-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NVAUfLtFhnj4xWyVpV3RIcTCDjEfTgAGdXlcjUgqAVLsxs2nIiKFmu3ik4zxHHG6 eccJBtDaEeUqVtV7FrAkEw== 0000950130-02-003663.txt : 20020515 0000950130-02-003663.hdr.sgml : 20020515 20020515134737 ACCESSION NUMBER: 0000950130-02-003663 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEREP NATIONAL RADIO SALES INC CENTRAL INDEX KEY: 0000796735 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 131865151 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28395 FILM NUMBER: 02650473 BUSINESS ADDRESS: STREET 1: 100 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129160700 MAIL ADDRESS: STREET 1: 100 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 d10q.txt FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 OR [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-28395 INTEREP NATIONAL RADIO SALES, INC. (Exact name of registrant as specified in its charter) New York 13-1865151 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Park Avenue, New York, New York 10017 (Address of principal executive offices) (Zip Code)
(212) 916-0700 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] The number of shares of the registrant's Common Stock outstanding as of the close of business on May 10, 2002, was 5,152,401 shares of Class A Common Stock, and 4,073,891 shares of Class B Common Stock. ================================================================================ PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS INTEREP NATIONAL RADIO SALES, INC. CONSOLIDATED BALANCE SHEETS (in thousands except share information)
March 31, December 31, 2002 2001 ----------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents..................................................... $ 5,942 $ 11,502 Receivables, net of allowance for doubtful accounts of $1,714 and $1,747, respectively................................................................ 23,532 26,656 Representation contract buyouts receivable.................................... -- 12,504 Current portion of deferred representation contract costs..................... 35,177 40,368 Prepaid expenses and other current assets..................................... 1,124 927 -------- -------- Total current assets...................................................... 65,775 91,957 -------- -------- Fixed assets, net................................................................ 3,660 3,909 Deferred representation contract costs........................................... 64,572 64,521 Investments and other assets..................................................... 20,246 19,342 -------- -------- Total assets.............................................................. $154,253 $179,729 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses......................................... $ 10,824 $ 8,606 Accrued interest.............................................................. 2,475 4,950 Representation contract buyouts payable....................................... 15,673 33,161 Accrued employee-related liabilities.......................................... 3,085 3,741 -------- -------- Total current liabilities................................................. 32,057 50,458 -------- -------- Long-term debt................................................................... 99,000 99,000 -------- -------- Representation contract buyouts payable.......................................... 18,762 21,267 -------- -------- Other noncurrent liabilities..................................................... 4,296 4,714 -------- -------- Shareholders' equity: Class A common stock, $0.01 par value--20,000,000 shares authorized, 5,060,237 and 4,907,996 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively............................................. 51 49 Class B common stock, $0.01 par value--10,000,000 shares authorized, 4,328,506 and 4,314,463 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively............................................. 43 43 Additional paid-in-capital....................................................... 39,093 39,456 Accumulated deficit.............................................................. (39,049) (35,258) -------- -------- Total shareholders' equity................................................ 138 4,290 -------- -------- Total liabilities and shareholders' equity................................ $154,253 $179,729 ======== ========
The accompanying Notes to Unaudited Interim Consolidated Financial Statements are an integral part of these balance sheets. 2 INTEREP NATIONAL RADIO SALES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share data) (unaudited) For the Three Months Ended March 31, ------------------- 2002 2001 ------- -------- Commission revenues................................... $17,528 $ 16,608 Contract termination revenue.......................... 2,387 69 ------- -------- Total revenues........................................ 19,915 16,677 ------- -------- Operating expenses: Selling expenses...................................... 12,864 14,964 General and administrative expenses................... 3,196 3,180 Depreciation and amortization expense................. 5,920 6,507 ------- -------- Total operating expenses.............................. 21,980 24,651 ------- -------- Operating loss........................................ (2,065) (7,974) Interest expense, net................................. 2,512 2,257 Other expense, net.................................... -- 313 ------- -------- Loss before benefit for income taxes.................. (4,577) (10,544) Benefit for income taxes.............................. (786) (4,239) ------- -------- Net loss.............................................. $(3,791) $ (6,305) ======= ======== Basic and diluted loss per share...................... $ (0.41) $ (0.74) The accompanying Notes to Unaudited Interim Consolidated Financial Statements are an integral part of these statements. 3 INTEREP NATIONAL RADIO SALES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
For the Three Months Ended March 31, ------------------- 2002 2001 - - -------- -------- Cash flows from operating activities: Net loss............................................................... $ (3,791) $ (6,305) Adjustments to reconcile loss to net cash used in operating activities: Depreciation and amortization.......................................... 5,920 6,507 Noncash compensation expense........................................... (920) 350 Equity loss on investment.............................................. -- 385 Changes in assets and liabilities: Receivables............................................................ 3,124 8,067 Representation contract buyouts receivable............................. 12,504 1,028 Prepaid expenses and other current assets.............................. (197) (251) Other noncurrent assets................................................ (1,158) (4,441) Accounts payable and accrued expenses.................................. 2,218 (6,974) Accrued interest....................................................... (2,475) (2,475) Accrued employee-related liabilities................................... (656) (4,609) Other noncurrent liabilities........................................... (418) (133) -------- -------- Net cash provided by (used in) operating activities.................... 14,151 (8,851) -------- -------- Cash flows from investing activities: Additions to fixed assets.............................................. (101) (211) Increase in other investments.......................................... -- (575) -------- -------- Net cash used in investing activities.................................. (101) (786) -------- -------- Cash flows from financing activities: Station representation contract payments............................... (20,169) (7,144) Issuance of Class B common stock....................................... 559 -- -------- -------- Net cash used in financing activities.................................. (19,610) (7,144) -------- -------- Net decrease in cash and cash equivalents.............................. (5,560) (16,781) Cash and cash equivalents, beginning of period......................... 11,502 23,681 -------- -------- Cash and cash equivalents, end of period............................... $ 5,942 $ 6,900 -------- -------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest paid....................................................... $ 4,950 $ 4,950 Income taxes paid................................................... 74 -- Non-cash investing and financing activities: Station representation contracts acquired........................... $ 176 $ 2,798
The accompanying Notes to Unaudited Interim Consolidated Financial Statements are an integral part of these statements. 4 INTEREP NATIONAL RADIO SALES, INC. NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (in thousands except share information) 1. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Interep National Radio Sales, Inc. ("Interep"), together with its subsidiaries (collectively, the "Company"), and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. All significant intercompany transactions and balances have been eliminated. The consolidated financial statements as of March 31, 2002 and 2001 are unaudited; however, in the opinion of management, such statements include all adjustments necessary for a fair presentation of the results for the periods presented. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Consolidated Financial Statements for the year ended December 31, 2001, which are available upon request of the Company. Due to the seasonal nature of the Company's business, the results of operations for the interim periods are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending December 31, 2002. Revenue Recognition The Company is a national representation ("rep") firm serving radio broadcast clients throughout the United States. Commission revenue is derived from sales of advertising time for radio stations under representation contracts. Commissions and fees are recognized in the month the advertisement is broadcast. In connection with its unwired network business, the Company collects fees for unwired network radio advertising and, after deducting its commissions, remits the fees to the respective radio stations. In instances when the Company is not legally obligated to pay a station until the corresponding receivable is paid, fees payable to stations have been offset against the related receivable from advertising agencies in the accompanying consolidated balance sheets. The Company records all commission revenues on a net basis. Commissions are recognized based on the standard broadcast calendar that ends on the last Sunday in each reporting period. The broadcast calendars for the three months ended March 31, 2002 and 2001 had 13 and 12 weeks, respectively. Representation Contract Termination Revenue and Contract Acquisition Costs The Company's station representation contracts usually renew automatically from year to year after their stated initial terms unless either party provides written notice of termination at least twelve months prior to the next automatic renewal date. In accordance with industry practice, in lieu of termination, an arrangement is normally made for the purchase of such contracts by a successor representative firm. The purchase price paid by the successor representation firm is generally based upon the historic commission income projected over the remaining contract period, plus two months. Costs of obtaining station representation contracts are deferred and amortized over the life of the new contract. Such amortization is included in the accompanying consolidated statements of operations as a component of depreciation and amortization expense. Amounts which are to be amortized during the next year are included as current assets in the accompanying consolidated balance sheets. Income earned from the loss of station representation contracts (contract termination revenue) is recognized on the effective date of the buyout agreement. 5 Earnings (Loss) Per Share Basic earnings (loss) per share for each of the respective periods has been computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period, which was 9,225,373 and 8,515,629 for the three months ended March 31, 2002 and 2001, respectively. Diluted earnings per share would reflect the potential dilution that could occur if the outstanding options to purchase common stock were exercised. For the three months ended March 31, 2002 and 2001, the exercise of outstanding options would have an antidilutive effect and therefore have been excluded from the calculation. Restructuring Charges A strategic restructuring program was undertaken in 2001 in response to difficult economic conditions and to further ensure the Company's competitive position. In 2001, the Company recognized restructuring charges of $3,471, which were primarily comprised of termination benefits. The restructuring program resulted in the termination of approximately 53 employees. At December 31, 2001, the remaining accrual was approximately $2,917. During the three months ended March 31, 2002, the Company paid approximately $716 of termination benefits. As of March 31, 2002, the remaining accrual was $2,201, of which $1,720 is included in accrued employee related liabilities and $481 is included in other noncurrent liabilities. New Accounting Pronouncements SFAS No. 142, "Goodwill and Other Intangible Assets," was issued in June 2001. This Statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets". It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. With the adoption of this Statement, goodwill is no longer subject to amortization over its estimated useful life. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value-based test. Similarly, goodwill associated with equity method investments is no longer amortized. Equity method goodwill is not, however, subject to the new impairment rules. The Company is in the process of assessing the impact of adopting the new impairment rules and may incur an impairment charge in accordance with the adoption of this Statement. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Segment Reporting In 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information." The Statement requires the Company to report segment financial information consistent with the presentation made to the Company's management for decision making purposes. The Company is managed as one segment and all revenues are derived from radio representation operations and related activities. The Company's management decisions are based on operating EBITDA, defined as operating income or loss before interest, taxes, depreciation and amortization and excluding contract termination revenue and a non-cash option re-pricing charge. Operating EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles, but the Company believes it is useful in evaluating the performance of Interep, in addition to the GAAP data presented herein. 6 3. Acquisitions and Investments In December 2000, the Company invested $3,000 in Cybereps, Inc. and thus increased its ownership percentage from 16% to 51%. In October 2001, the Company assumed effective control of Cybereps' operations and consolidated its results from that date. The operating loss included in the accompanying statement of operations for the three months ended March 31, 2002 is approximately $329, compared to $385 of equity loss included in other income for the three months ended March 31, 2001. The Company has investments in affiliates, which are accounted for using the cost method of accounting as the Company does not have the ability to exercise significant influence over operating and financial policies of these affiliates. The total carrying value of these investments was $2,500 as of March 31, 2002, representing a range of ownership from 8% to 16% of the affiliated companies. 4. Stock Options In April 2000, the Company granted options to purchase shares of Class A common stock at an exercise price of $8.77. In December 2000, the Company repriced these options to an exercise price of $2.81 which represented the fair market value on the date of the repricing. In accordance with generally accepted accounting principles, the Company has adopted variable plan accounting for these options from the date of the repricing. For the three months ended March 31, 2002 and 2001, the Company has recorded $(920) and $350 to selling expenses as a result of the repricing. 5. Shareholders' Equity In March 2002, the Company issued 164,117 shares of Class B common stock to the Interep Stock Growth Plan for net cash proceeds of $558. During 2001, the Company issued 680,330 shares of Class B common stock to the Interep Stock Growth Plan for net cash proceeds of $2,800. The shares were issued at the current fair market value on the date of issuance. 6. Commitments and Contingencies The Company may be involved in various legal actions from time to time arising in the normal course of business. In the opinion of management, there are no matters outstanding that would have a material adverse effect on the consolidated financial position or results of operations of the Company. In 2000, certain clients of the Company were served summons and complaints (on separate matters) for alleged breaches of various national sales representation agreements. The Company has agreed to indemnify its clients from and against any loss, liability, cost or expense incurred in the actions. In the first quarter of 2002, the Company entered into a settlement agreement regarding these contract acquisition claims. The settlement resulted in the offset of approximately $12,800 in representation contract buyout receivables and payables as well as additional contract termination revenue of $2,400. In addition, the settlement agreement includes amended payment schedules for approximately $10,000 in contract representation payables previously recorded. 7. Subsequent Event In May 2002, we issued $5,000 of units in a private placement. Each unit consists of one share of $100 face value, 4% pay-in-kind, Series A Convertible Preferred Stock and 6.25 warrants to purchase the same number of shares of our Class A common stock. Each share of Preferred Stock is convertible into 25 shares of our Class A common stock. Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations The following discussion is based upon and should be read in conjunction with our Consolidated Financial Statements, including the notes thereto, included elsewhere in this Report. Throughout this Quarterly Report, when we refer to "Interep" or "the Company," we refer collectively to Interep National Radio Sales, Inc. and all of our subsidiaries unless the context indicates otherwise or as otherwise noted. 7 Important Note Regarding Forward Looking Statements Some of the statements made in this Quarterly Report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not statements of historical fact, but instead represent our belief about future events. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. These statements are based on many assumptions and involve known and unknown risks and uncertainties that are inherently uncertain and beyond our control. These risks and uncertainties may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different than any expressed or implied by these forward-looking statements. Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should review the factors noted in Management's Discussion and Analysis of Financial Condition and Results of Operation--Certain Factors That May Affect Our Results of Operations for a discussion of some of the things that could cause actual results to differ from those expressed in our forward-looking statements. Overview We derive a substantial majority of our revenues from commissions on sales by us of national spot radio advertising airtime for the radio stations we represent. Generally, advertising agencies or media buying services retained by advertisers purchase national spot advertising time. We receive commissions from our client radio stations based on the national spot radio advertising billings of the station, net of standard advertising agency and media buying services commissions. We enter into written representation contracts with our clients, which include negotiated commission rates. Because commissions are based on the prices paid to radio stations for spots, our revenue base is automatically adjusted for inflation. Our operating results generally depend on: . changes in advertising expenditures; . increases and decreases in the size of the total national spot radio advertising market; . changes in our share of this market; . acquisitions and terminations of representation contracts; and . operating expense levels. The effect of these factors on our financial condition and results of operations varies from period to period. A number of factors influence the performance of the national spot radio advertising market, including, but not limited to, general economic conditions, consumer attitudes and spending patterns, the amount spent on advertising generally, the share of total advertising spent on radio and the share of total radio advertising represented by national spot radio. In this regard, we, like other media businesses, have been adversely affected by a sluggish economy generally, and the events of September 11, 2001, in particular, which we believe have contributed to a temporary decrease in the amount spent on advertising. Our share of the national spot advertising market changes as a result of increases and decreases in the amount of national spot advertising broadcast by our clients. Moreover, our market share increases as we acquire representation contracts with new client stations and decreases if current client representation contracts are terminated. Thus, our ability to attract new clients and to retain existing clients significantly affects our market share. The value of representation contracts that have been acquired or terminated during the last few years has tended to increase due to a number of factors, including the consolidation of ownership in the radio broadcast 8 industry following the passage of the Telecommunications Act of 1996. In recent years, we have increased our representation contract acquisition activity, and we have devoted a significant amount of our resources to these acquisitions. At the same time, we have received an increased amount of contract termination revenue. We base our decisions to acquire a representation contract on the market share opportunity presented and an analysis of the costs and net benefits to be derived. We continuously seek opportunities to acquire additional representation contracts on attractive terms, while maintaining our current clients. Our ability to acquire and maintain representation contracts has had, and will continue to have, a significant impact on our revenues and cash flows. We recognize revenues on a contract termination as of the effective date of the termination. When a contract is terminated, we write off in full the unamortized portion, if any, of the expense we originally incurred on our acquisition of the contract. When we enter into a representation contract with a new client, we amortize the contract acquisition cost in equal monthly installments over the life of the new contract. As a result, our operating income is affected, negatively or positively, by the acquisition or loss of client stations. We are unable to forecast any trends in contract buyout activity, or in the amount of revenues or expenses that will likely be associated with buyouts during a particular period. Generally, the amount of revenue resulting from the buyout of a representation contract depends on the length of the remaining term of the contract and the revenue generated under the contract during the 12-month "trailing period" preceding the date of termination. The amount recognized by us as contract termination revenue in any period is not, however, indicative of contract termination revenue that may be realized in any future period. Historically, the level of buyout activity has varied from period to period. Additionally, the length of the remaining terms, and the commission revenue generation, of the contracts which are terminated in any period vary to a considerable extent. Accordingly, while buyout activity and the size of buyout payments has increased since 1996, their impact on our revenues and income is expected to be uncertain, due to the variables of contract length and commission generation. During 1999, we added Internet advertising to our sales representation business. Revenues and expenses from the Internet advertising portion of our business will be affected by the level of advertising on the Internet generally and the portion of that advertising that we can direct to our clients, the traffic volume at our client's websites, the prices obtained for advertising on the Internet and our ability to obtain additional contracts from high-traffic Internet websites and from Internet advertisers. In December 2000, we merged our Interep Interactive business with Cybereps, Inc., an Internet advertising and marketing firm in which we had a minority interest, thereby increasing our ownership percentage from 16% to 51%. In October 2001, we assumed effective control of Cybereps' operations and consolidated its results from that date. Accordingly, the operations of Cybereps are included in the revenue and expense accounts for the three months ended March 31, 2002, whereas our share of the operating results for the three months ended March 31, 2001 are included in Other expenses, net. Our selling and corporate expense levels are dependent on management decisions regarding operating and staffing levels and on inflation. Selling expenses represent all costs associated with our marketing, sales and sales support functions. Corporate expenses include items such as corporate management, corporate communications, financial services, advertising and promotion expenses and employee benefit plan contributions. Our business generally follows the pattern of advertising expenditures in general. It is seasonal to the extent that radio advertising spending increases during the fourth calendar quarter in connection with the Christmas season and tends to be weaker during the first calendar quarter. Radio advertising also generally increases during the second and third quarters due to holiday-related advertising, school vacations and back-to-school sales. Additionally, radio tends to experience increases in the amount of advertising revenues as a result of special events such as political election campaigns. Furthermore, the level of advertising revenues of radio stations, and therefore our level of revenues, is susceptible to prevailing general and local economic conditions and the corresponding increases or decreases in the budgets of advertisers, as well as market conditions and trends affecting advertising expenditures in specific industries. 9 Results of Operations Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001 Commission revenues. Commission revenues for the first quarter of 2002 increased to $17.5 million from $16.6 million for the first quarter of 2001, or approximately 5.5%. This $0.9 million increase was primarily attributable to the inclusion, in the current period, of the commission revenue earned by our Internet operations. In the prior year, our share of the Internet loss was reported on the equity basis, under the caption "Other expense, net". Additionally, our comparative revenue was affected by the fact that the first quarter of 2002 had 13 weeks, as compared to 12 weeks during the first quarter of 2001. Contract termination revenue. Contract termination revenue in the first quarter of 2002 increased by $2.3 million, to $2.4 million, from $0.1 million in the first quarter of 2001. This increase was primarily attributable to settlement of the Katz litigation. See Note 6 to the Notes to the Unaudited Interim Consolidated Financial Statements included elsewhere in this Report. Selling expenses. Selling expenses for the first quarter of 2002 decreased to $12.9 million from $15.0 million in the first quarter of 2001. This decrease of $2.1 million, or approximately 14.0%, was primarily due to the strategic restructuring program undertaken in the fourth quarter of 2001 and the stock option repricing, offset in part by the operating expenses incurred by our Internet operations. In the prior year our share of the Internet loss was reported on the equity basis, under the caption "Other expense, net". General and administrative expenses. General and administrative expenses for the first quarter of 2002 were virtually unchanged from the first quarter of 2001. Operating EBITDA. Operating EBITDA increased by $1.7 million for the first quarter of 2002 to $0.5 million, from a loss of $1.2 million for the first quarter of 2001, for the reasons discussed above. Operating EBITDA is operating income or loss before interest, taxes, depreciation and amortization and excludes contract termination revenue and a non-cash option re-pricing charge. Operating EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles, but we believe it is useful in evaluating the performance of Interep, in addition to the GAAP data presented herein. Depreciation and amortization expense. Depreciation and amortization expense decreased $0.6 million, or 9.0%, during the first quarter of 2002, to $5.9 million from $6.5 million in the first quarter of 2001. This decrease was primarily due to new representation contracts terminated during the past 12 months. Operating loss. Operating loss decreased by $5.9 million, or 73.8%, for the first quarter of 2002 to $2.1 million, as compared to the loss of $8.0 million during the first quarter of 2001, for the reasons discussed above. Interest expense, net. Interest expense, net, increased $0.2 million, or 8.7%, to $2.5 million for the first quarter of 2002, from $2.3 million for the first quarter of 2001. This increase primarily resulted from a reduction in the amount of cash invested and lower interest rates. Other expense, net. Other expense, net, for 2001 primarily consisted of our share of the equity loss incurred by Cybereps, Inc. See discussion of commission revenues, selling expenses and general and administrative expenses, above. See also Note 3 to the Notes to the Unaudited Interim Consolidated Financial Statements included elsewhere in this Report. Benefit for income taxes. The benefit for income taxes decreased by 81.4%, to $0.8 million, for the first quarter of 2002 from $4.2 million for the first quarter of 2002, as a result of the decreased operating loss. Net loss. Our net loss after tax declined $2.5 million, or 39.9%, to $3.8 million for the first quarter of 2002, from $6.3 million for the first quarter of 2001. This improvement is attributable to the reasons discussed above. Due to the seasonality of our business, the first quarter is normally our weakest quarter. 10 Liquidity and Capital Resources Our cash requirements have been primarily funded by cash provided from operations and financing transactions. In December 1999 we closed our initial public offering, which resulted in net proceeds of $46.8 million. At March 31, 2002, we had cash and cash equivalents of $5.9 million and working capital of $33.7 million. In May 2002, we issued $5 million of units in a private placement. Each unit consists of one share of $100 face value, 4% pay-in-kind, Series A Convertible Preferred Stock and 6.25 warrants to purchase the same number of shares of our Class A common stock. Each share of Preferred Stock is convertible into 25 shares of our Class A common stock. Each warrant is exerciseable during the next five years at an exercise price of $4.00 per share. Cash provided by operating activities during the first quarter of 2002 was $14.2 million, as compared to cash used by operating activities of $8.8 million during the first quarter of 2001. This fluctuation was primarily attributable to representation contract buyouts in 2002 and increased payables and accrued expenses in 2002, as compared to a reduction in such items in 2001. As noted above, the first quarter is normally our weakest quarter due to the seasonality of our business. See Note 6 to the Notes to the Unaudited Interim Consolidated Financial Statements included elsewhere in this Report. Net cash used in investing activities is attributable to capital expenditures in 2002 and included investments in private companies in 2001. Net cash used in investing activities was $0.1 million during the first quarter of 2002. Cash used for financing activities of $19.6 million during the first quarter of 2002 was used for representation contract acquisition payments of $20.2 million, offset by $0.6 million from the sale of additional stock to our Stock Growth Plan. In general, as we acquire new representation contracts, we use more cash and, as our contracts are terminated, we receive additional cash. For the reasons noted above in "Overview", we are not able to predict the amount of cash we will require for contract acquisitions, or the cash we will receive on contract terminations, from period to period. We do not have any written options on financial assets, nor do we have any special purpose entities. We have not guaranteed any obligations of our unconsolidated investments. In July 1998 we issued 10% Senior Subordinated Notes in the aggregate principal amount of $100.0 million due July 1, 2008. Interest on the Senior Subordinated Notes is payable in semi-annual payments of $5.0 million. The Senior Subordinated Notes, while guaranteed by our subsidiaries, are unsecured and junior to certain other indebtedness. We used a portion of the net proceeds from the issuance of the Senior Subordinated Notes to repay the then outstanding balance of our bank debt. Additionally, we redeemed all of the outstanding shares of our then outstanding Series A preferred stock and Series B preferred stock, together with all of the associated shares of common stock then subject to redemption. We issued the Senior Subordinated Notes under an indenture that limits our ability to engage in various activities. Among other things, we are generally not able to pay any dividends to our shareholders, other than dividends payable in shares of common stock; we can only incur additional indebtedness under limited circumstances, and certain types of mergers, asset sales and changes of control either are not permitted or permit the note holders to demand immediate redemption of their Senior Subordinated Notes. The Senior Subordinated Notes may not be redeemed by us prior to July 1, 2003, except that we may redeem up to 30% of the Senior Subordinated Notes with the proceeds of equity offerings. If certain events occurred which would be deemed to involve a change of control under the indenture, we would be required to offer to repurchase all of the Senior Subordinated Notes at a price equal to 101% of their aggregate principal, plus unpaid interest. 11 We believe that the liquidity resulting from our initial public offering and the transactions described above, together with anticipated cash from continuing operations, should be sufficient to fund our operations and anticipated needs for required representation contract acquisition payments, and to make the required 10% annual interest payments on our Senior Subordinated Notes, for at least the next 12 months. We may not, however, generate sufficient cash flow for these purposes or to repay the notes at maturity. In this regard, we believe that the cost-saving restructuring we implemented in 2001 should contribute to an improvement in cash flow. Moreover, the improvement in radio advertising pacings experienced in the first quarter of 2002 may be indicative of an improving revenue trend that should also have a positive effect on liquidity and cash flow. At the same time, as noted above, we recently obtained $5 million of new equity financing, and we are continuing to seek additional debt and equity financing to enhance our working capital position. Our ability to fund our operations and required contract acquisition payments and to make scheduled principal and interest payments will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may also need to refinance all or a portion of our Senior Subordinated Notes on or prior to maturity. There can be no assurance that we will be able to effect any such refinancing on commercially reasonable terms, if at all. Certain Factors That May Affect Our Results of Operations The following factors are some, but not all, of the variables that may have an impact on our results of operations: . Changes in the ownership of our radio station clients, in the demand for radio advertising, in our expenses, in the types of services offered by our competitors, and in general economic factors may adversely affect our ability to generate the same levels of revenue and operating results. . Advertising tends to be seasonal in nature as advertisers typically spend less on radio advertising during the first calendar quarter. . The terrorist attacks that occurred in New York City and Washington, D.C. on September 11, 2001, and the subsequent military actions taken by the United States and its allies in response, have caused significant uncertainty. While the consequences of these events are uncertain, they could have a material adverse effect on general economic conditions, consumer confidence, advertising and the media industry and may continue to do so in the future. . The termination of a representation contract will increase our results of operations for the fiscal quarter in which the termination occurs due to the termination payments that are usually required to be paid, but will negatively affect our results in later quarters due to the loss of commission revenues. Hence, our results of operations on a quarterly basis are not predictable and are subject to significant fluctuations. . We depend heavily on our key personnel, including our Chief Executive Officer Ralph C. Guild and the President of our Marketing Division Marc Guild, and our inability to retain them could adversely affect our business. . We rely on a limited number of clients for a significant portion of our revenues. . Our significant indebtedness from our Senior Subordinated Notes may burden our operations, which could make us more vulnerable to general adverse economic and industry conditions, make it more difficult to obtain additional financing when needed, reduce our cash flow from operations to make payments of principal and interest and make it more difficult to react to changes in our business and industry. . We may need additional financing for our future capital needs, which may not be available on favorable terms, if at all. 12 . Competition could harm our business. Our only significant competitor is Katz Media Group, Inc., which is a subsidiary of a major radio station group that has significantly greater financial and other resources than do we. In addition, radio must compete for a share of advertisers' total advertising budgets with other advertising media such as television, cable, print, outdoor advertising and the Internet. . Acquisitions and strategic investments could adversely affect our business. . Our Internet business may suffer if the market for Internet advertising fails to develop or continues to weaken. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk from changes in interest rates that may adversely affect our results of operations and financial condition. We seek to minimize the risks from these interest rate fluctuations through our regular operating and financing activities. Our policy is not to use financial instruments for trading or other speculative purposes. We are not currently a party to any financial instruments. PART II OTHER INFORMATION Item 1. Legal Proceedings Katz Media Group, Inc., our principal competitor, and certain of its subsidiaries (together, "Katz"), instituted separate actions against four of our radio station clients in the New York Supreme Court, County of New York, from 1999 to 2001. In each case, our client (or its predecessor) was formerly represented by Katz, and Katz sued for monetary damages for alleged breaches of the representation agreement between Katz and the client stemming from the termination of the agreement by the client when it opted to retain us as its rep firm. In each case, we had agreed to indemnify our client against any liabilities that may arise from such termination, including customary termination payments and the costs of the litigation. The dispute in each case primarily concerned whether termination payments were owed to Katz, and, if so, the amount of such payments. In the first quarter of 2002, the Company entered into a settlement agreement regarding these contract acquisition claims. The terms of the settlement provide that various contract termination payments payable by both parties to each other will be offset, leaving a balance payable by Interep to Katz, which will be paid in installments through 2005. Item 2. Changes in Securities and Use of Proceeds In March 2002, we issued 164,117 shares of our Class B common stock to our Stock Growth Plan and Trust for net cash proceeds of approximately $558,000. One share of Class B common stock is convertible into one share of Class A common stock. We believe the issuance of these shares is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof. In May 2002, we issued preferred stock and warrants in connection with a private equity financing. See Item 5 below. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information In May 2002, we issued 50,000 units consisting of one share of Series A Convertible Preferred Stock ("Series A Stock") and 6.25 warrants to acquire the same number of shares of our Class A common stock ("Warrants") for an aggregate purchase price of $5 million. We will use the proceeds for working capital. 13 The Series A Stock has a face amount of $100 per share and a liquidation preference in such amount in priority over our Class A common stock and Class B common stock. Each share of the Series A Stock may be converted at the option of the holder at any time into 25 shares of our Class A common stock at an initial conversion price of $4.00 per share (subject to anti-dilution adjustment). If the market price of our Class A Common Stock is $8.00 or more for 30 consecutive trading days, the Series A Stock will automatically be converted into shares of our Class A Common Stock at the then applicable conversion price. The Series A Stock bears a 4% annual cumulative dividend that we can pay in cash or in kind in additional shares of the Series A Stock. Holders of shares of the Series A Stock vote, on an "as converted basis", together with the holders of our Class A and Class B common stock on all matters and would vote alone as a class if changes to the rights or status of the Series A Stock were proposed by us. Each warrant is immediately exercisable for one share of our Class A common Stock at a strike price of $4.00 per share (subject to anti-dilution adjustment). The Warrants expire on the fifth anniversary of their date of issuance. Item 6. Exhibits and Reports on Form 8-K. (A) Documents Filed as Part of this Report
Exhibit No. Description - ----------- ----------- 3.1 Certificate of Amendment of the Restated Certificate of Incorporation (filed herewith) 4.1 Form of Warrant (filed herewith) 10.1 Form of Stock Purchase Agreement (filed herewith) 10.2 Form of Registration Rights Agreement (filed herewith) 99.1 Press release issued on May 8, 2002 (filed herewith) 99.2 Letter, dated May 15, 2002, from Interep to the SEC regarding Arthur Andersen LLP (filed herewith)
(B) Reports on Form 8-K None. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of New York, State of New York. May 15, 2002 INTEREP NATIONAL RADIO SALES, INC. By: /s/ WILLIAM J. MCENTEE, JR. ----------------------------- William J. McEntee, Jr. Vice President and Chief Financial Officer 15 EX-3.1 3 dex31.txt CERT. OF AMEND. OF THE RESTATED CERT. OF INC. Exhibit 3.1 CERTIFICATE OF AMENDMENT of the RESTATED CERTIFICATE OF INCORPORATION of INTEREP NATIONAL RADIO SALES, INC. __________________________________________________ Under Section 805 of the Business Corporation Law __________________________________________________ The undersigned Vice President of INTEREP NATIONAL RADIO SALES, INC., for the purpose of amending its Restated Certificate of Incorporation, CERTIFIES that: FIRST: The name of the corporation is INTEREP NATIONAL RADIO SALES, INC. (the "Corporation"). The name under which the Corporation was originally incorporated was McGAVREN-QUINN CORPORATION. SECOND: The Certificate of Incorporation of the Corporation was filed by the Department of State on March 31, 1958. A Restated Certificate of Incorporation was filed on May 28, 1985 and Certificates of Amendment thereof were filed on June 13, 1991, June 29, 1993, November 9, 1993 and March 2, 1994. A Restated Certificate of Incorporation was filed on December 9, 1999. THIRD: The Restated Certificate of Incorporation is amended by the addition of a provision to Article 3 thereof stating the number, designation, relative rights, preferences and limitations of the shares of Series A Convertible Preferred Stock as fixed by the Board of Directors of the Corporation as follows: "SERIES A CONVERTIBLE PREFERRED STOCK A series of Preferred Stock known as the Series A Convertible Preferred Stock initially consisting of 400,000 shares of Preferred Stock which the Corporation has authority to issue, is hereby created, and the designation, rights, preferences and limitations of the shares of such series are fixed as follows: (a) Designation. 400,000 authorized shares of Preferred Stock, par value $.01 per share, having a liquidation preference of $100.00 per share (the "Liquidation Preference") and an aggregate Liquidation Preference of $40,000,000, may be issued in and as a series to be designated as the "Series A Convertible Preferred Stock" having the designations, rights, preferences and limitations set forth herein. The rights, preferences, limitations and other matters relating to the Series A Convertible Preferred Stock are subject to the issuance of any subsequent series of Preferred Stock by the Corporation in compliance with the limitations and restrictions set forth herein. (b) Ranking. The Series A Convertible Preferred Stock shall, with respect to dividend rights and distributions upon the liquidation, winding-up or dissolution of the Corporation, rank (i) senior to all classes of common stock of the Corporation and to each other class of capital stock or series of preferred stock established after the issue date of the Series A Convertible Preferred Stock by the Board of Directors, the terms of which do not expressly provide that it ranks senior to or on a parity with the Series A Convertible Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Corporation (collectively referred to with all classes of common stock of the Corporation as "Junior Securities"); (ii) on a parity with any additional shares of Series A Convertible Preferred Stock issued by the Corporation in the future in accordance with Section (h)(3) hereof and any other class of capital stock or series of preferred stock established after the issue date of the Series A Convertible Preferred Stock by the Board of Directors, in accordance with Section (h)(3) hereof, the terms of which expressly provide that such class or series will rank on a parity with the Series A Convertible Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and, dissolution of the Corporation (collectively referred to as "Parity Securities"); and (iii) subject to Section (h)(3) hereof, junior to any shares of any other class of capital stock or series of preferred stock established after the issue date of the Series A Convertible Preferred Stock by the Board of Directors, the terms of which expressly provide that such class or series will rank senior to the Series A Convertible Preferred Stock as to dividend distributions and distributions upon the liquidation, winding-up and dissolution of the Corporation (collectively referred to as "Senior Securities"). (c) Dividends. (1) Cash Dividends. Subject to the provisions of Sections (c)(2) and (c)(4) hereof, the holders of shares of the Series A Convertible Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation and out of the assets of the Corporation legally available therefor, cumulative preferential cash dividends at the rate per annum of $4.00 per share of the Series A Convertible Preferred Stock, from the date of issuance of such shares until such shares are no longer issued and outstanding and payable annually in arrears on May 1 in each year beginning in 2003 or, if such day is not a business day, on the next succeeding business day (each, a "Dividend Payment Date") to the holders of record as of the immediately preceding April 15. As used herein "business day" means any day other than a Saturday, a Sunday or a day on which banking institutions in the -2- City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. Dividends payable on the Series A Convertible Preferred Stock shall be computed on the basis of a 360-day year consisting of twelve 30-day months and shall be deemed to accumulate on a daily basis. All dividends paid with respect to shares of Series A Convertible Preferred Stack shall be made pro rata among the holders thereof based upon the aggregate accrued but unpaid dividends on the shares held by each such holder. To the extent not paid, dividends on the Series A Convertible Preferred Stack shall accumulate, whether or not there are funds legally available for the payment of such dividends and whether or not dividends are declared. For all purposes hereunder, dividends on the Series A Convertible Preferred Stock shall be treated as if the same were paid as the Dividend Payment Date, whether or not the same were in fact so paid or declared. Unpaid dividends on the Series A Preferred Stock shall bear interest at the rate of 8% per annum until paid in full. Full cumulative dividends on all outstanding shares of Series A Convertible Preferred Stock shall be payable in full before: (A) any dividends or distributions are paid on, or declared or any sums set apart for the payment of any dividend or distribution on any Junior Securities; (B) any payment is made in connection with any repurchase, redemption, retirement or other acquisition for valuable consideration of any Junior Securities; and (C) no monies shall be paid into or set apart or made available for a sinking or other like :fund for the purchase, redemption or other acquisition or retirement for valuable consideration of any Junior Securities. Accordingly, if in any annual dividend period all dividends at the rate fixed above accrued from the date of issuance of any shares of the Series A Convertible Preferred Stock shall not have been paid, or declared and set apart for payment, the deficiency shall be fully paid or set apart for payment, together with interest thereon as provided above, before any dividends or distributions shall be paid on, or set apart for, or any repurchase, redemption, retirement or other acquisition for valuable consideration is effected of any Junior Securities. Accrued but unpaid dividends for any past dividend periods may be declared by the Board of Directors and paid on any date fixed by the Board of Directors, whether or not a regular Dividend Payment Data, to holders of record on the books of the Corporation on such record date as may be fixed by the Board of Directors, which record date shall be no more than 60 days prior to the payment data thereof. (2) Stock Dividend. Notwithstanding the provisions of Section (c)(1) hereof, in lieu of payment of the cash dividends provided in Section (c)(1) for all periods commencing on the date of issuance of any shares of the Series A Convertible Preferred Stock, as well as any interest charges provided in Section (c)(1) hereof, the Board of Directors may declare and pay to each holder of shares of the Series A Convertible Preferred Stock a stock dividend in additional shares of the Series A Convertible Preferred Stock -3- (including fractional shares) having an aggregate Liquidation Preference equal to the amount of the dividend and interest, if any, to be paid. If and when any shares are issued under this Section (c)(2) for the payment of accrued dividends, such shares shall be validly issued and outstanding and fully paid and non-assessable and shall initially have a Conversion Price (defined below) equal to that of the Series A Convertible Preferred Stock with respect to which it is issued. As to shares of Series A Convertible Preferred Stock issued as a dividend on shares of Series A Convertible Preferred Stock, dividends shall accrue and be cumulative from the Dividend Payment Date in respect of which such shares were issued or were scheduled to be paid pursuant to Section (c)(2) hereof as a dividend. (3) Fractional Shares. (A) Fractional shares of the Series A Convertible Preferred Stock may be issued in connection with any stock dividend referred to in Section (c)(2) hereof. Alternatively, in lieu of any fractional interest in a share of the Series A Convertible Preferred Stock which would otherwise be issuable, the Corporation may pay to the holder thereof an amount in cash equal to the Liquidation Preference of such fractional share. (B) Each fractional share of Series A Convertible Preferred Stock outstanding (or treated as outstanding pursuant to Section (c)(1) hereof) shall be entitled to a ratably proportionate amount of all dividends accruing with respect to each outstanding or due to be issued and outstanding share of Series A Convertible Preferred Stock pursuant to Section (c)(2) and all such dividends with respect to such outstanding fractional shares shall be cumulative and shall accrue (whether or not declared) and shall be payable in the same manner and at such times as provided for in Section (c)(2) with respect to dividends on each outstanding or due to be issued and outstanding share of Series A Convertible Preferred Stock. Each fractional share of Series A Convertible Preferred Stock outstanding shall also be entitled to a ratably proportionate amount of any other distributions made with respect to each outstanding or due to be issued and outstanding share of Series A Convertible Preferred Stock, and all such distributions shall be payable in the same manner and at the same time as distributions on each outstanding or due to be issued and outstanding share of Series A Convertible Preferred Stock. (4) Additional Dividends. If, pursuant to the Registration Rights Agreement, dated as of May 3, 2002, between the Corporation and the purchasers of the Series A Convertible Preferred Stock named therein, a "Default" (as defined in such agreement) occurs, then, from and including the date of such Default until the date that the Corporation cures such Default by filing with the Securities and Exchange Commission the "Shelf Registration Statement" (as defined in such agreement), the dividend rate applicable to a share of the Series A Convertible Preferred Stock shall be increased by $0.25 per annum ("Additional Dividends") for the first 90 days (or a portion thereof) following the date of such Default and for any subsequent 90-day period (or a portion thereof) during which such Default shall remain uncured, but in no event shall the Additional Dividends exceed $1.00 per annum per share of Senior A Convertible Preference Stock. Following the cure of such Default, the accrual of the Additional Dividends shall cease. -4- (d) Preference on Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation or reduction or decrease in its capital stock resulting in a distribution of assets to the holders of any class or series of the Corporation's capital stock (the date of such occurrence, the "Liquidation Date"), the Corporation shall, out of the assets of the Corporation available for distribution, make the following payments in respect of its capital stock: (A) first, payments due in connection with the Senior Securities on the Liquidation Date, including any accumulated and unpaid dividends, if any, on such Senior Securities, to the Liquidation Date; (B) second, on a pro rata basis, payments (i) on shares of the Series A Convertible Preferred Stock equal to the Liquidation Preference per share of Series A. Convertible Preferred Stock held by or due to (as of. such date pursuant to Section (c) hereof) such holder, plus all partial dividend period amounts, if any, thereon to the Liquidation Date and (ii) due on Parity Securities; and (C) third, payments on any Junior Securities, including, without limitation, all classes of common stock of the Corporation. After payment in full in cash of the Liquidation Preference and all accumulated dividends, if any, to which holders of Series A Convertible Preferred Stock are entitled, such holders shall not be entitled to any further participation in any distribution of assets of the Corporation. As used herein "partial dividend period amount" means as of any applicable date, with respect to any Series A Convertible Preferred Stock, an amount equal to the amount of dividends that would accrue at the dividend rate on the Liquidation Preference of such Series A Convertible Preferred Stock on a daily basis from the last Dividend Payment Date to and including such applicable date. (e) Redemption. The shares of the Series A Convertible Preferred Stock shall not be subject to mandatory redemption, either by the Corporation or by the holders thereof, at any time. The Series A Convertible Preferred Stock shall not be entitled to the benefit of any sinking fund to be applied to the redemption thereof. (f) Certificates. So long as any shares of the Series A Convertible Preferred Stock are outstanding, there shall be set forth on the face or back of each stock certificate issued by the Corporation a statement that the Corporation shall furnish without charge to each shareholder who so requests, a full statement of the designations, rights, preferences and limitations and the relative rights, preferences and limitations of each class of stock or series thereof that the Corporation is authorized to issue and of the authority of the Board of Directors to designate and fix the relative rights, preferences and limitations of each series. (g) Conversion. (1) Right to Convert and Conversion Price. Subject to the terms and conditions of this Section (g), each of the holders of the shares of Series A Convertible Preferred Stock shall have the option, at any time and from time to time to convert each of -5- such shares into such number of fully paid and non-assessable shares of Class A Common Stock as is determined by dividing the $100.00 Liquidation Preference by the "Conversion Price" (as defined below) in effect on the date the of conversion. The Conversion Price shall initially be $4.00 and may be adjusted from time to time in accordance with Section (g)(5) hereof. (2) Automatic Conversion. Each share of Series A Convertible Preferred Stock shall automatically be converted into shares of the Class A Common Stock at the Conversion Price if, at any time after the issue date of the Series A Convertible Preferred Stock, the "market price" per share of Class A Common Stock is $8.00 or more. For purposes of this Section g(2), "market price" means (i) the average of the last reported sale prices of a share of the Class A Common Stock or the closing prices therefor quoted on the Nasdaq National Market or on any exchange on which shares of the Class A Common Stock are listed, whichever is applicable, over the 30 consecutive trading days immediately preceding the date of determination or (ii) if no such last sale or closing prices are available, the average of the closing bid and asked prices of a shares of the Class A Common Stock as quoted in the Over-the-Counter Market Summary for the 30 consecutive trading days immediately preceding the date of determination. In the event of such automatic conversion, the Corporation shall deliver to each holder of the Series A Convertible Preferred Stock a notice of automatic conversion and a letter of transmittal for the surrender of such holder's shares to the Corporation (a "Letter of Transmittal"). Holders of shares of Series A Convertible Preferred Stock at the close of business on a record date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof following such record date and prior to such Dividend Payment Date. A holder of shares of Series A Convertible Preferred Stock on a record date who (or whose transferee) tenders any such shares for conversion into shares of Class A Common Stock on such Dividend Payment Date will receive the dividend payable by the Corporation on such shares of Series A Convertible Preferred Stock on such date; provided, however, in the case of a dividend to be paid-in-kind, the aggregate liquidation preference of the Series A Convertible Preferred Stock to be issued will be equal to the partial dividend amount through the date of conversion. Except as provided for above, no payments or adjustments in respect of dividends on shares of Series A Convertible Preferred Stock surrendered for conversion or on account of any dividend on the Class A Common Stock issued upon conversion shall be made upon the conversion of any shares of Series A Convertible Preferred Stock. (3) Mechanics of Conversion. Each holder of Series A Convertible Preferred Stock that desires to convert its shares shall surrender to the Corporation at its principal offices the certificate or certificates for the shares of the Series A Convertible Preferred Stock to be converted, duly endorsed, together with an executed notice (a "Conversion Notice") that such holder elects to convert such shares in accordance with the provisions of this Section (g). Any Conversion Notice shall also state the name or names (with addresses) in which the certificate or certificates for the Class A Common Stock shall be issued; provided, however, that the Corporation shall not be obligated to issue certificates to any party other than such holder unless the certificates evidencing the shares to be converted are accompanied by proper instruments of transfer. If such holder elects to convert -6- only a portion of the number of shares of the Series A Convertible Preferred Stock covered by a certificate surrendered for conversion, the Corporation shall issue and deliver to such holder, registered in such name or names as such holder may direct, a certificate or certificates for the number of full shares of the Series A Convertible Preferred Stock not converted, subject, however, to the same proviso as set forth in the preceding sentence regarding the issuance of certificates to parties other than such holder. (4) Issuance of Certificates. Promptly after the Corporation's receipt from a holder of the Series A Convertible Preferred Stock of a Conversion Notice and surrendered certificates as aforesaid, or, in the case of an automatic conversion pursuant to Section (g)(2), promptly after the Corporation's receipt from a holder of the Series A Convertible Preferred Stock of a duly completed and executed Letter of Transmittal and surrendered certificates as aforesaid for all of the shares of the Series A Convertible Preferred Stock held by such holder, the Corporation shall issue and deliver to such holder, registered in such name or names as such holder may direct (subject to Section (g)(3)), a certificate or certificates for the number of full shares of Class A Common Stock issuable on the conversion of the shares surrendered therefor, together with cash adjustments in respect of any fractional shares. To the extent permitted by law, such conversion shall be deemed to have been effected and the Conversion Price shall be determined, as of the close of business on the date which the Conversion Notice shall have been received by the Corporation and such shares of the Series A Convertible Preferred Stock shall have been surrendered as aforesaid, and at such time the rights of such holder as to such shares surrendered shall cease and the person or persons in whose name or names any certificate or certificates for shares of Class A Common Stock shall then be issuable on such conversion shall be deemed to have become the holder or holders of record of the shares of Class A Common Stock represented thereby. (5) Adjustment of Conversion Price. The Conversion Price at which shares of Series A Convertible Preferred Stock are convertible into shares of Class A Common Stock shall be subject to adjustment from time to time, as follows. (A) in case at any time after the date hereof, the Corporation shall pay or make a dividend or other distribution on all or any portion of its Class A Common Stock or shall make a dividend or other distribution on any other class of Capital Stock of the Corporation which dividend or distribution includes Class A Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be decreased by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Class A Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such decrease to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this Section (g)(5)(A), the number of shares of Class A Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates, if any, issued in lieu of fractions of shares of Class A Common Stock If any dividend or distribution of the type described in this Section (g)(5)(A) is declared but not so -7- paid or made, the Conversion Price shall again be adjusted to be the Conversion price which would then be in effect if such dividend or distribution had not been declared. (B) in case at any time after the date hereof, the Corporation shall pay or make a dividend or other distribution on all of its Class A Common Stock consisting of, or shall otherwise issue to all holders of its Class A Common Stock, rights, warrants or options (not being available on an equivalent basis to holders of the Series A Convertible Preferred Stock upon conversion) entitling the holders of its Class A Common Stock to subscribe for or purchase Class A Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (H) of this Section (g)(5)) of the shares of Class A Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, warrants or options (other than pursuant to a dividend reinvestment plan), the Conversion Price in effect at the opening of business on the day following the date fixed for such determination shall be decreased by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Class A Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Class A Common Stock which the aggregate of the offering price of the total number of shares of Class A Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Class A Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Class A Common Stock so offered for subscription or purchase, such decrease to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this Section (g)(5)(B), the number of shares of Class A Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation but shall include shares issuable in respect of scrip certificates, if any, issued in lieu of fractions of shares of Common Stock. The Corporation will not issue any rights or warrants in respect of Class A Common Stock held in the treasury of the Corporation (or, if rights or warrants are issued in respect of all of the Class A Common Stock of the Corporation, will not exercise any such rights or warrants in respect of Class A Common Stock held in the treasury of the Corporation). In the event that such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders of shares of Class A Common Stock to subscribe for or purchase shares of Class A Common Stock at less than such current market price, and in determining the aggregate offering price of such shares of Class A Common Stock, there shall be taken into account any consideration received for such rights or warrants. The value of such consideration, if other than cash, shall be determined in the reasonable good faith judgment of the Board of Directors of the Corporation, whose determination shall be conclusive. (C) in case at any time after the date hereof, all or any portion of the Class A Common Stock outstanding shall be subdivided into a greater number of shares of Class A Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely in case at any time after the date hereof, all or any portion of the shares of Class A Common Stock outstanding shall each be combined into a smaller number -8- of shares of Class A Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which subdivision or combination becomes effective. (D) in case at any time after the date hereof, the Corporation shall, by dividend or otherwise, distribute to all holders of its Class A Common Stock evidences of its indebtedness or assets (including securities, rights, warrants or options, but excluding any rights, warrants, or options referred to in paragraph (B) of this Section (g)(5) as entitling the holders of Class A Common Stock to subscribe for or purchase Class A Common Stock at a price per share less than the current market price, any dividend or distribution paid exclusively in cash, any dividend or distribution referred to in paragraph (A) of this Section (g)(5) and any dividend or distribution upon a merger or consolidation referred to in Section (g)(7) hereof), the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution shall be decreased by multiplying such Conversion Price by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (H) of this Section (g)(5)) of the Class A Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive) of the portion of the assets or evidence of indebtedness so distributed applicable to one share of Class A Common Stock and the denominator shall be such current market price per share of Class A Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. If any dividend or distribution of the type described in this Section (g)(5)(D) is declared but not so paid or made, the Conversion price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared. (E) in case at any time after the date hereof, the Corporation shall, by dividend or otherwise, make a distribution to all holders of its Class A Common Stock consisting exclusively of cash (excluding any cash that is distributed upon a merger or consolidation or a sale or transfer of all or substantially all of the asserts of the Corporation to which Section (g)(7) hereof applies or as part of a distribution referred to in paragraph (D) of this Section (g) (5)) in an aggregate amount that, combined together with (i) the aggregate amount of any other distributions to all holders of its Class A Common Stock made exclusively in cash within the 12 months immediately preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this Section (g)(5)(E) has been made and (ii) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive) of consideration payable in respect of any tender offer by the Corporation or any of its subsidiaries for all or any portion of the Class A Common Stock concluded within the 12 months immediately preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this Section (g)(5) has been made, exceeds 12.5% of the product of the current market price per share of Class A Common Stock on the date for the determination of holders of Class A Common Stock entitled to receive such distribution multiplied by the number of shares of Class A Common Stock outstanding on such date, then, and in each such case, immediately -9- after the close of business on such date for determination, the Conversion Price in effect immediately prior to the close of business on the date fixed for determination of the stockholders entitled to receive such distribution shall be decreased by multiplying such Conversion Price by a fraction (A) the numerator of which shall be equal to the current market price per share (determined as provided in paragraph (H) of this Section (g)(5)) of the Class A Common Stock on the date fixed for such determination less an amount equal to the quotient of (x) the excess of such combined amount over such 12.5% and (y) the number of shares of Class A Common Stock outstanding on such date for determination and (B) the denominator of which shall be equal to the current market price per share (determined as provided in paragraph (H) of this section (g)(5)) of the Class A Common Stock on such date for determination. If any dividend or distribution of the type described in this Section (g)(5)(D) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared. (F) in case a tender or exchange offer made by the Corporation or any subsidiary of the Corporation for all or any portion of the Class A Common Stock shall expire and such tender or exchange offer (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive) that combined together with (i) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive) as of the expiration of such tender or exchange offer, of consideration payable in respect of any other tender or exchange offer, by the Corporation or any subsidiary of the Corporation for all or any portion of the Class A Common Stock expiring within the 12 months immediately preceding the expiration of such tender or exchange offer and in respect of which no adjustment, pursuant to this Section (g)(5)(F) has been made and (ii) the aggregate amount of any distributions to all holders of the Class A Common Stock made exclusively in cash within the 12 months immediately preceding the expiration of such tender or exchange offer and in respect of which no adjustment pursuant to Section (g)(5) has been made, exceeds 12.5% of the product of the current market price per share (determined as provided in paragraph (H) of this Section (g)(5)) of the Class A Common Stock as of the last time (the "Expiration Time") tenders or exchanges could have been made pursuant to such tender or exchange offer (as it may be amended) multiplied by the number of shares of Class A Common Stock outstanding (including any tendered or exchanged shares) on the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Price in effect immediately prior to the close of business on the date of the Expiration Time shall be decreased by multiplying such Conversion Price by a fraction (A) the numerator of which shall be equal to (1) the product of (x) the current market price per share (determined as provided in paragraph (H) of this Section (g)(5)) of the Class A Common Stock on the elate of the Expiration Time and (y) the number of shares of Class A Common Stock outstanding (including any tendered or exchanged shares) on the date of the Expiration Time less (2) the amount of cash plus the fair market value (determined by the Board of Directors, whose determination shall be conclusive) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares, and (B) -10- the denominator of which shall be equal to the product of (x) the current market price per share (determined as provided in paragraph (H) of this Section (g)(5)) of the Class A Common Stock as of the Expiration Time and (y) the number of shares of Class A Common Stock outstanding (including any tendered or exchanged shares) as of the Expiration Time less the number of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted up to any such maximum, being referred to as the "Purchased Shares"). In the event that the Corporation is obligated to purchase shares pursuant to any such tender offer, but the Corporation is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender offer had not been made. (G) the reclassification of Class A Common Stock into securities other than Class A Common Stock (other than any reclassification upon a consolidation or merger to which Section (g)(7) applies) shall be deemed to involve (i) a distribution of such securities other than Class A Common Stock to all holders of Class A Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and "the date fixed for such determination" within the meaning of paragraph (A) of this Section (g)(5)) and (ii) a subdivision or combination, as the case may be, of the number of Class A Common stock outstanding immediately prior to such reclassification into the number of Class A Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective", within the meaning of the paragraph (C) of this Section (g)(5)). (H) for the purpose of any computation under paragraphs (B), (D), (E), or (F) of this Section (g)(5), the current market price per share of Class A Common Stock on any date shall be deemed to be the average of the daily closing prices per share of Class A Common Stock for the five trading days immediately preceding the earlier of the day in question and the day before the "ex date" with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term "ex date", when used with respect to any issuance or distribution, means the first date on which the Class A Common Stock trades regular way on the applicable securities exchange or in the applicable securities market without the right to receive such issuance or distribution. (I) the Corporation may make such reductions in the Conversion Price, in addition to those required by subparagraphs (A), (B), (C.), (D), (E) and (F), of this Section (g)(5), as it considers to be advisable to avoid or diminish any income tax to holders of Class A Common Stock or rights to purchase Class A Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. The Corporation from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least twenty clays, the reduction is irrevocable during such period and the Board of Directors (or, to the extent permitted by applicable law, a duly authorized committee thereof) shall have made a determination that such reduction would be in the best interests of the Corporation, which determination shall be conclusive. Wherever the Conversion Price is reduced pursuant to the preceding sentence, -11- the Corporation shall mail to holders of record of the Series A Convertible Preferred Stock a notice of the reduction at least fifteen days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period it will be in effect. (J) notwithstanding any other provision of this Section (g)(5), no adjustment to the Conversion Price shall reduce the Conversion Price below the then par value per share of the Common Stock, and any such purported adjustment shall instead reduce the Conversion Price to such par value. The Corporation hereby covenants not to take any action (1) to increase the par value per share of the Class A Common Stock or (2) that would or does result in any adjustment in the Conversion Price that would cause the Conversion Price to be less than the then par value per share of the Class A Common Stock. (K) notwithstanding any other provision of this Section (g)(5), no adjustment in the Conversion Price need be made until all cumulative adjustments amount to 1% or more of the Conversion Price as last adjusted. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. (L) whenever the Conversion Price is adjusted as herein provided: (1) the Corporation shall compute the adjusted conversion price and shall prepare a certificate signed by the Treasurer or Chief Financial Officer of the Corporation setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the transfer agent for the Series A Convertible Preferred Stock, and (2) a notice stating that the Conversion price has been adjusted and setting forth the adjusted Conversion Price shall as soon as practicable be mailed by the Corporation to all record holders of shares of Series A Convertible Preferred Stock at their last addresses as they shall appear upon the stock transfer books of the Corporation. (M) in any case in which this Section (g)(5) provides that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence or such event (x) issuing to the holder of any share of Serves A Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Class A Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Class A Common Stock issuable upon such conversion before giving effect to such adjustment and (y) paying to such holder any amount in cash in lieu of any fractional share of Class A Common Stock pursuant to Section (g)(6) hereof. (6) Fractional Shares of Class A Common Stock The Corporation shall not issue fractional shares or scrip representing fractional shares of Class A Common Stock upon conversion of Series A Convertible Preferred Stock. Instead the Corporation shall pay a cash adjustment based upon the closing price of the Class A Common Stock on the -12- business day immediately preceding the date of conversion. If more than one certificate evidencing shares of Series A Convertible Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of shares issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Convertible Preferred Stock so surrendered. (7) Merger, Consolidation, Restructuring, Reclassification, etc. In the event that the Corporation shall be a party to any transaction, including without limitation any (i) recapitalization or reclassification of the Class A Common Stock(other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Class A Common Stock), (ii) any consolidation of the Corporation with, or merger of the Corporation into, any other Person, any merger of another Person into the Corporation (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Class A Common Stock of the Corporation), (iii) any sale or transfer of all or substantially all of the assets of the Corporation or (iv) any compulsory share exchange, pursuant to which the Class A Common Stock is converted into the right to receive other securities, cash or other property, then lawful provision shall he made as part of the terms of such transaction whereby the holder of each share of Series A Convertible Preferred Stock then outstanding shall have the right thereafter, to convert such share into the kind and amount of securities, cash and other property receivable upon such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Class A Common Stock into which such share of Series A Convertible Preferred Stock might have been converted immediately prior to such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange. The Corporation or the Person formed by such consolidation or resulting from such merger or which acquires such assets or which acquires the Corporation's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section (g). The above provisions shall similarly apply to successive recapitalizations, reclassifications, consolidations, mergers, sales, transfers or share exchanges. As used in this Section (g)(7) the word "Person" means any individual, corporation, partnership, joint venture, association, joint-stock corporation, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). (8) Stock to be Reserved. The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Class A Common Stock or its issued Class A Common Stock held in treasury, or both, solely for the purpose of issuance on the conversion of the Series A Convertible Preferred Stock herein provided such number of shares of Class A Common Stock as shall then be issuable on the conversion thereof. If at any time the number of authorized but unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of the Series A Convertible Preferred Stock, the Corporation shall use its best efforts to take such corporate action as may -13- in the opinion of its counsel be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for that purpose. The Corporation covenants and agrees that all shares of Class A Common Stock which shall be so issuable shall, on issuance, be duly authorized and validly issued, fully paid and nonassessable and free from all preemptive rights of stockholders and liens and charges with respect to the issue thereof. The Corporation shall use its best efforts to take all such action as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or regulation, the charter or by-laws of the Corporation, or any agreement, instrument or order to which the Corporation is then subject. (9) Notice of Action. In case: (A) the Corporation shall authorize or take an action that would, upon consummation, require a Conversion Price adjustment pursuant to subparagraphs (B), (C), (D), (E) or (F) of Section (f)(5) hereof; or (B) of any reclassification of Class A Common Stock (other than a subdivision or combination of the outstanding Class A Common Stock, or a charge in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of the sale or transfer of all or substantially all of the assets of the Corporation or of any compulsory share exchange whereby the Class A Common Stock is converted into other securities, cash or other property; or (C) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be mailed to the holders of record of the Series A Convertible Preferred Stock, at their last addresses as they shall appear upon the stock transfer books of the Corporation, at least twenty days prior to the proposed record or effective date as the case may be, notice stating (x) the date on which a record (if any) is to be taken for the purpose of such action, dividend or distribution, or, if a record is not to be taken, the date as of which the holders of Class A Common Stock of record to be entitled to such dividend or distribution are to be determined or (y) the date on which such action, reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Class A Common Stock of record shall be entitled to exchange their shares of Class A Common Stock for securities or other property deliverable upon such action, reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). (10) Employee Plan, etc. Notwithstanding the foregoing provisions, the issuance of any shares of Class A Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the -14- investment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in shares of Class A Common Stock under any such plan and the issuance of any shares of Class A Common Stock or options or rights to purchase such shares pursuant to any employee benefit plan or program of the Corporation or pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the issue date of the Series A Convertible Preferred Stock, shall not be deemed to constitute an issuance of Class A Common Stock or exercisable, exchangeable or convertible securities by the Corporation to which any of the adjustment provisions described above applies so long as the size or extent of the plan or plans are customary to corporations similar to the Corporation. There shall also be no adjustment of the Conversion Price in case of the issuance of any stock (or securities convertible into or exchangeable for stock) of the Corporation except as specifically described in this Section (g). If any action would require adjustment of the Conversion Price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment which has the greatest absolute value. (11) Listing. If any shares of the Class A Common Stock required to be reserved for purposes of the conversion of the Series A Convertible Preferred Stock hereunder require listing on the Nasdaq National Market or any stock exchange on which securities of the Corporation are then listed before such shares may be issued on conversion, the Corporation shall, at its expense, use its best efforts to cause such shares to be duly listed on the Nasdaq National Market or any such stock exchange. (12) Issue Tax. The issuance of certificates for shares of Class A Common Stock on conversion of the Series A Convertible Preferred Stock and the issuance of certificates for shares of the Series A Convertible Preferred Stock upon the conversion of only a portion of the number of shares of the Series A Convertible Preferred Stock covered by a certificate therefor, shall be made without charge to any holder thereof for any issuance tax in respect thereto, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of such holder. (13) Class A Common Stock owned by the Corporation. For purposes of this Section (g), the .number of shares of Class A Common Stock at any time outstanding shall not include any shares of Class A Common Stock then owned or held by or for the account of the Corporation. (h) Voting Rights. (1) General. Except as otherwise set forth herein or as may be otherwise required by law, the holders of shares of the Series A Convertible Preferred Stock shall be entitled to notice of all shareholder meetings in accordance with the By-Laws of the Corporation and to vote on all matters presented to the shareholders of the Corporation and shall be entitled to the number of votes per share of the Series A Convertible Preferred Stock equal to the number of full shares of the Class A Common Stock into which a share of the Series A Convertible Preferred Stock is convertible on the record date for the determination -15- of the shareholders entitled to vote on such matters or, if no such record is established, at the date on which such vote is taken. (2) Voting with Common Stock. Except as otherwise set forth herein or as may be otherwise required by law, the respective holders of shares of the Series A Convertible Preferred Stock, the Class A Common Stock, the Class B Common Stock and any other series of the Preferred Stock which is entitled to vote with the Class A Common Stock and the Class B Common Stock shall vote together as one class and not as separate classes. If the Corporation issues shares of the Preferred Stock in additional series, such shares may vote together with the shares of the Series A Convertible Preferred Stock, the Class A Common Stock, the Class B Common Stock if this Restated Certificate of Incorporation is amended to so provide, except on any matters as to which any one or more series of the Preferred Stock has the express right to vote separately as a class. (3) Class Voting. The Corporation shall not, without the affirmative vote or consent of the holders of a majority of the shares of Series A Convertible Preferred Stock then outstanding: (A) authorize, create (by way of reclassification or otherwise) or issue any Parity Securities or Senior Securities or any obligation or security convertible into or evidencing the right to purchase any Parity Securities or Senior Securities; provided, however, that the Corporation may authorize and issue, without any vote or consent of the holders of Series A Convertible Preferred Stock, up to $20 million aggregate Liquidation Preference amount of (i) additional shares of the Series A Convertible Preferred Stock and/or (ii) shares of one or more other series of the Corporation's Preferred Stock so long as such other series have rights, preferences and limitations that are substantially similar to, and not more favorable to the holders thereof than, those of the Series A Convertible Preferred Stock, and, in particular, have an initial conversion price or rate no more favorable than the Conversion Price and the terms of which expressly provide that such series will rank on a parity with the Series A Convertible Preferred Stock (any such additional shares of the Series A Convertible Preferred Stock and shares of any such series being referred to herein as "Comparable Parity Securities"); (B) amend or otherwise alter its Restated Certificate of Incorporation in any manner that adversely affects the rights, privileges and preferences of the Series A Convertible Preferred Stock set forth in this Certificate of Amendment; or (C) take any action requiring a vote of stockholders of the Corporation that (x) is materially adverse to the holders of Series A Convertible Preferred Stock or (y) adversely affects the rights, preferences and privileges of the Series A Convertible Preferred Stock set forth in this Certificate of Amendment. (i) Payment. (1) All amounts payable in cash with respect to the Series A Convertible Preferred Stock shall be payable in United States dollars at the principal executive office of the Corporation or, at the option of the holder, payment of dividends (if any) may be made by -16- check mailed to such holder of shares of Series A Convertible Preferred Stock at its address set forth in the register of holders of Series A Convertible Preferred Stock maintained by the Corporation. (2) Any payment on the Series A Convertible Preferred Stock due on any day that is not a business day need not be made on such day, but may be made on the next succeeding business day with the same force and effect as if made on such due date. (3) Dividends payable on the Series A Convertible Preferred Stock on any day that is a Dividend Payment Pate shall be paid to the holders of record as of the immediately preceding record date, (j) Headings of Subdivisions. The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. (k) Severability of Provisions. If any voting powers, preferences and relative, participating, optional and other special rights of the Series A Convertible Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Amendment (as it may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of the Series A Convertible Preferred Stock and qualifications, limitations and restrictions thereof set forth in this Certificate of Amendment (as so amended) which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional and other special rights of the Series A Convertible Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or other special rights of the Series A Convertible Preferred Stock and qualifications, limitations and restrictions thereof set forth shall be deemed dependent upon any other such voting powers, preferences and relative, participating optional or other special rights of the Series A Convertible Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein. The foregoing amendment was duly authorized in accordance with Sections 502(c) and (d) and 803(c) of the Business Corporation Law by the unanimous written consent of the Board of Directors. -17- IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment on May 3, 2002. /s/ Ralph C. Guild ---------------------------------- Ralph C. Guild Chairman of the Board Attest: /s/ Paul Parzuchowski - ---------------------------- Paul Parzuchowski, Secretary -18- EX-4.1 4 dex41.txt FORM OF WARRANT Exhibit 4.1 THIS WARRANT AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN INTEREP NATIONAL RADIO SALES, INC. WARRANT TO PURCHASE CLASS A COMMON STOCK ISSUE DATE: , 2002 This certifies that the following named purchaser, or its permitted assigns, is entitled, subject to the terms set forth below, to purchase from INTEREP NATIONAL RADIO SALES, INC. (the "Company"), a New York corporation, up to the number of fully paid and nonassessable shares (the "Shares) of Class A Common Stock, $.01 par value, of the Company ("Common Stock"), in the aggregate number and at the purchase price (the "Purchase Price") set forth below, from time to time through the Termination Date, as defined below. Such Purchase Price and number of Shares are subject to adjustment as provided in Section 2 of this Warrant. This Warrant is being issued together with certain other warrants of like tenor (collectively, the "Warrants") in connection with the Stock Purchase Agreement of even date herewith, (the "Agreement"), among the Company and the Purchasers named therein. Name of Purchaser: Address of Purchaser: Number of Shares: Purchase Price: per Share, as it may be adjusted in accordance with Section 2 hereof. 1. Definitions. ------------ As used in this Warrant, the following terms, unless the context otherwise requires, have the following meanings: (a) "Termination Date" means 5:00 p.m. New York City time, on , 2007. (b) "Company" includes any corporation which succeeds to or assumes the obligations of the Company under this Warrant. (c) "Stock" means shares of Class A Common Stock of the Company and stock of any other class into which those shares are hereafter changed. (d) "Warrantholder," "holder of Warrant," "holder," or similar terms when the context refers to a holder of this Warrant, means any person or entity that at the time is the registered holder of this Warrant. (e) Any other capitalized term used but not defined herein has the meaning set forth in the Agreement. 2. Adjustments to Purchase Price. The Purchase Price shall be subject to ----------------------------- adjustment from time to time, as follows: (a) In case at any time after the date hereof, the Company shall pay or make a dividend or distribution on all or any portion of its Stock or shall make a dividend or other distribution on any other class of capital stock of the Company which dividend or distribution includes Stock, the Purchase Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be decreased by multiplying such Purchase Price by a fraction of which the numerator shall be the number of shares of Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares of Stock and the total number of shares of Stock or other class of capital stock constituting such dividend or other distribution, such decrease to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this Section 2(a), the number of shares of Stock at any time outstanding shall not include shares held in treasury of the Company but shall include shares issuable in respect of scrip certificates, if any, issued in lieu of fractions of shares of Stock. If any dividend or other distribution of the type described in this Section 2(a) is declared but not so paid or made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such dividend or other distribution had not been declared. (b) In case at any time after the date hereof, the Company shall pay or make a dividend or distribution on all or any portion of its Stock consisting of, or shall otherwise issue to all holders of its Stock, rights, warrants or options (not being available on an equivalent basis to the Warrantholder on exercise of this Warrant) entitling the holders of its Stock to subscribe for or purchase Stock at a price per share less than the current market price per share (determined as provided in Section 2(h) hereof) of the shares of Stock on the date fixed for the determination of stockholders entitled to receive such rights, warrants or options (other than pursuant to a dividend reinvestment plan), the Purchase Price in effect at the opening of business on the day following the date fixed for such determination shall be decreased by multiplying such Purchase Price by a fraction of which the numerator shall be the number of shares of Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Stock which the aggregate of the offering price of the total number of shares of Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Stock so offered for subscription or purchase, such decrease to become effective immediately after the opening of business on the day following the date fixed for such determination. For purposes of this Section 2(b), the number of shares of Stock at any time outstanding shall not include shares held in treasury of the Company but shall include shares issuable in respect of scrip certificates, if any, issued in lieu of fractions of shares of Stock. The Company shall not issue any rights or warrants in respect of Stock held in treasury of the -2- Company (or, if rights or warrants are issued in respect of all of the Stock of the Company, will not exercise any such rights or warrants in respect of Stock held in treasury of the Company). In the event that such rights or warrants are not so issued, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Stock less than the current market price, and in determining the aggregate offering price of such shares of Stock, there shall be taken into account any consideration received for such rights or warrants. The value of such consideration, if other than cash, shall be determined in the reasonable good faith judgment of the Board of Directors of the Company, whose determination shall be conclusive. (c) In case at any time after the date hereof, all or any portion of the Stock outstanding shall be subdivided into a greater number of shares of Stock, the Purchase Price in effect at the opening of business on the day following the day on which such subdivision becomes effective shall be proportionately reduced, and, conversely in case at any time after the date hereof, all or any portion of the Stock outstanding shall each be combined into a smaller number of shares of Stock, the Purchase Price in effect at the opening of business on the day following the day on which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day on which such subdivision or combination becomes effective. (d) In case at any time after the date hereof, the Company shall, by dividend or otherwise, distribute to all holders of its Stock evidences of its indebtedness or assets (including securities, rights, warrants or options, but excluding any rights, warrants, or options referred to in Section 2(b) hereof as entitling the holders of Stock to subscribe for or purchase Stock at a price per share less than the then current market price, any dividend or distribution paid exclusively in cash, any dividend or distribution referred to in Section 2(a) hereof and any dividend or distribution upon a merger or consolidation referred to in Section 2(h) hereof), the Purchase Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be decreased by multiplying such Purchase Price by a fraction of which the numerator shall be the current market price per share (determined as provided in Section 2(h) hereof) of the Stock on the date fixed for such determination less the then fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) of the portion of the assets or evidence of indebtedness so distributed applicable to one share of Stock and the denominator shall be such current market price per share of the Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution. If any dividend or distribution of the type described in this Section 2(d) is declared but not paid or made, the Purchase Price shall again be adjusted to the Purchase Price which would then be in effect if such dividend or distribution had not been declared. -3- (e) In case at any time after the date hereof, the Company shall, by dividend or otherwise, make a distribution to all holders of its Stock consisting exclusively of cash (excluding any cash that is distributed upon a merger or consolidation or a sale or transfer of all or substantially all of the assets of the Company to which Section 3 hereof applies or as a part of a distribution referred to in Section 2(d)) in an aggregate amount that, combined together with (i) the aggregate amount of any other distributions to all holders of its Stock made exclusively in cash within the 12 months immediately preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this Section 2(e) has been made and (ii) the aggregate of any cash plus the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) of consideration payable in respect of any tender offer by the Company or any of its subsidiaries for all or any portion of the Stock concluded with the 12 months immediately preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this Section 2(e) has been made, exceeds 12.5% of the product of the current market price per share of Stock on the date for the determination of holders of Stock entitled to receive such distribution multiplied the number of shares of Stock outstanding on such date, then, and in each such case, immediately after the close of business on such date for determination, the Purchase Price in effect immediately prior to the close of business on the date fixed for determination of the stockholders entitled to receive such distribution shall be decreased by multiplying such Purchase Price by a fraction (A) the numerator of which shall be equal to the current market price per share (determined as provided in Section 2(h) hereof) of the Stock on the date fixed for such determination less an amount equal to the quotient of (x) the excess of such combined amount ever such 12.5% and (y) the number of shares of Stock outstanding on such date for determination and (B) the denominator of which shall be equal to the current market price per share (determined as provided in section 2(h) hereof) of the Stock on such date for determination. If any dividend or distribution of the type described in this Section 2(e) is declared but not so paid or made, the Purchase Price shall again be adjusted to the Purchase Price which would then be in effect if such dividend or distribution had not been declared. (f) In case a tender or exchange offer made by the Company or any subsidiary of the Company for all or any portion of the Stock shall expire and such tender or exchange offer (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration leaving a fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) that combined together with (i) the aggregate of the cash plus the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) as of the expiration of such tender or exchange offer, of consideration payable in respect of any other tender or exchange offer, by the Company or any subsidiary of the Company for all or any portion of the Stock expiring within the 12 months immediately preceding the expiration of such tender or exchange offer and in respect of which no adjustment, pursuant to this Section 2(f) has been made and (ii) the aggregate amount of any distributions to all holders of the Stock made exclusively in cash within 12 months immediately preceding the expiration of such tender or exchange offer and in respect of which no adjustment pursuant to Section 2(e) hereof -4- has been made, exceeds 12.5% of the product of the current market price per share (determined as provided in Section 2(h) hereof) of the Stock as of the last time (the "Expiration Time") tenders or exchanges could have been made pursuant to such tender or exchange offer (as it may be amended) multiplied by the number of shares of Stock outstanding (including any tendered or exchanged shares) on the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Purchase Price in effect immediately prior to the close of business on the date of the Expiration Time shall be decreased by multiplying such Purchase Price by a fraction (A) the numerator of which shall be equal to (1) the product of (x) the current market price per share (determined as provided in Section 2(h) hereof) of the Stock on the date of the Expiration Time and (y) the number of shares of Stock outstanding (including any tendered or exchanged shares) on the date of the Expiration Time less (2) the amount of cash plus the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares, and (B) the denominator of which shall be equal to the product of (xx) the current market price per share (determined as provided in Section 2(h) hereof) of the Stock on the date of the Expiration Time and (yy) the number of shares of Stock outstanding (including any tendered or exchanged shares) on the date of the Expiration Time less the number of all shares of Stock validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares of Stock deemed so accepted up to any such maximum, being referred to as the "Purchased Shares"). In the event that the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such tender offer had not been made. (g) The reclassification of Stock into securities other than Stock (other than any reclassification upon a consolidation or merger to which Section 3 hereof applies) shall be deemed to involve (i) a distribution of such securities other than Stock to all holders of Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of stockholders entitled to receive such distribution" and "the date fixed for such determination" within the meaning of Section 2(a)) and (ii) a subdivision or combination, as the case may be, of the number of shares of Stock outstanding immediately prior to such reclassification into the number of shares of Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective," as the case may be, and "the day upon which such subdivision or combination becomes effective", within the meaning of the Section 2(c)). (h) For the purpose of any computation under Sections 2(b), 2(d), 2(e) and 2(f) the current market price per share of Stock on any date shall be deemed to be the average of the daily closing prices per share for the five trading days immediately preceding the earlier of the day in question and the day before the "ex date" with respect to the issuance or distribution requiring such computation. For purposes of this Section 2(h), the term "ex date", when used with respect to any issuance or distribution, means the first date on -5- which the Stock trades regular way on the applicable securities exchange or in the applicable securities market without the right to receive such issuance or distribution. (i) The Company may make such reductions in the Purchase Price, in addition to those required by paragraphs (a), (b), (c.), (d), (e) and (f), of this Section 2, as it considers to be advisable to avoid or diminish any income tax to holders of Stock or rights to purchase Stock resulting from any dividend or distribution of Stock (or rights to acquire Stock) or from any event treated as such for income tax purposes. The Company from time to time may reduce the Purchase Price by any amount for any period of time if the period is at least twenty days, the reduction is irrevocable during the period and the Board of Directors of the Company (or, to the extent permitted by applicable law, a duly authorized, committee thereof) shall have made a determination that such reduction would be in the best interests of the Company, which determination shall be conclusive. Wherever the Purchase Price is reduced pursuant to the preceding sentence, the Company shall mail to Warrantholders of record a notice of the reduction at least fifteen days prior to the date the reduced Purchase Price takes effect, and such notice shall state the reduced purchase Price and the period it will be in effect. (j) Notwithstanding any other provision of this Section 2, no adjustment to the Purchase Price shall reduce the Purchase Price below the then par value per share of the Stock, and any such purported adjustment shall instead reduce the Purchase Price to such par value. The Company hereby covenants not to take any action (i) to increase the par value per share of the Stock or (ii) that would or does result in any adjustment in the Purchase Price that would cause the Purchase Price to be less than the then par value per share of the Stock. (k) Notwithstanding any other provision of this Section 2, no adjustment in the Purchase Price need be made until all cumulative adjustments amount to 1% or more of the Purchase Price as last adjusted. Any adjustments that are not made shall he carried forward and taken into account in any subsequent adjustment. (l) Whenever the Purchase Price is adjusted as herein provided: (i) The Company shall compute the adjusted Purchase Price and shall prepare a certificate signed by the Treasurer or Chief Financial Officer of the Company setting forth the adjusted Purchase Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the transfer agent for this Warrant, if any, and (ii) A notice stating that the Purchase Price has been adjusted and setting forth the adjusted Purchase Price shall be mailed, as soon as practicable, by the Company to all Warrantholders of record at their last addresses as they shall appear upon the books and records of the Company. (m) In any case in which this Section 2 provides that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (i) issuing to a Warrantholder who exercised this Warrant after such record -6- date and before the occurrence of such event the additional shares of Stock issuable upon such exercise by reason of the adjustment required by such event over and above the Stock issuable upon such exercise before giving effect to such adjustment and (ii) paying to such Warrantholder any amount in cash in lieu of any fractional share of Stock pursuant to Section 4(c) hereof. 3. Merger, Consolidation, Restructuring, Reclassification, etc. In the ------------------------------------------------------------ event that the Company shall be a party to any transaction, including without limitation any (i) recapitalization or reclassification of the Stock(other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Stock), (ii) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Stock), (iii) any sale or transfer of all or substantially all of the assets of the Company or (iv) any compulsory share exchange, pursuant to which the Stock is converted into the right to receive other securities, cash or other property, then lawful provision shall he made as part of the terms of such transaction whereby the Warrantholder shall have the right thereafter, to exercise this Warrant into the kind and amount of securities, cash and other property receivable upon such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock into which this Warrant might have been exercised immediately prior to such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange. The Company or the Person formed by such consolidation or resulting from such merger or which acquires such assets or which acquires the Company's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document shall be as nearly equivalent as may be practicable to die adjustments provided for in this Section 3. The above provisions shall similarly apply to successive recapitalizations, reclassifications, consolidations, mergers, sales, transfers or share exchanges. As used in this Section 3 the word "Person" means any individual, corporation, partnership, joint venture, association, joint-stock corporation, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). 4. Exercise Provisions. ------------------- (a) Manner of Exercise. This Warrant may be exercised in whole or in part ------------------ on or before the Termination Date only by the holder of this Warrant surrendering to the Company, at its principal office, this Warrant, together with the exercise form attached to this Warrant duly executed by the holder and payment to the Company in the amount obtained by multiplying the Purchase Price by the number of shares of Stock designated in the exercise form. Payment may be made at the option of the Warrantholder, either (A) by cash or (B) by bank wire transfer or (C) by surrender of this Warrant with instructions -7- that the Company retain as payment of the Purchase Price the number of Shares determined as set forth in clause (ii) of the following paragraph (a "Cashless Exercise"). ------------------ In the event of a Cashless Exercise: (i) the holder shall receive the number of Shares determined by multiplying the total number of Shares for which the Cashless Exercise is made by a fraction, the numerator of which shall be the difference between the Current Market Price (as defined below) per Share and the Purchase Price, and the denominator of which shall be the Current Market Price (determined as provided in this Section 4(a)) and (ii) the remaining Shares for which Cashless Exercise has been made shall be deemed to have been paid to the Company as the Purchase Price. For purposes of the above calculation, the Current Market Price of one share of Stock means: (i) the average of the reported closing prices of a share of Stock quoted on the Nasdaq National Market or on any exchange on which the shares of Stock are listed, whichever is applicable, for the five trading days immediately prior to the exercise date of this Warrant, (ii) if no such closing price is available, the average of the closing bid and asked prices of a share of Stock as quoted in the Over-the-Counter Market Summary for the five trading days immediately prior to the exercise date of this Warrant, or (iii) if the shares of Stock are not listed on the Nasdaq National Market or on any exchange as quoted in the Over-the-Counter Market, the fair market value per share of Stock as of the date of exercise of this Warrant as determined by the Company's Board of Directors in good faith. (b) Partial Exercise. On any partial exercise, the Company shall promptly ---------------- issue and deliver to the holder of this Warrant a new Warrant or Warrants of like tenor in the name of the holder of this Warrant providing for the right to purchase that number of Shares as to which this Warrant has not been exercised. The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of share certificates and new warrants. (c) No Fractional Shares. The Company shall not be required to issue -------------------- fractional Shares upon exercise of this Warrant. If any fraction of a Share would, but for this Section 4(c), be issuable upon final exercise of this Warrant, in lieu of such fractional Share the Company shall pay to the Warrantholder, in cash, an amount equal to the same fraction of the Current Market Price of such Share on the day immediately prior to the date of such exercise. 5. Delivery of Stock Certificates. ------------------------------ As promptly as practicable and in any event within seven days after full or partial exercise of this Warrant, the Company, at its expense, shall cause to be issued in the name of, and delivered to, the holder of this Warrant, a certificate or certificates for the number of validly issued, fully paid and nonassessable shares of Stock to which that holder is entitled on such exercise, together with any other securities and property to which that holder is entitled on such exercise under the terms of this Warrant. -8- 6. Compliance with Securities Act; Notice of Proposed Transfers; ------------------------------------------------------------- Registration Rights. -------------------- (a) Compliance with Securities Act. The holder of this Warrant, by ------------------------------ acceptance hereof, agrees that this Warrant and the Shares to be issued on its exercise are being acquired for investment and that such holder shall not offer, sell or otherwise dispose of this Warrant or any Shares issued on its exercise except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"). On exercise of this Warrant, the holder hereof shall confirm in writing, in a form reasonably satisfactory to the Company, that the Shares are being acquired for investment and not with a view toward distribution or resale (unless sale of the Shares has been registered under the Act or an exemption therefrom is available). Any proposed transferee of this Warrant or the Shares shall be required to agree in writing to the provisions of this Section 6 (unless such transfer of the Shares has been registered under the Act). Certificates representing all Shares (unless registered under the Act) shall be stamped or imprinted with a legend describing the restrictions set forth herein. (b) Notice of Proposed Transfers. Prior to any proposed transfer of this ---------------------------- Warrant, the Warrantholder shall give written notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if reasonably requested by the Company, shall be accompanied by an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer of this Warrant may be effected without registration under the Act, whereupon the Warrantholder shall be entitled to transfer this Warrant in accordance with the terms of its notice. Any new warrant issued to such transferee in replacement of this Warrant shall bear the same legend set forth on the first page of this Warrant, unless (i) such transfer is in accordance with the provisions of Rule 144 promulgated under the Act (or any other rule permitting public sale of this Warrant without registration under the Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate (as such term is defined in Rule 144 promulgated under the Act) of the Company) would be entitled to transfer such securities in a public sale without registration under the Act. Whenever a Warrantholder is able to demonstrate to the Company (and its counsel) that the provisions of Rule 144(k) promulgated under the Act are available to such Warrantholder without limitation, such Warrantholder shall be entitled to receive from the Company, without expense, a new warrant not bearing the restrictive legend set forth on the first page of this Warrant. (c) Registration Rights. The Shares constitute Registerable Securities for ------------------- purposes of the Registration Rights Agreement of even date herewith among the Company and the other parties named therein. 7. Miscellaneous Provisions. ------------------------ (a) Reservation of Stock. The Company has duly reserved and shall at all -------------------- times reserve and keep available, solely for issuance on exercise of this Warrant, all shares of Stock or other securities from time to time issuable on exercise of this Warrant. -9- (b) Amendment or Waiver. The provisions of this Warrant, or the provisions ------------------- of all of the Warrants, may be amended only by an instrument in writing signed by the Company and the holders of at least two-thirds in interest of the then outstanding and unexpired Warrants, provided that any such amendment that adversely affects any Warrantholder shall require the separate consent of such Warrantholder. So long as he is not adversely effected and subject to the foregoing, the Warrantholder agrees that his rights hereunder may be waived or amended by persons or entities holding more than two-thirds in interest of the then outstanding and unexpired Warrants without obtaining any additional consents of the Warrantholder; provided, however, that any holder of a Warrant may waive any of such holder's rights hereunder with respect to itself without obtaining the consent of any other holder. Any amendment or waiver effected in accordance with this Section 7(b) shall be binding on the Warrantholder and the Warrantholder's successors and assigns. (c) Replacement. On receipt of evidence reasonably satisfactory to the ----------- Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of loss, theft, or destruction, on delivery of any indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu of this Warrant, a new Warrant of like tenor. (d) No Rights as Shareholder. Without limiting the provisions of Section 2 ------------------------ hereof, no holder of this Warrant, as such, shall be entitled to vote or receive dividends or be considered a shareholder of the Company for any purpose, nor shall anything in this Warrant be construed to confer on any holder of this Warrant as such, any rights of a shareholder of the Company or any right to vote, to give or withhold consent to any corporate action, to receive notice of meetings of shareholders, to receive dividends or subscription rights or otherwise. (e) Notices. Notices hereunder to the holder of this Warrant shall be sent ------- by certified or registered mail to the address given to the Company by such holder and shall be deemed given when so mailed, or if sent to a holder outside the United States, by telecopy with a copy sent by air mail or courier. (f) Governing Law. This Warrant shall be governed by the laws of the State ------------- of New York. Dated: May 6, 2002 INTEREP NATIONAL RADIO SALES, INC. By _________________________ Ralph C. Guild Chairman of the Board -10- Form of Exercise ---------------- (To be signed only on exercise of Warrant) To: INTEREP NATIONAL RADIO SALES, INC. The undersigned holder of the attached Warrant hereby irrevocably elects to exercise the right to purchase _____________ shares of Class A Common Stock of INTEREP NATIONAL RADIO SALES, INC. (the "Company") and herewith makes payment of $_____________ for those shares and requests that the certificate for those shares be issued in the name of the undersigned and delivered to the address below the signature of the undersigned. The undersigned hereby affirms the statements and covenants in Sections 6(a) and 6(b) of the Warrant. Dated: ___________________ ___________________________________ Signature Print Name: (Signature must conform in all respects to the name of holder as specified on the face of the attached Warrant.) ___________________________________ Address -11- EX-10.1 5 dex101.txt STOCK PURCHASE AGREEMENT Exhibit 10.1 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of , 2002, among INTEREP NATIONAL RADIO SALES, INC., a New York corporation (the "Company"), and the parties listed on Exhibit A to this Agreement (together, the "Purchasers"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers desire to acquire, shares of the Company's Series A Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"), on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth below, the parties agree as follows: 1. Purchase and Sale of Shares. 1.1 Purchase and Sale. Subject to the terms and conditions of this ----------------- Agreement, at the Closing (as defined in Section 2), the Company shall issue and sell to the Purchasers, and the Purchasers shall severally purchase from the Company, for an aggregate purchase price of $ (the "Purchase Price"), an aggregate of shares of the Preferred Stock (the "Shares") and Warrants (the "Warrants") to purchase an aggregate of shares of the Company's Class A Common Stock, par value $0.01 per share (the "Class A Common Stock"), at an exercise price of $ per share. The Preferred Stock shall have the designation and the relative powers, rights, preferences and limitations set forth in the Company's Certificate of Amendment of its Restated Certificate of Incorporation to be filed with the Department of State of the State of New York in the form set forth in Exhibit B (the "Certificate of Amendment"). The Warrants shall be in the form set forth in Exhibit C. Each Purchaser shall purchase the number of Shares and the number of Warrants, for the portion of the Purchase Price, all as set forth opposite its name in Exhibit A. The Shares shall initially be convertible into shares of the Class A Common Stock at an initial conversion price of $ per share. 1.2 Free and Clear Delivery. The Company shall issue all of the Shares ----------------------- and the Warrants to Purchasers free and clear of all claims, liens, security interests, charges, encumbrances, interests and restrictions of any kind, except any imposed under the Securities Act of 1933 (the "1933 Act") or the securities registration provisions of any applicable state securities laws. 2. Closing. The closing of the transactions contemplated by Section 1 (the "Closing") shall occur at the offices of Salans Hertzfeld Heilbronn Christy & Viener, 620 Fifth Avenue, New York, New York, 10020 on , 2002, at 10:00 a.m. New York City time or at such other time, place or date as the parties may agree. At the Closing, the purchase and sale of the Shares and Warrants referred to in Section 1.1 shall be consummated. At the Closing, the Company shall deliver to each Purchaser a stock certificate and a warrant certificate, registered in the name of such Purchaser, evidencing the Shares and the Warrants being purchased by such Purchaser against such Purchaser's payment of the Purchase Price therefor by certified or bank check made payable to the order of the Company or by wire transfer of immediately available funds to an account designated by the Company. 3. Conditions to Closing. 3.1 Conditions to the Obligations of All Parties. The obligation of -------------------------------------------- each party to consummate the purchase and sale of the Shares shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions: (a) No temporary restraining order, preliminary or permanent injunction or other order issued by any court, tribunal or governmental agency or authority or other legal or regulatory restraint or prohibition preventing or impairing the issuance and sale of the Shares or the Warrants shall be in effect. No claim, action, suit, investigation or proceeding shall be pending or threatened against any of the parties which, if adversely determined, would (i) prevent or hinder consummation of the transactions contemplated by this Agreement or (ii) materially and adversely affect the business or assets of the Company. (b) The parties shall have received all material consents of third parties, and any authorizations, orders, grants, consents, permits and approvals of all relevant governmental authorities, required in connection with the consummation of the transactions contemplated under this Agreement, all of which shall continue to be in full force and effect on the date of the Closing. Notwithstanding the foregoing, it is understood that the Company shall file after each Closing, within the time periods allowed under applicable law, a Form D with the Securities and Exchange Commission (the "SEC") and any other relevant state securities commission or authority. 3.2 Conditions to the Obligations of the Company. The obligation of -------------------------------------------- the Company to consummate the purchase and sale of the Shares and the Warrants shall be subject to the satisfaction, at or prior to the Closing, of the following conditions: (a) All of the representations and warranties of the Purchasers set forth in this Agreement shall be true and correct as if made on and as of the date of the Closing (the "Closing Date"). (b) The Purchasers shall have in all material respects fully performed and complied with all agreements and conditions required under this Agreement to be performed or complied by them on or prior to the Closing Date. (c) Each Purchaser shall have delivered to the Company a certificate of one of its officers to the effect set forth in Sections 3.2(a) and (b). (d) Each Purchaser shall have paid the portion of the Purchase Price allocable to such Purchaser as set forth in Exhibit A and in the manner set forth in Section 2. (e) Each Purchaser shall have executed and delivered to the Company the Registration Rights Agreement in the form set forth in Exhibit D (the "Rights Agreement"). 2 (f) The Certificate of Amendment shall have been filed with the Department of State of the State of New York. (g) All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Agreement at or before the Closing, and all instruments and other documents incident thereto, shall be satisfactory in form and substance to the Company and its counsel. 3.3 Conditions to the Obligations of the Purchasers. The obligation of ----------------------------------------------- the Purchasers to consummate the purchase and sale of the Shares and the Warrants shall be subject to the satisfaction at or prior to the Closing of the following conditions: (a) All of the representations and warranties of the Company set forth in this Agreement shall be true and correct as if made on and as of the Closing Date. (b) The Company shall have in all material respects fully performed and complied with all agreements and conditions required under this Agreement to be performed or complied by it on or prior to the Closing Date. (c) The Company shall have delivered to each Purchaser a certificate of one of its officers to the effect set forth in Sections 3.3(a) and (b). (d) The Certificate of Amendment shall have been filed with the Department of State of the State of New York and the Company shall have delivered to each Purchaser a copy thereof certified by the Department of State of the State of New York or other reasonably satisfactory evidence of such filing. (e) The Company shall have delivered to each Purchaser a stock certificate representing the Shares, and a warrant certificate representing the Warrants, to be issued and sold to such Purchaser at the Closing. (f) The Company shall have executed and delivered to each of the Purchasers the Rights Agreement. (g) The Purchasers shall have received an opinion of Salans Hertzfeld Heilbronn Christy & Viener in the form set forth in Exhibit E dated the Closing Date. (h) The Purchasers shall have received copies of resolutions of the Company's Board of Directors, certified by the Secretary of Seller, approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. (i) The Company shall have delivered to each Purchaser a copy of its Restated Certificate of Incorporation, including the Certificate of Amendment, and By-laws certified by its Secretary or an Assistant Secretary as true and correct as of the Closing Date. (j) The Company shall have delivered to each Purchaser a certificate of its Secretary or an Assistant Secretary as to the incumbency and signatures of the officers of the Company executing this Agreement, the Rights Agreement, the Warrants and the certificates 3 representing the Shares, together with evidence of the incumbency of such Secretary or Assistant Secretary. (k) All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Agreement at or before such Closing, and all instruments and other documents incident thereto, shall be satisfactory in form and substance to the Purchasers and their counsel. 4. Waiver of Conditions. Each of the parties shall have the right to waive, in whole or in part, any of the conditions to its performance set forth in this Agreement and, on such waiver, the waiving party may proceed with the consummation of the transactions contemplated herein, it being understood that such waiver shall not constitute a waiver of any right which such party may have by reason of the breach by the other party of any representation, warranty or agreement contained herein, or by reason of any misrepresentation made by such other party herein. 5. Representations and Warranties of the Company. The Company represents and warrants to the Purchasers as follows: 5.1 Due Incorporation and Qualification. The Company is a corporation ----------------------------------- duly incorporated, validly existing and in good standing under the laws of the State of New York. Each of the Company's subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York or the State of Delaware, as the case may be. The Company and each of its subsidiaries has full corporate power and authority to own, lease and operate its properties and to carry on its business in the places and in the manner currently conducted. The Company and each of its subsidiaries is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the activities conducted by it or the character of the properties owned or leased by it makes such qualification necessary and the failure to so qualify would have a material adverse effect on its business. 5.2 Authority; Authorization; Valid Obligation. The Company has all ------------------------------------------ requisite corporate power and authority to execute and deliver, and to perform under, this Agreement, the Rights Agreement and the Warrants and to consummate the transactions contemplated hereunder and thereunder. The Company has taken all corporate action necessary for the execution and delivery by it of this Agreement, the Rights Agreement and the Warrants, for the execution and filing with the Department of State of the State of New York of the Certificate of Amendment, and for the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and the Rights Agreement and the Warrants shall, when executed and delivered, constitute, the Company's valid and binding obligations, each enforceable in accordance with its terms, except as may be limited by principles of equity or by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally. 5.3 No Conflicts or Defaults. The execution, delivery and performance ------------------------ of this Agreement, the Rights Agreement and the Warrants by the Company and the consummation of the transactions contemplated hereby and thereby do not and shall not (a) contravene the Restated Certificate of Incorporation or By-Laws of the Company, (b) with or without the giving 4 of notice or the passage of time, (i) materially violate or conflict with, or result in a material breach of, or a material default or loss of rights under, any material agreement, mortgage, indenture, lease, instrument, permit or license to which the Company is a party or by which it or any material portion of its assets are bound or (ii) result in the creation of, or give any party the right to create, any lien, charge, encumbrance or any other right or adverse interest upon any material portion of the assets of the Company, or (c) result in any violation of any law, rule, regulation, order, judgment or decree applicable to the Company or by which it or any material portion of its assets are bound. 5.4 Capitalization. On filing of the Certificate of Amendment with -------------- the Department of State of the State of New York, the authorized capital stock of the Company shall consist of (i) 20,000,000 shares of the Class A Common Stock, of which there are issued and outstanding on the date hereof 5,130,735 shares, (ii) 10,000,000 shares of the Company's Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"), of which there are issued and outstanding on the date hereof 4,093,891 shares and (iii) 1,000,000 shares of preferred stock, par value $0.01 per share, of which 400,000 shares shall be designated as the Series A Convertible Preferred Stock. All of the shares of the Company's capital stock issued and outstanding on the date hereof are duly authorized, validly issued, fully paid and nonassessable and were not issued in violation of any preemptive right of shareholders. On the date of the Closing, the Company shall have reserved for issuance all of the shares of the Class A Common Stock issuable on conversion of the Shares or on exercise of the Warrants. As of the date hereof, 4,893,089 shares of the Class A Common Stock are issuable on exercise of employee stock options and the Company has reserved such shares for issuance on such exercise. Except as set forth in this Section 5.4 and as contemplated under this Agreement, there are no outstanding options, warrants or rights, commitments or arrangements to acquire any shares of the Company's capital stock or any securities convertible or exercisable into such capital stock and no shares of the Company's capital stock are reserved for any purpose. The Company is not obligated, and has no options or rights, to repurchase, redeem or retire any outstanding shares of its capital stock. The Company is not a party to any shareholders' agreement, voting trust, pledge agreement or buy-sell or right of first offer or refusal arrangements or understandings with respect to any of the Company's capital stock and the Company is not aware of any such arrangements or understandings among other parties. 5.5 Authorizations. No authorization, approval, order, license, -------------- permit or consent of, or filing or registration with, any court or governmental authority, is required in connection with the execution, delivery and performance of this Agreement, the Rights Agreement or the Warrants by the Company, except (i) the filing of the Certificate of Amendment with the Department of State of the State of New York, (ii) the filing with the SEC of the Shelf Registration Statement (as defined in the Rights Agreement) and the SEC's declaring it effective, (iii) the filing of such reports with the SEC under the Securities Exchange Act of 1934 (the "1934 Act") as may be required in connection with the transactions contemplated hereunder and (iv) the filing of a Form D or other applicable forms with the SEC and such state securities authorities as may be relevant. 5.6 SEC Documents. The Company has made available to the ------------- Purchasers true and complete copies of each report, registration statement and definitive proxy statement filed by the Company with the SEC with respect to periods after December 31, 1998 (the "SEC 5 Documents"), which are all of the documents that the Company was required to file since such date. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1933 Act or the 1934 Act, as applicable, and the applicable rules and regulations of the SEC thereunder, and none of the SEC Documents, at the time of filing of each such document, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of the Company contained in the SEC Documents were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as indicated in the notes thereto or, in the case of unaudited statements, as permitted under applicable rules of the SEC) and present fairly the consolidated financial position of the Company, and the consolidated results of operations and cash flows of the Company, at the dates, and for the periods, indicated. 5.7 Compliance with Law. The Company holds all permits, ------------------- certificates, licenses, approvals and other authorizations of governmental authorities as are materially necessary to the conduct of its business. The Company is in material compliance with the terms of each thereof and has not received any notice or claim pertaining to the failure to obtain any such authorization. To the best of the Company's knowledge, the Company is conducting its business and affairs in material compliance with all applicable federal, state and local laws, ordinances, rules, regulations and court or administrative orders and decrees. 5.8 Litigation. Other than as disclosed in the SEC Documents, there ---------- is no claim, action, suit, proceeding or investigation pending against or affecting the Company or any material portion of its assets, at law or in equity, before any federal, state, local or other governmental authority or any arbitration tribunal or other forum, which would materially adversely affect the Company if adversely determined or which challenges the validity or propriety of the transactions contemplated by this Agreement. There is no outstanding judgment, order, writ, ruling, injunction, stipulation or decree of any court, arbitrator or governmental authority against or materially affecting the Company or any material portion of its assets. 5.9 No Defaults; Commitments. Neither the Company nor, to the best ------------------------ of its knowledge, any other party, is in material breach of, or in material default under, any material agreement, lease or instrument to which the Company is a party, and no event has occurred, is pending or, to the best of the Company's knowledge, is threatened, which, after the giving of notice, passage of time or otherwise, could constitute or result in such a material breach or default by the Company. 5.10 Ordinary Course; No Adverse Change. Since December 31, 2001, ---------------------------------- the Company has conducted its business and maintained its properties substantially in the same manner as previously conducted or maintained and solely in the ordinary course. Since such date, there has not been any material adverse change in the business of the Company or the financial or other condition thereof. 5.11 Offering of the Shares. Neither the Company nor any agent ---------------------- acting on its behalf has offered the Shares or the Warrants for sale to, or solicited any offer to buy the Shares or the Warrants from, any party other than Purchasers. Neither the Company nor any agent 6 acting on its behalf has taken any action which would subject the issuance or sale of the Shares to the provisions of Section 5 of the 1933 Act. 5.12 No Reliance. The Company has not relied on any representation, ----------- warranty or agreement of the Purchasers except as set forth in this Agreement. 5.13 Miscellaneous. No representation or warranty of the Company set ------------- forth in this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary in order to make such representation or warranty, in light of the circumstances under which it is made, not false or misleading. 6. Representations and Warranties of the Purchasers. Each Purchaser, severally and not jointly, represents and warrants to the Company as follows: 6.1 Due Organization. The Purchaser is a corporation, limited ---------------- liability company, limited partnership or other entity duly incorporated or organized , validly existing and in good standing under the laws of the state of its incorporation or organization. The Purchaser has full corporate or other power and authority to own, lease and operate its properties and to carry on its business in the places and in the manner currently conducted. The Purchaser has not been organized, reorganized or recapitalized specifically for the purpose of investing in the Company. 6.2 Authority; Due Authorization; Valid Obligation. The Purchaser ---------------------------------------------- has all requisite corporate or other power and authority to execute and deliver this Agreement and the Rights Agreement and to consummate the transactions contemplated hereunder and thereunder. Purchaser has taken all corporate or other action necessary for the execution and delivery by it of this Agreement and the Rights Agreement and for the consummation of the transactions contemplated hereby and thereby, and this Agreement constitutes, and the Rights Agreement shall, when executed and delivered, constitute, its valid and binding obligations, each enforceable in accordance with its terms, except as may be limited by principles of equity or by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally. 6.3 Authorizations. No authorization, approval, order, license, -------------- permit or consent of, or filing or registration with, any court or governmental authority, is required in connection with the execution, delivery and performance of this Agreement by the Purchaser. 6.4 Litigation. There is no claim, action, suit, proceeding or ---------- investigation pending against or affecting the Purchaser or any material portion of its assets, at law or in equity, before any federal, state, local or other governmental authority or any arbitration tribunal or other forum, challenges the validity or propriety of the transactions contemplated by this Agreement. 6.5 Investment Intent. The Purchaser is acquiring the Shares and ----------------- the Warrants and the shares of the Class A Common Stock issuable on conversion or exercise thereof (the "Conversion Shares") for its own account and not with a view to the resale or distribution of all or any part thereof, except pursuant to the Shelf Registration Statement or pursuant to an exemption from registration afforded by the 1933 Act. The Purchaser does not have any 7 contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Shares, Warrants or Conversion Shares. 6.6 Non-Registration. The Purchaser understands that the Shares and ---------------- the Warrants are not, and the Conversion Shares may not for some period be, registered under the 1933 Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from the registration requirements of the 1933 Act pursuant to Section 4(2) thereof and Regulation D thereunder, and that the Company's reliance on such exemption is predicated in part on the Purchasers' representations set forth in this Agreement. The Purchaser represents that it is an "accredited investor" as defined in Rule 501 of Regulation D under the Securities Act. Such Purchaser is, and as of the Closing Date shall be, a resident of the state indicated on Exhibit A. 6.7 Informed Investment. Each Purchaser has reviewed the SEC ------------------- Documents, and has acquired sufficient information about the Company to reach an informed and knowledgeable decision about the purchase of the Shares and the Warrants. Purchaser has had access to information about the Company that it has requested during the course of the transactions contemplated hereunder and has had an opportunity to discuss the business affairs and financial condition of the Company with officers of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to it or to which it had access. The Purchaser is able to look after its own interests in the transactions contemplated by this agreement and has the ability to bear the economic risks of an investment in the Shares, Warrants and Conversion Shares. 6.8 Legends. To the extent applicable, each certificate or other ------- document evidencing any of the Shares, Warrants or Conversion Shares shall be endorsed with the legends set forth below, and Purchaser agrees that, except to the extent such restrictions are waived by the Company, Purchaser shall not transfer the shares represented by any such certificate without complying with the restrictions on transfer described in the legends endorsed on such certificate: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO INTEREP NATIONAL RADIO SALES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT OR ANOTHER APPLICABLE EXEMPTION. A STATEMENT OF THE RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS GRANTED TO OR IMPOSED ON EACH CLASS OR SERIES OF CAPITAL STOCK AUTHORIZED TO BE ISSUED AND ON THE HOLDERS THEREOF WILL BE FURNISHED WITHOUT CHARGE TO ANY 8 SHAREHOLDER ON WRITTEN REQUEST TO THE SECRETARY OF INTEREP NATIONAL RADIO SALES, INC." 6.9 Miscellaneous. No representation or warranty of the Purchaser set ------------- forth in this Agreement contains any untrue statement of a material fact or omits any material fact necessary in order to make such representation or warranty, in light of the circumstances under which it is made, not false or misleading. 7. Miscellaneous. 7.1 Expenses. Except as provided in the Rights Agreement, the Company -------- and the Purchasers shall bear and pay, without any right of reimbursement from any other party, all costs, expenses and fees incurred by them or on their behalf incident to the preparation, execution and delivery of this Agreement and the performance of such party's obligations hereunder, whether or not the transactions contemplated by this Agreement are consummated, including, without limitation, the fees and disbursements of attorneys, accountants and consultants employed by such party. 7.2 Communications. All notices, consents and other communications -------------- given under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand or by Fedex or a similar overnight courier to, (b) seven days after being deposited in any United States post office enclosed in a postage prepaid registered or certified air mail envelope addressed to, or (c) when successfully transmitted by facsimile (with a confirming copy of such communication to be sent as provided in (a) or (b) above) to, the party for whom intended, at the address or facsimile number for such party set forth below, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein; provided, however, that any notice of change of address or facsimile number shall be effective only upon receipt. If to the Company: Mr. Ralph C. Guild Chairman of the Board Interep National Radio Sales, Inc. 100 Park Avenue. 5th Floor. New York, New York 10017 Fax No.: (212) 916-0755 with a copies to: Mr. William J. McEntee, Jr. Chief Financial Officer Interep National Radio Sales, Inc. 2090 Palm Beach Lakes Boulevard Suite 300 West Palm Beach, Florida 33409 Fax No.: (561) 616-4019 9 and Laurence S. Markowitz, Esq. Salans Hertzfeld Heilbronn Christy & Viener 620 Fifth Avenue New York, New York 10020 Fax No.: (212) 632-5555 If to the Purchasers: with a copy to: 7.3 Entire Agreement; No Waivers. This Agreement sets forth the ---------------------------- entire understanding of the parties with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter and may not be waived or modified, in whole or in part, except by a writing signed by each of the parties. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. Failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of its rights under such or any other provision. 7.4 Successors and Assigns. This Agreement shall be binding on, ---------------------- enforceable against and inure to the benefit of, the parties and their respective successors and permitted assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. No party may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other party. 7.5 Further Assurances. Whenever reasonably requested to do so by a ------------------ party to this Agreement, on or after the Closing, any other party shall do, execute, acknowledge and deliver all such acts, assignments, confirmations, consents and any and all such further instruments and documents, in form reasonably satisfactory to the requesting party, as shall be reasonably necessary or advisable to carry out the intent of this Agreement. 7.6 Brokers and Finders. Each party represents to the others that, ------------------- other than , no agent, broker, investment banker, financial advisor or other person or 10 entity is or shall be entitled to any broker's or finder's fee or other commission or similar fee in connection with the transactions contemplated by this Agreement. Each party shall indemnify and hold harmless the others from and against any claim, liability or obligation with respect to any fees, commissions or expenses asserted by any person or entity on the basis of any act or statement alleged to have been committed or made by such indemnifying party or any of its affiliates. 7.7 Governing Law. This Agreement shall in all respects be governed ------------- by and construed in accordance with the laws of the State of New York applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles. 7.8 Severability. If any provision of this Agreement is held to be ------------ invalid or unenforceable by any court or tribunal of competent jurisdiction, the remainder of this Agreement shall not be affected by such judgment, and such provision shall be carried out as nearly as possible according to its original terms and intent to eliminate such invalidity or unenforceability. 7.9 Counterparts. This Agreement may be executed in multiple ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 7.10 Construction. Headings used in this Agreement are for convenience ------------ only and shall not be used in the interpretation of this Agreement. References herein to Sections and Exhibits are to the sections and exhibits of this Agreement. As used herein, the singular includes the plural and the masculine, feminine and neuter genders each includes the others where the context so indicates. 7.11 Publicity. No party shall issue any press release or otherwise --------- make any statements to any third party or any public disclosure with respect to either this Agreement or the transactions contemplated hereby, other than the issuance by the Company and the Purchasers of a joint press release announcing this Agreement in a form acceptable to the Company and the Purchasers, or as required by applicable law. 7.12 Exculpation Among the Purchasers. Each Purchaser acknowledges and -------------------------------- agrees that it is not relying on any other Purchaser, or any officer, director, employee partner or affiliate of any other Purchaser, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor any controlling person, officer, director, stockholder, partner, agent or employee of any Purchaser, shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them relating to or in connection with the Shares, the Warrants or the Conversion Shares. 11 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. INTEREP NATIONAL RADIO SALES, INC. By --------------------------------- Marc G. Guild President, Marketing Division and Director 12 EXHIBIT A --------- PURCHASERS
- ----------------------------------------------------------------------------------------------------- Number of Number of --------- --------- Name Shares Warrants Purchase Price ---- ------ -------- -------------- - ----------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------
13 EX-10.2 6 dex102.txt REGISTRATION RIGHTS AGREEMENT Exhibit 10.2 REGISTRATION RIGHTS AGREEMENT , 2002 To the Purchasers Named in the Purchase Agreement referred to below Ladies and Gentlemen: This shall confirm that, in consideration of your purchase on or prior to the date hereof of an aggregate of shares of Series A Convertible Preferred Stock, $0.01 par value (the "Preferred Stock"), of Interep National Radio Sales, Inc., a New York corporation (the "Company"), pursuant to the Stock Purchase Agreement, dated as of , 2002, between the Company and each of you (the "Purchase Agreement"), and as an inducement to each of you to consummate the transactions contemplated by the Purchase Agreement, the Company agrees with each of you, and with each subsequent holder of Restricted Stock (as such term is defined below), as follows: 1. Certain Definitions. As used herein, the following terms shall ------------------- have the following respective meanings: "Affiliates" means, as to any party, a person or entity that ---------- controls, is controlled by or is under common control with such party (it being understood that such term shall be interpreted in a manner consistent with the definition of "affiliate" set forth in Rule 144 promulgated under the Securities Act). "Commission" means the Securities and Exchange Commission, or any ---------- other federal agency at the time administering the Securities Act. "Common Stock" means the Class A Common Stock of the Company, as ------------ constituted as of the date of this Agreement, subject to adjustment pursuant to the provisions of Section 10 hereof. "Conversion Shares" means shares of Common Stock issued on ----------------- conversion of the Preferred Stock or on exercise of the Warrants. "Default" has the meaning set forth in Section 4(c). ------- "Exchange Act" means the Securities Exchange Act of 1934 or any ------------ similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Filing Deadline" means the close of business on the 30th day --------------- after the date of the Agreement. "Preferred Stock" has the meaning given in the preamble of this --------------- Agreement. "Purchasers" has the meaning given in the Purchase Agreement. ---------- "Registerable Securities" means Conversion Shares; provided, ----------------------- however, that Registerable Securities shall not include any Conversion Shares which have previously been registered or which have been sold to the public, or which have been sold in a private transaction to a permitted transferee that does not, together with its Affiliates, hold at least shares of Restricted Stock (on an as converted basis). "Registration Expenses" means the expenses so described in Section --------------------- 6 hereof. "Restricted Stock" means any shares of Preferred Stock or any ---------------- Conversion Shares. "Securities Act" means the Securities Act of 1933 or any similar -------------- federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Selling Expenses" means the expenses so described in Section 6 ---------------- hereof. "Shelf Registration Statement" means a registration statement on ---------------------------- Form S-3 relating to the resale of all of the Registerable Securities and filed with the Commission pursuant to Rule 415. "Warrants" means the Warrants of even date herewith issued to the -------- Purchasers pursuant to the Purchase Agreement. 2. Restrictive Legend. Each certificate issued on exchange or ------------------ transfer of any Preferred Stock or Conversion Shares, other than shares acquired in a public sale or as otherwise permitted by the last paragraph of paragraph 3 hereof, shall be stamped or otherwise imprinted with a legend substantially in the form provided in Section 6.8 of the Purchase Agreement. 3. Notice of Proposed Transfer. Prior to any proposed transfer of --------------------------- any Restricted Stock or Warrants (other than under the circumstances described in Section 4 hereof), the holder thereof shall give written notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if reasonably requested by the Company, shall be accompanied by an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer of the Restricted Stock or Warrants may be effected without registration under the Securities Act, whereupon the holder of such Restricted Stock or Warrants shall be entitled to transfer such Restricted Stock or Warrants in accordance with the terms of its notice. Each certificate for Restricted Stock or Warrants transferred as provided above shall bear the legend referred to in Section 2, unless (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an Affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. 2 Whenever a holder of Restricted Stock or Warrants is able to demonstrate to the Company (and its counsel) that the provisions of Rule 144(k) of the Securities Act are available to such holder without limitation, such holder of Restricted Stock shall be entitled to receive from the Company, without expense, a new certificate not bearing the restrictive legend referred to in Section 2. 4. Registration. ------------ (a) The Company shall (i) cause the Shelf Registration Statement to be filed with the Commission as soon as practicable after the date hereof, but in no event later than the Filing Deadline, (ii) use its best efforts to cause the Shelf Registration Statement to become effective at the earliest possible time and (iii) in connection with the foregoing, (A) file all pre-effective amendments to the Shelf Registration Statement as may be necessary to cause it to become effective, (B) file, if applicable, a post-effective amendment to the Shelf Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings, if any, in connection within the registration and qualification of the Registerable Securities to be made under the blue sky laws of such jurisdictions as are necessary to permit the offer and sale of the Registerable Securities in such jurisdictions. (b) The Company shall use its best efforts to cause the Shelf Registration Statement to be effective continuously until such time as all of the Registerable Securities have been sold or the holders of Registerable Securities are able to effect resales of Registerable Securities pursuant to Rule 144(k) under the Securities Act, but in no event beyond the fifth anniversary date of this Agreement, and to comply with all applicable federal and state securities laws. No securities to be sold for the account of the Company shall be included in the Shelf Registration Statement. (c) If the Shelf Registration Statement is not filed with the Commission on or before the Filing Deadline (a "Default"), the holders of the Preferred Stock shall be entitled to receive Additional Dividends (as provided in the Certificate of Amendment of the Company's Restated Certificate of Incorporation setting forth the terms of the Preferred Stock) from the Filing Deadline until the date on which such Default is cured by the filing of the Shelf Registration Statement with the Commission. The Company shall have no liability for damages for any Default in addition to the Additional Dividends; provided, however, that the holders of the Registerable Securities shall be entitled to equitable relief, including injunction and specific performance. (d) No holder of Registerable Securities may include any of its Registerable Securities in the Shelf Registration Statement unless and until such holder furnishes to the Company in writing, within 15 days after receipt of a request therefor, the information specified in Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, for use in connection with the Shelf Registration Statement and any prospectus included therein. No holder shall be entitled to Additional Dividends pursuant to Section 4(c) above unless and until such holder shall have provided all such information. Each holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by such holder not materially misleading. 3 5. Registration Procedures. In connection with the Shelf ----------------------- Registration Statement, the Company shall, as soon as practicable: (a) prepare (and afford counsel for the selling holders reasonable opportunity to review and comment thereon) and file with the Commission the Shelf Registration Statement and use its best efforts to cause it to become and remain effective for the period referred to in Section 4(b); (b) prepare (and afford counsel for the selling holders reasonable opportunity to review and comment thereon) and file with the Commission such amendments and supplements to the Shelf Registration Statement and the prospectus used in connection therewith as may be necessary to keep it effective for the period referred to in Section 4(b) and to comply with the provisions of the Securities Act with respect to the disposition of all Registerable Securities covered by the Shelf Registration Statement in accordance with the sellers' intended method of disposition (i.e., underwritten or not underwritten) set forth in the Shelf Registration Statement; (c) furnish to each seller and to each underwriter such number of copies of the Shelf Registration Statement and the prospectus included therein (including any preliminary prospectus) as such persons may reasonably request in order to facilitate the public sale or other disposition of the Registerable Securities; (d) use its best efforts to register or qualify the Registerable Securities under the securities or blue sky laws of such jurisdictions as the sellers of Registerable Securities or, in the case of an underwritten public offering, the managing underwriter, shall reasonably request (provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any jurisdiction); (e) notify each seller and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in the Shelf Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (f) use its best efforts (if the offering is underwritten) to furnish, at the request of any seller or underwriter, on the date that Registerable Securities are delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller (if requested by a seller), stating that such registration statement has become effective under the Securities Act and that (A) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B) the Shelf Registration Statement, the related prospectus, and each amendment or supplement thereof, comply as to form in all material 4 respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder (except that such counsel need express no opinion as to financial statements, the notes thereto, and the financial schedules and other financial and statistical data contained therein) and (C) to such other effects as may reasonably be requested by counsel for the sellers or the underwriters, and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the sellers and the underwriters, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the Shelf Registration Statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters with respect to the registration in respect of which such letter is being given as such underwriters or seller may reasonably request; and (g) make available for inspection by each seller, any underwriter participating in any distribution pursuant to the Shelf Registration Statement, and any attorney, accountant or other agent retained by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement. (h) (i) cause all the Registerable Securities covered by the Shelf Registration Statement to be listed on each national securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registerable Securities is then permitted under the rules of such exchange, or (ii) to the extent the securities of the same class or series are not then listed on a national securities exchange, secure the designation and quotation of all Registerable Securities covered by the Shelf Registration Statement on the Nasdaq National Market. If the offering contemplated by the Shelf Registration Statement is an underwritten public offering, the Company shall enter into a written agreement with the managing underwriter in such form and containing such provisions as are customary in the securities business for such an arrangement between major underwriters and companies of the Company's size and investment stature; provided, however, that such agreement shall not contain any such provision applicable to the Company which is inconsistent with the provisions hereof. Each selling holder of Registerable Securities participating in an underwritten public offering shall also enter into and perform its obligations under such an agreement. Following the effectiveness of the Shelf Registration Statement, the Company may, at any time, suspend the effectiveness of such registration for up to 30 days (a "Suspension Period"), by giving notice to the holders of Registerable Securities, if the Company shall have reasonably determined that the Company may be required to disclose any corporate development which disclosure may have a material adverse effect on the business, assets, properties or financial condition of the Company. The Company shall use its best efforts to limit the duration and number of any Suspension Periods. Each holder of Registerable Securities shall, on receipt 5 of any notice from the Company of a Suspension Period, discontinue disposition of the Registerable Securities pursuant to the Shelf Registration Statement, prospectus contained therein, or any amendment or supplement thereof until such holder (i) is notified in writing by the Company that the use of the applicable prospectus may be resumed, (ii) has received copies of a supplemental or amended prospectus, if applicable, or (iii) has received copies of any additional or supplemental filings which are incorporated or deemed to be incorporated by reference into such prospectus. 6. Expenses. All expenses incurred by the Company in complying with -------- Section 4 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and disbursements of one special counsel to the sellers of Registerable Securities, and fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars but excluding any Selling Expenses, are herein called "Registration Expenses". All underwriting discounts and selling commissions applicable to the sale of Registerable Securities are herein called "Selling Expenses". The Company shall pay all Registration Expenses in connection with each registration pursuant to Section 4 hereof. All Selling Expenses shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such persons other than the Company (except to the extent the Company shall be a seller) as they may agree. 7. Indemnification. --------------- (a) In connection with the registration of the Registerable Securities under the Securities Act pursuant to Section 4 hereof, the Company shall indemnify and hold harmless each seller of such Registerable Securities thereunder and each underwriter of Registerable Securities thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement under which such Registerable Securities were registered under the Securities Act pursuant to Section 4, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement of a material fact or omission or alleged omission so made in conformity with information furnished by such seller, such underwriter or such controlling person in writing specifically for use in the Shelf Registration Statement or prospectus. 6 (b) In connection with the registration of the Registerable Securities under the Securities Act pursuant to Section 4 hereof, each seller of such Registerable Securities thereunder, severally and not jointly, shall indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company, each director of the Company, each underwriter, each person who controls any underwriter within the meaning of the Securities Act, legal counsel, and accountant against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer or director or underwriter or controlling person or legal counsel or accountant may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Shelf Registration Statement under which such Registerable Securities were registered under the Securities Act pursuant to Section 4, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse the Company and each such officer, director, underwriter, controlling person, legal counsel, or accountant for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that such seller shall be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based solely upon an untrue statement or alleged untrue statement of a material fact or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus; and provided, further, however, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not to exceed the proceeds (net of underwriting discounts and commissions) received by such seller from the sale of Registerable Securities covered by the Shelf Registration Statement. (c) Each party entitled to indemnification under this Section 7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense; and provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 7 to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the 7 claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (d) Notwithstanding the foregoing, any Indemnified Party shall have the right to retain its own counsel in any such action, but the fees and disbursements of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party shall have failed to retain counsel for the Indemnified Party as aforesaid or (ii) the Indemnifying Party and such Indemnified Party shall have mutually agreed to the retention of such counsel. It is understood that the Indemnifying Party shall not, in connection with any action or related actions in the same jurisdiction, be liable for the fees and disbursements of more than one separate firm qualified in such jurisdiction to act as counsel for the Indemnified Party. (e) If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with an underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 8. Changes in Common Stock. If, and as often as, there are any ----------------------- changes in the Common Stock by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof, as may be required, so that the rights and privileges granted hereby shall continue with respect to the Registerable Securities as so changed. 9. Rule 144 Reporting. The Company agrees to use its best efforts ------------------ to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after 90 days following the date it is first required by law to do so; (b) file with the Commission in a timely manner all reports and other documents as the Commission may prescribe under Section 13(a) or 15(d) of the Exchange Act 8 at any time after the Company has become subject to such reporting requirements of the Exchange Act; and (c) so long as a holder of Registerable Securities owns any Registerable Securities, furnish to such holder forthwith upon written request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after 90 days following the date it first becomes subject to such reporting requirements), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the Company and (iii) such other reports and documents so filed as a holder may reasonably request to avail itself of any rule or regulation of the Commission allowing such holder to sell any such Registerable Securities without registration. 10. Termination of Registration Rights. The right of any holder of ---------------------------------- Registerable Securities to request registration or inclusion in any registration pursuant to Section 4 hereof shall terminate upon the earliest to occur of (i) such time as all Registrable Securities held by such holder have been sold by such holder, (ii) such time as all Registerable Securities held or entitled to be held upon conversion by such holder may immediately be sold under Rule 144(k) or (iii) the closing of an acquisition or of another transaction in which the Registerable Securities are exchanged for publicly traded stock of another entity. 11. Miscellaneous. ------------- (a) Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns. The registration rights conferred herein on the holders of Registerable Securities shall inure to the benefit of any transferee (provided that any such transferee shall, together with its Affiliates, hold at least shares of Restricted Stock, on an as-converted basis) for so long as the certificates representing the Registerable Securities shall be required to bear the legend specified in Section 2 hereof. (b) All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered personally or by nationally recognized air courier, or mailed by first class registered mail, postage prepaid, addressed as follows: if to the Company, to it at the address specified in the Purchase Agreement; if to any holder of Restricted Stock, at its address as set forth in Exhibit A to the Purchase Agreement; if to any subsequent holder of Restricted Stock, to it at such address as may have been furnished to the Company in writing by such holder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Restricted Stock) or to the holders of Restricted Stock (in the case of the Company). 9 (c) This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles. (d) This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and may not be modified or amended except in writing signed by the Company and the holders of a majority in interest of the Preferred Stock (determined on an as-converted basis). (e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Please indicate your acceptance of the foregoing, by signing and returning the enclosed counterpart of this letter, whereupon this letter (herein sometimes called "this Agreement") shall be a binding agreement between the Company and you. INTEREP NATIONAL RADIO SALES, INC. By ------------------------------------- Ralph C. Guild Chairman of the Board 10 EX-99.1 7 dex991.txt PRESS RELEASE ISSUED MAY 8,2002 [LETTERHEAD OF INTEREP APPEARS HERE] EXHIBIT 99.1 N E W S R E L E A S E INTEREP RAISES $5 MILLION THROUGH PRIVATE PLACEMENT OF SECURITIES FOR IMMEDIATE RELEASE --------------------- NEW YORK -- May 8, 2002 -- Interep (NASDAQ: IREP), the largest independent sales and marketing company specializing in radio, the Internet and new media, today announced it has raised $5 million through a private placement of securities with a group of institutional investors including current shareholders. The investors are receiving 50,000 units consisting of: 1 share of $100 face value, 4% pay in kind, Series A convertible preferred stock; together with 6.25 warrants. Each share of preferred stock is convertible into twenty-five shares of Interep's Class A common stock. Each warrant may be exercised within the next five years to acquire one share of Class A common stock at $4 per share. "We are pleased to close this financing with such a well respected group of institutional investors," stated Ralph Guild, Chairman and CEO. "We believe this vote of confidence in the Company will benefit all our shareholders." "As we have expressed on our last few conference calls, the additional funds will provide added working capital to compensate for the impact of the problems the media industry encountered in 2001," stated Bill McEntee, Vice President and Chief Financial Officer. "We have, and are continuing to, explore additional financing alternatives. In view of the current market conditions, we believe this transaction provides an excellent opportunity for continued growth at Interep and value for our shareholders." About Interep: Interep is the nation's largest independent advertising sales and marketing company specializing in radio, the Internet and complementary media, with offices in 21 cities. Interep is the parent company of ABC Radio Sales, Allied Radio Partners, Cumulus Radio Sales, D&R Radio, Infinity Radio Sales, McGavren Guild Radio, MG/Susquehanna, SBS/Interep, as well as Interep Interactive, the company's interactive representation and web publishing division specializing in the sales and marketing of on-line advertising, including streaming media. Interep Interactive includes Cybereps, Winstar Interactive and Perfect Circle Media. In addition, Interep provides a variety of support services, including: consumer and media research, sales and management training, promotional programs and unwired radio "networks." Clients also benefit from Interep's new business development team, the Interep Marketing Group. For more information, visit the company's website at www.interep.com. The information contained in this news release, other than historical information, consists of forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. For a discussion of certain factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to Interep's recent filings with the Securities and Exchange Commission. For more information, visit the company's website at www.interep.com. ---------------- Contact: Ralph Guild (212) 916-0508 Bill McEntee (561) 227-0601 Or Mike Frank (201) 659-0101 mike@mikefrankassociates.com ---------------------------- EX-99.2 8 dex992.txt LETTER DATED 05/15/02 REGARDING ARTHUR ANDERSEN LLP Exhibit 99.2 INTEREP NATIONAL RADIO SALES, INC. 100 Park Avenue, 5th Floor New York, New York 10017 Letter To Commission Pursuant To Temporary Note 3T May 15, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0408 Ladies and Gentlemen: Pursuant to Temporary Note 3T to Article 3 of Regulation S-X, Interep National Radio Sales, Inc. ("Interep") has obtained a letter of representation from Arthur Andersen LLP ("Andersen") stating that Andersen's review of Interep's interim financial statements for the quarter ending March 31, 2002 was subject to their quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Andersen personnel working on the review and availability of national office consultation. Availability of personnel at foreign affiliates of Andersen is not relevant to this review. Very truly yours, INTEREP NATIONAL RADIO SALES, INC. By: /s/ Ralph C. Guild ----------------------------------- Name: Ralph C. Guild Title: President, Chief Executive Officer & Chairman of the Board -----END PRIVACY-ENHANCED MESSAGE-----