that status
as required by applicable Treasury Regulations, or to a Holder
that furnishes a correct taxpayer identification number and
certifies that it is not subject to backup withholding on a form
acceptable under applicable Treasury Regulations (generally an
IRS
Form W-9).
Backup withholding generally will not apply to a
Non-U.S. Holder
that certifies its foreign status on a form acceptable under
applicable Treasury Regulations (generally an IRS
Form W-8BEN
or other applicable
Form W-8).
Such forms may be obtained at the IRS website at www.irs.gov.
Non-U.S. Holders
may also need to furnish an acceptable form to avoid withholding
on amounts effectively connected with a U.S. trade or
business, to claim the benefits of an applicable tax treaty, or
to claim the benefits of any exemption from U.S. federal
income taxation described above. Backup withholding is not an
additional tax, but rather is credited against the Holders
U.S. federal income tax liability. Holders of Notes are
advised to consult their tax advisors to ensure compliance with
the procedural requirements to reduce or avoid withholding or,
if applicable, to file a claim for a refund of withheld amounts
in excess of the Holders U.S. federal income tax
liability.
198
PLAN OF
DISTRIBUTION
Each 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
Exchange Notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in
exchange for Old Notes if the Old Notes were acquired as a
result of market-making activities or other trading activities.
We have agreed to make this prospectus, as amended or
supplemented, available to any broker-dealer to use in
connection with any such resale for a period of at least
180 days after the expiration date.
We will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions:
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in the
over-the-counter
market;
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in negotiated transactions; or
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through the writing of options on the Exchange Notes or a
combination of such methods of resale.
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These resales may be made:
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at market prices prevailing at the time of resale;
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at prices related to such prevailing market prices; or
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at negotiated prices.
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Any such resale may be made directly to purchasers or to or
through brokers or dealers. Brokers or dealers may receive
compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Notes.
An underwriter within the meaning of the Securities
Act includes:
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any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the exchange offer; or
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any broker or dealer that participates in a distribution of such
Exchange Notes.
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Any profit on any resale of Exchange Notes and any commissions
or concessions received by any 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 broker-dealer will not
be deemed to admit that it is an underwriter within
the meaning of the Securities Act.
For a period of not less than 180 days after the expiration
of the exchange offer we will promptly send additional copies of
this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests those documents in
the letter of transmittal. We have agreed to pay all expenses
incident to performance of our obligations in connection with
the exchange offer, other than commissions or concessions of any
brokers or dealers. We will indemnify the holders of the
Exchange Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, and
will contribute to payments that they may be required to make in
request thereof.
199
LEGAL
MATTERS
Certain legal matters relating to the validity of the Exchange
Notes will be passed upon for us by Kirkland & Ellis
LLP, Chicago, Illinois. Certain matters of Michigan law will be
passed on by Clark Hill PLC, Detroit, Michigan. Certain matters
of Ohio law will be passed on by Keating Muething &
Klekamp PLL, Cincinnati, Ohio.
EXPERTS
The consolidated financial statements of Radio One, Inc. at
December 31, 2009 and 2008, and for each of the three years
in the period ended December 31, 2009 appearing in this
prospectus have been audited by Ernst & Young LLP,
independent registered public accounting firm, as set forth in
their report thereon (which contains an explanatory paragraph
describing conditions that raise substantial doubt about the
Companys ability to continue as a going concern as
described in Note 1 to the consolidated financial
statements) appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
200
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
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Page
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Number
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Consolidated Financial Statements
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F-2
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F-3
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F-4
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F-5
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F-7
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F-9
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Consolidated Condensed Financial Statements (Unaudited)
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F-66
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F-67
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F-68
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F-69
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F-70
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In accordance with SEC
Rule 3-10
of
Regulation S-X,
the consolidated financial statements of Radio One, Inc. are
included herein and separate financial statements of Radio
Ones subsidiary guarantors are not included. Condensed
financial data for Radio Ones subsidiary guarantors is
included in Note 20 to the audited consolidated financial
statements and in Note 13 to the unaudited consolidated
financial statements included herein.
F-1
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Radio One, Inc.:
We have audited the accompanying consolidated balance sheets of
Radio One, Inc. and subsidiaries as of December 31, 2009
and 2008, and the related consolidated statements of operations,
changes in stockholders equity, and cash flows for each of
the three years in the period ended December 31, 2009. Our
audits also included the financial statement schedule listed in
the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Radio One, Inc. and subsidiaries at
December 31, 2009 and 2008, and the consolidated results of
their operations and their cash flows for each of the three
years in the period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
The accompanying financial statements have been prepared
assuming that Radio One, Inc. and subsidiaries will continue as
a going concern. As more fully described in Note 1, the
Company in June and July 2010 violated certain covenants of loan
agreements, which ultimately may result in significant amounts
of outstanding debt becoming callable by lenders. These
conditions raise substantial doubt about the Companys
ability to continue as a going concern. Managements plans
in regard to these matters also are described in Note 1.
The 2009 financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
As discussed in Note 2 to the consolidated financial
statements, the accompanying financial statements have been
restated to correct the measurement and classification of the
non-controlling interests in a subsidiary of the Company.
Baltimore, Maryland
March 31, 2010
except for Notes 1(t), 1(v), 1(x), 2, 10, and 20, as to
which the date is
August 23, 2010
F-2
RADIO
ONE, INC. AND SUBSIDIARIES
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As of December 31,
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2009
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2008
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(As restated see
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notes 1 and 2)
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(In thousands, except share data)
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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19,963
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$
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22,289
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Trade accounts receivable, net of allowance for doubtful
accounts of $2,651 and $3,520, respectively
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47,019
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49,408
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Prepaid expenses and other current assets
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4,950
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5,304
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Deferred tax assets
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108
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Current assets from discontinued operations
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424
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1,088
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Total current assets
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72,356
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78,197
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PROPERTY AND EQUIPMENT, net
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40,585
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48,546
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GOODWILL
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137,517
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137,095
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RADIO BROADCASTING LICENSES
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698,645
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763,657
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OTHER INTANGIBLE ASSETS, net
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35,059
|
|
|
|
44,106
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
48,452
|
|
|
|
47,852
|
|
OTHER ASSETS
|
|
|
2,854
|
|
|
|
5,797
|
|
NON-CURRENT ASSETS FROM DISCONTINUED OPERATIONS
|
|
|
74
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,035,542
|
|
|
$
|
1,125,477
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,160
|
|
|
$
|
3,323
|
|
Accrued interest
|
|
|
9,499
|
|
|
|
10,082
|
|
Accrued compensation and related benefits
|
|
|
10,249
|
|
|
|
10,397
|
|
Income taxes payable
|
|
|
1,533
|
|
|
|
30
|
|
Other current liabilities
|
|
|
7,236
|
|
|
|
10,373
|
|
Current portion of long-term debt
|
|
|
652,534
|
|
|
|
43,807
|
|
Current liabilities from discontinued operations
|
|
|
2,949
|
|
|
|
3,191
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
688,160
|
|
|
|
81,203
|
|
LONG-TERM DEBT, net of current portion
|
|
|
1,000
|
|
|
|
631,555
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
10,185
|
|
|
|
11,008
|
|
DEFERRED TAX LIABILITIES
|
|
|
88,144
|
|
|
|
86,236
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
787,489
|
|
|
|
810,002
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS
|
|
|
52,225
|
|
|
|
43,423
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
Convertible preferred stock, $.001 par value;
1,000,000 shares authorized; no shares outstanding at
December 31, 2009 and 2008, respectively
|
|
|
|
|
|
|
|
|
Common stock Class A, $.001 par value,
30,000,000 shares authorized; 2,981,841 and
3,016,730 shares issued and outstanding at
December 31, 2009 and 2008, respectively
|
|
|
3
|
|
|
|
3
|
|
Common stock Class B, $.001 par value,
150,000,000 shares authorized; 2,861,843 shares issued
and outstanding at December 31, 2009 and 2008, respectively
|
|
|
3
|
|
|
|
3
|
|
Common stock Class C, $.001 par value,
150,000,000 shares authorized; 3,121,048 shares issued
and outstanding at December 31, 2009 and 2008, respectively
|
|
|
3
|
|
|
|
3
|
|
Common stock Class D, $.001 par value,
150,000,000 shares authorized; 42,280,153 and
69,971,551 shares issued and outstanding as of
December 31, 2009 and 2008, respectively
|
|
|
42
|
|
|
|
70
|
|
Accumulated other comprehensive loss
|
|
|
(2,086
|
)
|
|
|
(2,981
|
)
|
Additional paid-in capital
|
|
|
968,275
|
|
|
|
992,479
|
|
Accumulated deficit
|
|
|
(770,412
|
)
|
|
|
(717,525
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
195,828
|
|
|
|
272,052
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and
stockholders equity
|
|
$
|
1,035,542
|
|
|
$
|
1,125,477
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
RADIO
ONE, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except share data)
|
|
|
NET REVENUE
|
|
$
|
272,092
|
|
|
$
|
313,443
|
|
|
$
|
316,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based compensation of
$88, $187 and $479, respectively
|
|
|
75,635
|
|
|
|
79,304
|
|
|
|
70,463
|
|
Selling, general and administrative, including stock-based
compensation of $321, $513 and $1,444, respectively
|
|
|
91,016
|
|
|
|
103,108
|
|
|
|
100,620
|
|
Corporate selling, general and administrative, including
stock-based compensation of $1,240, $1,077 and $1,068
respectively
|
|
|
24,732
|
|
|
|
36,356
|
|
|
|
28,396
|
|
Depreciation and amortization
|
|
|
21,011
|
|
|
|
19,022
|
|
|
|
14,680
|
|
Impairment of long-lived assets
|
|
|
65,937
|
|
|
|
423,220
|
|
|
|
211,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
278,331
|
|
|
|
661,010
|
|
|
|
425,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(6,239
|
)
|
|
|
(347,567
|
)
|
|
|
(108,812
|
)
|
INTEREST INCOME
|
|
|
144
|
|
|
|
491
|
|
|
|
1,242
|
|
INTEREST EXPENSE
|
|
|
38,404
|
|
|
|
59,689
|
|
|
|
72,770
|
|
GAIN ON RETIREMENT OF DEBT
|
|
|
1,221
|
|
|
|
74,017
|
|
|
|
|
|
EQUITY IN INCOME (LOSS) OF AFFILIATED COMPANY
|
|
|
3,653
|
|
|
|
(3,652
|
)
|
|
|
(15,836
|
)
|
OTHER EXPENSE, net
|
|
|
104
|
|
|
|
316
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for (benefit from) income taxes,
noncontrolling interests in income of subsidiaries and loss from
discontinued operations, net of tax
|
|
|
(39,729
|
)
|
|
|
(336,716
|
)
|
|
|
(196,466
|
)
|
PROVISION FOR (BENEFIT FROM) INCOME TAXES
|
|
|
7,014
|
|
|
|
(45,183
|
)
|
|
|
54,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(46,743
|
)
|
|
|
(291,533
|
)
|
|
|
(250,549
|
)
|
LOSS FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(1,815
|
)
|
|
|
(7,414
|
)
|
|
|
(137,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED NET LOSS
|
|
|
(48,558
|
)
|
|
|
(298,947
|
)
|
|
|
(387,590
|
)
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
3,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
$
|
(52,887
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
(391,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.86
|
)
|
|
$
|
(3.14
|
)
|
|
$
|
(2.58
|
)
|
Discontinued operations, net of tax
|
|
|
(0.03
|
)
|
|
|
(0.08
|
)
|
|
|
(1.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(0.89
|
)
|
|
$
|
(3.22
|
)
|
|
$
|
(3.97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
59,465,252
|
|
|
|
94,118,699
|
|
|
|
98,710,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
59,465,252
|
|
|
|
94,118,699
|
|
|
|
98,710,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio One, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
|
|
|
Other
|
|
|
Stock
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Preferred
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Subscriptions
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class D
|
|
|
Income (Loss)
|
|
|
Income (Loss)
|
|
|
Receivable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(As restated see
|
|
|
|
|
|
(As restated see
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
note 2)
|
|
|
|
|
|
note 2)
|
|
|
|
In thousands, except share data
|
|
|
BALANCE, as of December 31, 2006 (as restated)
|
|
$
|
|
|
|
$
|
6
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
87
|
|
|
|
|
|
|
$
|
967
|
|
|
$
|
(1,642
|
)
|
|
$
|
986,649
|
|
|
$
|
(22,186
|
)
|
|
$
|
963,887
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(391,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(391,500
|
)
|
|
|
(391,500
|
)
|
Change in unrealized net loss on derivative and hedging
activities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(323
|
)
|
|
|
(323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(391,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of non-employee restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
(63
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,307
|
|
|
|
|
|
|
|
3,307
|
|
Interest income on stock subscriptions receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
Cumulative impact of change in accounting for uncertainties in
income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(895
|
)
|
|
|
(895
|
)
|
Conversion of 1,998,281 shares of Class A common stock
to 1,998,281 shares of Class D common stock
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of 5,620 shares of Class B common stock to
5,620 shares of Class D common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of 11,410 shares of Class C common stock to
11,410 shares of Class D common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of redeemable noncontrolling interests to estimated
redemption value (as restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(468
|
)
|
|
|
|
|
|
|
(468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, as of December 31, 2007 (as restated)
|
|
|
|
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
|
89
|
|
|
|
|
|
|
|
644
|
|
|
|
(1,717
|
)
|
|
|
989,425
|
|
|
|
(414,581
|
)
|
|
|
573,870
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(302,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(302,944
|
)
|
|
|
(302,944
|
)
|
Change in unrealized net loss on derivative and hedging
activities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,625
|
)
|
|
|
(3,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(306,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of 421,661 shares of Class A common stock
and 20,029,538 shares of Class D common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,084
|
)
|
|
|
|
|
|
|
(12,104
|
)
|
Conversion of 882,987 shares of Class A common stock
to 882,987 shares of Class D common stock
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of non-employee restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
Interest income on stock subscriptions receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Repayment of officers loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,737
|
|
|
|
|
|
|
|
|
|
|
|
1,737
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,643
|
|
|
|
|
|
|
|
1,643
|
|
Decretion of redeemable noncontrolling interests to estimated
redemption value (as restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,406
|
|
|
|
|
|
|
|
13,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, as of December 31, 2008 (as restated)
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
70
|
|
|
|
|
|
|
|
(2,981
|
)
|
|
|
|
|
|
|
992,479
|
|
|
|
(717,525
|
)
|
|
|
272,052
|
|
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio One, Inc. Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
|
|
|
Other
|
|
|
Stock
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Preferred
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Subscriptions
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class D
|
|
|
Income (Loss)
|
|
|
Income (Loss)
|
|
|
Receivable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(As restated see
|
|
|
|
|
|
(As restated see
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
note 2)
|
|
|
|
|
|
note 2)
|
|
|
|
In thousands, except share data
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(52,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,887
|
)
|
|
|
(52,887
|
)
|
Change in unrealized gain on derivative and hedging activities,
net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
895
|
|
|
|
895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(51,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of 34,889 shares of Class A common stock
and 27,691,398 shares of Class D common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,670
|
)
|
|
|
|
|
|
|
(19,698
|
)
|
Vesting of non-employee restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
554
|
|
|
|
|
|
|
|
554
|
|
Reach Media stock return from noncontrolling shareholder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,388
|
)
|
|
|
|
|
|
|
(1,388
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,095
|
|
|
|
|
|
|
|
1,095
|
|
Accretion of redeemable noncontrolling interests to estimated
redemption value (as restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,795
|
)
|
|
|
|
|
|
|
(4,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, as of December 31, 2009 (as restated)
|
|
$
|
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
42
|
|
|
|
|
|
|
$
|
(2,086
|
)
|
|
$
|
|
|
|
$
|
968,275
|
|
|
$
|
(770,412
|
)
|
|
$
|
195,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(52,887
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
(391,500
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
3,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(48,558
|
)
|
|
|
(298,947
|
)
|
|
|
(387,590
|
)
|
Adjustments to reconcile consolidated net loss to net cash from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
21,011
|
|
|
|
19,022
|
|
|
|
14,680
|
|
Amortization of debt financing costs
|
|
|
2,419
|
|
|
|
2,591
|
|
|
|
2,241
|
|
Deferred income taxes
|
|
|
1,996
|
|
|
|
(49,687
|
)
|
|
|
(28,013
|
)
|
Impairment of long-lived assets
|
|
|
65,937
|
|
|
|
423,220
|
|
|
|
211,051
|
|
Equity in (income) loss of affiliated company
|
|
|
(3,653
|
)
|
|
|
3,652
|
|
|
|
15,836
|
|
Stock-based and other non-cash compensation
|
|
|
1,649
|
|
|
|
1,732
|
|
|
|
2,991
|
|
Gain on retirement of debt
|
|
|
(1,221
|
)
|
|
|
(74,017
|
)
|
|
|
|
|
Amortization of contract inducement and termination fee
|
|
|
(1,263
|
)
|
|
|
(1,895
|
)
|
|
|
(1,809
|
)
|
Change in interest due on stock subscriptions receivable
|
|
|
|
|
|
|
(20
|
)
|
|
|
(75
|
)
|
Effect of change in operating assets and liabilities, net of
assets acquired and disposed of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
2,389
|
|
|
|
(1,800
|
)
|
|
|
3,510
|
|
Prepaid expenses and other current assets
|
|
|
353
|
|
|
|
(571
|
)
|
|
|
(1,225
|
)
|
Income tax receivable
|
|
|
|
|
|
|
|
|
|
|
1,296
|
|
Other assets
|
|
|
4,829
|
|
|
|
(966
|
)
|
|
|
(358
|
)
|
Accounts payable
|
|
|
837
|
|
|
|
(266
|
)
|
|
|
(4,289
|
)
|
Accrued interest
|
|
|
(584
|
)
|
|
|
(8,921
|
)
|
|
|
(270
|
)
|
Accrued compensation and related benefits
|
|
|
(148
|
)
|
|
|
(5,439
|
)
|
|
|
(1,230
|
)
|
Income taxes payable
|
|
|
1,503
|
|
|
|
(4,433
|
)
|
|
|
1,997
|
|
Other liabilities
|
|
|
(2,743
|
)
|
|
|
4,899
|
|
|
|
194
|
|
Net cash flows from operating activities from discontinued
operations
|
|
|
690
|
|
|
|
5,678
|
|
|
|
215,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities
|
|
|
45,443
|
|
|
|
13,832
|
|
|
|
44,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(4,528
|
)
|
|
|
(12,541
|
)
|
|
|
(9,815
|
)
|
Equity investments
|
|
|
|
|
|
|
|
|
|
|
(12,590
|
)
|
Cash paid for acquisitions
|
|
|
|
|
|
|
(70,455
|
)
|
|
|
|
|
Deposits for station equipment and purchases of other assets
|
|
|
|
|
|
|
(215
|
)
|
|
|
(5,904
|
)
|
Proceeds from sale of assets
|
|
|
|
|
|
|
150,224
|
|
|
|
108,100
|
|
Purchase of intangible assets
|
|
|
(343
|
)
|
|
|
(816
|
)
|
|
|
|
|
Net cash flows used in investing activities from discontinued
operations
|
|
|
|
|
|
|
(166
|
)
|
|
|
(1,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) from investing activities
|
|
|
(4,871
|
)
|
|
|
66,031
|
|
|
|
78,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from credit facility
|
|
|
116,500
|
|
|
|
227,000
|
|
|
|
|
|
Repayment of long-term debt
|
|
|
(1,220
|
)
|
|
|
(120,787
|
)
|
|
|
(124,697
|
)
|
Payment of dividend to noncontrolling interest shareholders of
Reach Media
|
|
|
|
|
|
|
(6,364
|
)
|
|
|
(2,940
|
)
|
Repayment of credit facility
|
|
|
(136,670
|
)
|
|
|
(170,299
|
)
|
|
|
|
|
Repayment of other debt
|
|
|
(153
|
)
|
|
|
(1,004
|
)
|
|
|
|
|
F-7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
Repayment of stock subscriptions receivable
|
|
|
|
|
|
|
1,737
|
|
|
|
|
|
Payment of bank financing costs
|
|
|
(1,658
|
)
|
|
|
|
|
|
|
(3,004
|
)
|
Repurchase of common stock
|
|
|
(19,697
|
)
|
|
|
(12,104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(42,898
|
)
|
|
|
(81,821
|
)
|
|
|
(130,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(2,326
|
)
|
|
|
(1,958
|
)
|
|
|
(8,159
|
)
|
CASH AND CASH EQUIVALENTS, beginning of year
|
|
|
22,289
|
|
|
|
24,247
|
|
|
|
32,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of year
|
|
$
|
19,963
|
|
|
$
|
22,289
|
|
|
$
|
24,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
36,568
|
|
|
$
|
68,611
|
|
|
$
|
70,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
3,639
|
|
|
$
|
7,907
|
|
|
$
|
6,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
RADIO
ONE, INC. AND SUBSIDIARIES
December 31,
2009, 2008 and 2007
|
|
1.
|
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|
Radio One, Inc. (a Delaware corporation referred to as
Radio One) and its subsidiaries (collectively, the
Company) is an urban-oriented, multi-media company
that primarily targets
African-American
consumers. Our core business is our radio broadcasting franchise
that is the largest radio broadcasting operation that primarily
targets
African-American
and urban listeners. We currently own 53 broadcast stations
located in 16 urban markets in the United States. While our
primary source of revenue is the sale of local and national
advertising for broadcast on our radio stations, our operating
strategy is to operate the premier multi-media entertainment and
information content provider targeting
African-American
consumers. Thus, we have diversified our revenue streams by
making acquisitions and investments in other complementary media
properties. Our other media interests include our approximately
37% ownership interest in TV One, LLC (TV One), an
African-American
targeted cable television network that we invested in with an
affiliate of Comcast Corporation and other investors; our 53.5%
ownership interest in Reach Media, Inc. (Reach
Media), which operates the Tom Joyner Morning Show; our
ownership of Interactive One, LLC (Interactive One),
an online platform serving the
African-American
community through social content, news, information, and
entertainment, which operates a number of branded sites,
including News One, UrbanDaily and HelloBeautiful; and our
ownership of Community Connect, LLC (formerly Community Connect
Inc.) (CCI), an online social networking company,
which operates a number of branded websites, including
BlackPlanet, MiGente and Asian Avenue. Through our national
multi-media presence, we provide advertisers with a unique and
powerful delivery mechanism to the
African-American
audience.
In December 2009, the Company ceased publication of our
urban-themed lifestyle periodical Giant Magazine. The remaining
assets and liabilities of this publication have been classified
as discontinued operations as of December 31, 2009 and
2008, and the publications results of operations for the
years ended December 31, 2009, 2008 and 2007, have been
classified as discontinued operations in the accompanying
consolidated financial statements.
During the period December 2006 to May 2008, we completed the
sale of 20 non-core radio stations for approximately
$287.9 million. While we maintained our core radio
franchise, these dispositions have allowed the Company to more
strategically allocate its resources consistent with its
long-term multi-media operating strategy.
As part of our consolidated financial statements, consistent
with our financial reporting structure and how the Company
currently manages its businesses, we have provided selected
financial information on the Companys two reportable
segments: (i) Radio Broadcasting and (ii) Internet.
(See Note 19 Segment Information.)
|
|
(b)
|
Basis
of Presentation
|
The consolidated financial statements are prepared in conformity
with accounting principles generally accepted in the United
States and require management to make certain estimates and
assumptions. These estimates and assumptions may affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the
financial statements. The Company bases these estimates on
historical experience, current economic environment or various
other assumptions that are believed to be reasonable under the
circumstances. However, uncertainties associated with the
continuing economic downturn and disruption in financial markets
increase the possibility that actual results may differ from
these estimates.
Certain reclassifications associated with accounting for
discontinued operations have been made to prior year balances to
conform to the current year presentation. These
reclassifications had no effect on any other previously reported
or consolidated net income or loss or any other statement of
operations, balance sheet or
F-9
cash flow amounts. Where applicable, these financial statements
have been identified as As Adjusted. (See
Note 4 Disposition of Assets and
Discontinued Operations.)
During the quarter ended September 30, 2009, the Company
identified and recorded deferred tax expense adjustments related
to the year ended December 31, 2008. The effect of these
adjustments in the third quarter of 2009 decreased tax expense
and increased consolidated net income by approximately
$1.9 million. The Company has concluded that these
corrections are immaterial to the 2008 annual financial
statements and the 2009 interim and annual financial statements
and accordingly, retroactive adjustments to previously issued
financial statements are unnecessary.
|
|
(c)
|
Principles
of Consolidation
|
The consolidated financial statements include the accounts of
Radio One and subsidiaries in which Radio One has a controlling
interest. In February 2005, the Company acquired a controlling
interest in Reach Media and began consolidating Reach Media for
financial reporting purposes. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Noncontrolling interests have been recognized where a
controlling interest exists, but the Company owns less than
100%. The equity method of accounting is used for investments in
affiliates over which Radio One has significant influence
(ownership between 20% and 50%), but does not have effective
control. Investments in affiliates in which Radio One cannot
exercise significant influence (ownership interest less than
20%) are accounted for using the cost method.
The Company accounts for its investment in TV One under the
equity method of accounting in accordance with Accounting
Standards Codification (ASC) 323,
Investments Equity Method and Joint
Ventures. The Company has recorded its investment at
cost and has adjusted the carrying amount of the investment to
recognize the change in Radio Ones claim on the net assets
of TV One resulting from income or losses of TV One, as well as
other capital transactions of TV One using a hypothetical
liquidation at book value approach. The Company will review the
realizability of the investment if conditions are present or
events occur to suggest that an impairment of the investment may
exist. The Company has determined that, although TV One is a
variable interest entity (as defined by ASC 810,
Consolidation) the Company is not the primary
beneficiary of TV One. (See Note 7
Investment in Affiliated Company.)
|
|
(d)
|
Cash
and Cash Equivalents
|
Cash and cash equivalents consist of cash, repurchase agreements
and money market funds at various commercial banks. All cash
equivalents have original maturities of 90 days or less.
For cash and cash equivalents, cost approximates fair value.
|
|
(e)
|
Trade
Accounts Receivable
|
Trade accounts receivable is recorded at the invoiced amount.
The allowance for doubtful accounts is the Companys
estimate of the amount of probable losses in the Companys
existing accounts receivable. The Company determines the
allowance based on the aging of the receivables, the impact of
economic conditions on the advertisers ability to pay and
other factors. Inactive delinquent accounts that are past due
beyond a certain amount of days are written off and often
pursued by other collection efforts. Bankruptcy accounts are
immediately written off upon receipt of the bankruptcy notice
from the courts. In bankruptcy instances, we file a proof of
claim with the courts in order to receive any later distribution
of funds that may be forthcoming.
|
|
(f)
|
Goodwill
and Radio Broadcasting Licenses
|
In connection with past acquisitions, a significant amount of
the purchase price was allocated to radio broadcasting licenses,
goodwill and other intangible assets. Goodwill consists of the
excess of the purchase price over the fair value of tangible and
identifiable intangible net assets acquired. In accordance with
ASC 350, Intangibles Goodwill and
Other, goodwill and radio broadcasting licenses are
not amortized, but are tested annually for impairment at the
reporting unit level and unit of accounting level, respectively.
We test for impairment annually, on October 1 of each year, or
more frequently when events or changes in
F-10
circumstances or other conditions suggest impairment may have
occurred. Impairment exists when the asset carrying values
exceed their respective fair values, and the excess is then
recorded to operations as an impairment charge. With the
assistance of a third-party valuation firm, we test for license
impairment at the unit of accounting level using the income
approach, which involves, but is not limited to judgmental
estimates and assumptions about projected revenue growth, future
operating margins discount rates and terminal values. In testing
for goodwill impairment, we follow a two-step approach, also
using the income approach that first estimates the fair value of
the reporting unit. If the carrying value of the reporting unit
exceeds its fair value, we then determine the implied goodwill
after allocating the reporting units fair value of assets
and liabilities in accordance with
ASC 805-10,
Business Combinations. Any excess of carrying
value of the reporting units goodwill balance over its
respective implied goodwill is written off as a charge to
operations. We then perform a reasonableness test by comparing
the average implied multiple arrived at based on our cash flow
projections and estimated fair values to multiples for actual
recently completed sale transactions and by comparing our
estimated fair values to the market capitalization of the Company
The recent economic downturn caused further deterioration to the
2009 outlook for radio and online advertising, and resulted in
significant revenue and profitability declines beyond levels
assumed in our 2008 annual impairment testing. As a result, we
lowered many of our internal projections and we performed
interim impairment assessments for our radio broadcasting
licenses and goodwill in February and August 2009, as well as
for CCI in August 2009, the results of which were to record
approximately $49.0 million in impairment charges against
radio broadcasting licenses in 11 of our 16 markets during the
first quarter of 2009. In the third quarter of 2009, Reach Media
lowered its 2009 projections as a result of amending its sales
representation agreement with Citadel Broadcasting Corporation
(Citadel), whereby, in exchange for prepayment,
Citadel paid Reach Media $2.0 million less in guaranteed
revenue for the fourth quarter of 2009. Consequently, interim
impairment testing was also performed on Reach Media in August
of 2009, as a result of which the Company concluded no
impairment had occurred. As part of our annual 2009 testing, we
recorded additional impairment charges of approximately
$16.1 million against radio broadcasting licenses in seven
of our 16 markets, and we impaired goodwill of $628,000 in
another one of our markets for the entire amount during the
fourth quarter of 2009. For the three years ended
December 31, 2009, 2008 and 2007, the Company recorded
broadcasting license and goodwill impairment charges of
approximately $65.6 million, $420.2 million and
$211.1 million, respectively. (See Note 6
Goodwill, Radio Broadcasting Licenses and Other Intangible
Assets.)
|
|
(g)
|
Impairment
of Long-Lived Assets, Excluding Goodwill and Radio Broadcasting
Licenses
|
The Company accounts for the impairment of long-lived intangible
assets, excluding goodwill and radio broadcasting licenses, in
accordance with ASC 350, Intangibles
Goodwill and Other. Long-lived intangible assets,
excluding goodwill and radio broadcasting licenses, are reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset or group of assets
may not be fully recoverable. These events or changes in
circumstances may include a significant deterioration in
operating results, changes in business plans, or changes in
anticipated future cash flows. If an impairment indicator is
present, the Company evaluates recoverability by a comparison of
the carrying amount of the assets to future undiscounted net
cash flows expected to be generated by the assets. Assets are
grouped at the lowest levels for which there are identifiable
cash flows that are largely independent of the cash flows
generated by other asset groups. If the assets are impaired, the
impairment recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets. Fair value
is generally determined by estimates of discounted future cash
flows. The discount rate used in any estimate of discounted cash
flows would be the rate of return for a similar investment of
like risk. Given the recent weak economy and the adverse impact
on radio and online advertising, the Company performed
impairment testing on certain advertising related long-lived
assets for Reach Media and CCI in August 2009, and concluded
that no impairment to the carrying value of the advertising
related intangibles had occurred. No additional impairment
indicators arose during the fourth quarter of 2009 for any of
our reporting units; hence, additional testing of advertising
related intangibles was not warranted. Given the radio
broadcasting license impairment in two of our reporting units
during 2009, we performed impairment testing on other
intangibles in those reporting units, and recorded $297,000 in
impairment charges during the fourth quarter against the
carrying value of those intangible assets. For the
F-11
years ended December 31, 2009 and 2008, $297,000 and
approximately $3.2 million were recorded, respectively, for
impairment of intangible assets other than goodwill and FCC
licenses. There were no impairment charges recorded for these
assets in 2007.
|
|
(h)
|
Financial
Instruments
|
Financial instruments as of December 31, 2009 and 2008
consisted of cash and cash equivalents, trade accounts
receivable, accounts payable, accrued expenses, note payable,
long-term debt, redeemable noncontrolling interests and
subscriptions receivable. The carrying amounts approximated fair
value for each of these financial instruments as of
December 31, 2009 and 2008, except for the Companys
outstanding senior subordinated notes. The
87/8% Senior
Subordinated Notes due July 2011 had a carrying value of
$101.5 million and a fair value of approximately
$78.2 million as of December 31, 2009, and a carrying
value of $104.0 million and a fair value of approximately
$52.0 million as of December 31, 2008. The
63/8% Senior
Subordinated Notes due February 2013 had a carrying value of
$200.0 million and a fair value of approximately
$142.0 million as of December 31, 2009, and a carrying
value of $200.0 million and a fair value of approximately
$60.0 million as of December 31, 2008. The fair values
were determined based on the current trading values of these
instruments.
|
|
(i)
|
Derivative
Financial Instruments
|
The Company recognizes all derivatives at fair value, whether
designated in hedging relationships or not, in the balance sheet
as either an asset or liability. The accounting for changes in
the fair value of a derivative, including certain derivative
instruments embedded in other contracts, depends on the intended
use of the derivative and the resulting designation. If the
derivative is designated as a fair value hedge, the changes in
the fair value of the derivative and the hedged item are
recognized in the statement of operations. If the derivative is
designated as a cash flow hedge, changes in the fair value of
the derivative are recorded in other comprehensive income and
are recognized in the statement of operations when the hedged
item affects net income. If a derivative does not qualify as a
hedge, it is marked to fair value through the statement of
operations. Any fees associated with these derivatives are
amortized over their term. (See Note 9
Derivative Instruments and Hedging Activities.)
The Company recognizes revenue for broadcast advertising when a
commercial is broadcast and is reported, net of agency and
outside sales representative commissions, in accordance with
ASC 605, Revenue Recognition. Agency and
outside sales representative commissions are calculated based on
a stated percentage applied to gross billing. Generally, clients
remit the gross billing amount to the agency or outside sales
representative, and the agency or outside sales representative
remits the gross billing, less their commission, to the Company.
Agency and outside sales representative commissions were
approximately $28.4 million, $34.6 million and
$37.0 million for the years ended December 31, 2009,
2008 and 2007, respectively.
CCI, which the Company acquired in April 2008, currently
generates the majority of the Companys internet revenue,
and derives such revenue principally from advertising services,
including advertising aimed at diversity recruiting. Advertising
services include the sale of banner and sponsorship
advertisements. Advertising revenue is recognized either as
impressions (the number of times advertisements appear in viewed
pages) are delivered, when click through purchases
or leads are reported, or ratably over the contract period,
where applicable. CCI has a diversity recruiting relationship
with Monster, Inc. (Monster). Monster posts job
listings and advertising on CCIs websites and CCI earns
revenue for displaying the images on its websites.
The Company provides broadcast advertising time in exchange for
programming content and certain services. In accordance with
ASC 605, Revenue Recognition, the terms
of these exchanges generally permit the Company to preempt such
broadcast time in favor of advertisers who purchase time in
exchange for cash.
F-12
The Company includes the value of such exchanges in both
broadcasting net revenue and station operating expenses. The
valuation of barter time is based upon the fair value of the
network advertising time provided for the programming content
and services received. For the years ended December 31,
2009, 2008 and 2007, barter transaction revenues were
approximately $3.2 million, $2.6 million and
$2.3 million, respectively. Additionally, barter
transaction costs were reflected in programming and technical
expenses and selling, general and administrative expenses of
approximately $3.0 million, $2.5 million and
$2.1 million, and $166,000, $166,000 and $166,000, for the
years ended December 31, 2009, 2008 and 2007, respectively.
|
|
(l)
|
Network
Affiliation Agreements
|
The Company has network affiliation agreements classified as
Other Intangible Assets. These agreements are amortized over
their useful lives. Losses on contract terminations are
determined based on the specifics of each contract in accordance
with
ASC 920-350,
Entertainment Broadcasters. (See
Note 6 Goodwill, Radio Broadcasting Licenses
and Other Intangible Assets.)
|
|
(m)
|
Advertising
and Promotions
|
The Company expenses advertising and promotional costs as
incurred. Total advertising and promotional expenses, including
expenses related to discontinued operations, were approximately
$4.9 million, $6.4 million and $14.1 million for
the years ended December 31, 2009, 2008 and 2007,
respectively. Total advertising and promotional expenses for
continuing operations, for the years ended December 31,
2009, 2008 and 2007, were approximately $4.8 million,
$6.2 million and $9.6 million, respectively.
The Company accounts for income taxes in accordance with
ASC 740, Income Taxes. Under
ASC 740, deferred tax assets or liabilities are computed
based upon the difference between financial statement and income
tax bases of assets and liabilities using the enacted marginal
tax rate. The Company has provided a valuation allowance on its
net deferred tax assets where it is more likely than not such
assets will not be realized. This has occurred for all entities
except for Reach Media. Deferred income tax expense or benefits
are based upon the changes in the asset or liability from period
to period.
|
|
(o)
|
Stock-Based
Compensation
|
The Company accounts for stock-based compensation in accordance
with ASC 718, Compensation Stock
Compensation. Under the provisions of ASC 718,
stock-based compensation cost is estimated at the grant date
based on the awards fair value as calculated by the
Black-Scholes (BSM) valuation option-pricing model
and is recognized as expense ratably over the requisite service
period. The BSM incorporates various highly subjective
assumptions including expected stock price volatility, for which
historical data is heavily relied upon, expected life of options
granted, forfeiture rates and interest rates. (See
Note 12 Stockholders Equity.)
The Company is currently in a cumulative loss tax position;
hence, tax benefits resulting from stock-based compensation
deductions in excess of amounts reported for financial reporting
purposes were not recognized in financing cash flows during the
years ended December 31, 2009, 2008 and 2007.
The Companys comprehensive loss consists of net loss and
other items recorded directly to the equity accounts. The
objective is to report a measure of all changes in equity of an
enterprise that result from transactions and other economic
events during the period, other than transactions with owners.
The Companys comprehensive loss consists of gains and
losses on derivative instruments that qualify for cash flow
hedge treatment.
F-13
The following table sets forth the components of comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Consolidated net loss
|
|
$
|
(48,558
|
)
|
|
$
|
(298,947
|
)
|
|
$
|
(387,590
|
)
|
Other comprehensive income (loss) (net of tax of $0, $0 and
$242, respectively):
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative and hedging activities
|
|
|
895
|
|
|
|
(3,625
|
)
|
|
|
(323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
(47,663
|
)
|
|
|
(302,572
|
)
|
|
|
(387,913
|
)
|
Comprehensive income attributable to noncontrolling interests
|
|
|
4,329
|
|
|
|
3,997
|
|
|
|
3,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to common stockholders
|
|
$
|
(51,992
|
)
|
|
$
|
(306,569
|
)
|
|
$
|
(391,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(q)
|
Segment
Reporting and Major Customers
|
In accordance with ASC 820, Segment
Reporting, and given its diversification strategy, the
Company has determined it has two reportable segments:
(i) Radio Broadcasting; and (ii) Internet. These two
segments operate in the United States and are consistently
aligned with the Companys management of its businesses and
its financial reporting structure.
The Radio Broadcasting segment consists of all broadcast and
Reach Media results of operations. The Internet segment includes
the results of our online business, including the operations of
CCI since its date of acquisition. Intercompany revenue earned
and expenses charged between segments are recorded at fair value
and eliminated in consolidation.
We derived a significant portion of our net revenue for 2009,
2008 and 2007 from a single customer, Radio Networks, a media
representation firm which is owned by Citadel. During those
years, Reach Media derived a substantial majority of its net
revenue from a sales representation agreement (the Sales
Representation Agreement) with Radio Networks. The Sales
Representation Agreement called for Radio Networks to act as
Reach Medias sales representative primarily for
advertising airing on 105 affiliate radio stations broadcasting
the Tom Joyner Morning Show, and to also serve as its sales
representative for internet and events sales. The Sales
Representation Agreement provided for Radio Networks to retain a
portion of Reach Medias advertising revenues only after
satisfying certain revenue guarantee obligations to Reach Media.
Further, but to a lesser extent, in accordance with
ASC 605, Revenue Recognition, revenue
for Company owned radio stations is also generated from Radio
Networks for barter agreements whereby the Company provides
advertising time in exchange for programming content (the
RN Barter Revenue). As a result of our 53.5%
ownership of Reach Media, we consolidate net revenue derived by
Reach Media from the Sales Representation Agreement into our
financial statements. For the years ended December 31,
2009, 2008 and 2007, net revenue attributable to the Sales
Representation Agreement and the RN Barter Revenue accounted for
11.9%, 10.6% and 10.8%, respectively, of our total consolidated
net revenues.
The Sales Representation Agreement commenced January 2003 and in
connection with entering into the Sales Representation
Agreement, Radio Networks obtained an ownership interest in
Reach Media. In June 2007, Radio Networks, a subsidiary of
Citadel, assumed the Sales Representation Agreement as a result
of Citadels purchase of ABC Radio Networks from The Walt
Disney Company. The agreement expired December 31, 2009;
however, during the quarter ended September 30, 2009, Reach
Media and Citadel reached an agreement whereby the revenue
guarantee obligations to Reach Media for each of the months of
November and December 2009 was reduced by $1.0 million in
exchange for prepayment of the reduced revenue guarantee
obligation for those months. Payment of the reduced revenue
guarantee obligation was received by Reach Media. A new Sales
Representation Agreement was executed in November 2009 to
replace the old agreement, whereby, effective January 1,
2010, Citadel will sell advertising inventory outside the Tom
Joyner Morning Show. As an inducement for Reach Media to enter
into the new Sales Representation Agreement, Citadel returned
its noncontrolling ownership interest in Reach Media back to
Reach Media. This ownership
F-14
interest was part of the original agreement signed in 2003. As a
result of classifying these shares as treasury stock, this
transaction effectively increased Radio Ones common stock
interest in Reach Media to 53.5%. In exchange for the returned
ownership interest, Reach Media issued a $1.0 million
promissory note payable to Radio Networks due in December 2011.
Basic earnings per share is computed on the basis of the
weighted average number of shares of common stock outstanding
during the period. Diluted earnings per share is computed on the
basis of the weighted average number of shares of common stock
plus the effect of dilutive potential common shares outstanding
during the period using the treasury stock method.
The Companys potentially dilutive securities include stock
options and unvested restricted stock. Diluted earnings per
share considers the impact of potentially dilutive securities
except in periods in which there is a net loss, as the inclusion
of the potentially dilutive common shares would have an
anti-dilutive effect.
|
|
(s)
|
Discontinued
Operations
|
For those businesses where management has committed to a plan to
divest or discontinue operations, each business is valued at the
lower of its carrying amount or estimated fair value less cost
to sell. If the carrying amount of the business exceeds its
estimated fair value, a loss is recognized. The fair values are
estimated using accepted valuation techniques such as a
discounted cash flow model, valuations performed by third
parties, earnings multiples, or indicative bids, when available.
A number of significant estimates and assumptions are involved
in the application of these techniques, including the
forecasting of markets and market share, revenues, costs and
expenses, and multiple other factors. Management considers
historical experience and all available information at the time
the estimates are made. However, the fair values that are
ultimately realized upon the sale of the businesses to be
divested may differ from the estimated fair values reflected in
the consolidated financial statements.
Businesses to be divested or operationally cease are classified
in the consolidated financial statements as discontinued
operations. For businesses classified as discontinued
operations, the balance sheet amounts and statement of
operations results are reclassified from their historical
presentation to assets and liabilities of discontinued
operations on the consolidated balance sheet and to discontinued
operations in the consolidated statement of operations for all
periods presented. The gains or losses associated with these
divested or ceased businesses are recorded in income or loss
from discontinued operations on the consolidated statement of
operations. The consolidated statement of cash flows is also
reclassified for discontinued operations for all periods
presented. For businesses reclassified as discontinued, other
than the collection of outstanding accounts receivable,
management does not expect any continuing involvement with these
businesses, and these businesses are expected to be disposed of
within one year.
|
|
(t)
|
Fair
Value Measurements
|
We report our financial and non-financial assets and liabilities
measured at fair value on a recurring basis under the provisions
of ASC 820, Fair Value Measurements and
Disclosures. ASC 820 defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. Effective January 1, 2009, we
adopted the provisions of ASC 820 for all non-financial
instruments accounted for at fair value on a non-recurring
basis. The adoption of ASC 820 for non-financial assets and
liabilities did not have a significant impact on our financial
condition or results of operations.
The fair value framework requires the categorization of assets
and liabilities into three levels based upon the assumptions
(inputs) used to price the assets or liabilities. Level 1
provides the most reliable measure of fair value, whereas
Level 3 generally requires significant management judgment.
The three levels are defined as follows:
Level 1: Inputs are unadjusted quoted
prices in active markets for identical assets and liabilities
that can be accessed at the measurement date.
F-15
Level 2: Observable inputs other than
those included in Level 1, (i.e. quoted prices for similar
assets or liabilities in active markets or quoted prices for
identical assets or liabilities in inactive markets.)
Level 3: Unobservable inputs reflecting
managements own assumptions about the inputs used in
pricing the asset or liability.
As of December 31, 2009 and 2008, the fair values of our
financial liabilities measured at fair value on a recurring
basis are categorized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(In thousands)
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities subject to fair value measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps(a)
|
|
$
|
2,086
|
|
|
$
|
|
|
|
$
|
2,086
|
|
|
$
|
|
|
Employment agreement award(b)
|
|
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,743
|
|
|
$
|
|
|
|
$
|
2,086
|
|
|
$
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine equity subject to fair value measurement: (As restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests(c)
|
|
$
|
52,225
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
52,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities subject to fair value measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps(a)
|
|
$
|
2,981
|
|
|
$
|
|
|
|
$
|
2,981
|
|
|
$
|
|
|
Employment agreement award(b)
|
|
|
4,326
|
|
|
|
|
|
|
|
|
|
|
|
4,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,307
|
|
|
$
|
|
|
|
$
|
2,981
|
|
|
$
|
4,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine equity subject to fair value measurement: (As restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests(c)
|
|
$
|
43,423
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
43,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Based on London Interbank Offered Rate (LIBOR). |
Pursuant to an employment agreement (the Employment
Agreement) executed in April 2008, the Chief Executive
Officer (CEO) is eligible to receive an award amount
equal to 8% of any proceeds from distributions or other
liquidity events in excess of the return of the Companys
aggregate investment in TV One. The Company reviews the factors
underlying this award at the end of each quarter. The
Companys obligation to pay the award will be triggered
only after the Companys recovery of the aggregate amount
of its capital contribution in TV One and only upon actual
receipt of distributions of cash or marketable securities or
proceeds from a liquidity event with respect to the
Companys membership interest in TV One. The CEO was fully
vested in the award upon execution of the Employment Agreement,
and the award lapses upon expiration of the Employment Agreement
in April 2011, or earlier if the CEO voluntarily leaves the
Company or is terminated for cause. A third-party valuation firm
assisted the Company in calculating the fair valuation of the
award. (See Note 9 Derivative Instruments
and Hedging Activities.)
Redeemable noncontrolling interest in Reach Media is measured at
fair value using a discounted cash flow methodology. Significant
inputs to the discounted cash flow analysis include forecasted
operating results, discount rate and a terminal value.
F-16
The following table presents the changes in Level 3
liabilities measured at fair value on a recurring basis for the
year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
Employment
|
|
|
Noncontrolling
|
|
|
|
Agreement Award
|
|
|
Interests
|
|
|
|
|
|
|
(As Restated)
|
|
|
|
(In thousands)
|
|
|
Balance at December 31, 2008
|
|
$
|
4,657
|
|
|
$
|
43,423
|
|
Losses (income) included in earnings (realized/unrealized)
|
|
|
945
|
|
|
|
|
|
Changes in accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
Purchases, issuances, and settlements
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
4,329
|
|
Stock repurchase from noncontrolling shareholder
|
|
|
|
|
|
|
(322
|
)
|
Change in fair value
|
|
|
|
|
|
|
4,795
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
5,602
|
|
|
$
|
52,225
|
|
|
|
|
|
|
|
|
|
|
The amount of total losses for the period included in earnings
attributable to the change in unrealized losses relating to
assets and liabilities still held at the reporting date
|
|
$
|
(945
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Losses included in earnings were recorded in the consolidated
statement of operations as corporate selling, general and
administrative expenses for the year ended December 31,
2009.
Net income attributable to noncontrolling interests amounts
reflected in the table above were recorded in the consolidated
statements of operations as noncontrolling interests in income
of subsidiaries for the year ended December 31, 2009.
Certain assets and liabilities are measured at fair value on a
non-recurring basis. These assets are not measured at fair value
on an ongoing basis but are subject to fair value adjustments
only in certain circumstances. Included in this category are
goodwill, radio broadcasting licenses and other intangible
assets, net, that are written down to fair value when they are
determined to be impaired.
As of December 31, 2009, each major category of assets and
liabilities measured at fair value on a non-recurring basis
during the period is categorized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
(Losses)
|
|
|
|
(In millions)
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring assets subject to fair value measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
137.5
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
137.5
|
|
|
$
|
(0.6
|
)
|
Radio broadcasting licenses
|
|
|
698.6
|
|
|
|
|
|
|
|
|
|
|
|
698.6
|
|
|
|
(65.0
|
)
|
Other intangible assets, net
|
|
|
35.1
|
|
|
|
|
|
|
|
|
|
|
|
35.1
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
871.2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
871.2
|
|
|
$
|
(65.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008, the total recorded carrying values
of goodwill and radio broadcasting licenses were approximately
$137.1 million and $763.7 million, respectively.
Pursuant to ASC 350, Intangibles Goodwill
and Other, and in connection with its interim impairment
testing performed in February 2009, the Company determined
carrying values for radio broadcasting licenses in 11 of its 16
markets were impaired, and recorded an impairment charge of
approximately $49.0 million for the quarter ended
March 31, 2009, thus reducing the total license carrying
values to approximately $714.7 million as of March 31,
2009. During the second quarter of 2009, no impairment
indicators were identified; hence, no interim impairment testing
was warranted. For the third quarter of 2009, the Company
performed interim impairment testing in August
F-17
2009 and concluded that impairment to the carrying values of
radio broadcasting licenses and goodwill had not occurred.
During the fourth quarter of 2009, the Company determined
carrying values for radio broadcasting licenses and goodwill in
eight of its 16 markets were impaired, and recorded an
impairment charge of approximately $16.1 million for the
quarter ended December 31, 2009, thus reducing the total
license carrying values to approximately $698.6 million and
reducing the carrying value of goodwill to approximately
$137.5 million as of December 31, 2009. A description
of the Level 3 inputs and the information used to develop
the inputs is discussed in Note 6 Goodwill,
Radio Broadcasting Licenses and Other Intangible Assets.
As of December 31, 2008, the total recorded carrying value
of other intangible assets excluding goodwill and radio
broadcasting licenses was approximately $44.1 million.
Pursuant to ASC 360, Property, Plant, and
Equipment, due to the challenging economic climate and its
negative impact on radio and online advertising, we performed
interim impairment testing in the third quarter of 2009 on
certain advertising related intangible assets, and concluded no
impairment had occurred. During the fourth quarter of 2009, we
performed impairment testing on other intangible assets in
reporting units where impairment had occurred, and recorded an
impairment charge of $297,000.
|
|
(u)
|
Software
and Web Development Costs
|
The Company capitalizes direct internal and external costs
incurred to develop internal-use computer software during the
application development stage pursuant to
ASC 350-40,
Intangibles Goodwill and Other.
Internal-use software is amortized under the straight-line
method using an estimated life of three years. All web
development costs incurred in connection with operating our
websites are accounted for under the provisions of
ASC 350-40,
unless a plan exists or is being developed to market the
software externally. The Company has no plans to market software
externally.
|
|
(v)
|
Redeemable
noncontrolling interests
|
Noncontrolling interests in subsidiaries that are redeemable
outside of the Companys control for cash or other assets
are classified as mezzanine equity and measured at the greater
of estimated redemption value at the end of each reporting
period or the historical cost basis of the noncontrolling
interests adjusted for cumulative earnings allocations. The
resulting increases or decreases in the estimated redemption
amount are affected by corresponding charges against retained
earnings, or in the absence of retained earnings, additional
paid-in-capital.
|
|
(w)
|
Impact
of Recently Issued Accounting Pronouncements
|
In December 2009, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU), Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities,
which amends the guidance on variable interest entities
(VIE) in ASC 810, Consolidation,
and is effective for fiscal years beginning after
November 15, 2009. It requires reporting entities to
evaluate former qualified special purpose entities for
consolidation, changes the approach to determining a VIEs
primary beneficiary from a quantitative assessment to a
qualitative assessment designed to identify a controlling
financial interest, and increases the frequency of required
reassessments to determine whether a company is the primary
beneficiary of a VIE. Additional year-end and interim
disclosures are required under this update. The adoption of this
guidance on January 1, 2010 will not have a material effect
on the Companys consolidated financial statements.
In June 2009, the FASB issued ASC 105, Generally
Accepted Accounting Principles, which establishes the
ASC as the source of authoritative non-SEC U.S. generally
accepted accounting principles (GAAP) for
non-governmental entities. ASC 105 is effective for
financial statements issued for interim and annual periods
ending after September 15, 2009. The adoption of
ASC 105 did not have a material impact on the
Companys consolidated financial statements.
In May 2009, the FASB issued ASC 855, Subsequent
Events, which addresses accounting and disclosure
requirements related to subsequent events. It requires
management to evaluate subsequent events
F-18
through the date the financial statements are either issued or
available to be issued. In February 2010, the FASB issued ASU
2010-09,
which amends ASC 855 to remove all requirements for SEC
filers to disclose the date through which subsequent events are
considered. The amendment became effective upon issuance. The
Company has provided the required disclosures regarding
subsequent events in Note 21 Subsequent
Events.
The provisions under ASC 825, Financial
Instruments, requiring disclosures about fair value of
financial instruments for interim reporting periods of publicly
traded companies, as well as in annual financial statements
became effective for the Company during the quarter ended
June 30, 2009. The additional disclosures required under
ASC 825 are included in Note 1
Organization and Summary of Significant Accounting
Policies.
Effective January 1, 2009, the provisions under
ASC 350, Intangibles Goodwill and
Other, related to the determination of the useful life
of intangible assets and requiring additional disclosures
related to renewing or extending the terms of recognized
intangible assets became effective for the Company. The adoption
of these provisions did not have a material effect on the
Companys consolidated financial statements.
Effective January 1, 2009, the Company adopted an
accounting standard update from the Emerging Issues Task Force
(EITF) consensus regarding the accounting for
contingent consideration agreements of an equity method
investment and the requirement for the investor to recognize its
share of any impairment charges recorded by the investee. This
update to ASC 323, Investments Equity
Method and Joint Ventures, requires the investor to
record share issuances by the investee as if it has sold a
portion of its investment with any resulting gain or loss being
reflected in earnings. The adoption of this update did not have
any impact on the Companys consolidated financial
statements.
In March 2008, the FASB issued an update to ASC 815,
Derivatives and Hedging, related to
disclosures about derivative instruments and hedging activities.
It requires disclosure of the fair value of derivative
instruments and their gains and losses in a tabular format. It
also provides for more information about an entitys
liquidity by requiring disclosure of derivative features that
are credit risk related. Finally, it requires cross referencing
within footnotes to enable financial statement users to locate
important information about derivative instruments. Effective
January 1, 2009, the Company adopted the updated provisions
of ASC 815. The Companys adoption of the updates had
no impact on its financial condition or results of operations.
(See Note 9 Derivative Instruments and
Hedging Activities.)
In February 2008, the FASB delayed the effective date for
applying the fair value provisions of ASC 820,
Fair Value Measurements and Disclosures, to
non-financial assets and non-financial liabilities, except those
that are recognized or disclosed on a recurring basis, to fiscal
years beginning after November 15, 2008. Effective
January 1, 2009, we adopted the provisions of ASC 820
for all non-financial instruments accounted for at fair value on
a non-recurring basis. The adoption of ASC 820 for
non-financial assets and liabilities did not have a significant
impact on our financial condition or results of operations.
In December 2007, the FASB issued
ASC 805-10,
Business Combinations, which requires the
acquirer of a business to recognize and measure the identifiable
assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at fair value.
ASC 805-10
also requires transaction costs related to the business
combination to be expensed as incurred. In April 2009, the FASB
issued
ASC 805-20,
Business Combinations, which amends and
clarifies
ASC 805-10
to address application issues associated with initial
recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising
from contingencies in a business combination.
ASC 805-10
and ASC
805-20 are
effective for business combinations for which the acquisition
date is on or after the January 1, 2009. Effective
January 1, 2009, the Company adopted
ASC 805-10
and
ASC 805-20,
which has had no effect on the Companys consolidated
financial statements. The Company expects
ASC 805-10
and
ASC 805-20
to have an impact on its accounting for future business
combinations, but the effect is dependent upon the acquisitions
that are made in the future.
In December 2007, the FASB issued updated guidance on
ASC 810, Consolidation, which changed
the accounting and reporting requirements for the noncontrolling
interests in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interests in a
subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial
statements. The requirements became effective for the Company on
January 1, 2009 and changed the accounting and reporting
for minority interests, which is
F-19
now characterized as noncontrolling interests. The updated
guidance required retroactive adoption of the presentation and
disclosure requirements for existing minority interests, with
all other requirements applied prospectively. Reflected in the
December 31, 2008
Form 10-K/A,
minority interests on the consolidated balance sheet was
approximately $2.0 million. See Note 2
Restatement of Consolidated Financial Statements, for a
discussion of the Companys accounting and reporting for
its noncontrolling interests.
In December 2007, the SEC issued Staff Accounting Bulletin
(SAB) No. 110 that modified
SAB No. 107 regarding the use of a
simplified method in developing an estimate of
expected term of plain vanilla share options in
accordance with provisions related to stock compensation under
ASC 718, Compensation Stock
Compensation. Under SAB No. 107, the use of
the simplified method was not allowed beyond
December 31, 2007. SAB No. 110 allows, however,
the use of the simplified method beyond
December 31, 2007 under certain circumstances. We currently
use the simplified method under
SAB No. 107, and we expect to continue to use the
simplified method in future periods if the facts and
circumstances permit.
In February 2007, the FASB issued provisions under ASC 825,
Financial Instruments, which permit companies
to choose to measure certain financial instruments and other
items at fair value that are not currently required to be
measured at fair value. Effective January 1, 2008, the
Company adopted the provisions under ASC 825, which
provides entities the option to measure many financial
instruments and certain other items at fair value. Entities that
choose the fair value option will recognize unrealized gains and
losses on items for which the fair value option was elected in
earnings at each subsequent reporting date. The Company has
chosen not to elect the fair value option for any items that are
not already required to be measured at fair value in accordance
with generally accepted accounting principles.
|
|
(x)
|
Liquidity
and Uncertainties Related to Going Concern
|
As of each of June 30, 2010 and July 1, 2010, we were
not in compliance with the terms of our Credit Agreement. More
specifically, (i) as of June 30, 2010, we failed to
maintain a total leverage ratio of 7.25 to 1.00 and (ii) as
of July 1, 2010, as a result of a step down of the total
leverage ratio from no greater than 7.25 to 1.00 to no greater
than 6.50 to 1.00 effective for the period July 1, 2010 to
September 30, 2011, we also failed to maintain the
requisite total leverage ratio. As previously disclosed in the
Companys Current Report on
Form 8-K,
filed with the SEC on July 16, 2010, on July 15, 2010,
the Company and its subsidiaries executed the Forbearance
Agreement with Wells Fargo Bank, N.A. (successor by merger to
Wachovia Bank, National Association), the Agent, and the
Required Lenders under our Credit Agreement, relating to the
above noted existing defaults and events of default. On
August 13, 2010, we entered into the Forbearance Agreement
Amendment that, among other things, extended the termination
date of the Forbearance Agreement to September 10, 2010,
unless terminated earlier by its terms, and provided additional
forbearance related to an anticipated default that may be caused
by an opinion of our independent registered public accounting
firm, Ernst & Young LLP, that included an explanatory
paragraph expressing substantial doubt about the Companys
ability to continue as a going concern. Under the Forbearance
Agreement and the Forbearance Agreement Amendment, the Agent and
the Required Lenders maintained the right to deliver
payment blockage notices to the trustees for the
holders of the 2011 Notes
and/or the
2013 Notes.
On August 5, 2010, the Agent delivered a payment blockage
notice to the Trustee under the Indenture governing our 2013
Notes. Under the terms of the Indenture, neither the Company nor
any of its guaranteeing subsidiaries may make any payment or
distribution of any kind or character in respect of obligations
under the 2013 Notes, including, without limitation, the
interest payment to the noteholders that was scheduled for
August 15, 2010. The Indenture permits a
30-day grace
period for the nonpayment of interest before such nonpayment
constitutes an event of default, in which case the Trustee or
holders of at least 25% in principal amount of the then
outstanding 2013 Notes may declare the principal amount, and
accrued and unpaid interest on all outstanding 2013 Notes to be
due and payable immediately.
The lenders under the Credit Agreement have not accelerated the
indebtedness thereunder and the Company continues to actively
pursue various financing alternatives with its lenders and the
members of an ad hoc group of the holders of its 2011 Notes and
2013 Notes.
F-20
We have been actively engaged with the lenders under our Credit
Agreement as well as with our bondholders to implement certain
Refinancing Transactions to solve both for the defaults under
the Credit Agreement and for our upcoming debt maturities. We
anticipate that if we complete the Refinancing Transactions, we
will cure or otherwise obtain a waiver of any defaults under the
Credit Agreement and the 2013 Notes Indenture. However, there is
no assurance that we will complete the Refinancing Transactions
and that an event of default under the 2013 Notes Indenture will
not arise. If we are unable to further amend the Forbearance
Agreement or otherwise obtain waivers from our lenders under the
Credit Agreement, an event of default under our 2013 Notes
Indenture may arise causing a cross-default under our Credit
Agreement, resulting in the acceleration of all of our
indebtedness thereunder. The trustee under the 2013 Notes
Indenture would also have the right to accelerate our
indebtedness under the 2013 Notes, and accordingly, we have
reclassified our long-term debt as a current obligation in the
accompanying 2009 consolidated balance sheet from its original
presentation in the Companys previously filed financial
statements. Either of these events would make it difficult for
us to operate our business in the ordinary course, and may force
us to seek protection under Chapter 11 of the Bankruptcy
Code, and accordingly, there is substantial doubt about our
ability to continue as a going concern. The accompanying
consolidated financial statements have been prepared assuming
that we will continue as a going concern and do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of liabilities that may result
from the outcome of this uncertainty.
|
|
2.
|
RESTATEMENT
OF CONSOLIDATED FINANCIAL STATEMENTS:
|
As part of the Companys acquisition of a controlling 51%
ownership interest of Reach Media in 2005, the noncontrolling
shareholders of Reach Media were granted the right to require
Reach Media to purchase all or a portion of their shares at the
then current fair market value for such shares during the
30 day period beginning on February 28, 2012 and each
anniversary thereafter (the Put Right). The purchase
price for such shares may be paid in cash
and/or
registered Class D Common Stock of Radio One, at the sole
discretion of Radio One. Because the Company cannot ensure that
it will be able to settle the Put Right in registered shares,
the Company determined that the Put Right is presumed to be
settlable only in cash. Accordingly, the noncontrolling
interests are considered to be instruments that are redeemable
at the option of the holders for cash and should be classified
outside of permanent equity in mezzanine equity.
In its previously filed consolidated financial statements, the
Company classified the noncontrolling interests as a component
of permanent equity and recorded the noncontrolling interests at
its historical cost basis adjusted for the portion of earnings
attributable to the noncontrolling interests. Because the
noncontrolling interests in Reach Media will become redeemable
on February 28, 2012, the Company must elect to
subsequently measure the noncontrolling interest to its expected
redemption value by either accreting changes in the redemption
value from the date of issuance to the earliest redemption date
using an appropriate methodology or by recognizing changes in
the redemption value immediately as they occur as if the end of
the reporting period was the redemption date. The Company has
elected to recognize changes in the redemption value immediately
as they occur as if the end of the reporting period was the
redemption date.
The following table summarizes the effects of the restatement
adjustments on the consolidated balance sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
As of December 31, 2008
|
|
|
As
|
|
|
|
|
|
As
|
|
|
|
|
|
|
Previously
|
|
|
|
As
|
|
Previously
|
|
|
|
As
|
|
|
Reported
|
|
Adjustments
|
|
Restated
|
|
Reported
|
|
Adjustments
|
|
Restated
|
|
Redeemable noncontrolling interests
|
|
$
|
|
|
|
$
|
52,225
|
|
|
$
|
52,225
|
|
|
$
|
|
|
|
$
|
43,423
|
|
|
$
|
43,423
|
|
Additional paid-in capital
|
|
$
|
1,014,512
|
|
|
$
|
(46,237
|
)
|
|
$
|
968,275
|
|
|
$
|
1,033,921
|
|
|
$
|
(41,442
|
)
|
|
$
|
992,479
|
|
Total stockholders equity
|
|
$
|
242,065
|
|
|
$
|
(46,237
|
)
|
|
$
|
195,828
|
|
|
$
|
313,494
|
|
|
$
|
(41,442
|
)
|
|
$
|
272,052
|
|
Noncontrolling interests
|
|
$
|
5,988
|
|
|
$
|
(5,988
|
)
|
|
$
|
|
|
|
$
|
1,981
|
|
|
$
|
(1,981
|
)
|
|
$
|
|
|
Total equity
|
|
$
|
248,053
|
|
|
$
|
(52,225
|
)
|
|
$
|
195,828
|
|
|
$
|
315,475
|
|
|
$
|
(43,423
|
)
|
|
$
|
272,052
|
|
F-21
The following table summarizes the effects of the restatement
adjustments on our previously issued consolidated statements of
changes in equity for the years ended December 31, 2007,
2008, and 2009 (in thousands).
Changes
in additional
paid-in-capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Restated
|
|
|
Additional paid-in capital as of December 31, 2006
|
|
$
|
1,041,029
|
|
|
$
|
(54,380
|
)
|
|
$
|
986,649
|
|
Vesting of non-employee restricted stock
|
|
|
(63
|
)
|
|
|
|
|
|
|
(63
|
)
|
Stock-based compensation expense
|
|
|
3,307
|
|
|
|
|
|
|
|
3,307
|
|
Accretion of redeemable noncontrolling interests
|
|
|
|
|
|
|
(468
|
)
|
|
|
(468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital at December 31, 2007
|
|
|
1,044,273
|
|
|
|
(54,848
|
)
|
|
|
989,425
|
|
Repurchase of common stock
|
|
|
(12,084
|
)
|
|
|
|
|
|
|
(12,084
|
)
|
Vesting of non-employee restricted stock
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
Stock-based compensation expense
|
|
|
1,643
|
|
|
|
|
|
|
|
1,643
|
|
Decretion of redeemable noncontrolling interests
|
|
|
|
|
|
|
13,406
|
|
|
|
13,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital as of December 31, 2008
|
|
|
1,033,921
|
|
|
|
(41,442
|
)
|
|
|
992,479
|
|
Repurchase of common stock
|
|
|
(19,670
|
)
|
|
|
|
|
|
|
(19,670
|
)
|
Vesting of non-employee restricted stock
|
|
|
554
|
|
|
|
|
|
|
|
554
|
|
Reach Media stock return from non-controlling shareholder
|
|
|
(1,388
|
)
|
|
|
|
|
|
|
(1,388
|
)
|
Stock-based compensation expense
|
|
|
1,095
|
|
|
|
|
|
|
|
1,095
|
|
Accretion of redeemable noncontrolling interests
|
|
|
|
|
|
|
(4,795
|
)
|
|
|
(4,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital as of December 31, 2009
|
|
$
|
1,014,512
|
|
|
$
|
(46,237
|
)
|
|
$
|
968,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in stockholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Restated
|
|
|
Total stockholders equity as of December 31, 2006
|
|
$
|
1,018,267
|
|
|
$
|
(54,380
|
)
|
|
$
|
963,887
|
|
Net loss
|
|
|
(391,500
|
)
|
|
|
|
|
|
|
(391,500
|
)
|
Other comprehensive loss
|
|
|
(323
|
)
|
|
|
|
|
|
|
(323
|
)
|
Vesting of non-employee restricted stock
|
|
|
(63
|
)
|
|
|
|
|
|
|
(63
|
)
|
Stock-based compensation expense
|
|
|
3,307
|
|
|
|
|
|
|
|
3,307
|
|
Interest income on stock subscription receivable
|
|
|
(75
|
)
|
|
|
|
|
|
|
(75
|
)
|
Accretion of redeemable noncontrolling interests
|
|
|
|
|
|
|
(468
|
)
|
|
|
(468
|
)
|
Cumulative effect of change in accounting for uncertain tax
positions
|
|
|
(895
|
)
|
|
|
|
|
|
|
(895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity as of December 31, 2007
|
|
|
628,718
|
|
|
|
(54,848
|
)
|
|
|
573,870
|
|
Net loss
|
|
|
(302,944
|
)
|
|
|
|
|
|
|
(302,944
|
)
|
Other comprehensive loss
|
|
|
(3,625
|
)
|
|
|
|
|
|
|
(3,625
|
)
|
Repurchase of common stock
|
|
|
(12,104
|
)
|
|
|
|
|
|
|
(12,104
|
)
|
Vesting of non-employee restricted stock
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
Interest income on stock subscription receivable
|
|
|
(20
|
)
|
|
|
|
|
|
|
(20
|
)
|
Repayment of officers loan
|
|
|
1,737
|
|
|
|
|
|
|
|
1,737
|
|
Stock-based compensation expense
|
|
|
1,643
|
|
|
|
|
|
|
|
1,643
|
|
Decretion of redeemable noncontrolling interests
|
|
|
|
|
|
|
13,406
|
|
|
|
13,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments
|
|
|
Restated
|
|
|
Total stockholders equity as of December 31, 2008
|
|
|
313,494
|
|
|
|
(41,442
|
)
|
|
|
272,052
|
|
Net loss
|
|
|
(52,887
|
)
|
|
|
|
|
|
|
(52,887
|
)
|
Other comprehensive loss
|
|
|
895
|
|
|
|
|
|
|
|
895
|
|
Repurchase of common stock
|
|
|
(19,698
|
)
|
|
|
|
|
|
|
(19,698
|
)
|
Vesting of non-employee restricted stock
|
|
|
554
|
|
|
|
|
|
|
|
554
|
|
Reach Media stock return from non-controlling shareholder
|
|
|
(1,388
|
)
|
|
|
|
|
|
|
(1,388
|
)
|
Stock-based compensation expense
|
|
|
1,095
|
|
|
|
|
|
|
|
1,095
|
|
Accretion of redeemable noncontrolling interests
|
|
|
|
|
|
|
(4,795
|
)
|
|
|
(4,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity as of December 31, 2009
|
|
$
|
242,065
|
|
|
$
|
(46,237
|
)
|
|
$
|
195,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the restatement, noncontrolling interests
previously classified as a component of stockholders
equity are now classified outside of equity (in
mezzanine equity) as redeemable noncontrolling
interests. A rollforward of redeemable noncontrolling interests
from January 1, 2007 through December 31, 2009 is as
follows:
|
|
|
|
|
|
|
Redeemable
|
|
|
|
Noncontrolling
|
|
|
|
Interests
|
|
|
|
(As restated)
|
|
|
|
(In thousands)
|
|
|
Balance at January 1, 2007
|
|
$
|
54,360
|
|
Net income attributable to noncontrolling interests
|
|
|
3,910
|
|
Accretion to estimated redemption value
|
|
|
468
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
58,738
|
|
|
|
|
|
|
Balance at January 1, 2008
|
|
$
|
58,738
|
|
Net income attributable to noncontrolling interests
|
|
|
3,997
|
|
Reach Media stock option cancellation
|
|
|
208
|
|
Noncontrolling interest in Distribution One
|
|
|
250
|
|
Dividends paid to noncontrolling interests
|
|
|
(6,364
|
)
|
Decretion to estimated redemption value
|
|
|
(13,406
|
)
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
43,423
|
|
|
|
|
|
|
Balance at January 1, 2009
|
|
$
|
43,423
|
|
Net income attributable to noncontrolling interests
|
|
|
4,329
|
|
Stock repurchase from noncontrolling shareholder
|
|
|
(322
|
)
|
Accretion to estimated redemption value
|
|
|
4,795
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
52,225
|
|
|
|
|
|
|
In June 2008, the Company purchased the assets of
WPRS-FM, a
radio station located in the Washington, DC metropolitan area
for $38.0 million in cash. Since April 2007 and until
closing, the station had been operated under a local marketing
agreement (LMA), and the results of its operations
had been included in the Companys consolidated financial
statements since the inception of the LMA. The station was
consolidated with the Companys existing Washington, DC
operations in April 2007. The Companys final purchase
price allocation consisted of approximately $33.9 million
to radio broadcasting license, approximately $1.3 million
to definitive-lived intangibles (acquired favorable income
leases), $965,000 to goodwill and approximately
$1.8 million to fixed assets on the Companys
consolidated balance sheet as of December 31, 2008.
F-23
In April 2008, the Company acquired CCI for $38.0 million
in cash. CCI is an online social networking company operating
branded websites including BlackPlanet, MiGente, and
AsianAvenue. The Companys purchase price allocation
consists of approximately $10.2 million to current assets,
$4.6 million to fixed assets, $20.4 million to
goodwill, $9.9 million to definitive-lived intangibles
(brand names, advertiser relationships and lists, favorable
subleases, trademarks, trade names, etc.), and $5.0 million
to current liabilities on the Companys consolidated
balance sheet as of December 31, 2008.
In July 2007, the Company purchased the assets of
WDBZ-AM, a
radio station located in the Cincinnati metropolitan area for
approximately $2.6 million financed by the seller. Since
August 2001 and up until closing, the station had been operated
under a LMA, and the results of its operations had been included
in the Companys consolidated financial statements since
the LMA. The station was consolidated with the Companys
existing Cincinnati operations in 2001. In accordance with
ASC 350, Intangibles Goodwill and
Other, for the years ended 2009, 2008 and 2007, we
recorded an impairment charge for radio broadcasting licenses
and goodwill, and intellectual property for all stations in the
Cincinnati market by approximately $3.3 million,
$27.9 million and $3.8 million, respectively. (See
Note 6 Goodwill, Radio Broadcasting
Licenses and Other Intangible Assets and
Note 13 Related Party Transactions.)
In February 2005, the Company acquired approximately 51% of the
common stock of Reach Media for approximately $55.8 million
in a combination of approximately $30.4 million of cash and
1,809,648 shares of the Companys Class D Common
Stock valued at approximately $25.4 million. The purchase
price allocation consisted of approximately $36.5 million
to definite-lived intangibles ($19.5 million to a talent
agreement, $9.2 million to intellectual property and
$7.8 million to affiliate agreements), $13.7 million
to deferred tax liability, $32.5 million to goodwill, and
$1.3 million to other net assets. Reach Media commenced
operations in 2003 and was formed by Tom Joyner, Chairman, and
David Kantor, Chief Executive Officer, to operate the Tom Joyner
Morning Show and related businesses. Reach Media primarily
derives its revenue from the sale of advertising inventory in
connection with its syndication agreements. Mr. Joyner is a
leading nationally syndicated radio personality. The Tom Joyner
Morning Show is currently broadcast on 105 affiliate stations
across the United States and is a top-rated morning show in many
of the markets in which it is broadcast. Reach Media also
operates the Tom Joyner Family Reunion and various other special
event-related activities. Additionally, Reach Media operates
www.BlackAmericaWeb.com, an
African-American
targeted internet destination, and provides programming content
which is aired on TV One. In November 2009, Citadel agreed to
return its noncontrolling ownership interest in Reach Media back
to the Reach Media as an inducement to execute a new sales
representation agreement replacing the old sales agreement that
expired December 31, 2009. This transaction effectively
increased Radio Ones common stock interest in Reach Media
to 53.5%.
|
|
4.
|
DISPOSITION
OF ASSETS AND DISCONTINUED OPERATIONS:
|
In December 2009, the Company ceased publication of Giant
Magazine. The remaining assets and liabilities of this
publication have been classified as discontinued operations as
of December 31, 2009 and 2008, and the publications
results of operations for the years ended December 31,
2009, 2008 and 2007, have been classified as discontinued
operations in the accompanying consolidated financial statements.
Between December 2006 and May 2008, the Company sold the assets
of 20 radio stations in seven markets for approximately
$287.9 million in cash. The remaining assets and
liabilities of these stations have been classified as
discontinued operations as of December 31, 2009 and 2008,
and the stations results of operations for the years ended
December 31, 2009, 2008 and 2007, have been classified as
discontinued operations in the accompanying consolidated
financial statements. For the period beginning December 1,
2006 and ending December 31, 2008, the Company used
approximately $262.0 million of the proceeds from these
asset sales to pay down debt.
Los Angeles Station: In May 2008, the Company
sold the assets of its radio station
KRBV-FM,
located in the Los Angeles metropolitan area, to Bonneville
International Corporation (Bonneville) for
approximately $137.5 million in cash. Bonneville began
operating the station under an LMA on April 8, 2008.
F-24
Miami Station: In April 2008, the Company sold
the assets of its radio station
WMCU-AM,
located in the Miami metropolitan area, to Salem Communications
Holding Corporation (Salem) for approximately
$12.3 million in cash. Salem began operating the station
under an LMA effective October 18, 2007.
Augusta Stations: In December 2007, the
Company sold the assets of its five radio stations in the
Augusta metropolitan area to Perry Broadcasting Company for
approximately $3.1 million in cash.
Louisville Station: In November 2007, the
Company sold the assets of its radio station
WLRX-FM in
the Louisville metropolitan area to WAY FM Media Group, Inc. for
approximately $1.0 million in cash.
Dayton and Louisville Stations: In September
2007, the Company sold the assets of its five radio stations in
the Dayton metropolitan area and five of its six radio stations
in the Louisville metropolitan area to Main Line Broadcasting,
LLC for approximately $76.0 million in cash.
Minneapolis Station: In August 2007, the
Company sold the assets of its radio station
KTTB-FM in
the Minneapolis metropolitan area to Northern Lights
Broadcasting, LLC for approximately $28.0 million in cash.
Boston Station: In December 2006, the Company
sold the assets of its radio station
WILD-FM in
the Boston metropolitan area to Entercom Boston, LLC
(Entercom) for approximately $30.0 million in
cash. Entercom began operating the station under an LMA
effective August 18, 2006.
The following table summarizes the operating results for Giant
Magazine and all of the stations sold and classified as
discontinued operations for all periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
see note 1)
|
|
|
|
(In thousands)
|
|
|
Net revenue
|
|
$
|
1,766
|
|
|
$
|
5,336
|
|
|
$
|
32,763
|
|
Operating expenses
|
|
|
3,306
|
|
|
|
8,999
|
|
|
|
36,499
|
|
Depreciation and amortization
|
|
|
87
|
|
|
|
183
|
|
|
|
1,598
|
|
Impairment of intangible assets
|
|
|
|
|
|
|
5,077
|
|
|
|
208,948
|
|
Other income
|
|
|
|
|
|
|
145
|
|
|
|
117
|
|
Loss on investment
|
|
|
448
|
|
|
|
49
|
|
|
|
56
|
|
Gain on sale of assets
|
|
|
260
|
|
|
|
1,497
|
|
|
|
2,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(1,815
|
)
|
|
|
(7,330
|
)
|
|
|
(212,038
|
)
|
Provision for (benefit from) income taxes
|
|
|
|
|
|
|
84
|
|
|
|
(74,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
(1,815
|
)
|
|
$
|
(7,414
|
)
|
|
$
|
(137,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assets and liabilities of Giant Magazine and the stations
sold or to be sold are classified as discontinued operations in
the accompanying consolidated balance sheets consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
see note 1)
|
|
|
|
(In thousands)
|
|
|
Currents assets:
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
$
|
424
|
|
|
$
|
832
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
424
|
|
|
|
1,088
|
|
Property and equipment, net
|
|
|
14
|
|
|
|
117
|
|
Intangible assets, net
|
|
|
60
|
|
|
|
110
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
498
|
|
|
$
|
1,315
|
|
|
|
|
|
|
|
|
|
|
F-25
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
see note 1)
|
|
|
|
(In thousands)
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
91
|
|
|
$
|
368
|
|
Accrued compensation and related benefits
|
|
|
70
|
|
|
|
137
|
|
Other current liabilities
|
|
|
2,788
|
|
|
|
2,686
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,949
|
|
|
|
3,191
|
|
Other long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,949
|
|
|
$
|
3,191
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
PROPERTY
AND EQUIPMENT:
|
Property and equipment are carried at cost less accumulated
depreciation and amortization. Depreciation is calculated using
the straight-line method over the related estimated useful
lives. Property and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
Estimated
|
|
|
2009
|
|
|
2008
|
|
|
Useful Lives
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
|
|
see note 1)
|
|
|
|
|
|
(In thousands)
|
|
Land and improvements
|
|
$
|
3,765
|
|
|
$
|
3,753
|
|
|
|
Buildings and improvements
|
|
|
1,535
|
|
|
|
1,525
|
|
|
31 years
|
Transmitters and towers
|
|
|
34,724
|
|
|
|
33,619
|
|
|
7-15 years
|
Equipment
|
|
|
45,628
|
|
|
|
44,294
|
|
|
3-7 years
|
Furniture and Fixtures
|
|
|
7,383
|
|
|
|
7,271
|
|
|
7 years
|
Software and Web Development
|
|
|
11,597
|
|
|
|
9,320
|
|
|
3 years
|
Leasehold improvements
|
|
|
18,712
|
|
|
|
18,174
|
|
|
Lease Term
|
Construction-in-progress
|
|
|
1,398
|
|
|
|
2,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,742
|
|
|
|
120,214
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
(84,157
|
)
|
|
|
(71,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
40,585
|
|
|
$
|
48,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for the years ended
December 31, 2009, 2008 and 2007 was approximately
$21.0 million, $19.0 million and $14.7 million,
respectively.
Repairs and maintenance costs are expensed as incurred.
|
|
6.
|
GOODWILL,
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE
ASSETS:
|
Impairment
Testing
In the past, we have made acquisitions whereby a significant
amount of the purchase price was allocated to radio broadcasting
licenses, goodwill and other intangible assets. In accordance
with ASC 350, Intangibles Goodwill and
Other, we do not amortize our radio broadcasting
licenses and goodwill. Instead, we perform a test for impairment
annually or on an interim basis when events or changes in
circumstances or other conditions suggest impairment may have
occurred. Other intangible assets continue to be amortized on a
straight-line basis over their useful lives. We perform our
annual impairment test as of October 1 of each year.
F-26
2009
Interim Impairment Testing
Since our annual testing in October 2008, the lingering economic
downturn and limited credit environment has weakened advertising
demand in general, and has led to declining radio and online
advertising, reduced growth expectations, deteriorating profits
and cash flows, debt downgrades and fewer sales transactions
with lower multiples. As a result, we made considerable
reductions to our internal 2009 projections in early 2009. Given
the adverse impact on terminal values, we deemed the weak
economic, credit and advertisement environments and the lowering
of our internal projections as triggering events that warranted
interim impairment testing in 2009. We performed such testing as
of February 28, 2009 for all of our radio markets and as of
August 31, 2009 for two of our radio markets, Reach Media
and CCI. The Reach Media interim testing was also driven by the
amendment effective September 2009 to its sales representation
agreement with Citadel, whereby the guaranteed revenue that
Citadel paid Reach Media in the fourth quarter of 2009 was
reduced by $2.0 million, (the final quarter of the term of
the sales agreement). (See Note 1
Organization and Summary of Significant Accounting
Policies.) The outcome of our February 2009 interim testing
was to record impairment charges of approximately
$49.0 million against radio broadcasting licenses in 11 of
our 16 markets during the first quarter of 2009. The results of
our August 2009 interim testing indicated carrying values for
the two radio markets tested, Reach Media and CCI had not been
impaired.
2009
Annual Impairment Testing
The results of our annual impairment testing in October 2009
were to record additional impairment charges of approximately
$16.1 million against radio broadcasting licenses in seven
of our 16 radio markets and to impair the remaining goodwill of
$628,000 in another one of our markets for that same amount.
Similar to our August 2009 interim impairment testing, our
October 2009 annual impairment testing indicated the carrying
values for Reach Media and CCI had not been impaired. For the
years ended December 31, 2009, 2008 and 2007, we recorded
impairment charges against radio broadcasting licenses and
goodwill of approximately $65.6 million,
$420.2 million and $211.1 million, respectively.
Valuation
of Broadcasting Licenses
We utilize the services of a third-party valuation firm to
provide independent analysis when evaluating the fair value of
our radio broadcasting licenses and reporting units. Fair value
is estimated to be the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Effective
January 1, 2002, we began using the income approach to test
for impairment of radio broadcasting licenses. A projection
period of 10 years is used, as we believe that is the time
horizon in which operators and investors generally expect to
recover their investments.
When evaluating our radio broadcasting licenses for impairment,
the testing is done at the unit of accounting level as
determined by ASC 350, Intangibles
Goodwill and Other. In our case, each unit of
accounting is a clustering of radio stations into one of our 16
geographical markets. Broadcasting license fair values are based
on the estimated after-tax discounted future cash flows of the
applicable unit of accounting assuming an initial hypothetical
start-up
operation which possesses FCC licenses as the only asset. Over
time, it is assumed the operation acquires other tangible assets
such as advertising and programming contracts, employment
agreements and going concern value, and matures into an average
performing operation in a specific radio market. The income
approach model incorporates several variables, including, but
not limited to: (i) radio market revenue estimates and
growth projections; (ii) estimated market share and revenue
for the hypothetical participant; (iii) likely media
competition within the market; (iv) estimated
start-up
costs and losses incurred in the early years; (v) estimated
profit margins and cash flows based on market size and station
type; (vi) anticipated capital expenditures;
(vii) probable future terminal values; (viii) an
effective tax rate assumption; and (ix) a discount rate
based on the weighted-average cost of capital for the radio
broadcast industry. In calculating the discount rate, we
considered: (i) the cost of equity, which includes
estimates of the risk-free return, the long-term market return,
small stock risk premiums and industry beta; (ii) the cost
of debt, which includes estimates for corporate borrowing rates
and tax rates; and (iii) estimated average percentages of
equity and debt in capital structures.
Our February and August 2009 interim impairment testing was
reflective of the recent economic downturn and tightened credit
markets, in that it incorporated more conservative assumptions
compared to the
F-27
annual testing in October 2008. Specifically, we updated our
projections to reflect a weaker, more deteriorated radio
marketplace with reduced potential for growth. We increased the
Year 1 (2009) radio marketplace decline from (8.0)% to a
range of (13.1)% to (17.7)% in our 2009 interim testing,
compared to the 2008 annual testing. The 2009 interim testing
assumed a slight recovery in Year 2 (2010), with growth rates
ranging from 0.3% to 0.5%. Given the somewhat improving economy
and the more positive outlook for the radio marketplace, the
2009 annual testing assumes a Year 1 (2010) recovery of
1.0% and we also lowered the long-term market growth rate for a
certain market from 1.5% to 1.0%. Year 2010 includes assumptions
of what could be significant cyclical content for political
advertising typically seen in the even numbered years.
Although the industry has responded to declining revenues with
significant cost-cutting initiatives, profitability levels have
been adversely impacted, as fixed costs represent a large
component of a radio stations operating costs. Depending
on the given market, we lowered the minimum profit margins in
our 2009 interim and annual testing by as much as 230 basis
points, compared to our 2008 annual testing. Since our annual
assessment in October 2008, we have not made any changes to the
methodology for valuing broadcasting licenses.
Below are some of the key assumptions used in the income
approach model for estimating broadcasting licenses fair values
for all annual and interim impairments assessments performed
since August 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
October 1,
|
|
February 28,
|
|
August 31,
|
|
October 1,
|
Radio Broadcasting Licenses
|
|
2008
|
|
2008
|
|
2009
|
|
2009(a)
|
|
2009
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Pre-tax impairment charge
|
|
$337.9
|
|
$51.2
|
|
$49.0
|
|
|
$
|
|
|
$16.1
|
Discount Rate
|
|
10.0%
|
|
10.5%
|
|
10.5%
|
|
|
|
|
|
10.5%
|
Year 1 Market Revenue Growth or Decline Rate or Range
|
|
(2.0)%
|
|
(8.0)%
|
|
(13.1)% - (17.7)%
|
|
|
(22.3
|
)%
|
|
1.0%
|
Long-term Market Revenue Growth Rate Range (Years 6
10)
|
|
1.5% - 2.5%
|
|
1.5% - 2.5%
|
|
1.5% - 2.5%
|
|
|
|
|
|
1.0% - 2.5%
|
Mature Market Share Range
|
|
5.8% - 27.0%
|
|
1.2% - 27.0%
|
|
1.2% - 27.0%
|
|
|
|
|
|
0.8% - 28.1%
|
Operating Profit Margin Range
|
|
34.0% - 50.7%
|
|
20.0% - 50.7%
|
|
17.7% - 50.7%
|
|
|
|
|
|
18.5% - 50.7%
|
|
|
|
(a) |
|
Reflects changes only to the key assumptions used in the
February 2009 interim testing for a certain unit of accounting. |
Broadcasting
Licenses Valuation Results
The Companys total broadcasting licenses carrying value
decreased to approximately $698.6 million as of
December 31, 2009, compared to approximately
$763.7 million as of December 31, 2008. The decrease
of approximately $65.0 million was for license impairment
charges recorded in 11 of our 16 markets. The table below
represents the changes to the carrying values of the
Companys radio broadcasting licenses for the year ended
December 31, 2009 for each unit of accounting. As noted
above, each unit of accounting is a clustering of radio stations
into one geographical market. The units of accounting are not
disclosed on a specific market basis so as to not make sensitive
information publicly available that could be competitively
harmful to the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting Licenses
|
|
|
|
Carrying Balances
|
|
|
|
As of
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
|
|
|
December 31,
|
|
Unit of Accounting
|
|
2008
|
|
|
Impairment
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Unit of Accounting 3
|
|
$
|
1,289
|
|
|
$
|
|
|
|
$
|
1,289
|
|
Unit of Accounting 2
|
|
|
3,086
|
|
|
|
|
|
|
|
3,086
|
|
Unit of Accounting 4
|
|
|
11,218
|
|
|
|
(1,736
|
)
|
|
|
9,482
|
|
Unit of Accounting 5
|
|
|
22,005
|
|
|
|
(3,348
|
)
|
|
|
18,657
|
|
Unit of Accounting 7
|
|
|
22,577
|
|
|
|
(3,312
|
)
|
|
|
19,265
|
|
Unit of Accounting 14
|
|
|
23,533
|
|
|
|
(3,098
|
)
|
|
|
20,435
|
|
Unit of Accounting 15
|
|
|
23,955
|
|
|
|
(3,069
|
)
|
|
|
20,886
|
|
F-28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting Licenses
|
|
|
|
Carrying Balances
|
|
|
|
As of
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
|
|
|
December 31,
|
|
Unit of Accounting
|
|
2008
|
|
|
Impairment
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Unit of Accounting 11
|
|
|
27,544
|
|
|
|
(6,409
|
)
|
|
|
21,135
|
|
Unit of Accounting 9
|
|
|
34,270
|
|
|
|
|
|
|
|
34,270
|
|
Unit of Accounting 6
|
|
|
35,260
|
|
|
|
(9,017
|
)
|
|
|
26,243
|
|
Unit of Accounting 16
|
|
|
52,965
|
|
|
|
|
|
|
|
52,965
|
|
Unit of Accounting 13
|
|
|
57,659
|
|
|
|
(5,103
|
)
|
|
|
52,556
|
|
Unit of Accounting 8
|
|
|
75,441
|
|
|
|
(8,726
|
)
|
|
|
66,715
|
|
Unit of Accounting 12
|
|
|
81,534
|
|
|
|
(2,808
|
)
|
|
|
78,726
|
|
Unit of Accounting 1
|
|
|
93,394
|
|
|
|
|
|
|
|
93,394
|
|
Unit of Accounting 10
|
|
|
197,927
|
|
|
|
(18,386
|
)
|
|
|
179,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
763,657
|
|
|
$
|
(65,012
|
)
|
|
$
|
698,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
of Goodwill
The impairment testing of goodwill is performed at the reporting
unit level. We had 20 reporting units as of our October 2009
annual impairment assessments. For the purpose of valuing
goodwill, the 20 reporting units consist of the 16 radio markets
and four other business divisions. In testing for the impairment
of goodwill, we also use the income approach. The approach
involves a
10-year
model with similar variables as described above for broadcasting
licenses, except that the discounted cash flows are based on the
Companys estimated and projected market revenue, market
share and operating performance for its reporting units, instead
of those for a hypothetical participant. We follow a two-step
process to evaluate if a potential impairment exists for
goodwill. The first step of the process involves estimating the
fair value of each reporting unit. If the reporting units
fair value is less than its carrying value, a second step is
performed as per the guidance of
ASC 805-10,
Business Combinations, to allocate the fair
value of the reporting unit to the individual assets and
liabilities of the reporting unit in order to determine the
implied fair value of the reporting units goodwill as of
the impairment assessment date. Any excess of the carrying value
of the goodwill over the implied fair value of the goodwill is
written off as a charge to operations.
While our internal projections considered the recent revenue and
cash flow declines experienced by the Company, those results may
not be necessarily indicative of our future results. Similar to
the 2009 interim assessments, which included more conservative
estimates and projections compared to our 2008 annual
assessment, we believe the October 2009 annual goodwill
valuation estimates and assumptions reflect the recent economic
downturn. We maintained the use of a consistent discount rate of
10.5%, however, with the improving economy and more positive
outlook for the radio marketplace, we raised the Year 2
(2010) recovery period from a slight growth rate range from
0.3% to 0.5% in the 2009 interim testing to 1.0% in the 2009
annual testing. In addition, since our assessment in October
2008, we have not made any changes to the methodology for
valuing or allocating goodwill when determining the carrying
values of the radio markets.
For Reach Media, in the annual testing in October 2009, we
raised the Year 1 growth rate (2010), to 16.5% primarily due to
the September 2009 amendment of Reach Medias sales
representation agreement with Citadel, whereby the guaranteed
revenue paid to Reach Media by Citadel was reduced by
$2.0 million in the fourth of quarter 2009, (the final
quarter of the term of the sales agreement). (See
Note 1 Organization and Summary of
Significant Accounting Policies.) Since our annual
assessment in October 2008, we have not made any changes to the
methodology for valuing or allocating goodwill when determining
the carrying value for Reach Media.
F-29
Below are some of the key assumptions used in the income
approach model for estimating reporting unit fair values for all
interim and annual impairment assessments performed since August
2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (Radio Market
|
|
August 31,
|
|
October 1,
|
|
February 28,
|
|
August 31,
|
|
October 1,
|
Reporting Units)
|
|
2008
|
|
2008
|
|
2009
|
|
2008(a)
|
|
2009(b)
|
|
|
(In millions)
|
|
Pre-tax impairment charge
|
|
$
|
|
$31.1
|
|
$
|
|
|
$
|
|
|
|
$0.6
|
Discount Rate
|
|
10.0%
|
|
10.5%
|
|
10.5%
|
|
|
|
|
|
|
10.5%
|
Year 1 Market Revenue Decline or Growth Rate or Range
|
|
(2.0)%
|
|
(8.0)%
|
|
(13.1)% - (17.7)%
|
|
|
(19.9
|
)
|
%
|
|
1.0%
|
Long-term Market Revenue Growth Rate Range (Years 6
10)
|
|
1.5% - 2.5%
|
|
1.5% - 2.5%
|
|
1.5% - 2.5%
|
|
|
|
|
|
|
1.5% - 2.5%
|
Mature Market Share Range
|
|
5.2% - 16.5%
|
|
1.1% - 23.0%
|
|
2.8% - 22.0%
|
|
|
|
|
|
|
7.0% - 16.5%
|
Operating Profit Margin Range
|
|
31.0% - 58.5%
|
|
18.0% - 60.0%
|
|
15.0% - 61.5%
|
|
|
|
|
|
|
30.0% - 57.5%
|
|
|
|
(a) |
|
Reflects changes only to the key assumptions used in the
February 2009 interim testing for a certain unit of accounting. |
|
(b) |
|
Reflects some of the key assumptions for testing only those
radio markets with remaining goodwill for October 2009, as
compared to testing all markets in October 2008 and February
2009. |
The outcome of our annual testing in October 2009 was to
eliminate the remaining goodwill of $628,000 in one of our radio
market reporting units.
Below are some of the key assumptions used in the income
approach model for estimating the fair value for Reach Media for
all interim and annual assessments since October 2008. When
compared to the discount rates used for assessing radio market
reporting units, the higher discount rates used in these
assessments reflect a premium for a riskier and broader media
business, with a heavier concentration and significantly higher
amount of programming content related intangible assets that are
highly dependent on the on-air personality Tom Joyner. As a
result of both the August and October 2009 interim and annual
assessments, the Company concluded no impairment to the carrying
value of Reach Media had occurred.
|
|
|
|
|
|
|
|
|
October 1,
|
|
August 31,
|
|
October 1,
|
Reach Media Goodwill (Within Radio Segment)
|
|
2008
|
|
2009
|
|
2009
|
|
|
(In millions)
|
|
Pre-tax impairment charges
|
|
$
|
|
$
|
|
$
|
Discount Rate
|
|
14.5%
|
|
14.0%
|
|
14.0%
|
Year 1 Revenue Growth Rate
|
|
5.9%
|
|
9.9%(a)
|
|
16.5% (a)
|
Long-term Revenue Growth Rate (Years 6 10)
|
|
2.5%
|
|
2.5%
|
|
2.5%
|
Operating Profit Margin Range
|
|
27.2% - 31.3%
|
|
28.9% - 33.5%
|
|
27.2% - 35.3%
|
|
|
|
(a) |
|
The Year 1 revenue growth rate is driven by the September 2009
amendment of Reach Medias sales representation agreement
with Citadel, whereby the guaranteed revenue paid to Reach Media
by Citadel was reduced by $2.0 million in the fourth
quarter of 2009, which was the final quarter for the term of the
agreement. A new agreement was executed in November 2009,
whereby, effective 2010, Citadel will sell advertising inventory
outside the Tom Joyner Morning Show. In addition Reach Media has
expanded its internal sales force to sell in-show advertising
inventory, event sponsorships and BlackAmericaWeb.com
advertising. |
CCI, an online social networking company, was acquired by the
Company in April 2008. The preliminary purchase price accounting
was completed for this reporting unit during the second quarter
of 2009. With the weak economy and its negative impact on online
advertising, the Company lowered its internal projections for
CCI, and performed its first interim impairment testing in
August 2009. Below are some of the key assumptions used in the
income approach model for determining CCIs fair value as
of August 2009 and again as of October 2009. When compared to
discount rates for the radio reporting units, the higher
discount rate used to value CCI is reflective of discount rates
applicable to internet media businesses. As a result of the
F-30
August and October 2009 interim and annual testing, the Company
concluded no impairment to the carrying value of CCI had
occurred. We did not make any changes to the methodology for
valuing or allocating goodwill when determining the carrying
value for CCI.
|
|
|
|
|
|
|
August 31,
|
|
October 1,
|
Goodwill (CCI Within Internet Segment)
|
|
2009
|
|
2009
|
|
|
(In millions)
|
|
Pre-tax impairment charges
|
|
$
|
|
$
|
Discount Rate
|
|
17.0%
|
|
16.5%
|
Year 1 Revenue Growth Rate
|
|
13.7%
|
|
13.7%
|
Long-term Revenue Growth Rate (Year 10)
|
|
3.5%
|
|
3.5%
|
Operating Profit Margin Range
|
|
8.8% - 42.9%
|
|
10.8% - 42.2%
|
The above three goodwill tables reflect some of the key
valuation assumptions used for 13 of our 20 reporting units. As
a result of our annual testing in October 2009, goodwill of
$628,000 was impaired in one of our radio markets for the entire
amount, thus leaving eight remaining reporting units that had no
goodwill carrying value balances as of December 31, 2009.
Goodwill
Valuation Results
The table below presents the changes in the Companys
goodwill carrying values for each of its 20 reporting units and
two reportable segments. The Companys goodwill balance
increased from approximately $137.1 million at
December 31, 2008 to $137.5 million at
December 31, 2009. The $422,000 increase was due to a
purchase price adjustment of approximately $1.1 million for
the CCI acquisition and the impairment of $628,000 of remaining
goodwill in one of our radio market reporting units. As noted
above, the 20 reporting units consist of the 16 radio markets
plus four other business divisions. The actual reporting units
are not disclosed so as to not make sensitive information
publicly available that could potentially be competitively
harmful to the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill Carrying Balances
|
|
|
|
As of
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
|
|
|
December 31,
|
|
Reporting Unit
|
|
2008
|
|
|
Increase/Decrease
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Reporting Unit 3
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Reporting Unit 4
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 9
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 15
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 14
|
|
|
628
|
|
|
|
(628
|
)
|
|
|
|
|
Reporting Unit 2
|
|
|
406
|
|
|
|
|
|
|
|
406
|
|
Reporting Unit 6
|
|
|
928
|
|
|
|
|
|
|
|
928
|
|
Reporting Unit 10
|
|
|
2,081
|
|
|
|
|
|
|
|
2,081
|
|
Reporting Unit 13
|
|
|
2,491
|
|
|
|
|
|
|
|
2,491
|
|
Reporting Unit 12
|
|
|
2,915
|
|
|
|
|
|
|
|
2,915
|
|
Reporting Unit 11
|
|
|
3,791
|
|
|
|
|
|
|
|
3,791
|
|
Reporting Unit 16
|
|
|
4,442
|
|
|
|
|
|
|
|
4,442
|
|
Reporting Unit 5
|
|
|
5,074
|
|
|
|
|
|
|
|
5,074
|
|
Reporting Unit 7
|
|
|
12,887
|
|
|
|
|
|
|
|
12,887
|
|
Reporting Unit 19
|
|
|
30,468
|
|
|
|
|
|
|
|
30,468
|
|
Reporting Unit 1
|
|
|
50,194
|
|
|
|
|
|
|
|
50,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting Segment
|
|
|
116,305
|
|
|
|
(628
|
)
|
|
|
115,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill Carrying Balances
|
|
|
|
As of
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
|
|
|
December 31,
|
|
Reporting Unit
|
|
2008
|
|
|
Increase/Decrease
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Reporting Unit 20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate/Eliminations/Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 17
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 18
|
|
|
20,790
|
|
|
|
1,050
|
|
|
|
21,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet Segment
|
|
|
20,790
|
|
|
|
1,050
|
|
|
|
21,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
137,095
|
|
|
$
|
422
|
|
|
$
|
137,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In arriving at the estimated fair values for radio broadcasting
licenses and goodwill, we also performed a reasonableness test
by comparing our overall average implied multiple based on our
cash flow projections and fair values to recently completed
sales transactions, and by comparing our estimated fair values
to the market capitalization of the Company. The results of
these comparisons confirmed that the fair value estimates
resulting from our annual assessments in 2009 were reasonable.
Intangible
Assets Excluding Goodwill and Radio Broadcasting
Licenses
Other intangible assets, excluding goodwill and radio
broadcasting licenses, are being amortized on a straight-line
basis over various periods. Other intangible assets consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Period of Amortization
|
|
|
|
(In thousands)
|
|
|
|
|
|
Trade names
|
|
$
|
16,965
|
|
|
$
|
16,893
|
|
|
|
2-5 Years
|
|
Talent agreement
|
|
|
19,549
|
|
|
|
19,549
|
|
|
|
10 Years
|
|
Debt financing and modification costs
|
|
|
17,527
|
|
|
|
15,586
|
|
|
|
Term of debt
|
|
Intellectual property
|
|
|
13,011
|
|
|
|
13,011
|
|
|
|
4-10 Years
|
|
Affiliate agreements
|
|
|
7,769
|
|
|
|
7,769
|
|
|
|
1-10 Years
|
|
Acquired income leases
|
|
|
1,282
|
|
|
|
1,282
|
|
|
|
3-9 Years
|
|
Non-compete agreements
|
|
|
1,260
|
|
|
|
1,260
|
|
|
|
1-3 Years
|
|
Advertiser agreements
|
|
|
6,613
|
|
|
|
6,613
|
|
|
|
2-7 Years
|
|
Favorable office and transmitter leases
|
|
|
3,358
|
|
|
|
3,655
|
|
|
|
2-60 Years
|
|
Brand names
|
|
|
2,539
|
|
|
|
2,539
|
|
|
|
2.5 Years
|
|
Other intangibles
|
|
|
1,260
|
|
|
|
1,241
|
|
|
|
1-5 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,133
|
|
|
|
89,398
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
(56,074
|
)
|
|
|
(45,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets, net
|
|
$
|
35,059
|
|
|
$
|
44,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of intangible assets for the years ended
December 31, 2009, 2008 and 2007 was approximately
$8.4 million, $7.3 million and $4.9 million,
respectively. The amortization of deferred financing costs was
charged to interest expense for all periods presented. The
amount of deferred financing costs included in interest expense
for the years ended December 31, 2009, 2008 and 2007 was
approximately $2.4 million, $2.6 million and
$2.2 million, respectively.
F-32
The following table presents the Companys estimate of
amortization expense for the years 2010 through 2014 for
intangible assets, excluding deferred financing costs:
|
|
|
|
|
|
|
(In thousands)
|
|
2010
|
|
$
|
6,884
|
|
2011
|
|
$
|
5,631
|
|
2012
|
|
$
|
5,350
|
|
2013
|
|
$
|
4,765
|
|
2014
|
|
$
|
4,066
|
|
Actual amortization expense may vary as a result of future
acquisitions and dispositions.
|
|
7.
|
INVESTMENT
IN AFFILIATED COMPANY:
|
In January 2004, the Company, together with an affiliate of
Comcast Corporation and other investors, launched TV One, an
entity formed to operate a cable television network featuring
lifestyle, entertainment and news-related programming targeted
primarily towards
African-American
viewers. At that time, we committed to make a cumulative cash
investment of $74.0 million in TV One, of which
$60.3 million had been funded as of April 30, 2007,
with no additional funding investment made since then. The
initial four year commitment period for funding the capital was
extended to June 30, 2010, due in part to TV Ones
lower than anticipated capital needs during the initial
commitment period. In December 2004, TV One entered into a
distribution agreement with DIRECTV and certain affiliates of
DIRECTV became investors in TV One. As of December 31, 2009
and 2008, the Company owned approximately 37% of TV One on a
fully-converted basis.
The Company has recorded its investment at cost and has adjusted
the carrying amount of the investment to recognize the change in
the Companys claim on the net assets of TV One resulting
from operating income or losses of TV One as well as other
capital transactions of TV One using a hypothetical liquidation
at book value approach. For the years ended December 31,
2009, 2008 and 2007, the Companys allocable share of TV
Ones operating income or (losses) was approximately
$3.7 million, $(3.7) million and $(15.8) million,
respectively.
We entered into separate network services and advertising
services agreements with TV One in 2003. Under the network
services agreement, we are providing TV One with administrative
and operational support services and access to Radio One
personalities. This agreement was originally scheduled to expire
in January 2009, and has now been extended to January 2011.
Under the advertising services agreement, we are providing a
specified amount of advertising to TV One. This agreement was
also originally scheduled to expire in January 2009 and has now
been extended to January 2011. In consideration of providing
these services, we have received equity in TV One, and receive
an annual cash fee of $500,000 for providing services under the
network services agreement.
The Company is accounting for the services provided to TV One
under the advertising and network services agreements in
accordance with
ASC 505-50-30,
Equity. As services are provided to TV One,
the Company is recording revenue based on the fair value of the
most reliable unit of measurement in these transactions. For the
advertising services agreement, the most reliable unit of
measurement has been determined to be the value of underlying
advertising time that is being provided to TV One. For the
network services agreement, the most reliable unit of
measurement has been determined to be the value of the equity
received in TV One. The Company recognized $2.3 million,
$3.6 million and $4.3 million in revenue relating to
these two agreements for the year ended December 31, 2009,
2008 and 2007, respectively.
F-33
|
|
8.
|
OTHER
CURRENT LIABILITIES:
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
see note 1)
|
|
|
|
(In thousands)
|
|
|
Deferred revenue
|
|
$
|
2,964
|
|
|
$
|
6,125
|
|
Deferred barter revenue
|
|
|
1,344
|
|
|
|
1,107
|
|
Deferred contract credits
|
|
|
237
|
|
|
|
1,263
|
|
Deferred rent
|
|
|
456
|
|
|
|
470
|
|
Accrued national representative fees
|
|
|
720
|
|
|
|
549
|
|
Accrued miscellaneous taxes
|
|
|
417
|
|
|
|
371
|
|
Current deferred tax liability
|
|
|
9
|
|
|
|
159
|
|
Other current liabilities
|
|
|
1,089
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
7,236
|
|
|
$
|
10,373
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES:
|
ASC 815, Derivatives and Hedging, establishes
disclosure requirements related to derivative instruments and
hedging activities with the intent to provide users of financial
statements with an enhanced understanding of: (a) how and
why an entity uses derivative instruments; (b) how
derivative instruments and related hedged items are accounted
for and its related interpretations; and (c) how derivative
instruments and related hedged items affect an entitys
financial position, financial performance, and cash flows.
ASC 815 requires qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures
about the fair value of gains and losses on derivative
instruments, and disclosures about credit-risk-related
contingent features in derivative instruments.
The fair values and the presentation of the Companys
derivative instruments in the consolidated balance sheet are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
As of December 31, 2009
|
|
|
As of December 31, 2008
|
|
|
|
|
|
Fair
|
|
|
Balance Sheet
|
|
Fair
|
|
|
|
Balance Sheet Location
|
|
Value
|
|
|
Location
|
|
Value
|
|
|
|
(In thousands)
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Current
|
|
|
|
|
Interest rate swaps
|
|
Other Current Liabilities
|
|
$
|
486
|
|
|
Liabilities
|
|
$
|
|
|
Interest rate swaps
|
|
Other Long-Term
|
|
|
|
|
|
Other Long-Term
|
|
|
|
|
|
|
Liabilities
|
|
|
1,600
|
|
|
Liabilities
|
|
|
2,981
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment agreement award
|
|
Other Long-Term
|
|
|
|
|
|
Other Long-Term
|
|
|
|
|
|
|
Liabilities
|
|
|
4,657
|
|
|
Liabilities
|
|
|
4,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
$
|
6,743
|
|
|
|
|
$
|
7,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
The effect and the presentation of the Companys derivative
instruments on the consolidated statement of operations are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
Amount of Gain (Loss) in Other Comprehensive Income on
Derivative (Effective Portion)
|
|
|
Gain (Loss) Reclassified from Accumulated Other Comprehensive
Income into Income (Effective Portion)
|
|
|
|
|
|
Gain (Loss) in Income (Ineffective Portion and Amount
Excluded from Effectiveness Testing)
|
|
|
|
Amount
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Amount
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Location
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Location
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Interest rate swaps
|
|
$
|
895
|
|
|
$
|
(3,625
|
)
|
|
$
|
(323
|
)
|
|
|
Interest expense
|
|
|
$
|
(1,749
|
)
|
|
$
|
(601
|
)
|
|
$
|
1,006
|
|
|
|
Interest expense
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) in
|
|
|
|
Location of Gain
|
|
Income of Derivative
|
|
Derivatives Not Designated as
|
|
(Loss) in Income of
|
|
For the Years Ended December 31,
|
|
Hedging Instruments
|
|
Derivative
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
(In thousands)
|
|
|
Employment agreement award
|
|
Corporate selling, general and administrative expense
|
|
$
|
(331
|
)
|
|
$
|
(4,326
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging
Activities
In June 2005, pursuant to the Credit Agreement (as defined in
Note 10 Long-Term Debt), the Company
entered into four fixed rate swap agreements to reduce interest
rate fluctuations on certain floating rate debt commitments. Two
of the four $25.0 million swap agreements expired in June
2007 and 2008, respectively.
The remaining swap agreements have the following terms:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agreement
|
|
Notional Amount
|
|
Expiration
|
|
Fixed Rate
|
|
No. 1
|
|
$
|
25.0 million
|
|
|
|
June 16, 2010
|
|
|
|
|
|
|
|
4.27
|
%
|
No. 2
|
|
$
|
25.0 million
|
|
|
|
June 16, 2012
|
|
|
|
|
|
|
|
4.47
|
%
|
Each swap agreement has been accounted for as a qualifying cash
flow hedge of the Companys senior bank debt, in accordance
with ASC 815, Derivatives and Hedging,
whereby changes in the fair market value are reflected as
adjustments to the fair value of the derivative instruments as
reflected on the accompanying consolidated financial statements.
The Companys objectives in using interest rate swaps are
to manage interest rate risk associated with the Companys
floating rate debt commitments and to add stability to future
cash flows. To accomplish this objective, the Company uses
interest rate swaps as part of its interest rate risk management
strategy. Interest rate swaps designated as cash flow hedges
involve the receipt of variable-rate amounts from a counterparty
in exchange for the Company making fixed-rate payments over the
life of the agreements without exchange of the underlying
notional amount.
The effective portion of changes in the fair value of
derivatives designated and qualifying as cash flow hedges is
recorded in Accumulated Other Comprehensive Loss and is
subsequently reclassified into earnings in the period that the
hedged forecasted transaction affects earnings. During 2009,
such derivatives were used to hedge the variable cash flows
associated with existing floating rate debt commitments. The
ineffective portion of the change in fair value of the
derivatives, if any, is recognized directly in earnings. There
was no hedging ineffectiveness during the years ended
December 31, 2009, 2008 and 2007.
Amounts reported in Accumulated Other Comprehensive Loss related
to derivatives are reclassified to interest expense as interest
payments are made on the Companys floating rate debt.
During the next 12 months, the Company estimates that an
additional amount of approximately $1.7 million will be
reclassified as an increase to interest expense.
Under the swap agreements, the Company pays the fixed rate
listed in the table above. The counterparties to the agreements
pay the Company a floating interest rate based on the three
month LIBOR, for which
F-35
measurement and settlement is performed quarterly. The
counterparties to these agreements are international financial
institutions. The Company estimates the net fair value of these
instruments as of December 31, 2009 to be a liability of
approximately $2.1 million. The fair value of the interest
rate swap agreements is estimated by obtaining quotations from
the financial institutions, which are parties to the
Companys swap agreements.
Costs incurred to execute the swap agreements are deferred and
amortized over the term of the swap agreements. The amounts
incurred by the Company, representing the effective difference
between the fixed rate under the swap agreements and the
variable rate on the underlying term of the debt, are included
in interest expense in the accompanying consolidated statements
of operations. In the event of early termination of these swap
agreements, any gains or losses would be amortized over the
respective lives of the underlying debt or recognized currently
if the debt is terminated earlier than initially anticipated.
Other
Derivative Instruments
The Company recognizes all derivatives at fair value, whether
designated in hedging relationships or not, in the balance sheet
as either an asset or liability. The accounting for changes in
the fair value of a derivative, including certain derivative
instruments embedded in other contracts, depends on the intended
use of the derivative and the resulting designation. If the
derivative is designated as a fair value hedge, the changes in
the fair value of the derivative and the hedged item are
recognized in the statement of operations. If the derivative is
designated as a cash flow hedge, changes in the fair value of
the derivative are recorded in other comprehensive income and
are recognized in the statement of operations when the hedged
item affects net income. If a derivative does not qualify as a
hedge, it is marked to fair value through the statement of
operations. Any fees associated with these derivatives are
amortized over their term.
As of December 31, 2009, the Company was party to an
Employment Agreement executed in April 2008 with the CEO which
calls for an award that has been accounted for as a derivative
instrument without a hedging relationship in accordance with the
guidance under ASC 815, Derivatives and
Hedging. Pursuant to the Employment Agreement, the CEO
is eligible to receive an award amount equal to 8% of any
proceeds from distributions or other liquidity events in excess
of the return of the Companys aggregate investment in TV
One. With the assistance of a third party valuation firm, the
Company reassessed the estimated fair value of the award at
December 31, 2009 to be approximately $4.7 million,
and accordingly, adjusted its liability to this amount. The
Companys obligation to pay the award will be triggered
only after the Companys recovery of the aggregate amount
of its capital contribution in TV One and only upon actual
receipt of distributions of cash or marketable securities or
proceeds from a liquidity event with respect to the
Companys membership interest in TV One. The CEO was fully
vested in the award upon execution of the Employment Agreement,
and the award lapses upon expiration of the Employment Agreement
in April 2011, or earlier if the CEO voluntarily leaves the
Company, or is terminated for cause.
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Senior bank term debt
|
|
$
|
45,024
|
|
|
$
|
164,701
|
|
Senior bank revolving debt
|
|
|
306,000
|
|
|
|
206,500
|
|
87/8% Senior
Subordinated Notes due July 2011
|
|
|
101,510
|
|
|
|
103,951
|
|
63/8% Senior
Subordinated Notes due February 2013
|
|
|
200,000
|
|
|
|
200,000
|
|
Note payable
|
|
|
1,000
|
|
|
|
|
|
Capital lease
|
|
|
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
653,534
|
|
|
|
675,362
|
|
Less: current portion
|
|
|
652,534
|
|
|
|
43,807
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
$
|
1,000
|
|
|
$
|
631,555
|
|
|
|
|
|
|
|
|
|
|
F-36
Credit
Facilities
In June 2005, the Company entered into the Credit Agreement with
a syndicate of banks. Simultaneous with entering into the Credit
Agreement, the Company borrowed $437.5 million to retire
all outstanding obligations under its previous credit agreement.
The Credit Agreement was amended in April 2006 and September
2007 to modify certain financial covenants and other provisions.
The Credit Agreement expires the earlier of (a) six months
prior to the scheduled maturity date of the
87/8% Senior
Subordinated Notes due July 1, 2011 (January 1, 2011)
(unless the
87/8% Senior
Subordinated Notes have been repurchased or refinanced prior to
such date) or (b) June 30, 2012. The total amount
available under the Credit Agreement is $800.0 million,
consisting of a $500.0 million revolving facility and a
$300.0 million term loan facility.
Borrowings under the credit facilities are subject to compliance
with certain provisions including, but not limited, to financial
covenants. The Company may use proceeds from the credit
facilities for working capital, capital expenditures made in the
ordinary course of business, its common stock repurchase
program, permitted direct and indirect investments and other
lawful corporate purposes.
The Credit Agreement contains affirmative and negative covenants
that the Company must comply with, including:
(a) maintaining an interest coverage ratio of no less than:
|
|
|
|
|
1.90 to 1.00 from January 1, 2006 to September 13,
2007;
|
|
|
|
1.60 to 1.00 from September 14, 2007 to June 30, 2008;
|
|
|
|
1.75 to 1.00 from July 1, 2008 to December 31, 2009;
|
|
|
|
2.00 to 1.00 from January 1, 2010 to December 31,
2010; and
|
|
|
|
2.25 to 1.00 from January 1, 2011 and thereafter;
|
(b) maintaining a total leverage ratio of no greater than:
|
|
|
|
|
7.00 to 1.00 beginning April 1, 2006 to September 13,
2007;
|
|
|
|
7.75 to 1.00 beginning September 14, 2007 to March 31,
2008;
|
|
|
|
7.50 to 1.00 beginning April 1, 2008 to September 30,
2008;
|
|
|
|
7.25 to 1.00 beginning October 1, 2008 to June 30,
2010;
|
|
|
|
6.50 to 1.00 beginning July 1, 2010 to September 30,
2011; and
|
|
|
|
6.00 to 1.00 beginning October 1, 2011 and thereafter;
|
(c) maintaining a senior leverage ratio of no greater than:
|
|
|
|
|
5.00 to 1.00 beginning June 13, 2005 to September 30,
2006;
|
|
|
|
4.50 to 1.00 beginning October 1, 2006 to
September 30, 2007; and
|
|
|
|
4.00 to 1.00 beginning October 1, 2007 and
thereafter; and
|
(d) limitations on:
|
|
|
|
|
liens;
|
|
|
|
sale of assets;
|
|
|
|
payment of dividends; and
|
|
|
|
mergers.
|
F-37
As of December 31, 2009, approximate ratios calculated in
accordance with the Credit Agreement, are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2009
|
|
|
Covenant Limit
|
|
Cushion
|
|
PF LTM Covenant EBITDA (In millions)
|
|
$
|
90.8
|
|
|
|
|
|
PF LTM Interest Expense (In millions)
|
|
$
|
38.4
|
|
|
|
|
|
Senior Debt (In millions)
|
|
$
|
351.9
|
|
|
|
|
|
Total Debt (In millions)
|
|
$
|
653.9
|
|
|
|
|
|
Senior Secured Leverage
|
|
|
|
|
|
|
|
|
Senior Secured Debt/Covenant EBITDA
|
|
|
3.88
|
x
|
|
4.00x
|
|
0.12x
|
Total Leverage
|
|
|
|
|
|
|
|
|
Total Debt / Covenant EBITDA
|
|
|
7.20x
|
|
|
7.25x
|
|
0.05x
|
Interest Coverage
|
|
|
|
|
|
|
|
|
Covenant EBITDA / Interest Expense
|
|
|
2.37x
|
|
|
1.75x
|
|
0.62x
|
PF Pro forma
LTM Last twelve months
EBITDA Earnings before interest, taxes, depreciation
and amortization
Based on its fiscal year end 2007 excess cash flow calculation,
the Company made a principal prepayment of approximately
$6.0 million in May 2008. For the years ended
December 31, 2009 and 2008, no excess cash calculation was
required and, therefore, no payment was required. In March 2009
and May 2009, the Company made prepayments of $70.0 million
and $31.5 million, respectively, on the term loan facility
based on its excess proceeds calculation, which included asset
acquisition and disposition activity for the twelve month period
ended May 31, 2008. These prepayments were funded with
$70.0 million and $31.5 million in loan proceeds from
the revolving facility in March 2009 and May 2009, respectively.
As of December 31, 2009, the Company had approximately
$193.0 million of borrowing capacity under its revolving
credit facility. Taking into consideration the financial
covenants under the Credit Agreement, approximately
$5.0 million of that amount was available for borrowing.
Under the terms of the Credit Agreement, upon any breach or
default under either the
87/8% Senior
Subordinated Notes due July 2011 or the 6(3/8}% Senior
Subordinated Notes due February 2013, the lenders could among
other actions immediately terminate the Credit Agreement and
declare the loans then outstanding under the Credit Agreement to
be due and payable in whole immediately. Similarly, under the
87/8% Senior
Subordinated Notes and the
63/8% Senior
Subordinated Notes, a default under the terms of the Credit
Agreement would constitute an event of default, and the trustees
or the holders of at least 25% in principal amount of the then
outstanding notes (under either class) may declare the principal
of such class of note and interest to be due and payable
immediately.
Interest payments under the terms of the Credit Agreement are
due based on the type of loan selected. Interest on alternate
base rate loans as defined under the terms of the Credit
Agreement is payable on the last day of each March, June,
September and December. Interest due on the LIBOR loans is
payable on the last day of the interest period applicable for
borrowings up to three months in duration, and on the last day
of each March, June, September and December for borrowings
greater than three months in duration. In addition, quarterly
installments of principal on the term loan facility are payable
on the last day of each March, June, September and December
commencing on September 30, 2007 in a percentage amount of
the principal balance of the term loan facility outstanding on
September 30, 2007, net of loan repayments, of 1.25%
between September 30, 2007 and June 30, 2008, 5.0%
between September 30, 2008 and June 30, 2009, and
6.25% between September 30, 2009 and June 30, 2012.
Based on the (i) $194.0 million net principal balance
of the term loan facility outstanding on September 30,
2007, (ii) a $70.0 million prepayment in March 2009
and (iii) a $31.5 million prepayment in May 2009,
quarterly payments of $4.5 million are payable between
December 31, 2009 and June 30, 2012.
F-38
As of December 31, 2009, the Company had outstanding
approximately $351.0 million on its credit facility. During
the year ended December 31, 2009 the Company borrowed
approximately $116.5 million and repaid approximately
$136.7 million.
The Credit Agreement expires the earlier of (a) six months
prior to the scheduled maturity of the
87/8% Senior
Subordinated Notes due July 1, 2011 (January 1, 2011)
(unless the
87/8% Senior
Subordinated Notes have been refinanced or repurchased prior to
such date) or (b) June 30, 2012. In prior reporting,
management had assumed that the Company would refinance the
87/8 %
Senior Subordinated Notes prior to January 1, 2011 and,
therefore, the maturity date for the loans governed by the
Credit Agreement would be June 30, 2012. However, while
management continues to believe it is probable that the Company
will refinance the
87/8 %
Senior Subordinated Notes prior to January 1, 2011, given the
current state of the U.S. economy and the volatility and
tightening of the credit markets, management believes it is
appropriate to reflect that the loans governed by the Credit
Agreement will mature on January 1, 2011, six months prior
to the scheduled maturity of the
87/8% Senior
Subordinated Notes.
Senior
Subordinated Notes
As of December 31, 2009, the Company had outstanding
$200.0 million of its
63/8% Senior
Subordinated Notes due February 2013 and $101.5 million of
its
87/8% Senior
Subordinated Notes due July 2011. During the year ended
December 31, 2009, the Company repurchased
$2.4 million of the
87/8% Senior
Subordinated Notes at an average discount of 50.0%, and recorded
a gain on the retirement of debt, net of the write-off of
deferred financing costs, of approximately $1.2 million.
The
87/8% Senior
Subordinated Notes due July 2011 had a carrying value of
$101.5 million and a fair value of approximately
$78.2 million as of December 31, 2009, and a carrying
value of $104.0 million and a fair value of approximately
$52.0 million as of December 31, 2008, The
63/8% Senior
Subordinated Notes due February 2013 had a carrying value of
$200.0 million and a fair value of approximately
$142.0 million as of December 31, 2009, and a carrying
value of $200.0 million and a fair value of approximately
$60.0 million as of December 31, 2008. The fair values
were determined based on the fair market value of similar
instruments.
Interest payments under the terms of the
63/8%
and the
87/8% Senior
Subordinated Notes are due in February and August, and January
and July of each year, respectively. Based on the
$200.0 million principal balance of the
63/8% Senior
Subordinated Notes outstanding on December 31, 2009,
interest payments of $6.4 million are payable each February
and August through February 2013. The Company made this
$6.4 million payment in February and August 2009, and in
February 2010. Based on the $101.5 million principal
balance of the
87/8% Senior
Subordinated Notes outstanding on December 31, 2009,
interest payments of $4.5 million are payable each January
and July through July 2011. The Company made a $4.6 million
interest payment in January 2009, and $4.5 million interest
payments in July 2009 and in January 2010.
The indentures governing the Companys senior subordinated
notes also contain covenants that restrict, among other things,
the ability of the Company to incur additional debt, purchase
common stock, make capital expenditures, make investments or
other restricted payments, swap or sell assets, engage in
transactions with related parties, secure non-senior debt with
assets, or merge, consolidate or sell all or substantially all
of its assets.
Subsequent to December 31, 2009, we noted that certain of
our subsidiaries identified as guarantors in our financial
statements did not have requisite guarantees filed with the
trustee as required under the terms of the indentures (the
Non-Joinder of Certain Subsidiaries). The
Non-Joinder of Certain Subsidiaries caused a non-monetary,
technical default under the terms of the relevant indentures at
December 31, 2009, causing a non-monetary, technical
cross-default at December 31, 2009 under the terms of our
Credit Agreement dated as of June 13, 2005. We have since
joined the relevant subsidiaries as guarantors under the
relevant indentures (the Joinder). Further, on
March 30, 2010, we entered into a third amendment (the
Third Amendment) to the Credit Agreement. The Third
Amendment provides for, among other things: (i) a
$100.0 million revolver commitment reduction under the bank
facilities; (ii) a 1.0% floor with respect to any loan
bearing interest at a rate determined by reference to the
adjusted LIBOR (iii) certain additional collateral
requirements; (iv) certain limitations on the use of
proceeds from the revolving loan commitments; (v) the
addition of Interactive One, LLC as a guarantor of the loans
under the Credit Agreement and under the notes governed by the
Companys 2001 and 2005 senior subordinated debt documents;
(vi) the waiver of the technical cross-defaults that
existed
F-39
as of December 31, 2009 and through the date of the
amendment arising due to the Non-Joinder of Certain
Subsidiaries; and (vii) the payment of certain fees and
expenses of the lenders in connection with their diligence in
connection with the amendment.
As of each of June 30, 2010 and July 1, 2010, we were
not in compliance with the terms of our Credit Agreement. More
specifically, (i) as of June 30, 2010, we failed to
maintain a total leverage ratio of 7.25 to 1.00 and (ii) as
of July 1, 2010, as a result of a step down of the total
leverage ratio from no greater than 7.25 to 1.00 to no greater
than 6.50 to 1.00 effective for the period July 1, 2010 to
September 30, 2011, we also failed to maintain the
requisite total leverage ratio. As previously disclosed in the
Companys Current Report on
Form 8-K,
filed with the SEC on July 16, 2010, on July 15, 2010,
the Company and its subsidiaries executed the Forbearance
Agreement with the Agent, and the Required Lenders under our
Credit Agreement, relating to the above noted existing defaults
and events of default. On August 13, 2010, we entered into
the Forbearance Agreement Amendment that, among other things,
extended the termination date of the Forbearance Agreement to
September 10, 2010, unless terminated earlier by its terms,
and provided additional forbearance related to an anticipated
default that may be caused by an opinion of our independent
registered public accounting firm, Ernst & Young LLP,
that included an explanatory paragraph that raises substantial
doubt about the Companys ability to continue as a going
concern. Under the Forbearance Agreement and the Forbearance
Agreement Amendment, the Agent and the Required Lenders
maintained the right to deliver payment blockage
notices to the trustees for the holders of the 2011 Notes
and/or the
2013 Notes.
On August 5, 2010, the Agent delivered a payment blockage
notice to the Trustee under the Indenture governing our 2013
Notes. Under the terms of the Indenture, neither the Company nor
any of its guaranteeing subsidiaries may make any payment or
distribution of any kind or character in respect of obligations
under the 2013 Notes, including, without limitation, the
interest payment to the noteholders that was scheduled for
August 15, 2010. The Indenture permits a
30-day grace
period for the nonpayment of interest before such nonpayment
constitutes an event of default, in which case the Trustee or
holders of at least 25% in principal amount of the then
outstanding 2013 Notes may declare the principal amount, and
accrued and unpaid interest on all outstanding 2013 Notes to be
due and payable immediately.
The lenders under the Credit Agreement have not accelerated the
indebtedness thereunder and the Company continues to actively
pursue various financing alternatives with its lenders and the
members of an ad hoc group of the holders of its 2011 Notes and
2013 Notes.
The remaining outstanding amounts of our
87/8% Senior
Subordinated Notes are due in July 2011. We have been actively
engaged with the lenders under our Credit Agreement as well as
with our bondholders to implement certain Refinancing
Transactions to solve both for the defaults under the Credit
Agreement and for our upcoming debt maturities. We anticipate
that if we complete the Refinancing Transactions, we will cure
or otherwise obtain a waiver of any defaults under the Credit
Agreement and the 2013 Notes Indenture. However, there is no
assurance that we will complete the Refinancing Transactions and
that an event of default under the 2013 Notes Indenture will not
arise. If we are unable to further amend the Forbearance
Agreement or otherwise obtain waivers from our lenders under the
Credit Agreement, an event of default under our 2013 Notes
Indenture may arise causing a cross-default under our Credit
Agreement, resulting in the acceleration of all of our
indebtedness thereunder. The trustee under the 2013 Notes
Indenture would also have the right to accelerate our
indebtedness under the 2013 Notes. Either of these events would
make it difficult for us to operate our business in the ordinary
course, and may force us to seek protection under
Chapter 11 of the Bankruptcy Code.
The Company conducts a portion of its business through its
subsidiaries. Certain of the Companys subsidiaries have
fully and unconditionally guaranteed the Companys
87/8% Senior
Subordinated Notes, the
63/8% Senior
Subordinated Notes and the Companys obligations under the
Credit Agreement.
Note
Payable
Reach Media issued a $1.0 million promissory note payable
in November 2009 to Radio Networks, a subsidiary of Citadel. The
note was issued in connection with Reach Media entering into a
new sales representation agreement with Radio Networks. The note
bears interest at 7.0% per annum, which is payable quarterly,
and the entire principal amount is due on December 31, 2011.
F-40
Future scheduled minimum principal payments of debt as of
December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
|
|
|
|
|
|
|
|
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
Credit Facilities
|
|
|
Note Payable
|
|
|
|
(In thousands)
|
|
|
2010
|
|
$
|
|
|
|
$
|
18,010
|
|
|
$
|
|
|
2011
|
|
|
101,510
|
|
|
|
333,014
|
|
|
|
1,000
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 and thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
|
$
|
301,510
|
|
|
$
|
351,024
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Senior Subordinated Notes and credit facilities are
classified as current in the accompanying consolidated balance
sheet at December 31, 2009 as these obligations may become
callable upon the termination of the Forebearance Agreement
Amendment on September 10, 2010.
The Companys provision for income taxes from continuing
operations was approximately $7.0 million for the year
ended December 31, 2009, compared to a benefit from income
taxes of approximately $45.2 million for the year ended
December 31, 2008, and compared to a provision for income
taxes of $54.1 million for 2007. A reconciliation of the
statutory federal income taxes to the recorded benefit from and
provision for income taxes for continuing operations is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
Statutory tax (@ 35% rate)
|
|
$
|
(13,905
|
)
|
|
$
|
(117,851
|
)
|
|
$
|
(68,763
|
)
|
Effect of state taxes, net of federal
|
|
|
(2,267
|
)
|
|
|
(8,651
|
)
|
|
|
(9,614
|
)
|
Effect of state rate and tax law changes
|
|
|
255
|
|
|
|
|
|
|
|
(959
|
)
|
Permanent items, excluding impairment of long-lived assets,
Internal Revenue Code Section 162(m) and ASC 718
|
|
|
152
|
|
|
|
220
|
|
|
|
(912
|
)
|
Effect of equity adjustments including ASC 718
|
|
|
198
|
|
|
|
321
|
|
|
|
607
|
|
Internal Revenue Code Section 162(m)
|
|
|
534
|
|
|
|
3,684
|
|
|
|
58
|
|
Valuation allowance
|
|
|
22,259
|
|
|
|
65,478
|
|
|
|
132,911
|
|
Effect of permanent impairment of long-lived assets
|
|
|
|
|
|
|
10,429
|
|
|
|
643
|
|
Other
|
|
|
(212
|
)
|
|
|
1,187
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
7,014
|
|
|
$
|
(45,183
|
)
|
|
$
|
54,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the benefit from and provision for income
taxes from continuing operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As adjusted see
|
|
|
|
|
|
|
note 1)
|
|
|
|
(In thousands)
|
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
3,834
|
|
|
$
|
4,186
|
|
|
$
|
4,194
|
|
Deferred
|
|
|
5,679
|
|
|
|
(42,805
|
)
|
|
|
45,980
|
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
1,184
|
|
|
|
301
|
|
|
|
787
|
|
Deferred
|
|
|
(3,683
|
)
|
|
|
(6,865
|
)
|
|
|
3,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
7,014
|
|
|
$
|
(45,183
|
)
|
|
$
|
54,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
The increase of approximately $52.2 million in the
provision for income taxes for continuing operation for the year
ended December 31, 2009 compared to the year ended
December 31, 2008 relates to the tax impact from
indefinite-lived intangibles. In 2008, the impairment of
indefinite-lived intangibles generated a gross tax benefit of
approximately $149.0 million. This benefit was offset by
the imposition of a valuation allowance of approximately
$63.2 million against the deferred tax asset
(DTA) created by the impairment and the tax expense
of approximately $37.2 million from the increase in the
deferred tax liability (DTL) from tax amortization
deductions related to indefinite-lived intangibles. This reduced
the 2008 tax benefit from indefinite-lived intangibles to
approximately $48.6 million. In 2009, the impairment of
intangibles was significantly smaller and resulted in a net tax
benefit after valuation allowance of approximately
$7.8 million, which partially offset the tax expense of
approximately $11.6 million from the increase in the DTL
from tax amortization deductions related to indefinite-lived
intangibles that have a DTL. In 2009, tax amortization
deductions related to indefinite-lived intangibles with a DTA
did not generate a net tax expense due to the impact of the
valuation allowance. Thus, in 2009, the indefinite-lived
intangibles generated a tax expense of approximately
$3.8 million, which was approximately $52.4 million
higher than their impact in 2008. Other items contributed a net
reduction of $200,000 between the two years. In 2007, the
provision for income taxes of approximately $54.1 million
was primarily due to the recording of a significant and full
valuation allowance for most of the Companys DTAs,
consisting primarily of net operating loss (NOL)
carryforwards.
The tax provision for the year ended December 31, 2009 of
approximately $7.0 million consists of approximately
$3.8 million for indefinite-lived intangibles,
approximately $4.5 million for the subsidiary Reach Media,
which does not have a valuation allowance, $100,000 for state
taxes, and a benefit of approximately $1.4 million driven
by an adjustment recorded in 2009 for approximately
$1.9 million that relates to 2008. (See
Note 1(b) Organization and Summary of
Significant Accounting Policies Basis of
Presentation.)
There was no tax benefit for the loss from discontinued
operations for the year ended December 31, 2009 due to the
valuation allowance. The components of the provision for and
benefit from income taxes from discontinued operations are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(As adjusted see
|
|
|
|
|
|
|
note 1)
|
|
|
|
(In thousands)
|
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Deferred
|
|
|
|
|
|
|
1,078
|
|
|
|
(68,172
|
)
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
(1,077
|
)
|
|
|
3,890
|
|
Deferred
|
|
|
|
|
|
|
83
|
|
|
|
(10,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
|
|
|
$
|
84
|
|
|
$
|
(74,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
The significant components of the Companys deferred tax
assets and liabilities as of December 31, 2009 and 2008 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
1,095
|
|
|
$
|
1,478
|
|
Accruals
|
|
|
2,447
|
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
Total current deferred tax assets before valuation allowance
|
|
|
3,542
|
|
|
|
3,100
|
|
Valuation allowance
|
|
|
(3,365
|
)
|
|
|
(2,833
|
)
|
|
|
|
|
|
|
|
|
|
Total current deferred tax assets, net
|
|
|
177
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
49,753
|
|
|
|
66,277
|
|
Depreciation
|
|
|
|
|
|
|
(201
|
)
|
Stock-based compensation
|
|
|
1,857
|
|
|
|
1,983
|
|
Other accruals
|
|
|
|
|
|
|
242
|
|
Net operating loss carryforwards
|
|
|
181,344
|
|
|
|
150,299
|
|
Other
|
|
|
2,354
|
|
|
|
3,409
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent deferred tax assets before valuation allowance
|
|
|
235,308
|
|
|
|
222,009
|
|
Valuation allowance
|
|
|
(224,654
|
)
|
|
|
(202,923
|
)
|
|
|
|
|
|
|
|
|
|
Net noncurrent deferred tax assets
|
|
|
10,654
|
|
|
|
19,086
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
10,831
|
|
|
$
|
19,353
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(186
|
)
|
|
|
(157
|
)
|
Other
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Total current deferred tax liability
|
|
|
(186
|
)
|
|
|
(159
|
)
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(87,592
|
)
|
|
|
(91,724
|
)
|
Depreciation
|
|
|
(1,041
|
)
|
|
|
(1,122
|
)
|
Partnership interests
|
|
|
(9,496
|
)
|
|
|
(12,247
|
)
|
Other
|
|
|
(667
|
)
|
|
|
(256
|
)
|
|
|
|
|
|
|
|
|
|
Total noncurrent deferred tax liabilities
|
|
|
(98,796
|
)
|
|
|
(105,349
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(98,982
|
)
|
|
|
(105,508
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(88,151
|
)
|
|
$
|
(86,155
|
)
|
|
|
|
|
|
|
|
|
|
The Companys April 2008 purchase of 100% of both the
common and convertible preferred stock of CCI via a merger was
treated as a stock acquisition. For income tax purposes, in
stock acquisitions where the purchase price exceeds the tax
basis of the underlying assets (including separately identified
intangibles), with the residual allocated to goodwill, a DTL or
DTA is recorded to reflect the differences between the book and
tax bases for the assets acquired, exclusive of goodwill. At the
time of acquisition, CCI had DTAs resulting from net operating
losses, depreciation and provision for doubtful accounts of
approximately $5.8 million. Additionally, the amount of the
DTL that resulted from the purchase price accounting was
approximately $4.7 million. It was determined that the DTA
could be benefited to the extent of reversing DTLs, resulting in
a net DTA, prior to any valuation allowance, of approximately
$1.1 million. Based on the lack of realizability of this
DTA, the Company recorded a valuation allowance of approximately
$1.1 million as part of its purchase price accounting for
this acquisition. The federal and state NOLs acquired with the
CCI acquisition were approximately $12.1 million and
$11.8 million, respectively. None of the federal NOL has
been used
F-43
since acquisition. Approximately $2.3 million of the state
NOL was used in 2008 and approximately $2.4 million is
expected to be utilized in 2009.
Deferred income taxes reflect the impact of temporary
differences between the assets and liabilities recognized for
financial reporting purposes and amounts recognized for tax
purposes. Deferred taxes are based on tax laws as currently
enacted.
As of December 31, 2009, the Company had federal, state,
and city NOL carryforward amounts of approximately
$452.5 million, $459.4 million, and $50.5 million
respectively. The state and city NOLs are applied separately
from the federal NOL as the Company generally files separate
state and city returns for each subsidiary. Additionally, the
amount of the state NOLs can change whenever future state
apportionment factors differ from current factors. The NOLs may
be subject to limitation under Internal Revenue Code
Section 382. The NOLs begin to expire as early as 2010,
with the final expirations in 2029.
The Company had unrecognized tax benefits of approximately
$5.5 million related to state NOLs of approximately
$62.8 million as of December 31, 2009.
In 2007, the Company concluded it was more likely than not that
the benefit from certain of its DTAs would not be realized. The
Company considered its historically profitable jurisdictions,
its sources of future taxable income and tax planning strategies
in determining the amount of valuation allowance recorded. As
part of that assessment, the Company also determined that it was
not appropriate under generally accepted accounting principles
to benefit its DTAs based on DTLs related to indefinite-lived
intangibles that cannot be scheduled to reverse in the same
period. Because the DTL in this case would not reverse until
some future indefinite period when the intangibles are either
sold or impaired, any resulting temporary differences cannot be
considered a source of future taxable income to support
realization of the DTAs. As a result of the assessment, and
given its then current total three year cumulative loss
position, the uncertainty of future taxable income and the
feasibility of tax planning strategies, the Company recorded a
valuation allowance of approximately $134.0 million as of
December 31, 2007. In 2009 and 2008, the Company again
concluded it was more likely than not that the benefit from
certain of its DTAs would again not be realized, and recorded an
additional valuation allowance of approximately $22.2 and
$68.8 million, respectively. The total valuation allowance
for DTAs at December 31, 2009 is approximately
$228.0 million.
As disclosed in Note 1 Organization and
Summary of Significant Accounting Policies, the Company
accounts for income taxes in accordance with ASC 740,
Income Taxes. The nature of the uncertainties
pertaining to our income taxes is primarily due to various state
tax positions. As of December 31, 2009, we had unrecognized
tax benefits of approximately $6.3 million, of which a net
amount of approximately $4.1 million, if recognized, would
impact the effective tax rate if there was no valuation
allowance. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as a component of tax
expense. Accordingly, during the year ended December 31,
2009, we recorded interest related to unrecognized tax benefits
of $87,000, and at December 31, 2009, we had recorded a
liability for accrued interest of $205,000. The Company
estimates the possible change to its unrecognized tax benefits
prior to December 31, 2010 would be up to $70,000, due to
closed statutes. A reconciliation of the beginning and ending
amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Balance as of January 1
|
|
$
|
4,953
|
|
|
$
|
4,534
|
|
|
$
|
4,932
|
|
Additions for tax position related to current year
|
|
|
82
|
|
|
|
134
|
|
|
|
71
|
|
Additions for tax positions related to prior years
|
|
|
1,525
|
|
|
|
457
|
|
|
|
71
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
|
(500
|
)
|
Reductions for tax positions as a result of the lapse of
applicable statutes of limitations
|
|
|
(234
|
)
|
|
|
(172
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31
|
|
$
|
6,326
|
|
|
$
|
4,953
|
|
|
$
|
4,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
As of December 31, 2009, the Company was not under audit in
any jurisdiction for federal or state income tax purposes.
However, the Companys open tax years for federal income
tax examinations include the tax years ended December 31,
2006 through 2008. Additionally, prior years are open to the
extent of the amount of the net operating loss from that year.
For state and local purposes, the open years for tax
examinations include the tax years ended December 31, 2005
through 2008.
|
|
12.
|
STOCKHOLDERS
EQUITY:
|
Common
Stock
The Company has four classes of common stock, Class A,
Class B, Class C and Class D. Generally, the
shares of each class are identical in all respects and entitle
the holders thereof to the same rights and privileges. However,
with respect to voting rights, each share of Class A Common
Stock entitles its holder to one vote and each share of
Class B Common Stock entitles its holder to ten votes. The
holders of Class C and Class D Common Stock are not
entitled to vote on any matters. The holders of Class A
Common Stock can convert such shares into shares of Class C
or Class D Common Stock. Subject to certain limitations,
the holders of Class B Common Stock can convert such shares
into shares of Class A Common Stock. The holders of
Class C Common Stock can convert such shares into shares of
Class A Common Stock. The holders of Class D Common
Stock have no such conversion rights.
Stock
Repurchase Program
In March 2008, the Companys board of directors authorized
a repurchase of shares of the Companys Class A and
Class D Common Stock through December 31, 2009, in an
amount of up to $150.0 million, the maximum amount
allowable under the Credit Agreement. The amount and timing of
such repurchases was based on pricing, general economic and
market conditions, and the restrictions contained in the
agreements governing the Companys credit facilities and
subordinated debt and certain other factors. While
$150.0 million is the maximum amount allowable under the
Credit Agreement, in 2005, under a prior board authorization,
the Company utilized approximately $78.0 million to
repurchase common stock leaving capacity of $72.0 million
under the Credit Agreement. During the year ended
December 31, 2009, the Company repurchased
34,889 shares of Class A Common Stock at an average
price of $0.68 and 27.7 million shares of Class D
Common Stock at an average price of $0.71. During the year ended
December 31, 2008, the Company repurchased
421,661 shares of Class A Common Stock at an average
price of $1.32 and 20.0 million shares of Class D
Common Stock at an average price of $0.58. As of
December 31, 2009, the Company did not have any capacity
available to repurchase stock since the authorization expired by
its terms December 31, 2009.
Stock
Option and Restricted Stock Grant Plan
Under the Companys 1999 Stock Option and Restricted Stock
Grant Plan (Plan), the Company had the authority to
issue up to 10,816,198 shares of Class D Common Stock
and 1,408,099 shares of Class A Common Stock. The Plan
expired March 10, 2009. The options previously issued under
this plan are exercisable in installments determined by the
compensation committee of the Companys board of directors
at the time of grant. These options expire as determined by the
compensation committee, but no later than ten years from the
date of the grant. The Company uses an average life for all
option awards. The Company settles stock options upon exercise
by issuing stock.
On January 1, 2006, the Company adopted the provisions
under ASC 718, Compensation Stock
Compensation, using the modified prospective method,
which requires measurement of compensation cost for all
stock-based awards at fair value on date of grant and
recognition of compensation over the service period for awards
expected to vest. These stock-based awards do not participate in
dividends until fully vested. The fair value of stock options is
determined using the Black-Scholes (BSM) valuation
model, which is consistent with our valuation methodologies
previously used for options in footnote disclosures. Such fair
value is recognized as an expense over the service period, net
of estimated forfeitures, using the straight-line method.
Estimating the number of stock awards that will ultimately vest
requires judgment, and to the extent actual forfeitures differ
substantially from our current estimates, amounts will be
recorded as a cumulative
F-45
adjustment in the period the estimated number of stock awards
are revised. We consider many factors when estimating expected
forfeitures, including the types of awards, employee
classification and historical experience. Actual forfeitures may
differ substantially from our current estimate.
The Company also uses the BSM valuation model to calculate the
fair value of stock-based awards. The BSM incorporates various
assumptions including volatility, expected life, and interest
rates. For options granted the Company uses the BSM
option-pricing model and determines: (i) the term by using
the simplified plain-vanilla method as allowed under
SAB No. 110; (ii) a historical volatility over a
period commensurate with the expected term, with the observation
of the volatility on a daily basis; and (iii) a risk-free
interest rate that was consistent with the expected term of the
stock options and based on the U.S. Treasury yield curve in
effect at the time of the grant.
The Company did not grant stock options during the year ended
December 31, 2009. The Company granted 1,913,650 and
230,800 stock options during the years ended December 31,
2008 and 2007, respectively. The per share weighted-average fair
value of options granted during the years ended
December 31, 2009, 2008 and 2007 was $0.00, $0.74 and
$2.77, respectively.
These fair values were derived using the BSM with the following
weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
Average risk-free interest rate
|
|
|
|
|
|
3.37%
|
|
4.67%
|
Expected dividend yield
|
|
|
|
|
|
0.00%
|
|
0.00%
|
Expected lives
|
|
|
|
|
|
6.5 years
|
|
7.4 years
|
Expected volatility
|
|
|
|
|
|
49.7%
|
|
39.6%
|
Transactions and other information relating to stock options for
the years December 31, 2009, 2008 and 2007 are summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Term
|
|
|
Value
|
|
|
|
(In Years)
|
|
|
Outstanding at December 31, 2006
|
|
|
5,876,100
|
|
|
$
|
14.49
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
230,800
|
|
|
$
|
5.54
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled/expired
|
|
|
(1,722,900
|
)
|
|
$
|
14.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
4,384,000
|
|
|
$
|
14.05
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
1,913,000
|
|
|
$
|
1.41
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled/expired
|
|
|
(750,000
|
)
|
|
$
|
14.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
5,547,000
|
|
|
$
|
9.64
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled/expired
|
|
|
(182,000
|
)
|
|
$
|
9.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
5,365,000
|
|
|
$
|
9.64
|
|
|
|
5.85
|
|
|
$
|
2,870,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2009
|
|
|
5,132,000
|
|
|
$
|
9.98
|
|
|
|
5.74
|
|
|
$
|
2,569,416
|
|
Unvested at December 31, 2009
|
|
|
1,366,000
|
|
|
$
|
1.83
|
|
|
|
8.32
|
|
|
$
|
1,891,484
|
|
Exercisable at December 31, 2009
|
|
|
3,999,000
|
|
|
$
|
12.31
|
|
|
|
5.01
|
|
|
$
|
978,992
|
|
The aggregate intrinsic value in the table above represents the
difference between the Companys stock closing price on the
last day of trading during the year ended December 31, 2009
and the exercise price,
F-46
multiplied by the number of shares that would have been received
by the holders of
in-the-money
options had all the option holders exercised their options on
December 31, 2009. This amount changes based on the fair
market value of the Companys stock. There were no options
exercised during year ended December 31, 2009. The number
of options that vested during the year ended December 31,
2009 was 858,375.
As of December 31, 2009, approximately $821,000 of total
unrecognized compensation cost related to stock options is
expected to be recognized over a weighted-average period of
10.5 months. The stock option weighted-average fair value
per share was $4.39 at December 31, 2009.
Transactions and other information relating to restricted stock
grants for the years ended December 31, 2009, 2008 and 2007
are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Fair Value
|
|
|
|
Shares
|
|
|
at Grant Date
|
|
|
Unvested at December 31, 2006
|
|
|
16,500
|
|
|
$
|
19.71
|
|
Grants
|
|
|
232,200
|
|
|
$
|
6.20
|
|
Vested
|
|
|
(16,700
|
)
|
|
$
|
19.71
|
|
Forfeited/cancelled/expired
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2007
|
|
|
232,000
|
|
|
$
|
6.20
|
|
Grants
|
|
|
525,000
|
|
|
$
|
1.41
|
|
Vested
|
|
|
(84,000
|
)
|
|
$
|
5.05
|
|
Forfeited/cancelled/expired
|
|
|
(45,000
|
)
|
|
$
|
7.33
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2008
|
|
|
628,000
|
|
|
$
|
2.14
|
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
|
|
|
$
|
|
|
Vested
|
|
|
(235,000
|
)
|
|
$
|
2.48
|
|
Forfeited/cancelled/expired
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2009
|
|
|
393,000
|
|
|
$
|
1.94
|
|
|
|
|
|
|
|
|
|
|
The restricted stock grants were included in the Companys
outstanding share numbers on the effective date of grant. As of
December 31, 2009, $431,000 of total unrecognized
compensation cost related to restricted stock grants was
expected to be recognized over the next 11.4 months.
A new stock option and restricted stock plan (the 2009
Stock Plan) was approved by the stockholders at the
Companys annual meeting on December 16, 2009. The
terms of the 2009 Stock Plan are substantially similar to the
prior Plan. The compensation committee and the non-executive
members of the Board of Directors have approved a long-term
incentive plan (the 2009 LTIP) for certain
key employees of the Company. The purpose of the
2009 LTIP is to retain and incent these key
employees in light of sacrifices they have made as a result of
the cost savings initiatives in response to current economic
conditions. These sacrifices included not receiving
performance-based bonuses in 2008 and salary reductions and
shorter work weeks in 2009 in order to provide expense savings
and financial flexibility to the Company. The 2009 LTIP is
comprised of 3,250,000 shares (the LTIP Shares)
of the 2009 Stock Plans 8,250,000 shares of
Class D Common Stock. Awards of the LTIP Shares have been
granted in the form of restricted stock and allocated among
31 employees of the Company, including the named executive
officers. The named executive officers were allocated LTIP
Shares as follows: (i) Chief Executive Officer
(CEO) (1.0 million shares); (ii) the
Chairperson (300,000 shares); (iii) the Chief
Financial Officer (CFO) (225,000 shares);
(iv) the Chief Administrative Officer (CAO)
(225,000 shares); and (v) the President of the Radio
Division (PRD) (130,000 shares). The remaining
1,370,000 shares were allocated among 26 other
key employees. All awards will vest in three
installments. The awards were granted effective January 5,
2010 and the first installment of 33% will vest on June 5,
2010. The remaining two installments will vested equally on
June 5, 2011 and 2012.
F-47
|
|
13.
|
RELATED
PARTY TRANSACTIONS:
|
In 2000, an officer of the Company, the former Chief Financial
Officer (Former CFO), purchased shares of the
Companys common stock. The Former CFO purchased
333,334 shares of the Companys Class A Common
Stock and 666,666 shares of the Companys Class D
Common Stock. The stock was purchased with the proceeds of full
recourse loans from the Company in the amount of approximately
$7.0 million. In September 2005, the Former CFO repaid a
portion of his loan. The partial repayment of approximately
$7.5 million, which included accrued interest, was effected
using 300,000 shares of the Companys Class A
Common Stock and 230,000 shares of the Companys
Class D Common Stock owned by the Former CFO. All shares
transferred to the Company in satisfaction of this loan have
been retired. As of December 31, 2008, there was no
remaining principal and interest balance on the Former
CFOs loan. The Former CFO was employed with the Company
through December 31, 2007, and pursuant to an agreement
with the Company, the loan became due in full in July 2008.
Pursuant to his employment agreement, the Former CFO was
eligible to receive a retention bonus in the amount of
approximately $3.1 million in cash on July 1, 2008,
for having remained employed with the Company through
December 31, 2007. The $3.1 million retention bonus
was a pro rata portion of a $7.0 million retention bonus
called for in his employment agreement, had he remained employed
with the Company for ten years, and is based on the number of
days of employment between October 18, 2005 and
December 31, 2007. In July 2008, the Former CFO settled the
remaining balance of the loan in full by offsetting the loan
with his after-tax proceeds from the $3.1 million retention
bonus, in addition to paying a cash amount of $34,000 to the
Company.
As of December 31, 2007, the Company had an additional loan
outstanding to the Former CFO in the amount of $88,000. The loan
was due on demand and accrued interest at 5.6%, totaling an
amount of $53,000 as of December 31, 2007. In January 2008,
the former CFO repaid the full remaining balance of the loan in
cash in the amount of $140,000.
In July 2007, the Company acquired the assets of
WDBZ-AM, a
radio station located in the Cincinnati metropolitan area from
Blue Chip Communications, Inc. (Blue Chip) for
approximately $2.6 million in seller financing. The
financing was a 5.1% interest bearing loan payable monthly,
which was fully paid in July 2008. In addition to the full
principal repayment, interest in the amount of $15,000 and
$79,000 was paid for the years ended December 31, 2008 and
2007, respectively. Blue Chip is owned by L. Ross Love, a former
member of the Companys board of directors. The transaction
was approved by a special committee of independent directors
appointed by the board of directors. Additionally, the Company
retained an independent valuation firm to provide a fair value
appraisal of the station. Prior to the closing, and since August
of 2001, the Company consolidated
WDBZ-AM
within its existing Cincinnati operations, and operated
WDBZ-AM
under an LMA for no annual fee, the results of which were
incorporated in the Companys financial statements.
The Companys CEO and Chairperson own a music company
called Music One, Inc. (Music One). The Company
sometimes engages in promoting the recorded music product of
Music One. Based on the cross-promotional value received by the
Company, we believe that the provision of such promotion is
fair. During the years ended December 31, 2009, 2008 and
2007, Radio One paid $38,000, $151,000 and $69,000,
respectively, to or on behalf of Music One, primarily for market
talent event appearances, travel reimbursement and sponsorships.
For the years ended December 31, 2009, 2008 and 2007 the
Company provided advertising to Music One in the amount of $0,
$61,000 and $0, respectively. There were no cash, trade or
no-charge orders placed by Music One in 2009 or 2007. As of
December 31, 2009, Music One owed Radio One $102,000 for
office space and administrative services provided in 2009, 2008
and 2007. In 2007, Music One paid to Radio One a total of
$169,000 for similar services provided during 2006 and 2005.
The office space and administrative support transactions between
Radio One and Music One are conducted at cost and all expenses
associated with the transactions are passed through at actual
costs. Costs associated with office space on behalf of Music One
are calculated based on square footage used by Music One,
multiplied by Radio Ones actual per square foot lease
costs for the appropriate time period. Administrative services
are calculated based on the approximate hours provided by each
Radio One employee to Music One, multiplied by such
employees applicable hourly rate and related benefits
allocation.
F-48
Advertising spots are priced at an average unit rate. Based on
the cross-promotional nature of the activities provided by Music
One and received by the Company, we believe that these
methodologies of charging average unit rates or passing through
the actual costs incurred are fair and reflect terms no more
favorable than terms generally available to a third-party.
|
|
14.
|
PROFIT
SHARING AND EMPLOYEE SAVINGS PLAN:
|
The Company maintains a profit sharing and employee savings plan
under Section 401(k) of the Internal Revenue Code. This
plan allows eligible employees to defer allowable portions of
their compensation on a pre-tax basis through contributions to
the savings plan. The Company may contribute to the plan at the
discretion of its board of directors. Effective January 1,
2006, the Company began matching employee contributions to the
employee savings plan. As of January 1, 2008, the Company
suspended the matching employer contribution indefinitely.
Employer contributions paid for the years ended
December 31, 2009, 2008 and 2007 were $0, $0 and
$1.3 million, respectively.
|
|
15.
|
COMMITMENTS
AND CONTINGENCIES:
|
Radio
Broadcasting Licenses
Each of the Companys radio stations operates pursuant to
one or more licenses issued by the Federal Communications
Commission that have a maximum term of eight years prior to
renewal. The Companys radio broadcasting licenses expire
at various times through August 1, 2014. Although the
Company may apply to renew its radio broadcasting licenses,
third parties may challenge the Companys renewal
applications. The Company is not aware of any facts or
circumstances that would prevent the Company from having its
current licenses renewed.
TV One
Cable Network
Pursuant to a limited liability company agreement dated
July 18, 2003, the Company and certain other investors
formed TV One for the purpose of developing and distributing a
new television programming service. At that time, we committed
to make a cumulative cash investment in TV One of
$74.0 million, of which $60.3 million had been funded
as of April 30, 2007, with no additional funding investment
made since then. The initial commitment period for funding the
capital was extended to June 30, 2010, due in part to TV
Ones lower than anticipated capital needs during the
initial commitment period.
Royalty
Agreements
The Company has entered into fixed fee and variable share
agreements with music performance rights organizations that
expire as late as 2011. During the years ended December 31,
2009, 2008 and 2007, the Company incurred expenses, including
discontinued operations, of approximately $12.6 million,
$12.2 million and $13.8 million, respectively, in
connection with these agreements. For continuing operations, for
the years ended December 31, 2009, 2008 and 2007, the
Company incurred expenses of approximately $12.6 million,
$11.8 million and $11.5 million, respectively, in
connection with these agreements.
Leases
and Other Operating Contracts and Agreements
The Company has noncancelable operating leases for office space,
studio space, broadcast towers and transmitter facilities that
expire over the next 20 years. The Companys leases
for broadcast facilities generally provide for a base rent plus
real estate taxes and certain operating expenses related to the
leases. Certain of the Companys leases contain renewal
options, escalating payments over the life of the lease and rent
concessions. Scheduled rent increases and rent concessions are
being amortized over the terms of the agreements using the
straight-line method, and are included in other liabilities in
the accompanying consolidated balance sheet. The future rentals
under non-cancelable leases as of December 31, 2009 are
shown below.
F-49
The Company has other operating contracts and agreements
including employment contracts, on-air talent contracts,
severance obligations, retention bonuses, consulting agreements,
equipment rental agreements, programming related agreements, and
other general operating agreements that expire over the next
five years. The amounts the Company is obligated to pay for
these agreements are shown below.
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Other Operating
|
|
|
|
Lease
|
|
|
Contracts and
|
|
|
|
Payments
|
|
|
Agreements
|
|
|
|
(In thousands)
|
|
|
Years ending December 31:
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
8,034
|
|
|
$
|
42,298
|
|
2011
|
|
|
6,414
|
|
|
|
25,013
|
|
2012
|
|
|
4,665
|
|
|
|
23,332
|
|
2013
|
|
|
3,750
|
|
|
|
11,097
|
|
2014
|
|
|
2,847
|
|
|
|
11,301
|
|
2015 and thereafter
|
|
|
7,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
33,030
|
|
|
$
|
113,041
|
|
|
|
|
|
|
|
|
|
|
Rent expense included in continuing operations for the years
ended December 31, 2009, 2008 and 2007 was approximately
$8.8 million, $8.9 million and $7.5 million,
respectively. Rent expense, including discontinued operations,
for the years ended December 31, 2009, 2008 and 2007 was
approximately $8.8 million, $9.0 million and
$8.3 million, respectively.
Reach
Media Noncontrolling Interest Shareholders Put
Rights
On February 28, 2012, and for a 30 day period
thereafter, the noncontrolling interest shareholders of Reach
Media have the right to require Reach Media to purchase all or a
portion of their shares at the then current fair market value
for such shares. The purchase price for such shares may be paid
in cash
and/or
registered Class D Common Stock of Radio One, at the
discretion of Radio One. As a result, our ability to fund
business operations, new acquisitions or new business
initiatives could be limited.
Letters
of Credit
As of December 31, 2009, we had three standby letters of
credit totaling $610,000 in connection with our annual insurance
policy renewals. In addition, we had a letter of credit of
$295,000 in connection with a contract that we inherited as part
of the acquisition of CCI. Other than a $40,000 reduction to the
insurance letters of credit in April 2009 and the cancellation
of a $200,000 letter of credit for a sponsorship event, there
has been no activity on these standby letters of credit.
Investment
in Private Equity Fund
In October 2007, the Company had committed (subject to the
completion and execution of requisite legal documentation) to
invest in QCP Capital Partners, L.P. (QCP). At that
time the Company also had agreed to provide an unsecured working
capital line of credit to QCP Capital Partners, LLC, the
management company for QCP, in the amount of $775,000. As of
December 31, 2008, the Company had provided $457,000 under
the line of credit. In December 2008, the Company made a
determination that there was a substantial likelihood that QCP
would not be able to proceed successfully with its fundraising,
and therefore the Company was unlikely to recover any of the
amounts provided to QCP Capital Partners, LLC pursuant to the
October 2007 line of credit agreement. As a result, in December
2008, the Company wrote off the full amount outstanding under
the line of credit agreement. No further investments in, or
loans to, QCP are anticipated to be made in the future.
F-50
Other
Contingencies
The Company has been named as a defendant in several legal
actions arising in the ordinary course of business. It is
managements opinion, after consultation with its legal
counsel, that the outcome of these claims will not have a
material adverse effect on the Companys financial position
or results of operations.
|
|
16.
|
CONTRACT
TERMINATION:
|
In connection with the September 2005 termination of the
Companys sales representation agreements with Interep
National Radio Sales, Inc. (Interep), and its
subsequent agreements with Katz Communications, Inc.
(Katz) making Katz the Companys sole national
sales representative, Katz paid the Company $3.4 million as
an inducement to enter into new agreements and paid Interep
approximately $5.3 million to satisfy the Companys
termination obligations. In August 2009, the Company completed
amortizing both over the four-year life of the subsequent Katz
agreements as a reduction to selling, general, and
administrative expense. For each of the years ended
December 31, 2009, 2008 and 2007, selling, general and
administrative expense was reduced by approximately
$1.3 million, $1.9 million and $1.9 million,
respectively. As of December 31, 2009 and December 31,
2008, an unamortized amount of $0 and approximately
$1.3 million, respectively, is reflected in other current
liabilities on the accompanying consolidated balance sheets.
|
|
17.
|
REACH
MEDIA SALES REPRESENTATION AND SHARES SALE AND REDEMPTION
AGREEMENT
|
In November 2009, Reach Media entered into a new sales
representation agreement (the New Agreement) with
Radio Networks, a subsidiary of Citadel. The New Agreement
replaces the original sales representation agreement (the
Original Agreement,) which expired December 31,
2009, whereby Radio Networks will serve as Reach Medias
sales representative for certain portions of advertising
inventory available on affiliate radio stations broadcasting the
Tom Joyner Morning Show. The term of the New Agreement commences
January 1, 2010 and expires on December 31, 2012;
however, either party has termination rights effective
December 31, 2011 given 90 days prior notice. As part
of the Original Agreement, Radio Networks owned a noncontrolling
interest in Reach Media. As an inducement to enter into the New
Agreement, Radio Networks returned its noncontrolling interest
in Reach Media back to Reach Media, and in exchange, Reach Media
issued a $1.0 million promissory note, whereby the
$1.0 million principal is due December 31, 2011, and
interest of 7.0% per annum is paid quarterly. The Company has
accounted for the consideration of the return of the
noncontrolling interest shares pursuant to ASC 605,
Revenue Recognition. Accordingly, as of
December 31, 2009, the Company has recorded deferred
credits of $237,000 and $474,000 in other current and long-term
liabilities, respectively, on the accompanying balance sheet.
The deferred credits will be recognized as other income ratably
over the three year life of the New Agreement.
F-51
|
|
18.
|
QUARTERLY
FINANCIAL DATA (UNAUDITED):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
March 31(a)
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31(a)
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands, except share data)
|
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
60,310
|
|
|
$
|
69,874
|
|
|
$
|
74,652
|
|
|
$
|
67,258
|
|
Operating (loss) income
|
|
|
(42,821
|
)
|
|
|
18,823
|
|
|
|
22,352
|
|
|
|
(4,590
|
)
|
Net (loss) income from continuing operations
|
|
|
(59,103
|
)
|
|
|
7,627
|
|
|
|
14,315
|
|
|
|
(13,909
|
)
|
Net loss from discontinued operations
|
|
|
(334
|
)
|
|
|
(412
|
)
|
|
|
(90
|
)
|
|
|
(979
|
)
|
Consolidated net (loss) income attributable to common
stockholders
|
|
|
(59,437
|
)
|
|
|
7,215
|
|
|
|
14,225
|
|
|
|
(14,888
|
)
|
BASIC NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations per share
|
|
$
|
(0.84
|
)
|
|
$
|
0.13
|
|
|
$
|
0.25
|
|
|
$
|
(0.26
|
)
|
Net loss from discontinued operations per share
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss) income per share attributable to common
stockholders
|
|
$
|
(0.84
|
)
|
|
$
|
0.12
|
|
|
$
|
0.25
|
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations per share
|
|
$
|
(0.84
|
)
|
|
$
|
0.13
|
|
|
$
|
0.25
|
|
|
$
|
(0.26
|
)
|
Net loss from discontinued operations per share
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss) income per share attributable to common
stockholders
|
|
$
|
(0.84
|
)
|
|
$
|
0.12
|
|
|
$
|
0.25
|
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic
|
|
|
70,719,332
|
|
|
|
59,421,562
|
|
|
|
56,242,964
|
|
|
|
52,735,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
70,719,332
|
|
|
|
60,034,168
|
|
|
|
56,684,369
|
|
|
|
52,735,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The net loss from continuing operations for the quarters ended
March 31, 2009 and December 31, 2009 includes
approximately $49.0 million and $17.0 million of
pre-tax impairment of long-lived assets, respectively. The
quarter ended December 31, 2009 includes an approximate
$21.9 million charge for recording a valuation allowance
against deferred tax assets. |
F-52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
March 31(a)
|
|
|
June 30
|
|
|
September 30(a)
|
|
|
December 31(a)
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands, except share data)
|
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
71,647
|
|
|
$
|
82,989
|
|
|
$
|
84,954
|
|
|
$
|
73,853
|
|
Operating income (loss)
|
|
|
19,022
|
|
|
|
12,457
|
|
|
|
(315,147
|
)
|
|
|
(63,900
|
)
|
Net loss from continuing operations
|
|
|
(10,585
|
)
|
|
|
(12,349
|
)
|
|
|
(266,263
|
)
|
|
|
(6,333
|
)
|
Net (loss) income from discontinued operations
|
|
|
(8,267
|
)
|
|
|
673
|
|
|
|
150
|
|
|
|
30
|
|
Consolidated net loss attributable to common stockholders
|
|
|
(18,852
|
)
|
|
|
(11,676
|
)
|
|
|
(266,113
|
)
|
|
|
(6,303
|
)
|
BASIC NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations per share basic
and diluted
|
|
$
|
(0.11
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(2.82
|
)*
|
|
$
|
(0.07
|
)
|
Net (loss) income from discontinued operations per
share basic and diluted
|
|
|
(0.08
|
)
|
|
|
0.01
|
|
|
|
0.00
|
*
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss per share attributable to common
stockholders basic and diluted
|
|
$
|
(0.19
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(2.81
|
)*
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic
|
|
|
98,728,411
|
|
|
|
98,403,298
|
|
|
|
94,537,081
|
|
|
|
85,093,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted
|
|
|
98,728,411
|
|
|
|
98,403,298
|
|
|
|
94,537,081
|
|
|
|
85,093,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The net loss from continuing operations for the quarters ended
September 30, 2008 and December 31, 2008 includes
approximately $337.9 million and $85.3 million of
pre-tax impairment of long-lived assets, respectively. The
quarter ended March 31, 2008 included a pre-tax impairment
for long-lived assets of approximately $5.1 million for
discontinued operations. |
|
* |
|
Per share amounts may not add due to rounding. |
The Company has two reportable segments: (i) Radio
Broadcasting; and (ii) Internet. These two segments operate
in the United States and are consistently aligned with the
Companys management of its businesses and its financial
reporting structure.
The Radio Broadcasting segment consists of all broadcast and
Reach Media results of operations. The Internet segment includes
the results of our online business, including the operations of
CCI since its date of acquisition. Corporate/Eliminations/Other
represents financial activity associated with our corporate
staff and offices, intercompany activity between the two
segments and activity associated with a small film venture.
Operating loss or income represents total revenues less
operating expenses, depreciation and amortization, and
impairment of long-lived assets. Intercompany revenue earned and
expenses charged between segments are recorded at fair value and
eliminated in consolidation.
The accounting policies described in the summary of significant
accounting policies in Note 1 Organization
and Summary of Significant Accounting Policies are applied
consistently across the two segments.
F-53
Detailed segment data for the years ended December 31,
2009, 2008 and 2007 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
264,058
|
|
|
$
|
304,976
|
|
|
$
|
319,647
|
|
Internet
|
|
|
14,044
|
|
|
|
12,325
|
|
|
|
|
|
Corporate/Eliminations/Other
|
|
|
(6,010
|
)
|
|
|
(3,858
|
)
|
|
|
(3,249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
272,092
|
|
|
$
|
313,443
|
|
|
$
|
316,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses (including stock-based compensation):
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
157,777
|
|
|
$
|
175,706
|
|
|
$
|
181,155
|
|
Internet
|
|
|
23,046
|
|
|
|
19,002
|
|
|
|
1,704
|
|
Corporate/Eliminations/Other
|
|
|
10,560
|
|
|
|
24,060
|
|
|
|
16,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
191,383
|
|
|
$
|
218,768
|
|
|
$
|
199,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
13,364
|
|
|
$
|
13,483
|
|
|
$
|
13,550
|
|
Internet
|
|
|
6,408
|
|
|
|
4,159
|
|
|
|
|
|
Corporate/Eliminations/Other
|
|
|
1,239
|
|
|
|
1,380
|
|
|
|
1,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
21,011
|
|
|
$
|
19,022
|
|
|
$
|
14,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Long-Lived Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
65,937
|
|
|
$
|
423,220
|
|
|
$
|
211,051
|
|
Internet
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate/Eliminations/Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
65,937
|
|
|
$
|
423,220
|
|
|
$
|
211,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
26,980
|
|
|
$
|
(307,433
|
)
|
|
$
|
(86,109
|
)
|
Internet
|
|
|
(15,410
|
)
|
|
|
(10,836
|
)
|
|
|
(1,704
|
)
|
Corporate/Eliminations/Other
|
|
|
(17,809
|
)
|
|
|
(29,298
|
)
|
|
|
(20,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
(6,239
|
)
|
|
$
|
(347,567
|
)
|
|
$
|
(108,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Total Assets:
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
921,946
|
|
|
$
|
1,169,925
|
|
Internet/Publishing
|
|
|
37,784
|
|
|
|
43,001
|
|
Corporate/Eliminations/Other
|
|
|
75,812
|
|
|
|
(87,449
|
)
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
1,035,542
|
|
|
$
|
1,125,477
|
|
|
|
|
|
|
|
|
|
|
F-54
|
|
20.
|
CONDENSED
CONSOLIDATING FINANCIAL STATEMENTS:
|
The Company conducts a portion of its business through its
subsidiaries. All of the Companys Subsidiary Guarantors
have fully and unconditionally guaranteed the Companys
87/8% Senior
Subordinated Notes due July 2011, the
63/8% Senior
Subordinated Notes due February 2013, and the Companys
obligations under the Credit Agreement.
Set forth below are consolidated balance sheets for the Company
and the Subsidiary Guarantors as of December 31, 2009 and
2008, and related consolidated statements of operations and cash
flow for each of the three years ended December 31, 2009,
2008 and 2007. The equity method of accounting has been used by
the Company to report its investments in subsidiaries. Separate
financial statements for the Subsidiary Guarantors are not
presented based on managements determination that they do
not provide additional information that is material to investors.
F-55
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio One,
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
(As restated see note 2)
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
127
|
|
|
$
|
19,836
|
|
|
$
|
|
|
|
$
|
19,963
|
|
Trade accounts receivable, net of allowance for doubtful accounts
|
|
|
27,934
|
|
|
|
19,085
|
|
|
|
|
|
|
|
47,019
|
|
Prepaid expenses and other current assets
|
|
|
1,818
|
|
|
|
3,132
|
|
|
|
|
|
|
|
4,950
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets from discontinued operations
|
|
|
300
|
|
|
|
124
|
|
|
|
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
30,179
|
|
|
|
42,177
|
|
|
|
|
|
|
|
72,356
|
|
PROPERTY AND EQUIPMENT, net
|
|
|
23,429
|
|
|
|
17,156
|
|
|
|
|
|
|
|
40,585
|
|
INTANGIBLE ASSETS, net
|
|
|
572,449
|
|
|
|
298,772
|
|
|
|
|
|
|
|
871,221
|
|
INVESTMENT IN SUBSIDIARIES
|
|
|
|
|
|
|
610,712
|
|
|
|
(610,712
|
)
|
|
|
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
|
|
|
|
48,452
|
|
|
|
|
|
|
|
48,452
|
|
OTHER ASSETS
|
|
|
1,482
|
|
|
|
1,372
|
|
|
|
|
|
|
|
2,854
|
|
NON-CURRENT ASSESTS FROM DISCONTINUED OPERATIONS
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
627,613
|
|
|
$
|
1,018,641
|
|
|
$
|
(610,712
|
)
|
|
$
|
1,035,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
828
|
|
|
$
|
3,332
|
|
|
$
|
|
|
|
$
|
4,160
|
|
Accrued interest
|
|
|
|
|
|
|
9,499
|
|
|
|
|
|
|
|
9,499
|
|
Accrued compensation and related benefits
|
|
|
2,659
|
|
|
|
7,590
|
|
|
|
|
|
|
|
10,249
|
|
Income taxes payable
|
|
|
|
|
|
|
1,533
|
|
|
|
|
|
|
|
1,533
|
|
Other current liabilities
|
|
|
8,007
|
|
|
|
(771
|
)
|
|
|
|
|
|
|
7,236
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
652,534
|
|
|
|
|
|
|
|
652,534
|
|
Current liabilities from discontinued operations
|
|
|
2,924
|
|
|
|
25
|
|
|
|
|
|
|
|
2,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
14,418
|
|
|
|
673,742
|
|
|
|
|
|
|
|
688,160
|
|
LONG-TERM DEBT, net of current portion
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
2,483
|
|
|
|
7,702
|
|
|
|
|
|
|
|
10,185
|
|
DEFERRED TAX LIABILITIES
|
|
|
|
|
|
|
88,144
|
|
|
|
|
|
|
|
88,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,901
|
|
|
|
770,588
|
|
|
|
|
|
|
|
787,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS
|
|
|
|
|
|
|
52,225
|
|
|
|
|
|
|
|
52,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
51
|
|
Accumulated comprehensive income adjustments
|
|
|
|
|
|
|
(2,086
|
)
|
|
|
|
|
|
|
(2,086
|
)
|
Additional paid-in capital
|
|
|
270,985
|
|
|
|
968,275
|
|
|
|
(270,985
|
)
|
|
|
968,275
|
|
Retained earnings (accumulated deficit)
|
|
|
339,727
|
|
|
|
(770,412
|
)
|
|
|
(339,727
|
)
|
|
|
(770,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
610,712
|
|
|
|
195,828
|
|
|
|
(610,712
|
)
|
|
|
195,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and
stockholders equity
|
|
$
|
627,613
|
|
|
$
|
1,018,641
|
|
|
$
|
(610,712
|
)
|
|
$
|
1,035,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio One,
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(As adjusted and restated see notes 1 and 2)
|
|
|
|
(In thousands)
|
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,601
|
|
|
$
|
19,688
|
|
|
$
|
|
|
|
$
|
22,289
|
|
Trade accounts receivable, net of allowance for doubtful accounts
|
|
|
25,401
|
|
|
|
24,007
|
|
|
|
|
|
|
|
49,408
|
|
Prepaid expenses and other current assets
|
|
|
1,685
|
|
|
|
3,619
|
|
|
|
|
|
|
|
5,304
|
|
Deferred tax assets
|
|
|
|
|
|
|
108
|
|
|
|
|
|
|
|
108
|
|
Current assets from discontinued operations
|
|
|
1,031
|
|
|
|
57
|
|
|
|
|
|
|
|
1,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
30,718
|
|
|
|
47,479
|
|
|
|
|
|
|
|
78,197
|
|
PROPERTY AND EQUIPMENT, net
|
|
|
28,105
|
|
|
|
20,441
|
|
|
|
|
|
|
|
48,546
|
|
INTANGIBLE ASSETS, net
|
|
|
626,614
|
|
|
|
318,244
|
|
|
|
|
|
|
|
944,858
|
|
INVESTMENT IN SUBSIDIARIES
|
|
|
|
|
|
|
669,308
|
|
|
|
(669,308
|
)
|
|
|
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
|
|
|
|
47,852
|
|
|
|
|
|
|
|
47,852
|
|
OTHER ASSETS
|
|
|
413
|
|
|
|
5,384
|
|
|
|
|
|
|
|
5,797
|
|
NON-CURRENT ASSESTS FROM DISCONTINUED OPERATIONS
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
686,077
|
|
|
$
|
1,108,708
|
|
|
$
|
(669,308
|
)
|
|
$
|
1,125,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,514
|
|
|
$
|
1,809
|
|
|
$
|
|
|
|
$
|
3,323
|
|
Accrued interest
|
|
|
|
|
|
|
10,082
|
|
|
|
|
|
|
|
10,082
|
|
Accrued compensation and related benefits
|
|
|
2,905
|
|
|
|
7,492
|
|
|
|
|
|
|
|
10,397
|
|
Income taxes payable
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
Other current liabilities
|
|
|
3,260
|
|
|
|
7,113
|
|
|
|
|
|
|
|
10,373
|
|
Current portion of long-term debt
|
|
|
210
|
|
|
|
43,597
|
|
|
|
|
|
|
|
43,807
|
|
Current liabilities from discontinued operations
|
|
|
2,639
|
|
|
|
552
|
|
|
|
|
|
|
|
3,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
10,528
|
|
|
|
70,675
|
|
|
|
|
|
|
|
81,203
|
|
LONG-TERM DEBT, net of current portion
|
|
|
|
|
|
|
631,555
|
|
|
|
|
|
|
|
631,555
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
|
|
|
|
11,008
|
|
|
|
|
|
|
|
11,008
|
|
DEFERRED TAX LIABILITIES
|
|
|
6,241
|
|
|
|
79,995
|
|
|
|
|
|
|
|
86,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,769
|
|
|
|
793,233
|
|
|
|
|
|
|
|
810,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS
|
|
|
|
|
|
|
43,423
|
|
|
|
|
|
|
|
43,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
79
|
|
Accumulated comprehensive income adjustments
|
|
|
|
|
|
|
(2,981
|
)
|
|
|
|
|
|
|
(2,981
|
)
|
Additional paid-in capital
|
|
|
301,002
|
|
|
|
992,479
|
|
|
|
(301,002
|
)
|
|
|
992,479
|
|
Retained earnings (accumulated deficit)
|
|
|
368,306
|
|
|
|
(717,525
|
)
|
|
|
(368,306
|
)
|
|
|
(717,525
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
669,308
|
|
|
|
272,052
|
|
|
|
(669,308
|
)
|
|
|
272,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and
stockholders equity
|
|
$
|
686,077
|
|
|
$
|
1,108,708
|
|
|
$
|
(669,308
|
)
|
|
$
|
1,125,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
NET REVENUE
|
|
$
|
124,672
|
|
|
$
|
147,420
|
|
|
$
|
|
|
|
$
|
272,092
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based Compensation
|
|
|
34,654
|
|
|
|
40,981
|
|
|
|
|
|
|
|
75,635
|
|
Selling, general and administrative, including stock-based
Compensation
|
|
|
53,830
|
|
|
|
37,186
|
|
|
|
|
|
|
|
91,016
|
|
Corporate selling, general and administrative, including
stock-based compensation
|
|
|
|
|
|
|
24,732
|
|
|
|
|
|
|
|
24,732
|
|
Depreciation and amortization
|
|
|
11,960
|
|
|
|
9,051
|
|
|
|
|
|
|
|
21,011
|
|
Impairment of long-lived assets
|
|
|
50,933
|
|
|
|
15,004
|
|
|
|
|
|
|
|
65,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
151,377
|
|
|
|
126,954
|
|
|
|
|
|
|
|
278,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(26,705
|
)
|
|
|
20,466
|
|
|
|
|
|
|
|
(6,239
|
)
|
INTEREST INCOME
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
144
|
|
INTEREST EXPENSE
|
|
|
3
|
|
|
|
38,401
|
|
|
|
|
|
|
|
38,404
|
|
EQUITY IN INCOME OF AFFILIATED COMPANY
|
|
|
|
|
|
|
3,653
|
|
|
|
|
|
|
|
3,653
|
|
GAIN ON RETIREMENT OF DEBT
|
|
|
|
|
|
|
1,221
|
|
|
|
|
|
|
|
1,221
|
|
OTHER INCOME (EXPENSE)
|
|
|
36
|
|
|
|
(140
|
)
|
|
|
|
|
|
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes, noncontrolling interests
in income of subsidiaries and discontinued operations
|
|
|
(26,672
|
)
|
|
|
(13,057
|
)
|
|
|
|
|
|
|
(39,729
|
)
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
7,014
|
|
|
|
|
|
|
|
7,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before equity in loss of subsidiaries and discontinued
operations
|
|
|
(26,672
|
)
|
|
|
(20,071
|
)
|
|
|
|
|
|
|
(46,743
|
)
|
EQUITY IN LOSS OF SUBSIDIARIES
|
|
|
|
|
|
|
(28,579
|
)
|
|
|
28,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(26,672
|
)
|
|
|
(48,650
|
)
|
|
|
28,579
|
|
|
|
(46,743
|
)
|
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(1,907
|
)
|
|
|
92
|
|
|
|
|
|
|
|
(1,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(28,579
|
)
|
|
|
(48,558
|
)
|
|
|
28,579
|
|
|
|
(48,558
|
)
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
4,329
|
|
|
|
|
|
|
|
4,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(28,579
|
)
|
|
$
|
(52,887
|
)
|
|
$
|
28,579
|
|
|
$
|
(52,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
NET REVENUE
|
|
$
|
142,933
|
|
|
$
|
170,510
|
|
|
$
|
|
|
|
$
|
313,443
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based Compensation
|
|
|
35,697
|
|
|
|
43,607
|
|
|
|
|
|
|
|
79,304
|
|
Selling, general and administrative, including stock-based
Compensation
|
|
|
56,768
|
|
|
|
46,340
|
|
|
|
|
|
|
|
103,108
|
|
Corporate selling, general and administrative, including
stock-based compensation
|
|
|
|
|
|
|
36,356
|
|
|
|
|
|
|
|
36,356
|
|
Depreciation and amortization
|
|
|
9,929
|
|
|
|
9,093
|
|
|
|
|
|
|
|
19,022
|
|
Impairment of long-lived assets
|
|
|
328,971
|
|
|
|
94,249
|
|
|
|
|
|
|
|
423,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
431,365
|
|
|
|
229,645
|
|
|
|
|
|
|
|
661,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(288,432
|
)
|
|
|
(59,135
|
)
|
|
|
|
|
|
|
(347,567
|
)
|
INTEREST INCOME
|
|
|
4
|
|
|
|
487
|
|
|
|
|
|
|
|
491
|
|
INTEREST EXPENSE
|
|
|
24
|
|
|
|
59,665
|
|
|
|
|
|
|
|
59,689
|
|
EQUITY IN LOSS OF AFFILIATED COMPANY
|
|
|
|
|
|
|
3,652
|
|
|
|
|
|
|
|
3,652
|
|
GAIN ON RETIREMENT OF DEBT
|
|
|
|
|
|
|
74,017
|
|
|
|
|
|
|
|
74,017
|
|
OTHER EXPENSE
|
|
|
|
|
|
|
316
|
|
|
|
|
|
|
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes, noncontrolling interests
in income of subsidiaries and discontinued operations
|
|
|
(288,452
|
)
|
|
|
(48,264
|
)
|
|
|
|
|
|
|
(336,716
|
)
|
(BENEFIT FROM) PROVISION FOR INCOME TAXES
|
|
|
(56,025
|
)
|
|
|
10,842
|
|
|
|
|
|
|
|
(45,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before equity in loss of subsidiaries and discontinued
operations
|
|
|
(232,427
|
)
|
|
|
(59,106
|
)
|
|
|
|
|
|
|
(291,533
|
)
|
EQUITY IN LOSS OF SUBSIDIARIES
|
|
|
|
|
|
|
(234,470
|
)
|
|
|
234,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(232,427
|
)
|
|
|
(293,576
|
)
|
|
|
234,470
|
|
|
|
(291,533
|
)
|
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(2,043
|
)
|
|
|
(5,371
|
)
|
|
|
|
|
|
|
(7,414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(234,470
|
)
|
|
|
(298,947
|
)
|
|
|
234,470
|
|
|
|
(298,947
|
)
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
3,997
|
|
|
|
|
|
|
|
3,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(234,470
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
234,470
|
|
|
$
|
(302,944
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
For The Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
NET REVENUE
|
|
$
|
140,882
|
|
|
$
|
175,516
|
|
|
$
|
|
|
|
$
|
316,398
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based Compensation
|
|
|
27,250
|
|
|
|
43,213
|
|
|
|
|
|
|
|
70,463
|
|
Selling, general and administrative, including stock-based
Compensation
|
|
|
51,934
|
|
|
|
48,686
|
|
|
|
|
|
|
|
100,620
|
|
Corporate selling, general and administrative, including
stock-based compensation
|
|
|
|
|
|
|
28,396
|
|
|
|
|
|
|
|
28,396
|
|
Depreciation and amortization
|
|
|
5,824
|
|
|
|
8,856
|
|
|
|
|
|
|
|
14,680
|
|
Impairment of long-lived assets
|
|
|
206,828
|
|
|
|
4,223
|
|
|
|
|
|
|
|
211,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
291,836
|
|
|
|
133,374
|
|
|
|
|
|
|
|
425,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(150,954
|
)
|
|
|
42,142
|
|
|
|
|
|
|
|
(108,812
|
)
|
INTEREST INCOME
|
|
|
|
|
|
|
1,242
|
|
|
|
|
|
|
|
1,242
|
|
INTEREST EXPENSE
|
|
|
1
|
|
|
|
72,769
|
|
|
|
|
|
|
|
72,770
|
|
EQUITY IN LOSS OF AFFILIATED COMPANY
|
|
|
|
|
|
|
15,836
|
|
|
|
|
|
|
|
15,836
|
|
GAIN ON RETIREMENT OF DEBT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE)
|
|
|
|
|
|
|
(290
|
)
|
|
|
|
|
|
|
(290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes, noncontrolling interests
in income of subsidiaries and discontinued operations
|
|
|
(150,955
|
)
|
|
|
(45,511
|
)
|
|
|
|
|
|
|
(196,466
|
)
|
PROVISION FOR INCOME TAXES
|
|
|
41,932
|
|
|
|
12,151
|
|
|
|
|
|
|
|
54,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before equity in loss of subsidiaries and discontinued
operations
|
|
|
(192,887
|
)
|
|
|
(57,662
|
)
|
|
|
|
|
|
|
(250,549
|
)
|
EQUITY IN LOSS OF SUBSIDIARIES
|
|
|
|
|
|
|
(202,996
|
)
|
|
|
202,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(192,887
|
)
|
|
|
(260,658
|
)
|
|
|
202,996
|
|
|
|
(250,549
|
)
|
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(10,109
|
)
|
|
|
(126,932
|
)
|
|
|
|
|
|
|
(137,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(202,996
|
)
|
|
|
(387,590
|
)
|
|
|
202,996
|
|
|
|
(387,590
|
)
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
3,910
|
|
|
|
|
|
|
|
3,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(202,996
|
)
|
|
$
|
(391,500
|
)
|
|
$
|
202,996
|
|
|
$
|
(391,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(28,579
|
)
|
|
$
|
(24,308
|
)
|
|
$
|
|
|
|
$
|
(52,887
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
|
|
|
|
4,329
|
|
|
|
|
|
|
|
4,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(28,579
|
)
|
|
|
(19,979
|
)
|
|
|
|
|
|
|
(48,558
|
)
|
Adjustments to reconcile consolidated net loss to net cash from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
11,960
|
|
|
|
9,051
|
|
|
|
|
|
|
|
21,011
|
|
Amortization of debt financing costs
|
|
|
|
|
|
|
2,419
|
|
|
|
|
|
|
|
2,419
|
|
Deferred income taxes
|
|
|
|
|
|
|
1,996
|
|
|
|
|
|
|
|
1,996
|
|
Impairment of long-lived assets
|
|
|
50,933
|
|
|
|
15,004
|
|
|
|
|
|
|
|
65,937
|
|
Equity in net losses of affiliated company
|
|
|
|
|
|
|
(3,653
|
)
|
|
|
|
|
|
|
(3,653
|
)
|
Stock-based compensation and other non-cash compensation
|
|
|
|
|
|
|
1,649
|
|
|
|
|
|
|
|
1,649
|
|
Gain on retirement of debt
|
|
|
|
|
|
|
(1,221
|
)
|
|
|
|
|
|
|
(1,221
|
)
|
Amortization of contract inducement and termination fee
|
|
|
(598
|
)
|
|
|
(665
|
)
|
|
|
|
|
|
|
(1,263
|
)
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(2,533
|
)
|
|
|
4,922
|
|
|
|
|
|
|
|
2,389
|
|
Prepaid expenses and other current assets
|
|
|
151
|
|
|
|
202
|
|
|
|
|
|
|
|
353
|
|
Other assets
|
|
|
(272
|
)
|
|
|
5,101
|
|
|
|
|
|
|
|
4,829
|
|
Accounts payable
|
|
|
(378
|
)
|
|
|
1,215
|
|
|
|
|
|
|
|
837
|
|
Due to corporate/from subsidiaries
|
|
|
(30,646
|
)
|
|
|
30,646
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
|
|
|
|
(584
|
)
|
|
|
|
|
|
|
(584
|
)
|
Accrued compensation and related benefits
|
|
|
435
|
|
|
|
(583
|
)
|
|
|
|
|
|
|
(148
|
)
|
Income taxes payable
|
|
|
1
|
|
|
|
1,502
|
|
|
|
|
|
|
|
1,503
|
|
Other liabilities
|
|
|
(634
|
)
|
|
|
(2,109
|
)
|
|
|
|
|
|
|
(2,743
|
)
|
Net cash flows used in operating activities from discontinued
operations
|
|
|
744
|
|
|
|
(54
|
)
|
|
|
|
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities
|
|
|
584
|
|
|
|
44,859
|
|
|
|
|
|
|
|
45,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(3,058
|
)
|
|
|
(1,470
|
)
|
|
|
|
|
|
|
(4,528
|
)
|
Purchase of intangible assets
|
|
|
|
|
|
|
(343
|
)
|
|
|
|
|
|
|
(343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(3,058
|
)
|
|
|
(1,813
|
)
|
|
|
|
|
|
|
(4,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of Senior Subordinated Notes
|
|
|
|
|
|
|
(1,220
|
)
|
|
|
|
|
|
|
(1,220
|
)
|
Repayment of other debt
|
|
|
|
|
|
|
(153
|
)
|
|
|
|
|
|
|
(153
|
)
|
Proceeds from credit facility
|
|
|
|
|
|
|
116,500
|
|
|
|
|
|
|
|
116,500
|
|
Repurchase of common stock
|
|
|
|
|
|
|
(19,697
|
)
|
|
|
|
|
|
|
(19,697
|
)
|
Payment of credit facility
|
|
|
|
|
|
|
(136,670
|
)
|
|
|
|
|
|
|
(136,670
|
)
|
Payment of bank financing costs
|
|
|
|
|
|
|
(1,658
|
)
|
|
|
|
|
|
|
(1,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
|
|
|
|
(42,898
|
)
|
|
|
|
|
|
|
(42,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(2,474
|
)
|
|
|
148
|
|
|
|
|
|
|
|
(2,326
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
2,601
|
|
|
|
19,688
|
|
|
|
|
|
|
|
22,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$
|
127
|
|
|
$
|
19,836
|
|
|
$
|
|
|
|
$
|
19,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-61
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(234,470
|
)
|
|
$
|
(302,944
|
)
|
|
$
|
234,470
|
|
|
$
|
(302,944
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
|
|
|
|
3,997
|
|
|
|
|
|
|
|
3,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(234,470
|
)
|
|
|
(298,947
|
)
|
|
|
234,470
|
|
|
|
(298,947
|
)
|
Adjustments to reconcile consolidated net loss to net cash from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
9,929
|
|
|
|
9,093
|
|
|
|
|
|
|
|
19,022
|
|
Amortization of debt financing costs
|
|
|
|
|
|
|
2,591
|
|
|
|
|
|
|
|
2,591
|
|
Deferred income taxes
|
|
|
|
|
|
|
(49,687
|
)
|
|
|
|
|
|
|
(49,687
|
)
|
Impairment of long-lived assets
|
|
|
328,972
|
|
|
|
94,248
|
|
|
|
|
|
|
|
423,220
|
|
Equity in net losses of affiliated company
|
|
|
|
|
|
|
3,652
|
|
|
|
|
|
|
|
3,652
|
|
Stock-based compensation and other non-cash compensation
|
|
|
389
|
|
|
|
1,343
|
|
|
|
|
|
|
|
1,732
|
|
Gain on retirement of debt
|
|
|
|
|
|
|
(74,017
|
)
|
|
|
|
|
|
|
(74,017
|
)
|
Amortization of contract inducement and termination fee
|
|
|
(896
|
)
|
|
|
(999
|
)
|
|
|
|
|
|
|
(1,895
|
)
|
Change in interest due on stock subscription receivable
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
(20
|
)
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(2,921
|
)
|
|
|
1,121
|
|
|
|
|
|
|
|
(1,800
|
)
|
Prepaid expenses and other current assets
|
|
|
(198
|
)
|
|
|
(373
|
)
|
|
|
|
|
|
|
(571
|
)
|
Other assets
|
|
|
(165
|
)
|
|
|
(801
|
)
|
|
|
|
|
|
|
(966
|
)
|
Accounts payable
|
|
|
1,648
|
|
|
|
(1,914
|
)
|
|
|
|
|
|
|
(266
|
)
|
Due to corporate/from subsidiaries
|
|
|
(50,128
|
)
|
|
|
50,128
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
|
|
|
|
(8,921
|
)
|
|
|
|
|
|
|
(8,921
|
)
|
Accrued compensation and related benefits
|
|
|
590
|
|
|
|
(6,029
|
)
|
|
|
|
|
|
|
(5,439
|
)
|
Income taxes payable
|
|
|
|
|
|
|
(4,433
|
)
|
|
|
|
|
|
|
(4,433
|
)
|
Other liabilities
|
|
|
(11,733
|
)
|
|
|
16,632
|
|
|
|
|
|
|
|
4,899
|
|
Net cash flows used in operating activities from discontinued
operations
|
|
|
1,322
|
|
|
|
4,356
|
|
|
|
|
|
|
|
5,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from (used in) operating activities
|
|
|
42,339
|
|
|
|
(262,977
|
)
|
|
|
234,470
|
|
|
|
13,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(5,002
|
)
|
|
|
(7,539
|
)
|
|
|
|
|
|
|
(12,541
|
)
|
Cash paid for acquisitions
|
|
|
(34,918
|
)
|
|
|
(35,537
|
)
|
|
|
|
|
|
|
(70,455
|
)
|
Investment in subsidiaries
|
|
|
|
|
|
|
234,470
|
|
|
|
(234,470
|
)
|
|
|
|
|
Proceeds from sale of assets
|
|
|
|
|
|
|
150,224
|
|
|
|
|
|
|
|
150,224
|
|
Purchase of intangible assets
|
|
|
(474
|
)
|
|
|
(342
|
)
|
|
|
|
|
|
|
(816
|
)
|
Deposits and payments for station purchases and other assets
|
|
|
|
|
|
|
(215
|
)
|
|
|
|
|
|
|
(215
|
)
|
Net cash flows used in investing activities from discontinued
operations
|
|
|
(166
|
)
|
|
|
|
|
|
|
|
|
|
|
(166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) from investing activities
|
|
|
(40,560
|
)
|
|
|
341,061
|
|
|
|
(234,470
|
)
|
|
|
66,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of Senior Subordinated Notes
|
|
|
|
|
|
|
(120,787
|
)
|
|
|
|
|
|
|
(120,787
|
)
|
Repayment of other debt
|
|
|
|
|
|
|
(1,004
|
)
|
|
|
|
|
|
|
(1,004
|
)
|
Proceeds from credit facility
|
|
|
|
|
|
|
227,000
|
|
|
|
|
|
|
|
227,000
|
|
Repurchase of common stock
|
|
|
|
|
|
|
(12,104
|
)
|
|
|
|
|
|
|
(12,104
|
)
|
Payment of credit facility
|
|
|
|
|
|
|
(170,299
|
)
|
|
|
|
|
|
|
(170,299
|
)
|
Payment of stock subscriptions receivable
|
|
|
|
|
|
|
1,737
|
|
|
|
|
|
|
|
1,737
|
|
Payment to noncontrolling interest shareholders of Reach Media
|
|
|
|
|
|
|
(6,364
|
)
|
|
|
|
|
|
|
(6,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
|
|
|
|
(81,821
|
)
|
|
|
|
|
|
|
(81,821
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
1,779
|
|
|
|
(3,737
|
)
|
|
|
|
|
|
|
(1,958
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
822
|
|
|
|
23,425
|
|
|
|
|
|
|
|
24,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$
|
2,601
|
|
|
$
|
19,688
|
|
|
$
|
|
|
|
$
|
22,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING
STATEMENT OF CASH FLOWS
For the
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(As adjusted see note 1)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(202,996
|
)
|
|
$
|
(391,500
|
)
|
|
$
|
202,996
|
|
|
$
|
(391,500
|
)
|
Noncontrolling interests in income of subsidiaries
|
|
|
|
|
|
|
3,910
|
|
|
|
|
|
|
|
3,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(202,996
|
)
|
|
|
(387,590
|
)
|
|
|
202,996
|
|
|
|
(387,590
|
)
|
Adjustments to reconcile consolidated net loss to net cash from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5,881
|
|
|
|
8,799
|
|
|
|
|
|
|
|
14,680
|
|
Amortization of debt financing costs
|
|
|
|
|
|
|
2,241
|
|
|
|
|
|
|
|
2,241
|
|
Deferred income taxes
|
|
|
|
|
|
|
(28,013
|
)
|
|
|
|
|
|
|
(28,013
|
)
|
Impairment of long-lived assets
|
|
|
206,828
|
|
|
|
4,223
|
|
|
|
|
|
|
|
211,051
|
|
Equity in net losses of affiliated company
|
|
|
|
|
|
|
15,836
|
|
|
|
|
|
|
|
15,836
|
|
Stock-based compensation and other non-cash compensation
|
|
|
1,200
|
|
|
|
1,791
|
|
|
|
|
|
|
|
2,991
|
|
Amortization of contract inducement and termination fee
|
|
|
(896
|
)
|
|
|
(913
|
)
|
|
|
|
|
|
|
(1,809
|
)
|
Change in interest due on stock subscription receivable
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
(75
|
)
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
952
|
|
|
|
2,558
|
|
|
|
|
|
|
|
3,510
|
|
Prepaid expenses and other current assets
|
|
|
(481
|
)
|
|
|
(744
|
)
|
|
|
|
|
|
|
(1,225
|
)
|
Income tax receivable
|
|
|
|
|
|
|
1,296
|
|
|
|
|
|
|
|
1,296
|
|
Other assets
|
|
|
41
|
|
|
|
(399
|
)
|
|
|
|
|
|
|
(358
|
)
|
Due to corporate/from subsidiaries
|
|
|
(18,564
|
)
|
|
|
18,564
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(1,669
|
)
|
|
|
(2,620
|
)
|
|
|
|
|
|
|
(4,289
|
)
|
Accrued interest
|
|
|
|
|
|
|
(270
|
)
|
|
|
|
|
|
|
(270
|
)
|
Accrued compensation and related benefits
|
|
|
223
|
|
|
|
(1,453
|
)
|
|
|
|
|
|
|
(1,230
|
)
|
Income taxes payable
|
|
|
|
|
|
|
1,997
|
|
|
|
|
|
|
|
1,997
|
|
Other liabilities
|
|
|
(1,027
|
)
|
|
|
1,221
|
|
|
|
|
|
|
|
194
|
|
Net cash flows from operating activities from discontinued
operations
|
|
|
15,012
|
|
|
|
200,065
|
|
|
|
|
|
|
|
215,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from (used in) operating activities
|
|
|
4,504
|
|
|
|
(163,486
|
)
|
|
|
202,996
|
|
|
|
44,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(4,164
|
)
|
|
|
(5,651
|
)
|
|
|
|
|
|
|
(9,815
|
)
|
Equity investments
|
|
|
|
|
|
|
(12,590
|
)
|
|
|
|
|
|
|
(12,590
|
)
|
Investment in subsidiaries
|
|
|
|
|
|
|
202,996
|
|
|
|
(202,996
|
)
|
|
|
|
|
Proceeds from sale of assets
|
|
|
|
|
|
|
108,100
|
|
|
|
|
|
|
|
108,100
|
|
Deposits and payments for station purchases and other assets
|
|
|
|
|
|
|
(5,904
|
)
|
|
|
|
|
|
|
(5,904
|
)
|
Net cash flows used in investing activities from discontinued
operations
|
|
|
(388
|
)
|
|
|
(935
|
)
|
|
|
|
|
|
|
(1,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) from investing activities
|
|
|
(4,552
|
)
|
|
|
286,016
|
|
|
|
(202,996
|
)
|
|
|
78,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt
|
|
|
(14
|
)
|
|
|
(124,683
|
)
|
|
|
|
|
|
|
(124,697
|
)
|
Payment of bank financing costs
|
|
|
|
|
|
|
(3,004
|
)
|
|
|
|
|
|
|
(3,004
|
)
|
Payment to noncontrolling interest shareholders in Reach Media
|
|
|
|
|
|
|
(2,940
|
)
|
|
|
|
|
|
|
(2,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(14
|
)
|
|
|
(130,627
|
)
|
|
|
|
|
|
|
(130,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(62
|
)
|
|
|
(8,097
|
)
|
|
|
|
|
|
|
(8,159
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
884
|
|
|
|
31,522
|
|
|
|
|
|
|
|
32,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$
|
822
|
|
|
$
|
23,425
|
|
|
$
|
|
|
|
$
|
24,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-63
Subsequent to December 31, 2009, we noted that certain of
our subsidiaries identified as guarantors in our financial
statements did not have requisite guarantees filed with the
trustee as required under the terms of the indentures (the
Non-Joinder of Certain Subsidiaries). The
Non-Joinder of Certain Subsidiaries caused a non-monetary,
technical default under the terms of the relevant indentures at
December 31, 2009, causing a non-monetary, technical
cross-default at December 31, 2009 under the terms of our
Credit Agreement dated as of June 13, 2005. We have since
joined the relevant subsidiaries as guarantors under the
relevant indentures (the Joinder). Further, on
March 30, 2010, we entered into a third amendment (the
Third Amendment) to the Credit Agreement. The Third
Amendment provides for, among other things: (i) a
$100.0 million revolver commitment reduction under the bank
facilities; (ii) a 1.0% floor with respect to any loan
bearing interest at a rate determined by reference to the
adjusted LIBOR; (iii) certain additional collateral
requirements; (iv) certain limitations on the use of
proceeds from the revolving loan commitments; (v) the
addition of Interactive One, LLC as a guarantor of the loans
under the Credit Agreement and under the notes governed by the
Companys 2001 and 2005 senior subordinated debt documents;
(vi) the waiver of the technical cross-defaults that
existed as of December 31, 2009 and through the date of the
amendment arising due to the Non-Joinder of Certain
Subsidiaries; and (vii) the payment of certain fees and
expenses of the lenders in connection with their diligence in
connection with the amendment.
A new stock option and restricted stock plan (the 2009
Stock Plan) was approved by the stockholders at the
Companys annual meeting on December 16, 2009. The
terms of the 2009 Stock Plan are substantially similar to the
prior Plan. The compensation committee and the non-executive
members of the Board of Directors have approved a long-term
incentive plan (the 2009 LTIP) for certain
key employees of the Company. The purpose of the
2009 LTIP is to retain and incent these key
employees in light of sacrifices they have made as a result of
the cost savings initiatives in response to current economic
conditions. These sacrifices included not receiving
performance-based bonuses in 2008 and salary reductions and
shorter work weeks in 2009 in order to provide expense savings
and financial flexibility to the Company. The 2009 LTIP is
comprised of 3,250,000 shares (the LTIP Shares)
of the 2009 Stock Plans 8,250,000 shares of
Class D Common Stock. Awards of the LTIP Shares have been
granted in the form of restricted stock and allocated among
31 employees of the Company, including the named executive
officers. The named executive officers were allocated LTIP
Shares as follows: (i) Chief Executive Officer
(CEO) (1.0 million shares); (ii) the
Chairperson (300,000 shares); (iii) the Chief
Financial Officer (CFO) (225,000 shares);
(iv) the Chief Administrative Officer (CAO)
(225,000 shares); and (v) the President of the Radio
Division (PRD) (130,000 shares). The remaining
1,370,000 shares were allocated among 26 other
key employees. All awards will vest in three
installments. The awards were granted effective January 5,
2010 and the first installment of 33% will vest on June 5,
2010. The remaining two installments will vested equally on
June 5, 2011 and 2012.
F-64
RADIO
ONE, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
For the
Years Ended December 31, 2009, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
Additions
|
|
|
|
|
|
|
|
|
at
|
|
Charged
|
|
Acquired
|
|
|
|
Balance
|
|
|
Beginning
|
|
to
|
|
from
|
|
|
|
at End
|
Description
|
|
of Year
|
|
Expense
|
|
Acquisitions
|
|
Deductions
|
|
of Year
|
|
|
(In thousands)
|
|
Allowance for Doubtful Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
3,520
|
|
|
$
|
2,124
|
|
|
$
|
|
|
|
$
|
2,993
|
|
|
$
|
2,651
|
|
2008
|
|
|
1,862
|
|
|
|
4,946
|
|
|
|
55
|
|
|
|
3,343
|
|
|
|
3,520
|
|
2007
|
|
|
3,721
|
|
|
|
1,269
|
|
|
|
|
|
|
|
3,128
|
|
|
|
1,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
Additions
|
|
|
|
|
|
|
|
|
at
|
|
Charged
|
|
Acquired
|
|
|
|
Balance
|
|
|
Beginning of
|
|
to
|
|
from
|
|
|
|
at End
|
Description
|
|
Year
|
|
Expense
|
|
Acquisitions
|
|
Deductions(1)
|
|
of Year
|
|
|
(In thousands)
|
|
Valuation Allowance for Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
205,756
|
|
|
$
|
21,958
|
|
|
$
|
|
|
|
$
|
305
|
|
|
$
|
228,019
|
|
2008
|
|
|
133,977
|
|
|
|
69,212
|
|
|
|
1,088
|
|
|
|
(1,479
|
)
|
|
|
205,756
|
|
2007
|
|
|
2,248
|
|
|
|
132,085
|
|
|
|
|
|
|
|
(356
|
)
|
|
|
133,977
|
|
|
|
|
(1) |
|
Relates to an increase or (decrease) to the valuation allowance
for deferred tax assets pertaining to interest rate swaps
charged to accumulated other comprehensive income instead of
provision for income taxes. |
F-65
RADIO
ONE, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(As adjusted see
|
|
|
|
|
|
(As adjusted see
|
|
|
|
|
|
|
note 1)
|
|
|
|
|
|
note 1)
|
|
|
|
(In thousands, except share data)
|
|
|
NET REVENUE
|
|
$
|
74,491
|
|
|
$
|
74,651
|
|
|
$
|
208,703
|
|
|
$
|
204,835
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based compensation of
$0 and $0, and $0 and $88, respectively
|
|
|
18,811
|
|
|
|
17,994
|
|
|
|
56,736
|
|
|
|
56,856
|
|
Selling, general and administrative, including stock-based
compensation of $151 and $54, and $833 and $285, respectively
|
|
|
27,517
|
|
|
|
24,018
|
|
|
|
78,290
|
|
|
|
68,828
|
|
Corporate selling, general and administrative, including
stock-based compensation of $757 and $248, and $4,044 and
$1,014, respectively
|
|
|
6,245
|
|
|
|
4,950
|
|
|
|
24,581
|
|
|
|
16,048
|
|
Depreciation and amortization
|
|
|
4,625
|
|
|
|
5,337
|
|
|
|
14,195
|
|
|
|
15,804
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
57,198
|
|
|
|
52,299
|
|
|
|
173,802
|
|
|
|
206,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
17,293
|
|
|
|
22,352
|
|
|
|
34,901
|
|
|
|
(1,654
|
)
|
INTEREST INCOME
|
|
|
28
|
|
|
|
33
|
|
|
|
95
|
|
|
|
98
|
|
INTEREST EXPENSE
|
|
|
12,122
|
|
|
|
9,224
|
|
|
|
31,059
|
|
|
|
29,036
|
|
GAIN ON RETIREMENT OF DEBT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,221
|
|
EQUITY IN INCOME OF AFFILIATED COMPANY
|
|
|
(1,784
|
)
|
|
|
(1,397
|
)
|
|
|
(3,832
|
)
|
|
|
(3,294
|
)
|
OTHER EXPENSE, net
|
|
|
50
|
|
|
|
38
|
|
|
|
2,934
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for (benefit from) income taxes,
noncontrolling interests in income of subsidiaries and loss from
discontinued operations
|
|
|
6,933
|
|
|
|
14,520
|
|
|
|
4,835
|
|
|
|
(26,173
|
)
|
PROVISION FOR (BENEFIT FROM) INCOME TAXES
|
|
|
4,760
|
|
|
|
(1,508
|
)
|
|
|
4,685
|
|
|
|
7,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
2,173
|
|
|
|
16,028
|
|
|
|
150
|
|
|
|
(33,513
|
)
|
LOSS FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(125
|
)
|
|
|
(90
|
)
|
|
|
(205
|
)
|
|
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED NET INCOME (LOSS)
|
|
|
2,048
|
|
|
|
15,938
|
|
|
|
(55
|
)
|
|
|
(34,348
|
)
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
1,010
|
|
|
|
1,712
|
|
|
|
1,427
|
|
|
|
3,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS
|
|
$
|
1,038
|
|
|
$
|
14,226
|
|
|
$
|
(1,482
|
)
|
|
$
|
(37,998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED CONSOLIDATED NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.02
|
|
|
$
|
0.25
|
|
|
$
|
(0.02
|
)*
|
|
$
|
(0.60
|
)
|
Discontinued operations, net of tax
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)*
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
0.02
|
|
|
$
|
0.25
|
|
|
$
|
(0.03
|
)*
|
|
$
|
(0.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
52,064,108
|
|
|
|
56,242,964
|
|
|
|
51,316,498
|
|
|
|
61,873,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
54,262,885
|
|
|
|
56,684,369
|
|
|
|
51,316,498
|
|
|
|
61,873,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Earnings per share amounts may not add due to rounding. |
The accompanying notes are an integral part of these
consolidated financial statements.
F-66
RADIO
ONE, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,571
|
|
|
$
|
19,963
|
|
Trade accounts receivable, net of allowance for doubtful
accounts of $2,784 and $2,651, respectively
|
|
|
60,840
|
|
|
|
47,019
|
|
Prepaid expenses and other current assets
|
|
|
4,739
|
|
|
|
4,950
|
|
Current assets from discontinued operations
|
|
|
78
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
87,228
|
|
|
|
72,356
|
|
PROPERTY AND EQUIPMENT, net
|
|
|
35,318
|
|
|
|
40,585
|
|
GOODWILL
|
|
|
137,493
|
|
|
|
137,517
|
|
RADIO BROADCASTING LICENSES
|
|
|
698,645
|
|
|
|
698,645
|
|
OTHER INTANGIBLE ASSETS, net
|
|
|
36,656
|
|
|
|
35,059
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
46,479
|
|
|
|
48,452
|
|
OTHER ASSETS
|
|
|
2,565
|
|
|
|
2,854
|
|
NON-CURRENT ASSETS FROM DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,044,384
|
|
|
$
|
1,035,542
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,719
|
|
|
$
|
4,160
|
|
Accrued interest
|
|
|
10,355
|
|
|
|
9,499
|
|
Accrued compensation and related benefits
|
|
|
12,085
|
|
|
|
10,249
|
|
Income taxes payable
|
|
|
2,444
|
|
|
|
1,533
|
|
Other current liabilities
|
|
|
7,105
|
|
|
|
7,236
|
|
Current portion of long-term debt
|
|
|
652,138
|
|
|
|
652,534
|
|
Current liabilities from discontinued operations
|
|
|
2,428
|
|
|
|
2,949
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
689,274
|
|
|
|
688,160
|
|
LONG-TERM DEBT, net of current portion
|
|
|
1,000
|
|
|
|
1,000
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
10,147
|
|
|
|
10,185
|
|
DEFERRED TAX LIABILITIES
|
|
|
90,762
|
|
|
|
88,144
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
791,183
|
|
|
|
787,489
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS
|
|
|
44,047
|
|
|
|
52,225
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
Convertible preferred stock, $.001 par value,
1,000,000 shares authorized; no shares outstanding at
September 30, 2010 and December 31, 2009
|
|
|
|
|
|
|
|
|
Common stock Class A, $.001 par value,
30,000,000 shares authorized; 2,863,912 and
2,981,841 shares issued and outstanding as of
September 30, 2010 and December 31, 2009, respectively
|
|
|
3
|
|
|
|
3
|
|
Common stock Class B, $.001 par value,
150,000,000 shares authorized; 2,861,843 shares issued
and outstanding as of September 30, 2010 and
December 31, 2009, respectively
|
|
|
3
|
|
|
|
3
|
|
Common stock Class C, $.001 par value,
150,000,000 shares authorized; 3,121,048 shares issued
and outstanding as of September 30, 2010 and
December 31, 2009, respectively
|
|
|
3
|
|
|
|
3
|
|
Common stock Class D, $.001 par value,
150,000,000 shares authorized; 45,416,082 and
42,280,153 shares issued and outstanding as of
September 30, 2010 and December 31, 2009, respectively
|
|
|
45
|
|
|
|
42
|
|
Accumulated other comprehensive loss
|
|
|
(1,685
|
)
|
|
|
(2,086
|
)
|
Additional paid-in capital
|
|
|
982,679
|
|
|
|
968,275
|
|
Accumulated deficit
|
|
|
(771,894
|
)
|
|
|
(770,412
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
209,154
|
|
|
|
195,828
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and
stockholders equity
|
|
$
|
1,044,384
|
|
|
$
|
1,035,542
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-67
RADIO
ONE, INC. AND SUBSIDIARIES
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2010 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
|
|
|
Other
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Preferred
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Comprehensive
|
|
|
Comprehensive
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Stock
|
|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class D
|
|
|
Income (Loss)
|
|
|
Loss
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
BALANCE, as of December 31, 2009
|
|
$
|
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
42
|
|
|
|
|
|
|
$
|
(2,086
|
)
|
|
$
|
968,275
|
|
|
$
|
(770,412
|
)
|
|
$
|
195,828
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,482
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,482
|
)
|
|
|
(1,482
|
)
|
Change in unrealized loss on derivative and hedging activities,
net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401
|
|
|
|
401
|
|
|
|
|
|
|
|
|
|
|
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
4,874
|
|
|
|
|
|
|
|
4,877
|
|
Decretion of redeemable noncontrolling interests to estimated
redemption value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,530
|
|
|
|
|
|
|
|
9,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, as of September 30, 2010
|
|
$
|
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
45
|
|
|
|
|
|
|
$
|
(1,685
|
)
|
|
$
|
982,679
|
|
|
$
|
(771,894
|
)
|
|
$
|
209,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-68
RADIO
ONE, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(As adjusted
|
|
|
|
|
|
|
see note 1)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(55
|
)
|
|
|
(34,348
|
)
|
Adjustments to reconcile consolidated net loss to net cash from
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
14,195
|
|
|
|
15,804
|
|
Amortization of debt financing costs
|
|
|
1,694
|
|
|
|
1,811
|
|
Write off of debt financing costs
|
|
|
3,055
|
|
|
|
|
|
Deferred income taxes
|
|
|
2,611
|
|
|
|
3,887
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
48,953
|
|
Equity in income of affiliated company
|
|
|
(3,832
|
)
|
|
|
(3,294
|
)
|
Stock-based compensation
|
|
|
4,877
|
|
|
|
1,381
|
|
Gain on retirement of debt
|
|
|
|
|
|
|
(1,221
|
)
|
Amortization of contract inducement and termination fee
|
|
|
|
|
|
|
(1,263
|
)
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
(13,821
|
)
|
|
|
(617
|
)
|
Prepaid expenses and other assets
|
|
|
211
|
|
|
|
1,404
|
|
Other assets
|
|
|
6,868
|
|
|
|
1,481
|
|
Accounts payable
|
|
|
(1,824
|
)
|
|
|
348
|
|
Accrued interest
|
|
|
856
|
|
|
|
(6,122
|
)
|
Accrued compensation and related benefits
|
|
|
1,836
|
|
|
|
(2,715
|
)
|
Income taxes payable
|
|
|
911
|
|
|
|
855
|
|
Other liabilities
|
|
|
(403
|
)
|
|
|
(4,687
|
)
|
Net cash flows (used in) provided from operating activities of
discontinued operations
|
|
|
(404
|
)
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided from operating activities
|
|
|
16,775
|
|
|
|
21,864
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(3,251
|
)
|
|
|
(3,368
|
)
|
Purchase of other intangible assets
|
|
|
(341
|
)
|
|
|
(272
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(3,592
|
)
|
|
|
(3,640
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayment of other debt
|
|
|
|
|
|
|
(153
|
)
|
Proceeds from credit facility
|
|
|
12,000
|
|
|
|
111,500
|
|
Repayment of credit facility
|
|
|
(12,396
|
)
|
|
|
(125,170
|
)
|
Repurchase of senior subordinated notes
|
|
|
|
|
|
|
(1,220
|
)
|
Debt refinancing and modification costs
|
|
|
(11,179
|
)
|
|
|
|
|
Repurchase of common stock
|
|
|
|
|
|
|
(10,695
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(11,575
|
)
|
|
|
(25,738
|
)
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
1,608
|
|
|
|
(7,514
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
19,963
|
|
|
|
22,289
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$
|
21,571
|
|
|
$
|
14,775
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
28,510
|
|
|
$
|
33,346
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
1,160
|
|
|
$
|
2,731
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-69
RADIO
ONE, INC. AND SUBSIDIARIES
|
|
1.
|
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Radio One, Inc. (a Delaware corporation referred to as
Radio One) and its subsidiaries (collectively, the
Company) is an urban-oriented, multi-media company
that primarily targets
African-American
consumers. Our core business is our radio broadcasting franchise
that is the largest radio broadcasting operation that primarily
targets
African-American
and urban listeners. We currently own 53 broadcast stations
located in 16 urban markets in the United States. While our
primary source of revenue is the sale of local and national
advertising for broadcast on our radio stations, our business
strategy is to operate the premier multi-media entertainment and
information content provider targeting
African-American
consumers. Thus, we have diversified our revenue streams by
making acquisitions and investments in other complementary media
properties. Our other media interests include our approximately
37% ownership interest in TV One, LLC (TV One), an
African-American
targeted cable television network that we invested in with an
affiliate of Comcast Corporation and other investors; our 53.5%
ownership interest in Reach Media, Inc. (Reach
Media), which operates the Tom Joyner Morning Show; our
ownership of Interactive One, LLC (Interactive One),
an online platform serving the
African-American
community through social content, news, information, and
entertainment, which operates a number of branded sites,
including News One, UrbanDaily and HelloBeautiful; and our
ownership of Community Connect, LLC (formerly Community Connect
Inc.) (CCI), an online social networking company,
which operates a number of branded websites, including
BlackPlanet, MiGente and Asian Avenue. Through our national
multi-media presence, we provide advertisers with a unique and
powerful delivery mechanism to the
African-American
and urban audience.
In December 2009, the Company ceased publication of our
urban-themed lifestyle periodical Giant Magazine. The remaining
assets and liabilities of this publication have been classified
as discontinued operations as of September 30, 2010 and
December 31, 2009, and the publications results from
operations for the three months and nine months ended
September 30, 2010 and 2009, have been classified as
discontinued operations in the accompanying consolidated
financial statements.
As part of our consolidated financial statements, consistent
with our financial reporting structure and how the Company
currently manages its businesses, we have provided selected
financial information on the Companys two reportable
segments: (i) Radio Broadcasting; and (ii) Internet.
(See Note 10 Segment Information.)
|
|
(b)
|
Interim
Financial Statements
|
The interim consolidated financial statements included herein
have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission (SEC). In managements opinion, the
interim financial data presented herein include all adjustments
(which include only normal recurring adjustments) necessary for
a fair presentation. Certain information and footnote
disclosures normally included in the financial statements
prepared in accordance with accounting principles generally
accepted in the United States (GAAP) have been
condensed or omitted pursuant to such rules and regulations.
Results for interim periods are not necessarily indicative of
results to be expected for the full year. This
Form 10-Q
should be read in conjunction with the financial statements and
notes thereto included in the Companys 2009 Annual Report
on
Form 10-K/A.
Certain reclassifications associated with accounting for
discontinued operations have been made to the accompanying prior
period financial statements to conform to the current period
presentation. These reclassifications had no effect on
previously reported net income or loss, or any other previously
reported statements of operations, balance sheet or cash flow
amounts. (See Note 3 Discontinued
Operations.)
F-70
|
|
(c)
|
Financial
Instruments
|
Financial instruments as of September 30, 2010 and
December 31, 2009 consisted of cash and cash equivalents,
trade accounts receivable, accounts payable, accrued expenses,
note payable, redeemable noncontrolling interests and long-term
debt. The carrying amounts approximated fair value for each of
these financial instruments as of September 30, 2010 and
December 31, 2009, except for the Companys
outstanding senior subordinated notes. The
87/8% Senior
Subordinated Notes due July 2011 had a carrying value of
$101.5 million and a fair value of approximately
$89.3 million as of September 30, 2010, and a carrying
value of $101.5 million and a fair value of approximately
$78.2 million as of December 31, 2009. The
63/8% Senior
Subordinated Notes due February 2013 had a carrying value of
$200.0 million and a fair value of approximately
$168.0 million as of September 30, 2010, and a
carrying value of $200.0 million and a fair value of
approximately $142.0 million as of December 31, 2009.
The fair values were determined based on the trading values of
these instruments as of the reporting date.
The Company recognizes revenue for broadcast advertising when a
commercial is broadcast and is reported, net of agency and
outside sales representative commissions, in accordance with
Accounting Standards Codification (ASC) 605,
Revenue Recognition. Agency and outside sales
representative commissions are calculated based on a stated
percentage applied to gross billing. Generally, clients remit
the gross billing amount to the agency or outside sales
representative, and the agency or outside sales representative
remits the gross billing, less their commission, to the Company.
Agency and outside sales representative commissions were
approximately $8.3 million and $7.8 million for the
three months ended September 30, 2010 and 2009,
respectively. Agency and outside sales representative
commissions were approximately $23.4 million and
$20.7 million for the nine months ended September 30,
2010 and 2009, respectively.
CCI, which the Company acquired in April 2008, currently
generates the majority of the Companys internet revenue,
and derives such revenue principally from advertising services,
including advertising aimed at diversity recruiting. Advertising
services include the sale of banner and sponsorship
advertisements. Advertising revenue is recognized either as
impressions (the number of times advertisements appear in viewed
pages) are delivered, when click through purchases
or leads are reported, or ratably over the contract period,
where applicable. CCI has a diversity recruiting relationship
with Monster, Inc. (Monster). Monster posts job
listings and advertising on CCIs websites and CCI earns
revenue for displaying the images on its websites.
From time to time, as part of our normal operations, the Company
provides broadcast advertising time in exchange for programming
content and certain services. In accordance with ASC 605,
Revenue Recognition, the terms of these
exchanges generally permit the Company to preempt such broadcast
time in favor of advertisers who purchase time in exchange for
cash. The Company includes the value of such exchanges in both
broadcasting net revenue and station operating expenses. The
valuation of barter time is based upon the fair value of the
network advertising time provided for the programming content
and services received. For the three months ended
September 30, 2010 and 2009, barter transaction revenues
were $794,000 and $820,000, respectively. For each of the nine
months ended September 30, 2010 and 2009, barter
transaction revenues were $2.4 million. Additionally,
barter transaction costs were reflected in programming and
technical expenses and selling, general and administrative
expenses of $741,000 and $779,000 and $53,000 and $41,000, for
the three months ended September 30, 2010 and 2009,
respectively. For the nine months ended September 30, 2010
and 2009, barter transaction costs were reflected in programming
and technical expenses and selling, general and administrative
expenses of $2.2 million and $2.3 million and $184,000
and $124,000, respectively.
F-71
The Companys comprehensive loss consists of net loss
attributable to common stockholders and other items recorded
directly to the equity accounts. The objective is to report a
measure of all changes in equity of an enterprise that result
from transactions and other economic events during the period,
other than transactions with owners. The Companys other
comprehensive loss consists of income on derivative instruments
that qualify for cash flow hedge treatment. (See Note 6 -
Derivative Instruments and Hedging Activities.)
The following table sets forth the components of comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Consolidated net income (loss)
|
|
$
|
2,048
|
|
|
$
|
15,938
|
|
|
$
|
(55
|
)
|
|
$
|
(34,348
|
)
|
Other comprehensive income (loss) (net of tax benefit of $0 for
all periods):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative and hedging activities
|
|
|
5
|
|
|
|
(97
|
)
|
|
|
401
|
|
|
|
378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
2,053
|
|
|
|
15,841
|
|
|
|
346
|
|
|
|
(33,970
|
)
|
Comprehensive income attributable to the noncontrolling interests
|
|
|
1,010
|
|
|
|
1,712
|
|
|
|
1,427
|
|
|
|
3,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income attributable to common stockholders
|
|
$
|
1,043
|
|
|
$
|
14,129
|
|
|
$
|
(1,081
|
)
|
|
$
|
(37,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share is computed on the basis of the
weighted average number of shares of common stock outstanding
during the period. Diluted earnings per share is computed on the
basis of the weighted average number of shares of common stock
plus the effect of dilutive potential common shares outstanding
during the period using the treasury stock method. The
Companys potentially dilutive securities include stock
options and restricted stock. Diluted earnings per share
considers the impact of potentially dilutive securities except
in periods in which there is a net loss, as the inclusion of the
potentially dilutive common shares would have an anti-dilutive
effect.
The following table sets forth the calculation of basic and
diluted earnings per share (in thousands, except share and per
share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss) attributable to common
stockholders
|
|
$
|
1,038
|
|
|
$
|
14,226
|
|
|
$
|
(1,482
|
)
|
|
$
|
(37,998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net income (loss) per share
weighted average outstanding shares
|
|
|
52,064,108
|
|
|
|
56,242,964
|
|
|
|
51,316,498
|
|
|
|
61,873,161
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
|
|
|
2,198,777
|
|
|
|
441,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per share
weighted-average outstanding shares
|
|
|
54,262,885
|
|
|
|
56,684,369
|
|
|
|
51,316,498
|
|
|
|
61,873,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
Net income (loss) attributable to common stockholders per share
basic
|
|
$
|
0.02
|
|
|
$
|
0.25
|
|
|
$
|
(0.03
|
)
|
|
$
|
(0.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders per share
diluted
|
|
$
|
0.02
|
|
|
$
|
0.25
|
|
|
$
|
(0.03
|
)
|
|
$
|
(0.61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All stock options and restricted stock were excluded from the
diluted calculation for the nine months ended September 30,
2010 and 2009, as their inclusion would have been anti-dilutive.
Additionally, for the three months ended September 30, 2010
and 2009, approximately 5.1 million options and
5.4 million options, respectively, to purchase shares were
not included in the diluted earnings per share calculation, as
their inclusion would have been anti-dilutive. The following
table summarizes the potential common shares excluded from the
diluted calculation.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Stock options
|
|
|
5,090
|
|
|
|
5,371
|
|
|
|
|
|
|
|
|
|
|
Restricted stock
|
|
|
2,185
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
(h)
|
Fair
Value Measurements
|
We report our financial and non-financial assets and liabilities
measured at fair value on a recurring and non-recurring basis
under the provisions of ASC 820, Fair Value
Measurements and Disclosures. ASC 820 defines fair
value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements.
The fair value framework requires the categorization of assets
and liabilities into three levels based upon the assumptions
(inputs) used to price the assets or liabilities. Level 1
provides the most reliable measure of fair value, whereas
Level 3 generally requires significant management judgment.
The three levels are defined as follows:
Level 1: Inputs are unadjusted quoted
prices in active markets for identical assets and liabilities
that can be accessed at measurement date.
Level 2: Observable inputs other than
those included in Level 1. For example, quoted prices for
similar assets or liabilities in active markets or quoted prices
for identical assets or liabilities in inactive markets.
Level 3: Unobservable inputs reflecting
managements own assumptions about the inputs used in
pricing the asset or liability.
As of September 30, 2010 and December 31, 2009, the
fair values of our financial liabilities are categorized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
As of September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities subject to fair value measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap(a)
|
|
$
|
1,687
|
|
|
$
|
|
|
|
$
|
1,687
|
|
|
$
|
|
|
Employment agreement award(b)
|
|
|
5,733
|
|
|
|
|
|
|
|
|
|
|
|
5,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,420
|
|
|
$
|
|
|
|
$
|
1,687
|
|
|
$
|
5,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Mezzanine equity subject to fair value measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest(c)
|
|
$
|
44,047
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
44,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities subject to fair value measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap(a)
|
|
$
|
2,086
|
|
|
$
|
|
|
|
$
|
2,086
|
|
|
$
|
|
|
Employment agreement award(b)
|
|
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,743
|
|
|
$
|
|
|
|
$
|
2,086
|
|
|
$
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine equity subject to fair value measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests(c)
|
|
$
|
52,225
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
52,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Based on London Interbank Offered Rate (LIBOR). |
|
(b) |
|
Pursuant to an employment agreement (the Employment
Agreement) executed in April 2008, the Chief Executive
Officer (CEO) is eligible to receive an award amount
equal to 8% of any proceeds from distributions or other
liquidity events in excess of the return of the Companys
aggregate investment in TV One. The Company reviews the factors
underlying this award at the end of each quarter. The
Companys obligation to pay the award will be triggered
only after the Companys recovery of the aggregate amount
of its capital contribution in TV One and only upon actual
receipt of distributions of cash or marketable securities or
proceeds from a liquidity event with respect to the
Companys membership interest in TV One. The CEO was fully
vested in the award upon execution of the Employment Agreement,
and the award lapses upon expiration of the Employment Agreement
in April 2011, or earlier if the CEO voluntarily leaves the
Company or is terminated for cause. A third-party valuation firm
assisted the Company in estimating the fair valuation of the
award. (See Note 6 Derivative Instruments
and Hedging Activities.) |
|
(c) |
|
Redeemable noncontrolling interest in Reach Media is measured at
fair value using a discounted cash flow methodology. Significant
inputs to the discounted cash flow analysis include forecasted
operating results, the discount rate and a terminal value. |
The following table presents the changes in Level 3
liabilities measured at fair value on a recurring basis for the
nine months ended September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
Employment
|
|
|
Noncontrolling
|
|
|
|
Agreement Award
|
|
|
Interests
|
|
|
|
(In thousands)
|
|
|
Balance at December 31, 2009
|
|
$
|
4,657
|
|
|
$
|
52,225
|
|
Losses included in earnings
|
|
|
1,076
|
|
|
|
|
|
Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
1,427
|
|
Decretion to estimated redemption value
|
|
|
|
|
|
|
(9,605
|
)
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010
|
|
$
|
5,733
|
|
|
$
|
44,047
|
|
|
|
|
|
|
|
|
|
|
The amount of total gains for the period included in earnings
attributable to the change in unrealized gains relating to
assets and liabilities still held at the reporting date
|
|
$
|
(1,076
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The increase in the fair value of the employment award liability
was recorded in the consolidated statements of operations as
corporate selling, general and administrative expenses for the
three and nine months ended September 30, 2010.
F-74
Net income attributable to noncontrolling interest amounts
reflected in the table above was recorded in the consolidated
statements of operations as noncontrolling interest in income of
subsidiaries for the three and nine months ended
September 30, 2010.
Certain assets and liabilities are measured at fair value on a
non-recurring basis. These assets are not measured at fair value
on an ongoing basis but are subject to fair value adjustments
only in certain circumstances. Included in this category are
goodwill, radio broadcasting licenses and other intangible
assets, net, that are written down to fair value when they are
determined to be impaired. These assets were not impaired during
the three and nine months ended September 30, 2010 and
therefore were not reported at fair value.
|
|
(i)
|
Impact
of Recently Issued Accounting Pronouncements
|
In December 2009, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU)
2009-17
Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities, which amends
the guidance on variable interest entities (VIE) in
ASC 810, Consolidation. Effective
January 1, 2010, the new guidance requires more qualitative
than quantitative analyses to determine the primary beneficiary
of a VIE, requires continuous assessments of whether an
enterprise is the primary beneficiary of a VIE, amends certain
guidance for determining whether an entity is a VIE and requires
additional year-end and interim disclosures. Under the new
guidance, a VIE must be consolidated if the enterprise has both
(a) the power to direct the activities of the VIE that most
significantly impact the entitys economic performance, and
(b) the obligation to absorb losses or the right to receive
benefits from the VIE that could potentially be significant to
the VIE. This new accounting guidance became effective for our
Company on January 1, 2010, and is being applied
prospectively. The application of the new guidance did not
result in any changes in the Companys accounting for its
investment in TV One. However, the Company updated its footnote
disclosure to comply with the disclosure requirements.
(See Note 5 Investment in Affiliated
Company.)
In June 2009, the FASB issued ASC 105, Generally
Accepted Accounting Principles, which establishes the
ASC as the source of authoritative non-SEC U.S. GAAP for
non-governmental entities. ASC 105 is effective for financial
statements issued for interim and annual periods ending after
September 15, 2009. The adoption of ASC 105 did not
have a material impact on the Companys consolidated
financial statements.
In May 2009, the FASB issued ASC 855, Subsequent
Events, which addresses accounting and disclosure
requirements related to subsequent events. It requires
management to evaluate subsequent events through the date the
financial statements are either issued or available to be
issued. In February 2010, the FASB issued ASU
2010-09,
which amends ASC 855 to remove all requirements for SEC
filers to disclose the date through which subsequent events are
considered. The amendment became effective upon issuance. The
Company has provided the required disclosures regarding
subsequent events in Note 15 Subsequent
Events.
The provisions under ASC 825, Financial
Instruments, requiring disclosures about fair value of
financial instruments for interim reporting periods of publicly
traded companies, as well as in annual financial statements
became effective for the Company during the quarter ended
June 30, 2009. The additional disclosures required under
ASC 825 are included in Note 1
Organization and Summary of Significant Accounting
Policies.
Effective January 1, 2009, the provisions under
ASC 350, Intangibles Goodwill and
Other, related to the determination of the useful life
of intangible assets and requiring additional disclosures
related to renewing or extending the terms of recognized
intangible assets became effective for the Company. The adoption
of these provisions did not have a material effect on the
Companys consolidated financial statements.
Effective January 1, 2009, the Company adopted an
accounting standard update from the Emerging Issues Task Force
(EITF) consensus regarding the accounting for
contingent consideration agreements of an equity method
investment and the requirement for the investor to recognize its
share of any impairment charges recorded by the investee. This
update to ASC 323, Investments Equity
Method and Joint Ventures, requires the investor to
record share issuances by the investee as if it has sold a
portion of its investment with
F-75
any resulting gain or loss being reflected in earnings. The
adoption of this update did not have any impact on the
Companys consolidated financial statements.
|
|
(j)
|
Liquidity
and Uncertainties Related to Going Concern
|
The Company continually projects its anticipated cash needs,
which include, but are not limited to, its operating needs,
capital requirements, the TV One funding commitment and
principal and interest payments on its indebtedness.
Managements most recent revenue, operating income and cash
flow projections considered the recent gradual improvement in
both the economy and advertising environment, and the
projections compare more favorably to prior periods during which
the economic downturn persisted.
In June 2005, the Company entered into an agreement with a
syndicate of banks (the Credit Agreement). The
Credit Agreement expires the earlier of (a) six months
prior to the scheduled maturity of the
87/8% Senior
Subordinated Notes due July 1, 2011 (January 1, 2011)
(unless the
87/8% Senior
Subordinated Notes have been refinanced or repurchased prior to
such date) or (b) June 30, 2012. Management believes
it is probable that the Company will refinance the
87/8% Senior
Subordinated Notes prior to January 1, 2011. The Senior
Subordinated Notes and credit facilities are classified as
current in the accompanying consolidated balance sheets at
September 30, 2010 and December 31, 2009 as these
obligations may become callable due to the termination of the
Forbearance Agreement Amendment on September 10, 2010.
As of each of June 30, 2010, July 1, 2010 and
September 30, 2010, we were not in compliance with the
terms of our Existing Credit Facility. More specifically,
(i) as of June 30, 2010, we failed to maintain a then
required total leverage ratio of 7.25 to 1.00, (ii) as of
July 1, 2010, as a result of a step down of the total
leverage ratio from no greater than 7.25 to 1.00 to no greater
than 6.50 to 1.00 effective for the period July 1, 2010 to
September 30, 2011, we failed to maintain the requisite
total leverage ratio, (iii) as of September 30, 2010,
we failed to meet our current total leverage ratio requirement
of 6.50 to 1.00 and our senior leverage ratio requirement of
4.00 to 1.00, and (iv) as of each of June 30, 2010 and
September 30, 2010, we failed to meet certain hedging
obligations; specifically, we failed to maintain a ratio of at
least 50% fixed rate debt to floating rate debt. On
July 15, 2010, the Company and its subsidiaries entered
into a forbearance agreement (the Forbearance
Agreement) with Wells Fargo Bank, N.A. (successor by
merger to Wachovia Bank, National Association), as
administrative agent (the Agent), and financial
institutions constituting the majority of outstanding loans and
commitments (the Required Lenders) under our
Existing Credit Facility, relating to the defaults and events of
default occurring as of June 30, 2010 and July 1,
2010. On August 13, 2010, we entered into an amendment to
the Forbearance Agreement (the Forbearance Agreement
Amendment) that, among other things, extended the
termination date of the Forbearance Agreement to
September 10, 2010, unless terminated earlier by its terms,
and provided additional forbearance related to the then
anticipated default caused by an opinion of Ernst &
Young LLP expressing substantial doubt about the Companys
ability to continue as a going concern as issued in connection
with the restatement of our financial statements. Under the
Forbearance Agreement and the Forbearance Agreement Amendment,
the Agent and the Required Lenders maintained the right to
deliver payment blockage notices to the trustees for
the holders of the
87/8% Senior
Subordinated Notes due 2011 (2011 Notes)
and/or the
63/8% Senior
Subordinated Notes due 2013 (2013 Notes).
On August 5, 2010, the Agent delivered a payment blockage
notice to the Trustee under the Indenture governing our 2013
Notes. As a result, neither we nor any of our guaranteeing
subsidiaries may make any payment or distribution of any kind or
character in respect of obligations under the 2013 Notes,
including the interest payment that was scheduled to be made on
August 16, 2010. The
30-day grace
period for the nonpayment of interest before such nonpayment
constituted an event of default under the 2013 Notes Indenture
expired on September 15, 2010. While the trustee or holders
of at least 25% in principal amount of the then outstanding 2013
Notes could declare the principal amount, and accrued and unpaid
interest, on all outstanding 2013 Notes to be due and payable
immediately as a result of such event of default, as of the date
of this filing, no such remedies have been sought as we continue
to negotiate the terms of the amended exchange offer and a new
support agreement with the members of the ad hoc group of
holders of our 2011 and 2013 Notes. The event of default under
the 2013 Notes Indenture also constitutes an event of default
F-76
under the Existing Credit Facility. While the Forbearance
Agreement Amendment expired by its terms on September 10,
2010, we and the Agent continue to negotiate the terms of a
credit facility amendment (the Credit Agreement
Amendment) and the Agent and the lenders have not, as of
the date of this filing, exercised additional remedies under the
Existing Credit Facility. We, along with our advisors, have
negotiated the principal terms of the Credit Agreement Amendment
with the Agent. However, to the extent the Required Lenders do
not agree to enter into the Credit Agreement Amendment at the
completion of an amended exchange offer, we would expect that
all of our indebtedness under the Existing Credit Facility would
be declared immediately due and payable. Such acceleration of
our indebtedness would also cause a cross-default under our
other debt obligations, including under the Existing Notes.
If we complete our anticipated refinancing transactions, we
intend to pay the August 16, 2010 defaulted interest in
full in cash and cure or otherwise obtain a waiver of any and
all defaults or events of default under the 2013 Notes Indenture
and the Existing Credit Facility. The members of the ad hoc
group continue to forbear from exercising rights and remedies
under the Existing Indentures with respect to any default or
event of default that has occurred or may occur as a result of
our failure to make the interest payment on the 2013 Notes due
on August 16, 2010. However, we cannot assure that we will
complete our anticipated refinancing transactions. In the event
we do not complete our anticipated refinancing transactions and
remedies are exercised by the trustee or holders under the 2013
Notes Indenture, we would expect that all of our indebtedness
under the Existing Notes and the Existing Credit Facility would
be declared immediately due and payable. Either of these events
would make it difficult for us to operate our business in the
ordinary course, and we would likely need to seek protection
under Chapter 11 of the Bankruptcy Code. The accompanying
consolidated financial statements have been prepared assuming
that we will continue as a going concern and do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of liabilities that may result
from the outcome of this uncertainty.
Managements projections are dependent on the continuation
of the recently improving economic and advertising environments,
and any adverse fluctuations, or other unforeseen circumstances,
may negatively impact the Companys operations beyond those
assumed. Management considered the risks that the current
economic conditions may have on its liquidity projections, as
well as the Companys ability to meet its debt covenant
requirements. If economic conditions deteriorate unexpectedly or
do not continue to rebound, or if other adverse factors outside
the Companys control arise, our operations could be
negatively impacted, and the Companys ability to maintain
compliance with its debt covenants could be negated or even
prevented. If it appears that we could not meet our liquidity
needs or that noncompliance with debt covenants is likely to
result, the Company would implement several remedial measures,
which could include further operating cost and capital
expenditure reductions and deferrals, seeking its share of
distributions from TV One and further de-leveraging actions,
which may include repurchases of discounted senior subordinated
notes and other debt repayments, subject to our available
liquidity to make such repurchases. It should be noted that the
TV One distributions require the consent of third-parties and
there is no assurance that such third-party consents would be
granted. These third parties did approve TV One distributions
for the fourth quarter of 2009, as well as for the first, second
and third quarters of 2010.
During 2009 and in prior years, we generated over 10% of our
consolidated net revenues from a single customer, Radio
Networks, Inc. (Radio Networks), a sales
representation company owned by Citadel Broadcasting Corporation
(Citadel).
Under agreements between the Companys owned radio stations
and Radio Networks, and in accordance with ASC 605,
Revenue Recognition, the Company generated
revenue through barter agreements whereby advertising time was
exchanged for programming content (the RN Barter
Revenue).
Under a separate sales representation agreement between our
subsidiary Reach Media, and Radio Networks (the Sales
Representation Agreement), Reach Media was paid an annual
guarantee in exchange for providing the rights to Radio Networks
to sell advertising inventory on Reach Medias 105
affiliate radio stations broadcasting the Tom Joyner Morning
Show. Radio Networks also served as sales representative for
F-77
Reach Medias Internet advertising and special events. This
agreement, which commenced in 2003, expired on December 31,
2009.
In November 2009, Reach Media entered into a new sales
representation agreement (the New Sales Representation
Agreement) with Radio Networks whereby Radio Networks
serves as the sales representative for the
out-of-show
portions of Reach Medias advertising inventory for the
period beginning January 1, 2010 through December 31,
2012. Under the New Sales Representation Agreement, which is
commission based, there are no minimum guarantees on revenue.
Consequently, and combined with the fact that Radio Networks is
only selling
out-of-show
advertising inventory, we believe it is unlikely that total
revenue to be generated from Radio Networks will exceed 10% in
future periods.
For the three months and nine months ended September 30,
2009, net revenues attributable to the RN Barter Revenue and
Sales Representation Agreement were approximately
$8.6 million and $25.8 million, respectively, all of
which was reported in our Radio Broadcasting segment.
|
|
(l)
|
Redeemable
Noncontrolling Interests
|
Noncontrolling interests in subsidiaries that are redeemable
outside of the Companys control for cash or other assets
are classified as mezzanine equity and measured at the greater
of estimated redemption value at the end of each reporting
period or the historical cost basis of the noncontrolling
interests adjusted for cumulative earnings allocations. The
resulting increases or decreases in the estimated redemption
amount are affected by corresponding charges against retained
earnings, or in the absence of retained earnings, additional
paid-in-capital.
In February 2005, the Company acquired approximately 51% of the
common stock of Reach Media for approximately $55.8 million
in a combination of approximately $30.4 million of cash and
1,809,648 shares of the Companys Class D Common
Stock valued at approximately $25.4 million. Citadel, Reach
Medias sales representative and an investor in the
company, owned a noncontrolling interest in Reach Media. In
November 2009, Citadel sold its ownership interest to Reach
Media in exchange for a $1.0 million note due in December
2011 (See Note 7 Long-Term Debt). This
transaction increased Radio Ones common stock interest in
Reach Media to 53.5%.
As part of the Companys acquisition of a controlling 51%
ownership interest of Reach Media in 2005, the noncontrolling
shareholders of Reach Media were granted the right to require
Reach Media, a consolidated subsidiary of the Company, to
purchase all or a portion of their shares at the then current
fair market value for such shares during the 30 day period
beginning on February 28, 2012 and each anniversary
thereafter (Put Right). The purchase price for such
shares may be paid in cash
and/or
registered Class D Common Stock of Radio One, at the sole
discretion of Radio One. Because the Company cannot ensure that
it will be able to settle the Put Right in registered shares,
the Company determined that the Put Right is presumed to be
settlable only in cash. Accordingly, the noncontrolling
interests are considered to be instruments that are redeemable
at the option of the holders for cash and are classified outside
of permanent equity in mezzanine equity.
|
|
3.
|
DISCONTINUED
OPERATIONS
|
In December 2009, the Company ceased publication of Giant
Magazine. The remaining assets and liabilities of this
publication have been classified as discontinued operations as
of September 30, 2010 and 2009, and the publications
results from operations for the three months and nine months
ended September 30, 2010 and 2009, have been classified as
discontinued operations in the accompanying consolidated
financial statements.
F-78
The following table summarizes the operating results for Giant
Magazine as well as all of the stations sold and classified as
discontinued operations for all periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Net revenue
|
|
$
|
|
|
|
$
|
852
|
|
|
$
|
|
|
|
$
|
1,423
|
|
Station operating expenses
|
|
|
113
|
|
|
|
994
|
|
|
|
188
|
|
|
|
2,489
|
|
Depreciation and amortization
|
|
|
|
|
|
|
24
|
|
|
|
3
|
|
|
|
72
|
|
Loss (gain) on sale of assets
|
|
|
12
|
|
|
|
16
|
|
|
|
14
|
|
|
|
(302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(125
|
)
|
|
|
(182
|
)
|
|
|
(205
|
)
|
|
|
(836
|
)
|
(Benefit from) provision for income taxes
|
|
|
|
|
|
|
(92
|
)
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
(125
|
)
|
|
$
|
(90
|
)
|
|
$
|
(205
|
)
|
|
$
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assets and liabilities of Giant Magazine and all stations
classified as discontinued operations in the accompanying
consolidated balance sheets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands)
|
|
|
Currents assets:
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
$
|
78
|
|
|
$
|
424
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
78
|
|
|
|
424
|
|
Property and equipment, net
|
|
|
|
|
|
|
14
|
|
Intangible assets, net
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
78
|
|
|
$
|
498
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
91
|
|
Accrued compensation and related benefits
|
|
|
|
|
|
|
70
|
|
Other current liabilities
|
|
|
2,428
|
|
|
|
2,788
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,428
|
|
|
|
2,949
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,428
|
|
|
$
|
2,949
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
GOODWILL,
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE
ASSETS
|
Impairment
Testing
In the past, we have made acquisitions whereby a significant
amount of the purchase price was allocated to radio broadcasting
licenses, goodwill and other intangible assets. Effective
January 1, 2002, in accordance with ASC 350,
Intangibles Goodwill and Other,
we do not amortize our radio broadcasting licenses and
goodwill. Instead, we perform a test for impairment annually or
on an interim basis when events or changes in circumstances or
other conditions suggest impairment may have occurred. Other
intangible assets continue to be amortized on a straight-line
basis over their useful lives. We perform our annual impairment
test as of October 1 of each year.
Since our October 2009 annual goodwill impairment test, the
Company has revised its internal projections for Reach Media
three times due to lower than expected revenue and operating
results during the first, second and third quarters of 2010.
These revised financial projections are lower than those assumed
in the 2009
F-79
annual testing. The decline in net revenues was driven by the
December 31, 2009 expiration of a sales representation
agreement with Citadel whereby a minimum level of revenue was
guaranteed over the term of the agreement. Reach Medias
newly established sales organization began selling its inventory
on the Tom Joyner Morning Show and under a new commission based
sales representation agreement with Citadel. The Company deemed
the lowered financial projections as triggering events that
warranted interim impairment testing of goodwill attributable to
Reach Media. We performed such testing as of February 28,
2010, May 31, 2010, and again as of August 31, 2010
and concluded all three times that the goodwill carrying value
for Reach Media had not been impaired. Accordingly, there were
no impairment charges recorded for the three or nine month
periods ended September 30, 2010 for Reach Media.
During the first quarter of 2009, the prolonged economic
downturn at that time caused further deterioration to the then
current 2009 outlook for the radio industry, and resulted in
further significant revenue and profitability declines beyond
levels assumed in our 2008 annual impairment testing. As a
result, we made reductions to our internal projections and given
the adverse impact on terminal values, we deemed the then
worsening radio outlook and the lowering of our early 2009
internal projections as impairment indicators that warranted
interim impairment testing of our radio broadcasting licensees
and goodwill associated with our radio markets, which we
performed as of February 28, 2009. The outcome of our
interim testing was to record impairment charges against radio
broadcasting licenses in 11 of our 16 markets, for approximately
$49.0 million, for the three months ended March 31,
2009. The Company concluded that goodwill had not been impaired
during the first quarter of 2009. There were no impairment
charges recorded for the three or nine month periods ended
September 30, 2010.
Valuation
of Broadcasting Licenses
We utilize the services of a third-party valuation firm to
provide independent analysis when evaluating the fair value of
our radio broadcasting licenses and reporting units, including
goodwill. Fair value is estimated to be the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date. Effective January 1, 2002, we began using
the income approach to test for impairment of radio broadcasting
licenses. We believe this method of valuation to be consistent
with
ASC 805-20-S-99-3,
Use of the Residual Method to Value Acquired Assets
Other Than Goodwill. A projection period of
10 years is used, as that is the time horizon in which
operators and investors generally expect to recover their
investments. When evaluating our radio broadcasting licenses for
impairment, the testing is done at the unit of accounting level
as determined by ASC 350, Intangibles
Goodwill and Other. In our case, each unit of
accounting is a clustering of radio stations into one of our 16
geographical radio markets. Broadcasting license fair values are
based on the estimated after-tax discounted future cash flows of
the applicable unit of accounting assuming an initial
hypothetical
start-up
operation which possesses FCC licenses as the only asset. Over
time, it is assumed the operation acquires other tangible assets
such as advertising and programming contracts, employment
agreements and going concern value, and matures into an average
performing operation in a specific radio market. The income
approach model incorporates several variables, including, but
not limited to: (i) radio market revenue estimates and
growth projections; (ii) estimated market share and revenue
for the hypothetical participant; (iii) likely media
competition within the market; (iv) estimated
start-up
costs and losses incurred in the early years; (v) estimated
profit margins and cash flows based on market size and station
type; (vi) anticipated capital expenditures;
(vii) probable future terminal values; (viii) an
effective tax rate assumption; and (ix) a discount rate
based on the weighted-average cost of capital for the radio
broadcast industry. In calculating the discount rate, we
considered: (i) the cost of equity, which includes
estimates of the risk-free return, the long-term market return,
small stock risk premiums and industry beta; (ii) the cost
of debt, which includes estimates for corporate borrowing rates
and tax rates; and (iii) estimated average percentages of equity
and debt in capital structures. We have not made any changes to
the methodology for valuing broadcasting licenses.
Compared to our October 2008 annual testing, the projections
incorporated into our February and August 2009 license
valuations were more conservative and included updated
assumptions relative to the prolonged economic downturn at that
time, which led to a further weakened, deteriorating and less
profitable radio marketplace with reduced potential for growth.
Specifically, while we kept the discount rate at 10.5%, we
F-80
increased the 2009 radio marketplace revenue decline from (8.0)%
to a range of (13.1)% to (17.7)%, which in most cases decreased
market share ranges. We assumed a slight recovery, with growth
rates ranging from 0.3% to 0.5% in Year 2, which is 2010.
Industry growth rates can still vary significantly year to year
based upon the even and odd numbered years in the projection
period, which is reflective of what could be significant
cyclical content for political advertising in the even numbered
years.
Although the industry responded to declining revenues at that
time with significant cost-cutting initiatives, profitability
levels were still adversely impacted, as fixed costs represent a
large component of a stations operating costs. Depending
on the given market, we lowered the minimum profit margin by as
much as 230 basis points between the annual October 2008
and interim February 2009 assessments.
Below are other key assumptions used in the income approach
model for estimating broadcasting licenses fair values for the
annual October 2008 and October 2009 as well as the interim
February 2009 and August 2009 impairment tests.
|
|
|
|
|
|
|
|
|
|
|
October 1,
|
|
February 28,
|
|
August 31,
|
|
October 1,
|
Radio Broadcasting Licenses
|
|
2008
|
|
2009
|
|
2009(a)
|
|
2009
|
|
|
(In millions)
|
|
Pre-tax impairment charge
|
|
$51.2
|
|
$49.0
|
|
$
|
|
$16.1
|
Discount Rate
|
|
10.5%
|
|
10.5%
|
|
|
|
10.5%
|
Year 1 Market Revenue Growth or Decline Rate or Range
|
|
(8.0)%
|
|
(13.1)% - (17.7)%
|
|
(22.3)%
|
|
1.0%
|
Long-term Market Revenue Growth Rate Range (Years 6
10)
|
|
1.5% - 2.5%
|
|
1.5% - 2.5%
|
|
|
|
1.0% - 2.5%
|
Mature Market Share Range
|
|
1.2% - 27.0%
|
|
1.2% - 27.0%
|
|
|
|
0.8% - 28.1%
|
Operating Profit Margin Range
|
|
20.0% - 50.7%
|
|
17.7% - 50.7%
|
|
|
|
18.5% - 50.7%
|
|
|
|
(a) |
|
Reflects changes only to the key assumptions used in the
February 2009 interim testing for a certain unit of accounting. |
Relative to the 2009 environment, the recent improved economy
and credit markets and the recovery of the advertising industry
have contributed to more stable valuations for these intangible
assets in 2010. In addition, there were no triggering events
warranting impairment testing of our radio broadcasting licenses
for the three and nine month periods ended September 30,
2010.
Valuation
of Goodwill
The impairment testing of goodwill is performed at the reporting
unit level. We currently have, and had as of our October 2009
annual impairment assessments, 20 reporting units. For the
purpose of valuing goodwill, the 20 reporting units consist of
the 16 radio markets and four other business divisions. In
testing for the impairment of goodwill, with the assistance of a
third-party valuation firm, we also use the income approach to
estimate the fair value of our reporting units. The approach
involves a
10-year
model with similar variables as described above for broadcasting
licenses, except that the discounted cash flows are generally
based on the Companys estimated and projected market
revenue, market share and operating performance for its
reporting units, instead of those for a hypothetical
participant. We follow a two-step process to evaluate if a
potential impairment exists for goodwill. The first step of the
process involves estimating the fair value of each reporting
unit. If the reporting units fair value is less than its
carrying value, a second step is performed as per the guidance
of ASC 350, Intangibles Goodwill and
Other, to allocate the fair value of the reporting
unit to the individual assets and liabilities of the reporting
unit in order to determine the implied fair value of the
reporting units goodwill as of the impairment assessment
date. Any excess of the carrying value of the goodwill over the
implied fair value of the goodwill is written off as a charge to
operations. We have not made any changes to the methodology for
determining the fair value of our reporting units or goodwill.
F-81
For the August 2010 goodwill interim impairment test of Reach
Media, using updated internal projections, the Year 1
(2010) revenue growth rate remained at 2.5%. The 2010
growth rates used in the impairment tests are lower than the
16.5% growth rate assumed in the October 2009 annual assessment.
The 2010 revenue growth rates were lowered to reflect Reach
Media net revenues and cash flows which had declined for the
three quarters of 2010 compared to the same period in 2009, thus
causing the Company to revise its financial projections below
those assumed in the 2009 annual impairment test. The revenue
decline was attributable to the December 31, 2009
expiration of a sales representation agreement with Citadel
whereby a minimum level of revenue was guaranteed over the term
of the agreement. Reach Medias newly established sales
organization began selling its inventory on the Tom Joyner
Morning Show and under a new commission based sales
representation agreement with Citadel.
Below are key assumptions used in the income approach model for
estimating the fair value for Reach Media for the annual October
2009 and interim February, May and August 2010 impairment tests.
When compared to a 9.5% to 10.5% discount rate used for
assessing radio market reporting units, the higher discount rate
used in this assessment reflects a premium for a riskier and
broader media business, with a heavier concentration and
significantly higher amount of programming content related
intangible assets that are highly dependent on the on-air
personality Tom Joyner.
|
|
|
|
|
|
|
|
|
Reach Media Goodwill (Reporting
|
|
|
|
|
|
|
|
|
Unit Within the Radio Broadcasting
|
|
October 1,
|
|
February 28,
|
|
May 31,
|
|
August 31,
|
Segment)
|
|
2009
|
|
2010
|
|
2010
|
|
2010
|
|
|
|
|
(In millions)
|
|
|
|
Pre-tax impairment charge
|
|
$
|
|
$
|
|
$
|
|
$
|
Discount Rate
|
|
14.0%
|
|
13.5%
|
|
13.5%
|
|
13.0%
|
2010 (Year 1) Revenue Growth Rate
|
|
16.5%(a)
|
|
8.5%
|
|
2.5%
|
|
2.5%
|
Long-term Revenue Growth Rate Range (Years 6-10)
|
|
2.5% - 3.0%
|
|
2.5% - 3.0%
|
|
2.5% - 2.9%
|
|
2.5% - 3.3%
|
Operating Profit Margin Range
|
|
27.2% - 35.3%
|
|
22.7% - 31.4%
|
|
23.3% - 31.5%
|
|
25.5% - 31.2%
|
|
|
|
(a) |
|
The Year 1 revenue growth rate is driven by the September 2009
amendment of Reach Medias sales representation agreement
with Citadel, whereby the guaranteed revenue paid to Reach Media
by Citadel was reduced by $2.0 million in the fourth
quarter of 2009, the final quarter for the term of the
agreement. Effective January 2010, Reach Media and Citadel
became parties to a commission based sales representation
agreement, whereby Citadel sells
out-of-show
inventory for the Tom Joyner Morning Show. Reach Media now sells
all in-show inventory. |
As a result of the February, May and August 2010 interim
impairment tests, the Company concluded that the carrying value
of goodwill attributable to Reach Media had not been impaired.
F-82
Goodwill
Valuation Results
The table below presents the changes in the carrying amount of
goodwill by segment and reporting unit during the nine month
period ended September 30, 2010. The actual reporting units
are not disclosed so as to not make publicly available sensitive
information that could potentially be competitively harmful to
the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
Changes in Goodwill Carrying Value
|
|
|
As of
|
|
|
|
December 31,
|
|
|
Nine Months Ended September 30, 2010
|
|
|
September 30,
|
|
|
|
2009
|
|
|
|
|
|
Acquisitions/
|
|
|
Other
|
|
|
2010
|
|
Reporting Unit
|
|
Goodwill
|
|
|
Impairment
|
|
|
Dispositions
|
|
|
Activity
|
|
|
Goodwill
|
|
|
Reporting Unit 3
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Reporting Unit 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 2
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
406
|
|
Reporting Unit 6
|
|
|
928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
928
|
|
Reporting Unit 10
|
|
|
2,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,081
|
|
Reporting Unit 13
|
|
|
2,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,491
|
|
Reporting Unit 12
|
|
|
2,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,915
|
|
Reporting Unit 11
|
|
|
3,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,791
|
|
Reporting Unit 16
|
|
|
4,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,442
|
|
Reporting Unit 5
|
|
|
5,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,074
|
|
Reporting Unit 7
|
|
|
12,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,887
|
|
Reporting Unit 19
|
|
|
30,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,468
|
|
Reporting Unit 1
|
|
|
50,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio Broadcasting Segment
|
|
|
115,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate/Eliminations/Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Unit 18
|
|
|
21,840
|
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
21,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet Segment
|
|
|
21,840
|
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
21,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
137,517
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(24
|
)
|
|
$
|
137,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-83
Intangible
Assets Excluding Goodwill and Radio Broadcasting
Licenses
Other intangible assets, excluding goodwill and radio
broadcasting licenses, are being amortized on a straight-line
basis over various periods. Other intangible assets consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
Period of Amortization
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Trade names
|
|
$
|
17,133
|
|
|
$
|
16,965
|
|
|
|
2-5 Years
|
|
Talent agreement
|
|
|
19,549
|
|
|
|
19,549
|
|
|
|
10 Years
|
|
Debt financing and modification costs
|
|
|
25,159
|
|
|
|
17,527
|
|
|
|
Term of debt
|
|
Intellectual property
|
|
|
13,011
|
|
|
|
13,011
|
|
|
|
4-10 Years
|
|
Affiliate agreements
|
|
|
7,769
|
|
|
|
7,769
|
|
|
|
1-10 Years
|
|
Acquired income leases
|
|
|
1,282
|
|
|
|
1,282
|
|
|
|
3-9 Years
|
|
Non-compete agreements
|
|
|
1,260
|
|
|
|
1,260
|
|
|
|
1-3 Years
|
|
Advertiser agreements
|
|
|
6,613
|
|
|
|
6,613
|
|
|
|
2-7 Years
|
|
Favorable office and transmitter leases
|
|
|
3,358
|
|
|
|
3,358
|
|
|
|
2-60 Years
|
|
Brand names
|
|
|
2,539
|
|
|
|
2,539
|
|
|
|
2.5 Years
|
|
Other intangibles
|
|
|
1,257
|
|
|
|
1,260
|
|
|
|
1-5 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,930
|
|
|
|
91,133
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
(62,274
|
)
|
|
|
(56,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets, net
|
|
$
|
36,656
|
|
|
$
|
35,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of intangible assets for the three months
ended September 30, 2010 and 2009 was approximately
$1.8 million and $2.1 million, respectively, and for
the nine months ended September 30, 2010 and 2009 was
approximately $5.4 million and $6.4 million,
respectively. The amortization of deferred financing costs was
charged to interest expense for all periods presented. The
amount of deferred financing costs included in interest expense
for the three months ended September 30, 2010 and 2009 was
$527,000 and $606,000, respectively, and for the nine month
periods ended September 30, 2010 and 2009 was approximately
$1.7 million and $1.8 million, respectively.
The following table presents the Companys estimate of
amortization expense for the remainder of 2010 and years 2011
through 2015 for intangible assets, excluding deferred financing
costs:
|
|
|
|
|
|
|
(In thousands)
|
|
|
2010 (October through December)
|
|
$
|
1,666
|
|
2011
|
|
$
|
5,647
|
|
2012
|
|
$
|
5,415
|
|
2013
|
|
$
|
4,830
|
|
2014
|
|
$
|
4,124
|
|
2015
|
|
$
|
248
|
|
Actual amortization expense may vary as a result of future
acquisitions and dispositions.
|
|
5.
|
INVESTMENT
IN AFFILIATED COMPANY
|
In January 2004, the Company, together with an affiliate of
Comcast Corporation and other investors, launched TV One, LLC,
an entity formed to operate a cable television network featuring
lifestyle, entertainment and news-related programming targeted
primarily towards
African-American
viewers. At that time, we committed to make a cumulative cash
investment of $74.0 million in TV One, of which
$60.3 million had
F-84
been funded as of April 30, 2007, with no additional
funding investment made since then. Since December 31,
2006, the initial four year commitment period for funding the
capital has been extended on a quarterly basis due in part to TV
Ones lower than anticipated capital needs. Currently, the
commitment period has been extended to November 15, 2010,
and we anticipate further extension based upon TV Ones
cash flow and anticipated capital needs. In December 2004, TV
One entered into a distribution agreement with DIRECTV and
certain affiliates of DIRECTV became investors in TV One. As of
September 30, 2010, the Company owned approximately 37% of
TV One on a fully-converted basis.
On June 16, 2010, the Company announced a series of
financing transactions designed to refinance substantially all
of its existing indebtedness (the Refinancing
Transactions) and finance (the TV One
Financing) its purchase of an additional approximately 19%
of the outstanding equity interests in TV One (the TV One
Acquisition). On July 16, 2010, the Company announced
that it had extended the expiration time of the Refinancing
Transactions; however, it also announced that it had determined
not to further extend the subscription offer for the TV One
Financing. Thus, the Company elected to focus its efforts on the
Refinancing Transactions and determined not to continue to
pursue the TV One Acquisition at that time. As of the date
hereof, the Company maintains its ownership of approximately 37%
of TV One on a fully-converted basis.
The Company has recorded its investment at cost and has adjusted
the carrying amount of the investment to recognize the change in
the Companys claim on the net assets of TV One resulting
from operating income or losses of TV One as well as other
capital transactions of TV One using a hypothetical liquidation
at book value approach. For the three months ended
September 30, 2010 and 2009, the Companys allocable
share of TV Ones operating income was $1.8 million
and $1.4 million, respectively. For the nine months ended
September 30, 2010 and 2009, the Companys allocable
share of TV Ones operating income was $3.8 million
and $3.3 million, respectively.
At each of September 30, 2010 and December 31, 2009,
the carrying value of the Companys investment in TV One
was approximately $46.5 million and $48.5 million,
respectively, and is presented on the consolidated balance
sheets as investment in affiliated company. At
September 30, 2010, the Company has future contractual
funding commitments of $13.7 million and the Companys
maximum exposure to loss as a result of its involvement with TV
One was determined to be approximately $60.2 million, which
is the Companys carrying value of its investment plus its
future contractual funding commitment.
We entered into separate network services and advertising
services agreements with TV One in 2003. Under the network
services agreement, we are providing TV One with administrative
and operational support services and access to Radio One
personalities. This agreement, originally scheduled to expire in
January 2009, has been extended to January 2011. Under the
advertising services agreement, we are providing a specified
amount of advertising to TV One. This agreement was also
originally scheduled to expire in January 2009 and has been
extended to January 2011. In consideration of providing these
services, we have received equity in TV One, and receive an
annual cash fee of $500,000 for providing services under the
network services agreement.
The Company is accounting for the services provided to TV One
under the advertising services agreements in accordance with
ASC 505-50-30,
Equity. As services are provided to TV One,
the Company is recording revenue based on the fair value of the
most reliable unit of measurement in these transactions. The
most reliable unit of measurement has been determined to be the
value of underlying advertising time that is being provided to
TV One. The Company recognized $42,000 and $334,000 in revenue
relating to this agreement for the three months ended
September 30, 2010 and 2009, respectively. The Company
recognized $1.0 million in revenue relating to this
agreement for both of the nine month periods ended
September 30, 2010 and 2009.
|
|
6.
|
DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES
|
ASC 815, Derivatives and Hedging, establishes
disclosure requirements related to derivative instruments and
hedging activities with the intent to provide users of financial
statements with an enhanced understanding of: (i) how and
why an entity uses derivative instruments; (ii) how
derivative instruments and
F-85
related hedged items are accounted for and its related
interpretations; and (iii) how derivative instruments and
related hedged items affect an entitys financial position,
financial performance, and cash flows. ASC 815 requires
qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about the fair value
of gains and losses on derivative instruments, and disclosures
about credit-risk-related contingent features in derivative
instruments.
The fair values and the presentation of the Companys
derivative instruments in the consolidated balance sheets are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
As of September 30, 2010
|
|
|
As of December 31, 2009
|
|
|
|
(Unaudited)
|
|
Fair
|
|
|
Balance Sheet
|
|
|
|
|
|
Balance Sheet Location
|
|
Value
|
|
|
Location
|
|
Fair Value
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Current
|
|
|
|
|
Interest rate swaps
|
|
Other Current Liabilities
|
|
$
|
|
|
|
Liabilities
|
|
$
|
486
|
|
|
|
Other Long-Term
|
|
|
|
|
|
Other Long-Term
|
|
|
|
|
Interest rate swaps
|
|
Liabilities
|
|
|
1,687
|
|
|
Liabilities
|
|
|
1,600
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment agreement award
|
|
Other Long-Term Liabilities
|
|
|
5,733
|
|
|
Other Long-Term Liabilities
|
|
|
4,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
$
|
7,420
|
|
|
|
|
$
|
6,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect and the presentation of the Companys derivative
instruments on the consolidated statements of operations are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Amount of Gain (Loss) in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) in Income (Ineffective
|
|
|
|
on Derivative (Effective
|
|
|
Loss Reclassified from Accumulated Other
|
|
|
Portion and Amount Excluded from
|
|
Derivatives in Cash
|
|
Portion)
|
|
|
Comprehensive Loss into Income (Effective Portion)
|
|
|
Effectiveness Testing)
|
|
Flow Hedging
|
|
Amount
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Amount
|
|
Relationships
|
|
2010
|
|
|
2009
|
|
|
Location
|
|
|
2010
|
|
|
2009
|
|
|
Location
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Interest rate swaps
|
|
$
|
5
|
|
|
$
|
(97
|
)
|
|
|
Interest expense
|
|
|
$
|
(254
|
)
|
|
$
|
(485
|
)
|
|
|
Interest expense
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
Amount of Gain (Loss) in
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) in Income (Ineffective Portion
|
|
|
|
Other Comprehensive Loss
|
|
|
Loss Reclassified from Accumulated Other
|
|
|
and Amount Excluded from
|
|
Derivatives in Cash
|
|
on Derivative (Effective Portion)
|
|
|
Comprehensive Loss into Income (Effective Portion)
|
|
|
Effectiveness Testing)
|
|
Flow Hedging
|
|
Amount
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Amount
|
|
Relationships
|
|
2010
|
|
|
2009
|
|
|
Location
|
|
|
2010
|
|
|
2009
|
|
|
Location
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Interest rate swaps
|
|
$
|
401
|
|
|
$
|
378
|
|
|
|
Interest expense
|
|
|
$
|
(1,243
|
)
|
|
$
|
(1,107
|
)
|
|
|
Interest expense
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) in
|
|
|
|
|
|
Income of Derivative
|
|
Derivatives Not
|
|
Location of Gain
|
|
Three Months Ended
|
|
Designated as Hedging
|
|
(Loss) in Income of
|
|
September 30,
|
|
Instruments
|
|
Derivative
|
|
2010
|
|
|
2009
|
|
|
|
|
|
(Unaudited) (In thousands)
|
|
|
Employment agreement award
|
|
Corporate selling, general and administrative expense
|
|
$
|
(131
|
)
|
|
$
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) in
|
|
|
|
|
|
Income of Derivative
|
|
Derivatives Not
|
|
Location of Gain
|
|
Nine Months Ended
|
|
Designated as Hedging
|
|
(Loss) in Income on
|
|
September 30,
|
|
Instruments
|
|
Derivative
|
|
2010
|
|
|
2009
|
|
|
|
|
|
(Unaudited) (In thousands)
|
|
|
Employment agreement award
|
|
Corporate selling, general and administrative expense
|
|
$
|
(1,076
|
)
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging
Activities
In June 2005, pursuant to the Credit Agreement (as defined in
Note 7 Long-Term Debt), the Company
entered into four fixed rate swap agreements to reduce interest
rate fluctuations on certain floating rate debt commitments.
Three of the four $25.0 million swap agreements have
expired, one in each of June 2007, 2008, and 2010, respectively.
The remaining swap agreement has the following terms:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
Expiration
|
|
|
Fixed Rate
|
|
|
Swap Agreement
|
|
$
|
25.0 million
|
|
|
|
June 16, 2012
|
|
|
|
4.47
|
%
|
The remaining swap agreement has been accounted for as a
qualifying cash flow hedge of the Companys senior bank
debt, in accordance with ASC 815, Derivatives and
Hedging, whereby changes in the fair market value are
reflected as adjustments to the fair value of the derivative
instruments as reflected on the accompanying consolidated
financial statements.
The Companys objectives in using interest rate swaps are
to manage interest rate risk associated with the Companys
floating rate debt commitments and to add stability to future
cash flows. To accomplish this objective, the Company uses
interest rate swaps as part of its interest rate risk management
strategy. Interest rate swaps designated as cash flow hedges
involve the receipt of variable-rate amounts from a counterparty
in exchange for the Company making fixed-rate payments over the
life of the agreements without exchange of the underlying
notional amount.
The effective portion of changes in the fair value of
derivatives designated and qualifying as cash flow hedges is
recorded in Accumulated Other Comprehensive Loss and is
subsequently reclassified into earnings in the period that the
hedged forecasted transaction affects earnings. During the nine
months ended September 30, 2010, such derivatives were used
to hedge the variable cash flows associated with existing
floating rate debt commitments. The ineffective portion of the
change in fair value of the derivatives, if any, is recognized
directly in earnings.
Amounts reported in Accumulated Other Comprehensive Loss related
to derivatives are reclassified to interest expense as interest
payments are made on the Companys floating rate debt.
During the next 12 months, the Company estimates that an
additional amount of approximately $1.0 million will be
reclassified as an increase to interest expense.
F-87
Under the swap agreement, the Company pays the fixed rate listed
in the table above. The counterparties to the agreement pay the
Company a floating interest rate based on the three month LIBOR,
for which measurement and settlement is performed quarterly. The
counterparty to the agreement is an international financial
institution. The Company estimates the net fair value of the
instrument as of September 30, 2010 to be a liability of
approximately $1.7 million. The fair value of the interest
rate swap agreement is determined by obtaining a quotation from
the financial institution, which is a party to the
Companys swap agreement and adjusted for credit risk.
Costs incurred to execute the swap agreement are deferred and
amortized over the term of the swap agreement. The amounts
incurred by the Company, representing the effective difference
between the fixed rate under the swap agreement and the variable
rate on the underlying term of the debt, are included in
interest expense in the accompanying consolidated statements of
operations. In the event of early termination of the swap
agreement, any gains or losses would be amortized over the
respective lives of the underlying debt or recognized currently
if the debt is terminated earlier than initially anticipated.
Other
Derivative Instruments
The Company recognizes all derivatives at fair value, whether
designated in hedging relationships or not, in the balance sheet
as either an asset or liability. The accounting for changes in
the fair value of a derivative, including certain derivative
instruments embedded in other contracts, depends on the intended
use of the derivative and the resulting designation. If the
derivative is designated as a fair value hedge, the changes in
the fair value of the derivative and the hedged item are
recognized in the statement of operations. If the derivative is
designated as a cash flow hedge, changes in the fair value of
the derivative are recorded in other comprehensive income and
are recognized in the statement of operations when the hedged
item affects net income. If a derivative does not qualify as a
hedge, it is marked to fair value through the statement of
operations. Any fees associated with these derivatives are
amortized over their term.
As of September 30, 2010, the Company was party to an
Employment Agreement executed in April 2008 with the CEO, which
calls for an award that has been accounted for as a derivative
instrument without a hedging relationship in accordance with the
guidance under ASC 815, Derivatives and
Hedging. Pursuant to the Employment Agreement, the CEO
is eligible to receive an award amount equal to 8% of any
proceeds from distributions or other liquidity events in excess
of, and only after the return of the Companys aggregate
investment in TV One. The Company reassessed the estimated fair
value of the award at September 30, 2010 to be
approximately $5.7 million, and accordingly, adjusted its
liability to this amount. The Companys obligation to pay
the award will be triggered only after the Companys
recovery of the aggregate amount of its capital contribution in
TV One and only upon actual receipt of distributions of cash or
marketable securities or proceeds from a liquidity event with
respect to the Companys membership interest in TV One. The
CEO was fully vested in the award upon execution of the
Employment Agreement, and the award lapses upon expiration of
the Employment Agreement in April 2011, or earlier if the CEO
voluntarily leaves the Company, or is terminated for cause.
F-88
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands)
|
|
|
Senior bank term debt
|
|
$
|
27,628
|
|
|
$
|
45,024
|
|
Senior bank revolving debt
|
|
|
323,000
|
|
|
|
306,000
|
|
87/8% Senior
Subordinated Notes due July 2011
|
|
|
101,510
|
|
|
|
101,510
|
|
63/8% Senior
Subordinated Notes due February 2013
|
|
|
200,000
|
|
|
|
200,000
|
|
Note payable due December 31, 2011
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
653,138
|
|
|
|
653,534
|
|
Less: current portion
|
|
|
652,138
|
|
|
|
652,534
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
Credit
Facilities
In June 2005, the Company entered into the Credit Agreement with
a syndicate of banks. Simultaneous with entering into the Credit
Agreement, the Company borrowed $437.5 million to retire
all outstanding obligations under its previous credit agreement.
The Credit Agreement was amended in April 2006, September 2007
and March 2010 to modify certain financial covenants and other
provisions. The Credit Agreement expires the earlier of
(a) six months prior to the scheduled maturity date of the
87/8% Senior
Subordinated Notes due July 1, 2011 (January 1, 2011)
(unless the
87/8% Senior
Subordinated Notes have been repurchased or refinanced prior to
such date) or (b) June 30, 2012. The total amount
available under the Credit Agreement is $700.0 million,
consisting of a $400.0 million revolving facility and a
$300.0 million term loan facility. Borrowings under the
credit facilities are subject to compliance with certain
provisions including, but not limited to, financial covenants.
The Company may use proceeds from the credit facilities for
working capital, capital expenditures made in the ordinary
course of business, its common stock repurchase program,
permitted direct and indirect investments and other lawful
corporate purposes.
During the quarter ended March 31, 2010, we noted that
certain of our subsidiaries identified as guarantors in our
financial statements did not have requisite guarantees filed
with the trustee as required under the terms of the indentures
governing the
63/8%
and
87/8% Senior
Subordinated Notes (the Non-Joinder of Certain
Subsidiaries). The Non-Joinder of Certain Subsidiaries
caused a non-monetary, technical default under the terms of the
relevant indentures at December 31, 2009, causing a
non-monetary, technical cross-default at December 31, 2009
under the terms of our Credit Agreement dated June 2005. We have
since joined the relevant subsidiaries as guarantors under the
relevant indentures (the Joinder). Further, on
March 30, 2010, we entered into a third amendment (the
Third Amendment) to the Credit Agreement. The Third
Amendment provides for, among other things: (i) a
$100.0 million revolver commitment reduction (from
$500.0 million to $400.0 million) under the bank
facilities; (ii) a 1.0% floor with respect to any loan
bearing interest at a rate determined by reference to the
adjusted LIBOR; (iii) certain additional collateral
requirements; (iv) certain limitations on the use of
proceeds from the revolving loan commitments; (v) the
addition of Interactive One, LLC as a guarantor of the loans
under the Credit Agreement and under the notes governed by the
Companys 2001 and 2005 senior subordinated debt documents;
(vi) the waiver of the technical cross-defaults that
existed as of December 31, 2009 and through the date of the
amendment arising due to the Non-Joinder of Certain
Subsidiaries; and (vii) the payment of certain fees and
expenses of the lenders in connection with their diligence work
on the amendment.
F-89
The Credit Agreement contains affirmative and negative covenants
that the Company must comply with, including:
(a) maintaining an interest coverage ratio of no less than:
|
|
|
|
|
1.90 to 1.00 from January 1, 2006 to September 13,
2007;
|
|
|
|
|
|
1.60 to 1.00 from September 14, 2007 to June 30, 2008;
|
|
|
|
1.75 to 1.00 from July 1, 2008 to December 31, 2009;
|
|
|
|
2.00 to 1.00 from January 1, 2010 to December 31,
2010; and
|
|
|
|
2.25 to 1.00 from January 1, 2011 and thereafter;
|
(b) maintaining a total leverage ratio of no greater than:
|
|
|
|
|
7.00 to 1.00 beginning April 1, 2006 to September 13,
2007;
|
|
|
|
7.75 to 1.00 beginning September 14, 2007 to March 31,
2008;
|
|
|
|
7.50 to 1.00 beginning April 1, 2008 to September 30,
2008;
|
|
|
|
7.25 to 1.00 beginning October 1, 2008 to June 30,
2010;
|
|
|
|
6.50 to 1.00 beginning July 1, 2010 to September 30,
2011; and
|
|
|
|
6.00 to 1.00 beginning October 1, 2011 and thereafter;
|
(c) maintaining a senior leverage ratio of no greater than:
|
|
|
|
|
5.00 to 1.00 beginning June 13, 2005 to September 30,
2006;
|
|
|
|
4.50 to 1.00 beginning October 1, 2006 to
September 30, 2007; and
|
|
|
|
4.00 to 1.00 beginning October 1, 2007 and
thereafter; and
|
(d) limitations on:
|
|
|
|
|
liens;
|
|
|
|
sale of assets;
|
|
|
|
payment of dividends; and
|
|
|
|
mergers.
|
As of September 30, 2010, approximate ratios calculated in
accordance with the Credit Agreement, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
Covenant
|
|
|
|
|
|
|
2010
|
|
|
Limit
|
|
|
Cushion/(Deficit)
|
|
|
PF LTM Covenant EBITDA (In millions)
|
|
$
|
86.6
|
|
|
|
|
|
|
|
|
|
PF LTM Interest Expense (In millions)
|
|
$
|
40.4
|
|
|
|
|
|
|
|
|
|
Senior Debt (In millions)
|
|
$
|
351.5
|
|
|
|
|
|
|
|
|
|
Total Debt (In millions)
|
|
$
|
653.6
|
|
|
|
|
|
|
|
|
|
Senior Secured Leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Secured Debt / Covenant EBITDA
|
|
|
4.06
|
x
|
|
|
4.00
|
x
|
|
|
(.06
|
)x
|
Total Leverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt / Covenant EBITDA
|
|
|
7.55
|
x
|
|
|
6.50
|
x
|
|
|
(1.05
|
)x
|
Interest Coverage
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenant EBITDA / Interest Expense
|
|
|
2.14
|
x
|
|
|
2.00
|
x
|
|
|
0.14
|
x
|
F-90
PF Pro forma
LTM Last twelve months
EBITDA Earnings before interest, taxes, depreciation
and amortization
Based on its December 31, 2009 excess cash flow
calculation, the Company made a $5.0 million term loan
principal prepayment in May 2010 on its senior bank term debt.
No excess cash calculation was required and, therefore, no
payment was required for the year ended December 31, 2008.
In March 2009 and May 2009, the Company made prepayments of
$70.0 million and $31.5 million, respectively, on the
term loan facility based on its excess proceeds calculation,
which included asset acquisition and disposition activity for
the twelve month period ended May 31, 2008. These
prepayments were funded with $70.0 million and
$31.5 million in loan proceeds from the revolving facility
in March 2009 and May 2009, respectively.
As of each of June 30, 2010, July 1, 2010 and
September 30, 2010, we were not in compliance with the
terms of our Existing Credit Facility. More specifically,
(i) as of June 30, 2010, we failed to maintain a then
required total leverage ratio of 7.25 to 1.00, (ii) as of
July 1, 2010, as a result of a step down of the total
leverage ratio from no greater than 7.25 to 1.00 to no greater
than 6.50 to 1.00 effective for the period July 1, 2010 to
September 30, 2011, we failed to maintain the requisite
total leverage ratio, (iii) as of September 30, 2010,
we failed to meet our current total leverage ratio requirement
of 6.50 to 1.00 and our senior leverage ratio requirement of
4.00 to 1.00, and (iv) as of each of June 30, 2010 and
September 30, 2010, we failed to meet certain hedging
obligations; specifically, we failed to maintain a ratio of at
least 50% fixed rate debt to floating rate debt. On
July 15, 2010, the Company and its subsidiaries entered
into a forbearance agreement (the Forbearance
Agreement) with Wells Fargo Bank, N.A. (successor by
merger to Wachovia Bank, National Association), as
administrative agent (the Agent), and financial
institutions constituting the majority of outstanding loans and
commitments (the Required Lenders) under our
Existing Credit Facility, relating to the defaults and events of
default existing as of June 30, 2010 and July 1, 2010.
On August 13, 2010, we entered into an amendment to the
Forbearance Agreement (the Forbearance Agreement
Amendment) that, among other things, extended the
termination date of the Forbearance Agreement to
September 10, 2010, unless terminated earlier by its terms,
and provided additional forbearance related to the then
anticipated default caused by an opinion of Ernst &
Young LLP expressing substantial doubt about the Companys
ability to continue as a going concern as issued in connection
with the restatement of our financial statements. Under the
Forbearance Agreement and the Forbearance Agreement Amendment,
the Agent and the Required Lenders maintained the right to
deliver payment blockage notices to the trustees for
the holders of the
87/8% Senior
Subordinated Notes due 2011 (2011 Notes)
and/or the
63/8% Senior
Subordinated Notes due 2013 (2013 Notes).
On August 5, 2010, the Agent delivered a payment blockage
notice to the Trustee under the Indenture governing our 2013
Notes. As a result, neither we nor any of our guaranteeing
subsidiaries may make any payment or distribution of any kind or
character in respect of obligations under the 2013 Notes,
including the interest payment that was scheduled to be made on
August 16, 2010. The
30-day grace
period for the nonpayment of interest before such nonpayment
constituted an event of default under the 2013 Notes Indenture
expired on September 15, 2010. While the trustee or holders
of at least 25% in principal amount of the then outstanding 2013
Notes could declare the principal amount, and accrued and unpaid
interest, on all outstanding 2013 Notes to be due and payable
immediately as a result of such event of default, as of the date
of this filing, no such remedies have been exercised as we
continue to negotiate the terms of the amended exchange offer
and a new support agreement with the members of the ad hoc group
of holders of our 2011 and 2013 Notes. The event of default
under the 2013 Notes Indenture also constitutes an event of
default under the Existing Credit Facility. While the
Forbearance Agreement Amendment expired by its terms on
September 10, 2010, we and the Agent continue to negotiate
the terms of a credit facility amendment (the Credit
Agreement Amendment) and the Agent and the lenders have
not, as of the date of this filing, exercised additional
remedies under the Existing Credit Facility. We, along with our
advisors, have negotiated the principal terms of the Credit
Agreement Amendment with the Agent. However, to the extent the
Required Lenders do not agree to enter into the Credit Agreement
Amendment at the completion of an amended exchange offer, we
would expect that all of our indebtedness under the Existing
Credit Facility would be
F-91
declared immediately due and payable. Such acceleration of our
indebtedness would also cause a cross-default under our other
debt obligations, including under the Existing Notes.
If we complete our anticipated refinancing transactions, we
intend to pay the August 16, 2010 defaulted interest in
full in cash and cure or otherwise obtain a waiver of any and
all defaults or events of default under the 2013 Notes Indenture
and the Existing Credit Facility. The members of the ad hoc
group continue to forbear from exercising rights and remedies
under the Existing Indentures with respect to any default or
event of default that has occurred or may occur as a result of
our failure to make the interest payment on the 2013 Notes on
August 16, 2010. However, we cannot assure that we will
complete our anticipated refinancing transactions. In the event
we do not complete our anticipated refinancing transactions or
if the term of the new support agreement expires and remedies
are exercised by the trustee or holders under the 2013 Notes
Indenture, we would expect that all of our indebtedness under
the Existing Notes and the Existing Credit Facility would be
declared immediately due and payable. Either of these events
would make it difficult for us to operate our business in the
ordinary course, and we would likely need to seek protection
under Chapter 11 of the Bankruptcy Code.
Interest payments under the terms of the Credit Agreement are
due based on the type of loan selected. Interest on alternate
base rate loans as defined under the terms of the Credit
Agreement is payable on the last day of each March, June,
September and December. Interest due on the LIBOR loans is
payable on the last day of the interest period applicable for
borrowings up to three months in duration, and on the last day
of each March, June, September and December for borrowings
greater than three months in duration. In addition, quarterly
installments of principal on the term loan facility are payable
on the last day of each March, June, September and December
commencing on September 30, 2007 in a percentage amount of
the principal balance of the term loan facility outstanding on
September 30, 2007, net of loan repayments, of 1.25%
between September 30, 2007 and June 30, 2008, 5.0%
between September 30, 2008 and June 30, 2009, and
6.25% between September 30, 2009 and June 30, 2012.
Based on the (i) $174.4 million net principal balance
of the term loan facility outstanding on September 30,
2008, (ii) a $70.0 million prepayment in March 2009,
(iii) a $31.5 million prepayment in May 2009 and
(iv) a $5.0 million prepayment in May 2010, quarterly
payments of $4.0 million are payable between June 30,
2010 and June 30, 2012.
As of September 30, 2010, the Company had outstanding
approximately $350.6 million on its credit facility, all of
which was classified as current portion of long-term debt in the
consolidated balance sheet. During the three months and nine
months ended September 30, 2010, the Company repaid
approximately $3.9 million and $396,000, respectively.
Senior
Subordinated Notes
As of September 30, 2010 and December 31, 2009, the
Company had outstanding $200.0 million of its
63/8% Senior
Subordinated Notes due February 2013 and $101.5 million of
its
87/8% Senior
Subordinated Notes due July 2011. The
63/8% Senior
Subordinated Notes due February 2013 had a carrying value of
$200.0 million and a fair value of approximately
$168.0 million as of September 30, 2010, and a
carrying value of $200.0 million and a fair value of
approximately $142.0 million as of December 31, 2009.
The
87/8% Senior
Subordinated Notes due July 2011 had a carrying value of
$101.5 million and a fair value of approximately
$89.3 million as of September 30, 2010, and a carrying
value of $101.5 million and a fair value of approximately
$78.2 million as of December 31, 2009. The fair values
were determined based on the trading value of the instruments as
of the reporting date.
During the first quarter of 2010, we noted that certain of our
subsidiaries identified as guarantors in our financial
statements did not have requisite guarantees filed with the
trustee as required under the terms of the indentures governing
the
63/8%
and
87/8% Senior
Subordinated Notes (the Non-Joinder of Certain
Subsidiaries). The Non-Joinder of Certain Subsidiaries
caused a non-monetary, technical default under the terms of the
relevant indentures at December 31, 2009, causing a
non-monetary, technical cross-default at December 31, 2009
under the terms of our Credit Agreement dated June 2005. We have
since joined the relevant subsidiaries as guarantors under the
relevant indentures (the Joinder). As discussed in
the section above, on March 30,
F-92
2010, the Company cured a non-monetary technical cross-default
under the terms of our Credit Agreement dated June 2005 by
entering into the Third Amendment.
Interest payments under the terms of the
63/8%
and the
87/8% Senior
Subordinated Notes are due in February and August, and January
and July of each year, respectively. Based on the
$200.0 million principal balance of the
63/8% Senior
Subordinated Notes outstanding on September 30, 2010,
interest payments of $6.4 million are payable each February
and August through February 2013. The Company made this
$6.4 million payment in February and August 2009, and in
February 2010. Based on the $101.5 million principal
balance of the
87/8% Senior
Subordinated Notes outstanding on September 30, 2010,
interest payments of $4.5 million are payable each January
and July through July 2011. The Company made a $4.6 million
interest payment in January 2009, and $4.5 million interest
payment in each of July 2009, January 2010 and July 2010.
On August 5, 2010, the Agent under our Existing Credit
Facility delivered a payment blockage notice to the Trustee
under the Indenture governing our 2013 Notes. As a result,
neither we nor any of our guaranteeing subsidiaries may make any
payment or distribution of any kind or character in respect of
obligations under the 2013 Notes, including the interest payment
that was scheduled to be made on August 16, 2010. The
30-day grace
period for the nonpayment of interest before such nonpayment
constituted an event of default under the 2013 Notes Indenture
expired on September 15, 2010. While the trustee or holders
of at least 25% in principal amount of the then outstanding 2013
Notes could declare the principal amount, and accrued and unpaid
interest, on all outstanding 2013 Notes to be due and payable
immediately as a result of such event of default, as of the date
of this filing, no such remedies have been sought as we continue
to negotiate the terms of the amended exchange offer and a new
support agreement with the members of the ad hoc group of
holders of our 2011 and 2013 Notes. The event of default under
the 2013 Notes Indenture also constitutes an event of default
under the Existing Credit Facility. If we complete our
anticipated refinancing transactions, we intend to pay the
August 16, 2010 defaulted interest in full in cash and cure
or otherwise obtain a waiver of any and all defaults under the
2013 Notes Indenture and the Existing Credit Facility. However,
we cannot assure that we will complete our anticipated
refinancing transactions. Our ability to consummate our
anticipated refinancing transactions will depend on prevailing
market conditions, our liquidity requirements, contractual
restrictions and other factors, some of which may be beyond our
control. In the event we do not complete our anticipated
refinancing transactions, we would expect that all of our
indebtedness under the Existing Notes and the Existing Credit
Facility would be declared immediately due and payable.
The indentures governing the Companys senior subordinated
notes also contain covenants that restrict, among other things,
the ability of the Company to incur additional debt, purchase
common stock, make capital expenditures, make investments or
other restricted payments, swap or sell assets, engage in
transactions with related parties, secure non-senior debt with
assets, or merge, consolidate or sell all or substantially all
of its assets.
The Company conducts a portion of its business through its
subsidiaries. Certain of the Companys subsidiaries have
fully and unconditionally guaranteed the Companys
87/8% Senior
Subordinated Notes, the
63/8% Senior
Subordinated Notes and the Companys obligations under the
Credit Agreement.
Note
Payable
In November 2009, Reach Media issued a $1.0 million
promissory note payable to a subsidiary of Citadel. The note
bears interest at 7%, interest is payable quarterly and
principal is due on December 31, 2011.
F-93
Future scheduled minimum principal payments of debt as of
September 30, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
|
|
|
|
|
|
|
|
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
Credit Facilities
|
|
|
Note Payable
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
October December 2010
|
|
$
|
|
|
|
$
|
3,947
|
|
|
$
|
|
|
2011
|
|
|
101,510
|
|
|
|
346,681
|
|
|
|
1,000
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 and thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
|
$
|
301,510
|
|
|
$
|
350,628
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Senior Subordinated Notes and credit facilities are
classified as current in the accompanying consolidated balance
sheets at September 30, 2010 and December 31, 2009 as
these obligations may become callable due to the termination of
the Forbearance Agreement Amendment on September 10, 2010.
The effective tax rate from continuing operations for the nine
month period ended September 30, 2010 was 96.9%. This rate
is based on the blending of an estimated annual effective tax
rate of 136.5% for Radio One, which has a full valuation
allowance for its deferred tax assets (DTAs), with
an estimated annual effective tax rate of 36.3% for Reach Media,
which does not have a valuation allowance. The Radio One annual
effective tax rate calculation for 2010 is due primarily to the
increase in the deferred tax liability (DTL) of
approximately $3.8 million associated with the amortization
for tax purposes of certain of the Companys radio
broadcasting licenses. A tax expense of $759,000 was recognized
for Reach Media and $83,000 was recognized for discrete items
for Radio One, which resulted in a consolidated net tax expense
of $4.7 million for the nine months ended
September 30, 2010.
In 2007, the Company concluded it was more likely than not that
the benefit from certain of its DTAs related to Radio One would
not be realized. The Company considered its historically
profitable jurisdictions, its sources of future taxable income
and tax planning strategies in determining the amount of
valuation allowance recorded. As part of that assessment, the
Company also determined that it was not appropriate under GAAP
to benefit its DTAs based on DTLs related to indefinite-lived
intangibles that cannot be scheduled to reverse in the same
period. Because the DTL in this case would not reverse until
some future indefinite period when the intangibles are either
sold or impaired, any resulting temporary differences cannot be
considered a source of future taxable income to support
realization of the DTAs. As a result of this assessment, and
given the then three year cumulative loss position, the
uncertainty of future taxable income and the feasibility of tax
planning strategies, the Company recorded a valuation allowance
for the Radio One DTAs. For the nine month period ended
September 30, 2010, an additional valuation allowance for
the current year anticipated increase to DTAs related to net
operating loss carryforwards from the amortization of
indefinite-lived intangibles related to Radio One was included
in the annual effective tax rate calculation.
On January 1, 2007, the Company adopted the provisions of
ASC 740, Income Taxes, related to
accounting for uncertainty in income taxes, which recognizes the
impact of a tax position in the financial statements if it is
more likely than not that the position would be sustained on
audit based on the technical merits of the position. The nature
of the uncertainties pertaining to our income tax position is
primarily due to various state tax positions. As of
September 30, 2010, we had approximately $6.3 million
in unrecognized tax benefits. Accrued interest and penalties
related to unrecognized tax benefits is recognized as a
component of tax expense. During the nine months ended
September 30, 2010, the Company recorded an expense for
interest and penalties of approximately $71,000. As of
September 30, 2010, the Company had a liability of
approximately $275,000 for unrecognized tax benefits for
interest and penalties which is included in taxes payable in the
consolidated balance sheet. The Company estimates the possible
change in unrecognized tax
F-94
benefits prior to September 30, 2011 which could range from
zero to a reduction of $74,000, due to expiring statutes.
Common
Stock
The Company has four classes of common stock, Class A,
Class B, Class C and Class D. Generally, the
shares of each class are identical in all respects and entitle
the holders thereof to the same rights and privileges. However,
with respect to voting rights, each share of Class A Common
Stock entitles its holder to one vote and each share of
Class B Common Stock entitles its holder to ten votes. The
holders of Class C and Class D Common Stock are not
entitled to vote on any matters. The holders of Class A
Common Stock can convert such shares into shares of Class C
or Class D Common Stock. Subject to certain limitations,
the holders of Class B Common Stock can convert such shares
into shares of Class A Common Stock. The holders of
Class C Common Stock can convert such shares into shares of
Class A Common Stock. The holders of Class D Common
Stock have no such conversion rights.
Stock
Repurchase Program
In March 2008, the Companys board of directors authorized
a repurchase of shares of the Companys Class A and
Class D Common Stock through December 31, 2009, in an
amount of up to $150.0 million, the maximum amount
allowable under the Credit Agreement. The amount and timing of
such repurchases was based on pricing, general economic and
market conditions, and the restrictions contained in the
agreements governing the Companys credit facilities and
subordinated debt and certain other factors. While
$150.0 million is the maximum amount allowable under the
Credit Agreement, in 2005, under a prior board authorization,
the Company utilized approximately $78.0 million to
repurchase common stock leaving capacity of $72.0 million
under the Credit Agreement. During the nine months ended
September 30, 2010, the Company did not repurchase any
Class A Common Stock or Class D Common Stock. During
the nine months ended September 30, 2009, the Company
repurchased 34,889 shares of Class A Common Stock at
an average price of $0.68 and 22.7 million shares of
Class D Common Stock at an average price of $0.47. The
Company does not have any capacity available to repurchase stock
in 2010 as the authorization expired by its terms on
December 31, 2009 and has not been renewed.
Stock
Option and Restricted Stock Grant Plan
Under the Companys 1999 Stock Option and Restricted Stock
Grant Plan (Plan), the Company had the authority to
issue up to 10,816,198 shares of Class D Common Stock
and 1,408,099 shares of Class A Common Stock. The Plan
expired March 10, 2009. The options previously issued under
this plan are exercisable in installments determined by the
compensation committee of the Companys board of directors
at the time of grant. These options expire as determined by the
compensation committee, but no later than ten years from the
date of the grant. The Company uses an average life for all
option awards. The Company settles stock options upon exercise
by issuing stock.
A new stock option and restricted stock plan (the 2009
Stock Plan) was approved by the stockholders at the
Companys annual meeting on December 16, 2009. The
terms of the 2009 Stock Plan are substantially similar to the
prior Plan. The Company has the authority to issue up to
8,250,000 shares of Class D Common Stock under the
2009 Stock Plan. As of September 30, 2010,
5,175,570 shares of Class D Common Stock were
available for grant under the 2009 Stock Plan.
The compensation committee and the non-executive members of the
Board of Directors approved a long-term incentive plan (the
2009 LTIP) for certain key employees of
the Company. The purpose of the 2009 LTIP was to retain and
incent these key employees in light of sacrifices
they made as a result of the cost savings initiatives in
response to current economic conditions. These sacrifices
included not receiving performance-based bonuses in 2008 and
salary reductions and shorter work weeks in 2009 in order to
provide expense savings and financial flexibility to the
Company. The 2009 LTIP is comprised of 3,250,000 shares
(the LTIP Shares) of the 2009 Stock Plans
8,250,000 shares of Class D Common Stock. Awards of
the
F-95
LTIP Shares were granted in the form of restricted stock and
allocated among 31 employees of the Company, including the
named executive officers. The named executive officers were
allocated LTIP Shares as follows: (i) Chief Executive
Officer (CEO) (1.0 million shares);
(ii) the Chairperson (300,000 shares); (iii) the
Chief Financial Officer (CFO) (225,000 shares);
(iv) the Chief Administrative Officer (CAO)
(225,000 shares); and (v) the President of the Radio
Division (PRD) (130,000 shares). The remaining
1,370,000 shares were allocated among 26 other
key employees. All awards will vest in three
installments. The awards were granted effective January 5,
2010 and the first installment of 33% vested on June 5,
2010. The remaining two installments will vest equally on
June 5, 2011 and June 5, 2012. Pursuant to the terms
of the 2009 Stock Plan, subject to the Companys insider
trading policy, a portion of each recipients vested shares
may be sold into the open market for tax purposes on or about
the vesting dates.
The Company follows the provisions under ASC 718,
Compensation Stock Compensation,
using the modified prospective method, which requires
measurement of compensation cost for all stock-based awards at
fair value on date of grant and recognition of compensation over
the service period for awards expected to vest. These
stock-based awards do not participate in dividends until fully
vested. The fair value of stock options is determined using the
Black-Scholes (BSM) valuation model, which is
consistent with our valuation methodologies previously used for
options in footnote disclosures. Such fair value is recognized
as an expense over the service period, net of estimated
forfeitures, using the straight-line method. Estimating the
number of stock awards that will ultimately vest requires
judgment, and to the extent actual forfeitures differ
substantially from our current estimates, amounts will be
recorded as a cumulative adjustment in the period the estimated
number of stock awards are revised. We consider many factors
when estimating expected forfeitures, including the types of
awards, employee classification and historical experience.
Actual forfeitures may differ substantially from our current
estimate.
The Company also uses the BSM valuation model to calculate the
fair value of stock-based awards. The BSM incorporates various
assumptions including volatility, expected life, and interest
rates. For options granted the Company uses the BSM
option-pricing model and determines: (i) the term by using
the simplified plain-vanilla method as allowed under
SAB No. 110; (ii) a historical volatility over a
period commensurate with the expected term, with the observation
of the volatility on a daily basis; and (iii) a risk-free
interest rate that was consistent with the expected term of the
stock options and based on the U.S. Treasury yield curve in
effect at the time of the grant.
The Company granted 39,430 stock options during the nine months
ended September 30, 2010, and did not grant stock options
during the three months ended September 30, 2010 and 2009,
and the nine months ended September 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Average risk-free interest rate
|
|
|
|
|
|
|
|
|
|
|
3.28
|
%
|
|
|
|
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
Expected lives
|
|
|
|
|
|
|
6.25 Years
|
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
|
|
|
|
|
|
|
|
111.27
|
%
|
|
|
|
|
F-96
Transactions and other information relating to stock options for
the nine months ended September 30, 2010 are summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Remaining
|
|
|
|
|
|
|
Number
|
|
|
Average
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
of
|
|
|
Exercise
|
|
|
Term
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
(In Years)
|
|
|
Value
|
|
|
Outstanding at December 31, 2009
|
|
|
5,365,000
|
|
|
$
|
9.64
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
39,000
|
|
|
$
|
3.17
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled/expired
|
|
|
(314,000
|
)
|
|
$
|
12.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2010
|
|
|
5,090,000
|
|
|
$
|
9.43
|
|
|
|
5.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2010
|
|
|
4,954,000
|
|
|
$
|
9.62
|
|
|
|
5.14
|
|
|
|
|
|
Unvested at September 30, 2010
|
|
|
679,000
|
|
|
$
|
1.84
|
|
|
|
7.70
|
|
|
|
|
|
Exercisable at September 30, 2010
|
|
|
4,411,000
|
|
|
$
|
10.60
|
|
|
|
4.82
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the
difference between the Companys stock closing price on the
last day of trading during the nine months ended
September 30, 2010 and the exercise price, multiplied by
the number of shares that would have been received by the
holders of
in-the-money
options had all the option holders exercised their options on
September 30, 2010. This amount changes based on the fair
market value of the Companys stock. There were no options
exercised during the three and nine months ended
September 30, 2010. There were no options that vested
during the three months ended September 30, 2010 and
693,156 options vested during the nine months ended
September 30, 2010.
As of September 30, 2010, approximately $362,000 of total
unrecognized compensation cost related to stock options is
expected to be recognized over a weighted-average period of
3.5 months. The stock option weighted-average fair value
per share was $4.19 at September 30, 2010.
Transactions and other information relating to restricted stock
grants for the nine months ended September 30, 2010 are
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Fair Value
|
|
|
|
Shares
|
|
|
at Grant Date
|
|
|
Unvested at December 31, 2009
|
|
|
393,000
|
|
|
$
|
1.94
|
|
Grants
|
|
|
3,250,000
|
|
|
$
|
3.17
|
|
Vested
|
|
|
(1,226,000
|
)
|
|
$
|
3.01
|
|
Forfeited/cancelled/expired
|
|
|
(232,000
|
)
|
|
$
|
3.23
|
|
|
|
|
|
|
|
|
|
|
Unvested at September 30, 2010
|
|
|
2,185,000
|
|
|
$
|
3.03
|
|
|
|
|
|
|
|
|
|
|
The restricted stock grants were included in the Companys
outstanding share numbers on the effective date of grant. As of
September 30, 2010, approximately $5.6 million of
total unrecognized compensation cost related to restricted stock
grants is expected to be recognized over the next 1.2 years.
The Company has two reportable segments: (i) Radio
Broadcasting; and (ii) Internet. These two segments operate
in the United States and are consistently aligned with the
Companys management of its businesses and its financial
reporting structure.
The Radio Broadcasting segment consists of all broadcast and
Reach Media results of operations. The Internet segment includes
the results of our online business, including the operations of
CCI. Corporate/Eliminations/Other represents financial activity
associated with our corporate staff and offices, intercompany
activity between the two segments and activity associated with a
small film venture.
F-97
Operating income or loss represents total revenues less
operating expenses, depreciation and amortization, and
impairment of long-lived assets. Intercompany revenue earned and
expenses charged between segments are recorded at fair value and
eliminated in consolidation.
The accounting policies described in the summary of significant
accounting policies in Note 1 Organization
and Summary of Significant Accounting Policies are applied
consistently across the two segments.
Detailed segment data for the three and nine month periods ended
September 30, 2010 and 2009 is presented in the following
tables:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Net Revenue:
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
72,059
|
|
|
$
|
72,541
|
|
Internet
|
|
|
4,382
|
|
|
|
3,548
|
|
Corporate/Eliminations/Other
|
|
|
(1,950
|
)
|
|
|
(1,438
|
)
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
74,491
|
|
|
$
|
74,651
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses (including stock-based compensation):
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
44,362
|
|
|
$
|
39,776
|
|
Internet
|
|
|
5,663
|
|
|
|
4,825
|
|
Corporate/Eliminations/Other
|
|
|
2,548
|
|
|
|
2,361
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
52,573
|
|
|
$
|
46,962
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
3,131
|
|
|
$
|
3,402
|
|
Internet
|
|
|
1,222
|
|
|
|
1,615
|
|
Corporate/Eliminations/Other
|
|
|
272
|
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
4,625
|
|
|
$
|
5,337
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
24,566
|
|
|
$
|
29,363
|
|
Internet
|
|
|
(2,503
|
)
|
|
|
(2,892
|
)
|
Corporate/Eliminations/Other
|
|
|
(4,770
|
)
|
|
|
(4,119
|
)
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
17,293
|
|
|
$
|
22,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands)
|
|
|
Total Assets:
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
926,070
|
|
|
$
|
921,946
|
|
Internet
|
|
|
33,924
|
|
|
|
37,784
|
|
Corporate/Eliminations/Other
|
|
|
84,390
|
|
|
|
75,812
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
1,044,384
|
|
|
$
|
1,035,542
|
|
|
|
|
|
|
|
|
|
|
F-98
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Net Revenue:
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
202,099
|
|
|
$
|
198,853
|
|
Internet
|
|
|
12,330
|
|
|
|
10,027
|
|
Corporate/Eliminations/Other
|
|
|
(5,726
|
)
|
|
|
(4,045
|
)
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
208,703
|
|
|
$
|
204,835
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses (excluding impairment charges and including
stock-based compensation):
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
129,092
|
|
|
$
|
118,915
|
|
Internet
|
|
|
17,801
|
|
|
|
16,175
|
|
Corporate/Eliminations/Other
|
|
|
12,714
|
|
|
|
6,642
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
159,607
|
|
|
$
|
141,732
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
9,491
|
|
|
$
|
10,101
|
|
Internet
|
|
|
3,853
|
|
|
|
4,785
|
|
Corporate/Eliminations/Other
|
|
|
851
|
|
|
|
918
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
14,195
|
|
|
$
|
15,804
|
|
|
|
|
|
|
|
|
|
|
Impairment of Long-Lived Assets:
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
|
|
|
$
|
48,953
|
|
Internet
|
|
|
|
|
|
|
|
|
Corporate/Eliminations/Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
|
|
|
$
|
48,953
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Radio Broadcasting
|
|
$
|
63,516
|
|
|
$
|
20,884
|
|
Internet
|
|
|
(9,324
|
)
|
|
|
(10,933
|
)
|
Corporate/Eliminations/Other
|
|
|
(19,291
|
)
|
|
|
(11,605
|
)
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
34,901
|
|
|
$
|
(1,654
|
)
|
|
|
|
|
|
|
|
|
|
In connection with the September 2005 termination of the
Companys sales representation agreements with Interep
National Radio Sales, Inc., and its subsequent agreements with
Katz Communications, Inc. (Katz) making Katz the
Companys sole national sales representative, Katz paid the
Company $3.4 million as an inducement to enter into new
agreements and paid Interep approximately $5.3 million to
satisfy the Companys termination obligations. In August
2009, the Company completed amortizing both over the four-year
life of the subsequent Katz agreements as a reduction to
selling, general, and administrative expense. For the three and
nine month periods ended September 30, 2009, selling,
general and administrative expense was reduced by $316,000 and
$1.3 million, respectively. The Companys agreement
with Katz automatically renews on an annual basis.
F-99
|
|
12.
|
RELATED
PARTY TRANSACTIONS
|
The Companys CEO and Chairperson own a music company
called Music One, Inc. (Music One). The Company
sometimes engages in promoting the recorded music product of
Music One. Based on the cross-promotional value received by the
Company, we believe that the provision of such promotion is
fair. During the three and nine months ended September 30,
2010 and 2009, Radio One paid $0 and $6,000 and $9,000 and
$37,000, respectively, to or on behalf of Music One, primarily
for market talent event appearances, travel reimbursement and
sponsorships. For the three and nine months ended
September 30, 2010 and 2009, the Company provided no
advertising services to Music One. There were no cash, trade or
no-charge orders placed by Music One for the three and nine
months ended September 30, 2010 and 2009. As of
September 30, 2010, Music One owed Radio One $102,000 for
office space and administrative services provided in 2009, 2008
and 2007.
The office space and administrative support transactions between
Radio One and Music One are conducted at cost and all expenses
associated with the transactions are passed through at actual
costs. Costs associated with office space on behalf of Music One
are calculated based on square footage used by Music One,
multiplied by Radio Ones actual per square foot lease
costs for the appropriate time period. Administrative services
are calculated based on the approximate hours provided by each
Radio One employee to Music One, multiplied by such
employees applicable hourly rate and related benefits
allocation. Advertising spots are priced at an average unit
rate. Based on the cross-promotional nature of the activities
provided by Music One and received by the Company, we believe
that these methodologies of charging average unit rates or
passing through the actual costs incurred are fair and reflect
terms no more favorable than terms generally available to a
third-party.
|
|
13.
|
CONDENSED
CONSOLIDATING FINANCIAL STATEMENTS
|
The Company conducts a portion of its business through its
subsidiaries. All of the Companys subsidiary guarantors
have fully and unconditionally guaranteed the Companys
87/8% Senior
Subordinated Notes due July 2011, the
63/8% Senior
Subordinated Notes due February 2013, and the Companys
obligations under the Credit Agreement.
Set forth below are consolidated balance sheets for the Company
and the subsidiary guarantors as of September 30, 2010 and
December 31, 2009, and related consolidated statements of
operations and cash flows for each of the three and nine month
periods ended September 30, 2010 and 2009. The equity
method of accounting has been used by the Company to report its
investments in subsidiaries. Separate financial statements for
the subsidiary guarantors are not presented based on
managements determination that they do not provide
additional information that is material to investors.
F-100
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
NET REVENUE
|
|
$
|
35,540
|
|
|
$
|
38,951
|
|
|
$
|
|
|
|
$
|
74,491
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based compensation
|
|
|
8,631
|
|
|
|
10,180
|
|
|
|
|
|
|
|
18,811
|
|
Selling, general and administrative, including stock-based
compensation
|
|
|
15,313
|
|
|
|
12,204
|
|
|
|
|
|
|
|
27,517
|
|
Corporate selling, general and administrative, including
stock-based compensation
|
|
|
|
|
|
|
6,245
|
|
|
|
|
|
|
|
6,245
|
|
Depreciation and amortization
|
|
|
2,436
|
|
|
|
2,189
|
|
|
|
|
|
|
|
4,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
26,380
|
|
|
|
30,818
|
|
|
|
|
|
|
|
57,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
9,160
|
|
|
|
8,133
|
|
|
|
|
|
|
|
17,293
|
|
INTEREST INCOME
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
28
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
12,122
|
|
|
|
|
|
|
|
12,122
|
|
EQUITY IN INCOME OF AFFILIATED COMPANY
|
|
|
|
|
|
|
(1,784
|
)
|
|
|
|
|
|
|
(1,784
|
)
|
OTHER (INCOME) EXPENSE, NET
|
|
|
(1
|
)
|
|
|
51
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes, noncontrolling
interests in income of subsidiaries and discontinued operations
|
|
|
9,161
|
|
|
|
(2,228
|
)
|
|
|
|
|
|
|
6,933
|
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
4,760
|
|
|
|
|
|
|
|
4,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income of subsidiaries and
discontinued operations
|
|
|
9,161
|
|
|
|
(6,988
|
)
|
|
|
|
|
|
|
2,173
|
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
9,068
|
|
|
|
(9,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
9,161
|
|
|
|
2,080
|
|
|
|
(9,068
|
)
|
|
|
2,173
|
|
LOSS FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(93
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
9,068
|
|
|
|
2,048
|
|
|
|
(9,068
|
)
|
|
|
2,048
|
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
1,010
|
|
|
|
|
|
|
|
1,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income attributable to common stockholders
|
|
$
|
9,068
|
|
|
$
|
1,038
|
|
|
$
|
(9,068
|
)
|
|
$
|
1,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-101
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(As Adjusted See Note 1)
|
|
|
|
(In thousands)
|
|
|
NET REVENUE
|
|
$
|
33,182
|
|
|
$
|
41,469
|
|
|
$
|
|
|
|
$
|
74,651
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based compensation
|
|
|
8,003
|
|
|
|
9,991
|
|
|
|
|
|
|
|
17,994
|
|
Selling, general and administrative, including stock-based
compensation
|
|
|
13,150
|
|
|
|
10,868
|
|
|
|
|
|
|
|
24,018
|
|
Corporate selling, general and administrative, including
stock-based compensation
|
|
|
|
|
|
|
4,950
|
|
|
|
|
|
|
|
4,950
|
|
Depreciation and amortization
|
|
|
3,029
|
|
|
|
2,308
|
|
|
|
|
|
|
|
5,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
24,182
|
|
|
|
28,117
|
|
|
|
|
|
|
|
52,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
9,000
|
|
|
|
13,352
|
|
|
|
|
|
|
|
22,352
|
|
INTEREST INCOME
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
33
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
9,224
|
|
|
|
|
|
|
|
9,224
|
|
EQUITY IN INCOME OF AFFILIATED COMPANY
|
|
|
|
|
|
|
(1,397
|
)
|
|
|
|
|
|
|
(1,397
|
)
|
OTHER EXPENSE, NET
|
|
|
32
|
|
|
|
6
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before benefit from income taxes, noncontrolling
interests in income of subsidiaries and discontinued operations
|
|
|
8,968
|
|
|
|
5,552
|
|
|
|
|
|
|
|
14,520
|
|
BENEFIT FROM INCOME TAXES
|
|
|
|
|
|
|
(1,508
|
)
|
|
|
|
|
|
|
(1,508
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before equity in income of subsidiaries and
discontinued operations
|
|
|
8,968
|
|
|
|
7,060
|
|
|
|
|
|
|
|
16,028
|
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
8,706
|
|
|
|
(8,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
8,968
|
|
|
|
15,766
|
|
|
|
(8,706
|
)
|
|
|
16,028
|
|
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(262
|
)
|
|
|
172
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
|
8,706
|
|
|
|
15,938
|
|
|
|
(8,706
|
)
|
|
|
15,938
|
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
1,712
|
|
|
|
|
|
|
|
1,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss) attributable to common
stockholders
|
|
$
|
8,706
|
|
|
$
|
14,226
|
|
|
$
|
(8,706
|
)
|
|
$
|
14,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-102
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio One,
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
NET REVENUE
|
|
$
|
99,950
|
|
|
$
|
108,753
|
|
|
$
|
|
|
|
$
|
208,703
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based compensation
|
|
|
25,810
|
|
|
|
30,926
|
|
|
|
|
|
|
|
56,736
|
|
Selling, general and administrative, including stock-based
compensation
|
|
|
44,219
|
|
|
|
34,071
|
|
|
|
|
|
|
|
78,290
|
|
Corporate selling, general and administrative, including
stock-based compensation
|
|
|
|
|
|
|
24,581
|
|
|
|
|
|
|
|
24,581
|
|
Depreciation and amortization
|
|
|
7,599
|
|
|
|
6,596
|
|
|
|
|
|
|
|
14,195
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
77,628
|
|
|
|
96,174
|
|
|
|
|
|
|
|
173,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
22,322
|
|
|
|
12,579
|
|
|
|
|
|
|
|
34,901
|
|
INTEREST INCOME
|
|
|
|
|
|
|
95
|
|
|
|
|
|
|
|
95
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
31,059
|
|
|
|
|
|
|
|
31,059
|
|
EQUITY IN INCOME OF AFFILIATED COMPANY
|
|
|
|
|
|
|
(3,832
|
)
|
|
|
|
|
|
|
(3,832
|
)
|
OTHER (INCOME) EXPENSE, NET
|
|
|
(115
|
)
|
|
|
3,049
|
|
|
|
|
|
|
|
2,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes, noncontrolling
interests in income of subsidiaries and discontinued operations
|
|
|
22,437
|
|
|
|
(17,602
|
)
|
|
|
|
|
|
|
4,835
|
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
4,685
|
|
|
|
|
|
|
|
4,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in income of subsidiaries and
discontinued operations
|
|
|
22,437
|
|
|
|
(22,287
|
)
|
|
|
|
|
|
|
150
|
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
22,433
|
|
|
|
(22,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
22,437
|
|
|
|
146
|
|
|
|
(22,433
|
)
|
|
|
150
|
|
LOSS FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(4
|
)
|
|
|
(201
|
)
|
|
|
|
|
|
|
(205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
|
22,433
|
|
|
|
(55
|
)
|
|
|
(22,433
|
)
|
|
|
(55
|
)
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
1,427
|
|
|
|
|
|
|
|
1,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
22,433
|
|
|
$
|
(1,482
|
)
|
|
$
|
(22,433
|
)
|
|
$
|
(1,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-103
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio One,
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(As Adjusted See Note 1)
|
|
|
|
(In thousands)
|
|
|
NET REVENUE
|
|
$
|
91,076
|
|
|
$
|
113,759
|
|
|
$
|
|
|
|
$
|
204,835
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and technical, including stock-based compensation
|
|
|
26,213
|
|
|
|
30,643
|
|
|
|
|
|
|
|
56,856
|
|
Selling, general and administrative, including stock-based
compensation
|
|
|
38,957
|
|
|
|
29,871
|
|
|
|
|
|
|
|
68,828
|
|
Corporate selling, general and administrative, including
stock-based compensation
|
|
|
|
|
|
|
16,048
|
|
|
|
|
|
|
|
16,048
|
|
Depreciation and amortization
|
|
|
8,997
|
|
|
|
6,807
|
|
|
|
|
|
|
|
15,804
|
|
Impairment of long-lived assets
|
|
|
37,424
|
|
|
|
11,529
|
|
|
|
|
|
|
|
48,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
111,591
|
|
|
|
94,898
|
|
|
|
|
|
|
|
206,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(20,515
|
)
|
|
|
18,861
|
|
|
|
|
|
|
|
(1,654
|
)
|
INTEREST INCOME
|
|
|
|
|
|
|
98
|
|
|
|
|
|
|
|
98
|
|
INTEREST EXPENSE
|
|
|
3
|
|
|
|
29,033
|
|
|
|
|
|
|
|
29,036
|
|
GAIN ON RETIREMENT OF DEBT
|
|
|
|
|
|
|
1,221
|
|
|
|
|
|
|
|
1,221
|
|
EQUITY IN INCOME OF AFFILIATED COMPANY
|
|
|
|
|
|
|
(3,294
|
)
|
|
|
|
|
|
|
(3,294
|
)
|
OTHER (INCOME) EXPENSE, NET
|
|
|
(38
|
)
|
|
|
134
|
|
|
|
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes, noncontrolling interests
in income of subsidiaries and discontinued operations
|
|
|
(20,480
|
)
|
|
|
(5,693
|
)
|
|
|
|
|
|
|
(26,173
|
)
|
PROVISION FOR INCOME TAXES
|
|
|
|
|
|
|
7,340
|
|
|
|
|
|
|
|
7,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before equity in income of subsidiaries and
discontinued operations
|
|
|
(20,480
|
)
|
|
|
(13,033
|
)
|
|
|
|
|
|
|
(33,513
|
)
|
EQUITY IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
(21,928
|
)
|
|
|
21,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(20,480
|
)
|
|
|
(34,961
|
)
|
|
|
21,928
|
|
|
|
(33,513
|
)
|
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, net of tax
|
|
|
(1,448
|
)
|
|
|
613
|
|
|
|
|
|
|
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
|
(21,928
|
)
|
|
|
(34,348
|
)
|
|
|
21,928
|
|
|
|
(34,348
|
)
|
NONCONTROLLING INTERESTS IN INCOME OF SUBSIDIARIES
|
|
|
|
|
|
|
3,650
|
|
|
|
|
|
|
|
3,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(21,928
|
)
|
|
$
|
(37,998
|
)
|
|
$
|
21,928
|
|
|
$
|
(37,998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-104
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
As of September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio One,
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,045
|
|
|
$
|
19,526
|
|
|
$
|
|
|
|
$
|
21,571
|
|
Trade accounts receivable, net of allowance for doubtful accounts
|
|
|
30,464
|
|
|
|
30,376
|
|
|
|
|
|
|
|
60,840
|
|
Prepaid expenses and other current assets
|
|
|
1,981
|
|
|
|
2,758
|
|
|
|
|
|
|
|
4,739
|
|
Current assets from discontinued operations
|
|
|
(49
|
)
|
|
|
127
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
34,441
|
|
|
|
52,787
|
|
|
|
|
|
|
|
87,228
|
|
PROPERTY AND EQUIPMENT, net
|
|
|
20,862
|
|
|
|
14,456
|
|
|
|
|
|
|
|
35,318
|
|
INTANGIBLE ASSETS, net
|
|
|
570,226
|
|
|
|
302,568
|
|
|
|
|
|
|
|
872,794
|
|
INVESTMENT IN SUBSIDIARIES
|
|
|
|
|
|
|
609,619
|
|
|
|
(609,619
|
)
|
|
|
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
|
|
|
|
46,479
|
|
|
|
|
|
|
|
46,479
|
|
OTHER ASSETS
|
|
|
613
|
|
|
|
1,952
|
|
|
|
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
626,142
|
|
|
$
|
1,027,861
|
|
|
$
|
(609,619
|
)
|
|
$
|
1,044,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND
STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
545
|
|
|
$
|
2,174
|
|
|
$
|
|
|
|
$
|
2,719
|
|
Accrued interest
|
|
|
|
|
|
|
10,355
|
|
|
|
|
|
|
|
10,355
|
|
Accrued compensation and related benefits
|
|
|
2,920
|
|
|
|
9,165
|
|
|
|
|
|
|
|
12,085
|
|
Income taxes payable
|
|
|
|
|
|
|
2,444
|
|
|
|
|
|
|
|
2,444
|
|
Other current liabilities
|
|
|
9,066
|
|
|
|
(1,961
|
)
|
|
|
|
|
|
|
7,105
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
652,138
|
|
|
|
|
|
|
|
652,138
|
|
Current liabilities from discontinued operations
|
|
|
2,438
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
2,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
14,969
|
|
|
|
674,305
|
|
|
|
|
|
|
|
689,274
|
|
LONG-TERM DEBT, net of current portion
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
1,554
|
|
|
|
8,593
|
|
|
|
|
|
|
|
10,147
|
|
DEFERRED TAX LIABILITIES
|
|
|
|
|
|
|
90,762
|
|
|
|
|
|
|
|
90,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,523
|
|
|
|
774,660
|
|
|
|
|
|
|
|
791,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTEREST
|
|
|
|
|
|
|
44,047
|
|
|
|
|
|
|
|
44,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
54
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(1,685
|
)
|
|
|
|
|
|
|
(1,685
|
)
|
Additional paid-in capital
|
|
|
269,892
|
|
|
|
982,679
|
|
|
|
(269,892
|
)
|
|
|
982,679
|
|
Retained earnings (accumulated deficit)
|
|
|
339,727
|
|
|
|
(771,894
|
)
|
|
|
(339,727
|
)
|
|
|
(771,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
609,619
|
|
|
|
209,154
|
|
|
|
(609,619
|
)
|
|
|
209,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interest and
stockholders equity
|
|
$
|
626,142
|
|
|
$
|
1,027,861
|
|
|
$
|
(609,619
|
)
|
|
$
|
1,044,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-105
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
One,
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
127
|
|
|
$
|
19,836
|
|
|
$
|
|
|
|
$
|
19,963
|
|
Trade accounts receivable, net of allowance for doubtful accounts
|
|
|
27,934
|
|
|
|
19,085
|
|
|
|
|
|
|
|
47,019
|
|
Prepaid expenses and other current assets
|
|
|
1,818
|
|
|
|
3,132
|
|
|
|
|
|
|
|
4,950
|
|
Current assets from discontinued operations
|
|
|
300
|
|
|
|
124
|
|
|
|
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
30,179
|
|
|
|
42,177
|
|
|
|
|
|
|
|
72,356
|
|
PROPERTY AND EQUIPMENT, net
|
|
|
23,429
|
|
|
|
17,156
|
|
|
|
|
|
|
|
40,585
|
|
INTANGIBLE ASSETS, net
|
|
|
572,449
|
|
|
|
298,772
|
|
|
|
|
|
|
|
871,221
|
|
INVESTMENT IN SUBSIDIARIES
|
|
|
|
|
|
|
610,712
|
|
|
|
(610,712
|
)
|
|
|
|
|
INVESTMENT IN AFFILIATED COMPANY
|
|
|
|
|
|
|
48,452
|
|
|
|
|
|
|
|
48,452
|
|
OTHER ASSETS
|
|
|
1,482
|
|
|
|
1,372
|
|
|
|
|
|
|
|
2,854
|
|
NON-CURRENT ASSETS FROM DISCONTINUED OPERATIONS
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
627,613
|
|
|
$
|
1,018,641
|
|
|
$
|
(610,712
|
)
|
|
$
|
1,035,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
828
|
|
|
$
|
3,332
|
|
|
$
|
|
|
|
$
|
4,160
|
|
Accrued interest
|
|
|
|
|
|
|
9,499
|
|
|
|
|
|
|
|
9,499
|
|
Accrued compensation and related benefits
|
|
|
2,659
|
|
|
|
7,590
|
|
|
|
|
|
|
|
10,249
|
|
Income taxes payable
|
|
|
|
|
|
|
1,533
|
|
|
|
|
|
|
|
1,533
|
|
Other current liabilities
|
|
|
8,007
|
|
|
|
(771
|
)
|
|
|
|
|
|
|
7,236
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
652,534
|
|
|
|
|
|
|
|
652,534
|
|
Current liabilities from discontinued operations
|
|
|
2,924
|
|
|
|
25
|
|
|
|
|
|
|
|
2,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
14,418
|
|
|
|
673,742
|
|
|
|
|
|
|
|
688,160
|
|
LONG-TERM DEBT, net of current portion
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
2,483
|
|
|
|
7,702
|
|
|
|
|
|
|
|
10,185
|
|
DEFERRED TAX LIABILITIES
|
|
|
|
|
|
|
88,144
|
|
|
|
|
|
|
|
88,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,901
|
|
|
|
770,588
|
|
|
|
|
|
|
|
787,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS
|
|
|
|
|
|
|
52,225
|
|
|
|
|
|
|
|
52,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
51
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
|
(2,086
|
)
|
|
|
|
|
|
|
(2,086
|
)
|
Additional paid-in capital
|
|
|
270,985
|
|
|
|
968,275
|
|
|
|
(270,985
|
)
|
|
|
968,275
|
|
Retained earnings (accumulated deficit)
|
|
|
339,727
|
|
|
|
(770,412
|
)
|
|
|
(339,727
|
)
|
|
|
(770,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
610,712
|
|
|
|
195,828
|
|
|
|
(610,712
|
)
|
|
|
195,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and
stockholders equity
|
|
$
|
627,613
|
|
|
$
|
1,018,641
|
|
|
$
|
(610,712
|
)
|
|
$
|
1,035,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-106
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
$
|
22,433
|
|
|
$
|
(55
|
)
|
|
$
|
(22,433
|
)
|
|
$
|
(55
|
)
|
Adjustments to reconcile consolidated net loss to net cash from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
7,599
|
|
|
|
6,596
|
|
|
|
|
|
|
|
14,195
|
|
Amortization of debt financing costs
|
|
|
|
|
|
|
1,694
|
|
|
|
|
|
|
|
1,694
|
|
Write off of debt financing costs
|
|
|
|
|
|
|
3,055
|
|
|
|
|
|
|
|
3,055
|
|
Deferred income taxes
|
|
|
|
|
|
|
2,611
|
|
|
|
|
|
|
|
2,611
|
|
Equity in income of affiliated company
|
|
|
|
|
|
|
(3,832
|
)
|
|
|
|
|
|
|
(3,832
|
)
|
Stock-based compensation and other non-cash compensation
|
|
|
|
|
|
|
4,877
|
|
|
|
|
|
|
|
4,877
|
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(2,530
|
)
|
|
|
(11,291
|
)
|
|
|
|
|
|
|
(13,821
|
)
|
Prepaid expenses and other current assets
|
|
|
(163
|
)
|
|
|
374
|
|
|
|
|
|
|
|
211
|
|
Other assets
|
|
|
184
|
|
|
|
6,684
|
|
|
|
|
|
|
|
6,868
|
|
Accounts payable
|
|
|
(283
|
)
|
|
|
(1,541
|
)
|
|
|
|
|
|
|
(1,824
|
)
|
Due to corporate/from subsidiaries
|
|
|
(22,982
|
)
|
|
|
22,982
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
|
|
|
|
856
|
|
|
|
|
|
|
|
856
|
|
Accrued compensation and related benefits
|
|
|
261
|
|
|
|
1,575
|
|
|
|
|
|
|
|
1,836
|
|
Income taxes payable
|
|
|
|
|
|
|
911
|
|
|
|
|
|
|
|
911
|
|
Other liabilities
|
|
|
67
|
|
|
|
(470
|
)
|
|
|
|
|
|
|
(403
|
)
|
Net cash flows used in operating activities from discontinued
operations
|
|
|
(60
|
)
|
|
|
(344
|
)
|
|
|
|
|
|
|
(404
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided from (used in) operating activities
|
|
|
4,526
|
|
|
|
34,682
|
|
|
|
(22,433
|
)
|
|
|
16,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(2,608
|
)
|
|
|
(643
|
)
|
|
|
|
|
|
|
(3,251
|
)
|
Investment in subsidiaries
|
|
|
|
|
|
|
(22,433
|
)
|
|
|
22,433
|
|
|
|
|
|
Purchase of other intangible assets
|
|
|
|
|
|
|
(341
|
)
|
|
|
|
|
|
|
(341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) provided from investing activities
|
|
|
(2,608
|
)
|
|
|
(23,417
|
)
|
|
|
22,433
|
|
|
|
(3,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from credit facility
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
12,000
|
|
Repayment of credit facility
|
|
|
|
|
|
|
(12,396
|
)
|
|
|
|
|
|
|
(12,396
|
)
|
Debt refinancing and modification costs
|
|
|
|
|
|
|
(11,179
|
)
|
|
|
|
|
|
|
(11,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
|
|
|
|
(11,575
|
)
|
|
|
|
|
|
|
(11,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
1,918
|
|
|
|
(310
|
)
|
|
|
|
|
|
|
1,608
|
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
127
|
|
|
|
19,836
|
|
|
|
|
|
|
|
19,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$
|
2,045
|
|
|
$
|
19,526
|
|
|
$
|
|
|
|
$
|
21,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-107
RADIO
ONE, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Radio
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
One, Inc.
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(As Adjusted See Note 1)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
$
|
(21,928
|
)
|
|
$
|
(34,348
|
)
|
|
$
|
21,928
|
|
|
$
|
(34,348
|
)
|
Adjustments to reconcile consolidated net loss to net cash from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,998
|
|
|
|
6,806
|
|
|
|
|
|
|
|
15,804
|
|
Amortization of debt financing costs
|
|
|
|
|
|
|
1,811
|
|
|
|
|
|
|
|
1,811
|
|
Deferred income taxes
|
|
|
|
|
|
|
3,887
|
|
|
|
|
|
|
|
3,887
|
|
Impairment of long-lived assets
|
|
|
37,424
|
|
|
|
11,529
|
|
|
|
|
|
|
|
48,953
|
|
Equity in income of affiliated company
|
|
|
|
|
|
|
(3,294
|
)
|
|
|
|
|
|
|
(3,294
|
)
|
Stock-based compensation and other non-cash compensation
|
|
|
|
|
|
|
1,381
|
|
|
|
|
|
|
|
1,381
|
|
Gain on retirement of debt
|
|
|
|
|
|
|
(1,221
|
)
|
|
|
|
|
|
|
(1,221
|
)
|
Amortization of contract inducement and termination fee
|
|
|
|
|
|
|
(1,263
|
)
|
|
|
|
|
|
|
(1,263
|
)
|
Effect of change in operating assets and liabilities, net of
assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(1,166
|
)
|
|
|
549
|
|
|
|
|
|
|
|
(617
|
)
|
Prepaid expenses and other current assets
|
|
|
274
|
|
|
|
1,130
|
|
|
|
|
|
|
|
1,404
|
|
Other assets
|
|
|
(733
|
)
|
|
|
2,214
|
|
|
|
|
|
|
|
1,481
|
|
Accounts payable
|
|
|
(383
|
)
|
|
|
731
|
|
|
|
|
|
|
|
348
|
|
Due to corporate/from subsidiaries
|
|
|
(28,649
|
)
|
|
|
28,649
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
|
|
|
|
(6,122
|
)
|
|
|
|
|
|
|
(6,122
|
)
|
Accrued compensation and related benefits
|
|
|
(700
|
)
|
|
|
(2,015
|
)
|
|
|
|
|
|
|
(2,715
|
)
|
Income taxes payable
|
|
|
|
|
|
|
855
|
|
|
|
|
|
|
|
855
|
|
Other liabilities
|
|
|
4,512
|
|
|
|
(9,199
|
)
|
|
|
|
|
|
|
(4,687
|
)
|
Net cash flows provided from (used in) operating activities from
discontinued operations
|
|
|
460
|
|
|
|
(253
|
)
|
|
|
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) provided from operating activities
|
|
|
(1,891
|
)
|
|
|
1,827
|
|
|
|
21,928
|
|
|
|
21,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
(3,368
|
)
|
|
|
|
|
|
|
(3,368
|
)
|
Investment in subsidiaries
|
|
|
|
|
|
|
21,928
|
|
|
|
(21,928
|
)
|
|
|
|
|
Purchase of intangible assets
|
|
|
|
|
|
|
(272
|
)
|
|
|
|
|
|
|
(272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided from (used in) from investing activities
|
|
|
|
|
|
|
18,288
|
|
|
|
(21,928
|
)
|
|
|
(3,640
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of other debt
|
|
|
|
|
|
|
(153
|
)
|
|
|
|
|
|
|
(153
|
)
|
Proceeds from credit facility
|
|
|
|
|
|
|
111,500
|
|
|
|
|
|
|
|
111,500
|
|
Repayment of credit facility
|
|
|
|
|
|
|
(125,170
|
)
|
|
|
|
|
|
|
(125,170
|
)
|
Repurchase of senior subordinated notes
|
|
|
|
|
|
|
(1,220
|
)
|
|
|
|
|
|
|
(1,220
|
)
|
Repurchase of common stock
|
|
|
|
|
|
|
(10,695
|
)
|
|
|
|
|
|
|
(10,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
|
|
|
|
(25,738
|
)
|
|
|
|
|
|
|
(25,738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(1,891
|
)
|
|
|
(5,623
|
)
|
|
|
|
|
|
|
(7,514
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
2,601
|
|
|
|
19,688
|
|
|
|
|
|
|
|
22,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$
|
710
|
|
|
$
|
14,065
|
|
|
$
|
|
|
|
$
|
14,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-108
|
|
14.
|
COMMITMENTS
AND CONTINGENCIES
|
Royalty
Agreements
Effective December 31, 2009, our radio music license
agreements with the two largest performance rights
organizations, American Society of Composers, Authors and
Publishers (ASCAP) and Broadcast Music, Inc.
(BMI), expired. The Radio Music License Committee
(RMLC), which negotiates music licensing fees for
most of the radio industry with ASCAP and BMI, had reached an
agreement with these organizations on a temporary fee schedule
that reflects a provisional discount of 7.0% against 2009 fee
levels. The temporary fee reductions became effective in January
2010. Absent an agreement on long-term fees between the RMLC and
ASCAP and BMI, the U.S. District Court in New York has the
authority to make an interim and permanent fee ruling for the
new contract period. In May 2010 and June 2010, the
U.S. District Courts judge charged with determining
the licenses fees ruled to further reduce interim fees paid to
ASCAP and BMI, respectively, down approximately another 11.0%
from the previous temporary fees negotiated with the RMLC.
The Company has entered into other fixed and variable fee music
license agreements with other performance rights organizations,
which expire as late as December 2015. In connection with these
agreements, the Company incurred approximately $2.8 million
and $8.7 million for the three and nine month periods ended
September 30, 2010, respectively, and approximately
$3.1 million and $9.3 million, respectively, for the
three and nine month periods ended September 30, 2009.
Other
Contingencies
The Company has been named as a defendant in several legal
actions arising in the ordinary course of business. It is
managements opinion, after consultation with its legal
counsel, that the outcome of these claims will not have a
material adverse effect on the Companys financial position
or results of operations.
Off-Balance
Sheet Arrangements
As of September 30, 2010, we had three standby letters of
credit totaling $610,000 in connection with our annual insurance
policy renewals. In addition, we had a letter of credit of
$295,000 in connection with a contract we inherited as part of
the acquisition of CCI as well as a letter of credit of $500,000
for Reach Media in connection with an upcoming event.
Noncontrolling
Interest Shareholders Put Rights
Beginning on February 28, 2012, the noncontrolling interest
shareholders of Reach Media have an annual right to require
Reach Media to purchase all or a portion of their shares at the
then current fair market value for such shares. Beginning in
2012, this annual right can be exercised for a
30-day
period beginning February 28th of each year. The
purchase price for such shares may be paid in cash
and/or
registered Class D Common Stock of Radio One, at the
discretion of Radio One.
On October 15, 2010 a standby letter of credit in the
amount of $295,000 in connection with a contract we inherited as
part of the acquisition of CCI expired. The terms of the
associated contract were satisfied resulting in the release of
the standby letter of credit obligation.
F-109
Radio One, Inc.
Exchange Offer for up
to
$286,794,302
12.5%/15.0% Senior
Subordinated Notes due 2016
PRELIMINARY
PROSPECTUS
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
Item 20.
|
Indemnification
of Directors and Officers.
|
Delaware
Law
All Registrants, other than Bell Broadcasting Company, Blue Chip
Broadcasting, Ltd., and Blue Chip Broadcasting Licenses, Ltd.,
are incorporated or organized under the laws of the State of
Delaware. Section 102(b)(7) of the General Corporation Law
of the State of Delaware permits a Delaware corporation to limit
the personal liability of its directors in accordance with the
provisions set forth therein. The Restated Certificate of
Incorporation of Radio One provides that the personal liability
of its directors shall be limited to the fullest extent
permitted by applicable law.
Section 145 of the General Corporation Law of the State of
Delaware contains provisions permitting corporations organized
thereunder to indemnify directors, officers, employees or agents
against expenses, judgments and fines reasonably incurred and
against certain other liabilities in connection with any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of the fact that such person was or is a director,
officer, employee or agent of the corporation. The Amended and
Restated Certificate of Incorporation or equivalent constituting
document of each of the Registrants, other than Bell
Broadcasting Company, Blue Chip Broadcasting, Ltd., Blue Chip
Broadcasting Licenses, Ltd., and Hawes-Saunders Broadcast
Properties, Inc., provides for indemnification of its directors
and officers to the fullest extent permitted by applicable law.
Hawes-Saunders bylaws provide that any indemnification
(unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent
is proper in the circumstances because the person has met the
applicable standard of conduct. Such determination shall be made
(a) by a majority vote of directors who are not party to
such suit, action, or proceeding, even though less than a
quorum, (b) by a committee of such directors designated by
a majority vote of such directors, even though less than a
quorum, (c) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written
opinion, or (d) by the stockholders.
Radio One of Indiana, L.P. is organized as a limited partnership
under the laws of the State of Delaware.
Section 17-108
of the Delaware Revised Uniform Limited Partnership Act provides
that a limited partnership, subject to any standards and
restrictions in its partnership agreement, may indemnify and
hold harmless any partner or other person from and against any
and all claims and demands. The Limited Partnership Agreement of
Radio One of Indiana, L.P. provide that the partnership shall
indemnify and hold harmless its general partners from any loss
or damage incurred by reason of any act performed by them for
and on behalf of the partnership unless the act constituted
gross negligence, willful or wanton misconduct, or intentional
malfeasance.
Community Connect, LLC, Distribution One, LLC, Interactive One,
LLC, Satellite One, L.L.C., Radio One Distribution Holdings,
LLC, Radio One Licences, LLC, Radio One of Charlotte, LLC, Radio
One of Detroit, LLC, Radio One of Atlanta, LLC, ROA Licenses,
LLC, Charlotte Broadcasting, LLC, Radio One of North Carolina,
LLC, Radio One of Boston Licenses, LLC, Radio One of Indiana,
LLC, Radio One of Texas II, LLC and Radio One Media Holdings,
LLC are organized as limited liability companies under the laws
of the State of Delaware.
Section 18-108
of the Delaware Limited Liability Company Act provides that a
limited liability company, subject to any standards and
restrictions in its limited liability company agreement, may
indemnify and hold harmless any member or manager or other
person from and against any and all claims and demands.
The Limited Liability Company Agreement of each of Community
Connect, LLC, Distribution One, LLC, Interactive One, LLC,
Satellite One, L.L.C., Radio One Distribution Holdings, LLC,
Radio One Licences, LLC, Radio One of Charlotte, LLC, Radio One
of Detroit, LLC, Radio One of Atlanta, LLC, ROA Licenses, LLC,
Charlotte Broadcasting, LLC, Radio One of North Carolina, LLC,
Radio One of Boston
II-1
Licenses, LLC, Radio One of Indiana, LLC, and Radio One of Texas
II, LLC provides that the company shall, in accordance with
Section 18-
108 of the Delaware Limited Liability Company Act, indemnify and
hold harmless any member, manager or officer of such company (or
of an affiliate thereof) to the fullest extent permitted by law
against any loss, liability, damage, judgment, demand, claim,
cost or expense incurred by or asserted against such indemnitee,
including, without limitation, reasonable attorneys fees
and disbursements incurred in the defense thereof, arising out
of any act or omission of such indemnitee in connection with the
company. Additionally, the limited liability company agreement
of Radio One Media Holdings, LLC provides that in the event of
any action by the member against the indemnitee, including a
derivative suit, the company shall indemnify, hold harmless, and
pay all expenses of such indemnitee, including reasonable
attorneys fees and disbursements incurred in the defense
thereof and that no indemnitee shall be indemnified from any
liability for the fraud, intentional misconduct, gross
negligence or a knowing violation of the law which is material
to the cause of the action.
The limited liability company agreement of Radio One of
Charlotte, LLC provides that, to the maximum extent permitted by
law, the company shall indemnify any person who is or was a
manager of the company or is or was serving at the request of
the company, if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best
interests of the company and, with respect to any criminal
proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The company may also, to the maximum
extent permitted by law, indemnify any employee or agent who is
not a manager under the same standard if such indemnification is
approved by the companys managers.
Michigan
Law
Bell Broadcasting Company (BBC) is incorporated
under the laws of the State of Michigan. Under
Sections 561-571
of the Michigan Business Corporation Act, directors and officers
of a Michigan corporation may be entitled to indemnification by
the corporation against judgments, expenses, fines and amounts
paid by the director or officer in settlement of claims brought
against them by third persons or by or in the right of the
corporation if those directors and officers acted in good faith
and in a manner reasonably believed to be in, or not opposed to,
the best interests of the corporation or its shareholders.
BBCs Restated Articles of Incorporation provide that its
directors shall not be personally liable to BBC or its
shareholders for monetary damages for breach of the
directors fiduciary duty. However, BBCs Restated
Articles of Incorporation do not eliminate or limit the
liability of a director for any of the following: (i) a
breach of the directors duty of loyalty to us or our
shareholders; (ii) acts or omissions not in good faith or
that involve intentional misconduct or knowing violation of law;
(iii) a violation of Section 551(1) of the Michigan
Business Corporation Act; (iv) a transaction from which the
director derived an improper personal benefit; or (v) an
act or omission occurring before the effective date of the
Restated Articles of Incorporation. In addition, BBCs
By-Laws generally provide that BBC shall indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of BBC) by reason of the fact
that he is or was a BBC director, officer, employee or
agent or is or was serving at BBCs request as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise.
Ohio
Law
Blue Chip Broadcasting, Ltd. and Blue Chip Broadcasting
Licenses, Ltd. are organized as limited liability companies
under the laws of the State of Ohio. Under Section 1705.32
of the Ohio Revised Code, a limited liability company may
indemnify a manager, member, partner, officer, employee, agent
or certain other persons against expenses, including
attorneys fees, judgments, fines, and amounts paid in
settlement, actually and reasonably incurred in connection with
an action, suit or proceeding, if such manager, member, partner,
officer, employee, agent or other person acted in good faith and
in a manner reasonably believed to be in, or not opposed to, the
best interests of the company and, in connection with any
criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. A limited liability company
may also indemnify a manager, officer, employee, agent or
certain other persons against expenses, including
attorneys fees, actually and reasonably incurred in
connection with an action or suit by or in the right of such
company, if
II-2
such manager, officer, employee, agent or other person acted in
good faith and in a manner reasonably believed to be in, or not
opposed to, the best interests of the company. The Bylaws of
each of Blue Chip Broadcasting, Ltd. and Blue Chip Broadcasting
Licenses, Ltd. provide that the company shall indemnify the
foregoing persons to the full extent authorized by the Ohio
Revised Code.
The above discussion of the relevant statutes and the governing
documents of the registrants is not intended to be exhaustive
and is qualified in its entirety by reference to such statutes
and governing documents.
Reference is made to the attached Exhibit Index.
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser, each prospectus
filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part
of and included in the registration statement as of the date it
is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the
registrant under the Securities Act to any purchaser in the
initial distribution of the securities, the undersigned
registrant undertakes that in a
II-3
primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and
will be considered to offer or sell such securities to such
purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(6) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(7) That every prospectus (i) that is filed pursuant
to paragraph (h)(1) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of
the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(8) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
provisions referred to in Item 15, or otherwise, each of
the registrants has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by such
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, such registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(b) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lanham, State of Maryland, on
February 9, 2011.
RADIO ONE, INC.
|
|
|
|
By:
|
/s/ Alfred
C. Liggins, III
|
Alfred C. Liggins, III
President and Chief Executive Officer
Bell Broadcasting Company
Blue Chip Broadcasting Licenses, Ltd.
Blue Chip Broadcasting, Ltd.
Charlotte Broadcasting, LLC
Community Connect Inc.
Community Connect, LLC
Distribution One, LLC
Hawes-Saunders Broadcast Properties, Inc.
Interactive One, Inc.
Interactive One, LLC
New Mableton Broadcasting Corporation
Radio One Cable Holdings, Inc.
Radio One Distribution Holdings, LLC
Radio One Licenses, LLC
Radio One Media Holdings, LLC
Radio One of Atlanta, LLC
Radio One of Boston Licenses, LLC
Radio One of Boston, Inc.
Radio One of Charlotte, LLC
Radio One of Detroit, LLC
Radio One of Indiana, LLC
Radio One of North Carolina, LLC
Radio One of Texas II, LLC
ROA Licenses, LLC
Satellite One, L.L.C.
II-5
|
|
|
|
By:
|
/s/ Alfred
C. Liggins, III
|
Alfred C. Liggins, III
President and Chief Executive Officer
RADIO ONE OF INDIANA, L.P.
|
|
|
|
By:
|
RADIO ONE, INC., its general partner
|
|
|
|
|
By:
|
/s/ Alfred
C. Liggins, III
|
Alfred C. Liggins, III
President and Chief Executive Officer
II-6
POWER OF
ATTORNEY
Know All Persons By These Presents, that each person
whose signature appears below constitutes and appoints Alfred C.
Liggins, III, Linda J. Vilardo and Peter D. Thompson and
each of them, as true and lawful attorneys-in-fact and agents,
with full powers of substitution and resubstitution, for them
and in their name, place and stead, in any and all capacities,
to sign any and all amendments (including pre-effective and
post-effective amendments) to this registration statement and
any additional registration statements filed pursuant to
Rule 462 under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission (the SEC), and generally to do all such
things in their names and behalf in their capacities as officers
and directors to enable Radio One, Inc. and its co-registrants
to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the SEC, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as he or she might or could do
in person, ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or
her substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Alfred
C. Liggins, III
Alfred
C. Liggins, III(1)(2)
|
|
Director, President and Chief Executive
Officer (principal executive officer)
|
|
February 9, 2011
|
|
|
|
|
|
/s/ Catherine
L. Hughes
Catherine
L. Hughes(2)
|
|
Chairperson and Secretary
|
|
February 9, 2011
|
|
|
|
|
|
/s/ Terry
L. Jones
Terry
L. Jones(2)
|
|
Director
|
|
February 9, 2011
|
|
|
|
|
|
/s/ Brian
W. McNeill
Brian
W. McNeill(2)
|
|
Director
|
|
February 9, 2011
|
|
|
|
|
|
/s/ B.
Doyle Mitchell Jr.
B.
Doyle Mitchell Jr.(3)
|
|
Director
|
|
February 9, 2011
|
|
|
|
|
|
/s/ D.
Geoffrey Armstrong
D.
Geoffrey Armstrong(3)
|
|
Director
|
|
February 9, 2011
|
|
|
|
|
|
/s/ Ronald
E. Blaylock
Ronald
E. Blaylock(3)
|
|
Director
|
|
February 9, 2011
|
|
|
|
|
|
/s/ Linda
J. Vilardo
Linda
J. Vilardo(4)
|
|
Director
|
|
February 9, 2011
|
|
|
|
|
|
/s/ Peter
D. Thompson
Peter
D. Thompson(5)
|
|
Executive Vice President and Chief Financial Officer (principal
financial officer and
principal accounting officer)
|
|
February 9, 2011
|
|
|
|
(1) |
|
For the registrants that are limited liability companies or
limited partnerships, Alfred C. Liggins, III is executing
on behalf of such registrants in the following capacity:
(a) for each of Radio One Licenses, LLC, Radio One of
Atlanta, LLC, Radio One of Charlotte, LLC, Radio One of Texas
II, LLC, Satellite One, |
II-7
|
|
|
|
|
L.L.C., and Radio One Media Holdings, LLC, as President and
Chief Executive Officer of Radio One, Inc., the sole member of
each such limited liability company, (b) for Radio One of
Detroit, LLC, as President and Chief Executive Officer of Bell
Broadcasting Company, its sole member, (c) for ROA
Licenses, LLC, as President and Chief Executive Officer of Radio
One of Atlanta, LLC, its sole member, (d) for Radio One
Distribution Holdings, LLC, as President and Chief Executive
Officer of Radio One, its sole member, (e) for Charlotte
Broadcasting, LLC, as President and Treasurer of Radio One of
Charlotte, LLC, the sole member of each such limited liability
company, (f) for Radio One of North Carolina, LLC, as
President and Chief Executive Officer of Charlotte Broadcasting,
LLC, its sole member, (g) for Radio One of Boston Licenses,
LLC, as President and Chief Executive Officer of Radio One of
Boston, Inc., its sole member, (h) for Blue Chip
Broadcasting, Ltd., as President and Chief Executive Officer of
Blue Chip Broadcast Company, its sole member, (i) for Blue
Chip Broadcasting Licenses, Ltd., as President and Chief
Executive Officer of Blue Chip Broadcasting, Ltd., its sole
member, (j) for Radio One of Indiana, L.P., as President
and Chief Executive Officer of Radio One, Inc., its general
partner, (k) for Radio One of Indiana, LLC, as President
and Chief Executive Officer of Radio One, Inc., the general
partner of Radio One of Indiana, L.P., its sole member; and
(l) as Manager of Interactive One, LLC and Community
Connect, LLC. |
|
(2) |
|
As director of Radio One, Inc., Bell Broadcasting Company, Radio
One of Boston, Inc., Blue Chip Broadcasting, Ltd., Blue Chip
Broadcasting Licenses, Ltd., New Mableton Broadcasting
Corporation,
Hawes-Saunders
Broadcast Properties, Inc., Radio One Cable Holdings, Inc.,
Community Connect Inc. and Interactive One, Inc. |
|
(3) |
|
As director of Radio One, Inc., New Mableton Broadcasting
Corporation, Radio One Cable Holdings, Inc., Community Connect
Inc. and Interactive One, Inc. |
|
(4) |
|
As manager of Interactive One, LLC and Community Connect, LLC. |
|
(5) |
|
As Vice President and Chief Financial Officer for all
registrants, other than Radio One of Indiana, L.P., and in his
capacity as Executive Vice President and Chief Financial Officer
of Radio One, Inc., acting as General Partner of Radio One of
Indiana, L.P. |
II-8
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Radio One,
Inc., dated as of May 4, 2000, as filed with the State of
Delaware on May 9, 2000 (incorporated by reference to Radio
Ones Quarterly Report on
Form 10-Q
for the period ended March 31, 2000).
|
|
3
|
.1.1
|
|
Certificate of Amendment, dated as of September 21, 2000,
of the Amended and Restated Certificate of Incorporation of
Radio One, Inc., dated as of May 4, 2000, as filed with the
State of Delaware on September 21, 2000 (incorporated by
reference to Radio Ones Current Report on
Form 8-K
filed October 6, 2000).
|
|
3
|
.2
|
|
Amended and Restated By-laws of Radio One, Inc. amended as of
August 7, 2009 (incorporated by reference to Radio
Ones Current Report on
Form 8-K
filed August 21, 2009).
|
|
3
|
.3
|
|
Restated Articles of Incorporation of Bell Broadcasting Company
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.4
|
|
Restated Bylaws of Bell Broadcasting Company (incorporated by
reference to Radio Ones Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.5
|
|
Articles of Organization of Blue Chip Broadcasting Licenses,
Ltd. (incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.6
|
|
Operating Agreement of Blue Chip Broadcasting Licenses, Ltd.
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.7
|
|
Articles of Organization of Blue Chip Broadcasting, Ltd.
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.8
|
|
Amended and Restated Operating Agreement of Blue Chip
Broadcasting, Ltd. (incorporated by reference to Radio
Ones Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.9
|
|
Certificate of Formation of Charlotte Broadcasting, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.10
|
|
Limited Liability Company Agreement of Charlotte Broadcasting,
LLC (incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.11
|
|
Articles of Incorporation of Community Connect Inc.*
|
|
3
|
.12
|
|
Bylaws of Community Connect Inc.*
|
|
3
|
.13
|
|
Certificate of Formation of Community Connect, LLC.*
|
|
3
|
.14
|
|
Limited Liability Company Agreement of Community Connect, LLC.*
|
|
3
|
.15
|
|
Certificate of Formation of Distribution One, LLC.*
|
|
3
|
.16
|
|
Limited Liability Company Agreement of Distribution One, LLC.*
|
|
3
|
.17
|
|
Certificate of Incorporation of Hawes-Saunders Broadcast
Properties, Inc. (incorporated by reference to Radio Ones
Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.18
|
|
Amended and Restated Bylaws of Hawes-Saunders Broadcast
Properties, Inc. (incorporated by reference to Radio Ones
Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.19
|
|
Articles of Incorporation of Interactive One, Inc.*
|
|
3
|
.20
|
|
Bylaws of Interactive One, Inc.*
|
|
3
|
.21
|
|
Certificate of Formation of Interactive One, LLC.*
|
|
3
|
.22
|
|
Limited Liability Company Agreement of Interactive One, LLC.*
|
|
3
|
.23
|
|
Certificate of Incorporation of New Mableton Broadcasting
Corporation (incorporated by reference to Radio Ones
Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.24
|
|
Bylaws of New Mableton Broadcasting Corporation (incorporated by
reference to Radio Ones Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.25
|
|
Articles of Radio One Cable Holdings, Inc.*
|
|
3
|
.26
|
|
Bylaws of Radio One Cable Holdings, Inc.*
|
|
3
|
.27
|
|
Certificate of Formation of Radio One Distribution Holdings,
LLC.*
|
|
3
|
.28
|
|
Limited Liability Company Agreement of Radio One Distribution
Holdings, LLC.*
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.29
|
|
Certificate of Formation of Radio One Licenses, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.30
|
|
Limited Liability Company Agreement of Radio One Licenses, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.31
|
|
Certificate of Formation of Radio One Media Holdings, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.32
|
|
Limited Liability Company Agreement of Radio One Media Holdings,
LLC (incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.33
|
|
Certificate of Formation of Radio One of Atlanta, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.34
|
|
Limited Liability Company Agreement of Radio One of Atlanta, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.35
|
|
Certificate of Formation of Radio One of Boston Licenses, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.36
|
|
Limited Liability Company Agreement of Radio One of Boston
Licenses, LLC (incorporated by reference to Radio Ones
Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.37
|
|
Certificate of Incorporation of Radio One of Boston, Inc.
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.38
|
|
Bylaws of Radio One of Boston, Inc. (incorporated by reference
to Radio Ones Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.39
|
|
Certificate of Formation of Radio One of Charlotte, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.40
|
|
Limited Liability Company Agreement of Radio One of Charlotte,
LLC (incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.41
|
|
Certificate of Formation of Radio One of Detroit, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.42
|
|
Limited Liability Company Agreement of Radio One of Detroit, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.43
|
|
Certificate of Limited Partnership of Radio One of Indiana, L.P.
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.44
|
|
Limited Partnership Agreement of Radio One of Indiana, L.P.
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.45
|
|
Certificate of Formation of Radio One of Indiana, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.46
|
|
Limited Liability Company Agreement of Radio One of Indiana, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.47
|
|
Certificate of Formation of Radio One of North Carolina, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.48
|
|
Limited Liability Company Agreement of Radio One of North
Carolina, LLC (incorporated by reference to Radio Ones
Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.49
|
|
Certificate of Formation of Radio One of Texas II, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.50
|
|
Limited Liability Company Agreement of Radio One of Texas II,
LLC (incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.51
|
|
Certificate of Formation of ROA Licenses, LLC (incorporated by
reference to Radio Ones Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.52
|
|
Limited Liability Company Agreement of ROA Licenses, LLC
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
3
|
.53
|
|
Certificate of Formation of Satellite One, L.L.C. (incorporated
by reference to Radio Ones Registration Statement on
Form S-4,
filed August 5, 2005).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
3
|
.54
|
|
Limited Liability Company Agreement of Satellite One, L.L.C.
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed August 5, 2005).
|
|
4
|
.1
|
|
Indenture dated May 18, 2001 among Radio One, Inc., the
Guarantors listed therein, and United States
Trust Company of New York (incorporated by reference to
Radio Ones Registration Statement on
Form S-4,
filed July 17, 2001).
|
|
4
|
.2
|
|
First Supplemental Indenture, dated August 10, 2001, among
Radio One, Inc., the Guaranteeing Subsidiaries and other
Guarantors listed therein, and The Bank of New York, as Trustee,
(incorporated by reference to Radio Ones Registration
Statement on
Form S-4,
filed October 4, 2001).
|
|
4
|
.3
|
|
Second Supplemental Indenture dated as of December 31,
2001, among Radio One, Inc., the Guaranteeing Subsidiaries and
other Guarantors listed therein, and The Bank of New York, as
Trustee, (incorporated by reference to Radio Ones
registration statement on
Form S-3,
filed January 29, 2002).
|
|
4
|
.4
|
|
Third Supplemental Indenture dated as of July 17, 2003,
among Radio One, Inc., the Guaranteeing Subsidiaries and other
Guarantors listed therein, and The Bank of New York, as Trustee,
(incorporated by reference to Radio Ones Annual Report on
Form 10-K
for the period ended December 31, 2003).
|
|
4
|
.5
|
|
Fourth Supplemental Indenture dated as of October 19, 2004,
among Radio One, Inc., the Guaranteeing Subsidiaries and other
Guarantors listed therein, and The Bank of New York, as Trustee,
(incorporated by reference to Radio Ones Quarterly Report
on
Form 10-Q
for the period ended September 30, 2004).
|
|
4
|
.6
|
|
Fifth Supplemental Indenture dated as of February 8, 2005,
among Radio One, Inc., the Guaranteeing Subsidiaries and other
Guarantors listed therein, and The Bank of New York, as Trustee
(incorporated by reference to Radio Ones Annual Report on
Form 10-K
for the period ended December 31, 2004).
|
|
4
|
.7
|
|
Indenture dated February 10, 2005 between Radio One, Inc.
and The Bank of New York, as Trustee, (incorporated by reference
to Radio Ones Current Report on
Form 8-K
filed February 11, 2005).
|
|
4
|
.8
|
|
Sixth Supplemental Indenture dated as of February 15, 2006
among Radio One, Inc., the Guaranteeing Subsidiary and the
Existing Guarantors listed therein, and The Bank of New York, as
successor trustee under the Indenture dated May 18, 2001,
as amended (incorporated by reference to Radio Ones
Quarterly Report on
Form 10-Q
for the period ended June 30, 2006).
|
|
4
|
.9
|
|
First Supplemental Indenture dated as of February 15, 2006
among Radio One, Inc., Syndication One, Inc., the other
Guarantors listed therein, and The Bank of New York, as trustee
under the Indenture dated February 10, 2005 (incorporated
by reference to Radio Ones Quarterly Report on
Form 10-Q
for the period ended June 30, 2006).
|
|
4
|
.11
|
|
Seventh Supplemental Indenture dated as of December 22,
2006 among Radio One, Inc., the Guaranteeing Subsidiary and the
Existing Guarantors listed therein, and The Bank of New York, as
successor trustee under the Indenture dated May 18, 2001,
as amended. (incorporated by reference to Radio Ones
Annual Report on
Form 10-K
for the period ended December 31, 2006).
|
|
4
|
.12
|
|
Second Supplemental Indenture dated as of December 22, 2006
among Radio One, Inc., Magazine One, Inc., the other Guarantors
listed therein, and The Bank of New York, as trustee under the
Indenture dated February 10, 2005 (incorporated by
reference to Radio Ones Annual Report on
Form 10-K
for the period ended December 31, 2006).
|
|
4
|
.13
|
|
Third Supplemental Indenture, dated as of March 30, 2010 by
and among Radio One, Inc., each of the subsidiaries of Radio One
listed on Exhibit A attached thereto, Interactive One,
Inc., Interactive One, LLC, Community Connect, LLC, Community
Connect Inc., Distribution One, LLC and Radio One Distribution
Holdings, LLC, and The Bank of New York Mellon (formerly known
as The Bank of New York), as trustee under the Indenture dated
February 10, 2005 (incorporated by reference to Radio
Ones Annual Report on
Form 10-K
for the period ended December 31, 2009).
|
|
4
|
.14
|
|
Eighth Supplemental Indenture, dated as of March 30, 2010,
by and among Radio One, Inc., each of the subsidiaries of Radio
One listed on Exhibit A attached thereto Interactive One,
Inc., Interactive One, LLC, Community Connect, LLC, Community
Connect Inc., Distribution One, LLC and Radio One Distribution
Holdings, LLC, and The Bank of New York Mellon, as successor to
United States Trust Company of New York, as trustee under
the Indenture dated as of May 18, 2001 (incorporated by
reference to Radio Ones Annual Report on
Form 10-K
for the period ended December 31, 2009).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.15
|
|
Indenture, dated as of November 24, 2010, among Radio One,
Inc., the guarantors signatory thereto and Wilmington
Trust Company, as trustee, relating to the
12.5%/15.0% Senior Subordinated Notes due 2016
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed on December 1, 2010).
|
|
4
|
.16
|
|
Ninth Supplemental Indenture, dated as of November 24,
2010, among Radio One, Inc., the guarantors listed therein, and
Wilmington Trust Company, as successor trustee to The Bank
of New York Mellon Trust Company, N.A., as trustee
under the Indenture dated May 18, 2001, as amended
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed on December 1, 2010).
|
|
4
|
.17
|
|
Fourth Supplemental Indenture, dated as of November 24,
2010, among Radio One, Inc., the guarantors listed therein, and
Wilmington Trust Company, as successor trustee to The Bank
of New York Mellon Trust Company, N.A., as trustee
under the Indenture dated February 10, 2005. (incorporated
by reference to Radio Ones Current Report on
Form 8-K
filed on December 1, 2010).
|
|
4
|
.18
|
|
Exchange and Registration Rights Agreement, dated as of
November 24, 2010, among Radio One, Inc., the guarantors
signatory thereto and certain holders of its debt securities
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed on December 1, 2010).
|
|
5
|
.1
|
|
Opinion of Kirkland & Ellis LLP.*
|
|
5
|
.2
|
|
Opinion of Clark Hill PLC.*
|
|
5
|
.3
|
|
Opinion of Keating Muething & Klekamp PLL.*
|
|
10
|
.1
|
|
Certificate Of Designations, Rights and Preferences of the
61/2% Convertible
Preferred Securities Remarketable Term Income Deferrable Equity
Securities (HIGH TIDES) of Radio One, Inc., as filed with the
State of Delaware on July 13, 2000 (incorporated by
reference to Radio Ones Quarterly Report on
Form 10-Q
for the period ended June 30, 2000).
|
|
10
|
.2
|
|
Amended and Restated Stockholders Agreement dated as of
September 28, 2004 among Catherine L. Hughes and Alfred C.
Liggins, III (incorporated by reference to Radio Ones
Quarterly Report on
Form 10-Q
for the period ended June 30, 2005).
|
|
10
|
.5
|
|
Credit Agreement, dated June 13, 2005, by and among Radio
One Inc., Wachovia Bank and the other lenders party thereto
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed June 17, 2005).
|
|
10
|
.6
|
|
Guarantee and Collateral Agreement, dated June 13, 2005,
made by Radio One, Inc. and its Restricted Subsidiaries in favor
of Wachovia Bank (incorporated by reference to Radio Ones
Current Report on
Form 8-K
filed June 17, 2005).
|
|
10
|
.7
|
|
Radio One, Inc. 2009 Stock Option and Restricted Stock Grant
Plan (incorporated by reference to Radio Ones Definitive
Proxy on Schedule 14A filed November 6, 2009).
|
|
10
|
.8
|
|
First Amendment to Credit Agreement dated as of April 26,
2006, to Credit Agreement dated June 13, 2005, by and among
Radio One, Inc., Wachovia Bank and the other lenders party
thereto (incorporated by reference to Radio Ones Current
Report on
Form 8-K
filed April 28, 2006).
|
|
10
|
.9
|
|
Waiver to Credit Agreement dated July 12, 2007, by and
among Radio One, Inc., the several Lenders thereto, and Wachovia
Bank National Association, as Administrative Agent (incorporated
by reference to Radio Ones Quarterly Report on
Form 10-Q
for the period ended June 30, 2007).
|
|
10
|
.10
|
|
Employment Agreement between Radio One, Inc. and Barry A. Mayo
dated as of August 31, 2009 and effective as of
August 5, 2009 (incorporated by reference to Radio
Ones Current Report on
Form 8-K
filed September 2, 2009).
|
|
10
|
.11
|
|
Second Amendment to Credit Agreement and Waiver dated as of
September 14, 2007, by and among Radio One, Inc., the
several Lenders thereto, and Wachovia Bank National Association,
as Administrative Agent (incorporated by reference to Radio
Ones Current Report on
Form 8-K
filed September 18, 2007).
|
|
10
|
.12
|
|
Waiver and Consent to Credit Agreement dated May 14, 2007,
by and among Radio One, Inc., the several Lenders thereto, and
Wachovia Bank National Association, as Administrative Agent
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed May 18, 2007).
|
|
10
|
.13
|
|
Consent to Credit Agreement dated March 30, 2007, by and
among Radio One, Inc., the several Lenders thereto, and Wachovia
Bank National Association, as Administrative Agent (incorporated
by reference to Radio Ones Current Report on
Form 8-K
filed April 5, 2007).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.14
|
|
Employment Agreement between Radio One, Inc. and Peter D.
Thompson dated March 31, 2008 (incorporated by reference to
Radio Ones Current Report on
Form 8-K
filed April 2, 2008).
|
|
10
|
.16
|
|
Employment Agreement between Radio One, Inc. and Alfred C.
Liggins, III dated April 16, 2008 (incorporated by
reference to Radio Ones Current Report on
Form 8-K
filed April 18, 2008).
|
|
10
|
.17
|
|
Employment Agreement between Radio One, Inc. and Catherine L.
Hughes dated April 16, 2008 (incorporated by reference to
Radio Ones Current Report on
Form 8-K
filed April 18, 2008).
|
|
|
|
|
Employment Agreement Amendment and Modification dated as of
October 7, 2008 between Radio One, Inc. and Peter D.
Thompson (incorporated by reference to Radio Ones Current
Report on
Form 8-K
filed December 12, 2008).
|
|
10
|
.18
|
|
Third Amendment to Credit Agreement and Waiver to Credit
Agreement by and among Radio One, Inc., Wells Fargo Bank, N.A.
(formerly known as Wachovia Bank, National Association), as
Administrative Agent and the Lenders, dated as of March 30,
2010 (incorporated by reference to Radio Ones Annual
Report on
Form 10-K
for the period ended December 31, 2009).
|
|
10
|
.19
|
|
Agreement, dated June 16, 2010, by and among Radio One,
Inc. and certain holders of its outstanding debt securities
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed June 16, 2010).
|
|
10
|
.20
|
|
Commitment Letter, exhibits and annexes thereto, dated as of
June 16, 2010, by and among Radio One, Inc., Deutsche Bank
Trust Company Americas and Deutsche Bank Securities Inc.
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed June 16, 2010).
|
|
10
|
.21
|
|
Forbearance Agreement, dated as of July 15, 2010, by and
among the Radio One, Inc., Wells Fargo Bank, N.A. and certain of
Radio Ones lenders (incorporated by reference to Radio
Ones Current Report on
Form 8-K
filed July 16, 2010).
|
|
10
|
.22
|
|
Amendment to Forbearance Agreement, by and among Radio One,
Inc., Wells Fargo Bank, N.A. and certain of Radio One
Inc.s lenders (incorporated by reference to Radio
Ones Current Report on
Form 8-K
filed August 17, 2010).
|
|
10
|
.23
|
|
Support Agreement, dated November 5, 2010, by and among
Radio One, Inc. and certain holders of its outstanding debt
securities (incorporated by reference to Radio Ones
Current Report on
Form 8-K
filed November 8, 2010).
|
|
10
|
.24
|
|
Agreement, dated November 12, 2010, by and among the
Company and certain holders of its outstanding debt securities
(incorporated by reference to Radio Ones Current Report on
Form 8-K
filed November 18, 2010).
|
|
10
|
.25
|
|
Amendment and Restatement Agreement, dated as of
November 24, 2010, to the Credit Agreement, dated as of
June 13, 2005, by and among Radio One, Inc. as Borrower,
Wells Fargo Bank, N.A.,
successor-by-merger
to Wachovia Bank, National Association, as Administrative Agent,
the lenders referred to therein and the other parties from time
to time party thereto (incorporated by reference to Radio One
Inc.s Current Report on
Form 8-K
filed on December 1, 2010).
|
|
12
|
.1
|
|
Statement Regarding Computation of Ratios.*
|
|
21
|
.1
|
|
Subsidiaries of Radio One, Inc.*
|
|
23
|
.1
|
|
Consent of Ernst & Young LLP.*
|
|
23
|
.2
|
|
Consent of Kirkland & Ellis LLP (included in
Exhibit 5.1).*
|
|
23
|
.3
|
|
Consent of Clark Hill PLC (included in Exhibit 5.2).*
|
|
23
|
.4
|
|
Consent of Keating Muething & Klekamp PLL (included in
Exhibit 5.3).*
|
|
24
|
.1
|
|
Powers of Attorney (included in signature pages).
|
|
25
|
.1
|
|
Statement of Eligibility under the Trust Indenture Act of
1939 of Wilmington Trust Company, on
Form T-1.*
|
|
99
|
.1
|
|
Form of Letter of Transmittal.*
|
|
|
|
* |
|
Indicates documents filed herewith. |
exv3w11
Exhibit 3.11
|
|
|
|
|
State of Delaware
Secretary of State
Division of Corporations
Delivered 10:50 AM 10/15/2007
FILED 10:43 AM 10/15/2007
SRV 071114701 2680622 FILE |
SEVENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF COMMUNITY CONNECT INC.
COMMUNITY CONNECT INC., a corporation organized under the General Corporation Law of the State of
Delaware (the Company), does hereby certify as follows:
The Certificate of Incorporation of the Company was filed with the office of the Secretary of State
of the State of Delaware on October 31, 1996.
The Amended and Restated Certificate of Incorporation of the Company was filed with the office of
the Secretary of State of the State of Delaware on September 14, 1998.
The Second Amended and Restated Certificate of Incorporation of the Company was filed with the
office of the Secretary of State of the State of Delaware on May 25, 1999.
The Third Amended and Restated Certificate of Incorporation of the Company was filed with the
office of the Secretary of State of the State of Delaware on March 17, 2000.
The Fourth Amended and Restated Certificate of Incorporation of the Company was filed with the
office of the Secretary of State of the State of Delaware on September 27, 2002.
The
Fifth Amended and Restated Certificate of Incorporation of the
Company was filed with the
office of the Secretary of State of the State of Delaware on June 30, 2006.
The Sixth Amended and Restated Certificate of Incorporation of the Company was filed with the
office of the Secretary of State of the State of Delaware on July 25, 2007.
The Board of Directors of the Company, by written consent of the Board of Directors dated July 31,
2007, duly adopted resolutions setting forth the Seventh Amended and Restated Certificate of
Incorporation herein contained (the Seventh Amended Certificate), declaring its
advisability and directing that such Seventh Amended Certificate be submitted to the holders of the
issued and outstanding Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock of the Company for approval in accordance with the
applicable provisions of Sections 242 and 245 of the General Corporation Law of the State of
Delaware (the GCL). The Seventh Amended Certificate was duly adopted, after having been
declared advisable by the Board of Directors of the Company, by the affirmative vote of the holders
of a majority of each of the outstanding Common Stock, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock of the Company on September 8, 2007 in
accordance with the GCL.
The text of the Seventh Amended Certificate, as restated and amended hereby, shall read in its
entirety as follows:
SEVENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF COMMUNITY CONNECT INC.
FIRST: The name of the Company shall be Community Connect Inc. (the Company).
SECOND: The address of the Companys registered office in the State of Delaware is 2711
Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808. The name of its
registered agent at such address is the Corporation Service Company.
THIRD: The purpose of the Company shall be to engage in any lawful act or activity for
activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The Company is authorized to issue two classes of stock to be designated Common
Stock and Preferred Stock, respectively. The total number of shares which the Company is
authorized to issue is Eleven Million Seven Hundred Fifty Thousand (11,750,000), of which Ten
Million (10,000,000) shall be Common Stock and One Million Seven Hundred Fifty Thousand (1,750,000)
shall be Preferred Stock. The Common Stock shall have $.00001 par value per share, and the
Preferred Stock shall have $.00004 par value per share.
Authority is hereby vested in the Board of Directors of the Company to provide for the issuance of
Preferred Stock in one or more series, and in connection therewith to fix by resolution providing
for the issue of such series, the designation, number, full or limited voting powers, or the denial
of voting powers, preferences and relative, participating, optional and other special rights,
powers, preferences and attributes, and the qualifications, limitations, restrictions and other
distinguishing characteristics of such series, including, without limitation, rights of redemption
or conversion into Common Stock, to the fullest extent now or hereafter permitted by the Delaware
General Corporation Law.
The first series of Preferred Stock shall consist of Two Hundred Eight Thousand (208,000) shares of
Series A Convertible Preferred Stock (the Series A Preferred Stock). The second series of
Preferred Stock shall consist of One Hundred Forty-Five Thousand (145,000) shares of Series B
Convertible Preferred Stock (the Series B Preferred Stock). The third series of Preferred
Stock shall consist of Three Hundred Sixty-One Thousand Ninety-Eight (361,098) shares of Series C
Convertible Preferred Stock (the Series C Preferred Stock). The fourth series of
Preferred Stock shall consist of Four Hundred Twenty-Eight Thousand Five Hundred Seventy-One
(428,571) shares of Series D Convertible Preferred Stock (the Series D Preferred Stock). The
fifth series of Preferred Stock shall consist of Three Hundred Twelve Thousand One Hundred
Twenty-One (312,121) shares of Series E Convertible Preferred Stock (the Series E Preferred
Stock).
The following is a statement of the designations, powers, preferences, and the relative
participating, optional or other special rights, qualifications, limitations and restrictions
granted to or imposed upon the respective classes of shares of capital stock of the Company or the
holders thereof:
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A. COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock
are subject to and qualified by the rights of the holders of any outstanding Preferred Stock.
2. Voting. The holders of the Common Stock are entitled to one vote for each share of
Common Stock held at all meetings of the stockholders (and written actions in lieu of meetings).
There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors of the Company and subject to
the preferential or pari passu dividend rights, if any, of any then-outstanding Preferred Stock.
4. Liquidation. Upon the dissolution, liquidation or winding up of the Company, whether
voluntary or Involuntary, the holders of the Common Stock will be entitled to receive ratably all
assets of the Company available for distribution to its stockholders, subject to any preferential
liquidation rights of any then-outstanding Preferred Stock.
B. SERIES A CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The series of Preferred Stock designated and known as
the Series A Preferred Stock shall have a par value of $.00004 per share and the number of shares
constituting the Series A Preferred Stock shall be 208,000 shares. The Series A Preferred Stock
shall have a stated value of $6.252 per share (the Stated Value), which shall be subject
to appropriate arithmetic adjustment in the event of any stock splits, stock dividends,
combinations of shares, recapitalizations or other such events relating to the Series A Preferred
Stock occurring from time to time subsequent to the effective date of this Seventh Amended and
Restated Certificate of Incorporation.
Section 2. Rank. The Series A Preferred Stock shall rank, in each case as to dividends, and
as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary: (i) prior to all of the Companys Common Stock, par value $.0000l per
share (Common Stock), (ii) on a parity with the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock (collectively, for
purposes of this Section B, the Other Series), and (iii) prior to any other class or
series of capital stock of the Company hereafter created, unless with the affirmative written
approval or consent of the holders of a majority of the then issued and outstanding Series A
Preferred Stock, such other class or series, by its terms, ranks on a parity with or senior on
liquidation to the Series A Preferred Stock.
Section 3. Dividends. The Series A Preferred Stock shall not entitle the holders thereof to
any dividends, except that, in the event that the Company shall at any time or from
time to time declare or pay any dividend with respect to the Common Stock, any of the Other Series,
or any other series of Preferred Stock which is hereafter created with or granted parity dividend
rights with the Series A Preferred Stock, then the Company shall simultaneously declare or pay (as
the case may be) an equal per share dividend (with all such dividends being calculated, with
respect
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to Preferred Stock, on an as converted basis into Common Stock) on the outstanding shares of
Series A Preferred Stock. Any and all dividends shall be payable out of any cash legally available
therefor, and if there is not a sufficient amount of cash available, then out of the remaining
assets of the Company legally available therefor (valued at the fair market value thereof on the
date of payment as determined by the Board of Directors of the Company), provided that, to the
extent that funds or assets are not legally available for the payment of any declared dividend,
then the Company shall pay such unpaid declared dividend promptly as funds or assets become legally
available therefor, with payments to be made to the holders of All Series (on a pari passu as
converted basis) prior to the payment of any dividends on the Common Stock or any Junior
Securities (as such term is defined in Section 4(a) below).
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, the holders of Series A Preferred Stock shall be entitled to receive, prior to any
holders of Common Stock or other class or series of Company Preferred Stock ranking junior to the
Series A Preferred Stock (collectively, the Junior Securities), and concurrently on a
ratable basis (in proportion to the respective preferential amounts payable to all subject holders)
with the holders of any outstanding shares of Other Series or other Parity Securities (as such term
is hereinafter defined), an amount per share equal to the sum of (i) the then effective Stated
Value of each outstanding share of Series A Preferred Stock, plus (ii) any and all declared and
unpaid dividends thereon to the date of payment under this Section 4 (the Series A Liquidation
Preference); and after the payment to all holders of Series A Preferred Stock of the full such
Series A Liquidation Preference, the holders of Series A Preferred Stock shall not be entitled to
any further payments in respect of the Series A Preferred Stock. If upon the occurrence of such
event, the assets and funds available to be distributed among the holders of the Series A Preferred
Stock, the holders of any outstanding shares of Other Series and the holders of any other shares of
capital stock of the Company which, by their terms, and with the approval of the holders of not
less than a majority of the issued and outstanding shares of Series A Preferred Stock on the date
of issuance thereof, rank on liquidation on a parity with the Series A Preferred Stock (the
Parity Securities) shall be insufficient to permit the payment, to the holders of the
Series A Preferred Stock, Other Series and any other Parity Securities, of the full preferential
amounts due to such holders, then the entire assets and funds of the Company legally available for
distribution shall be distributed among the holders of the Series A Preferred Stock, Other Series
and any other Parity Securities on a ratable basis in proportion to the respective preferential
amounts payable to such holders, subject, however, to first being distributed to holders of any
capital stock senior on liquidation to the Series A Preferred Stock to the extent permitted
hereunder.
(b) The (i) sale, conveyance or disposition of all or substantially all of the assets or
outstanding capital stock of the Company to any person or entity, or (ii) consolidation, merger,
acquisition, share exchange or other business combination of the Company with or into any other
company or companies (other than a wholly-owned subsidiary of the Company), unless, in either case,
the Companys stockholders of record as constituted immediately prior to the consummation of such
transaction (by virtue of the shares of the Company owned by such stockholders or securities issued
solely with respect thereto as consideration for the Companys acquisition or sale or otherwise)
hold not less than 50% of the voting power of the acquiring or
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surviving entity, shall be treated as a liquidation, dissolution or winding up within the meaning
of this Section 4.
(c) The Company shall give written notice of any liquidation, dissolution or winding up reasonably
in advance of the occurrence thereof, and each holder of Series A Preferred Stock may exercise such
holders right of conversion pursuant to Section 6 below with respect to any or all shares of
Series A Preferred Stock at any time prior to the effectiveness of the liquidation, dissolution or
winding up.
Section 5. Redemption.
(a) Mandatory Redemption. All of the outstanding Series A Preferred Stock shall be redeemed
by the Company on the Redemption Date, in accordance with this Section 5; provided, however, that
if (i) the holders of a majority of the aggregate outstanding Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock (voting as a single class and with all shares
having the number of votes equal to the number of shares of Common Stock then issuable upon
conversion thereof) agree, at the request of the Company, to any delay or postponement (in whole or
in part) of the redemption of (or payment of the redemption price in respect of) the shares of All
Series on a ratable basis as further provided in this Section 5(a), and (ii) the holders of a
majority of the aggregate outstanding Series D Preferred Stock and Series E Preferred Stock (voting
as a single class and with all shares having the number of votes equal to the number of shares of
Common Stock then issuable upon conversion thereof) agree, at the request of the Company, to the
same delay or postponement (in whole or in part) of the redemption of (or payment of the redemption
price in respect of) the shares of All Series on a ratable basis as further provided in this
Section 5(a), then such delay or postponement shall be binding upon all holders of Series A
Preferred Stock and all holders of Other Series. The rights of the holders of Series A Preferred
Stock to receive the redemption payments in respect of the Series A Preferred Stock shall rank
pari passu with the rights of the holders of Other Series to receive any redemption
payments in respect thereof. If, at the Redemption Date, the assets and funds legally available for
such redemption payments shall be insufficient to permit the payment of all such redemption
payments in respect of the Series A Preferred Stock and Other Series, then the entire assets and
funds of the Company legally available for such redemption payments shall be paid to the holders of
the Series A Preferred Stock and Other Series on a ratable basis in proportion to the respective
amounts payable to such holders. Thereafter, the Company shall make additional redemption payments
(on a ratable basis as aforesaid) as and when it has funds legally available for such purpose, and
the Company shall use its best efforts and take all necessary and appropriate action to have funds
legally available for such purpose when due and thereafter as promptly as practicable.
(b) Redemption Price. The redemption price per share of Series A Preferred Stock shall be
an amount equal to the sum of (i) the then effective Stated Value, plus (ii) all declared and
unpaid dividends thereon to the date on which such redemption price is paid to the holder of the
subject Series A Preferred Stock.
(c) Payment of Redemption Price. Any all redemption payments hereunder shall be paid to the
subject holder by wire transfer of immediately available funds or by certified or bank cashiers
check. Against payment of such redemption price, the subject holder shall deliver to
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the Company for cancellation the certificate evidencing the Series A Preferred Stock so
redeemed (or, in the event that such certificate has been lost, stolen, mutilated or destroyed, the
subject holder shall deliver to the Company a lost certificate affidavit in form and substance
reasonably satisfactory to the Company and its transfer agent, if any).
(d) Replacement Certificates. In the event that any redemption payment hereunder shall be
made with respect to less than all of the shares represented by any stock certificate tendered to
the Company hereunder, the Company shall, at its expense, in conjunction with the payment of the
redemption price for the shares redeemed, issue to the subject holder a new stock certificate
representing the shares which were not redeemed.
(e) Conversion Rights. Prior to the payment of the redemption price in respect of any
shares of Series A Preferred Stock which the holder has required to be redeemed hereunder, the
holder shall continue to have the right to convert any or all of such shares of Series A Preferred
Stock into Common Stock in accordance with Section 6 below.
Section 6. Conversion into Common Stock.
(a) Conversion. Each outstanding share of Series A Preferred Stock (i) may, at any time at
the option of the holder thereof, be converted into Common Stock of the Company, and (ii) shall
automatically be converted into Common Stock of the Company upon (A) the consummation of a
Qualified Public Offering, or (B) upon written demand therefor by the Company to all holders of
Series A Preferred Stock and Other Series simultaneously with or at any time subsequent to the
consummation of a Qualified Sale Transaction, in each case initially at the rate of four (4) shares
of Common Stock for each share of Series A Preferred Stock. The Conversion Price in
respect of the Series A Preferred Stock shall initially be fixed at $1.563 per share of Common
Stock, and such Conversion Price shall be subject to adjustment from time to time as hereinafter
provided in this Section 6; and upon each such adjustment, except pursuant to Section 6(g), the
number of Conversion Shares receivable upon any conversion of a share of Series A Preferred Stock
shall be adjusted to an amount equal to the then effective Stated Value of such share of Series A
Preferred Stock divided by the adjusted Conversion Price.
(b) Conversion Price Adjustment Formulas. If, at any time and from time to time after the
effective date of this Seventh Amended and Restated Certificate of Incorporation, the Company shall
issue or sell (or be deemed to have issued or sold pursuant to Section 6(c)) any share of Common
Stock (excluding any grant, issuance or sale described in Section 6(h)) for a consideration per
share which is less than the Conversion Price in effect at the time of such issue or sale, then in
each such case (except when a different method of adjusting the Conversion Price is provided in
Section 6(d) or 6(f)), the Conversion Price shall be forthwith changed (but only, except as
otherwise provided in Section 6(c)(3), if a reduction would result) to the price (calculated to the
nearest one/one hundredth of a cent) determined by dividing (1) an amount equal to the sum of (a)
the number of shares of Common Stock outstanding immediately prior to such issue or sale,
multiplied by the then effective Conversion Price, plus (b) the total consideration, if any,
received and deemed (in accordance with Section 6(c)) received by the Company upon
such issue or sale, by (2) the total number of shares of Common Stock outstanding and deemed (in
accordance with Section 6(c)) outstanding immediately after such issue or sale.
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No adjustment of the Conversion Price, however, shall be made in an amount less than one cent per
share, but any such lesser adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which together with any subsequent adjustments so
carried forward shall amount to one cent per share or more.
(c) Constructive Issuances of Common Stock: Convertible Securities Rights and Options. For
purposes of Section 6(b), the following provisions shall also be applicable:
(1) If at any time the Company shall in any manner grant any rights or options (except for the
grant of any rights or options referred to in Section 6(h)) to subscribe for or to purchase Common
Stock or any stock or securities convertible into or exchangeable for shares of Common Stock (such
convertible or exchangeable stock or securities being hereinafter called Convertible
Securities), whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of
such Convertible Securities (determined by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, plus, in the case of any such rights or options which relate to
such Convertible Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (b) the total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than the Conversion Price in
respect of the Series A Preferred Stock in effect as of the time of granting such rights or
options, then the total maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall (on and after the date of the
granting of such rights or options) be deemed to be outstanding and to have been issued for such
price per share. Except as provided in clause (3) below, no further adjustments of the Conversion
Price shall be made upon the actual issue of shares of Common Stock or Convertible Securities upon
exercise of such rights or options or upon the actual issue of shares of Common Stock upon
conversion or exchange of such Convertible Securities.
(2) If at any time the Company shall in any manner issue or sell any Convertible Securities (other
than any Convertible Securities referred to in Section 6(h)), whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing (a) the total amount received
or receivable by the Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon
the
conversion or exchange thereof, by (b) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be less than the
Conversion Price in respect of the Series A Preferred Stock in effect as of the time of such issue
or sale, then the total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall (on and after the date of the issue or sale of
such Convertible
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Securities)
be deemed to be outstanding and to have been issued for such price per share, provided, that, except as otherwise specified in clause (3) below, (i) no further adjustments of the
Conversion Price shall be made upon the actual issue of Common Stock upon conversion or exchange of
such Convertible Securities, and (ii) if any such issue or sale of such Convertible Securities is
made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Conversion Price have been or are to be made
pursuant to other provisions of this Section 6(c), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(3) If the exercise price provided for in any right or option referred to in clause (1) of this
Section 6(c), or the rate at which any Convertible Securities referred to in clauses (1) and (2) of
this Section 6(c) are convertible into or exchangeable for Common Stock, shall change or a
different exercise price or rate shall become effective at any time or from time to time (other
than under or by reason of provisions designed to protect against dilution) then, upon such change
becoming effective, the Conversion Price then in effect in respect of the Series A Preferred Stock
shall forthwith be increased or decreased to such Conversion Price as would have been obtained had
the adjustments made and required to be made under this Section 6(c) upon the issuance of such
rights or options or Convertible Securities been made upon the basis of (and the total
consideration received therefor) (a) the issuance of the number of shares of Common Stock
theretofore actually delivered upon the exercise of such options or rights or upon the conversion
or exchange of such Convertible Securities, (b) the issuance of all of Common Stock and all other
rights, options and Convertible Securities issued after the issuance of such rights, options or
Convertible Securities, and (c) the original issuance at the time of such change of any such
options, rights and Convertible Securities then still outstanding. On the expiration of any such
option or right or the termination of any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect in respect of the Series A Preferred Stock shall
forthwith be increased or decreased to such Conversion Price as would have obtained (i) had the
adjustments made upon the issuance of such rights or options or such Convertible Securities been
made upon the basis of the issuance of only the number of shares of Common Stock theretofore
actually delivered (and the total consideration received therefor) upon the exercise of such rights
or options or upon the conversion or exchange of such Convertible Securities, and (ii) had
adjustments been made on the basis of the Conversion Price as adjusted under the immediately
preceding clause (i) for all issues or sales of Common Stock or rights, options or Convertible
Securities made after the issuance of such rights or options or such Convertible Securities. If the
exercise price provided for in any right or option referred to in clause (1) of this Section 6(c),
or the rate at which any Convertible Securities referred to in clauses (1) and (2) of this Section
6(c) are convertible into or exchangeable for shares of Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect against dilution, then in
the case of the delivery of shares of Common Stock upon the exercise of any such right or option or
upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect
in respect of the Series A Preferred Stock shall forthwith be decreased to such Conversion Price as
would have obtained had the adjustments made upon issuance of such right or
option or such Convertible Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
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(4) If at any time any shares of Common Stock or Convertible Securities or any rights or options to
purchase any shares of Common Stock or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount paid to the Company therefor
without deduction therefrom of any expenses incurred or any underwriting commissions, concessions
or discounts, or finders fees or brokerage commissions, paid or allowed by the Company in
connection therewith. In case any shares of Common Stock or Convertible Securities or any rights or
options to purchase any shares of Common Stock or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration other than cash payable to the
Company shall be deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company, without deduction therefrom of any expenses incurred or any
underwriting commissions, concessions or discounts, or finders fees or brokerage commissions, paid
or allowed by the Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any share of Common Stock or
Convertible Securities shall be issued in connection with any merger of another corporation into
the Company, the amount of consideration therefor shall be deemed to be the fair value as
determined in good faith by the Board of Directors of the Company of such portion of the assets of
such merged corporation as such Board shall determine to be attributable to such shares of Common
Stock, Convertible Securities, rights or options, as the case may be.
(5) If at any time the Company shall take a record of the holders of Common Stock for the purpose
of entitling them (a) to receive a dividend or other distribution payable in shares of Common Stock
or in Convertible Securities, or (b) to subscribe for or purchase shares of Common Stock or
Convertible Securities, then such record date shall be deemed to be the date of the issue or sale
of the shares of the Common Stock deemed to have been issued or sold upon the declaration of such
dividend or of such other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(d) Stock Dividends. If at any time the Company shall declare a dividend or any other
distribution upon any capital stock of the Company which is payable in shares of Common Stock, then
the Conversion Price in respect of the Series A Preferred Stock in effect immediately prior to the
declaration of such dividend or distribution shall be reduced to the quotient obtained by dividing
(1) the product of (i) the number of shares of Common Stock outstanding and deemed (in accordance
with Section 6(c)) to be outstanding immediately prior to such declaration, multiplied by (ii) the
then effective Conversion Price, by (2) the total number of shares of Common Stock outstanding and
deemed (in accordance with Section 6(c)) to be outstanding immediately after such declaration. All
shares of Common Stock and all Convertible Securities issuable in payment of any dividend or other
distribution upon the capital stock of the Company shall be deemed after such declaration to have
been issued and sold without consideration.
(e) Extraordinary Dividends and Distributions. If at any time the Company shall declare a
dividend or any other distribution upon the Common Stock payable otherwise than out of
current earnings, retained earnings or earned surplus and otherwise than in shares of Common Stock
or Convertible Securities, then, except to the extent that such dividend or distribution shall have
been paid to the holders of Series A Preferred Stock pursuant to Section 3, the Company shall set
aside an equal per share dividend (calculated, with respect to the Series A Preferred
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Stock, on an as converted basis), which shall be payable to the holder of the subject Series A
Preferred Stock upon conversion thereof into Common Stock. At such time as shares of Series A
Preferred Stock are redeemed in accordance with Section 5, the corresponding amount set aside under
this Section 6(e) may returned to the general, unrestricted assets of the Company. To the extent
that any dividend or distribution required to be set aside under this Section 6(e) shall be in a
form other than cash, then the Company shall have the right, in lieu of setting aside such non-cash
property, to set aside a cash amount equal to the fair value of such non-cash property as
determined by the Board of Directors of the Company in good faith. For the purpose of the
foregoing, a dividend or distribution other than in cash shall be considered payable out of
earnings, retained earnings or earned surplus only to the extent that such current earnings,
retained earnings or earned surplus are charged an amount equal to the fair value of such dividend
or distribution at the time of the declaration thereof, as determined by the Board of Directors of
the Company. Such reductions shall take effect as of the date on which a record is taken for the
purpose of such dividend or distribution or, if a record is not taken, the date as of which the
holders of record of Common Stock entitled to such dividend or distribution are to be determined.
(f) Stock Splits and Reverse Splits. If at any time the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the Conversion Price in respect
of the Series A Preferred Stock in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Conversion Shares receivable upon conversion of
outstanding Series A Preferred Stock immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in respect of the Series A
Preferred Stock in effect immediately prior to such combination shall be proportionately increased
and the number of Conversion Shares receivable upon conversion of outstanding Series A Preferred
Stock immediately prior to such combination shall be proportionately reduced.
(g) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. If at any
time the Company shall be a party to any transaction (including without limitation a merger,
consolidation, sale of all or substantially all of the Companys assets or a recapitalization of
the Common Stock) in which the previously outstanding shares of Common Stock shall be changed into
or exchanged for different securities of the Company or changed into or exchanged for common stock
or other securities of another corporation or other property (including cash) or any combination of
any of the foregoing (each such transaction being hereinafter referred to as the
Transaction, the Company (in the case of a recapitalization of the Stock) or such other
corporation being hereinafter referred to as the Acquiring Company, and the common stock
of the Acquiring Company being hereinafter referred to as the Acquirers Stock), then, as
a condition to the consummation of the Transaction, lawful and adequate provisions shall be made so
that, upon the basis and the terms and in the manner provided in this Section 6(g), each holder of
Series A Preferred Stock, upon conversion of such Series A Preferred Stock at any time after the
consummation of the Transaction, shall be entitled to receive, in lieu of the shares of Common
Stock issuable upon such exercise prior to such consummation,
at the election of such holder given by notice to the Company on or before the later of the day on
which the holders of Common Stock approve the Transaction, or the thirtieth day following the date
of delivery or
10
mailing to such holder of the last proxy statement relating to the vote on the Transaction by
the holders of Common Stock:
(1) the stock and other securities, cash and property to which such holder would have been
entitled upon the consummation of the Transaction if such holder had converted such Series A
Preferred Stock immediately prior thereto (subject to adjustments from and after the date of the
consummation of the Transaction (the Consummation Date) as nearly equivalent as possible
to the adjustments provided for in this Section 6); or
(2) only in the case of a Transaction consummated after an Initial Public Offering other than
a Transaction in which the previously outstanding shares of Common Stock shall be exchangeable for
cash only, if the Acquiring Company meets the requirements set forth in this Section 6(g), the
number of shares of the Acquirers Stock or, if the Acquiring Company fails to meet, but a Parent
(as defined in this Section 6(g)) does meet, such requirements, of such Parents common stock
(subject to adjustments from and after the Consummation Date as nearly equivalent as possible to
the adjustments provided for in this Section 6), determined by dividing (i) the product obtained by
multiplying (a) the number of shares of Common Stock to which the holder of such Series A Preferred
Stock would have been entitled had such holder converted such Series A Preferred Stock immediately
prior to the consummation of the Transaction, times (b) the greater of the Conversion Price or the
Acquisition Price (as defined in this Section 6(g)) in effect immediately prior to the consummation
of the Transaction, by (ii) the Market Value of the Acquirers Stock on the date immediately
preceding the Consummation Date.
For the purposes of this Section 6(g) only, the term Market Value shall mean, for any
share of common stock on any date specified herein, the last sale price, regular way, on such date,
or, if no sale takes place on such date, the average of the closing bid and asked prices on such
date, in each case as officially reported on the NYSE or, if not so reported, on the principal
national securities exchange on which such stock is listed or if not listed or admitted to trading,
the average of the closing bid and asked prices of such stock in the over-the-counter market as
reported by Nasdaq or a similar organization; and the term Acquisition Price shall mean
the consideration per share to be paid for or received by the holders of the previously-outstanding
shares of Common Stock in accordance with the terms of the Transaction, determined (i) in the case
where the holders of the previously outstanding Common Stock received solely shares of the
Acquirers Stock in the Transaction, by multiplying the Market Value of the Acquirers Stock as of
the date immediately preceding the Consummation Date by a fraction the numerator of which shall be
the aggregate number of shares of the Acquirers Stock to be received in the Transaction in
exchange for all of the previously outstanding shares of Common Stock and the denominator of which
shall be the aggregate number of such previously outstanding shares of Common Stock, and (ii) in
any other case, by dividing the aggregate fair market value (using Market Value for any shares of
the Acquirers Stock), as of the date immediately preceding the Consummation Date, of the aggregate
consideration to be received by the holders of such previously outstanding shares of
Common Stock by the number of shares of such previously outstanding Common Stock. The requirements
referred to in clause (2) of this Section 6(g) with reference to the Acquiring Company or to a
corporation (herein referred to as a Parent) which directly or indirectly controls the
Acquiring Company are as follows: (x) its common stock is listed on the NYSE or a principal
national securities exchange or bid and asked prices are reported with respect thereto by Nasdaq or
a similar organization and such common stock
11
continues to meet such requirements for listing thereon, (y) it is required to file, and in each of
its three fiscal years immediately preceding the Consummation Date has filed, reports with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and (z) in the case of a Parent,
such Parent is required to include the Acquiring Company in the consolidated financial statements
contained in the Parents Annual Report on Form 10-K and is not itself included in the consolidated
financial statements of any other person (other than its consolidated subsidiaries).
Notwithstanding anything contained herein to the contrary, the Company shall not effect any
Transaction unless prior to or simultaneously with the consummation of such Transaction the
survivor or successor entity (if other than the Company) resulting from such Transaction shall (AA)
assume by written instrument executed and delivered to each holder of Series A Preferred Stock the
obligation to deliver to such holder of Series A Preferred Stock such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be entitled to receive,
and containing the express assumption of such successor entity of the due and punctual performance
and observance of every provision of the Series A Preferred Stock to be performed and observed by
the Company and of all liabilities and obligations of the Company hereunder, and (BB) deliver to
the holders of Series A Preferred Stock an opinion, in form, substance and from counsel reasonably
satisfactory to the holders of Series A Preferred Stock, to the effect that such written instrument
has been duly authorized, executed and delivered by such successor entity and constitutes a legal,
valid and binding instrument enforceable (subject to applicable bankruptcy and other similar laws
affecting the enforcement of creditors rights generally) against such successor entity in
accordance with its terms, and to such further effects as the holders of Series A Preferred Stock
may reasonably request.
(h) Exceptions to Adjustment of Conversion Price. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the Conversion Price
in the case of (i) the issuance of shares of Common Stock upon conversion of the Series A Preferred
Stock or any Other Series or any adjustment of the conversion price with respect thereto in
accordance herewith, (ii) the issuance of options or warrants included within the Option/Warrant
Pool, and the issuance of Common Stock upon the exercise of any such options or warrants (including
options and warrants outstanding on the Date of First Issuance), and (iii) the issuance of shares
of Common Stock in a Qualified Public Offering pursuant to an effective registration statement
under the Securities Act.
(i) Treasury Shares. The number of shares of Common Stock outstanding at any time
shall not include shares owned or held by or for the account of the Company, and the disposition of
any such shares shall be considered an issue or sale of Common Stock for the purposes of this
Section 6.
(j) Certificate of Adjustment. Upon each adjustment of the Conversion Price in respect
of the Series A Preferred Stock and upon each change in the number of Conversion Shares issuable
upon the conversion of the Series A Preferred Stock, and in the event of any change in the rights
of the holders of the Series A Preferred Stock by reason of other events herein set forth, then and
in each such case, the Company will promptly prepare a certificate of adjustment stating the
adjusted Conversion Price and the new number of Conversion Shares so issuable, or specifying the other shares of stock,
securities or assets and the amount thereof receivable as a result of such change in rights, and
setting forth in reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company will promptly
12
mail a copy of such certificate of adjustment to each registered holder of Series A Preferred
Stock.
(k) Company to Prevent Dilution. If at any time or from time to time conditions arise
by reason of action taken by the Company, which in the opinion of its Board of Directors, are not
adequately covered by the provisions of this Section 6, and which might materially and adversely
affect the conversion rights of the registered holders of Series A Preferred Stock, the Board of
Directors of the Company shall appoint a firm of independent certified public accountants, which
may be the firm regularly retained by the Company, which shall give
its opinion upon the adjustment, if any, on a basis consistent with the standards established in the other provisions of
this Section 6, necessary with respect to the Conversion Price, so as to preserve, without
dilution, the conversion rights of the registered holders of the Series A Preferred Stock. Upon
receipt of such opinion, the Board of Directors of the Company shall forthwith make the adjustments
described therein.
(l) Reservation of Shares. The Company will authorize, reserve and set apart and have
available for issuance at all times, free from preemptive rights, including, without limitation,
rights derived from rights offerings, that number of shares of Common Stock which is deliverable
upon the conversion of the Series A Preferred Stock, and the Company will have at all times any
other rights or privileges provided for therein sufficient to enable it at any time to fulfill all
its obligations hereunder.
(m) Costs. The Company shall pay all documentary, stamp, transfer or other transactional
taxes attributable to the issuance or delivery of Conversion Shares upon conversion of any shares
of the Series A Preferred Stock; provided, however, that the Company shall not be required to pay
any federal or state income taxes or other taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such Conversion Shares in a name other
than that of the holder of the shares of the Series A Preferred Stock in respect of which such
shares are being issued.
Section 7. Voting Rights. Except as otherwise required by law or expressly provided herein,
the holders of shares of Series A Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the stockholders of the Company and shall have such number of votes equal to
the number of shares of Common Stock into which such holders shares of Series A Preferred Stock
are convertible pursuant to the provisions hereof at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited. Except as otherwise
required by law or expressly provided herein, the holders of shares of Series A Preferred Stock,
Other Series and Common Stock shall vote together as a single class, and not as separate classes.
Such voting rights shall be in addition to the rights of holders of Series A Preferred Stock to
vote on specific matters of Company business, as provided in the Stockholders Agreement.
Section 8. Preference Rights. Nothing contained herein shall be construed to prevent the
Board of Directors of the Company from issuing one or more series or classes of Junior
Securities with dividend and/or liquidation preferences junior to the dividend and liquidation
preferences of the Series A Preferred Stock.
13
Section 9. Registration of Transfer. The Company will keep at its principal office a
register for the registration of Series A Preferred Stock. Upon the surrender of any certificate
representing Series A Preferred Stock at such place, the Company will, at the written request of
the record holder of such certificate, execute and deliver (at the Companys expense) a new
certificate or certificates in exchange therefor representing in the aggregate the number of shares
represented by the surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of Shares as is requested by the holder of the surrendered
certificate.
Section 10. Replacement. Upon receipt of evidence reasonably satisfactory to the Company of
the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series A Preferred Stock and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided that if the holder is a financial
institution, an entity whose securities are traded or listed on any national securities exchange or
recognized automated quotation system, or any subsidiary of the foregoing, then the holders own
agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company will (at its expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 11. Amendment and Waiver. No amendment, modification or waiver will be binding or
effective with respect to any provision of Sections 1 through 11 of this part B without the prior
written consent or affirmative vote of the holders of not less than a majority of the Series A
Preferred Stock outstanding at the time such action is taken.
Section 12. Notices. Except as otherwise expressly provided hereunder, all notices referred
to herein will be in writing and will be delivered by registered or certified mail, return receipt
requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and will
be deemed to have been given when so mailed or sent (a) to the Company, at its principal executive
offices, and (b) to any stockholder, at such holders address as it appears in the stock records of
the Company (unless otherwise indicated by notice given to the Company by any such holder).
C. SERIES B CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The series of Preferred Stock designated and known as
the Series B Preferred Stock shall have a par value of $.00004 per share and the number of shares
constituting the Series B Preferred Stock shall be 145,000 shares. The Series B Preferred Stock
shall have a stated value of $23.768 per share (the Stated Value), which shall be
subject to appropriate arithmetic adjustment in the event of any stock splits, stock dividends,
combinations of shares, recapitalizations or other such events relating to the Series B Preferred
Stock occurring from time to time subsequent to the effective date of this Seventh Amended and
Restated Certificate of Incorporation.
Section 2. Rank. The Series B Preferred Stock shall rank, in each case as to dividends, and
as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether
14
voluntary
or involuntary: (i) prior to all of the Companys Common
Stock, par value $.00001 per
share (Common Stock), (ii) on a parity with the Series A Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock (collectively, for
purposes of this Section C, the Other Series), and (iii) prior to any other class or
series of capital stock of the Company hereafter created, unless with the affirmative written
approval or consent of the holders of a majority of the then issued and outstanding Series B
Preferred Stock, such other class or series, by its terms, ranks on a parity with or senior on
liquidation to the Series B Preferred Stock.
Section 3. Dividends. The Series B Preferred Stock shall not entitle the holders thereof to
any dividends except that, in the event that the Company shall at any time or from
time to time declare or pay any dividend with respect to the Common Stock, any of the Other Series,
or any other series of Preferred Stock which is hereafter created with or granted parity dividend
rights with the Series B Preferred Stock, then the Company shall simultaneously declare or pay (as
the case may be) an equal per share dividend (with all such dividends being calculated, with
respect to Preferred Stock, on an as converted basis into Common Stock) on the outstanding shares
of Series B Preferred Stock. Any and all dividends shall be payable out of any cash legally
available therefor, and if there is not a sufficient amount of cash available, then out of the
remaining assets of the Company legally available therefor (valued at the fair market value thereof
on the date of payment as determined by the Board of Directors of the Company), provided that, to
the extent that funds or assets are not legally available for the payment of any declared dividend,
then the Company shall pay such unpaid declared dividend promptly as funds or assets become legally
available therefor, with payments to be made to the holders of All Series (on a pari
passu as converted basis) prior to the payment of any dividends on the Common Stock or
any Junior Securities (as such term is defined in Section 4(a) below).
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, the holders of Series B Preferred Stock shall be entitled to receive, prior to any
holders of Common Stock or other class or series of Company Preferred Stock ranking junior to the
Series B Preferred Stock (collectively, the Junior Securities), and concurrently
on a ratable basis (in proportion to the respective preferential amounts payable to all subject
holders) with the holders of any outstanding shares of Other Series or other Parity Securities (as
such term is hereinafter defined), an amount per share equal to the sum of (i) the then effective
Stated Value of each outstanding share of Series B Preferred Stock, plus (ii) any and all declared
and unpaid dividends thereon to the date of payment under this Section 4 (the Series B
Liquidation Preference); and after the payment to all holders of Series B Preferred
Stock of the full such Series B Liquidation Preference, the holders of Series B Preferred Stock
shall not be entitled to any further payments in respect of the Series B Preferred Stock. If upon
the occurrence of such event, the assets and funds available to be distributed among the holders of
the Series B Preferred Stock, the holders of any outstanding shares of Other Series and the holders
of any other shares of capital stock of the Company which, by their
terms, and with the approval of the holders of not less than a majority of the issued and
outstanding shares of Series B Preferred Stock on the date of issuance thereof, rank on liquidation
on a parity with the Series B Preferred Stock (the Parity Securities) shall be
insufficient to permit the payment, to the holders of the Series B Preferred Stock, Other Series
and any other Parity Securities, of the full
15
preferential amounts due to such holders, then the entire assets and funds of the Company
legally available for distribution shall be distributed among the holders of the Series B Preferred
Stock, Other Series and any other Parity Securities on a ratable basis in proportion to the
respective preferential amounts payable to such holders, subject, however, to first being
distributed to holders of any capital stock senior on liquidation to the Series B Preferred Stock
to the extent permitted hereunder.
(b) The (i) sale, conveyance or disposition of all or substantially all of the assets or
outstanding capital stock of the Company to any person or entity, or (ii) consolidation, merger,
acquisition, share exchange or other business combination of the Company with or into any other
company or companies (other than a wholly-owned subsidiary of the Company), unless, in either case,
the Companys stockholders of record as constituted immediately prior to the consummation of such
transaction (by virtue of the shares of the Company owned by such stockholder or securities issued
solely with respect thereto as consideration for the Companys acquisition or sale or otherwise)
hold not less than 50% of the voting power of the acquiring or surviving entity, shall be treated
as a liquidation, dissolution or winding up within the meaning of this Section 4.
(c) The Company shall give written notice of any liquidation, dissolution or winding up
reasonably in advance of the occurrence thereof, and each holder of Series B Preferred Stock may
exercise such holders right of conversion pursuant to Section 6 below with respect to any or all
shares of Series B Preferred Stock at any time prior to the effectiveness of the liquidation,
dissolution or winding up.
Section 5. Redemption.
(a) Mandatory Redemption. All of the outstanding Series B Preferred Stock shall be
redeemed by the Company on the Redemption Date, in accordance with
this Section 5; provided,
however, that if (i) the holders of a majority of the aggregate outstanding Series B Preferred
Stock, Series A Preferred Stock and Series C Preferred Stock (voting as a single class and with all
shares having the number of votes equal to the number of shares of Common Stock then issuable upon
conversion thereof) agree, at the request of the Company, to any delay or postponement (in whole or
in part) of the redemption of (or payment of the redemption price in respect of) the shares of All
Series on a ratable basis as further provided in this Section 5(a), and (ii) the holders of a
majority of the aggregate outstanding Series D Preferred Stock and Series E Preferred Stock (voting
as a single class and with all shares having the number of votes equal to the number of shares of
Common Stock then issuable upon conversion thereof) agree, at the request of the Company, to the
same delay or postponement (in whole or in part) of the redemption of (or payment of the redemption
price in respect of) the shares of All Series on a ratable basis as further provided in this
Section 5(a), then such delay or postponement shall be binding upon all holders of Series B
Preferred Stock and all holders of Other Series. The rights of the holders of Series B Preferred
Stock to receive the redemption payments in respect of the Series B Preferred Stock shall rank
pari passu with the rights of the holders of Other Series to receive any redemption
payments in respect thereof. If, at the Redemption Date, the assets and funds legally available for
such redemption payments shall be insufficient to permit the payment of all such redemption payments in respect of the
Series B Preferred Stock and Other Series, then the entire assets and funds of the Company legally
available for such redemption payments shall
16
be paid to the holders of the Series B Preferred Stock and Other Series on a ratable basis in
proportion to the respective amounts payable to such holders. Thereafter, the Company shall make
additional redemption payments (on a ratable basis as aforesaid) as and when it has funds legally
available for such purpose, and the Company shall use its best efforts and take all necessary and
appropriate action to have funds legally available for such purpose when due and thereafter as
promptly as practicable.
(b) Redemption Price. The redemption price per share of Series B Preferred Stock shall
be an amount equal to the sum of (i) the then effective Stated Value, plus (ii) all declared and
unpaid dividends thereon to the date on which such redemption price is paid to the holder of the
subject Series B Preferred Stock.
(c) Payment of Redemption Price. Any all redemption payments hereunder shall be paid
to the subject holder by wire transfer of immediately available funds or by certified or bank
cashiers check. Against payment of such redemption price, the subject holder shall deliver to the
Company for cancellation the certificate evidencing the Series B Preferred Stock so redeemed (or,
in the event that such certificate has been lost, stolen, mutilated or destroyed, the subject
holder shall deliver to the Company a lost certificate affidavit in form and substance reasonably
satisfactory to the Company and its transfer agent, if any).
(d) Replacement Certificates. In the event that any redemption payment hereunder shall
be made with respect to less than all of the shares represented by any stock certificate tendered
to the Company hereunder, the Company shall, at its expense, in conjunction with the payment of the
redemption price for the shares redeemed, issue to the subject holder a new stock certificate
representing the shares which were not redeemed.
(e) Conversion Rights. Prior to the payment of the redemption price in respect of any
shares of Series B Preferred Stock which the holder has required to be redeemed hereunder, the
holder shall continue to have the right to convert any or all of such shares of Series B Preferred
Stock into Common Stock in accordance with Section 6 below.
Section 6. Conversion into Common Stock.
(a) Conversion. Each outstanding share of Series B Preferred Stock (i) may, at any
time at the option of the holder thereof, be converted into Common Stock of the Company, and (ii)
shall automatically be converted into Common Stock of the Company upon (A) the consummation of a
Qualified Public Offering, or (B) upon written demand therefor by the Company to all holders of
Series B Preferred Stock and Other Series simultaneously with or at any time subsequent to the
consummation of a Qualified Sale Transaction, in each case initially at the rate of 4.246 shares of
Common Stock for each share of Series B Preferred Stock. The Conversion Price in respect
of the Series B Preferred Stock shall initially be fixed at $5.5977 per share of Common Stock, and
such Conversion Price shall be subject to adjustment from time to time as hereinafter provided in
this Section 6; and upon each such adjustment, except pursuant to Section 6(g), the
number of Conversion Shares receivable upon any conversion of a share of Series B Preferred
Stock shall be adjusted to an amount equal to the then effective Stated Value of such share of
Series B Preferred Stock divided by the adjusted Conversion Price.
17
(b) Conversion Price Adjustment Formulas. If, at any time and from time to time after
the effective date of this Seventh Amended and Restated Certificate of Incorporation, the Company
shall issue or sell (or be deemed to have issued or sold pursuant to Section 6(c)) any share of
Common Stock (excluding any grant, issuance or sale described in Section 6(h)) for a consideration
per share which is less than the Conversion Price in effect at the time of such issue or sale, then
in each such case (except when a different method of adjusting the Conversion Price is provided in
Section 6(d) or 6(f)), the Conversion Price shall be forthwith changed (but only, except as
otherwise provided in Section 6(c)(3), if a reduction would result) to the price (calculated to the
nearest one/one hundredth of a cent) determined by dividing (1) an amount equal to the sum of (a)
the number of shares of Common Stock outstanding immediately prior to such issue or sale,
multiplied by the then effective Conversion Price, plus (b) the total consideration, if any,
received and deemed (in accordance with Section 6(c)) received by the Company upon such issue or
sale, by (2) the total number of shares of Common Stock outstanding and deemed (in accordance with
Section 6(c)) outstanding immediately after such issue or sale.
No adjustment of the Conversion Price, however, shall be made in an amount less than one cent
per share, but any such lesser adjustment shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which together with any subsequent adjustments so
carried forward shall amount to one cent per share or more.
(c) Constructive Issuances of Common Stock; Convertible Securities; Rights and
Options. For purposes of Section 6(b), the following provisions shall also be applicable:
(1) If at any time the Company shall in any manner grant any rights or options (except for the
grant of any rights or options referred to in Section 6(h)) to subscribe for or to purchase Common
Stock or any stock or securities convertible into or exchangeable for shares of Common Stock (such
convertible or exchangeable stock or securities being hereinafter called Convertible
Securities), whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of
such Convertible Securities (determined by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, plus, in the case of any such rights or options which relate to
such Convertible Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (b) the total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than the Conversion Price in
respect of the Series B Preferred Stock in effect as of the time of granting such rights or
options, then the total maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall (on and after the date of the
granting of such rights or options) be deemed to be outstanding and to have been issued for such
price per share. Except as provided in clause (3) below, no further adjustments of the Conversion
Price shall be made upon the actual
18
issue of shares of Common Stock or Convertible Securities upon exercise of such rights or options
or upon the actual issue of shares of Common Stock upon conversion or exchange of such Convertible
Securities.
(2) If at any time the Company shall in any manner issue or sell any Convertible Securities
(other than any Convertible Securities referred to in Section 6(h)), whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by dividing (a) the total
amount received or receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (b) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in respect of the Series B Preferred Stock in effect as of
the time of such issue or sale, then the total maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall (on and after the date of the
issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued
for such price per share, provided, that, except as otherwise specified in clause (3) below, (i) no
further adjustments of the Conversion Price shall be made upon the actual issue of Common Stock
upon conversion or exchange of such Convertible Securities, and (ii) if any such issue or sale of
such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or
any option to purchase any such Convertible Securities for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions of this Section 6(c), no further
adjustment of the Conversion Price shall be made by reason of such issue or sale.
(3) If the exercise price provided for in any right or option referred to in clause (1) of
this Section 6(c), or the rate at which any Convertible Securities referred to in clauses (1) and
(2) of this Section 6(c) are convertible into or exchangeable for Common Stock, shall change or a
different exercise price or rate shall become effective at any time or from time to time (other
than under or by reason of provisions designed to protect against dilution) then, upon such change
becoming effective, the Conversion Price then in effect hereunder shall forthwith be increased or
decreased to such Conversion Price as would have been obtained had the adjustments made and
required to be made under this Section 6(c) upon the issuance of such rights or options or
Convertible Securities been made upon the basis of (and the total consideration received therefor)
(a) the issuance of the number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such Convertible
Securities, (b) the issuance of all of Common Stock and all other rights, options and Convertible
Securities issued after the issuance of such rights, options or Convertible Securities, and (c) the
original issuance at the time of such change of any such options, rights and Convertible Securities
then still outstanding. On the expiration of any such option or right or the termination of any
such right to convert or exchange such Convertible Securities, the Conversion Price then in effect
in respect of the Series B Preferred Stock shall forthwith be increased or decreased to such
Conversion Price as would have obtained (i) had the adjustments made upon the issuance of such rights or options or such Convertible
Securities been made upon the basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible Securities, and (ii)
had
19
adjustments been made on the basis of the Conversion Price as adjusted under the immediately
preceding clause (i) for all issues or sales of Common Stock or rights, options or Convertible
Securities made after the issuance of such rights or options or such Convertible Securities. If the
exercise price provided for in any right or option referred to in clause (1) of this Section 6(c),
or the rate at which any Convertible Securities referred to in clauses (1) and (2) of this Section
6(c) are convertible into or exchangeable for shares of Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect against dilution, then in
the case of the delivery of shares of Common Stock upon the exercise of any such right or option or
upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect
in respect of the Series B Preferred Stock shall forthwith be decreased to such Conversion Price as
would have obtained had the adjustments made upon issuance of such right or option or such
Convertible Securities been made upon the basis of the issuance of (and the total consideration
received for) the shares of Common Stock delivered as aforesaid.
(4) If at any time any shares of Common Stock or Convertible Securities or any rights or
options to purchase any shares of Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the amount paid to the Company
therefor without deduction therefrom of any expenses incurred or any underwriting commissions,
concessions or discounts, or finders fees or brokerage commissions, paid or allowed by the Company
in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any shares of Common Stock or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration other than cash payable to the
Company shall be deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company, without deduction therefrom of any expenses incurred or any
underwriting commissions, concessions or discounts, or finders fees or brokerage commissions, paid
or allowed by the Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any share of Common Stock or
Convertible Securities shall be issued in connection with any merger of another corporation into
the Company, the amount of consideration therefor shall be deemed to be the fair value as
determined in good faith by the Board of Directors of the Company of such portion of the assets of
such merged corporation as such Board shall determine to be attributable to such shares of Common
Stock, Convertible Securities, rights or options, as the case may be.
(5) If at any time the Company shall take a record of the holders of Common Stock for the
purpose of entitling them (a) to receive a dividend or other distribution payable in shares of
Common Stock or in Convertible Securities, or (b) to subscribe for or purchase shares of Common
Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue
or sale of the shares of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) Stock Dividends. If at any time the Company shall declare a dividend or any other
distribution upon any capital stock of the Company which is payable in shares of Common Stock, then
the Conversion Price in respect of the Series B Preferred Stock in effect immediately prior to the
declaration of such dividend or distribution shall be reduced to the quotient obtained by dividing
(1) the product of (i) the number of shares of Common Stock outstanding and
20
deemed (in accordance with Section 6(c)) to be outstanding immediately prior to such
declaration, multiplied by (ii) the then effective Conversion Price, by (2) the total number of
shares of Common Stock outstanding and deemed (in accordance with Section 6(c)) to be outstanding
immediately after such declaration. All shares of Common Stock and all Convertible Securities
issuable in payment of any dividend or other distribution upon the capital stock of the Company
shall be deemed after such declaration to have been issued and sold without consideration.
(e) Extraordinary Dividends and Distributions. If at any time the Company shall
declare a dividend or any other distribution upon the Common Stock payable otherwise than out of
current earnings, retained earnings or earned surplus and otherwise than in shares of Common Stock
or Convertible Securities, then, except to the extent that such dividend or distribution shall have
been paid to the holders of Series B Preferred Stock pursuant to Section 3, the Company shall set
aside an equal per share dividend (calculated, with respect to the Series B Preferred Stock, on an
as converted basis), which shall be payable to the holder of the subject Series B Preferred Stock
upon conversion thereof into Common Stock. At such time as shares of Series B Preferred Stock are
redeemed in accordance with Section 5, the corresponding amount set aside under this Section 6(e)
may returned to the general, unrestricted assets of the Company. To the extent that any dividend or
distribution required to be set aside under this Section 6(e) shall be in a form other than cash,
then the Company shall have the right, in lieu of setting aside such non-cash property, to set
aside a cash amount equal to the fair value of such non-cash property as determined by the Board of
Directors of the Company in good faith. For the purposes of the foregoing, a dividend or
distribution other than in cash shall be considered payable out of earnings, retained earnings or
earned surplus only to the extent that such current earnings, retained earnings or earned surplus
are charged an amount equal to the fair value of such dividend or distribution at the time of the
declaration thereof, as determined by the Board of Directors of the Company. Such reductions shall
take effect as of the date on which a record is taken for the purposes of such dividend or
distribution, or, if a record is not taken, the date as of which the holders of record of Common
Stock entitled to such dividend or distribution.
(f) Stock Splits and Reverse Splits. If at any time the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the Conversion Price in respect
of the Series B Preferred Stock in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Conversion Shares receivable upon conversion of
outstanding Series B Preferred Stock immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in respect of the Series B
Preferred Stock in effect immediately prior to such combination shall be proportionately increased
and the number of Conversion Shares receivable upon conversion of outstanding Series B Preferred
Stock immediately prior to such combination shall be proportionately reduced.
(g) Adjustments
for Consolidation, Merger, Sale of Assets, Reorganization, etc. If at
any time the Company shall be a party to any transaction (including without limitation
a merger, consolidation, sale of all or substantially all of the Companys assets or a
recapitalization of the Common Stock) in which the previously outstanding shares of Common Stock
shall be changed into or exchanged for different securities of the Company or changed into or
exchanged for
21
common stock or other securities of another corporation or other property (including cash) or any
combination of any of the foregoing (each such transaction being hereinafter referred to as the
Transaction; the Company (in the case of a recapitalization of the Stock) or such other
corporation being hereinafter referred to as the Acquiring Company, and the common stock
of the Acquiring Company being hereinafter referred to as the Acquirers Stock), then, as
a condition to the consummation of the Transaction, lawful and adequate provisions shall be made so
that, upon the basis and the terms and in the manner provided in this Section 6(g), each holder of
Series B Preferred Stock, upon conversion of such Series B Preferred Stock at any time after the
consummation of the Transaction, shall be entitled to receive, in lieu of the shares of Common
Stock issuable upon such exercise prior to such consummation, at the election of such holder given
by notice to the Company on or before the later of the day on which the holders of Common Stock
approve the Transaction, or the thirtieth day following the date of delivery or mailing to such
holder of the last proxy statement relating to the vote on the Transaction by the holders of Common
Stock:
(1) the stock and other securities, cash and property to which such holder would have been
entitled upon the consummation of the Transaction if such holder had converted such Series B
Preferred Stock immediately prior thereto (subject to adjustments from and after the date of the
consummation of the Transaction (the Consummation Date) as nearly equivalent as possible
to the adjustments provided for this Section 6); or
(2) only in the case of a Transaction consummated after an Initial Public Offering other than
a Transaction in which the previously outstanding shares of Common Stock shall be exchangeable for
cash only, if the Acquiring Company meets the requirements set forth in this Section 6(g), the
number of shares of the Acquirers Stock or, if the Acquiring Company fails to meet, but a Parent
(as defined in this Section 6(g)) does meet, such requirements, of such Parents common stock
(subject to adjustments from and after the Consummation Date as nearly equivalent as possible to
the adjustments provided for in this Section 6), determined by dividing (i) the product obtained by
multiplying (a) the number of shares of Common Stock to which the holder of such Series B Preferred
Stock would have been entitled had such holder converted such Series B Preferred Stock immediately
prior to the consummation of the Transaction, times (b) the greater of the Conversion Price or the
Acquisition Price (as defined in this Section 6(g)) in effect immediately prior to the consummation
of the Transaction, by (ii) the Market Value of the Acquirers Stock on the date immediately
preceding the Consummation Date.
For the purposes of this Section 6(g) only, the term Market Value shall mean, for any
share of common stock on any date specified herein, the last sale price, regular way, on such
date, or, if no sale takes place on such date, the average of the closing bid and asked prices on
such date, in each case as officially reported on the NYSE or, if not so reported, on the principal
national securities exchange on which such stock is listed or if not listed or admitted to trading,
the average of the closing bid and asked prices of such stock in the over-the-counter market as
reported by Nasdaq or a similar organization; and the term
Acquisition Price shall mean the consideration per share to be paid for or received by
the holders of the previously-outstanding shares of Common Stock in accordance with the terms of
the Transaction, determined (i) in the case where the holders of the previously outstanding Common
Stock received solely shares of the Acquirers Stock in the Transaction, by multiplying the Market
Value of the Acquirers Stock as of the date immediately preceding the Consummation Date by a
fraction the numerator
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of which shall be the aggregate number of shares of the Acquirers Stock to be received in the
Transaction in exchange for all of the previously outstanding shares of Common Stock and the
denominator of which shall be the aggregate number of such previously outstanding shares of Common
Stock, and (ii) in any other case, by dividing the aggregate fair market value (using Market Value
for any shares of the Acquirers Stock), as of the date immediately preceding the Consummation
Date, of the aggregate consideration to be received by the holders of such previously outstanding
shares of Common Stock by the number of shares of such previously outstanding Common Stock. The
requirements referred to in clause (2) of this Section 6(g) with reference to the Acquiring Company
or to a corporation (herein referred to as a
Parent) which directly or indirectly
controls the Acquiring Company are as follows: (x) its common stock is listed on the NYSE or a
principal national securities exchange or bid and asked prices are reported with respect thereto by
Nasdaq or a similar organization and such common stock continues to meet such requirements for
listing thereon, (y) it is required to file, and in each of its three fiscal years immediately
preceding the Consummation Date has filed, reports with the Commission pursuant to Section 13 or
15(d) of the Exchange Act, and (z) in the case of a Parent, such Parent is required to include the
Acquiring Company in the consolidated financial statements contained in the Parents Annual Report
on Form 10-K and is not itself included in the consolidated financial statements of any other
person (other than its consolidated subsidiaries). Notwithstanding anything contained herein to the
contrary, the Company shall not effect any Transaction unless prior to or simultaneously with the
consummation of such Transaction the survivor or successor entity (if other than the Company)
resulting from such Transaction shall (AA) assume by written instrument executed and delivered to
each holder of Series B Preferred Stock the obligation to deliver to such holder of Series B
Preferred Stock such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to receive, and containing the express assumption of such
successor entity of the due and punctual performance and observance of every provision of the
Series B Preferred Stock to be performed and observed by the Company and of all liabilities and
obligations of the Company hereunder, and (BB) deliver to the holders of Series B Preferred Stock
an opinion, in form, substance and from counsel reasonably satisfactory to the holders of Series B
Preferred Stock, to the effect that such written instrument has been duly authorized, executed and
delivered by such successor entity and constitutes a legal, valid and binding instrument
enforceable (subject to applicable bankruptcy and other similar laws affecting the enforcement of
creditors rights generally) against such successor entity in accordance with its terms, and to
such further effects as the holders of Series B Preferred Stock may reasonably request.
(h) Exceptions to Adjustment of Conversion Price. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the Conversion Price
in the case of (i) the issuance of shares of Common Stock upon conversion of the Series B Preferred
Stock or any Other Series or any adjustment of the conversion price with respect thereto in
accordance herewith, (ii) the issuance of options or warrants included within the Option/Warrant
Pool, and the issuance of Common Stock upon the exercise of any such options or warrants (including
options and warrants outstanding on the Date of First Issuance), and (iii) the issuance of shares
of Common Stock in a Qualified Public Offering pursuant to an effective registration statement under the
Securities Act.
(i) Treasury Shares. The number of shares of Common Stock outstanding at any time
shall not include shares owned or held by or for the account of the Company, and the
23
disposition of any such shares shall be considered an issue or sale of Common Stock for the
purposes of this Section 6.
(j) Certificate of Adjustment. Upon each adjustment of the Conversion Price in respect
of the Series B Preferred Stock and upon each change in the number of Conversion Shares issuable
upon the conversion of the Series B Preferred Stock, and in the event of any change in the rights
of the holders of the Series B Preferred Stock by reason of other events herein set forth, then and
in each such case, the Company will promptly prepare a certificate of adjustment stating the
adjusted Conversion Price and the new number of Conversion Shares so issuable, or specifying the
other shares of stock, securities or assets and the amount thereof receivable as a result of such
change in rights, and setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. The Company will promptly mail a copy of such certificate of
adjustment to each registered holder of Series B Preferred Stock.
(k) Company to Prevent Dilution. If at any time or from time to time conditions arise
by reason of action taken by the Company, which in the opinion of its Board of Directors, are not
adequately covered by the provisions of this Section 6, and which might materially and adversely
affect the conversion rights of the registered holders of Series B Preferred Stock, the Board of
Directors of the Company shall appoint a firm of independent certified public accountants, which
may be the firm regularly retained by the Company, which shall give its opinion upon the
adjustment, if any, on a basis consistent with the standards established in the other provisions of
this Section 6, necessary with respect to the Conversion Price, so as to preserve, without
dilution, the conversion rights of the registered holders of the Series B Preferred Stock. Upon
receipt of such opinion, the Board of Directors of the Company shall forthwith make the adjustments
described therein.
(l) Reservation of Shares. The Company will authorize, reserve and set apart and have
available for issuance at all times, free from preemptive rights, including, without limitation,
rights derived from rights offerings, that number of shares of Common Stock which is deliverable
upon the conversion of the Series B Preferred Stock, and the Company will have at all times any
other rights or privileges provided for therein sufficient to enable it at any time to fulfill all
its obligations hereunder.
(m) Costs. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of Conversion Shares upon conversion
of any shares of the Series B Preferred Stock; provided, however, that the Company
shall not be required to pay any federal or state income taxes or other taxes which may be payable
in respect of any transfer involved in the issuance or delivery of any certificate for such
Conversion Shares in a name other than that of the holder of the shares of the Series B Preferred
Stock in respect of which such shares are being issued.
Section 7. Voting Rights. Except as otherwise required by law or expressly provided herein,
the holders of shares of Series B Preferred Stock shall be
entitled to vote on all matters
submitted to a vote of the stockholders of the Company and shall have such
number of votes equal to the number of shares of Common Stock into which such holders shares of
Series B Preferred Stock are convertible pursuant to the provisions hereof at the record date for
the determination of
24
stockholders entitled to vote on such matters or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited. Except as otherwise
required by law or expressly provided herein, the holders of shares of Series B Preferred Stock,
Other Series and Common Stock shall vote together as a single class, and not as separate classes.
Such voting rights shall be in addition to the rights of holders of Series B Preferred Stock to
vote on specific matters of Company business, as provided in the Stockholders Agreement.
Section 8. Preference Rights. Nothing contained herein shall be construed to prevent the
Board of Directors of the Company from issuing one or more series or classes of Junior
Securities with dividend and/or liquidation preferences junior to the dividend and liquidation
preferences of the Series B Preferred Stock.
Section 9. Registration of Transfer. The Company will keep at its principal office a
register for the registration of Series B Preferred Stock. Upon the surrender of any certificate
representing Series B Preferred Stock at such place, the Company will, at the written request of
the record holder of such certificate, execute and deliver (at the Companys expense) a new
certificate or certificates in exchange therefor representing in the aggregate the number of shares
represented by the surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of Shares as is requested by the holder of the surrendered
certificate.
Section 10. Replacement. Upon receipt of evidence reasonably satisfactory to the Company of
the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series B Preferred Stock and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided that if the holder is a financial
institution, an entity whose securities are traded or listed on any national securities exchange or
recognized automated quotation system, or any subsidiary of the foregoing, then the holders own
agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company will (at its expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 11. Amendment and Waiver. No amendment, modification or waiver will be binding or
effective with respect to any provision of Sections 1 through 11 of this part C without the prior
written consent or affirmative vote of the holders of not less than a majority of the Series B
Preferred Stock outstanding at the time such action is taken.
Section 12. Notices. Except as otherwise expressly provided hereunder, all notices referred
to herein will be in writing and will be delivered by registered or certified mail, return receipt
requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and will
be deemed to have been given when so mailed or sent (a) to the Company, at its principal executive
offices, and (b) to any stockholder, at such holders address as it appears in the stock records of
the Company (unless otherwise indicated by notice given to the Company by any such holder).
25
D. SERIES C CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The series of Preferred Stock designated and known as
the Series C Preferred Stock shall have a par value of $.00004 per share and the number of shares
constituting the Series C Preferred Stock shall be 361,098 shares. The Series C Preferred Stock
shall have a stated value of $41.54 per share (the Stated Value), which shall be subject
to appropriate arithmetic adjustment in the event of any stock splits, stock dividends,
combinations of shares, recapitalizations or other such events relating to the Series C Preferred
Stock occurring from time to time subsequent to the effective date of this Seventh Amended and
Restated Certificate of Incorporation.
Section 2. Rank. The Series C Preferred Stock shall rank, in each case as to dividends, and
as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary: (i) prior to all of the Companys Common Stock, par value $.0000l per
share (Common Stock), (ii) on a parity with the Series A Preferred Stock, the Series B
Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock (collectively, for
purposes of this Section D, the Other Series), and (iii) prior to any other class or
series of capital stock of the Company hereafter created, unless with the affirmative written
approval or consent of the holders of not less than a majority of the then issued and outstanding
shares of Series C Preferred Stock, such other class or series of capital stock of the Company, by
its terms, ranks on a parity with or senior on liquidation to the Series C Preferred Stock.
Section 3. Dividends. The Series C Preferred Stock shall not entitle the holders thereof to
any dividends, except that, in the event that the Company shall at any time or from
time to time declare or pay any dividend with respect to the Common Stock, any of the Other Series,
or any other series of Preferred Stock which is hereafter created with or granted parity dividend
rights with the Series C Preferred Stock, then the Company shall simultaneously declare or pay (as
the case may be) an equal per share dividend (with all such dividends being calculated, with
respect to Preferred Stock, on an as converted basis into Common Stock) on the outstanding shares
of Series C Preferred Stock. Any and all dividends shall be payable out of any cash legally
available therefor, and if there is not a sufficient amount of cash available, then out of the
remaining assets of the Company legally available therefor (valued at the fair market value thereof
on the date of payment as determined by the Board of Directors of the Company), provided that, to
the extent that funds or assets are not legally available for the payment of any declared dividend,
then the Company shall pay such unpaid declared dividend promptly as funds or assets become legally
available therefor, with payments to be made to the holders of All Series (on a pari passu as
converted basis) prior to the payment of any dividends on the Common Stock or any Junior
Securities (as such term is defined in Section 4(a) below).
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the Company, either
voluntary or involuntary, the holders of Series C Preferred Stock shall be entitled
to receive, prior to any holders of Common Stock or other class or series of Company Preferred
Stock ranking junior to the Series C Preferred Stock (collectively, the Junior
Securities), and concurrently on a ratable basis (in proportion to the respective preferential
amounts payable to all subject holders) with the holders of any outstanding shares of Other Series
or other Parity
26
Securities (as such term is hereinafter defined), an amount per share equal to the sum of (i) the
then effective Stated Value of each outstanding share of Series C Preferred Stock, plus (ii) any
and all declared and unpaid dividends thereon to the date of payment under this Section 4 (the
Series C Liquidation Preference); and after the payment to all holders of Series C
Preferred Stock of the full such Series C Liquidation Preference, the holders of Series C Preferred
Stock shall not be entitled to any further payments in respect of the Series C Preferred Stock. If
upon the occurrence of such event, the assets and funds available to be distributed among the
holders of the Series C Preferred Stock, the holders of any outstanding Series A Preferred Stock,
the holders of any outstanding shares of Other Series and the holders of any other shares of
capital stock which, by their terms, and with the approval of the holders of not less than a
majority of the issued and outstanding shares of Series C Preferred Stock on the date of issuance
thereof, rank on liquidation on a parity with the Series C Preferred Stock (the Parity
Securities) shall be insufficient to permit the payment, to the holders of the Series C
Preferred Stock, Other Series and any other Parity Securities, of the full preferential amounts due
to such holders, then the entire assets and funds of the Company legally available for distribution
shall be distributed among the holders of the Series C Preferred Stock, Other Series and any other
Parity Securities on a ratable basis in proportion to the respective preferential amounts payable
to such holders, subject, however, to first being distributed to holders of any capital stock
senior on liquidation to the Series C Preferred Stock to the extent permitted hereunder.
(b) The (i) sale, conveyance or disposition of all or substantially all of the assets or
outstanding capital stock of the Company to any person or entity, or (ii) consolidation, merger,
acquisition, share exchange or other business combination of the Company with or into any other
company or companies (other than a wholly-owned subsidiary of the Company), unless, in either case,
the Companys stockholders of record as constituted immediately prior to the consummation of such
transaction (by virtue of the shares of the Company owned by such stockholders or securities issued
solely with respect thereto as consideration for the Companys acquisition or sale or otherwise)
hold not less than 50% of the voting power of the acquiring or surviving entity, shall be treated
as a liquidation, dissolution or winding up within the meaning of this Section 4.
(c) The Company shall give written notice of any liquidation, dissolution or winding up
reasonably in advance of the occurrence thereof, and each holder of Series C Preferred Stock may
exercise such holders right of conversion pursuant to Section 6 below with respect to any or all
shares of Series C Preferred Stock at any time prior to the effectiveness of the liquidation,
dissolution or winding up.
Section 5. Redemption.
(a) Mandatory Redemption. All of the outstanding Series C Preferred Stock shall be
redeemed by the Company on the Redemption Date, in accordance with this Section 5;
provided, however, that if (i) the holders of a majority of the aggregate
outstanding Series C Preferred Stock, Series A Preferred Stock and Series B Preferred Stock (voting
as a single class and with all shares having the number of votes equal to the number of shares
of Common Stock then issuable upon conversion thereof) agree, at the request of the Company,
to any delay or postponement (in whole or in part) of the redemption of (or payment of the
redemption price in respect of) the shares of All Series on a ratable basis as further provided in
this Section 5(a), and
27
(ii) the holders of a majority of the aggregate outstanding Series D Preferred Stock and Series E
Preferred Stock (voting as a single class and with all shares having the number of votes equal to
the number of shares of Common Stock then issuable upon conversion thereof) agree, at the request
of the Company, to the same delay or postponement (in whole or in part) of the redemption of (or
payment of the redemption price in respect of) the shares of All Series on a ratable basis as
further provided in this Section 5(a), then such delay or postponement shall be binding upon all
holders of Series C Preferred Stock and all holders of Other Series. The rights of the holders of
Series C Preferred Stock to receive the redemption payments in respect of the Series C Preferred
Stock shall rank pari passu with the rights of the holders of Other Series to
receive any redemption payments in respect thereof. If, at the Redemption Date, the assets and
funds legally available for such redemption payments shall be insufficient to permit the payment of
all such redemption payments in respect of the Series C Preferred Stock and Other Series, then the
entire assets and funds of the Company legally available for such redemption payments shall be paid
to the holders of the Series C Preferred Stock and Other Series on a ratable basis in proportion to
the respective amounts payable to such holders. Thereafter, the Company shall make additional
redemption payments (on a ratable basis as aforesaid) as and when it has funds legally available
for such purpose, and the Company shall use its best efforts and take all necessary and appropriate
action to have funds legally available for such purpose when due and thereafter as promptly as
practicable.
(b) Redemption Price. The redemption price per share of Series C Preferred Stock shall
be an amount equal to the sum of (i) the then effective Stated Value, plus (ii) all declared and
unpaid dividends thereon to the date on which such redemption price is paid to the holder of the
subject Series C Preferred Stock.
(c) Payment of Redemption Price. Any and all redemption payments hereunder shall be
paid to the subject holder by wire transfer of immediately available funds or by certified or bank
cashiers check. Against payment of such redemption price, the subject holder shall deliver to the
Company for cancellation the certificate evidencing the Series C Preferred Stock so redeemed (or,
in the event that such certificate has been lost, stolen, mutilated or destroyed, the subject
holder shall deliver to the Company a lost certificate affidavit in form and substance reasonably
satisfactory to the Company and its transfer agent, if any).
(d) Replacement Certificates. In the event that any redemption payment hereunder shall
be made with respect to less than all of the shares represented by any stock certificate tendered
to the Company hereunder, the Company shall, at its expense, in conjunction with the payment of the
redemption price for the shares redeemed, issue to the subject holder a new stock certificate
representing the shares which were not redeemed.
(e) Conversion Rights. Prior to the payment of the redemption price in respect of any
shares of Series C Preferred Stock which the holder has required to be redeemed
hereunder, the holder shall continue to have the right to convert any or all of such shares of
Series C Preferred Stock into Common Stock in accordance with Section 6 below.
28
Section 6. Conversion into Common Stock.
(a) Conversion. Each outstanding share of Series C Preferred Stock (i) may, at any
time at the option of the holder thereof, be converted into Common Stock of the Company, and (ii)
shall automatically be converted into Common Stock of the Company upon (A) the consummation of a
Qualified Public Offering, or (B) upon written demand therefor by the Company to all holders of
Series C Preferred Stock and Other Series simultaneously with or at any time subsequent to the
consummation of a Qualified Sale Transaction, in each case initially at the rate of 4.5752 shares
of Common Stock for each share of Series C Preferred Stock. The Conversion Price in
respect of the Series C Preferred Stock shall initially be fixed at $9.0794 per share of Common
Stock, and such Conversion Price shall be subject to adjustment from time to time as hereinafter
provided in this Section 6; and upon each such adjustment, except pursuant to Section 6(g), the
number of Conversion Shares receivable upon any conversion of a share of Series C Preferred Stock
shall be adjusted to an amount equal to the then effective Stated Value of such share of Series C
Preferred Stock divided by the adjusted Conversion Price.
(b) Conversion Price Adjustment Formulas. If, at any time and from time to time on or
after the effective date of this Seventh Amended and Restated Certificate of Incorporation
(including, without limitation, upon issuance of the Series E Preferred Stock), the Company shall
issue or sell (or be deemed to have issued or sold pursuant to Section 6(c)) any share of Common
Stock (excluding any grant, issuance or sale described in Section 6(h)) for a consideration per
share which is less than the Conversion Price in effect at the time of such issue or sale, then in
each such case (except when a different method of adjusting the Conversion Price is provided in
Section 6(d) or 6(f)), the Conversion Price shall be forthwith changed (but only, except as
otherwise provided in Section 6(c)(3), if a reduction would result) to the price (calculated to the
nearest one/one hundredth of a cent) determined by dividing (1) an amount equal to the sum of (a)
the number of shares of Common Stock outstanding immediately prior to such issue or sale,
multiplied by the then effective Conversion Price, plus (b) the total consideration, if any,
received and deemed (in accordance with Section 6(c)) received by the Company upon such issue or
sale, by (2) the total number of shares of Common Stock outstanding and deemed (in accordance with
Section 6(c)) outstanding immediately after such issue or sale.
No adjustment of the Conversion Price, however, shall be made in an amount less than one cent
per share, but any such lesser adjustment shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which together with any subsequent adjustments so
carried forward shall amount to one cent per share or more.
(c) Constructive Issuances of Common Stock; Convertible Securities; Rights and
Options. For purposes of Section 6(b), the following provisions shall also be applicable:
(1) If at any time the Company shall in any manner grant any rights or options (except for the
grant of any rights or options referred to in Section 6(h)) to subscribe for
or to purchase Common Stock or any stock or securities convertible into or exchangeable for
shares of Common Stock (such convertible or exchangeable stock or securities being hereinafter
called Convertible Securities), whether or not such rights or options or the right to
convert or exchange any such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such rights or options or upon
29
conversion or exchange of such Convertible Securities (determined by dividing (a) the total amount,
if any, received or receivable by the Company as consideration for the granting of such rights or
options, plus the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of such rights or options, plus, in the case of any such rights or
options which relate to such Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (b) the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or options) shall be less than the
Conversion Price in respect of the Series C Preferred Stock in effect as of the time of granting
such rights or options, then the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon conversion or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of such rights or options shall (on and
after the date of the granting of such rights or options) be deemed to be outstanding and to have
been issued for such price per share. Except as provided in clause (3) below, no further
adjustments of the Conversion Price shall be made upon the actual issue of shares of Common Stock
or Convertible Securities upon exercise of such rights or options or upon the actual issue of
shares of Common Stock upon conversion or exchange of such Convertible Securities.
(2) If at any time the Company shall in any manner issue or sell any Convertible Securities
(other than any Convertible Securities referred to in Section 6(h)), whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by dividing (a) the total
amount received or receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (b) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in respect of the Series C Preferred Stock in effect as of
the time of such issue or sale, then the total maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall (on and after the date of the
issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued
for such price per share, provided, that, except as otherwise specified in clause (3) below, (i) no
further adjustments of the Conversion Price shall be made upon the actual issue of Common Stock
upon conversion or exchange of such Convertible Securities, and (ii) if any such issue or sale of
such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or
any option to purchase any such Convertible Securities for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions of this Section 6(c), no further
adjustment of the Conversion Price shall be made by reason of such issue or sale.
(3) If the exercise price provided for in any right or option referred to in clause (1) of
this Section 6(c), or the rate at which any Convertible Securities referred to in clauses
(1) and (2) of this Section 6(c) are convertible into or exchangeable for Common Stock, shall
change or a different exercise price or rate shall become effective at any time or from time to
time (other than under or by reason of provisions designed to protect against dilution) then, upon
such change becoming effective, the Conversion Price then in effect hereunder shall
30
forthwith be increased or decreased to such Conversion Price as would have been obtained had the
adjustments made and required to be made under this Section 6(c) upon the issuance of such rights
or options or Convertible Securities been made upon the basis of (and the total consideration
received therefor) (a) the issuance of the number of shares of Common Stock theretofore actually
delivered upon the exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, (b) the issuance of all of Common Stock and all other rights, options and
Convertible Securities issued after the issuance of such rights, options or Convertible Securities,
and (c) the original issuance at the time of such change of any such options, rights and
Convertible Securities then still outstanding. On the expiration of any such option or right or the
termination of any such right to convert or exchange such Convertible Securities, the Conversion
Price then in effect in respect of the Series C Preferred Stock shall forthwith be increased or
decreased to such Conversion Price as would have obtained (i) had the adjustments made upon the
issuance of such rights or options or such Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such rights or options or upon the conversion
or exchange of such Convertible Securities, and (ii) had adjustments been made on the basis of the
Conversion Price as adjusted under the immediately preceding clause (i) for all issues or sales of
Common Stock or rights, options or Convertible Securities made after the issuance of such rights or
options or such Convertible Securities. If the exercise price provided for in any right or option
referred to in clause (1) of this Section 6(c), or the rate at which any Convertible Securities
referred to in clauses (1) and (2) of this Section 6(c) are convertible into or exchangeable for
shares of Common Stock, shall decrease at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then in the case of the delivery of shares of Common
Stock upon the exercise of any such right or option or upon conversion or exchange of any such
Convertible Securities, the Conversion Price then in effect in respect of the Series C Preferred
Stock shall forthwith be decreased to such Conversion Price as would have obtained had the
adjustments made upon issuance of such right or option or such Convertible Securities been made
upon the basis of the issuance of (and the total consideration received for) the shares of Common
Stock delivered as aforesaid.
(4) If at any time any shares of Common Stock or Convertible Securities or any rights or
options to purchase any shares of Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the amount paid to the Company
therefor without deduction therefrom of any expenses incurred or any underwriting commissions,
concessions or discounts, or finders fees or brokerage commissions, paid or allowed by the Company
in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any shares of Common Stock or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration other than cash payable to the
Company shall be deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company, without deduction therefrom of any expenses incurred or any
underwriting commissions, concessions or discounts, or finders fees or brokerage commissions, paid
or allowed by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any share of Common Stock or Convertible Securities shall be issued
in connection with any merger of another corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value as determined in good faith by the Board of Directors
of the Company of such portion of the assets
31
of such merged corporation as such Board shall determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or options, as the case may be.
(5) If at any time the Company shall take a record of the holders of Common Stock for the
purpose of entitling them (a) to receive a dividend or other distribution payable in shares of
Common Stock or in Convertible Securities, or (b) to subscribe for or purchase shares of Common
Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue
or sale of the shares of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) Stock Dividends. If at any time the Company shall declare a dividend or any other
distribution upon any capital stock of the Company which is payable in shares of Common Stock, then
the Conversion Price in respect of the Series C Preferred Stock in effect immediately prior to the
declaration of such dividend or distribution shall be reduced to the quotient obtained by dividing
(1) the product of (i) the number of shares of Common Stock outstanding and deemed (in accordance
with Section 6(c)) to be outstanding immediately prior to such declaration, multiplied by (ii) the
then effective Conversion Price, by (2) the total number of shares of Common Stock outstanding and
deemed (in accordance with Section 6(c)) to be outstanding immediately after such declaration. All
shares of Common Stock and all Convertible Securities issuable in payment of any dividend or other
distribution upon the capital stock of the Company shall be deemed after such declaration to have
been issued and sold without consideration.
(e) Extraordinary Dividends and Distributions. If at any time the Company shall
declare a dividend or any other distribution upon the Common Stock payable otherwise than out of
current earnings, retained earnings or earned surplus and otherwise than in shares of Common Stock
or Convertible Securities, then, except to the extent that such dividend or distribution shall have
been paid to the holders of Series C Preferred Stock pursuant to Section 3, the Company shall set
aside an equal per share dividend (calculated, with respect to the Series C Preferred Stock, on an
as converted basis), which shall be payable to the holder of the subject Series C Preferred Stock
upon conversion thereof into Common Stock. At such time as shares of Series C Preferred Stock are
redeemed in accordance with Section 5, the corresponding amount set aside under this Section 6(e)
may be returned to the general, unrestricted assets of the Company. To the extent that any dividend
or distribution required to be set aside under this Section 6(e) shall be in a form other than
cash, then the Company shall have the right, in lieu of setting aside such non-cash property, to
set aside a cash amount equal to the fair value of such non-cash property as determined by the
Board of Directors of the Company in good faith. For the purposes of the foregoing, a dividend or
distribution other than in cash shall be considered payable out of earnings, retained earnings or
earned surplus only to the extent that such current earnings, retained earnings or earned surplus
are charged an amount equal to the fair value of such dividend or distribution at the time of the
declaration thereof, as determined by the Board of Directors of the Company. Such
reductions shall take effect as of the date on which a record is taken for the purposes of
such dividend or distribution, or, if a record is not taken, the date as of which the holders of
record of Common Stock entitled to such dividend or distribution are to be determined.
32
(f) Stock Splits and Reverse Splits. If at any time the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the Conversion Price in respect
of the Series C Preferred Stock in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Conversion Shares receivable upon conversion of
outstanding Series C Preferred Stock immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in respect of the Series C
Preferred Stock in effect immediately prior to such combination shall be proportionately increased
and the number of Conversion Shares receivable upon conversion of outstanding Series C Preferred
Stock immediately prior to such combination shall be proportionately reduced.
(g) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. If at
any time the Company shall be a party to any transaction (including without limitation a merger,
consolidation, sale of all or substantially all of the Companys assets or a recapitalization of
the Common Stock) in which the previously outstanding shares of Common Stock shall be changed into
or exchanged for different securities of the Company or changed into or exchanged for common stock
or other securities of another corporation or other property (including cash) or any combination of
any of the foregoing (each such transaction being hereinafter referred to as the
Transaction; the Company (in the case of a recapitalization of the Stock) or such other
corporation being hereinafter referred to as the Acquiring Company, and the common stock
of the Acquiring Company being hereinafter referred to as the Acquirers Stock), then, as
a condition to the consummation of the Transaction, lawful and adequate provisions shall be made so
that, upon the basis and the terms and in the manner provided in this Section 6(g), each holder of
Series C Preferred Stock, upon conversion of such Series C Preferred Stock at any time after the
consummation of the Transaction, shall be entitled to receive, in lieu of the shares of Common
Stock issuable upon such exercise prior to such consummation, at the election of such holder given
by notice to the Company on or before the later of the day on which the holders of Common Stock
approve the Transaction, or the thirtieth day following the date of delivery or mailing to such
holder of the last proxy statement relating to the vote on the Transaction by the holders of Common
Stock:
(1) the stock and other securities, cash and property to which such holder would have been
entitled upon the consummation of the Transaction if such holder had converted such Series C
Preferred Stock immediately prior thereto (subject to adjustments from and after the date of the
consummation of the Transaction (the Consummation Date) as nearly equivalent as possible
to the adjustments provided for in this Section 6); or
(2) only in the case of a Transaction consummated after an Initial Public Offering other than
a Transaction in which the previously outstanding shares of Common Stock shall be exchangeable for
cash only, if the Acquiring Company meets the requirements set forth in this Section 6(g), the
number of shares of the Acquirers Stock or, if the Acquiring Company fails to meet, but a Parent
(as defined in this Section 6(g)) does meet, such requirements, of such Parents common stock
(subject to adjustments from and after the Consummation Date as nearly equivalent as possible to the adjustments provided
for in this Section 6), determined by dividing (i) the product obtained by multiplying (a) the
number of shares of Common Stock to which the holder of such Series C Preferred Stock would have
been entitled had such holder converted such
33
Series C Preferred Stock immediately prior to the consummation of the Transaction, times (b) the
greater of the Conversion Price or the Acquisition Price (as defined in this Section 6(g)) in
effect immediately prior to the consummation of the Transaction, by (ii) the Market Value of the
Acquirers Stock on the date immediately prior to the consummation of the Transaction, preceding
the Consummation Date.
For the
purposes of this Section 6(g) only, the term Market Value shall mean, for
any share of common stock on any date specified herein, the last sale price, regular way, on such
date, or, if no sale takes place on such date, the average of the closing bid and asked prices on
such date, in each case as officially reported on the NYSE or, if not so reported, on the principal
national securities exchange on which such stock is listed or if not listed or admitted to trading,
the average of the closing bid and asked prices of such stock in the over-the-counter market as
reported by Nasdaq or a similar organization; and the term Acquisition Price shall mean
the consideration per share to be paid for or received by the holders of the previously-outstanding
shares of Common Stock in accordance with the terms of the Transaction, determined (i) in the case
where the holders of the previously outstanding Common Stock received solely shares of the
Acquirers Stock in the Transaction, by multiplying the Market Value of the Acquirers Stock as of
the date immediately preceding the Consummation Date by a fraction the numerator of which shall be
the aggregate number of shares of the Acquirers Stock to be received in the Transaction in
exchange for all of the previously outstanding shares of Common Stock and the denominator of-which
shall be the aggregate number of such previously outstanding shares of Common Stock, and (ii) in
any other case, by dividing the aggregate fair market value (using Market Value for any shares of
the Acquirers Stock), as of the date immediately preceding the Consummation Date, of the aggregate
consideration to be received by the holders of such previously outstanding shares of Common Stock
by the number of shares of such previously outstanding Common Stock. The requirements referred to
in clause (2) of this Section 6(g) with reference to the Acquiring Company or to a corporation
(herein referred to as a Parent) which directly or indirectly controls the Acquiring
Company are as follows: (x) its common stock is listed on the NYSE or a principal national
securities exchange or bid and asked prices are reported with respect thereto by Nasdaq or a
similar organization and such common stock continues to meet such requirements for listing thereon,
(y) it is required to file, and in each of its three fiscal years immediately preceding the
Consummation Date has filed, reports with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act, and (z) in the case of a Parent, such Parent is required to include the Acquiring
Company in the consolidated financial statements contained in the Parents Annual Report on Form
10-K and is not itself included in the consolidated financial statements of any other person (other
than its consolidated subsidiaries). Notwithstanding anything contained herein to the contrary, the
Company shall not effect any Transaction unless prior to or simultaneously with the consummation of
such Transaction the survivor or successor entity (if other than the Company) resulting from such
Transaction shall (AA) assume by written instrument executed and delivered to each holder of Series
C Preferred Stock the obligation to deliver to such holder of Series C Preferred Stock such shares
of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive, and containing the express assumption of such successor entity of the
due and punctual performance and observance of every provision of the Series C Preferred Stock
to be performed and observed by the Company and of all liabilities and obligations of the Company
hereunder, and (BB) deliver to the holders of Series C Preferred Stock an opinion, in form,
substance and from counsel reasonably satisfactory to the holders of Series C Preferred
34
Stock, to the effect that such written instrument has been duly authorized, executed and delivered
by such successor entity and constitutes a legal, valid and binding instrument enforceable (subject
to applicable bankruptcy and other similar laws affecting the enforcement of creditors rights
generally) against such successor entity in accordance with its terms, and to such further effects
as the holders of Series C Preferred Stock may reasonably request.
(h) Exceptions to Adjustment of Conversion Price. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the Conversion Price
in the case of (i) the issuance of shares of Common Stock upon conversion of the Series C Preferred
Stock or any Other Series or any adjustment of the conversion price with respect thereto in
accordance herewith, (ii) the issuance of options or warrants included within the Option/Warrant
Pool, and the issuance of Common Stock upon the exercise of any such options or warrants (including
options and warrants outstanding on the Date of First Issuance), and (iii) the issuance of shares
of Common Stock in a Qualified Public Offering pursuant to an effective registration statement
under the Securities Act.
(i) Treasury Shares. The number of shares of Common Stock outstanding at any time
shall not include shares owned or held by or for the account of the Company, and the disposition of
any such shares shall be considered an issue or sale of Common Stock for the purposes of this
Section 6.
(j) Certificate of Adjustment. Upon each adjustment of the Conversion Price in respect
of the Series C Preferred Stock and upon each change in the number of Conversion Shares issuable
upon the conversion of the Series C Preferred Stock, and in the event of any change in the rights
of the holders of the Series C Preferred Stock by reason of other events herein set forth, then and
in each such case, the Company will promptly prepare a certificate of adjustment stating the
adjusted Conversion Price and the new number of Conversion Shares so issuable, or specifying the
other shares of stock, securities or assets and the amount thereof receivable as a result of such
change in rights, and setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. The Company will promptly mail a copy of such certificate of
adjustment to each registered holder of Series C Preferred Stock.
(k) Company to Prevent Dilution. If at any time or from time to time conditions arise
by reason of action taken by the Company, which in the opinion of its Board of Directors, are not
adequately covered by the provisions of this Section 6, and which might materially and adversely
affect the conversion rights of the registered holders of Series C Preferred Stock, the Board of
Directors of the Company shall appoint a firm of independent certified public accountants, which
may be the firm regularly retained by the Company, which shall give its opinion upon the
adjustment, if any, on a basis consistent with the standards established in the other provisions of
this Section 6, necessary with respect to the Conversion Price, so as to preserve, without
dilution, the conversion rights of the registered holders of the Series C Preferred Stock. Upon
receipt of such opinion,
the Board of Directors of the Company shall forthwith make the adjustments described therein.
(l) Reservation of Shares. The Company will authorize, reserve and set apart and have
available for issuance at all times, free from preemptive rights, including, without
35
limitation, rights derived from rights offerings, that number of shares of Common Stock which is
deliverable upon the conversion of the Series C Preferred Stock, and the Company will have at all
times any other rights or privileges provided for therein sufficient to enable it at any time to
fulfill all its obligations hereunder.
(m) Costs. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of Conversion Shares upon conversion
of any shares of the Series C Preferred Stock; provided, however, that the Company shall not be
required to pay any federal or state income taxes or other taxes which may be payable in respect of
any transfer involved in the issuance or delivery of any certificate for such Conversion Shares in
a name other than that of the holder of the shares of the Series C Preferred Stock in respect of
which such shares are being issued.
Section 7. Voting Rights. Except as otherwise required by law or expressly provided herein,
the holders of shares of Series C Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the stockholders of the Corporation and shall have such number of votes
equal to the number of shares of Common Stock into which such holders shares of Series C Preferred
Stock are convertible pursuant to the provisions hereof at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited. Except as otherwise
required by law or expressly provided herein, the holders of shares of Series C Preferred Stock,
Other Series and Common Stock shall vote together as a single class, and not as separate classes.
Such voting rights shall be in addition to the rights of holders of Series C Preferred Stock to
vote on specific matters of Company business, as provided in the Stockholders Agreement.
Section 8. Preference Rights. Without prejudice to any required consent pursuant to the
Stockholders Agreement, nothing contained herein shall be construed to prevent the Board of
Directors of the Company from issuing one or more series or classes of Junior Securities with
dividend and/or liquidation preferences junior to the dividend and liquidation preferences of the
Series C Preferred Stock.
Section 9. Registration of Transfer. The Company will keep at its principal office a
register for the registration of Series C Preferred Stock. Upon the surrender of any certificate
representing Series C Preferred Stock at such place, the Company will, at the written request of
the record holder of such certificate, execute and deliver (at the Companys expense) a new
certificate or certificates in exchange therefor representing in the aggregate the number of shares
represented by the surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of Shares as is requested by the holder of the surrendered
certificate.
Section 10. Replacement. Upon receipt of evidence reasonably satisfactory to the Company of
the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series C Preferred Stock and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided
that if the holder is a financial institution, an entity whose securities are traded or listed on
any national securities exchange or recognized automated quotation system, or any subsidiary of the
foregoing, then the holders own agreement will be satisfactory), or, in the case of any such
mutilation upon surrender of
36
such certificate, the Company will (at its expense) execute and deliver in lieu of such certificate
a new certificate of like kind representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 11. Amendment and Waiver. No amendment, modification or waiver will be binding or
effective with respect to any provision of Sections 1 through 11 hereof without the prior written
consent or affirmative vote of the holders of not less than a majority of the Series C Preferred
Stock outstanding at the time such action is taken.
Section 12. Notices. Except as otherwise expressly provided hereunder, all notices referred
to herein will be in writing and will be delivered by registered or certified mail, return receipt
requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and will
be deemed to have been given when so mailed or sent (a) to the Company, at its principal executive
offices, and (b) to any stockholder, at such holders address as it appears in the stock records of
the Company (unless otherwise indicated by notice given to the Company by any such holder).
E. SERIES D CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The series of Preferred Stock designated and known as
the Series D Preferred Stock shall have a par value of $.00004 per share and the number of shares
constituting the Series D Preferred Stock shall be 428,571 shares. The Series D Preferred Stock
shall have a stated value of $3.50 per share (the Stated Value), which shall be subject
to appropriate arithmetic adjustment in the event of any stock splits, stock dividends,
combinations of shares, recapitalizations or other such events relating to the Series D Preferred
Stock occurring from time to time subsequent to the effective date of this Seventh Amended and
Restated Certificate of Incorporation.
Section 2. Rank. The Series D Preferred Stock shall rank, in each case as to dividends, and
as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary: (i) prior to all of the Companys Common Stock, par value $.0000l per
share (Common Stock), (ii) on a parity with the Series A Preferred Stock, the Series B Preferred
Stock, Series C Preferred Stock and the Series E Preferred Stock (collectively, for purposes of
this Section E, the Other Series), and (iii) prior to any other class or series of
capital stock of the Company hereafter created, unless with the affirmative written approval or
consent of the holders of not less than a majority of the then issued and outstanding shares of
Series D Preferred Stock, such other class or series of capital stock of the Company, by its terms,
ranks on a parity with or senior on liquidation to the Series D Preferred Stock.
Section 3. Dividends. The Series D Preferred Stock shall not entitle the holders thereof to
any dividends, except that, in the event that the Company shall at any time or from
time to time declare or pay any dividend with respect to the Common Stock, any of the Other Series
or any other series of Preferred Stock which is hereafter created with or granted parity dividend
rights with the Series D Preferred Stock, then the Company shall
simultaneously declare or pay (as the case may be) an equal per share dividend (with all such
dividends being calculated, with respect to Preferred Stock, on an as converted basis into Common
Stock) on the outstanding shares of
37
Series D Preferred Stock. Any and all dividends shall be payable out of any cash legally available
therefor, and if there is not a sufficient amount of cash available, then out of the remaining
assets of the Company legally available therefor (valued at the fair market value thereof on the
date of payment as determined by the Board of Directors of the Company), provided that, to the
extent that funds or assets are not legally available for the payment of any declared dividend,
then the Company shall pay such unpaid declared dividend promptly as funds or assets become legally
available therefor, with payments to be made to the holders of All
Series (on a pari
passu as converted basis) prior to the payment of any dividends on the Common Stock or any
Junior Securities (as such term is defined in Section 4(a) below).
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the Company, either
voluntary or involuntary, the holders of Series D Preferred Stock shall be entitled to receive,
prior to any holders of Common Stock or other class or series of Company Preferred Stock ranking
junior to the Series D Preferred Stock (collectively, the
Junior Securities), and
concurrently on a ratable basis (in proportion to the respective preferential amounts payable to
all subject holders) with the holders of any outstanding shares of Other Series or other Parity
Securities (as such term is hereinafter defined), an amount per share equal to the sum of (i) the
then effective Stated Value of each outstanding share of Series D Preferred Stock, plus (ii) any
and all declared and unpaid dividends thereon to the date of payment under this Section 4 (the
Series D Liquidation Preference); and after the payment to all holders of Series D
Preferred Stock of the full such Series D Liquidation Preference, the holders of Series D Preferred
Stock shall not be entitled to any further payments in respect of the Series D Preferred Stock. If
upon the occurrence of such event, the assets and funds available to be distributed among the
holders of the Series D Preferred Stock, the holders of any outstanding shares of Other Series and
the holders of any other shares of capital stock which, by their terms, and with the approval of
the holders of not less than a majority of the issued and outstanding shares of Series D Preferred
Stock on the date of issuance thereof, rank on liquidation on a parity with the Series D Preferred
Stock (the Parity Securities) shall be insufficient to permit the payment, to the holders
of the Series D Preferred Stock, Other Series and any other Parity Securities, of the full
preferential amounts due to such holders, then the entire assets and funds of the Company legally
available for distribution shall be distributed among the holders of the Series D Preferred Stock,
Other Series and any other Parity Securities on a ratable basis in proportion to the respective
preferential amounts payable to such holders, subject, however, to first being distributed to
holders of any capital stock senior on liquidation to the Series D Preferred Stock to the extent
permitted hereunder.
(b) The (i) sale, conveyance or disposition of all or substantially all of the assets or
outstanding capital stock of the Company to any person or entity, or (ii) consolidation, merger,
acquisition, share exchange or other business combination of the Company with or into any other
company or companies (other than a wholly-owned subsidiary of the Company), unless, in either case,
the Companys stockholders of record as constituted immediately prior to the consummation of such
transaction (by virtue of the shares of the
Company owned by such stockholders or securities issued solely with respect thereto as
consideration for the Companys acquisition or sale or otherwise) hold not less than 50% of the
voting power of the acquiring or
38
surviving entity, shall be treated as a liquidation, dissolution or winding up within the meaning
of this Section 4.
(c) The Company shall give written notice of any liquidation, dissolution or winding up
reasonably in advance of the occurrence thereof, and each holder of Series D Preferred Stock may
exercise such holders right of conversion pursuant to Section 6 below with respect to any or all
shares of Series D Preferred Stock at any time prior to the effectiveness of the liquidation,
dissolution or winding up.
Section 5. Redemption.
(a) Mandatory Redemption. All of the outstanding Series D Preferred Stock shall be
redeemed by the Company on the Redemption Date, in accordance with this Section 5;
provided, however, that if (i) the holders of a majority of the aggregate
outstanding Series D Preferred Stock and Series E Preferred Stock (voting as a single class and
with all shares having the number of votes equal to the number of shares of Common Stock then
issuable upon conversion thereof) agree, at the request of the Company, to any delay or
postponement (in whole or in part) of the redemption of (or payment of the redemption price in
respect of) the shares of All Series on a ratable basis as further provided in this Section 5(a),
and (ii) the holders of a majority of the aggregate outstanding Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock (voting as a single class and with all shares having
the number of votes equal to the number of shares of Common Stock then issuable upon conversion
thereof) agree, at the request of the Company, to the same delay or postponement (in whole or in
part) of the redemption of (or payment of the redemption price in respect of) the shares of All
Series on a ratable basis as further provided in this Section 5(a), then such delay or postponement
shall be binding upon all holders of Series D Preferred Stock and all holders of Other Series. The
rights of the holders of Series D Preferred Stock to receive the redemption payments in respect of
the Series D Preferred Stock shall rank pari passu with the rights of the holders of Other Series
to receive any redemption payments in respect thereof. If, at the Redemption Date, the assets and
funds legally available for such redemption payments shall be insufficient to permit the payment of
all such redemption payments in respect of the Series D Preferred Stock and Other Series, then the
entire assets and funds of the Company legally available for such redemption payments shall be paid
to the holders of the Series D Preferred Stock and Other Series, on a ratable basis in proportion
to the respective amounts due and payable to such holders. Thereafter, the Company shall make
additional redemption payments (on a ratable basis as aforesaid) as and when it has funds legally
available for such purpose, and the Company shall use its best efforts and take all necessary and
appropriate action to have funds legally available for such purpose when due and thereafter as
promptly as practicable.
(b) Redemption Price. The redemption price per share of Series D Preferred Stock shall
be an amount equal to the sum of (i) the then effective Stated Value, plus (ii) all declared and
unpaid dividends thereon to the date on which such redemption price is paid to the holder of the
subject Series D Preferred Stock.
(c) Payment of Redemption Price. Any and all redemption payments hereunder shall be
paid to the subject holder by wire transfer of immediately available funds or by certified or bank
cashiers check. Against payment of such redemption price, the subject holder shall deliver
39
to the Company for cancellation the certificate evidencing the Series D Preferred Stock so redeemed
(or, in the event that such certificate has been lost, stolen, mutilated or destroyed, the subject
holder shall deliver to the Company a lost certificate affidavit in form and substance reasonably
satisfactory to the Company and its transfer agent, if any).
(d) Replacement Certificates. In the event that any redemption payment hereunder shall
be made with respect to less than all of the shares represented by any stock certificate tendered
to the Company hereunder, the Company shall, at its expense, in conjunction with the payment of the
redemption price for the shares redeemed, issue to the subject holder a new stock certificate
representing the shares which were not redeemed.
(e) Conversion Rights. Prior to the payment of the redemption price in respect of any
shares of Series D Preferred Stock which the holder has required to be redeemed hereunder, the
holder shall continue to have the right to convert any or all of such shares of Series D Preferred
Stock into Common Stock in accordance with Section 6 below.
Section 6. Conversion into Common Stock.
(a) Conversion. Each outstanding share of Series D Preferred Stock (i) may, at any
time at the option of the holder thereof, be converted into Common Stock of the Company, and (ii)
shall automatically be converted into Common Stock of the Company upon (A) the consummation of a
Qualified Public Offering, or (B) upon written demand therefor by the Company to all holders of
Series D Preferred Stock and Other Series simultaneously with or at any time subsequent to the
consummation of a Qualified Sale Transaction, in each case initially at the rate of one (1) share
of Common Stock for each share of Series D Preferred Stock. The Conversion Price in
respect of the Series D Preferred Stock shall initially be fixed at $3.50 per share of Common
Stock, and such Conversion Price shall be subject to adjustment from time to time as hereinafter
provided in this Section 6; and upon each such adjustment, except pursuant to Section 6(g), the
number of Conversion Shares receivable upon any conversion of a share of Series D Preferred Stock
shall be adjusted to an amount equal to the then effective Stated Value of such share of Series D
Preferred Stock divided by the adjusted Conversion Price.
(b) Conversion Price Adjustment Formulas. If, at any time and from time to time after
the effective date of this Seventh Amended and Restated Certificate of Incorporation, the Company
shall issue or sell (or be deemed to have issued or sold pursuant to Section 6(c)) any share of
Common Stock (excluding any grant, issuance or sale described in Section 6(h)) for a consideration
per share which is less than the Conversion Price in effect at the time of such issue or sale, then
in each such case (except when a different method of adjusting the Conversion Price is provided in
Section 6(d) or 6(f)), the Conversion Price shall be forthwith changed (but only, except as
otherwise provided in Section 6(c)(3), if a reduction would result) to the price (calculated to the
nearest one/one hundredth of a cent) determined by dividing (1) an amount equal to the sum of (a)
the number of shares of Common Stock outstanding immediately prior to such issue or sale,
multiplied by the then effective Conversion Price, plus (b) the total
consideration, if any, received and deemed (in accordance with Section 6(c)) received by the
Company upon such issue or sale, by (2) the total number of shares of Common Stock outstanding and
deemed (in accordance with Section 6(c)) outstanding immediately after such issue or sale.
40
No adjustment of the Conversion Price, however, shall be made in an amount less than one cent
per share, but any such lesser adjustment shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which together with any subsequent adjustments so
carried forward shall amount to one cent per share or more.
(c) Constructive Issuances of Common Stock; Convertible Securities; Rights and
Options. For purposes of Section 6(b), the following provisions shall also be applicable:
(1) If at any time the Company shall in any manner grant any rights or options (except for the
grant of any rights or options referred to in Section 6(h)) to subscribe for or to purchase Common
Stock or any stock or securities convertible into or exchangeable for shares of Common Stock (such
convertible or exchangeable stock or securities being hereinafter called Convertible
Securities), whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of
such Convertible Securities (determined by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, plus, in the case of any such rights or options which relate to
such Convertible Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (b) the total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than the Conversion Price in
respect of the Series D Preferred Stock in effect as of the time of granting such rights or
options, then the total maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall (on and after the date of the
granting of such rights or options) be deemed to be outstanding and to have been issued for such
price per share. Except as provided in clause (3) below, no further adjustments of the Conversion
Price shall be made upon the actual issue of shares of Common Stock or Convertible Securities upon
exercise of such rights or options or upon the actual issue of shares of Common Stock upon
conversion or exchange of such Convertible Securities.
(2) If at any time the Company shall in any manner issue or sell any Convertible Securities
(other than any Convertible Securities referred to in Section 6(h)), whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by dividing (a) the total
amount received or receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (b) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be
less than the Conversion Price in respect of the Series D Preferred Stock in effect as of the time
of such issue or sale, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (on and after the date of the issue
or sale of such Convertible
41
Securities) be deemed to be outstanding and to have been issued for such price per share,
provided, that, except as otherwise specified in clause (3) below, (i) no further
adjustments of the Conversion Price shall be made upon the actual issue of Common Stock upon
conversion or exchange of such Convertible Securities, and (ii) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any
option to purchase any such Convertible Securities for which adjustments of the Conversion Price
have been or are to be made pursuant to other provisions of this Section 6(c), no further
adjustment of the Conversion Price shall be made by reason of such issue or sale.
(3) If the exercise price provided for in any right or option referred to in clause (1) of
this Section 6(c), or the rate at which any Convertible Securities referred to in clauses (1) and
(2) of this Section 6(c) are convertible into or exchangeable for Common Stock, shall change or a
different exercise price or rate shall become effective at any time or from time to time (other
than under or by reason of provisions designed to protect against dilution) then, upon such change
becoming effective, the Conversion Price then in effect hereunder shall forthwith be increased or
decreased to such Conversion Price as would have been obtained had the adjustments made and
required to be made under this Section 6(c) upon the issuance of such rights or options or
Convertible Securities been made upon the basis of (and the total consideration received therefor)
(a) the issuance of the number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such Convertible
Securities, (b) the issuance of all of Common Stock and all other rights, options and Convertible
Securities issued after the issuance of such rights, options or Convertible Securities, and (c) the
original issuance at the time of such change of any such options, rights and Convertible Securities
then still outstanding. On the expiration of any such option or right or the termination of any
such right to convert or exchange such Convertible Securities, the Conversion Price then in effect
in respect of the Series D Preferred Stock shall forthwith be increased or decreased to such
Conversion Price as would have obtained (i) had the adjustments made upon the issuance of such
rights or options or such Convertible Securities been made upon the basis of the issuance of only
the number of shares of Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights or options or upon the conversion or exchange
of such Convertible Securities, and (ii) had adjustments been made on the basis of the Conversion
Price as adjusted under the immediately preceding clause (i) for all issues or sales of Common
Stock or rights, options or Convertible Securities made after the issuance of such rights or
options or such Convertible Securities. If the exercise price provided for in any right or option
referred to in clause (1) of this Section 6(c), or the rate at which any Convertible Securities
referred to in clauses (1) and (2) of this Section 6(c) are convertible into or exchangeable for
shares of Common Stock, shall decrease at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then in the case of the delivery of shares of Common
Stock upon the exercise of any such right or option or upon conversion or exchange of any such
Convertible Securities, the Conversion Price then in effect in respect of the Series D Preferred
Stock shall forthwith be decreased to such Conversion Price as would have obtained had the
adjustments made upon issuance of such right or option or such Convertible Securities
been made upon the basis of the issuance of (and the total consideration received for) the
shares of Common Stock delivered as aforesaid.
(4) If at any time any shares of Common Stock or Convertible Securities or any rights or
options to purchase any shares of Common Stock or Convertible Securities shall be
42
issued or sold for cash, the consideration received therefor shall be deemed to be the amount
paid to the Company therefor without deduction therefrom of any expenses incurred or any
underwriting commissions, concessions or discounts, or finders fees or brokerage commissions, paid
or allowed by the Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any shares of Common Stock or
Convertible Securities shall be issued or sold for a consideration other than cash, the amount of
the consideration other than cash payable to the Company shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any underwriting commissions, concessions or
discounts, or finders fees or brokerage commissions, paid or allowed by the Company in connection
therewith. In case any shares of Common Stock or Convertible Securities or any rights or options to
purchase any share of Common Stock or Convertible Securities shall be issued in connection with any
merger of another corporation into the Company, the amount of consideration therefor shall be
deemed to be the fair value as determined in good faith by the Board of Directors of the Company of
such portion of the assets of such merged corporation as such Board shall determine to be
attributable to such shares of Common Stock, Convertible Securities, rights or options, as the case
may be.
(5) If at any time the Company shall take a record of the holders of Common Stock for the
purpose of entitling them (a) to receive a dividend or other distribution payable in shares of
Common Stock or in Convertible Securities, or (b) to subscribe for or purchase shares of Common
Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue
or sale of the shares of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) Stock Dividends. If at any time the Company shall declare a dividend or any other
distribution upon any capital stock of the Company which is payable in shares of Common Stock, then
the Conversion Price in respect of the Series D Preferred Stock in effect immediately prior to the
declaration of such dividend or distribution shall be reduced to the quotient obtained by dividing
(1) the product of (i) the number of shares of Common Stock outstanding and deemed (in accordance
with Section 6(c)) to be outstanding immediately prior to such declaration, multiplied by (ii) the
then effective Conversion Price, by (2) the total number of shares of Common Stock outstanding and
deemed (in accordance with Section 6(c)) to be outstanding immediately after such declaration. All
shares of Common Stock and all Convertible Securities issuable in payment of any dividend or other
distribution upon the capital stock of the Company shall be deemed after such declaration to have
been issued and sold without consideration.
(e) Extraordinary Dividends and Distributions. If at any time the Company shall
declare a dividend or any other distribution upon the Common Stock payable otherwise than out of
current earnings, retained earnings or earned surplus and otherwise than in shares of Common Stock
or Convertible Securities, then, except to the extent that such dividend or distribution shall have been paid to the holders of Series D Preferred Stock
pursuant to Section 3, the Company shall set aside an equal per share dividend (calculated, with
respect to the Series D Preferred Stock, on an as converted basis), which shall be payable to the
holder of the subject Series D Preferred Stock upon conversion thereof into Common Stock. At such
time as shares of Series D
43
Preferred Stock are redeemed in accordance with Section 5, the corresponding amount set aside under
this Section 6(e) may be returned to the general, unrestricted assets of the Company. To the extent
that any dividend or distribution required to be set aside under this Section 6(e) shall be in a
form other than cash, then the Company shall have the right, in lieu of setting aside such non-cash
property, to set aside a cash amount equal to the fair value of such non-cash property as
determined by the Board of Directors of the Company in good faith. For the purposes of the
foregoing, a dividend or distribution other than in cash shall be considered payable out of
earnings, retained earnings or earned surplus only to the extent that such current earnings,
retained earnings or earned surplus are charged an amount equal to the fair value of such dividend
or distribution at the time of the declaration thereof, as determined by the Board of Directors of
the Company. Such reductions shall take effect as of the date on which a record is taken for the
purposes of such dividend or distribution, or, if a record is not taken, the date as of which the
holders of record of Common Stock entitled to such dividend or distribution are to be determined.
(f) Stock Splits and Reverse Splits. If at any time the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the Conversion Price in respect
of the Series D Preferred Stock in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Conversion Shares receivable upon conversion of
outstanding Series D Preferred Stock immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in respect of the Series D
Preferred Stock in effect immediately prior to such combination shall be proportionately increased
and the number of Conversion Shares receivable upon conversion of outstanding Series D Preferred
Stock immediately prior to such combination shall be proportionately reduced.
(g) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. If at
any time the Company shall be a party to any transaction (including without limitation a merger,
consolidation, sale of all or substantially all of the Companys assets or a recapitalization of
the Common Stock) in which the previously outstanding shares of Common Stock shall be changed into
or exchanged for different securities of the Company or changed into or exchanged for common stock
or other securities of another corporation or other property (including cash) or any combination of
any of the foregoing (each such transaction being hereinafter referred to as the
Transaction; the Company (in the case of a recapitalization of the Stock) or such other
corporation being hereinafter referred to as the Acquiring Company, and the common stock
of the Acquiring Company being hereinafter referred to as the Acquirers Stock), then, as
a condition to the consummation of the Transaction, lawful and adequate provisions shall be made so
that, upon the basis and the terms and in the manner provided in this Section 6(g), each holder of
Series D Preferred Stock, upon conversion of such Series D Preferred Stock at any time after the
consummation of the Transaction, shall be entitled to receive, in lieu of the shares of Common
Stock issuable upon such exercise prior to such consummation, at the election of such holder given
by notice to the Company on or before the later of the day on which the holders of Common Stock
approve the Transaction, or the thirtieth day following the date of delivery or mailing to such holder of the last proxy statement relating
to the vote on the Transaction by the holders of Common Stock:
44
(1) the stock and other securities, cash and property to which such holder would have been
entitled upon the consummation of the Transaction if such holder had converted such Series D
Preferred Stock immediately prior thereto (subject to adjustments from and after the date of the
consummation of the Transaction (the Consummation Date) as nearly equivalent as possible
to the adjustments provided for in this Section 6); or
(2) only in the case of a Transaction consummated after an Initial Public Offering other than
a Transaction in which the previously outstanding shares of Common Stock shall be exchangeable for
cash only, if the Acquiring Company meets the requirements set forth in this Section 6(g), the
number of shares of the Acquirers Stock or, if the Acquiring Company fails to meet, but a Parent
(as defined in this Section 6(g)) does meet, such requirements, of such Parents common stock
(subject to adjustments from and after the Consummation Date as nearly equivalent as possible to
the adjustments provided for in this Section 6), determined by dividing (i) the product obtained by
multiplying (a) the number of shares of Common Stock to which the holder of such Series D Preferred
Stock would have been entitled had such holder converted such Series D Preferred Stock immediately
prior to the consummation of the Transaction, times (b) the greater of the Conversion Price or the
Acquisition Price (as defined in this Section 6(g)) in effect immediately prior to the consummation
of the Transaction, by (ii) the Market Value of the Acquirers Stock on the date immediately prior
to the consummation of the Transaction, preceding the Consummation Date.
For the purposes of this Section 6(g) only, the term Market Value shall mean, for any
share of common stock on any date specified herein, the last sale price, regular way, on such date,
or, if no sale takes place on such date, the average of the closing bid and asked prices on such
date, in each case as officially reported on the NYSE or, if not so reported, on the principal
national securities exchange on which such stock is listed or if not listed or admitted to trading,
the average of the closing bid and asked prices of such stock in the over-the-counter market as
reported by Nasdaq or a similar organization; and the term Acquisition Price shall mean
the consideration per share to be paid for or received by the holders of the previously-outstanding
shares of Common Stock in accordance with the terms of the Transaction, determined (i) in the case
where the holders of the previously outstanding Common Stock received solely shares of the
Acquirers Stock in the Transaction, by multiplying the Market Value of the Acquirers Stock as of
the date immediately preceding the Consummation Date by a fraction the numerator of which shall be
the aggregate number of shares of the Acquirers Stock to be received in the Transaction in
exchange for all of the previously outstanding shares of Common Stock and the denominator of which
shall be the aggregate number of such previously outstanding shares of Common Stock, and (ii) in
any other case, by dividing the aggregate fair market value (using Market Value for any shares of
the Acquirers Stock), as of the date immediately preceding the Consummation Date, of the aggregate
consideration to be received by the holders of such previously outstanding shares of Common Stock
by the number of shares of such previously outstanding Common Stock. The requirements referred to
in clause (2) of this Section 6(g) with reference to the Acquiring Company or to a corporation
(herein referred to as a Parent) which directly or indirectly controls the Acquiring Company are as follows: (x) its common stock is listed on the
NYSE or a principal national securities exchange or bid and asked prices are reported with respect
thereto by Nasdaq or a similar organization and such common stock continues to meet such
requirements for listing thereon, (y) it is required to file, and in each of its three fiscal years
immediately preceding the Consummation Date has filed, reports with the
45
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and (z) in the case of a Parent,
such Parent is required to include the Acquiring Company in the consolidated financial statements
contained in the Parents Annual Report on Form 10-K arid is not itself included in the
consolidated financial statements of any other person (other than its consolidated subsidiaries).
Notwithstanding anything contained herein to the contrary, the Company shall not effect any
Transaction unless prior to or simultaneously with the consummation of such Transaction the
survivor or successor entity (if other than the Company) resulting from such Transaction shall (AA)
assume by written instrument executed and delivered to each holder of Series D Preferred Stock the
obligation to deliver to such holder of Series D Preferred Stock such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be entitled to receive,
and containing the express assumption of such successor entity of the due and punctual performance
and observance of every provision of the Series D Preferred Stock to be performed and observed by
the Company and of all liabilities and obligations of the Company hereunder, and (BB) deliver to
the holders of Series D Preferred Stock an opinion, in form, substance and from counsel reasonably
satisfactory to the holders of Series D Preferred Stock, to the effect that such written instrument
has been duly authorized, executed and delivered by such successor entity and constitutes a legal,
valid and binding instrument enforceable (subject to applicable bankruptcy and other similar laws
affecting the enforcement of creditors rights generally) against such successor entity in
accordance with its terms, and to such further effects as the holders of Series D Preferred Stock
may reasonably request.
(h) Exceptions to Adjustment of Conversion Price. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the Conversion Price
in the case of (i) the issuance of shares of Common Stock upon conversion of the Series D Preferred
Stock or any Other Series or any adjustment of the conversion price with respect thereto in
accordance herewith, (ii) the issuance of options or warrants included within the Option/Warrant
Pool, and the issuance of Common Stock upon the exercise of any such options or warrants (including
options and warrants outstanding on the Date of First Issuance), and (iii) the issuance of shares
of Common Stock in a Qualified Public Offering pursuant to an effective registration statement
under the Securities Act.
(i) Treasury Shares. The number of shares of Common Stock outstanding at any time
shall not include shares owned or held by or for the account of the Company, and the disposition of
any such shares shall be considered an issue or sale of Common Stock for the purposes of this
Section 6.
(j) Certificate of Adjustment. Upon each adjustment of the Conversion Price in respect
of the Series D Preferred Stock and upon each change in the number of Conversion Shares issuable
upon the conversion of the Series D Preferred Stock, and in the event of any change in the rights
of the holders of the Series D Preferred Stock by reason of other events herein set forth, then and
in each such case, the Company will promptly prepare a certificate of adjustment stating the
adjusted Conversion Price and the new number of Conversion Shares so issuable, or specifying the
other shares of stock, securities or assets and the amount thereof receivable as a result of such change in rights,
and setting forth in reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company will promptly mail a copy of such certificate of adjustment to
each registered holder of Series D Preferred Stock.
46
(k) Company to Prevent Dilution. If at any time or from time to time conditions arise
by reason of action taken by the Company, which in the opinion of its Board of Directors, are not
adequately covered by the provisions of this Section 6, and which might materially and adversely
affect the conversion rights of the registered holders of Series D Preferred Stock, the Board of
Directors of the Company shall appoint a firm of independent certified public accountants, which
may be the firm regularly retained by the Company, which shall give its opinion upon the
adjustment, if any, on a basis consistent with the standards established in the other provisions of
this Section 6, necessary with respect to the Conversion Price, so as to preserve, without
dilution, the conversion rights of the registered holders of the Series D Preferred Stock. Upon
receipt of such opinion, the Board of Directors of the Company shall forthwith make the adjustments
described therein.
(l) Reservation of Shares. The Company will authorize, reserve and set apart and have
available for issuance at all times, free from preemptive rights, including, without limitation,
rights derived from rights offerings, that number of shares of Common Stock which is deliverable
upon the conversion of the Series D Preferred Stock, and the Company will have at all times any
other rights or privileges provided for therein sufficient to enable it at any time to fulfill all
its obligations hereunder.
(m) Costs. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of Conversion Shares upon conversion
of any shares of the Series D Preferred Stock; provided, however, that the Company shall not be
required to pay any federal or state income taxes or other taxes which may be payable in respect of
any transfer involved in the issuance or delivery of any certificate for such Conversion Shares in
a name other than that of the holder of the shares of the Series D Preferred Stock in respect of
which such shares are being issued.
Section 7. Voting Rights. Except as otherwise required by law or expressly provided herein,
the holders of shares of Series D Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the stockholders of the Corporation and shall have such number of votes
equal to the number of shares of Common Stock into which such holders shares of Series D Preferred
Stock are convertible pursuant to the provisions hereof at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited. Except as otherwise
required by law or expressly provided herein, the holders of shares of Series D Preferred Stock,
Other Series and Common Stock shall vote together as a single class, and not as separate classes.
Section 8. Preference Rights. Without prejudice to any required consent pursuant to the
Series D Stock Purchase Agreement, nothing contained herein shall be construed to prevent the Board
of Directors of the Company from issuing one or more series or classes of Junior Securities with
dividend and/or liquidation preferences junior to the dividend and liquidation preferences of the
Series D Preferred Stock.
Section 9. Registration of Transfer. The Company will keep at its principal office a
register for the registration of Series D Preferred Stock. Upon the surrender of any certificate
representing Series D Preferred Stock at such place, the Company will, at the written request of
the record holder of such certificate, execute and deliver (at the Companys expense) a new
47
certificate or certificates in exchange therefor representing in the aggregate the number of shares
represented by the surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of Shares as is requested by the holder of the surrendered
certificate.
Section 10. Replacement. Upon receipt of evidence reasonably satisfactory to the Company of
the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series D Preferred Stock and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided that if the holder is a financial
institution, an entity whose securities are traded or listed on any national securities exchange or
recognized automated quotation system, or any subsidiary of the foregoing, then the holders own
agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company will (at its expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 11. Amendment and Waiver. No amendment, modification or waiver will be binding or
effective with respect to any provision of Sections 1 through 11 hereof without the prior written
consent or affirmative vote of the holders of not less than a majority of the Series D Preferred
Stock outstanding at the time such action is taken.
Section 12. Notices. Except as otherwise expressly provided hereunder, all notices referred
to herein will be in writing and will be delivered by registered or certified mail, return receipt
requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and will
be deemed to have been given when so mailed or sent (a) to the Company, at its principal executive
offices, and (b) to any stockholder, at such holders address as it appears in the stock records of
the Company (unless otherwise indicated by notice given to the Company by any such holder).
F.
SERIES E CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The series of Preferred Stock designated and known as
the Series E Preferred Stock shall have a par value of $.00004 per share and the number of shares
constituting the Series E Preferred Stock shall be 312,121 shares. The Series E Preferred Stock
shall have a stated value of $6.00 per share (the Stated Value), which shall be subject
to appropriate arithmetic adjustment in the event of any stock splits, stock dividends,
combinations of shares, recapitalizations or other such events relating to the Series E Preferred
Stock occurring from time to time subsequent to the effective date of this Seventh Amended and
Restated Certificate of Incorporation.
Section 2. Rank. The Series E Preferred Stock shall rank, in each case as to dividends, and
as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary: (i) prior to all of the Companys Common Stock, par value $.00001 per
share (Common Stock), (ii) on a parity with the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock (collectively, for purposes of this Section F, the Other Series), and
(iii) prior to any other class or series of
48
capital stock of the Company hereafter created, unless with the affirmative written approval or
consent of the holders of not less than a majority of the then issued and outstanding shares of
Series E Preferred Stock, such other class or series of capital stock of the Company, by its terms,
ranks on a parity with or senior on liquidation to the Series E Preferred Stock.
Section 3. Dividends. The Series E Preferred Stock shall not entitle the holders thereof to
any dividends, except that, in the event that the Company shall at any time or from
time to time declare or pay any dividend with respect to the Common Stock, any of the Other Series,
or any other series of Preferred Stock which is hereafter created with or granted parity dividend
rights with the Series E Preferred Stock, then the Company shall simultaneously declare or pay (as
the case may be) an equal per share dividend (with all such dividends being calculated, with
respect to Preferred Stock, on an as converted basis into Common Stock) on the outstanding shares
of Series E Preferred Stock. Any and all dividends shall be payable out of any cash legally
available therefor, and if there is not a sufficient amount of cash available, then out of the
remaining assets of the Company legally available therefor (valued at the fair market value thereof
on the date of payment as determined by the Board of Directors of the Company), provided that, to
the extent that funds or assets are not legally available for the payment of any declared dividend,
then the Company shall pay such unpaid declared dividend promptly as funds or assets become legally
available therefor, with payments to be made to the holders of All Series (on a pari
passu as converted basis) prior to the payment of any dividends on the Common Stock or
any Junior Securities (as such term is defined in Section 4(a) below).
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the Company, either
voluntary or involuntary, the holders of Series E Preferred Stock shall be entitled to receive,
prior to any holders of Common Stock or other class or series of Company Preferred Stock ranking
junior to the Series E Preferred Stock (collectively, the Junior Securities), and
concurrently on a ratable basis (in proportion to the respective preferential amounts payable to
all subject holders) with the holders of any outstanding shares of Other Series or other Parity
Securities (as such term is hereinafter defined), an amount per share equal to the sum of (i) the
then effective Stated Value of each outstanding share of Series E Preferred Stock, plus (ii) any
and all declared and unpaid dividends thereon to the date of payment under this Section 4 (the
Series E Liquidation Preference); and after the payment to all holders of Series E
Preferred Stock of the full such Series E Liquidation
Preference, the holders of Series E Preferred
Stock shall not be entitled to any further payments in respect of the Series E Preferred Stock. If
upon the occurrence of such event, the assets and funds available to be distributed among the
holders of the Series E Preferred Stock, the holders of any outstanding shares of Other Series and
the holders of any other shares of capital stock which, by their terms, and with the approval of
the holders of not less than a majority of the issued and outstanding shares of Series E Preferred
Stock on the date of issuance thereof, rank on liquidation on a
parity with the Series E Preferred
Stock (the Parity Securities) shall be insufficient to
permit the payment, to the holders of the Series E Preferred Stock, Other Series and any other
Parity Securities, of the full preferential amounts due to such holders, then the entire assets and
funds of the Company legally available for distribution shall be distributed among the holders of
the Series E Preferred Stock, Other Series and any other Parity Securities on a ratable basis in
proportion to the respective preferential amounts payable to such holders, subject, however, to
first being distributed to
49
holders of any capital stock senior on liquidation to the Series E Preferred Stock to the extent
permitted hereunder.
(b) The (i) sale, conveyance or disposition of all or substantially all of the assets or
outstanding capital stock of the Company to any person or entity, or (ii) consolidation, merger,
acquisition, share exchange or other business combination of the Company with or into any other
company or companies (other than a wholly-owned subsidiary of the Company), unless, in either case,
the Companys stockholders of record as constituted immediately prior to the consummation of such
transaction (by virtue of the shares of the Company owned by such stockholders or securities issued
solely with respect thereto as consideration for the Companys acquisition or sale or otherwise)
hold not less than 50% of the voting power of the acquiring or surviving entity, shall be treated
as a liquidation, dissolution or winding up within the meaning of this Section 4.
(c) The Company shall give written notice of any liquidation, dissolution or winding up
reasonably in advance of the occurrence thereof, and each holder of Series E Preferred Stock may
exercise such holders right of conversion pursuant to Section 6 below with respect to any or all
shares of Series E Preferred Stock at any time prior to the effectiveness of the liquidation,
dissolution or winding up.
Section 5. Redemption.
(a) Mandatory Redemption. All of the outstanding Series E Preferred Stock shall be
redeemed by the Company on the Redemption Date, in accordance with this Section 5;
provided, however, that if (i) the holders of a majority of the aggregate
outstanding Series E Preferred Stock and Series D Preferred Stock (voting as a single class and
with all shares having the number of votes equal to the number of shares of Common Stock then
issuable upon conversion thereof) agree, at the request of the Company, to any delay or
postponement (in whole or in part) of the redemption of (or payment of the redemption price in
respect of) the shares of All Series on a ratable basis as further provided in this Section 5(a),
and (ii) the holders of a majority of the aggregate outstanding Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock (voting as a single class and with all shares having
the number of votes equal to the number of shares of Common Stock then issuable upon conversion
thereof) agree, at the request of the Company, to the same delay or postponement (in whole or in
part) of the redemption of (or payment of the redemption price in respect of) the shares of All
Series on a ratable basis as further provided in this Section 5(a), then such delay or postponement
shall be binding upon all holders of Series E Preferred Stock and all holders of Other Series. The
rights of the holders of Series E Preferred Stock to receive the redemption payments in respect of
the Series E Preferred Stock shall rank pari passu with the rights of the holders
of Other Series to receive any redemption payments in respect thereof. If, at the Redemption Date,
the assets and funds legally available for such redemption payments shall be insufficient to permit
the payment of all such redemption payments in respect of the
Series E Preferred Stock and Other
Series, then the entire assets and funds of the Company legally available for such redemption
payments shall be paid to the holders of the Series E Preferred Stock and Other Series on a ratable
basis in proportion to the respective amounts due and payable to such holders. Thereafter, the Company shall make
additional redemption payments (on a ratable basis as aforesaid) as and when it has funds legally
available for such purpose, and the Company shall use its best efforts and take all necessary and
50
appropriate action to have funds legally available for such purpose when due and thereafter as
promptly as practicable.
(b) Redemption Price. The redemption price per share of Series E Preferred Stock shall
be an amount equal to the sum of (i) the then effective Stated Value, plus (ii) all declared and
unpaid dividends thereon to the date on which such redemption price is paid to the holder of the
subject Series E Preferred Stock.
(c) Payment of Redemption Price. Any and all redemption payments hereunder shall be
paid to the subject holder by wire transfer of immediately available funds or by certified or bank
cashiers check. Against payment of such redemption price, the subject holder shall deliver to the
Company for cancellation the certificate evidencing the Series E Preferred Stock so redeemed (or,
in the event that such certificate has been lost, stolen, mutilated or destroyed, the subject
holder shall deliver to the Company a lost certificate affidavit in form and substance reasonably
satisfactory to the Company and its transfer agent, if any).
(d) Replacement Certificates. In the event that any redemption payment hereunder shall
be made with respect to less than all of the shares represented by any stock certificate tendered
to the Company hereunder, the Company shall, at its expense, in conjunction with the payment of the
redemption price for the shares redeemed, issue to the subject holder a new stock certificate
representing the shares which were not redeemed.
(e) Conversion Rights. Prior to the payment of the redemption price in respect of any
shares of Series E Preferred Stock which the holder has required to be redeemed hereunder, the
holder shall continue to have the right to convert any or all of such shares of Series E Preferred
Stock into Common Stock in accordance with Section 6 below.
Section 6. Conversion into Common Stock.
(a) Conversion.
Each outstanding share of Series E Preferred Stock (i) may, at any
time at the option of the holder thereof, be converted into Common Stock of the Company, and (ii)
shall automatically be converted into Common Stock of the Company upon (A) the consummation of a
Qualified Public Offering, or (B) upon written demand therefor by the Company to all holders of
Series E Preferred Stock and Other Series simultaneously with or at any time subsequent to the
consummation of a Qualified Sale Transaction, in each case initially at the rate of one (1) share
of Common Stock for each share of Series E Preferred Stock. The Conversion Price in
respect of the Series E Preferred Stock shall initially be fixed at $6.00 per share of Common
Stock, and such Conversion Price shall be subject to adjustment from time to time as hereinafter
provided in this Section 6; and upon each such adjustment, except pursuant to Section 6(g), the
number of Conversion Shares receivable upon any conversion of a share of Series E Preferred Stock
shall be adjusted to an amount equal to the then effective Stated Value of such share of Series E
Preferred Stock divided by the adjusted Conversion Price.
(b) Conversion Price Adjustment Formulas. If, at any time and from time to time after
the effective date of this Seventh Amended and Restated Certificate of Incorporation, the Company
shall issue or sell (or be deemed to have issued or sold pursuant to Section 6(c)) any share of
Common Stock (excluding any grant, issuance or sale described in Section 6(h)) for a
51
consideration per share which is less than the Conversion Price in effect at the time of such issue
or sale, then in each such case (except when a different method of adjusting the Conversion Price
is provided in Section 6(d) or 6(f)), the Conversion Price shall be forthwith changed (but only,
except as otherwise provided in Section 6(c)(3), if a reduction would result) to the price
(calculated to the nearest one/one hundredth of a cent) determined by dividing (1) an amount equal
to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issue
or sale, multiplied by the then effective Conversion Price, plus (b) the total consideration, if
any, received and deemed (in accordance with Section 6(c)) received by the Company upon such issue
or sale, by (2) the total number of shares of Common Stock outstanding and deemed (in accordance
with Section 6(c)) outstanding immediately after such issue or sale.
No adjustment of the Conversion Price, however, shall be made in an amount less than one cent
per share, but any such lesser adjustment shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which together with any subsequent adjustments so
carried forward shall amount to one cent per share or more.
(c) Constructive
Issuances of Common Stock; Convertible Securities; Rights and
Options. For purposes of Section 6(b), the following provisions shall also be applicable:
(1) If at any time the Company shall in any manner grant any rights or options (except for the
grant of any rights or options referred to in Section 6(h)) to subscribe for or to purchase Common
Stock or any stock or securities convertible into or exchangeable for shares of Common Stock (such
convertible or exchangeable stock or securities being hereinafter called Convertible
Securities), whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of
such Convertible Securities (determined by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the granting of such rights or options, plus the
minimum aggregate amount of additional consideration, if any, payable to the Company upon the
exercise of such rights or options, plus, in the case of any such rights or options which relate to
such Convertible Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (b) the total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than the Conversion Price in
respect of the Series E Preferred Stock in effect as of the time of granting such rights or
options, then the total maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall (on and after the date of the
granting of such rights or options) be deemed to be outstanding and to have been issued for such
price per share. Except as provided in clause (3) below, no further adjustments of the Conversion
Price shall be made upon the actual issue of shares of Common Stock or Convertible Securities upon exercise of such rights or options or upon the
actual issue of shares of Common Stock upon conversion or exchange of such Convertible Securities.
52
(2) If at any time the Company shall in any manner issue or sell any Convertible Securities
(other than any Convertible Securities referred to in Section 6(h)), whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by dividing (a) the total
amount received or receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (b) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in respect of the Series E Preferred Stock in effect as of
the time of such issue or sale, then the total maximum number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall (on and after the date of the
issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued
for such price per share, provided, that, except as otherwise specified in clause (3)
below, (i) no further adjustments of the Conversion Price shall be made upon the actual issue of
Common Stock upon conversion or exchange of such Convertible Securities, and (ii) if any such issue
or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to
purchase or any option to purchase any such Convertible Securities for which adjustments of the
Conversion Price have been or are to be made pursuant to other provisions of this Section 6(c), no
further adjustment of the Conversion Price shall be made by reason of such issue or sale.
(3) If the exercise price provided for in any right or option referred to in clause (1) of
this Section 6(c), or the rate at which any Convertible
Securities referred to in clauses (1) and
(2) of this Section 6(c) are convertible into or exchangeable for Common Stock, shall change or a
different exercise price or rate shall become effective at any time or from time to time (other
than under or by reason of provisions designed to protect against dilution) then, upon such change
becoming effective, the Conversion Price then in effect hereunder shall forthwith be increased or
decreased to such Conversion Price as would have been obtained had the adjustments made and
required to be made under this Section 6(c) upon the issuance of such rights or options or
Convertible Securities been made upon the basis of (and the total consideration received therefor)
(a) the issuance of the number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such Convertible
Securities, (b) the issuance of all of Common Stock and all other rights, options and Convertible
Securities issued after the issuance of such rights, options or Convertible Securities, and (c) the
original issuance at the time of such change of any such options, rights and Convertible Securities
then still outstanding. On the expiration of any such option or right or the termination of any
such right to convert or exchange such Convertible Securities, the Conversion Price then in effect
in respect of the Series E Preferred Stock shall forthwith be increased or decreased to such
Conversion Price as would have obtained (i) had the adjustments made upon the issuance of such
rights or options or such Convertible Securities been made upon the basis of the issuance of only
the number of shares of Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights or options or upon the conversion or exchange
of such Convertible Securities, and (ii) had adjustments been made on the basis of the
Conversion Price as adjusted under the immediately preceding clause (i) for all issues or sales of
Common Stock or rights, options or Convertible Securities made after the issuance of such rights or
options or such Convertible Securities. If the exercise price provided for in any right or option
referred to in clause (1) of this Section 6(c), or
53
the rate at which any Convertible Securities referred to in clauses (1) and (2) of this Section
6(c) are convertible into or exchangeable for shares of Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect against dilution, then in
the case of the delivery of shares of Common Stock upon the exercise of any such right or option or
upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect
in respect of the Series E Preferred Stock shall forthwith be decreased to such Conversion Price as
would have obtained had the adjustments made upon issuance of such right or option or such
Convertible Securities been made upon the basis of the issuance of (and the total consideration
received for) the shares of Common Stock delivered as aforesaid.
(4) If at any time any shares of Common Stock or Convertible Securities or any rights or
options to purchase any shares of Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the amount paid to the Company
therefor without deduction therefrom of any expenses incurred or any underwriting commissions,
concessions or discounts, or finders fees or brokerage commissions, paid or allowed by the Company
in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any shares of Common Stock or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration other than cash payable to the
Company shall be deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company, without deduction therefrom of any expenses incurred or any
underwriting commissions, concessions or discounts, or finders fees or brokerage commissions, paid
or allowed by the Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any share of Common Stock or
Convertible Securities shall be issued in connection with any merger of another corporation into
the Company, the amount of consideration therefor shall be deemed to be the fair value as
determined in good faith by the Board of Directors of the Company of such portion of the assets of
such merged corporation as such Board shall determine to be attributable to such shares of Common
Stock, Convertible Securities, rights or options, as the case may be.
(5) If at any time the Company shall take a record of the holders of Common Stock for the
purpose of entitling them (a) to receive a dividend or other distribution payable in shares of
Common Stock or in Convertible Securities, or (b) to subscribe for or purchase shares of Common
Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue
or sale of the shares of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) Stock Dividends. If at any time the Company shall declare a dividend or any other
distribution upon any capital stock of the Company which is payable in shares of Common Stock, then
the Conversion Price in respect of the Series E Preferred Stock in effect immediately prior to the
declaration of such dividend or distribution shall be reduced to the quotient obtained by dividing
(1) the product of (i) the number of shares of Common Stock outstanding and deemed (in accordance with Section 6(c)) to be outstanding
immediately prior to such declaration, multiplied by (ii) the then effective Conversion Price, by
(2) the total number of shares of Common Stock outstanding and deemed (in accordance with Section
6(c)) to be outstanding immediately after such declaration. All shares of Common Stock and all
Convertible
54
Securities issuable in payment of any dividend or other distribution upon the capital stock of the
Company shall be deemed after such declaration to have been issued and sold without consideration.
(e) Extraordinary Dividends and Distributions. If at any time the Company shall
declare a dividend or any other distribution upon the Common Stock payable otherwise than out of
current earnings, retained earnings or earned surplus and otherwise than in shares of Common Stock
or Convertible Securities, then, except to the extent that such dividend or distribution shall have
been paid to the holders of Series E Preferred Stock pursuant to Section 3, the Company shall set
aside an equal per share dividend (calculated, with respect to the Series E Preferred Stock, on an
as converted basis), which shall be payable to the holder of the subject Series E Preferred Stock
upon conversion thereof into Common Stock. At such time as shares of Series E Preferred Stock are
redeemed in accordance with Section 5, the corresponding amount set aside under this Section 6(e)
may be returned to the general, unrestricted assets of the Company. To the extent that any dividend
or distribution required to be set aside under this Section 6(e) shall be in a form other than
cash, then the Company shall have the right, in lieu of setting aside such non-cash property, to
set aside a cash amount equal to the fair value of such non-cash property as determined by the
Board of Directors of the Company in good faith. For the purposes of the foregoing, a dividend or
distribution other than in cash shall be considered payable out of earnings, retained earnings or
earned surplus only to the extent that such current earnings, retained earnings or earned surplus
are charged an amount equal to the fair value of such dividend or distribution at the time of the
declaration thereof, as determined by the Board of Directors of the Company. Such reductions shall
take effect as of the date on which a record is taken for the purposes of such dividend or
distribution, or, if a record is not taken, the date as of which the holders of record of Common
Stock entitled to such dividend or distribution are to be determined.
(f) Stock Splits and Reverse Splits. If at any time the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the Conversion Price in respect
of the Series E Preferred Stock in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Conversion Shares receivable upon conversion of
outstanding Series E Preferred Stock immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in respect of the Series E
Preferred Stock in effect immediately prior to such combination shall be proportionately increased
and the number of Conversion Shares receivable upon conversion of outstanding Series E Preferred
Stock immediately prior to such combination shall be proportionately reduced.
(g) Adjustments
for Consolidation, Merger, Sale of Assets, Reorganization, etc. If at
any time the Company shall be a party to any transaction (including without limitation a merger,
consolidation, sale of all or substantially all of the Companys assets or a recapitalization of
the Common Stock) in which the previously outstanding shares of Common Stock shall be changed into
or exchanged for different securities of the Company or changed into or exchanged for common stock
or other securities of another corporation or other property (including cash) or any combination of any of the foregoing
(each such transaction being hereinafter referred to as the
Transaction; the Company (in
the case of a recapitalization of the Stock) or such other
55
corporation being hereinafter referred to as the Acquiring Company, and the common stock
of the Acquiring Company being hereinafter referred to as the
Acquirers Stock), then, as a
condition to the consummation of the Transaction, lawful and adequate provisions shall be made so
that, upon the basis and the terms and in the manner provided in this Section 6(g), each holder of
Series E Preferred Stock, upon conversion of such Series E Preferred Stock at any time after the
consummation of the Transaction, shall be entitled to receive, in lieu of the shares of Common
Stock issuable upon such exercise prior to such consummation, at the election of such holder given
by notice to the Company on or before the later of the day on which the holders of Common Stock
approve the Transaction, or the thirtieth day following the date of delivery or mailing to such
holder of the last proxy statement relating to the vote on the Transaction by the holders of Common
Stock:
(1) the stock and other securities, cash and property to which such holder would have been
entitled upon the consummation of the Transaction if such holder had converted such Series E
Preferred Stock immediately prior thereto (subject to adjustments from and after the date of the
consummation of the Transaction (the Consummation Date) as nearly equivalent as possible to the
adjustments provided for in this Section 6); or
(2) only in the case of a Transaction consummated after an Initial Public Offering other than
a Transaction in which the previously outstanding shares of Common Stock shall be exchangeable for
cash only, if the Acquiring Company meets the requirements set forth in this Section 6(g), the
number of shares of the Acquirers Stock or, if the Acquiring Company fails to meet, but a Parent
(as defined in this Section 6(g)) does meet, such requirements, of such Parents common stock
(subject to adjustments from and after the Consummation Date as nearly equivalent as possible to
the adjustments provided for in this Section 6), determined by dividing (i) the product obtained by
multiplying (a) the number of shares of Common Stock to which the holder of such Series E Preferred
Stock would have been entitled had such holder converted such Series E Preferred Stock immediately
prior to the consummation of the Transaction, times (b) the greater of the Conversion Price or the
Acquisition Price (as defined in this Section 6(g)) in effect immediately prior to the consummation
of the Transaction, by (ii) the Market Value of the Acquirers Stock on the date immediately prior
to the consummation of the Transaction, preceding the Consummation Date.
For the purposes of this Section 6(g) only, the term Market Value shall mean, for any
share of common stock on any date specified herein, the last sale price, regular way, on such date,
or, if no sale takes place on such date, the average of the closing bid and asked prices on such
date, in each case as officially reported on the NYSE or, if not so reported, on the principal
national securities exchange on which such stock is listed or if not listed or admitted to trading,
the average of the closing bid and asked prices of such stock in the over-the-counter market as
reported by Nasdaq or a similar organization; and the term Acquisition Price shall mean
the consideration per share to be paid for or received by the holders of the previously-outstanding
shares of Common Stock in accordance with the terms of the Transaction, determined (i) in the case
where the holders of the previously outstanding Common Stock received solely shares of the Acquirers Stock in the
Transaction, by multiplying the Market Value of the Acquirers Stock as of the date immediately
preceding the Consummation Date by a fraction the numerator of which shall be the aggregate number
of shares of the Acquirers Stock to be received in the Transaction in exchange for all of the
previously outstanding shares of Common Stock and the
56
denominator of which shall be the aggregate number of such previously outstanding shares of Common
Stock, and (ii) in any other case, by dividing the aggregate fair market value (using Market Value
for any shares of the Acquirers Stock), as of the date immediately preceding the Consummation
Date, of the aggregate consideration to be received by the holders of such previously outstanding
shares of Common Stock by the number of shares of such previously outstanding Common Stock. The
requirements referred to in clause (2) of this Section 6(g) with reference to the Acquiring Company
or to a corporation (herein referred to as a Parent) which directly or indirectly controls the
Acquiring Company are as follows: (x) its common stock is listed on the NYSE or a principal
national securities exchange or bid and asked prices are reported with respect thereto by Nasdaq or
a similar organization and such common stock continues to meet such requirements for listing
thereon, (y) it is required to file, and in each of its three fiscal years immediately preceding
the Consummation Date has filed, reports with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act, and (z) in the case of a Parent, such Parent is required to include the Acquiring
Company in the consolidated financial statements contained in the Parents Annual Report on Form
10-K and is not itself included in the consolidated financial statements of any other person (other
than its consolidated subsidiaries). Notwithstanding anything contained herein to the contrary, the
Company shall not effect any Transaction unless prior to or simultaneously with the consummation of
such Transaction the survivor or successor entity (if other than the Company) resulting from such
Transaction shall (AA) assume by written instrument executed and delivered to each holder of Series
E Preferred Stock the obligation to deliver to such holder of Series E Preferred Stock such shares
of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive, and containing the express assumption of such successor entity of the due and
punctual performance and observance of every provision of the Series E Preferred Stock to be
performed and observed by the Company and of all liabilities and obligations of the Company
hereunder, and (BB) deliver to the holders of Series E Preferred Stock an opinion, in form,
substance and from counsel reasonably satisfactory to the holders of Series E Preferred Stock, to
the effect that such written instrument has been duly authorized, executed and delivered by such
successor entity and constitutes a legal, valid and binding instrument enforceable (subject to
applicable bankruptcy and other similar laws affecting the enforcement of creditors rights
generally) against such successor entity in accordance with its terms, and to such further effects
as the holders of Series E Preferred Stock may reasonably request.
(h) Exceptions to Adjustment of Conversion Price. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the Conversion Price
in the case of (i) the issuance of shares of Common Stock upon conversion of the Series E Preferred
Stock or any Other Series or any adjustment of the conversion price with respect thereto in
accordance herewith, (ii) the issuance of options or warrants included within the Option/Warrant
Pool, and the issuance of Common Stock upon the exercise of any such options or warrants (including
options and warrants outstanding on the Date of First Issuance), and (iii) the issuance of shares
of Common Stock in a Qualified Public Offering pursuant to an effective registration statement
under the Securities Act.
(i) Treasury Shares. The number of shares of Common Stock outstanding at any time shall not
include shares owned or held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the purposes of this Section 6.
57
(j) Certificate of Adjustment. Upon each adjustment of the Conversion Price in respect
of the Series E Preferred Stock and upon each change in the number of Conversion Shares issuable
upon the conversion of the Series E Preferred Stock, and in the event of any change in the rights
of the holders of the Series E Preferred Stock by reason of other events herein set forth, then and
in each such case, the Company will promptly prepare a certificate of adjustment stating the
adjusted Conversion Price and the new number of Conversion Shares so issuable, or specifying the
other shares of stock, securities or assets and the amount thereof receivable as a result of such
change in rights, and setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. The Company will promptly mail a copy of such certificate of
adjustment to each registered holder of Series E Preferred Stock.
(k) Company to Prevent Dilution. If at any time or from time to time conditions arise
by reason of action taken by the Company, which in the opinion of its Board of Directors, are not
adequately covered by the provisions of this Section 6, and which might materially and adversely
affect the conversion rights of the registered holders of Series E Preferred Stock, the Board of
Directors of the Company shall appoint a firm of independent certified public accountants, which
may be the firm regularly retained by the Company, which shall give its opinion upon the
adjustment, if any, on a basis consistent with the standards established in the other provisions of
this Section 6, necessary with respect to the Conversion Price, so as to preserve, without
dilution, the conversion rights of the registered holders of the Series E Preferred Stock. Upon
receipt of such opinion, the Board of Directors of the Company shall forthwith make the adjustments
described therein.
(l) Reservation of Shares. The Company will authorize, reserve and set apart and have
available for issuance at all times, free from preemptive rights, including, without limitation,
rights derived from rights offerings, that number of shares of Common Stock which is deliverable
upon the conversion of the Series E Preferred Stock, and the Company will have at all times any
other rights or privileges provided for therein sufficient to enable it at any time to fulfill all
its obligations hereunder.
(m) Costs. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of Conversion Shares upon conversion
of any shares of the Series E Preferred Stock; provided, however, that the Company shall not be
required to pay any federal or state income taxes or other taxes which may be payable in respect of
any transfer involved in the issuance or delivery of any certificate for such Conversion Shares in
a name other than that of the holder of the shares of the Series E Preferred Stock in respect of
which such shares are being issued.
Section 7. Voting Rights. Except as otherwise required by law or expressly provided herein,
the holders of shares of Series E Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the stockholders of the Corporation and shall have such number of votes
equal to the number of shares of Common Stock into which such holders shares of Series E Preferred
Stock are convertible pursuant to the provisions hereof at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise
58
required by law or expressly provided herein, the holders of shares of Series E Preferred Stock,
Other Series and Common Stock shall vote together as a single class, and not as separate classes.
Section 8. Preference Rights. Without prejudice to any required consent pursuant to the
Series E Stock Purchase Agreement, nothing contained herein shall be construed to prevent the Board
of Directors of the Company from issuing one or more series or classes of Junior Securities with
dividend and/or liquidation preferences junior to the dividend and liquidation preferences of the
Series E Preferred Stock.
Section 9. Registration of Transfer. The Company will keep at its principal office a
register for the registration of Series E Preferred Stock. Upon the surrender of any certificate
representing Series E Preferred Stock at such place, the Company will, at the written request of
the record holder of such certificate, execute and deliver (at the Companys expense) a new
certificate or certificates in exchange therefor representing in the aggregate the number of shares
represented by the surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of Shares as is requested by the holder of the surrendered
certificate.
Section 10. Replacement. Upon receipt of evidence reasonably satisfactory to the Company of
the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series E Preferred Stock and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided that if the holder is a financial
institution, an entity whose securities are traded or listed on any national securities exchange or
recognized automated quotation system, or any subsidiary of the foregoing, then the holders own
agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company will (at its expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 11. Amendment and Waiver. No amendment, modification or waiver will be binding or
effective with respect to any provision of Sections 1 through 11 hereof without the prior written
consent or affirmative vote of the holders of not less than a
majority of the Series E Preferred
Stock outstanding at the time such action is taken.
Section 12. Notices. Except as otherwise expressly provided hereunder, all notices referred
to herein will be in writing and will be delivered by registered or certified mail, return receipt
requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and will
be deemed to have been given when so mailed or sent (a) to the Company, at its principal executive
offices, and (b) to any stockholder, at such holders address as it appears in the stock records of
the Company (unless otherwise indicated by notice given to the Company by any such holder).
G.
DEFINITIONS
In addition to the various defined terms contained in parts B, C, D, E and F above (which
defined terms shall be applicable in part B, part C, part D, part E or part F, as the case may be,
59
where such definitions appear), the following terms have the meanings set forth below wherever used
in part B, part C, part D, part E or part F above:
All Series shall mean the collective reference to the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock.
Conversion Shares shall mean the shares of Common Stock of the Company issued and/or
issuable from time to time upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock (as the case
may be) pursuant to Section 6 of part B, Section 6 of part C, Section 6 of part D, Section 6 of
part E or Section 6 of part F above, respectively.
Date of First Issuance shall mean the first date on which any shares of Series E
Preferred Stock are issued.
Initial Public Offering shall mean the initial offer and sale of shares of the
Companys Common Stock to the general public pursuant to a registration statement filed and made
effective pursuant to the Securities Act.
NYSE shall mean the New York Stock Exchange.
Option/Warrant Pool shall mean a reserve of 1,276,860 shares of Common Stock
(subject to adjustment in the event of any stock splits, stock dividends, combinations of shares,
recapitalizations or other such events relating to the outstanding Common Stock at any time and
from time to time subsequent to the effective date of this Seventh Amended and Restated Certificate
of Incorporation) in respect of options and/or warrants which are currently outstanding and/or
which may hereafter be granted by the Company from time to time (including, without limitation,
options pursuant to the Companys 1999 Stock Option Plan).
Qualified Public Offering shall mean a sale of shares of Common Stock to the public
in a firm commitment underwritten public offering pursuant to a registration statement under the
Securities Act which has been declared effective by the Securities and Exchange Commission (other
than a registration statement on Form S-4, Form S-8 or any successor form) in which (a) the Company
receives gross proceeds of not less than $20,000,000, and (b) the Common Stock is offered to the
public at an initial price per share of not less than three (3) times the then effective Conversion
Price in respect of the Series C Preferred Stock.
Qualified Sale Transaction shall mean the acquisition of a controlling interest in
the Company by, or the merger or consolidation of the Company with or into, an entity whose shares
of common stock (or whose parents shares of common stock) are listed or traded on the NYSE, the
American Stock Exchange or The Nasdaq Capital Market, and in which the consideration paid per share
of Common Stock (including Preferred Stock on an as converted basis) is in the form of cash
and/or capital stock listed or traded on an exchange or system as aforesaid and which may be traded, sold or resold without further
registration, having an aggregate fair value per share, at the time of consummation of such
transaction, of not less than three (3) times the then effective Conversion Price in respect of the
Series C Preferred Stock.
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Redemption Date shall mean September 27, 2009.
Securities Act shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, all as in effect from time to time.
Series D Stock Purchase Agreement shall mean the Stock Purchase Agreement, dated as
of September 27, 2002, by and among the Company and the Purchasers party thereto in respect of the
Series D Preferred Stock, as the same may be amended and modified from time to time in accordance
with the provisions thereof.
Series E Stock Purchase Agreement shall mean the Stock Purchase Agreement, dated as
of the Date of First Issuance, by and among the Company and the Purchasers party thereto in respect
of the Series E Preferred Stock, as the same may be amended and modified from time to time in
accordance with the provisions thereof.
Stockholders Agreement shall mean the Stockholders Agreement, dated as of the Date
of First Issuance, by and among the Company and certain of its Stockholders, as the same may be
amended, modified and/or supplemented from time to time in accordance with the provisions thereof.
FIFTH: The Company is to have perpetual existence.
SIXTH: The Company expressly elects to be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
SEVENTH: The board of directors is expressly authorized to adopt, amend or repeal the
by-laws of the Company.
EIGHTH: Elections of directors need not be by written ballot unless the by-laws of the
Company shall otherwise provide.
NINTH: No director of the Company shall be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any
breach of the directors duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
TENTH: Except as may otherwise be specifically provided in this Seventh Amended and
Restated Certificate of Incorporation, no provision of this Seventh Amended and Restated
Certificate of Incorporation is intended by the Company to be construed as limiting, prohibiting,
denying or abrogating any of the general or specific powers or rights conferred under the General
Corporation Law upon the Company, upon its stockholders, bondholders and security holders, and upon
its directors, officers and other corporate personnel, including, in particular, the power of the
Company to furnish indemnification to directors and officers in the capacities defined and prescribed by the
General Corporation Law and the defined and prescribed rights of said persons to indemnification as
the same are conferred under the General Corporation Law. The Company shall, to the fullest extent
permitted by the laws of the State of
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Delaware, including, but not limited to Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all directors and officers
of the Company and may, in the discretion of the board of directors, indemnify any and all other
persons whom it shall have power to indemnify under said Section or otherwise under Delaware law,
from and against any and all of the expenses, liabilities or other matters referred to or covered
by said Section. The indemnification provisions contained in the Delaware General Corporation Law
shall not be deemed exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, resolution of stockholders or disinterested directors, or otherwise, and
shall continue as to a person who has ceased to be a director, officer, employee or agent, both as
to action in his official capacity and as to action in another capacity while holding such office,
and shall inure to the benefit of the heirs, executors and administrators of such person.
IN WITNESS WHEREOF, the undersigned has executed, signed and acknowledged this Seventh Amended
and Restated Certificate of Incorporation of Community Connect Inc.
as of this 15th day of October,
2007.
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/s/ Benjamin Sun
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Benjamin Sun, President |
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State of Delaware Secretary of State
Division of Corporations
Delivered 04:27 PM 04/10/2008
FILED 04:27 PM 04/10/2008
SRV 080416159 2680622 FILE |
CERTIFICATE OF MERGER
OF
CCI ACQUISITION SUB, INC.,
a Delaware Corporation
INTO
COMMUNITY CONNECT INC.,
a Delaware Corporation
* * * * * * * *
The undersigned corporation organized and existing under and by virtue of the General
Corporation Law of Delaware, DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent corporations of the
merger is as follows:
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NAME
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STATE OF INCORPORATION |
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CCI Acquisition Sub, Inc.
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Delaware |
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Community Connect Inc.
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Delaware |
SECOND: That an Agreement and Plan of Merger between the parties to the merger has been
approved, adopted, certified, executed and acknowledged by each of the constituent corporations in
accordance with the requirements of section 251 of the General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation of the merger is Community Connect Inc.
FOURTH:
That the Certificate of Incorporation of Community Connect Inc. is amended and
restated in its entirety to read as is set forth in Exhibit A attached hereto.
FIFTH: That the executed Agreement and Plan of Merger is on file at an office of the surviving
corporation, the address of which is 205 Hudson Street, 6th Floor, New York, NY 10013.
SIXTH: That a copy of the Agreement and Plan of Merger will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent corporation.
SEVENTH: That this instrument shall be effective at 5:00 p.m. on the date of filing hereof.
[Signature page follows]
IN WITNESS WHEREOF, said surviving corporation has caused this certificate to be signed by an
authorized officer, the 10th day of April, 2008.
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COMMUNITY CONNECT INC.
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By: |
/s/ Benjamin Sun
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Name: |
Benjamin Sun |
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Title: |
President & CEO |
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EXHIBIT A
Amended and Restated
Certificate of Incorporation
of
Community Connect Inc.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COMMUNITY CONNECT INC.
FIRST: The name of the Corporation is COMMUNITY CONNECT INC. (the Corporation).
SECOND: The address of the Corporations registered office in the State of Delaware is 2711
Centerville Road, Suite 400, Wilmington, County of New Castle 19808. The name of the Corporations
registered agent at such address is Corporation Service Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under the General Corporation Law of
the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have authority to
issue is One Thousand (1,000) shares of Common Stock, $0.01 par value per share.
FIFTH: The board of directors (Board of Directors) is authorized to make, alter or repeal
the by-laws of the Corporation. Election of directors need not be by written ballot.
SIXTH: A director of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the directors duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal benefit. If the
General Corporation Law of the State of Delaware is hereafter amended to authorize the further
elimination or limitation of the liability of directors, then the liability of the directors of the
Corporation, in addition to the limitation on personal liability provided herein, shall be limited
to the fullest extent permitted by the amended General Corporation Law of the State of Delaware.
Any repeal or modification of this paragraph by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal liability of a
director of the Corporation at the time of such repeal or modification.
SEVENTH: Except as may otherwise be specifically provided in this Certificate of
Incorporation, no provision of this Certificate of Incorporation is intended by the Corporation to
be construed as limiting, prohibiting, denying or abrogating any of the general or specific powers
or rights conferred under the General Corporation Law of the State of Delaware upon the Corporation, upon its stockholders, bondholders and security
holders, and upon its directors, officers and other corporate personnel, including, in particular,
the power of the Corporation to furnish indemnification to directors and officers in the capacities
defined and prescribed by the
General Corporation Law of the State of Delaware and the defined and prescribed rights of said
persons to indemnification as the same are conferred under the General Corporation Law of the State
of Delaware. Except as provided herein, the Corporation shall, to the fullest extent permitted by
the laws of the State of Delaware, including but not limited to Section 145 of the General
Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify
any and all directors and officers of the Corporation, and may, in the discretion of the board of
directors, indemnify any and all other persons whom it shall have the power to indemnify under said
Section, or otherwise under Delaware law, from and against any and all of the expenses, liabilities
or other matters referred to or covered by said Section. The indemnification provisions contained
in the General Corporation Law of the State of Delaware shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement, resolution of
stockholders or disinterested directors, or otherwise, and shall continue as to a person who has
ceased to be a director, officer, employee or agent, both as to action in his official capacity and
as to action in another capacity while holding such office, and shall inure to the benefit of the
heirs, executors and administrators of such person.
Notwithstanding anything in this Article, elsewhere in this Certificate of Incorporation or in any
prior certificate of incorporation or similar organizational document to the contrary, the
indemnification rights and any similar or analogous rights provided hereunder by the Corporation to
any person or entity, including but not limited to any directors and officers, for any reason based
upon or arising from any action or omission occurring prior to the effective date of the proposed
merger of the Corporation with and into Community Connect Inc. (hereinafter referred to as the
Historical Indemnities), shall be limited as follows: (a) for claims actually made and reported
to the Corporation up to and until the last day of the fourteen (14) month period following the
filing date hereof, the Corporations aggregate indemnity obligation to any and all Historical
Indemnities, individually, in any combination with each other and/or in the aggregate, shall be
Three Million Eight Hundred Thousand United States Dollars (U.S.$3,800,000); (b) for claims
actually made and reported to the Corporation after the last day of the fourteen (14) month period
following the filing date hereof up to and until the sixth anniversary of the filing date hereof,
the Corporations aggregate indemnity obligation to indemnify any and all Historical Indemnities,
individually, in any combination with each other and/or in the aggregate, shall be One Million
United States Dollars (U.S.$1,000,000); and (c) after the sixth anniversary of the filing date
hereof, the Corporation shall have no indemnity obligation whatsoever to any and all Historical
Indemnities, individually, in any combination with each other and/or in the aggregate. The
limitations set out above in (a), (b) and (c) shall hereinafter be referred to collectively as the
Limitations. The Limitations are retrospective in application and replace in the entirety any
unlimited indemnification rights under any prior certificate of incorporation or organizational
document of the Corporation or any of its predecessor entities. The Limitations shall apply to any
and all claims for indemnification (whenever made) based upon any events, action or omissions
occurring prior to the filing date hereof. In making payment of its obligations hereunder, the
Corporations obligations shall immediately cease, regardless of whether any claims are paid or
unpaid in whole or in part, once the applicable dollar threshold under the applicable section ($3,800,000 and/or $1,000,000 for sections
(a) and (b), respectively, of the Limitations) is met. In meeting such applicable amount(s), the
Corporation shall only be required to allocate the dollar threshold set forth in the applicable
Limitation on a first come first serve basis based upon actual receipt of claims (and
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actual submission of expenses and actual receipt of documentation thereof) regardless of whether
any claims are paid or unpaid in whole or in part.
The Corporation may maintain insurance, at its expense, to protect itself and any person who
is or was a director, officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any such expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
3
exv3w12
Exhibit 3.12
BYLAWS
OF
CCI ACQUISITION SUB, INC.
(as of April 8, 2008)
A DELAWARE CORPORATION
ARTICLE I OFFICES
Section 1.
Registered Office. The registered office in the State of Delaware shall be
at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 in the County of New Castle. The
name of the corporations registered agent at such address shall be Corporation Service Company.
The registered office or registered agent of the corporation may be changed from time to time by
action of the board of directors on the filing of a certificate or certificates as required by law.
Section 2. Other Offices. The corporation may also have offices at such other places,
both within and without the State of Delaware, as the board of directors may from time to time
determine or the business of the corporation may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall be
held each year, beginning in the year 2008, prior to the last day of September. At such meeting,
the stockholders shall elect the directors of the corporation and conduct such other business as
may come before the meeting. The time and place of the annual meeting shall be determined by the
board of directors. Special meetings of the stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof. Special
meetings of the stockholders may be
called by the president or the chairman of the board for any purpose and shall be called by the
secretary if directed in writing by two or more members of the board of directors or the holders of
more than 10% of the outstanding stock and stating the purpose or purposes of the proposed
meeting. The board of directors may elect to hold a meeting of the stockholders solely by means of
remote communications.
Section 2. Notice. Whenever stockholders are required or permitted to take action at a
meeting, written or printed notice of every annual or special meeting of the stockholders, stating
the place, date, time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor
more than 60 days before the date of the meeting. All such notices shall be delivered, either
personally or by mail, by or at the direction of the board of directors, the chairman of the board,
the chief executive officer, the president or the secretary, and if mailed, such notice shall be
deemed to be delivered when deposited in the United States mail with
postage prepaid and addressed to the stockholder at his or her address as it appears on the records
of the corporation. Without limiting the manner by which notice otherwise may be given to the
stockholders, any notice given by the corporation to the stockholders shall be effective if given
by a form of electronic transmission consented to by the stockholder to whom the notice is given.
Any such consent shall be revocable by the stockholder by written notice to the corporation. Any
such consent shall be deemed revoked if (a) the corporation is unable to deliver by electronic
transmission two consecutive notices given by the corporation in accordance with such consent and
(b) such inability becomes known to the corporations secretary, an assistant secretary, transfer
agent or other person responsible for giving such notice;
provided, however, that the inadvertent
failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Notice given by electronic transmission shall be deemed given: (i) if by facsimile, when directed
to a number at which the stockholder has consented to receive notice, (ii) if by electronic mail,
when directed to an electronic mail address at which the stockholder has consented to receive
notice, (iii) if by posting on an electronic network together with separate notice to the
stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such
separate notice, and (iv) if by any other form of electronic transmission, when directed to the
stockholder.
Section 3. Waiver of Notice. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice, or a waiver by
electronic transmission by the person entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be specified in any written
waiver of notice or any waiver by electronic transmission unless so required by the certificate of
incorporation or these bylaws.
Section 4. Stockholders List. The officer having charge of the stock ledger of the
corporation shall make, at least 10 days before every meeting of the stockholders, a complete list
arranged in alphabetical order of the stockholders entitled to vote at such meeting, specifying the
address of and the number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the notice of the meeting
or, if not so specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5.
Quorum; Adjourned Meetings. The presence of stockholders entitled to cast at least
a majority of the votes that all stockholders are entitled to cast on a matter to be acted upon at
a meeting of the stockholders shall constitute a quorum for the purposes of consideration and
action on the matter, except as otherwise provided by statute or by the certificate of
incorporation. If a quorum is not present, the holders of the shares present in
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person or represented by proxy at the meeting and entitled to vote thereat shall have the power, by
the affirmative vote of the holders of a majority of such shares, to adjourn the meeting to another
time or place. Unless the adjournment is for more than thirty days or unless a new record date is
set for the adjourned meeting, no notice of the adjourned meeting need be given to any stockholder,
provided that the time and place of the adjourned meeting were announced at the meeting at which
the adjournment was taken. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
Section 6. Vote Required. When a quorum is present or represented by proxy at any
meeting, the vote of a majority of the votes cast by all stockholders entitled to vote and, if any
stockholders are entitled to vote as a class, the vote of a majority of the votes cast by the
stockholders entitled to vote as a class, whether such stockholders are present in person or
represented by proxy at the meeting, shall be the act of the stockholders, unless the question is
one upon which by express provisions of an applicable statute or of the certificate of
incorporation a different vote is required, in which case such express provision shall govern and
control the decision of such question.
Section 7. Voting Rights. Except as otherwise provided by the General Corporation Law
of the State of Delaware or by the certificate of incorporation of the corporation or any
amendments thereto and subject to Section 4 of ARTICLE VI hereof, each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or by proxy for each share of capital
stock held by such stockholder.
Section 8. Proxies. Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer period.
Section 9. Action Without Meeting. Any action required by law or these bylaws to be
taken at any annual or special meeting of stockholders of the corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than the minimum number
of votes that would be necessary to authorize such action at a meeting at which all shares entitled
to vote thereon were present and voted. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior action by the board
of directors is necessary, shall be the date on which the first written consent is expressed. A
telegram, cablegram or other electronic transmission consenting to an action to be taken and
transmitted by a stockholder, or by a person or persons authorized to act for a stockholder, shall
be deemed to be written, signed and dated for purposes of this
Section 9, provided, that any such
telegram, cablegram or other electronic transmission sets forth or is delivered with information
from which the corporation can determine (a) that the telegram, cablegram or other electronic
transmission was transmitted by the stockholder, or by a person or persons authorized to act for
the stockholder, and (b) the date on which such stockholder or authorized person or persons
transmitted such telegram, cablegram or electronic transmission. The date on which such telegram,
cablegram or electronic transmission is transmitted shall be
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deemed to be the date on which such consent was signed. Any copy, facsimile or other reliable
reproduction of a consent in writing may be substituted or used in lieu of the original writing for
any and all purposes for which the original writing could be used,
provided, that such copy,
facsimile or other reproduction shall be a complete reproduction of the entire original writing.
ARTICLE III DIRECTORS
Section 1. General Authority. The business and affairs of the corporation shall be
managed by or under the direction of its board of directors which may exercise all such powers of
the corporation and do such lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done by the stockholders.
Section 2.
Number, Election and Term of Office. The number of directors shall be no
fewer than 3 nor more than 7, as determined from time to time by resolution of the board or as
otherwise provided in the certificate of incorporation of the corporation. The directors shall be
elected by a plurality of the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote in the election of directors except that the first directors of the
corporation shall be appointed by the sole incorporator of the corporation. The directors shall be
elected in this manner at the annual meeting of the stockholders, except as provided in Section 3
of this ARTICLE III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal as hereinafter
provided. Directors need not be stockholders of the corporation.
Section 3. Removal and Resignation. Any director or the entire board of directors may
be removed at any time, with or without cause, by the vote of a majority of the votes cast by all
stockholders entitled to vote at an election of directors, except as otherwise provided by statute.
Any director may resign at any time upon written notice to the president or secretary of the
corporation. The resignation of any director shall take effect at the time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4. Vacancies. Except as otherwise provided by the certificate of incorporation
of the corporation or any amendments thereto, vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a majority vote of the
holders of the corporations outstanding stock entitled to vote thereon or by a majority vote of
the Board of Directors. Each director so chosen shall hold office until a successor is duly elected
and qualified or until his or her earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board of
directors shall be held without other notice than this bylaw immediately after, and at the same
place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting,
of the board of directors may be held without notice at such time and at such place as shall from
time to time be determined by resolution of the board. Special meetings of
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the board of directors may be called by or at the request of the chairman, the chief
executive officer or the president on at least 24 hours notice to each director, either personally,
by telephone, by mail, by telegraph, by facsimile or by other electronic transmission; in like
manner and on like notice the secretary must call a special meeting on the written request of a
majority of directors. Such notice shall state the date, time and place, if any, of the meeting but
need not state the purpose thereof, except as otherwise herein expressly provided. A written waiver
of notice signed by the director entitled to notice, whether before or after the time stated
therein, shall be equivalent to notice. Attendance of a director at the meeting shall constitute a
waiver of notice of such meeting, except when the director attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any business because
the meeting is not lawfully called or convened.
Section 7. Quorum. A majority of the total number of directors shall constitute a
quorum for the transaction of business. The vote of a majority of directors present at a meeting at
which a quorum is present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 8. Committees. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees. Each committee shall consist of one or more
of the directors of the corporation, which, to the extent provided in such resolution and not
otherwise limited by statute, shall have and may exercise the powers of the board of directors in
the management and affairs of the corporation including without limitation the power to declare a
dividend and to authorize the issuance of stock; provided, however, that no such committee shall
have the power or authority to amend these bylaws or the certificate of incorporation. The board of
directors may designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to time by resolution
adopted by the board of directors. Each committee shall keep regular minutes of its meetings and
report the same to the directors when required.
Section 9. Committee Rules. Each committee of the board of directors may fix its own
rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise
be provided by the resolution of the board of directors designating such committee, but in all
cases the presence of at least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that members alternate, if alternates are
designated by the board of directors as provided in Section 8 of this ARTICLE III, of such
committee is/are absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Section 10. Compensation. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
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receiving
compensation therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 11. Communications Equipment. Members of the board of directors or any
committee thereof may participate in and act at any meeting of such board or committee through the
use of a conference telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 12. Action by Written Consent. Any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the board of directors or
committee.
ARTICLE IV OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the board of
directors and shall consist of a chairman of the board (if the board of directors so deems
advisable and elects), a president (who shall perform the functions of the chairman of the board if
none be elected), one or more vice-presidents, a secretary, a treasurer, and such other officers
and assistant officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board of directors may
choose not to fill any office for any period as it may deem advisable, except the offices of
president and secretary.
Section 2. Election and Term of Office. The officers of the corporation shall be
elected annually by the board of directors at the meeting of the board of directors held after each
annual meeting of stockholders. If the election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each officer shall hold office
until the next annual meeting of the board of directors and until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors may be
removed by the board of directors whenever in its judgment the best interest of the corporation
would be served thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the board of directors for the unexpired portion of
the term by the board of directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the board of
directors, and no officer shall be prevented from receiving such compensation by virtue of the fact
that he or she is also a director of the corporation.
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Section 6. Chairman of the Board. The chairman shall preside at all meetings of the
board of directors and all meetings of the stockholders and shall have such other powers and
perform such duties as may from time to time be assigned to him by the board of directors.
Section 7. The Chief Executive Officer. The chief executive officer of the corporation
shall have such powers and perform such duties as are specified in these bylaws and as may from
time to time be assigned to him by the board of directors. The chief executive officer shall have
overall management of the business of the corporation and its subsidiaries and shall see that all
orders and resolutions of the boards of directors of the corporation and its subsidiaries are
carried into effect. The chief executive officer shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of the corporation.
The chief executive officer shall have general powers of supervision and shall be the final
arbitrator of all differences among officers of the corporation and its subsidiaries, and such
decision as to any matter affecting the corporation and its subsidiaries subject only to the boards
of directors. In the absence of the chairman for any reason, including the failure of the board of
directors to elect a chairman, or in the event of the chairmans inability or refusal to act, the
chief executive officer shall have all the powers of and be subject to all the restrictions upon
the chairman.
Section 8. The President. The president shall have such powers and perform such duties
as are specified in these bylaws and as may from time to time be assigned to him by the board of
directors. The president shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of directors are carried
into effect. The president shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. The president shall have
general powers of supervision and shall be the final arbitrator of all differences between officers
of the corporation, and such decision as to any matter affecting the corporation subject only to
the board of directors or the chief executive officer (if the president and the chief executive
officer are not the same person). In the absence of the chief executive officer for any reason,
including the failure of the board of directors to elect a chief executive officer or in the event
of the chief executive officers inability or refusal to act, the president shall have all the
powers of and be subject to all the restrictions upon the chief executive officer.
Section 9. Vice Presidents. The vice-president, or if there shall be more than one,
the vice-presidents in the order determined by the board of directors, including any executive vice
presidents, shall, in the absence or disability of the president, perform the duties and exercise
the powers of the president and shall perform such other duties and have such other powers as the
board of directors or the president may, from time to time, determine or these bylaws may
prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and the board of directors in a book to be kept for
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that purpose and shall perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders and special meetings
of the board of directors; perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he or she shall be; shall have custody of the corporate seal
of the corporation and the secretary, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by his or her signature
or by the signature of such assistant secretary. The board of directors may give general authority
to any other officer to affix the seal of the corporation and to attest the affixing by his or her
signature. The assistant secretary, or if there be more than one, the assistant secretaries in the
order determined by the board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors or the president may from time to time prescribe.
Section 11. The Treasurer and Assistant Treasurer. The treasurer shall have the
custody of the corporate funds and securities; shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation; shall deposit all monies and other
valuable effects in the name and to the credit of the corporation as may be ordered by the board of
directors, taking proper vouchers for such disbursements; and shall render to the president and the
board of directors, at its regular meeting or when the board of directors so requires, an account
of the corporation. If required by the board of directors, the treasurer shall give the corporation
a bond (which shall be rendered every six years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of the duties of the
office of treasurer and for the restoration to the corporation, in case of death, resignation,
retirement, or removal from office, of all books, papers, vouchers, money, and other property of
whatever kind in the possession or under the control of the treasurer belonging to the corporation.
The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order
determined by the board of directors, shall in the absence or disability of the treasurer, perform
the duties and exercise the powers of the treasurer and shall perform such other duties and have
such other powers as the board of directors or the president may from time to time prescribe.
Section 12.
Other Officers, Assistant Officers and Agents. Officers, assistant
officers and agents, if any, other than those whose duties are provided for in these bylaws, shall
have such authority and perform such duties as may from time to time be prescribed by resolution of
the board of directors.
ARTICLE
V INDEMNIFICATION
Officers, directors and others shall be entitled to indemnification to the extent provided in
the certificate of incorporation.
ARTICLE
VI CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be entitled to have a
certificate, signed by, or signed in the name of the corporation by the president or a
vice-president, and the secretary or an assistant secretary of the corporation, certifying the
number of
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shares owned by him or her in the corporation. Where a certificate is signed (1) by a transfer
agent or an assistant transfer agent other than the corporation or its employee or (2) by a
registrar, other than the corporation or its employee, the signature of any such president, vice-president, secretary, or assistant secretary may be facsimile. In case any officer or officers have
signed a certificate or certificates, or whose facsimile signature or signatures have been used on
certificate or certificates, shall cease to be such officer or officers of the corporation whether
because of death, resignation or otherwise before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used on such certificate or certificates had not ceased
to be such officer or officers of the corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue, shall be entered on
the books of the corporation. All certificates surrendered to the corporation for transfer shall be
canceled, and no new certificate shall be issued in replacement until the former certificate for a
like number of shares shall have been surrendered or canceled, except as otherwise provided in
Section 2 with respect to lost, stolen or destroyed certificates.
Section 2. Lost Certificates. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of
that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed certificate or certificates, or his or her legal representative, to give the
corporation a bond in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 3. Transfers of Stock. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares, it shall be the duty of the corporation to issue a
new certificate to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Fixing a Record Date. The board of directors may fix in advance a record
date for the determination of stockholders entitled to notice of, and to vote at, any meeting of
stockholders and any adjournment thereof; stockholders entitled to consent to corporate action in
writing without a meeting; stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or entitled to exercise any rights in respect to any change,
conversion or exchange of stock; or, for the purpose of any other lawful action, which record date
may not precede the date on which the resolution fixing such record date is adopted by the board of
directors. The record date for the determination of stockholders entitled to notice of, and to vote
at, a meeting of stockholders shall not be more than 60 days nor less than 10 days before the date
of such meeting. The record date for the determination of stockholders entitled to consent to
corporate action in writing without a meeting shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the board of directors. The record date
for the determination of stockholders with respect to any other action shall not be
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more than 60 days before the date of such action. If no record date is fixed: the record date for
determining stockholders entitled to notice of, and to vote at, a meeting of stockholders shall be
at the close of business on the day next preceding the day on which notice is given, or if notice
is waived, at the close of business on the day next preceding the day on which the meeting is held;
the record date for determining stockholders entitled to consent to corporate action in writing
without a meeting when no prior action by the board of directors is required by the General
Corporation Law of the State of Delaware, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the corporation by delivery
to its registered office in the State of Delaware, its principal place of business, or an officer
or agent of the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded; and, the record date for determining stockholders with respect to any
other action shall be the close of business on the day on which the board of directors adopts the
resolution relating thereto.
ARTICLE
VII GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by the board of
directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet contingencies, equalize
dividends, repair or maintain any property of the corporation, or for any other purpose, and the
directors may modify or abolish any such reserve in the manner in which it was created.
Section 2.
Checks, Drafts or Orders. All checks, drafts, or other orders for the
payment of money by or to the corporation and all notes and other evidences of indebtedness issued
in the name of the corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner, as shall be determined by resolution of the board of directors or
a duly authorized committee thereof.
Section 3. Deposits. All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation or otherwise as the board of directors
or the Chief Executive Officer, the President or the Treasurer shall direct in such banks, trust
companies or other depositories as the board of directors may select, or as may be selected by any
officer or officers or agent or agents of the corporation to whom power in that respect shall have
been delegated by the board of directors. For the purpose of deposit and collection for the account
of the corporation, checks, drafts and other orders for the payment of money which are payable to
the order of the corporation may be endorsed, assigned and delivered by any officer of the
corporation.
Section 4. Contracts. The board of directors may authorize any officer or officers, or
any agent or agents, of the corporation to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority may be general or
confined to specific instances.
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Section 5. Loans. The corporation may lend money to, or guarantee any obligation of,
or otherwise assist any officer or other employee of the corporation or of its subsidiary,
including any officer or employee who is a director of the corporation or its subsidiary, whenever,
in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or without interest,
and may be unsecured, or secured in such manner as the board of directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing contained in this
section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
Section 6. Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
Section 7. Corporate Seal. The board of directors shall provide a corporate seal which
shall be in the form of a circle and shall have inscribed thereon the name of the corporation and
the words Corporate Seal, Delaware. The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
Section 8. Voting Securities Owned by Corporation. Voting securities in any other
corporation held by the corporation shall be voted by the president or the executive vice
president, unless the board of directors specifically confers authority to vote with respect
thereto upon some other person or officer. Any person authorized to vote securities shall have the
power to appoint proxies, with general power of substitution.
Section 9. Inspection of Books and Records. Any stockholder of record, in person or by
attorney or other agent, shall, upon written demand upon oath stating the purpose thereof, have the
right during the usual hours of business to inspect for any proper purpose the corporations stock
ledger, a list of its stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such persons interest as
a stockholder. In every instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of attorney or such
other writing which authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered office in the State of
Delaware or at its principal place of business.
Section 10. Form of Records. Any records maintained by the corporation in the regular
course of its business, including its stock ledger, books of account, and minute books, may be kept
on, or by means of, or be in the form of, any information storage
device or method, provided, that
the records so kept can be converted into clearly legible paper form within a reasonable time. The
corporation shall so convert any records so kept upon the request of any person entitled to inspect
the same.
Section 11. Section Headings. Section headings in these bylaws are for convenience of
reference only and shall note given any substantive effect in limiting or otherwise construing any
provision herein.
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Section 12. Inconsistent Provisions. In the event that any provision of these
bylaws is or becomes inconsistent with any provision of the certificate of incorporation, the
General Corporation Law of the State of Delaware or any other applicable law, the provision of
these bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise
be given full force and effect.
ARTICLE VIII INTERESTED DIRECTORS
No contract or transaction between this Corporation and one or more of its directors or
officers, or between this Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) The material facts as to such directors or officers relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors or the committee,
and the board or committee in good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the disinterested directors may be
less than a quorum; or
(b) The material facts as to such directors or officers relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith by vote of the
stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the board of directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorized the contract or transaction.
ARTICLE IX AMENDMENTS
These bylaws may be amended, altered or repealed and new bylaws adopted at any meeting of the
board of directors by a majority vote, provided that the affirmative vote of the holders of a
majority of the shares of common stock of the corporation then entitled to vote shall be required
to adopt any provision inconsistent with, or to amend or repeal any provision of, Section 2 or 4 of
ARTICLE III or this ARTICLE IX. The fact that the power to adopt, amend, alter or
repeal the bylaws has been conferred upon the board of directors shall not divest the stockholders
of the same powers.
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exv3w13
Exhibit 3.13
State of Delaware
Secretary of State
Division of Corporations
Delivered 09:17 PM 02/27/2009
FILED 09:17 PM 02/27/2009
SRV 090222750 4661894 FILE
STATE OF DELAWARE
CERTIFICATE OF FORMATION
OF
COMMUNITY CONNECT, LLC
FIRST: The name of the limited liability company is Community Connect, LLC (the Company)
SECOND: The address, including street, number, city, and county, of the registered office of the
Company in the State of Delaware is 2711 Centerville Road,
Suite 400, City of Wilmington, County of
New Castle, Delaware 19808; and the name of the registered agent of the Company in the State of
Delaware at such address is Corporation Service Company.
IN
WITNESS WHEREOF, the undersigned has executed this Certificate of Formation this
27th day of February, 2009.
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/s/ Deborah Hawkins
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Name: Deborah Hawkins |
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Authorized Person |
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COMMUNITY
CONNECT, LLC
5900 Princess Garden Parkway
7th Floor
Lanham, Maryland 20706
CONSENT
TO USE OF NAME
COMMUNITY
CONNECT, INC., a corporation organized under the laws of the State of Delaware, hereby
consents to the organization of COMMUNITY CONNECT, LLC in the State of Delaware.
IN
WITNESS WHEREOF, the said corporation has caused this consent to be executed by its Vice
President this 27th day of February, 2009.
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COMMUNITY CONNECT, INC.
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By: |
/s/ Linda J. Vilardo
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Name: |
Linda J. Vilardo |
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Title: |
Vice President |
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exv3w14
Exhibit 3.14
AMENDMENT NO. 1
TO
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
COMMUNITY CONNECT, LLC
THIS AMENDMENT NO. 1 (this Amendment) to Limited Liability Company Operating Agreement of
Community Connect, LLC, a Delaware limited liability company (the Company), is made as of
this day of [October], 2010 by and among Community Connect Inc., a Delaware corporation (together
with any Substitute Member, the Sole Member), the Company, the Equity Plan Members
signatory hereto and each Person subsequently admitted as a Member of the Company in accordance
with the LLC Agreement (defined below). Members shall mean collectively the Sole Member,
the Equity Plan Members and any person subsequently admitted as a Member. Capitalized terms used
herein without definition shall have the meanings ascribed thereto in the LLC Agreement referred to
below.
W I T N E S S E T H:
WHEREAS, the Members are party to that certain Limited Liability Company Operating Agreement of
Community Connect, LLC adopted as of October 26, 2009 (the LLC Agreement) relating to the
management and operation of the Company;
WHEREAS, the Members and the Company have agreed to amend the LLC Agreement in accordance with
Section 18.2 of the LLC Agreement as set forth in this Amendment;
NOW, THEREFOR, for mutual consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Amendment to Transfer Restrictions. Section 11.1 of the LLC Agreement is hereby stricken in its
entirety and the following Section 11.1 is inserted in its place:
Section 11.1 Transfers
(a) Subject to Section 11.1(d) hereof, no Member may Transfer all or any portion of its Equity
Interests other than (i) to a Permitted Transferee, (ii) any Transfer of all or any portion of a
Members Equity Interests pursuant to Sections 12.1, 12.2, 12.3 or 12.4 hereof and (iii) any
Transfer of all or any portion of a Members Equity Interests pursuant to a Sale Transaction (each,
a Permitted Transfer), provided that in each case such Transfer is made in accordance
with Section 11.2 hereof. Any attempted Transfer of the Equity Interests by such Members, other
than in strict accordance with this Article XI, shall be null and void and the purported transferee
shall have no rights as a Member hereunder, except as may otherwise be provided in Section 13.4 as
to such transferee.
(b) Notwithstanding anything to the contrary in this Agreement, no Transfer of Units (other than in
accordance with Section 11.1(d) hereof) shall be deemed effective until the transferee of such
Units executes a joinder agreement, in substantially the form attached hereto as Schedule B
(the Joinder Agreement) pursuant to which, among other things, such transferee shall
agree to be bound by the obligations of the Member transferring such Units to such transferee under
this Agreement and, if such transferee is an Affiliate of the Member transferring such Units, such
transferee shall agree to grant all authority to act on its behalf to the Member transferring such
Units to such transferee. Any purported transfer in violation of this Section 11.1(b) shall be null
and void.
(c) Notwithstanding anything to the contrary in this Agreement but subject to Section 11.1(d)
hereof, no Member shall enter into any agreement to vote or otherwise exercise any of the rights
appurtenant to any of the Units held by such Member with any Person other than an Affiliate of such
Member.
(d) Notwithstanding anything to the contrary in this Agreement, no consent of any Member shall be
required to permit (i) the Sole Member to pledge its membership interest as security for a loan to
such Sole Member or any Affiliate of such Sole Member, or (ii) a pledgee of the Sole Members
membership interest in the Company to Transfer such membership interest in connection with such
pledgees exercise of its rights and remedies with respect thereto, or to permit such pledgee or
its assignee to be substituted for the Sole Member under this Agreement in connection with such
pledgees exercise of such rights and remedies. For the avoidance of doubt, any such Transfer
pursuant to this Section 11.1(d) shall be deemed effective upon its occurrence and shall not
require the execution of a Joinder Agreement.
2. Amendment to Schedule A. Schedule A to the Operating Agreement is hereby stricken in its
entirety and replaced with Schedule A attached hereto.
3. Full Force and Effect. Except as amended herein, the LLC Agreement shall remain in full
force and effect.
4. Governing Law; Counterparts. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the principles of conflicts of
laws. This Amendment may be executed in counterparts, each of which shall constitute an original
but all of which when taken together shall constitute a single agreement.
IN
WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written
above.
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MEMBER:
COMMUNITY CONNECT INC.,
a Delaware corporation
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By: |
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Name: |
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Title: |
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COMPANY:
COMMUNITY CONNECT, LLC,
a Delaware limited liability company
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By: |
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Name: |
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Title: |
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Amendment No. 1 to Limited Liability Company Operating Agreement
community Connect, LLC
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EQUITY PLAN MEMBERS:
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By: |
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Name: |
Thomas Newman |
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By: |
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Name: |
Courtney I. Williams |
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By: |
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Name: |
Christopher Keith Bowen |
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By: |
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Name: |
Smokey D. Fontaine |
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Amendment No. 1 to Limited Liability Company Operating Agreement
Community Connect, LLC
SCHEDULE A
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Aggregate Capital |
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Contribution as of May |
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11, 2009 for Community |
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Connect Inc. and as of |
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the Effective Date for |
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Name/Address of Member |
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Equity Plan Members |
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Number of Units |
CLASS A UNITS
Community Connect Inc.
New York, New York
Attn: Alfred C. Liggins III
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Approximately $14,000,000 |
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4,700 |
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EQUITY PLAN UNITS
Thomas Newman |
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$ |
100 |
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100 |
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EQUITY PLAN UNITS
Courtney I. Williams |
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$ |
50 |
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50 |
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EQUITY PLAN UNITS
Christopher Keith Bowen |
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$ |
50 |
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50 |
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EQUITY PLAN UNITS
Smokey D. Fontaine |
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$ |
50 |
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50 |
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LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
COMMUNITY CONNECT, LLC
EFFECTIVE AS OF OCTOBER 26, 2009
Table of Contents
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ARTICLE I DEFINITIONS AND CONSTRUCTION |
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1 |
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Section 1.1 Definitions |
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1 |
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Section 1.2 Company Powers |
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12 |
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Section 1.3
Construction |
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12 |
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Section 1.4 Headings |
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12 |
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ARTICLE II FORMATION AND ORGANIZATION |
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12 |
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Section 2.1 Formation |
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12 |
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Section 2.2 Name |
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12 |
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Section 2.3 Business Purpose |
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13 |
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Section 2.4 Registered Office and Agent |
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13 |
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Section 2.5 Term |
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13 |
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Section 2.6 Principal Place of Business |
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13 |
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Section 2.7 Title to Company Property |
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13 |
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Section 2.8 Business Transactions of the Members and Managers with the Company |
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13 |
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Section 2.9 Fiscal Year |
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13 |
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Section 2.10 Other Qualifications |
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13 |
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Section 2.11 No State Law Partnership |
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14 |
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ARTICLE III THE MEMBERS |
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14 |
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Section 3.1 Members; Powers of Members |
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14 |
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Section 3.2 Meetings of Members |
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14 |
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Section 3.3 Place of Meetings |
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14 |
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Section 3.4 Notice of Members Meetings |
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14 |
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Section 3.5 Waiver of Notice |
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15 |
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Section 3.6 Voting Record |
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15 |
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Section 3.7 Vote Required |
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15 |
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Section 3.8 Action by Written Consent of Members |
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16 |
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Section 3.9 No Liability of Members |
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16 |
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ARTICLE IV MANAGEMENT OF THE COMPANY |
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16 |
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Section 4.1 Management by Board of Managers |
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16 |
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Section 4.2 Removal; Resignations; Vacancies |
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17 |
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Section 4.3 Meetings of the Board |
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17 |
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Section 4.4 Compensation of Managers |
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18 |
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Section 4.5 Power to Bind Company |
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18 |
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Section 4.6 Committees |
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18 |
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Section 4.7
Chairman of the Board |
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18 |
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Section 4.8 Officers and Related Persons; Retention of Authority by Board; Matters Not Subject
to Approval |
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18 |
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Section 4.9 President |
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19 |
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TABLE OF CONTENTS
(continued)
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Page |
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Section 4.10 Chief Financial Officer |
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19 |
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Section 4.11 Vice Presidents |
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20 |
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Section 4.12 Treasurer |
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20 |
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Section 4.13 Assistant Treasurers |
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20 |
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Section 4.14 Secretary |
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20 |
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Section 4.15 Assistant Secretaries |
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20 |
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Section 4.16 Adoption of the Annual Budget |
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20 |
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Section 4.17 Employment Agreements |
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21 |
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ARTICLE V CAPITAL STRUCTURE |
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21 |
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Section 5.1 Authorized Units |
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21 |
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Section 5.2 Rights of Designated Common Units |
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22 |
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Section 5.3 Reservation and Issuance of Common Units |
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23 |
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Section 5.4 Units Subject to Forfeiture |
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23 |
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Section 5.5 No Appraisal Rights |
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24 |
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ARTICLE VI CONTRIBUTIONS |
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24 |
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Section 6.1 Initial Capital Contribution |
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24 |
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Section 6.2 Further Contributions |
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24 |
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Section 6.3 Interest |
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24 |
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Section 6.4 No Return of Capital Contribution |
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Section 6.5 No Loans |
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24 |
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ARTICLE VII CAPITAL ACCOUNTS |
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24 |
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Section 7.1 Maintenance of Capital Accounts |
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Section 7.2 Negative Capital Accounts |
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25 |
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Section 7.3 Sale or Exchange of Units |
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25 |
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ARTICLE VIII ALLOCATIONS OF PROFITS AND LOSSES |
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25 |
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Section 8.1 Net Profits |
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25 |
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Section 8.2 Net Losses |
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25 |
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Section 8.3 Limitation on Allocation of Losses |
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25 |
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Section 8.4 Allocation of Nonrecourse Deductions |
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26 |
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Section 8.5 Allocation of Member Nonrecourse Deductions |
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26 |
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Section 8.6 Qualified Income Offset |
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26 |
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Section 8.7 Minimum Gain Chargeback |
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26 |
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Section 8.8 Partner Minimum Gain Chargeback |
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26 |
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Section 8.9 Book-Ups/Tax Disparities |
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26 |
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Section 8.10 Individual Tax Items |
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26 |
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Section 8.11 Tax Credits |
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27 |
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Section 8.12 Changes in Number of Units |
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27 |
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ARTICLE IX DISTRIBUTIONS |
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27 |
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Section 9.1 Limitations on Distributions |
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27 |
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-ii-
TABLE OF CONTENTS
(continued)
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Page |
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Section 9.2 Mandatory Tax Distributions |
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28 |
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Section 9.3 Distributions Prior to Liquidation |
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29 |
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Section 9.4 Withholding Taxes |
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29 |
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ARTICLE X ACCOUNTS |
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29 |
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Section 10.1 Books |
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29 |
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Section 10.2 Tax Matters |
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29 |
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Section 10.3 Special Basis Adjustment |
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30 |
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ARTICLE XI TRANSFERS OF UNITS |
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30 |
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Section 11.1 Transfers |
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30 |
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Section 11.2 Conditions to Permitted Transfers |
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31 |
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Section 11.3 Prohibited Transfers |
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31 |
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Section 11.4 Representations Regarding Transfers |
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31 |
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Section 11.5 Treatment of Equity Plan Units Issued Pursuant to a Combined Award
Agreement |
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32 |
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ARTICLE XII ADDITIONAL RIGHTS AND OBLIGATIONS OF THE MEMBERS |
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32 |
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Section 12.1 Call Rights |
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32 |
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Section 12.2 Put Rights |
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33 |
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Section 12.3 Drag Along Rights |
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35 |
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Section 12.4 Tag Along Rights |
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36 |
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Section 12.5 Treatment of Equity Plan Units Issued Pursuant to a Combined Award Agreement |
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36 |
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ARTICLE XIII
ADDITIONAL, SUBSTITUTE AND LIMITED MEMBERS |
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37 |
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Section 13.1 Admissions |
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37 |
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Section 13.2 Admission of Additional Members |
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37 |
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Section 13.3 Admission of Substitute Members |
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37 |
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Section 13.4 Limited Members |
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37 |
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Section 13.5 Admission of Equity Plan Members |
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38 |
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Section 13.6 Withdrawal of Member |
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39 |
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ARTICLE XIV REPORTS TO MEMBERS |
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39 |
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Section 14.1 Books and Records |
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39 |
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Section 14.2 Annual Reports |
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40 |
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Section 14.3 Quarterly Reports |
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40 |
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Section 14.4 Tax Returns and Tax Information to Members |
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41 |
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Section 14.5 Equity Plan Member Information Rights |
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41 |
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ARTICLE XV EVENTS OF DISSOLUTION |
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41 |
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Section 15.1 Dissolution |
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41 |
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Section 15.2 No other Event of Dissolution |
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41 |
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-iii-
TABLE OF CONTENTS
(continued)
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Page |
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ARTICLE XVI TERMINATION |
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42 |
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Section 16.1 Liquidation |
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42 |
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Section 16.2 Final Accounting |
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42 |
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Section 16.3 Cancellation of Certificate |
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42 |
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ARTICLE XVII EXCULPATION AND INDEMNIFICATION |
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42 |
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Section 17.1 Exculpation |
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42 |
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Section 17.2 Indemnification |
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42 |
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ARTICLE XVIII GENERAL PROVISIONS |
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43 |
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Section 18.1 Confidentiality |
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43 |
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Section 18.2 Amendment |
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44 |
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Section 18.3 Governing Law |
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45 |
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Section 18.4 WAIVER OF JURY TRIAL |
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45 |
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Section 18.5 Remedies |
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45 |
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Section 18.6 Notices |
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46 |
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Section 18.7 Severability |
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46 |
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Section 18.8 Counterparts; Signatures |
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47 |
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Section 18.9 Entire Agreement |
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47 |
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Section 18.10 Assignment; Binding Effect |
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47 |
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Section 18.11 Relationship |
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47 |
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Section 18.12 Interpretation |
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47 |
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Section 18.13 No Third-Party Beneficiary |
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47 |
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-iv-
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
COMMUNITY CONNECT, LLC
This
LIMITED LIABILITY COMPANY OPERATING AGREEMENT, effective as of October 26, 2009 (this
Agreement), of Community Connect, LLC, a Delaware limited liability company (the
Company), is made by and among Community Connect, Inc., a Delaware corporation
(Community Connect or the Sole Member), and each Person subsequently
admitted as a Member of the Company in accordance with the terms of this Agreement.
RECITAL
On February 27, 2009, the Company was formed as a limited liability company in accordance with
the provisions of the Delaware Limited Liability Company Act, 6 Del. C § 18-101 et seq, as amended
from time to time, and any successor statute (the Act). The Sole Member wishing to set
forth the terms and conditions pursuant to which the Company will conduct its business, and
intending to be legally bound hereby, agrees as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Definitions. As used in this Agreement, the following terms shall have the
meanings set forth below:
Additional Member shall mean a Person who has acquired Units from the Company after
the Effective Date and been admitted as a Member of the Company pursuant to Section 13.2 or, for
Equity Plan Members, Section 13.5 hereof.
Adjusted Capital Account Deficit shall mean, with respect to any Member, the deficit
balance, if any, in such Members Capital Account as of the end of the relevant Taxable Year after
giving effect to the following adjustments: (a) credit to such Capital Account any amounts that
such Member is obligated to restore pursuant to the penultimate
sentences of Regulations §§ 1.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such Capital Account the items described in
Regulations §§ 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of Regulations § 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
Affiliate shall mean, with respect to any Person, any other Person, other than an
individual, that is directly or indirectly Controlling, Controlled by or under common Control with
such Person.
Agreed Value shall mean the fair market value of contributed property at the time it
is accepted by the Company, as determined by the majority of the Board using any reasonable method
of valuation.
Applicable Interest Rate shall mean the Prime Rate plus 3%.
Award Agreement shall mean either a Community Connect Award Agreement issued
pursuant to the Community Connect Equity Plan or a Combined Award Agreement issued pursuant to the
Community Connect Equity Plan and the Interactive Equity Plan, as the case may be.
Bankruptcy shall mean, with respect to any Person, the occurrence of any of the
following events: (a) the filing by such Person of a petition in bankruptcy or for relief under
applicable bankruptcy laws; (b) the filing against such Person of any such petition (unless such
petition is dismissed within ninety (90) days from the date of filing thereof); (c) entry against
such Person of an order for relief under applicable bankruptcy laws; (d) written admission by such
Person of its inability to pay its debts as they mature, or a general assignment by such Person for
the benefit of creditors; or (e) appointment of a trustee, conservator or receiver for such Person
or for any substantial part of the property or affairs of such Person.
Board shall mean the Board of Managers of the Company consisting of those Managers
who are elected from time to time to serve on the Board in accordance with Article IV
hereof.
Business Day shall mean each day of the calendar year other than a Saturday, a
Sunday or a day on which banks are required or authorized to close in New York, New York.
Capital Account shall mean the account maintained for a Member determined in
accordance with Article VII hereof.
Capital Commitment shall mean, as to any Member, the amount of such Members
commitment, if any, to make Capital Contributions when called upon to do so by the Board, as set
forth on Schedule A attached hereto.
Capital Contribution shall mean the amount of cash or the Agreed Value of any other
property (net of any liabilities assumed by the Company or to which such property is subject)
contributed to the Company by or on behalf of a Member in consideration for Units as described in
Article VI hereof. In the case of a grant of Equity Plan Units to a provider of services to the
Company after the date of adoption of the final regulations contemplated by notice of proposed
rulemaking REG 105346-03 (May 24, 2005), the Capital Contribution of the applicable Equity Plan
Member providing such services shall also include any amount included on or after that date in such
Members compensation income under Sections 83(a), 83(b) and 83(d)(2) of the Code.
Cause shall mean: (1) Cause as defined in an Equity Plan Members employment or
consulting agreement, if any, with the Company; or (2) if there is no effective employment or
consulting agreement between the Equity Plan Member and the Company that
2
includes a definition of Cause, then Cause means: (i) a charge, indictment or conviction of, or a
plea of guilty or nolo contendere to, a misdemeanor involving fraud, embezzlement or an act of moral
turpitude, or a felony, whether or not in connection with the performance by the Equity Plan Member
of his or her duties or obligations to the Company; (ii) habitual drunkenness or substance abuse;
(iii) theft relating to the business of the Company or dishonesty with respect to a material aspect
of the Companys business; (iv) the repeated refusal by the Equity Plan Member to use his or her
reasonable and diligent efforts to follow the lawful and reasonable policies or directives of the
President of the Company or of his or her designated representatives; (v) gross negligence or
willful misconduct in the performance of the Equity Plan Members duties or engaging in illegal
activity in connection therewith, including, without limitation, the Equity Plan Members knowing
engagement in any act or course of conduct that would result in the termination or revocation of,
or jeopardize the renewal of, any licenses, permits, consents, authorization, approvals or material
agreements necessary for the Company to conduct its business or that would have a material adverse
effect on the Company; (vi) violation of any nonsolicitation, noncompetition or nondisclosure
provision contained in any agreement, including an Award Agreement, entered into by and between the
Equity Plan Member and the Company; or (vii) the Equity Plan Members breach of any fiduciary duty
to the Company involving personal gain or profit to the Equity Plan Member. In the case of Newman,
the term Cause shall be as defined in his employment agreement dated as of May 1, 2007, as
amended, between Magazine One, Inc., a subsidiary of Radio One, and Newman (the Newman Employment
Agreement); provided that for purposes of Section 12.1(c) (and indirectly Section 12.2(c)) of this
Agreement, this modified definition of Cause for Tom Newman shall refer only to clauses (ii),
(vi), (vii), (viii), (ix) or (x) of such definition in his employment agreement.
Certificate of Formation shall mean the certificate of formation of the Company
filed in the Office of the Secretary of State of the State of Delaware pursuant to the Act and
through which the Company has been formed.
Chairman shall mean the individual selected by the Members from time to time to hold
such office pursuant to Section 4.7 hereof.
Chief Financial Officer shall mean the individual selected by the Board from time to
time to hold such office pursuant to Section 4.10 hereof.
Class A Units shall mean Units designated as Class A Units as described in Section
5.2(a) hereof.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time (or
any corresponding provisions of succeeding law).
Combined Award Agreement shall mean the Combined Interactive One, LLC and Community
Connect, LLC Unit Award Agreement issued pursuant to the Interactive Equity Plan and the Community
Connect Equity Plan.
Combined Capital Contributions shall mean the aggregate Capital Contributions of
Community Connect to the Company and Interactive One, Inc. to Interactive
3
One, net of any distributions to the holders of Class A Units under Section 9.3(a) and net of any
deemed distributions pursuant to Section 9.1(b) hereof. According to the books and records of the
Sole Member, as of May 11, 2009, the Combined Capital Contributions was approximately $52,000,000.
Any Member will be entitled to review the books and records of the Company and Interactive One to
verify the accuracy of the amount of Combined Capital Contributions at any time, and in the event
of any dispute concerning the amount of Combined Capital Contributions at any time, the decision of
Community Connect. shall be binding upon all parties hereto unless a court issues a final and
non-appealable decision that the decision of Community Connect. was materially inaccurate, in which
case the decision of such court shall govern the determination of the amount of the Combined
Capital Contributions. In the event that the amount of the Combined Capital Contributions is
challenged hereunder as provided in the immediately preceding sentence, the party prevailing in the
court proceeding resulting from such challenge shall be entitled to recoup all costs and expenses
incurred in relation to such challenge and the court proceeding from the party that failed to
prevail in such court proceeding.
Community Connect Award Agreement shall mean a Community Connect, LLC Incentive
Award Plan Unit Award Agreement issued pursuant to the Community Connect Equity Plan.
Community Connect Equity Plan shall mean that certain Community Connect, LLC
Incentive Award Plan, dated as of February 27, 2009, as it exists from time to time.
Control
(including with correlative meanings Controls, Controlling, Controlled by, Controlled or under common Control with) as used with respect to any Person, shall mean (a)
the power of another Person to exercise, directly or indirectly through one or more intermediaries,
more than fifty percent (50%) of the Voting Power of such Person or (b) the power to direct or
cause the direction, directly or indirectly through one or more intermediaries, of the management
and policies of such Person.
Depreciation shall mean, for each Taxable Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an asset for such Taxable
Year, except that, if the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Taxable Year, Depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Taxable Year bears to such beginning
adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes
of an asset at the beginning of such Taxable Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method selected by the Tax
Matters Partner, and provided,further, that Depreciation with respect to an asset for which the
Company uses the remedial allocation method shall be determined in accordance with Regulations § 1.704-3(d)(2).
Distribution shall mean a transfer of cash or property by the Company to a Member on
account of Units as described in Article IX hereof.
4
Effective Date shall mean October 26, 2009.
Equity Interests shall mean all outstanding Units of the Company, regardless of
class or series.
Equity Plan Units shall mean Units designated as Equity Plan Units as described in
Section 5.2(b) hereof.
Equity Plan Members shall mean Members holding Equity Plan Units pursuant to the
Community Connect Equity Plan and an Award Agreement.
Family Member shall mean as to any Person, any lineal descendant of such Person, any
Person for whom such Person is a lineal descendant, any sibling of such Person, any spouse of any
of the foregoing Persons or any trust for the benefit of any of the foregoing Persons.
Federal Rate shall mean, for each Taxable Year, the highest federal income tax rate
applicable to a U.S. corporation for such Taxable Year.
Fully Diluted Basis shall mean a computation of Units which includes all outstanding
Units and all authorized Equity Plan Units (whether or not outstanding) and all other Units that
are issuable upon conversion, exercise or exchange of all derivative equity interests.
Grant Date shall mean, with respect to a Equity Plan Unit, the date on which such
Unit is issued by the Company to a Equity Plan Member pursuant to an Award Agreement.
Gross Asset Value shall mean, with respect to any asset, such assets adjusted basis
for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be
the Agreed Value at the time it is accepted by the Company, unreduced by any liability secured by
such asset.
(b) The Gross Asset Value of all Company assets shall be adjusted as provided by Regulation
Section 1.704-1(b)(2)(iv)(f )to equal their respective fair market values, as determined by the
Board, as of the following times: (i) the acquisition of Units by a new or existing Member in
exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a
Member of more than a de minimis amount of money or other Company property as consideration for an
interest in the Company; (iii) the liquidation of the Company for Federal income tax purposes
within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); (iv) in connection with
the grant of Equity Plan Units (other than a de minimis number of Units) prior to the date of
adoption of the final regulations contemplated by notice of proposed rulemaking REG 105346-03 (May
24, 2005) as consideration for the provision of services to or for the benefit of the Company by an
existing Equity Plan Member acting in his capacity as a Member, or by a new Equity Plan Member
acting in his capacity as a Member or in anticipation of becoming a Member; and (v) in connection
with the grant or vesting of Units that have been granted on or after the date of adoption of the
final regulations
5
contemplated by notice of proposed rulemaking REG 105346-03 (May 24, 2005) to a new or
existing Equity Plan Member in connection with the performance of services for the Company, but
only if such grant or vesting results in such Equity Plan Member recognizing income under section
83 of the Code (or if such grant or vesting would result in such recognition if the Units had a
fair market value other than zero); provided, however, that the adjustments pursuant to clauses
(i), (ii), (iii), (iv) and (iv) above shall be made only if the Board reasonably determines that
such adjustments are necessary or appropriate to reflect the relative economic interests of the
Members in the Company.
(c) The Gross Asset Value of any asset of the Company distributed to any Member shall be adjusted
to equal the fair market value of such asset as determined by the Board, unreduced by any liability
secured by such asset, on the date of Distribution.
(d) The Gross Asset Value of the Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Code §§ 734(b) or 743(b), but only to
the extent that such adjustments are taken into account in determining Capital Accounts pursuant to
Regulations § l.704-1(b)(2)(iv)(m) and paragraph (f) of the definition of Net Profits and Net
Losses.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraphs (a),
(b) or (d) of this definition, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of computing Net Profits
and Net Losses.
Interactive One shall mean Interactive One, LLC, a Delaware limited liability company
that is an affiliate of the Company.
Interactive Equity Plan shall mean that certain Interactive One, LLC Incentive Award
Plan, dated as of February 25, 2009, as such plan may be amended from time to time with the
approval of the Board for purposes of providing incentives to employees and other representatives
of the Company.
Limited Member shall mean a Member or other Person that has become a Limited Member
pursuant to Section 13.4 hereof or a Person that acquires Units
from a Limited Member; provided
that a Member (that is not a Limited Member) that acquires Units from a Limited Member shall not be
deemed to be a Limited Member hereunder but such Member shall, as to such Units, have the rights
and obligations of the Limited Member that last held such Units.
Manager shall mean each individual elected by the Members to serve on the Board pursuant
to Article IV. A Manager need not be a Member.
Mandatory Tax Distribution shall mean, for each Taxable Year, an amount equal to the
product of the Tax Rate for such Taxable Year, multiplied by the net taxable income (other than any
income or gain attributable to a Sale Transaction) of the Company for such Taxable Year.
6
Member shall mean the Sole Member, Substitute Member, Additional Member or Limited Member, as the
case may be; and Members shall mean the Sole Member, Substitute Members, Additional Members and
Limited Members, collectively.
Member Nonrecourse Debt shall have the meaning of partner nonrecourse debt as set forth
in Regulations § 1.704-2(b)(4).
Member Nonrecourse Deductions shall have the meaning of partner nonrecourse deductions
as set forth in Regulations § 1.704-2(i).
Net Gain from a Sale Transaction or Net Loss from a Sale Transaction shall mean
the net income, gain, loss or deduction recognized by the Company on a Sale Transaction, computed
in accordance with the principles set forth in the definition of Net Profits and Net Losses.
Net Proceeds from a Sale Transaction shall mean the proceeds received by the Company or
the Members from any Sale Transaction, reduced by the Companys out-of-pocket costs incurred in
connection therewith.
Net Profits and Net Losses shall mean, for any Taxable Year or other period, an
amount equal to the Companys taxable income or loss for such year or period, determined in
accordance with Code § 703(a) (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code § 703(a)(1) shall be included in taxable income
or loss), with the following adjustments:
(a) Any income of the Company that is exempt from federal income tax and not otherwise taken into
account in computing Net Profits or Net Losses shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code § 705(a)(2)(B) or treated as Code §
705(a)(2)(B) expenditures pursuant to Regulations § 1.704-1(b)(2)(iv)(i) and not otherwise taken
into account in computing Net Profits or Net Losses shall be subtracted from such taxable income or
loss;
(c) In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraphs (b)
or (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into
account as gain or loss, as the case may be, from the disposition of such asset for purposes of
computing Net Profits or Net Losses;
(d) Gain or loss resulting from any disposition of property with respect to which gain or loss is
recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value
of property disposed of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) In lieu of depreciation, amortization, and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into account
7
Depreciation with respect to each asset of the Company for such Taxable Year, computed in
accordance with the definition of Depreciation above;
(f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code §§
734(b) or 743(b) is required pursuant to Regulations § 1.704-1 (b)(2)(iv)(m)(4) to be taken into
account in determining Capital Accounts as a result of a Distribution other than in complete
liquidation of a Members Units, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis
of the asset) from the disposition of the asset and shall be taken into account for purposes of
computing Net Profits or Net Losses; and
(g) Net Profits and Net Losses shall not include any Net Gain from a Sale Transaction or Net Loss
from a Sale Transaction or any items specifically allocated in Sections 8.5, 8.6, 8.7 and 8.8.
Newman shall mean Thomas Newman.
Non-Equity Plan Members shall mean Members other than Equity Plan
Members.
Nonrecourse Deductions shall have the meaning set forth in Regulations §
1.704-2(b)(1).
Percentage Interest shall mean, with respect to any Member, the ratio of a Members Units
to all outstanding Units, expressed as a percentage. For purposes of determining the number of
outstanding Units, all Equity Plan Units awarded under the Community Connect Equity Plan shall be
considered outstanding and all Equity Plan Units reserved but not yet awarded shall be allocated
among the Non-Equity Plan Members pro rata. Each Members initial Percentage Interest shall be set
forth opposite the name of such Member on Schedule A hereto, and such percentage may be adjusted
from time to time pursuant to the terms of this Agreement.
Permitted Transfereeshall mean (a) with respect to the Sole Member, an
Affiliate of Radio One and (b) with respect to a Equity Plan Member that is admitted as a Member pursuant to Section 13.5 hereof, (i) the Company, (ii) a transferee pursuant to the Equity
Plan Members will or other similar testamentary disposition or the laws of descent and
distribution, (iii) a Family Member of such Equity Plan Member, or (iv) a Person that is an
Affiliate of the Equity Plan Member or a Family Member of such Equity Plan Member.
Person shall mean an individual, corporation, partnership, limited liability
company, business trust, estate, unincorporated association, joint venture or other entity of
whatever nature.
President shall mean the individual selected by the Board from time to time to hold such
office pursuant to Section 4.9 hereof.
8
Prime Rate means the prime rate as published from time to time by The Wall
Street Journal and, if no Prime Rate is published by The Wall Street Journal, then the rate
announced by a major New York money center bank selected by the Board, as its prime rate or base
rate, or, if no such rate is announced, then the rate charged to its best corporate customers for
demand loans, with changes in such rate being effective for purposes of this Agreement as of the
date announced.
Radio One shall mean Radio One, Inc., a Delaware corporation.
Regulations shall mean, except where the context indicates otherwise, the permanent and
temporary regulations of the Department of the Treasury promulgated under the Code, as such
regulations may be lawfully changed from time to time (including corresponding provisions of
succeeding regulations).
Sale Transaction shall mean (i) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in a single transaction or series of related
transactions, or (ii) the acquisition of the Company by a Person or group of Persons by means of
any transaction or series of related transactions (including, without limitation, any merger,
consolidation, or reorganization), if, following such transaction or transactions, the Persons that
were Members or Affiliates of Members immediately prior to such transaction or transactions
beneficially own, directly or indirectly, less than 50 percent (50%) of both the then outstanding
equity securities and the combined Voting Power of the then outstanding securities of the
purchaser, transferee or successor; provided, however, that any transaction consummated under Sections
12.1 or 12.2 hereof shall not constitute or be deemed to be a Sale Transaction hereunder.
Secretary shall mean the individual selected by the Board from time to time to hold such
office pursuant to Section 4.14 hereof.
Sole Member shall mean Community Connect, Inc. and shall
include, solely for purposes of Article VI hereof, any Substitute Member for the Sole Member.
State Rate shall mean, for each Taxable Year, the highest combined State and local income
(or similar) tax rate applicable to corporations in any single geographical taxing jurisdiction in
which the Company conducts business for such Taxable Year; provided, however, that for any Taxable
Year, the Board may select a lesser tax rate that, in the reasonable good faith judgment of the
Board, approximates the combined State and local tax rates to which the Members shares of the net
income of the Company likely will be subject for such Taxable Year.
Substitute Member shall mean a Person who has been admitted as a Member pursuant to
Section 13.3 hereof; provided that a Member that acquires Units from another Member shall not be
deemed to be a Substitute Member hereunder.
Tax Matters Partner shall mean the tax matters partner of the Company as defined in
Code § 6231(a)(7).
9
Tax Rate shall mean, for each Taxable Year, the sum of (a) the Federal Rate
for such Taxable Year, plus (b) the product of (i) the State Rate for such Taxable Year,
multiplied by (ii) 100% minus the Federal Rate for such Taxable Year.
Taxable Year shall mean the taxable year of the Company, which shall be the same as the
Fiscal Year unless otherwise agreed to by the Board and all of the Members or as otherwise required
by applicable law.
Transfer shall mean, as a noun, any voluntary or involuntary sale, assignment, transfer,
grant, hypothecation, pledge, encumbrance or other disposition; and, as a verb, voluntarily or
involuntarily to sell, assign, transfer, grant, give away, hypothecate, pledge, encumber or
otherwise dispose of, and shall include any transfer by will, gift or intestate succession.
Units shall mean the personal property ownership interests in the Company, as designated
into classes in accordance with Article V of this Agreement, including any and all benefits to
which the holder of such personal property ownership interests may be entitled as provided in this
Agreement, together with all obligations of such holder to comply with the terms and provisions of
this Agreement, including, but not limited to, the rights of each Member in the Distributions, Net
Profits, Net Losses and Capital Accounts of the Company with respect to the personal property
ownership interests held by such Member.
Vested means, with respect to the Equity Plan Units, the lapse, in accordance with the
terms of the Community Connect Equity Plan or Award Agreement, of the forfeiture restrictions
applicable to all or a portion of the Equity Plan Common Units awarded to an Equity Plan Member
pursuant to the applicable Award Agreement.
Voting Power shall mean, with respect to a Person, the power to vote, or to direct the
voting of, whether directly or indirectly, through record ownership or any contract, securities
that may be cast for the election of the board of directors or the board of managers (or similar
governing body) of such Person.
As used in this Agreement, the following terms shall have the meanings set forth in the respective
sections of this Agreement identified below:
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Term |
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Section |
Annual Budget
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4.16 |
(b) |
Claims
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17.2 |
(a) |
Class A Sale Price
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12.3 |
(a) |
Class A Unit Sale
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12.3 |
Closing Date
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12.3 |
(a) |
Common Units
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5.1 |
(a) |
Community Connect
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Preamble
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Term |
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Section |
Company |
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Preamble |
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Confidential Information |
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18.1 |
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Covered Person |
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17.1 |
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Covered Persons |
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17.1 |
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Drag-Along Equity Plan Member |
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12.3 |
(b) |
Electronic Transmission |
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3.8 |
(b) |
Equity Plan Call Closing |
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12.1 |
(d) |
Equity Plan Call Unit Price |
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12.1 |
(c) |
Equity Plan Call Units |
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12.1 |
(b) |
Equity Plan Drag-Along Closing |
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12.3 |
(c) |
Equity Plan Drag-Along Unit Price |
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12.3 |
(b) |
Equity Plan Drag-Along Units |
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12.3 |
(b) |
Equity Plan Put Closing |
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12.2 |
(d) |
Equity Plan Put Unit Price |
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12.2 |
(c) |
Equity Plan Put Units |
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12.2 |
(b) |
Equity Plan Tag-Along Closing |
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12.4 |
(b) |
Equity Plan Tag-Along Unit Price |
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12.4 |
(a) |
Equity Plan Tag-Along Units |
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12.4 |
(a) |
Event of Dissolution |
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15.1 |
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Fiscal Year |
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2.9 |
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Indemnified Person |
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17.2 |
(a) |
Indemnified Persons |
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17.2 |
(a) |
Interactive One Equity Plan Units |
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5.2 |
(b)(iii) |
Joinder Agreement |
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11.1 |
(b) |
Liquidation |
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16.1 |
(a) |
Newman Employment Agreement |
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Definition of
Cause in this Section 1.1 |
Permitted Inter-Company Cost Schedule |
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9.1 |
(b) |
Permitted Transfer |
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11.1 |
(a) |
Prohibited Transfer |
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11.3 |
(a) |
Proposed Annual Budget |
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4.16 |
(a) |
Proposed Inter-Company Cost Schedule |
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9.1 |
(b) |
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Term |
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Section |
Purchaser |
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12.3 |
(b) |
Qualifying Equity Plan Put Units |
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12.2 |
(a) |
Safe Harbor Election |
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10.2 |
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Sale Notice |
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12.3 |
(a) |
Service |
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2.3 |
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Tag-Along Notice |
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12.4 |
(a) |
Tag-Along Seller |
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12.4 |
(a) |
Section 1.2 Company Powers. Subject to the terms of this Agreement, the Company and the Board
(acting on behalf of the Company) shall possess and may exercise all of the powers and privileges
permitted by the Act, together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion or attainment of the business
purposes of the Company specified in Section 2.3 hereof.
Section 1.3 Construction. Whenever the context requires, the gender of any word used in this
Agreement includes the masculine, feminine or neuter, and the number of any word includes the
singular or plural. The words include, includes and including shall be deemed to be followed
by the phrase without limitation. Unless the context otherwise requires, all references to
articles, sections and paragraphs refer to articles, sections and paragraphs of this Agreement, and
the terms hereof, herein, and other like terms refer to this Agreement as a whole, including
the schedules hereto.
Section 1.4 Headings. The headings and subheadings in this Agreement are included for
convenience and identification only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
ARTICLE II
FORMATION AND ORGANIZATION
Section 2.1 Formation. The Company was formed as a Delaware limited liability company pursuant
to the provisions of the Act by filing the Certificate of Formation for the Company with the Office
of the Secretary of State of the State of Delaware in conformity with the Act. The Company and, if
required, the Members and each of the future Members, if any, shall execute or cause to be executed
from time to time all other instruments, certificates, notices and documents and shall do or cause
to be done all such acts and things (including keeping books and records and making publications or
periodic filings) as may now or hereafter be required for the formation, valid existence and, when
appropriate in accordance with the terms of this Agreement, termination of the Company as a limited
liability company under the laws of the State of Delaware.
Section 2.2 Name. The name of the Company shall be COMMUNITY CONNECT, LLC and its
business shall be carried on in such name with such variations and changes as the Board shall
determine or deem necessary or desirable to comply with
12
requirements of the jurisdictions in which the Companys operations are conducted or to comply with
applicable law.
Section 2.3 Business Purpose. The Company is formed for the purpose of developing and
conducting certain Internet activities for Radio One (the Service). The Company may
engage in other business purposes permitted under the Act only upon the approval of the Board.
Section 2.4 Registered Office and Agent. The location of the registered office of the Company
in the State of Delaware shall be 2711 Centerville Road, Wilmington, Delaware 19808. The Companys
registered agent at such address shall be Corporation Service Company. The Board may, from time to
time, change the Companys registered office or registered agent, and shall forthwith amend the
Certificate of Formation to reflect such change.
Section 2.5 Term. The existence of the Company commenced on the Effective Date and, subject to
the provisions of Articles XV and XVI below, the Company shall have perpetual existence.
Notwithstanding the actual date of execution of this Agreement, this Agreement shall be effective
as of the Effective Date, pursuant to Section 18-201(d) of the Act
Section 2.6 Principal Place of Business. The principal place of business of the Company shall
be located at 205 Hudson Street,
6th Floor, New York, New York 10013 or at such other location as
the Board may, from time to time, select.
Section 2.7 Title to Company Property. Legal title to all property of the Company shall be
held, vested and conveyed in the name of the Company and no real or other property of the Company
shall be deemed to be owned by the Members individually.
Section 2.8 Business Transactions of the Members and Managers with the Company. In accordance
with Section 18-107 of the Act and subject to the terms and conditions of this Agreement, each
Member and Manager may lend money to, borrow money from, act as a surety, guarantor or endorser
for, guarantee or assume one or more obligations of, provide collateral for, and transact other
business with, the Company and, subject to applicable law, shall have the same rights and
obligations with respect to any such matter as a Person who is not a Member or Manager.
Section 2.9 Fiscal Year. The fiscal year of the Company (the Fiscal Year) for
financial statement purposes shall end on December 31 of each year. The Board may change the Fiscal
Year solely upon receiving the written consent of all of the Members.
Section 2.10 Other Qualifications. The Members agree that the Company shall file or record
such documents and take such other actions under the laws of any jurisdiction as are necessary or
desirable to permit the Company to do business in any such jurisdiction and/or promote the
limitation of liability for the Members in any such jurisdiction. Each Member hereby authorizes the
Board to take any action that may be necessary or desirable in order to permit the Company to do
business (or facilitate the doing of business) in any jurisdiction and/or to promote the limitation
of liability for the Members therein; provided that any such action is not in conflict with any of
the terms of this Agreement.
13
Section 2.11 No State Law Partnership. The parties to this Agreement agree to form a limited
liability company and do not intend to form a partnership under the laws of the State of Delaware
or any other laws; provided, however, that, to the extent permitted by U.S. or other applicable
law, the Company shall be treated as a partnership for U.S. federal, state and local income tax
purposes.
ARTICLE III
THE MEMBERS
Section 3.1 Members; Powers of Members. The name and address of each Member is set forth on
Schedule A hereto. Schedule A shall be amended from time to time by (a) the Board (without any
further action by the Members or any class of Members) to reflect the admission of an Additional
Member, Substitute Member or Limited Member in accordance with Article XIII hereof, the Transfer of
Units between Members, the acquisition or forfeiture of Units by Members or the withdrawal of a
Member pursuant to Section 13.6 hereof, in each case provided that such actions complied with the
terms of this Agreement or (b) the Secretary of the Company (without any further action by the
Members or any class of Members) to reflect any updated notice information for a Member properly
delivered by such Member to the Company. The Members shall have the power to exercise any and all
rights or powers granted to the Members (or individual or groups of Members, if applicable)
pursuant to the express terms of this Agreement. Except as otherwise provided in this Agreement or
specifically required by the Act (which requirement may not be waived or superseded by a contrary
provision in a Delaware limited liability companys operating agreement) (i) no Person or Persons
other than the Board acting under the authority of this Agreement, and individuals authorized by
the Board acting under the authority of the Board, shall have the power to act for or on behalf of,
or to bind, the Company and (ii) no Member shall have the right to vote upon or consent to any
matter.
Section 3.2 Meetings of Members. Meetings of the Members, for any purpose or purposes, unless
otherwise prescribed by the Act or by this Agreement, may be called by the Chairman and shall be
called by the Secretary at the request in writing of any Member or Members owning at least
twenty-five percent (25%) of the Vested Units on a Fully Diluted Basis. Such request shall state
the purpose or purposes of the proposed meeting. Business transacted at any meeting of the Members
will be limited to the purposes stated in the notice.
Section 3.3 Place of Meetings. The Board may designate any place, either within or outside of
the State of Delaware, as the place of meeting for any meeting of the Members. If no designation is
made, the place of meeting shall be the principal executive offices of the Company. Members may
participate in a meeting by means of a conference telephone or electronic media by means of which
all Persons participating in the meeting can communicate concurrently with each other, and any such
participation in a meeting shall constitute presence in person of such Member at such meeting.
Section 3.4 Notice of Members Meetings.
(a) Written notice stating the place, day, and hour of the meeting and the purpose for which
the meeting is called shall be delivered not less than ten (10) days nor more
14
than fifty (50) days before the date of the meeting, by or at the direction of the Person calling
the meeting to each Member of record of Units entitled to vote at such meeting.
(b) Notice to Members shall be made and shall be deemed effective in accordance with Section
18.7 hereof.
(c) When a meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Company may transact any business which might
have been transacted at the original meeting. If the adjourmnent is for more than thirty (30) days,
a notice of the adjourned meeting shall be given to each Member holding Units entitled to vote at
the meeting.
Section 3.5 Waiver of Notice.
(a) When any notice is required to be given to any Member of the Company under the provisions
of Section 3.4 hereof, a waiver thereof in writing signed by the Person entitled to such notice,
whether before, at, or after the time stated therein, shall be equivalent to the giving of such
notice.
(b) By attending or participating in a meeting, a Member:
(i) waives objection to lack of notice or defective notice of such meeting unless the Member,
at the beginning of the meeting, objects to the holding of the meeting or the transacting of
business at the meeting; and
(ii) waives objection to consideration at such meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the Member objects to considering the
matter when it is presented.
Section 3.6 Voting Record. The Secretary shall make a complete record of the Members entitled
to vote at each meeting of Members or any adjournment thereof, and the results of any such vote of
the Members. Members shall be entitled to inspect such voting record during normal business hours
at the Companys principal executive offices.
Section 3.7 Vote Required. Only those actions that require the approval of the Members (or
certain individual classes of the Members) under this Agreement or that specifically require the
approval of the Members under the Act (which requirement may not be waived or superseded by a
contrary provision in a Delaware limited liability companys operating agreement) shall be
submitted to the Members for approval. On all matters submitted to all of the Members for approval,
the affirmative vote, in person or by proxy, of the holders of a majority of the outstanding Units
entitled to vote shall be the act of the Members, unless the vote of a greater proportion is
required by the Act or this Agreement.
15
Section 3.8 Action by Written Consent of Members.
(a) Any action required or permitted to be taken at any meeting of the Members may be taken
without a meeting if Members holding not less than the minimum number of Units that would be
necessary to approve the action pursuant to the terms of this Agreement consent thereto in writing.
Such writing or writings shall be filed with the minutes of the proceedings of the Members. In no
instance where action is authorized by written consent shall a meeting of Members be called or
notice be given; however, a copy of the action taken by written consent shall be maintained with
the records of the Company. Reasonably prompt notice of the taking of any action taken without a
meeting by less than unanimous written consent shall be given to those Members who have not
consented in writing and who, if the action had been taken at a meeting, would have been entitled
to notice of the meeting if the record date for such meeting had been the date that written
consents signed by a sufficient number of Members to take the action were obtained. Written consent
by the Members pursuant to this Section 3.8 shall have the same force and effect as a vote of such
Members taken at a duly held meeting of the Members and may be stated as such in any document.
(b) An Electronic Transmission consenting to an action to be taken and transmitted by a
Member, or by a Person or Persons authorized to act for a Member, shall be deemed to be written,
signed and dated for purposes of this Section 3.8, provided that any such Electronic Transmission
sets forth or is delivered with information from which the Company can determine (i) that the
electronic transmission was transmitted by the Member, or by a Person or Persons authorized to act
for the Member, and (ii) the date on which such Member or authorized Person or Persons transmitted
such electronic transmission. The date on which such electronic transmission is transmitted shall
be deemed to be the date on which such consent was signed. For the purposes of this Agreement,
Electronic Transmission means any form of communication not directly involving physical
transmission of paper that creates a record that may be retained, retrieved and reviewed by a
recipient thereof and that may be directly reproduced in paper form by such recipient through an
automated process.
(c) Any copy, facsimile or other reliable reproduction of a consent in writing may be
substituted or used in lieu of the original writing for any and all purposes for which the original
writing could be used, provided that such copy, facsimile or other reproduction shall be a complete
reproduction of the entire original writing.
Section 3.9 No Liability of Members. All debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member.
ARTICLE IV
MANAGEMENT OF THE COMPANY
Section 4.1 Management by Board of Managers. Except for situations in which the approval of
Members is expressly required by this Agreement or by a provision of the Act (which cannot be
waived or superseded by this Agreement), the powers of the Company shall be
16
exercised by or under the authority of a Board of Managers and such Board of Managers may make (or
designate to officers of the Company in accordance with this Agreement the authority to make) all
decisions affecting the business and affairs of the Company. All decisions made, and all actions
taken, by the Board shall be made or taken only with the affirmative consent of both Managers or,
if there are more than two Managers, a majority of the Managers then serving on the Board (each
Manager having one vote). The Managers shall be elected annually by a majority in interest of the
Class A Members. Each Manager shall serve until the next annual election of Managers by a majority
in interest of the Class A Members or his or her earlier resignation, removal, incapacity or death.
The number of Managers shall be determined by a majority in interest of the Class A Members. As of
the date hereof, the number of Managers that constitutes the Board is two (2), and consists of
Alfred C. Liggins III and Linda J. Vilardo.
Section 4.2 Removal; Resignations; Vacancies.
A Manager may be removed by a majority in interest of the Class A Members at any time, with or
without cause. Any Manager may resign at any time by providing written notice to each Manager and
each Class A Member entitled to vote. Such resignation shall be effective upon receipt of such
notice by each of the Persons indicated above or, if later, at the time specified in such written
notice of resignation. If at any time a vacancy is created on the Board by reason of an increase in
the number of Managers by a majority in interest of the Class A Members or the incapacity, death,
removal or resignation of a Manager, then a majority in interest of the Class A Members shall fill
the new position or designate a replacement for such Manager by delivering a written notice of such
new election or replacement to the other Managers and the other Members. From and after the date on
which the other Managers and the other Members receive such notice, the new or replacement Manager
shall be deemed to be a Manager and shall have all authority, power and capacity accorded to a
Manager on the Board.
Section 4.3 Meetings of the Board.
(a) The Board shall meet at such times as determined by the Board to be necessary for the
management of the Companys business. Meetings of the Board may be called by the Chairman or any
Manager on at least three (3) days prior written notice of the time and place of such meeting. A
majority of the Managers then in office shall constitute a quorum for the transaction of business
by the Board.
(b) Notice of any Board meeting may be waived by any Manager before or after such meeting.
(c) By attending or participating in a meeting, a Manager:
(i) waives objection to lack of notice or defective notice of such meeting unless the Manager,
at the beginning of the meeting, objects to the holding of the meeting or the transacting of
business at the meeting; and
(ii) waives objection to consideration at such meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the Manager objects to considering the
matter when it is presented.
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(d) Meetings of the Board or committees thereof may be conducted in person or by telephone conference facilities. Any action required or permitted to be taken at any meeting
of the Board may be taken without a meeting if all of the Managers then in office consent thereto
in writing (including by Electronic Transmission), and the writing or writings (including
Electronic Transmissions) are filed with the minutes of proceedings of the Board. The date on which
an Electronic Transmission is transmitted shall be deemed to be the date on which such consent was
signed.
Section 4.4 Compensation of Managers. Managers shall not receive any salary or other
compensation for their services, but shall be reimbursed for their reasonable out-of-pocket
expenses incurred in attending meetings of the Board and any committees thereof.
Section 4.5 Power to Bind Company. No Manager (acting in his or her capacity as such) shall
have any authority to bind the Company with respect to any matter except pursuant to a resolution
expressly authorizing such action which resolution is duly adopted by the Board by the affirmative
vote required for such matter pursuant to this Agreement or the Act.
Section 4.6 Committees. The Board also may designate one or more committees, each committee to
consist of one or more of the Managers of the Company. The Board may designate one or more Managers
as alternate members of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. Any committee, to the extent permitted by law and provided in the
resolution establishing such committee, shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Company. Each committee shall keep
regular minutes and report to the Board promptly following each committee meeting.
Section 4.7 Chairman of the Board. There shall be a Chairman of the Board of the Company (the
Chairman) (who is currently Alfred C.
Liggins III), who shall serve as such until the
earlier of his or her death, resignation or removal by the Board, with or without cause, which
removal shall require the written consent of the Board.
(a) The Chairman shall have the responsibility for (i) general oversight of the operations of
the Company, including oversight over the President of the Company, and (ii) reporting to the Board
regarding the financial and operational status of the Company.
(b) If, at any time, a vacancy is created in the position of Chairman for any reason,
including by reason of the incapacity, death, removal or resignation of the initial Chairman,
Alfred C. Liggins III, then a majority in interest of the Class A Members shall, within thirty (30)
days of the date of the vacancy, appoint a new Chairman.
Section 4.8 Officers and Related Persons; Retention of Authority by Board; Matters Not Subject
to Approval.
(a) The Board shall have the authority to appoint and terminate officers of the Company in
accordance with and subject to the provisions of Sections 4.7 and 4.9 through 4.15 hereof and
retain and terminate employees, agents and consultants of the Company. The Board may delegate such
duties to any such officers, employees, agents and consultants as the Board
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deems appropriate, including the power, acting individually or jointly, to represent and bind the
Company in all matters, in accordance with the scope of their
respective duties; provided, however,
that the Board may not delegate any of its duties and obligations under this Agreement and may not
delegate any duties that are required to be exercised by the Board under the Act or any duties that
a Board of Directors of a Delaware corporation is required to retain and exercise under the
Delaware General Corporation Law.
(b) Without limiting the provisions of Section 4.8(a) hereof or any other provision of this
Agreement, prior approval of the Board shall be required before the Company shall be permitted to
take any of the following actions:
(i) the entering into, amendment or waiver of the terms of, or termination of any contract or
agreement (A) providing for receipts to or expenditures by the Company in any twelve (12) month
period in excess of $100,000, and (B) with any Member or any Affiliate thereof, except as otherwise
provided in this Agreement;
(ii) any issuance of Equity Plan Units;
(iii) any authorization of or incurrence of any indebtedness from any Person or Persons in an
amount greater than $100,000 over any consecutive twelve (12) month period;
(iv) commencing any litigation proceeding; or
(v) settling any litigation proceeding (A) for an amount in excess of $50,000, or (B)
involving a Manager or a senior executive officer of the Company.
Section 4.9 President. There shall be a President of the Company who shall be appointed by the
Board upon the recommendation of the Chairman and serve as such until the earlier of his or her
death, resignation or removal by the Board, with or without cause. The President shall have the
responsibility for managing the day-to-day business operations and affairs of the Company and
supervising its other officers, subject to the direction, supervision and control of both the
Chairman and the Board. In general, the President shall (subject to Section 4.8 hereof) have such
other powers and perform such other duties as usually pertain to the office of the President of a
corporation under Delaware law, including, without limitation, the authority to appoint and
terminate officers of the Company (other than the Chairman) and retain and terminate employees of
the Company to whom the President may delegate his or her duties; provided, however, the President
shall be subject to the power of the Chairman or the Board at any time or from time to time to
withhold authority with respect to any matter or assign specific duties and responsibilities to him
or her The initial President is Thomas Newman.
Section 4.10 Chief Financial Officer. The Board may appoint a Chief Financial Officer of the
Company who shall serve as such until the earlier of his or her death, resignation or removal by
the Board, with or without cause. In general, the Chief Financial Officer shall have such powers
and perform such duties as usually pertain to the office of Chief Financial Officer of a
corporation under Delaware law. The initial Chief Financial Officer is Gillian Kellie.
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Section 4.11 Vice Presidents. The Board may from time to time appoint one or more Vice
Presidents who shall each serve until the earlier of his or her death, resignation or removal by
the Board with or without cause. Each Vice President shall have such powers and duties as may be
assigned to him or her by the Board (subject to Section 4.8 hereof) or the President.
Section 4.12 Treasurer. There shall be a Treasurer of the Company who shall be appointed by
the Board and serve as such until the earlier of his or her death, resignation or removal by the
Board, with or without cause. The Treasurer shall have custody of the Companys funds and
securities, shall keep full and accurate account of receipts and disbursements, shall deposit all
monies and valuable effects in the name and to the credit of the Company in such depository or
depositories as may be designated by the Board, and shall perform such other duties as may be
assigned to him or her by the Board (subject to Section 4.8 hereof) or the President.
Section 4.13 Assistant Treasurers. The Board may from time to time appoint one or more
Assistant Treasurers who shall each serve until the earlier of his or her death, resignation or
removal by the Board with or without cause. Each Assistant Treasurer shall have such powers and
duties as may be assigned to him or her by the Board (subject to Section 4.8 hereof) or the
President.
Section 4.14 Secretary. There shall be a Secretary of the Company who shall be appointed by
the Board and serve as such until the earlier of his or her death, resignation or removal by the
Board, with or without cause. Except as otherwise provided in this Agreement, the Secretary shall
keep the minutes of all meetings of the Board and of the Members in books provided for that
purpose, and shall attend to the giving and service of all notices. The Secretary may sign with the
Chairman or President all certificates representing Units of the Company, if any, and shall have
charge of the transfer books, and other papers as the Board may direct, all of which shall at all
reasonable times be open to inspection by any Manager (or any designee thereof) upon prior written
request at the office of the Company during normal business hours. The Secretary shall perform such
other duties as may be assigned to him or her by the Board (subject to Section 4.8 hereof) or the
President. The initial Secretary is Linda J. Vilardo.
Section 4.15 Assistant Secretaries. The Board may from time to time appoint one or more
Assistant Secretaries who shall each serve until the earlier of his or her death, resignation or
removal by the Board with or without cause. Each Assistant Secretary shall have such powers and
duties as may be assigned to him or her by the Board (subject to Section 4.8 hereof) or the
President.
Section 4.16 Adoption of the Annual Budget.
(a) Prior to January 1, 2009 and thereafter at least sixty (60) days prior to the last day of
each calendar year (beginning with the year 2009), the President shall present a proposed annual
budget (the Proposed Annual Budget) to the Board, such Proposed Annual Budget to contain detailed
projections covering the Companys anticipated revenues and expenses for the applicable period.
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(b) The Chairman shall call a meeting of the Board as soon as practicable after the delivery
of the Proposed Annual Budget to the Board, which meeting shall take place no later than thirty
(30) days prior to the end of the applicable calendar year. At this meeting, at which the President
shall receive written notice and the right to be present, the Board shall approve the Proposed
Annual Budget, with such changes as the Board may approve (in the form approved by the Board, the
Annual Budget).
(c) A copy of the Annual Budget shall be provided to the President and each Non-Equity Plan
Member within ten (10) Business Days of approval by the Board.
Section 4.17 Employment Agreements.
(a) Subject to Section 4.17(b), the rights and obligations of the Company or the Board with
respect to any officer as set forth in this Article IV and elsewhere in this Agreement shall not
override or supersede the contractual obligations of the Company or Radio One, as employer, or the
rights of any officer, as employee, in each case under any employment agreement to which such
officer of the Company is a party.
(b) This Agreement, the limited liability company agreement of Interactive One and the
Combined Award Agreement with Newman dated October 26, 2009, shall supercede and replace Sections 5
and 7(d) of the Newman Employment Agreement and Schedule A thereto, and all references to Section
7(d) and Schedule A in the Newman Employment Agreement (including those in Section 2.2) shall be
deemed to be references to this Agreement, such limited liability company agreement and such Award Agreement. Newman acknowledges that by
reason of this Agreement, the limited liability company agreement of Interactive One and the
Combined Award Agreement dated October 26, 2009, the obligations of Radio One and its subsidiaries
under Section 7(d) of the Newman Employment Agreement have been satisfied.
(c) The terms and conditions of this Section 4.17 shall supercede anything to the contrary
contained in this Agreement.
ARTICLE V
CAPITAL STRUCTURE
Section 5.1 Authorized Units.
(a) The Company is authorized to issue one class of Units designated as Common
Units. The total number of Common Units which the Company is authorized to issue is Ten
Thousand (10,000) Units. The Board may increase the number of authorized Units and create
additional classes and/or series of Units, subject to the approval of a majority in interest of the
Class A Members. In the event that the authorized number of Units available for issuance is
increased pursuant to this Section 5.1, the Board shall indicate the total number of Units
available for issuance with respect to any then existing class and/or series and any new class
and/or series after giving effect to such approved increase. Any increase in the authorization of,
or the issuance of additional, Common Units or the authorization or issuance of new or additional
classes and/or series of Units shall not supersede the express rights of any
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holder of Equity Plan Units as set forth in the Award Agreement or employment agreement to which
such holder is a party.
(b) As of the date hereof, there are two (2) separate series of Common Units designated as
Class A Units and Equity Plan Units. The total number of Class A Units which
the Company has authority to issue is Nine Thousand (9,000) Class A Units and the total number of
Equity Plan Units which the Company has authority to issue One Thousand (1,000) Equity Plan Units.
Section 5.2 Rights of Designated Common Units. The series of Common Units designated as of the
date hereof shall have the following rights, preferences and limitations (subject to the
restrictions and limitations on the rights of any Limited Member as set forth in Section 13.4
hereof):
(a) Class A Units.
(i) Voting Rights. Subject to Section 13.4 hereof, each Member holding Class A Units
shall have the right to one vote per Class A Unit held, and shall be entitled to notice of any
Members meeting in accordance with this Agreement, and shall be entitled to vote upon such matters
and in such manner as may be provided by the Act or this Agreement.
(ii) Other Rights. Subject to Section 13.4 hereof, each holder of Class A Units shall
have rights applicable to all Members (in their capacity as Members without regard to any rights
attributable to any specific class or series of Units) and otherwise provided hereunder expressly
for Members holding Class A Units.
Notwithstanding any other provision to the contrary in this Agreement, none of the following
actions shall be taken by the Company without (and the Board and officers, on behalf of the
Company, shall not take such action without) the prior approval the holders of at least fifty
percent (50%) of the outstanding Class A Units:
(1) any amendment, modification or termination of the Certificate of Formation, except to
change the Companys registered office or registered agent;
(2) any creation of a new class or series of Units or reclassification of the existing Units,
in either case which provides for any rights or preferences equal to or greater than those provided
in this Agreement for the Class A Units;
(3) the issuance of any additional Units other than Equity Plan Units reserved for issuance
pursuant to Section 5.1 and the Community Connect Equity Plan and approved by the Board;
(4) entering into any agreement or other document to effect a Sale Transaction or the
consummation of any Liquidation;
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(5) any Distribution, unless such Distribution is a Mandatory Tax Distribution approved by the
Board or is otherwise expressly provided for in this Agreement;
(6) any redemption, purchase or other acquisition of any outstanding Units, except as
otherwise expressly provided in this Agreement or the Community Connect Equity Plan;
(7) except as otherwise provided in this Agreement, any change in the authorized number of
Managers on the Board;
(b) Equity Plan Units.
(i) Voting Rights. The Equity Plan Units shall be non-voting.
(ii) Other Rights. The rights of each Equity Plan Member shall be limited to those
expressly provided to such Member in this Agreement.
(iii) The Members acknowledge and agree that the Board may issue Equity Plan Units
simultaneously with equity plan units (Interactive One Equity Plan Units) that are issued by
Interactive One, an Affiliate of the Company, under the Interactive One Equity Plan and that the
Equity Plan Units and the Interactive One Equity Plan Units are to carry identical rights and
obligations to the fullest extent permitted by law and will be evidenced by the Combined Award
Agreement. All rights with respect to the Equity Plan Units that are subject to the Combined Award
Agreement shall be subject to all of the terms and conditions of the Combined Award Agreement.
Section 5.3 Reservation and Issuance of Common Units.
(a) Class A Units. Four Thousand Seven Hundred and Fifty (4,750) Class A Units were
issued on the Effective Date to the Sole Member. The remaining authorized Class A Units shall be
reserved for issuance to the extent authorized under Section 5.2.
(b) Equity Plan Units. One Hundred (100) Equity Plan Units were issued on the
Effective Date to Newman. The remaining authorized Equity Plan Units shall be reserved for issuance
to employees and consultants of the Company in accordance with the Community Connect Equity Plan.
No Capital Contribution or Capital Commitment is required in exchange for such Units other than as
required under the Community Connect Equity Plan or applicable Award Agreement.
Section 5.4 Units Subject to Forfeiture.
(a) Subject to the express terms of any applicable Award Agreement or employment agreement,
all Units of a Limited Member shall be subject to forfeiture in accordance with the provisions of
Section 13.4(c) hereof.
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(b) All Equity Plan Units that fail to Vest pursuant to the terms of the Community Connect
Equity Plan and the related Award Agreement shall be forfeited.
(c) A Member who forfeits Units shall retain no interest in profits or capital of the Company
associated with such Units.
Section 5.5 No Appraisal Rights. No class or series of Units or Members shall be entitled to
appraisal rights in connection with or as a result of any amendment to this Agreement, any merger
or consolidation of the Company, any conversion of the Company to another business form, any
transfer to or domestication in any jurisdiction by the Company or the sale of all or substantially
all of the Companys assets.
ARTICLE VI
CONTRIBUTIONS
Section 6.1 Initial Capital Contribution.
(a) The Sole Member made the Capital Contribution set forth opposite its name under the
heading Capital Contribution on
Schedule A hereto and has received therefore 4,750 Class A Units.
Section 6.2 Further Contributions. No further Capital Contributions (including any cash that
may be required to pay Company costs and expenses) shall be required of any Member.
Section 6.3 Interest. No interest shall accrue on any Capital Contribution and no Member shall
have the right to withdraw or be repaid any Capital Contribution, except as otherwise provided in
this Agreement.
Section 6.4 No Return of Capital Contribution. Except as expressly provided in this Agreement,
no Member shall be entitled to a return of its Capital Contribution.
Section 6.5 No Loans. If any Member advances any money to, or on behalf of, the Company, the
amount of any such advance shall not be deemed a Loan but shall be deemed an additional Capital
Contribution of such Member. No Interest shall accrue on any such advance. Additional Capital
Contributions from a Member shall not result in the issuance of additional Class A Units to such
Member unless all Members (including the holders of Equity Plan Units) approve such issuance.
ARTICLE VII
CAPITAL ACCOUNTS
Section 7.1 Maintenance of Capital Accounts.
(a) The Company shall establish and maintain Capital Accounts for each Member in accordance
with the following provisions:
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(i) to each Members Capital Account there shall be credited (A) such Members Capital
Contributions, including the Agreed Value of any contributions other than cash, (B) such Members
distributive share of Net Profits and any items in the nature of income or gain that are specially
allocated, and (C) the amount of any Company liabilities assumed by such Member or that are secured
by any property distributed to such Member; and
(ii) to each Members Capital Account there shall be debited (A) the amount of money and the
Gross Asset Value of any other property distributed to such Member pursuant to any provision of
this Agreement, (B) such Members distributive share of Net Losses and any items in the nature of
expense or losses that are specially allocated and (C) the amount of any liabilities of such Member
assumed by the Company or that are secured by any property contributed by such Member to the
Company (to the extent not otherwise taken into account in determining a Members Capital
Contribution).
(b) This Section and other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations § 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such Regulations. Notwithstanding that a particular adjustment is not
set forth in this Section 7.1, the Capital Accounts of the Members shall be adjusted as required
by, and in accordance with, the capital account maintenance rules of Regulations § 1.704-1(b).
Section 7.2 Negative Capital Accounts. No Member shall be required to make up a Capital
Account deficit or to pay to any Member the amount of any such deficit.
Section 7.3 Sale or Exchange of Units. In the event of a Transfer of some or all of a Members
Units, the Capital Account of the transferring Member shall become or be added to the Capital
Account of the Substitute Member or the Member that acquires Units in such Transfer, to the extent
it relates to the Members Units so Transferred, and, with respect to the Units so Transferred, the
provisions of Articles VIII and IX shall apply to the Substitute Member or the Member that acquires
such Units as if such Person had held such Units from inception and received all allocations and
distributions with respect to such Units that have been received by the transferring Member.
ARTICLE VIII
ALLOCATIONS OF PROFITS AND LOSSES
Section 8.1 Net Profits. Except as otherwise provided herein, Net Profits shall be allocated
among the Members in accordance with each Members Percentage Interest.
Section 8.2 Net Losses. Except as otherwise provided herein, Net Losses shall be allocated
among the Members in accordance with each Members Percentage Interest.
Section 8.3 Limitation on Allocation of Losses. If an allocation of Net Losses to a Member
would cause an Adjusted Capital Account Deficit for such Member, such Net Losses shall instead be
allocated among Members with positive Capital Account balances in proportion to such balances.
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Section 8.4 Allocation of Nonrecourse Deductions. Nonrecourse Deductions shall be allocated
among the Members in proportion to each Members Percentage Interest.
Section 8.5 Allocation of Member Nonrecourse Deductions. Member Nonrecourse Deductions shall
be allocated, as provided in Regulations § 1.704-2(i)(1) to the Members in accordance with the
ratios in which they bear the economic risk of loss for the relevant Member Nonrecourse Debt for
purposes of Regulations § 1.752-2.
Section 8.6
Qualified Income Offset. If any Member unexpectedly receives any adjustments,
allocations or distributions described in Regulations § 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items
of Company income and gain shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account
Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section
8.6 shall be made only if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article VIII have been tentatively made as
if this Section 8.6 were not in the Agreement.
Section 8.7 Minimum Gain Chargeback. In the event that there is a net decrease in the
partnership minimum gain of the Company during a Taxable Year, the minimum gain chargeback
described in Regulations §§ 1.704-2(f) and (g) shall apply.
Section 8.8 Partner Minimum Gain Chargeback. In the event that there is a net decrease in
partner nonrecourse debt minimum gain (as defined in Regulations § 1.704-2) during a Taxable Year,
any Member with a share of that nonrecourse debt minimum gain (determined under Regulations § 1.704-2(i)(5)) as of the beginning of the year must be allocated items of income and gain for the
year (and, if necessary, for succeeding years) equal to that Members share of such net decrease in
accordance with Regulations § 1.704-2(i)(4).
Section 8.9 Book-Ups/Tax Disparities.
(a) In the case of contributed property, items of income, gain, loss and deduction, shall be
allocated for federal income tax purposes in a manner consistent with the requirements of Code §
704(c) and Regulations § 1.704-3 to take into account the difference between the Agreed Value of
such property and its adjusted tax basis at the time of contribution.
(b) In the event of an adjustment to Capital Accounts in accordance with paragraph (b) of the
definition of Gross Asset Value, items of income, gain, loss and deduction shall thereafter be
allocated for federal income tax purposes in a manner consistent with Regulations §
1.704-3(a)(6)(i).
(c) Allocations under this Section 8.9 shall not affect Capital Accounts of the Members. The
method or methods to be elected under Regulations § 1.704-3 for such allocations shall be selected
by the Tax Matters Partner.
Section 8.10 Individual Tax Items. For each Taxable Year (or portion thereof) in which one
Member owns all of the Percentage Interests, all Company items of income, gain, loss and deduction,
and all other tax items for such Taxable Year (or portion thereof), shall be
26
allocated to such Member. Except as otherwise provided in the preceding sentence and in Section
8.9, all Company items of income, gain, loss, and deduction, and all other tax items for each
Taxable Year, shall be allocated among the Members as follows: (a) each Members allocable share of
each item included in the computation of Net Profit or Net Loss for that year shall equal such
Members overall percentage share of the Net Profit or Net Loss for such year, (b) each Members
allocable share of each item included in the computation of Net Gain from a Sale Transaction or Net
Loss from a Sale Transaction for such year shall equal such Members overall percentage share of
the Net Gain from a Sale Transaction or Net Loss from a Sale Transaction for such year, and (c)
each Member shall be allocated any items specifically allocated to such Member under Sections 8.5,
8.6, 8.7 and 8.8.
Section 8.11 Tax Credits. Tax credits of the Company, if any, shall be allocated among the
Members in proportion to the number of Units held by each Member.
Section 8.12 Changes in Number of Units. In the event the number or character of Units held by
a Member changes during a Taxable Year, the allocation of items of income, gain, loss and deduction
to such Member shall be based on the weighted average number of Units held by the Member and the
weighted average number of Units outstanding during the Taxable Year, unless otherwise required by
the Code or Regulations or agreed to by each Member affected by such allocation. Further, any items
of deduction allowable to the Company on account of a compensatory transfer of Equity Plan Units
and any adjustment to the Gross Asset Value of Company assets that is taken into account as gain or
loss in accordance with paragraph (c) of the definition of Net Profits and Net Losses shall be
allocated to and among the Members in proportion to the Units they held immediately prior to the
date the grantee of such Equity Plan Units included corresponding amounts as compensation income
under Sections 83(a), 83(b) or 83(d)(2) of the Code.
ARTICLE IX
DISTRIBUTIONS
Section 9.1 Limitations on Distributions.
(a) No Distribution to Members shall be declared or paid unless, after giving effect to such
Distribution, the fair value of all assets of the Company exceeds all liabilities of the Company
(and such reserves as shall be reasonably established by the Board), other than liabilities to
Members on account of their Capital Accounts.
(b) Further, notwithstanding anything herein to the contrary, no Distribution shall be made to
the holder of any Equity Plan Unit holder until and unless (i) the holders of the Class A Units and
the holders of Class A Units of Interactive One have received Distributions from both the Company
and Interactive One equal to the Combined Capital Contributions and (ii) the holders of Class A
Units and the other holders of Equity Plan Units have (to the extent not in duplication of
subclause (i)) received Distributions equal to each such Members Capital Account balance
immediately before the issuance of the Equity Plan Units with respect to which such Distribution
would otherwise be made (taking into account the last sentence of Section 8.12). For purposes
hereof, the holders of Class A Units will be deemed to receive Distributions
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in an amount equal to the excess, if any, of (x) payments that are made to such holders
or their Affiliates for the provision of goods and services to the Company and Interactive One over
(y) the costs to such Affiliates of providing such goods and services. For purposes hereof, the
Company and Newman agree that there needs to be established a list of specific services and an
appropriate cost amount for such services that will not be considered Distributions to holders of
Class A Units. In lieu of attaching such a list to this Agreement, the Members have agreed that
Community Connect will each year, in connection with the review of the Annual Budget, prepare a
schedule (the Proposed Inter-Company Cost Schedule) that details the services rendered and the
cost for such services for review by all Members. If such Proposed Inter-Company Cost Schedule is
approved by all Members, it shall become the Permitted Inter-Company Cost Schedule and no
payments for the services and in the amounts specified therein shall be treated as Distributions to
the holders of Class A Units. In the event of any dispute relating to the items on the Proposed
Inter-Company Cost Schedule, the Companys determination as to the cost of any service in question
shall be deemed conclusive unless either (i) the disputing Member can provide a third party bid
demonstrating the cost of the item or service is 10% greater or lower than the determination of
cost made by the Company in the case of goods and services that can be readily acquired from third
parties or (ii) the disputing Member can establish that the method of allocating costs to the
Company of support services that are provided by Community Connect or
its Affiliates (e.g.,
accounting, legal, human resources, etc.) are not reasonable in light of the size and activities of
the Company as compared with the other entities which are part of Radio One to which such costs are
allocated. In such event, the Company and such Member will jointly hire an independent accountant
to determine the cost of the item or service that should
have been allocated to the Company. In the event the cost of the item or service is determined by
such independent accountant to be within 10% of the cost as determined by the Company, the
Member disputing the cost of such service shall bear the full cost of such accounting, including
all costs (including any legal expenses) of the Company associated therewith. In the event the cost
of the item or service is determined by such independent accountant to be more than 10% higher or
more than 10% lower than the cost of such item or service as determined by the Company, then the
Company shall bear the full cost of such mediation, including all costs (including any legal
expenses) of the disputing Member associated therewith. In determining the costs of such items or
services that are obtained from third parties, the independent accountant shall be required to
determine the cost of such items or services from three (3) independent parties and take the
average cost of such service among such parties. The decision of such independent accountant shall
then govern the determination of the items and the costs thereof that should be included in the
Permitted Inter-Company Cost Schedule. To the extent that the Company does not pay to Community
Connect any amounts specified on the Permitted Inter-Company Cost Schedule for the provision of
goods and services by Community Connect to the Company, such unpaid amounts shall be treated as
liabilities of the Company.
Section 9.2 Mandatory Tax Distributions. The Mandatory Tax Distribution shall be distributed
to the Members in proportion to each Members Percentage Interest at the
time of the distribution. Such distributions shall be made at least annually, on or before the 60th
day after the end of the relevant Taxable Year, and shall not be accounted for on the books and
records of the Company as a return of Capital Contributions and shall not be charged against
Distributions to which Members are entitled under Section 9.3(a) hereof.
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Section 9.3 Distributions Prior to Liquidation. Except as otherwise provided in this Agreement
and subject to the limitations provided herein, and subject to all Mandatory Tax Distributions
having been made, Distributions may be made to the Members at such times and in such amounts as the
Board may determine. Distributions shall be made to the Members as follows:
(a) first, to the holders of the Class A Units until they have received from the Company and
Interactive One an amount equal to the Combined Capital Contributions (excluding Mandatory Tax
Distributions);
(b) second, to the Members on a per Unit basis in proportion to each Members Percentage Interest.
Section 9.4 Withholding Taxes. The Company is authorized to withhold from Distributions to a
Member, or with respect to allocations to a Member, and to pay over to a federal, state or local
government, any amounts required to be withheld pursuant to the Code, or any provisions of any
other federal, state or local law. Any amounts so withheld shall be treated as having been
distributed to such Member pursuant to Section 9.2 for all purposes of this Agreement, and shall be
offset against the amounts otherwise distributable to such Member under Section 9.2 hereof.
ARTICLE X
ACCOUNTS
Section 10.1 Books. The Chief Financial Officer, or the Treasurer if at any time there is no Chief
Financial Officer, shall cause to be maintained complete and accurate books of account of the
Companys affairs at the Companys principal place of business. Separate accounts shall be kept for
each class and series of Units. Such books shall be kept on such method of accounting as the Board
shall select.
Section 10.2 Tax Matters. Community Connect shall be the Tax Matters Partner. The Tax Matters
Partner shall, except to the extent impracticable as a result of the failure of a Member to timely
deliver necessary information to the Tax Matters Partner, cause to be prepared, signed and filed
all tax returns of the Company required by any federal state or local law, make any tax elections
for the Company allowed under the Code or the tax laws of any state or other jurisdiction having
taxing jurisdiction over the Company and monitor any governmental tax authority in any audit that
such authority may conduct of the Companys books and records or other documents. The Tax Matters
Partner shall cause the Company to deliver to the Members an IRS Schedule K-1 as soon as
practicable following the close of each Taxable Year, but no later than seventy-five (75) days
after the end of each Taxable Year; provided, however, that such period shall be automatically
extended in the event of a delay beyond the control of the Tax Matters Partner, such as a delay
resulting from the failure of a third party to provide required tax information to the Company in a
timely manner. The Tax Matters Partner shall be entitled to reimbursement from the Company for all
necessary and reasonable out-of-pocket expenses incurred in performing its duties as Tax Matters
Partner.
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The Tax Matters Partner shall also cause the Company to elect the safe harbor described in Notice
2005-43, 2005-1 CB 1221, under which the fair market value of an Equity Plan Unit that is
transferred in connection with the performance of services is treated as being equal to the
liquidation value of such Unit (the Safe Harbor Election). The Safe Harbor Election shall
be made as of the earliest date permitted under any IRS revenue procedure or other administrative
guidance issued subsequent to Notice 2005-43. The Company and each of its Members (including each
Equity Plan Member to whom a Unit is transferred in connection with the performance of services)
agree to comply with all requirements of the Safe Harbor Election with respect to all Equity Plan
Units transferred in connection with the performance of services.
Section 10.3 Special Basis Adjustment. The Tax Matters Partner shall, without any further consent
of the Members being required (except as specifically required herein), have discretion to make an
election for federal income tax purposes to adjust the basis of
property pursuant to §§ 754,734(b)
and 743(b) of the Code, or comparable provisions of state, local or foreign law, in connection with
Transfers of Units.
ARTICLE XI
TRANSFERS OF UNITS
Section 11.1 Transfers.
(a) No
Member may Transfer all or any portion of its Equity Interests other than (i) to a Permitted
Transferee, (ii) any Transfer of all or any portion of a Members Equity Interests pursuant to
Sections 12.1, 12.2, 12.3 or 12.4 hereof, and (iii) any Transfer of all or any portion of a
Members Equity Interests pursuant to a Sale Transaction (each,
a Permitted Transfer),
provided that in each case such Transfer is made in accordance with Section 11.2 hereof. Any
attempted Transfer of the Equity Interests by such Members, other than in strict accordance with
this Article XI, shall be null and void and the purported transferee shall have no rights as a
Member hereunder, except as may otherwise by provided in Section 13.4 as to such transferee.
(b) Notwithstanding anything to the contrary in this Agreement, no Transfer of Units shall be
deemed effective until the transferee of such Units executes a joinder agreement, in substantially
the form attached hereto as Schedule B (the
Joinder Agreement) pursuant to which, among
other things, such transferee shall agree to be bound by the obligations of the Member transferring
such Units to such transferee under this Agreement and, if such transferee is an Affiliate of the
Member transferring such Units, such transferee shall agree to grant all authority to act on its
behalf to the Member transferring such Units to such transferee. Any purported transfer in
violation of this Section 11.1(b) shall be null and void.
(c) Notwithstanding anything to the contrary in this Agreement, no Member shall enter into any
agreement to vote or otherwise exercise any of the rights appurtenant to any of the Units held by
such Member with any Person other than an Affiliate of such Member.
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Section 11.2 Conditions to Permitted Transfers. A Member shall be entitled to make a Permitted
Transfer of all or any portion of its Equity Interests only upon satisfaction of each of the
following conditions:
(a) such Transfer does not require the registration or qualification of such Equity Interests
pursuant to any applicable federal or state securities laws, rules and regulations;
(b) such Transfer does not result in a violation of applicable laws, rules and regulations;
(c) the Chairman receives written instruments that are in a form and substance satisfactory to the
Chairman, as determined in his or her reasonable judgment (including, without limitation, (i)
copies of any instruments of Transfer, (ii) such Persons agreement to be bound by this Agreement
in the same manner, and subject to the same obligations and restrictions (including without
limitation the transfer restrictions set forth in this Article XI) as the Member making such
Transfer, including by execution of a Joinder Agreement; provided,
however, that no such agreement
shall be required if the Person receiving such Transfer is also a Member hereunder, and (iii) if
requested by the Chairman, an opinion of counsel to such Person, in form and substance reasonably
acceptable to the Chairman, to the effect that the conditions set forth in subsections (a) and (b)
above have been satisfied).
Section 11.3 Prohibited Transfers.
(a) Prohibited
Transfer. A Prohibited Transfer shall be deemed to have occurred if a
transaction or series of related transactions is consummated that results in a Transfer of Units
other than Permitted Transfer occurring in accordance with
Section 11.1 and Section 11.2.
(b) Effect
of a Prohibited Transfer. Upon receipt of written notice from any Member or the Company
that such Person believes that a Prohibited Transfer has occurred, each Member transferring Units
in the alleged Prohibited Transfer shall use its best efforts to nullify such Prohibited Transfer
within a period of thirty (30) days or to demonstrate within a period of thirty (30) days to the
reasonable satisfaction of the Board that the alleged Prohibited Transfer is not a Prohibited
Transfer. Failure to nullify such Prohibited Transfer or to demonstrate to the reasonable
satisfaction of the Board that an alleged Prohibited Transfer is not a Prohibited Transfer within
such 30 day period shall automatically result in the Member transferred in the Prohibited Transfer
becoming a Limited Member in accordance with Section 13.4 hereof.
Section 11.4 Representations Regarding Transfers. Each Member hereby covenants and agrees with the
Company for the benefit of the Company and all Members, that (i) it is not currently making a
market in Units and will not in the future make a market in Units, and (ii) it will not Transfer
its Equity Interest on an established securities market, a secondary market (or the substantial
equivalent thereof) within the meaning of Code Section 7704(b) (and any Regulations, proposed
Regulations, revenue rulings, or other official pronouncements of the Internal Revenue Service or
the United States Treasury
Department that may be promulgated or published thereunder). Each Member further agrees that it
will not Transfer any Equity Interest
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to any Person unless such Person agrees to be bound by this Section 11.4 and to Transfer such Interest
only to Persons who agree to be similarly bound.
Section 11.5 Treatment of Equity Plan Units Issued Pursuant to a Combined Award Agreement.
Notwithstanding anything else in this Article XI to the contrary, if Equity Plan Members hold
Equity Plan Units issued pursuant to a Combined Award Agreement, then there may be no Transfer
under this Article XI unless the Interactive One Equity Plan Units granted by Interactive One under
the Combined Award Agreement are Transferred in the same proportions as the Equity Plan Units are
Transferred.
ARTICLE XII
ADDITIONAL RIGHTS AND OBLIGATIONS OF THE MEMBERS
Section 12.1 Call Rights.
(a) The Company may, in its sole discretion, elect to purchase up to all of the Vested Equity Plan
Units of each Equity Plan Member under the following circumstances:
(i) within twelve (12) months (or such shorter period if required by applicable law) of the date an
Equity Plan Member ceases to be an employee, consultant or representative of the Company, as
applicable;
(ii) in the event of a Sale Transaction;
(iii) in the event of the Bankruptcy of such Equity Plan Member; and
(iv) as permitted by and in accordance with the terms and conditions of the applicable Award
Agreement or employment agreement.
(b) If the Company elects to exercise its right to purchase such Equity Plan Units in accordance
with this Article XII, it shall provide written notice thereof to the Equity Plan Members, which
notice shall include the number of Equity Plan Units to be purchased
(the Equity Plan Call Units)
and the basis on which the Company is exercising its call rights under Section 12.1(a).
(c) The fair market value of each Equity Plan Call Unit (such price, the Equity Plan Call Unit
Price) shall be determined by an appraisal process between the Company and the applicable
Equity Plan Member, which process shall include deductions for any outstanding debt or other
liabilities of the Company (including accrued but unpaid interest at the Applicable Interest Rate)
and each Class A Members right to the return of its Capital Contributions under Section 9.3(a) (it
being understood that the deduction of debt and/or the right to receive back contributed capital
may result in the Equity Plan Units or the Interactive One Equity Plan Units having a negative
value that will be taken into consideration in determining the net value of the Equity Plan Units
and Interactive One Equity Plan Units subject to the same Combined
Award Agreement); provided,
however, in the event that the basis for the Companys exercise of its rights under this
Section 12.1 is as a result of the termination of an
32
Equity Plan Member for Cause, or the Board has determined that such Member has violated any
non-solicitation, non-competition or non-disclosure provision contained in any agreement entered
into by and between such Member and the Company, the fair market value of such Members Equity Plan
Units shall be the lesser of such Members Capital Account balance attributed to such Units or the
value determined in accordance with the procedures described above. If the value of the Equity Plan
Units is positive and the value of the Interactive One Equity Plan Units is negative, the Equity
Plan Units will only have value equal to the sum of such positive and negative amounts (i.e., the
positive amount of the value of the Equity Plan Units will be offset by the negative amount of the
value of the Interactive One Equity Plan Units that have a negative value). In the event that the
Equity Plan Member and the Company cannot reach an agreement as to the Equity Plan Call Unit Price
within thirty (30) days of the date of the notice delivered pursuant to Section 12.1(b), the
parties agree to submit such determination to binding arbitration in
New York, New York, before one
(1) arbitrator. The arbitration shall be administered by the American Arbitration Association
pursuant to the AAA Rules and Procedures. For purposes of determining the Equity Plan Call Unit
Price, the valuation of the Company shall first be determined as an entirety before determining the
value of the Equity Plan Units held by the applicable Equity Plan Member, based on the amount that
such Equity Plan Member would receive from the proceeds of the sale of the Company at such
valuation upon the liquidation of the Company, and the interest of the Equity Plan Member shall not
be subject to a discount for minority interest or lack of liquidity.
(d) The closing of the purchase and sale of the Equity Plan Call Units pursuant to this Section
12.1 (the Equity Plan Call Closing) shall occur on the date as is determined by the Board
but, in any event, within one hundred twenty (120) days of the date that the notice of the
Companys intent to purchase the Equity Plan Call Units is delivered pursuant to Section 12.1(b).
At the Equity Plan Call Closing, (1) each Equity Plan Member selling Equity Plan Call Units shall
(A) execute and deliver such documents as shall be reasonably requested by the Company and (B)
represent and warrant that such Equity Plan Call Units are being transferred free and clear of
liens, encumbrances and interests or rights of other Persons, and (2) the Company shall make
payment to each Equity Plan Member selling such Equity Plan Call Units in an amount equal to the
Equity Plan Call Unit Price multiplied by the number of Equity Plan Call Units being sold by such
Equity Plan Member, such payment to be made, in the Companys sole discretion, by (x) wire transfer
of immediately available funds to an account specified in writing by such Equity Plan Member or (y)
by wire transfer of immediately available funds equal to at least twenty percent (20%) of such
purchase price and by delivery of a promissory note in the principal amount of the balance of such
purchase price issued by the Company (in form and substance satisfactory to the Board) bearing
interest at a rate of eight percent (8.0%) per annum, the principal and interest of which shall be
due and payable in four (4) equal quarterly installments of principal, together with accrued
interest, beginning on the first day of the fiscal quarter following the fiscal quarter in which
the closing occurs, and continuing on the first day of each succeeding fiscal quarter until fully
paid.
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Section 12.2 Put Rights.
(a) Each Equity Plan Member may, in his, her or its sole discretion, elect to have the Company
purchase all or a portion of his, her or its Equity Plan Units that are Vested (the Qualifying
Equity Plan Put Units) under the following circumstances:
(i) in the event that the Equity Plan Member ceases to be an employee of the Company, but only to
the extent permitted by, and subject to, the terms and conditions of such Equity Plan Members
Award Agreement;
(ii) a material breach by the Company of any agreement between the Equity Plan Member and the
Company;
(iii) in
the event that Alfred C. Liggins III ceases to be associated in
any capacity with the Company or any Affiliate of the Company in connection with a change in
Control of Radio One; and
(iv) as permitted by and in accordance with the terms and conditions of the applicable Award
Agreement.
(b) If an Equity Plan Member elects to exercise his, her or its right to cause
the Company to purchase such Members Qualifying Equity Plan Put Units in accordance with this
Article XII, it shall provide written notice thereof to the Company, which notice shall include the
number of Qualifying Equity Plan Put Units to be purchased (the Equity Plan Put Units)
and the basis on which the Equity Plan Member is exercising its put rights under Section 12.2(a)
above.
(c) The fair market value of each Equity Plan Put Unit (such price, the Equity Plan Put Unit
Price) shall be determined in accordance with the procedures described in Section 12.1(c) with
respect to the determination of the Equity Plan Call Unit Price.
(d) The closing of the purchase and sale of the Equity Plan Put Units pursuant to this Section 12.2
(the Equity Plan Put Closing) shall occur on the date as is determined by the Board but,
in any event, within one hundred twenty (120) days of the date that the notice of the Equity Plan
Members intent to require the Company to purchase the Equity Plan Call Units is delivered pursuant
to Section 12.2(b). At the Equity Plan Put Closing, (1) each Equity Plan Member selling Equity Plan
Put Units shall (A) execute and deliver such documents as shall be reasonably requested by the
Company and (B) represent and warrant that such Equity Plan Put Units are being transferred free
and clear of liens, encumbrances and interests or rights of other Persons, and (2) the Company
shall make payment to each Equity Plan Member selling such Equity Plan Put Units in an amount equal
to the Equity Plan Put Unit Price multiplied by the number of Equity Plan Put Units being sold by
such Equity Plan Member, such payment to be made, in the Companys sole discretion, by (x) wire
transfer of immediately available funds to an account specified in writing by such Equity Plan
Member or (y) by wire transfer of immediately available funds equal to at least twenty percent
(20%) of such purchase price and by
delivery of a promissory note in the principal amount of the balance of such purchase price issued
by the Company (in form and substance satisfactory to the Board) bearing interest at a rate of
eight percent (8.0%) per annum, the principal and interest of which shall be due and payable in
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four (4) equal quarterly installments of principal, together with accrued interest, beginning on
the first day of the fiscal quarter following the fiscal quarter in which the closing occurs, and
continuing on the first day of each succeeding fiscal quarter until fully paid.
Section 12.3 Drag Along Rights In connection with any transaction in which the Sole
Member is selling in excess of twenty-five percent (25%) of their aggregate Class A Units in the
Company to a Person or Persons that are not Affiliates of the Company or Controlled by Affiliates
of the Company (the Class A Unit Sale), the Sole Member shall have the rights and
obligations set forth in this Section 12.3.
(a) At least sixty (60) days prior to the date that the proposed Class A Unit Sale is scheduled to
close (the Closing Date), the Sole Member shall provide each Equity Plan Member with a
written notice of the proposed Class A Unit Sale (the Sale Notice). The Sale Notice shall
contain (i) a description of the Class A Unit Sale, (ii) the per-Unit price (the Class A Sale
Price) to be paid by the Purchaser, (iii) the Closing Date and (iv) an indication as to
whether or not the Member intends to exercise its rights set forth in Section 12.3(b) and, if so,
the number of Equity Plan Drag-Along Units (as defined below) to be included in the Class A Unit
Sale.
(b) The Sole Member shall have the right, but not the obligation, to require each Equity Plan
Member (each such Equity Plan Member, a Drag-Along Equity Plan Member and, collectively,
the Drag-Along Equity Plan Members) to sell to the Class A Unit Sale purchaser (the
Purchaser) a pro rata portion of Equity Plan Units held by such Equity Plan Member that,
as of the Closing Date, are Vested (the Equity Plan Drag-Along
Units) at a price per Equity Plan Drag-Along Unit equal to the amount that the Equity Plan
Member would receive on account the Equity Plan Drag-Along Units if the Company were sold for a
value that would result in the Class A Members receiving the Class A Sale Price per Class A Unit
after allocation of such value to all Members in accordance with the provisions of this Agreement
applicable to the liquidation of the Company.
(c) The closing of the purchase and sale of the Equity Plan Drag-Along Units pursuant to this
Section 12.3 (the Equity Plan Drag-Along Closing) shall occur as close as practicable to
the Closing Date. At the Equity Plan Drag-Along Closing, (1) each Drag-Along Equity Plan Member
shall (A) execute and deliver such documents as shall be reasonably requested by the Purchaser and
(B) represent and warrant to the Purchaser that such Units are being transferred to the Purchaser
free and clear of liens, encumbrances and interests or rights of other Persons, and (2) the
Purchaser shall make payment to the Drag-Along Equity Plan Member selling such Units in an amount
equal to the Equity Plan Drag-Along Price multiplied by the number of Equity Plan Drag-Along Units
being sold by such Member, such payment to be made by wire transfer of immediately available funds
to an account specified in writing by such Member.
(d) Nothing contained in this Section 12.3 and the exercise of the Sole Members rights hereunder
will impact on any Equity Plan Units that are not Vested.
35
(e) Notwithstanding
anything else in this Section 12.3 to the contrary, the
Equity Plan Members shall not be subject to the provisions of this Section 12.3 if no payment would
be made to the Equity Plan Members hereunder.
Section 12.4 Tag-Along Rights. In the event of a Class A Unit Sale in which the Sole Member does
not elect to exercise its rights pursuant to Section 12.3(b), each Equity Plan Member shall have
the rights and obligations set forth in this Section 12.4.
(a) Upon receipt of a Sale Notice in which the Sole Member does not elect to exercise its rights
pursuant to 12.3(b), each Equity Plan Member shall have the right, but not the obligation, to
require the Sole Member to include a pro rata portion of Equity Plan Units held by such Equity Plan
Member that, as of the Closing Date, are Vested (the
Equity Plan Tag-Along Units) at a
price per Equity Plan Tag-Along Unit equal to the amount that the Equity Plan Member would receive
on account the Equity Plan Tag-Along Units if the Company were sold for a value that would result
in the Class A Members receiving the Class A Sale Price per Class A Unit after allocation of such
value to all Members in accordance with the provisions of this Agreement applicable to the
liquidation of the Company (such price, the Equity Plan
Tag-Along Unit Price), by
delivering a written notice (the Tag-Along Notice) to the Sole Member at least forty (40)
days prior to the Closing Date indicating such Members desire to sell to the Purchaser the Equity
Plan Tag-Along Units. Each Equity Plan Member delivering a Tag- Along Notice to the Sole Member
shall be referred to herein as a Tag-Along Seller.
(b) The closing of the purchase and sale of the Equity Plan Tag-Along Units pursuant to this
Section 12.4 (the Equity Plan Tag-Along Closing) shall occur as close as practicable to
the Closing Date. At the Equity Plan Tag-Along Closing (i) each Tag-Along Seller shall (A) execute
and deliver such documents as shall be reasonably requested by the Purchaser in order to vest full
beneficial and record ownership of the Equity Plan Tag-Along Units in the Purchaser, and (B)
represent and warrant to the Purchaser that such Equity Plan Tag- Along Units are being acquired by
the Purchaser free and clear of liens, encumbrances and interests or rights of other Persons, and
(ii) the Purchaser shall make payment to each Tag-Along Seller in an amount equal to the number of
Equity Plan Tag-Along Units being acquired from such Tag-Along Seller
multiplied by the Equity Plan
Tag-Along Unit Price, such payment to be made by wire transfer of immediately available funds to an
account specified in writing by such Member.
(c) Nothing contained in this Section 12.4 and the exercise of the Sole
Members rights hereunder will impact on any Equity Plan Units that are not Vested.
(d) Notwithstanding anything else in this Section 12.4 to the contrary, no
Equity Plan Holder will have any rights hereunder if no payment would be made to the Equity Plan
Members by exercising the rights set forth in this Section 12.4.
Section 12.5 Treatment of Equity Plan Units Issued Pursuant to a Combined Award Agreement.
Notwithstanding anything else in this Article XII to the contrary, if Equity
Plan Members hold Equity Plan Units issued pursuant to a Combined Award Agreement, then there may
be no purchase or sale under Sections 12.1 or 12.2 of this Article XII unless the
36
Interactive One Equity Plan Units granted by Interactive One under the Combined Award Agreement are
purchased or sold in the same proportions as the Equity Plan Units are purchased or sold.
ARTICLE XIII
ADDITIONAL, SUBSTITUTE AND LIMITED MEMBERS
Section 13.1 Admissions. No Person shall be admitted to the Company as a Member (other than the
Sole Member and Newman as an Equity Plan Member who are the signatories hereto) except in
accordance with Section 13.2, 13.3, 13.4 or 13.5 hereof. Any purported admission which is not in
accordance with this Article XIII shall be null and void. Upon admission of any Additional,
Substitute Member or Limited Member, or upon any Member ceasing to be a Member, the books and
records of the Company shall be revised accordingly to reflect such admission or cessation.
Section 13.2 Admission of Additional Members. Except for the admission of Equity Plan Members which
shall be as set forth in Section 13.5, a Person shall become an Additional Member pursuant to the
terms of this Agreement only if and when each of the following conditions is satisfied:
(a) the Board, in its sole and absolute discretion, determines the nature and amount of the Capital
Contribution and/or Capital Commitment to be made by such Person;
(b) the Board has received, on behalf of the Company, such Persons Capital Contribution and/or
Capital Commitment as so determined;
(c) the Board consents in writing to such admission, which consent may be given or withheld in its
sole and absolute discretion and, if such Person is to be admitted as a Member holding Units, the
Board shall determine which class or series of authorized Units such Person shall hold;
(d) the Board receives written instruments (including, without limitation, a subscription agreement
and such Persons consent to be bound by this Agreement as a Member) that are in form and substance
satisfactory to the Board, as determined in its sole and absolute discretion; and
(e) the Sole Member has approved the classification and issuance of Units.
Section 13.3 Admission of Substitute Members. A Person who acquires all or a portion of a Members
Units shall become a Substitute Member of the Company only following a Transfer of Units made in
accordance with Article XI hereof.
Section 13.4 Limited Members.
(a) A Member (or its successor in interest, if any, pursuant to (i) or (ii) below or his or her
personal representatives, executors or heirs, pursuant to (iv) below) shall automatically become a
Limited Member upon the earliest to occur of any of the following events:
37
(i) as
to any Member that is not an individual, the filing of a certificate of dissolution, or its
equivalent, for such Member;
(ii) as to any Member that Transfers all or any part of its Units (and as to the Person to whom
such Units are Transferred), in the event that such Units are Transferred in a manner that does not
comply with Article XI hereof following a determination by a court of competent jurisdiction or the
Board upon advice of counsel selected by the Board that the provisions of Article XI shall not be
applicable to such Transfer; provided that in the event of such a Transfer the limitations and
restrictions applicable to a Limited Member shall only apply to the Units so Transferred;
(iii) the Bankruptcy of such Member; or
(iv) as to any Non-Equity Plan Member that is an individual, the death or permanent incapacity (as
determined in good faith by the Board) of such Non-Equity Plan Member.
(b) Notwithstanding anything to the contrary contained in this Agreement, a Limited Member shall
have no:
(i) right to vote on any matter being voted on by the Members generally or by any class or group of
Members or to receive notice of a meeting of Members; or
(ii) inspection or information rights provided to Members under Article XIV hereof.
(c) Subject to the limitations and restrictions set forth in Section 13.4(b) hereof, a Limited
Member shall retain such rights, and remain subject to such obligations, as were applicable to such
Limited Member (or the Member from whom such Limited Member acquired Units or other Equity
Interests) prior to becoming a Limited Member. If a Limited Member shall fail, within twenty (20)
days of a written request from the Company, to consent in writing to be bound by this Agreement,
(in the event such Person is not a party to any such agreement at the time such written request is
made), the Equity Interests held by such Limited Member shall be forfeited and cancelled.
Section 13.5 Admission of Equity Plan Members. Persons awarded Equity Plan Units under the
Community Connect Equity Plan shall be admitted as Members in accordance with the terms of the
Community Connect Equity Plan, the applicable Award Agreement and this Agreement if and only if,
and when, each of the following conditions is satisfied:
(a) the Board or a committee thereof approves the issuance of such Equity Plan Units to such
Person, and
(b) the Board or a committee thereof receives written instruments (including, without limitation,
such Persons consent to be bound by this Agreement as a Member as a Equity Plan Member and the
applicable Award Agreement executed by such Person) that are in form and substance satisfactory to
the Board, as determined in its sole and absolute discretion.
38
Section 13.6 Withdrawal of Member. Members shall not be permitted to voluntarily withdraw from the
Company for any reason. Any Member shall cease to be a Member of the Company upon the date such
Member ceases to hold any Units. No such Member shall have a right to a return of its Capital
Contribution solely in his or her capacity as a Member.
ARTICLE XIV
REPORTS TO MEMBERS
Section 14.1 Books and Records.
(a) Each Non-Equity Plan Member has the right, subject to such reasonable standards (including
standards governing what information and documents are to be furnished at what time and location
and at whose expense) as may be established by the Managers, to obtain from the Company from time
to time upon reasonable demand for any purpose reasonably related to the Non-Equity Plan Members
interest as a Member of the Company:
(i) True and full information regarding the status of the business and financial condition of the
Company;
(ii) Promptly after they become available, a copy of the federal, state and local income tax
returns for each year of the Company;
(iii) A current list of the name and last known business, residence or mailing address of each
Member and Manager;
(iv) A copy of this Agreement, the Certificate of Formation and all amendments thereto;
(v) True and full information regarding the amount of cash and a description and statement of the
Agreed Value of any other property or services contributed by each Member and the date on which
each became a Member; and
(vi) Other information regarding the affairs of the Company as is reasonable.
(b) Each Equity Plan Member has the right, subject to such reasonable standards (including
standards governing what information and documents are to be furnished) and at whose expense as may
be established by the Board from time to time, to obtain from the Company from time to time upon
reasonable demand for any purpose reasonably related to the Equity Plan Members interest as a
Member of the Company:
(i) information regarding the status of the business and financial condition of the Company;
(ii) promptly after they become available, a copy of the federal, state and local income tax
returns for each year of the Company; and
39
(iii) a copy of this Agreement, the Certificate of Formation and all amendments thereto.
The foregoing information will either be mailed to each Equity Plan Member at his residence address
that has been supplied by such Equity Plan Member to the Company or at the Companys offices in New
York City.
(c) Each Manager shall have the right to examine all of the information described in subsections
(a) and (b) of this Section 14.1 for any purpose reasonably related to his or her position as a
Manager.
(d) The Company may maintain its records in other than a written form if such form is capable of
conversion into written form within a reasonable time.
(e) Any demand by a Member under this Section shall be in writing and shall state the purpose of
such demand.
(f) The Company shall permit each Non-Equity Plan Member to visit and inspect the Companys
properties, to examine its books of account and records and to discuss the Companys affairs,
finances and accounts with its officers, during normal business hours upon reasonable advance
notice.
(g) The Company shall provide each Non-Equity Plan Member with prompt notice of the initiation of
any material legal action against the Company.
(h) The obligations and limitations set forth in Section 18.1 hereof shall apply to any
Confidential Information disclosed or otherwise made available to any Member pursuant to this
Section 14.1.
Section 14.2 Annual Reports. Within sixty (60) days after the end of each Fiscal Year, the Company
shall cause to be prepared, and each Member furnished with, financial statements accompanied by a
report thereon from an independent accounting firm approved by the Board or a committee thereof
stating that such statements are prepared and fairly stated in all material respects in accordance
with generally accepted accounting principles, and, to the extent inconsistent therewith, in
accordance with this Agreement, including the following:
(a) A copy of the balance sheet of the Company as of the last day of such Fiscal Year;
(b) A statement of income or loss for the Company for such Fiscal Year; and
(c) A statement of the Members Capital Accounts, changes thereto for such Fiscal Year and
Percentage Interests at the end of such Fiscal Year.
Section 14.3 Quarterly Reports. Within thirty (30) days after the end of each quarter, the Company
shall cause each Non-Equity Plan Member to be furnished with unaudited quarterly financial
statements prepared in accordance with the Companys methods of
40
accounting,
of the type described in Section 14.2, as of the last day of
such quarter, provided
that such quarterly reports need not include such footnotes as may be required by generally
accepted accounting principles.
Section 14.4 Tax Returns and Tax Information to Members. The Company shall send to each Person who
was a Member at any time during such Fiscal Year such tax information, including, without
limitation, Federal Tax Schedule K-1, as shall be reasonably necessary for the preparation of such
Members federal income tax return. The Tax Matters Partner shall use reasonable efforts to
distribute all necessary tax information to each Member as soon as practicable after the end of
each Taxable Year, but not later than seventy-five (75) days after the end of each Taxable Year;
provided, however, that such period shall be automatically extended in the event of a delay beyond
the control of the Tax Matters Partner, such as a delay resulting from the failure of a third party
to provide required tax information to the Company in a timely manner.
Section 14.5 Equity Plan Member Information Rights. Notwithstanding anything to the contrary in
this Agreement, the Equity Plan Members in their capacity as Equity Plan Members shall have no
rights to obtain or review books or records of the Company or other information or reports except
to the extent specifically set forth in Section 14.1(b), Section 14.2 and Section 14.4 hereof.
ARTICLE XV
EVENTS OF DISSOLUTION
Section 15.1 Dissolution. The Company shall be dissolved upon the occurrence of any of the
following events (each, an Event of
Dissolution):
(a) A judicial dissolution of the Company pursuant to Section 18-802 of the Act;
(b) Following the sale, transfer or other disposition of all or substantially all of the assets of
the Company pursuant to a Sale Transaction; or
(c) The Members that are entitled to vote holding at least a majority of the Class A Units vote for
dissolution.
Section 15.2 No other Event of Dissolution. No other event, including the retirement, withdrawal,
insolvency, liquidation, dissolution, insanity, resignation, expulsion, Bankruptcy, death,
incapacity or adjudication of incompetency of a Member, shall cause the dissolution of the Company.
41
ARTICLE XVI
TERMINATION
Section 16.1 Liquidation. In the event that an Event of Dissolution shall occur, the Company shall
be liquidated and its affairs shall be wound up (in each case, a
Liquidation) and all proceeds
from such Liquidation shall be distributed as set forth below:
(i) first, to pay, or otherwise make reasonable provision for payment, to creditors, including
Members who are creditors to the extent permitted by law, in satisfaction of the Companys
liabilities; and
(ii) second, to the Members, in accordance with their respective positive Capital Account balances
(after giving effect to the allocation of all items of Profit, Loss, deduction and credit (or items
thereof)).
Section 16.2 Final Accounting. In the event of the dissolution of the Company, prior to any
Liquidation, a proper accounting shall be made to the Members from the date of the last previous
accounting to the date of dissolution.
Section 16.3 Cancellation of Certificate. Upon the completion of the Distribution of the Companys
assets upon dissolution of the Company, the Company shall be terminated, all Units shall be
cancelled and the Board shall cause the Company to execute and file a Certificate of Cancellation
in accordance with Section 18-203 of the Act.
ARTICLE XVII
EXCULPATION AND INDEMNIFICATION
Section 17.1 Exculpation. Notwithstanding any other provisions of this Agreement, whether express
or implied, or obligation or duty at law or in equity, none of the Members, Managers or any
officers, directors, stockholders, Affiliates, partners, members, employees, representatives,
consultants or agents of either the Managers or the Members
(individually, a Covered Person and,
collectively, the Covered Persons) shall be liable to the Company or any other Person for any act
or omission taken or omitted in good faith by a Covered Person on behalf of the Company and in the
reasonable belief that such act or omission was in or was not opposed to the best interests of the
Company; provided that such act or omission does not constitute fraud, willful misconduct, bad
faith, or gross negligence. Equity Plan Members and their respective Covered Persons shall not be
entitled by reason of this Section 17.1 to exculpation from any liability that arises under any
employment or consulting agreement or arrangement in existence between the Company and such Person
or by reason of any breach thereof.
Section 17.2 Indemnification.
(a) To the fullest extent permitted by law, the Company shall indemnify and hold harmless each
Covered Person (individually, an Indemnified Person and, collectively,
the Indemnified Persons) from and against any and all losses, claims, demands,
liabilities, expenses (including reasonable attorneys fees and expenses), judgments, fines,
settlements and
42
other amounts arising from any and all actions, suits or proceedings, whether civil, criminal,
administrative or investigative (Claims), in which such Indemnified Person may be
involved, or threatened to be involved, as a party or otherwise, by reason of its management of the
property, business, or affairs of the Company or the fact that such Indemnified Person was a
Member, Manager, officer, employee, representative, consultant or agent of the Company, or by
reason of the fact that such Person, at the request of the Company, is or was serving as an
officer, director, employee or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise if the Indemnified Person in relation to the
facts, events and circumstances on which such action, suit or proceeding is based (i) acted in good
faith and in a manner that the Indemnified Person reasonably believed to be in, or not opposed to,
the best interests of the Company or (ii) with respect to a criminal action or proceeding had no
reasonable cause to believe that the Indemnified Persons conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere, or its equivalent, shall not, in and of itself, create a presumption or otherwise
constitute evidence that the Indemnified Person acted in a manner contrary to that specified in (i)
or (ii) above. An Indemnified Person shall not be entitled to indemnification under this Section
17.2 with respect to any Claim if it has engaged in fraud, willful misconduct, bad faith or gross
negligence with respect to the matters that gave rise to such Claim. In the event that an
employment or consulting agreement or arrangement exists between a Equity Plan Member and the
Company, such Equity Plan Member and his or her Covered Persons shall not be entitled to
indemnification under this Section 17.2 for Claims arising thereunder or in breach thereof.
(b) Expenses (including reasonable attorneys fees and disbursements) incurred by an
Indemnified Person in investigating or defending any Claim shall be paid by the Company in advance
of the final disposition of such Claim upon receipt by the Company of an undertaking by or on
behalf of such Indemnified Person to repay such amount if it shall be ultimately determined by a
court of competent jurisdiction from which no further appeal may be taken or the time for any
appeal has lapsed (or otherwise, as the case may be) that such Indemnified Person is not entitled
to be indemnified by the Company as authorized by this Section 17.2.
(c) The indemnification provided by this Section 17.2 shall be in addition to any other rights
to which each Indemnified Person may be entitled under any agreement, as a matter of law or
otherwise, both (i) as to the action in the Indemnified Persons capacity as a Member, Manager,
officer, employee, representative, consultant or agent of the Company or by reason of its
management of the property, business or affairs of the Company, and (ii) as to action in another
capacity, and shall continue as to an Indemnified Person who has ceased to serve in such capacity
and shall inure to the benefit of the heirs, successors, assigns, administrators and personal
representatives of the Indemnified Person.
43
ARTICLE XVIII
GENERAL PROVISIONS
Section 18.1 Confidentiality.
(a) Each Member agrees that it shall at all times keep confidential and not disclose or make
accessible to anyone, any confidential or proprietary information, knowledge or data concerning or
relating to the business or financial affairs of the Company (Confidential Information),
except to the extent as may be required by applicable law, court process or other obligations
pursuant to any governmental or regulatory authority requirement. Notwithstanding the foregoing,
each Member may disclose such Confidential Information to its directors, officers, employees,
Affiliates and advisors having a need to know the Confidential Information in order to accomplish
the legitimate purposes or functions of the Company subject to (1) such Persons being advised of
the provisions of this Section 18.1, and (2) such Member being responsible for any breach of this
Section 18.1 by any such Persons. Each Member shall safeguard Confidential Information with the
same degree of care as such Member uses to safeguard the confidentiality of its own confidential
and proprietary information, knowledge or data.
(b) The obligations of the Members specified in Section 18.1(a) hereof shall not apply, and
the Member shall have no further obligations, with respect to any Confidential Information to the
extent that a Member can demonstrate that such Confidential Information (i) is generally known to
the public or within the Companys industry at the time of disclosure to the Member or becomes
generally known through no wrongful act on the part of the Member, (ii) is in the Members
possession at the time of disclosure to the Member otherwise than as a result of the Members
breach of any legal obligation, (iii) becomes known to the Member through the disclosure by sources
other than the Company having, based upon a reasonable investigation by such Member, the legal
right to disclose such Confidential Information, or (iv) is independently developed by the Member
without reference to or reliance upon the Confidential Information.
(c) The obligations set forth in this Section 18.1 shall be continuing and survive the
termination of this Agreement and following the dissolution of the Company, in each case for a
period of three years, and shall be continuing and survive the withdrawal of a Member from the
Company with respect to such Member for a period of five years following such withdrawal.
Section 18.2 Amendment.
(a) Except as otherwise expressly provided herein:
(i) no provision of this Agreement may be amended or modified except upon the written consent
of a majority of the holders of Class A Units;
(ii) any amendment or modification of any provision of this Agreement that would modify the
limited liability of a Member as set forth in Section 3.9
hereof or increase the amount of capital to be contributed or committed by a Member to the
Company must be approved by such Member; and
(iii) no provision of Articles VIII, IX, XI or XII or Section 4.17,
Section 6.5 or this Section 18.2 may be amended or modified in a manner adverse to the rights of an
Equity Plan Member without the written consent of such Equity Plan Member.
44
(b) Subject to the contractual rights of any Member as expressly set forth in the Award
Agreement or an employment agreement, and subject to Section 18.2(a)(iii), each Member shall be
bound by any amendment or modification effected in accordance with this Section 18.2, whether or
not such Member has consented to such amendment or waiver. The failure of any party to enforce any
of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
(c) Notwithstanding anything to the contrary contained in this Section 18.2, (1) the name of
the Company and/or the name under which the Companys services are provided may be changed (and
corresponding amendments to this Agreement and the Certificate of Formation may be made), (2)
corrections or clarifications that do not change the substantive meaning of any provision hereof
may be made and (3) changes to Article VIII of this Agreement and other conforming changes in this
Agreement may be made to the extent necessary to properly reflect the terms of the Community
Connect Equity Plan (provided that any such amendment shall be consistent with the economic
arrangement of the Members as reflected in the terms of this Agreement).
(d) Notwithstanding anything to the contrary contained in this Section 18.2, Schedules A and B
hereto may be amended from time to time by the Company as necessary to reflect accurate and correct
information relating to the Members.
Section 18.3 Governing Law. This Agreement shall be construed in accordance with and governed
exclusively by the laws of the State of Delaware (without giving effect to any conflicts or choice
of law provisions that would cause the application of the domestic substantive laws of any other
jurisdiction).
Section 18.4 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 18.5 Remedies.
(a) The parties hereto agree that irreparable harm would occur in the event that any of the
agreements and provisions of this Agreement were not performed fully by the parties hereto in
accordance with their specific terms or conditions or were otherwise breached, and that money
damages are an inadequate remedy for breach of the Agreement because of the difficulty of
ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in
the event that this Agreement is not performed in accordance with its terms or conditions or is
otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or
injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to
enforce specifically such terms and provisions of this Agreement, such remedy being in addition to,
and not in lieu of, any other rights and remedies to which the other parties are entitled at law or
in equity.
45
(b) The rights and remedies provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive its right to use any or all other
remedies. Said rights and remedies are given in addition to any other rights the parties may have
by law, statute, ordinance or otherwise. Except where a time period is specified, no delay on the
part of any party in the exercise of any right, power, privilege or remedy hereunder shall operate
as a waiver thereof, nor shall any exercise or partial exercise of any such right, power, privilege
or remedy preclude any further exercise thereof or the exercise of any other right, power,
privilege or remedy.
Section 18.6 Notices. All demands, notices, requests, consents and other communications
required or permitted under this Agreement shall be by written notice and sent by (a) personal
delivery, (b) Electronic Transmission (including pursuant to Section 3.8(b) and Section 4.3(d)
hereof) or facsimile machine (in each case with a confirmation copy sent by one of the other
methods authorized in clauses (a), (c) or (d) hereof), (c) commercial courier (including Federal
Express) or U.S. Postal Service overnight delivery service, or (d) deposit with the U.S. Postal
Service mailed first class, registered or certified mail, postage prepaid. If such notice is being
made or delivered to the Company, such notice shall be made to the Companys principal executive
offices as follows: 205 Hudson Street, 6th Floor, New York, New York 10013 and if such is being
made to the Sole Member (or to a Unit Affiliate of such Sole Member) or a Substitute Member or
Additional Member that is not a Unit Affiliate of the Sole Member, such notice shall be made to
such Sole Member for and on behalf of itself and its Unit Affiliates or to such Substitute Member
or Additional Member (and to such other Persons to be copied in connection with notices to such
Member) as set forth on Schedule A hereof. Notices shall be deemed delivered and to have
been received upon the earliest to occur of (i) if sent by personal delivery, upon receipt by the
party to whom such notice is directed; (ii) if sent by facsimile machine or by Electronic
Transmission (including pursuant to Section 3.8(b) or Section 4.3(d) hereof), the day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice
is sent if sent (as evidenced by Electronic Transmission or facsimile confirmed receipt) prior to
5:00 p.m. U.S. Eastern Time, or the day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) after which such notice is sent if sent after 5:00
p.m. U.S. Eastern Time; (iii) if sent by overnight delivery service, the first day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following
the day the same is deposited with the commercial carrier or U.S. Postal Service; and (iv) if sent
by first class mail, registered or certified, postage prepaid, the fifth day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following
the day the same is deposited with the U.S. Postal Service. Each party, by notice duly given to the
Company and all other Members, may specify a different address for the giving of any notice
hereunder.
Section 18.7 Severability. If any term or provision of this Agreement, or the application
thereof to any Person or circumstance, shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement, or application to other Persons or circumstances, shall not be
affected thereby, and each term and provision of this Agreement shall be enforced to the fullest
extent permitted by law.
46
Section 18.8 Counterparts; Signatures. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same document, and all
counterparts shall be construed together and shall constitute one instrument. A facsimile or
photocopied signature shall be deemed to be the functional equivalent of an original for all
purposes.
Section 18.9 Entire Agreement. This Agreement, any Award Agreement and any employment
agreement with a Member constitute the full and entire understanding and agreement among the
parties hereto pertaining to the subject matter hereof and supercede all prior understandings and
agreements pertaining hereto, whether written or oral. In the event of any conflict between the
terms of this Agreement and the terms of any Award Agreement, the terms of the Award Agreement
shall govern.
Section 18.10 Assignment; Binding Effect. This Agreement may not be assigned, in whole or in
part, by any party hereto except in connection with a Transfer of Units to a Substitute Member in
accordance with the terms and conditions of this Agreement. Any purported assignment in violation
of this Section 18.11 shall be null and void. A Transfer of Units to a Substitute Member shall not
be deemed to be an assignment of any of the rights or obligations of the Transferring Member under
those Sections of this Agreement in which such Transferring Member is granted rights or has
undertaken obligations specifically by name.
Section 18.11 Relationship. Nothing in this Agreement shall be construed to render any of the
Members partners or joint venturers or to impose upon any of them any liability as such, except as
otherwise specifically provided in this Agreement. No party to this Agreement has any authorization
to enter into any contracts or assume any obligations for any other party or make any warranties or
representations on behalf of another party other than as expressly authorized herein.
Section 18.12 Interpretation. Each Member has agreed to the use of the particular language of
the provisions of this Agreement, and any questions of doubtful interpretation shall not be
resolved by any rule or interpretation against the draftsman, but rather in accordance with the
fair meaning thereof, having due regard to the benefits and rights intended to be conferred upon
the parties and the limitations and restrictions upon such rights and benefits intended to be
provided.
Section 18.13
No Third-Party Beneficiary. Except as provided in Article XVII hereof, this Agreement
is made solely for the benefit of the parties hereto and no other Person shall have any rights,
interest, or claims hereunder or otherwise be entitled to any benefits under or on account of this
Agreement as a third-party beneficiary or otherwise.
[SIGNATURES CONTAINED ON FOLLOWING PAGE]
47
IN
WITNESS WHEREOF, each Member has executed this Agreement as of the date first above
written.
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COMMUNITY CONNECT, INC.
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By: |
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Name: |
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Title: |
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EQUITY PLAN MEMBER
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Name: Thomas Newman |
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[SIGNATURE
PAGE TO OPERATING AGREEMENT]
IN
WITNESS WHEREOF, each Member has executed this Agreement as of the date first above written.
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COMMUNITY CONNECT, INC.
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By: |
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Name: |
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Title: |
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EQUITY PLAN MEMBER
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/s/ Thomas Newman
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Name: Thomas Newman |
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[SIGNATURE
PAGE TO OPERATING AGREEMENT]
SCHEDULE
A
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Aggregate Capital |
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Contribution as of May |
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11, 2009 for Community |
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Connect, Inc. and as of |
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the Effective Date for |
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Name/Address of Member |
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Thomas Newman |
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Number of Units |
Class A
Units |
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Community
Connect, Inc. |
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New York, New York |
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Approximately |
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Attn: Alfred C. Liggins III |
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$38,000,000 |
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4,750 |
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Equity
Plan Units |
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Thomas
Newman |
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$100 |
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100 |
SCHEDULE
B
JOINDER
AGREEMENT
This JOINDER AGREEMENT (this Agreement), is executed by and among [ ], a
resident of (the Transferee), and Community Connect, LLC, a Delaware
limited liability corporation (the Company).
W I
T N E S S E T H:
WHEREAS, the Interactive One and Newman (as such terms are defined in the Operating Agreement
referred to below) entered into that certain Amended and Restated Limited Liability Company
Operating Agreement of the Company, dated as of , 2009 (as amended from time to time,
the Operating Agreement), providing for, among other things, the capitalization and
operation of the Company;
WHEREAS, pursuant to Article XI of the Operating Agreement, no Transfer of Units may be
effective unless the Transferee executes an agreement agreeing to be bound by the terms of the
Operating Agreement; and
WHEREAS, in order to effectuate the Transfer permitted by the Operating Agreement, the
Transferee and the Company desire to enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements
set forth herein, and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. |
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Defined Terms. Capitalized terms used but not otherwise defined in this Agreement shall have the
respective meanings ascribed to such terms in the Operating Agreement. |
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2. |
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Representations, Warranties and Covenants of the
Transferee. The Transferee hereby represents
and warrants to, and covenants and agrees with, the Company, effective as of the date hereof, as
follows: |
a) the Transferee understands that (i) the Units are not registered under the Securities Act
of 1933, as amended (the Act), or any state securities laws and are being offered and sold in
reliance upon exemptions provided in the Act and state securities laws for transactions not
involving any public offering and, therefore, the Units cannot be resold or transferred unless the
Units are registered under the Act and any applicable state securities laws or unless an exemption
from registration is available, and (ii) the availability of the exemptions relied upon by the
Company in issuing the Units is dependent, in part, upon the truth of the representations and
warranties made by the Transferee in this Agreement;
b) the Transferee is acquiring the Units for investment only, solely for the Transferees own
account, not as a nominee or agent, and not with a view to the sale or
other distribution thereof, in whole or in part, and the Transferee has no contract, understanding,
agreement or arrangement with any Person to transfer to such Person or any other Person any of the
Units (except as provided in the Operating Agreement), and the Transferee has no present intention
to enter into any such contract, understanding, agreement or arrangement;
c)
the Transferee understands that the Units are subject to restrictions on transfer, and
that the Transferee may not transfer the Units except in accordance with the Operating Agreement;
d) the Transferee understands that that the Units are restricted securities under applicable
U.S. federal and state securities laws and that, pursuant to these laws, the Transferee must hold
the Units indefinitely unless they are registered with the Securities and Exchange Commission and
qualified by the state authorities (unless an exemption from such registration and qualification
requirements is available) and the Company is under no obligation (and has no intention) to
register the Units under any circumstances or to attempt to make available any exemption from
registration under the Act or any applicable state securities law, at the Transferees expense or
otherwise;
e) the Transferee acknowledges that (i) if an exemption from registration or qualification is
available, it may be conditioned on various requirements, including but not limited to the
availability of current public information about the Company, the time and manner of the sale, the
holding period of the Units and on requirements relating to the Company that are outside of the
Transferees control; and (ii) the Company is not presently subject, and may never be subject, to
the reporting requirements of the Securities Exchange Act of 1934, as amended, to the extent
required to enable the Transferee to sell its Units pursuant to Rule 144 under the Securities Act
of 1933, as amended;
f) the Transferee understands that no public market now exists for any of the securities
issued by the Company, and that the Company has made no assurances that a public market will ever
exist for the Units;
g) the Transferee is relying solely on its own conclusions or the advice of its own counsel or
advisors with respect to the tax aspects of its investment in the Company;
h) for the purpose of qualification of the offer and sale of the Units under applicable state
securities laws, (i) if such Transferee is an individual, then the Transferee is a resident of the
state set forth on the signature page to this Agreement and (ii) if the Transferee is a
partnership, corporation, limited liability company or other entity, then the office or offices of
the Transferee in which its investment decision was made is located at the address or addresses of
the Transferee set forth on the signature page to this Agreement;
- 3 -
i) if the Transferee is a partnership, corporation, limited liability
company or other entity, then this Agreement has been executed by a duly authorized officer on
behalf of the Transferee, and the execution, delivery and performance hereof by the Transferee have
been duly authorized by all required action;
j) the Transferee has full power and authority to enter into this Agreement and the Operating
Agreement and the execution and delivery by the Transferee of, and the performance by the
Transferee of its obligations under, this Agreement and the Operating Agreement will result in
valid and legally binding obligations of the Transferee, enforceable against the Transferee in
accordance with the respective terms and provisions hereof and thereof, subject to the effect of
bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting the
rights and remedies of creditors generally and of general principles of equity;
k) the execution and delivery by the Transferee of, and the performance by the Transferee of
its obligations under, this Agreement and the Operating Agreement (i) does not and will not result
in a breach of any of the terms, conditions or provisions of, or constitute a default under (A) any
governing instrument of the Transferee (if the Transferee is a partnership, corporation, limited
liability company or other entity) or (B) (1) any note, credit agreement, mortgage, indenture or
other evidence of indebtedness, or any lease or other agreement or understanding to which
Transferee is a party, or (2) any license, permit or franchise, in either case to which the
Transferee is a party or by which it is bound or to which any of its properties or assets are
subject except, in each case, where the breach or default thereunder is not reasonably likely to
materially and adversely affect the Transferees ability to perform its obligations under this
Agreement or the Operating Agreement, (ii) does not require any authorization or approval under or
pursuant to any of the matters set forth in (A) or (B) above (other than such authorizations or
approvals which have been obtained on or prior to the date hereof), or (iii) does not violate, in
any material respect, any statute, regulation, law, order, injunction or decree to which the
Transferee is subject;
l) there is no litigation, investigation or other proceeding pending or, to the Transferees
knowledge, threatened, against the Transferee which, if adversely determined, would materially and
adversely affect the Transferees ability to perform its obligations under this Agreement or the
Operating Agreement;
m) no consent, approval or authorization of, or filing, registration or qualification with,
any court or governmental authority is required on the part of the Transferee for the execution and
delivery of this Agreement and the Operating Agreement or the performance by the Transferee of its
obligations under this Agreement and the Operating Agreement;
n) neither the Transferee, nor any of its officers, employees, agents, directors, stockholders
or partners, if applicable has (i) agreed to pay any commission, fee or other remuneration to any
third party to solicit or contact any potential investor,
- 4 -
(ii) engaged in any general solicitation, or (iii) published any advertisement, in each case,
in connection with the offer and sale of the Units; and
o) the Transferee acknowledges and understands that the Units in the Company shall be
uncertificated and that, should the Company elect to represent the Units by certificates, any
certificates evidencing Units shall be stamped or endorsed with a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND
ACCORDINGLY NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED,
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH
ACT AND ANY SUCH LAWS APPLICABLE THERETO AND THE
RULES AND REGULATIONS THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTION AS TO THEIR VOTING, SALE,
TRANSFER, HYPOTHECATION, OR ASSIGNMENT AND MAY BE
SUBJECT TO FORFEITURE AND OTHER RESTRICTIONS, IN EACH
CASE, AS SET FORTH IN THE LIABILITY COMPANY OPERATING
AGREEMENT OF COMMUNITY CONNECT, LLC, DATED AS OF
, 2009, AMONG CERTAIN MEMBERS NAMED
THEREIN, TOGETHER WITH ANY RELATED AGREEMENTS.
COPIES OF SUCH AGREEMENTS ARE ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY AND MAY BE OBTAINED
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY.
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Survival of Representations and Warranties. All representations and warranties made by the
Transferee in Section 2 hereof shall survive the execution and delivery of this Agreement. |
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Joinder to Operating Agreement. By execution and delivery of this Agreement, the Transferee
hereby (i) joins in and agrees to be fully bound by, and subject to, all of the obligations,
covenants, terms and conditions of the Operating Agreement applicable to a Member as though the
Transferee were an original party thereto, and shall be deemed included in the definition of
Member and Additional Member for all purposes thereof, (ii) acknowledges receipt of the
Operating Agreement and represents, warrants, covenants and agrees that the Transferee has read the
Operating Agreement and understands that by signing this document, the Transferee shall assume all
of the duties and obligations of a Member thereunder and (iii) authorizes this Agreement to be
attached to and made part of the Operating Agreement or counterparts thereof. |
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Modification. Except to the extent modified by the terms of this Agreement, and the
terms and conditions of the Operating Agreement shall remain in full force and effect. |
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Notice. The address to which notice should be sent to the Transferee pursuant to the Operating
Agreement (including Schedule A thereof) is set forth on the signature page hereof. In the event
such address shall change, Transferee shall promptly provide written notice of such new address to
the Company and the Company shall be authorized to update such information as appropriate in the
books and records of the Company and any other relevant documents. |
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Governing Law. This Agreement shall be construed in accordance with and governed exclusively by
the law of the State of Delaware (without giving effect to any conflicts or choice of law
provisions that would cause the application of the domestic substantive laws of any other
jurisdiction). |
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Counterparts; Signatures. This Agreement may be executed in any number of counterparts with the
same effect as if all parties hereto had signed the same document, and all counterparts shall be
construed together and shall constitute one instrument. A facsimile or photocopied signature shall
be deemed to be the functional equivalent of an original for all purposes. |
[The
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
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TRANSFEREE:
[ ]
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By: |
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Name: |
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Transferee Address for Notice:
[insert address]
COMPANY:
COMMUNITY CONNECT, LLC
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Name: |
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Title: |
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exv3w15
Exhibit 3.15
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State of Delaware |
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Secretary of State |
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Division of Corporations |
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Delivered 07:07 PM 03/27/2007 |
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FILED 06:44 PM 03/27/2007 |
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SRV 070368868 4324715 FILE |
CERTIFICATE OF FORMATION
OF
DISTRIBUTION ONE, LLC
This
Certificate of Formation of Distribution One, LLC (the Company), dated as of February 12,
2007, is being duly executed and filed by the undersigned, an authorized person, to form a limited
liability company under the Delaware Limited Liability Company Act (6
Del.C. § 18-101, et seq.).
FIRST. The name of the limited liability company formed hereby is
DISTRIBUTION ONE, LLC.
SECOND. The address of the initial registered office of the Company in the State of Delaware shall
be: 2711 Centerville Road, Suite 400, Wilmington, DE 19808.
THIRD. The name and address of the Companys registered agent for service of process on the Company
in the State of Delaware are: Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, DE 19808.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the
date first above written.
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/s/ Linda J. Vilardo |
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Authorized Person |
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exv3w16
Exhibit 3.16
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
DISTRIBUTION ONE, LLC
This Amended and Restated Limited Liability Company Agreement (the Agreement) of Distribution
One, LLC, a Delaware limited liability company (the Company), is made as of October 18, 2010, by
Radio One Distribution Holdings, LLC, a Delaware limited liability company, as sole member (the
Member).
RECITALS
WHEREAS, on February 12, 2007, the Company was formed as a limited liability company in accordance
with the provisions of the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq, as
amended from time to time, and any successor statute (the Act) and, on March 27, 2007, the
initial members of the Company, the Member and TV One, LLC, a Delaware limited liability company
(TV One, and collectively with the Member, the Original Members) entered into an operating
agreement pursuant to the Act governing the affairs of the Company and the conduct of its business
(the Operating Agreement);
WHEREAS, the Original Members of the Company have entered into a Membership Interest Transfer
Agreement whereby the Member acquired all equity interests in the Company previously held by TV
One, thereby becoming the sole equity holder of the Company;
WHEREAS, the Member agrees that it is in its best interests to amend and restate the Operating
Agreement of the Company in its entirety as set forth herein;
NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and intending
to be legally bound, and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Member hereby agrees as follows:
1. Formation; Admission of Member. The Company was formed as a Delaware limited
liability company pursuant to the provisions of the Act by filing the Certificate of Formation for
the Company with the Office of the Secretary of State of the State of Delaware in conformity with
the Act. The Company and, if required, the Member shall execute or cause to be executed from time
to time all other instruments, certificates, notices and documents and shall do or cause to be done
all such acts and things (including keeping books and records and making periodic filings) as may
now or hereafter be required for the formation, valid existence and, when appropriate in accordance
with the terms of this Agreement, termination of the Company as a limited liability company under
the laws of the State of Delaware.
2. Name. The name of the Company is Distribution One, LLC and all Company business
shall be conducted under such name.
3. Purpose. The Company is formed for the purpose of engaging in any lawful act or
activity for which limited liability companies may be formed under Delaware law and engaging in any
and all activities necessary, convenient, desirable or incidental to the foregoing.
4. Principal Place of Business. The principal place of business of the Company shall
be at c/o Radio One, Inc., 5900 Princess Garden Parkway, 7th Floor, Lanham, MD 20706.
5. Member. The name and mailing address of the Member is as follows:
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Radio One Distribution Holdings, LLC
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5900 Princess Garden Parkway, 7th Floor |
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Lanham, MD 20706 |
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Attn: General Counsel |
6. Registered Agent and Office. The street address of the initial registered office of
the Company shall be: 2711 Centerville Road, Suite 400, Wilmington, DE 19808. The name of the
Companys registered agent at such address is: Corporation Service Company. At any time, the Member
may designate a different registered agent and/or registered office.
7. Powers. The Company shall have the power and authority to take any and all actions
necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of
the purposes described herein, including all powers, statutory or otherwise, possessed by the
members of limited liability companies under Delaware law.
8. Management of the Company. The business affairs of the Company shall be managed by
the Member in accordance with Section 18-402 of the Act. Management of the Company shall be vested
solely in the Member. The Member shall have sole and complete discretion in determining whether to
issue Units, the number of Units to be issued at any particular time, the purchase price for any
Units issued, and all other terms and conditions governing any Units or the issuance thereof. The
number of Units outstanding as of the date of this Agreement shall be one hundred (100). The Member
may appoint a President, one or more Vice Presidents, a Treasurer, a Secretary and/or one or more
other officers as it deems necessary, desirable or appropriate, with such authority and upon such
terms and conditions as the Member deems appropriate or, in the absence of such determination by
the Member, as are appropriate to an officer with a similar title of a Delaware corporation. Any
such officer shall serve at the pleasure of the Member and may be removed, with or without cause,
by the Member.
9. Relationship Between the Member and the Company.
(a) The Member, its Affiliates (hereinafter defined), and the managers, officers and employees
of the Member and its Affiliates may enter into agreements with the Company providing for the
performance of services for the Company, and the receipt of such compensation as the Company may
agree to pay.
(b) None of the Member, Manager (as defined in the Act) or officers of the Company shall be
liable or accountable in damages or otherwise to the Company or the Member for any act or omission
done or omitted by him, her or it in good faith, unless such act or omission constitutes gross
negligence or willful misconduct on the part of the Member, Manager or officer of the Company. The
Company is expressly permitted in the normal course of its business to enter into transactions with
the Member and any or all Managers or officers or with any Affiliates of the Member or of any such
Manager or officer.
(c) All expenses incurred with respect to the organization, operation and management of the
Company shall be borne by the Company. The Member shall be entitled to reimbursement from the
Company for direct expenses allocable to the organization, operation and management of the Company.
(d) Affiliate shall mean any Person (hereinafter defined) directly or indirectly
controlling, controlled by or under common control with the Person in question; and, if the Person
in question is not an individual, any executive officer or director of the Person in question or of
any Person directly or indirectly controlling the Person in question. As used in this definition of
Affiliate, the term control means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Person shall mean any individual,
corporation, association, partnership, limited liability company, joint venture, trust, estate or
other entity or organization.
10. Indemnity. In accordance with Section 18-108 of the Act, the Company shall
indemnify and hold harmless the Member and any Manager, officer of the Company and Affiliate
thereof (individually, in each case, an Indemnitee), to the fullest extent permitted by law
against any loss, liability, damage, judgment, demand, claim, cost or expense incurred by or
asserted against the Indemnitee (including, without limitation, reasonable attorneys fees and
disbursements incurred in the defense thereof) arising out of any act or omission of the Indemnitee
in connection with the Company. Unless otherwise provided in this Section 10, in the event of any
action by the Member against any Indemnitee, including a derivative suit, the Company shall
indemnify, hold harmless and pay all expenses of such Indemnitee, including reasonable attorneys
fees and disbursements incurred in the defense thereof. Notwithstanding the provisions of this
Section 10, this Section 10 shall be enforced only to the maximum extent permitted by law, and no
Indemnitee shall be indemnified from any liability for the fraud, intentional misconduct, gross
negligence or a knowing violation of the law which was material to the cause of action.
11. Allocation of Profits and Losses. The Companys profits and losses, and all items
allocable for tax purposes, shall be allocated to the Member.
12. Distributions. Distributions shall be made to the Member at the times and in the
aggregate amounts as determined by the Member.
13. Assignments. The Member may assign in whole or in part its limited liability
interest in the Company in accordance with the Act.
14. Admission of Additional Members. One or more additional members may be admitted to the
Company with the consent of the Member upon such terms and conditions as the Member, in its
discretion, shall approve. In the event of the admission of any new member or members, the Member
and such additional member or members shall execute an appropriate amendment to this Agreement
reflecting such terms and conditions and such other matters which the Member deems appropriate or
upon which the Member and such additional member or members shall agree.
15. Resignation of Member. The Member may resign from the Company in accordance with the Act.
16. Liability of Member. Except as otherwise required in the Act, the debts, obligations, and
liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, the Member shall not be obligated for any such
debt, obligation or liability of the Company solely by reason of being a member or participating in
the management of the Company. The failure of the Company to observe any formalities or
requirements relating to the exercise of its powers or management of its business or affairs under
the Act or this Agreement shall not be grounds for imposing liability on the Member for liabilities
of the Company.
17. Dissolution. The Company shall dissolve, and its affairs shall be wound up, upon the first
to occur of the following: (a) the written consent of the Member; (b) the resignation of the
Member; (c) the termination of the legal existence of the Member; (d) the occurrence of any event
which terminates the continued membership of the Member in the Company; and (e) the entry of a
decree of judicial dissolution under Section 18-802 of the Act. Upon the occurrence of an event set
forth in this Section 17, the Member shall be entitled to receive, after winding up the affairs of
the Company and paying or making reasonable provision for all of the Companys creditors to the
extent required by Section 18-804 of the Act, the remaining funds of the Company. The Member shall
not have any obligation to restore to the Company the amount by which its capital account may be
negative. Actions taken by the Member or the Company to effectuate or facilitate the orderly
winding up of the Companys affairs shall not be construed to involve a continuation of the
Company.
18. Amendments. This Agreement may be amended only in writing. Any such amendment must be
approved and executed by the Member.
19. Binding
Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of
the Member and, to the extent permitted by this Agreement, its successors, legal representatives
and assigns. No Person other than the Member shall be entitled to any benefits under the Agreement,
except as otherwise expressly provided. Reference to any Person in this Agreement includes such
Persons successors and permitted assigns.
20. Captions. Captions contained in this Agreement are inserted as a matter of convenience and
in no way define, limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
21. Severability. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision were omitted. The preceding sentence
shall be of no force or effect if the consequence of enforcing the remainder of this Agreement
without such invalid or unenforceable provision would be to cause any party to lose the benefit of
its economic bargain.
22. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ANY
CONFLICTS OF LAWS, RULE OR PRINCIPLE THAT MIGHT REFER THE
GOVERNANCE OR CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF
ANOTHER JURISDICTION.
23. Consent to Jurisdiction Provision. The Member hereby (i) irrevocably submits to the
nonexclusive jurisdiction of any Delaware State court or Federal court sitting in Wilmington,
Delaware, in any action arising out of this Agreement, and (ii) consents to the service of process
by mail. Nothing herein shall affect the right of any party to serve legal process in any manner
permitted by law or affect its right to bring any action in any other court.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Member has executed this Agreement as of the date and year first above
written.
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RADIO ONE DISTRIBUTION HOLDINGS,
LLC
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By: |
/s/ Linda J. Vilardo
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Name: |
Linda J. Vilardo |
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Title: |
Vice President |
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Amended & Restated Limited Liability Company Operating Agreement
Distribution One, LLC
exv3w19
Exhibit 3.19
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State of Delaware |
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Secretary of State |
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Division of Corporations |
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Delivered 06:32 PM 11/28/2007 |
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FILED 06:32 PM 11/28/2007 |
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SRV 071264269 4451231 FILE |
CERTIFICATE
OF INCORPORATION
OF
INTERACTIVE
ONE, INC.
FIRST:
The name of the Corporation is INTERACTIVE ONE, INC. (the
Corporation).
SECOND: The address of the Corporations registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, the City of Wilmington, County of
New Castle 19801. The name of the Corporations registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under
the General Corporation Law of
Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have authority to
issue is One Thousand (1,000) shares of Common Stock, $0.01 par value
per share.
FIFTH: The board of directors (Board of Directors) is authorized to make, alter or repeal
the by-laws of the Corporation. Election of directors need not be by written ballot.
SIXTH: A director of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the directors duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal
benefit. If the Delaware General
Corporation Law is hereafter amended to authorize the further elimination or limitation of the
liability of directors, then the liability of the directors of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the fullest extent permitted
by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by
the stockholders of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation at the time of such repeal or
modification.
SEVENTH: A. Each person who was or is a party or is threatened to be made a party to or is
involved in any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
proceeding, by reason of the fact that
he or she, or a person of whom he or she is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorneys fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered by such person in connection therewith, and such indemnification shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall inure to the benefit
of his or her heirs, executors and administrators; provided, however, that, except as provided in
Paragraph B hereof, the Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or
part thereof) was authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article SEVENTH shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his or her capacity as
a director or officer (and not in any other capacity in which service was or is rendered by such
person while a director or officer, including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is not entitled to be
indemnified under this Article SEVENTH or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
B. If a claim under Paragraph A of this Article SEVENTH is not paid in full by the Corporation
within thirty days after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of providing such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the applicable standard
of conduct.
C. The right to indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in this Article SEVENTH
2
shall not be exclusive of any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect itself and any person
who is or was a director, officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any such expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
EIGHTH: The name and mailing address of the incorporator is:
Deborah Hawkins
5900 Princess Garden Parkway
5th Floor
Lanham, MD 20706
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a
corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby
declaring and certifying that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 28th day of November, 2007.
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/s/ Deborah Hawkins
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Deborah Hawkins, Sole Incorporator |
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Division of Corporations Name Reservation Name Reservation Status
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Frequently Asked Questions Entity Search Name Reservation Status Logout
Name Reservation Status
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4451231
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INTERACTIVE ONE INC.
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CORPORATION
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RESERVED
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03/01/2008 |
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INTERACTIVE ONE LLC
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LIMITED LIABILITY COMPANY (LLC)
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NOT AVAILABLE
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SRV
Number 07l184177
Payment Type Credit Card
Card Number -************3836
Card Type MC
Credit Card Reference Number 110207123101305
Amount Charged $75.00
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State of Delaware |
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Secretary of State |
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Division of Corporations |
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Delivered 06:43 PM 06/05/2008 |
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FILED 04:55 PM 06/05/2008 |
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SRV 080667602 4451231 FILE |
CERTIFICATE
OF CHANGE OF LOCATION OF REGISTERED OFFICE
AND
OF REGISTERED AGENT
OF
Interactive
One, Inc.
It is hereby certified that:
1. The name of the corporation (hereinafter called the corporation) is:
Interactive
One, Inc.
2. The registered office of the corporation within the State of Delaware is hereby changed to
2711 Centerville Road, Suite 400, City of Wilmington 19808, County of New Castle.
3. The registered agent of the corporation within the State of Delaware is hereby changed to
Corporation Service Company, the business office of which is identical with the registered office
of the corporation as hereby changed.
4. The corporation has authorized the changes hereinbefore set forth by resolution of its
Board of Directors.
Signed on June 5, 2008
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/s/ Linda J. Vilardo
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Name: |
Linda J. Vilardo |
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Title: |
Vice President |
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State of Delaware |
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Secretary of State |
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Division of Corporations |
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Delivered 01:20 PM 07/01/2008 |
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FILED 01:14 PM 07/01/2008 |
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SRV 080747616 4451231 FILE |
STATE OF DELAWARE
CERTIFICATE OF MERGER OF
DOMESTIC CORPORATIONS
Pursuant to Title 8, Section 251(c) of the Delaware General Corporation Law, the undersigned
corporation executed the following Certificate of Merger:
FIRST: The name of the surviving corporation is Interactive One, Inc., and the name of the corporation being merged into this surviving
corporation is Magazine One, Inc.
SECOND: The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations.
THIRD: The name of the surviving corporation is Interactive One, Inc. a Delaware corporation.
FOURTH: The Certificate of Incorporation of the surviving corporation shall be its Certificate of
Incorporation.
FIFTH: The merger is to become effective July on 1, 2008.
SIXTH:
The Agreement of Merger is on file at 5900 Princess Garden Parkway,
7th Floor, Lanham, Maryland 20706, the place of business of the surviving corporation.
SEVENTH: A copy of the Agreement of Merger will be furnished by the surviving corporation on
request, without cost, to any stockholder of the constituent corporations.
IN
WITNESS WHEREOF, said surviving corporation has caused this certificate to be
signed by an authorized officer, the l6th day of June, A.D., 2008.
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By:
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/s/ Linda J. Vilardo
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Authorized Officer |
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Name: Linda J. Vilardo |
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Print or Type |
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Title: Vice President |
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exv3w20
Exhibit 3.20
BYLAWS
OF
INTERACTIVE ONE, INC.
(as of November 30, 2007)
A DELAWARE CORPORATION
ARTICLE I OFFICES
Section 1. Registered Office. The registered office in the State of Delaware shall be
at 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 in the County of New Castle. The
name of the corporations registered agent at such address shall be Corporation Service Company.
The registered office or registered agent of the corporation may be changed from time to time by
action of the board of directors on the filing of a certificate or certificates as required by law.
Section 2. Other Offices. The corporation may also have offices at such other places,
both within and without the State of Delaware, as the board of directors may from time to time
determine or the business of the corporation may require.
ARTICLE II MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall be
held each year, beginning in the year 2008, prior to the last day of September. At such meeting,
the stockholders shall elect the directors of the corporation and conduct such other business as
may come before the meeting. The time and place of the annual meeting shall be determined by the
board of directors. Special meetings of the stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof. Special meetings of the stockholders may be
called by the president or the chairman of the board for any purpose and shall be called by the
secretary if directed in writing by two or more members of the board of directors or the holders of
more than 10% of the outstanding stock and stating the purpose or purposes of the proposed meeting.
The board of directors may elect to hold a meeting of the stockholders solely by means of remote
communications.
Section 2. Notice. Whenever stockholders are required or permitted to take action at a
meeting, written or printed notice of every annual or special meeting of the stockholders, stating
the place, date, time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor
more than 60 days before the date of the meeting. All such notices shall be delivered, either
personally or by mail, by or at the direction of the
board of directors, the chairman of the board, the chief executive officer, the president or the
secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United
States mail with
postage prepaid and addressed to the stockholder at his or her address as it appears on the records
of the corporation. Without limiting the manner by which notice otherwise may be given to the
stockholders, any notice given by the corporation to the stockholders shall be effective if given
by a form of electronic transmission consented to by the stockholder to whom the notice is given.
Any such consent shall be revocable by the stockholder by written notice to the corporation. Any
such consent shall be deemed revoked if (a) the corporation is unable to deliver by electronic
transmission two consecutive notices given by the corporation in accordance with such consent and
(b) such inability becomes known to the corporations secretary, an assistant secretary, transfer
agent or other person responsible for giving such notice;
provided, however, that the inadvertent
failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Notice given by electronic transmission shall be deemed given: (i) if by facsimile, when directed
to a number at which the stockholder has consented to receive notice, (ii) if by electronic mail,
when directed to an electronic mail address at which the stockholder has consented to receive
notice, (iii) if by posting on an electronic network together with separate notice to the
stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such
separate notice, and (iv) if by any other form of electronic transmission, when directed to the
stockholder.
Section 3. Waiver of Notice. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice, or a waiver by
electronic transmission by the person entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be specified in any written
waiver of notice or any waiver by electronic transmission unless so required by the certificate of
incorporation or these bylaws.
Section 4. Stockholders List. The officer having charge of the stock ledger of the
corporation shall make, at least 10 days before every meeting of the stockholders, a complete list
arranged in alphabetical order of the stockholders entitled to vote at such meeting, specifying the
address of and the number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the notice of the meeting
or, if not so specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Quorum; Adjourned Meetings. The presence of stockholders entitled to cast
at least a majority of the votes that all stockholders are entitled to cast on a matter to be acted
upon at a meeting of the stockholders shall constitute a quorum for the purposes of consideration
and action on the matter, except as otherwise provided by statute or by the certificate of
incorporation. If a quorum is not present, the holders of the shares present in
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person or represented by proxy at the meeting and entitled to vote thereat shall have the power, by
the affirmative vote of the holders of a majority of such shares, to adjourn the meeting to another
time or place. Unless the adjournment is for more than thirty days or unless a new record date is
set for the adjourned meeting, no notice of the adjourned meeting need be given to any stockholder,
provided that the time and place of the adjourned meeting were announced at the meeting at which
the adjournment was taken. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
Section 6. Vote Required. When a quorum is present or represented by proxy at any
meeting, the vote of a majority of the votes cast by all stockholders entitled to vote and, if any
stockholders are entitled to vote as a class, the vote of a majority of the votes cast by the
stockholders entitled to vote as a class, whether such stockholders are present in person or
represented by proxy at the meeting, shall be the act of the stockholders, unless the question is
one upon which by express provisions of an applicable statute or of the certificate of
incorporation a different vote is required, in which case such express provision shall govern and
control the decision of such question.
Section 7. Voting Rights. Except as otherwise provided by the Delaware General
Corporation Law or by the certificate of incorporation of the corporation or any amendments thereto
and subject to Section 4 of ARTICLE VI hereof, each stockholder shall at every meeting of
the stockholders be entitled to one vote in person or by proxy for each share of capital stock held
by such stockholder.
Section 8. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him or her by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Section 9. Action Without Meeting. Any action required by law or these bylaws to be
taken at any annual or special meeting of stockholders of the corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than the minimum number
of votes that would be necessary to authorize such action at a meeting at which all shares entitled
to vote thereon were present and voted. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior action by the board
of directors is necessary, shall be the date on which the first written consent is expressed. A
telegram, cablegram or other electronic transmission consenting to an action to be taken and
transmitted by a stockholder, or by a person or persons authorized to act for a stockholder, shall
be deemed to be written, signed and dated for purposes of this
Section 9, provided, that any such
telegram, cablegram or other electronic transmission sets forth or is delivered with information
from which the corporation can determine (a) that the telegram, cablegram or other electronic
transmission was transmitted by the
stockholder, or by a person or persons authorized to act for the stockholder, and (b) the date on
which such stockholder or authorized person or persons transmitted such telegram, cablegram or
electronic transmission. The date on which such telegram, cablegram or electronic transmission is
transmitted shall be
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deemed to be the date on which such consent was signed. Any copy, facsimile or other reliable
reproduction of a consent in writing may be substituted or used in lieu of the original writing for
any and all purposes for which the original writing could be used,
provided, that such copy,
facsimile or other reproduction shall be a complete reproduction of the entire original writing.
ARTICLE III DIRECTORS
Section 1. General Authority. The business and affairs of the corporation shall be
managed by or under the direction of its board of directors which may exercise all such powers of
the corporation and do such lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done by the stockholders.
Section 2. Number, Election and Term of Office. The number of directors shall be no
fewer than 3 nor more than 7, as determined from time to time by resolution of the board or as
otherwise provided in the certificate of incorporation of the corporation. The directors shall be
elected by a plurality of the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote in the election of directors except that the first directors of the
corporation shall be appointed by the sole incorporator of the corporation. The directors shall be
elected in this manner at the annual meeting of the stockholders, except as provided in Section 3
of this ARTICLE III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal as hereinafter
provided. Directors need not be stockholders of the corporation.
Section 3. Removal and Resignation. Any director or the entire board of directors may
be removed at any time, with or without cause, by the vote of a majority of the votes cast by all
stockholders entitled to vote at an election of directors, except as otherwise provided by statute.
Any director may resign at any time upon written notice to the president or secretary of the
corporation. The resignation of any director shall take effect at the time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4. Vacancies. Except as otherwise provided by the certificate of incorporation
of the corporation or any amendments thereto, vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a majority vote of the
holders of the corporations outstanding stock entitled to vote thereon or by a majority vote of
the Board of Directors. Each director so chosen shall hold office until a successor is duly elected
and qualified or until his or her earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board of
directors shall be held without other notice than this bylaw immediately after, and at the same
place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting,
of the board of directors may be held without notice at such time and at such place as shall from
time to time be determined by resolution of the board. Special meetings of
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the board of directors may be called by or at the request of the chairman, the chief executive
officer or the president on at least 24 hours notice to each director, either personally, by
telephone, by mail, by telegraph, by facsimile or by other electronic transmission; in like manner
and on like notice the secretary must call a special meeting on the written request of a majority
of directors. Such notice shall state the date, time and place, if any, of the meeting but need not
state the purpose thereof, except as otherwise herein expressly provided. A written waiver of
notice signed by the director entitled to notice, whether before or after the time stated therein,
shall be equivalent to notice. Attendance of a director at the meeting shall constitute a waiver of
notice of such meeting, except when the director attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 7. Quorum. A majority of the total number of directors shall constitute a
quorum for the transaction of business. The vote of a majority of directors present at a meeting at
which a quorum is present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 8. Committees. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees. Each committee shall consist of one or more
of the directors of the corporation, which, to the extent provided in such resolution and not
otherwise limited by statute, shall have and may exercise the powers of the board of directors in
the management and affairs of the corporation including without limitation the power to declare a
dividend and to authorize the issuance of stock; provided, however, that no such committee shall
have the power or authority to amend these bylaws or the certificate of incorporation. The board of
directors may designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to time by resolution
adopted by the board of directors. Each committee shall keep regular minutes of its meetings and
report the same to the directors when required.
Section 9. Committee Rules. Each committee of the board of directors may fix its own
rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise
be provided by the resolution of the board of directors designating such committee, but in all
cases the presence of at least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that members alternate, if alternates are
designated by the board of directors as provided in Section 8 of
this ARTICLE III, of such
committee is/are absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Section 10. Compensation. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
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receiving compensation therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 11. Communications Equipment. Members of the board of directors or any
committee thereof may participate in and act at any meeting of such board or committee through the
use of a conference telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 12. Action by Written Consent. Any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the board of directors or
committee.
ARTICLE IV OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the board of
directors and shall consist of a chairman of the board (if the board of directors so deems
advisable and elects), a president (who shall perform the functions of the chairman of the board if
none be elected), one or more vice-presidents, a secretary, a treasurer, and such other officers
and assistant officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board of directors may
choose not to fill any office for any period as it may deem advisable, except the offices of
president and secretary.
Section 2. Election and Term of Office. The officers of the corporation shall be
elected annually by the board of directors at the meeting of the board of directors held after each
annual meeting of stockholders. If the election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each officer shall hold office
until the next annual meeting of the board of directors and until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors may be
removed by the board of directors whenever in its judgment the best interest of the corporation
would be served thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the board of directors for the unexpired portion of
the term by the board of directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the board of
directors, and no officer shall be prevented from receiving such compensation by virtue of the fact
that he or she is also a director of the corporation.
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Section 6. Chairman of the Board. The chairman shall preside at all meetings of the
board of directors and all meetings of the stockholders and shall have such other powers and
perform such duties as may from time to time be assigned to him by the board of directors.
Section 7. The Chief Executive Officer. The chief executive officer of the corporation
shall have such powers and perform such duties as are specified in these bylaws and as may from
time to time be assigned to him by the board of directors. The chief executive officer shall have
overall management of the business of the corporation and its subsidiaries and shall see that all
orders and resolutions of the boards of directors of the corporation and its subsidiaries are
carried into effect. The chief executive officer shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where
required or permitted by law to
be otherwise signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of the corporation.
The chief executive officer shall have general powers of supervision and shall be the final
arbitrator of all differences among officers of the corporation and its subsidiaries, and such
decision as to any matter affecting the corporation and its subsidiaries subject only to the boards
of directors. In the absence of the chairman for any reason, including the failure of the board of
directors to elect a chairman, or in the event of the chairmans inability or refusal to act, the
chief executive officer shall have all the powers of and be subject to all the restrictions upon
the chairman.
Section 8. The President. The president shall have such powers and perform such duties
as are specified in these bylaws and as may from time to time be assigned to him by the board of
directors. The president shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of directors are carried
into effect. The president shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. The president shall have
general powers of supervision and shall be the final arbitrator of all differences between officers
of the corporation, and such decision as to any matter affecting the corporation subject only to
the board of directors or the chief executive officer (if the president and the chief executive
officer are not the same person). In the absence of the chief executive officer for any reason,
including the failure of the board of directors to elect a chief executive officer or in the event
of the chief executive officers inability or refusal to act, the president shall have all the
powers of and be subject to all the restrictions upon the chief executive officer.
Section 9. Vice Presidents. The vice-president, or if there shall be more than one,
the vice-presidents in the order determined by the board of directors, including any executive vice
presidents, shall, in the absence or disability of the president, perform the duties and exercise
the powers of the president and shall perform such other duties
and have such other powers as the board of directors or the president may, from time to time,
determine or these bylaws may prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and the board of directors in a book to be kept for
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that purpose and shall perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders and special meetings
of the board of directors; perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he or she shall be; shall have custody of the corporate seal
of the corporation and the secretary, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by his or her signature
or by the signature of such assistant secretary. The board of directors may give general authority
to any other officer to affix the seal of the corporation and to attest the affixing by his or her
signature. The assistant secretary, or if there be more than one, the assistant secretaries in the
order determined by the board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors or the president may from time to time prescribe.
Section 11. The Treasurer and Assistant Treasurer. The treasurer shall have the
custody of the corporate funds and securities; shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation; shall deposit all monies and other
valuable effects in the name and to the credit of the corporation as may be ordered by the board of
directors, taking proper vouchers for such disbursements; and shall render to the president and the
board of directors, at its regular meeting or when the board of directors so requires, an account
of the corporation. If required by the board of directors, the treasurer shall give the corporation
a bond (which shall be rendered every six years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of the duties of the
office of treasurer and for the restoration to the corporation, in case of death, resignation,
retirement, or removal from office, of all books, papers, vouchers, money, and other property of
whatever kind in the possession or under the control of the treasurer belonging to the corporation.
The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order
determined by the board of directors, shall in the absence or disability of the treasurer, perform
the duties and exercise the powers of the treasurer and shall perform such other duties and have
such other powers as the board of directors or the president may from time to time prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers, assistant
officers and agents, if any, other than those whose duties are provided for in these bylaws, shall
have such authority and perform such duties as may from time to time be prescribed by resolution of
the board of directors.
ARTICLE V INDEMNIFICATION
Officers, directors and others shall be entitled to indemnification to the extent provided in the
certificate of incorporation.
ARTICLE VI CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be entitled to have a
certificate, signed by, or signed in the name of the corporation by the president or a
vice-president, and the secretary or an assistant secretary of the corporation, certifying the number of
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shares owned by him or her in the corporation. Where a certificate is signed (1) by a transfer
agent or an assistant transfer agent other than the corporation or its employee or (2) by a
registrar, other than the corporation or its employee, the signature of any such president,
vice-president, secretary, or assistant secretary may be facsimile. In case any officer or officers have
signed a certificate or certificates, or whose facsimile signature or signatures have been used on
certificate or certificates, shall cease to be such officer or officers of the corporation whether
because of death, resignation or otherwise before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used on such certificate
or certificates had not ceased
to be such officer or officers of the corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue, shall be entered on
the books of the corporation. All certificates surrendered to the corporation for transfer shall be
canceled, and no new certificate shall be issued in replacement until the former certificate for a
like number of shares shall have been surrendered or canceled, except as otherwise provided in
Section 2 with respect to lost, stolen or destroyed certificates.
Section 2. Lost Certificates. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of
that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed certificate or certificates, or his or her legal representative, to give the
corporation a bond in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 3. Transfers of Stock. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and record the transaction
upon its books.
Section 4. Fixing a Record Date. The board of directors may fix in advance a record date for
the determination of stockholders entitled to notice of, and to vote at, any meeting of
stockholders and any adjournment thereof; stockholders entitled to consent to corporate action in
writing without a meeting; stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or entitled to exercise any rights in respect to any change,
conversion or exchange of stock; or, for the purpose of any other lawful action, which record date
may not precede the date on which the resolution fixing such record date is adopted by the board of
directors. The record date for the determination of stockholders entitled to notice of, and to vote
at, a meeting of stockholders shall not be more than 60 days nor less than 10 days before the date
of such meeting. The record date for the determination of stockholders entitled to consent to
corporate action in writing without a meeting shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted by the board of directors. The record
date for the determination of stockholders with respect to any other action shall not be
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more than 60 days before the date of such action. If no record date is fixed: the record date for
determining stockholders entitled to notice of, and to vote at, a meeting of stockholders shall be
at the close of business on the day next preceding the day on which notice is given, or if notice
is waived, at the close of business on the day next preceding the day on which the meeting is held;
the record date for determining stockholders entitled to consent to corporate action in writing
without a meeting when no prior action by the board of directors is required by the Delaware
General Corporation Law, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of meetings of stockholders are
recorded; and, the record date for determining stockholders with respect to any other action shall
be the close of business on the day on which the board of directors adopts the resolution relating
thereto.
ARTICLE VII - GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the board of directors
at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the certificate of incorporation.
Before payment of any dividend, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, equalize dividends, repair
or maintain any property of the corporation, or for any other purpose, and the directors may modify
or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of
money by or to the corporation and all notes and other evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers, agent or agents of the corporation,
and in such manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Deposits. All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation or otherwise as the board of directors or the
Chief Executive Officer, the President or the Treasurer shall direct in such banks, trust companies
or other depositories as the board of directors may select, or as may be selected by any officer or
officers or agent or agents of the corporation to whom power in that respect shall have been
delegated by the board of directors. For the purpose of deposit and collection for the account of
the corporation, checks, drafts and other orders for the payment of money which are payable to the
order of the corporation may be endorsed, assigned and delivered by any officer of the corporation.
Section 4. Contracts. The board of directors may authorize any officer or officers, or any
agent or agents, of the corporation to enter into any contract or to execute and
deliver any instrument in the name of and on behalf of the corporation, and such authority may
be general or confined to specific instances.
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Section 5. Loans. The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its subsidiary, including
any officer or employee who is a director of the corporation or its subsidiary, whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit
the corporation. The loan, guaranty or other assistance may be with or without interest, and may be
unsecured, or secured in such manner as the board of directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall
be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 6. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
Section 7. Corporate Seal. The board of directors shall provide a corporate seal which shall
be in the form of a circle and shall have inscribed thereon the name of the corporation and the
words Corporate Seal, Delaware. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 8. Voting Securities Owned by Corporation. Voting securities in any other corporation
held by the corporation shall be voted by the president or the executive vice president, unless the
board of directors specifically confers authority to vote with respect thereto upon some other
person or officer. Any person authorized to vote securities shall have the power to appoint
proxies, with general power of substitution.
Section 9. Inspection of Books and Records. Any stockholder of record, in person or by
attorney or other agent, shall, upon written demand upon oath stating the purpose thereof, have the
right during the usual hours of business to inspect for any proper purpose the corporations stock
ledger, a list of its stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such persons interest as
a stockholder. In every instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of attorney or such
other writing which authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered office in the State of
Delaware or at its principal place of business.
Section 10. Form of Records. Any records maintained by the corporation in the regular course
of its business, including its stock ledger, books of account, and minute books, may be kept on, or
by means of, or be in the form of, any information storage device or
method, provided, that the
records so kept can be converted into clearly legible paper form within a reasonable time. The
corporation shall so convert any records so kept upon the request of any person entitled to inspect
the same.
Section 11. Section Headings. Section headings in these bylaws are for convenience of
reference only and shall note given any substantive effect in limiting or otherwise construing any
provision herein.
- 11 -
Section 12. Inconsistent Provisions. In the event that any provision of these bylaws is or
becomes inconsistent with any provision of the certificate of incorporation, the Delaware General
Corporation Law or any other applicable law, the provision of these bylaws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full force and effect.
ARTICLE VIII INTERESTED DIRECTORS
No contract or transaction between this Corporation and one or more of its directors or
officers, or between this Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) The material facts as to such directors or officers relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors or the committee,
and the board or committee in good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the disinterested directors may be
less than a quorum; or
(b) The material facts as to such directors or officers relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith by vote of the
stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the board of directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorized the contract or transaction.
ARTICLE IX AMENDMENTS
These bylaws may be amended, altered or repealed and new bylaws adopted at any meeting of the
board of directors by a majority vote, provided that the affirmative vote of the holders of a
majority of the shares of common stock of the corporation then entitled to vote shall be required
to adopt any provision inconsistent with, or to amend or repeal any provision of, Section 2 or 4 of
ARTICLE III or this ARTICLE IX. The fact that the power to adopt, amend, alter or repeal the bylaws
has been conferred upon the board of directors shall not divest the stockholders of the same
powers.
- 12 -
exv3w21
Exhibit 3.21
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State of Delaware |
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Secretary of State |
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Division of Corporations |
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Delivered 06:32 PM 11/28/2007 |
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FILED 06:33 PM 11/28/2007 |
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SRV 071264273 4464518 FILE |
STATE OF DELAWARE
CERTIFICATE OF FORMATION
OF
INTERACTIVE ONE, LLC
FIRST: The name of the limited liability company is Interactive One, LLC (the Company).
SECOND: The address, including street, number, city, and county, of the registered office of the
Company in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801; and the name of the registered agent of the Company in the State of Delaware at
such address is The Corporation Trust Company.
IN
WITNESS WHEREOF, the undersigned has executed this Certificate
of Formation this, 28th day of
November, 2007.
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/s/ Deborah Hawkins
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Name: |
Deborah Hawkins |
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Authorized Person |
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INTERACTIVE
ONE, INC.
5900 Princess Garden Parkway
5th Floor
Lanham, MD 20706
CONSENT TO USE OF NAME
INTERACTIVE ONE, INC., a corporation organized under
the laws of the State of Delaware, hereby consents to the
organization of INTERACTIVE ONE, LLC in the State of
Delaware.
IN WITNESS WHEREOF, the said corporation has caused
this consent to be executed by its Vice President this
28th day of November, 2007.
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INTERACTIVE ONE, INC.
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By: |
/s/ Linda J. Vilardo
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Name: |
Linda J. Vilardo |
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Title: |
Vice President |
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State of Delaware |
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Secretary of State |
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Division of Corporations |
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Delivered 06:44 PM 06/05/2008 |
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FILED 04:58 PM 06/05/2008 |
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SRV 080667627 4464518 FILE |
Certificate of Amendment to Certificate of Formation
of
Interactive One, LLC
It is hereby certified that:
1. The name of the limited liability company (hereinafter called the limited liability
company) is:
Interactive
One, LLC
2. The certificate of formation of the limited liability company is hereby amended by striking
out the statement relating to the limited liability companys registered agent and registered office
and by substituting in lieu thereof the following new statement:
The address of the registered office and the name and the address of the registered agent
of the limited liability company required to be maintained by Section 18-104 of the
Delaware Limited Liability Company Act are Corporation Service
Company, 2711 Centerville
Road, Suite 400, Wilmington, Delaware 19808.
Executed on June 5, 2008
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By: |
/s/ Linda J. Vilardo
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Name: |
Linda J. Vilardo |
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Title: |
Vice President |
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exv3w22
Exhibit 3.22
AMENDMENT
NO.1
TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
INTERACTIVE ONE, LLC
THIS AMENDMENT NO. 1 (this Amendment) to Amended and Restated Limited Liability
Company Operating Agreement of Interactive One, LLC, a Delaware limited liability company (the
Company), is made as of this 4th day of November, 2010 by and among Interactive One,
Inc., a Delaware corporation (together with any Substitute Member, the Sole
Member), the Company, the Equity Plan Members signatory hereto and each Person
subsequently admitted as a Member of the Company in accordance with the LLC Agreement (defined
below). Members shall mean collectively the Sole Member, the Equity Plan Members and any
person subsequently admitted as a Member. Capitalized terms used herein without definition shall
have the meanings ascribed thereto in the LLC Agreement referred to below.
W I
T N E S S E T H:
WHEREAS, the Members are party to that certain Amended and Restated Limited Liability Company
Operating Agreement of Interactive One, LLC adopted as of October 26, 2009 (the LLC
Agreement) relating to the management and operation of the
Company;
WHEREAS, the Members and the Company have agreed to amend the LLC Agreement in accordance with
Section 18.2 of the LLC Agreement as set forth in this Amendment;
NOW, THEREFOR, for mutual consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Amendment to Transfer Restrictions. Section 11.1 of the LLC Agreement is hereby
stricken in its entirety and the following Section 11.1 is inserted in its place:
Section 11.1
Transfers
(a) Subject to Section 11.1(d) hereof, no Member may Transfer
all or any portion of its Equity Interests other than (i) to a Permitted Transferee, (ii) any
Transfer of all or any portion of a Members Equity Interests pursuant to Sections 12.1, 12.2, 12.3
or 12.4 hereof and (iii) any Transfer of all or any portion of a Members Equity Interests pursuant
to a Sale Transaction (each, a Permitted Transfer), provided that in each case such
Transfer is made in accordance with Section 11.2 hereof. Any attempted Transfer of the Equity
Interests by such Members, other than in strict accordance with this Article XI, shall be null and void and the purported transferee shall have no rights as a
Member hereunder, except as may otherwise be provided in Section 13.4 as to such transferee.
(b) Notwithstanding anything to the contrary in this Agreement, no Transfer of Units (other
than in accordance with Section 11.1(d) hereof) shall be deemed effective until the transferee of
such Units executes a joinder agreement, in substantially the form attached hereto as Schedule
B (the Joinder Agreement) pursuant to which, among other things, such transferee
shall agree to be bound by the obligations of the Member transferring such Units to such transferee
under this Agreement and, if such transferee is an Affiliate of the Member transferring such Units,
such transferee shall agree to grant all authority to act on its behalf to the Member transferring
such Units to such transferee. Any purported transfer in violation of this Section 11.1(b) shall be
null and void.
(c) Notwithstanding anything to the contrary in this Agreement but subject to Section 11.1(d)
hereof, no Member shall enter into any agreement to vote or otherwise exercise any of the rights
appurtenant to any of the Units held by such Member with any Person other than an Affiliate of such
Member.
(d) Notwithstanding anything to the contrary in this Agreement, no consent of any Member shall
be required to permit (i) the Sole Member to pledge its membership interest as security for a loan
to such Sole Member or any Affiliate of such Sole Member, or (ii) a pledgee of the Sole Members
membership interest in the Company to Transfer such membership interest in connection with such
pledgees exercise of its rights and remedies with respect thereto, or to permit such pledgee or
its assignee to be substituted for the Sole Member under this Agreement in connection with such
pledgees exercise of such rights and remedies. For the avoidance of doubt, any such Transfer
pursuant to this Section 11.1(d) shall be deemed effective upon its occurrence and shall not
require the execution of a Joinder Agreement.
2. Amendment to Schedule A. Schedule A to the Operating Agreement is hereby stricken
in its entirety and replaced with Schedule A attached hereto.
3. Full Force and Effect. Except as amended herein, the LLC Agreement shall remain in
full force and effect.
4. Governing
Law; Counterparts. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the principles of conflicts of
laws. This Amendment may be executed in counterparts, each of which shall constitute an original
but all of which when taken together shall constitute a single agreement.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written
above.
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MEMBER:
INTERACTIVE ONE, INC.,
a Delaware corporation
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By: |
/s/ Linda J. Vilardo
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Name: |
LINDA J. VILARDO |
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Title: |
Vice President |
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COMPANY:
INTERACTIVE ONE, LLC,
a Delaware limited liability company
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By: |
/s/ Linda J. Vilardo
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Name: |
LINDA J. VILARDO |
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Title: |
Vice President |
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Amendment No.1 to Amended & Restated Limited Liability Company Operating Agreement
Interactive
One, LLC
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EQUITY PLAN MEMBERS:
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By: |
/s/
Thomas Newman
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Name: |
Thomas Newman |
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By: |
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Name: |
Courtney I. Williams |
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By: |
/s/ Christopher Keith Bowen
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Name: |
Christopher Keith Bowen |
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By: |
/s/ Smokey D. Fontaine
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Name: |
Smokey D. Fontaine |
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Amendment
No. 1 to Amended & Restated Limited Liability Company Operating Agreement
Interactive
One, LLC
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EQUITY PLAN MEMBERS:
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By: |
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Name: |
Thomas Newman |
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By: |
/s/ Courtney I. Williams
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Name: |
Courtney I. Williams |
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By: |
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Name: |
Christopher Keith Bowen |
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By: |
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Name: |
Smokey D. Fontaine |
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Amendment
No. 1 to Amended & Restated Limited Liability Company Operating Agreement
Interactive
One, LLC
SCHEDULE A
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Aggregate Capital |
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Contribution as of May |
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11, 2009 for Interactive |
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One, Inc. and as of the |
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Effective Date for Equity |
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Name/Address of Member |
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Plan Members |
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Number of Units |
CLASS A UNITS |
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Approximately |
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Interactive One, Inc. |
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$14,000,000 |
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4,700 |
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New York, New York |
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Attn: Alfred C. Liggins III |
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EQUITY PLAN UNITS |
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Thomas Newman |
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$100 |
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100 |
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EQUITY PLAN UNITS |
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Courtney I. Williams |
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$50 |
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50 |
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EQUITY PLAN UNITS |
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Christopher Keith Bowen |
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$50 |
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50 |
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EQUITY PLAN UNITS |
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Smokey D. Fontaine |
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$50 |
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50 |
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
INTERACTIVE ONE, LLC
EFFECTIVE AS OF OCTOBER 26, 2009
K&E.
Table of Contents
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Page |
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ARTICLE I DEFINITIONS AND CONSTRUCTION |
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1 |
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Section 1.1 Definitions |
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1 |
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Section 1.2 Company Powers |
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12 |
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Section 1.3 Construction |
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12 |
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Section 1.4 Headings |
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12 |
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ARTICLE II FORMATION AND ORGANIZATION |
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12 |
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Section 2.1 Formation |
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12 |
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Section 2.2 Name |
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12 |
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Section 2.3 Business Purpose |
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13 |
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Section 2.4 Registered Office and Agent |
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13 |
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Section 2.5 Term |
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13 |
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Section 2.6 Principal Place of Business |
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13 |
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Section 2.7 Title to Company Property |
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13 |
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Section 2.8 Business Transactions of the Members and Managers with the Company |
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13 |
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Section 2.9 Fiscal Year |
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13 |
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Section 2.10 Other Qualifications |
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13 |
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Section 2.11 No State Law Partnership |
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14 |
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ARTICLE III THE MEMBERS |
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14 |
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Section 3.1 Members; Powers of Members |
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14 |
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Section 3.2 Meetings of Members |
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14 |
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Section 3.3 Place of Meetings |
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14 |
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Section 3.4 Notice of Members Meetings |
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14 |
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Section 3.5 Waiver of Notice |
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15 |
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Section 3.6 Voting Record |
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15 |
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Section 3.7 Vote Required |
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15 |
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Section 3.8 Action by Written Consent of Members |
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16 |
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Section 3.9 No Liability of Members |
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16 |
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ARTICLE IV MANAGEMENT OF THE COMPANY |
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16 |
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Section 4.1 Management by Board of Managers |
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16 |
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Section 4.2 Removal; Resignations; Vacancies |
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17 |
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Section 4.3 Meetings of the Board |
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17 |
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Section 4.4 Compensation of Managers |
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18 |
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Section 4.5 Power to Bind Company |
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18 |
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Section 4.6 Committees |
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18 |
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Section 4.7 Chairman of the Board |
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18 |
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Section 4.8 Officers and Related Persons; Retention of Authority by Board; Matters Not Subject to Approval |
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18 |
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Section 4.9 President |
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19 |
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TABLE OF CONTENTS
(continued)
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Page |
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Section 4.10 Chief Financial Officer |
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19 |
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Section 4.11 Vice Presidents |
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20 |
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Section 4.12 Treasurer |
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20 |
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Section 4.13 Assistant Treasurers |
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20 |
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Section 4.14 Secretary |
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20 |
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Section 4.15 Assistant Secretaries |
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20 |
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Section 4.16 Adoption of the Annual Budget |
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20 |
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Section 4.17 Employment Agreements |
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21 |
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ARTICLE V CAPITAL STRUCTURE |
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21 |
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Section 5.1 Authorized Units |
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21 |
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Section 5.2 Rights of Designated Common Units |
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22 |
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Section 5.3 Reservation and Issuance of Common Units |
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23 |
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Section 5.4 Units Subject to Forfeiture |
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23 |
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Section 5.5 No Appraisal Rights |
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24 |
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ARTICLE VI CONTRIBUTIONS |
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24 |
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Section 6.1 Initial Capital Contribution |
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24 |
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Section 6.2 Further Contributions |
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24 |
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Section 6.3 Interest |
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24 |
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Section 6.4 No Return of Capital Contribution |
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24 |
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Section 6.5 No Loans |
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24 |
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ARTICLE VII CAPITAL ACCOUNTS |
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24 |
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Section 7.1 Maintenance of Capital Accounts |
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24 |
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Section 7.2 Negative Capital Accounts |
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25 |
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Section 7.3 Sale or Exchange of Units |
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25 |
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ARTICLE VIII ALLOCATIONS OF PROFITS AND LOSSES |
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25 |
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Section 8.1 Net Profits |
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25 |
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Section 8.2 Net Losses |
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25 |
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Section 8.3 Limitation on Allocation of Losses |
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25 |
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Section 8.4 Allocation of Nonrecourse Deductions |
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25 |
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Section 8.5 Allocation of Member Nonrecourse Deductions |
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26 |
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Section 8.6 Qualified Income Offset |
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26 |
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Section 8.7 Minimum Gain Chargeback |
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26 |
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Section 8.8 Partner Minimum Gain Chargeback |
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26 |
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Section 8.9 Book-Ups/Tax Disparities |
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26 |
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Section 8.10 Individual Tax Items |
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26 |
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Section 8.11 Tax Credits |
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27 |
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Section 8.12 Changes in Number of Units |
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27 |
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ARTICLE IX DISTRIBUTIONS |
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27 |
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Section 9.1 Limitations on Distributions |
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27 |
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-ii-
TABLE OF CONTENTS
(continued)
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Page |
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Section 9.2 Mandatory Tax Distributions |
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28 |
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Section 9.3 Distributions Prior to Liquidation |
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28 |
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Section 9.4 Withholding Taxes |
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29 |
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ARTICLE X ACCOUNTS |
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29 |
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Section 10.1 Books |
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29 |
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Section 10.2 Tax Matters |
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29 |
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Section 10.3 Special Basis Adjustment |
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30 |
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ARTICLE XI TRANSFERS OF UNITS |
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30 |
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Section 11.1 Transfers |
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30 |
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Section 11.2 Conditions to Permitted Transfers |
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30 |
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Section 11.3 Prohibited Transfers |
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31 |
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Section 11.4 Representations Regarding Transfers |
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31 |
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Section 11.5 Treatment of Equity Plan Units Issued Pursuant to a Combined Award Agreement |
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32 |
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ARTICLE XII ADDITIONAL RIGHTS AND OBLIGATIONS OF THE MEMBERS |
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32 |
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Section 12.1 Call Rights |
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32 |
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Section 12.2 Put Rights |
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33 |
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Section 12.3 Drag Along Rights |
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35 |
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Section 12.4 Tag-Along Rights |
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36 |
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Section 12.5 Treatment of Equity Plan Units Issued Pursuant to a Combined Award Agreement |
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36 |
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ARTICLE XIII ADDITIONAL, SUBSTITUTE AND LIMITED MEMBERS |
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37 |
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Section 13.1 Admissions |
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37 |
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Section 13.2 Admission of Additional Members |
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37 |
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Section 13.3 Admission of Substitute Members |
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37 |
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Section 13.4 Limited Members |
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37 |
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Section 13.5 Admission of Equity Plan Members |
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38 |
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Section 13.6 Withdrawal of Member |
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38 |
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ARTICLE XIV REPORTS TO MEMBERS |
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39 |
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Section 14.1 Books and Records |
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39 |
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Section 14.2 Annual Reports |
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40 |
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Section 14.3 Quarterly Reports |
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40 |
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Section 14.4 Tax Returns and Tax Information to Members |
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41 |
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Section 14.5 Equity Plan Member Information Rights |
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41 |
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ARTICLE XV EVENTS OF DISSOLUTION |
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41 |
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Section 15.1 Dissolution |
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41 |
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Section 15.2 No other Event of Dissolution |
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41 |
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-iii-
TABLE OF CONTENTS
(continued)
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Page |
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ARTICLE XVI TERMINATION |
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41 |
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Section 16.1 Liquidation |
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41 |
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Section 16.2 Final Accounting |
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42 |
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Section 16.3 Cancellation of Certificate |
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42 |
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ARTICLE XVII EXCULPATION AND INDEMNIFICATION |
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42 |
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Section 17.1 Exculpation |
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42 |
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Section 17.2 Indemnification |
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42 |
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ARTICLE XVIII GENERAL PROVISIONS |
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43 |
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Section 18.1 Confidentiality |
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43 |
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Section 18.2 Amendment |
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44 |
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Section 18.3 Governing Law |
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45 |
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Section 18.4 WAIVER OF JURY TRIAL |
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45 |
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Section 18.5 Remedies |
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45 |
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Section 18.6 Notices |
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46 |
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Section 18.7 Severability |
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46 |
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Section 18.8 Counterparts; Signatures |
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46 |
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Section 18.9 Entire Agreement |
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46 |
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Section 18.10 Assignment; Binding Effect |
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47 |
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Section 18.11 Relationship |
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47 |
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Section 18.12 Interpretation |
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47 |
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Section 18.13 No Third-Party Beneficiary |
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47 |
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-iv-
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
INTERACTIVE ONE, LLC
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT, effective as of
October 26, 2009 (this Agreement), of Interactive One, LLC, a Delaware limited liability company
(the Company), is made by and among Interactive One, Inc., a Delaware corporation (Interactive
One or the Sole Member), and each Person subsequently admitted as a Member of the Company in
accordance with the terms of this Agreement.
RECITAL
On November 27, 2007, the Company was formed as a limited liability company in accordance with
the provisions of the Delaware Limited Liability Company Act, 6 Del. C § 18-101 et seq, as amended
from time to time, and any successor statute (the Act). Initially, the Company had two member
entities: Interactive One, Inc and Magazine One, Inc. (Magazine One). On July 1, 2008, Magazine One was
merged with and into Interactive One leaving Interactive One as the Sole Member of the Company.
Accordingly, the Sole Member wishing to set forth the terms and conditions pursuant to which the
Company will conduct its business, and intending to be legally bound hereby, agrees as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Definitions. As used in this Agreement, the following terms shall have the
meanings set forth below:
Additional Member shall mean a Person who has acquired Units from the Company after
the Effective Date and been admitted as a Member of the Company pursuant to Section 13.2 or, for
Equity Plan Members, Section 13.5 hereof.
Adjusted Capital Account Deficit shall mean, with respect to any Member, the deficit
balance, if any, in such Members Capital Account as of the end of the relevant Taxable Year after
giving effect to the following adjustments: (a) credit to such Capital Account any amounts that
such Member is obligated to restore pursuant to the penultimate sentences of Regulations §§ l.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such Capital Account the items described in
Regulations §§ 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of Regulations § 1.704- 1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
Affiliate shall mean, with respect to any Person, any other Person, other than an
individual, that is directly or indirectly Controlling, Controlled by or under common Control with
such Person.
Agreed Value shall mean the fair market value of contributed property at the time it is
accepted by the Company, as determined by the majority of the Board using any reasonable method of
valuation.
Applicable Interest Rate shall mean the Prime Rate plus 3%.
Award Agreement shall mean either an Interactive Award Agreement issued pursuant to the
Interactive Equity Plan or a Combined Award Agreement issued pursuant to the Interactive Equity
Plan and the Community Connect Equity Plan, as the case may be.
Bankruptcy shall mean, with respect to any Person, the occurrence of any of the following events:
(a) the filing by such Person of a petition in bankruptcy or for relief under applicable bankruptcy
laws; (b) the filing against such Person of any such petition (unless such petition is dismissed
within ninety (90) days from the date of filing thereof); (c) entry against such Person of an order
for relief under applicable bankruptcy laws; (d) written admission by such Person of its inability
to pay its debts as they mature, or a general assignment by such Person for the benefit of
creditors; or (e) appointment of a trustee, conservator or receiver for such Person or for any
substantial part of the property or affairs of such Person.
Board shall mean the Board of Managers of the Company consisting of those Managers who
are elected from time to time to serve on the Board in accordance with Article IV hereof.
Business Day shall mean each day of the calendar year other than a Saturday, a Sunday or
a day on which banks are required or authorized to close in New York, New York.
Capital Account shall mean the account maintained for a Member determined in accordance
with Article VII hereof.
Capital Commitment shall mean, as to any Member, the amount of such Members commitment,
if any, to make Capital Contributions when called upon to do so by the Board, as set forth on
Schedule A attached hereto.
Capital Contribution shall mean the amount of cash or the Agreed Value of any other
property (net of any liabilities assumed by the Company or to which such property is subject)
contributed to the Company by or on behalf of a Member in consideration for Units as described in
Article VI hereof. In the case of a grant of Equity Plan Units to a provider of services to the
Company after the date of adoption of the final regulations contemplated by notice of proposed
rulemaking REG 105346-03 (May 24, 2005), the Capital Contribution of the applicable Equity Plan
Member providing such services shall also include any amount included on or after that date in such
Members compensation income under Sections 83(a), 83(b) and 83(d)(2) of the Code.
2
Cause shall mean: (1) Cause as defined in an Equity Plan Members employment or
consulting agreement, if any, with the Company; or (2) if there is no effective employment or
consulting agreement between the Equity Plan Member and the Company that includes a definition of
Cause, then Cause means: (i) a charge, indictment or conviction of, or a plea of guilty or nolo
contendere to, a misdemeanor involving fraud, embezzlement or an act of moral turpitude, or a
felony, whether or not in connection with the performance by the Equity Plan Member of his or her
duties or obligations to the Company; (ii) habitual drunkenness or substance abuse; (iii) theft
relating to the business of the Company or dishonesty with respect to a material aspect of the
Companys business; (iv) the repeated refusal by the Equity Plan Member to use his or her
reasonable and diligent efforts to follow the lawful and reasonable policies or directives of the
President of the Company or of his or her designated representatives; (v) gross negligence or
willful misconduct in the performance of the Equity Plan Members duties or engaging in illegal
activity in connection therewith, including, without limitation, the Equity Plan Members knowing
engagement in any act or course of conduct that would result in the termination or revocation of,
or jeopardize the renewal of, any licenses, permits, consents, authorization, approvals or material
agreements necessary for the Company to conduct its business or that would have a material adverse
effect on the Company; (vi) violation of any nonsolicitation, noncompetition or nondisclosure
provision contained in any agreement, including an Award Agreement, entered into by and between the
Equity Plan Member and the Company; or (vii) the Equity Plan Members breach of any fiduciary duty
to the Company involving personal gain or profit to the Equity Plan Member. In the case of Newman,
the term Cause shall be as defined in his employment agreement dated as of May 1, 2007, as
amended, between Magazine One, Inc., a subsidiary of Radio One, and Newman (the Newman Employment
Agreement); provided that for purposes of Section 12.1(c) (and indirectly Section 12.2(c)) of this
Agreement, this modified definition of Cause for Tom Newman shall refer only to clauses (ii),
(vi), (vii), (viii), (ix) or (x) of such definition in his employment agreement.
Certificate of Formation shall mean the certificate of formation of the Company filed in
the Office of the Secretary of State of the State of Delaware pursuant to the Act and through which
the Company has been formed.
Chairman shall mean the individual selected by the Members from time to time to hold such
office pursuant to Section 4.7 hereof.
Chief Financial Officer shall mean the individual selected by the Board from time to time
to hold such office pursuant to Section 4.10 hereof.
Class A
Units shall mean Units designated as Class A Units as described in Section
5.2(a) hereof.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time (or any
corresponding provisions of succeeding law).
Combined Award Agreement shall mean the Combined Interactive One, LLC and Community
Connect, LLC Unit Award Agreement issued pursuant to the Interactive Equity Plan and the Community
Connect Equity Plan.
3
Combined Capital Contributions shall mean the aggregate Capital Contributions of
Interactive One to the Company and Community Connect, Inc. to Community Connect, net of any
distributions to the holders of Class A Units under Section 9.3(a) and net of any deemed
distributions pursuant to Section 9.1(b) hereof. According to the books and records of the Sole
Member, as of May 11, 2009, the Combined Capital Contributions was approximately $52,000,000. Any
Member will be entitled to review the books and records of the Company and Community Connect to
verify the accuracy of the amount of Combined Capital Contributions at any time, and in the event
of any dispute concerning the amount of Combined Capital Contributions at any time, the decision of
Interactive One shall be binding upon all parties hereto unless a court issues a final and
non-appealable decision that the decision of Interactive One was materially inaccurate, in which
case the decision of such court shall govern the determination of the amount of the Combined
Capital Contributions. In the event that the amount of the Combined Capital Contributions is
challenged hereunder as provided in the immediately preceding sentence, the party prevailing in the
court proceeding resulting from such challenge shall be entitled to recoup all costs and expenses
incurred in relation to such challenge and the court proceeding from the party that failed to
prevail in such court proceeding.
Community
Connect Equity Plan shall mean that certain Community Connect, LLC Incentive
Award Plan, dated as of February 27, 2009, as it exists from time to time.
Community Connect shall mean Community Connect, LLC, a Delaware limited liability company that is
an affiliate of the Company.
Control
(including with correlative meanings Controls, Controlling,Controlled
by, Controlled or under common Control with) as used with respect to any Person, shall mean (a)
the power of another Person to exercise, directly or indirectly through one or more intermediaries,
more than fifty percent (50%) of the Voting Power of such Person or (b) the power to direct or
cause the direction, directly or indirectly through one or more intermediaries, of the management
and policies of such Person.
Depreciation shall mean, for each Taxable Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an asset for such Taxable
Year, except that, if the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Taxable Year, Depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Taxable Year bears to such beginning
adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes
of an asset at the beginning of such Taxable Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method selected by the Tax
Matters Partner, and provided, further, that Depreciation with respect to an asset for which the
Company uses the remedial allocation method shall be determined in accordance with Regulations
§ 1.704-3(d)(2).
Distribution shall mean a transfer of cash or property by the Company to a Member on
account of Units as described in Article IX hereof.
4
Effective Date shall mean October 26, 2009.
Equity Interests shall mean all outstanding Units of the Company, regardless of class or
series.
Equity Plan Units shall mean Units designated as Equity Plan Units as described in
Section 5.2(b) hereof.
Equity Plan Members shall mean Members holding Equity Plan Units pursuant to the
interactive Equity Plan and an Award Agreement.
Family Member shall mean as to any Person, any lineal descendant of such Person, any
Person for whom such Person is a lineal descendant, any sibling of such Person, any spouse of any
of the foregoing Persons or any trust for the benefit of any of the foregoing Persons.
Federal Rate shall mean, for each Taxable Year, the highest federal income tax rate
applicable to a U.S. corporation for such Taxable Year.
Fully Diluted Basis shall mean a computation of Units which includes all outstanding
Units and all authorized Equity Plan Units (whether or not outstanding) and all other Units that
are issuable upon conversion, exercise or exchange of all derivative equity interests.
Grant Date shall mean, with respect to a Equity Plan Unit, the date on which such Unit is
issued by the Company to a Equity Plan Member pursuant to an Award Agreement.
Gross Asset Value shall mean, with respect to any asset, such assets adjusted basis for
federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the
Agreed Value at the time it is accepted by the Company, unreduced by any liability secured by such
asset.
(b) The Gross Asset Value of all Company assets shall be adjusted as provided by Regulation Section
1.704-1(b)(2)(iv)(f )to equal their respective fair market values, as determined by the Board, as
of the following times: (i) the acquisition of Units by a new or existing Member in exchange for
more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of
more than a de minimis amount of money or other Company property as consideration for an interest
in the Company; (iii) the liquidation of the Company for Federal income tax purposes within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); (iv) in connection with the grant of
Equity Plan Units (other than a de minimis number of Units) prior to the date of adoption of the
final regulations contemplated by notice of proposed rulemaking REG 105346-03 (May 24, 2005) as
consideration for the provision of services to or for the benefit of the Company by an existing Equity Plan Member acting in his capacity as a Member, or by a new Equity
Plan Member acting in his capacity as a Member or in anticipation of becoming a Member; and (v) in
connection with the grant or vesting of Units that have been granted on or after the date of
adoption of the final regulations
5
contemplated by notice of proposed rulemaking REG 105346-03 (May 24, 2005) to a new or existing
Equity Plan Member in connection with the performance of services for the Company, but only if such
grant or vesting results in such Equity Plan Member recognizing income under section 83 of the Code
(or if such grant or vesting would result in such recognition if the Units had a fair market value
other than zero); provided, however, that the adjustments pursuant to clauses (i), (ii), (iii),
(iv) and (iv) above shall be made only if the Board reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the Members in the Company.
(c) The Gross Asset Value of any asset of the Company distributed to any Member shall be adjusted
to equal the fair market value of such asset as determined by the Board, unreduced by any liability
secured by such asset, on the date of Distribution.
(d) The Gross Asset Value of the Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Code §§ 734(b) or 743(b), but only to
the extent that such adjustments are taken into account in determining Capital Accounts pursuant to
Regulations § 1.704-1(b)(2)(iv)(m) and paragraph (f) of the definition of Net Profits and Net
Losses.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraphs (a),
(b) or (d) of this definition, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of computing Net Profits
and Net Losses.
Interactive Award Agreement shall mean an Interactive One, LLC Incentive Award Plan Unit
Award Agreement issued pursuant to the Interactive Equity Plan
Interactive Equity Plan shall mean that certain Interactive One, LLC Incentive Award Plan, dated
as of February 25, 2009, as such plan may be amended from time to time with the approval of the
Board for purposes of providing incentives to employees and other representatives of the Company.
Limited Member shall mean a Member or other Person that has become a Limited Member
pursuant to Section 13.4 hereof or a Person that acquires Units
from a Limited Member; provided
that a Member (that is not a Limited Member) that acquires Units from a Limited Member shall not be
deemed to be a Limited Member hereunder but such Member shall, as to such Units, have the rights
and obligations of the Limited Member that last held such Units.
Manager shall mean each individual elected by the Members to serve on the Board pursuant
to Article IV. A Manager need not be a Member.
Mandatory Tax Distribution shall mean, for each Taxable Year, an amount equal to the
product of the Tax Rate for such Taxable Year, multiplied by the net taxable income (other than any
income or gain attributable to a Sale Transaction) of the Company for such Taxable Year.
6
Member shall mean the Sole Member, Substitute Member, Additional Member or
Limited Member, as the case may be; and Members shall mean the Sole Member, Substitute Members,
Additional Members and Limited Members, collectively.
Member Nonrecourse Debt shall have the meaning of partner nonrecourse debt as set
forth in Regulations § 1.704-2(b)(4).
Member Nonrecourse Deductions shall have the meaning of partner nonrecourse
deductions as set forth in Regulations § 1.704-2(i).
Net Gain from a Sale Transaction or Net Loss from a Sale Transaction shall
mean the net income, gain, loss or deduction recognized by the Company on a Sale Transaction,
computed in accordance with the principles set forth in the definition of Net Profits and Net Losses.
Net Proceeds from a Sale Transaction shall mean the proceeds received by the Company
or the Members from any Sale Transaction, reduced by the Companys out-of-pocket costs incurred in
connection therewith.
Net Profits and Net Losses shall mean, for any Taxable Year or other
period, an amount equal to the Companys taxable income or loss for such year or period, determined
in accordance with Code § 703(a) (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code § 703(a)(l) shall be included in taxable income
or loss), with the following adjustments:
(a) Any income of the Company that is exempt from federal income tax and not otherwise taken
into account in computing Net Profits or Net Losses shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code § 705(a)(2)(B) or treated as Code §
705(a)(2)(B) expenditures pursuant to Regulations § 1.704-1(b)(2)(iv)(i) and not otherwise taken
into account in computing Net Profits or Net Losses shall be subtracted from such taxable income or
loss;
(c) In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraphs
(b) or (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken
into account as gain or loss, as the case may be, from the disposition of such asset for purposes
of computing Net Profits or Net Losses;
(d) Gain or loss resulting from any disposition of property with respect to which gain or loss
is recognized for federal income tax purposes shall be computed by reference to the Gross Asset
Value of property disposed of, notwithstanding that the adjusted tax basis of such property differs
from its Gross Asset Value;
(e) In lieu of depreciation, amortization, and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be taken into account
7
Depreciation with respect to each asset of the Company for such Taxable Year, computed in
accordance with the definition of Depreciation above;
(f) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to
Code §§ 734(b) or 743(b) is required pursuant to Regulations § 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a Distribution other than in complete
liquidation of a Members Units, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis
of the asset) from the disposition of the asset and shall be taken into account for purposes of
computing Net Profits or Net Losses; and
(g) Net Profits and Net Losses shall not include any Net Gain from a Sale Transaction or Net
Loss from a Sale Transaction or any items specifically allocated in Sections 8.5, 8.6, 8.7 and 8.8.
Newman shall mean Thomas Newman.
Non-Equity Plan Members shall mean Members other than Equity Plan Members.
Nonrecourse Deductions shall have the meaning set forth in Regulations §
1.704-2(b)( 1).
Percentage Interest shall mean, with respect to any Member, the ratio of a Members Units
to all outstanding Units, expressed as a percentage. For purposes of determining the number of
outstanding Units, all Equity Plan Units awarded under the Interactive Equity Plan shall be
considered outstanding and all Equity Plan Units reserved but not yet awarded shall be allocated
among the Non-Equity Plan Members pro rata. Each Members initial Percentage Interest shall be set
forth opposite the name of such Member on Schedule A hereto, and such percentage may be adjusted
from time to time pursuant to the terms of this Agreement.
Permitted Transferee shall mean (a) with respect to the Sole Member, an
Affiliate of Radio One and (b) with respect to a Equity Plan Member that is admitted as a
Member pursuant to Section 13.5 hereof (i) the Company, (ii) a transferee pursuant to the Equity
Plan Members will or other similar testamentary disposition or the laws of descent and
distribution, (iii) a Family Member of such Equity Plan Member, or (iv) a Person that is an
Affiliate of the Equity Plan Member or a Family Member of such Equity Plan Member.
Person shall mean an individual, corporation, partnership, limited liability company,
business trust, estate, unincorporated association, joint venture or other entity of whatever
nature.
President shall mean the individual selected by the Board from time to time to hold such
office pursuant to Section 4.9 hereof.
8
Prime Rate means the prime rate as published from time to time by The Wall Street
Journal and, if no Prime Rate is published by The Wall Street
Journal, then the rate announced by a
major New York money center bank selected by the Board, as its prime rate or base rate, or, if
no such rate is announced, then the rate charged to its best corporate customers for demand loans,
with changes in such rate being effective for purposes of this Agreement as of the date announced.
Radio One shall mean Radio One, Inc., a Delaware corporation.
Regulations shall mean, except where the context indicates otherwise, the permanent and
temporary regulations of the Department of the Treasury promulgated under the Code, as such
regulations may be lawfully changed from time to time (including corresponding provisions of
succeeding regulations).
Sale Transaction shall mean (i) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in a single transaction or series of related
transactions, or (ii) the acquisition of the Company by a Person or group of Persons by means of
any transaction or series of related transactions (including, without limitation, any merger,
consolidation, or reorganization), if, following such transaction or transactions, the Persons that
were Members or Affiliates of Members immediately prior to such transaction or transactions
beneficially own, directly or indirectly, less than 50 percent (50%) of both the then outstanding
equity securities and the combined Voting Power of the then outstanding securities of the
purchaser, transferee or successor; provided, however, that any transaction consummated under
Sections 12.1 or 12.2 hereof shall not constitute or be deemed to be a Sale Transaction hereunder.
Secretary shall mean the individual selected by the Board from time to time to hold such
office pursuant to Section 4.14 hereof.
Sole Member shall mean Interactive One, Inc. and shall include, solely for purposes of
Article VI hereof, any Substitute Member for the Sole Member.
State Rate shall mean, for each Taxable Year, the highest combined State and local income
(or similar) tax rate applicable to corporations in any single geographical taxing jurisdiction in
which the Company conducts business for such Taxable Year; provided, however, that for any Taxable
Year, the Board may select a lesser tax rate that, in the reasonable good faith judgment of the
Board, approximates the combined State and local tax rates to which the Members shares of the net
income of the Company likely will be subject for such Taxable Year.
Substitute Member shall mean a Person who has been admitted as a Member pursuant to
Section 13.3 hereof; provided that a Member that acquires Units from another Member shall not be
deemed to be a Substitute Member hereunder.
Tax Matters Partner shall mean the tax matters partner of the Company as defined in
Code § 6231(a)(7).
9
Tax Rate shall mean, for each Taxable Year, the sum of (a) the Federal Rate for such
Taxable Year, plus (b) the product of (i) the State Rate for such Taxable Year, multiplied by (ii)
100% minus the Federal Rate for such Taxable Year.
Taxable Year shall mean the taxable year of the Company, which shall be the same as the
Fiscal Year unless otherwise agreed to by the Board and all of the Members or as otherwise required
by applicable law.
Transfer shall mean, as a noun, any voluntary or involuntary sale, assignment, transfer,
grant, hypothecation, pledge, encumbrance or other disposition; and, as a verb, voluntarily or
involuntarily to sell, assign, transfer, grant, give away, hypothecate, pledge, encumber or
otherwise dispose of, and shall include any transfer by will, gift or intestate succession.
Units shall mean the personal property ownership interests in the Company, as designated
into classes in accordance with Article V of this Agreement, including any and all benefits to
which the holder of such personal property ownership interests may be entitled as provided in this
Agreement, together with all obligations of such holder to comply with the terms and provisions of
this Agreement, including, but not limited to, the rights of each Member in the Distributions, Net
Profits, Net Losses and Capital Accounts of the Company with respect to the personal property
ownership interests held by such Member.
Vested means, with respect to the Equity Plan Units, the lapse, in accordance with the
terms of the Interactive Equity Plan or Award Agreement, of the forfeiture restrictions applicable
to all or a portion of the Equity Plan Common Units awarded to an Equity Plan Member pursuant to
the applicable Award Agreement.
Voting Power shall mean, with respect to a Person, the power to vote, or to direct the
voting of, whether directly or indirectly, through record ownership or any contract, securities
that may be cast for the election of the board of directors or the board of managers (or similar
governing body) of such Person.
As used in this Agreement, the following terms shall have the meanings set forth in the respective
sections of this Agreement identified below:
|
|
|
Term |
|
Section |
Annual Budget
|
|
4.16(b) |
Community Connect Equity Plan Units
|
|
5.2(b)(iii) |
Claims
|
|
17.2(a) |
Class A Sale Price
|
|
12.3(a) |
Class A Unit Sale
|
|
12.3 |
Closing Date
|
|
12.3(a) |
Common Units
|
|
5.1(a) |
10
|
|
|
Term |
|
Section |
Company
|
|
Preamble |
Confidential Information
|
|
18.1 |
Covered Person
|
|
17.1 |
Covered Persons
|
|
17.1 |
Drag-Along Equity Plan Member
|
|
12.3(b) |
Electronic Transmission
|
|
3.8(b) |
Equity Plan Call Closing
|
|
12.1(d) |
Equity Plan Call Unit Price
|
|
12.1(c) |
Equity Plan Call Units
|
|
12.1(b) |
Equity Plan Drag-Along Closing
|
|
12.3(c) |
Equity Plan Drag-Along Unit Price
|
|
12.3(b) |
Equity Plan Drag-Along Units
|
|
12.3(b) |
Equity Plan Put Closing
|
|
12.2(d) |
Equity Plan Put Unit Price
|
|
12.2(c) |
Equity Plan Put Units
|
|
12.2(b) |
Equity Plan Tag-Along Closing
|
|
12.4(b) |
Equity Plan Tag-Along Unit Price
|
|
12.4(a) |
Equity Plan Tag-Along Units
|
|
12.4(a) |
Event of Dissolution
|
|
15.1 |
Fiscal Year
|
|
2.9 |
Indemnified Person
|
|
17.2(a) |
Indemnified Persons
|
|
17.2(a) |
Interactive One
|
|
Preamble |
Joinder Agreement
|
|
11.1(b) |
Liquidation
|
|
16.1(a) |
Newman Employment Agreement
|
|
Definition of
Cause in
this Section
1.1 |
Permitted Inter-Company Cost Schedule
|
|
9.1(b) |
Permitted Transfer
|
|
11.1(a) |
Prohibited Transfer
|
|
11.3(a) |
Proposed Annual Budget
|
|
4.16(a) |
Proposed Inter-Company Cost Schedule
|
|
9.1(b) |
11
|
|
|
Term |
|
Section |
Purchaser
|
|
12.3(b) |
Qualifying Equity Plan Put Units
|
|
12.2(a) |
Safe Harbor Election
|
|
10.2 |
Sale Notice
|
|
12.3(a) |
Service
|
|
2.3 |
Tag-Along Notice
|
|
12.4(a) |
Tag-Along Seller
|
|
12.4(a) |
Section 1.2 Company Powers. Subject to the terms of this Agreement, the Company and the Board
(acting on behalf of the Company) shall possess and may exercise all of the powers and privileges
permitted by the Act, together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion or attainment of the business
purposes of the Company specified in Section 2.3 hereof.
Section 1.3 Construction. Whenever the context requires, the gender of any word used in this
Agreement includes the masculine, feminine or neuter, and the number of any word includes the
singular or plural. The words include,includes and including shall be deemed to be followed
by the phrase without limitation. Unless the context otherwise requires, all references to
articles, sections and paragraphs refer to articles, sections and paragraphs of this Agreement, and
the terms hereof,herein, and other like terms refer to this Agreement as a whole, including the
schedules hereto.
Section 1.4 Headings. The headings and subheadings in this Agreement are included for convenience
and identification only and are in no way intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any provision hereof.
ARTICLE II
FORMATION AND ORGANIZATION
Section 2.1 Formation. The Company was formed as a Delaware limited liability
company pursuant to the provisions of the Act by filing the Certificate of Formation for the
Company with the Office of the Secretary of State of the State of Delaware in conformity with the
Act. The Company and, if required, the Members and each of the future Members, if any, shall
execute or cause to be executed from time to time all other instruments, certificates, notices and
documents and shall do or cause to be done all such acts and things (including keeping books and
records and making publications or periodic filings) as may now or hereafter be required for the
formation, valid existence and, when appropriate in accordance with the terms of this Agreement,
termination of the Company as a limited liability company under the laws of the State of Delaware.
Section 2.2 Name. The name of the Company shall be INTERACTIVE ONE, LLC and its business
shall be carried on in such name with such variations and changes as the
12
Board shall determine or deem necessary or desirable to comply with requirements of the
jurisdictions in which the Companys operations are conducted or to comply with applicable law.
Section 2.3 Business Purpose. The Company is formed for the purpose of developing and conducting
certain Internet activities for Radio One (the Service). The Company may engage in other
business purposes permitted under the Act only upon the approval of the Board.
Section 2.4 Registered Office and Agent. The location of the registered office of the Company in
the State of Delaware shall be 2711 Centerville Road, Wilmington, Delaware 19808. The Companys
registered agent at such address shall be Corporation Service Company. The Board may, from time to
time, change the Companys registered office or registered agent, and shall forthwith amend the
Certificate of Formation to reflect such change.
Section 2.5 Term. The existence of the Company commenced on the Effective Date and, subject to the
provisions of Articles XV and XVI below, the Company shall have perpetual existence.
Section 2.6 Principal Place of Business. The principal place of business of the Company shall be
located at 205 Hudson Street, 6th Floor, New York, New York 10013 or at such other location as the
Board may, from time to time, select.
Section 2.7 Title to Company Property. Legal title to all property of the Company shall be held,
vested and conveyed in the name of the Company and no real or other property of the Company shall
be deemed to be owned by the Members individually.
Section 2.8 Business Transactions of the Members and Managers with the Company. In accordance with
Section 18-107 of the Act and subject to the terms and conditions of this Agreement, each Member
and Manager may lend money to, borrow money from, act as a surety, guarantor or endorser for,
guarantee or assume one or more obligations of, provide collateral for, and transact other business
with, the Company and, subject to applicable law, shall have the same rights and obligations with
respect to any such matter as a Person who is not a Member or Manager.
Section 2.9 Fiscal Year. The fiscal year of the Company (the Fiscal Year) for financial
statement purposes shall end on December 31 of each year. The Board may change the Fiscal Year
solely upon receiving the written consent of all of the Members.
Section 2.10 Other Qualifications. The Members agree that the Company shall file or record such
documents and take such other actions under the laws of any jurisdiction as are necessary or
desirable to permit the Company to do business in any such jurisdiction and/or promote the
limitation of liability for the Members in any such jurisdiction. Each Member hereby authorizes the
Board to take any action that may be necessary or desirable in order to permit the Company to do
business (or facilitate the doing of business) in any jurisdiction and/or to promote the limitation
of liability for the Members
therein; provided that any such action is not in conflict with any of the terms of this Agreement.
13
Section 2.11 No State Law Partnership. The parties to this Agreement agree to form a limited
liability company and do not intend to form a partnership under the laws of the State of Delaware
or any other laws; provided, however, that, to the extent permitted by U.S. or other applicable
law, the Company shall be treated as a partnership for U.S. federal, state and local income tax
purposes.
ARTICLE III
THE MEMBERS
Section 3.1 Members; Powers of Members. The name and address of each Member is set forth on Schedule A hereto.Schedule A
shall be amended from time to time by (a) the Board
(without any further action by the Members or any class of Members) to reflect the admission of an
Additional Member, Substitute Member or Limited Member in accordance with Article XIII hereof, the
Transfer of Units between Members, the acquisition or forfeiture of Units by Members or the
withdrawal of a Member pursuant to Section 13.6 hereof, in each case provided that such actions
complied with the terms of this Agreement or (b) the Secretary of the Company (without any further
action by the Members or any class of Members) to reflect any updated notice information for a
Member properly delivered by such Member to the Company. The Members shall have the power to
exercise any and all rights or powers granted to the Members (or individual or groups of Members,
if applicable) pursuant to the express terms of this Agreement. Except as otherwise provided in
this Agreement or specifically required by the Act (which requirement may not be waived or
superseded by a contrary provision in a Delaware limited liability companys operating agreement)
(i) no Person or Persons other than the Board acting under the authority of this Agreement, and
individuals authorized by the Board acting under the authority of the Board, shall have the power
to act for or on behalf of, or to bind, the Company and (ii) no Member shall have the right to vote
upon or consent to any matter.
Section 3.2 Meetings of Members. Meetings of the Members, for any purpose or purposes, unless
otherwise prescribed by the Act or by this Agreement, may be called by the Chairman and shall be
called by the Secretary at the request in writing of any Member or Members owning at least
twenty-five percent (25%) of the Vested Units on a Fully Diluted Basis. Such request shall state
the purpose or purposes of the proposed meeting. Business transacted at any meeting of the Members
will be limited to the purposes stated in the notice.
Section 3.3 Place of Meetings. The Board may designate any place, either within or outside of the
State of Delaware, as the place of meeting for any meeting of the Members. If no designation is
made, the place of meeting shall be the principal executive offices of the Company. Members may
participate in a meeting by means of a conference telephone or electronic media by means of which
all Persons participating in the meeting can communicate concurrently with each other, and any such
participation in a meeting shall constitute presence in person of such Member at such meeting.
Section 3.4 Notice of Members Meetings.
(a) Written notice stating the place, day, and hour of the meeting and the purpose for which the
meeting is called shall be delivered not less than ten (10) days nor more
14
than fifty (50) days before the date of the meeting, by or at the direction of the Person calling
the meeting to each Member of record of Units entitled to vote at such meeting.
(b) Notice to Members shall be made and shall be deemed effective in accordance with Section 18.7
hereof.
(c) When a meeting is adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Company may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice
of the adjourned meeting shall be given to each Member holding Units entitled to vote at the
meeting.
Section 3.5 Waiver of Notice.
(a) When any notice is required to be given to any Member of the Company under the provisions of
Section 3.4 hereof, a waiver thereof in writing signed by the Person entitled to such notice,
whether before, at, or after the time stated therein, shall be equivalent to the giving of such
notice.
(b) By attending or participating in a meeting, a Member:
(i) waives objection to lack of notice or defective notice of such meeting unless the Member, at
the beginning of the meeting, objects to the holding of the meeting or the transacting of business
at the meeting; and
(ii) waives objection to consideration at such meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the Member objects to considering the
matter when it is presented.
Section 3.6 Voting Record. The Secretary shall make a complete record of the Members entitled to
vote at each meeting of Members or any adjournment thereof, and the results of any such vote of the
Members. Members shall be entitled to inspect such voting record during normal business hours at
the Companys principal executive offices.
Section 3.7 Vote Required. Only those actions that require the approval of the Members (or certain
individual classes of the Members) under this Agreement or that specifically require the approval
of the Members under the Act (which requirement may not be waived or superseded by a contrary
provision in a Delaware limited liability companys operating agreement) shall be submitted to the
Members for approval. On all matters submitted to all of the Members for approval, the affirmative
vote, in person or by proxy, of the holders of a majority of the outstanding Units entitled to vote
shall be the act of the Members, unless the vote of a greater proportion is required by the Act or
this Agreement.
15
Section 3.8 Action by Written Consent of Members.
(a) Any action required or permitted to be taken at any meeting of the Members may be taken without
a meeting if Members holding not less than the minimum number of Units that would be necessary to
approve the action pursuant to the terms of this Agreement consent thereto in writing. Such writing
or writings shall be filed with the minutes of the proceedings of the Members. In no instance where
action is authorized by written consent shall a meeting of Members be called or notice be given;
however, a copy of the action taken by written consent shall be maintained with the records of the
Company. Reasonably prompt notice of the taking of any action taken without a meeting by less than
unanimous written consent shall be given to those Members who have not consented in writing and
who, if the action had been taken at a meeting, would have been entitled to notice of the meeting
if the record date for such meeting had been the date that written consents signed by a sufficient
number of Members to take the action were obtained. Written consent by the Members pursuant to this
Section 3.8 shall have the same force and effect as a vote of such Members taken at a duly held
meeting of the Members and may be stated as such in any document.
(b) An Electronic Transmission consenting to an action to be taken and transmitted by a Member, or
by a Person or Persons authorized to act for a Member, shall be deemed to be written, signed and
dated for purposes of this Section 3.8, provided that any such Electronic Transmission sets forth
or is delivered with information from which the Company can determine (i) that the electronic
transmission was transmitted by the Member, or by a Person or Persons authorized to act for the
Member, and (ii) the date on which such Member or authorized Person or Persons transmitted such
electronic transmission. The date on which such electronic transmission is transmitted shall be
deemed to be the date on which such consent was signed. For the purposes of this Agreement,
Electronic Transmission means any form of communication not directly involving physical
transmission of paper that creates a record that may be retained, retrieved and reviewed by a
recipient thereof and that may be directly reproduced in paper form by such recipient through an
automated process.
(c) Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted
or used in lieu of the original writing for any and all purposes for which the original writing
could be used, provided that such copy, facsimile or other reproduction shall be a complete
reproduction of the entire original writing.
Section 3.9 No Liability of Members. All debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of
the Company, and no Member shall be obligated personally for any such debt, obligation or liability
of the Company solely by reason of being a Member.
ARTICLE IV
MANAGEMENT OF THE COMPANY
Section 4.1 Management by Board of Managers. Except for situations in which the approval of Members
is expressly required by this Agreement or by a provision of the Act (which cannot be waived or
superseded by this Agreement), the powers of the Company shall be
16
exercised by or under the authority of a Board of Managers and such Board of Managers may make (or
designate to officers of the Company in accordance with this Agreement the authority to make) all
decisions affecting the business and affairs of the Company. All decisions made, and all actions
taken, by the Board shall be made or taken only with the affirmative consent of both Managers or,
if there are more than two Managers, a majority of the Managers then serving on the Board (each
Manager having one vote). The Managers shall be elected annually by a majority in interest of the
Class A Members. Each Manager shall serve until the next annual election of Managers by a majority
in interest of the Class A Members or his or her earlier resignation, removal, incapacity or death.
The number of Managers shall be determined by a majority in interest of the Class A Members. As of
the date hereof, the number of Managers that constitutes the Board is two (2), and consists of
Alfred C. Liggins III and Linda J. Vilardo.
Section 4.2 Removal; Resignations; Vacancies.
A Manager may be removed by a majority in interest of the Class A Members at any time, with or
without cause. Any Manager may resign at any time by providing written notice to each Manager and
each Class A Member entitled to vote. Such resignation shall be effective upon receipt of such
notice by each of the Persons indicated above or, if later, at the time specified in such written
notice of resignation. If at any time a vacancy is created on the Board by reason of an increase in
the number of Managers by a majority in interest of the Class A Members or the incapacity, death,
removal or resignation of a Manager, then a majority in interest of the Class A Members shall fill
the new position or designate a replacement for such Manager by delivering a written notice of such
new election or replacement to the other Managers and the other Members. From and after the date on
which the other Managers and the other Members receive such notice, the new or replacement Manager
shall be deemed to be a Manager and shall have all authority, power and capacity accorded to a
Manager on the Board.
Section 4.3 Meetings of the Board.
(a) The Board shall meet at such times as determined by the Board to be necessary for the
management of the Companys business. Meetings of the Board may be called by the Chairman or any
Manager on at least three (3) days prior written notice of the time and place of such meeting. A
majority of the Managers then in office shall constitute a quorum for the transaction of business
by the Board.
(b) Notice of any Board meeting may be waived by any Manager before or
after such meeting.
(c) By attending or participating in a meeting, a Manager:
(i) waives objection to lack of notice or defective notice of such meeting unless the Manager, at
the beginning of the meeting, objects to the holding of the meeting or the transacting of business
at the meeting; and
(ii) waives objection to consideration at such meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the Manager objects to considering the
matter when it is presented.
17
(d) Meetings of the Board or committees thereof may be conducted in person or by telephone
conference facilities. Any action required or permitted to be taken at any meeting of the Board may
be taken without a meeting if all of the Managers then in office consent thereto in writing
(including by Electronic Transmission), and the writing or writings (including Electronic
Transmissions) are filed with the minutes of proceedings of the Board. The date on which an
Electronic Transmission is transmitted shall be deemed to be the date on which such consent was
signed.
Section 4.4 Compensation of Managers. Managers shall not receive any salary or other compensation
for their services, but shall be reimbursed for their reasonable out-of-pocket expenses incurred in
attending meetings of the Board and any committees thereof.
Section 4.5 Power to Bind Company. No Manager (acting in his or her capacity as such) shall have
any authority to bind the Company with respect to any matter except pursuant to a resolution
expressly authorizing such action which resolution is duly adopted by the Board by the affirmative
vote required for such matter pursuant to this Agreement or the Act.
Section 4.6 Committees. The Board also may designate one or more committees, each committee to
consist of one or more of the Managers of the Company. The Board may designate one or more Managers
as alternate members of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. Any committee, to the extent permitted by law and provided in the
resolution establishing such committee, shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Company. Each committee shall keep
regular minutes and report to the Board promptly following each committee meeting.
Section 4.7 Chairman of the Board. There shall be a Chairman of the Board of the Company (the
Chairman) (who is currently Alfred C. Liggins III), who shall serve as such until the earlier of
his or her death, resignation or removal by the Board, with or without cause, which removal shall
require the written consent of the Board.
(a) The Chairman shall have the responsibility for (i) general oversight of the operations of the
Company, including oversight over the President of the Company, and (ii) reporting to the Board
regarding the financial and operational status of the Company.
(b) If, at any time, a vacancy is created in the position of Chairman for any reason, including by
reason of the incapacity, death, removal or resignation of the current Chairman, Alfred C. Liggins
III, then a majority in interest of the Class A Members shall, within thirty (30) days of the date
of the vacancy, appoint a new Chairman.
Section 4.8 Officers and Related Persons; Retention of Authority by Board; Matters Not Subject to
Approval.
(a) The Board shall have the authority to appoint and terminate officers of the Company in
accordance with and subject to the provisions of Sections 4.7 and 4.9 through 4.15
hereof and retain and terminate employees, agents and consultants of the Company. The Board may
delegate such duties to any such officers, employees, agents and consultants as the Board
18
deems appropriate, including the power, acting individually or jointly, to represent and bind the
Company in all matters, in accordance with the scope of their respective duties; provided, however,
that the Board may not delegate any of its duties and obligations under this Agreement and may not
delegate any duties that are required to be exercised by the Board under the Act or any duties that
a Board of Directors of a Delaware corporation is required to retain and exercise under the
Delaware General Corporation Law.
(b) Without limiting the provisions of Section 4.8(a) hereof or any other provision of this
Agreement, prior approval of the Board shall be required before the Company shall be permitted to
take any of the following actions:
(i) the entering into, amendment or waiver of the terms of, or termination of any contract or
agreement (A) providing for receipts to or expenditures by the Company in any twelve (12) month
period in excess of $100,000, and (B) with any Member or any Affiliate thereof, except as otherwise
provided in this Agreement;
(ii) any issuance of Equity Plan Units;
(iii) any authorization of or incurrence of any indebtedness from any Person or Persons in an
amount greater than $100,000 over any consecutive twelve (12) month period;
(iv) commencing any litigation proceeding; or
(v) settling any litigation proceeding (A) for an amount in excess of $50,000, or (B) involving a
Manager or a senior executive officer of the Company.
Section 4.9 President. There shall be a President of the Company who shall be appointed by the
Board upon the recommendation of the Chairman and serve as such until the earlier of his or her
death, resignation or removal by the Board, with or without cause. The President shall have the
responsibility for managing the day-to-day business operations and affairs of the Company and
supervising its other officers, subject to the direction, supervision and control of both the
Chairman and the Board. In general, the President shall (subject to Section 4.8 hereof) have such
other powers and perform such other duties as usually pertain to the office of the President of a
corporation under Delaware law, including, without limitation, the authority to appoint and
terminate officers of the Company (other than the Chairman) and retain and terminate employees of
the Company to whom the President may delegate his or her duties; provided, however, the President
shall be subject to the power of the Chairman or the Board at any time or from time to time to
withhold authority with respect to any matter or assign specific duties and responsibilities to him
or her The current President is Thomas Newman.
Section 4.10 Chief Financial Officer. The Board may appoint a Chief Financial Officer of the
Company who shall serve as such until the earlier of his or her death, resignation or removal by
the Board, with or without cause. In general, the Chief Financial Officer shall have such powers
and perform such duties as usually pertain to the office of Chief
Financial Officer of a corporation under Delaware law. The current Chief Financial Officer is
Gillian Kellie.
19
Section 4.11 Vice Presidents. The Board may from time to time appoint one or more Vice Presidents
who shall each serve until the earlier of his or her death, resignation or removal by the Board
with or without cause. Each Vice President shall have such powers and duties as may be assigned to
him or her by the Board (subject to Section 4.8 hereof) or the President.
Section 4.12 Treasurer. There shall be a Treasurer of the Company who shall be appointed by the
Board and serve as such until the earlier of his or her death, resignation or removal by the Board,
with or without cause. The Treasurer shall have custody of the Companys funds and securities,
shall keep full and accurate account of receipts and disbursements, shall deposit all monies and
valuable effects in the name and to the credit of the Company in such depository or depositories as
may be designated by the Board, and shall perform such other duties as may be assigned to him or
her by the Board (subject to Section 4.8 hereof) or the President.
Section 4.13 Assistant Treasurers. The Board may from time to time appoint one or more Assistant
Treasurers who shall each serve until the earlier of his or her death, resignation or removal by
the Board with or without cause. Each Assistant Treasurer shall have such powers and duties as may
be assigned to him or her by the Board (subject to Section 4.8 hereof) or the President.
Section 4.14 Secretary. There shall be a Secretary of the Company who shall be appointed by the
Board and serve as such until the earlier of his or her death, resignation or removal by the Board,
with or without cause. Except as otherwise provided in this Agreement, the Secretary shall keep the
minutes of all meetings of the Board and of the Members in books provided for that purpose, and
shall attend to the giving and service of all notices. The Secretary may sign with the Chairman or
President all certificates representing Units of the Company, if any, and shall have charge of the
transfer books, and other papers as the Board may direct, all of which shall at all reasonable
times be open to inspection by any Manager (or any designee thereof) upon prior written request at
the office of the Company during normal business hours. The Secretary shall perform such other
duties as may be assigned to him or her by the Board (subject to Section 4.8 hereof) or the
President. The current Secretary is Linda J. Vilardo.
Section 4.15 Assistant Secretaries. The Board may from time to time appoint one or more Assistant
Secretaries who shall each serve until the earlier of his or her death, resignation or removal by
the Board with or without cause. Each Assistant Secretary shall have such powers and duties as may
be assigned to him or her by the Board (subject to Section 4.8 hereof) or the President.
Section 4.16 Adoption of the Annual Budget.
(a) Prior to January 1, 2009 and thereafter at least sixty (60) days prior to the last day of each
calendar year (beginning with the year 2009), the President shall present a proposed annual budget
(the Proposed Annual Budget) to the Board, such Proposed Annual
Budget to contain detailed projections covering the Companys anticipated revenues and expenses for
the applicable period.
20
(b) The Chairman shall call a meeting of the Board as soon as practicable after the delivery of the
Proposed Annual Budget to the Board, which meeting shall take place no later than thirty (30) days
prior to the end of the applicable calendar year. At this meeting, at which the President shall
receive written notice and the right to be present, the Board shall approve the Proposed Annual
Budget, with such changes as the Board may approve (in the form approved by the Board, the
Annual Budget).
(c) A copy of the Annual Budget shall be provided to the President and each Non-Equity Plan Member
within ten (10) Business Days of approval by the Board.
Section 4.17 Employment Agreements.
(a) Subject to Section 4.17(b), the rights and obligations of the Company or the Board with respect
to any officer as set forth in this Article IV and elsewhere in this Agreement shall not override
or supersede the contractual obligations of the Company or Radio One, as employer, or the rights of
any officer, as employee, in each case under any employment agreement to which such officer of the
Company is a party.
(b) This Agreement, the limited liability company agreement of Community Connect and the Combined
Award Agreement with Newman dated October 26, 2009, shall supercede and replace Sections 5 and 7(d)
of the Newman Employment Agreement and Schedule A thereto, and all references to Section 7(d) and
Schedule A in the Newman Employment Agreement (including those in Section 2.2) shall be deemed to
be references to this Agreement, such limited liability company agreement and such Award Agreement.
Newman acknowledges that by reason of this Agreement, the limited liability company agreement of
Community Connect and the Combined Award Agreement dated October 26, 2009, the obligations of Radio
One and its subsidiaries under Section 7(d) of the Newman Employment Agreement have been satisfied.
(c) The terms and conditions of this Section 4.17 shall supercede anything to the contrary
contained in this Agreement.
ARTICLE V
CAPITAL STRUCTURE
Section 5.1 Authorized Units.
(a) The Company is authorized to issue one class of Units designated as Common Units. The
total number of Common Units which the Company is authorized to issue is Ten Thousand (10,000)
Units. The Board may increase the number of authorized Units and create additional classes and/or
series of Units, subject to the approval of a majority in interest of the Class A Members. In the
event that the authorized number of Units available for issuance is increased pursuant to this
Section 5.1, the Board shall indicate the total number of Units available for issuance with respect
to any then existing class and/or series and any new class and/or series after giving effect to
such approved increase. Any increase in the authorization of, or the issuance of additional, Common
Units or the authorization or issuance of new or additional classes and/or series of Units shall
not supersede the express rights of any
21
holder of Equity Plan Units as set forth in the Award Agreement or employment agreement to which
such holder is a party.
(b) As of the date hereof, there are two (2) separate series of Common Units designated as
Class A Units and Equity Plan Units. The total number of Class A Units which
the Company has authority to issue is Nine Thousand (9,000) Class A Units and the total number of
Equity Plan Units which the Company has authority to issue One Thousand (1,000) Equity Plan Units.
Section 5.2 Rights of Designated Common Units. The series of Common Units designated as of the date
hereof shall have the following rights, preferences and limitations (subject to the restrictions
and limitations on the rights of any Limited Member as set forth in Section 13.4 hereof):
(a) Class A Units.
(i) Voting Rights. Subject to Section 13.4 hereof, each Member holding Class A Units shall
have the right to one vote per Class A Unit held, and shall be entitled to notice of any Members
meeting in accordance with this Agreement, and shall be entitled to vote upon such matters and in
such manner as may be provided by the Act or this Agreement.
(ii) Other Rights. Subject to Section 13.4 hereof, each holder of Class A Units shall have
rights applicable to all Members (in their capacity as Members without regard to any rights
attributable to any specific class or series of Units) and otherwise provided hereunder expressly
for Members holding Class A Units.
Notwithstanding any other provision to the contrary in this Agreement, none of the following
actions shall be taken by the Company without (and the Board and officers, on behalf of the
Company, shall not take such action without) the prior approval the holders of at least fifty
percent (50%) of the outstanding Class A Units:
(1) any amendment, modification or termination of the Certificate of Formation, except to change
the Companys registered office or registered agent;
(2) any creation of a new class or series of Units or reclassification of the existing Units, in
either case which provides for any rights or preferences equal to or greater than those provided in
this Agreement for the Class A Units;
(3) the issuance of any additional Units other than Equity Plan Units reserved for issuance
pursuant to Section 5.1 and the Interactive Equity Plan and approved by the Board;
(4) entering into any agreement or other document to effect a Sale Transaction or the consummation
of any Liquidation;
22
(5) any Distribution, unless such Distribution is a Mandatory Tax Distribution approved by the
Board or is otherwise expressly provided for in this Agreement;
(6) any redemption, purchase or other acquisition of any outstanding Units, except as otherwise
expressly provided in this Agreement or the Interactive Equity Plan;
(7) except as otherwise provided in this Agreement, any change in the authorized number of Managers
on the Board;
(b) Equity Plan Units.
(i) Voting Rights. The Equity Plan Units shall be non-voting.
(ii) Other Rights. The rights of each Equity Plan Member shall be limited to those
expressly provided to such Member in this Agreement.
(iii) The Members acknowledge and agree that the Board may issue Equity Plan Units simultaneously
with equity plan units (Community Connect Equity Plan Units) that are issued by Community
Connect, an Affiliate of the Company, under the Community Connect Equity Plan and that the Equity
Plan Units and the Community Connect Equity Plan Units are to carry identical rights and
obligations to the fullest extent permitted by law and will be evidenced by the Combined Award
Agreement. All rights with respect to the Equity Plan Units that are subject to the Combined Award
Agreement shall be subject to all of the terms and conditions of the Combined Award Agreement.
Section 5.3 Reservation and Issuance of Common Units.
(a) Class A Units. Four Thousand Seven Hundred and Fifty (4,750) Class A Units were issued
on the Effective Date to the Sole Member. The remaining authorized Class A Units shall be reserved
for issuance to the extent authorized under Section 5.2.
(b) Equity Plan Units. One Hundred (100) Equity Plan Units were issued on the Effective
Date to Newman. The remaining authorized Equity Plan Units shall be reserved for issuance to
employees and consultants of the Company in accordance with the Interactive Equity Plan. No Capital
Contribution or Capital Commitment is required in exchange for such Units other than as required
under the Interactive Equity Plan or applicable Award Agreement.
Section 5.4 Units Subject to Forfeiture.
(a) Subject to the express terms of any applicable Award Agreement or employment agreement, all
Units of a Limited Member shall be subject to forfeiture in accordance with the provisions of
Section 13.4(c) hereof.
(b) All Equity Plan Units that fail to Vest pursuant to the terms of the Interactive Equity Plan
and the related Award Agreement shall be forfeited.
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(c) A Member who forfeits Units shall retain no interest in profits or capital of the Company
associated with such Units.
Section 5.5 No Appraisal Rights. No class or series of Units or Members shall be entitled to
appraisal rights in connection with or as a result of any amendment to this Agreement, any merger
or consolidation of the Company, any conversion of the Company to another business form, any
transfer to or domestication in any jurisdiction by the Company or the sale of all or substantially
all of the Companys assets.
ARTICLE VI
CONTRIBUTIONS
Section 6.1 Initial Capital Contribution.
(a) The Sole Member made the Capital Contribution set forth opposite its name under the heading
Capital Contribution on Schedule A hereto and has received therefore 4,750 Class A Units.
Section 6.2 Further Contributions. No further Capital Contributions (including any cash that may be
required to pay Company costs and expenses) shall be required of any Member.
Section 6.3 Interest. No interest shall accrue on any Capital Contribution and no Member shall have
the right to withdraw or be repaid any Capital Contribution, except as otherwise provided in this
Agreement.
Section 6.4 No Return of Capital Contribution. Except as expressly provided in this Agreement, no
Member shall be entitled to a return of its Capital Contribution.
Section 6.5 No Loans. If any Member advances any money to, or on behalf of, the Company, the amount
of any such advance shall not be deemed a Loan but shall be deemed an additional Capital
Contribution of such Member. No Interest shall accrue on any such advance. Additional Capital
Contributions from a Member shall not result in the issuance of additional Class A Units to such
Member unless all Members (including the holders of Equity Plan Units) approve such issuance.
ARTICLE VII
CAPITAL ACCOUNTS
Section 7.1 Maintenance of Capital Accounts.
(a) The Company shall establish and maintain Capital Accounts for each Member in accordance with
the following provisions:
(i) to each Members Capital Account there shall be credited (A) such Members Capital
Contributions, including the Agreed Value of any contributions other than cash, (B) such Members
distributive share of Net Profits and any items in the nature of income
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or gain that are specially allocated, and (C) the amount of any Company liabilities assumed by such
Member or that are secured by any property distributed to such Member; and
(ii) to each Members Capital Account there shall be debited (A) the amount of money and the Gross
Asset Value of any other property distributed to such Member pursuant to any provision of this
Agreement, (B) such Members distributive share of Net Losses and any items in the nature of
expense or losses that are specially allocated and (C) the amount of any liabilities of such Member
assumed by the Company or that are secured by any property contributed by such Member to the
Company (to the extent not otherwise taken into account in determining a Members Capital
Contribution).
(b) This Section and other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations § 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such Regulations. Notwithstanding that a particular adjustment is not
set forth in this Section 7.1, the Capital Accounts of the Members shall be adjusted as required
by, and in accordance with, the capital account maintenance rules of Regulations § 1.704-1(b).
Section 7.2 Negative Capital Accounts. No Member shall be required to make up a Capital Account
deficit or to pay to any Member the amount of any such deficit.
Section 7.3 Sale or Exchange of Units. In the event of a Transfer of some or all of a Members
Units, the Capital Account of the transferring Member shall become or be added to the Capital
Account of the Substitute Member or the Member that acquires Units in such Transfer, to the extent
it relates to the Members Units so Transferred, and, with respect to the Units so Transferred, the
provisions of Articles VIII and IX shall apply to the Substitute Member or the Member that acquires
such Units as if such Person had held such Units from inception and received all allocations and
distributions with respect to such Units that have been received by the transferring Member.
ARTICLE VIII
ALLOCATIONS OF PROFITS AND LOSSES
Section 8.1 Net Profits. Except as otherwise provided herein, Net Profits shall be allocated among
the Members in accordance with each Members Percentage Interest.
Section 8.2 Net Losses. Except as otherwise provided herein, Net Losses shall be allocated among
the Members in accordance with each Members Percentage Interest.
Section 8.3 Limitation on Allocation of Losses. If an allocation of Net Losses to a Member would
cause an Adjusted Capital Account Deficit for such Member, such Net Losses shall instead be
allocated among Members with positive Capital Account balances in proportion to such balances.
Section 8.4 Allocation of Nonrecourse Deductions. Nonrecourse Deductions shall be allocated among
the Members in proportion to each Members Percentage Interest.
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Section 8.5 Allocation of Member Nonrecourse Deductions. Member Nonrecourse Deductions shall be
allocated, as provided in Regulations § 1.704-2(i)(1) to the Members in accordance with the ratios
in which they bear the economic risk of loss for the relevant Member Nonrecourse Debt for purposes
of Regulations § 1.752-2.
Section 8.6 Qualified Income Offset. If any Member unexpectedly receives any adjustments,
allocations or distributions described in Regulations § 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items
of Company income and gain shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account
Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section
8.6 shall be made only if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article VIII have been tentatively made as
if this Section 8.6 were not in the Agreement.
Section 8.7 Minimum Gain Chargeback. In the event that there is a net decrease in the partnership
minimum gain of the Company during a Taxable Year, the minimum gain chargeback described in
Regulations §§ 1.704-2(f) and (g) shall apply.
Section 8.8 Partner Minimum Gain Chargeback. In the event that there is a net decrease in partner
nonrecourse debt minimum gain (as defined in Regulations § 1.704-2) during a Taxable Year, any
Member with a share of that nonrecourse debt minimum gain (determined under Regulations § 1.704-2(i)(5)) as of the beginning of the year must be allocated items of income and gain for the
year (and, if necessary, for succeeding years) equal to that Members share of such net decrease in
accordance with Regulations § 1.704-2(i)(4).
Section 8.9 Book-Ups/Tax Disparities.
(a) In the case of contributed property, items of income, gain, loss and deduction, shall be
allocated for federal income tax purposes in a manner consistent with the requirements of Code §704(c) and Regulations § 1.704-3 to take into account the difference between the Agreed Value of
such property and its adjusted tax basis at the time of contribution.
(b) In the event of an adjustment to Capital Accounts in accordance with paragraph (b) of the
definition of Gross Asset Value, items of income, gain, loss and deduction shall thereafter be
allocated for federal income tax purposes in a manner consistent with Regulations § 1.704-3(a)(6)(i).
(c) Allocations under this Section 8.9 shall not affect Capital Accounts of the Members. The method
or methods to be elected under Regulations § 1.704-3 for such allocations shall be selected by the
Tax Matters Partner.
Section 8.10 Individual Tax Items. For each Taxable Year (or portion thereof) in which one Member
owns all of the Percentage Interests, all Company items of income, gain, loss and deduction, and
all other tax items for such Taxable Year (or portion thereof),
shall be allocated to such Member. Except as otherwise provided in the preceding sentence and in
Section 8.9, all Company items of income, gain, loss, and deduction, and all other tax items for
each Taxable Year, shall be allocated among the Members as follows: (a) each Members
26
allocable share of each item included in the computation of Net Profit or Net Loss for that year
shall equal such Members overall percentage share of the Net Profit or Net Loss for such year, (b)
each Members allocable share of each item included in the computation of Net Gain from a Sale
Transaction or Net Loss from a Sale Transaction for such year shall equal such Members overall
percentage share of the Net Gain from a Sale Transaction or Net Loss from a Sale Transaction for
such year, and (c) each Member shall be allocated any items specifically allocated to such Member
under Sections 8.5, 8.6, 8.7 and 8.8.
Section 8.11 Tax Credits. Tax credits of the Company, if any, shall be allocated among the Members
in proportion to the number of Units held by each Member.
Section 8.12 Changes in Number of Units. In the event the number or character of Units held by a
Member changes during a Taxable Year, the allocation of items of income, gain, loss and deduction
to such Member shall be based on the weighted average number of Units held by the Member and the
weighted average number of Units outstanding during the Taxable Year, unless otherwise required by
the Code or Regulations or agreed to by each Member affected by such allocation. Further, any items
of deduction allowable to the Company on account of a compensatory transfer of Equity Plan Units
and any adjustment to the Gross Asset Value of Company assets that is taken into account as gain or
loss in accordance with paragraph (c) of the definition of Net Profits and Net Losses shall be
allocated to and among the Members in proportion to the Units they held immediately prior to the
date the grantee of such Equity Plan Units included corresponding amounts as compensation income
under Sections 83(a), 83(b) or 83(d)(2) of the Code.
ARTICLE IX
DISTRIBUTIONS
Section 9.1 Limitations on Distributions.
(a) No Distribution to Members shall be declared or paid unless, after giving effect to such
Distribution, the fair value of all assets of the Company exceeds all liabilities of the Company
(and such reserves as shall be reasonably established by the Board), other than liabilities to
Members on account of their Capital Accounts.
(b) Further, notwithstanding anything herein to the contrary, no Distribution shall be made to the
holder of any Equity Plan Unit holder until and unless (i) the holders of the Class A Units and the
holders of Class A Units of Community Connect have received Distributions from both the Company and
Community Connect equal to the Combined Capital Contributions and (ii) the holders of Class A Units
and the other holders of Equity Plan Units have (to the extent not in duplication of subclause (i))
received Distributions equal to each such Members Capital Account balance immediately before the
issuance of the Equity Plan Units with respect to which such Distribution would otherwise be made
(taking into account the last sentence of Section 8.12). For purposes hereof, the holders of Class
A Units will be deemed to receive Distributions in an amount equal to the excess, if any, of (x)
payments that are made to such holders or their
Affiliates for the provision of goods and services to the Company and Community Connect over (y)
the costs to such Affiliates of providing such goods and services.
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For purposes hereof, the Company and Newman agree that there needs to be established a list of
specific services and an appropriate cost amount for such services that will not be considered
Distributions to holders of Class A Units. In lieu of attaching such a list to this Agreement, the
Members have agreed that Interactive One will each year, in connection with the review of the
Annual Budget, prepare a schedule (the Proposed Inter-Company Cost Schedule) that details the
services rendered and the cost for such services for review by all Members. If such Proposed
Inter-Company Cost Schedule is approved by all Members, it shall become the Permitted
Inter-Company Cost Schedule and no payments for the services and in the amounts specified therein
shall be treated as Distributions to the holders of Class A Units. In the event of any dispute
relating to the items on the Proposed Inter-Company Cost Schedule, the Companys determination as
to the cost of any service in question shall be deemed conclusive unless either (i) the disputing
Member can provide a third party bid demonstrating the cost of the item or service is 10% greater
or lower than the determination of cost made by the Company in the case of goods and services that
can be readily acquired from third parties or (ii) the disputing Member can establish that the
method of allocating costs to the Company of support services that are provided by Interactive One
or its Affiliates (e.g., accounting, legal, human resources, etc.) are not reasonable in light of
the size and activities of the Company as compared with the other entities which are part of Radio
One to which such costs are allocated. In such event, the Company and such Member will jointly hire
an independent accountant to determine the cost of the item or service that should have been
allocated to the Company. In the event the cost of the item or service is determined by such
independent accountant to be within 10% of the cost as determined by the Company, the Member
disputing the cost of such service shall bear the full cost of such accounting, including all costs
(including any legal expenses) of the Company associated therewith. In the event the cost of the
item or service is determined by such independent accountant to be more than 10% higher or more
than 10% lower than the cost of such item or service as determined by the Company, then the Company
shall bear the full cost of such mediation, including all costs (including any legal expenses) of
the disputing Member associated therewith. In determining the costs of such items or services that
are obtained from third parties, the independent accountant shall be required to determine the cost
of such items or services from three (3) independent parties and take the average cost of such
service among such parties. The decision of such independent accountant shall then govern the
determination of the items and the costs thereof that should be included in the Permitted
Inter-Company Cost Schedule. To the extent that the Company does not pay to Interactive One any
amounts specified on the Permitted Inter-Company Cost Schedule for the provision of goods and
services by Interactive One to the Company, such unpaid amounts shall be treated as liabilities of
the Company.
Section 9.2 Mandatory Tax Distributions. The Mandatory Tax Distribution shall be distributed to the
Members in proportion to each Members Percentage Interest at the time of the distribution. Such
distributions shall be made at least annually, on or before the 60th day after the end of the
relevant Taxable Year, and shall not be accounted for on the books and records of the Company as a
return of Capital Contributions and shall not be charged against Distributions to which members are
entitled under Section 9.3(a) hereof.
Section 9.3 Distributions Prior to Liquidation. Except as otherwise provided in this Agreement and
subject to the limitations provided herein, and subject to all Mandatory Tax
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Distributions having been made, Distributions may be made to the Members at such times and in
such amounts as the Board may determine. Distributions shall be made to the Members as follows:
(a) first, to the holders of the Class A Units until they have received from the Company and
Community Connect an amount equal to the Combined Capital Contributions (excluding Mandatory Tax
Distributions);
(b) second, to the Members on a per Unit basis in proportion to each Members Percentage Interest.
Section 9.4 Withholding Taxes. The Company is authorized to withhold from Distributions to a
Member, or with respect to allocations to a Member, and to pay over to a federal, state or local
government, any amounts required to be withheld pursuant to the Code, or any provisions of any
other federal, state or local law. Any amounts so withheld shall be treated as having been
distributed to such Member pursuant to Section 9.2 for all purposes of this Agreement, and shall be
offset against the amounts otherwise distributable to such Member under Section 9.2 hereof.
ARTICLE X
ACCOUNTS
Section 10.1 Books. The Chief Financial Officer, or the Treasurer if at any time there is no Chief
Financial Officer, shall cause to be maintained complete and accurate books of account of the
Companys affairs at the Companys principal place of business. Separate accounts shall be kept for
each class and series of Units. Such books shall be kept on such method of accounting as the Board
shall select.
Section 10.2 Tax Matters. Interactive One shall be the Tax Matters Partner. The Tax Matters Partner
shall, except to the extent impracticable as a result of the failure of a Member to timely deliver
necessary information to the Tax Matters Partner, cause to be prepared, signed and filed all tax
returns of the Company required by any federal state or local law, make any tax elections for the
Company allowed under the Code or the tax laws of any state or other jurisdiction having taxing
jurisdiction over the Company and monitor any governmental tax authority in any audit that such
authority may conduct of the Companys books and records or other documents. The Tax Matters
Partner shall cause the Company to deliver to the Members an IRS Schedule K-1 as soon as
practicable following the close of each Taxable Year, but no later than seventy-five (75) days
after the end of each Taxable Year; provided, however, that such period shall be automatically
extended in the event of a delay beyond the control of the Tax Matters Partner, such as a delay
resulting from the failure of a third party to provide required tax information to the Company in a
timely manner. The Tax Matters Partner shall be entitled to reimbursement from the Company for all
necessary and reasonable out-of-pocket expenses incurred in performing its duties as Tax Matters
Partner.
The Tax Matters Partner shall also cause the Company to elect the safe harbor described in Notice
2005-43, 2005-1 CB 1221, under which the fair market value of an Equity
29
Plan Unit that is transferred in connection with the performance of services is treated as being
equal to the liquidation value of such Unit (the Safe Harbor Election). The Safe Harbor
Election shall be made as of the earliest date permitted under any IRS revenue procedure or other
administrative guidance issued subsequent to Notice 2005-43. The Company and each of its Members
(including each Equity Plan Member to whom a Unit is transferred in connection with the performance
of services) agree to comply with all requirements of the Safe Harbor Election with respect to all
Equity Plan Units transferred in connection with the performance of services.
Section 10.3 Special Basis Adjustment. The Tax Matters Partner shall, without any further consent
of the Members being required (except as specifically required herein), have discretion to make an
election for federal income tax purposes to adjust the basis of property pursuant to §§754, 734(b)
and 743(b) of the Code, or comparable provisions of state, local or foreign law, in connection with
Transfers of Units.
ARTICLE XI
TRANSFERS OF UNITS
Section 11.1 Transfers.
(a) No Member may Transfer all or any portion of its Equity Interests other than (i) to a Permitted
Transferee, (ii) any Transfer of all or any portion of a Members Equity Interests pursuant to
Sections 12.1, 12.2, 12.3 or 12.4 hereof, and (iii) any Transfer of all or any portion of a
Members Equity Interests pursuant to a Sale Transaction (each, a Permitted Transfer),
provided that in each case such Transfer is made in accordance with Section 11.2 hereof. Any
attempted Transfer of the Equity Interests by such Members, other than in strict accordance with
this Article XI, shall be null and void and the purported transferee shall have no rights as a
Member hereunder, except as may otherwise by provided in Section 13.4 as to such transferee.
(b) Notwithstanding anything to the contrary in this Agreement, no Transfer of Units shall be
deemed effective until the transferee of such Units executes a joinder agreement, in substantially
the form attached hereto as Schedule B (the Joinder Agreement) pursuant to which,
among other things, such transferee shall agree to be bound by the obligations of the Member
transferring such Units to such transferee under this Agreement and, if such transferee is an
Affiliate of the Member transferring such Units, such transferee shall agree to grant all authority
to act on its behalf to the Member transferring such Units to such transferee. Any purported
transfer in violation of this Section 11.1(b) shall be null and void.
(c) Notwithstanding anything to the contrary in this Agreement, no Member shall enter into any
agreement to vote or otherwise exercise any of the rights appurtenant to any of the Units held by
such Member with any Person other than an Affiliate of such Member.
Section 11.2 Conditions to Permitted Transfers. A Member shall be entitled to make a Permitted
Transfer of all or any portion of its Equity Interests only upon satisfaction of each of the
following conditions:
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(a) such Transfer does not require the registration or qualification of such Equity Interests
pursuant to any applicable federal or state securities laws, rules and regulations;
(b) such Transfer does not result in a violation of applicable laws, rules and regulations;
(c) the Chairman receives written instruments that are in a form and substance satisfactory to the
Chairman, as determined in his or her reasonable judgment (including, without limitation, (i)
copies of any instruments of Transfer, (ii) such Persons agreement to be bound by this Agreement
in the same manner, and subject to the same obligations and restrictions (including without
limitation the transfer restrictions set forth in this Article XI) as the Member making such
Transfer, including by execution of a Joinder Agreement; provided, however, that no such agreement
shall be required if the Person receiving such Transfer is also a Member hereunder, and (iii) if
requested by the Chairman, an opinion of counsel to such Person, in form and substance reasonably
acceptable to the Chairman, to the effect that the conditions set forth in subsections (a) and (b)
above have been satisfied).
Section 11.3 Prohibited Transfers.
(a) Prohibited Transfer. A Prohibited Transfer shall be deemed to have occurred
if a transaction or series of related transactions is consummated that results in a Transfer of
Units other than Permitted Transfer occurring in accordance with Section 11.1 and Section 11.2.
(b) Effect of a Prohibited Transfer. Upon receipt of written notice from any Member or the
Company that such Person believes that a Prohibited Transfer has occurred, each Member transferring
Units in the alleged Prohibited Transfer shall use its best efforts to nullify such Prohibited
Transfer within a period of thirty (30) days or to demonstrate within a period of thirty (30) days
to the reasonable satisfaction of the Board that the alleged Prohibited Transfer is not a
Prohibited Transfer. Failure to nullify such Prohibited Transfer or to demonstrate to the
reasonable satisfaction of the Board that an alleged Prohibited Transfer is not a Prohibited
Transfer within such 30 day period shall automatically result in the Member transferred in the
Prohibited Transfer becoming a Limited Member in accordance with Section 13.4 hereof.
Section 11.4 Representations Regarding Transfers. Each Member hereby covenants and agrees with the
Company for the benefit of the Company and all Members, that (i) it is not currently making a
market in Units and will not in the future make a market in Units, and (ii) it will not Transfer
its Equity Interest on an established securities market, a secondary market (or the substantial
equivalent thereof) within the meaning of Code Section 7704(b) (and any Regulations, proposed
Regulations, revenue rulings, or other official pronouncements of the Internal Revenue Service or
the United States Treasury Department that may be promulgated or published thereunder). Each Member
further agrees that it will not Transfer any Equity Interest to any Person unless such Person
agrees to be bound by this Section 11.4 and to Transfer such Interest only to Persons who agree to
be similarly bound.
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Section 11.5 Treatment of Equity Plan Units Issued Pursuant to a Combined Award Agreement.
Notwithstanding anything else in this Article XI to the contrary, if Equity Plan Members hold
Equity Plan Units issued pursuant to a Combined Award Agreement, then there may be no Transfer
under this Article XI unless the Community Connect Equity Plan Units granted by Community Connect
under the Combined Award Agreement are Transferred in the same proportions as the Equity Plan Units
are Transferred.
ARTICLE XII
ADDITIONAL RIGHTS AND OBLIGATIONS OF THE MEMBERS
Section 12.1 Call Rights.
(a) The Company may, in its sole discretion, elect to purchase up to all of the Vested Equity Plan
Units of each Equity Plan Member under the following circumstances:
(i) within twelve (12) months (or such shorter period if required by applicable law) of the date an
Equity Plan Member ceases to be an employee, consultant or representative of the Company, as
applicable;
(ii) in the event of a Sale Transaction;
(iii) in the event of the Bankruptcy of such Equity Plan Member; and
(iv) as permitted by and in accordance with the terms and conditions of the applicable Award
Agreement or employment agreement.
(b) If the Company elects to exercise its right to purchase such Equity Plan Units in accordance
with this Article XII, it shall provide written notice thereof to the Equity Plan Members, which
notice shall include the number of Equity Plan Units to be purchased (the Equity Plan Call
Units) and the basis on which the Company is exercising its call rights under Section 12.1(a).
(c) The fair market value of each Equity Plan Call Unit (such price, the Equity Plan Call Unit
Price) shall be determined by an appraisal process between the Company and the applicable Equity
Plan Member, which process shall include deductions for any outstanding debt or other liabilities
of the Company (including accrued but unpaid interest at the Applicable Interest Rate) and each
Class A Members right to the return of its Capital Contributions under Section 9.3(a) (it being
understood that the deduction of debt and/or the right to receive back contributed capital may
result in the Equity Plan Units or the Community Connect Equity Plan Units having a negative value
that will be taken into consideration in determining the net value of the Equity Plan Units and
Community Connect Equity Plan Units subject to the same Combined Award Agreement); provided,
however, in the event that the basis for the Companys exercise of its rights under this Section
12.1 is as a result of the termination of an Equity Plan Member for Cause, or the Board has
determined that such Member has violated any non-
solicitation, non-competition or non-disclosure provision contained in any agreement entered into
by and between such Member and the Company, the fair market value of such Members Equity Plan
Units shall be the lesser of such Members Capital Account balance
32
attributed to such Units or the value determined in accordance with the procedures described above.
If the value of the Equity Plan Units is positive and the value of the Community Connect Equity
Plan Units is negative, the Equity Plan Units will only have value equal to the sum of such
positive and negative amounts (i.e., the positive amount of the value of the Equity Plan Units will
be offset by the negative amount of the value of the Community Connect Equity Plan Units that have
a negative value). In the event that the Equity Plan Member and the Company cannot reach an
agreement as to the Equity Plan Call Unit Price within thirty (30) days of the date of the notice
delivered pursuant to Section 12.1(b), the parties agree to submit such determination to binding
arbitration in New York, New York, before one (1) arbitrator. The arbitration shall be administered
by the American Arbitration Association pursuant to the AAA Rules and Procedures. For purposes of
determining the Equity Plan Call Unit Price, the valuation of the Company shall first be determined
as an entirety before determining the value of the Equity Plan Units held by the applicable Equity
Plan Member, based on the amount that such Equity Plan Member would receive from the proceeds of
the sale of the Company at such valuation upon the liquidation of the Company, and the interest of
the Equity Plan Member shall not be subject to a discount for minority interest or lack of
liquidity.
(d) The closing of the purchase and sale of the Equity Plan Call Units pursuant to this Section
12.1 (the Equity Plan Call Closing) shall occur on the date as is determined by the Board
but, in any event, within one hundred twenty (120) days of the date that the notice of the
Companys intent to purchase the Equity Plan Call Units is delivered pursuant to Section 12.1(b).
At the Equity Plan Call Closing, (1) each Equity Plan Member selling Equity Plan Call Units shall
(A) execute and deliver such documents as shall be reasonably requested by the Company and (B)
represent and warrant that such Equity Plan Call Units are being transferred free and clear of
liens, encumbrances and interests or rights of other Persons, and (2) the Company shall make
payment to each Equity Plan Member selling such Equity Plan Call Units in an amount equal to the
Equity Plan Call Unit Price multiplied by the number of Equity Plan Call Units being sold by such
Equity Plan Member, such payment to be made, in the Companys sole discretion, by (x) wire transfer
of immediately available funds to an account specified in writing by such Equity Plan Member or (y)
by wire transfer of immediately available funds equal to at least twenty percent (20%) of such
purchase price and by delivery of a promissory note in the principal amount of the balance of such
purchase price issued by the Company (in form and substance satisfactory to the Board) bearing
interest at a rate of eight percent (8.0%) per annum, the principal and interest of which shall be
due and payable in four (4) equal quarterly installments of principal, together with accrued
interest, beginning on the first day of the fiscal quarter following the fiscal quarter in which
the closing occurs, and continuing on the first day of each succeeding fiscal quarter until fully
paid.
Section 12.2 Put Rights.
(a) Each Equity Plan Member may, in his, her or its sole discretion, elect to have the Company
purchase all or a portion of his, her or its Equity Plan Units that are Vested (the Qualifying
Equity Plan Put Units) under the following circumstances:
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(i) in the event that the Equity Plan Member ceases to be an employee of the Company, but only to
the extent permitted by, and subject to, the terms and conditions of such Equity Plan Members
Award Agreement;
(ii) a material breach by the Company of any agreement between the Equity Plan Member and the
Company;
(iii) in the event that Alfred C. Liggins III ceases to be associated in any capacity with the
Company or any Affiliate of the Company in connection with a change in Control of Radio One; and
(iv) as permitted by and in accordance with the terms and conditions of the applicable Award
Agreement.
(b) If an Equity Plan Member elects to exercise his, her or its right to cause the Company to
purchase such Members Qualifying Equity Plan Put Units in accordance with this Article XII, it
shall provide written notice thereof to the Company, which notice shall include the number of
Qualifying Equity Plan Put Units to be purchased (the
Equity Plan Put Units) and the
basis on which the Equity Plan Member is exercising its put rights under Section 12.2(a) above.
(c) The fair market value of each Equity Plan Put Unit (such price, the Equity Plan Put Unit
Price) shall be determined in accordance with the procedures described in Section 12.1(c) with
respect to the determination of the Equity Plan Call Unit Price.
(d) The closing of the purchase and sale of the Equity Plan Put Units pursuant to this Section 12.2
(the Equity Plan Put Closing) shall occur on the date as is determined by the Board but,
in any event, within one hundred twenty (120) days of the date that the notice of the Equity Plan
Members intent to require the Company to purchase the Equity Plan Call Units is delivered pursuant
to Section 12.2(b). At the Equity Plan Put Closing, (1) each Equity Plan Member selling Equity Plan
Put Units shall (A) execute and deliver such documents as shall be reasonably requested by the
Company and (B) represent and warrant that such Equity Plan Put Units are being transferred free
and clear of liens, encumbrances and interests or rights of other Persons, and (2) the Company
shall make payment to each Equity Plan Member selling such Equity Plan Put Units in an amount equal
to the Equity Plan Put Unit Price multiplied by the number of Equity Plan Put Units being sold by
such Equity Plan Member, such payment to be made, in the Companys sole discretion, by (x) wire
transfer of immediately available funds to an account specified in writing by such Equity Plan
Member or (y) by wire transfer of immediately available funds equal to at least twenty percent
(20%) of such purchase price and by delivery of a promissory note in the principal amount of the
balance of such purchase price issued by the Company (in form and substance satisfactory to the
Board) bearing interest at a rate of eight percent (8.0%) per annum, the principal and interest of
which shall be due and payable in four (4) equal quarterly installments of principal, together with
accrued interest, beginning on the first day of the fiscal quarter following the fiscal
quarter in which the closing occurs, and continuing on the first day of each succeeding fiscal
quarter until fully paid.
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Section 12.3 Drag Along Rights In connection with any transaction in which the Sole
Member is selling in excess of twenty-five percent (25%) of their aggregate Class A Units in the
Company to a Person or Persons that are not Affiliates of the Company or Controlled by
Affiliates of the Company (the Class A Unit Sale), the Sole Member shall have the rights
and
obligations set forth in this Section 12.3.
(a) At least sixty (60) days prior to the date that the proposed Class A Unit Sale is scheduled to
close (the Closing Date), the Sole Member shall provide each Equity Plan Member with a
written notice of the proposed Class A Unit Sale (the Sale Notice). The Sale Notice shall
contain (i) a description of the Class A Unit Sale, (ii) the per-Unit price (the Class A Sale
Price) to be paid by the Purchaser, (iii) the Closing Date and (iv) an indication as to
whether or not the Member intends to exercise its rights set forth in Section 12.3(b) and, if so,
the number of Equity Plan Drag-Along Units (as defined below) to be included in the Class A Unit
Sale.
(b) The Sole Member shall have the right, but not the obligation, to require each Equity Plan
Member (each such Equity Plan Member, a Drag-Along Equity Plan Member and, collectively,
the Drag-Along Equity Plan Members) to sell to the Class A Unit Sale purchaser (the
Purchaser) a pro rata portion of Equity Plan Units held by such Equity Plan Member that,
as of the Closing Date, are Vested (the Equity Plan Drag-Along Units) at a price per
Equity Plan Drag-Along Unit equal to the amount that the Equity Plan Member would receive on
account the Equity Plan Drag-Along Units if the Company were sold for a value that would result in
the Class A Members receiving the Class A Sale Price per Class A Unit after allocation of such
value to all Members in accordance with the provisions of this Agreement applicable to the
liquidation of the Company.
(c) The closing of the purchase and sale of the Equity Plan Drag-Along Units pursuant to this
Section 12.3 (the Equity Plan Drag-Along Closing) shall occur as close as practicable to
the Closing Date. At the Equity Plan Drag-Along Closing, (1) each Drag-Along Equity Plan Member
shall (A) execute and deliver such documents as shall be reasonably requested by the Purchaser and
(B) represent and warrant to the Purchaser that such Units are being transferred to the Purchaser
free and clear of liens, encumbrances and interests or rights of other Persons, and (2) the
Purchaser shall make payment to the Drag-Along Equity Plan Member selling such Units in an amount
equal to the Equity Plan Drag-Along Price multiplied by the number of Equity Plan Drag-Along Units
being sold by such Member, such payment to be made by wire transfer of immediately available funds
to an account specified in writing by such Member.
(d) Nothing contained in this Section 12.3 and the exercise of the Sole Members rights hereunder
will impact on any Equity Plan Units that are not Vested.
(e) Notwithstanding anything else in this Section 12.3 to the contrary, the Equity Plan Members
shall not be subject to the provisions of this Section 12.3 if no payment would be made to the
Equity Plan Members hereunder.
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Section 12.4 Tag-Along Rights. In the event of a Class A Unit Sale in which the Sole Member does
not elect to exercise its rights pursuant to Section 12.3(b), each Equity Plan Member shall have
the rights and obligations set forth in this Section 12.4.
(a) Upon receipt of a Sale Notice in which the Sole Member does not elect to exercise its rights
pursuant to 12.3(b), each Equity Plan Member shall have the right, but not the obligation, to
require the Sole Member to include a pro rata portion of Equity Plan Units held by such Equity Plan
Member that, as of the Closing Date, are Vested (the Equity Plan Tag-Along Units) at a
price per Equity Plan Tag-Along Unit equal to the amount that the Equity Plan Member would receive
on account the Equity Plan Tag-Along Units if the Company were sold for a value that would result
in the Class A Members receiving the Class A Sale Price per Class A Unit after allocation of such
value to all Members in accordance with the provisions of this Agreement applicable to the
liquidation of the Company (such price, the Equity Plan Tag-Along Unit Price), by
delivering a written notice (the Tag-Along Notice) to the Sole Member at least forty (40)
days prior to the Closing Date indicating such Members desire to sell to the Purchaser the Equity
Plan Tag-Along Units. Each Equity Plan Member delivering a Tag-Along Notice to the Sole Member
shall be referred to herein as a Tag-Along
Seller.
(b) The closing of the purchase and sale of the Equity Plan Tag-Along Units pursuant to this
Section 12.4 (the Equity Plan Tag-Along Closing) shall occur as close as practicable to
the Closing Date. At the Equity Plan Tag-Along Closing (i) each Tag-Along Seller shall (A) execute
and deliver such documents as shall be reasonably requested by the Purchaser in order to vest full
beneficial and record ownership of the Equity Plan Tag-Along Units in the Purchaser, and (B)
represent and warrant to the Purchaser that such Equity Plan Tag-Along Units are being acquired by
the Purchaser free and clear of liens, encumbrances and interests or rights of other Persons, and
(ii) the Purchaser shall make payment to each Tag-Along Seller in an amount equal to the number of
Equity Plan Tag-Along Units being acquired from such Tag-Along Seller
multiplied by the Equity Plan
Tag-Along Unit Price, such payment to be made by wire transfer of immediately available funds to an
account specified in writing by such Member.
(c) Nothing contained in this Section 12.4 and the exercise of the Sole Members rights hereunder
will impact on any Equity Plan Units that are not Vested.
(d) Notwithstanding anything else in this Section 12.4 to the contrary, no Equity Plan Holder will
have any rights hereunder if no payment would be made to the Equity Plan Members by exercising the
rights set forth in this Section 12.4.
Section 12.5
Treatment of Equity Plan Units Issued Pursuant to a Combined Award
Agreement.
Notwithstanding anything else in this Article XII to the contrary, if Equity Plan Members hold
Equity Plan Units issued pursuant to a Combined Award Agreement, then there may be no purchase or
sale under Sections 12.1 or 12.2 of this Article XII unless the Community Connect Equity Plan Units
granted by Community Connect under
the Combined Award Agreement are purchased or sold in the same proportions as the Equity Plan Units
are purchased or sold.
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ARTICLE XIII
ADDITIONAL, SUBSTITUTE AND LIMITED MEMBERS
Section 13.1 Admissions. No Person shall be admitted to the Company as a Member (other than the
Sole Member and Newman as an Equity Plan Member who are the signatories hereto) except in
accordance with Section 13.2, 13.3, 13.4 or 13.5 hereof. Any purported admission which is not in
accordance with this Article XIII shall be null and void. Upon admission of any Additional,
Substitute Member or Limited Member, or upon any Member ceasing to be a Member, the books and
records of the Company shall be revised accordingly to reflect such admission or cessation.
Section 13.2 Admission of Additional Members. Except for the admission of Equity Plan Members which
shall be as set forth in Section 13.5, a Person shall become an Additional Member pursuant to the
terms of this Agreement only if and when each of the following conditions is satisfied:
(a) the Board, in its sole and absolute discretion, determines the nature and amount of the Capital
Contribution and/or Capital Commitment to be made by such Person;
(b) the Board has received, on behalf of the Company, such Persons Capital Contribution and/or
Capital Commitment as so determined;
(c) the Board consents in writing to such admission, which consent may be given or withheld in its
sole and absolute discretion and, if such Person is to be admitted as a Member holding Units, the
Board shall determine which class or series of authorized Units such Person shall hold;
(d) the Board receives written instruments (including, without limitation, a subscription agreement
and such Persons consent to be bound by this Agreement as a Member) that are in form and substance
satisfactory to the Board, as determined in its sole and absolute discretion; and
(e) the Sole Member has approved the classification and issuance of Units.
Section 13.3 Admission of Substitute Members. A Person who acquires all or a portion of a Members
Units shall become a Substitute Member of the Company only following a Transfer of Units made in
accordance with Article XI hereof.
Section 13.4 Limited Members.
(a) A Member (or its successor in interest, if any, pursuant to (i) or (ii) below or his or her
personal representatives, executors or heirs, pursuant to (iv) below) shall automatically become a
Limited Member upon the earliest to occur of any of the following events:
(i) as to any Member that is not an individual, the filing of a certificate of dissolution, or its
equivalent, for such Member;
37
(ii) as to any Member that Transfers all or any part of its Units (and as to the Person to whom
such Units are Transferred), in the event that such Units are Transferred in a manner that does not
comply with Article XI hereof following a determination by a court of competent jurisdiction or the
Board upon advice of counsel selected by the Board that the provisions of Article XI shall not be
applicable to such Transfer; provided that in the event of such a Transfer the limitations and
restrictions applicable to a Limited Member shall only apply to the Units so Transferred;
(iii) the Bankruptcy of such Member; or
(iv) as to any Non-Equity Plan Member that is an individual, the death or permanent incapacity (as
determined in good faith by the Board) of such Non-Equity Plan Member.
(b) Notwithstanding anything to the contrary contained in this Agreement, a Limited Member shall
have no:
(i) right to vote on any matter being voted on by the Members generally or by any class or group of
Members or to receive notice of a meeting of Members; or
(ii) inspection or information rights provided to Members under Article XIV hereof.
(c) Subject to the limitations and restrictions set forth in Section 13.4(b) hereof, a Limited
Member shall retain such rights, and remain subject to such obligations, as were applicable to such
Limited Member (or the Member from whom such Limited Member acquired Units or other Equity
Interests) prior to becoming a Limited Member. If a Limited Member shall fail, within twenty (20)
days of a written request from the Company, to consent in writing to be bound by this Agreement,
(in the event such Person is not a party to any such agreement at the time such written request is
made), the Equity Interests held by such Limited Member shall be forfeited and cancelled.
Section 13.5 Admission of Equity Plan Members. Persons awarded Equity Plan Units under the
Interactive Equity Plan shall be admitted as Members in accordance with the terms of the
Interactive Equity Plan, the applicable Award Agreement and this Agreement if and only if, and
when, each of the following conditions is satisfied:
(a) the Board or a committee thereof approves the issuance of such Equity Plan Units to such
Person, and
(b) the Board or a committee thereof receives written instruments (including, without limitation,
such Persons consent to be bound by this Agreement as a Member as a Equity Plan Member and the
applicable Award Agreement executed by such Person) that are in form and substance satisfactory to
the Board, as determined in its sole and absolute discretion.
Section 13.6 Withdrawal of Member. Members shall not be permitted to voluntarily withdraw from the
Company for any reason. Any Member shall cease to be a Member of the
38
Company upon the date such Member ceases to hold any Units. No such Member shall have a right
to a return of its Capital Contribution solely in his or her capacity as a Member.
ARTICLE XIV
REPORTS TO MEMBERS
Section 14.1 Books and Records.
(a) Each Non-Equity Plan Member has the right, subject to such reasonable standards (including
standards governing what information and documents are to be furnished at what time and location
and at whose expense) as may be established by the Managers, to obtain from the Company from time
to time upon reasonable demand for any purpose reasonably related to the Non-Equity Plan Members
interest as a Member of the Company:
(i) True and full information regarding the status of the business and financial condition of
the Company;
(ii) Promptly after they become available, a copy of the federal, state and local income tax
returns for each year of the Company;
(iii) A current list of the name and last known business, residence or mailing address of each
Member and Manager;
(iv) A copy of this Agreement, the Certificate of Formation and all amendments thereto;
(v) True and full information regarding the amount of cash and a description and statement of
the Agreed Value of any other property or services contributed by each Member and the date on which
each became a Member; and
(vi) Other information regarding the affairs of the Company as is reasonable.
(b) Each Equity Plan Member has the right, subject to such reasonable standards (including
standards governing what information and documents are to be furnished) and at whose expense as may
be established by the Board from time to time, to obtain from the Company from time to time upon
reasonable demand for any purpose reasonably related to the Equity Plan Members interest as a
Member of the Company:
(i) information regarding the status of the business and financial condition of the Company;
(ii) promptly after they become available, a copy of the federal, state and local income tax
returns for each year of the Company; and
(iii) a copy of this Agreement, the Certificate of Formation and all amendments thereto.
39
The foregoing information will either be mailed to each Equity Plan Member at his residence address
that has been supplied by such Equity Plan Member to the Company or at the Companys offices in New
York City.
(c) Each Manager shall have the right to examine all of the information described in subsections
(a) and (b) of this Section 14.1 for any purpose reasonably related to his or her position as a
Manager.
(d) The Company may maintain its records in other than a written form if such form is capable of
conversion into written form within a reasonable time.
(e) Any demand by a Member under this Section shall be in writing and shall state the purpose of
such demand.
(f) The Company shall permit each Non-Equity Plan Member to visit and inspect the Companys
properties, to examine its books of account and records and to discuss the Companys affairs,
finances and accounts with its officers, during normal business hours upon reasonable advance
notice.
(g) The Company shall provide each Non-Equity Plan Member with prompt notice of the initiation of
any material legal action against the Company.
(h) The obligations and limitations set forth in Section 18.1 hereof shall apply to any
Confidential Information disclosed or otherwise made available to any Member pursuant to this
Section 14.1.
Section 14.2 Annual Reports. Within sixty (60) days after the end of each Fiscal Year, the Company
shall cause to be prepared, and each Member furnished with, financial statements accompanied by a
report thereon from an independent accounting firm approved by the Board or a committee thereof
stating that such statements are prepared and fairly stated in all material respects in accordance
with generally accepted accounting principles, and, to the extent inconsistent therewith, in
accordance with this Agreement, including the following:
(a) A copy of the balance sheet of the Company as of the last day of such Fiscal Year;
(b) A statement of income or loss for the Company for such Fiscal Year; and
(c) A statement of the Members Capital Accounts, changes thereto for such Fiscal Year and
Percentage Interests at the end of such Fiscal Year.
Section 14.3 Quarterly Reports. Within thirty (30) days after the end of each quarter, the Company
shall cause each Non-Equity Plan Member to be furnished with unaudited quarterly financial
statements prepared in accordance with the Companys methods of accounting, of the type described
in Section 14.2, as of the last day of such quarter,
provided that such quarterly reports need not include such footnotes as may be required by
generally accepted accounting principles.
40
Section 14.4 Tax Returns and Tax Information to Members. The Company shall send to each Person who
was a Member at any time during such Fiscal Year such tax information, including, without
limitation, Federal Tax Schedule K-1, as shall be reasonably necessary for the preparation of such
Members federal income tax return. The Tax Matters Partner shall use reasonable efforts to
distribute all necessary tax information to each Member as soon as practicable after the end of
each Taxable Year, but not later than seventy-five (75) days after the end of each Taxable Year;
provided, however, that such period shall be automatically extended in the event of a delay beyond
the control of the Tax Matters Partner, such as a delay resulting from the failure of a third party
to provide required tax information to the Company in a timely manner.
Section 14.5 Equity Plan Member Information Rights. Notwithstanding anything to the contrary in
this Agreement, the Equity Plan Members in their capacity as Equity Plan Members shall have no
rights to obtain or review books or records of the Company or other information or reports except
to the extent specifically set forth in Section 14.1(b), Section 14.2 and Section 14.4 hereof.
ARTICLE XV
EVENTS OF DISSOLUTION
Section 15.1 Dissolution. The Company shall be dissolved upon the occurrence of any of the
following events (each, an Event of Dissolution):
(a) A judicial dissolution of the Company pursuant to Section 18-802 of the Act;
(b) Following the sale, transfer or other disposition of all or substantially all of the assets of
the Company pursuant to a Sale Transaction; or
(c) The Members that are entitled to vote holding at least a majority of the Class A Units vote for
dissolution.
Section 15.2 No other Event of Dissolution. No other event, including the retirement, withdrawal,
insolvency, liquidation, dissolution, insanity, resignation, expulsion, Bankruptcy, death,
incapacity or adjudication of incompetency of a Member, shall cause the dissolution of the Company.
ARTICLE XVI
TERMINATION
Section 16.1 Liquidation. In the event that an Event of Dissolution shall occur, the Company shall
be liquidated and its affairs shall be wound up (in each case, a Liquidation) and all
proceeds from such Liquidation shall be distributed as set forth below:
(i) first, to pay, or otherwise make reasonable provision for payment, to creditors, including
Members who are creditors to the extent permitted by law, in satisfaction of the Companys
liabilities; and
41
(ii) second, to the Members, in accordance with their respective positive Capital Account balances
(after giving effect to the allocation of all items of Profit, Loss, deduction and credit (or items
thereof)).
Section 16.2 Final Accounting. In the event of the dissolution of the Company, prior to any
Liquidation, a proper accounting shall be made to the Members from the date of the last previous
accounting to the date of dissolution.
Section 16.3 Cancellation of Certificate. Upon the completion of the Distribution of the Companys
assets upon dissolution of the Company, the Company shall be terminated, all Units shall be
cancelled and the Board shall cause the Company to execute and file a Certificate of Cancellation
in accordance with Section 18-203 of the Act.
ARTICLE XVII
EXCULPATION AND INDEMNIFICATION
Section 17.1 Exculpation. Notwithstanding any other provisions of this Agreement, whether express
or implied, or obligation or duty at law or in equity, none of the Members, Managers or any
officers, directors, stockholders, Affiliates, partners, members, employees, representatives,
consultants or agents of either the Managers or the Members (individually, a Covered
Person and, collectively, the Covered Persons) shall be liable to the Company or any
other Person for any act or omission taken or omitted in good faith by a Covered Person on behalf
of the Company and in the reasonable belief that such act or omission was in or was not opposed to
the best interests of the Company; provided that such act or omission does not constitute fraud,
willful misconduct, bad faith, or gross negligence. Equity Plan Members and their respective
Covered Persons shall not be entitled by reason of this Section 17.1 to exculpation from any
liability that arises under any employment or consulting agreement or arrangement in existence
between the Company and such Person or by reason of any breach thereof.
Section 17.2 Indemnification.
(a) To the fullest extent permitted by law, the Company shall indemnify and hold harmless each
Covered Person (individually, an Indemnified Person and, collectively, the
Indemnified Persons) from and against any and all losses, claims, demands, liabilities,
expenses (including reasonable attorneys fees and expenses), judgments, fines, settlements and
other amounts arising from any and all actions, suits or proceedings, whether civil, criminal,
administrative or investigative (Claims), in which such Indemnified Person may be
involved, or threatened to be involved, as a party or otherwise, by reason of its management of the
property, business or affairs of the Company or the fact that such Indemnified Person was a Member,
Manager, officer, employee, representative, consultant or agent of the Company, or by reason of the
fact that such Person, at the request of the Company, is or was
serving as an officer, director, employee or agent of another limited liability company, corporation, partnership, joint venture,
trust or other enterprise if the Indemnified Person in relation to the facts, events
and circumstances on which such action, suit or proceeding is based (i) acted in good faith and in
a manner that the Indemnified Person reasonably believed to be in, or not opposed to, the best
42
interests of the Company or (ii) with respect to a criminal action or proceeding had no reasonable
cause to believe that the Indemnified Persons conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere, or
its equivalent, shall not, in and of itself, create a presumption or otherwise constitute evidence
that the Indemnified Person acted in a manner contrary to that specified in (i) or (ii) above. An
Indemnified Person shall not be entitled to indemnification under this Section 17.2 with respect to
any Claim if it has engaged in fraud, willful misconduct, bad faith or gross negligence with
respect to the matters that gave rise to such Claim. In the event that an employment or consulting
agreement or arrangement exists between a Equity Plan Member and the Company, such Equity Plan
Member and his or her Covered Persons shall not be entitled to indemnification under this Section
17.2 for Claims arising thereunder or in breach thereof.
(b) Expenses (including reasonable attorneys fees and disbursements) incurred by an Indemnified
Person in investigating or defending any Claim shall be paid by the Company in advance of the final
disposition of such Claim upon receipt by the Company of an undertaking by or on behalf of such
Indemnified Person to repay such amount if it shall be ultimately determined by a court of
competent jurisdiction from which no further appeal may be taken or the time for any appeal has
lapsed (or otherwise, as the case may be) that such Indemnified Person is not entitled to be
indemnified by the Company as authorized by this Section 17.2.
(c) The indemnification provided by this Section 17.2 shall be in addition to any other rights to
which each Indemnified Person may be entitled under any agreement, as a matter of law or otherwise,
both (i) as to the action in the Indemnified Persons capacity as a Member, Manager, officer,
employee, representative, consultant or agent of the Company or by reason of its management of the
property, business or affairs of the Company, and (ii) as to action in another capacity, and shall
continue as to an Indemnified Person who has ceased to serve in such capacity and shall inure to
the benefit of the heirs, successors, assigns, administrators and personal representatives of the
Indemnified Person.
ARTICLE XVIII
GENERAL PROVISIONS
Section 18.1 Confidentiality.
(a) Each Member agrees that it shall at all times keep confidential and not disclose or make
accessible to anyone, any confidential or proprietary information, knowledge or data concerning or
relating to the business or financial affairs of the Company (Confidential Information),
except to the extent as may be required by applicable law, court process or other obligations
pursuant to any governmental or regulatory authority requirement. Notwithstanding the foregoing,
each Member may disclose such Confidential Information to its directors, officers, employees,
Affiliates and advisors having a need to know the Confidential Information in order to accomplish
the legitimate purposes or functions of the Company subject to (1) such Persons being advised of
the
provisions of this Section 18.1, and (2) such Member being responsible for any breach of this
Section 18.1 by any such Persons. Each Member shall safeguard Confidential
43
Information with the same degree of care as such Member uses to safeguard the confidentiality of
its own confidential and proprietary information, knowledge or data.
(b) The obligations of the Members specified in Section 18.1(a) hereof shall not apply, and the
Member shall have no further obligations, with respect to any Confidential Information to the
extent that a Member can demonstrate that such Confidential Information (i) is generally known to
the public or within the Companys industry at the time of disclosure to the Member or becomes
generally known through no wrongful act on the part of the Member, (ii) is in the Members
possession at the time of disclosure to the Member otherwise than as a result of the Members
breach of any legal obligation, (iii) becomes known to the Member through the disclosure by sources
other than the Company having, based upon a reasonable investigation by such Member, the legal
right to disclose such Confidential Information, or (iv) is independently developed by the Member
without reference to or reliance upon the Confidential Information.
(c) The obligations set forth in this Section 18.1 shall be continuing and survive the termination
of this Agreement and following the dissolution of the Company, in each case for a period of three
years, and shall be continuing and survive the withdrawal of a Member from the Company with respect
to such Member for a period of five years following such withdrawal.
Section 18.2 Amendment.
(a) Except as otherwise expressly provided herein:
(i) no provision of this Agreement may be amended or modified except upon the written consent of a
majority of the holders of Class A Units;
(ii) any amendment or modification of any provision of this Agreement that would modify the limited
liability of a Member as set forth in Section 3.9 hereof or increase the amount of capital to be
contributed or committed by a Member to the Company must be approved by such Member; and
(iii) no provision of Articles VIII, IX, XI or XII or Section 4.17, Section 6.5 or this Section
18.2 may be amended or modified in a manner adverse to the rights of an Equity Plan Member without
the written consent of such Equity Plan Member.
(b) Subject to the contractual rights of any Member as expressly set forth in the Award Agreement
or an employment agreement, and subject to Section 18.2(a)(iii), each Member shall be bound by any
amendment or modification effected in accordance with this Section 18.2, whether or not such Member
has consented to such amendment or waiver. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every provision of this Agreement
in accordance with its terms.
(c) Notwithstanding anything to the contrary contained in this Section 18.2, (1) the name of the
Company and/or the name under which the Companys services are provided
44
may be changed (and corresponding amendments to this Agreement and the Certificate of Formation may
be made), (2) corrections or clarifications that do not change the substantive meaning of any
provision hereof may be made and (3) changes to Article VIII of this Agreement and other conforming
changes in this Agreement may be made to the extent necessary to properly reflect the terms of the
Interactive Equity Plan (provided that any such amendment shall be consistent with the economic
arrangement of the Members as reflected in the terms of this Agreement).
(d) Notwithstanding anything to the contrary contained in this Section 18.2, Schedules A and B
hereto may be amended from time to time by the Company as necessary to reflect accurate and correct
information relating to the Members.
Section 18.3 Governing Law. This Agreement shall be construed in accordance with and governed
exclusively by the laws of the State of Delaware (without giving effect to any conflicts or choice
of law provisions that would cause the application of the domestic substantive laws of any other
jurisdiction).
Section 18.4 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 18.5 Remedies.
(a) The parties hereto agree that irreparable harm would occur in the event that any of the
agreements and provisions of this Agreement were not performed fully by the parties hereto in
accordance with their specific terms or conditions or were otherwise breached, and that money
damages are an inadequate remedy for breach of the Agreement because of the difficulty of
ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in
the event that this Agreement is not performed in accordance with its terms or conditions or is
otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an
injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other
parties and to enforce specifically such terms and provisions of this Agreement, such remedy being
in addition to, and not in lieu of, any other rights and remedies to which the other parties are
entitled at law or in equity.
(b) The rights and remedies provided by this Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may have by law, statute,
ordinance or otherwise. Except where a time period is specified, no delay on the part of any party
in the exercise of any right, power, privilege or remedy hereunder shall operate as a waiver
thereof, nor shall any exercise or partial exercise of any such right, power, privilege or remedy
preclude any further exercise thereof or the exercise of any other right, power, privilege or
remedy.
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Section 18.6 Notices. All demands, notices, requests, consents and other communications required or
permitted under this Agreement shall be by written notice and sent by (a) personal delivery, (b)
Electronic Transmission (including pursuant to Section 3.8(b) and Section 4.3(d) hereof) or
facsimile machine (in each case with a confirmation copy sent by one of the other methods
authorized in clauses (a), (c) or (d) hereof), (c) commercial courier (including Federal Express)
or U.S. Postal Service overnight delivery service, or (d) deposit with the U.S. Postal Service
mailed first class, registered or certified mail, postage prepaid. If such notice is being made or
delivered to the Company, such notice shall be made to the Companys principal executive offices as
follows: 205 Hudson Street, 6th Floor, New York, New York 10013 and if such is being made to the
Sole Member (or to a Unit Affiliate of such Sole Member) or a Substitute Member or Additional
Member that is not a Unit Affiliate of the Sole Member, such notice shall be made to such Sole
Member for and on behalf of itself and its Unit Affiliates or to such Substitute Member or
Additional Member (and to such other Persons to be copied in connection with notices to such
Member) as set forth on Schedule A hereof. Notices shall be deemed delivered and to have
been received upon the earliest to occur of (i) if sent by personal delivery, upon receipt by the
party to whom such notice is directed; (ii) if sent by facsimile machine or by Electronic
Transmission (including pursuant to Section 3.8(b) or Section 4.3(d) hereof), the day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice
is sent if sent (as evidenced by Electronic Transmission or facsimile confirmed receipt) prior to
5:00 p.m. U.S. Eastern Time, or the day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) after which such notice is sent if sent after 5:00
p.m. U.S. Eastern Time; (iii) if sent by overnight delivery service, the first day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following
the day the same is deposited with the commercial carrier or U.S. Postal Service; and (iv) if sent
by first class mail, registered or certified, postage prepaid, the fifth day (other than a
Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following
the day the same is deposited with the U.S. Postal Service. Each party, by notice duly given to the
Company and all other Members, may specify a different address for the giving of any notice
hereunder.
Section 18.7 Severability. If any term or provision of this Agreement, or the application thereof
to any Person or circumstance, shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement, or application to other Persons or circumstances, shall not be affected thereby,
and each term and provision of this Agreement shall be enforced to the fullest extent permitted by
law.
Section 18.8 Counterparts; Signatures. This Agreement may be executed in any number of counterparts
with the same effect as if all parties hereto had signed the same document, and all counterparts
shall be construed together and shall constitute one instrument. A facsimile or photocopied
signature shall be deemed to be the functional equivalent of an original for all purposes.
Section 18.9 Entire Agreement. This Agreement, any Award Agreement and any employment agreement
with a Member constitute the full and entire understanding and agreement among the parties hereto
pertaining to the subject matter hereof and supercede all prior understandings and agreements
pertaining hereto, whether written or oral. In the event of
46
any conflict between the terms of this Agreement and the terms of any Award Agreement, the terms of
the Award Agreement shall govern.
Section 18.10 Assignment; Binding Effect. This Agreement may not be assigned, in whole or in part,
by any party hereto except in connection with a Transfer of Units to a Substitute Member in
accordance with the terms and conditions of this Agreement. Any purported assignment in violation
of this Section 18.11 shall be null and void. A Transfer of Units to a Substitute Member shall not
be deemed to be an assignment of any of the rights or obligations of the Transferring Member under
those Sections of this Agreement in which such Transferring Member is granted rights or has
undertaken obligations specifically by name.
Section 18.11 Relationship. Nothing in this Agreement shall be construed to render any of the
Members partners or joint venturers or to impose upon any of them any liability as such, except as
otherwise specifically provided in this Agreement. No party to this Agreement has any authorization
to enter into any contracts or assume any obligations for any other party or make any warranties or
representations on behalf of another party other than as expressly authorized herein.
Section 18.12 Interpretation. Each Member has agreed to the use of the particular language of the
provisions of this Agreement, and any questions of doubtful interpretation shall not be resolved by
any rule or interpretation against the draftsman, but rather in accordance with the fair meaning
thereof, having due regard to the benefits and rights intended to be conferred upon the parties and
the limitations and restrictions upon such rights and benefits intended to be provided.
Section 18.13 No Third-Party Beneficiary. Except as provided in Article XVII hereof, this Agreement
is made solely for the benefit of the parties hereto and no other Person shall have any rights,
interest, or claims hereunder or otherwise be entitled to any benefits under or on account of this
Agreement as a third-party beneficiary or otherwise.
[SIGNATURES CONTAINED ON FOLLOWING PAGE]
47
IN WITNESS WHEREOF, each Member has executed this Agreement as of the date first above written.
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INTERACTIVE ONE, INC.
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By: |
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Name: |
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Title: |
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EQUITY PLAN MEMBER
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By: |
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THOMAS NEWMAN |
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[SIGNATURE PAGE TO OPERATING AGREEMENT]
SCHEDULE A
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Aggregate Capital |
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Contribution as of |
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May 11, 2009 for |
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Interactive One, |
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Inc. and as of the |
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Effective Date for |
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Name/Address of Member |
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Thomas Newman |
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Number of Units |
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CLASS A UNITS
Interactive One,
Inc. |
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Approximately
$14,000,000 |
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4,750 |
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New York, New York |
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Attn: Alfred C. Liggins III |
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EQUITY PLAN UNITS
Thomas Newman |
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$100 |
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100 |
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SCHEDULE B
JOINDER AGREEMENT
This
JOINDER AGREEMENT (this Agreement), is executed by
and among [ ], a resident
of ______________ (the Transferee), and Interactive One, LLC, a Delaware limited liability
corporation (the Company).
W I T N E S S E T H:
WHEREAS, the Interactive One and Newman (as such terms are defined in the Operating Agreement
referred to below) entered into that certain Amended and Restated Limited Liability Company
Operating Agreement of the Company, dated as of _________ __, 2009 (as amended from time to time,
the Operating Agreement), providing for, among other things, the capitalization and
operation of the Company;
WHEREAS,
pursuant to Article XI of the Operating Agreement, no Transfer of Units may be effective
unless the Transferee executes an agreement agreeing to be bound by the terms of the Operating
Agreement; and
WHEREAS, in order to effectuate the Transfer permitted by the Operating Agreement, the Transferee
and the Company desire to enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements set
forth herein, and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
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Defined Terms. Capitalized terms used but not otherwise defined in this Agreement shall
have the respective meanings ascribed to such terms in the Operating Agreement. |
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2. |
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Representations, Warranties and Covenants of the Transferee. The Transferee hereby
represents and warrants to, and covenants and agrees with, the Company, effective as of the date
hereof, as follows: |
a) the Transferee understands that (i) the Units are not registered under the Securities Act of
1933, as amended (the Act), or any state securities laws and are being offered and sold in reliance
upon exemptions provided in the Act and state securities laws for transactions not involving any
public offering and, therefore, the Units cannot be resold or transferred unless the Units are
registered under the Act and any applicable state securities laws or unless an exemption from
registration is available, and (ii) the availability of the exemptions relied upon by the Company
in issuing the Units is dependent, in part, upon the truth of the representations and warranties
made by the Transferee in this Agreement;
b) the Transferee is acquiring the Units for investment only, solely for the Transferees own
account, not as a nominee or agent, and not with a view to the sale or other distribution thereof,
in whole or in part, and the Transferee has no contract, understanding, agreement or arrangement
with any Person to transfer to such Person or any other Person any of the Units (except as provided
in the Operating Agreement), and the Transferee has no present intention to enter into any such
contract, understanding, agreement or arrangement;
c) the Transferee understands that the Units are subject to restrictions on transfer, and that the
Transferee may not transfer the Units except in accordance with the Operating Agreement;
d) the Transferee understands that that the Units are restricted securities under applicable U.S.
federal and state securities laws and that, pursuant to these laws, the Transferee must hold the
Units indefinitely unless they are registered with the Securities and Exchange Commission and
qualified by the state authorities (unless an exemption from such registration and qualification
requirements is available) and the Company is under no obligation (and has no intention) to
register the Units under any circumstances or to attempt to make available any exemption from
registration under the Act or any applicable state securities law, at the Transferees expense or
otherwise;
e) the Transferee acknowledges that (i) if an exemption from registration or qualification is
available, it may be conditioned on various requirements, including but not limited to the
availability of current public information about the Company, the time and manner of the sale, the
holding period of the Units and on requirements relating to the Company that are outside of the
Transferees control; and (ii) the Company is not presently subject, and may never be subject, to
the reporting requirements of the Securities Exchange Act of 1934, as amended, to the extent
required to enable the Transferee to sell its Units pursuant to Rule 144 under the Securities Act
of 1933, as amended;
f) the Transferee understands that no public market now exists for any of the securities issued by
the Company, and that the Company has made no assurances that a public market will ever exist for
the Units;
g) the Transferee is relying solely on its own conclusions or the advice of its own counsel or
advisors with respect to the tax aspects of its investment in the Company;
h) for the purpose of qualification of the offer and sale of the Units under applicable state
securities laws, (i) if such Transferee is an individual, then the Transferee is a resident of the
state set forth on the signature page to this Agreement and (ii) if the Transferee is a
partnership, corporation, limited liability company or other entity, then the office or offices of
the Transferee in which its investment decision was made is located at the address or addresses of
the Transferee set forth on the signature page to this Agreement;
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i) if the Transferee is a partnership, corporation, limited liability company or other entity, then
this Agreement has been executed by a duly authorized officer on behalf of the Transferee, and the
execution, delivery and performance hereof by the Transferee have been duly authorized by all
required action;
j) the Transferee has full power and authority to enter into this Agreement and the Operating
Agreement and the execution and delivery by the Transferee of, and the performance by the
Transferee of its obligations under, this Agreement and the Operating Agreement will result in
valid and legally binding obligations of the Transferee, enforceable against the Transferee in
accordance with the respective terms and provisions hereof and thereof, subject to the effect of
bankruptcy, insolvency, reorganization, receivership, moratorium and other laws affecting the
rights and remedies of creditors generally and of general principles of equity;
k) the execution and delivery by the Transferee of, and the performance by the Transferee of its
obligations under, this Agreement and the Operating Agreement (i) does not and will not result in a
breach of any of the terms, conditions or provisions of, or constitute a default under (A) any
governing instrument of the Transferee (if the Transferee is a partnership, corporation, limited
liability company or other entity) or (B) (1) any note, credit agreement, mortgage, indenture or
other evidence of indebtedness, or any lease or other agreement or understanding to which
Transferee is a party, or (2) any license, permit or franchise, in either case to which the
Transferee is a party or by which it is bound or to which any of its properties or assets are
subject except, in each case, where the breach or default thereunder is not reasonably likely to
materially and adversely affect the Transferees ability to perform its obligations under this
Agreement or the Operating Agreement, (ii) does not require any authorization or approval under or
pursuant to any of the matters set forth in (A) or (B) above (other than such authorizations or
approvals which have been obtained on or prior to the date hereof), or (iii) does not violate, in
any material respect, any statute, regulation, law, order, injunction or decree to which the
Transferee is subject;
l) there is no litigation, investigation or other proceeding pending or, to the Transferees
knowledge, threatened, against the Transferee which, if adversely determined, would materially and
adversely affect the Transferees ability to perform its obligations under this Agreement or the
Operating Agreement;
m) no consent, approval or authorization of, or filing, registration or qualification with, any
court or governmental authority is required on the part of the Transferee for the execution and
delivery of this Agreement and the Operating Agreement or the performance by the Transferee of its
obligations under this Agreement and the Operating Agreement;
n) neither the Transferee, nor any of its officers, employees, agents, directors, stockholders or
partners, if applicable has (i) agreed to pay any commission, fee or other remuneration to any
third party to solicit or contact any potential investor,
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(ii) engaged in any general solicitation, or (iii) published any advertisement, in each case, in
connection with the offer and sale of the Units; and
o) the Transferee acknowledges and understands that the Units in the Company shall be
uncertificated and that, should the Company elect to represent the Units by certificates, any
certificates evidencing Units shall be stamped or endorsed with a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY NEITHER SUCH SECURITIES NOR
ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ANY SUCH LAWS APPLICABLE THERETO AND
THE RULES AND REGULATIONS THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTION AS TO THEIR VOTING, SALE,
TRANSFER, HYPOTHECATION, OR ASSIGNMENT AND MAY BE SUBJECT TO FORFEITURE AND OTHER RESTRICTIONS, IN
EACH CASE, AS SET FORTH IN THE LIABILITY COMPANY OPERATING AGREEMENT OF INTERACTIVE ONE, LLC, DATED
AS OF __________, 2009, AMONG CERTAIN MEMBERS NAMED THEREIN, TOGETHER WITH ANY RELATED AGREEMENTS.
COPIES OF SUCH AGREEMENTS ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND MAY BE OBTAINED
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY.
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Survival of Representations and Warranties. All representations and warranties made by
the Transferee in Section 2 hereof shall survive the execution and delivery of this Agreement. |
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Joinder to Operating Agreement. By execution and delivery of this Agreement, the
Transferee hereby (i) joins in and agrees to be fully bound by, and subject to, all of the
obligations, covenants, terms and conditions of the Operating Agreement applicable to a Member as
though the Transferee were an original party thereto, and shall be deemed included in the
definition of Member and Additional Member for all purposes thereof, (ii) acknowledges receipt
of the Operating Agreement and represents, warrants, covenants and agrees that the Transferee has
read the Operating Agreement and understands that by signing this document, the Transferee shall
assume all of the duties and obligations of a Member thereunder and (iii) authorizes this Agreement
to be attached to and made part of the Operating Agreement or counterparts thereof. |
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Modification. Except to the extent modified by the terms of this Agreement, and the
terms and conditions of the Operating Agreement shall remain in full force and effect. |
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Notice. The address to which notice should be sent to the Transferee pursuant to the
Operating Agreement (including Schedule A thereof) is set forth on the signature page hereof. In
the event such address shall change, Transferee shall promptly provide written notice of such new
address to the Company and the Company shall be authorized to update such information as
appropriate in the books and records of the Company and any other relevant documents. |
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Governing Law. This Agreement shall be construed in accordance with and governed
exclusively by the law of the State of Delaware (without giving effect to any conflicts or choice
of law provisions that would cause the application of the domestic substantive laws of any other
jurisdiction). |
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Counterparts; Signatures. This Agreement may be executed in any number of counterparts
with the same effect as if all parties hereto had signed the same document, and all counterparts
shall be construed together and shall constitute one instrument. A facsimile or photocopied
signature shall be deemed to be the functional equivalent of an original for all purposes. |
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.
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TRANSFEREE:
[ ]
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By: |
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Name: |
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Title: |
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Transferee Address for Notice:
[insert address]
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COMPANY:
INTERACTIVE ONE, LLC
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By: |
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Name: |
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exv3w25
Exhibit 3.25
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State of Delaware
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Secretary of State |
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Division of Corporations |
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Delivered 01:39 PM 07/10/2003 |
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FILED 01:27 PM 07/10/2003 |
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SRV 030453879 3678014 FILE |
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CERTIFICATE OF INCORPORATION
OF
RADIO ONE CABLE HOLDINGS, INC.
The undersigned natural person of the age of eighteen years or more for the purpose of
organizing a corporation for conducting the business and promoting the purposes hereinafter stated,
under the provisions and subject to the requirements of the laws of the State of Delaware
(particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and
supplemental thereto, and known, identified, and referred to as the General Corporation Law of the
State of Delaware), hereby certifies that:
ARTICLE FIRST
The name of the corporation is Radio One Cable Holdings, Inc. (hereinafter the Corporation).
ARTICLE SECOND
The address of the Corporations registered office in the State of Delaware is 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808, in the County of New Castle. The name of
the registered agent at such address is the Corporation Service Company.
ARTICLE THIRD
The nature of the business or purposes to be conducted or promoted is to engage in any lawful
act or activity for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE FOURTH
The total number of shares of stock which the Corporation has the authority to issue is one
thousand (1,000) shares of Common Stock, with a par value of $0.01 per share.
ARTICLE FIFTH
The name and address of the sole incorporator of the Corporation is as follows:
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NAME
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ADDRESS: |
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Linda J. Eckard Vilardo
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c/o Radio One, Inc. |
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5900 Princess Garden Parkway, 7th Floor
Lanham, Maryland 20706 |
ARTICLE SIXTH
The Corporation is to have perpetual existence.
ARTICLE SEVENTH
In furtherance and not in limitation of the powers conferred by statute, the board of
directors of the Corporation is expressly authorized to adopt, amend or repeal the By-Laws of the
Corporation.
ARTICLE EIGHTH
Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws of
the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware
at such place or places as may be designated from time to time by the board of directors or in the
By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws
of the Corporation so provide.
ARTICLE NINTH
Whenever a compromise or arrangement is proposed between this Corporation and its creditors or
any class of them and/or between this Corporation and its stockholder or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware
Code or on the application of trustees in dissolution or of any receiver or receivers appointed for
this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
ARTICLE TENTH
To the fullest extent permitted by the General Corporation Law of the State of Delaware as the
same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification rights than
permitted as of the date hereof), a director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal, modification or amendment of the provisions of this Article Tenth by the stockholders
of the Corporation shall not adversely affect any right or protection of a director of this
Corporation existing hereunder with respect to any act or omission occurring prior to the time of
such repeal, modification or amendment.
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ARTICLE
ELEVENTH
Section 1. Right to Indemnification. Each person who was or is made party or is
threatened to be made a party to or is otherwise involved (including involvement as a witness) in any
action, suit or proceeding whether civil, criminal, administrative or investigative (hereinafter a
Proceeding), by reason of the fact that he or she is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an Indemnitee), whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide for broader indemnification rights than permitted
as of the date hereof), against all expense, liability and loss (including attorneys fees,
judgments, fines, excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such Indemnitee in connection therewith and such indemnification shall continue as to
an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the Indemnitees heirs, executors and administrators; provided, however, that except as
provided in Section 2 of this Article Eleventh with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Indemnitee in connection with a
Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation. The right to indemnification conferred
in this Section 1 of this Article Eleventh shall be a contract right and shall include the
obligation of the Corporation to pay the expenses incurred in defending any such Proceeding in
advance of its final disposition (hereinafter an Advance of Expenses); provided, however that if
and to the extent that the Board of Directors of the Corporation requires, an Advance of Expenses
incurred by an Indemnitee in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such Indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an Undertaking), by or on behalf of such Indemnitee, to repay all
amounts so advanced if its shall ultimately be determined by final judicial decision from which
there is no further right to appeal that such Indemnitee is not entitled to be indemnified for
such expenses under this Section 1 or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation with the same or
lesser scope and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification. Any indemnification of a director or officer
of the Corporation or Advance of Expenses under Section 8.1 of this Article Eleventh shall be made
promptly, and in any event within forty-five days (or, in the case of an Advance of Expenses,
twenty days) upon the written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant to this Article Eleventh is required, and the Corporation fails to
respond within sixty days to a written request for indemnity, the Corporation shall be deemed to
have approved the request. If the Corporation denies a written request for indemnification or
Advance of Expenses, in whole or in part, or if payment in full pursuant to such request is not
made within forty-five days (or. in the case of an
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Advance of Expenses, twenty days), the right to indemnification or advances as granted by this
Article Eleventh shall be enforceable by the director or officer in any court of competent
jurisdiction. Such persons costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any such action shall also
be indemnified by the Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the Advance of Expenses where the Undertaking required pursuant to
Section 1 of this Article Eleventh, if any, has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible under the General Corporation Law of
the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the
burden of such defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of conduct set forth
in the General Corporation Law of the State of Delaware, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of conduct. The
procedure for indemnification of other employees and agents for whom indemnification is provided
pursuant to Section 1 of this Article Eleventh shall be the same procedure set forth in this
Section 2 for directors or officers, unless otherwise set forth in the action of the Board of
Directors of the Corporation providing for indemnification for such employee or agent.
Section 3. Insurance. The Corporation may purchase and maintain insurance on its own behalf
and on behalf of any person who is or was a director, officer, employee or agent of the Corporation
or was serving at the request of the Corporation as a director, officer, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise against any expense,
liability or loss asserted against him or her and incurred by him or
her in any such capacity,
whether or not the Corporation would have the power to indemnify such person against such expenses,
liability or loss under the General Corporation Law of the State of Delaware.
Section 4. Service for Subsidiaries. Any person serving as a director, officer,
employee or agent of another Corporation, partnership, limited liability company, joint venture or
other enterprise, at least 50% of whose equity interests are owned by the Corporation (hereinafter
a subsidiary for this Article Eleventh) shall be
conclusively presumed to be serving in such
capacity at the request of the Corporation.
Section 5. Reliance. Persons who after the date hereof become or remain directors or
officers of the Corporation or who, while a director or officer of the Corporation, become or
remain a director, officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, Advance of Expenses and other rights contained in this
Article Eleventh in entering into or continuing such service. The rights to indemnification and to
the Advance of Expenses conferred in this Article Eleventh shall apply to claims made against an Indemnitee arising out of acts or
omissions which occurred or occur both prior and subsequent to the adoption hereof.
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Section 6.
Non-Exclusivity of Rights. The rights to indemnification and to the Advance of Expenses conferred in this Article Eleventh shall not be exclusive of any other right
which any person may have or hereafter acquire hereunder or under any statute, bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 7. Merger or Consolidation. For purposes of this Article Eleventh, references to the
Corporation shall include any constituent corporation (including any constituent of a constituent)
absorbed into the Corporation in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this Article Eleventh with respect to such
resulting or surviving corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
ARTICLE TWELFTH
The Corporation expressly elects not to be governed by Section 203 of the General Corporation
Law of the State of Delaware.
ARTICLE THIRTEENTH
The Corporation reserves the right to amend, alter, change or repeal any provision contained in
this certificate of incorporation in the manner now or hereafter prescribed herein and by the laws
of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to
this reservation.
I,
the undersigned, being the sole incorporator hereinbefore named, for
the purpose of forming a
corporation in pursuance of the General Corporation Law of the State of Delaware, do make and file
this certificate, hereby declaring and certifying that the facts herein stated are true, and
accordingly have hereunto set my hand this
10th day of July, 2003.
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/s/
Linda J. Eckard Vilardo
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Linda J. Eckard Vilardo |
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Sole Incorporator |
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State of Delaware
Secretary of State |
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Division of Corporations |
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Delivered 04:31 PM 06/30/2010 |
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FILED 04:25 PM 06/30/2010 |
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SRV 100706427 3678014 FILE |
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
The corporation organized and existing under and by virtue of the General Corporation Law of the
State of Delaware does hereby certify:
FIRST: That at a meeting of the Board of Directors of Radio One Cable Holdings, Inc.
resolutions were duly adopted setting forth a proposed amendment of the Certificate of
Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting
of the stockholders of said corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the
Article thereof numbered Article Ninthso that, as amended, said Article shall be and read as
follows:
Article Ninth. Reserved.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the
stockholders of said corporation was duly called and held upon notice in accordance with Section
222 of the General Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed this 29th day of June, 2010.
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By: |
/s/ Linda J. Vilardo
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Authorized Officer
Title: Vice President |
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Name: Linda J. Vilardo |
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Print or Type |
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exv3w26
Exhibit 3.26
BYLAWS
OF
RADIO ONE CABLE HOLDINGS, INC.
(as of July 3, 2003)
A DELAWARE CORPORATION
ARTICLE I OFFICES
Section 1.
Registered Office. The registered office in the State of Delaware shall be at
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 in the County of New Castle. The name
of the corporations registered agent at such address shall be Corporation Service Company. The
registered office or registered agent of the corporation may be changed from time to time by action
of the board of directors on the filing of a certificate or certificates as required by law.
Section 2.
Other Offices. The corporation may also have offices at such other places, both
within and without the State of Delaware, as the board of directors may from time to time determine
or the business of the corporation may require.
ARTICLE
II MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the stockholders shall be held
each year, beginning in the year 2004, prior to the last day of September. At such meeting, the
stockholders shall elect the directors of the corporation and conduct such other business as may
come before the meeting. The time and place of the annual meeting shall be determined by the board
of directors. Special meetings of the stockholders for any other purpose may be held at such time
and place, within or without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof. Special meetings of the stockholders may be called
by the president or the chairman of the board for any purpose and shall be called by the secretary
if directed in writing by two or more members of the board of directors or the holders of more than
10% of the outstanding stock and stating the purpose or purposes of the proposed meeting. The board
of directors may elect to hold a meeting of the stockholders solely by means of remote
communications.
Section 2. Notice. Whenever stockholders are required or permitted to take action at a
meeting, written or printed notice of every annual or special meeting of the stockholders, stating
the place, date, time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor
more than 60 days before the date of the meeting. All such notices shall be delivered, either
personally or by mail, by or at the direction of the board of directors, the chairman of the board,
the chief executive officer, the president or the secretary, and
if mailed, such notice shall be deemed to be delivered when deposited in the United States mail
with
postage prepaid and addressed to the stockholder at his or her address as it appears on the records
of the corporation. Without limiting the manner by which notice otherwise may be given to the
stockholders, any notice given by the corporation to the stockholders shall be effective if given
by a form of electronic transmission consented to by the stockholder to whom the notice is given.
Any such consent shall be revocable by the stockholder by written notice to the corporation. Any
such consent shall be deemed revoked if (a) the corporation is unable to deliver by electronic
transmission two consecutive notices given by the corporation in accordance with such consent and
(b) such inability becomes known to the corporations secretary, an assistant secretary, transfer
agent or other person responsible for giving such notice;
provided, however, that the inadvertent
failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Notice given by electronic transmission shall be deemed given: (i) if by facsimile, when directed
to a number at which the stockholder has consented to receive notice, (ii) if by electronic mail,
when directed to an electronic mail address at which the stockholder has consented to receive
notice, (iii) if by posting on an electronic network together with separate notice to the
stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such
separate notice, and (iv) if by any other form of electronic transmission, when directed to the
stockholder.
Section 3. Waiver of Notice. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice, or a waiver by
electronic transmission by the person entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be specified in any written
waiver of notice or any waiver by electronic transmission unless so required by the certificate of
incorporation or these bylaws.
Section 4. Stockholders List. The officer having charge of the stock ledger of the
corporation shall make, at least 10 days before every meeting of the stockholders, a complete list
arranged in alphabetical order of the stockholders entitled to vote at such meeting, specifying the
address of and the number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the notice of the meeting
or, if not so specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5.
Quorum; Adjourned Meetings. The presence of stockholders entitled to cast at
least a majority of the votes that all stockholders are entitled to cast on a matter to be
acted upon at a meeting of the stockholders shall constitute a quorum for the purposes of
consideration and action on the matter, except as otherwise provided by statute or by the
certificate of incorporation. If a quorum is not present, the holders of the shares present in
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person or represented by proxy at the meeting and entitled to vote thereat shall have the power, by
the affirmative vote of the holders of a majority of such shares, to adjourn the meeting to another
time or place. Unless the adjournment is for more than thirty days or unless a new record date is
set for the adjourned meeting, no notice of the adjourned meeting need be given to any stockholder,
provided that the time and place of the adjourned meeting were announced at the meeting at which
the adjournment was taken. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
Section 6.
Vote Required. When a quorum is present or represented by proxy at any meeting,
the vote of a majority of the votes cast by all stockholders entitled to vote and, if any
stockholders are entitled to vote as a class, the vote of a majority of the votes cast by the
stockholders entitled to vote as a class, whether such stockholders are present in person or
represented by proxy at the meeting, shall be the act of the stockholders, unless the question is
one upon which by express provisions of an applicable statute or of the certificate of
incorporation a different vote is required, in which case such express provision shall govern and
control the decision of such question.
Section 7.
Voting Rights. Except as otherwise provided by the Delaware General Corporation
Law or by the certificate of incorporation of the corporation or any amendments thereto and subject
to Section 4 of ARTICLE VI hereof, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of capital stock held by such
stockholder.
Section 8.
Proxies. Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may authorize another
person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
Section 9. Action Without Meeting. Any action required by law or these bylaws to be taken
at any annual or special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than the minimum number
of votes that would be necessary to authorize such action at a meeting at which all shares entitled
to vote thereon were present and voted. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior action by the board
of directors is necessary, shall be the date on which the first written consent is expressed. A
telegram, cablegram or other electronic transmission consenting to an action to be taken and
transmitted by a stockholder, or by a person or persons authorized to act for a stockholder, shall
be deemed to be written, signed and dated for purposes of this
Section 9, provided, that any such
telegram, cablegram or other electronic transmission sets forth or is delivered with information
from which the corporation can determine (a) that the telegram, cablegram or other electronic
transmission was transmitted by the stockholder, or by a person or
persons authorized to act for the stockholder, and (b) the date on which such stockholder or
authorized person or persons transmitted such telegram, cablegram or electronic transmission. The
date on which such telegram, cablegram or electronic transmission is transmitted shall be
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deemed to be the date on which such consent was signed. Any copy, facsimile or other reliable
reproduction of a consent in writing may be substituted or used in lieu of the original writing for
any and all purposes for which the original writing could be used,
provided, that such copy,
facsimile or other reproduction shall be a complete reproduction of the entire original writing.
ARTICLE
III DIRECTORS
Section 1. General Authority. The business and affairs of the corporation shall be managed
by or under the direction of its board of directors which may exercise all such powers of the
corporation and do such lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done by the stockholders.
Section 2. Number, Election and Term of Office. The number of directors shall be no fewer
than 5 nor more than 11, as determined from time to time by resolution of the board or as otherwise
provided in the certificate of incorporation of the corporation. The directors shall be elected by
a plurality of the votes of the shares present in person or represented by proxy at the meeting and
entitled to vote in the election of directors except that the first directors of the corporation
shall be appointed by the sole incorporator of the corporation. The directors shall be elected in
this manner at the annual meeting of the stockholders, except as provided in Section 3 of this
ARTICLE III. Each director elected shall hold office until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as hereinafter provided.
Directors need not be stockholders of the corporation.
Section 3.
Removal and Resignation. Any director or the entire board of directors may be
removed at any time, with or without cause, by the vote of a majority of the votes cast by all
stockholders entitled to vote at an election of directors, except as otherwise provided by statute.
Any director may resign at any time upon written notice to the president or secretary of the
corporation. The resignation of any director shall take effect at the time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.
Vacancies. Except as otherwise provided by the certificate of incorporation of
the corporation or any amendments thereto, vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority vote of the holders
of the corporations outstanding stock entitled to vote thereon or by a majority vote of the Board
of Directors. Each director so chosen shall hold office until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as herein provided.
Section 5.
Annual Meetings. The annual meeting of each newly elected board of directors
shall be held without other notice than this bylaw immediately after, and at the same place as, the
annual meeting of stockholders.
Section 6.
Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board
of directors may be held without notice at such time and at such place as shall from time to time
be determined by resolution of the board. Special meetings of
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the board of directors may be called by or at the request of the chairman, the chief executive
officer or the president on at least 24 hours notice to each director, either personally, by
telephone, by mail, by telegraph, by facsimile or by other electronic transmission; in like manner
and on like notice the secretary must call a special meeting on the written request of a majority
of directors. Such notice shall state the date, time and place, if any, of the meeting but need not
state the purpose thereof, except as otherwise herein expressly provided. A written waiver of
notice signed by the director entitled to notice, whether before or after the time stated therein,
shall be equivalent to notice. Attendance of a director at the meeting shall constitute a waiver of
notice of such meeting, except when the director attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 7.
Quorum. A majority of the total number of directors shall constitute a quorum
for the transaction of business. The vote of a majority of directors present at a meeting at which
a quorum is present shall be the act of the board of directors. If a quorum shall not be present at
any meeting of the board of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a quorum shall be
present.
Section 8. Committees. The board of directors may, by resolution passed by a majority of
the whole board, designate one or more committees. Each committee shall consist of one or more of
the directors of the corporation, which, to the extent provided in such resolution and not
otherwise limited by statute, shall have and may exercise the powers of the board of directors in
the management and affairs of the corporation including without limitation the power to declare a
dividend and to authorize the issuance of stock; provided, however, that no such committee shall
have the power or authority to amend these bylaws or the certificate of incorporation. The board of
directors may designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such committee or
committees shall have such name or names as may be determined from time to time by resolution
adopted by the board of directors. Each committee shall keep regular minutes of its meetings and
report the same to the directors when required.
Section 9. Committee Rules. Each committee of the board of directors may fix its own rules
of procedure and shall hold its meetings as provided by such rules, except as may otherwise be
provided by the resolution of the board of directors designating such committee, but in all cases
the presence of at least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that members alternate, if alternates are
designated by the board of directors as provided in Section 8 of
this ARTICLE III, of such
committee is/are absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Section 10.
Compensation. The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such payment shall preclude
any director from serving the corporation in any other capacity and
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receiving compensation therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 11.
Communications Equipment. Members of the board of directors or any committee
thereof may participate in and act at any meeting of such board or committee through the use of a
conference telephone or other communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 12. Action by Written Consent. Any action required or permitted to be taken at any meeting
of the board of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the board of directors or committee.
ARTICLE IV OFFICERS
Section 1.
Number. The officers of the corporation shall be elected by the board of
directors and shall consist of a chairman of the board (if the board of directors so deems
advisable and elects), a president (who shall perform the functions of the chairman of the board if
none be elected), one or more vice-presidents, a secretary, a treasurer, and such other officers
and assistant officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board of directors may
choose not to fill any office for any period as it may deem advisable, except the offices of
president and secretary.
Section 2.
Election and Term of Office. The officers of the corporation shall be elected
annually by the board of directors at the meeting of the board of directors held after each annual
meeting of stockholders. If the election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each officer shall hold office
until the next annual meeting of the board of directors and until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors may be removed
by the board of directors whenever in its judgment the best interest of the corporation would be
served thereby, but such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. Vacancies. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the board of directors for the unexpired portion of
the term by the board of directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the board of
directors, and no officer shall be prevented from receiving such compensation by virtue of the fact
that he or she is also a director of the corporation.
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Section 6.
Chairman of the Board. The chairman shall preside at all meetings of the board
of directors and all meetings of the stockholders and shall have such other powers and perform such
duties as may from time to time be assigned to him by the board of directors.
Section 7. The Chief Executive Officer. The chief executive officer of the corporation
shall have such powers and perform such duties as are specified in these bylaws and as may from
time to time be assigned to him by the board of directors. The chief executive officer shall have
overall management of the business of the corporation and its subsidiaries and shall see that all
orders and resolutions of the boards of directors of the corporation and its subsidiaries are
carried into effect. The chief executive officer shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where
required or permitted by law to
be otherwise signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of the corporation.
The chief executive officer shall have general powers of supervision and shall be the final
arbitrator of all differences among officers of the corporation and its subsidiaries, and such
decision as to any matter affecting the corporation and its subsidiaries subject only to the boards
of directors. In the absence of the chairman for any reason, including the failure of the board of
directors to elect a chairman, or in the event of the chairmans inability or refusal to act, the
chief executive officer shall have all the powers of and be subject to all the restrictions upon
the chairman.
Section 8. The President. The president shall have such powers and perform such duties as
are specified in these bylaws and as may from time to time be assigned to him by the board of
directors. The president shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of directors are carried
into effect. The president shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. The president shall have
general powers of supervision and shall be the final arbitrator of all differences between officers
of the corporation, and such decision as to any matter affecting the corporation subject only to
the board of directors or the chief executive officer (if the president and the chief executive
officer are not the same person). In the absence of the chief executive officer for any reason,
including the failure of the board of directors to elect a chief executive officer or in the event
of the chief executive officers inability or refusal to act, the president shall have all the
powers of and be subject to all the restrictions upon the chief executive officer.
Section 9. Vice Presidents. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, including any executive vice
presidents, shall, in the absence or disability of the president, perform the duties and exercise
the powers of the president and shall perform such other duties and have such
other powers as the board of directors or the president may, from time to time, determine or these
bylaws may prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and the board of directors in a book to be kept for
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that purpose and shall perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders and special meetings
of the board of directors; perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he or she shall be; shall have custody of the corporate seal
of the corporation and the secretary, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by his or her signature
or by the signature of such assistant secretary. The board of directors may give general authority
to any other officer to affix the seal of the corporation and to attest the affixing by his or her
signature. The assistant secretary, or if there be more than one, the assistant secretaries in the
order determined by the board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors or the president may from time to time prescribe.
Section 11. The Treasurer and Assistant Treasurer. The treasurer shall have the custody of
the corporate funds and securities; shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation; shall deposit all monies and other valuable
effects in the name and to the credit of the corporation as may be ordered by the board of
directors, taking proper vouchers for such disbursements; and shall render to the president and the
board of directors, at its regular meeting or when the board of directors so requires, an account
of the corporation. If required by the board of directors, the treasurer shall give the corporation
a bond (which shall be rendered every six years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of the duties of the
office of treasurer and for the restoration to the corporation, in case of death, resignation,
retirement, or removal from office, of all books, papers, vouchers, money, and other property of
whatever kind in the possession or under the control of the treasurer belonging to the corporation.
The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order
determined by the board of directors, shall in the absence or disability of the treasurer, perform
the duties and exercise the powers of the treasurer and shall perform such other duties and have
such other powers as the board of directors or the president may from time to time prescribe.
Section 12.
Other Officers, Assistant Officers and Agents. Officers, assistant officers and
agents, if any, other than those whose duties are provided for in these bylaws, shall have such
authority and perform such duties as may from time to time be prescribed by resolution of the board
of directors.
ARTICLE V INDEMNIFICATION
Officers,
directors and others shall be entitled to indemnification to the
extent provided in the
certificate of incorporation.
ARTICLE
VI CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be entitled to have a
certificate, signed by, or signed in the name of the corporation by the president or a vice-president, and the secretary or an assistant secretary of the
corporation, certifying the number of
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shares owned by him or her in the corporation. Where a certificate is signed (1) by a transfer
agent or an assistant transfer agent other than the corporation or its employee or (2) by a
registrar, other than the corporation or its employee, the signature of any such president, vice-president, secretary, or assistant secretary may be facsimile. In case any officer or officers have
signed a certificate or certificates, or whose facsimile signature or signatures have been used on
certificate or certificates, shall cease to be such officer or officers of the corporation whether
because of death, resignation or otherwise before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used on such certificate or certificates had not ceased
to be such officer or officers of the corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue, shall be entered on
the books of the corporation. All certificates surrendered to the corporation for transfer shall be
canceled, and no new certificate shall be issued in replacement until the former certificate for a
like number of shares shall have been surrendered or canceled, except as otherwise provided in
Section 2 with respect to lost, stolen or destroyed certificates.
Section 2. Lost Certificates. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of
that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed certificate or certificates, or his or her legal representative, to give the
corporation a bond in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 3. Transfers of Stock. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and record the transaction
upon its books.
Section 4. Fixing a Record Date. The board of directors may fix in advance a record date
for the determination of stockholders entitled to notice of, and to vote at, any meeting of
stockholders and any adjournment thereof; stockholders entitled to consent to corporate action in
writing without a meeting; stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or entitled to exercise any rights in respect to any change,
conversion or exchange of stock; or, for the purpose of any other lawful action, which record date
may not precede the date on which the resolution fixing such record date is adopted by the board of
directors. The record date for the determination of stockholders entitled to notice of, and to vote
at, a meeting of stockholders shall not be more than 60 days nor less than 10 days before the date
of such meeting. The record date for the determination of stockholders entitled to consent to
corporate action in writing without a meeting shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the board of directors. The record date
for the determination of stockholders with respect to any other action shall not be
- 9 -
more than 60 days before the date of such action. If no record date is fixed: the record date for
determining stockholders entitled to notice of, and to vote at, a meeting of stockholders shall be
at the close of business on the day next preceding the day on which notice is given, or if notice
is waived, at the close of business on the day next preceding the day on which the meeting is held;
the record date for determining stockholders entitled to consent to corporate action in writing
without a meeting when no prior action by the board of directors is required by the Delaware
General Corporation Law, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of meetings of stockholders are
recorded; and, the record date for determining stockholders with respect to any other action shall
be the close of business on the day on which the board of directors adopts the resolution relating
thereto.
ARTICLE
VII GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the board of directors
at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the certificate of incorporation.
Before payment of any dividend, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, equalize dividends, repair
or maintain any property of the corporation, or for any other purpose, and the directors may modify
or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of
money by or to the corporation and all notes and other evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers, agent or agents of the corporation,
and in such manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Deposits. All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation or otherwise as the board of directors or the
Chief Executive Officer, the President or the Treasurer shall direct in such banks, trust companies
or other depositories as the board of directors may select, or as may be selected by any officer or
officers or agent or agents of the corporation to whom power in that respect shall have been
delegated by the board of directors. For the purpose of deposit and collection for the account of
the corporation, checks, drafts and other orders for the payment of money which are payable to the
order of the corporation may be endorsed, assigned and delivered by any officer of the corporation.
Section 4. Contracts. The board of directors may authorize any officer or officers, or any
agent or agents, of the corporation to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority may be general or
confined to specific instances.
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Section 5. Loans. The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its subsidiary, including
any officer or employee who is a director of the corporation or its subsidiary, whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit
the corporation. The loan, guaranty or other assistance may be with or without interest, and may be
unsecured, or secured in such manner as the board of directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall
be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 6. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of
the board of directors.
Section 7. Corporate Seal. The board of directors shall provide a corporate seal which
shall be in the form of a circle and shall have inscribed thereon the name of the corporation and
the words Corporate Seal, Delaware. The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
Section 8. Voting Securities Owned by Corporation. Voting securities in any other
corporation held by the corporation shall be voted by the president or the executive vice
president, unless the board of directors specifically confers authority to vote with respect
thereto upon some other person or officer. Any person authorized to vote securities shall have the
power to appoint proxies, with general power of substitution.
Section 9. Inspection of Books and Records. Any stockholder of record, in person or by
attorney or other agent, shall, upon written demand upon oath stating the purpose thereof, have the
right during the usual hours of business to inspect for any proper purpose the corporations stock
ledger, a list of its stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such persons interest as
a stockholder. In every instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of attorney or such
other writing which authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered office in the State of
Delaware or at its principal place of business.
Section 10. Form of Records. Any records maintained by the corporation in the regular
course of its business, including its stock ledger, books of account, and minute books, may be kept
on, or by means of, or be in the form of, any information storage
device or method, provided, that
the records so kept can be converted into clearly legible paper form within a reasonable time. The
corporation shall so convert any records so kept upon the request of any person entitled to inspect
the same.
Section 11. Section Headings. Section headings in these bylaws are for convenience of
reference only and shall note given any substantive effect in limiting or otherwise construing any
provision herein.
- 11 -
Section 12. Inconsistent Provisions. In the event that any provision of these bylaws is or
becomes inconsistent with any provision of the certificate of incorporation, the Delaware General
Corporation Law or any other applicable law, the provision of these bylaws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full force and effect.
ARTICLE VIII INTERESTED DIRECTORS
No contract or transaction between this Corporation and one or more of its directors or officers,
or between this Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) The material facts as to such directors or officers relationship or interest and as to the
contract or transaction are disclosed or are known to the board of directors or the committee, and
the board or committee in good faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the disinterested directors may be
less than a quorum; or
(b) The material facts as to such directors or officers relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled to vote thereon,
and the contract or transaction is specifically approved in good faith by vote of the stockholders;
or
(c) The contract or transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the board of directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a quorum at a meeting
of the board of directors or of a committee which authorized the contract or transaction.
ARTICLE IX AMENDMENTS
These bylaws may be amended, altered or repealed and new bylaws adopted at any meeting of the board
of directors by a majority vote, provided that the affirmative vote of the holders of a majority of
the shares of common stock of the corporation then entitled to vote shall be required to adopt any
provision inconsistent with, or to amend or repeal any provision of, Section 2 or 4 of ARTICLE
III or this ARTICLE IX. The fact that the power to adopt, amend, alter or repeal the
bylaws has been conferred upon the board of directors shall not divest the stockholders of the same
powers.
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exv3w27
Exhibit 3.27
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State of Delaware
Secretary of State
Division of Corporations
Delivered 01:43 PM 04/07/2006
FILED 01:37 PM 04/07/2006
SRV 060329346 4139072 FILE |
CERTIFICATE OF FORMATION
OF
RADIO
ONE DISTRIBUTION HOLDINGS, LLC
This Certificate of Formation of Radio One Distribution Holdings, LLC (the Company), dated
as of April 6, 2006, is being duly executed and filed by the undersigned, an authorized person, to
form a limited liability company under the Delaware Limited Liability Company Act (6 Del.C.
§18-101, et seq.).
FIRST. The name of the limited liability company formed hereby is
RADIO ONE DISTRIBUTION HOLDINGS, LLC.
SECOND. The address of the initial registered office of the Company in the State of Delaware shall
be: 2711 Centerville Road, Suite 400, Wilmington, DE 19808.
THIRD. The name and address of the Companys registered agent for service of process on the Company
in the State of Delaware are: Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, DE 19808.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first
above written.
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/s/ John W. Jones
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John W. Jones |
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Authorized Person |
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exv3w28
Exhibit 3.28
LIMITED LIABILITY COMPANY AGREEMENT
OF
RADIO ONE DISTRIBUTION HOLDINGS, LLC
This Limited Liability Company Agreement (the Agreement) of Radio One Distribution Holdings,
LLC, a Delaware limited liability company (the Company),
is made as of April ___, 2006, by Radio
One, Inc., a Delaware corporation (the Member).
In consideration of the agreements and obligations set forth herein and intending to be legally
bound, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Member hereby agrees as follows:
1. Formation: Admission of Member. The Company was formed on April ___, 2006 by filing
a Certificate of Formation with the Delaware Secretary of State pursuant to the Delaware Limited
Liability Company Act (the Delaware Act) and on behalf of the Member. Simultaneously with the
execution and delivery of this Agreement and the aforementioned filing of the Certificate of
Formation, the Member is admitted as the sole member of the Company.
2. Name. The name of the Company is Radio One Distribution Holdings, LLC and all
Company business shall be conducted under such name.
3. Purpose.
The Company is formed for the purpose of engaging in any lawful act or
activity for which limited liability companies may be formed under Delaware law and engaging in any
and all activities necessary, convenient, desirable or incidental to
the foregoing, provided that
such acts and activities are in no way inconsistent with the agreements in effect from time to time
between the Member and its lenders.
4. Principal Place of Business. The principal place of business of the Company shall
be at c/o Radio One, Inc., 5900 Princess Garden Parkway, 7th Floor, Lanham, MD 20706.
5. Member. The name and mailing address of the Member is as follows:
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Name |
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Address |
Radio One, Inc.
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5900 Princess Garden Parkway,
7th Floor
Lanham, MD 20706
Attn: General Counsel |
6. Registered Agent and Office. The street address of the initial registered office of the
Company shall be: 2711 Centerville Road, Suite 400, Wilmington, DE 19808. The name of the Companys
registered agent at such address is: Corporation Service Company. At any time, the Member may
designate a different registered agent and/or registered office.
7. Powers. The Company shall have the power and authority to take any and all actions
necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of
the purposes described herein, including all powers, statutory or otherwise, possessed by the
members of limited liability companies under Delaware law.
8. Management of the Company. The business affairs of the Company shall be managed by the
Member in accordance with Section 18-402 of the Delaware Act. Management of the Company shall be
vested solely in the Member. The Member shall have sole and complete discretion in determining
whether to issue Units, the number of Units to be issued at any particular time, the purchase price
for any Units issued, and all other terms and conditions governing any Units or the issuance
thereof. The Member may appoint a President, one or more Vice Presidents, a Treasurer, a Secretary
and/or one or more other officers as it deems necessary, desirable or appropriate, with such
authority and upon such terms and conditions as the Member deems appropriate or, in the absence of
such determination by the Member, as are appropriate to an officer with a similar title of a
Delaware corporation. Any such officer shall serve at the pleasure of the Member and may be
removed, with or without cause, by the Member.
9. Relationship Between the Member and the Company.
(a) The Member, its Affiliates (hereinafter defined), and the directors, officers and employees of
the Member and its Affiliates may enter into agreements with the Company providing for the
performance of services for the Company, and the receipt of such compensation as the Company may
agree to pay.
(b) None of the Member, Manager (as defined in the Delaware Act) or officers of the Company shall
be liable or accountable in damages or otherwise to the Company or the Member for any act or
omission done or omitted by him, her or it in good faith, unless such act or omission constitutes
gross negligence or willful misconduct on the part of the Member, Manager or officer of the
Company. The Company is expressly permitted in the normal course of its business to enter into
transactions with the Member and any or all Managers or officers or with any Affiliates of the
Member or of any such Manager or officer.
(c) All expenses incurred with respect to the organization, operation and management of the Company
shall be borne by the Company. The Member shall be entitled to reimbursement from the Company for
direct expenses allocable to the organization, operation and management of the Company.
(d) Affiliate shall mean any Person (hereinafter defined) directly or indirectly controlling,
controlled by or under common control with the Person in question; and, if the Person in question
is not an individual, any executive officer or director of the Person in question or of any Person
directly or indirectly controlling the Person in question. As used in this definition of
Affiliate, the term control means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Person shall mean any individual, corporation, association, partnership, limited liability
company, joint venture, trust, estate or other entity or organization.
- 2 -
10. Indemnity. In accordance with Section 18-108 of the Delaware Act, the Company shall
indemnify and hold harmless the Member and any Manager, officer of the Company and Affiliate
thereof (individually, in each case, an Indemnitee), to the fullest extent permitted by law
against any loss, liability, damage, judgment, demand, claim, cost or expense incurred by or
asserted against the Indemnitee (including, without limitation, reasonable attorneys fees and
disbursements incurred in the defense thereof) arising out any act or omission of the Indemnitee in
connection with the Company. Unless otherwise provided in this Section 10, in the event of any
action by the Member against any Indemnitee, including a derivative suit, the Company shall
indemnify, hold harmless and pay all expenses of such Indemnitee, including reasonable attorneys
fees and disbursements incurred in the defense thereof. Notwithstanding the provisions of this
Section 10, this Section 10 shall be enforced only to the maximum extent permitted by law, and no
Indemnitee shall be indemnified from any liability for the fraud, intentional misconduct, gross
negligence or a knowing violation of the law which was material to the cause of action.
11. Capital Contributions. The Member has made an initial capital contribution to the
Company of $1,000.00, and the Company has issued to the Member the entire membership interest in
the Company. The Member is not required to make any additional contributions to the Company.
12. Allocation of Profits and Losses. The Companys profits and losses, and all items
allocable for tax purposes, shall be allocated to the Member.
13. Distributions. Distributions shall be made to the Member at the times and in the
aggregate amounts as determined by the Member.
14. Assignments. The Member may assign in whole or in part its limited liability interest
in the Company in accordance with the Delaware Act.
15. Admission of Additional Members. One or more additional members may be admitted to the
Company with the consent of the Member upon such terms and conditions as the Member, in its
discretion, shall approve. In the event of the admission of any new member or members, the Member
and such additional member or members shall execute an appropriate amendment to this Agreement
reflecting such terms and conditions and such other matters which the Member deems appropriate or
upon which the Member and such additional member or members shall agree.
16. Resignation of Member. The Member may resign from the Company in accordance with the
Delaware Act.
17. Liability of Member. Except as otherwise required in the Delaware Act, the debts,
obligations, and liabilities of the Company, whether arising in contract, tort or otherwise, shall
be solely the debts, obligations and liabilities of the Company, the Member shall not be obligated
for any such debt, obligation or liability of the Company solely by reason of being a member or
participating in the management of the Company. The failure of the
Company to observe any formalities or requirements relating to the exercise of its powers or
management of
- 3 -
its business or affairs under the Delaware Act or this Agreement shall not be grounds for imposing
liability on the Member for liabilities of the Company.
18. Dissolution. Dissolution of the Company will occur upon the consent of the Member to
dissolution of the Company. The exclusive means by which the Company may be dissolved are set forth
in this Section 18. The Company will not be dissolved upon the death, retirement, resignation,
expulsion, bankruptcy, or dissolution of the Member or upon the occurrence of any other event which
terminates the continued membership of the Member in the Company. Upon the occurrence of an event
set forth in this Section 18, the Member shall be entitled to receive, after paying or making
reasonable provision for all of the Companys creditors to the extent required by Section 18-804 of
the Delaware Act, the remaining funds of the Company.
19. Amendments. This Agreement may be amended only in writing. Any such amendment must be
approved and executed by the Member.
20. Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit
of the Member and, to the extent permitted by this Agreement, its successors, legal representatives
and assigns. No Person other than the Member shall be entitled to any benefits under the Agreement,
except as otherwise expressly provided. Reference to any Person in this Agreement includes such
Persons successors and permitted assigns.
21. Captions. Captions contained in this Agreement are inserted as a matter of convenience
and in no way define, limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
22. Severability. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision were omitted. The preceding sentence
shall be of no force or effect if the consequence of enforcing the remainder of this Agreement
without such invalid or unenforceable provision would be to cause any party to lose the benefit of
its economic bargain.
23. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICTS OF LAWS, RULE OR PRINCIPLE THAT MIGHT REFER THE
GOVERNANCE OR CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.
24. Consent to Jurisdiction Provision. The Member hereby (i) irrevocably submits to the
nonexclusive jurisdiction of any Delaware State court or Federal court sitting in Wilmington,
Delaware, in any action arising out of this Agreement, and (ii) consents to the service of process
by mail. Nothing herein shall affect the right of any party to serve legal process in any manner
permitted by law or affect its right to bring any action in any other court.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 4 -
IN WITNESS WHEREOF, the Member has executed this Agreement as of the date and year first above
written.
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RADIO ONE, INC.
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By: |
/s/ John W. Jones
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Name: |
John W. Jones |
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Title: |
Vice President and General Counsel |
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exv5w1
Exhibit 5.1
300 North LaSalle
Chicago, Illinois 60654
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312 862-2000
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Facsimile: |
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312 862-2200 |
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www.kirkland.com |
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February 9, 2011
Radio One, Inc.
5900 Princess Garden Parkway,
7th Floor
Lanham, Maryland 20706
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special legal counsel to Radio One,
Inc., a Delaware corporation (the Issuer), and each of the Issuers subsidiaries listed on
Schedule I hereto (collectively, the Guarantors and, together with the Issuer, the
Registrants). This opinion letter is being delivered in connection with the proposed
registration by the Registrants of (i) $286,794,302 in aggregate principal amount of the Issuers
12.5%/15.0% Senior Subordinated Notes due 2016 (the Exchange Notes), (ii) up to $40,241,304 in
additional 12.5%/15.0% Senior Subordinated Notes due 2016 issued as interest in respect of the Exchange Notes
(the PIK Notes and together with the Exchange Notes, the Notes) and (iii) the guarantees of the
Guarantors with respect to the Notes (the Guarantees), pursuant to a Registration Statement on
Form S-4, to be filed with the Securities and Exchange Commission (the Commission) on or about
February 9, 2011, under the Securities Act of 1933, as amended (the Act). Such Registration
Statement, as amended or supplemented, is hereinafter referred to as the Registration Statement.
The Registration Statement is being filed in accordance with a Registration Rights Agreement, dated
November 24, 2010, by and among the Registrants and certain initial holders (the Registration
Rights Agreement) and the Notes and the Guarantees are being offered in exchange for and in
replacement of $286,794,302 in aggregate principal amount of 12.5%/15.0% Senior Subordinated Notes
due 2016 (the Existing Notes) and the guarantees thereof issued by the Issuer on November 24,
2010 through a private placement exempt from the registration requirements of the Act.
The Notes and the Guarantees are to be issued pursuant to the Indenture with respect to the
12.5%/15.0% Senior Subordinated Notes due 2016, dated as of November 24, 2010 (as may be amended or
supplemented from time to time, the Indenture), among the Issuer, the Guarantors and Wilmington
Trust Company, as trustee (the Trustee).
In connection with issuing this opinion letter, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents, corporate records and
Radio One, Inc.
February 9, 2011
Page 2
other instruments as we have deemed necessary for the purposes of this opinion, including (i)
resolutions of the Registrants with respect to the issuance of the Notes and the Guarantees, (ii)
the Indenture, (iii) the Registration Statement and (iv) the Registration Rights Agreement.
For purposes of this opinion, we have assumed the authenticity of all documents submitted to
us as originals, the conformity to the originals of all documents submitted to us as copies and the
authenticity of the originals of all documents submitted to us as copies. We have also assumed the
legal capacity of all natural persons, the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of such persons signing
on behalf of the parties thereto (other than the Registrants) and the due authorization, execution
and delivery of all documents by the parties thereto (other than the Registrants). We have not
independently established or verified any facts relevant to the opinions expressed herein, but have
relied upon statements and representations of officers and other representatives of the Registrants
and others.
Our opinion expressed below is subject to the qualifications that we express no opinion as to
the applicability of, compliance with, or effect of (i) any bankruptcy, insolvency, reorganization,
fraudulent transfer, fraudulent conveyance, moratorium or other similar law affecting the
enforcement of creditors rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law) or (iii) other commonly
recognized statutory and judicial constraints on enforceability including statutes of limitations.
We have also assumed that:
(i) the Registration Statement will be effective at the time the Notes are offered as
contemplated by the Registration Statement;
(ii) any applicable prospectus supplement has been prepared and filed with the Commission
describing the Notes offered thereby to the extent necessary;
(iii) the Existing Notes have been exchanged in the manner described in the prospectus forming
a part of the Registration Statement;
(iv) the PIK Notes will be offered and sold in the manner stated in the Registration Statement
or any applicable prospectus supplement;
(v) the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended;
and
(vi) the Registrants will have obtained any legally required consents, approvals,
authorizations and other orders of the Commission and any other federal regulatory agencies
Radio One, Inc.
February 9, 2011
Page 3
necessary for the Notes to be exchanged, offered and sold in the manner stated in the
Registration Statement and any applicable prospectus supplement.
Based upon and subject to the qualifications, assumptions and limitations set forth herein, we
are of the opinion that (A) when the Exchange Notes have been duly executed and authenticated in
accordance with the provisions of the Indenture, and duly delivered to the holders thereof in
exchange for the Existing Notes, the Exchange Notes will be valid and binding obligations of the
Issuer and the Guarantees thereof will be valid and binding obligations of the Guarantors and (B)
when the PIK Notes have been duly executed, authenticated and issued in accordance with the
provisions of the Indenture, and duly delivered to the holders thereof, the PIK Notes will be valid
and binding obligations of the Issuer and the Guarantees thereof will be valid and binding
obligations of the Guarantors.
We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the heading Legal
Matters in the Registration Statement. In giving this consent, we do not thereby admit that we are
in the category of persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
Our advice on every legal issue addressed in this letter is based exclusively on the federal
securities laws of the United States, the laws of the State of New York, the General Corporation
Law of the State of Delaware, the Limited Liability Company Act of the State of Delaware and the
Delaware Revised Uniform Limited Partnership Act, including the applicable provisions of the
Delaware constitution and reported judicial decisions interpreting these laws. For purposes of
our opinion that the Guarantees will be valid and binding obligations of the Guarantors, we have,
without conducting any research or investigation with respect thereto, relied on the opinions of:
(i) Clark Hill PLC, with respect to Bell Broadcasting Company, a Michigan corporation and (ii)
Keating Muething & Klekamp PLL, with respect to Blue Chip Broadcasting Licenses, Ltd. and Blue Chip
Broadcasting, Ltd., each an Ohio limited liability company, that such Guarantors have the
requisite corporate power and authority to perform their respective obligations under the Indenture
and the applicable Guarantees and that such Guarantees do not conflict with, or require consents
under the laws of the Guarantors respective states of organization. We are not licensed to
practice in any of these states.
We express no opinion with respect to the enforceability of: (i) consents to, or restrictions
upon, judicial relief or jurisdiction or venue; (ii) waivers of rights or defenses with respect to
stay, extension or usury laws; (iii) advance waivers of claims, defenses, rights granted by law, or
notice, opportunity for hearing, evidentiary requirements, statutes of limitation, trial by jury or
at law, or other procedural rights; (iv) waivers of broadly or vaguely stated rights; (v)
provisions for exclusivity, election or cumulation of rights or remedies; (vi) provisions
authorizing or validating conclusive or discretionary determinations; (vii) grants of setoff
rights; (viii) provisions for the payment of attorneys fees where such payment is contrary to law
or public policy; (ix) proxies, powers and trusts; (x) restrictions upon non-written modifications
and waivers; (xi) provisions
Radio One, Inc.
February 9, 2011
Page 4
prohibiting, restricting, or requiring consent to assignment or transfer of any right or
property; (xii) any provision to the extent it requires any party to indemnify any other person
against loss in obtaining the currency due following a court judgment in another currency; and
(xiii) provisions for liquidated damages, default interest, late charges, monetary penalties,
make-whole premiums or other economic remedies to the extent such provisions are deemed to
constitute a penalty.
To the extent that the obligations of the Issuer and the Guarantors under the Indenture may be
dependent on such matters, we assume for purposes of this opinion that the applicable trustee is
duly organized, validly existing and in good standing under the laws of its jurisdiction of
organization; that such trustee is duly qualified to engage in the activities contemplated by the
Indenture; that the Indenture has been duly authorized, executed and delivered by the applicable
trustee and constitutes the legally valid and binding obligations of such trustee, enforceable
against such trustee in accordance with its terms; that the applicable trustee is in compliance,
generally and with respect to acting as an agent under the Indenture with all applicable laws and
regulations; and that the applicable trustee has the requisite organizational and legal power and
authority to perform its obligations under the Indenture.
This opinion is limited to the specific issues addressed herein, and no opinion may be
inferred or implied beyond that expressly stated herein. This opinion speaks only as of the date
hereof and we assume no obligation to revise or supplement this opinion.
This opinion is furnished to you in connection with the filing of the Registration Statement
in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act.
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Sincerely,
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/s/ Kirkland & Ellis LLP
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Kirkland & Ellis LLP |
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Schedule I
Guarantors
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Exact Name as Specified in its Charter |
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Jurisdiction of Formation |
Bell Broadcasting Company
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Michigan |
Blue Chip Broadcasting Licenses, Ltd.
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Ohio |
Blue Chip Broadcasting, Ltd.
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Ohio |
Charlotte Broadcasting, LLC
|
|
Delaware |
Community Connect Inc.
|
|
Delaware |
Community Connect, LLC
|
|
Delaware |
Distribution One, LLC
|
|
Delaware |
Hawes-Saunders Broadcast Properties, Inc.
|
|
Delaware |
Interactive One, Inc.
|
|
Delaware |
Interactive One, LLC
|
|
Delaware |
New Mableton Broadcasting Corporation
|
|
Delaware |
Radio One Cable Holdings, Inc.
|
|
Delaware |
Radio One Distribution Holdings, LLC
|
|
Delaware |
Radio One Licenses, LLC
|
|
Delaware |
Radio One Media Holdings, LLC
|
|
Delaware |
Radio One of Atlanta, LLC
|
|
Delaware |
Radio One of Boston Licenses, LLC
|
|
Delaware |
Radio One of Boston, Inc.
|
|
Delaware |
Radio One of Charlotte, LLC
|
|
Delaware |
Radio One of Detroit, LLC
|
|
Delaware |
Radio One of Indiana, L.P.
|
|
Delaware |
Radio One of Indiana, LLC
|
|
Delaware |
Radio One of North Carolina, LLC
|
|
Delaware |
Radio One of Texas II, LLC
|
|
Delaware |
ROA Licenses, LLC
|
|
Delaware |
Satellite One, L.L.C.
|
|
Delaware |
exv5w2
Blair B. Hysni
T 313.965.8668
F 313.309.6878
Email:bhysni@clarkhill.com
February 9, 2011
Bell Broadcasting Company
c/o Radio One, Inc.
5900 Princess Garden Parkway, 7th Floor
Lanham, Maryland 20706
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special counsel to Bell Broadcasting
Company, a Michigan corporation (the Guarantor), in connection with Guarantors proposed
guarantee, along with the other guarantors under the Indenture (defined below), of (i) $286,794,302
in aggregate principal amount of 12.5%/15.0% Senior Subordinated Notes due 2016 (the Exchange
Notes), and (ii) $40,241,304 of additional Senior Subordinated Notes due 2016 issued in respect of
interest on the Exchange Notes (the PIK Notes and, together with the Exchange Notes, the
Notes). The Exchange Notes are to be issued by Radio One, Inc., a Delaware corporation (the
Issuer), in connection with an offering made pursuant to a Registration Statement on Form S-4 (as
amended or supplemented, the Registration Statement), filed with the Securities and Exchange
Commission (the Commission) on February 9, 2011, under the Securities Act of 1933, as amended
(the Securities Act). The Registration Statement is being filed in accordance with a
Registration Rights Agreement entered into by the Issuer, the guarantors party thereto, including
Guarantor, and certain initial purchasers on November 24, 2010, and the Exchange Notes are being
offered in exchange for $286,794,302 12.5%/15.0% Senior Subordinated Notes due 2016 issued by the
Issuer on November 24, 2010 through a private placement exempt from the registration requirements
of the Securities Act, all of which are eligible to be exchanged for the Exchange Notes. The
obligations of the Issuer under the Notes will be guaranteed by Guarantor (the Guarantee),
jointly and severally with other guarantors. The Notes are to be issued pursuant to the Indenture
dated as of November 24, 2010 (the Indenture), among the Issuer, the guarantors party thereto
Bell Broadcasting Company
February 9, 2011
Page 2
and Wilmington Trust Company, as trustee (the Trustee). The Guarantee is to be issued pursuant
to the Indenture.
In connection with this opinion, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of the Transaction Documents and Organizational Documents described
below, to which we have limited the scope of our inquiry and review:
Transaction Documents
The Transaction Documents consist of the following documents:
|
1. |
|
The Registration Statement and the exhibits thereto; |
|
|
2. |
|
The Indenture and the exhibits thereto; |
|
|
3. |
|
The Notes; and |
|
|
4. |
|
The Notations of Guarantee attached to the Notes. |
Organizational Documents
The Organizational Documents consist of the following documents:
|
1. |
|
The Articles of Incorporation of Guarantor, as amended (the Articles of
Incorporation), certified as a true copy by the Michigan Department of Energy, Labor &
Economic Growth (the Michigan Department) on January 28, 2011; |
|
|
2. |
|
Certificate of Good Standing for Guarantor issued by the Michigan Department on
January 28, 2011 (the Michigan Certificate); and |
|
|
3. |
|
Certificate of Fact of Guarantor dated the date of this letter, in the form
attached as Exhibit A, together with Guarantors Restated Bylaws, amended as of
May 11, 1993 (the Bylaws), and the Consent in Lieu of Special Meeting of the Board of
Directors dated November 23, 2010, executed by Guarantors Board of Directors. |
For purposes of this opinion, we have assumed the authenticity of all documents submitted to
us as originals, the conformity to the originals of all documents submitted to us as copies and the
authenticity of the originals of all documents submitted to us as copies. We have also assumed the
legal capacity of all natural persons, the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of such persons signing
on behalf of the parties thereto other than Guarantor and the due authorization, execution and
delivery of all documents by the parties thereto other than
Bell Broadcasting Company
February 9, 2011
Page 3
Guarantor. We have not independently established or verified any facts relevant to the opinion
expressed herein, but have relied upon statements and representations of the officers and other
representatives of Guarantor, public officials and others.
We have also assumed that:
(i) the Registration Statement will be effective at the time the Notes are offered as
contemplated by the Registration Statement;
(ii) any applicable prospectus supplement will have been prepared and filed with the
Commission describing the Notes offered thereby to the extent necessary;
(iii) all Notes will be offered and sold in the manner stated in the Registration Statement or
any applicable prospectus supplement; and
(iv) the Issuer will have obtained any legally required consents, approvals, authorizations
and other orders of the Commission and any other federal regulatory agencies necessary for the
Notes to be offered and sold in the manner stated in the Registration Statement or any applicable
prospectus supplement.
Based upon and subject to the foregoing qualifications, assumptions and limitations and the
further limitations set forth below, we are of the opinion that:
1. |
|
Guarantor is a corporation duly incorporated, validly existing and, based solely on the
Michigan Certificate, in good standing under the laws of the State of Michigan. |
|
2. |
|
The Indenture has been duly authorized, executed and delivered by Guarantor and constitutes
the valid and binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms. |
|
3. |
|
When the Notes have been duly executed and authenticated in accordance with the Indenture,
and duly delivered to the holders thereof, the Guarantee will be a valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its terms. |
|
4. |
|
The execution and delivery of the Indenture by Guarantor and the performance by Guarantor of
its obligations thereunder (including with respect to the Guarantee) do not conflict with or
constitute or result in a breach or default under (or an event which with notice or the
passage of time or both would constitute a default under) or result in the creation of a lien
or encumbrance under or violation of any of (i) the Articles of Incorporation or Bylaws, or
(ii) any law, rule or regulation of governmental authorities (other than those of counties,
towns, municipalities and special political subdivisions) of the State of Michigan which we,
in the exercise of customary professional diligence, |
Bell Broadcasting Company
February 9, 2011
Page 4
|
|
would reasonably recognize as being applicable to Guarantor and the transactions
contemplated by the Indenture (such laws, rule and regulations are referred to in this
opinion as Applicable Laws). |
|
5. |
|
No consent, waiver, approval, authorization or order of any court or governmental authority
of the State of Michigan is required pursuant to any Applicable Law in connection with
Guarantors issuance of the Guarantee. |
Our opinion expressed above is subject to the qualifications that we express no opinion as to
the applicability of, compliance with, or effect of: (i) any bankruptcy, insolvency,
reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar law
affecting the enforcement of creditors rights generally; (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at law); (iii) public
policy considerations which may limit the rights of parties to obtain certain remedies; (iv) any
laws except the laws of the State of Michigan and the Michigan case law decided thereunder; and (v)
the Blue Sky laws and regulations of Michigan.
This opinion is limited to the specific issues addressed herein, and no opinion may be
inferred or implied beyond that expressly stated herein. We assume no obligation to revise or
supplement this opinion should the present laws of the State of Michigan be changed by legislative
action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the Registration Statement
and will be incorporated by reference in the Registration Statement. This opinion may not be used,
circulated, quoted or otherwise relied upon for any other purpose, except that Kirkland & Ellis LLP
may rely upon this opinion to the same extent as if it were an addressee hereof.
Bell Broadcasting Company
February 9, 2011
Page 5
We hereby consent to the filing of this opinion with the Commission as Exhibit 5.2 to the
Registration Statement. We also consent to the reference to our firm under the heading Legal
Matters in the Registration Statement with respect to the laws of the State of Michigan. In
giving this consent, we do not thereby admit that we are in the category of persons whose consent
is required under Section 7 of the Securities Act or the rules and regulations of the Commission.
Sincerely,
/s/ CLARK HILL PLC
CLARK HILL PLC
exv5w3
Exhibit 5.3
F. Mark Reuter
DIRECT DIAL: (513) 579-6469
FACSIMILE: (513) 579-6457
E-MAIL: MReuter@KMKLAW.com
February 9, 2011
|
|
|
|
Blue Chip Broadcasting, Ltd.
1821 Summit Road, Suite 401
Cincinnati, Ohio 45237
|
|
Blue Chip Broadcasting Licenses, Ltd.
1821 Summit Road, Suite 401
Cincinnati, Ohio 45237 |
Re: Registration Statement on Form S-4
Dear Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special counsel to Blue Chip
Broadcasting, Ltd., an Ohio limited liability company and Blue Chip Broadcasting Licenses, Ltd., an
Ohio limited liability company (each a Guarantor and collectively, the Guarantors), in
connection with the Guarantors proposed guarantee, along with the other guarantors under the
Indenture (as defined below), of up to $286,794,302 in aggregate principal amount of 12.5%/15.0%
Senior Subordinated Notes due 2016 (the New 2016 Notes) and up to $40,241,304 in aggregate
principal amount of Senior Subordinated Notes Paid-in-Kind (the Paid-in-Kind Notes and,
collectively with the New 2016 Notes, the Notes).
The Notes are to be issued by Radio One, Inc., a Delaware corporation (the Issuer), in
connection with an offering made pursuant to a Registration Statement on Form S-4 (such
Registration Statement, as supplemented or amended, is hereinafter referred to as the Registration
Statement), filed with the Securities and Exchange Commission (the Commission) on the date
hereof under the Securities Act of 1933, as amended (the Securities Act). The Registration
Statement is being filed in accordance with a Registration Rights Agreement entered into by the
Issuer, the guarantors party thereto, including the Guarantors, and certain initial purchasers on
November 24, 2010.
The New 2016 Notes are being offered in exchange for up to $286,794,302 in aggregate principal
amount of 12.5%/15.0% Senior Subordinated Notes due 2016 (the Old 2016 Notes) issued by the
Issuer on November 24, 2010 through a private placement exempt from the registration requirements
of the Securities Act, all of which are eligible to be exchanged for the Notes. The Paid-in-Kind
Notes are being issued by the Issuer in respect of interest due and payable on the Old 2016 Notes
to May 15, 2012. The obligations of the Issuer under the Notes will be guaranteed by each of the
Guarantors (the Guarantee). The Notes are to be issued pursuant to the Indenture (Indenture),
dated as of November 24, 2010, between the Issuer, the guarantors set forth therein and Wilmington
Trust Company, as Trustee (the Trustee). The Guarantee is to be issued pursuant to the
Indenture.
In connection with this opinion, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of the following documents, corporate records and other
instruments: (i) the articles of organization, operating agreement and by-laws of each Guarantor,
(ii) a unanimous written consent of the sole director of each Guarantor with respect to the
issuance of the Guarantee and the execution of the Indenture, (iii) the Registration Statement,
(iv) the Indenture and (v) the Notation of Guarantee dated November 24, 2010.
One East Fourth Street Suite 1400 Cincinnati, Ohio 45202
TEL (513) 579-6400 FAX (513) 579-6457 www.kmklaw.com
Blue Chip Broadcasting, Ltd.
Blue Chip Broadcasting Licenses, Ltd.
Page 2
For purposes of this opinion, we have assumed the authenticity of all documents submitted to
us as originals, the conformity to the originals of all documents submitted to us as copies and the
authenticity of the originals of all documents submitted to us as copies. We have also assumed the
genuineness of the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the parties thereto other
than the Guarantors and the due authorization, execution and delivery of all documents by the
parties thereto other than the Guarantors. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Guarantors, public officials and
others.
Our opinions expressed below are subject to the qualifications that we express no opinion as
to the applicability of, compliance with, or effect of (i) any bankruptcy, insolvency,
reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar law
affecting the enforcement of creditors rights generally, (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain certain remedies, (iv)
any law except the laws of the State of Ohio and the Ohio case law decided thereunder, and (v) the
Blue Sky laws and regulations of the State of Ohio. We express no opinion as to the
applicability to the obligations of the Guarantors (or as to the effect thereof on any opinion
expressed in this opinion letter) of Section 548 of the United States Bankruptcy Code or any other
provision of law relating to fraudulent conveyances, transfers or obligations or the provisions of
the law of the State of Ohio restricting loans, distributions or other obligations by any entity
for the benefit of the holders of its shares or other ownership interests. Specifically, we
express no opinion on any provision of law relating to fraudulent conveyances with respect to the
upstream subsidiary Guarantee of the Guarantors.
Based upon and subject to the assumptions, qualifications, assumptions and limitations and the
further limitations set forth below, we are of the opinion that:
1. |
|
Each Guarantor is a limited liability company duly organized, validly existing and in
full force and effect under the laws of the State of Ohio. |
|
2. |
|
The Indenture has been duly authorized, executed and delivered by each Guarantor. The
Indenture is a valid and binding obligation of each Guarantor and is enforceable against each
Guarantor in accordance with its terms. |
|
3. |
|
When the Notes have been duly executed and authenticated in accordance with the
Indenture, and duly delivered to the holders thereof, the Guarantee of the Notes will be a
valid and binding obligation of the Guarantors, enforceable against each of the Guarantors in
accordance with its terms. |
|
4. |
|
The execution and delivery of the Indenture by each Guarantor and the performance by
each Guarantor of its obligations thereunder (including with respect to the Guarantee) do not
conflict with or constitute or result in a breach or default under (or an event which with
notice or the passage of time or both would constitute a default under) or result in the
creation of a lien or encumbrance under or violation of any of (i) the articles of
organization, operating agreement, by-laws or other organizational documents of the Guarantors
or (ii) Applicable Laws. As used herein, Applicable Laws means those laws, rules and
regulations of governmental authorities (other than those of counties, towns, municipalities
and special political subdivisions) of the State |
Blue Chip Broadcasting, Ltd.
Blue Chip Broadcasting Licenses, Ltd.
Page 3
|
|
of Ohio which we, in the exercise of customary professional diligence, would reasonably
recognize as being applicable to the Guarantors and the transactions contemplated by the
Indenture. |
|
5. |
|
No consent, waiver, approval, authorization or order of any State of Ohio court or
governmental authority of the State of Ohio or any political subdivision thereof is required
pursuant to any Applicable Laws for the issuance by the Guarantors of the Guarantee. |
Our opinion expressed in Paragraph 1 above with respect to the full force and effect of each
Guarantor is based solely on a Certificate issued with respect to each Guarantor by the Secretary
of State of the State of Ohio dated January 25, 2011.
This opinion is limited to the specific issues addressed herein, and no opinion may be
inferred or implied beyond that expressly stated herein. We assume no obligation to revise or
supplement this opinion should the present laws of the State of Ohio be changed by legislative
action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing by the Issuer of a Registration
Statement on Form S-4 (the Form S-4) which will be incorporated by reference into the
Registration Statement and is not to be used, circulated, quoted or otherwise relied upon for any
other purpose.
We hereby consent to the filing of this opinion with the commission as Exhibit 5.3 to the Form
S-4. We also consent to the reference to our firm under the heading Legal Matters in the
Registration Statement. In giving this consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities Act or the rules
and regulations of the Commission.
|
|
|
|
|
Sincerely, |
|
|
|
|
|
/s/ KEATING MUETHING & KLEKAMP PLL |
|
|
|
|
|
KEATING MUETHING & KLEKAMP PLL |
exv12w1
Exhibit 12.1
Radio One, Inc.
Calculation of Ratio of Earnings to Fixed Charges
(in thousands of U.S. dollars except for ratios)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Year Ended |
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
before provision for
(benefit from) income
taxes(1) |
|
$ |
4,835 |
|
|
$ |
(26,173 |
) |
|
$ |
(39,729 |
) |
|
$ |
(336,716 |
) |
|
$ |
(196,466 |
) |
|
$ |
38,499 |
|
|
$ |
54,751 |
|
Plus: fixed charges |
|
|
31,577 |
|
|
|
29,521 |
|
|
|
39,050 |
|
|
|
60,401 |
|
|
|
73,730 |
|
|
|
73,877 |
|
|
|
63,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
36,412 |
|
|
$ |
3,348 |
|
|
$ |
(679 |
) |
|
$ |
(276,315 |
) |
|
$ |
(122,736 |
) |
|
$ |
112,376 |
|
|
$ |
118,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
31,059 |
|
|
$ |
29,036 |
|
|
$ |
38,404 |
|
|
$ |
59,689 |
|
|
$ |
72,770 |
|
|
$ |
72,932 |
|
|
$ |
63,010 |
|
Estimate of the
interest within
operating leases(2) |
|
|
518 |
|
|
|
485 |
|
|
|
646 |
|
|
|
712 |
|
|
|
960 |
|
|
|
945 |
|
|
|
654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
31,577 |
|
|
$ |
29,521 |
|
|
$ |
39,050 |
|
|
$ |
60,401 |
|
|
$ |
73,730 |
|
|
$ |
73,877 |
|
|
$ |
63,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficiency of
earnings available to
cover fixed charges |
|
|
|
|
|
|
26.2 |
|
|
|
39.7 |
|
|
|
336.7 |
|
|
|
196.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings
to fixed charges) |
|
|
1.15 |
|
|
|
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.52 |
|
|
|
1.86 |
|
|
|
|
(1) |
|
For purposes of calculating the ratio of earnings to fixed charges, earnings represent income
(loss) before income taxes plus fixed charges. |
|
(2) |
|
For purposes of estimating interest within operating leases, an interest rate equal to the
three month LIBOR plus a spread of 2.25% at the end of each period presented was utilized. |
exv21w1
Exhibit 21.1
SUBSIDIARIES OF RADIO ONE, INC.
As of December 31, 2010
Radio One Licenses, LLC, a Delaware limited liability company, is a restricted subsidiary of
Radio One, Inc. and is the licensee of the following stations:
|
|
|
|
|
|
|
KBFB-FM
|
|
WFXC-FM
|
|
WNNL-FM
|
|
WRNB-FM |
KBXX-FM
|
|
WFXK-FM
|
|
WOL-AM
|
|
WTPS-AM |
KMJQ-FM
|
|
WHHL-FM
|
|
WOLB-AM
|
|
WWIN-AM |
KROI-FM
|
|
WHTA-FM
|
|
WPHI-FM
|
|
WWIN-FM |
KSOC-FM
|
|
WKJM-FM
|
|
WPPZ-FM
|
|
WYCB-AM |
WCDX-FM
|
|
WKJS-FM
|
|
WPRS-FM |
|
|
WERQ-FM
|
|
WKYS-FM
|
|
WPZZ-FM |
|
|
WFUN-FM
|
|
WMMJ-FM
|
|
WQOK-FM |
|
|
Bell Broadcasting Company (Bell), a Michigan corporation, is a wholly owned restricted
subsidiary of Radio One, Inc. Radio One of Detroit, LLC (Radio One of Detroit) is a Delaware
limited liability company, the sole member of which is Bell. Radio One of Detroit is the licensee
of the following stations:
Radio One of Atlanta, LLC (ROA), a Delaware limited liability company, is a restricted
subsidiary of Radio One, Inc. ROA Licenses, LLC (ROA Licenses) is a Delaware limited liability
company, the sole member of which is ROA. ROA Licenses is the licensee of the following stations:
Radio One of Charlotte, LLC (Radio One of Charlotte), a Delaware limited liability company,
the sole member of which is Radio One, Inc., is a restricted subsidiary of Radio One, Inc.
Charlotte Broadcasting, LLC (Charlotte Broadcasting) is a Delaware limited liability
company, the sole member of which is Radio One of Charlotte. Radio One of North Carolina, LLC
(Radio One of North Carolina) is a Delaware limited liability company, the sole member of which
is Charlotte Broadcasting. Radio One of North Carolina is the licensee of the following stations:
Radio One of Boston, Inc. (Radio One of Boston), a Delaware corporation, is a wholly owned
restricted subsidiary of Radio One, Inc. Radio One of Boston Licenses, LLC (Boston Licenses) is a
Delaware limited liability company, the sole member of which is Radio One of Boston. Boston
Licenses is the licensee of the following station:
Blue Chip Broadcasting, Ltd. (BCB Ltd.), an Ohio limited liability company, the sole member
of which is Radio One, Inc., and which is a restricted subsidiary of Radio One, Inc. Blue Chip
Broadcasting Licenses, Ltd. (BC Licenses) is an Ohio limited liability company, the sole member of
which is BCB Ltd. BC Licenses is the licensee of the following stations:
|
|
|
|
|
WIZF-FM
|
|
WMOJ-FM
|
|
WDBZ-AM |
WJYD-FM
|
|
WCKX-FM
|
|
WXMG-FM |
WERE-AM
|
|
WJMO-AM
|
|
WZAK-FM |
WENZ-FM |
|
|
|
|
Hawes-Saunders Broadcast Properties, Inc. (HSBP) is a wholly owned restricted subsidiary of
Blue Chip Broadcasting, Ltd.
Radio One of Texas II, LLC, a Delaware limited liability company, the sole member of which is
Radio One, Inc., and it is a restricted subsidiary of Radio One, Inc.
Radio One of Indiana, L.P. is a Delaware limited partnership. Radio One, Inc. is the general
partner and 99% owner of Radio One of Indiana, L.P. Radio One of Texas II, LLC is the limited
partner and 1% owner of Radio One of Indiana, L.P. Radio One of Indiana, LLC is a Delaware limited
liability company, the sole member of which is Radio One of Indiana, L.P. Radio One of Indiana, LLC
is the licensee of the following stations:
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WDNI-CD
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WHHH-FM
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WTLC-AM |
WTLC-FM
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WNOU-FM |
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Satellite One, LLC is a Delaware limited liability company, the sole member of which is
Radio One, Inc.
New Mableton Broadcasting Corporation, a Delaware corporation, is a wholly owned subsidiary of
Radio One, Inc. and is the licensee of the following station:
Radio One Cable Holdings, Inc., a Delaware corporation, is a wholly owned subsidiary of Radio
One, Inc. Radio One Cable Holdings, Inc. holds a 36% interest in TV One, LLC, a Delaware limited
liability company.
Radio One Media Holdings, LLC is a Delaware limited liability company, the sole member of
which is Radio One, Inc.
Reach Media, Inc. is a Texas corporation. Radio One, Inc. owns 53% of the common stock of
Reach Media, Inc.
Radio One Distribution Holdings, LLC is a Delaware limited liability company, the sole member
of which is Radio One, Inc.
Distribution One, LLC is a Delaware limited liability company, the sole member of which is.
Radio One Distribution Holdings, LLC.
Interactive One, Inc., a Delaware corporation, is a wholly owned subsidiary of Radio One, Inc.
and the sole member of Interactive One, LLC.
Interactive One, LLC, is a Delaware limited liability company, the sole member of which is
Interactive One, Inc.
Community Connect Inc., a Delaware corporation, is a wholly owned subsidiary of Radio One,
Inc. and the sole member of Community Connect, LLC.
Community Connect, LLC, is a Delaware limited liability company, the sole member of which is
Community Connect Inc.
exv23w1
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our
report dated March 31, 2010 (except Notes 1(t), 1(v), 1(x), 2, 10 and 20, as to which the date is
August 23, 2010) in the Registration Statement (Form S-4) and the related Prospectus of
Radio One, Inc. for the registration of $286,794,302 of 12.5%/15.0% Senior Subordinated Notes and
$40,241,304 Senior Subordinated Notes Paid-in-Kind due 2016.
/s/ ERNST & YOUNG LLP
Baltimore, Maryland
February 8, 2011
exv25w1
SECURITIES AND EXCHANGE COMMISSION
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) o
WILMINGTON TRUST COMPANY
(Exact name of Trustee as specified in its charter)
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Delaware
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51-0055023 |
(Jurisdiction of incorporation of
organization if not a U.S. national
bank)
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(I.R.S. Employer Identification No.) |
1100 North Market Street
Wilmington, Delaware 19890-0001
(302) 651-1000
(Address of principal executive offices, including zip code)
Michael A. DiGregorio
Senior Vice President and General Counsel
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890-0001
(302) 651-8793
(Name, address, including zip code, and telephone number, including area code, of agent of service)
RADIO ONE, INC.*
(Exact name of obligor as specified in its charter)
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Delaware
(State or other jurisdiction or incorporation or organization)
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52-1166660
(I.R.S. Employer Identification No.) |
5900 Princess Garden Parkway,
7th Floor
Lanham, Maryland 20706
(301) 306-1111
(Address of principal executive offices, including zip code)
12.5%/15.0% Senior Subordinated Notes due 2016
(Title of the indenture securities)
TABLE OF CONTENTS
Table of Additional Obligors
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I.R.S. Employer |
Exact Name of Additional Obligors* |
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Jurisdiction of Formation |
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Identification No. |
Bell Broadcasting Company |
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Michigan |
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38-1537987 |
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Blue Chip Broadcasting Licenses, Ltd. |
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Ohio |
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31-1402186 |
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Blue Chip Broadcasting, Ltd. |
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Ohio |
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31-1459349 |
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Charlotte Broadcasting, LLC |
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Delaware |
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52-1166660 |
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Community Connect Inc. |
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Delaware |
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13-3923078 |
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Community Connect, LLC |
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Delaware |
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52-1166660 |
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Distribution One, LLC |
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Delaware |
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52-1166660 |
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Hawes-Saunders Broadcast Properties, Inc. |
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Delaware |
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31-1313021 |
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Interactive One, Inc. |
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Delaware |
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30-0223248 |
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Interactive One, LLC |
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Delaware |
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30-0451522 |
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New Mableton Broadcasting Corporation |
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Delaware |
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58-2455006 |
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Radio One Cable Holdings, Inc. |
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Delaware |
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20-0966592 |
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Radio One Distribution Holdings, LLC |
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Delaware |
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52-1166660 |
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Radio One Licenses, LLC |
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Delaware |
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52-1166660 |
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Radio One Media Holdings, LLC |
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Delaware |
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20-2180640 |
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Radio One of Atlanta, LLC |
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Delaware |
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52-1166660 |
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Radio One of Boston Licenses, LLC |
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Delaware |
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52-2297366 |
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Radio One of Boston, Inc. |
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Delaware |
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52-2297366 |
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Radio One of Charlotte, LLC |
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Delaware |
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57-1103928 |
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Radio One of Detroit, LLC |
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Delaware |
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38-1537987 |
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Radio One of Indiana, L.P. |
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Delaware |
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52-2359338 |
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Radio One of Indiana, LLC |
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Delaware |
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52-1166660 |
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Radio One of North Carolina, LLC |
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Delaware |
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52-1166660 |
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Radio One of Texas II, LLC |
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Delaware |
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52-2359333 |
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ROA Licenses, LLC |
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Delaware |
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52-1166660 |
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Satellite One, L.L.C. |
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Delaware |
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52-1166660 |
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The address for each of the additional Obligors is c/o Radio One, Inc., 5900 Princess Garden
Parkway, 7th Floor, Lanham, Maryland 20706, (301) 306-1111. |
ITEM 1. GENERAL INFORMATION.
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Furnish the following information as to the trustee: |
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(a)Name and address of each examining or supervising authority to which it is subject. |
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Federal Reserve Bank of Philadelphia
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State Bank Commissioner |
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Ten Independence Mall
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555 East Lockerman Street, Suite 210 |
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Philadelphia, PA 19106-1574
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Dover, Delaware 19901 |
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(b) Whether it is authorized to exercise corporate trust powers. |
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The trustee is authorized to exercise corporate trust powers. |
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
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If the obligor is an affiliate of the trustee, describe each affiliation: |
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Based upon an examination of the books and records of the trustee and information
available to the trustee, the obligor is not an affiliate of the trustee. |
ITEM 16. LIST OF EXHIBITS.
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Listed below are all exhibits filed as part of this Statement of Eligibility and
Qualification. |
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Exhibit 1. Copy of the Charter of Wilmington Trust Company: |
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Exhibit 2 Certificate of Authority of Wilmington Trust Company to commence business
included in Exhibit 1 above. |
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Exhibit 3 Authorization of Wilmington Trust Company to exercise corporate trust
powers included in Exhibit 1 above. |
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Exhibit 4. Copy of By-Laws of Wilmington Trust Company. |
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Exhibit 5. Not applicable |
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Exhibit 6. Consent of Wilmington Trust Company required by Section 321(b) of the Trust
Indenture Act. |
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Exhibit 7. Copy of most recent Report of Condition of Wilmington Trust Company. |
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Exhibit 8. Not applicable. |
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Exhibit 9. Not applicable. |
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee,
Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly
caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 2nd day of
February, 2011.
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[SEAL] |
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WILMINGTON TRUST COMPANY |
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Attest:
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/s/ Joseph B. Feil
Assistant Secretary
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By:
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/s/ Patrick J. Healy
Name: Patrick J. Healy
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Title: Vice President |
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EXHIBIT 1*
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
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* |
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Exhibit 1 also constitutes Exhibits 2 and 3. |
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General Assembly of the
State of Delaware, entitled An Act to Incorporate the Delaware Guarantee and Trust Company,
approved March 2, A.D. 1901, and the name of which company was changed to Wilmington Trust
Company by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and
the Charter or Act of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust companies of the
State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same
as so altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is at Rodney
Square North, in the City of Wilmington, County of New Castle; the name of its resident
agent is Wilmington Trust Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle
County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County
Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of business as may be authorized
from time to time by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes proposed to be
transacted, promoted or carried on by this Corporation are to do any or all of the things
herein mentioned as fully and to the same extent as natural persons might or could do and in
any part of the world, viz.:
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To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at pleasure, to
hold, purchase, convey, mortgage or otherwise deal in real and personal estate
and property, and to appoint such officers and agents as the business of the
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to discount bills,
notes or other evidences of debt, to receive deposits of money, or securities
for money, to buy gold and silver bullion and foreign coins, to buy and sell
bills of exchange, and generally to use, exercise and enjoy all the powers,
rights, privileges and franchises incident to a corporation which are proper or
necessary for the transaction of the business of the Corporation hereby
created. |
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(2) |
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To insure titles to real and personal property, or any estate
or interests therein, and to guarantee the holder of such property, real or
personal, against any claim |
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or claims, adverse to his interest therein, and to
prepare and give certificates of title for any lands or premises in the State
of Delaware, or elsewhere. |
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(3) |
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To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the purchase,
sale, management and disposal of property of all descriptions, and to prepare
and execute all papers which may be necessary or proper in such business. |
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(4) |
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To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description, and to
carry on the business of conveyance in all its branches. |
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(5) |
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To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and kind,
from executors, administrators, guardians, public officers, courts, receivers,
assignees, trustees, and from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal, corporate or
private, and to rent boxes, safes, vaults and other receptacles for such
property. |
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(6) |
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To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting the stock,
bonds or other obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund therefore on such
terms as may be agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality. |
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To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic, corporation,
association or person, either alone or in conjunction with any other person or
persons, corporation or corporations. |
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(8) |
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To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons, for the
faithful performance of any trust, office, duty, contract or agreement, either
by itself or in conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond, recognizance,
obligation, judgment, suit, order, or decree to be entered in any court of
record within the State of Delaware or elsewhere, or which may now or hereafter
be required by any law, judge, officer or court in the State of Delaware or
elsewhere. |
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(9) |
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To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and all estates and
property, real, personal or mixed, and to be appointed as such trustee, trustee
in bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian or bailee by any persons, corporations, court,
officer,
or authority, in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation, court, |
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officer or
authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with surety, but its
capital stock shall be taken and held as security for the performance of the
duties devolving upon it by such appointment. |
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(10) |
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And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the duties
which it may undertake or be called upon to perform, or for the assumption of
any responsibility the said Corporation may be entitled to receive a proper
compensation. |
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(11) |
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To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities, obligations,
contracts and evidences of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware, or of the Government of
the United States, or of any state, territory, colony, or possession thereof,
or of any foreign government or country; to receive, collect, receipt for, and
dispose of interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property held and owned by it,
and to exercise in respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts, evidences of
indebtedness and other property, any and all the rights, powers and privileges
of individual owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon such securities
and in such manner as it may think fit and proper, and from time to time to
vary or realize such investments; to issue bonds and secure the same by pledges
or deeds of trust or mortgages of or upon the whole or any part of the property
held or owned by the Corporation, and to sell and pledge such bonds, as and
when the Board of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or interest therein. |
(b) In furtherance of, and not in limitation, of the powers conferred by the laws of
the State of Delaware, it is hereby expressly provided that the said Corporation shall also
have the following powers:
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To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the world. |
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(2) |
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To acquire the good will, rights, property and franchises and
to undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in cash,
stock of this Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so purchased; to conduct in
any lawful manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the conduct and
management of such business. |
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(3) |
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To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, |
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exchange, transfer, or in any manner whatever dispose of property,
real, personal or mixed, wherever situated. |
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(4) |
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To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without limit as
to amount, to draw, make, accept, endorse, discount, execute and issue
promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and
other negotiable or transferable instruments. |
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(5) |
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To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as natural
persons might or could do, to purchase or otherwise acquire, to hold, own, to
mortgage, sell, convey or otherwise dispose of, real and personal property, of
every class and description, in any State, District, Territory or Colony of the
United States, and in any foreign country or place. |
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(6) |
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It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where otherwise
expressed in said paragraph) be nowise limited or restricted by reference to or
inference from the terms of any other clause of this or any other paragraph in
this charter, but that the objects, purposes and powers specified in each of
the clauses of this paragraph shall be regarded as independent objects,
purposes and powers. |
Fourth: - (a) The total number of shares of all classes of stock which the Corporation
shall have authority to issue is forty-one million (41,000,000) shares, consisting of:
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One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as Preferred Stock); and |
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(2) |
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Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as Common Stock). |
(b) Shares of Preferred Stock may be issued from time to time in one or more series as
may from time to time be determined by the Board of Directors each of said series to be
distinctly designated. All shares of any one series of Preferred Stock shall be alike in
every particular, except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the preferences and
relative, participating, optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may differ from those of any
and all other series at any time outstanding; and, subject to the provisions of subparagraph
1 of Paragraph (c) of this Article Fourth, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the voting powers and the
designations, preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but without limiting
the generality of the foregoing, the following:
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(1) |
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The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors) or
decreased (but not below the |
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number of shares thereof then outstanding) from
time to time by like action of the Board of Directors; |
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(2) |
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The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be paid, the
extent of the preference or relation, if any, of such dividends to the
dividends payable on any other class or classes, or series of the same or other
class of stock and whether such dividends shall be cumulative or
non-cumulative; |
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(3) |
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The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of any other
class or classes or of any series of the same or any other class or classes of
stock of the Corporation and the terms and conditions of such conversion or
exchange; |
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(4) |
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Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or times at
which, and the terms and conditions on which, Preferred Stock of such series
may be redeemed. |
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(5) |
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The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding-up, of the Corporation. |
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(6) |
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The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such series; and |
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(7) |
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The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the foregoing
include the right, voting as a series or by itself or together with other
series of Preferred Stock or all series of Preferred Stock as a class, to elect
one or more directors of the Corporation if there shall have been a default in
the payment of dividends on any one or more series of Preferred Stock or under
such circumstances and on such conditions as the Board of Directors may
determine. |
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(c) |
(1) |
After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with respect
to the setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of section (b) of this
Article Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article Fourth, then and
not otherwise the holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of Directors. |
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(2) |
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After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this Article
Fourth), to be distributed to the holders of Preferred Stock in the event of
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the
remaining |
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assets of the Corporation,
tangible and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively. |
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(3) |
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Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of Directors
pursuant to section (b) of this Article Fourth, each holder of Common Stock
shall have one vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders. |
(d) No holder of any of the shares of any class or series of stock or of options,
warrants or other rights to purchase shares of any class or series of stock or of other
securities of the Corporation shall have any preemptive right to purchase or subscribe for
any unissued stock of any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of the Corporation of
any class or series, or bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of stock or securities
convertible into or exchangeable for stock, or carrying any right to purchase stock, may be
issued and disposed of pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others, and upon such terms as
may be deemed advisable by the Board of Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of Preferred Stock in
relation to the relative powers, preferences and rights of each other series of Preferred
Stock shall, in each case, be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in section (b) of this
Article Fourth and the consent, by class or series vote or otherwise, of the holders of such
of the series of Preferred Stock as are from time to time outstanding shall not be required
for the issuance by the Board of Directors of any other series of Preferred Stock whether or
not the powers, preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and rights of such
outstanding series, or any of them; provided, however, that the Board of Directors may
provide in the resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article Fourth that the consent of the holders of a majority
(or such greater proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all other series of
Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of Preferred Stock
may be issued from time to time as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of Directors of
the Corporation shall determine and on such terms and for such consideration as shall be
fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock may,
without a class or series vote, be increased or decreased from time to time by the
affirmative vote of the holders of a majority of the stock of the Corporation entitled to
vote thereon.
6
Fifth: - (a) The business and affairs of the Corporation shall be conducted and
managed by a Board of Directors. The number of directors constituting the entire Board
shall be not less than five nor more than twenty-five as fixed from time to time by vote of
a majority of the whole Board, provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office, and provided
further, that the number of directors constituting the whole Board shall be twenty-four
until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly equal in
number as the then total number of directors constituting the whole Board permits, with the
term of office of one class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for a term expiring at
the next succeeding annual meeting, directors of the second class shall be elected to hold
office for a term expiring at the second succeeding annual meeting and directors of the
third class shall be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason, and any newly
created directorships resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in office, although less than
a quorum, and any directors so chosen shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a successor to such director to
hold office until the next election of the class for which such director shall have been
chosen and until his successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the
By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be
specified by law, this Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the Corporation may be removed at any time
without cause, but only by the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of Directors or
by any stockholder entitled to vote for the election of directors. Such nominations shall
be made by notice in writing, delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of directors; provided,
however, that if less than 21 days notice of the meeting is given to stockholders, such
written notice shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which are proposed by the
Board of Directors shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age, business
address and, if known, residence address of each nominee proposed in such notice, (ii) the
principal occupation or employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such nominee.
7
(f) The Chairman of the meeting may, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
(g) No action required to be taken or which may be taken at any annual or special
meeting of stockholders of the Corporation may be taken without a meeting, and the power of
stockholders to consent in writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agents and servants as may be
provided in the By-Laws as they may from time to time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same powers, rights and
privileges as may be conferred upon corporations organized under the Act entitled An Act
Providing a General Corporation Law, approved March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the whole Board,
may designate any of their number to constitute an Executive Committee, which Committee, to
the extent provided in said resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of the Corporation to
be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable for the
payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly authorized to
make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire
Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by
them, provided however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the State of Delaware at
such places as may be from time to time designated by the Board, and the Directors may keep
the books of the Company outside of the State of Delaware at such places as may be from time
to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this Article
Fifteenth:
8
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(A) |
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any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or not itself
an Interested Stockholder), which, after such merger or consolidation, would be
an Affiliate (as hereinafter defined) of an Interested Stockholder, or |
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(B) |
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any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions) to or with
any Interested Stockholder or any Affiliate of any Interested Stockholder of
any assets of the Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or |
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(C) |
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the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any securities of
the Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate fair market value
of $1,000,000 or more, or |
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(D) |
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the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or |
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(E) |
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any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or consolidation
of the Corporation with any of its Subsidiaries or any similar transaction
(whether or not with or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any Interested
Stockholder, |
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shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote generally in
the election of directors, considered for the purpose of this Article Fifteenth as
one class (Voting Shares). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified, by law or in any agreement with any national securities
exchange or otherwise. |
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(2) |
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The term business combination as used in this Article
Fifteenth shall mean any transaction which is referred to in any one or more of
clauses (A) through (E) of paragraph 1 of the section (a). |
(b) The provisions of section (a) of this Article Fifteenth shall not be applicable to
any particular business combination and such business combination shall require only such
affirmative vote as is required by law and any other provisions of the Charter or Act of
Incorporation or By-Laws if such business combination has been approved by a majority of the
whole Board.
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(c) |
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For the purposes of this Article Fifteenth: |
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(1) |
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A person shall mean any individual, firm, corporation or other entity. |
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(2) |
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Interested Stockholder shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who or
which as of the record date for the determination of stockholders entitled to
notice of and to vote on such business combination, or immediately prior to the
consummation of any such transaction: |
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(A) |
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is the beneficial owner, directly or
indirectly, of more than 10% of the Voting Shares, or |
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(B) |
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is an Affiliate of the Corporation and at any
time within two years prior thereto was the beneficial owner, directly
or indirectly, of not less than 10% of the then outstanding voting
Shares, or |
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(C) |
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is an assignee of or has otherwise succeeded in
any share of capital stock of the Corporation which were at any time
within two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred in
the course of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of 1933. |
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(3) |
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A person shall be the beneficial owner of any Voting Shares: |
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(A) |
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which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly or
indirectly, or |
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(B) |
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which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (ii) the right to vote pursuant to any agreement, arrangement or
understanding, or |
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(C) |
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which are beneficially owned, directly or
indirectly, by any other person with which such first mentioned person
or any of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation. |
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(4) |
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The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon exercise
of conversion rights, warrants or options or otherwise. |
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(5) |
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Affiliate and Associate shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981. |
10
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(6) |
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Subsidiary shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
Subsidiary shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the Corporation. |
(d) majority of the directors shall have the power and duty to determine for the
purposes of this Article Fifteenth on the basis of information known to them, (1) the number
of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or
Associate of another, (3) whether a person has an agreement, arrangement or understanding
with another as to the matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any Subsidiary has an aggregate
fair market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may
be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative
vote of the holders of at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors (considered for this
purpose as one class) shall be required to amend, alter or repeal any provision of Articles
Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter or Act of Incorporation.
Seventeenth:
(a) a Director of this Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a Director, except to the
extent such exemption from liability or limitation thereof is not permitted under the
Delaware General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not adversely affect
any right or protection of a Director of the Corporation existing hereunder with respect to
any act or omission occurring prior to the time of such repeal or modification.
11
ADOPTED: January 21, 2009
EXHIBIT 4
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
ARTICLE 1
Stockholders Meetings
Section 1. Annual Meeting. The annual meeting of stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at such other date,
time or place as may be designated by resolution by the Board of Directors.
Section 2. Special Meetings. Special meetings of stockholders may be called at any
time by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the
President.
Section 3. Notice. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his last known address,
a written or printed notice fixing the time and place of such meeting.
Section 4. Quorum. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall constitute a quorum at all
meetings of stockholders for the transaction of any business, but the holders of a smaller number
of shares may adjourn from time to time, without further notice, until a quorum is secured. At
each annual or special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each share of stock registered in the stockholders name on the
books of the Company on the record date for any such meeting as determined herein.
ARTICLE 2
Directors
Section 1. Management. The affairs and business of the Company shall be managed by
or under the direction of the Board of Directors.
Section 2. Number. The authorized number of directors that shall constitute the
Board of Directors shall be fixed from time to time by or pursuant to a resolution passed by a
majority of
the Board of Directors within the parameters set by the Charter of the Company. No more than
two directors may also be employees of the Company or any affiliate thereof.
Section 3. Qualification. In addition to any other provisions of these Bylaws, to be
qualified for nomination for election or appointment to the Board of Directors, a person must have
not attained the age of sixty-nine years at the time of such election or appointment, provided
however, the Nominating and Corporate Governance Committee may waive such qualification as to a
particular candidate otherwise qualified to serve as a director upon a good faith determination by
such committee that such a waiver is in the best interests of the Company and its stockholders.
The Chairman of the Board and the Chief Executive Officer shall not be qualified to continue to
serve as directors upon the termination of their service in those offices for any reason.
Section 4. Meetings. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a majority of its
members, or at the call of the Chairman of the Board of Directors, the Chief Executive Officer or
the President.
Section 5. Special Meetings. Special meetings of the Board of Directors may be
called at any time by the Chairman of the Board, the Chief Executive Officer or the President, and
shall be called upon the written request of a majority of the directors.
Section 6. Quorum. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting of the Board of
Directors.
Section 7. Notice. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or place of any regular
meeting, stating the time and place of such meeting, which shall be mailed not less than two days
before the time of holding such meeting.
Section 8. Vacancies. In the event of the death, resignation, removal, inability to
act or disqualification of any director, the Board of Directors, although less than a quorum, shall
have the right to elect the successor who shall hold office for the remainder of the full term of
the class of directors in which the vacancy occurred, and until such directors successor shall
have been duly elected and qualified.
Section 9. Organization Meeting. The Board of Directors at its first meeting after
its election by the stockholders shall appoint an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee, and shall elect from its own members a Chairman of
the Board, a Chief Executive Officer and a President, who may be the same person. The Board of
Directors shall also elect at such meeting a Secretary and a Chief Financial Officer, who may be
the same person, and may appoint at any time such committees as it may deem advisable. The Board
of Directors may also elect at such meeting one or more Associate
2
Directors. The Board of Directors, or a committee designated by the Board of Directors may
elect or appoint such other officers as they may deem advisable.
Section 10. Removal. The Board of Directors may at any time remove, with or without
cause, any member of any committee appointed by it or any associate director or officer elected by
it and may appoint or elect his successor.
Section 11. Responsibility of Officers. The Board of Directors may designate an
officer to be in charge of such departments or divisions of the Company as it may deem advisable.
Section 12. Participation in Meetings. The Board of Directors or any committee of
the Board of Directors may participate in a meeting of the Board of Directors or such committee, as
the case may be, by conference telephone, video facilities or other communications equipment. Any
action required or permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if all of the members of the Board of Directors or the
committee, as the case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of the Board of Directors or such committee.
ARTICLE 3
Committees of the Board of Directors
Section 1. Audit Committee.
(A) The Audit Committee shall be composed of not less than three (3) members, who shall be
selected by the Board of Directors from its own members, none of whom shall be an officer or
employee of the Company, and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general supervision over the Audit Services Division in all
matters however subject to the approval of the Board of Directors; it shall consider all matters
brought to its attention by the officer in charge of the Audit Services Division, review all
reports of examination of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of Directors with respect
thereto or with respect to any other matters pertaining to auditing the Company as it shall deem
desirable.
(C) The Audit Committee shall meet whenever and wherever its Chairperson, the Chairman of the
Board, the Chief Executive Officer, the President or a majority of the Committees members shall
deem it to be proper for the transaction of its business. A majority of the Committees members
shall constitute a quorum for the transaction of business. The acts of the majority at a meeting at
which a quorum is present shall constitute action by the Committee.
3
Section 2. Compensation Committee.
(A) The Compensation Committee shall be composed of not less than three (3) members, who shall
be selected by the Board of Directors from its own members, none of whom shall be an officer or
employee of the Company, and shall hold office at the pleasure of the Board of Directors.
(B) The Compensation Committee shall in general advise upon all matters of policy concerning
compensation, including salaries and employee benefits.
(C) The Compensation Committee shall meet whenever and wherever its Chairperson, the Chairman
of the Board, the Chief Executive Officer, the President or a majority of the Committees members
shall deem it to be proper for the transaction of its business. A majority of the Committees
members shall constitute a quorum for the transaction of business. The acts of the majority at a
meeting at which a quorum is present shall constitute action by the Committee.
Section 3. Nominating and Corporate Governance Committee.
(A) The Nominating and Corporate Governance Committee shall be composed of not less than three
(3) members, who shall be selected by the Board of Directors from its own members, none of whom
shall be an officer or employee of the Company, and shall hold office at the pleasure of the Board
of Directors.
(B) The Nominating and Corporate Governance Committee shall provide counsel and make
recommendations to the Chairman of the Board and the full Board with respect to the performance of
the Chairman of the Board and the Chief Executive Officer, candidates for membership on the Board
of Directors and its committees, matters of corporate governance, succession planning for the
Companys executive management and significant shareholder relations issues.
(C) The Nominating and Corporate Governance Committee shall meet whenever and wherever its
Chairperson, the Chairman of the Board, the Chief Executive Officer, the President, or a majority
of the Committees members shall deem it to be proper for the transaction of its business. A
majority of the Committees members shall constitute a quorum for the transaction of business. The
acts of the majority at a meeting at which a quorum is present shall constitute action by the
Committee.
Section 4. Other Committees. The Company may have such other committees with such
powers as the Board may designate from time to time by resolution or by an amendment to these
Bylaws.
4
Section 5. Associate Directors.
(A) Any person who has served as a director may be elected by the Board of Directors as an
associate director, to serve at the pleasure of the Board of Directors.
(B) Associate directors shall be entitled to attend all meetings of directors and participate
in the discussion of all matters brought to the Board of Directors, but will not have a right to
vote.
Section 6. Absence or Disqualification of Any Member of a Committee. In the absence
or disqualification of any member of any committee created under Article III of these Bylaws, the
member or members thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
ARTICLE 4
Officers
Section 1. Chairman of the Board. The Chairman of the Board shall preside at all
meetings of the Board of Directors and shall have such further authority and powers and shall
perform such duties the Board of Directors may assign to him from time to time.
Section 2. Chief Executive Officer. The Chief Executive Officer shall have the
powers and duties pertaining to the office of Chief Executive Officer conferred or imposed upon him
by statute, incident to his office or as the Board of Directors may assign to him from time to
time. In the absence of the Chairman of the Board, the Chief Executive Officer shall have the
powers and duties of the Chairman of the Board.
Section 3. President. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute, incident to his office or as
the Board of Directors may assign to him from time to time. In the absence of the Chairman of the
Board and the Chief Executive Officer, the President shall have the powers and duties of the
Chairman of the Board.
Section 4. Duties. The Chairman of the Board, the Chief Executive Officer or the
President, as designated by the Board of Directors, shall carry into effect all legal directions of
the Board of Directors and shall at all times exercise general supervision over the interest,
affairs and operations of the Company and perform all duties incident to his office.
Section 5. Vice Presidents. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all of the duties of the
Chairman of the Board, the Chief Executive Officer and/or the President and such other powers and
duties incident to their respective offices or as the Board of Directors, the Chairman of the
5
Board, the Chief Executive Officer or the President or the officer in charge of the department
or division to which they are assigned may assign to them from time to time.
Section 6. Secretary. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the committees thereof, to the keeping
of accurate minutes of all such meetings, recording the same in the minute books of the Company and
in general notifying the Board of Directors of material matters affecting the Company on a timely
basis. In addition to the other notice requirements of these Bylaws and as may be practicable
under the circumstances, all such notices shall be in writing and mailed well in advance of the
scheduled date of any such meeting. He shall have custody of the corporate seal, affix the same to
any documents requiring such corporate seal, attest the same and perform other duties incident to
his office.
Section 7. Chief Financial Officer. The Chief Financial Officer shall have general
supervision over all assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all transactions of the Company. He
shall have general supervision of the expenditures of the Company and periodically shall report to
the Board of Directors the condition of the Company, and perform such other duties incident to his
office or as the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the
President may assign to him from time to time.
Section 8. Controller. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting, and shall render to
the Board of Directors or the Audit Committee at appropriate times a report relating to the general
condition and internal operations of the Company and perform other duties incident to his office.
There may be one or more subordinate accounting or controller officers however denominated,
who may perform the duties of the Controller and such duties as may be prescribed by the
Controller.
Section 9. Audit Officers. The officer designated by the Board of Directors to be in
charge of the Audit Services Division of the Company, with such title as the Board of Directors
shall prescribe, shall report to and be directly responsible to the Audit Committee and the Board
of Directors.
There shall be an Auditor and there may be one or more Audit Officers, however denominated,
who may perform all the duties of the Auditor and such duties as may be prescribed by the officer
in charge of the Audit Services Division.
Section 10. Other Officers. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from time to time by the
Board of Directors, who shall ex officio hold the office of Assistant Secretary of the Company and
who
6
may perform such duties as may be prescribed by the officer in charge of the department or
division to which they are assigned.
Section 11. Powers and Duties of Other Officers. The powers and duties of all other
officers of the Company shall be those usually pertaining to their respective offices, subject to
the direction of the Board of Directors, the Chairman of the Board, the Chief Executive Officer or
the President and the officer in charge of the department or division to which they are assigned.
Section 12. Number of Offices. Any one or more offices of the Company may be held by
the same person, except that (A) no individual may hold more than one of the offices of Chief
Financial Officer, Controller or Audit Officer and (B) none of the Chairman of the Board, the Chief
Executive Officer or the President may hold any office mentioned in Section 12(A).
ARTICLE 5
Stock and Stock Certificates
Section 1. Transfer. Shares of stock shall be transferable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificates. Every holder of stock shall be entitled to have a
certificate signed by or in the name of the Company by the Chairman of the Board, the Chief
Executive Officer or the President or a Vice President, and by the Secretary or an Assistant
Secretary, of the Company, certifying the number of shares owned by him in the Company. The
corporate seal affixed thereto, and any of or all the signatures on the certificate, may be a
facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the Company with the same
effect as if he were such officer, transfer agent or registrar at the date of issue. Duplicate
certificates of stock shall be issued only upon giving such security as may be satisfactory to the
Board of Directors.
Section 3. Record Date. The Board of Directors is authorized to fix in advance a
record date for the determination of the stockholders entitled to notice of, and to vote at, any
meeting of stockholders and any adjournment thereof, or entitled to receive payment of any
dividend, or to any allotment of rights, or to exercise any rights in respect of any change,
conversion or exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days
preceding the date of any meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such consent.
ARTICLE 6
Seal
7
The corporate seal of the Company shall be in the following form:
Between two concentric circles the words Wilmington Trust Company
within the inner circle the words Wilmington, Delaware.
ARTICLE 7
Fiscal Year
The fiscal year of the Company shall be the calendar year.
ARTICLE 8
Execution of Instruments of the Company
The Chairman of the Board, the Chief Executive Officer, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and authority to enter into,
make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall
have full power and authority to attest and affix the corporate seal of the Company to any and all
deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all
other instruments incident to the business of this Company or in acting as executor, administrator,
guardian, trustee, agent or in any other fiduciary or representative capacity by any and every
method of appointment or by whatever person, corporation, court officer or authority in the State
of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation
by the Board of Directors, and any and all such instruments shall have the same force and validity
as though expressly authorized by the Board of Directors.
ARTICLE 9
Compensation of Directors and Members of Committees
Directors and associate directors of the Company, other than salaried officers of the Company,
shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as
the Board of Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company, shall be paid such
reasonable honoraria or fees for services as members of committees as the Board of Directors shall
from time to time determine and directors and associate directors may be authorized by the Company
to perform such special services as the Board of Directors may from time to time determine in
accordance with any guidelines the Board of Directors may adopt for such services, and shall be
paid for such special services so performed reasonable compensation as may be determined by the
Board of Directors.
8
ARTICLE 10
Indemnification
Section 1. Persons Covered. The Company shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any
person who was or is made or is threatened to be made a party or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or investigative (a
proceeding) by reason of the fact that he, or a person for whom he is the legal representative,
is or was a director or associate director of the Company, a member of an advisory board the Board
of Directors of the Company or any of its subsidiaries may appoint from time to time or is or was
serving at the request of the Company as a director, officer, employee, fiduciary or agent of
another corporation, partnership, limited liability company, joint venture, trust, enterprise or
non-profit entity that is not a subsidiary or affiliate of the Company, including service with
respect to employee benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Company shall be required to indemnify such a person in connection
with a proceeding initiated by such person only if the proceeding was authorized by the Board of
Directors.
The Company may indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person who was or is made or threatened to
be made a party or is otherwise involved in any proceeding by reason of the fact that he, or a
person for whom he is the legal representative, is or was an officer, employee or agent of the
Company or a director, officer, employee or agent of a subsidiary or affiliate of the Company,
against all liability and loss suffered and expenses reasonably incurred by such person. The
Company may indemnify any such person in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by the Board of Directors.
Section 2. Advance of Expenses. The Company shall pay the expenses incurred in
defending any proceeding involving a person who is or may be indemnified pursuant to Section 1 in
advance of its final disposition, provided, however, that the payment of expenses incurred by such
a person in advance of the final disposition of the proceeding shall be made only upon receipt of
an undertaking by that person to repay all amounts advanced if it should be ultimately determined
that the person is not entitled to be indemnified under this Article 10 or otherwise.
Section 3. Certain Rights. If a claim under this Article 10 for (A) payment of
expenses or (B) indemnification by a director, associate director, member of an advisory board the
Board of Directors of the Company or any of its subsidiaries may appoint from time to time or a
person who is or was serving at the request of the Company as a director, officer, employee,
fiduciary or agent of another corporation, partnership, limited liability company, joint venture,
trust, enterprise or nonprofit entity that is not a subsidiary or affiliate of the Company,
including service with respect to employee benefit plans, is not paid in full within sixty days
after a written claim therefor has been received by the Company, the claimant may file suit to
recover the
9
unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be
paid the expense of prosecuting such claim. In any such action, the Company shall have the burden
of proving that the claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.
Section 4. Non-Exclusive. The rights conferred on any person by this Article 10
shall not be exclusive of any other rights which such person may have or hereafter acquire under
any statute, provision of the Charter or Act of Incorporation, these Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 5. Reduction of Amount. The Companys obligation, if any, to indemnify any
person who was or is serving at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by
any amount such person may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or nonprofit entity.
Section 6. Effect of Modification. Any amendment, repeal or modification of the
foregoing provisions of this Article 10 shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the time of such
amendment, repeal or modification.
ARTICLE 11
Amendments to the Bylaws
These Bylaws may be altered, amended or repealed, in whole or in part, and any new Bylaw or
Bylaws adopted at any regular or special meeting of the Board of Directors by a vote of a majority
of all the members of the Board of Directors then in office.
ARTICLE 12
Miscellaneous
Whenever used in these Bylaws, the singular shall include the plural, the plural shall include
the singular unless the context requires otherwise and the use of either gender shall include both
genders.
10
EXHIBIT 6
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust
Company hereby consents that reports of examinations by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
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WILMINGTON TRUST COMPANY
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Dated: February 2, 2011 |
By: |
/s/ Patrick J. Healy
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Name: |
Patrick J. Healy |
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Title: |
Vice President |
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EXHIBIT 7
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has not been
approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
REPORT OF CONDITION
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WILMINGTON TRUST COMPANY
Name of Bank
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of
City
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Wilmington |
in the State of Delaware, at the close of business on September 30, 2010:
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Thousands of Dollars |
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ASSETS |
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|
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Cash and balances due from depository institutions: |
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815,920 |
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Securities: |
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578,878 |
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Federal funds sold and securities purchased under agreement to resell: |
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25,000 |
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Loans and leases held for sale: |
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5,772 |
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Loans and leases net of unearned income, allowance: |
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6,595,790 |
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Premises and fixed assets: |
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116,882 |
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Other real estate owned: |
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36,090 |
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Investments in unconsolidated subsidiaries and associated companies: |
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1,206 |
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Direct and indirect investments in real estate ventures: |
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5,553 |
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Intangible assets: |
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|
6,239 |
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Other assets: |
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513,451 |
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Total Assets: |
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8,700,781 |
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Thousands of Dollars |
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LIABILITIES |
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|
|
|
Deposits |
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7,066,266 |
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Federal Funds Purchased and Securities Sold Under Agreements to Repurchase |
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314,979 |
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Other borrowed money: |
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|
78,917 |
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Other Liabilities: |
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428,918 |
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Total Liabilities |
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7,889,080 |
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|
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Thousands of Dollars |
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EQUITY CAPITAL |
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|
|
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Common Stock |
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500 |
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Surplus |
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579,976 |
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Retained Earnings |
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339,476 |
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Accumulated other comprehensive income |
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|
(108,251 |
) |
Total Equity Capital |
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811,701 |
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Total Liabilities and Equity Capital |
|
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8,700,781 |
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exv99w1
Letter Of
Transmittal
Offer to Exchange
12.5%/15.0% Senior Subordinated Notes due 2016, which have been
registered
under the Securities Act of 1933, as amended,
for any and all outstanding 12.5%/15.0% Senior Subordinated
Notes due 2016
144A Notes (CUSIP 75040P AK4 and ISIN US75040PAK49)
Regulation S Notes (CUSIP U74935 AC8 and ISIN
USU74935AC87)
Institutional Accredited Investor Notes (75040P AM0 and ISIN
US75040PAM05)
of
Radio
One, Inc.
THE EXCHANGE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME,
ON ,
2011 (THE EXPIRATION DATE), UNLESS EXTENDED
BY RADIO ONE, INC., IN ITS SOLE DISCRETION.
The Exchange Agent for the Exchange Offer is:
Wilmington Trust Company
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By Registered Mail or Overnight Carrier:
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Facsimile Transmission:
(for eligible institutions only)
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By Hand Delivery:
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Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE
19890-1600
Attention: Patrick Healy
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(302) 636-4149
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Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-1605
Attention: Patrick Healy
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Confirm by Telephone:
(302) 636-6391
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Delivery of this Letter of Transmittal to an address other
than as set forth above or transmission of this Letter of
Transmittal via a facsimile transmission to a number other than
as set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the prospectus,
dated ,
2011 (the Prospectus), of Radio One, Inc., and this
Letter of Transmittal (the Letter of Transmittal),
which together describe Radio One, Inc.s offer (the
Exchange Offer) to exchange up to $286,794,302
aggregate principal amount of 12.5%/15.0% Senior Subordinated
Notes due 2016 (together with the guarantees thereof, the
Exchange Notes), which have been registered under
the Securities Act of 1933, as amended (the Securities
Act), of Radio One, Inc., for a like aggregate principal
amount of 12.5%/15.0% Senior Subordinated Notes due 2016
(together with the guarantees thereof, the Outstanding
Notes) of Radio One, Inc.
The terms of the Exchange Notes and the Outstanding Notes are
identical in all respects, except that, because the offer of the
Exchange Notes will have been registered under the Securities
Act, the Exchange Notes will not be subject to transfer
restrictions, registration rights or the related provisions for
increased interest if we default under the registration rights
agreement applicable to the Outstanding Notes.
Capitalized terms used but not defined herein shall have the
same meaning given them in the Prospectus.
Your bank or broker can assist you in completing this form.
The instructions included with this Letter of Transmittal must
be followed. Questions and requests for assistance or for
additional copies of the prospectus and this Letter of
Transmittal may be directed to the Exchange Agent.
The undersigned has checked the appropriate boxes below and
signed this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
Please read the entire Letter of Transmittal and the
prospectus carefully before checking any box below.
List below the Outstanding Notes to which this Letter of
Transmittal relates. If the space provided below is inadequate,
the certificate numbers and aggregate principal amounts should
be listed on a separate signed schedule affixed hereto.
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DESCRIPTION OF OUTSTANDING
NOTES
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Name(s) And Address(es) of
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Aggregate Principal
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Registered Holder(s)
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Certificate
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Amount
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Principal Amount
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(Please Fill In)
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Number(s)*
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Represented**
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Tendered**
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Total principal amount of Outstanding Notes
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* Need not be completed by holders delivering by book-entry
transfer (see below).
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** Outstanding Notes may be tendered in whole or in part in
minimum denominations of U.S.$1 and integral multiples of U.S.$1
in excess thereof. All Outstanding Notes held shall be deemed
tendered unless a lesser number is specified in this column. See
Instruction 4.
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Unless the context otherwise requires, the term
holder for purposes of this Letter of Transmittal
means any person in whose name Outstanding Notes are registered
or any other person who has obtained a properly completed bond
power from the registered holder or any person whose Outstanding
Notes are held of record by The Depository Trust Company
(DTC).
2
Please read this entire Letter of Transmittal carefully
before completing the boxes below.
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o
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Check here if certificates for tendered Outstanding Notes are
enclosed herewith.
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o
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Check here if tendered Outstanding Notes are being delivered
by book-entry transfer made to the account maintained by the
Exchange Agent with the DTC and complete the following:
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Name of Tendering Institution:
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o |
Check here if you tendered by book-entry transfer and desire
any non-exchanged notes to be returned to you by crediting the
book-entry transfer facility account number set forth above.
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Broker-Dealer
Status
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o |
Check here if you are a broker-dealer that acquired your
tendered notes for your own account as a result of market-making
or other trading activities and wish to receive 10 additional
copies of the Prospectus and any amendments or supplements
thereto.
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Note: signatures must be provided below
3
PLEASE
READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange
Offer, the undersigned hereby tenders to Radio One, Inc. the
principal amount of the Outstanding Notes indicated above.
Subject to, and effective upon, the acceptance for exchange of
all or any portion of the Outstanding Notes tendered herewith in
accordance with the terms and conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the
terms and conditions of any such extension or amendment), the
undersigned hereby exchanges, assigns and transfers to, or upon
the order of, Radio One, Inc. all right, title and interest in
and to such Outstanding Notes as are being tendered herewith.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its true and lawful agent and attorney-in-fact
of the undersigned to cause the Outstanding Notes to be
assigned, transferred and exchanged.
The undersigned represents and warrants that it has full power
and authority to tender, exchange, assign and transfer the
Outstanding Notes and to acquire Exchange Notes issuable upon
the exchange of such tendered Outstanding Notes, and that, when
the same are accepted for exchange, Radio One, Inc. will acquire
good and unencumbered title to the tendered Outstanding Notes,
free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The
undersigned also warrants that it will, upon request, execute
and deliver any additional documents deemed by the Exchange
Agent or Radio One, Inc. to be necessary or desirable to
complete the exchange, assignment and transfer of the tendered
Outstanding Notes or transfer ownership of such Outstanding
Notes on the account books maintained by the book-entry transfer
facility. The undersigned further agrees that acceptance of any
and all validly tendered Outstanding Notes by Radio One, Inc.
and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by Radio One, Inc. of its
obligations under the Registration Rights Agreement, dated as of
November 24, 2010, among Radio One, Inc., the note
guarantors named therein and initial holders of the Outstanding
Notes (the Registration Rights Agreement), and that
Radio One, Inc. shall have no further obligations or liabilities
thereunder. The undersigned will comply with its obligations
under the Registration Rights Agreement.
The Exchange Offer is subject to certain conditions as set forth
in the Prospectus under the caption Exchange
Offer Conditions to the Exchange Offer. As a
result of these conditions (which may be waived, in whole or in
part, by Radio One, Inc.), as more particularly set forth in the
Prospectus, Radio One, Inc. may not be required to exchange any
of the Outstanding Notes tendered hereby and, in such event, the
Outstanding Notes not exchanged will be returned to the
undersigned at the address shown above, promptly following the
expiration or termination of the Exchange Offer. In addition,
Radio One, Inc. may amend the Exchange Offer at any time prior
to the Expiration Date if any of the conditions set forth under
Exchange Offer Conditions to the Exchange
Offer occur.
Tenders of Outstanding Notes pursuant to any one of the
procedures described in the Prospectus and in the instructions
attached hereto will, upon Radio One, Inc.s acceptance for
exchange of such tendered Outstanding Notes, constitute a
binding agreement between the undersigned and Radio One, Inc.
upon the terms and subject to the conditions of the Exchange
Offer. Under circumstances set forth in the Prospectus, Radio
One, Inc. may not be required to accept for exchange any of the
Outstanding Notes.
By tendering Outstanding Notes and executing this Letter of
Transmittal, the undersigned represents that (1) the
Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the undersigned,
(2) the undersigned is not engaging in and does not intend
to engage in a distribution of such Exchange Notes, (3) the
undersigned does not have an arrangement or understanding with
any person to participate in the distribution of such Exchange
Notes, (4) the undersigned is not an affiliate
of Radio One, Inc. within the meaning of Rule 405 under the
Securities Act, (5) the undersigned is not a broker-dealer
tendering Outstanding Notes directly acquired from Radio One,
Inc. for its own account, and (6) the undersigned is not
acting on behalf of any person who could not truthfully make the
foregoing representations.
The undersigned also acknowledges that this Exchange Offer is
being made by Radio One, Inc. based upon Radio One, Inc.s
understanding of an interpretation by the staff of the
Securities and Exchange Commission (the Commission)
as set forth in no-action letters issued to third parties, that
the Exchange Notes issued in exchange for the Outstanding Notes
pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than any
such holder that is an affiliate of Radio One, Inc. within the
meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such
4
Exchange Notes are acquired in the ordinary course of such
holders business, and such holders are not engaged in, and
do not intend to engage in, a distribution of such Exchange
Notes and have no arrangement or understanding with any person
to participate in the distribution of such Exchange Notes.
However, the staff of the Commission has not considered this
Exchange Offer in the context of a no-action letter, and there
can be no assurance that the staff of the Commission would make
a similar determination with respect to this Exchange Offer as
in other circumstances. If a holder of Outstanding Notes is an
affiliate of Radio One, Inc., or is engaged in or intends to
engage in a distribution of the Exchange Notes or has any
arrangement or understanding with respect to the distribution of
the Exchange Notes to be acquired pursuant to the Exchange
Offer, such holder could not rely on the applicable
interpretations of the staff of the Commission and must comply
with the registration and prospectus delivery requirements of
the Securities Act in connection with any secondary resale
transaction. If the undersigned is a broker-dealer it:
(1) represents that the Outstanding Notes to be exchanged
for Exchange Notes were acquired by it as a result of
market-making or other trading activities, (2) confirms
that it has not entered into any arrangement or understanding
with the issuer or an affiliate of the issuer to distribute the
Exchange Notes and (3) acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. By
acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, the
undersigned is not deemed to admit that it is an
underwriter within the meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and every
obligation of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of
the undersigned. Tendered Outstanding Notes may be withdrawn at
any time prior to the Expiration Date in accordance with the
terms of this Letter of Transmittal. Except as stated in the
Prospectus, this tender is irrevocable.
Certificates for all Exchange Notes delivered in exchange for
tendered Outstanding Notes and any Outstanding Notes delivered
herewith but not exchanged, and registered in the name of the
undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
The undersigned, by completing the box entitled
Description of Outstanding Notes above and signing
this letter, will be deemed to have tendered the Outstanding
Notes as set forth in such box.
5
PLEASE
SIGN HERE
(To
Be Completed By All Tendering Holders of Outstanding
Notes Regardless of
Whether Outstanding Notes Are Being Physically Delivered
Herewith, unless an Agents Message
Is Delivered in Connection with a Book-Entry Transfer of Such
Outstanding Notes)
This Letter of Transmittal must be signed by the registered
holder(s) of Outstanding Notes exactly as their name(s)
appear(s) on certificate(s) for Outstanding Notes or on a
security position listing, or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted
with this Letter of Transmittal. If the signature is by a
trustee, executor, administrator, guardian, attorney-in-fact,
officer or other person acting in a fiduciary or representative
capacity, such person must set forth his or her full title below
under Capacity and submit evidence satisfactory to
the Exchange Agent of such persons authority to so act.
See Instruction 5 below.
If the signature appearing below is not of the registered
holder(s) of the Outstanding Notes, then the registered
holder(s) must sign a valid power of attorney.
Signature(s) of Holder(s) or
Authorized Signatory
Including Zip Code
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Area Code and Telephone
No. |
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Please Complete Substitute
Form W-9
Herein
SIGNATURE GUARANTEE (If required see
Instructions 2 and 5 below)
Certain Signatures Must be Guaranteed by a Signature Guarantor
(Name of Signature Guarantor
Guaranteeing Signatures)
(Address (including zip code)
and Telephone Number (including area code) of Firm)
(Authorized Signature)
(Printed Name)
(Title)
6
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4 through 7)
To be completed ONLY if certificates for Outstanding Notes in a
principal amount not tendered are to be issued in the name of,
or Exchange Notes issued pursuant to the Exchange Offer are to
be issued in the name of, someone other than the person or
persons whose name(s) appear(s) within this Letter of
Transmittal or issued to an address different from that shown in
the box entitled Description of Outstanding Notes
within this Letter of Transmittal.
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Issue: |
o Exchange
Notes o Outstanding
Notes
(Complete as applicable)
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(Please Print)
(Please Print)
(Zip Code)
Tax Identification or Social
Security Number
(See Substitute
Form W-9
Herein)
Credit Outstanding Notes not tendered, but represented by
certificates tendered by this Letter of Transmittal, by
book-entry transfer to:
o The
Depository Trust Company
Credit Exchange Notes issued pursuant to the Exchange Offer by
book-entry transfer to:
o The
Depository Trust Company
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4 through 7)
To be completed ONLY if certificates for Outstanding Notes in a
principal amount not tendered, or Exchange Notes, are to be sent
to someone other than the person or persons whose name(s)
appear(s) within this Letter of Transmittal to an address
different from that shown in the box entitled Description
of Outstanding Notes within this Letter of Transmittal.
Deliver: o Exchange
Notes o Outstanding
Notes
(Complete
as applicable)
(Please Print)
(Please Print)
(Zip Code)
Is this a permanent address change:
o Yes o No
(check one box)
7
INSTRUCTIONS TO
LETTER OF TRANSMITTAL
Forming Part Of The Terms And Conditions
Of The Exchange Offer
1. Delivery of this Letter of Transmittal and
Outstanding Notes. This Letter of Transmittal is
to be completed by holders of Outstanding Notes if certificates
representing such Outstanding Notes are to be forwarded
herewith, or, unless an agents message is utilized, if
delivery of such certificates is to be made by book-entry
transfer to the account maintained by DTC, pursuant to the
procedures set forth in the Prospectus under Exchange
Offer Procedures for Tendering. For a holder
to properly tender Outstanding Notes pursuant to the Exchange
Offer, a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), together
with any signature guarantees and any other documents required
by these Instructions, or a properly transmitted agents
message in the case of a book entry transfer, must be received
by the Exchange Agent at its address set forth herein on or
prior to the expiration date, and either (1) certificates
representing such Outstanding Notes must be received by the
Exchange Agent at its address, or (2) such Outstanding
Notes must be transferred pursuant to the procedures for
book-entry transfer described in the Prospectus under
Exchange Offer Procedures for Tendering
and a book-entry confirmation must be received by the Exchange
Agent on or prior to the expiration date.
The method of delivery of this Letter of Transmittal, the
Outstanding Notes and all other required documents to the
Exchange Agent is at the election and sole risk of the holder.
Instead of delivery by mail, holders should use an overnight or
hand delivery service. In all cases, holders should allow for
sufficient time to ensure delivery to the Exchange Agent prior
to the expiration of the Exchange Offer. Holders may request
their broker, dealer, commercial bank, trust company or nominee
to effect these transactions for such holder. Holders should not
send any Outstanding Note, Letter of Transmittal or other
required documents to Radio One, Inc.
2. Guarantee of
Signatures. Signatures on this Letter of
Transmittal or a notice of withdrawal must be guaranteed by a
member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or
correspondent in the United States or by an eligible
guarantor institution within the meaning of
Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as
amended (banks; brokers and dealers; credit unions; national
securities exchanges; registered securities associations;
learning agencies; and savings associations) unless the
Outstanding Notes tendered hereby are tendered (1) by a
registered holder of Outstanding Notes (or by a participant in
DTC whose name appears on a security position listing as the
owner of such Outstanding Notes) who has not completed any of
the boxes entitled Special Issuance Instructions or
Special Delivery Instructions, on the Letter of
Transmittal, or (2) for the account of an eligible
guarantor institution. If the Outstanding Notes are
registered in the name of a person other than the person who
signed the Letter of Transmittal or if Outstanding Notes not
tendered are to be returned to, or are to be issued to the order
of, a person other than the registered holder or if Outstanding
Notes not tendered are to be sent to someone other than the
registered holder, then the signature on this Letter of
Transmittal accompanying the tendered Outstanding Notes must be
guaranteed as described above. Beneficial owners whose
Outstanding Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or
other nominee if they desire to tender Outstanding Notes. See
Exchange Offer Procedures for Tendering
in the Prospectus.
3. Withdrawal of Tenders. Except as
otherwise provided in the Prospectus, tenders of Outstanding
Notes may be withdrawn at any time on or prior to the expiration
date. For a withdrawal of tendered Outstanding Notes to be
effective, a written or facsimile transmission notice of
withdrawal must be received by the Exchange Agent on or prior to
the expiration date at its address set forth on the cover of
this Letter of Transmittal. Any such notice of withdrawal must
(1) specify the name of the person who tendered the
Outstanding Notes to be withdrawn, (2) identify the
Outstanding Notes to be withdrawn, including the certificate
number or numbers shown on the particular certificates
evidencing such Outstanding Notes (unless such Outstanding Notes
were tendered by book-entry transfer) and the aggregate
principal amount represented by such Outstanding Notes, and
(3) be signed by the holder of such Outstanding Notes in
the same manner as the original signature on the Letter of
Transmittal by which such Outstanding Notes were tendered
(including any required signature guarantees), or be accompanied
by (i) documents of transfer sufficient to have the trustee
register the transfer of the Outstanding Notes into the name of
the person withdrawing such Outstanding Notes, and (ii) a
properly completed irrevocable proxy authorizing such person to
effect such withdrawal on behalf of such holder. If the
Outstanding Notes to be withdrawn have been delivered or
otherwise identified to the Exchange Agent, a signed notice of
8
withdrawal is effective immediately upon written or facsimile
notice of such withdrawal even if physical release is not yet
effected.
Any permitted withdrawal of Outstanding Notes may not be
rescinded. Any Outstanding Notes properly withdrawn will
thereafter be deemed not validly tendered for purposes of the
Exchange Offer. However, properly withdrawn Outstanding Notes
may be retendered by following one of the procedures described
in the Prospectus under the caption Exchange
Offer Procedures for Tendering at any time
prior to the expiration date.
4. Partial Tenders. Tenders of
Outstanding Notes pursuant to the Exchange Offer will be
accepted only in principal amounts of at least U.S.$1 and in
integral multiples of U.S.$1 in excess thereof. If less than the
entire principal amount of any Outstanding Notes evidenced by a
submitted certificate is tendered, the tendering holder must
fill in the principal amount tendered in the last column of the
box entitled Description of Outstanding Notes
herein. The entire principal amount represented by the
certificates for all Outstanding Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Outstanding
Notes held by the holder is not tendered, certificates for the
principal amount of Outstanding Notes not tendered and Exchange
Notes issued in exchange for any Outstanding Notes tendered and
accepted will be sent (or, if tendered by book-entry transfer,
returned by credit to the account at DTC designated herein) to
the holder unless otherwise provided in the appropriate box on
this Letter of Transmittal (see Instruction 6), promptly
after the expiration date.
5. Signature on this Letter of Transmittal; Bond
Powers and Endorsements; Guarantee of
Signatures. If this Letter of Transmittal is
signed by the registered holder(s) of the Outstanding Notes
tendered hereby, the signature must correspond with the name(s)
as written on the face of certificates without alteration,
enlargement or change whatsoever. If this Letter of Transmittal
is signed by a participant in DTC whose name is shown as the
owner of the Outstanding Notes tendered hereby, the signature
must correspond with the name shown on the security position
listing the owner of the Outstanding Notes.
If any of the Outstanding Notes tendered hereby are owned of
record by two or more joint owners, all such owners must sign
this Letter of Transmittal. If any tendered Outstanding Notes
are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many copies of
this Letter of Transmittal and any necessary accompanying
documents as there are different names in which certificates are
held.
If this Letter of Transmittal is signed by the holder, and the
certificates for any principal amount of Outstanding Notes not
tendered are to be issued (or if any principal amount of
Outstanding Notes that is not tendered is to be reissued or
returned) to or, if tendered by book-entry transfer, credited to
the account of DTC of the registered holder, and Exchange Notes
exchanged for Outstanding Notes in connection with the Exchange
Offer are to be issued to the order of the registered holder,
then the registered holder need not endorse any certificates for
tendered Outstanding Notes nor provide a separate bond power. In
any other case (including if this Letter of Transmittal is not
signed by the registered holder), the registered holder must
either properly endorse the certificates for Outstanding Notes
tendered or transmit a separate properly completed bond power
with this Letter of Transmittal (in either case, executed
exactly as the name(s) of the registered holder(s) appear(s) on
such Outstanding Notes, and, with respect to a participant in
DTC whose name appears on a security position listing as the
owner of Outstanding Notes, exactly as the name(s) of the
participant(s) appear(s) on such security position listing),
with the signature on the endorsement or bond power guaranteed
by a signature guarantor or an eligible guarantor institution,
unless such certificates or bond powers are executed by an
eligible guarantor institution. See Instruction 2.
Endorsements on certificates for Outstanding Notes and
signatures on bond powers provided in accordance with this
Instruction 5 by registered holders not executing this
Letter of Transmittal must be guaranteed by an eligible
institution. See Instruction 2.
If this Letter of Transmittal or any certificates representing
Outstanding Notes or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when
signing, and proper evidence satisfactory to the Exchange Agent
of their authority so to act must be submitted with this Letter
of Transmittal.
6. Special Issuance and Special Delivery
Instructions. Tendering holders should indicate
in the applicable box or boxes the name and address to which
Outstanding Notes for principal amounts not tendered or Exchange
Notes exchanged for Outstanding Notes in connection with the
Exchange Offer are to be issued or sent, if different from the
name and
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address of the holder signing this Letter of Transmittal. In the
case of issuance in a different name, the
taxpayer-identification number of the person named must also be
indicated. If no instructions are given, Outstanding Notes not
tendered will be returned to the registered holder of the
Outstanding Notes tendered. For holders of Outstanding Notes
tendered by book-entry transfer, Outstanding Notes not tendered
will be returned by crediting the account at DTC designated
above.
7. Taxpayer Identification Number and Substitute
Form W-9. Each
tendering holder is required to provide the Exchange Agent with
its correct taxpayer identification number, which, in the case
of a holder who is an individual, is his or her social security
number. If the Exchange Agent is not provided with the correct
taxpayer identification number, the holder may be subject to
backup withholding and a U.S.$50 penalty imposed by the Internal
Revenue Service. If withholding results in an over-payment of
taxes, a refund may be obtained. Certain holders (including,
among others, all corporations and certain foreign individuals)
are not subject to these backup withholding and reporting
requirements. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute
Form W-9
for additional instructions.
To prevent backup withholding, each holder tendering Outstanding
Notes must provide such holders correct taxpayer
identification number by completing the Substitute
Form W-9,
certifying that the taxpayer identification number provided is
correct (or that such holder is awaiting a taxpayer
identification number), and that (i) the holder has not
been notified by the Internal Revenue Service that such holder
is subject to backup withholding as a result of failure to
report all interest or dividends or (ii) the Internal
Revenue Service has notified the holder that such holder is no
longer subject to backup withholding. If the Outstanding Notes
are registered in more than one name or are not in the name of
the actual owner, consult the Guidelines for Certification
of Taxpayer Identification Number on Substitute
Form W-9
for information on which tax payer identification number to
report.
Radio One, Inc. reserves the right in its sole discretion to
take whatever steps are necessary to comply with its obligation
regarding backup withholding.
8. Transfer Taxes. Radio One, Inc.
will pay all transfer taxes, if any, required to be paid by
Radio One, Inc. in connection with the exchange of the
Outstanding Notes for the Exchange Notes. If, however, Exchange
Notes, or Outstanding Notes for principal amounts not tendered
or accepted for exchange, are to be delivered to, or are to be
issued in the name of, any person other than the registered
holder of the Outstanding Notes tendered, or if a transfer tax
is imposed for any reason other than the exchange of the
Outstanding Notes in connection with the Exchange Offer, then
the amount of any transfer tax (whether imposed on the
registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of the
transfer taxes or exemption therefrom is not submitted with the
Letter of Transmittal, the amount of such transfer taxes will be
billed directly to the tendering holder.
9. Mutilated, Lost, Stolen or Destroyed
Outstanding Notes. Any holder whose Exchange
Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for
further instructions.
10. Irregularities. All questions
as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of any tenders of Outstanding Notes
pursuant to the procedures described in the Prospectus and the
form and validity of all documents will be determined by Radio
One, Inc., in its sole discretion, which determination shall be
final and binding on all parties. Radio One, Inc. reserves the
absolute right, in its sole discretion, to reject any or all
tenders of any Outstanding Notes determined by it not to be in
proper form or the acceptance of which may, in the opinion of
Radio One, Inc.s counsel, be unlawful. Radio One, Inc.
also reserves the absolute right, in its sole discretion, to
waive or amend any of the conditions of the Exchange Offer or to
waive any defect or irregularity in the tender of any particular
Outstanding Notes, whether or not similar defects or
irregularities are waived in the case of other tenders. Radio
One, Inc.s interpretations of the terms and conditions of
the Exchange Offer (including, without limitation, the
instructions in this Letter of Transmittal) shall be final and
binding. No alternative, conditional or contingent tenders will
be accepted. Unless waived, any irregularities in connection
with tenders must be cured within such time as Radio One, Inc.
shall determine. None of Radio One, Inc., the Exchange Agent or
any other person will be under any duty to give notification of
any defects or irregularities in such tenders or will incur any
liability to holders for failure to give such notification.
Tenders of such Outstanding Notes shall not be deemed to have
been made until such irregularities have been cured or waived.
Any Outstanding Notes received by the Exchange Agent that are
not properly tendered and as to which the irregularities have
10
not been cured or waived will be returned by the Exchange Agent
to the tendering holders, unless such holders have otherwise
provided herein, promptly following the expiration date.
11. Requests for Assistance or Additional
Copies. Questions relating to the procedure for
tendering, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone
number set forth above. Holders may also contact their broker,
dealer, commercial bank, trust company or other nominee for
assistance concerning the Exchange Offer.
IMPORTANT: This Letter of Transmittal or a facsimile thereof
(together with certificates for Outstanding Notes and all other
required documents) must be received by the Exchange Agent on or
prior to 5:00 p.m., New York City time, on the
expiration date.
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PAYERS NAME: Wilmington Trust Company
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SUBSTITUTE
FORM W-9
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Part 1 PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY OR BY SIGNING AND DATING BELOW
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Social
Security Number(s)
OR
Employer Identification Number(s)
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Department of the
Treasury Internal
Revenue Service
Payers Request For
Taxpayer Identification
Number (TIN)
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PART 2
CERTIFICATION Under Penalties of Perjury,
I certify that
(1) The number shown on this form is my correct
taxpayer identification number (or I am waiting for a number to
be issued to me), and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, (b) I have
not been notified by the Internal Revenue Service (the
IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to
backup withholding.
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Part 3
Awaiting TIN o
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CERTIFICATION INSTRUCTIONS You must cross out
item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after
being notified by the IRS that you are subject to backup
withholding you receive another notification from the IRS
stating that you are no longer subject to backup withholding, do
not cross out item (2).
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SIGNATURE
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DATE
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NAME
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(please print)
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YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE
FORM W-9.
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and either
(1) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal
Revenue Service Center or Social Security Administration office,
or (2) I intend to mail or deliver an application in the
near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 28% of all
reportable cash payments made to me thereafter will be withheld
until I provide a taxpayer identification number to the payer
and that, if I do not provide my taxpayer identification number
within sixty days, such retained amounts shall be remitted to
the IRS as backup withholding.
SIGNATURE
DATE
NAME (please
print)
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NOTE: |
FAILURE TO COMPLETE AND RETURN THIS
FORM W-9
MAY RESULT IN BACKUP WITHHOLDING AND A U.S.$50 PENALTY IMPOSED
BY THE INTERNAL REVENUE SERVICE. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM
W-9 FOR
ADDITIONAL DETAILS.
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GUIDELINES
FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE
FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR
THE PAYEE (YOU) TO GIVE THE PAYER.
Social security numbers have nine digits separated by two
hyphens: i.e.,
000-00-0000.
Employee identification numbers have nine digits separated by
only one hyphen: i.e.,
00-0000000.
The table below will help determine the number to give the
payer. All Section references are to the Internal
Revenue Code of 1986, as amended. IRS is the
Internal Revenue Service.
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Security for this Type
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Give the Social
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of Account:
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Number of
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1.
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Individual
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The individual
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2.
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Two or more individuals (joint account)
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The actual owner of the combined account or, if individual
funds, the first on the account(1)
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3.
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Custodian account of a minor (Uniform Gift to Minors Act)
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The minor(2)
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4.
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a. The usual revocable savings trust account trustee(1)
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The grantor (grantor is also trustee)
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b. So-called trust account that is not a legal owner(1)
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The actual or valid trust under state law
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5.
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Sole proprietorship
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The owner(1)
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Employer for this
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Give the Identification
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type of account:
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Number of
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6.
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Sole proprietorship
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The owner(1)
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7.
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A valid trust, estate or pension trust
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The legal entity(4)
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8.
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Corporate
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The corporation
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9.
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Association, club, religious, charitable, educational, or other
tax-exempt organization account
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The organization
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10.
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Partnership
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The partnership
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11.
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A broker or registered nominee
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The broker or nominee
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12.
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Account with the Department of Agriculture in the name of a
public entity (such as a state or local government, school
district, or prison) that receives agricultural program payments
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The public entity
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(1)
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List first and circle the name of
the person whose number you furnish. If only one person on a
joint account has a social security number, that persons
number must be furnished.
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(2)
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Circle the minors name and
furnish the minors social security number.
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(3)
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You must show your individual name,
but you may also enter your business or doing business
as name. You may use either your social security number or
your employer identification number (if you have one).
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(4)
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List first and circle the name of
the legal trust, estate, or pension trust. (Do not furnish the
taxpayer identification number of the personal representative or
trustee unless the legal entity itself is not designated in the
account title.)
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NOTE: |
If no name is circled when there is more than one name, the
number will be considered to be that of the first name listed.
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Obtaining
A Number
If you dont have a taxpayer identification number or you
dont know your number, obtain
Form SS-5,
Application for a Social Security Card, at the local Social
Administration office, or
Form SS-4,
Application for Employer Identification Number, by calling 1
(800) TAX-FORM, and apply for a number.
Payees
Exempt From Backup Withholding
Payees specifically exempted from withholding include:
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An organization exempt from tax under Section 501(a), an
individual retirement account (IRA), or a custodial account
under Section 403(b)(7), if the account satisfies the
requirements of Section 401(f)(2).
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The United States or a state thereof, the District of Columbia,
a possession of the United States, or a political subdivision or
wholly-owned agency or instrumentality of any one or more of the
foregoing.
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An international organization or any agency or instrumentality
thereof.
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A foreign government and any political subdivision, agency or
instrumentality thereof.
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Payees that may be exempt from backup withholding include:
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A corporation.
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A financial institution.
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A dealer in securities or commodities required to register in
the United States, the District of Columbia, or a possession of
the United States.
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A real estate investment trust.
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A common trust fund operated by a bank under Section 584(a).
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An entity registered at all times during the tax year under the
Investment Company Act of 1940.
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A middleman known in the investment community as a nominee or
who is listed in the most recent publication of the American
Society of Corporate Secretaries, Inc., Nominee List.
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A futures commission merchant registered with the Commodity
Futures Trading Commission.
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A foreign central bank of issue.
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Payments of dividends and patronage dividends generally exempt
from backup withholding include:
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Payments to nonresident aliens subject to withholding under
Section 1441.
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Payments to partnerships not engaged in a trade or business in
the United States and that have at least one nonresident alien
partner.
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Payments of patronage dividends not paid in money.
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Payments made by certain foreign organizations.
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Section 404(k) payments made by an ESOP.
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Payments of interest generally exempt from backup withholding
include:
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Payments of interest on obligations issued by individuals. Note:
You may be subject to backup withholding if this interest is
$600 or more and you have not provided your correct taxpayer
identification number to the payer.
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Payments of tax-exempt interest (including exempt-interest
dividends under Section 852).
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Payments described in Section 6049(b)(5) to nonresident
aliens.
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Payments on tax-free covenant bonds under Section 1451.
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Payments made by certain foreign organizations.
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Mortgage interest paid to you.
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Certain payments, other than payments of interest, dividends,
and patronage dividends, that are exempt from information
reporting are also exempt from backup withholding. For details,
see the regulations under sections 6041, 6041A, 6042, 6044,
6045, 6049, 6050A and 6050N.
EXEMPT PAYEES DESCRIBED ABOVE MUST FILE
FORM W-9
OR A SUBSTITUTE
FORM W-9
TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS
FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION
NUMBER, WRITE EXEMPT IN PART II OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
PRIVACY ACT NOTICE Section 6109 requires you to
provide your correct taxpayer identification number to payers,
who must report the payments to the IRS. The IRS uses the number
for identification purposes and may also provide this
information to various government agencies for tax enforcement
or litigation purposes. Payers must be given the numbers whether
or not recipients are required to file tax returns. Payers must
generally withhold up to 28% of taxable interest, dividends, and
certain other payments to a payee who does not furnish a
taxpayer identification number to payer. Certain penalties may
also apply.
Penalties
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION
NUMBER. If you fail to furnish your taxpayer
identification number to a payer, you are subject to a penalty
of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO
WITHHOLDING. If you make a false statement with
no reasonable basis that results in no backup withholding, you
are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING
INFORMATION. Willfully falsifying certifications
or affirmations may subject you to criminal penalties including
fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE.
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