Filed Pursuant to Rule 424(b)(3)
Registration Nos. 333-81878
333-81878-01
333-81878-02
333-81878-03
333-81878-04
333-81878-05
333-81878-06
333-81878-07
333-81878-08
333-81878-09
333-81878-10
333-81878-11
333-81878-12
333-81878-13
333-81878-14
333-81878-15
333-81878-16
333-81878-17
333-81878-18
333-81878-19
333-81878-20
333-81878-21
333-81878-22
Prospectus
Young Broadcasting Inc.
Offer to Exchange
$250,000,000 of our
8 1/2% Senior Notes due 2008
The notes being offered by this prospectus are being issued in exchange for
notes sold by us in a private placement on December 7, 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 June 24, 2002,
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 11 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.
-----------------
May 24, 2002
TABLE OF CONTENTS
Page
----
Prospectus Summary............................. 1
Risk Factors................................... 11
Use Of Proceeds................................ 18
Description Of Certain Indebtedness............ 19
Description Of Notes........................... 23
Book-Entry, Delivery And Form.................. 48
Exchange Offer................................. 51
United States Federal Tax Considerations....... 61
Plan Of Distribution........................... 66
Legal Matters.................................. 67
Experts........................................ 67
Incorporation Of Certain Documents By Reference 67
Available Information.......................... 68
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 2001, as prepared by
A.C. Nielsen Company. Nielsen data provided in this prospectus 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 eleven 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. (CBS), one is 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. KRON-TV, San Francisco, California, is our independent VHF
television station operating in the San Francisco market, which is ranked as
the fifth largest television market in terms of population.
We are a Delaware corporation that was 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.
Our principal offices are located at 599 Lexington Avenue, New York, New
York 10022, and our telephone number is (212) 754-7070.
Recent Developments
Sale of KCAL-TV. On May 15, 2002, we completed the sale of the assets of
KCAL-TV, Los Angeles, California, an independent station we have owned since
1996, to a subsidiary of Viacom Inc. for approximately $650 million in cash.
Upon completion of this sale, we repaid in full all indebtedness then
outstanding under our senior credit facilities. The remaining net cash
proceeds, after closing costs and estimated taxes, will be available to repay
outstanding indebtedness.
Expiration of KRON-TV Affiliation Agreement With NBC. KRON became an
independent station as of January 1, 2002 after its affiliation agreement with
NBC expired on December 31, 2001 in accordance with its terms. We expect to
incur increased programming costs as a result of KRON-TV becoming an
independent station.
Intangible Asset Impairment Loss. In accordance with a new accounting
standard that took effect on January 1, 2002, we recorded an impairment loss of
$308.2 million on the broadcast license of KRON-TV in the first quarter of
2002. See Note 2 to our Consolidated Financial Statements included in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and
incorporated herein by reference.
1
Initial Offering
The initial notes were originally issued by us on December 7, 2001 in a
private offering. We are parties to a registration rights agreement with the
initial purchasers 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 March 7, 2002, to use our best efforts to cause the
registration statement to be declared effective by June 5, 2002, and to
complete this exchange offer on or before July 20, 2002. 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 $250.0 million aggregate principal amount of
our exchange notes for $250.0 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 June 24, 2002, 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 under "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;
. 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.
3
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 in the exchange notes will be the same
as your adjusted tax basis in the initial notes
at the time of the exchange. For additional
information, you should read the discussion under
"United States 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.............. Wachovia Bank, National Association (f/k/a First
Union National Bank) is the exchange agent for
the exchange 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 are subject to the same indenture as the
initial notes. For additional information, you should read the discussion under
"Description of Notes".
Securities Offered.......... $250.0 million aggregate principal amount of
8 1/2% senior notes due 2008.
Maturity.................... December 15, 2008.
Interest Rate............... 8 1/2% per year (calculated using a 360-day year).
Interest Payment Dates...... Interest on the exchange notes is payable
semiannually in cash in arrears on each June 15
and December 15, beginning June 15, 2002.
Escrow Account.............. We have placed into an escrow account, for the
benefit of the holders of the initial notes and
the exchange notes, an amount sufficient to pay
the first four interest payments required under
the indenture governing the initial notes and the
exchange notes. The initial notes are and the
exchange notes will be secured by a first
priority security interest in the escrow account.
Guarantees.................. Our subsidiaries will unconditionally guarantee
the exchange notes.
If we create or acquire a new subsidiary, it will
guarantee the exchange notes unless we designate
the subsidiary as an "unrestricted subsidiary"
under the indenture governing the exchange notes
or the subsidiary does not have significant
assets.
Ranking..................... Except to the extent of the escrow account, the
exchange notes will be our unsecured senior
obligations and will rank equally with our
existing and future senior debt and senior to our
existing and future subordinated debt. The
exchange notes will be effectively subordinated
to our and our subsidiaries' existing and future
senior secured debt. The guarantees by our
subsidiaries will be unsecured senior obligations
and will rank equally with existing and future
senior debt of the subsidiaries that guarantee
the exchange notes. As of March 31, 2002, we had
$151.0 million of senior secured debt outstanding
(including approximately $2.5 million of capital
lease obligations) and approximately $75.0
million of unused borrowing availability under
our senior credit facilities. These amounts do
not reflect our repayment on May 15, 2002 of all
indebtedness outstanding as of such date under
our senior credit facilities. See "Prospectus
Summary--Recent Developments--Sale of KCAL-TV."
5
Optional Redemption......... We cannot optionally redeem the exchange notes
until December 15, 2005. After such date, we may
redeem some or all of the exchange notes at the
redemption prices listed in the "Description of
Notes" section under the heading "Optional
Redemption," plus accrued and unpaid interest to
the date of redemption.
Optional Redemption After
Public Equity Offerings... At any time and from time to time on or before
December 15, 2004, we may redeem up to 35% of the
original principal amount of the exchange notes
with the net proceeds of one or more public
equity offerings, as long as:
. the redemption price equals 108.5% of the face
amount of the exchange notes so redeemed, plus
accrued and unpaid interest to the date of
redemption;
. the redemption of the exchange notes occurs
within 180 days following the closing of such
public equity offerings; and
. at least 65% of the aggregate principal amount
of exchange notes issued remains outstanding
after each such redemption.
Change of Control Offer..... If we experience a change in control, we must
give holders of the exchange notes the
opportunity to sell us their exchange notes at
101% of their face amount, plus accrued and
unpaid interest.
We may not be able to pay you the required price
for the exchange notes you present to us at the
time of a change of control, because:
. we might not have enough funds at that time; or
. the terms of our senior debt may prevent us
from paying.
Asset Sale Proceeds......... If we or our subsidiaries engage in asset sales,
we generally must either invest the net cash
proceeds from such sales in our business within a
certain period of time, prepay indebtedness under
our senior credit facility or make an offer to
purchase a principal amount of the exchange notes
equal to the excess net cash proceeds. The
purchase price of the exchange notes will be 100%
of their principal amount, plus accrued and
unpaid interest.
Basic Covenants of Indenture The indenture governing the exchange notes will
contain covenants limiting our (and most or all
of our subsidiaries') ability to:
. incur additional debt or enter into sale and
leaseback transactions;
. pay dividends or distributions on our capital
stock or repurchase our capital stock;
. issue stock of subsidiaries;
6
. make certain investments;
. create liens on our assets to secure debt;
. enter into transactions with affiliates;
. merge or consolidate with another company; and
. transfer and sell assets.
These covenants are subject to a number of
important limitations and exceptions.
7
Summary Historical Consolidated Financial Data
The summary historical consolidated financial data set forth below for the
three years ended December 31, 2001 have been derived from our consolidated
financial statements. The consolidated financial statements for the five years
ended December 31, 2001 have been audited by Ernst & Young LLP, independent
auditors, and restated to reflect the discontinued operations of KCAL-TV. The
summary historical consolidated financial data for the three month periods
ended March 31, 2001 and 2002 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 should
be read in conjunction with our consolidated financial statements and notes
thereto and other financial information incorporated in this prospectus by
reference. The data for the periods presented are not necessarily comparable
because of acquisitions made throughout such periods.
In accordance with new accounting standards issued in 2001 and due to our
sale of KCAL-TV which was completed on May 15, 2002, the results from
continuing operations for the years ended December 31, 1997, 1998, 1999, 2000
and 2001 and the quarters ended March 31, 2001 and 2002 do not include the
results of operations for KCAL-TV. These results are reflected as discontinued
operations.
8
Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------------- ------------------------
1997 1998 1999 2000 2001 2001 2002
----------- ----------- ----------- ----------- ----------- ----------- -----------
(unaudited)
(dollars in thousands, except per share data)
Statement of Operation
Data:
Net revenue (1)............ $ 150,020 $ 165,039 $ 159,576 $ 249,179 $ 266,788 $ 65,118 $ 46,587
Operating expenses,
including selling, general
and administrative
expenses.................. 64,716 72,912 74,051 105,601 127,291 32,106 33,187
Amortization of program
license rights............ 7,879 7,974 9,307 14,054 20,176 4,491 4,290
Depreciation and
amortization.............. 26,994 29,597 27,927 35,233 46,613 11,714 6,112
Corporate overhead......... 7,150 7,860 8,227 12,010 9,934 2,746 2,728
Non-cash compensation
paid in common stock (2).. 967 1,146 19,102 1,321 1,468 454 377
Merger related costs....... -- 1,444 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income........... 42,314 44,106 20,962 80,960 61,306 13,607 (107)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Interest expense, net...... (64,103) (62,617) (62,831) (95,653) (112,634) (31,214) (26,810)
Interest expense, non-cash. -- -- -- -- (3,773) -- (4,257)
Gain on sale of station.... -- -- -- 15,651 -- -- --
Non-cash change in fair
value swap................ -- -- -- -- 2,295 -- --
Other expense, net......... (493) (788) (1,244) (1,013) 48 (378) (87)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from continuing
operations before
provision for income
taxes, extraordinary item
and cumulative effect of
accounting change......... (22,282) (19,299) (43,113) (55) (52,758) (17,985) (31,261)
Provision for income taxes. -- -- -- 1,500 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from continuing
operations before
extraordinary item and
cumulative effect of
accounting change......... (22,282) (19,299) (43,113) (1,555) (52,758) (17,985) (31,261)
Income (loss) from
discontinued operations,
net of applicable income
taxes..................... 21,176 23,298 21,571 15,544 1,580 (1,800) 2,886
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Loss) income before
extraordinary item and
cumulative effect of
accounting change......... (1,106) 3,999 (21,542) 13,989 (51,178) (19,785) (28,375)
Extraordinary loss on
extinguishment of debt.... (9,243) -- -- -- (12,437) (12,437) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
(Loss) income before
cumulative effect of
accounting change......... (10,349) 3,999 (21,542) 13,989 (63,615) (32,222) (28,375)
Cumulative effect of
accounting change......... -- -- -- -- -- -- (308,174)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net (loss) income.......... $ (10,349) $ 3,999 $ (21,542) $ 13,989 $ (63,615) $ (32,222) $ (336,549)
=========== =========== =========== =========== =========== =========== ===========
Net (loss) income per
common share--basic:
Loss from continuing
operations................ $ (1.59) $ (1.36) $ (3.17) $ (0.10) $ (2.90) $ (1.08) $ (1.59)
Income (loss) from
discontinued operations... 1.51 1.64 1.59 1.02 0.08 (0.11) 0.15
Extraordinary item......... (0.66) -- -- -- (0.68) (0.75) --
Cumulative effect of
accounting change......... -- -- -- -- -- -- (15.69)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net (loss) income per
common share.............. $ (0.74) $ 0.28 $ (1.58) $ 0.92 $ (3.50) $ (1.94) $ (17.13)
=========== =========== =========== =========== =========== =========== ===========
Weighted average shares--
basic..................... 13,989,969 14,147,522 13,588,108 15,157,243 18,185,945 16,567,865 19,645,921
9
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------------------- ----------------------
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- ---------- ---------- ---------- ----------
(unaudited)
(dollars in thousands, except per share data)
Other Financial Data:
Ratio of earnings to fixed charges (3) -- -- -- 1.0x -- -- --
Cash flow provided by (used in)
operating activities................. $ 41,025 $ 54,292 $ 36,398 $ 80,762 $ 24,982 $ 596 $ (2,286)
Cash flow used in investing activities $(11,757) $(34,154) $ (7,887) $ (645,115) $ (14,768) $ (3,933) $ (3,395)
Cash flow (used in) provided by
financing activities................. $(34,621) $(21,127) $(26,222) $ 566,977 $ (13,853) $ 1,477 $ 4,381
Payments for program license
liabilities (4)...................... $ 8,144 $ 8,263 $ 8,859 $ 13,479 $ 19,560 $ 4,261 $ 4,063
Broadcast cash flow (4)(5)............ $ 77,160 $ 83,864 $ 76,666 $ 130,099 $ 119,937 $ 28,751 $ 9,337
Broadcast cash flow margin (4)........ 51.4% 50.8% 48.0% 52.2% 45.0% 44.2% 20.0%
Operating cash flow (4)(6)............ $ 70,010 $ 76,004 $ 68,439 $ 118,089 $ 110,003 $ 26,005 $ 6,609
Capital expenditures (4).............. $ 8,065 $ 6,520 $ 3,685 $ 14,455 $ 9,763 $ 360 $ 320
Balance Sheet Data (as of end of
period):
Total assets.......................... $845,966 $825,668 $818,670 $1,554,368 $1,543,015 $1,501,339 $1,193,171
Long-term debt (including current
portion)............................. $657,672 $658,224 $650,510 $1,276,285 $1,223,309 $1,284,003 $1,228,533
Stockholders' equity (deficit)........ $ 59,846 $ 46,865 $ 30,659 $ 103,094 $ 134,768 $ 59,175 $ (199,302)
- --------
(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 1997, 1998, 1999, 2000 and 2001 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 $22.3 million, $19.3 million, $43.1
million and $52.8 million for the years ended December 31, 1997, 1998, 1999
and 2001, respectively, and $18.0 million and $31.3 million for the three
months ended March 31, 2001 and March 31, 2002, respectively.
(4) Restated to reflect the discontinued operations of KCAL-TV.
(5) "Broadcast cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), merger related costs, non-cash
compensation 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.
(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), merger related costs and non-cash
compensation, 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 principles and should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
10
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 purchasers of the initial notes
have advised us that they currently intend to make a market in the exchange
notes, they are 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 as of March 31, 2002.
As of March 31,
2002
----------------------
(dollars in thousands)
Total debt................................... $1,228.5
Shareholders' deficit........................ $ (199.3)
The amount of our total debt, including senior secured debt, and unused
borrowing availability under our revolving credit facility as of March 31, 2002
does not reflect our repayment on May 15, 2002 of all indebtedness outstanding
as of such date under our senior credit facilities. See "Prospectus
Summary--Recent Developments--Sale of KCAL-TV."
Our high level of 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;
11
. we will need to use a large portion of our revenues to pay interest on
borrowings under our senior credit facility, our senior subordinated
notes and the exchange 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 facility 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.
Subject to restrictions in our senior credit facility, the indenture
governing the exchange notes and the indentures governing our 10% senior
subordinated notes due 2011, 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 (some or all of which may be secured debt) for
working capital, for capital expenditures, in connection with our strategy of
pursuing strategic acquisitions, expanding through internal growth and for
other purposes. If we do so, the risks related to our high level of debt could
intensify. At March 31, 2002 the notes and the guarantees ranked equally in
right of payment with $155.4 million of our and our subsidiaries' senior
secured debt (including approximately $2.5 million of capital lease
obligations) and an additional $75.0 million of unused availability was
available to borrow under the senior credit facilities.
The exchange notes will be effectively subordinated to our existing and future
senior secured indebtedness
The exchange notes will not be secured by any of our or the guarantors'
assets. All of the indebtedness outstanding under our senior credit facility is
secured by substantially all of our and the guarantors' assets, and the terms
of the indenture and the instruments governing our other indebtedness permit us
and the guarantors to incur additional senior secured indebtedness. As a
result, the exchange notes will be effectively subordinated to indebtedness
outstanding under our senior credit facility and any additional senior secured
debt that we or the guarantors may incur in the future to the extent of the
value of the assets securing that debt.
Covenant restrictions under our senior credit facility and our indentures may
limit our ability to operate our business
Our senior credit facility, the indentures governing our existing notes and
the indenture governing the exchange notes and certain of our other agreements
regarding debt 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 facility 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;
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. 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 facility require us to maintain specified
financial ratios and satisfy financial condition tests that 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 facility and our indentures. If an event of default under our senior
credit facility occurs, our senior lenders could elect to declare all amounts
outstanding, together with accrued interest, to be immediately due and payable.
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 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 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 facility restricts 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 facility and could cause the acceleration of our debt.
The inability to repay such debt, if accelerated, and to purchase all of the
tendered exchange 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
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. 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.
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 has been and continues to 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 susceptible to prevailing economic conditions at both the
national and regional levels. Our revenues have been adversely affected by the
current national recessionary environment and since a substantial portion of
our revenues are derived from local advertisers, our operating results in
individual markets may be adversely affected by any further local and regional
economic downturn.
KRON-TV and KCAL-TV together contributed approximately 56.8% of our
broadcast cash flow for the year ended December 31, 2001. With the sale of
KCAL-TV having been completed, the performance of KRON will have a larger
proportionate impact on our operating results and cash flows. See "Prospectus
Summary--Recent Developments--Sale of KCAL-TV". Consequently, we will be
particularly susceptible to economic conditions in the San Francisco
advertising market. The general San Francisco market continues to be sharply
lower in the first and second quarters of 2002 as compared to 2001 and we are
unable to predict with any certainty when the San Francisco advertising market
will improve.
Our operating results have been and may continue to be adversely affected by
acts of war and terrorism
In response to the September 11, 2001 terrorist attacks on New York City
and Washington, D.C., we increased our news and community service programming,
which decreased the amount of broadcast time available for commercial
advertising. In addition, these events caused advertisers to reschedule
advertisements on our stations. Each of these factors adversely affected our
revenues in
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2001. Acts of war and terrorism against the United States, and the country's
response to such acts, may also cause the current general slowdown in the U.S.
advertising market to worsen, which could cause our advertising revenues to
decline further due to advertising cancellations, delays or defaults in payment
for advertising time, and other factors. In addition, these events may have
other negative effects on our business, the nature and duration of which we
cannot predict.
We are dependent on networks for our programming, and the loss of one or more
of our network affiliations may 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 eleven stations are affiliated with the ABC television network,
three are affiliated with the CBS television network, one is affiliated with
the NBC television network and one station is independent. The television
viewership levels for stations other than KRON-TV, our 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 KRON-TV 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.
As an independent station, KRON-TV purchases all of its programming,
resulting in proportionally higher programming costs. 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.
KRON-TV became an independent station as of January 1, 2002 after its
affiliation agreement with NBC expired on December 31, 2001 in accordance with
its terms. We are currently unable to ascertain with any certainty the effect
KRON-TV becoming an independent station will have on our operations and
financial condition, although we expect to incur increased programming costs
which may materially adversely affect our operating results.
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 or issue more
equity securities, 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.
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,
15
President, James A. Morgan, Executive Vice President and Chief Financial
Officer, or Deborah A. McDermott, Executive Vice President--Operations, could
have an adverse impact on us.
Our business is 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 to operate broadcast television stations 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. Similarly, each of our stations has received or has
applied for a construction permit from the FCC to build digital television
("DTV") facilities. KRON and several of our other stations have completed their
DTV build-outs. The deadline, recently extended, for our remaining stations for
completion of construction of their DTV facilities is November 1, 2002. We
anticipate that we will need to seek further extensions from the FCC for the
DTV construction deadline for at least a few of our stations. The non-renewal
or revocation of one or more of our primary FCC licenses, or our inability to
obtain an extension of time to construct certain of our DTV facilities, 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
. 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
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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 December 31, 2001, there were no shares of
Class C common stock outstanding.
As of April 1, 2002, Adam Young, Vincent Young and our other executive
officers, as a group, together beneficially owned shares of Class A common
stock and Class B common stock representing approximately 54% of the total
voting power of our common stock. As a result, Adam Young, Vincent Young and
our other executive officers, as a group, 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 take over
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.
17
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 $243.1 million from the private
offering of the initial notes. We used substantially all of the net proceeds of
such offering to repay indebtedness outstanding under our senior credit
facilities and to pay fees related to such offering.
Our $600.0 million senior credit facility matures in 2005, with quarterly
reductions in the amount of the outstanding loans and commitments having
commenced in 2001. The weighted average interest rate for loans outstanding
under our $600.0 million senior credit facility was 5.6% as of March 31, 2002.
Borrowings under this credit facility were used for payment of a portion of the
cash consideration payable in the KRON-TV 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 having
commenced in 2001. The weighted average interest rate for loans outstanding
under our $200.0 million senior credit facility was 5.4% as of March 31, 2002.
Borrowings under this credit facility were used for payment of a portion of the
cash consideration payable in the KRON-TV acquisition and for general corporate
purposes.
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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 herein. Any terms
not defined in this section are defined in the debt agreements. See "Available
Information."
Senior Credit Facilities
On June 26, 2000, we entered into a credit agreement which provided for
borrowings of 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. The outstanding borrowings under the $600 million
senior credit facility were repaid in full on May 15, 2002.
On June 26, 2000, we entered into a second amended and restated credit
agreement which provided 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
outstanding borrowings under the Term A loan have been repaid in full and the
revolving credit facility is currently in the amount of $100 million. The
borrowings under this senior credit facility rank equally with, and will be
repaid prior to, the exchange notes.
Interest Rate Calculations. Interest under the 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 5.0:1 to 3.50%, based upon a 7.0:1 or greater ratio for
revolving advances.
Covenants and Conditions. In addition to specific customary covenants, the
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
. engage in certain transactions with subsidiaries and affiliates and
otherwise restrict corporate activities.
The senior credit facility requires us to maintain certain financial ratios. We
are not required to maintain a total debt to operating cash flow ratio until
June 30, 2004, when the commencing ratio will be 7.35x. We are required to
maintain a senior debt to operating cash flow ratio ranging from 3.50x to
4.00x. We are also required to maintain until March 31, 2004 a senior secured
debt to operating cash flow ratio
19
ranging from 1.75x to 2.00x. Additionally, we are required to maintain an
operating cash flow to total cash interest expense ratio ranging from 1.20x to
1.40x and 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.
Guarantees. Each of our subsidiaries has guaranteed our obligations under
the senior credit facility. The 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 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 exchange notes.
9% Senior Subordinated 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 senior credit facility;
. rank junior to the exchange notes;
. 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
. 10% senior subordinated notes due 2011;
. 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.
We may redeem some or all of the 9% senior subordinated notes at any time
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 similar 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.
On November 27, 2001, the holders of a majority in principal amount of our
9% senior subordinated notes due 2006 consented to proposed amendments to the
indenture governing the 9% senior subordinated notes. These amendments, among
other things, provide us with the flexibility to incur additional debt,
including the initial notes. The amendments became effective upon the issuance
of the initial notes. We paid consenting holders $25.00 in cash for each $1,000
principal amount of the 9% senior subordinated notes held by such consenting
holders.
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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 senior credit facility;
. rank junior to the exchange notes;
. rank junior to any future senior debt of us or our subsidiaries;
. rank equally with our:
. 9% senior subordinated notes due 2006; and
. 10% senior subordinated notes due 2011;
. 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.
The indenture governing the 8 3/4% senior subordinated notes contains
covenants that are substantially similar 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.
10% Senior Subordinated Notes Due 2011
We have outstanding $500.0 million in aggregate principal amount of 10%
senior subordinated notes due 2011. Interest on such notes is payable
semiannually on March 1 and September 1 of each year.
The 10% senior subordinated notes constitute general unsecured obligations.
They:
. rank junior to all of our liabilities under our senior credit facility;
. rank junior to the exchange notes;
. rank junior to any future senior debt of us or our subsidiaries;
. rank equally with our:
. 9% senior subordinated notes due 2006; and
. 8 3/4% senior subordinated notes due 2007;
. will rank equally with all of our future subordinated, unsecured debt
that does not expressly provide that it is subordinated to the 10% senior
subordinated notes; and
21
. will rank ahead of all our future debt that expressly provides that it is
subordinated to the 10% senior subordinated notes.
On or after March 1, 2006, we may redeem some or all of the 10% 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 10% 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 10% 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 10% senior subordinated notes contains
covenants that are substantially similar to the covenants of the exchange
notes. The 10% senior subordinated notes are guaranteed, jointly and severally,
on a senior subordinated basis by our subsidiaries.
22
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 December 7, 2001, by
and among the Company, the Subsidiary Guarantors and First Union National Bank,
as Trustee and Escrow Agent (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 herein for which no definition is provided.
Maturity and Interest
Except with respect to the escrow account discussed below, the Notes will
be general unsecured obligations of the Company limited in aggregate principal
amount to $250.0 million and will mature on December 15, 2008. Interest on the
Notes will accrue at the rate of 8 1/2% per annum and will be payable
semi-annually in arrears on June 15 and December 15 in each year, commencing on
June 15, 2002, to holders of record on the immediately preceding June 1 and
December 1, 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
The Notes will be unsecured, senior obligations of the Company and will
rank equally in right of payment with all other senior obligations of the
Company. The Notes will be effectively subordinated to any senior secured
Indebtedness of the Company.
Subsidiary Guarantees
The Company's payment obligations under the Notes will be jointly and
severally guaranteed on a senior unsecured basis 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.
23
Escrow Account
Pursuant to the Indenture, the Company has placed into an escrow account,
for the benefit of the holders of the Notes, an amount sufficient to pay the
first four interest payments on the Notes (the "Escrow Account") in accordance
with the Escrow Agreement. The Escrow Account was funded by the Company from
borrowings under its senior credit facilities. The Company entered into the
Escrow Agreement, which provides, among other things, that funds may be
disbursed from the Escrow Account only to pay interest on the Notes (or, if a
portion of the Notes has been retired by the Company, funds representing the
interest payment on the retired Notes will be released to the Company as long
as no default exists under the Indenture) and, upon certain repurchases or
redemptions thereof, to pay principal of and premium, if any, thereon. The
Escrow Agreement provides for the grant by the Company to the Trustee of a
security interest in the Escrow Account for the benefit of the holders of the
Notes. Such security interest secures the payment and performance when due of
the Company's obligations under the Notes, as provided in the Escrow Agreement.
The Lien created by the Escrow Agreement is a first priority security interest
in the Escrow Account. The ability of holders to realize upon such funds or
securities may be subject to certain bankruptcy law limitations in the event of
the bankruptcy of the Company. Pending such disbursement, all funds contained
in the Escrow Account will be invested in Cash Equivalents. Interest earned on
the Cash Equivalents will be added to the Escrow Account.
Pursuant to the Escrow Agreement, if the Company makes the first four
interest payments on the Notes in a timely manner, immediately after the fourth
interest payment any amounts remaining in the Escrow Account will be released
from the Escrow Account to the Company and thereafter the Notes will be
unsecured.
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 December 15, 2005. 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
December 15 of the years indicated below.
Year Percentage
---- ----------
2005 104.250%
2006 102.125%
2007 and thereafter 100.000%
Notwithstanding the foregoing, at any time prior to December 15, 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 108.5% 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% of
the aggregate principal amount of the Notes originally issued in the initial
notes 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
24
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 herein), 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").
If a Change of Control were to occur, we cannot assure you that the Company
would have sufficient funds to pay the Change of Control Purchase price for all
the Notes tendered by the Holders. The Company's existing credit agreement and
indentures contain, and any future other agreements relating to other
indebtedness to which we become a party may contain, restrictions or
prohibitions on the Company's ability to repurchase Notes or may provide that
an occurrence of a Change of Control constitutes an event of default under, or
otherwise requires payment of amounts borrowed under those agreements. If a
Change of Control occurs at a time when the Company is prohibited from
repurchasing the Notes, we could seek the consent of our then existing lenders
and note holders to the repurchase of the Notes or could attempt to refinance
the borrowings that contain the prohibition. If the Company does not obtain
such a consent or repay the borrowings, it would remain prohibited from
repurchasing the Notes. In that case, failure to repurchase tendered Notes
would constitute an Event of Default under the Indenture and may constitute a
default under the terms of other indebtedness that we my enter into from time
to time.
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
25
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 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.
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 issued on
the Issue Date 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
26
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;
(ix) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(x) 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 (iii),
(iv) and (ix) above or incurred under the Debt to Operating Cash Flow Ratio
pursuant to the first paragraph of this covenant ("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) 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
Subordinated Indebtedness, such new Indebtedness is subordinated to the
Notes or the applicable Subsidiary Guarantee, as the case may be, to the
same extent as the Indebtedness being refinanced; and
(xi) Indebtedness of the Company in addition to that described in
clauses (i) through (x) 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
(xi) does not exceed $15,000,000 at any one time outstanding.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (i) through (xi)
above or is entitled to be incurred pursuant to the first paragraph of this
covenant, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness shall be treated as having been incurred as so classified.
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
27
"--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; and
(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).
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; provided, further, that the
Company and such Restricted Subsidiary shall be permitted to make an Asset Sale
without complying with clause (ii) above to the extent the consideration for
such Asset Sale constitutes Additional Assets.
Within 360 days after any Asset Sale, the Company may elect to apply the
Net Proceeds from such Asset Sale to (a) permanently reduce Indebtedness under
the Credit Agreement, 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 the
revolving portion of the Credit Agreement 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 commence an offer to purchase
the maximum principal amount of Notes and other
28
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"). 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,
including for the redemption, repurchase, retirement or other acquisition of
the Existing Subordinated Notes in accordance with the Existing Subordinated
Notes Indentures.
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 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.
29
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 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 or (h) the Indenture.
30
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 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 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 on a senior basis;
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 for
sales, conveyances, transfers or other dispositions made in the ordinary course
of business and except
31
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."
32
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;
(ii) a default in the payment when due of principal on any Note,
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) or the Escrow Agreement 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 Escrow Agreement or 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;
33
(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;
(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
34
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); or
(x) the Company shall assert or acknowledge in writing that the Escrow
Agreement is invalid or unenforceable.
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. 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
35
("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 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;
36
(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
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 in the foregoing amendment and waiver provisions; or (ix) release any
Liens created by the Escrow Agreement except in accordance with the terms of
the Escrow Agreement.
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 obligations 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.
37
"Additional Assets" means any property or assets (other than Indebtedness)
used or useful in the television or broadcast business, including all of the
Capital Stock of an entity owning such property or assets.
"Additional Guarantee" means any guarantee of the Company's obligations
under the Indenture and the Senior 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 Senior Notes after the
Issue Date as described in "--Covenants--Limitations on Guarantees of Company
Indebtedness by Restricted Subsidiaries" and "--Covenants--Future Subsidiary
Guarantors."
"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.
38
"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.
"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.
39
"Credit Agreement" means the $600 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 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.
"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.
"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
40
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 Senior Notes
would have similar rights), in whole or in part on or prior to the stated
maturity of the Senior Notes.
"Dollars" and "$" means lawful money of the United States of America.
"Escrow Agent" means First Union National Bank, as Escrow Agent under the
Escrow Agreement, or any successor thereto appointed pursuant to such Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of the date of the
Indenture, by and among the Escrow Agent, the Trustee and the Company,
governing the disbursement of funds in the Escrow Account.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Subordinated Notes" means each of the Company's 8 3/4% Senior
Subordinated Notes due 2007, 9% Senior Subordinated Notes due 2006 and 10%
Senior Subordinated Notes due 2011.
"Existing Subordinated Notes Indentures" means the indentures governing the
Existing Subordinated Notes.
"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.
"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
41
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 Senior 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.
"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
42
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).
"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)
43
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
Indebtedness under the Credit Agreement and any Subsidiary Guarantee; and (x)
any other Investments that do not exceed $15,000,000 in amount in the aggregate
at any one time outstanding.
"Permitted Liens" means (i) Liens on assets or property of the Company or
any Restricted Subsidiary that secure Indebtedness of the Company or any
Restricted Subsidiary under the Credit Agreement, in each case in which such
Indebtedness 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, incurred by the Company or any Restricted Subsidiary in the ordinary
course of business; (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; and (xi) Liens
created by the Escrow Agreement.
"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.
"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.
44
"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 Senior Notes
other than (A) any payment to purchase, redeem, defease or otherwise acquire or
retire the Company's 9% Senior Subordinated Notes due 2006 at any time or the
other Existing Subordinated Notes in accordance with the Existing Subordinated
Notes Indentures in connection with an excess asset sale proceeds offer or
change of control offer after complying with the covenants described under
"--Covenants--Limitation on Asset Sales" and "--Covenants--Change of Control"
and (B) 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.
"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 $250,000,000, 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.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated or junior in right of payment to the
Senior Notes or the Subsidiary Guarantee, as the case may be.
"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
45
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.
"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
46
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.
47
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 purchasers
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 and Clearstream Banking, S.A. of
Luxembourg 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 purchasers 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;
48
. a banking organization within the meaning of the New York Banking Law;
. 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.
49
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day, which must be a business day for Euroclear and
Clearstream, immediately following the settlement date of DTC. 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.
50
EXCHANGE OFFER
Registration Rights Agreement
The initial notes were originally issued on December 7, 2001 to Deutsche
Banc Alex. Brown Inc., First Union Securities, Inc. and CIBC World Markets
Corp., pursuant to a purchase agreement dated November 30, 2001. The initial
purchasers 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 purchasers 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 March 7, 2002
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 June 5, 2002.
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.
For a description of the procedures for resales by broker-dealers, see
"Plan of Distribution."
51
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 August 4, 2002, 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:
. Ifthe exchange offer registration statement or the shelf registration
statement is not filed by March 7, 2002, 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.
. Ifthe exchange offer registration statement or the shelf registration
statement is not declared effective on or prior to June 5, 2002, then,
commencing on the day after such date, 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 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.
52
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 June
24, 2002, 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
. 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
53
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.
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
54
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 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
55
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 procedures 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.
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
56
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 address provided below under
"Exchange Agent" and before acceptance of your tendered initial notes for
exchange by us.
57
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
. 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."
58
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 Wachovia Bank, National Association (f/k/a First Union
National Bank) 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:
Wachovia Bank, National Association
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
. 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.
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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 U.S. 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 on the Code, existing and proposed U.S. 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 that 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 day of 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 disposition and the U.S. Holder's
adjusted tax basis in the exchange note. A U.S. Holder's adjusted tax
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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 be 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
Payments of Interest
The payment to a Foreign Holder of interest on an exchange note generally
will not be subject to a 30% U.S. federal withholding tax 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 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 exchange 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 (or a successor form) and certifies under penalties of perjury that it
is not a U.S. person or (b) a bank, brokerage house or other financial
institution that holds the notes on behalf of the Foreign Holder in the
ordinary course of its trade or business certifies to us, under penalty of
perjury, that it has received an IRS Form W-8BEN (or a successor form) from the
beneficial owner and furnishes us with a copy thereof (hereinafter referred to
as the "portfolio interest exception").
If a Foreign Holder cannot satisfy the requirements described in the
immediately preceding paragraph, payments of interest made to the Foreign
Holder will be subject to a 30% U.S. federal withholding tax, unless the
Foreign Holder provides us with a properly executed (1) IRS Form W-8BEN (or a
successor form) claiming an exemption from or reduction in the rate of
withholding under the benefit of an applicable income tax treaty or (2) IRS
Form W-8ECI (or a successor form) stating that the interest paid on the
exchange note is not subject to withholding tax because it is effectively
connected with the Foreign Holder's conduct of a trade or business in the U.S
In addition, the Foreign Holder may, under certain circumstances, be required
to obtain a U.S. taxpayer identification number ("TIN").
If a Foreign Holder of an exchange note is engaged in a trade or business
in the U.S. and interest on the exchange note is effectively connected with the
conduct of such trade or business, the Foreign Holder will be subject to U.S.
federal income tax on such interest in the same manner as if it were a U.S.
Holder, unless the Foreign Holder can claim an exemption under the benefit of
an applicable income tax treaty. In addition, if such Foreign Holder is a
foreign corporation, it 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 its conduct of a
trade or business in the U.S.
Generally, the payments of interest to a Foreign Holder would be subject to
reporting requirements, even though such payments are not subject to a 30% U.S.
federal withholding tax.
Sale, Exchange, or Redemption of the Exchange Notes
Generally, a Foreign Holder will not be subject to U.S. federal income tax
with respect to gain realized on the sale, exchange, redemption or other
disposition of an exchange note unless (1) the gain is effectively connected
with the conduct by the Foreign Holder of a trade or business in the U.S.;
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(2) in the case of a Foreign Holder who is a nonresident alien individual, such
individual 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 if, at the time of the individual's death, interest on the
exchange note would have qualified for the portfolio interest exception.
Information Reporting and Backup Withholding
U.S. Holders, unless otherwise exempt as noted below, will be subject to
information reporting with respect to payments of principal, interest and the
gross proceeds from the sale, exchange, redemption or other disposition of an
exchange note. Backup withholding at a rate equal to the fourth lowest rate of
tax under Section 1(c) of the Code (which is 30% for amounts paid during
calendar years 2002 and 2003) may apply to payments of interest and to the
gross proceeds from the sale, exchange, redemption or other disposition of an
exchange note if the U.S. Holder (1) fails to furnish its 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) is informed 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 information reporting
and backup withholding, including corporations and financial institutions. U.S.
Holders of the exchange notes should consult their tax advisors as to their
qualification for exemption and the procedure for obtaining such exemption.
Foreign Holders generally will 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 the sale, exchange, redemption or other
disposition of an exchange note effected by or through a U.S. office of a
broker generally will be subject to backup withholding and information
reporting unless the Foreign Holder certifies as to its non-U.S. status on IRS
Form W-8BEN (or a successor form) or 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
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engaged in a U.S. trade or business. Notwithstanding the foregoing, 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.
Backup withholding is not an additional tax. The amount of any backup
withholding imposed on a payment to a U.S. or Foreign Holder of the exchange
notes will be allowed as a refund or a credit against such holder's U.S.
federal income tax liability, provided that the required information is
furnished to the IRS.
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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
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K
for the year ended December 31, 2001, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority 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, 2001;
. our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002;
. our Current Report on Form 8-K dated February 12, 2002, filed with the
Commission on March 8, 2002 ;
. our Current Report on Form 8-K dated February 13, 2002, filed with the
Commission on February 13, 2002;
. the definitive proxy statement relating to our 2002 annual meeting of
stockholders dated April 5, 2002; 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.
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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
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. The registration
statement can be inspected and copied at proscribed rates at 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, 2002, 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.
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YOUNG BROADCASTING INC.