FILED PURSUANT TO RULE 424B(3)
FILE No. 333-59848
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Prospectus
Young Broadcasting Inc.
Offer to Exchange
$500,000,000 of our
10% Senior Subordinated Notes due 2011
The notes being offered by this prospectus are being issued in exchange for
notes sold by us in a private placement on March 1, 2001. The exchange notes
will be governed by the same indenture governing the initial notes. The
exchange notes will be substantially identical to the initial notes, except the
transfer restrictions will not apply to the exchange notes.
The exchange offer expires at 5:00 p.m., New York City time, on September 24,
2001, unless extended.
No public market exists for the initial notes or the exchange notes. We do not
intend to list the exchange notes on any securities exchange or to seek
approval for quotation through any automated quotation system.
See "Risk Factors" beginning on page 10 for a discussion of certain risks that
you should consider in connection with the tender of your initial notes.
-----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these notes or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
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August 20, 2001
TABLE OF CONTENTS
Page
----
Prospectus Summary.................... 1
Risk Factors.......................... 10
Use Of Proceeds....................... 17
Unaudited Pro Forma Combined Financial
Statements.......................... 18
Description Of Certain Indebtedness... 20
Description Of Notes.................. 24
Book-entry, Delivery And Form......... 50
Page
----
Exchange Offer.......................... 53
United States Federal Tax Considerations 63
Plan Of Distribution.................... 67
Legal Matters........................... 68
Experts................................. 68
Incorporation Of Certain Documents By
Reference............................. 68
Available Information................... 69
-----------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy these securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made under this prospectus after the date of this prospectus
shall create an implication that the information contained in this prospectus
or our affairs have not changed since the date of this prospectus.
-----------------
INDUSTRY AND MARKET DATA
In this prospectus, we rely on and refer to information and statistics
regarding the television broadcasting industry and our market share in the
sectors in which we compete. We obtained this information and statistics from
various third-party sources, discussions with our customers and our own
internal estimates. All market rank, rank in market, station audience rating
and share, and television household data in this prospectus are from the
Nielsen Station Index Viewers and Profile dated November 2000, as prepared by
A.C. Nielsen Company. Nielsen data provided herein refers solely to the United
States television markets. We believe that these sources and estimates are
reliable, but we have not independently verified them and cannot guarantee
their accuracy or completeness.
i
PROSPECTUS SUMMARY
The following summary contains information about us and the exchange of the
initial notes. It does not contain all the information that may be important to
you in making a decision to exchange the initial notes. For a more complete
understanding of us and the exchange of the initial notes, we encourage you to
read the entire prospectus and the documents incorporated in this prospectus by
reference.
The Company
We own and operate twelve television stations in geographically diverse
markets and a national television sales representation firm, Adam Young Inc.
Six of the stations are affiliated with American Broadcasting Companies, Inc.
("ABC"), three are affiliated with CBS Inc., two are affiliated with National
Broadcasting Company, Inc. ("NBC"), and one is an independent station. Each of
our stations is owned and operated by a direct or indirect subsidiary. We are
presently the eighth largest ABC network affiliate group in terms of households
reached. Our sole independent television station, KCAL, Los Angeles,
California, is the only independent VHF television station operating in the Los
Angeles market, which is ranked as the second-largest television market in
terms of population and the largest in terms of estimated television revenue.
We were founded in 1986 by Vincent Young and his father, Adam Young. Vincent
Young, our chairman, has over 25 years of experience in the television
broadcast industry, and Adam Young has over 50 years of experience in the
industry. Ronald Kwasnick, our president, has over 25 years of experience in
the industry.
We are a Delaware corporation that was formed in 1986. Our principal offices
are located at 599 Lexington Avenue, New York, New York 10022, and our
telephone number is (212) 754-7070.
Recent Developments
BayTV. On July 2, 2001, we received notification from AT&T Broadband, LLC
that carriage of BayTV on AT&T Broadband's cable system in San Francisco would
end effective July 31, 2001. As of that date, BayTV ceased operations. We had
previously acquired a 51% interest in BayTV, a 24-hour local news and
information channel in the San Francisco Bay Area, as part of our acquisition
of KRON-TV in June 2000. The cessation of BayTV activities will not have
material impact on either us or KRON-TV.
Public Offering. On June 26, 2001, we completed an underwritten public
offering of 3.0 million shares of our Class A common stock at a price per share
of $36.00. The proceeds of the offering to us, net of underwriting discounts
and commissions, was $103.5 million and all such net proceeds were used by us
to repay indebtedness outstanding under our senior credit facilities.
KRON and BayTV Acquisition. On June 26, 2000, we acquired KRON-TV, currently
an NBC affiliated station in San Francisco, and a 51% interest in BayTV from
The Chronicle Publishing Company. At the time of this acquisition, we entered
into two senior credit facilities in the aggregate amount of $800.0 million, a
portion of which was used to finance the cash component of the acquisition and
to pay the fees and expenses associated with the acquisition. We paid Chronicle
Publishing $650.0 million in cash plus 3,888,788 shares of our Class A common
stock. Chronicle Publishing
1
subsequently distributed these shares to its shareholders. While KRON-TV is
currently an NBC affiliate, NBC has informed us that they will not extend the
affiliation past December 31, 2001, when the affiliation agreement expires.
Share Repurchase Program. On June 27, 2000, we announced that our board of
directors had authorized the repurchase of up to $30.0 million of our Class A
common stock. We have repurchased 888,631 shares of our Class A common stock
under this repurchase program for an aggregate purchase price of $30.0 million.
Disposition of WKBT-TV. On February 29, 2000, we completed the sale of WKBT-
TV, in La Crosse, Wisconsin to Television Wisconsin, Inc. of Madison, Wisconsin
for approximately $24.0 million. We recorded a gain on the sale of
approximately $15.7 million, and a provision for income taxes of $1.5 million,
in connection with the sale in the first quarter of 2000. The proceeds from the
sale were used to pay down debt under our then existing senior credit facility.
Initial Offering
The initial notes were originally issued by us on March 1, 2001 in a private
offering. We are parties to a registration rights agreement with the initial
purchaser of the initial notes pursuant to which we agreed, among other things,
to file a registration statement with respect to the exchange notes on or
before April 30, 2001, to use our best efforts to cause the registration
statement to be declared effective by August 28, 2001, and to complete this
exchange offer by September 27, 2001. We must pay liquidated damages to the
holders of the initial notes if we do not meet those deadlines.
2
Summary of Exchange Offer
We are offering to exchange $500.0 million aggregate principal amount of our
exchange notes for $500.0 million aggregate principal amount of our initial
notes. To exchange your initial notes, you must properly tender them and we
must accept your tender. We will exchange all outstanding initial notes that
are validly tendered and not validly withdrawn.
Expiration Date................. The exchange offer will expire at 5:00 p.m., New York City time
on September 24, 2001, unless we extend it.
Registration Rights Agreement... You have the right to exchange the initial notes that you hold for
exchange notes with substantially identical terms. This exchange
offer is intended to satisfy these rights. Once the exchange offer
is complete, you will no longer be entitled to any exchange or
registration rights with respect to your initial notes.
Accrued Interest on the Exchange
Notes and Initial Notes....... The exchange notes will bear interest from their issuance date.
Holders of initial notes which are accepted for exchange will
receive, in cash, accrued interest on the initial notes to, but not
including, the issuance date of the exchange notes. Such interest
will be paid with the first interest payment on the exchange notes.
Conditions to the Exchange
Offer......................... The exchange offer is subject to customary conditions, which we
may waive. You should read the discussion "Exchange Offer--
Conditions to the Exchange Offer" for more information regarding
conditions of the exchange offer.
Procedures for Tendering
Initial Notes................. If you are a holder of initial notes and wish to accept the
exchange offer, you must either:
. complete, sign and date the accompanying Letter of
Transmittal, or a facsimile of the Letter of Transmittal; or
. arrange for The Depository Trust Company to transmit required
information to the exchange agent in connection with a book-
entry transfer.
The exchange agent must receive such documentation or
information and your initial notes on or prior to the expiration date
at the address set forth in this prospectus under "The Exchange
Offer--Exchange Agent."
Representation Upon Tender...... By tendering your initial notes in this manner, you will be
representing, among other things, that:
. the exchange notes you acquire in the exchange offer are
being acquired in the ordinary course of your business;
3
. you are not participating, do not intend to participate, and have
no arrangement or understanding with any person to
participate, in the distribution of the exchange notes issued to
you in the exchange offer; and
. you are not a party related to us.
Procedures for Beneficial
Owners .......................... If you are the beneficial owner of initial notes registered in the
name of a broker, dealer or other nominee and you wish to
tender your notes, you should contact the person in whose name
your notes are registered and promptly instruct the person to
tender on your behalf.
Material Federal Tax
Consequences..................... The exchange of initial notes for exchange notes will not result in
any gain or loss to you for federal income tax purposes. Your
holding period for the exchange notes will include the holding
period for the initial notes and your adjusted tax basis of the
exchange notes be the same as your adjusted tax basis of the
initial notes at the time of the exchange. For additional
information, you should read the discussion under "U.S. Federal
Tax Considerations."
Failure to Exchange Will Affect
You Adversely.................... Initial notes that are not tendered, or that are tendered but not
accepted, will be subject to the existing transfer restrictions on
the initial notes after the exchange offer. We will have no further
obligation to register the initial notes under the Act of 1933. If you
do not participate in the exchange offer, the liquidity of your notes
could be adversely affected.
Guaranteed Delivery
Procedures....................... If you wish to tender your initial notes and time will not permit
your required documents to reach the exchange agent by the
expiration date, or the procedure for book-entry transfer cannot
be completed on time, you may tender your notes according to
the guaranteed delivery procedures. For additional information,
you should read the discussion under "Exchange Offer--
Guaranteed Delivery Procedure."
Acceptance of Initial Notes;
Delivery of Exchange Notes....... Subject to customary conditions, we will accept initial notes which
are properly tendered in the exchange offer and not withdrawn,
before 5:00 p.m., New York City time, on the expiration date of
the exchange offer. The exchange notes will be delivered as
promptly as practicable following the expiration date.
Use of Proceeds.................... We will not receive any proceeds from the exchange offer.
Exchange Agent..................... First Union National Bank is the exchange agent for the offer.
4
Summary of Terms of the Exchange Notes
The exchange notes are substantially identical to the initial notes, with
limited exceptions. The exchange notes will evidence the same debt as the
initial notes. The exchange notes are subject to the same indenture as the
initial notes. For additional information, you should read the discussion under
"Description of Notes."
Notes Offered............ $500,000,000 aggregate principal amount of 10% Senior
Subordinated Notes due 2011.
Maturity Date............ March 1, 2011.
Interest Rate and Payment Interest on the exchange notes will accrue at the rate of 10% per
Dates.................. annum, payable semiannually in cash in arrears on March 1 and
September 1 of each year.
Guarantees............... All of our subsidiaries will guarantee the exchange notes. If we
create or acquire a new subsidiary it will guarantee the notes
unless we designate the subsidiary as an "unrestricted
subsidiary" under the indenture governing the exchange notes.
The guarantees by our subsidiaries will be unsecured senior
subordinated obligations of each such subsidiary and will rank
junior to all existing and future senior debt of those subsidiaries.
Optional Redemption...... We may redeem some or all of the notes at our option at any
time, on or after March 1, 2006, at the redemption prices set forth
in the section "Description of Notes--Redemption--Optional
Redemption."
In addition, on or before March 1, 2004, we have the option to
redeem exchange notes representing up to 33 1/3% of the aggregate
principal amount of the exchange notes with the net proceeds of
certain sales of our equity, at the price listed in the section
"Description of Notes--Redemption--Optional Redemption."
Mandatory Offer to If we sell certain assets or we experience specific kinds of
Repurchase............. changes of control, we must make an offer to repurchase the
notes at the prices listed in the section "Description of Notes--
Change of Control." We cannot assure you that we will have
sufficient funds available satisfy our obligations under the notes.
See "Risk Factors--We may not be able to finance a change of
control offer required by the indenture."
Ranking.................. The notes are general unsecured obligations and will rank junior
to all of our outstanding indebtedness under our existing senior
credit facilities and junior to any future senior debt of us and our
subsidiaries. The notes will rank equally with our 8 3/4% senior
subordinated notes due 2007 and our 9% senior subordinated
notes due 2008.
5
In addition, the notes will rank equally with all of our senior
subordinated debt. The notes will rank ahead of all our future
debt that expressly provides that it is subordinated to the notes.
As of June 30, 2001, we had approximately $1,267.5 million of
indebtedness outstanding, $437.2 million of which would rank
effectively senior to the notes in right of payment and $325
million of which would rank equally with these notes. In addition,
as of June 30, 2001 we had the capacity to borrow up to an
additional $75.0 million of indebtedness ranking effectively senior
to the notes in right of payment.
Basic Covenants of We will issue the exchange notes under an indenture with First
Indenture....... Union National Bank N.A., as trustee. The indenture will limit our
ability and the ability of certain of our subsidiaries to:
. incur more debt;
. issue capital stock;
. enter into transactions with affiliates;
. merge or consolidate;
. pay dividends, redeem stock or make other distributions;
. make certain investments; and
. enter into sale and leaseback transactions.
These covenants are subject to a number of important
qualifications and limitations. See "Description of Notes--
Covenants."
6
Summary Historical and Pro Forma Consolidated Financial Data
The summary historical consolidated financial data set forth below for the
three years ended December 31, 2000 have been derived from our consolidated
financial statements. The consolidated financial statements for the three years
ended December 31, 2000 have been audited by Ernst & Young LLP, independent
auditors. The summary historical consolidated financial data for the six month
periods ended June 30, 2000 and 2001 have been derived from our unaudited
consolidated financial statements, which include all adjustments (consisting of
normal recurring accruals) that we consider necessary for a fair presentation
of the financial position and results of operations for these periods. The data
for the periods presented are not necessarily comparable because of
acquisitions made throughout such periods. The unaudited pro forma consolidated
financial information for the twelve-month period ended December 31, 2000 has
been derived from the unaudited pro forma consolidated financial data included
elsewhere in this prospectus.
Six Months Ended
Year Ended December 31, June 30,
-------------------------------------------------- ------------------------
Pro forma
1998 1999 2000 2000 2000 2001
----------- ----------- ----------- ----------- ----------- -----------
Statement of Operations Data:
Net revenue(1)................................. $ 277,052 $ 280,659 $ 372,685 $ 446,734 $ 147,091 $ 192,858
Operating expenses, including selling, general
and administrative expenses................... 116,712 114,974 149,773 182,177 60,721 86,700
Amortization of program license rights......... 33,014 47,690 57,655 63,187 27,308 30,604
Depreciation and amortization.................. 49,472 47,983 55,232 69,913 22,669 30,899
Corporate overhead............................. 7,860 8,227 12,010 12,010 7,034 5,640
Non-cash compensation paid in common
stock(2)...................................... 1,146 19,102 1,321 1,321 665 847
Merger related costs........................... 1,444 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Operating income............................... 67,404 42,683 96,694 118,126 28,694 38,168
Interest expense, net.......................... (62,617) (62,981) (95,843) (125,503) (31,605) (60,836)
Gain on sale of station........................ -- -- 15,651 15,651 15,651 --
Minority interest in BayTV..................... -- -- -- (66) -- --
Other expenses, net............................ (788) (1,244) (1,013) (933) (621) (895)
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before provision for income taxes
and extraordinary item........................ 3,999 (21,542) 15,489 7,275 12,119 (23,563)
Provision for income taxes..................... -- -- (1,500) (1,500) (1,500) --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item........ $ 3,999 $ (21,542) $ 13,989 $ 5,775 10,619 (23,563)
Extraordinary loss on extinguishment
of debt....................................... -- -- -- -- -- (12,436)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss).............................. $ 3,999 $ (21,542) $ 13,989 $ 5,775 $ 10,619 $ (35,999)
=========== =========== =========== =========== =========== ===========
Income (loss) per basic common share before
extraordinary item............................ $ 0.28 $ (1.59) $ 0.92 $ 0.34 $ 0.78 (1.41)
Net income (loss) per basic common share....... $ 0.28 $ (1.59) $ 0.92 $ 0.34 $ 0.78 $ (2.15)
Basic shares used in earnings per share
calculation................................... 14,147,522 13,588,108 15,157,243 17,037,886 13,618,034 16,729,923
Other Financial Data:
Ratio of earnings to fixed charges(3).......... 1.1x -- 1.2x -- 1.3x --
Cash flow provided by operating activities..... $ 54,292 $ 36,398 $ 80,762 -- $ 33,186 $ 24,733
Cash flow used in investing activities......... $ (34,154) $ (7,887) $ (645,115) -- $ (634,722) $ (7,837)
Cash flow (used in) provided by financing
activities.................................... $ (21,127) $ (26,222) $ 566,977 -- $ 602,878 $ 85,022
Payments for program license liabilities....... $ 33,337 $ 46,678 $ 53,623 $ 59,292 $ 26,050 $ 28,019
Broadcast cash flow(4)......................... $ 127,003 $ 119,007 $ 169,289 $ 205,265 $ 60,320 $ 78,139
Broadcast cash flow margin..................... 45.8% 42.4% 45.4% 45.9% 41.0% 40.5%
Adjusted broadcast cash flow(5)................ -- -- -- $ 216,832 $ 96,296 $ --
Operating cash flow(6)......................... $ 119,143 $ 110,780 $ 157,279 $ 193,255 $ 57,696 $ 72,499
Adjusted operating cash flow(7)................ -- -- -- $ 204,435 $ 89,262 $ --
Capital expenditures........................... $ 7,524 $ 9,360 $ 17,213 $ 21,034 $ 2,624 $ 2,877
Balance Sheet Data (as of end of period):
Total assets................................... $ 825,668 $ 818,670 $ 1,554,368 $ 1,552,822 $ 1,551,823 $ 1,599,790
Long-term debt (including current portion)..... $ 658,224 $ 650,510 $ 1,276,285 $ 1,282,715 $ 1,277,761 $ 1,267,505
Stockholders' equity........................... $ 46,865 $ 30,659 $ 103,094 $ 90,343 $ 130,834 $ 157,953
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Notes to Summary Historical and Pro Forma Consolidated Financial Data
(1)Net revenue is total revenue net of agency and national representation
commissions.
(2)Represents non-cash charges for the employer matching contribution to the
defined benefit plan in 1998, 1999 and 2000 of shares of Class A common
stock. In 1999, approximately $18.3 million relates to the extension of the
expiration date of stock options granted in 1994 and 1995.
(3)For purposes of this ratio, "fixed charges" are defined as interest,
amortization of debt expense and a portion of rental expense representing
the interest factor, and "earnings" are defined as income (loss) before
income taxes, extraordinary items and fixed charges. Earnings were
insufficient to cover fixed charges by $1.1 million, $21.5 million and $23.6
million for the years ended December 31, 1997 and 1999 and the six months
ended June 30, 2001, respectively.
(4)"Broadcast cash flow" is defined as operating income before income taxes and
interest expense, plus depreciation and amortization (including amortization
of program license rights), non-cash compensation, merger related costs and
corporate overhead, less payments for program license liabilities. Other
television broadcasting companies may measure broadcast cash flow in a
different manner. We have included broadcast cash flow data because such
data are commonly used as a measure of performance for broadcast companies
and are also used by investors to measure a company's ability to service
debt. Broadcast cash flow is not, and should not be used as, an indicator or
alternative to operating income, net income or cash flow as reflected in our
consolidated financial statements, is not intended to represent funds
available for debt service, dividends, reimbursement or other discretionary
uses, is not a measure of financial performance under generally accepted
accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
(5)Represents pro forma broadcast cash flow after adjustments for net
annualized expense reductions for labor, benefits, programming, national
representation fees, advertising and promotion and other operating costs.
The following table sets forth a reconciliation of pro forma broadcast cash
flow to adjusted broadcast cash flow:
For the Year
Ended
December 31,
2000
------------
(dollars in
thousands)
Broadcast cash flow (pro forma). $205,265
Labor & Benefits............. 6,308
Programming costs............ 1,560
National representation fees. 1,960
Advertising & Promotion...... 976
Other operating costs........ 763
--------
Adjusted broadcast cash flow.... $216,832
========
(6)"Operating cash flow" is defined as operating income before income taxes and
interest expense, plus depreciation and amortization (including amortization
of program license rights), non-cash compensation and merger related costs,
less payments for program license liabilities. Other television broadcasting
companies may measure operating cash flow in a different manner. We have
included operating cash flow data because such data are used by investors to
measure a company's ability to service debt and are used in calculating the
amount of additional indebtedness that we may incur in the future under our
indentures. Operating cash flow does not purport to represent cash provided
by operating activities as reflected in our consolidated financial
statements, is not a measure of financial performance under generally
accepted accounting
8
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
(7)Represents pro forma operating cash flow after adjustments for net
annualized expense reductions for labor, benefits, programming, national
representation fees, advertising and promotion and other operating costs.
The following table sets forth a reconciliation of pro forma operating cash
flow to adjusted operating cash flow:
For the Year
Ended
December 31,
2000
------------
(dollars in
thousands)
Operating cash flow (pro forma). $193,255
Labor & Benefits............. 6,308
Programming costs............ 1,560
National representation fees. 1,960
Advertising & Promotion...... 976
Other operating costs........ 376
--------
Adjusted operating cash flow.... $204,435
========
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RISK FACTORS
An investment in the notes involves a high degree of risk. You should
carefully consider the risk factors set forth below, as well as other
information appearing elsewhere in this prospectus and the documents
incorporated in this prospectus by reference, before tendering your initial
notes in exchange for exchange notes.
Risks Related To The Notes And The Exchange Offer
Your failure to participate in the exchange offer will have adverse
consequences
Holders of initial notes who do not exchange their initial notes for
exchange notes pursuant to the exchange offer will continue to be subject to
the restrictions on transfer of the initial notes as a consequence of the
issuance of the initial notes pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. In general, initial notes may not be offered or sold, unless registered
under the Securities Act of 1933, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. We do not anticipate that we will register the initial notes under the
Securities Act.
Because of the lack of a public market for the exchange notes, you may not be
able to sell your exchange notes at all or at an attractive price
The exchange notes are a new issue of securities with no existing trading
market. We do not intend to have the notes listed on a national securities
exchange, although we expect that they will be eligible for trading in the
PORTAL market. In addition, while the initial purchaser of the initial notes
has advised us that it currently intends to make a market in the exchange
notes, it is not obligated to do so, and may discontinue market making
activities at any time without notice. Accordingly, we cannot assure you as to
the liquidity of the market for the exchange notes or the prices at which you
may be able to sell the exchange notes.
We have substantial debt and have significant interest payment requirements
We have a substantial amount of debt. The following table shows certain
important credit statistics about us and is presented on an actual basis which
gives effect to the offering of the initial notes and repayment of some of our
existing debt.
As of June 30, 2001
----------------------
(dollars in thousands)
Total debt................ $1,267,505
Shareholders' equity...... 157,953
Debt to equity ratio...... 8.0x
Subject to restrictions in our senior credit facilities, the indenture
governing the notes and the indentures governing our 8 3/4% senior subordinated
notes due 2007 and our 9% senior subordinated notes due 2006, we may also incur
significant amounts of additional debt for working capital, for capital
expenditures, in connection with our strategy of pursuing strategic
acquisitions and for other purposes.
Our high level of combined debt could have important consequences for our
company, including the following:
. We may have difficulty borrowing money for working capital, capital
expenditures, acquisitions or other purposes;
10
. We will need to use a large portion of our revenues to pay interest on
borrowings under our senior credit facilities and our senior subordinated
notes, which will reduce the amount of money available to finance our
operations, capital expenditures and other activities;
. Some of our debt has a variable rate of interest, which exposes us to the
risk of increased interest rates;
. Borrowings under our senior credit facilities will be secured and will
mature prior to the exchange notes;
. We are more vulnerable to economic downturns and adverse developments in
our business;
. We are less flexible in responding to changing business and economic
conditions, including increased competition and demand for new products
and services; and
. We may not be able to implement our strategy.
We depend on the cash flow of our subsidiaries to satisfy our obligations,
including our obligations under the exchange notes
Our operations are conducted through our direct and indirect wholly-owned
subsidiaries, which will guarantee the exchange notes, jointly and severally,
fully and unconditionally, on a senior subordinated unsecured basis. As a
holding company, we own no significant assets other than our equity in our
subsidiaries, and we are dependent upon the cash flow of our subsidiaries to
meet our obligations. Accordingly, our ability to make interest and principal
payments when due to holders of the exchange notes and our ability to purchase
the exchange notes upon a change of control is dependent upon the receipt of
sufficient funds from our subsidiaries, which may be restricted by the terms of
existing and future senior indebtedness of our subsidiaries, including the
terms of existing and future guarantees of our indebtedness given by our
subsidiaries. As a result, the exchange notes and the subsidiary guarantees
effectively will be subordinated to all existing and future senior indebtedness
and other liabilities and commitments of our subsidiaries.
Your right to receive payment on the exchange notes and under the guarantees is
junior to all of our and the guarantors' senior debt
The exchange notes will be general unsecured obligations, junior in right of
payment to all of our and each guarantor's existing and future senior debt,
including obligations under our senior credit facilities. The exchange notes
will not be secured by any of our or the guarantors' assets, and as such will
be effectively subordinated to any secured debt that we or the guarantors may
have now or may incur in the future to the extent of the value of the assets
securing that debt.
In the event that we or a guarantor is declared bankrupt, becomes insolvent
or is liquidated or reorganized, any debt that ranks ahead of the exchange
notes and the guarantees will be entitled to be paid in full from our assets or
the assets of the guarantor, as applicable, before any payment may be made with
respect to the exchange notes or under the affected guarantees. In any of the
foregoing events, we cannot assure you that we would have sufficient assets to
pay amounts due on the exchange notes. As a result, holders of the exchange
notes may receive less, proportionally, than the holders of debt that is senior
to the exchange notes and the guarantees. The subordination provisions of the
indenture will also provide that we can make no payment to you during the
continuance of payment defaults on our senior debt, and payments to you may be
suspended for a period of up to 179 days if a nonpayment default exists under
our senior debt. See "Description of Notes--Ranking and Subordination" for
additional information.
11
At June 30, 2001, the exchange notes and the guarantees would have ranked
junior to $437.2 million of our and our subsidiaries' senior debt and an
additional $75.0 million of unused availability would have been available to
borrow under the senior credit facilities. In addition, the indenture and our
senior credit facilities permit, subject to specified limitations, the
incurrence of additional debt, some or all of which may be senior debt. See
"Description of Notes--Covenants" and "Description of Certain Indebtedness" for
additional information.
We may be able to incur significantly more debt in the future, which will
increase the risks related to our indebtedness
At June 30, 2001, we had approximately $75.0 million available (subject to
certain borrowing conditions) for additional borrowings under our senior credit
facilities. In addition, we may be able to incur substantial additional debt in
the future. If we do so, the risks described above relating to having
substantial debt could intensify. Provided we meet certain financial and other
covenants, the terms of the indenture governing the exchange notes do not
prohibit us from incurring such additional indebtedness. We expect to incur
additional indebtedness in connection with our continuing strategy of pursuing
strategic acquisitions and expanding through internal growth.
Covenant restrictions under our senior credit facilities and our indentures may
limit our ability to operate our business
Our senior credit facilities and the indentures governing our existing notes
contain, and the indenture governing the exchange notes and certain of our
other agreements regarding debt will contain, among other things, covenants
that may restrict our and the guarantors' ability to finance future operations
or capital needs or to engage in other business activities. Our senior credit
facilities and our indentures restrict, among other things, our ability and the
ability of the guarantors to:
. borrow money;
. pay dividends or make distributions;
. purchase or redeem stock;
. make investments and extend credit;
. engage in transactions with affiliates;
. engage in sale-leaseback transactions;
. consummate certain asset sales;
. effect a consolidation or merger or sell, transfer, lease, or otherwise
dispose of all or substantially all of our assets; and
. create liens on our assets.
In addition, our senior credit facilities require us to maintain specified
financial ratios and satisfy certain financial condition tests which may
require that we take action to reduce our debt or to act in a manner contrary
to our business objectives. Events beyond our control, including changes in
general economic and business conditions, may affect our ability to meet those
financial ratios and financial condition tests. We cannot assure you that we
will meet those tests or that our senior lenders will waive any failure to meet
those tests. A breach of any of these covenants would result in a default under
our senior credit facilities and our indentures. If an event of default under
our senior credit facilities occurs, our senior lenders could elect to declare
all amounts outstanding under such senior credit facilities, together with
accrued interest, to be immediately due and payable.
12
We may not be able to finance a change of control offer required by the
indenture
If we were to experience a change of control, the indenture governing the
exchange notes requires us to purchase all of the exchange notes then
outstanding at 101% of their principal amount, plus accrued interest to the
date of repurchase. A change of control under the indenture governing the
exchange notes would also constitute a change of control under the indentures
governing each of our currently existing senior subordinated notes, pursuant to
which we would be required to offer to repurchase those notes. If a change of
control were to occur, we cannot assure you that we would have sufficient funds
to purchase the exchange notes or any of our currently existing senior
subordinated notes. In fact, we expect that we would require third-party
financing, but we cannot assure you that we would be able to obtain that
financing on favorable terms or at all.
Our senior credit facilities restrict our ability to repurchase the exchange
notes, even when we are required to do so by the indenture in connection with a
change of control. A change of control could therefore result in a default
under such senior credit facilities and could cause the acceleration of our
debt. The inability to repay such debt, if accelerated, and to purchase all of
the tendered notes, would constitute an event of default under the indenture.
The guarantees may not be enforceable because of fraudulent conveyance laws
The incurrence of the guarantees by the guarantors may be subject to review
under U.S. federal bankruptcy law or relevant state fraudulent conveyance laws
if a bankruptcy case or lawsuit is commenced by or on behalf of the guarantors'
unpaid creditors. Under these laws, if in such a case or lawsuit a court were
to find that, at the time such guarantor incurred a guarantee of the exchange
notes, such guarantor:
. incurred the guarantee of the exchange notes with the intent of hindering,
delaying or defrauding current or future creditors; or
. received less than reasonably equivalent value or fair consideration for
incurring the guarantee of the exchange notes and such guarantor:
. was insolvent or was rendered insolvent;
. was engaged, or about to engage, in a business or transaction for which
its remaining assets constituted unreasonably small capital to carry on
its business; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay as such debts matured (as all of the foregoing terms are
defined in or interpreted under the relevant fraudulent transfer or
conveyance statutes),
then such court could avoid the guarantee of such guarantor or subordinate the
amounts owing under such guarantee to such guarantor's presently existing or
future debt or take other actions detrimental to you.
It may be asserted that the guarantors incurred their guarantees for our
benefit and they incurred the obligations under the guarantees for less than
reasonably equivalent value or fair consideration.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, a company would be considered insolvent if, at the
time it incurred the debt or issued the guarantee, either:
. the sum of its debts (including contingent liabilities) is greater than
its assets, at fair valuation; or
. the present fair saleable value of its assets is less than the amount
required to pay the probable liability on its total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured.
13
If a guarantee is avoided as a fraudulent conveyance or found to be
unenforceable for any other reason, you will not have a claim against that
obligor and will only be a creditor of us or any guarantor whose obligation was
not set aside or found to be unenforceable.
Risks Related To Our Business
Our business may be adversely affected by national and local economic
conditions that adversely affect advertising
The television industry is cyclical in nature. Because we rely upon sales of
advertising time at our stations for substantially all of our revenues, our
operating results are particularly susceptible to being affected by prevailing
economic conditions at both the national and regional levels. KRON and KCAL,
together and individually, represent a significant portion of our revenues; our
operating results, therefore, are particularly susceptible to economic
conditions in the San Francisco and Los Angeles markets. Our revenues could be
adversely affected by a future national recessionary environment and, due to
the substantial portion of revenues derived from local advertisers, our
operating results in individual markets could be adversely affected by local or
regional economic downturns.
We may experience disruptions in our business if we acquire and integrate new
television stations
As part of our business strategy, we will continue to evaluate opportunities
to acquire television stations. There can be no assurance that we will find
attractive acquisition candidates or effectively manage the integration of
acquired stations into our existing business. If the expected operating
efficiencies from acquisitions do not materialize, if we fail to integrate new
stations or recently acquired stations into our existing business, or if the
costs of such integration exceed expectations, our operating results and
financial condition could be adversely affected. If we make acquisitions in the
future, we may need to incur more debt, issue more equity securities (which
could dilute the position of current stockholders), and we may incur contingent
liabilities and amortization expenses related to goodwill and other intangible
assets. Any of these occurrences could adversely affect our operating results
and financial condition.
We are dependent on our personnel, and the departure of one or more of our key
personnel could impair our ability to effectively operate our business or
pursue our business strategies
Our success is substantially dependent upon the retention of, and the
continued performance by, our senior management. The loss of the services of
Vincent J. Young, Chairman, Ronald J. Kwasnick, President, James A. Morgan,
Executive Vice President, or Deborah A. McDermott, Executive Vice
President--Operations, could have an adverse impact on us.
We are dependent on networks for our programming, and the loss of one or more
of our network affiliations would disrupt our business and could have a
material adverse effect on our financial condition and results of operations by
reducing station revenue at the effected station(s)
Six of our twelve stations are affiliated with the ABC television network,
three are affiliated with the CBS television network, two are affiliated with
the NBC television network and one station is independent. The television
viewership levels for stations other than KCAL (Los Angeles, California), our
only independent television station, are materially dependent upon programming
provided by these major networks and are particularly dependent upon
programming provided by the ABC network. Each of our stations other than KCAL
is a party to an affiliation agreement with one of the networks, giving the
station the right to rebroadcast programs transmitted by the network. The
networks currently pay each affiliated station a fee for each hour of network
programming broadcast by the stations in exchange for the networks' right to
sell the majority of the commercial announcement time during such programming.
14
As an independent station, KCAL purchases all of its programming, resulting
in proportionally higher programming costs for the station. We may be exposed
in the future to volatile or increased programming costs that may adversely
affect our operating results. Further, programs are usually purchased for
broadcasting for two to three year periods, making it difficult to accurately
predict how a program will perform. In some instances, programs must be
replaced before their cost has been fully amortized, resulting in write-offs
that increase station operating costs.
While KRON is currently affiliated with the NBC television network, NBC has
informed us that they will not extend the affiliation past December 31, 2001
when the affiliation agreement expires. As a result, we expect that KRON will
become an independent station and, in such case, it is likely that KRON will
experience increased programming costs and generate lower broadcast cash flow,
which may adversely affect our operating results.
We are dependent on KRON and KCAL for over 50% of our broadcast cash flow
KRON and KCAL together contributed approximately 59.5% and 56.0% of our
broadcast cash flow for the years ended December 31, 2000 and 1999,
respectively. We are dependent on these two stations to satisfy a substantial
amount of our obligations. If either of these stations were to experience
increased programming costs or otherwise failed to be as profitable as they
have been in recent years, our operating results may be adversely affected.
Our business has been, and continues to be, subject to extensive governmental
legislation and regulation, which may restrict our ability to pursue our
business strategy and/or increase our operating expenses
Our television operations are subject to significant regulation by the
Federal Communications Commission under the Communications Act of 1934, as
amended. A television station may not operate without the authorization of the
FCC. Approval of the FCC is required for the issuance, renewal, and transfer of
station operating licenses. In particular, our business will be dependent upon
our ability to continue to hold television broadcasting licenses from the FCC.
FCC licenses generally have a term of eight years. While in the vast
majority of cases such licenses are renewed by the FCC, there can be no
assurance that our licenses will be renewed at their expiration dates or, if
renewed, that the renewal terms will be for the maximum permitted period. The
non-renewal or revocation of one or more of our primary FCC licenses could have
a material adverse effect on our operations. Congress and the FCC currently
have under consideration, and may in the future adopt, new laws, regulations,
and policies regarding a wide variety of matters that could, directly or
indirectly, affect the operation and ownership of our broadcast properties. We
are unable to predict the impact that any such laws or regulations may have on
our operations.
We operate in a very competitive business environment
We face competition from:
. cable television;
. new networks;
. alternative methods of receiving and distributing television signals and
satellite delivered programs, including direct broadcast satellite
television systems;
. multipoint multichannel distributions systems, master antenna television
systems and satellite master antenna television systems; and
15
. other sources of news, information and entertainment such as off- air
television broadcast programming, streaming video broadcasts over the
Internet, newspapers, movie theaters, live sporting events and home video
products, including videotape cassette recorders and digital video disc
players.
In addition to competing with other media outlets for audience share, we
also compete for advertising revenues that comprise the primary source of
revenues for our operating subsidiaries. Our stations compete for such
advertising revenues with other television stations in their respective
markets, as well as with other advertising media such as newspapers, radio
stations, the Internet, magazines, outdoor advertising, transit advertising,
yellow page directories, direct mail and local cable systems.
Our television stations are located in highly competitive markets.
Accordingly, the results of our operations will be dependent upon the ability
of each station to compete successfully in its market, and there can be no
assurance that any one of our stations will be able to maintain or increase its
current audience share or revenue share. To the extent that certain of our
competitors have or may, in the future, obtain greater resources, our ability
to compete successfully in our broadcasting markets may be impeded.
Management, as major stockholders, possesses unequal voting rights and control
Our common stock is divided into three classes with different voting rights
that allow for the maintenance of control by our management. Each share of
Class A common stock is entitled to one vote, each share of Class B common
stock is entitled to ten votes, except for certain significant transactions for
which such shares are entitled to one vote per share, and shares of Class C
common stock are not entitled to vote except in connection with any change to
our certificate of incorporation that would adversely affect the rights of
holders of such common stock. As of June 30, 2001, there were no shares of
Class C common stock outstanding.
As of July 31, 2001, Adam Young and Vincent Young together beneficially
owned shares of Class A common stock and Class B common stock representing
approximately 51% of the total voting power of our common stock. As a result,
Adam Young and Vincent Young have control over the election of a majority of
our directors and, thus, over our operations and business. In addition, such
stockholders have the ability to prevent certain types of material
transactions, including a change of control.
The disproportionate voting rights of the Class A common stock relative to
the Class B common stock may make us a less attractive target for a takeover
than we otherwise might be, or render more difficult or discourage a merger
proposal or tender offer.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they:
. discuss our future expectations;
. contain projections of our future results of operations or of our
financial condition; or
. state other "forward-looking" information.
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or over which we have no control. The risk factors listed in this
prospectus, as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results
to differ materially from the expectations we describe in our forward-looking
statements. You should be aware that the occurrence of the events described in
these risk factors and elsewhere in this prospectus could have a material
adverse effect on our business, operating results and financial condition.
16
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreement. We will not receive any cash proceeds from the
issuance of the exchange notes in the exchange offer.
We received net proceeds of approximately $508.4 million from the private
offering of the initial notes. We used approximately $254.4 million of the net
proceeds to redeem all of our 11 3/4% senior subordinated notes due 2004 and
our 10 1/8% senior subordinated notes due 2005 and approximately $254.0 million
to repay a portion of the existing debt under our senior credit facilities.
Our $600.0 million senior credit facility matures in 2005, with quarterly
reductions in the amount of the outstanding loans and commitments commencing in
2001. The weighted average interest rate for loans outstanding under our $600.0
million senior credit facility was 8.02% as of June 30, 2001. Borrowings under
this credit facility were used for payment of a portion of the cash
consideration payable in the KRON acquisition and for general corporate
purposes.
Our $200.0 million senior credit facility matures in 2005, with quarterly
reductions in the amount of the outstanding loans and commitments commencing in
2001. The weighted average interest rate for loans outstanding under our $200.0
million senior credit facility was 7.78% as of June 30, 2001. Borrowings under
this credit facility were used for payment of a portion of the cash
consideration payable in the KRON acquisition and for general corporate
purposes.
17
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements of Young
Broadcasting Inc. reflect the June 2000 acquisition of KRON and Bay-TV as if
such transaction occurred on January 1, 2000. The unaudited pro forma combined
financial statements do not give effect to the offering of the initial notes or
to our disposition of WKBT-TV on February 29, 2000 for approximately $24
million.
The unaudited pro forma adjustments are based upon available information and
certain assumptions that we believe are reasonable. The Unaudited Pro Forma
Combined Financial Statements do not purport to be indicative of what our
financial position or results of operations would actually have been had the
transactions been completed on the dates indicated or to project our results of
operations for any future date.
18
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended December 31, 2000
For the Year Ended December 31, 2000
--------------------------------------------------
KRON and KRON and
Young Bay-TV Bay-TV
Broadcasting Acquisition Adjustments Pro Forma
------------ ----------- ----------- -----------
(dollars in thousands, except per share data)
Gross revenue.................................. $ 436,071 $88,282 -- $ 524,353
Less commissions............................... 63,386 14,233 -- 77,619
----------- ------- -------- -----------
Net revenue.................................... 372,685 74,049 -- 446,734
Operating expenses............................. 84,787 21,905 -- 106,692
Amortization of program rights................. 57,655 5,532 -- 63,187
Selling, general and administrative expenses... 64,986 10,499 -- 75,485
Depreciation and amortization.................. 55,232 2,742 $ 11,939 (1) 69,913
Corporate overhead............................. 12,010 -- -- 12,010
Non-cash compensation paid in common stock..... 1,321 -- -- 1,321
----------- ------- -------- -----------
Total operating expenses....................... 275,991 40,678 11,939 328,608
----------- ------- -------- -----------
Operating income............................... 96,694 33,371 (11,939) 118,126
----------- ------- -------- -----------
Interest expense, net......................... (95,843) -- (29,660)(2) (125,503)
Gain on sale of station....................... 15,651 -- -- 15,651
Minority interest of BayTV.................... (66) -- (66)
Other expenses................................ (1,013) 80 -- (933)
----------- ------- -------- -----------
Income (loss) before provision for income taxes
and extraordinary item....................... 15,489 33,385 (41,599) 7,275
Provision for income taxes..................... (1,500) -- -- (1,500)
----------- ------- -------- -----------
Income (loss) before extraordinary item........ $ 13,989 $33,385 $(41,599) $ 5,775
=========== ======= ======== ===========
Basic income per common share before
extraordinary item........................... $ 0.92 $ 0.34
Basic shares used in EPS calculation........... 15,157,243 17,037,886
=========== ===========
- --------
(1)Reflects the amortization of intangible assets associated with the KRON and
BayTV acquisition over a 40 year period and increased annual depreciation
resulting from the newly acquired property and equipment depreciated over
new estimated useful lives. In addition, reflects the amortization expense
of the new debt financing costs related to our $600.0 million senior credit
facility entered into in June 2000.
(2)Reflects the drawdown of approximately $688.0 million from our senior credit
facilities entered into in June 2000 at the assumed rate of 8.5% and the
increased rate of such facilities.
19
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of our debt agreements is not complete and is
qualified in its entirety by reference to the debt agreements described below,
including the definitions of certain capitalized terms used in this section.
Any terms not defined in this section are defined in the debt agreements. See
"Available Information."
Credit Agreements
$600,000,000 Credit Agreement
On June 26, 2000, we entered into a credit agreement which provides for
borrowings of up to an aggregate of $600 million in the form of an amortizing
Term A loan facility in the amount of $125 million that matures on November 30,
2005, and an amortizing Term B loan facility in the amount of $475 million that
matures on December 31, 2006. We can increase the Term B loan facility by up to
an additional $150 million for general corporate purposes. The minimum amount
of the increase must be $25.0 million, notice must be given to Bankers Trust
Company, as Administrative Agent, no later than November 15, 2001, and the
additional borrowings have to be made on or before December 31, 2001. The
borrowings under the $600 million senior credit facility rank senior to, and
will be repaid prior to, the exchange notes.
Interest Rate Calculations. Interest under the $600 million senior credit
facility is payable at the LIBOR rate, "CD Rate" or "Base Rate." In addition to
the index rates, we pay a floating percentage tied to our ratio of total debt
to operating cash flow; ranging, in the case of LIBOR rate loans, from 1.75%
based upon a ratio under 5:1 to 3.00%, based upon a 7:1 or greater ratio for
Term A advances; and 3.25% for Term B advances.
Fees. The $600 million senior credit facility requires us to pay the
following fees:
. An arrangement fee to Bankers Trust Company, as Administrative Agent, for
the account of the Co-Arrangers;
. A participation fee to Bankers Trust Company, as Administrative Agent, for
the account of the Lenders; and
. A yearly administrative fee to Bankers Trust Company, as Administrative
Agent.
Covenants and Conditions. In addition to specific customary covenants, the
$600 million senior credit facility includes covenants that restrict our
ability to:
. dispose of assets;
. incur additional indebtedness;
. incur liens on property or assets;
. pay dividends;
. guarantee any obligations;
. enter into certain investments or transactions;
. repurchase or redeem capital stock;
. engage in mergers or consolidation;
. make acquisitions; and
20
. engage in certain transactions with subsidiaries and affiliates and
otherwise restrict corporate activities.
Additionally, we are prohibited from making investments or advances to third
parties exceeding $15.0 million unless the third party becomes a guarantor of
our obligation. However, we are permitted to purchase up to $30.0 million of
our shares of common stock, subject to the certain limitations.
The $600 million senior credit facility requires us to maintain certain
financial ratios. We are required to maintain a total debt/operating cash flow
ratio ranging from 5.25x to 7.40x depending on senior debt leverages. We are
also required to maintain a debt/operating cash flow ratio ranging from 2.00x
to 3.00x depending on senior debt leverages. Additionally, we are required to
maintain an operating cash flow/total interest expense ratio ranging from 1.40x
to 1.75x depending on senior debt leverages. We are also required to maintain
an operating cash flow minus capital expenditures to pro forma debt service
ratio of no less than 1.10x at any time. Such ratios must be maintained as of
the last day of the quarter for each of the periods.
The $600 million senior credit facility requires us to apply on April 30 of
each year 50% to 75% (depending upon the level of our debt to operating cash
flow ratio at the end of such year) of our "Excess Cash Flow" for the preceding
completed fiscal year, beginning with Fiscal Year 2001, to reduce outstanding
debt under the Term A advances and Term B advances in proportion to the
outstanding principal amount of such advances.
Guarantees. Each of our subsidiaries has guaranteed our obligations under
the $600 million senior credit facility. The $600 million senior credit
facility is secured by the pledge of all the stock of our subsidiaries and a
first priority lien on all of our assets and the assets of our subsidiaries.
Events of Default. The $600 million senior credit facility contains
customary events of default, which includes a default in the payment of
principal or interest on debt. If any event of default occurs, our obligations
could be accelerated with material adverse results to the holders of the notes.
$200,000,000 Second Amended and Restated Credit Agreement
On June 26, 2000, we entered into a second amended and restated credit
agreement which provides for borrowings of up to an aggregate of $200 million
in the form of a $50 million Term A loan and a revolving credit facility in the
amount of $150 million, both of which mature on November 30, 2005. The
borrowings under the $200 million senior credit facility rank senior to, and
will be repaid prior to, the exchange notes.
Interest Rate Calculations. Interest under the $200 million senior credit
facility is payable at the LIBOR rate, "CD Rate" or "Base Rate." In addition to
the index rates, we pay a floating percentage tied to our ratio of total debt
to operating cash flow; ranging, in the case of LIBOR rate loans, from 1.75%
based upon a ratio under 5:1 to 3.00%, based upon a 7:1 or greater ratio for
Term A and revolving advances.
Fees. The $200 million senior credit facility requires us to pay the
following fees:
. An arrangement fee to Bankers Trust Company, as Administrative Agent, for
the account of the Co-Arrangers;
. A participation fee to Bankers Trust Company, as Administrative Agent, for
the account of the Lenders;
. A yearly administrative fee to Bankers Trust Company, as Administrative
Agent;
21
. A commitment fee to Bankers Trust Company, as Administrative Agent, for
the account of the Lenders ratably in proportion to their respective
"Revolving Facility Commitments" on each day; and
. A letter of credit fee to Bankers Trust Company, as Administrative Agent,
at a rate per annum equal to "Letter of Credit Fee Rate" in effect from
time to time on the aggregate amount available for drawing under any
letters of credit, for the account of the Lenders with such commitments.
Covenants and Conditions. The $200 million senior credit agreement includes
the same covenants and conditions as the $600 million senior credit facility
described above.
Guarantees. Each of our subsidiaries has guaranteed our obligations under
the $200 million senior credit facility. The $200 million senior credit
facility is secured by the pledge of all the stock of our subsidiaries and a
first priority lien on all of our assets and the assets of our subsidiaries.
Events of Default. The $200 million senior credit facility contains
customary events of default, which includes a default in the payment of
principal or interest on debt. If any event of default occurs, our obligations
could be accelerated with material adverse results to the holders of the notes.
10% Senior Subordinated Notes Due 2011
See "Description of Notes."
8 3/4% Senior Subordinated Notes Due 2007
We have outstanding $200.0 million in aggregate principal amount of 8 3/4%
senior subordinated notes due 2007. Interest on such notes is payable
semiannually on June 15 and December 15 of each year .
The 8 3/4% senior subordinated notes constitute general unsecured
obligations. They:
. rank junior to all of our liabilities under our existing senior credit
facilities;
. rank junior to any future senior debt of us or our subsidiaries;
. rank equally with our:
. 9% senior subordinated notes due 2006; and
. the exchange notes;
. will rank equally with all of our future subordinated, unsecured debt that
does not expressly provide that it is subordinated to the 8 3/4% senior
subordinated notes; and
. will rank ahead of all our future debt that expressly provides that it is
subordinated to the 8 3/4% senior subordinated notes.
On or after June 15, 2002, we may redeem some or all of the 8 3/4% senior
subordinated notes at specified redemption prices, plus accrued and unpaid
interest.
If we experience specific kinds of changes of control, we must offer to
repurchase the 8 3/4% senior subordinated notes at a purchase price equal to
101% of the principal amount, plus accrued and unpaid interest. In addition, we
must offer to repurchase the 8 3/4% senior subordinated notes at a purchase
price equal to 100% of the principal amount, plus accrued and unpaid interest,
in the event of certain asset sales.
22
The indenture governing the 8 3/4% senior subordinated notes contains
covenants that are substantially identical to the covenants of the exchange
notes. The 8 3/4% senior subordinated notes are guaranteed, jointly and
severally, on a senior subordinated basis by our subsidiaries.
9% Senior Subordinated Notes Due 2006
We have outstanding $125.0 million in aggregate principal amount of 9%
senior subordinated notes due 2006. Interest on such notes is payable
semiannually on January 15 and July 15 of each year.
The 9% senior subordinated notes constitute general unsecured obligations.
They:
. rank junior to all of our liabilities under our existing senior credit
facilities;
. rank junior to any future senior debt of us or our subsidiaries;
. rank equally with our:
. 8 3/4% senior subordinated notes due 2007, and
. the exchange notes;
. will rank equally with all of our future subordinated, unsecured debt that
does not expressly provide that it is subordinated to the 9% senior
subordinated notes; and
. will rank ahead of all our future debt that expressly provides that it is
subordinated to the 9% senior subordinated notes.
On or after January 15, 2001, we may redeem some or all of the 9% senior
subordinated notes at specified redemption prices, plus accrued and unpaid
interest.
If we experience specific kinds of changes of control, we must offer to
repurchase the 9% senior subordinated notes at a purchase price equal to 101%
of the principal amount, plus accrued and unpaid interest. In addition, we must
offer to repurchase the 9% senior subordinated notes at a purchase price equal
to 100% of the principal amount, plus accrued and unpaid interest, in the event
of certain asset sales.
The indenture governing the 9% senior subordinated notes contains covenants
that are substantially identical to the covenants of the exchange notes. The 9%
senior subordinated notes are guaranteed, jointly and severally, on a senior
subordinated basis by our subsidiaries.
23
DESCRIPTION OF NOTES
General
The initial notes were issued and the exchange notes (the "Notes") will be
issued under an indenture (the "Indenture") dated as of March 1, 2001, by and
among the Company, the Subsidiary Guarantors and First Union National Bank, as
trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"), as in effect on the date of
the Indenture. The Notes are subject to all such terms, and holders of Notes
are referred to the Indenture and the Trust Indenture Act for a statement of
those terms.
The following is a summary of the material provisions of the Notes and the
Indenture. This summary does not purport to be complete and is subject to the
detailed provisions of, and is qualified in its entirety by reference to, the
Notes and the Indenture. A copy of the Indenture may be obtained from the
Company. The definitions of certain terms used in the following summary are set
forth below under "--Certain Definitions." Reference is made to the Indenture
for the full definition of all such terms, as well as any other capitalized
terms used in this section for which no definition is provided.
Maturity and Interest
The Notes are general unsecured obligations of the Company limited in
aggregate principal amount to $500,000,000 and will mature on March 1, 2011.
Interest on the Notes will accrue at the rate of 10% per annum and will be
payable semi-annually in arrears on March 1 and September 1 in each year,
commencing on September 1, 2001, to holders of record on the immediately
preceding February 15 and August 15, respectively. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of the Notes
(the "Issue Date"). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be payable at
the office or agency of the Company maintained for such purpose within the City
of New York or, at the option of the Company, payment of interest may be made
by check mailed to the holders of the Notes at their respective addresses as
set forth in the register of holders of Notes. Until otherwise designated by
the Company, the Company's office or agency in the City of New York will be the
office of the Trustee maintained for such purpose. The Notes will be issued in
fully registered form, without coupons, and in denominations of $1,000 and
integral multiples thereof.
Ranking and Subordination
The payment of principal of, premium, if any, and interest on the Notes will
be subordinated in right of payment, to the extent and in the manner provided
in the Indenture, to the prior payment in full of all Senior Debt of the
Company, whether outstanding on the Issue Date or incurred thereafter. As of
June 30, 2001, the Company had approximately $437.2 million of Senior Debt,
with the ability, subject to certain limitations, to incur approximately $75.0
million of additional Senior Debt pursuant to the Credit Agreement. The
Indenture will, subject to certain financial tests, permit the Company and its
Restricted Subsidiaries to incur additional Indebtedness, including Senior
Debt. See "--Covenants --Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock."
Upon any payment or distribution of cash, securities or other property of
the Company to creditors upon any liquidation, dissolution or winding up of the
Company, or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property or securities, the
holders of any Senior Debt of the Company will be entitled to receive payment
in full, in cash or Cash Equivalents, of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding
at the rate specified in the agreements governing such Senior Debt) before the
holders of the Notes will be entitled to receive any payment or distribution
with respect to the Notes.
24
The Company also may not make any payment upon or in respect of the Notes if
(i) a default in the payment of the principal of, premium, if any, or interest
on any Designated Senior Debt occurs and is continuing, whether at maturity or
at a date fixed for prepayment or by declaration of acceleration or otherwise,
or (ii) the Trustee has received written notice (a "Payment Blockage Notice")
from the representative of any holders of Designated Senior Debt that a
nonpayment default has occurred and is continuing with respect to such
Designated Senior Debt that permits such holders to accelerate the maturity of
such Designated Senior Debt. Payments on the Notes shall resume (and all past
due amounts on the Notes, with interest thereon as specified in the Indenture,
shall be paid) (i) in the case of a payment default in respect of any
Designated Senior Debt, on the date on which such default is cured or waived,
and (ii) in the case of a nonpayment default in respect of any Designated
Senior Debt, on the earlier of (a) the date on which such nonpayment default is
cured or waived, or (b) 179 days after the date on which the Payment Blockage
Notice with respect to such default was received by the Trustee, in each case,
unless the maturity of any Designated Senior Debt has been accelerated and the
Company has defaulted with respect to the payment of such Designated Senior
Debt. During any consecutive 365-day period, the aggregate number of days in
which payments due on the Notes may not be made as a result of nonpayment
defaults on Designated Senior Debt (a "Payment Blockage Period") shall not
exceed 179 days, and there shall be a period of at least 186 consecutive days
in each consecutive 365-day period when such payments are not prohibited. No
event or circumstance that creates a default under any Designated Senior Debt
that (i) gives rise to the commencement of a Payment Blockage Period or (ii)
exists at the commencement of or during any Payment Blockage Period shall be
made the basis for the commencement of any subsequent Payment Blockage Period
unless such default has been cured or waived for a period of not less than 90
consecutive days following the commencement of the initial Payment Blockage
Period.
As a result of the subordination provisions described above, in the event of
liquidation or insolvency, holders of Notes may recover less ratably than
creditors holding Senior Debt of the Company. In such circumstances, funds
which would otherwise be payable to the holders of the Notes will be paid to
the holders of the Senior Debt to the extent necessary to pay the Senior Debt
in full in cash or Cash Equivalents, and the Company may be unable to meet its
obligations fully with respect to the Notes.
The subordination provisions described above will cease to be applicable to
the Notes upon any defeasance or covenant defeasance of the Notes. See
"--Defeasance."
Subsidiary Guarantees
The Company's payment obligations under the Notes will be jointly and
severally guaranteed by the Subsidiary Guarantors. The obligations of each
Subsidiary Guarantor under its Subsidiary Guarantee will be unconditional and
absolute, irrespective of any invalidity, illegality, unenforceability of any
Note or the Indenture or any extension, compromise, waiver or release in
respect of any obligation of the Company or any other Subsidiary Guarantor
under any Note or the Indenture, or any modification or amendment of or
supplement to the Indenture.
The obligations of any Subsidiary Guarantor under its Subsidiary Guarantee
will be subordinated, to the same extent as the obligations of the Company in
respect of the Notes, to the prior payment in full in cash or Cash Equivalents
of all Senior Debt of such Subsidiary Guarantor, which will include any
guarantee issued by such Subsidiary Guarantor of any Senior Debt, including
Indebtedness represented by guarantees under the Credit Agreement. The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be
limited to the extent necessary to provide that such Subsidiary Guarantee does
not constitute a fraudulent conveyance under applicable law. Each Subsidiary
Guarantor that makes a payment or distribution under its Subsidiary Guarantee
shall be entitled to a contribution from each other Subsidiary Guarantor so
long as the exercise of such right does not impair the rights of holders of
Notes under any Subsidiary Guarantee. See "Risk Factors--The guarantees may not
be enforceable because of fraudulent conveyance laws." A Subsidiary Guarantor
shall be
25
released and discharged from its obligations under its Subsidiary Guarantee
under certain limited circumstances. See "--Covenants--Limitation on Guarantees
of Company Indebtedness by Restricted Subsidiaries" and "--Merger,
Consolidation and Sale of Assets."
Redemption
Mandatory Redemption. The Notes are not subject to any mandatory sinking
fund redemption prior to maturity.
Optional Redemption. Except as set forth below, the Notes are not redeemable
at the Company's option prior to March 1, 2006. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, at the
redemption prices (expressed as percentages of the principal amount of the
Notes) set forth below, plus accrued and unpaid interest to the date of
redemption, if redeemed during the twelve-month period beginning on March 1 of
the years indicated below.
Year Percentage
- ---- ----------
2006............... 105.000%
2007............... 103.333%
2008............... 101.667%
2009 and thereafter 100.000%
Notwithstanding the foregoing, at any time prior to March 1, 2004, the
Company, at its option, may redeem the Notes, in part, with the net proceeds of
one or more Public Equity Offerings, at a redemption price equal to 110% of the
principal amount thereof, together with accrued and unpaid interest to the date
of redemption; provided, however, that after any such redemption the aggregate
principal amount of the Notes outstanding must equal at least 66 2/3% of the
aggregate principal amount of the Notes originally issued in this Offering.
Selection and Notice. If less than all of the Notes are to be redeemed at
any time, selection of the Notes to be redeemed will be made by the Company in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
securities exchange, on a pro rata basis, by lot or by any other method as the
Trustee shall deem fair and appropriate; provided that Notes redeemed in part
shall only be redeemed in integral multiples of $1,000. Notices of any optional
or mandatory redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at such holder's registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed, and the Trustee shall
authenticate and mail to the holder of the original Note a new Note in
principal amount equal to the unredeemed portion of the original Note promptly
after the original Note has been canceled. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption.
Change of Control
In the event of a Change of Control (as defined in this prospectus), each
holder of Notes will have the right, subject to the terms and conditions of the
Indenture, to require the Company to offer to repurchase all or any portion
(equal to $1,000 or an integral multiple thereof) of such holder's Notes at a
purchase price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest to the date of repurchase, in accordance with
the terms set forth below (a "Change of Control Offer").
The Credit Agreement prohibits the Company from repurchasing any Notes
pursuant to a Change of Control Offer prior to repayment in full of the Senior
Bank Debt under the Credit Agreement. As of June 30, 2001, the Company had
approximately $437.2 million of Senior Debt, with the ability, subject
26
to certain limitations, to incur approximately $75.0 million of additional
Senior Debt pursuant to the Credit Agreement. Accordingly, if a Change of
Control were to occur, there can be no assurance that the Company will have
sufficient assets to satisfy its obligations under the Credit Agreement or,
thereafter, to purchase any of the Notes. Any additional credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. Moreover, the Credit Agreement
contains a "change of control" provision that is similar to the provision in
the Indenture relating to a Change of Control, and the occurrence of such a
"change of control" would constitute a default under the Credit Agreement.
In the event that a Change of Control occurs at a time when the Company is
prohibited from repurchasing the Notes by the Credit Agreement or any other
agreement governing Senior Debt of the Company, the Company shall seek either
to repay such Senior Debt or to obtain the requisite consents of the holders of
such Senior Debt to commence a Change of Control Offer to repurchase the Notes
in accordance with the terms of the Indenture. If the Company is unable to
obtain such consents and/or repay all such Senior Debt, the Company would
remain prohibited from repurchasing any Notes and, as a result, the Company
could not commence a Change of Control Offer to repurchase the Notes within 30
days of the occurrence of the Change of Control, which would constitute an
Event of Default under the Indenture. The Company's failure to commence such a
Change of Control Offer would also constitute an event of default under the
Credit Agreement which would permit the lenders thereunder to accelerate all of
the Company's Senior Bank Debt under the Credit Agreement. If a Change of
Control were to occur, there can be no assurance that the Company would have
sufficient assets to first satisfy its obligations under the Credit Agreement
or other agreements relating to Senior Debt, if accelerated, and then to
repurchase all of the Notes that might be delivered by holders seeking to
accept a Change of Control Offer. See "Risk Factors--We may not be able to
finance a change of control offer required by the indenture."
Within 30 days following the occurrence of any Change of Control, the
Company shall mail to each holder of Notes at such holder's registered address
a notice stating: (i) that a Change of Control has occurred and that such
holder has the right to require the Company to repurchase all or a portion
(equal to $1,000 or an integral multiple thereof) of such holder's Notes at a
purchase price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest to the date of purchase (the "Change of
Control Purchase Date"), which shall be a business day, specified in such
notice, that is not earlier than 30 days or later than 60 days from the date
such notice is mailed; (ii) the amount of accrued and unpaid interest as of the
Change of Control Purchase Date; (iii) that any Note not tendered will continue
to accrue interest; (iv) that, unless the Company defaults in the payment of
the purchase price for the Notes payable pursuant to the Change of Control
Offer, any Notes accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Purchase Date; (v)
the procedures, consistent with the Indenture, to be followed by a holder of
Notes in order to accept a Change of Control Offer or to withdraw such
acceptance; and (vi) such other information as may be required by the Indenture
and applicable laws and regulations.
On the Change of Control Purchase Date, the Company will (i) accept for
payment all Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent the aggregate purchase price
of all Notes or portions thereof accepted for payment and any accrued and
unpaid interest on such Notes as of the Change of Control Purchase Date, and
(iii) deliver or cause to be delivered to the Trustee all Notes tendered
pursuant to the Change of Control Offer. If less than all Notes tendered
pursuant to the Change of Control Offer are accepted for payment by the Company
for any reason consistent with the Indenture, selection of the Notes to be
purchased by the Company shall be in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided that Notes
accepted for payment in part shall only be purchased in integral multiples of
$1,000. The Paying Agent shall promptly mail to each holder of Notes or
portions thereof accepted for payment an amount equal to the purchase price
27
for such Notes plus any accrued and unpaid interest thereon, and the Trustee
shall promptly authenticate and mail to such holder of Notes accepted for
payment in part a new Note equal in principal amount to any unpurchased portion
of the Notes, and any Note not accepted for payment in whole or in part shall
be promptly returned to the holder of such Note. On and after a Change of
Control Purchase Date, interest will cease to accrue on the Notes or portions
thereof accepted for payment, unless the Company defaults in the payment of the
purchase price therefor. The Company will announce the results of the Change of
Control Offer to holders of the Notes on or as soon as practicable after the
Change of Control Purchase Date.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other applicable
securities laws and regulations in connection with any Change of Control Offer.
Covenants
Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or directly or indirectly
guarantee or in any other manner become directly or indirectly liable for
("incur") any Indebtedness (including Acquired Debt) or issue any Disqualified
Stock if, at the time of and immediately after giving pro forma effect to such
incurrence of Indebtedness or issuance of Disqualified Stock, the Debt to
Operating Cash Flow Ratio of the Company and its Restricted Subsidiaries is
more than 7.0:1; provided that any Indebtedness that is not Senior Debt that is
permitted to be incurred hereunder by the Company or any Restricted Subsidiary
shall, at the time of incurrence, have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the Notes.
The foregoing limitations will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"):
(i) Senior Bank Debt arising under the Credit Agreement;
(ii) Indebtedness of any Restricted Subsidiary consisting of a guarantee
of the Company's Senior Bank Debt under the Credit Agreement;
(iii) Indebtedness of the Company represented by the Notes and
Indebtedness of any Subsidiary Guarantor represented by a Subsidiary
Guarantee;
(iv) Indebtedness of the Company represented by the Exchange Notes;
(v) Indebtedness owed by any Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, or owed by the
Company to any Wholly Owned Restricted Subsidiary; provided that any such
Indebtedness shall be at all times held by a Person which is either the
Company or a Wholly Owned Restricted Subsidiary of the Company; and provided
further that upon either (a) the transfer or other disposition of any such
Indebtedness to a Person other than the Company or another Wholly Owned
Restricted Subsidiary or (b) the sale, lease, transfer or other disposition
of shares of Capital Stock (including by consolidation or merger) of any
such Wholly Owned Restricted Subsidiary to a Person other than the Company
or another Wholly Owned Restricted Subsidiary, the incurrence of such
Indebtedness shall be deemed to be an incurrence that is not permitted by
this clause (v);
(vi) Guarantees of any Restricted Subsidiary that are made in accordance
with the provisions of the covenant described under "--Covenants--Limitation
on Guarantees of Company Indebtedness by Restricted Subsidiaries";
(vii) Indebtedness arising with respect to Interest Rate Agreement
Obligations incurred for the purpose of fixing or hedging interest rate risk
with respect to any floating rate Indebtedness that is permitted by the
terms of the Indenture to be outstanding;
(viii) Purchase Money Indebtedness and Capital Lease Obligations which do
not exceed, as determined in accordance with GAAP, $10,000,000 in the
aggregate at any one time outstanding;
28
(ix) Any Indebtedness incurred in connection with or given in exchange
for the renewal, extension, substitution, refunding, defeasance, refinancing
or replacement of any Indebtedness described in clauses (i), (ii), (iii) and
(iv) above ("Refinancing Indebtedness"); provided that (a) the principal
amount of such Refinancing Indebtedness shall not exceed the principal
amount of the Indebtedness so renewed, extended, substituted, refunded,
defeased, refinanced or replaced (plus the premiums paid in connection
therewith (which shall not exceed the stated amount of any premium or other
payment required to be paid in connection with such a refinancing pursuant
to the terms of the Indebtedness being renewed, extended, substituted,
refunded, defeased, refinanced or replaced) and the expenses incurred in
connection therewith); (b) with respect to Refinancing Indebtedness of any
Indebtedness other than Senior Debt, the Refinancing Indebtedness shall have
a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being renewed, extended,
substituted, refunded, defeased, refinanced or replaced; and (c) with
respect to Refinancing Indebtedness of Indebtedness other than Senior Debt
incurred by (1) the Company, such Refinancing Indebtedness shall rank no
more senior, and shall be at least as subordinated, in right of payment to
the Notes as the Indebtedness being renewed, extended, substituted,
refunded, defeased, refinanced or replaced, and (2) a Subsidiary Guarantor,
such Refinancing Indebtedness shall rank no more senior, and shall be at
least as subordinated, in right of payment to the Subsidiary Guarantee as
the Indebtedness being renewed, extended, substituted, refunded, defeased,
refinanced or replaced; and
(x) Indebtedness of the Company in addition to that described in clauses
(i) through (ix) above, and any renewals, extensions, substitutions,
refinancings or replacements of such Indebtedness, so long as the aggregate
principal amount of all such Indebtedness incurred pursuant to this clause
(x) does not exceed $15,000,000 at any one time outstanding.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, make any Restricted Payment, unless at the time of and
immediately after giving effect to the proposed Restricted Payment (with the
value of any such Restricted Payment, if other than cash, to be determined by
the Board of Directors of the Company, whose determination shall be conclusive
and evidenced by a board resolution), (i) no Default or Event of Default (and
no event that, after notice or lapse of time, or both, would become an "event
of default" under the terms of any Indebtedness of the Company or its
Restricted Subsidiaries) shall have occurred and be continuing or would occur
as a consequence thereof, (ii) the Company could incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph under
"--Covenants--Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock" and (iii) the aggregate amount of all Restricted Payments
made after September 30, 1994 shall not exceed the sum of (a) an amount equal
to the Company's Cumulative Operating Cash Flow less 1.4 times the Company's
Cumulative Consolidated Interest Expense, plus (b) the aggregate amount of all
net cash proceeds received after September 30, 1994 by the Company (but
excluding the net cash proceeds received by the Company from its initial public
offering of Class A Common Stock on November 14, 1994) from the issuance and
sale (other than to a Restricted Subsidiary) of Capital Stock (other than
Disqualified Stock) to the extent that such proceeds are not used to redeem,
repurchase, retire or otherwise acquire Capital Stock or any Indebtedness of
the Company or any Restricted Subsidiary pursuant to clause (ii) of the next
paragraph.
The foregoing provisions will not prohibit, so long as there is no Default
or Event of Default continuing, the following actions (collectively, "Permitted
Payments"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment would have
been permitted under the Indenture, and such payment shall be deemed to have
been paid on such date of declaration for purposes of clause (iii) of the
preceding paragraph;
29
(ii) the redemption, repurchase, retirement or other acquisition of any
Capital Stock or any Indebtedness of the Company in exchange for, or out of
the proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary) of, Capital Stock of the Company (other than any
Disqualified Stock); and
(iii) the payment to Nationwide Communications Inc. of the deferred
portion of the purchase price for the three television stations that are
subject of the Acquisition Agreement.
Limitation on Asset Sales. The Indenture provides that the Company will not,
and will not permit any Restricted Subsidiary to, make any Asset Sale unless
(i) the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or other property
sold or disposed of in the Asset Sale, and (ii) at least 75% of such
consideration is in the form of cash or Cash Equivalents; provided that for
purposes of this covenant "cash" shall include the amount of any liabilities
(other than liabilities that are by their terms subordinated to the Notes or
any Subsidiary Guarantee) of the Company or such Restricted Subsidiary (as
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto) that are assumed by the transferee of any such
assets or other property in such Asset Sale (and excluding any liabilities that
are incurred in connection with or in anticipation of such Asset Sale), but
only to the extent that such assumption is effected on a basis under which
there is no further recourse to the Company or any of its Restricted
Subsidiaries with respect to such liabilities.
Within 360 days after any Asset Sale, the Company may elect to apply the Net
Proceeds from such Asset Sale to (a) permanently reduce any Senior Debt of the
Company, and/or (b) make an investment in, or acquire assets directly related
to, the television broadcasting business. Pending the final application of any
such Net Proceeds, the Company may temporarily reduce Senior Bank Debt of the
Company or temporarily invest such Net Proceeds in any manner permitted by the
Indenture. Any Net Proceeds from an Asset Sale not applied or invested as
provided in the first sentence of this paragraph within 360 days of such Asset
Sale will be deemed to constitute "Excess Proceeds."
As soon as practical, but in no event later than 10 business days after any
date (an "Asset Sale Offer Trigger Date") that the aggregate amount of Excess
Proceeds exceeds $5,000,000, the Company shall, if and to the extent permitted
by the agreements governing any Senior Debt of the Company and the Existing
Notes Indenture as in effect on the Issue Date, commence an offer to purchase
the maximum principal amount of Notes and other Indebtedness of the Company
that ranks pari passu in right of payment with the Notes (to the extent
required by the instrument governing such other Indebtedness) that may be
purchased out of the Excess Proceeds (an "Asset Sale Offer"); provided that
prior to making any such Asset Sale Offer the Company may, to the extent
required pursuant to the Existing Notes Indentures as in effect on the Issue
Date, use all or a portion of such Excess Proceeds to redeem Existing Notes.
Any Notes and other Indebtedness to be purchased pursuant to an Asset Sale
Offer shall be purchased pro rata based on the aggregate principal amount of
Notes and such other Indebtedness outstanding and all Notes shall be purchased
at an offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the date of purchase. To the
extent that any Excess Proceeds remain after completion of an Asset Sale Offer,
the Company may use the remaining amount for general corporate purposes. In the
event that the Company is prohibited under the terms of any agreement governing
outstanding Senior Debt of the Company from repurchasing Notes with Excess
Proceeds pursuant to an Asset Sale Offer as set forth in the first sentence of
this paragraph, the Company shall promptly use all Excess Proceeds to
permanently reduce such outstanding Senior Debt of the Company.
Within 30 days following any Asset Sale Offer Trigger Date, the Company
shall mail to each holder of Notes at such holder's registered address a notice
stating: (i) that an Asset Sale Offer Trigger Date has occurred and that the
Company is offering to purchase the maximum principal amount of Notes
30
that may be purchased out of the Excess Proceeds (to the extent provided in the
immediately preceding paragraph), at an offer price in cash in an amount equal
to 100% of the principal amount thereof, plus accrued and unpaid interest to
the date of purchase (the "Asset Sale Offer Purchase Date"), which shall be a
business day, specified in such notice, that is not earlier than 30 days or
later than 60 days from the date such notice is mailed; (ii) the amount of
accrued and unpaid interest as of the Asset Sale Offer Purchase Date; (iii)
that any Note not tendered will continue to accrue interest; (iv) that, unless
the Company defaults in the payment of the purchase price for the Notes payable
pursuant to the Asset Sale Offer, any Notes accepted for payment pursuant to
the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer
Purchase Date; (v) the procedures, consistent with the Indenture, to be
followed by a holder of Notes in order to accept an Asset Sale Offer or to
withdraw such acceptance; and (vi) such other information as may be required by
the Indenture and applicable laws and regulations.
On the Asset Sale Offer Purchase Date, the Company will (i) accept for
payment the maximum principal amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer that can be purchased out of Excess Proceeds
from such Asset Sale (to the extent provided in the second preceding
paragraph), (ii) deposit with the Paying Agent the aggregate purchase price of
all Notes or portions thereof accepted for payment and any accrued and unpaid
interest on such Notes as of the Asset Sale Offer Purchase Date, and (iii)
deliver or cause to be delivered to the Trustee all Notes tendered pursuant to
the Asset Sale Offer. If less than all Notes tendered pursuant to the Asset
Sale Offer are accepted for payment by the Company for any reason consistent
with the Indenture, selection of the Notes to be purchased by the Company shall
be in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that Notes accepted for payment in part shall
only be purchased in integral multiples of $1,000. The Paying Agent shall
promptly mail to each holder of Notes or portions thereof accepted for payment
an amount equal to the purchase price for such Notes plus any accrued and
unpaid interest thereon, and the Trustee shall promptly authenticate and mail
to such holder of Notes accepted for payment in part a new Note equal in
principal amount to any unpurchased portion of the Notes, and any Note not
accepted for payment in whole or in part shall be promptly returned to the
holder of such Note. On and after an Asset Sale Offer Purchase Date, interest
will cease to accrue on the Notes or portions thereof accepted for payment,
unless the Company defaults in the payment of the purchase price therefor. The
Company will announce the results of the Asset Sale Offer to holders of the
Notes on or as soon as practicable after the Asset Sale Offer Purchase Date.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act, and all other applicable
securities laws and regulations in connection with any Asset Sale Offer.
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any Subsidiary Guarantor to, directly or indirectly, create,
incur, assume or suffer to exist any Lien (other than Permitted Liens) on any
asset now owned or hereafter acquired or any income or profits therefrom or
assign or convey any right to receive income therefrom to secure any
Indebtedness; provided that in addition to creating Permitted Liens on its
properties or assets, (i) the Company may create any Lien upon any of its
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Notes are equally and ratably secured thereby, and (ii) a
Subsidiary Guarantor may create any Lien upon any of its properties or assets
(including, but not limited to, any Capital Stock of its Subsidiaries) if its
Subsidiary Guarantee is equally and ratably secured thereby; provided, however,
that if (a) the Company creates any Lien on its assets to secure any
Subordinated Indebtedness of the Company, the Lien securing such Subordinated
Indebtedness shall be subordinated and junior to the Lien securing the Notes
with the same or lesser priorities as the Subordinated Indebtedness shall have
with respect to the Notes, and (b) a Subsidiary Guarantor
31
creates any Lien on its assets to secure any Subordinated Indebtedness of such
Subsidiary Guarantor, the Lien securing such Subordinated Indebtedness shall be
subordinated and junior to the Lien securing the Subsidiary Guarantee of such
Subsidiary Guarantor with the same or lesser priorities as the Subordinated
Indebtedness shall have with respect to the Subsidiary Guarantee.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions to the Company or any other Restricted Subsidiary
on its Capital Stock or with respect to any other interest or participation in,
or measured by, its profits, or pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (ii) make loans or advances to the Company or any
other Restricted Subsidiary, or (iii) transfer any of its properties or assets
to the Company or any other Restricted Subsidiary, except for such encumbrances
or restrictions existing under or by reason of (a) the Credit Agreement as in
effect on the Issue Date, and any amendments, restatements, renewals,
replacements or refinancings thereof; provided that such amendments,
restatements, renewals, replacement or refinancings are no more restrictive in
the aggregate with respect to such dividend and other payment restrictions than
those contained in the Credit Agreement (or, if more restrictive, than those
contained in the Indenture) immediately prior to any such amendment,
restatement, renewal, replacement or refinancing, (b) applicable law, (c) any
instrument governing Indebtedness or Capital Stock of an Acquired Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with such acquisition); provided that (1) such
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Acquired Person, and (2) the consolidated net income of
an Acquired Person for any period prior to such acquisition shall not be taken
into account in determining whether such acquisition was permitted by the terms
of the Indenture, (d) by reason of customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with past
practices, (e) Purchase Money Indebtedness for property acquired in the
ordinary course of business that only impose restrictions on the property so
acquired, (f) an agreement for the sale or disposition of the Capital Stock or
assets of such Restricted Subsidiary; provided that such restriction is only
applicable to such Restricted Subsidiary or assets, as applicable, and such
sale or disposition otherwise is permitted under the covenant described under
"--Covenants--Limitation on Asset Sales"; and provided, further, that such
restriction or encumbrance shall be effective only for a period from the
execution and delivery of such agreement through a termination date not later
than 270 days after such execution and delivery, (g) Refinancing Indebtedness
permitted under the Indenture; provided that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more restrictive in
the aggregate than those contained in the agreements governing the Indebtedness
being refinanced immediately prior to such refinancing, (h) the Acquisition
Agreement or (i) the Indenture.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property
or services) with any Affiliate of the Company (other than the Company or a
Wholly Owned Restricted Subsidiary) unless (i) such transaction or series of
transactions is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than would be available in a
comparable transaction in arm's-length dealings with an unrelated third party,
and (ii)(a) with respect to any transaction or series of transactions involving
aggregate payments in excess of $1,000,000, the Company delivers an Officers'
Certificate to the Trustee certifying that such transaction or series of
related transactions complies with clause (i) above and such transaction or
series of related transactions has been approved by a majority of the members
of the Board of Directors of the Company (and approved by a majority of the
Independent Directors or, in the event there is only one Independent Director,
by such Independent Director), and (b) with respect to any transaction or
series
32
of transactions involving aggregate payments in excess of $5,000,000, an
opinion as to the fairness to the Company or such Restricted Subsidiary from a
financial point of view issued by an investment banking firm of national
standing. Notwithstanding the foregoing, this provision will not apply to (i)
employment agreements or compensation or employee benefit arrangements with any
officer, director or employee of the Company entered into in the ordinary
course of business (including customary benefits thereunder), (ii) any
transaction entered into by the Company or one of its Wholly Owned Restricted
Subsidiaries with one or more Wholly Owned Restricted Subsidiaries of the
Company, and (iii) the national advertising representation agreements between
the Company (or any of its Restricted Subsidiaries) and Adam Young, Inc.
existing on the date of the Indenture (and any renewals, extensions or
replacements thereof, and any future such agreements with respect to television
stations acquired by the Company or its Restricted Subsidiaries after the date
of the Indenture, so long as such renewals, extensions, replacements or future
agreements are on terms substantially similar to those of such existing
agreements) and other transactions in existence on the date of the Indenture
and described or referred to in "Certain Transactions."
Limitation on Incurrence of Senior Subordinated Indebtedness. The Indenture
provides that (i) the Company will not, directly or indirectly, incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is subordinated or junior in right of payment to any Senior Debt of the Company
and senior in any respect in right of payment to the Notes, and (ii) the
Company will not, directly or indirectly, permit any Subsidiary Guarantor to
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinated or junior in right of payment to its Senior
Debt and senior in any respect in right of payment to its Subsidiary Guarantee.
Limitation on Guarantees of Company Indebtedness by Restricted Subsidiaries.
The Indenture provides that in the event that any Restricted Subsidiary,
directly or indirectly, guarantees any Indebtedness of the Company other than
the Notes (the "Other Indebtedness") the Company shall cause such Restricted
Subsidiary to concurrently guarantee (an "Additional Guarantee") the Company's
Obligations under the Indenture and the Notes to the same extent that such
Restricted Subsidiary guaranteed the Company's Obligations under the Other
Indebtedness (including waiver of subrogation, if any); provided that if such
Other Indebtedness is (i) Senior Debt, the Additional Guarantee shall be
subordinated in right of payment to the guarantee of such Other Indebtedness,
in the same manner and to the same extent as the Notes are subordinated to
Senior Debt pursuant to the subordination provisions of the Indenture, and such
Additional Guarantee shall be on the same terms and subject to the same
conditions as the Initial Guarantees given under the Indenture, (ii) Senior
Subordinated Indebtedness, the Additional Guarantee shall be pari passu in
right of payment with the guarantee of the Other Indebtedness, or (iii)
Subordinated Indebtedness, the Additional Guarantee shall be senior in right of
payment to the guarantee of the Other Indebtedness; provided, however, that
each Additional Guarantee shall by its terms provide that the Additional
Guarantor making such Additional Guarantee will be automatically and
unconditionally released and discharged from its obligations under such
Additional Guarantee upon the release or discharge of the guarantee of the
Other Indebtedness that resulted in the creation of such Additional Guarantee,
except a discharge or release by, or as a result of, any payment under the
guarantee of such Other Indebtedness by such Additional Guarantor.
Limitation on Subsidiary Capital Stock. The Indenture provides that the
Company will not permit any Restricted Subsidiary of the Company to issue any
Capital Stock, except for (i) Capital Stock issued to and held by the Company
or a Wholly Owned Restricted Subsidiary, and (ii) Capital Stock issued by a
Person prior to the time (a) such Person becomes a Restricted Subsidiary, (b)
such Person merges with or into a Restricted Subsidiary or (c) a Restricted
Subsidiary merges with or into such Person; provided that such Capital Stock
was not issued by such Person in anticipation of the type of transaction
contemplated by clause (a), (b) or (c).
Limitation on Certain Transfers of Assets. The Indenture provides that the
Company and the Subsidiary Guarantors will not sell, convey, transfer or
otherwise dispose of their respective assets or properties to any of the
Company's Subsidiaries (other than another Subsidiary Guarantor), except
33
for sales, conveyances, transfers or other dispositions made in the ordinary
course of business and except for capital contributions to any Restricted
Subsidiary, the only material assets of which are broadcast licenses. For
purposes of this provision, any sale, conveyance, transfer, lease or other
disposition of property or assets having a fair market value in excess of (i)
$1,000,000 for any sale, conveyance, transfer, lease or disposition or series
of related sales, conveyances, transfers, leases or dispositions and (ii)
$5,000,000 in the aggregate for all such sales, conveyances, transfers, leases
or dispositions in any fiscal year of the Company shall not be considered "in
the ordinary course of business."
Future Subsidiary Guarantors. The Indenture provides that the Company and
each Subsidiary Guarantor shall cause each Restricted Subsidiary of the Company
which, after the date of the Indenture (if not then a Subsidiary Guarantor),
becomes a Restricted Subsidiary to execute and deliver an indenture
supplemental to the Indenture and thereby become an Additional Guarantor which
shall be bound by the Guarantee of the Notes in the form set forth in the
Indenture (without such Additional Guarantor being required to execute and
deliver the Guarantee endorsed on the Notes).
Provision of Financial Statements. The Indenture provides that, whether or
not the Company is then subject to Section 13(a) or 15(d) of the Exchange Act,
the Company will file with the Commission, so long as the Notes are
outstanding, the annual reports, quarterly reports and other periodic reports
which the Company would have been required to file with the Commission pursuant
to such Section 13(a) or 15(d) if the Company were so subject, and such
documents shall be filed with the Commission on or prior to the respective
dates (the "Required Filing Dates") by which the Company would have been
required so to file such documents if the Company were so subject. The Company
will also in any event (i) within 15 days of each Required Filing Date, (a)
transmit by mail to all holders of Notes, as their names and addresses appear
in the Note register, without cost to such holders and (b) file with the
Trustee copies of the annual reports, quarterly reports and other periodic
reports which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were
subject to such Section and (ii) if filing such documents by the Company with
the Commission is prohibited under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost.
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in the City of New York; (iii) maintenance
of corporate existence; (iv) payment of taxes and other claims; (v) maintenance
of properties; and (vi) maintenance of insurance.
Merger, Consolidation and Sale of Assets
The Indenture provides that the Company shall not consolidate or merge with
or into (whether or not the Company is the Surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
unless (i) the Surviving Person is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Surviving Person (if other than the Company) assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
at the time of and immediately after such Disposition, no Default or Event of
Default shall have occurred and be continuing; and (iv) the Surviving Person
(A) will have Consolidated Net Worth (immediately after giving effect to the
Disposition on a pro forma basis) equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction, and (B) at the time
of such Disposition and after giving pro forma effect thereto, would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described under "--Covenants--Limitation on
Incurrence of Indebtedness and Issuance of Disqualified Stock."
34
The Indenture provides that in the event of a sale of all or substantially
all of the assets of any Subsidiary Guarantor or all of the Capital Stock of
any Subsidiary Guarantor, by way of merger, consolidation or otherwise, then
the Surviving Person of any such merger or consolidation, or such Subsidiary
Guarantor, if all of its Capital Stock is sold, shall be released and relieved
of any and all obligations under the Subsidiary Guarantee of such Subsidiary
Guarantor if (i) the person or entity surviving such merger or consolidation or
acquiring the Capital Stock of such Subsidiary Guarantor is not a Subsidiary of
the Company, and (ii) the Net Proceeds from such sale are used after such sale
in a manner that complies with the provisions of the covenant described under
"--Covenants--Limitation on Asset Sales" concerning the disposition of Net
Proceeds from an Asset Sale. Except as provided in the preceding sentence, the
Indenture provides that no Subsidiary Guarantor shall consolidate with or merge
with or into another Person, whether or not such Person is affiliated with such
Subsidiary Guarantor and whether or not such Subsidiary Guarantor is the
Surviving Person, unless (i) the Surviving Person is a corporation organized or
existing under the laws of the United States, any state thereof or the District
of Columbia; (ii) the Surviving Person (if other than such Subsidiary
Guarantor) assumes all the obligations of such Subsidiary Guarantor under the
Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) at the time of and immediately
after such Disposition, no Default or Event of Default shall have occurred and
be continuing; and (iv) the Surviving Person will have Consolidated Net Worth
(immediately after giving pro forma effect to the Disposition) equal to or
greater than the Consolidated Net Worth of such Subsidiary Guarantor
immediately preceding the transaction; provided, however, that clause (iv) of
this paragraph shall not be a condition to a merger or consolidation of a
Subsidiary Guarantor if such merger or consolidation only involves the Company
and/or one or more Wholly Owned Restricted Subsidiaries of the Company.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which the Company or any Subsidiary Guarantor is not the Surviving Person and
the Surviving Person is to assume all the obligations of the Company or any
such Subsidiary Guarantor under the Notes and the Indenture pursuant to a
supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or such
Subsidiary Guarantor, as the case may be, and the Company or such Subsidiary
Guarantor, as the case may be, would be discharged from its obligations under
the Indenture, the Notes or its Subsidiary Guarantee, as the case may be.
Events of Default
The Indenture provides that each of the following constitutes an Event of
Default:
(i) a default for 30 days in the payment when due of interest on any Note
(whether or not prohibited by the subordination provisions of the
Indenture);
(ii) a default in the payment when due of principal on any Note (whether
or not prohibited by the subordination provisions of the Indenture), whether
upon maturity, acceleration, optional or mandatory redemption, required
repurchase or otherwise;
(iii) failure to perform or comply with any covenant, agreement or
warranty in the Indenture (other than the defaults specified in clauses (i)
and (ii) above) which failure continues (A) in the case of any such
covenant, agreement or warranty described herein under
"--Covenants--Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock," "--Covenants--Limitation on Restricted Payments,"
"--Covenants--Limitation on Asset Sales," and "--Merger, Consolidation and
Sale of Assets," for 30 days after written notice thereof has been given to
the Company by the Trustee or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the then outstanding Notes
and (B) in the case of any other such covenant, agreement or warranty
contained in the Indenture, for 60 days after written notice thereof has
been given to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the then
outstanding Notes;
35
(iv) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company, any Subsidiary Guarantor
or any other Restricted Subsidiary then has outstanding Indebtedness in
excess of $5,000,000 in the aggregate and, if not already matured at its
final maturity in accordance with its terms, such Indebtedness shall have
been accelerated;
(v) except as permitted by the Indenture, any Subsidiary Guarantee shall
for any reason cease to be, or be asserted in writing by any Subsidiary
Guarantor or the Company not to be, in full force and effect, and
enforceable in accordance with its terms;
(vi) one or more judgments, orders or decrees for the payment of money in
excess of $5,000,000, either individually or in the aggregate (net of
amounts covered by reputable and creditworthy insurance company, or by bond,
surety or similar instrument), shall be entered against the Company, any
Subsidiary Guarantor or any other Restricted Subsidiary or any of their
respective properties and which judgments, orders or decrees are not paid,
discharged, bonded or stayed for a period of 60 days after their entry;
(vii) any holder or holders of at least $5,000,000 in aggregate principal
amount of Indebtedness of the Company, any Subsidiary Guarantor or any other
Restricted Subsidiary after a default under such Indebtedness shall notify
the Trustee of the intended sale or disposition of any assets of the
Company, any Subsidiary Guarantor or any other Restricted Subsidiary with an
aggregate fair market value (as determined in good faith by the Company's
Board of Directors) of at least $500,000 that have been pledged to or for
the benefit of such holder or holders to secure such Indebtedness or shall
commence proceedings, or take any action (including by way of set-off), to
retain in satisfaction of such Indebtedness or to collect on, seize, dispose
of or apply in satisfaction of such Indebtedness, such assets of the
Company, any Subsidiary Guarantor or any other Restricted Subsidiary
(including funds on deposit or held pursuant to lock-box and other similar
arrangements);
(viii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Subsidiary Guarantor or any other Restricted Subsidiary in an
involuntary case or proceeding under any applicable Bankruptcy Law or (b) a
decree or order adjudging the Company, any Subsidiary Guarantor or any other
Restricted Subsidiary bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company, any
Subsidiary Guarantor or any other Restricted Subsidiary under any applicable
federal or state law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company,
any Subsidiary Guarantor or any other Restricted Subsidiary or of any
substantial part of their respective properties, or ordering the winding up
or liquidation of their affairs, and any such decree or order for relief
shall continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 days; or
(ix) (a) the Company, any Subsidiary Guarantor or any other Restricted
Subsidiary commences a voluntary case or proceeding under any applicable
Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or
insolvent, (b) the Company, any Subsidiary Guarantor or any other Restricted
Subsidiary consents to the entry of a decree or order for relief in respect
of the Company, such Subsidiary Guarantor or such Restricted Subsidiary in
an involuntary case or proceeding under any applicable Bankruptcy Law or to
the commencement of any bankruptcy or insolvency case or proceeding against
it, (c) the Company, any Subsidiary Guarantor or any other Restricted
Subsidiary files a petition or answer or consent seeking reorganization or
relief under any applicable federal or state law, (d) the Company, any
Subsidiary Guarantor or any other Restricted Subsidiary (x) consents to the
filing of such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company, such Subsidiary Guarantor or such
Restricted Subsidiary or of any substantial part of their respective
property, (y) makes an assignment for the benefit of creditors or (z) admits
in writing its inability to pay its debts generally as they become due or
(e) the Company, any Subsidiary Guarantor or any other Restricted Subsidiary
takes any corporate action in furtherance of any such actions in this
paragraph (ix).
36
If any Event of Default (other than as specified in clause (viii) or (ix) of
the preceding paragraph) occurs and is continuing, the Trustee or the holders
of at least 25% in aggregate principal amount of the then outstanding Notes
may, and the Trustee at the request of such holders shall, declare all the
Notes to be due and payable immediately; provided, however, that if any
Indebtedness is outstanding pursuant to the Credit Agreement upon a declaration
of acceleration of the Notes, the principal and interest on the Notes will not
be payable until the earlier of (1) the day which is five business days after
notice of acceleration is given to the Company and the representative of the
lenders under the Credit Agreement, and (2) the date of acceleration of the
Indebtedness under the Credit Agreement. Notwithstanding the foregoing, in the
case of an Event of Default arising from the events specified in clause (viii)
or (ix) of the preceding paragraph, the principal of, premium, if any, and any
accrued and unpaid interest on all outstanding Notes shall ipso facto become
immediately due and payable without further action or notice. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. In the event of a declaration of acceleration of the Notes because
an Event of Default has occurred and is continuing as a result of the
acceleration of any Indebtedness described in clause (iv) of the preceding
paragraph, the declaration of acceleration of the Notes shall be automatically
annulled if the holders of any Indebtedness described in clause (iv) have
rescinded the declaration of acceleration in respect of such Indebtedness
within 15 business days of the date of such declaration and if (a) the
annulment of the acceleration of the Notes would not conflict with any judgment
or decree of a court of competent jurisdiction, and (b) all existing Events of
Default, except non-payment of principal or interest on the Notes that became
due solely because of the acceleration of the Notes, have been cured or waived.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except (i) a continuing Default or Event of Default in the
payment of the principal of, or premium, if any, or interest on the Notes
(which may only be waived with the consent of each holder of Notes affected),
or (ii) in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each Note
outstanding. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from holders of the Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal, premium or interest) if it
determines that withholding notice is in their interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
The Indenture provides that no director, officer, employee, incorporator or
stockholder of the Company shall have any liability for any obligation of the
Company under the Indenture or the Notes or for any claim based on, in respect
of, or by reason of any such obligation or the creation of any such obligation.
Each Holder by accepting a Note waives and releases such Persons from all such
liability and such waiver and release is part of the consideration for the
issuance of the Notes.
Defeasance
The Indenture provides that (i) the Company will be discharged from any and
all obligations in respect of the Notes and the Subsidiary Guarantors will be
released from their Subsidiary Guarantees ("defeasance") or (ii) the payment of
the Notes may not be accelerated upon an Event of Default specified in clause
(iii), (iv), (v), (vi) or (vii) of "--Events of Default" ("covenant
defeasance"), in either case (i) or (ii) upon irrevocable deposit with the
Trustee, in trust, of money and/or U.S. government obligations which will
provide money in an amount sufficient in the opinion of a nationally recognized
37
accounting firm to pay the principal of, premium, if any, and each installment
of interest, if any, on the Notes. With respect to covenant defeasance under
clause (ii), the obligations under the Indenture (other than the covenants that
are the subject of such covenant defeasance) and the Events of Default (other
than the Event of Default specified above) shall remain in full force and
effect. Such trust may only be established if, among other things, (i)(a) with
respect to defeasance, the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a change
in applicable federal income tax law which in the opinion of counsel provides
that holders of the Notes will not recognize gain or loss for federal income
tax purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount, in the same manner and at the
same time as would have been the case if such deposit, defeasance and discharge
had not occurred, or (b) with respect to covenant defeasance, the Company has
delivered to the Trustee an opinion of counsel to the effect that holders of
the Notes will not recognize gain or loss for federal income tax purposes as a
result of such deposit and covenant defeasance and will be subject to federal
income tax on the same amount, in the same manner and at the same time as would
have been the case if such deposit and covenant defeasance had not occurred;
(ii) no Default or Event of Default shall have occurred and be continuing (and
no Default or Event of Default specified in clause (viii) or (ix) of the first
paragraph under "Events of Default" shall have occurred at any time during the
period ending on the 91st day after the date of such deposit in trust); (iii)
the Company has delivered to the Trustee an opinion of counsel to the effect
that such deposit shall not cause the Trustee or the trust so created to be
subject to the Investment Company Act of 1940; and (iv) certain other customary
conditions precedent shall have been satisfied.
Transfer and Exchange
The registered holder of a Note will be treated as the owner of it for all
purposes. A holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. Neither the Company nor the Registrar shall be
required to issue, register the transfer of or exchange any Note (i) during a
period beginning at the opening of business on the day that the Trustee
receives notice of any redemption from the Company and ending at the close of
business on the day the notice of redemption is sent to holders, (ii) selected
for redemption, in whole or in part, except the unredeemed portion of any Note
being redeemed in part may be transferred or exchanged, and (iii) during a
Change of Control Offer or an Asset Sale Offer if such Note is tendered
pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn.
Amendment, Supplement and Waiver
Except as provided in the next two paragraphs, the Indenture or the Notes
may be amended or supplemented with the written consent of the holders of at
least a majority in aggregate principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange
offer for the Notes), and any existing Default or Event of Default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver shall
not: (i) reduce the principal amount of the Notes whose holders must consent to
an amendment, supplement or waiver; (ii) reduce the principal of or change the
fixed maturity of any Note, or alter the provisions with respect to the
redemption of the Notes in a manner adverse to the holders of the Notes; (iii)
reduce the rate of or change the time for payment of interest on any Note; (iv)
waive a Default or Event of Default in the payment of principal of, premium, if
any, or interest on the Notes (except that holders of at least a majority in
aggregate principal amount of the then outstanding Notes may (a) rescind an
acceleration of the Notes that resulted from a non-payment default, and (b)
waive the payment default that resulted
38
from such acceleration); (v) make any Note payable in money other than that
stated in the Notes; (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of holders of Notes to
receive payments of principal of, or premium, if any, or interest on the Notes;
(vii) waive a redemption payment with respect to any Note; (viii) make any
change to the subordination provisions of the Indenture that adversely affects
holders; or (viii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
(i) to cure any ambiguity, defect or inconsistency, (ii) to provide for
uncertificated Notes in addition to or in place of certificated Notes, (iii) to
provide for the assumption of the Company's obligations to holders of the Notes
in the event of any Disposition involving the Company in which the Company is
not the Surviving Person, (iv) to make any change that would provide any
additional rights or benefits to the holders of the Notes or that does not
adversely affect the interests of any such holder, or (v) to comply with
requirements of the Securities and Exchange Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
The Trustee
In the event that the Trustee becomes a creditor of the Company, the
Indenture contains certain limitations on the rights of the Trustee to obtain
payment of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as Trustee, or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
has occurred and has not been cured, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. The Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any holder of
Notes unless such holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of all other terms used in the
Indenture.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of
any other Person (the "Acquired Person") existing at the time the Acquired
Person merges with or into, or becomes a Subsidiary of, such specified Person,
including Indebtedness incurred in connection with, or in contemplation of, the
Acquired Person merging with or into, or becoming a Subsidiary of, such
specified Person.
"Additional Guarantee" means any guarantee of the Company's obligations
under the Indenture and the Notes issued after the Issue Date as described in
"--Covenants--Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries."
"Additional Guarantor" means any Subsidiary of the Company that guarantees
the Company's obligations under the Indenture and the Notes issued after the
Issue Date as described in "--Covenants--Limitation on Guarantees of Company
Indebtedness by Restricted Subsidiaries" and "--Covenants--Future Subsidiary
Guarantors."
39
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") of any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means (i) any sale, lease, conveyance or other disposition by
the Company or any Restricted Subsidiary of any assets (including by way of a
sale-and-leaseback) other than in the ordinary course of business (provided
that the sale, lease, conveyance or other disposition of all or substantially
all of the assets of the Company shall not be an "Asset Sale" but instead shall
be governed by the provisions of the Indenture described under "Merger,
Consolidation and Sale of Assets"), or (ii) the issuance or sale of Capital
Stock of any Restricted Subsidiary, in each case, whether in a single
transaction or a series of related transactions, to any Person (other than to
the Company or a Wholly-Owned Restricted Subsidiary) for Net Proceeds in excess
of $1,000,000.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization
or relief of debtors, or any amendment to, succession to or change in any such
law.
"Capital Lease Obligation" of any Person means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease for property leased by such Person that would at such time be
required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Stock.
"Cash Equivalents" means (i) securities with maturities of one year or less
from the date of acquisition issued, fully guaranteed or insured by the United
States Government or any agency thereof, (ii) certificates of deposit, time
deposits, overnight bank deposits, bankers' acceptances and repurchase
agreements issued by a Qualified Issuer having maturities of 270 days or less
from the date of acquisition, (iii) commercial paper of an issuer rated at
least A-2 by Standard & Poor's Corporation or P-2 by Moody's Investors Service,
Inc., or carrying an equivalent rating by a nationally recognized rating agency
if both of the two named rating agencies cease publishing ratings of
investments, and having maturities of 270 days or less from the date of
acquisition, and (iv) money market accounts or funds with or issued by
Qualified Issuers.
"Change of Control" means the occurrence of either of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 30% of the total outstanding Voting Stock of the Company; provided that
the Permitted Holders "beneficially own" (as so defined) a lesser percentage of
such Voting Stock than such other Person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company, or (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of 66 2/3%
of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of such
Board of Directors then in office.
40
"Company" means Young Broadcasting Inc., a Delaware corporation, unless and
until a successor replaces it in accordance with the Indenture and thereafter
means such successor.
"Consolidated Interest Expense" means, with respect to any period, the sum
of (i) the interest expense of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP
consistently applied, including, without limitation, (a) amortization of debt
discount, (b) the net payments, if any, under interest rate contracts
(including amortization of discounts), (c) the interest portion of any deferred
payment obligation and (d) accrued interest, plus (ii) the interest component
of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company during such period, and all capitalized interest of the
Company and its Restricted Subsidiaries, in each case as determined on a
consolidated basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any period, the net income
(or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP consistently
applied, adjusted, to the extent included in calculating such net income (or
loss), by excluding, without duplication, (i) all extraordinary gains but not
losses (less all fees and expenses relating thereto), (ii) the portion of net
income (or loss) of the Company and its Restricted Subsidiaries allocable to
interests in unconsolidated Persons or Unrestricted Subsidiaries, except to the
extent of the amount of dividends or distributions actually paid to the Company
or its Restricted Subsidiaries by such other Person during such period, (iii)
net income (or loss) of any Person combined with the Company or any of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) net gain but not losses (less all
fees and expenses relating thereto) in respect of dispositions of assets
(including, without limitation, pursuant to sale and leaseback transactions)
other than in the ordinary course of business, or (v) the net income of any
Restricted Subsidiary to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income to the
Company is not at the time permitted, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders.
"Consolidated Net Worth" means, with respect to any Person on any date, the
equity of the common and preferred stockholders of such Person and its
Restricted Subsidiaries as of such date, determined on a consolidated basis in
accordance with GAAP consistently applied.
"Credit Agreement" means the $600.0 million Credit Agreement dated as of
June 26, 2000 between the Company, the banks listed therein, Bankers Trust
Company as Administrative Agent and the other parties thereto and the $200.0
million Second Amended and Restated Credit Agreement dated as of June 26, 2000
between the Company, the banks listed therein, Bankers Trust Company as
Administrative Agent and Issuing Bank as each of the same may be amended,
modified, renewed, refunded, replaced or refinanced from time to time,
including (i) any related notes, letters of credit, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, and (ii) any notes, guarantees, collateral documents, instruments
and agreements executed in connection with any such amendment, modification,
renewal, refunding, replacement or refinancing.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense from October 1, 1994 to the end of
the Company's most recently ended full fiscal quarter prior to such date, taken
as a single accounting period.
"Cumulative Operating Cash Flow" means, as of any date of determination,
Operating Cash Flow from October 1, 1994 to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
41
"Debt to Operating Cash Flow Ratio" means, with respect to any date of
determination, the ratio of (i) the aggregate principal amount of all
outstanding Indebtedness of the Company and its Restricted Subsidiaries as of
such date on a consolidated basis, plus the aggregate liquidation preference or
redemption amount of all Disqualified Stock of the Company and its Restricted
Subsidiaries (excluding any such Disqualified Stock held by the Company or its
Wholly Owned Restricted Subsidiaries), to (ii) Operating Cash Flow of the
Company and its Restricted Subsidiaries on a consolidated basis for the four
most recent full fiscal quarters ending on or immediately prior to such date,
determined on a pro forma basis after giving pro forma effect to (i) the
incurrence of such Indebtedness and (if applicable) the application of the net
proceeds therefrom, including to refinance other Indebtedness, as if such
Indebtedness was incurred, and the application of such proceeds occurred, at
the beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company and its Restricted
Subsidiaries since the first day of such four-quarter period as if such
Indebtedness was incurred, repaid or retired at the beginning of such four-
quarter period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average balance of such Indebtedness at the end of each month during such
four-quarter period); (iii) in the case of Acquired Debt, the related
acquisition as if such acquisition had occurred at the beginning of such four-
quarter period; and (iv) any acquisition or disposition by the Company and its
Restricted Subsidiaries of any company or any business or any assets out of the
ordinary course of business, or any related repayment of Indebtedness, in each
case since the first day of such four-quarter period, assuming such acquisition
or disposition had been consummated on the first day of such four-quarter
period.
"Default" means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"Designated Senior Debt" means (i) the Senior Bank Debt, and (ii) any other
Senior Debt of the Company permitted to be incurred under the Indenture the
principal amount of which is $20,000,000 or more at the time of the designation
of such Senior Debt as "Designated Senior Debt" by the Company in a written
instrument delivered to the Trustee.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance
or other disposition of all or substantially all of such Person's assets.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof (other than upon a change of
control of the Company in circumstances where the holders of the Notes would
have similar rights), in whole or in part on or prior to the stated maturity of
the Notes.
"Dollars" and "$" means lawful money of the United States of America.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Film Contracts" means contracts with suppliers that convey the right to
broadcast specified films, videotape motion pictures, syndicated television
programs or sports or other programming.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
42
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication, and
whether or not contingent, (i) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services or which is
evidenced by a note, bond, debenture or similar instrument, (ii) all Capital
Lease Obligations of such Person, (iii) all obligations of such Person in
respect of letters of credit or bankers' acceptances issued or created for the
account of such Person, (iv) all Interest Rate Agreement Obligations of such
Person, (v) all liabilities secured by any Lien on any property owned by such
Person even if such Person has not assumed or otherwise become liable for the
payment thereof to the extent of the value of the property subject to such
Lien, (vi) all obligations to purchase, redeem, retire, or otherwise acquire
for value any Capital Stock of such Person, or any warrants, rights or options
to acquire such Capital Stock, now or hereafter outstanding, (vii) to the
extent not included in (vi), all Disqualified Stock issued by such Person,
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends thereon, and (viii) to the extent not
otherwise included, any guarantee by such Person of any other Person's
indebtedness or other obligations described in clauses (i) through (vii) above.
"Indebtedness" of the Company and the Restricted Subsidiaries shall not include
current trade payables incurred in the ordinary course of business and payable
in accordance with customary practices, and non-interest bearing installment
obligations and accrued liabilities incurred in the ordinary course of business
which are not more than 90 days past due. For purposes hereof, the "maximum
fixed repurchase price" of any Disqualified Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were purchased on any date on
which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by the fair market
value of, such Disqualified Stock, such fair market value is to be determined
in good faith by the board of directors of the issuer of such Disqualified
Stock.
"Independent Director" means a director of the Company other than a director
(i) who (apart from being a director of the Company or any Subsidiary) is an
employee, associate or Affiliate of the Company or a Subsidiary or has held any
such position during the previous five years, or (ii) who is a director,
employee, associate or Affiliate of another party to the transaction in
question.
"Initial Guarantees" means the guarantees of the Company's obligations under
the Indenture and the Notes by the Initial Guarantors.
"Initial Guarantors" means (i) Young Broadcasting of Albany, Inc., a
Delaware corporation, (ii) Young Broadcasting of Lansing, Inc., a Michigan
corporation, (iii) Winnebago Television Corporation, an Illinois corporation,
(iv) Young Broadcasting of Nashville, Inc., a Delaware corporation, (v) YBT,
Inc., a Delaware corporation, (vi) WKRN, G.P., a Delaware general partnership,
(vii) Young Broadcasting of Louisiana, Inc., a Delaware corporation, (viii)
LAT, Inc., a Delaware corporation, (ix) KLFY, L.P., a Delaware limited
partnership, (x) Young Broadcasting of Richmond, Inc., a Delaware corporation,
(xi) Young Broadcasting of Green Bay, Inc., a Delaware corporation, (xii) Young
Broadcasting of Knoxville, Inc., a Delaware corporation, (xiii) WATE, G.P., a
Delaware general partnership, (xiv) YBK, Inc., a Delaware corporation, (xv)
Young Broadcasting of Davenport, Inc., a Delaware corporation, (xvi) Young
Broadcasting of Sioux Falls, Inc., a Delaware corporation, (xvii) Young
Broadcasting of Rapid City, Inc., a Delaware corporation, (xviii) Young
Broadcasting of Los Angeles, Inc., a Delaware corporation, (xix) Young
Broadcasting of San Francisco, Inc., a Delaware corporation, (xx) Honey Bucket
Films, Inc., a Delaware corporation, (xxi) Adam Young Inc., a Delaware
corporation, and (xxii) Fidelity Television, Inc., a California corporation.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
43
"Interest Rate Agreement Obligations" means, with respect to any Person, the
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates of such Person) in the form of
loans, Guarantees, advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Capital Stock or other securities and all other items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Proceeds" means, with respect to any Asset Sale by any Person, the
aggregate cash proceeds received by such Person and/or its Affiliates in
respect of such Asset Sale, which amount is equal to the excess, if any, of (i)
the cash received by such Person and/or its Affiliates (including any cash
payments received by way of deferred payment pursuant to, or monetization of, a
note or installment receivable or otherwise, but only as and when received) in
connection with such Asset Sale, over (ii) the sum of (a) the amount of any
Indebtedness that is secured by such asset and which is required to be repaid
by such Person in connection with such Asset Sale, plus (b) all fees,
commissions and other expenses incurred by such Person in connection with such
Asset Sale, plus (c) provision for taxes, including income taxes, attributable
to the Asset Sale or attributable to required prepayments or repayments of
Indebtedness with the proceeds of such Asset Sale, plus (d) a reasonable
reserve for the after-tax cost of any indemnification payments (fixed or
contingent) attributable to seller's indemnities to purchaser in respect of
such Asset Sale undertaken by the Company or any of its Restricted Subsidiaries
in connection with such Asset Sale plus (e) if such Person is a Restricted
Subsidiary, any dividends or distributions payable to holders of minority
interests in such Restricted Subsidiary from the proceeds of such Asset Sale.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Operating Cash Flow" means, with respect to any period, the Consolidated
Net Income of the Company and its Restricted Subsidiaries for such period, plus
(i) extraordinary net losses and net losses realized on any sale of assets
during such period, to the extent such losses were deducted in computing
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits, to the extent such provision for taxes was included in computing such
Consolidated Net Income, and any provision for taxes utilized in computing the
net losses under clause (i) hereof, plus (iii) Consolidated Interest Expense of
the Company and its Restricted Subsidiaries for such period, plus (iv)
depreciation, amortization and all other non-cash charges, to the extent such
depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income (including amortization of goodwill and
other intangibles, including Film Contracts and write-downs of Film Contracts),
minus (v) any cash payments contractually required to be made with respect to
Film Contracts (to the extent not previously included in computing such
Consolidated Net Income).
44
"Permitted Holders" means (i) any of Adam Young or Vincent Young; (ii) the
spouse, ancestors, siblings, descendants (including children or grandchildren
by adoption) of any such siblings or the spouse of any of the Persons described
in clause (i); (iii) in the event of the incompetence or death of any of the
Persons described in clauses (i) and (ii), such Person's estate, executor,
administrator, committee or other personal representative, in each case who at
any particular date shall beneficially own or have the right to acquire,
directly or indirectly, Capital Stock of the Company; (iv) any trusts created
for the benefit of the Persons described in clause (i), (ii) or (iii) or any
trust for the benefit of any such trust; or (v) any Person controlled by any of
the Persons described in clause (i), (ii), (iii) or (iv). For purposes of this
definition, "control," as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or by contract or otherwise.
"Permitted Investments" means (i) any Investment in the Company or any
Wholly Owned Restricted Subsidiary; (ii) any Investments in Cash Equivalents;
(iii) any Investment in a Person (an "Acquired Person") if, as a result of such
Investment, (a) the Acquired Person becomes a Wholly Owned Restricted
Subsidiary of the Company, or (b) the Acquired Person either (1) is merged,
consolidated or amalgamated with or into the Company or one of its Wholly Owned
Restricted Subsidiaries and the Company or such Wholly Owned Restricted
Subsidiary is the Surviving Person, or (2) transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or one of its Wholly
Owned Restricted Subsidiaries; (iv) Investments in accounts and notes
receivable acquired in the ordinary course of business; (v) notes from
employees issued to the Company representing (x) loans for the payment of the
exercise price of options to purchase Capital Stock of the Company or (y) loans
to satisfy federal income tax withholding requirements relating to the issuance
of Capital Stock of the Company pursuant to the Company's Incentive Stock Grant
Program, in an aggregate amount not to exceed $2,000,000 outstanding at any one
time; (vi) any securities received in connection with an Asset Sale that
complies with the covenant described under "--Covenants--Limitations on Asset
Sales"; (vii) any Investment represented by the Company's obligations to
Nationwide Communications Inc. pursuant to the Acquisition Agreement; (viii)
Interest Rate Agreement Obligations permitted pursuant to the second paragraph
of the covenant described under "--Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock"; (ix) any Guarantee issued by any Subsidiary of
the Company in respect of Senior Debt and any Subsidiary Guarantee; and (x) any
other Investments that do not exceed $5,000,000 in amount in the aggregate at
any one time outstanding.
"Permitted Liens" means (i) Liens on assets or property of the Company that
secure Senior Debt of the Company and Liens on assets or property of a
Restricted Subsidiary that secure Senior Debt of such Restricted Subsidiary, in
each case in which such Senior Debt is permitted under the provisions of the
covenant described under "--Covenants--Limitation on Incurrence of Indebtedness
and Issuance of Disqualified Stock" and provided that the provisions described
under "--Covenants--Limitations on Guarantees of Company Indebtedness by
Restricted Subsidiaries" are complied with; (ii) Liens securing Indebtedness of
a Person existing at the time that such Person is merged into or consolidated
with the Company or a Restricted Subsidiary; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of such Person; (iii) Liens on property
acquired by the Company or a Restricted Subsidiary; provided that such Liens
were in existence prior to the contemplation of such acquisition and do not
extend to any other property; (iv) Liens arising from Capital Lease Obligations
permitted under the Indenture; (v) Liens arising from Purchase Money
Indebtedness permitted under the Indenture; (vi) Liens in respect of Interest
Rate Agreement Obligations permitted under the Indenture; (vii) Liens in favor
of the Company or any Restricted Subsidiary; (viii) Liens incurred, or pledges
and deposits in connection with, workers' compensation, unemployment insurance
and other social security benefits, and leases, appeal bonds and other
obligations of like nature incurred by the Company or any Restricted Subsidiary
in the ordinary course of business; (ix) Liens imposed by law, including,
without limitation, mechanics', carriers', warehousemen's, materialmen's,
suppliers' and vendors' Liens,
45
incurred by the Company or any Restricted Subsidiary in the ordinary course of
business; and (x) Liens for ad valorem, income or property taxes or assessments
and similar charges which either are not delinquent or are being contested in
good faith by appropriate proceedings for which the Company has set aside on
its books reserves to the extent required by GAAP.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument
creating, evidencing or governing such Indebtedness, whether or not, pursuant
to applicable law or otherwise, the claim for such interest is allowed as a
claim in such Insolvency or Liquidation Proceeding.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Stock) of the Company, pursuant to an effective
registration statement filed under the Securities Act, the net proceeds of
which to the Company (after deducting any underwriting discounts and
commissions) exceed $25,000,000.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in connection with the purchase of property or
assets for the business of the Company and its Restricted Subsidiaries.
"Qualified Issuer" means (A) any lender that is a party to the Credit
Agreement; and (B) any commercial bank (i) which has capital and surplus in
excess of $100,000,000, and (ii) the outstanding short-term debt securities of
which are rated at least A-2 by Standard & Poor's Corporation or at least P-2
by Moody's Investors Service, Inc., or carry an equivalent rating by nationally
recognized rating agency if both the two named rating agencies cease publishing
ratings of investments.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means (i) any dividend or other distribution declared
or paid on any Capital Stock of the Company or any of its Restricted
Subsidiaries (other than dividends or distributions payable solely in Capital
Stock (other than Disqualified Stock) of the Company or such Restricted
Subsidiary or dividends or distributions payable to the Company or any Wholly
Owned Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company or any Restricted
Subsidiary or other Affiliate of the Company (other than any Capital Stock
owned by the Company or any Wholly Owned Restricted Subsidiary); (iii) any
payment to purchase, redeem, defease or otherwise acquire or retire for value
any Indebtedness that is subordinated in right of payment to the Notes other
than a purchase, redemption, defeasance or other acquisition or retirement for
value that is paid for with the proceeds of Refinancing Indebtedness that is
permitted under the covenant described under "--Covenants--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock"; or (iv) any
Restricted Investment. Notwithstanding the foregoing, a "Restricted Payment"
shall not include the repurchase of the Company's DEF Preferred Stock (as
defined in the Company's Prospectus dated November 7, 1994 relating to the
November 1994 Notes (the "Prospectus")) and related warrants pursuant to the
Financing Plan as described in the Prospectus.
46
"Restricted Subsidiary" means each direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Senior Bank Debt" means (i) the Indebtedness outstanding or arising under
the Credit Agreement up to a maximum principal amount of $500,000,000, less any
required repayments which result in a permanent reduction in the commitments
thereunder, (ii) all Obligations incurred by or owing to the holders of such
Indebtedness outstanding or arising under the Credit Agreement (including, but
not limited to, all fees and expenses of counsel and all other charges, fees
and expenses), and (iii) all Interest Rate Agreement Obligations arising
pursuant to the Interest Rate and Currency Exchange Agreement dated as of June
30, 1989 between the Company and Morgan Guaranty Trust Company of New York (or
its assigns), any schedule thereto or any confirmation of an interest rate swap
transaction thereunder, as the same may be amended or modified from time to
time.
"Senior Debt" means (A) with respect to the Company, the principal of and
interest (including Post-Petition Interest) on, and all other amounts owing in
respect of, (i) Senior Bank Debt and (ii) any other Indebtedness permitted to
be incurred by the Company under the terms of the Indenture (including, but not
limited to, reasonable fees and expenses of counsel and all other charges, fees
and expenses incurred in connection with such Indebtedness), unless the
instrument creating or evidencing such Indebtedness or pursuant to which such
Indebtedness is outstanding expressly provides that such Indebtedness is on a
parity with or subordinated in right of payment to the Notes, and (B) with
respect to any Subsidiary Guarantor, the principal of and interest (including
Post-Petition Interest) on, and all other amounts owing in respect of, (i) such
Subsidiary Guarantor's obligations in respect of the Senior Bank Debt,
including its obligations as a guarantor thereof, and (ii) any other
Indebtedness permitted to be incurred by such Subsidiary Guarantor under the
terms of the Indenture (including, but not limited to, reasonable fees and
expenses of counsel and all other charges, fees and expenses incurred in
connection with such Indebtedness), unless the instrument creating or
evidencing such Indebtedness or pursuant to which such Indebtedness is
outstanding expressly provides that such Indebtedness is on a parity with or
subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary
Guarantor. Notwithstanding the foregoing, Senior Debt shall not include (i) any
Indebtedness for federal, state, local or other taxes, (ii) any Indebtedness
among or between the Company, any Restricted Subsidiary and/or their
Affiliates, (iii) any Indebtedness incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business or any
Obligations in respect of any such Indebtedness, (iv) any Indebtedness that is
incurred in violation of the Indenture, (v) Indebtedness evidenced by the Notes
or the Subsidiary Guarantees, or (vi) Indebtedness of a Person that is
expressly subordinate or junior in right of payment to any other Indebtedness
of such Person.
"Senior Subordinated Indebtedness" means (A) with respect to the Company.
all Indebtedness of the type referred to in clause (A)(ii) of the definition of
Senior Debt unless the instrument creating or evidencing such Indebtedness or
pursuant to which such Indebtedness is outstanding expressly provides that such
Indebtedness is either Senior Debt of the Company or is subordinated in right
of payment to the Notes, and (B) with respect to each Subsidiary Guarantor, all
Indebtedness of the type referred to in clause (B)(ii) of the definition of
Senior Debt unless the instrument creating or evidencing such Indebtedness or
pursuant to which such Indebtedness is outstanding expressly provides that such
Indebtedness is either Senior Debt of such Subsidiary Guarantor or subordinated
in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor.
Notwithstanding the foregoing, Senior Subordinated Indebtedness shall not
include any Indebtedness of the type referred to in clauses (i), (ii), (iii)
and (iv) at the end of the definition of Senior Debt.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor of the type referred to in clause (A)(ii) or (B)(ii) of
the definition of Senior Debt if the instrument creating or evidencing such
Indebtedness or pursuant to which such Indebtedness is outstanding expressly
provides that such Indebtedness is (A) if incurred by the Company, subordinated
in right of payment to the Notes, or (B) if incurred by a Subsidiary Guarantor,
subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary
Guarantor.
47
"Subsidiary" of any Person means (i) any corporation more than 50% of the
outstanding Voting Stock of which is owned or controlled, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person,
or by such Person and one or more other Subsidiaries thereof, or (ii) any
limited partnership of which such Person or any Subsidiary of such Person is a
general partner, or (iii) any other Person (other than a corporation or limited
partnership) in which such Person, or one or more other Subsidiaries of such
Person, or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has more than 50% of the outstanding partnership or similar
interests or has the power, by contract or otherwise, to direct or cause the
direction of the policies, management and affairs thereof.
"Subsidiary Guarantees" means the Initial Guarantees and any Additional
Guarantees.
"Subsidiary Guarantors" means the Initial Guarantors and any Additional
Guarantors.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or
the Person to which such Disposition is made.
"Television Stations" means the Television Stations presently known as WKRN-
TV, Nashville, Tennessee, WTEN-TV, Albany, New York, WLNS-TV, Lansing,
Michigan, KLFY-TV, Lafayette, Louisiana, WTVO-TV, Rockford, Illinois, WRIC-TV,
Richmond, Virginia, WATE-TV, Knoxville, Tennessee, WBAY-TV, Green Bay,
Wisconsin, KWQC-TV, Davenport, Iowa, KELO-TV, Sioux Falls, South Dakota,
KRON-TV, San Francisco, California, and KCAL-TV, Los Angeles, California.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
an Unrestricted Subsidiary by the Board of Directors of the Company; provided
that (i) if such Subsidiary is formed or created by the Company, such
Subsidiary (a) is designated as an Unrestricted Subsidiary prior to such
formation or creation, (b) has total assets at the time of such formation or
creation with a fair market value not exceeding $1,000, and (c) does not own
any Capital Stock of the Company or any Restricted Subsidiary, (ii) if such
Subsidiary is acquired by the Company, such Subsidiary is designated as an
Unrestricted Subsidiary prior to the consummation of such acquisition, (iii) no
portion of any Indebtedness or any other obligation (contingent or otherwise)
of such Subsidiary (a) is guaranteed by, or is otherwise the subject of credit
support provided by the Company or any of its Restricted Subsidiaries, (b) is
recourse to or obligates the Company or any of its Restricted Subsidiaries in
any way, or (c) subjects any property or asset of the Company or any of its
Restricted Subsidiaries directly or indirectly, contingently or otherwise, to
the satisfaction of such Indebtedness or other obligation, (iv) neither the
Company nor any of its Restricted Subsidiaries has any contract, agreement,
arrangement or understanding with such Subsidiary other than on terms as
favorable to the Company or such Restricted Subsidiary as those that might be
obtained at the time from Persons that are not Affiliates of the Company, and
(v) neither the Company nor any of its Restricted Subsidiaries has any
obligation (a) to subscribe for additional shares of Capital Stock of such
Subsidiary, or (b) to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results. Any such designation by the Company's Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Company's Board of Directors giving effect to such
designation and a certificate stating that such designation complies with the
foregoing conditions. Notwithstanding the foregoing or any other provision of
the Indenture to the contrary, no assets of the Television Stations may be held
at any time by any Unrestricted Subsidiary, other than assets transferred to
Unrestricted Subsidiaries that in the aggregate are not material to such
broadcasting operations. In the event of any Disposition involving the Company
in which the Company is not the Surviving Person, the Board of Directors of the
Surviving Person may (x) prior to such Disposition, designate any of its
Subsidiaries, and any of the Company's Subsidiaries being acquired pursuant to
such Disposition that are not Restricted Subsidiaries, as Unrestricted
Subsidiaries, and (y) after such Disposition, designate any of its direct or
indirect Subsidiaries as an Unrestricted Subsidiary under the same conditions
and in the same manner as the Company under the terms of the Indenture.
48
"Voting Stock" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary with
respect to which all of the outstanding voting securities (other than
directors' qualifying shares) of which are owned, directly or indirectly, by
the Company or a Surviving Person of any Disposition involving the Company, as
the case may be.
49
BOOK-ENTRY, DELIVERY AND FORM
Principal and interest payments on global securities registered in the name
of DTC's nominee will be made in immediate available funds to DTC's nominee as
the registered owner of the global securities. We and the trustee will treat
DTC's nominee as the owner of the global securities for all other purposes as
well. Accordingly, we, the trustee, any paying agent and the initial purchaser
will have no direct responsibility or liability for any aspect of the records
relating to payments made on account of beneficial interests in the global
securities or for maintaining, supervising or reviewing any records relating to
these beneficial interests. It is DTC's current practice, upon receipt of any
payment of principal or interest, to credit direct participants' accounts on
the payment date according to their respective holdings of beneficial interests
in the global securities. These payments will be the responsibility of the
direct and indirect participants and not of DTC, the trustee or us.
So long as DTC or its nominee is the registered owner or holder of the
global security, DTC or its nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by the global security for the
purposes of:
. receiving payment on the notes;
. receiving notices; and
. for all other purposes under the Indenture and the notes.
Beneficial interests in the notes will be evidenced only by, and transfers
of the notes will be effected only through, records maintained by DTC and its
participants.
Except as described below, owners of beneficial interests in a global
security will not be entitled to receive physical delivery of certificated
notes in definitive form and will not be considered the holders of the global
security for any purposes under the Indenture. Accordingly, each person owning
a beneficial interest in a global security must rely on the procedures of DTC.
And, if that person is not a participant, the person must rely on the
procedures of the participant through which that person owns its interest, to
exercise any rights of a holder under the Indenture. Under existing industry
practices, if we request any action of holders or an owner of a beneficial
interest in a global security desires to take any action under the Indenture,
DTC would authorize the participants holding the relevant beneficial interest
to take that action. The participants then would authorize beneficial owners
owning through the participants to take the action or would otherwise act upon
the instructions of beneficial owners owning through them.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more participants to whose
account with DTC interests in the global security are credited. Further, DTC
will take action only as to the portion of the aggregate principal amount at
maturity of the notes as to which the participant or participants has or have
given the direction.
Although DTC, the Euroclear System ("Euroclear") and Clearstream Banking,
S.A. of Luxembourg ("Clearstream") have agreed to the procedures described
above in order to facilitate transfers of interests in global securities among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform these procedures, and the procedures may be discontinued at any time.
None of us, the trustee, any agent of the initial purchaser or ours will have
any responsibility for the performance by DTC, Euroclear and Clearstream or
their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
DTC has provided the following information to us. DTC is a:
. limited-purpose trust company organized under the New York Banking Law;
. a banking organization within the meaning of the New York Banking Law;
50
. a member of the U.S. Federal Reserve System;
. a clearing corporation within the meaning of the New York Uniform
Commercial Code; and
. a clearing agency registered under the provisions of Section 17A of the
Securities Exchange Act.
Certificated Notes
Notes represented by a global security are exchangeable for certificated
notes only if:
. DTC notifies us that it is unwilling or unable to continue as depository
or if DTC ceases to be a registered clearing agency, and a successor
depository is not appointed by us within 90 days;
. determine not to require all of the notes to be represented by a global
security and notifies the trustee of their decision; or
. an event of default or an event which, with the giving of notice or lapse
of time, or both, would constitute an Event of Default relating to the
notes represented by the global security has occurred and is continuing.
Any global security that is exchangeable for certificated notes in
accordance with the preceding sentence will be transferred to, and registered
and exchanged for, certificated notes in authorized denominations and
registered in the names as DTC or its nominee may direct. However, a global
security is only exchangeable for a global security of like denomination to be
registered in the name of DTC or its nominee. If a global security becomes
exchangeable for certificated notes:
. certificated notes will be issued only in fully registered form in
denominations of $1,000 or integral multiples of $1,000;
. payment of principal, premium, if any, and interest on the certificated
notes will be payable, and the transfer of the certificated notes will be
registrable, at the office or agency we maintain for these purposes; and
. no service charge will be made for any issuance of the certificated notes,
although the issuers may require payment of a sum sufficient to cover any
tax or governmental charge imposed in connection with the issuance.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Clearstream will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes, cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparts in such system in
accordance with the rules and procedures and within the established deadlines,
Brussels time, of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
global notes in DTC, and making or receiving payment in accordance with normal
procedures for same- day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositories for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
51
settlement processing day, which must be a business day for Euroclear and
Clearstream, immediately following the settlement date of DTC. Cash received in
Euroclear or Clearstream as a result of sales of interest in a global security
by or through a Euroclear or Clearstream participant to a participant in DTC
will be received with value on the settlement date of DTC but will be available
in the relevant Euroclear or Clearstream cash account only as of the business
day for Euroclear or Clearstream following DTC's settlement date.
52
EXCHANGE OFFER
Registration Rights Agreement
The initial notes were originally issued on March 1, 2001 to Chase
Securities Inc., pursuant to a purchase agreement dated February 16, 2001. The
initial purchaser subsequently resold the notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act, and outside the
United States in accordance with Regulation S under the Securities Act. We are
parties to a registration rights agreement with the initial purchaser entered
into as a condition to the closing under the purchase agreement. Pursuant to
the registration rights agreement, we agreed, for the benefit of the holders of
the initial notes, at our cost to:
. file an exchange offer registration statement on or before April 30, 2001
with the Securities and Exchange Commission with respect to the exchange
offer for the notes; and
. use our best efforts to cause the exchange offer registration statement to
be declared effective under the Securities Act by August 28, 2001.
Upon the exchange offer registration statement being declared effective, we
will offer the exchange notes in exchange for surrender of the initial notes.
We will keep the exchange offer open for not less than 20 business days, or
longer if required by applicable law, after the date on which notice of the
exchange offer is mailed to the holders of the initial notes. For each initial
note surrendered to us pursuant to the exchange offer, the holder of such
initial note will receive an exchange note having a principal amount equal to
that of the surrendered initial note and a related guarantee.
Under existing interpretations of the staff of the Securities and Exchange
Commission contained in several no-action letters to third parties, we believe
that the exchange notes and the related guarantees will in general be freely
tradeable after the exchange offer without further registration under the
Securities Act. However, any purchaser of initial notes who is an "affiliate"
of ours or any of our subsidiary guarantors or who intends to participate in
the exchange offer for the purpose of distributing the exchange notes:
. will not be able to rely on these interpretations of the staff of the
Securities and Exchange Commission;
. will not be able to tender its initial notes in the exchange offer; and
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the initial
notes, unless such sale or transfer is made pursuant to an exemption from
such requirements.
As contemplated by these no-action letters and the registration rights
agreement, each holder accepting the exchange offer is required to represent to
us in the letter of transmittal that:
. neither the holder nor any such other person is an "affiliate" of ours or
any of our subsidiary guarantors within the meaning of Rule 405 under the
Securities Act;
. the holder or any such other person is not engaged in, does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the exchange notes; and
. it is acquiring the exchange notes in the ordinary course of business.
Each holder participating in the exchange offer for the purpose of
distributing the exchange notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the exchange notes and cannot rely on those no-action letters.
53
For a description of the procedures for resales by broker-dealers, see "Plan
of Distribution."
Shelf Registration Statement
If applicable interpretations of the Commission do not permit us and our
subsidiary guarantors to effect the exchange of the initial notes for the
exchange notes, or, under certain other circumstances, including if for any
other reason the exchange offer is not consummated by October 27, 2001, we
will:
. as promptly as reasonably practicable, file a shelf registration statement
covering resales of the initial notes;
. use our best efforts to cause the shelf registration statement to be
declared effective under the Securities Act; and
. use our best efforts to keep effective the shelf registration statement
until the earlier of two years after its effective date and such time as
all of the applicable initial notes have been sold under such registration
statement.
We will, in the event of the filing of the shelf registration statement:
. provide to each holder of the initial notes copies of the prospectus which
is a part of the shelf registration statement;
. notify each such holder when the shelf registration statement has become
effective; and
. take certain other actions as are required to permit unrestricted resales
of the initial notes and the related guarantees.
A holder that sells its initial notes pursuant to the shelf registration
statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
registration rights agreement which are applicable to such a holder, including
certain indemnification obligations.
We are required to pay as liquidated damages upon the following occurrences,
the following additional interest with respect to the initial notes:
. If the exchange offer registration statement or the shelf registration
statement is not filed by April 30, 2001, additional interest shall accrue
on the initial notes over and above the stated interest at a rate of 0.50%
per annum for the first 90 days immediately following such date, such
additional interest rate increasing by an additional 0.25% per annum at
the beginning of each subsequent 90 day period.
. If the exchange offer registration statement or the shelf registration
statement is not declared effective within 120 days following April 30,
2001, then, commencing on the 121st day after the date on which such
registration statement is required to be filed, additional interest shall
accrue on the initial notes over and above the stated interest at a rate
of 0.50% per annum for the first 90 days immediately following such date,
such additional interest rate increasing by an additional 0.25% per annum
at the beginning of each subsequent 90 day period.
. If (i) we have not exchanged the initial notes for all exchange notes
validly tendered in accordance with the terms of the exchange offer on or
prior to 60 days after the date on which the registration statement was
declared effective or (ii) if applicable, a shelf registration statement
has been declared effective and such shelf registration statement ceases
to be effective at any time prior to the third anniversary of its
effective date, unless all the initial notes have been sold thereunder,
then additional interest shall accrue on the initial notes over and
54
above the stated interest at a rate of 0.50% per annum for the first 90
days commencing on (x) the 61st day after such effective date, in the case
of (i) above, or (y) the day such shelf registration statement ceases to
be effective in the case of (ii) above, such additional interest rate
increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period.
The additional interest rates described above may not exceed in the
aggregate 1.0% per annum; and provided that (1) upon the filing of the exchange
offer registration statement or a shelf registration statement in the case of
the first bulleted paragraph above, (2) upon the effectiveness of the exchange
offer registration statement or a shelf registration statement in the case of
the second bulleted paragraph above, or (3) upon the exchange of exchange notes
for all initial notes tendered in the case of clause (i) of the third bulleted
paragraph above, or upon the effectiveness of the shelf registration statement
which has ceased to remain effective in the case of clause (ii) of the third
bulleted paragraph above, additional interest on the initial notes as a result
of such paragraph or clause, as the case may be, shall cease to accrue.
Any amounts of additional interest due will be payable in cash, on the same
original interest payment dates as the initial notes. The amount of additional
interest will be determined by multiplying the applicable interest rate by the
principal amount of the initial notes multiplied by a fraction, the numerator
of which is the number of days such additional interest rate was applicable
during such period (determined on the basis of a 360-day year comprised of
twelve 30- day months), and the denominator of which is 360.
This summary of certain provisions of the registration rights agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by, all the provisions of the registration rights agreement, a copy of which is
filed as an exhibit to the registration statement of which this prospectus is a
part.
Following consummation of the exchange offer, holders of initial notes who
are eligible to participate in the exchange offer but who do not tender their
initial notes will not have any additional registration rights and such initial
notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such initial notes could be
adversely affected.
Expiration Date; Extensions; Amendments; Termination
The exchange offer will expire at 5:00 p.m., New York City time, on
September 24, 2001, unless we extend it in our reasonable discretion. The
expiration date of the exchange offer will be at least 30 days after we mail
notice of the exchange offer to holders as provided in Rule 14e-1(a) under the
Securities Exchange Act of 1934 and the registration rights agreement.
To extend the expiration date, we will need to notify the exchange agent of
any extension by oral, promptly confirmed in writing, or written notice. We
will also need to notify the holders of the initial notes by mailing an
announcement or by means of a press release or other public announcement
communicated, unless otherwise required by applicable law or regulation, before
9:00 A.M., New York City time, on the next business day after the previously
scheduled expiration date.
We expressly reserve the right:
. to delay acceptance of any initial notes, to extend the exchange offer or
to terminate the exchange offer and not permit acceptance of initial notes
not previously accepted if any of the conditions described below under
"--Conditions to the Exchange Offer" have occurred and have not been
waived by us, if permitted to be waived, by giving oral or written notice
of the delay, extension or termination to the exchange agent; or
55
. to amend the terms of the exchange offer in any manner.
If we amend the exchange offer in a manner determined by us to constitute a
material change, we will promptly disclose the amendment in a manner reasonably
calculated to inform the holders of the initial notes of the amendment
including providing public announcement, or giving oral or written notice to
the holders of the initial notes. A material change in the terms of the
exchange offer could include a change in the timing of the exchange offer, a
change in the exchange agent and other similar changes in the terms of the
exchange offer. If any material change is made to the terms of the exchange
offer, we will disclose the change by means of a post-effective amendment to
the registration statement of which this prospectus is a part and will
distribute an amended or supplemented prospectus to each registered holder of
initial notes. In addition, we will also extend the exchange offer for an
additional five to ten business days as required by the Securities Exchange
Act, depending on the significance of the amendment, if the exchange offer
would otherwise expire during that period. Any delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral,
promptly confirmed in writing, or written notice to the exchange agent.
Procedures for Tendering Initial Notes
To tender your initial notes in this exchange offer, you must use one of the
three alternative procedures described below:
Regular Delivery Procedure: Complete, sign and date the letter of transmittal, or a facsimile of
the letter of transmittal. Have the signatures on the letter of
transmittal guaranteed if required by the letter of transmittal. Mail
or otherwise deliver the letter of transmittal or the facsimile,
together with the certificates representing your initial notes being
tendered and any other required documents, to the exchange
agent on or before 5:00 p.m., New York City time, on the
expiration date.
Book-entry Delivery Procedure: Send a timely confirmation of a book- entry transfer of your initial
notes, if this procedure is available, into the exchange agent's
account at The Depository Trust Company ("DTC") as
contemplated by the procedures for book-entry transfer
described under "--Book-Entry Delivery Procedure" below, on or
before 5:00 p.m., New York City time, on the expiration date.
Guaranteed Delivery Procedure: If time will not permit you to complete your tender by using the
procedures described above before the expiration date, comply
with the guaranteed delivery procedures described under
"--Guaranteed Delivery Procedure" below.
The method of delivery of initial notes, the letter of transmittal and all
other required documents is at your election and risk. Instead of delivery by
mail, we recommend that you use an overnight or hand-delivery service. If you
choose the mail, we recommend that you use registered mail, properly insured,
with return receipt requested. In all cases, you should allow sufficient time
to assure timely delivery. You should not send any letters of transmittal or
initial notes to us. You must deliver all documents to the exchange agent at
its address provided below. You may also request your respective brokers,
dealers, commercial banks, trust companies or nominees to tender your initial
notes on your behalf.
Only a holder of initial notes may tender initial notes in this exchange
offer. For purposes of this exchange offer, a holder is any person in whose
name initial notes are registered on our books or any other person who has
obtained a properly completed bond power from the registered holder.
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If you are the beneficial owner of initial notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to tender your notes, you must contact this registered holder promptly
and instruct this registered holder to tender these notes on your behalf. If
you wish to tender these initial notes on your own behalf, you must, before
completing and executing the letter of transmittal and delivering your initial
notes, either make appropriate arrangements to register the ownership of these
notes in your name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
You must have any signatures on a letter of transmittal or a notice of
withdrawal guaranteed by an eligible institution. An eligible institution is:
. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
. a commercial bank or trust company having an office or correspondent in
the United States; or
. an eligible guarantor institution within the meaning of Rule 17Ad-15 under
the Securities Exchange Act.
However, signatures on a letter of transmittal do not have to be guaranteed
if initial notes are tendered:
. by a registered holder, or by a participant in DTC in the case of
book-entry transfers, whose name appears on a security position listing as
the owner, who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the letter of
transmittal and only if the exchange notes are being issued directly to
this registered holder, or deposited into this participant's account at
DTC in the case of book-entry transfers; or
. for the account of an eligible institution.
If the letter of transmittal or any bond powers are signed by:
. the recordholder(s) of the initial notes tendered: The signature must
correspond with the name(s) written on the face of the initial notes
without alteration, enlargement or any change whatsoever;
. a participant in DTC: The signature must correspond with the same as it
appears on the security position listing as the holder of the initial
notes;
. a person other than the registered holder of any initial notes: These
initial notes must be endorsed or accompanied by bond powers and a proxy
that authorize this person to tender the initial notes on behalf of the
registered holder, in satisfactory form to us as determined in our sole
discretion, in each case, as the name of the registered holder or holders
appears on the initial notes;
. trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity: These persons should so indicate such capacities when signing.
Unless waived by us, evidence satisfactory to us of their authority to so
act must also be submitted with the letter of transmittal.
Book-Entry Delivery Procedure
Any financial institution that is a participant in DTC's system may make
book-entry deliveries of initial notes by causing DTC to transfer these initial
notes into the exchange agent's account at DTC
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according to DTC's procedures for transfer. To effectively tender notes through
DTC, the financial institution that is a participant in DTC will electronically
transmit its acceptance through the Automatic Tender Offer Program. DTC will
then edit and verify the acceptance and send an agent's message to the exchange
agent for its acceptance. An agent's message is a message transmitted by DTC to
the exchange agent stating that DTC has received an express acknowledgment from
the participant in DTC tendering the initial notes that the participant has
received and agrees to be bound by the terms of the letter of transmittal, and
that we may enforce this agreement against the participant. The exchange agent
will make a request to establish an account for the initial notes at DTC for
purposes of the exchange offer within two business days after the date of this
prospectus.
A delivery of initial notes through a book-entry transfer into the exchange
agent's account at DTC will only be effective if an agent's message or the
letter of transmittal or a facsimile of the letter of transmittal with any
required signature guarantees and any other required documents is transmitted
to and received by the exchange agent at the address indicated below under
"--Exchange Agent" on or before the expiration date unless the guaranteed
delivery rocedures described below are complied with. Delivery of documents to
DTC does not constitute delivery to the Exchange Agent.
Guaranteed Delivery Procedure
If you are a registered holder of initial notes and desire to tender your
notes, and (1) these notes are not immediately available, (2) time will not
permit your notes or other required documents to reach the exchange agent
before the expiration date, or (3) the procedures for book-entry transfer
cannot be completed on a timely basis and an agent's message delivered, you may
still tender in this exchange offer if:
. you tender through an eligible institution, on or before the expiration
date, the exchange agent receives a properly completed and duly executed
letter of transmittal or facsimile of the letter of transmittal and a
notice of guaranteed delivery, substantially in the form provided by us,
with your name and address as holder of the initial notes and the amount
of notes tendered, stating that the tender is being made by this letter
and notice and guaranteeing that within three New York Stock Exchange
trading days after the expiration date the certificates for all the
initial notes tendered, in proper form for transfer, or a book-entry
confirmation with an agent's message, as the case may be, and any other
documents required by the letter of transmittal will be deposited by the
eligible institution with the exchange agent; and
. the certificates for all your tendered initial notes in proper form for
transfer, or a book-entry confirmation, as the case may be, and all other
documents required by the letter of transmittal are received by the
exchange agent within three New York Stock Exchange trading days after the
expiration date.
Acceptance of Initial Notes for Exchange; Delivery of Exchange Notes
Your tender of initial notes will constitute an agreement between you and us
governed by the terms and conditions provided in this prospectus and in the
letter of transmittal.
We will be deemed to have received your tender as of the date when your duly
signed letter of transmittal accompanied by your initial notes tendered, or a
timely confirmation of a book-entry transfer of these notes into the exchange
agent's account at DTC with an agent's message, or a notice of guaranteed
delivery from an eligible institution is received by the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal tenders will be determined by us in our sole
discretion. Our determination will be final and binding.
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We reserve the absolute right to reject any and all initial notes not
properly tendered or any initial notes which, if accepted, would, in our
opinion or our counsel's opinion, be unlawful. We also reserve the absolute
right to waive any conditions of this exchange offer or irregularities or
defects in tender as to particular notes. Our interpretation of the terms and
conditions of this exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of initial notes must be
cured within the time that we shall determine. Neither the exchange agent, any
other person or we will be under any duty to give notification of defects or
irregularities with respect to tenders of initial notes. Neither the exchange
agent nor we will incur any liability for any failure to give notification of
these defects or irregularities. Tenders of initial notes will not be deemed to
have been made until the irregularities have been cured or waived. The exchange
agent will return without cost to their holders any initial notes that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived as promptly as practicable following the expiration date.
If all the conditions to the exchange offer are satisfied or waived on the
expiration date, we will accept all initial notes properly tendered and will
issue the exchange notes promptly thereafter. Please refer to the section of
this prospectus entitled "--Conditions to the Exchange Offer" below. For
purposes of this exchange offer, initial notes will be deemed to have been
accepted as validly tendered for exchange when, as and if, we give oral or
written notice of acceptance to the exchange agent.
We will issue the exchange notes in exchange for the initial notes tendered
by a notice of guaranteed delivery by an eligible institution only against
delivery to the exchange agent of the letter of transmittal, the tendered
initial notes and any other required documents, or the receipt by the exchange
agent of a timely confirmation of a book-entry transfer of initial notes into
the exchange agent's account at DTC with an agent's message, in each case, in
form satisfactory to us and the exchange agent.
If any tendered initial notes are not accepted for any reason or if initial
notes are submitted for a greater principal amount than the holder desires to
exchange, the unaccepted or non-exchanged initial notes will be returned
without expense to the tendering holder, or, in the case of initial notes
tendered by book-entry transfer procedures described above, will be credited to
an account maintained with the book-entry transfer facility, as promptly as
practicable after withdrawal, rejection of tender or the expiration or
termination of the exchange offer.
In addition, we reserve the right in our sole discretion, but in compliance
with the provisions of the indenture, to:
. purchase or make offers for any initial notes that remain outstanding
after the expiration date, or, as described under "Expiration Date;
Extensions; Amendments; Termination," to terminate the exchange offer as
provided by the terms of our registration rights agreement, and
. purchase initial notes in the open market, in privately negotiated
transactions or otherwise, to the extent permitted by applicable law.
The terms of any of the purchases or offers described above could differ
from the terms of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders of
initial notes at any time before 5:00 p.m., New York City time, on the
expiration date.
For a withdrawal to be effective, you must send a written or facsimile
transmission notice of withdrawal to the exchange agent before 5:00 p.m., New
York City time, on the expiration date at the
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address provided below under "Exchange Agent" and before acceptance of your
tendered initial notes for exchange by us.
Any notice of withdrawal must:
. specify the name of the person having tendered the initial notes to be
withdrawn;
. identify the initial notes to be withdrawn, including, if applicable, the
registration number or numbers and total principal amount of these notes;
. be signed by the person having tendered the initial notes to be withdrawn
in the same manner as the original signature on the letter of transmittal
by which these initial notes were tendered, including any required
signature guarantees, or be accompanied by documents of transfer
sufficient to permit the trustee for the initial notes to register the
transfer of these notes into the name of the person having made the
original tender and withdrawing the tender; and
. state that you are withdrawing your tender of initial notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of all notices of withdrawal and our determination
will be final and binding on all parties. Initial notes that are withdrawn will
be deemed not to have been validly tendered for exchange in this exchange
offer.
You may retender properly withdrawn initial notes in this exchange offer by
following one of the procedures described under "--Procedures for Tendering
Initial Notes" above at any time before the expiration date.
Conditions to the Exchange Offer
With exceptions, we will not be required to accept initial notes for
exchange, or issue exchange notes in exchange for any initial notes, and we may
terminate or amend the exchange offer as provided in this prospectus before the
acceptance of the initial notes, if:
. the exchange offer violates applicable law or any interpretation of the
staff of the Securities and Exchange Commission;
. any required governmental approval has not been obtained; or
. a court or any governmental authority has issued an injunction, order or
decree that would prevent or impair our ability to proceed with the
exchange offer.
These conditions are for our sole benefit. We may assert any of these
conditions regardless of the circumstances giving rise to any of them. We may
also waive these conditions, in whole or in part, at any time and from time to
time, if we determine in our reasonable discretion, but within the limits of
applicable law, that any of the foregoing events or conditions has occurred or
exists or has not been satisfied. Our failure at any time to exercise any of
rights will not be deemed a waiver of these rights and these rights will be
deemed ongoing rights which we may assert at any time and from time to time.
If we determine that we may terminate the exchange offer, as provided above,
we may:
. refuse to accept any initial notes and return any initial notes that have
been tendered to their holders;
. extend the exchange offer and retain all initial notes tendered before the
expiration date, allowing, however, the holders of tendered initial notes
to exercise their rights to withdraw their tendered initial notes; or
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. waive any termination event with respect to the exchange offer and accept
all properly tendered initial notes that have not been withdrawn or
otherwise amend the terms of the exchange offer in any respect as provided
under "--Expiration Date; Extensions; Amendments; Termination."
If we determine that we may terminate the exchange offer, we may be required
to file a shelf registration statement with the Securities and Exchange
Commission as described under "--Shelf Registration Statement." The exchange
offer is not dependent upon any minimum principal amount of initial notes being
tendered for exchange.
Accounting Treatment
We will record the exchange notes at the same carrying value as the initial
notes, as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes. We
will amortize the costs of the exchange offer and the unamortized expenses
related to the issuance of the exchange notes over the term of the exchange
notes.
Exchange Agent
We have appointed as exchange agent for the exchange offer. You should
direct all questions and requests for assistance or additional copies of this
prospectus or the letter of transmittal to the exchange agent as follows:
First Union National Bank
First Union Customer Information Center
Corporate Trust Operations--NC1153
1525 West W.T. Harris Boulevard--3C3
Charlotte, NC 28288
Attention: Marsha Rice
Fees and Expenses
We will bear the expenses of soliciting tenders under the exchange offer.
The principal solicitation for tenders under the exchange offer is being made
by mail; however, our officers and other employees may make additional
solicitations by telegraph, telephone, telecopy or in person.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. However, we will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with the
exchange offer. We may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of the prospectus, letters of transmittal and related
documents to the beneficial owners of the initial notes, and in handling or
forwarding tenders for exchange.
We will pay the expenses incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting,
legal, printing and related fees and expenses.
We will generally pay all transfer taxes, if any, applicable to the exchange
of initial notes under the exchange offer. However, tendering holders will pay
the amount of any transfer taxes, whether imposed on the registered holder or
any other person, if:
. certificates representing exchange notes or initial notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or
are to be registered or issued in the name of, any person other than the
registered holder of the initial notes tendered; or
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. tendered initial notes are registered in the name of any person other than
the person signing the letter of transmittal; or
. a transfer tax is imposed for any reason other than the exchange of
initial notes under the exchange offer.
If satisfactory evidence of payment of these taxes or exemption therefrom is
not submitted with the letter of transmittal, the amount of the transfer taxes
will be billed directly to the tendering holder.
Your Failure to Participate in the Exchange Offer Will Have Adverse
Consequences
If you do not properly tender your initial notes in the exchange offer, your
initial notes will remain outstanding and continue to accrue interest. However,
you will not be able to resell, offer to resell or otherwise transfer the
initial notes unless they are registered under the Securities Act or unless you
resell them, offer to resell or otherwise transfer them under an exemption from
the registration requirements of, or in a transaction not governed by, the
Securities Act. In addition, you will no longer be able to obligate us to
register the initial notes under the Securities Act, except in the limited
circumstances provided under our registration rights agreement. To the extent
the initial notes are tendered and accepted in the exchange offer, the trading
market, if any, for the initial notes would be adversely affected. You should
refer to "Risk Factors--Your failure to participate in the exchange offer will
have adverse consequences."
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UNITED STATES FEDERAL TAX CONSIDERATIONS
In the opinion of Sonnenschein Nath & Rosenthal, the following general
discussion summarizes the material U.S. federal tax aspects of the exchange
offer. This discussion is a summary for general information only and does not
consider all aspects of U.S. federal tax that may be relevant to the purchase,
ownership and disposition of exchange notes by a prospective investor in light
of such investor's personal circumstances. This discussion also does not
address the U.S. federal tax consequences of ownership of notes not held as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"), or the U.S. federal tax consequences to
investors subject to special treatment under the U.S. federal income tax laws,
such as dealers in securities, tax-exempt entities, banks, thrifts, insurance
companies, U.S. expatriates, persons that hold the notes as part of a
"straddle," a "hedge" against currency risk or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar, and
investors in pass-through entities. In addition, except as otherwise provided,
this discussion addresses only certain U.S. federal income tax consequences and
does not describe U.S. federal estate or gift tax consequences or the tax
consequences arising out of the tax laws of any state, local, or foreign
jurisdiction.
A U.S. Holder is a beneficial owner of a note that is (1) a citizen or
resident of the U.S.; (2) a corporation or other entity treated as a
corporation for U.S. federal tax purposes that is created or organized in or
under the laws of the U.S. or any political subdivision thereof; (3) an estate
the income of which is subject to U.S. federal income taxation regardless of
its source; or (4) a trust which is either subject to the supervision of a
court within the U.S. and the control of one or more U.S. persons, or has a
valid election in effect under applicable Treasury regulations to be treated as
a U.S. person. A Foreign Holder is a beneficial owner of a note that is not a
U.S. Holder.
This discussion is based upon the Code, existing and proposed Treasury
regulations thereunder, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject
to change (possibly on a retroactive basis). We have not and will not seek any
opinions of counsel or rulings from the IRS with respect to the matters
discussed below. There can be no assurance that the IRS will not take positions
concerning the tax consequences of the purchase, ownership, or disposition of
the notes which are different from those discussed herein.
Investors in notes should consult their own tax advisors concerning the
application of U.S. federal income tax laws, as well as the laws of any state,
local, or foreign taxing jurisdiction, in light of their particular situations.
Exchange of Notes
The exchange of notes pursuant to the exchange offer will not be treated as
a taxable sale, exchange or other disposition of the corresponding initial
notes because the terms of the exchange notes are not materially different from
the terms of the initial notes. Accordingly:
. a holder will not recognize gain or loss upon receipt of an exchange note;
. the holding period of an exchange note will include the holding period of
the initial note exchanged therefor; and
. the adjusted tax basis of an exchange note will be the same as the
adjusted tax basis of the initial note exchanged.
The filing of a shelf registration statement will not result in a taxable
exchange to us or to any holder of a note.
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U.S. Federal Income Taxation of U.S. Holders
Payments of Interest
A U.S. Holder of an exchange note generally will be required to report as
ordinary income for U.S. federal income tax purposes interest received or
accrued on the exchange note in accordance with the U.S. Holder's method of
accounting.
Bond Premium and Market Discount
A U.S. Holder who purchases an exchange note for an amount in excess of its
stated principal amount will be considered to have purchased the exchange note
at a premium equal to the amount of such excess. A U.S. Holder generally may
elect to amortize the premium on the constant yield method. The amount
amortized in any year under such method will be treated as a reduction of the
holder's interest income from the exchange note during such year and will
reduce the holder's adjusted tax basis in the exchange note by such amount. A
holder of an exchange note that does not make the election to amortize the
premium will not reduce its tax basis in the exchange note, and thus
effectively will realize a smaller gain, or a larger loss, on a taxable
disposition of the exchange note than it would have realized had the election
been made. The election to amortize the premium on a constant yield method,
once made, applies to all debt obligations held or acquired by the electing
holder on or after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of the IRS.
If a U.S. Holder purchases an exchange note for an amount that is less than
its stated principal amount, the amount of the difference will be treated as
"market discount" for U.S. federal income tax purposes unless such difference
is less than a specified de minimis amount. Under the de minimis exception, an
exchange note is considered to have no market discount if the excess of the
stated redemption price at maturity of the exchange note over the holder's tax
basis in such note immediately after its acquisition is less than 0.25% of the
stated redemption price at maturity of the exchange note multiplied by the
number of complete years to the maturity date of the exchange note after the
acquisition date.
Under the market discount rules, a U.S. Holder is required to treat any
principal payment on, or any gain from the sale, exchange, retirement or other
disposition of an exchange note as ordinary income to the extent of the accrued
market discount not previously included in income at the time of such payment
or disposition. In addition, such a holder may be required to defer until
maturity of the exchange note, or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such exchange note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the exchange note, unless
the U.S. Holder elects to accrue the market discount on a constant interest
method. A U.S. Holder of an exchange note may elect to include market discount
in income currently as it accrues (on either a ratable or constant interest
method), in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Sale, Exchange, or Redemption of the Exchange Notes
Upon the sale, exchange, retirement, or other disposition of an exchange
note, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the
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disposition and the U.S. Holder's adjusted tax basis in the exchange note. A
U.S. Holder's adjusted tax basis in an exchange note generally will equal the
cost of the exchange note (or the cost of the initial note exchanged for the
exchange note) to the U.S. Holder, increased by any market discount previously
included in income through the date of disposition and decreased by any
amortized bond premium applied to reduce interest and by any principal payments
on the exchange note. Such gain or loss generally will constitute capital gain
or loss, except to the extent of any accrued market discount not previously
included in income, which will be taxed as ordinary income. Amounts received
attributable to accrued but unpaid interest will be treated as ordinary
interest income.
U.S. Federal Income Taxation of Foreign Holders
If the income or gain on the exchange notes is "effectively connected with
the conduct of a trade or business within the U.S." of the Foreign Holder, such
income or gain will be subject to tax essentially in the same manner as if the
exchange notes were held by a U.S. Holder, as discussed above, unless the
Foreign Holder can claim an exemption under an applicable income tax treaty. In
addition, a Foreign Holder that is a foreign corporation may be subject to a
branch profits tax equal to 30% (or lower applicable treaty rate) of its
earnings and profits for the taxable year, subject to adjustments, that are
effectively connected with the conduct by it of a trade or business in the U.S.
For this purpose, interest or gain on the sale or other disposition of the
notes will be included in earnings and profits.
If the income on the exchange note is not effectively connected with the
conduct of a trade or business of a Foreign Holder in the U.S., the Foreign
Holder will not be subject to U.S. tax, or to U.S. withholding tax on interest
on an exchange note provided that the Foreign Holder (1) does not actually (or
constructively) own 10% or more of the total combined voting power of all
classes of our voting stock within the meaning of the Code and the U.S.
Treasury Regulations; (2) is not a controlled foreign corporation that is
related to us through stock ownership as provided in the Code and U.S. Treasury
Regulations; (3) is not a bank whose receipt of interest on the notes is in
connection with an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of its trade or business; and (4) (a)
provides its name and address on an IRS Form W-8BEN, and certifies, under
penalty of perjury, that it is not a U.S. person or (b) a financial institution
holding the notes on behalf of the Foreign Holder certifies to us, under
penalty of perjury, that it has received an IRS Form W-8BEN from the beneficial
owner and provides us with a copy.
If the Foreign Holder cannot satisfy the requirements described in the
immediately preceding paragraph, a Foreign Holder will be subject to a 30% U.S.
federal withholding tax on interest payments on the notes unless the Foreign
Holder provides a properly executed (1) IRS Form W-8BEN claiming an exemption
from, or reduction in, withholding under the benefit of a tax treaty or (2) IRS
Form W-8ECI stating that interest paid on the notes is not subject to
withholding tax because it is effectively connected with the conduct of a trade
or business of a Foreign Holder in the U.S.
Any gain realized on the disposition of an exchange note generally will not
be subject to U.S. federal income tax unless (1) that gain is effectively
connected with the conduct of a trade or business in the U.S. by the Foreign
Holder, or (2) the Foreign Holder is an individual who is present in the U.S.
for 183 days or more in the taxable year of disposition, and certain other
conditions are met. Notwithstanding (1) and (2), a Foreign Holder will not be
subject to U.S. federal income tax if a treaty exemption applies and the
appropriate documentation is provided.
U.S. Federal Estate Taxation of Foreign Holders
An exchange note that is held by an individual who, at the time of death, is
not a citizen or resident of the U.S. generally will not be subject to U.S.
federal estate tax, provided that, at the time of the individual's death,
payments of interest with respect to such exchange note would have qualified
for the portfolio interest exception.
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Information Reporting and Backup Withholding
U.S. Holders may be subject, under certain circumstances, to information
reporting and backup withholding at a rate equal to the fourth lowest rate of
tax under Section 1(c) of the Code (which is 30.5% for amounts paid before 2002
and after August 6, 2001) with respect to payments of principal, interest, and
the gross proceeds from dispositions of the exchange notes. Backup withholding
may apply if the U.S. Holder (1) fails to furnish its social security or other
taxpayer identification number ("TIN") on an IRS Form W-9 (or a suitable
substitute form) within a reasonable time after a request therefor; (2)
furnishes an incorrect TIN; (3) has been notified by the IRS that it failed to
report properly any interest or dividends; or (4) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that it is not subject
to backup withholding. Certain persons are exempt from backup withholding,
including corporations and financial institutions.
Foreign Holders will generally not be subject to backup withholding at the
rate described in the immediately preceding paragraph with respect to payments
of interest on the exchange notes if we do not have actual knowledge or reason
to know that the Foreign Holder is a U.S. person and such holder provides the
requisite certification on IRS Form W-8BEN (or a successor form) or otherwise
establishes an exemption from backup withholding. Such payments of interest,
however, would generally be subject to reporting requirements.
Payments of the gross proceeds from dispositions of the exchange notes
effected by or through a U.S. office of a broker generally will not be subject
to backup withholding and information reporting if the Foreign Holder certifies
as to its non-U.S. status on IRS Form W-8BEN (or a successor form) and the
broker does not have actual knowledge or reason to know that the Foreign Holder
is not a U.S. person, or the Foreign Holder otherwise establishes an exemption.
Generally, information reporting and backup withholding will not apply to a
payment of disposition proceeds where the sale is effected outside the U.S.
through a non-U.S. office of a non-U.S. broker and payment is not received in
the U.S. However, information reporting will generally apply to a payment of
disposition proceeds where the sale is effected outside the U.S. by or through
an office outside the U.S. of a broker which fails to maintain documentary
evidence that the holder is a Foreign Holder or that the holder otherwise is
entitled to an exemption, and the broker is (1) a U.S. person; (2) a foreign
person which derives 50% or more of its gross income for defined periods from
the conduct of a trade or business in the U.S.; (3) a controlled foreign
corporation for U.S. federal income tax purposes; or (4) a foreign partnership
(a) more than 50% of the capital or profits interest of which is owned by U.S.
persons or (b) which is engaged in a U.S. trade or business. Backup withholding
will apply to a payment of those disposition proceeds if the broker has actual
knowledge that the holder is a U.S. person.
The amount of any backup withholding imposed on a payment to a U.S. or
Foreign Holder of an exchange note will be allowed as a credit against such
holder's U.S. federal income tax liability, and such holder may be entitled to
a refund, provided that the required information is furnished to the IRS.
Holders should consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for obtaining such
exemption.
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PLAN OF DISTRIBUTION
A broker-dealer that is the holder of initial notes that were acquired for
the account of such broker-dealer as a result of market-making or other trading
activities, other than initial notes acquired directly from us or any of our
affiliates, may exchange such initial notes for exchange notes pursuant to the
exchange offer; provided, that each broker-dealer that receives exchange notes
for its own account in exchange for initial notes, where such initial notes
were acquired by such broker-dealer as a result of market-making or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of exchange notes received in exchange for initial
notes where such initial notes were acquired as a result of market-making
activities or other trading activities. We have agreed that for a period of
time not to exceed 180 days after the registration statement of which this
prospectus forms a part is declared effective, we will make this prospectus, as
it may be amended or supplemented from time to time, available to any
broker-dealer for use in connection with any such resale. All dealers effecting
transactions in the exchange notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes by broker-
dealers or any other holder of exchange notes. Exchange notes received by
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the exchange
notes or a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such exchange notes. Any broker-dealer that resells exchange notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such exchange notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of exchange notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 180 days after consummation of the exchange offer or such
time as any broker-dealer no longer owns any registrable securities, we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. We have agreed to pay all expenses incident to
the exchange offer and to our performance of, or compliance with, the
registration rights agreement, other than commissions or concessions of any
brokers or dealers, and will indemnify the holders of the notes, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
The validity of the exchange notes offered by this prospectus will be passed
upon for us by Sonnenschein Nath & Rosenthal, New York, New York.
EXPERTS
The consolidated financial statements of Young Broadcasting Inc. and
subsidiaries appearing in the Annual Report on Form 10-K of Young Broadcasting
for the years ended December 31, 1999 and 2000, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated in this prospectus by reference. Such consolidated
financial statements are incorporated in this prospectus by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to incorporate by reference
the information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus and
information we file later with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and
any future filings made by us with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 until the sale of all of the
securities that are part of this offering. The documents we are incorporating
by reference are as follows:
. our Annual Report on Form 10-K for the year ended December 31, 2000;
. our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
. our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001;
. our Current Report on Form 8-K, dated February 14, 2001, filed with the
Commission on February 15, 2001;
. our Current Report on Form 8-K, dated June 20, 2001, filed with the
Commission on June 26, 2001;
. the definitive proxy statement relating to our 2001 annual meeting of
stockholders dated April 10, 2001; and
. the description of our Class A common stock contained in our registration
statement on Form 8-A, including any amendments or reports filed for the
purpose of updating that description.
Any statement contained in a document that is incorporated by reference will
be modified or superseded for all purposes to the extent that a statement
contained in this prospectus (or in any other document that is subsequently
filed with the SEC and incorporated by reference) modifies or is contrary to
that previous statement. Any statement so modified or superseded will not be
deemed a part of this prospectus except as so modified or superceded.
You may request a copy of these filings at no cost by writing or telephoning
our investor relations department at the following address and number:
Young Broadcasting Inc.
599 Lexington Avenue
New York, New York 10022
(212) 754-7070
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AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4, including all amendments, exhibits, schedules and
supplements, to register the exchange notes. Although this prospectus, which
forms a part of the registration statement, contain all material information
included in the registration statement, parts of the registration statement
have been omitted as permitted by the rules of the Commission. For further
information about us and the exchange notes offered in this prospectus, you
should refer to the registration statement and its exhibits. You may read and
copy any document we file with the Commission at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, NW, Washington, D.C. 20549, at prescribed rates. You can also review
such material by accessing the Commission's Internet web site at
http://www.sec.gov. This site contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the Commission.
We are currently subject to the periodic reporting and other informational
requirements of the Securities Exchange Act. So long as we are subject to these
periodic reporting requirements, we will continue to furnish the information
required thereby to the Commission. We are required to file periodic reports
with the Commission pursuant to the Securities Exchange Act during our current
fiscal year and thereafter so long as the exchange notes are held by at least
300 registered holders. We do not anticipate that, for periods following
December 31, 2001, the exchange notes will be held of record by more than 300
registered holders. Therefore, we do not expect to be required to comply with
the periodic reporting requirements imposed under the Securities Exchange Act
after that date. However, we have agreed that, whether or not we are required
to do so by the rules and regulations of the Commission, for so long as any of
the notes remain outstanding, we will furnish to the holders of the notes and
file with the Commission, unless the Commission will not accept such a filing:
. all quarterly and annual financial information that would be required to
be contained in such a filing with the Commission on Forms 10-Q and 10-K
if we were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, regarding a discussion of the annual information only, a report
thereon by our certified independent public accountants; and
. all reports that would be required to be filed with the Commission on Form
8-K if we were required to file such reports.
In addition, for so long as any of the notes remain outstanding, we have
agreed to make available to any prospective purchaser of the notes or
beneficial owner of the notes in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act.
69
YOUNG BROADCASTING INC.