<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
PARK NEWSPAPERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 2711 16-1087610
(STATE OR OTHER
JURISDICTION OF
INCORPORATION)
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
1700 VINE CENTER OFFICE TOWER, 333 WEST VINE STREET, LEXINGTON, KENTUCKY 40507
(606) 252-7275
(ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
----------------
WRIGHT M. THOMAS, PRESIDENT PARK NEWSPAPERS, INC. 1700 VINE CENTER OFFICE
TOWER 333 WEST VINE STREET LEXINGTON, KENTUCKY 40507 (606) 252-7275
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
with copies to:
GREGORY A. WEINGART, ESQ. ECKERT SEAMANS CHERIN & MELLOTT 42ND FLOOR, 600
GRANT STREET PITTSBURGH, PENNSYLVANIA 15219 (412) 566-6000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
REGISTERED REGISTERED PER NOTE (1) (1) FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series B 11 7/8% Senior
Notes
due 2004.............. $155,000,000 100% $155,000,000 $53,448.28
- -----------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PARK NEWSPAPERS, INC.
CROSS-REFERENCE SHEET PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF
FORM S-4
<TABLE>
<CAPTION>
ITEMS IN FORM S-4 LOCATION OR HEADING IN PROSPECTUS
----------------- ---------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Forepart of Registration Statement; Cross-
Reference Sheet; Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
of Prospectus; Table of Contents; Available
Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Prospectus Summary; Risk Factors; The
Company; Selected Historical and Pro Forma
Consolidated Financial Data; The Exchange
Offer
4. Terms of the Transaction................... Prospectus Summary; Description of the
Notes; The Exchange Offer; Certain Federal
Income Tax Consequences
5. Pro Forma Financial Information............ Unaudited Pro Forma Condensed Consolidated
Financial Statements
6. Material Contracts with the Company Being
Acquired Not Applicable.................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ Not Applicable
8. Interests of Named Experts and Counsel..... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
10. Information with Respect to S-3
Registrants................................ Not Applicable
11. Incorporation of Certain Information by
Reference.................................. Not Applicable
12. Information with Respect to S-2 or S-3
Registrants................................ Not Applicable
13. Incorporation of Certain Information by
Reference.................................. Not Applicable
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants.......... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; The
Company; Capitalization; Unaudited Pro
Forma Condensed Consolidated Financial
Data; Selected Historical and Pro Forma
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Securities Ownership
of Certain Beneficial Owners; Description
of Certain Indebtedness; Description of the
Notes; Financial Statements
15. Information with Respect to S-3 Companies.. Not Applicable
16. Information with Respect to S-2 or S-3
Companies.................................. Not Applicable
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies.................. Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or Management; Securities Ownership of Certain
in an Exchange Offer....................... Beneficial Owners
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 20, 1996
PROSPECTUS
OFFER TO EXCHANGE SERIES B 11 7/8% SENIOR NOTES DUE 2004 FOR ALL OUTSTANDING 11
7/8% SENIOR NOTES DUE 2004 OF PARK NEWSPAPERS, INC.
-----------
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1996, unless extended.
Park Newspapers, Inc., a Delaware corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its Series B 11 7/8% Senior Notes due 2004 (the "Series B Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for each $1,000 principal amount of its outstanding 11
7/8% Senior Notes due 2004 (the "Series A Notes"), of which $155,000,000 in
aggregate principal amount are outstanding on the date hereof. The form and
terms of the Series B Notes are the same as the form and terms of the Series A
Notes (which they replace) except that the Series B Notes will bear a "Series
B" designation and will have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer, and holders of the
Series B Notes will not be entitled to certain rights of holders of Series A
Notes under the Registration Rights Agreement (as defined), which rights will
terminate upon the consummation of the Exchange Offer. The Series B Notes will
evidence the same debt as the Series A Notes (which they replace) and will be
entitled to the benefits of an Indenture dated as of May 13, 1996 governing the
Series A Notes and the Series B Notes (the "Indenture"). The Series A Notes and
the Series B Notes are sometimes referred to herein collectively as the
"Notes." See "Description of the Notes" and "The Exchange Offer."
The Notes are redeemable at the option of the Company, in whole or in part,
on or after May 15, 2001, at the redemption prices set forth herein plus
accrued and unpaid interest, if any, to the date of redemption. Prior to May
15, 1999, the Company may, at its option, redeem up to $50.0 million of the
aggregate principal amount of Notes originally issued with the net proceeds of
one or more Public Equity Offerings (as defined) or Strategic Equity
Investments (as defined) where the proceeds to the Company of any such offering
or investment are at least $40.0 million, at 111.875% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of redemption;
provided, however, that not less than $100.0 million aggregate principal amount
of the Notes is outstanding immediately after giving effect to such redemption.
In addition, prior to May 15, 2001, upon the occurrence of a Change of Control
(as defined), the Company may redeem the Notes, in whole but not in part, at a
redemption price equal to the principal amount thereof plus the Applicable
Premium (as defined) plus accrued and unpaid interest, if any, to the date of
redemption. See "Description of the Notes--Redemption--Optional Redemption" and
"--Change of Control."
Upon a Change of Control Triggering Event (as defined), each holder of the
Notes will have the right to require the Company to offer to purchase such
holder's Notes at a price equal to 101% of the principal amount plus accrued
and unpaid interest, if any, to the date of purchase. In addition, the Company
will be obligated to offer to repurchase the Notes at 100% of their principal
amount plus accrued and unpaid interest, if any, to the date of repurchase in
the event of certain asset sales. See "Description of the Notes--Change of
Control" and "--Certain Covenants--Limitation on Asset Sales."
The Notes will rank pari passu in right of payment with all existing and
future unsecured and unsubordinated indebtedness of the Company and senior in
right of payment to all existing and future subordinated indebtedness of the
Company. The Notes will be effectively subordinated to all secured indebtedness
of the Company to the extent of the assets securing such indebtedness and to
all existing and future indebtedness and other obligations of the subsidiaries
of the Company. As of December 31, 1995, on a pro forma basis after giving
effect to the sale of Notes and the other
(Continued on following page)
SEE "RISK FACTORS," WHICH BEGINS ON PAGE 15 OF THIS PROSPECTUS, FOR A
DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR
SERIES A NOTES IN THE EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
Refinancing Transactions (as defined) and the application of the net proceeds
therefrom, the Company would have had no secured indebtedness outstanding and
the subsidiaries of the Company would have had $0.4 million of indebtedness
outstanding. See "Description of Certain Indebtedness."
Each Series B Note will bear interest from its issuance date. Holders of
Series A Notes that are accepted for exchange will receive accrued interest
thereon to, but not including, the issuance date of the Series B Notes. Such
interest will be paid with the first interest payment on the Series B Notes.
Interest on the Series A Notes accepted for exchange will cease to accrue upon
issuance of the Series B Notes.
The Company will accept for exchange any and all validly tendered Series A
Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1996,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Series A Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. The Exchange Offer is subject to
certain customary conditions. See "The Exchange Offer--Conditions." Series A
Notes may be tendered only in integral multiples of $1,000. In the event the
Company terminates the Exchange Offer and does not accept for exchange any
Series A Notes, the Company will promptly return all previously tendered
Series A Notes to the holders thereof.
The Series A Notes were sold by the Company on May 13, 1996 to the Initial
Purchasers (as defined) in a transaction not registered under the Securities
Act in reliance upon an exemption under the Securities Act. The Initial
Purchasers subsequently resold the Series A Notes to qualified institutional
buyers in reliance upon Rule 144A under the Securities Act and to
institutional accredited investors in a manner exempt from the registration
requirements of the Securities Act. Accordingly, the Series A Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Series B
Notes are being offered hereunder in order to satisfy the obligations of the
Company under the Registration Rights Agreement. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Series B Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Series B Notes are acquired in the ordinary course of such holder's business
and that such holder does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of such
Series B Notes. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer" and "--Resale of the Series B Notes." Each holder of the Series A Notes
(other than certain specified holders) who wishes to exchange the Series A
Notes for Series B Notes in the Exchange Offer will be required to represent
in the Letter of Transmittal that (i) it is not an affiliate of the Company,
(ii) the Series B Notes to be received by it are being acquired in the
ordinary course of its business and (iii) at the time of commencement of the
Exchange Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Series B Notes.
Each broker-dealer (a "Participating Broker-Dealer") that receives Series B
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Series B
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in connection with resales of Series
B Notes received in exchange for Series A Notes where such Series A Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any
such resale. See "Plan of Distribution."
Holders of Series A Notes not tendered and accepted in the Exchange Offer
will continue to hold such Series A Notes and will be entitled to all the
rights and benefits and will be subject to the limitations applicable thereto
under the Indenture and with respect to transfer under the Securities Act. The
Company will pay all the expenses incurred by it incident to the Exchange
Offer. See "The Exchange Offer."
There has been no previous public market for the Series A Notes or the
Series B Notes. The Company does not intend to list the Series B Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Series B Notes will develop. See "Risk Factors--Lack of Established Market for
the Securities." Moreover, to the extent that Series A Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Series A Notes could be adversely affected.
The Series B Notes will be available initially only in book-entry form. The
Company expects that the Series B Notes issued pursuant to this Exchange Offer
will be issued in the form of a Global Certificate (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in its name or in the name of Cede & Co., its
nominee. Beneficial interests in the Global Certificate representing the
Series B Notes will be shown on, and transfers thereof to qualified
institutional buyers will be effected through, records maintained by the
Depositary and its participants. After the initial issuance of the Global
Certificate, Series B Notes in certified form will be issued in exchange for
the Global Certificate only on the terms set forth in the Indenture.
<PAGE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. As used herein, the term "Company" refers to Park
Newspapers, Inc. and its subsidiaries. Since Park Communications and its
subsidiaries, including the Company, were acquired by Park Acquisitions, Inc.
("PAI") on May 11, 1995 (the "Acquisition"), the financial information
contained herein, with respect to periods prior to the Acquisition, does not
reflect any changes in the operation or management of the Company that have
been made since the Acquisition or that the Company intends to make in the
future; thus, this financial information is not necessarily indicative of the
results of operations that would have been achieved had the Company been owned
and operated by PAI during all of the periods with respect to which financial
information is presented herein or which may be achieved in the future. As used
herein, "Newspaper Cash Flow" means operating income of the Company plus
depreciation and amortization, certain operating expenses of Park
Communications, Inc. ("Central Corporate Overhead") allocated to the Company
and, for 1995, approximately $145,000 representing operating losses related to
a publication which was discontinued in 1995.
THE COMPANY
The Company through its subsidiaries owns and operates 104 newspapers and
related publications in geographically diverse markets throughout the United
States. The Company's 104 newspaper publications include 28 daily newspapers
(of which 16 publish Sunday editions), 26 non-daily newspapers, and 50 "total
market coverage" publications. The Company's newspaper publications serve
readers in 43 counties in 12 states. The Company's daily newspaper publications
range in circulation from approximately 4,000 to 17,000, with a combined
average paid daily circulation of approximately 242,000. For the year ended
December 31, 1995, the Company had revenue of $78.9 million and Newspaper Cash
Flow of $25.6 million.
The Company is a wholly-owned subsidiary of Park Communications, which was
founded in 1971 by Roy H. Park to consolidate media holdings which Mr. Park
began acquiring in 1962. Mr. Park's strategy was to complete at least one
acquisition per year and to improve operating cash flow by managing costs
rather than increasing revenue. PAI, which is effectively controlled by Dr.
Gary B. Knapp and Donald R. Tomlin, Jr., acquired Park Communications on May
11, 1995 because Messrs. Knapp and Tomlin believed the Acquisition presented a
unique opportunity to acquire a group of media assets, each with strong local
franchises in the markets in which they operate and potential revenue
enhancement opportunities. Due to the prior owner's operating strategy, the
Company's newspaper properties generally have captured a smaller relative share
of advertising dollars in their respective markets than their relative
positions would indicate. Messrs. Knapp and Tomlin, along with the Company's
experienced management team, developed and initiated a strategy to take
advantage of this opportunity to increase revenue and Newspaper Cash Flow,
while maintaining strict control over costs. Collectively, Messrs. Knapp and
Tomlin have significant business, operating and investment experience in media,
real estate and turnaround situations. The management team at Park
Communications and at the Company has substantial experience in the newspaper
industry.
The Company's daily and non-daily newspapers generally combine news, sports
and features with a special emphasis on local information. The markets which
the publications serve had a combined household count of approximately 545,000
and aggregate retail sales of approximately $15.2 billion in 1995. The Company
believes that operating a geographically diverse group of newspapers reduces
the impact of the performance of any one newspaper.
A major component of the Company's long-term strategy has been to operate
newspapers having a dominant position in stable, growing communities. The
Company's dailies have been in existence for an average of 111 years (with none
in existence for less than 46 years), are well established and have a strong
local brand appeal.
3
<PAGE>
In most cases, the dailies typically serve a small or medium population
community and are the dominant or only local newspaper in the market. The
Company believes that an added benefit of operating in these types of
communities is the workforce stability which it has experienced.
The Company's newspaper publications serve readers in 43 counties in 12
states. Demographics USA, 1994 has forecasted that 30 of the counties which the
Company serves (or approximately 70% of the total number of counties it serves)
will experience retail sales growth during the period from 1994 through 1999
equal to or in excess of the forecast national average of 30.6% over this
period; another 11 of these counties (or approximately 26% of the total number
of counties it serves) are projected to have retail sales growth during this
period of at least 80% of the national average, with most growing at 90% or
more of the national average; and only two of these counties (Columbia and
Niagara Counties in New York) are projected to be "slow-growth" counties.
BUSINESS AND OPERATING STRATEGY. The Company's operating strategy is to
increase revenue and Newspaper Cash Flow by capitalizing on the strong local
brand recognition of its newspapers. Management believes that its strong brand
recognition combined with the Company's emphasis on producing a high quality
product and improving its sales and marketing efforts will enhance the value of
the Company's publications to its readers and advertisers and result in
increased circulation, revenue and Newspaper Cash Flow.
Prior to the Acquisition, the Company focused on improving Newspaper Cash
Flow through cost management rather than generation of incremental revenue.
Industry standards suggest that revenue performance of a community newspaper
equal to 0.70% to 1.25% of total retail sales in a defined market is a
reasonable target for share of market revenue. The Company ended 1995 with
advertising revenue equal to 0.52% of total retail sales in the aggregate in
the markets served by its publications. The Company believes that through new
sales and marketing programs, continued quality editorial and news leadership
and increased circulation penetration, along with continued strict cost
controls, it can capitalize on the growing markets in which it operates and
improve its share of retail advertising dollars.
The Company's business and operating strategy includes the following key
elements:
Strengthen Sales and Marketing Development. Since the Acquisition, the
Company has instituted a sales force upgrade and implemented a motivation
program which includes performance-based compensation plans, daily sales
reports to monitor each account executive's development, and on-site
training programs. The Company has purchased a new demographic/advertising
research program to provide qualitative data to its sales force to better
identify sales opportunities. The Company has also introduced advertising
programs to generate revenue from sources new to the Company.
Enhance Quality of Editorial Content, Presentation and Local News. The
Company's publications are committed to editorial excellence and providing
the best mix of local and national news to effectively serve their markets.
The Company's newspapers generally have the largest local news gathering
resources in their local markets and, through emphasizing local news,
generally have a high degree of reader loyalty among their core circulation
base group. The Company has recently completed a review of its daily
newspapers' layouts and has instituted a layout redesign program for all of
its daily newspapers to ensure that each newspaper offers attractive
layout, design and color enhancement.
Increase Circulation. Prior to the Acquisition, the Company pursued a
circulation strategy aimed at driving circulation revenue through price
increases. This strategy ultimately adversely impacted circulation
penetration levels. As of December 31, 1995, the Company had only a 47%
penetration of the occupied households in its defined market areas, a level
which the Company believes offers significant potential for improvement.
The Company has launched an aggressive direct marketing effort with the
goal of improving market penetration (in the aggregate) to 70% of the
occupied households in its defined markets.
4
<PAGE>
Realize Benefits From Clustering. The Company has clustered its publication
operations regionally. With the change in strategy from cost management to
revenue maximization and cost containment, the Company has identified and
is implementing programs to enhance revenue available as a result of its
clustering of operations, such as regional sales promotion programs and
other cross-selling techniques. In addition to these revenue opportunities,
consolidating the operations of groups of newspapers affords both operating
and economic efficiencies. These efficiencies include, but are not limited
to, the sharing of management, accounting and production functions.
Management will continue to review its newspaper businesses for
opportunities to merge operations to both enhance revenue and reduce costs.
Maintain Effective Cost Controls. Expenses at each of the Company's
publications are closely monitored to control costs without sacrificing
revenue opportunities. The Company seeks to reduce labor costs through
investment in modern production equipment and through the consolidation of
operations and administrative activities associated with clustering. The
Company's newsprint costs are approximately 10.4% of its revenue, and it
generally enters into long-term supply contracts to reduce newsprint costs
during periods of short supply. Management believes that the Company's
newsprint costs as a percentage of revenue are generally lower than many of
the other community newspaper groups. The Company's cost control
initiatives also include group purchasing of materials and aggressive
control of newsprint waste.
Develop Additional Non-Traditional Revenue Sources. The Company has
recently introduced new informational products and services and advertising
programs to generate revenue from sources other than traditional newspaper
publishing activities. These products, services and programs include voice
personals, audio-text and incentive marketing.
THE REFINANCING TRANSACTIONS
The Company sold the Series A Notes on May 13, 1996 in one of a series of
transactions (the "Refinancing Transactions"), the purpose of which was to
refinance the indebtedness under a credit agreement among Park Communications,
PAI and the lenders thereunder (the "Prior Credit Agreement"), which was
guaranteed by the Company. The Refinancing Transactions consisted of (i) the
sale of the Series A Notes, (ii) the establishment of and drawings by Park
Communications under a Senior Credit Facility between Park Communications and
certain lenders (the "Communications Senior Credit Facility") in the amount of
$58.0 million, (iii) the sale, which was completed on May 13, 1996, of 80,000
Units (the "Communications Units") consisting of $80.0 million in principal
amount of 13 3/4% Senior Pay-in-Kind Notes due 2004 of Park Communications (the
"Communications Notes") and Warrants to purchase 800,000 shares of common stock
of Park Communications (the "Communications Warrants"), (iv) the sale, which
was completed on May 13, 1996, of $241.0 million in principal amount of 11 3/4%
Senior Notes due 2004 of Park Broadcasting (the "Broadcasting Notes") and (v)
the sale, which was completed on March 25, 1996, of Park Broadcasting's WPAT-AM
and FM radio stations for aggregate gross proceeds of $103.0 million.
Park Broadcasting is in the process of selling its radio station operations.
As of May 6, 1996, Park Broadcasting had sold two of its radio stations and had
entered into definitive agreements providing for the divestiture of its
remaining ten AM and ten FM radio stations (such remaining stations,
collectively, the "Radio Station Assets"). Park Communications decided to
divest such operations to focus on its core television broadcasting and
newspaper publication operations, to raise cash to prepay a portion of its
existing indebtedness and to take advantage of attractive prices for which such
operations could be sold.
Between May 6, 1996 and June 14, 1996, Park Broadcasting had sold an
additional 12 radio stations. Although there can be no assurance that the sale
of the remaining Radio Station Assets will occur, Park Broadcasting currently
anticipates that the sale of four of its eight remaining individual radio
stations will be completed by June 30, 1996, the sale of an additional two of
its individual radio stations will be completed by
5
<PAGE>
July 31, 1996 and the sale of its last two individual radio stations will be
completed by August 31, 1996. The proceeds of sales of radio station operations
occurring after May 13, 1996 have been and will be used to repay the
Communications Senior Credit Facility and to pay taxes resulting from the sale
of the radio station operations. For additional information concerning the sale
of the Radio Station Assets, see "Description of Certain Indebtedness--Sales of
Radio Station Assets; Communications Senior Credit Facility"
In addition to the Refinancing Transactions, it is contemplated that the
Company will have commitments for a senior revolving credit facility (the
"Revolving Credit Facility") in an amount not to exceed $10.0 million for
future working capital and general corporate purposes (the execution and
delivery of which will be subject to negotiation of satisfactory documentation
and other customary conditions). Under the terms of the Communications Senior
Credit Facility, the Company will not be permitted to borrow funds under the
Revolving Credit Facility until such time as all indebtedness under the
Communications Senior Credit Facility has been repaid. See "Description of
Certain Indebtedness."
6
<PAGE>
THE SERIES A NOTES OFFERING
Series A Notes................ The Series A Notes were sold by the Company on
May 13, 1996 to Goldman, Sachs & Co. and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Initial Purchasers")
pursuant to a Purchase Agreement dated May 6,
1996 (the "Purchase Agreement"). The Initial
Purchasers subsequently resold the Series A
Notes to qualified institutional buyers in
reliance upon Rule 144A under the Securities
Act and to institutional accredited investors
in a manner exempt from the registration
requirements of the Securities Act.
Registration Rights Pursuant to the Purchase Agreement, the Company
Agreement..................... and the Initial Purchasers entered into a
Registration Rights Agreement dated May 13,
1996 (the "Registration Rights Agreement"),
which grants the holders of the Series A Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such
exchange rights, which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
Notes Offered................. $155,000,000 aggregate principal amount of
Series B 11 7/8% Senior Notes due 2004.
The Exchange Offer............ $1,000 principal amount of Series B Notes in
exchange for each $1,000 principal amount of
Series A Notes. As of the date hereof,
$155,000,000 aggregate principal amount of
Series A Notes are outstanding. The Company
will issue the Series B Notes to tendering
holders on or promptly after the Expiration
Date.
Based on no-action letters issued by the staff
of the Commission to third parties, the Company
believes the Series B Notes issued pursuant to
the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder that is an
"affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Series B Notes are acquired
in the ordinary course of such holder's
business and that such holder does not intend
to participate, and has no arrangement or
understanding with any person to participate,
in the distribution of such Series B Notes.
Each Participating Broker-Dealer that receives
Series B Notes for its own account pursuant to
the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with
any resale of such Series B Notes. The Letter
of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meeting of
the Securities Act. This Prospectus, as it may
be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in
connection with resale of Series B Notes
received in exchange for Series A
7
<PAGE>
Notes where such Series A Notes were acquired
by such Participating Broker-Dealer as a result
of market-making activities or other trading
activities. The Company has agreed that, for a
period of 180 days after the Expiration Date,
it will make this Prospectus available to any
Participating Broker- Dealer for use in
connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the Series B Notes could not rely on the
position of the staff of the Commission
communicated in no-action letters and, in the
absence of an exception therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Company.
Expiration Date............... 5:00 p.m., New York City time, on , 1996,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended.
Accrued Interest on the
Series B Notes and the
Series A Notes................
Each Series B Note will bear interest from its
issuance date. Holders of Series A Notes that
are accepted for exchange will receive accrued
interest thereon to, but not including, the
issuance date of the Series B Notes. Such
interest will be paid with the first interest
payment on the Series B Notes. Interest on the
Series A Notes accepted for exchange will cease
to accrue upon issuance of the Series B Notes.
The Exchange Offer is subject to certain
Conditions to the Exchange customary conditions, which may be waived by
Offer......................... the Company. See "The Exchange Offer--
Conditions."
Procedures for Tendering Each holder of Series A Notes wishing to accept
Series........................ the Exchange Offer must complete, sign and date
the accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the Series A Notes and any other required
documentation to the Exchange Agent (as
defined) at the address set forth herein. By
executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the Series B Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business of
the person receiving such Series B Notes,
whether or not such person is the holder, that
neither the holder nor any such other person
has any arrangement or understanding with any
person to participate in the distribution of
such Series B Notes and that neither the holder
nor any such
8
<PAGE>
other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "--Procedures
for Tendering."
Untendered Series A Notes..... Following the consummation of the Exchange
Offer, holders of Series A Notes eligible to
participate in the Exchange Offer but who do
not tender their Series A Notes will not have
any further exchange rights and such Series A
Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the
liquidity of the market for such Series A Notes
could be adversely affected.
Consequences of Failure to The Series A Notes that are not exchanged
Exchange...................... pursuant to the Exchange Offer will remain
restricted securities. Accordingly, such Series
A Notes may be resold only (i) to the Company,
(ii) pursuant to Rule 144A or Rule 144 under
the Securities Act or pursuant to another
exemption under the Securities Act,
(iii) outside the United States to a foreign
person pursuant to the requirements of Rule 904
under the Securities Act or (iv) pursuant to an
effective registration statement under the
Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
Shelf Registration Statement.. If any holder of the Series A Notes (other than
any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under
the Securities Act) is not eligible under
applicable securities laws to participate in
the Exchange Offer, and such holder has
provided information regarding such holder and
the distribution of such holder's Series A
Notes to the Company for use therein, the
Company has agreed to register the Series A
Notes with a shelf registration statement (the
"Shelf Registration Statement") and use its
best efforts to cause it to be declared
effective by the Commission as promptly as
practical on or after the consummation of the
Exchange Offer. The Company has agreed to
maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of three years, to
cover resales of the Series A Notes held by any
such holders.
Special Procedures for Any beneficial owner whose Series A Notes are
Beneficial Owners............. registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Series A Notes, either make appropriate
arrangements to register ownership of the
Series A Notes in such owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of registered
ownership may
9
<PAGE>
take considerable time. The Company will keep
the Exchange Offer open for not less than 30
days in order to provide for the transfer of
registered ownership.
Guaranteed Delivery Holders of Series A Notes who wish to tender
Procedures.................... their Series A Notes and whose Series A Notes
are not immediately available or who cannot
deliver their Series A Notes, the Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
(or comply with the procedures for book-entry
transfer) prior to the Expiration Date must
tender their Series A Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Series A Notes
and Delivery of Series B
Notes......................... The Company will accept for exchange any and
all Series A Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Series B Notes issued pursuant to the Exchange
Offer will be delivered on or promptly after
the Expiration Date. See "The Exchange Offer--
Terms of the Exchange Offer."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ IBJ Schroder Bank & Trust Company (the
"Exchange Agent").
THE SERIES B NOTES
General....................... The form and terms of the Series B Notes are
the same as the form and terms of the Series A
Notes except that (i) the Series B Notes will
bear a "Series B" designation, (ii) the Series
B Notes will have been registered under the
Securities Act and, therefore, will not bear
legends restricting their transfer and (iii)
the holders of Series B Notes will not be
entitled to certain rights of holders of Series
A Notes under the Registration Rights
Agreement, including the provisions providing
for an increase in the interest rate on the
Series A Notes in certain circumstances
relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange
Offer is consummated. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer." The
Series B Notes will evidence the same debt as
the Series A Notes (which they replace) and
will be entitled to the benefits of the
Indenture. See "Description of the Notes."
Notes Offered................. $155,000,000 aggregate principal amount of
Series B 11 7/8% Senior Notes due 2004.
10
<PAGE>
Maturity Date................. May 15, 2004.
Interest Payment Dates........ Interest on the Notes is payable semi-annually
in arrears on each May 15 and November 15,
commencing November 15, 1996.
Optional Redemption........... The Notes are redeemable at the option of the
Company, in whole or in part, on or after May
15, 2001, at the redemption prices set forth
herein plus accrued and unpaid interest, if
any, to the date of redemption. Prior to May
15, 1999, the Company may, at its option,
redeem up to $50.0 million of the aggregate
principal amount of Notes originally issued
with the net proceeds of one or more Public
Equity Offerings or Strategic Equity
Investments where the proceeds to the Company
of any such offering or investment are at least
$40.0 million, at 111.875% of the principal
amount thereof plus accrued and unpaid
interest, if any, to the date of redemption;
provided, however, that not less than $100.0
million aggregate principal amount of the Notes
is outstanding immediately after giving effect
to such redemption (other than any Notes owned
by the Company or any of its affiliates) and
such redemption is effected within 60 days of
such issuance or investment.
In addition, prior to May 15, 2001, upon the
occurrence of a Change of Control, the Company
may redeem the Notes, in whole but not in part,
at a redemption price equal to the principal
amount thereof plus the Applicable Premium plus
accrued and unpaid interest, if any, to the
date of redemption.
Change of Control............. Upon the occurrence of a Change of Control
Triggering Event, each holder of the Notes will
have the right, subject to the terms and
conditions of the Indenture, to require the
Company to offer to purchase such holder's
Notes at a price equal to 101% of the principal
amount thereof plus accrued and unpaid
interest, if any, to the date of purchase.
Asset Sales................... In the event of certain asset sales, the
Company will be required to offer to purchase
the Notes at 100% of their principal amount
plus accrued and unpaid interest, if any, to
the date of purchase with the net proceeds of
such asset sales.
Ranking....................... The Notes will rank pari passu in right of
payment with all existing and future unsecured
and unsubordinated indebtedness of the Company
and senior in right of payment to all existing
and future subordinated indebtedness of the
Company. The Notes will be effectively
subordinated to all secured indebtedness of the
Company to the extent of the assets securing
such indebtedness and to all existing and
future indebtedness and other obligations of
the subsidiaries of the Company. As of December
31, 1995, on a pro forma basis after giving
effect to the sale of Notes, the other
Refinancing Transactions and the application of
the net
11
<PAGE>
proceeds therefrom, the Company would have had
no secured indebtedness outstanding and the
subsidiaries of the Company would have had $0.4
million of indebtedness outstanding.
Restrictive Covenants......... The Indenture imposes certain limitations on
the ability of the Company and certain of its
subsidiaries to, among other things, (i) incur
additional indebtedness, (ii) pay dividends or
make certain other restricted payments or make
certain investments, (iii) consummate certain
asset sales, (iv) enter into certain
transactions with affiliates, (v) incur certain
liens, (vi) impose restrictions on the ability
of certain subsidiaries to pay dividends or
make certain payments to the Company, (vii)
merge or consolidate with any other person or
(viii) sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all
of the assets of the Company. The restrictive
covenants are subject to certain exceptions and
qualifications. See "Description of the Notes--
Certain Covenants."
Notice to Investors........... For additional information regarding the Notes,
see "Description of the Notes."
RISK FACTORS
Investors should consider all of the information contained in this Prospectus
before tendering their Series A Notes in the Exchange Offer. In particular,
investors should carefully consider the factors set forth under "Risk Factors"
prior to tendering their Series A Notes in the Exchange Offer.
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The summary historical consolidated financial data presented below have been
derived from audited financial statements of the Company as of and for the
years ended December 31, 1993, 1994 and 1995 (data for the years ended December
31, 1991 and 1992 have been derived from unaudited financial statements). The
selected pro forma consolidated financial data as of March 31, 1996 and for the
12-month period April 1, 1995 to March 31, 1996 presented below have been
derived from unaudited financial statements of the Company. The data presented
below should be read in conjunction with the Consolidated Financial Statements
of Park Newspapers, Inc. and Subsidiaries, including the notes thereto,
"Unaudited Pro Forma Condensed Consolidated Financial Statements," "Selected
Historical and Pro Forma Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. The unaudited pro forma information does not purport
to represent what the Company's financial position or results of operations
actually would have been if the Acquisition, the Refinancing Transactions and
the sale of the Radio Station Assets (as applicable) had, in fact, occurred on
the dates indicated or to project the Company's financial position or results
of operations at any future date or for any future period.
<TABLE>
<CAPTION>
YEAR ENDED TWELVE
DECEMBER 31, 1995 MONTHS
YEAR ENDED DECEMBER 31, PRO FORMA ENDED
------------------------------------ ------------------------ MARCH 31,
ACQUISITION TRANSACTIONS 1996
1991 1992 1993 1994 1995 (A) 1995 (B) PRO FORMA (B)
-------- -------- ------- ------- ----------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue (c)............. $ 82,200 $ 82,584 $84,751 $76,810 $ 78,904 $ 78,904 $ 78,987
-------- -------- ------- ------- -------- -------- --------
Operating expenses:
Cost of sales.......... 39,444 37,628 39,221 32,364 33,810 33,810 34,351
Selling, general and
administrative (d).... 25,784 25,892 27,155 22,216 21,869 21,869 22,255
-------- -------- ------- ------- -------- -------- --------
Total operating expenses
(c).................... 65,228 63,520 66,376 54,580 55,679 55,679 56,606
-------- -------- ------- ------- -------- -------- --------
Operating income before
depreciation and
amortization (c)....... 16,972 19,064 18,375 22,230 23,225 23,225 22,381
Depreciation and
amortization........... 7,614 7,247 6,895 5,816 8,167 8,167 8,342
-------- -------- ------- ------- -------- -------- --------
Operating income........ 9,358 11,817 11,480 16,414 15,058 15,058 14,039
Interest expense........ (512) (279) (177) (76) (24,810) (19,144) (19,144)
Interest income......... 29 42 45 11 291 291 321
Other................... (304) (380) (204) (832) (511) (511) (444)
-------- -------- ------- ------- -------- -------- --------
Income/(loss) before
income tax............. 8,571 11,200 11,144 15,517 (9,972) (4,306) (5,228)
Provision/(benefit) for
income tax............. 4,499 5,370 5,335 7,007 (2,792) (946) (1,293)
-------- -------- ------- ------- -------- -------- --------
Net income/(loss) (c)... $ 4,072 $ 5,830 $ 5,809 $ 8,510 $ (7,180) $ (3,360) $ (3,935)
======== ======== ======= ======= ======== ======== ========
Ratio of earnings to
fixed charges (e)...... -- -- --
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets............ $110,705 $115,225 $98,075 $93,060 $219,738 $225,058 $222,294
Total long-term debt,
excluding current
maturities............. 2,792 1,912 746 360 168,305 155,240 155,120
OTHER FINANCIAL DATA AND
RATIOS:
Newspaper Cash Flow (f). $ 19,163 $ 21,344 $20,477 $24,218 $ 25,587 $ 25,587 $ 24,774
Newspaper Cash Flow
margin (g)............. 23.3% 25.8% 24.2% 31.5% 32.4% 32.4% 31.4%
Cash interest expense... 512 279 177 76 19,768 18,493 18,493
Capital expenditures
(h).................... 1,084 2,252 1,512 2,858 2,122 2,122 2,037
Ratio of Newspaper Cash
Flow to cash interest
expense................ -- 1.38x 1.34x
Ratio of Newspaper Cash
Flow to interest
expense................ -- 1.34x 1.29x
Ratio of total long-term
debt to Newspaper Cash
Flow................... 6.58x 6.07x 6.26x
</TABLE>
(footnotes begin on next page)
13
<PAGE>
- -------
(a) Presented on a pro forma basis assuming that the Acquisition had occurred
on January 1, 1995. See Note (2) to the Consolidated Financial Statements.
(b) Presented on a pro forma basis assuming that the Acquisition, the
Refinancing Transactions and the sale of the Radio Station Assets on the
terms described herein occurred on either December 31, 1995 or March 31,
1996 for balance sheet data and on either January 1, 1995 or April 1, 1995
for all other data.
(c) On December 31, 1993, the Company sold 33 newspaper publications located
in 13 of its smaller markets. The impact of the sale of these publications
was not material to net income in 1993. The results of operations of the
33 newspaper publications are included in the 1991, 1992 and 1993
operating results as follows:
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Revenue......................................... $11,132 $10,812 $10,385
Operating expenses.............................. 11,304 10,707 10,551
Operating income (loss) before depreciation and
amortization................................... (172) 105 (166)
</TABLE>
(d) Includes an allocation of Central Corporate Overhead from Park
Communications to the Company as follows:
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Allocated Central Corporate Over-
head............................ $2,191 $2,280 $2,102 $1,988 $2,217 $2,393
</TABLE>
Cash payments to Park Communications from the Company to satisfy future
allocations of Central Corporate Overhead will be subject to certain
limitations and restrictions under the Indenture. See "Description of the
Notes--Certain Covenants--Limitation on Restricted Payments."
(e) 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 net loss before income
taxes and fixed charges. On a pro forma basis as described in Note (a)
above, earnings were insufficient to cover fixed charges by $10.0 million
for the year ended December 31, 1995. On a pro forma basis as described in
Note (b) above, earnings were insufficient to cover fixed charges by $4.3
million for the year ended December 31, 1995 and by $5.2 million for the
12 months ended March 31, 1996.
(f) The Company has included Newspaper Cash Flow data because it understands
that such data are used by investors to measure a company's ability to
service its debt and meet certain of its obligations. Newspaper Cash Flow
does not purport to represent cash flows from operating activities
determined in accordance with generally accepted accounting principles
("GAAP") as reflected in the historical consolidated financial statements;
it is not a measure of financial performance under GAAP and should not be
considered in isolation or as a substitute for or more important than net
income or cash flows from operating activities.
(g) Defined as Newspaper Cash Flow divided by revenue.
(h) Capital expenditures do not include the purchase in 1994 for $600 of
certain operating equipment and facilities from RHP Incorporated, which
the Company had been leasing.
14
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Prospectus, investors
should carefully review the following risk factors in evaluating whether to
tender their Series A Notes for Series B Notes in the Exchange Offer.
SUBSTANTIAL LEVERAGE
The Company has, and after giving effect to the sale of Notes and the other
Refinancing Transactions and the Exchange Offer will continue to have,
consolidated indebtedness that is substantial in relation to its total
stockholder's equity. The Acquisition was financed entirely by borrowings
under the Prior Credit Agreement and existing cash-on-hand at Park
Communications and its subsidiaries. At December 31, 1995, the Company had
outstanding long-term indebtedness of approximately $168.3 million, with a
total stockholder's deficit of approximately $7.0 million. After giving pro
forma effect to the sale of Notes and the other Refinancing Transactions and
the application of the net proceeds therefrom, the total consolidated long-
term indebtedness of the Company outstanding at December 31, 1995 would have
been approximately $155.2 million, as compared to a total stockholder's equity
of approximately $18.6 million. On a pro forma basis assuming that the
Acquisition had occurred on January 1, 1995, earnings were insufficient to
cover fixed charges by $10.0 million during the year ended December 31, 1995.
On a pro forma basis after giving effect to the sale of Notes, the other
Refinancing Transactions and the sale of the Radio Station Assets on the terms
described herein and the application of the net proceeds therefrom, earnings
would have been insufficient to cover fixed charges by approximately $4.3
million for the year ended December 31, 1995. The Company will have
significant cash interest expense relating to its indebtedness, and a
significant amount of the Company's consolidated cash flow will be required
for debt service.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes including, but not limited to, the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate or other purposes may be limited; (ii) a substantial portion of the
Company's consolidated cash flow from operations will be dedicated to the
payment of the principal of, and interest on, its consolidated debt; (iii) the
agreements governing the Company's long-term debt contain certain restrictive
financial and operating covenants which could limit the Company's ability to
compete, as well as its ability to expand; and (iv) the Company's substantial
leverage may make it more vulnerable to economic downturns, limit its ability
to withstand competitive pressures and reduce its flexibility in responding to
changing business and economic conditions. The ability of the Company to pay
interest and principal on the Notes and to satisfy its debt obligations will
be dependent on the future operating performance of the Company, which could
be affected by changes in economic conditions and other factors, including
factors beyond the control of the Company. A failure to comply with the
covenants and other provisions of its debt instruments could result in events
of default under such instruments, which could permit acceleration of the debt
under such instruments and in some cases acceleration of debt under other
instruments that contain cross-default or cross-acceleration provisions. See
"Description of Certain Indebtedness" and "Description of the Notes--Events of
Default."
If the Company is unable to generate sufficient cash flow to meet its debt
obligations, the Company may be required to renegotiate the terms of the
instruments relating to its long-term debt or to refinance all or a portion of
its long-term debt. However, there can be no assurance that the Company will
be able to successfully renegotiate such terms or refinance its indebtedness,
or, if the Company were able to do so, that the terms available would be
favorable to it. In the event that the Company were unable to refinance its
indebtedness or obtain new financing under these circumstances, the Company
likely would have to consider various other options such as the sale of
certain assets to meet its required debt service, negotiation with its lenders
to restructure applicable indebtedness or other options available to it under
law. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
15
<PAGE>
HOLDING COMPANY STRUCTURE; DEPENDENCE ON CASH FLOW FROM SUBSIDIARIES
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries. As a holding company, the Company owns no
significant assets other than the capital stock of its subsidiaries.
Accordingly, the Company's ability to pay its obligations, including its
obligation to pay interest on and principal of the Notes, whether at maturity,
upon a Change of Control Triggering Event or otherwise, will be dependent
primarily upon receiving dividends and other payments or advances from its
subsidiaries or new equity. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts
due pursuant to the Notes or to make funds available therefor. The ability of
the subsidiaries to pay dividends or make other payments or advances to the
Company will depend upon their operating results and will be subject to
applicable laws and contractual restrictions.
EFFECTIVE SUBORDINATION; PAYMENT RESTRICTIONS
The Notes will be unsecured and effectively subordinated to all existing and
future secured indebtedness of the Company to the extent of the assets
securing such indebtedness and to all existing and future indebtedness and
other obligations of the subsidiaries of the Company. As of December 31, 1995,
on a pro forma basis after giving effect to the sale of Notes and the other
Refinancing Transactions and the application of the net proceeds therefrom,
the Company would have had no secured indebtedness outstanding and the
subsidiaries of the Company would have had $0.4 million of indebtedness
outstanding. The claims of holders of the Notes upon any distribution of
assets of any subsidiary of the Company in the event of the liquidation or
reorganization of such subsidiary will be subordinated to the prior claims of
present and future creditors of such subsidiary. In such an event, there may
not be sufficient assets remaining to pay amounts due on any or all of the
Notes then outstanding. The Indenture permits subsidiaries of the Company to
incur indebtedness and permits the Company and its subsidiaries to secure
indebtedness other than subordinated indebtedness. See "Description of Certain
Indebtedness" and "Description of the Notes--Certain Covenants--Limitation on
Liens Securing Certain Debt."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture restricts, among other things, the ability of the Company and
certain of its subsidiaries to, among other things, (i) incur additional
indebtedness, (ii) pay dividends or make certain other restricted payments or
make certain investments, (iii) consummate certain asset sales, (iv) enter
into certain transactions with affiliates, (v) incur certain liens, (vi)
impose restrictions on the ability of a Restricted Subsidiary to pay dividends
or make certain payments to the Company, (vii) merge or consolidate with any
other person or (viii) sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
it is anticipated that the Revolving Credit Facility will contain other and
more restrictive covenants and will prohibit the Company from prepaying its
indebtedness, including the Notes, in certain circumstances. It is anticipated
that the Revolving Credit Facility will require the Company to maintain
specified financial ratios and satisfy certain financial condition tests. The
Company's ability to meet those financial ratios and financial condition tests
can be affected by events beyond its control, and there can be no assurance
that the Company will meet those tests. A breach of any of these covenants
could result in a default under the Revolving Credit Facility and/or the
Indenture. In the event of an event of default under the Revolving Credit
Facility, the lenders thereunder could elect to declare all amounts
outstanding under the Revolving Credit Facility, together with accrued
interest, to be immediately due and payable. If the Company were unable to
repay those amounts, the lenders could proceed against the collateral granted
to them to secure that indebtedness. If the indebtedness under the Revolving
Credit Facility were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full that indebtedness
and the other indebtedness of the Company, including the Notes. It is
anticipated that all of the assets of the Company will be pledged as security
under the Revolving Credit Facility. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Description of Certain Indebtedness--Revolving Credit Facility"
and "Description of the Notes--Certain Covenants."
16
<PAGE>
FULL IMPLEMENTATION OF BUSINESS AND OPERATING STRATEGY
There can be no assurance that the Company will be able to fully implement
its business and operating strategy or that the anticipated results of its
strategy will be realized. In addition, after gaining experience with the
Company's operations under its new operating strategy, the Company and the
management team may decide to alter or discontinue certain aspects of the
operating strategy discussed herein and may adopt alternative or additional
strategies. Implementation of the strategy could also be affected by a number
of factors beyond its control, such as operating difficulties, increased
operating costs, regulatory developments, general economic conditions or
increased competition. Any such failure to implement the operating strategy or
improve the operating results of the Company could affect the ability of the
Company and its subsidiaries to service its indebtedness, including the Notes.
See "Business--Business and Operating Strategy."
FAILURE TO CONSUMMATE SALES OF RADIO STATION ASSETS
As of May 6, 1996, Park Broadcasting had entered into definitive agreements
providing for the divestiture of all of the Radio Station Assets. Between May
6, 1996 and June 14, 1996, the Company had sold Radio Station Assets relating
to 12 of its radio stations. Sales of the remaining Radio Station Assets are
contingent upon the satisfaction of certain conditions, some of which are
beyond the control of the Company, including the approval of transfer of the
broadcasting licenses by the Federal Communications Commission (the "FCC").
The failure to consummate any such sales upon the terms currently in effect
and within the time frames currently anticipated could materially adversely
affect the ability of Park Communications to repay any amounts outstanding
under the Communications Senior Credit Facility. The Communications Senior
Credit Facility will be secured by, among other things, a pledge of the
capital stock of the Company.
The Communications Senior Credit Facility was entered into in anticipation
of the sale of the Radio Station Assets and matures on November 13, 1996,
although it may be extended by Park Communications for up to an additional six
months under certain circumstances. Park Communications is required to make
mandatory prepayments in certain situations, including at any time that the
definitive agreements referred to above which are in full force and effect do
not provide for either (i) gross proceeds to be received by Park
Communications of at least 170%, or (ii) Net Cash Proceeds (as such term is
defined in the Communications Senior Credit Facility) of at least 110%, of the
aggregate principal amount of loans outstanding under the Communications
Senior Credit Facility. In such an event, Park Communications may not have
sufficient funds to make such mandatory prepayments, which would result in an
event of default under the Communications Senior Credit Facility and permit
the lenders thereunder to accelerate the indebtedness outstanding thereunder
and foreclose upon any assets, including the capital stock of the Company,
pledged to secure such indebtedness. Such acceleration could result in an
event of default under other indebtedness of Park Communications and its
subsidiaries. At June 14, 1996, the outstanding principal amount due under the
Communications Senior Credit Facility was $22.2 million. See "Description of
Certain Indebtedness--Sales of Radio Station Assets; Communications Senior
Credit Facility."
The divestiture of the radio station operations will result in the
consolidated group of which the Company is a part (and which also includes
PAI, Park Communications and Park Broadcasting and its subsidiaries) being
obligated to pay income taxes of approximately $65.4 million in connection
therewith assuming the sale of all radio station operations is completed on
the terms described herein. The Communications Senior Credit Facility requires
the loans outstanding thereunder to be repaid from the proceeds of the sale of
each Radio Station Asset (other than KEZX-AM and KWJZ-FM radio stations in
Seattle, Washington) regardless of the taxes owed with respect to such sale
until such loan is repaid in full. In the event that Park Broadcasting does
not consummate sales of Radio Station Assets in amounts sufficient or in the
time frame necessary to pay the taxes payable on the sales that were
consummated (after repayment of the Communications Senior Credit Facility),
the members of the consolidated group in the aggregate may not have available
cash resources to make such tax payments and any such failure to pay taxes
could have a material adverse effect on the Company's financial condition and
liquidity. See "Description of Certain Indebtedness--Sales of Radio Station
Assets; Communications Senior Credit Facility."
17
<PAGE>
NEWSPAPER INDUSTRY CHARACTERISTICS
The Company's publishing business is concentrated in newspapers located in
cities or towns of small or medium populations in the United States. Revenue
in the newspaper industry is dependent primarily upon advertising revenue and
paid circulation. Competition for advertising and circulation revenue comes
from local and regional newspapers, radio, broadcast and cable television,
direct mail, and other communications and advertising media. The extent and
nature of such competition is, in large part, determined by the location and
demographics of the markets and the number of media alternatives in those
markets. In the Company's case, its paid daily newspapers are the only paid
daily newspapers of general circulation published in their respective cities
or towns. There are no broadcast television stations licensed to any city or
town in which the Company publishes a daily newspaper, although regional
television service is provided by broadcast television stations licensed to
larger nearby communities and by cable television systems. Other daily
newspapers published in nearby locations are generally circulated in some of
the Company's markets. Some of such competitors are larger and have greater
financial resources than the Company. Competition for advertising revenue also
arises from radio stations broadcasting in such markets. See "Business--
Competition."
In recent years on-line services and other new technologies have also begun
to compete with newspapers. Although it is impossible to predict the extent of
such competition, the Company believes that such technologies are less likely
to represent significant competition in smaller markets where advertisers are
more likely to focus limited budgets on outlets such as local newspapers
having more limited coverage areas. The Company also believes that its news
collection system in the communities served by its publications positions the
Company to provide news in future electronic delivery systems.
Because of the common ownership of the Company and Park Broadcasting, the
Communications Act of 1934, as amended, and certain rules of the FCC
thereunder place limitations on common ownership, operation and other
interests in broadcast stations and newspapers serving the same area. This may
affect the number, type and location of newspapers that the Company may
acquire in the future. These rules do not currently require any change in the
Company's present ownership of newspapers.
NEWSPRINT COSTS
Newsprint represents the single largest raw material expense of the
Company's business and, together with employee costs, is one of the most
significant operating costs in the newspaper industry. Newsprint costs
increased approximately 40% per metric ton in 1995 on an industry-wide basis
and may continue to increase in 1996, although any such increases in 1996 are
not anticipated to be as significant as the 1995 increases. Newsprint expenses
represented 12%, 12% and 15% of the Company's total operating costs and
expenses for the years ended December 31, 1993, 1994 and 1995, respectively.
Although the Company has implemented measures in an attempt to offset the rise
in newsprint prices, such as affording individual newspapers the ability to
purchase newsprint under master supply contracts to avoid reliance on spot
purchases, and total operating expenses, including newsprint costs, in 1995
increased by only 2.0% over 1994, newsprint price increases have had and may
continue to have an adverse effect on the Company's results of operations.
EFFECT OF NATIONAL AND LOCAL ECONOMIC CONDITIONS
The Company's business is cyclical in nature. Because the Company relies
upon sales of advertising at its newspapers for substantially all of its
revenue, the Company's operating results are particularly susceptible to being
affected by prevailing economic conditions. Although the geographic diversity
of the Company's operations reduces the likelihood that local economic
fluctuations could materially affect the Company, it has exposure to changes
in regional and national economic conditions in the United States,
particularly as they may affect advertising expenditures and circulation
levels. Because of the substantial portion of the Company's revenue derived
from local advertisers, the Company's operating results in individual markets
could be adversely affected by local or regional economic downturns.
18
<PAGE>
CONTROL BY STOCKHOLDERS; INDEBTEDNESS AND INVESTMENT DECISIONS BY PARK
COMMUNICATIONS
Gary B. Knapp and Donald R. Tomlin, Jr. effectively control the Company.
Messrs. Knapp and Tomlin are the only directors of the Company, each with 50%
of the voting control, and, collectively, are able to control the vote on all
matters submitted to a vote of the Company's stockholder. There can be no
assurance that the interests of Messrs. Knapp and Tomlin will not conflict
with the interests of the holders of the Notes or that a potential "deadlock"
will not arise between Messrs. Knapp and Tomlin which could have a material
adverse effect on the Company and its operations. See "Securities Ownership of
Certain Beneficial Owners."
Park Communications sold the Communications Notes concurrently with the sale
of Notes and may incur additional indebtedness in the future. Park
Communications will be dependent upon its subsidiaries, including the Company,
for dividends and distributions to service such indebtedness. The Indenture
restricts the ability of the Company to pay dividends and distributions to
Park Communications, and other indebtedness of the Company may also restrict
such payments. Failure of Park Communications to pay its indebtedness when due
could result in defaults thereunder and entitle the lenders thereof to pursue
their remedies, including accelerating such indebtedness or foreclosing on the
collateral securing such indebtedness, which may include the capital stock of
the Company. Any insolvency resulting from Park Communications' inability to
pay its debts when due could result in an insolvency proceeding involving the
Company. In addition, the foreclosure upon the capital stock of the Company
securing any debt of Park Communications likely would result in a "Change of
Control" of the Company.
Park Communications is not required to make any investments in or capital
contributions to the Company, whether from the proceeds of any debt incurred
in the future or otherwise, and is not limited in making investments in or
capital contributions to one subsidiary, and not another, such as to Park
Broadcasting but not the Company.
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer and conveyance laws, if the
Company, at the time it issued the Notes, (a) incurred such indebtedness with
the actual intent to hinder, delay or defraud creditors or (b)(i) received
less than reasonably equivalent value or fair consideration therefor and
(ii)(A) was insolvent at the time of such incurrence, (B) was rendered
insolvent by reason of such incurrence (and the application of the proceeds
thereof), (C) was engaged or was about to engage in a business or transaction
for which the assets remaining with the Company constituted unreasonably small
capital to carry on its business or (D) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they mature, then,
in each such case, a court of competent jurisdiction could avoid, in whole or
in part, the Notes or, in the alternative, fashion other equitable relief such
as subordinating the Notes to existing and future indebtedness of the Company.
The measure of insolvency for purposes of the foregoing would likely vary
depending upon the law applied in such case. Generally, however, the Company
would be considered insolvent if the sum of its debts, including contingent
liabilities, was greater than all of its assets at a fair valuation, or if the
present fair-saleable value of its assets was less than the amount that would
be required to pay the probable liabilities on its existing debts, including
contingent liabilities, as such debts become absolute and matured. The
Company's management believes that, for purposes of the United States
Bankruptcy Code and state fraudulent transfer and conveyance laws, the Notes
were issued without the intent to hinder, delay or defraud creditors and for
proper purposes and in good faith; that the Company received reasonably
equivalent value or fair consideration therefor and that, after the issuance
of the Notes and the application of the net proceeds thereof, the Company is
solvent, has sufficient capital for carrying on its business and is able to
pay its debts as they mature. However, there can be no assurance that a court
passing on such issues would agree with the determination of the Company's
management.
LACK OF ESTABLISHED MARKET FOR THE NOTES
Prior to the Exchange Offer, there has not been any public market for the
Series A Notes. The Series A Notes have not been registered under the
Securities Act and will be subject to restrictions on transferability to the
extent that they are not exchanged for Series B Notes by holders who are
entitled to participate in the
19
<PAGE>
Exchange Offer. The holders of Series A Notes (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who are not eligible to participate in the Exchange Offer are
entitled to certain registration rights, and the Company is required to file a
Shelf Registration Statement with respect to such Series A Notes. The Series B
Notes will constitute a new issue of securities with no established trading
market. The Company does not intend to list the Series B Notes on any
securities exchange or to seek their admission to trading in any automated
quotation system. The Initial Purchasers have advised the Company that they
currently intend to make a market in the Series B Notes, but they are not
obligated to do so and may discontinue such market-making at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and may be limited during the Exchange Offer and
the pendency of any Shelf Registration Statement. Accordingly, no assurance
can be given that an active public or other market will develop for the Series
B Notes or as to the liquidity of the trading market for the Series B Notes.
If a trading market does not develop or is not maintained, holders of the
Series B Notes may experience difficulty in reselling the Series B Notes or
may be unable to sell them at all. If a market for the Series B Notes
develops, any such market may be discontinued at any time.
If a public trading market develops for the Series B Notes, future trading
prices of the Series B Notes will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results and
the market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Series B Notes may trade at a discount from
their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO
EXCHANGE
Issuance of the Series B Notes in exchange for the Series A Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company
of such Series A Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the Series
A Notes desiring to tender such Series A Notes in exchange for Series B Notes
should allow sufficient time to ensure timely delivery. The Company is under
no duty to give notification of defects or irregularities with respect to the
tenders of Series A Notes for exchange. Series A Notes that are not tendered
or are tendered but not accepted will, following the consummation of the
Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, certain
registration rights under the Registration Rights Agreement will terminate. In
addition, any holder of Series A Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the Series B Notes may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transactions. Each holder of the
Series A Notes (other than certain specified holders) who wishes to exchange
the Series A Notes for Series B Notes in the Exchange Offer will be required
to represent in the Letter of Transmittal that (i) it is not an affiliate of
the Company, (ii) the Series B Notes to be received by it are being acquired
in the ordinary course of its business and (iii) at the time of commencement
of the Exchange Offer, it has no arrangement with any person to participate in
the distribution (within the meaning of the Securities Act) of the Series B
Notes. Each Participating Broker-Dealer that receives Series B Notes for its
own account in exchange for Series A Notes, where such Series A Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such Series B Notes. See "Plan
of Distribution." To the extent that Series A Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted Series A Notes could be adversely affected. See "The Exchange
Offer."
20
<PAGE>
THE COMPANY
The Company through its subsidiaries owns and operates 104 newspapers and
related publications in geographically diverse markets throughout the United
States. The Company's 104 newspaper publications include 28 daily newspapers
(of which 16 publish Sunday editions), 26 non-daily newspapers, and 50 "total
market coverage" publications. For the year ended December 31, 1995, the
Company had revenue of $78.9 million and Newspaper Cash Flow of $25.6 million.
The Company's newspaper publications serve readers in 43 counties in 12
states. The Company's daily newspaper publications range in circulation from
approximately 4,000 to 17,000, with a combined average paid daily circulation
of approximately 242,000. The Company's daily and non-daily newspapers
generally combine news, sports and features with a special emphasis on local
information. The markets which the publications serve, which the Company
identifies using postal ZIP codes, had a combined household count of
approximately 545,000 and aggregate retail sales of approximately $15.2
billion in 1995. The Company believes that operating a geographically diverse
group of newspapers reduces the impact of the performance of any one
newspaper.
The Company is a wholly-owned subsidiary of Park Communications, which,
through Park Broadcasting, also owns and operates nine network affiliated
television stations. The Company's principal offices are located at 1700 Vine
Center Office Tower, 333 West Vine Street, Lexington, Kentucky 40507, and its
telephone number is (606) 252-7275.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Series B Notes in the
Exchange Offer. The net proceeds to the Company from the issuance of the Notes
were approximately $149.8 million. These net proceeds, together with net
proceeds from the issuance of the Communications Units and the Broadcasting
Notes, borrowings under the Communications Senior Credit Facility and net
proceeds from the sale of Park Broadcasting's WPAT-AM and FM radio stations,
were used to repay all outstanding indebtedness under the Prior Credit
Agreement (the "Prior Term Loan"). See "Summary--The Refinancing
Transactions."
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1995 and as adjusted to give effect to the sale of Notes and the
other Refinancing Transactions and the application of the net proceeds
therefrom. This table should be read in conjunction with the Consolidated
Financial Statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
HISTORICAL PRO FORMA(A)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Current portion of long-term debt................. $ 126 $ 126
-------- --------
Total short-term debt............................ 126 126
-------- --------
Long-term debt, less current maturities:
Prior Credit Agreement(b)......................... 168,065 --
Notes............................................. -- 155,000
Subordinated notes................................ 240 240
-------- --------
Total long-term debt............................. 168,305 155,240
-------- --------
Stockholder's equity:
Common stock...................................... 4,150 4,150
Additional paid in capital........................ (4,150) 18,690(c)
Intercompany receivables from parent.............. (3,355) --
Retained earnings (deficit)....................... (3,646) (3,814)
-------- --------
Total stockholder's equity (deficit)............. (7,001) 19,026
-------- --------
Total capitalization............................... $161,430 $174,392
======== ========
</TABLE>
- --------
(a) Reflects the pro forma capitalization of the Company at December 31, 1995
after giving effect to the Refinancing Transactions and the application of
the net proceeds therefrom.
(b) As of December 31, 1995, due to "push down" accounting, $168,065 was
"pushed down" to the historical balance sheet of the Company as a result
of the Prior Credit Agreement.
(c) Reflects a capital contribution from Park Communications of $22,840 funded
substantially with the proceeds of the sale of Communications Units.
22
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Statement of Continuing
Operations for the year ended December 31, 1995 and for the 12-month period
April 1, 1995 to March 31, 1996 presents the consolidated results of
continuing operations of Park Newspapers, Inc. and Subsidiaries assuming that
the Acquisition and the application of the purchase method of accounting, the
Refinancing Transactions, the sale of the Radio Station Assets on the terms
described herein and the application of the net proceeds therefrom had been
completed as of January 1, 1995 and April 1, 1995, respectively. The Unaudited
Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1995 and
March 31, 1996 is presented assuming the Refinancing Transactions, the sale of
the Radio Station Assets on the terms described herein and the application of
the net proceeds therefrom had been completed on December 31, 1995 and March
31, 1996, respectively. All material adjustments necessary to reflect the
transactions are presented in the pro forma adjustments columns, which are
further described in the notes to unaudited pro forma condensed consolidated
financial statements.
The unaudited pro forma information does not purport to represent what the
Company's financial position or results of operations actually would have been
if the Acquisition, the Refinancing Transactions, the sale of the Radio
Station Assets on the terms described herein and the application of the net
proceeds therefrom had, in fact, occurred on such date or to project the
Company's financial position or results of operations at any future date or
for any future period. The unaudited pro forma condensed consolidated
financial statements should be read in conjunction with the Consolidated
Financial Statements and related notes thereto included elsewhere herein.
23
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
-------------------------------------- --------------------------------------
PRO FORMA PRO FORMA
TRANSACTION FOR TRANSACTION FOR
HISTORICAL ADJUSTMENTS TRANSACTIONS HISTORICAL ADJUSTMENTS TRANSACTIONS
---------- ----------- ------------ ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................... $ 710 $ 149,400 (a) $ 710 $ 762 $ 149,400 (a) $ 762
(175,595)(b) (181,289)(b)
26,195 (c) 31,889 (c)
Other current assets... 9,564 9,564 8,372 8,372
-------- --------- -------- -------- --------- --------
Total current assets... 10,274 10,274 9,134 9,134
Property, plant and
equipment, net.......... 26,231 26,231 25,672 25,672
Intangible assets, net.. 183,029 183,029 181,857 181,857
Other assets............ 204 5,600 (a) 5,524 304 5,600 (a) 5,631
(280)(b) (273)(b)
-------- --------- -------- -------- --------- --------
Total assets........... $219,738 $ 5,320 $225,058 $216,967 $ 5,327 $222,294
======== ========= ======== ======== ========= ========
LIABILITIES AND
STOCKHOLDER'S EQUITY
Total current
liabilities............. $ 13,684 $ (7,642)(b) $ 6,042 $ 19,748 $ (13,320)(b) $ 6,428
Long-term debt-term
loan.................... 168,065 (168,065)(b) -- 167,969 (167,969)(b) --
Long-term debt-other.... 240 240 120 120
Long-term debt-new
debt.................... -- 155,000 (a) 155,000 -- 155,000 (a) 155,000
Consulting/non-compete
contracts.............. 2,778 2,778 2,596 2,596
Deferred income taxes... 41,972 41,972 42,011 42,011
-------- --------- -------- -------- --------- --------
Total liabilities...... 226,739 (20,707) 206,032 232,444 (26,289) 206,155
-------- --------- -------- -------- --------- --------
Stockholder's equity:
Common stock........... 4,150 4,150 4,150 4,150
Paid in capital........ (4,150) 22,840 (c) 18,690 (4,150) 22,549 (c) 18,399
Intercompany
receivables from
parent................ (3,355) 3,355 (c) (9,340) 9,340 (c)
Retained earnings
(deficit)............. (3,646) (168)(b) (3,814) (6,137) (273)(b) (6,410)
-------- --------- -------- -------- --------- --------
Total stockholder's
equity................ (7,001) 26,027 19,026 (15,477) 31,616 16,139
-------- --------- -------- -------- --------- --------
Total liabilities and
stockholder's equity.. $219,738 $ 5,320 $225,058 $216,967 $ 5,327 $222,294
======== ========= ======== ======== ========= ========
</TABLE>
- --------
(a) Reflects the issuance of the Notes and the incurrence of related fees and
expenses of $5.6 million.
(b) Reflects the payoff of the Prior Term Loan, accrued interest and write-off
of related debt issue costs.
(c) Reflects the payment of the intercompany receivable and a capital
contribution from Park Communications funded substantially with the
proceeds of the sale of Communications Units.
24
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONTINUING OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
------------------
NEW PARK OLD PARK
-------- -------- PRO FORMA PRO FORMA
5/11/95- 1/01/95- ACQUISITION FOR TRANSACTION FOR
12/31/95 5/10/95 ADJUSTMENTS ACQUISITION ADJUSTMENTS TRANSACTIONS
-------- -------- ----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Newspaper revenue....... $ 51,723 $27,181 $ 78,904 $ 78,904
-------- ------- -------- --------
Operating expenses:
Cost of sales.......... 20,783 13,027 33,810 33,810
Selling, general and
administrative........ 15,107 6,762 21,869 21,869
-------- ------- -------- --------
35,890 19,789 55,679 55,679
-------- ------- -------- --------
Operating income before
depreciation and
amortization........... 15,833 7,392 23,225 23,225
-------- ------- -------- --------
Depreciation............ 1,621 833 $ 83 (a) 2,537 2,537
Amortization............ 2,356 524 808 (a) 3,688 3,688
Amortization of excess
cost................... 1,241 664 37 (a) 1,942 1,942
-------- ------- ------- -------- --------
5,218 2,021 928 8,167 8,167
-------- ------- ------- -------- --------
Operating income........ 10,615 5,371 (928) 15,058 15,058
Interest expense........ (15,851) (23) (8,936)(b) (24,810) $ 24,723 (e) (19,144)
(19,057)(f)
Interest income......... 186 3 102 (c) 291 291
Other expense........... (26) (485) (511) (511)
-------- ------- ------- -------- -------- --------
(Loss) income from
continuing operations
before income taxes.... (5,076) 4,866 (9,762) (9,972) 5,666 (4,306)
Provision (benefit) for
income taxes........... (1,430) 2,222 (3,584)(d) (2,792) 1,846 (g) (946)
-------- ------- ------- -------- -------- --------
(Loss) income from
continuing operations.. $ (3,646) $ 2,644 $(6,178) $ (7,180) $ 3,820 $ (3,360)
======== ======= ======= ======== ======== ========
Loss per share.......... $(162.63) $ (76.10)
======== ========
Average shares.......... 44,150 44,150
======== ========
</TABLE>
- --------
(a) To adjust depreciation and amortization expense to reflect the application
of the purchase method of accounting for the Acquisition as if it occurred
on January 1, 1995.
(b) To record the additional interest expense on the Prior Term Loan as if it
had been incurred on January 1, 1995.
(c) To reflect estimated annualized amounts to be earned on intercompany
advances.
(d) Pro forma income tax benefit has been computed at an overall effective
rate of 28.0%. This rate gives effect to non-deductible goodwill.
(e) To eliminate interest expense incurred on the Prior Term Loan.
(f) To record interest expense attributable to the Notes: principal $155.0
million, stated rate 11.875%, and record one year of amortization of new
debt issuance costs of $5.6 million (overall effective rate of
approximately 12.8%).
(g) Pro forma income tax benefit has been computed at the marginal rate of
32.6% times the pro forma interest adjustment.
25
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONTINUING OPERATIONS
FOR THE TWELVE MONTH PERIOD APRIL 1, 1995 TO MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
NEW PARK OLD PARK NEW PARK OLD PARK
--------- -------- -------- -------- PRO FORMA PRO FORMA
5/11/95- 1/01/95- 1/1/96- 1/1/95- ACQUISITION FOR TRANSACTION FOR
12/31/95 5/10/95 3/31/96 3/31/95 ADJUSTMENTS ACQUISITION ADJUSTMENTS TRANSACTIONS
--------- -------- -------- -------- ----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Newspaper revenue....... $ 51,723 $27,181 $18,342 $18,259 $ 78,987 $ 78,987
--------- ------- ------- ------- --------- ---------
Operating expenses:
Cost of sales.......... 20,783 13,027 8,584 8,043 34,351 34,351
Selling, general and
administrative........ 15,107 6,762 6,026 5,640 22,255 22,255
--------- ------- ------- ------- --------- ---------
35,890 19,789 14,610 13,683 56,606 56,606
--------- ------- ------- ------- --------- ---------
Operating income before
depreciation and
amortization........... 15,833 7,392 3,732 4,576 22,381 22,381
--------- ------- ------- ------- --------- ---------
Depreciation............ 1,621 833 789 553 2,690 2,690
Amortization............ 2,356 524 900 375 $ 252 (a) 3,657 3,657
Amortization of excess
cost................... 1,241 664 482 392 1,995 1,995
--------- ------- ------- ------- ------- --------- ---------
5,218 2,021 2,171 1,320 252 8,342 8,342
--------- ------- ------- ------- ------- --------- ---------
Operating income........ 10,615 5,371 1,561 3,256 (252) 14,039 14,039
Interest expense........ (15,851) (23) (5,685) (17) (2,692)(b) (24,234) $24,147 (e) (19,144)
(19,057)(f)
Interest income......... 186 3 103 1 30 (c) 321 321
Other expense........... (26) (485) 82 15 (444) (444)
--------- ------- ------- ------- ------- --------- ------- ---------
(Loss) income from
continuing operations
before income taxes.... (5,076) 4,866 (3,939) 3,255 (2,914) (10,318) 5,090 (5,228)
Provision (benefit) for
income taxes........... (1,430) 2,222 (1,448) 1,473 (760)(d) (2,889) 1,596 (g) (1,293)
--------- ------- ------- ------- ------- --------- ------- ---------
(Loss) income from
continuing operations.. $ (3,646) $ 2,644 $(2,491) $ 1,782 $(2,154) $ (7,429) $ 3,494 $ (3,935)
========= ======= ======= ======= ======= ========= ======= =========
Loss per share.......... $ (168.27) $ (89.13)
========= =========
Average shares.......... 44,150 44,150
========= =========
</TABLE>
- --------
(a) To adjust depreciation and amortization expense to reflect the application
of the purchase method of accounting for the Acquisition as if it occurred
on April 1, 1995.
(b) To record the additional interest expense on the Prior Term Loan as if it
had been incurred on April 1, 1995.
(c) To reflect estimated annualized amounts to be earned on intercompany
advances.
(d) Pro forma income tax benefit has been computed at an overall effective
rate of 28.0%. This rate gives effect to non-deductible goodwill.
(e) To eliminate interest expense incurred on the Prior Term Loan.
(f) To record interest expense attributable to the Notes: principal $155.0
million, stated rate 11.875%, and record one year of amortization of new
debt issuance costs of $5.6 million (overall effective rate of
approximately 12.8%).
(g) Pro forma income tax benefit has been computed at the marginal rate of
31.4% times the pro forma interest adjustment.
26
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data presented below have
been derived from audited financial statements of the Company as of and for
the years ended December 31, 1993, 1994 and 1995 (data for the years ended
December 31, 1991 and 1992 have been derived from unaudited financial
statements). The selected pro forma consolidated financial data as of March
31, 1996 and for the 12-month period April 1, 1995 to March 31, 1996 presented
below have been derived from unaudited financial statements of the Company.
The data presented below should be read in conjunction with the Consolidated
Financial Statements of Park Newspapers, Inc. and Subsidiaries, including the
notes thereto, "Unaudited Pro Forma Condensed Consolidated Financial
Statements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein. The unaudited pro forma
information does not purport to represent what the Company's financial
position or results of operations actually would have been if the Acquisition,
the Refinancing Transactions and the sale of the Radio Station Assets (as
applicable) had, in fact, occurred on the dates indicated or to project the
Company's financial position or results of operations at any future date or
for any future period.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
YEAR ENDED DECEMBER 31, PRO FORMA TWELVE MONTHS
------------------------------------ ------------------------ ENDED
ACQUISITION TRANSACTIONS MARCH 31, 1996
1991 1992 1993 1994 1995 (A) 1995 (B) PRO FORMA (B)
-------- -------- ------- ------- ----------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue (c)............. $ 82,200 $ 82,584 $84,751 $76,810 $ 78,904 $ 78,904 $ 78,987
-------- -------- ------- ------- -------- -------- --------
Operating expenses:
Cost of sales.......... 39,444 37,628 39,221 32,364 33,810 33,810 34,351
Selling, general and
administrative (d).... 25,784 25,892 27,155 22,216 21,869 21,869 22,255
-------- -------- ------- ------- -------- -------- --------
Total operating expenses
(c).................... 65,228 63,520 66,376 54,580 55,679 55,679 56,606
-------- -------- ------- ------- -------- -------- --------
Operating income before
depreciation and
amortization (c)....... 16,972 19,064 18,375 22,230 23,225 23,225 22,381
Depreciation and
amortization........... 7,614 7,247 6,895 5,816 8,167 8,167 8,342
-------- -------- ------- ------- -------- -------- --------
Operating income........ 9,358 11,817 11,480 16,414 15,058 15,058 14,039
Interest expense........ (512) (279) (177) (76) (24,810) (19,144) (19,144)
Interest income......... 29 42 45 11 291 291 321
Other................... (304) (380) (204) (832) (511) (511) (444)
-------- -------- ------- ------- -------- -------- --------
Income/(loss) before
income tax............. 8,571 11,200 11,144 15,517 (9,972) (4,306) (5,228)
Provision/(benefit) for
income tax............. 4,499 5,370 5,335 7,007 (2,792) (946) (1,293)
-------- -------- ------- ------- -------- -------- --------
Net income/(loss) (c)... $ 4,072 $ 5,830 $ 5,809 $ 8,510 $ (7,180) $ (3,360) $ (3,935)
======== ======== ======= ======= ======== ======== ========
Ratio of earnings to
fixed charges (e)...... -- -- --
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets............ $110,705 $115,225 $98,075 $93,060 $219,738 $225,058 $222,294
Total long-term debt,
excluding current
maturities............. 2,792 1,912 746 360 168,305 155,240 155,120
OTHER FINANCIAL DATA AND RATIOS:
Newspaper Cash Flow (f). $ 19,163 $ 21,344 $20,477 $24,218 $ 25,587 $ 25,587 $ 24,774
Newspaper Cash Flow
margin (g)............. 23.3% 25.8% 24.2% 31.5% 32.4% 32.4% 31.4%
Cash interest expense... 512 279 177 76 19,768 18,493 18,493
Capital expenditures
(h).................... 1,084 2,252 1,512 2,858 2,122 2,122 2,037
Ratio of Newspaper Cash
Flow to cash interest
expense................ -- 1.38x 1.34x
Ratio of Newspaper Cash
Flow to interest
expense................ -- 1.34x 1.29x
Ratio of total long-term
debt to Newspaper Cash
Flow................... 6.58x 6.07x 6.26x
</TABLE>
(footnotes begin on next page)
27
<PAGE>
- --------
(a) Presented on a pro forma basis assuming that the Acquisition had occurred
on January 1, 1995. See Note (2) to the Consolidated Financial Statements.
(b) Presented on a pro forma basis assuming that the Acquisition, the
Refinancing Transactions and the sale of the Radio Station Assets on the
terms described herein occurred on either December 31, 1995 or March 31,
1996 for balance sheet data and on either January 1, 1995 or April 1, 1995
for all other data.
(c) On December 31, 1993, the Company sold 33 newspaper publications located
in 13 of its smaller markets. The impact of the sale of these publications
was not material to net income in 1993. The results of operations of the
33 newspaper publications are included in the 1991, 1992 and 1993
operating results as follows:
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Revenue......................................... $11,132 $10,812 $10,385
Operating expenses.............................. 11,304 10,707 10,551
Operating income (loss) before depreciation and
amortization................................... (172) 105 (166)
</TABLE>
(d) Includes an allocation of Central Corporate Overhead from Park
Communications to the Company as follows:
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Allocated Central Corporate
Overhead....................... $ 2,191 $2,280 $2,102 $1,988 $2,217 $2,393
</TABLE>
Cash payments to Park Communications from the Company to satisfy future
allocations of Central Corporate Overhead will be subject to certain
limitations and restrictions under the Indenture. See "Description of the
Notes--Certain Covenants--Limitation on Restricted Payments."
(e) 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 net loss before income
taxes and fixed charges. On a pro forma basis as described in Note (a)
above, earnings were insufficient to cover fixed charges by $10.0 million
for the year ended December 31, 1995. On a pro forma basis as described in
Note (b) above, earnings were insufficient to cover fixed charges by $4.3
million for the year ended December 31, 1995 and by $5.2 million for the
12 months ended March 31, 1996.
(f) The Company has included Newspaper Cash Flow data because it understands
that such data are used by investors to measure a company's ability to
service its debt and meet certain of its obligations. Newspaper Cash Flow
does not purport to represent cash flows from operating activities
determined in accordance with GAAP as reflected in the historical
consolidated financial statements; it is not a measure of financial
performance under GAAP and should not be considered in isolation or as a
substitute for or more important than net income or cash flows from
operating activities.
(g) Defined as Newspaper Cash Flow divided by revenue.
(h) Capital expenditures do not include the purchase in 1994 for $600 of
certain operating equipment and facilities from RHP Incorporated, which
the Company had been leasing.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION
The Company's results of operations have been affected by: (i) the
acquisition of Park Communications and its subsidiaries, including the
Company, from the estate of Roy H. Park, its original owner, by PAI on May 11,
1995, (ii) the development and implementation of new operating strategies and
initiatives by PAI and (iii) the sale of 33 publications in December 1993 for
$6.3 million. As a result, period-to-period historical and future comparisons
may be difficult without the following overview.
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1995 presents the consolidated results of
operations of the Company assuming the Acquisition and the application of the
purchase method of accounting had been completed as of January 1, 1995. All
material adjustments necessary to reflect the Acquisition as if it had
occurred on such date are included in the 1995 pro forma column. Such
adjustments are described further in the notes to unaudited pro forma
condensed consolidated financial statements. The unaudited pro forma
information does not purport to represent what the Company's financial
position or results of operations actually would have been if the Acquisition
had, in fact, occurred on such date or to project the Company's financial
position or results of operations at any future date or for any future period.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the Consolidated Financial Statements and related
notes thereto included elsewhere herein.
PAI acquired Park Communications and its subsidiaries from the estate of Roy
H. Park on May 11, 1995 for $711.4 million. PAI financed the Acquisition with
borrowings under the Prior Credit Agreement and existing cash-on-hand at Park
Communications and its subsidiaries. The Acquisition was accounted for under
purchase accounting and involved, among other things, the write-up of certain
assets. As a result of the Acquisition, interest expense and depreciation and
amortization expense increased substantially. See "Unaudited Pro Forma
Condensed Consolidated Financial Statements."
Mr. Park had operated the Company's business with a primary focus on
improving Newspaper Cash Flow by managing costs rather than on increasing
revenue. The Company's management believes its newspaper publications, under
ownership by Mr. Park, had underperformed relative to industry standards.
Under new ownership, the Company has focused on revenue and cash flow
generation. In particular, the Company (i) hired new senior management, (ii)
is substantially upgrading its sales force, (iii) invested in information
systems to better equip its sales force and (iv) enhanced its marketing and
promotional efforts. Certain of these strategies have been implemented
gradually since the Acquisition. In many cases, the costs of these strategies
have been incurred without sufficient time for the revenue benefits to be
recognized. The Company has designed these strategies in an effort to increase
revenue and Newspaper Cash Flow to levels more comparable to industry
standards.
In December 1993, the Company sold 33 publications for gross proceeds of
$6.3 million. The 33 publications contributed $10.4 million to revenue and
($0.2) million to Newspaper Cash Flow for the year ended December 31, 1993. As
a result, comparisons between periods prior to and after the divestiture may
be difficult.
OVERVIEW OF OPERATIONS
The Company through its subsidiaries owns and operates 104 community
newspapers and related publications. Revenue of the Company is derived
primarily from advertising revenue and, to a lesser extent, from paid
circulation and commercial print jobs. The primary operating expenses involved
in owning and operating newspaper publications are employee compensation,
newsprint, circulation delivery costs, news gathering and the solicitation of
advertising. In addition, the Company has historically made payments to Park
Communications for the costs allocated to the Company associated with Park
Communications' providing management supervisory functions, internal auditing,
consolidated financial statements and tax preparation, centralized cash
29
<PAGE>
management services, benefits administration and other corporate services. The
Company intends to continue to make such payments to Park Communications for
the provision of such services, subject to certain limitations and
restrictions, including those pursuant to the terms of the Indenture.
Newspaper advertising rates and rate structures are generally based on
circulation and type of advertising, such as classified or display and
national or retail. Substantially all of the Company's total publication
advertising revenue is derived from local retailers and classified
advertisers. Advertisements in community newspapers such as the Company's
publications are generally less expensive to advertisers than larger, non-
local publications or electronic media. Local and regional advertising is sold
by regional sales representatives who receive a commission.
Circulation revenue is primarily derived from home delivery sales of paid
daily and non-daily newspapers to subscribers and through single-copy sales
made through retailers and vending racks. Over 80% of the Company's
circulation revenue is derived from subscription sales.
The Company's newsprint costs are approximately 10.4% of revenue, which the
Company believes compares favorably to other community newspaper groups. The
Company believes that its group purchasing of newsprint and attention to
efficiency and waste control are responsible for this favorable comparison.
The Company's advertising revenue is generally the highest in the second and
fourth quarters of each year. The increase is due to increased advertising in
the spring and in the periods leading up to and including the Christmas
holiday season. In addition, political advertising increases the Company's
revenue during election years and is typically heaviest during the fourth
quarters of those years. However, management believes that fluctuations in its
political advertising revenue are tempered by the levels of political activity
in the areas in which it operates.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
items and percentage relationships:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
--------------------------------------------- --------------------------
1995
1993 % 1994 % PRO FORMA % 1995 % 1996 %
------- ----- ------- ----- --------- ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Local...................................... $26,846 31.7% $24,890 32.4% $25,394 32.2% $5,793 31.7% $5,626 30.7%
Circulation................................ 19,373 22.9 17,281 22.5 18,726 23.7 4,470 24.5 4,677 25.5
Classified................................. 11,832 14.0 11,978 15.6 12,455 15.8 2,941 16.1 2,928 16.0
Preprint................................... 5,817 6.9 5,743 7.5 5,838 7.4 1,243 6.8 1,206 6.6
National................................... 799 0.9 575 0.7 523 0.7 107 0.6 145 0.8
Political.................................. 222 0.3 577 0.8 215 0.3 22 0.1 19 0.1
Other (includes nondailies and shoppers)... 19,862 23.3 15,766 20.5 15,753 19.9 3,683 20.2 3,741 20.3
------- ------- ------- ------ ------
Total..................................... 84,751 100.0% 76,810 100.0% 78,904 100.0% 18,259 100.0% 18,342 100.0%
------- ------- ------- ------ ------
Operating expenses:
Costs of sales............................. 39,221 46.3% 32,364 42.1% 33,810 42.8% 8,043 44.0% 8,584 46.8%
Selling, general and administrative........ 27,155 32.0 22,216 28.9 21,869 27.7 5,640 30.9 6,026 32.9
------- ------- ------- ------ ------
Total..................................... 66,376 54,580 55,679 13,683 14,610
------- ------- ------- ------ ------
Depreciation and amortization............... 6,895 8.1 5,816 7.6 8,167 10.4 1,320 7.2 2,171 11.8
------- ------- ------- ------ ------
Operating income............................ $11,480 13.6% $16,414 21.4% $15,058 19.1% $3,256 17.8% $1,561 8.5%
======= ======= ======= ====== ======
</TABLE>
QUARTER ENDED MARCH 31, 1996 (UNAUDITED) COMPARED WITH QUARTER ENDED MARCH 31,
1995 (UNAUDITED)
Revenue. Gross revenue for each of the quarters ended March 31, 1996 and
March 31, 1995 was $18.3 million. Revenue for the first quarter of 1996 was
adversely affected by severe winter weather in many of the markets the Company
serves.
30
<PAGE>
Operating Expenses. Operating expenses (excluding depreciation and
amortization) for the quarter ended March 31, 1996 were $14.6 million compared
to $13.7 million for the quarter ended March 31, 1995, an increase of $0.9
million, or 6.6%. As a percentage of newspaper revenue, operating expenses
(excluding depreciation and amortization) were 79.7% for the quarter ended
March 31, 1996 compared to 74.9% for the quarter ended March 31, 1995. The
dollar increase was primarily due to increased newsprint costs and increased
costs related to upgrading the sales staff compensation plans.
Newsprint expenses for the quarter ended March 31, 1996 were $2.2 million
compared to $1.7 million for the quarter ended March 31, 1995, an increase of
$0.5 million, or 29.4%. As a percentage of newspaper revenue, newsprint
expenses were 12.2% for the quarter ended March 31, 1996 compared to 9.3% for
the quarter ended March 31, 1995. The increase was primarily a result of
industry-wide higher newsprint prices. Newsprint prices have stabilized
recently and management anticipates that prices will decrease slightly during
the latter part of 1996.
Operating Income Before Depreciation and Amortization (EBITDA). EBITDA for
the quarter ended March 31, 1996 was $3.7 million compared to $4.6 million for
the quarter ended March 31, 1995, a decrease of $0.9 million, or 19.6%. As a
percentage of newspaper revenue, EBITDA was 20.3% for the quarter ended March
31, 1996 compared to 25.1% for the quarter ended March 31, 1995. The decrease
was a result of expenses increasing more than operating revenue as described
above. EBITDA includes $0.8 million and $0.6 million of allocated Central
Corporate Overhead for the quarters ended March 31, 1996 and March 31, 1995,
respectively.
Depreciation and Amortization. Depreciation and amortization for the quarter
ended March 31, 1996 was $2.2 million compared to $1.3 million for the quarter
ended March 31, 1995, an increase of $0.9 million, or 69.2%. As a percentage
of newspaper revenue, depreciation and amortization was 11.8% for the quarter
ended March 31, 1996 compared to 7.2% for the quarter ended March 31, 1995.
The increase was primarily due to the write-up of assets as a result of the
Acquisition.
Interest Expense. Interest expense for the quarter ended March 31, 1996 was
$5.7 million. There was minimal interest expense for the quarter ended March
31, 1995. The increase was due to the increase in total debt as a result of
the financing for the Acquisition.
Income Taxes. Income taxes (benefit) for the quarter ended March 31, 1996
were ($1.4) million compared to $1.5 million for the quarter ended March 31,
1995, a decrease of $2.9 million. The decrease was due to the decrease in
taxable income as a result of the increase in depreciation and amortization
and interest expense resulting from the Acquisition. The effective tax rate
for the quarter ended March 31, 1996 reflects a tax benefit rate of 37%,
compared to an effective tax expense rate of 45% for the quarter ended March
31, 1995. The change in the effective rate is due to the increase in the
amortization of nondeductible goodwill resulting from purchase accounting
adjustments.
Income (Loss) from Continuing Operations. Income (loss) from continuing
operations for the quarter ended March 31, 1996 was ($2.5) million compared to
$1.8 million for the quarter ended March 31, 1995, a decrease of $4.3 million.
The decrease was primarily due to the increase in depreciation and
amortization and interest expense as a result of the Acquisition.
YEAR ENDED DECEMBER 31, 1995 (PRO FORMA UNAUDITED) COMPARED WITH YEAR ENDED
DECEMBER 31, 1994
Revenue. Gross revenue for the year ended December 31, 1995 was $78.9
million compared to $76.8 million for the year ended December 31, 1994, an
increase of $2.1 million, or 2.7%. The increase was primarily due to an
increase in circulation revenue of $1.4 million resulting from price
increases, partially offset by a reduction in political advertising revenue of
$0.4 million.
31
<PAGE>
Local advertising revenue for the year ended December 31, 1995 was $25.4
million compared to $24.9 million for the year ended December 31, 1994, an
increase of $0.5 million, or 2.0%.
Classified revenue for the year ended December 31, 1995 was $12.5 million
compared to $12.0 million for the year ended December 31, 1994, an increase of
$0.5 million, or 4.1%. The increase was the result of several initiatives by
the Company to increase classified revenue.
Operating Expenses. Operating expenses (excluding depreciation and
amortization) for the year ended December 31, 1995 were $55.7 million compared
to $54.6 million for the year ended December 31, 1994, an increase of $1.1
million, or 2.0%. As a percentage of newspaper revenue, operating expenses
(excluding depreciation and amortization) were 70.5% in 1995 compared to 71.0%
in 1994. The dollar increase was primarily due to increased newsprint costs,
partially offset by reductions in other operating expenses of $0.8 million
which were primarily due to a decrease in consulting/non-compete expense,
since no value was assigned to these contracts after the Acquisition, and the
effect of the consolidation of five production facilities.
Newsprint expenses for the year ended December 31, 1995 were $8.2 million
compared to $6.3 million for the year ended December 31, 1994, an increase of
$1.9 million or 29.4%. As a percentage of newspaper revenue, newsprint
expenses were 10.4% in 1995 compared to 8.3% in 1994. The increase was
primarily a result of industry-wide higher newsprint prices.
Operating Income Before Depreciation and Amortization (EBITDA). EBITDA for
the year ended December 31, 1995 was $23.2 million compared to $22.2 million
for the year ended December 31, 1994, an increase of $1.0 million, or 4.5%. As
a percentage of newspaper revenue, EBITDA was 29.4% in 1995 compared to 28.9%
in 1994. The increase was a result of revenue increasing more than operating
expenses as described above. EBITDA includes $2.2 million and $2.0 million of
allocated Central Corporate Overhead for 1995 and 1994, respectively.
Depreciation and Amortization. Depreciation and amortization for the year
ended December 31, 1995 was $8.2 million compared to $5.8 million for the year
ended December 31, 1994, an increase of $2.4 million, or 41.4%. As a
percentage of newspaper revenue, depreciation and amortization was 10.4% in
1995 compared to 7.6% in 1994. The increase was primarily due to the write-up
of assets as a result of the Acquisition.
Interest Expense. Interest expense for the year ended December 31, 1995 was
$24.8 million compared to $0.1 million for the year ended December 31, 1994,
an increase of $24.7 million. The increase was primarily due to the increase
in total debt as a result of the financing for the Acquisition.
Income Taxes. Income taxes for the year ended December 31, 1995 was ($2.8)
million compared to $7.0 million for the year ended December 31, 1994, a
decrease of $9.8 million. The decrease was due to the decrease in taxable
income as a result of the increase in depreciation and amortization and
interest expense resulting from the Acquisition. The effective tax rate for
1995 reflects a tax benefit rate of 28%, compared to an effective tax expense
rate of 45% in 1994. The change in the effective rate is due to the increase
in the amortization of nondeductible goodwill resulting from purchase
accounting adjustments.
Income (Loss) from Continuing Operations. Income (loss) from continuing
operations for the year ended December 31, 1995 was ($7.2) million compared to
$8.5 million for the year ended December 31, 1994, a decrease of $15.7
million. The decrease was primarily due to the increase in depreciation and
amortization and interest expense as a result of the Acquisition.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Revenue. Gross revenue for the year ended December 31, 1994 was $76.8
million compared to $84.8 million for the year ended December 31, 1993, a
decrease of $8.0 million, or 9.4%. The decrease was primarily due to the sale
of 33 publications in December 1993 which was responsible for $10.4 million in
decreased revenue, partially offset by an increase in political advertising
revenue of $0.4 million.
32
<PAGE>
Local advertising revenue for the year ended December 31, 1994 was $24.9
million compared to $26.8 million for the year ended December 31, 1993, a
decrease of $1.9 million, or 7.1%, primarily because of the sale of 33
publications in December 1993.
Classified revenue for the year ended December 31, 1994 was $12.0 million
compared to $11.8 million for the year ended December 31, 1993, an increase of
$0.2 million, or 1.7%.
Operating Expenses. Operating expenses (excluding depreciation and
amortization) for the year ended December 31, 1994 were $54.6 million compared
to $66.4 million for the year ended December 31, 1993, a decrease of $11.8
million, or 17.8%. As a percentage of newspaper revenue, operating expenses
(excluding depreciation and amortization) were 71.0% in 1994 compared to 78.3%
in 1993. Of the decrease, $10.6 million resulted from the sale of 33
publications. The remainder was principally a result of the effectiveness of
the Company's cost control programs and decreases in newsprint expense of $0.3
million and in insurance expense of $0.3 million.
Newsprint expenses for the year ended December 31, 1994 were $6.3 million
compared to $7.6 million for the year ended December 31, 1993, a decrease of
$1.3 million, or 17.1%. As a percentage of newspaper revenue, newsprint
expenses were 8.3% in 1994 compared to 9.0% in 1993. The decrease was
primarily due to the sale of 33 publications in December 1993.
Operating Income Before Depreciation and Amortization (EBITDA). EBITDA for
the year ended December 31, 1994 was $22.2 million compared to $18.4 million
for the year ended December 31, 1993, an increase of $3.8 million, or 20.7%.
As a percentage of newspaper revenue, EBITDA was 29.0% in 1994 compared to
21.7% in 1993. The increase was a result of operating expenses decreasing more
than revenue as described above. EBITDA includes $2.0 million and $2.1 million
of allocated Central Corporate Overhead for 1994 and 1993, respectively.
Depreciation and Amortization. Depreciation and amortization for the year
ended December 31, 1994 was $5.8 million compared to $6.9 million for the year
ended December 31, 1993, a decrease of $1.1 million, or 15.9%. As a percentage
of newspaper revenue, depreciation and amortization was 7.6% in 1994 compared
to 8.1% in 1993, a decrease caused, in part, by the sale of 33 publications in
December 1993.
Interest Expense. Interest expense for the year ended December 31, 1994 was
$0.1 million compared to $0.2 million for the year ended December 31, 1993.
Income Taxes. Income taxes for the year ended December 31, 1994 were $7.0
million compared to $5.3 million for the year ended December 31, 1993, an
increase of $1.7 million, or 32.1%.
Income from Continuing Operations. Income from continuing operations for the
year ended December 31, 1994 was $8.5 million compared to $5.8 million for the
year ended December 31, 1993, an increase of $2.7 million, or 46.6%.
LIQUIDITY AND CAPITAL RESOURCES
The Company derives substantially all of its cash flow from its
subsidiaries. The Company's primary sources of liquidity in the future will be
dividends from its subsidiaries and tax sharing payments pursuant to a tax
sharing agreement among the Company and its subsidiaries. The Company's
subsidiaries' principal source of liquidity is net cash provided by operating
activities. Net cash provided by operating activities decreased from $9.8
million for the year ended December 31, 1994 to $9.3 million for the year
ended December 31, 1995. The Company believes that it will have sufficient
liquidity to meet its future capital expenditure and working capital
requirements, debt service and other obligations.
33
<PAGE>
Capital expenditures decreased from $3.5 million for the year ended December
31, 1994 to $2.1 million for the year ended December 31, 1995. Capital
expenditures in 1994 included the purchase of color printing equipment
totaling $1.7 million and the purchase of property from RHP Incorporated, a
company owned and operated by the estate of Mr. Park, for $0.6 million.
Capital expenditures in 1996 are expected to be approximately $1.5 million,
including $1.0 million principally for capital replacement purposes and $0.5
million for consolidation of the Concord and Kannapolis, North Carolina
facilities. Historically, the Company has financed capital expenditures
through internally generated cash flow. The Company expects to finance capital
expenditures in the future through cash flow from operations and borrowings
under the Revolving Credit Facility. See "Description of Certain
Indebtedness."
The Company sold the Series A Notes on May 13, 1996 as part of the
Refinancing Transactions, the purpose of which was to refinance the
indebtedness under the Prior Credit Agreement, which was guaranteed by the
Company. The Refinancing Transactions consisted of (i) the sale of the Series
A Notes, (ii) the establishment of and drawings under the Senior Credit
Facility in the amount of $58.0 million, (iii) the sale, which was completed
on May 13, 1996, of 80,000 Units consisting of $80.0 million in principal
amount of 13 3/4% Senior Pay-in-Kind Notes due 2004 of Park Communications and
Warrants to purchase 800,000 shares of Common Stock of Park Communications,
(iv) the sale, which was completed on May 13, 1996, of $241.0 million in
principal amount of 11 3/4% Senior Notes due 2004 of Park Broadcasting and (v)
the sale, which was completed on March 25, 1996, of Park Broadcasting's WPAT-
AM and FM radio stations for aggregate gross proceeds of $103.0 million.
It is contemplated that the Company will have commitments for a senior
revolving credit facility in an amount not to exceed $10.0 million for future
working capital and general corporate purposes. See "Description of Certain
Indebtedness."
The sale of Park Communications' radio station operations will result in the
consolidated group of which the Company is a part (and which also includes
PAI, Park Communications and Park Broadcasting and its subsidiaries) being
obligated to pay income taxes of approximately $65.4 million in connection
therewith assuming the sales of all Radio Station Assets are completed on the
terms in effect on the date hereof. In anticipation of the sale of the Radio
Station Assets, Park Communications entered into the Communications Senior
Credit Facility which will mature on November 13, 1996 (subject to an
additional six-month extension under certain circumstances). The
Communications Senior Credit Facility requires that the loans outstanding
thereunder be repaid from the proceeds of the sale of each of the Radio
Station Assets (other than the KEZX-AM and KWJZ-FM radio stations in Seattle,
Washington, the assets of which are not subject to the lien of the
Communications Senior Credit Facility) regardless of the taxes owed with
respect to such sale until such loan is repaid in full. In the event that Park
Broadcasting does not consummate sales of the Radio Station Assets in amounts
and at times sufficient to pay the amounts due on the Communications Senior
Credit Facility as well as the taxes payable on the sales that are
consummated, members of the consolidated group in the aggregate may not have
available cash resources to make such payments. The failure to make such
payments could have a material adverse effect on the Company's financial
condition and liquidity.
For a further discussion relating to the Company's liquidity, see "Risk
Factors--Substantial Leverage" and "--Failure to Consummate Sales of Radio
Station Assets."
INCOME TAXES
PAI and its subsidiaries (including the Company) file a consolidated federal
income tax return and separate state or local tax returns as required. See
"Business--Tax Sharing Agreement."
34
<PAGE>
BUSINESS
The Company through its subsidiaries owns and operates 104 newspapers and
related publications in geographically diverse markets throughout the United
States. The Company's 104 newspaper publications include 28 daily newspapers,
26 non-daily newspapers and 50 "total market coverage" publications
("shoppers"). The Company's daily and non-daily newspapers generally combine
news, sports and features with a special emphasis on local information. The
markets which the publications serve, which the Company identifies using
postal ZIP codes, had a combined household count of approximately 545,000 and
aggregate retail sales of approximately $15.2 billion in 1995. The Company has
enjoyed a history of journalistic excellence and effective community
relations. For the year ended December 31, 1995, the Company had revenue of
$78.9 million and Newspaper Cash Flow of $25.6 million.
The Company's newspaper publications serve readers in 43 counties in 12
states. Demographics USA, 1994 has forecasted that 30 of the counties which
the Company serves (or approximately 70% of the total number of counties it
serves) will experience retail sales growth during the period from 1994
through 1999 equal to or in excess of the forecast national average of 30.6%
over this period; another 11 of these counties (or approximately 26% of the
total number of counties it serves) are projected to have retail sales growth
during this period of at least 80% of the national average, with most growing
at 90% or more of the national average; and only two of these counties
(Columbia and Niagara Counties in New York) are projected to be "slow-growth"
counties.
The Company is a wholly-owned subsidiary of Park Communications, which was
founded in 1971 by Roy H. Park to consolidate media holdings which Mr. Park
began acquiring in 1962. Mr. Park's strategy was to complete at least one
acquisition per year and to improve operating cash flow by managing costs
rather than increasing revenue. PAI, which is effectively controlled by Gary
B. Knapp and Donald R. Tomlin, Jr., acquired Park Communications on May 11,
1995. Messrs. Knapp and Tomlin believed the Acquisition presented a unique
opportunity to acquire a group of media assets, each with strong local
franchises in the markets in which they operate and potential revenue
enhancement opportunities. Due to the prior owner's operating strategy, the
Company's properties generally have captured a smaller relative share of
advertising dollars in their respective markets than their relative positions
would indicate. Messrs. Knapp and Tomlin, along with the Company's experienced
management team, developed and initiated a strategy to take advantage of this
opportunity to increase revenue and Newspaper Cash Flow, while maintaining
strict control over costs. Collectively, Messrs. Knapp and Tomlin have
significant business, operating and investment experience in media, real
estate and turnaround situations. The management team at Park Communications
and the Company has substantial experience in the newspaper industry.
The Company publishes 28 daily newspapers in 12 states which range in
circulation from approximately 4,000 to 17,000, with a combined average paid
daily circulation of approximately 242,000 as of March 1, 1996. Of the
Company's daily newspapers, 16 publish Sunday newspapers. The Company's
dailies have been in existence for an average of 111 years (with none in
existence for less than 46 years) and are the only paid dailies of general
circulation published in each of their respective cities or towns, which are
generally areas of small or medium populations. The Company believes that an
added benefit of operating in these types of communities is the workforce
stability which it has experienced.
The Company publishes 26 paid non-daily newspapers one or more times per
week in 12 states. The markets where the Company publishes non-dailies are too
small to support a daily newspaper. In most cases, such markets are close to
cities or towns where the Company publishes daily newspapers, and the non-
dailies are printed at the Company's daily newspaper facilities. In five
locations, several non-dailies share production facilities. The Company's paid
non-daily newspapers range in circulation from 1,300 to 18,000 and have a
total weekly circulation of approximately 77,000.
The newspapers generally provide community news, commentary, sports and
local features and information, such as information about town meetings and
school and social activities. The Company's daily newspapers also use
Associated Press wire service materials which provide regional, national and
international news and
35
<PAGE>
information. The Company's long-term policy has been to emphasize local news
and to develop strong local news staffs. High levels of local news content
have been emphasized throughout the Company's history. The Company's daily
newspapers average 17 pages and are produced by full-time staffs, including
news reporting and editorial staffs, averaging 35 people. The Company's non-
daily newspapers average 23 pages, have small news reporting and editorial
staffs and generally share production and business staffs with one or more of
the Company's other newspapers. The Company believes that its newspapers
benefit from good community relations and strong reader and advertiser
loyalty.
In addition to reaching the local population through paid daily and non-
daily community newspapers, the Company also prints 50 shoppers in 12 states
which range in distribution from approximately 13,000 to 45,000. Shoppers
contain certain local and classified advertising with little originally
produced news or editorial comment. The Company currently publishes shoppers
only in the markets where it also publishes paid circulation newspapers, and
the shoppers are printed at the Company's newspaper facilities. Shoppers
typically are distributed to both subscribers and non-subscribers of a paid
circulation newspaper of the Company, allowing the Company to cover a
significant portion of a market with advertising contained in its
publications. Advertisements in shoppers are generally sold in combination
with parallel advertising in the paid circulation community paper to afford
advertisers the ability to reach the general market area.
The Company's strategy has been to acquire and operate newspapers having a
dominant position in stable, growing communities, each of which is the only
such publication in the community. In December 1993, the Company sold 33 of
its smaller publications in 13 communities in nine states. The sale of these
publications was designed to allow the Company to focus its resources on its
larger publications. The Company may, from time to time, make strategic
targeted newspaper acquisitions, dispositions or tax-free exchanges.
Acquisitions may be made in circumstances in which management believes that
such acquisitions would contribute to the Company's overall growth strategy,
whether through revenue growth and/or cost-reduction opportunities.
Management's criteria for acquisitions include the ability to cluster with
existing publications, markets with good transportation systems, specifically,
interstate highway access, local institutions of higher education, state and
federal operations and a diverse economic base with no one industry dominating
the market.
BUSINESS AND OPERATING STRATEGY
The Company's operating strategy is to increase revenue and Newspaper Cash
Flow by capitalizing on the strong local brand recognition of its newspapers.
Management believes that its strong brand recognition combined with the
Company's emphasis on producing a high quality product and improving its sales
and marketing efforts will enhance the value of the Company's publications to
its readers and advertisers and result in increased circulation and Newspaper
Cash Flow.
Prior to the Acquisition, the Company focused on improving Newspaper Cash
Flow through cost management rather than generation of incremental revenue.
Industry standards suggest that revenue performance of a community newspaper
equal to 0.70% to 1.25% of total retail sales in a defined market is a
reasonable target for share of market revenue. The Company ended 1995 with
advertising revenue equal to a 0.52% of total retail sales in the aggregate in
the markets served by its publications. Attainment of 0.70% of retail sales in
its markets would have resulted in a significant increase in the Company's
1995 revenue. The Company believes that through new sales and marketing
programs, continued quality editorial and news leadership, increased
circulation penetration, along with continued strict cost controls, it can
capitalize on the growing markets in which it operates and improve its share
of retail advertising dollars.
The Company's business and operating strategy includes the following key
elements:
Strengthen Sales and Marketing Development. Since the Acquisition, the
Company has instituted a sales force upgrade and implemented a motivation
program which includes performance-based compensation plans, daily sales
reports to monitor each account executive's development, and on-site
training programs. The Company has purchased a new demographic/advertising
research program to provide
36
<PAGE>
qualitative data to its sales force to better identify sales opportunities.
The Company has also introduced advertising programs to generate revenue
from sources new to the Company, including category selling, targeted
marketing, single sheet and other free standing insert advertising, along
with a top of mind awareness (TOMA) program. TOMA is a program whereby an
advertiser can develop a cost effective long-term frequency-based
advertising program designed to get the advertiser's name and product or
service out in the market and create top of mind awareness of the
advertiser's product or service.
Enhance Quality of Editorial Content, Presentation and Local News. The
Company's publications are committed to editorial excellence and providing
the best mix of local and national news to effectively serve their markets.
The Company's newspapers generally have the largest local news gathering
resources in their local markets and, through emphasizing local news,
generally have a high degree of reader loyalty among their core circulation
base group. The Company's publications are produced on offset presses, all
of which have color capability. The Company has recently completed a review
of its daily newspapers' layouts and has instituted a layout redesign
program for all of its daily newspapers to ensure that each newspaper
offers attractive layout, design and color enhancement.
Increase Circulation. Prior to the Acquisition, the Company pursued a
circulation strategy aimed at driving circulation revenue through price
increases. This strategy ultimately adversely impacted circulation
penetration levels. As of December 31, 1995, the Company had only a 47%
penetration of the occupied households in its defined market areas, a level
which the Company believes offers significant potential for improvement.
The Company has launched an aggressive direct marketing effort, through
door-to-door marketing, telemarketing, sampling and direct response
marketing programs, with the goal of improving market penetration (in the
aggregate) to 70% of the occupied households in its defined markets.
Realize Benefits From Clustering. The Company has clustered its
publication operations regionally. With the change in strategy from cost
management to revenue maximization and cost containment, the Company has
identified and is implementing programs to enhance revenue available as a
result of its clustering of operations, such as regional sales promotion
programs and other cross-selling techniques. In addition to the revenue
opportunities, consolidating the operations of groups of newspapers affords
both operating and economic efficiencies. These efficiencies include, but
are not limited to, the sharing of management, accounting and production
functions. In addition to regional clustering, the Company will also seek
to merge operations where possible, as in progress at Concord/Kannapolis,
North Carolina. Management will continue to review its newspaper businesses
for opportunities to merge operations to both enhance revenue and reduce
costs.
Maintain Effective Cost Controls. Expenses at each of the Company's
publications are closely monitored to control costs without sacrificing
revenue opportunities. The Company seeks to reduce labor costs through
investment in modern production equipment and through the consolidation of
operations and administrative activities associated with clustering. The
Company's newsprint costs are approximately 10.4% of its revenue, and it
generally enters into long-term supply contracts to reduce newsprint costs
during short supply. Management believes that the Company's newsprint costs
as a percentage of revenue are generally lower than many of the other
community newspaper groups. The Company's cost control initiatives also
include group purchasing of materials and aggressive control of newsprint
waste.
Develop Additional Non-Traditional Revenue Sources. The Company has
recently introduced new informational products and services and advertising
programs to generate revenue from sources other than traditional newspaper
publishing activities. These products, services and programs include voice
personals, audio-text and incentive marketing.
As a result of the implementation of these operating strategies, management
believes the Company is well positioned to achieve internal growth. By being
the leading, and in certain instances the sole, provider of local
37
<PAGE>
news in most of its markets, management believes that the Company's
established franchises should enable it to respond to and benefit from any
changes in the manner in which information is delivered.
NEWSPAPER INDUSTRY BACKGROUND
Newspaper publishing is the oldest and largest segment of the media
industry, with total advertising expenditures on daily and weekly newspapers
reported at $36.0 billion in 1995 according to Newspaper Association of
America (the "NAA"). Due to a focus on local news, newspapers remain the
dominant medium for local advertising and account for more than 48.1% of all
local media advertising expenditures according to the NAA. Additionally,
newspapers continue to be the preferred medium for retail advertising which
emphasizes the price of goods, in contrast to television which is generally
used for image advertising.
The number of adult readers of daily and Sunday newspapers is reported to
have increased from 115.3 million and 125.9 million, respectively, in 1992 to
115.4 million and 132.2 million, respectively, in 1994. Readers of newspapers
tend to be more highly educated and have higher incomes than non-newspaper
readers. For instance, in 1994, 74% of college graduates and 71% of households
with income of $40,000 or more are reported to read a daily newspaper,
compared to 61% for non-college graduates and 54% of households with income
less than $40,000. Management believes that newspapers continue to be the most
cost-effective means for advertisers to reach this highly targeted demographic
group.
Total morning daily national circulation has increased from 42.4 million in
1992 to 43.1 million in 1995, representing a compounded annual growth rate of
0.6%. Total Sunday national circulation, however, declined from 62.2 million
in 1992 to 61.8 million in 1995. Total reported daily national circulation,
including evening editions, declined from 60.2 million in 1992 to 58.2 million
in 1995, or 0.5% annually. This decrease can be directly attributable to the
declining national circulation of evening newspapers, which is reported to
have decreased from 17.8 million in 1992 to 15.1 million in 1995, or 5.3%
annually, as a result of an inability to compete with existing morning
newspapers and from increased competition by evening broadcast news
programming and specialized cable programming such as CNN and Headline News.
Advertising and, to a lesser extent, circulation revenues are cyclical and
dependent upon general economic conditions. Historically, increases in
advertising revenues have corresponded with economic recoveries while
decreases, as well as changes in the mix of advertising, have corresponded
with general economic downturns and regional and local economic recessions.
PUBLICATIONS
The Company has organized its operations into 31 newspaper centers.
Generally each daily newspaper constitutes a separate newspaper center, but in
some cases one or more non-daily newspapers in the same geographic area are
consolidated with a daily newspaper in a single newspaper center. The rest of
the Company's newspaper centers consist of a group of non-daily newspapers
distributed in the same geographic area. The table below shows the
organization of the publications into newspaper centers.
The Company has a significant presence in North Carolina which is forecasted
as a high growth area by Demographics USA, 1994, and the revenue and
associated cash flows originate in ten different newspaper centers dispersed
across the state. The ten of the Company's 31 newspaper centers which are
located in North Carolina generated 38.3% of the Company's revenue in 1995.
The Concord/Kannapolis, North Carolina newspaper center was the greatest
revenue and Newspaper Cash Flow producer of the newspaper centers, but only
provided 10.2% of the Company's total revenue and 11.8% of its total Newspaper
Cash Flow, while the average newspaper center accounted for 3.1% of total
revenue and 3.1% of total Newspaper Cash Flow from all newspaper centers.
The following table identifies the states and communities in which the
Company publishes its paid newspapers and shoppers, the names of the Company's
publications and the circulation (paid or free) as of March 1, 1996. Each
community shown in boldface type in this table is the location of a newspaper
center. Communities in standard type and indented under a community shown in
boldface type are part of that newspaper center.
38
<PAGE>
<TABLE>
<CAPTION>
STATE AND COMMUNITY PUBLICATION FREQUENCY CIRCULATION
- ------------------- ----------------------------- -------------------- -----------
<S> <C> <C> <C>
GEORGIA
WARNER ROBINS The Daily Sun Daily (M-F) 7,791 paid
Sunday Sun Sunday 8,525 paid
Daily Sun Extra 1x week 6,967 free
Robins Rev-up 1x week 25,013 free
IDAHO
BURLEY South Idaho Press Daily (M-F & Sunday) 4,797 paid
The News Review 1x week 11,055 free
The Sunrise Shopper 1x week 4,632 free
Hailey The Wood River Journal 1x week 1,697 paid
9,400 free
Sun Valley Dining Guide 1x year 40,000 free
Minidoka Minidoka County News 1x week 1,146 paid
ILLINOIS
EFFINGHAM Effingham Daily News Daily (M-Sat.) 12,771 paid
The Weekly Advertiser 1x week 9,832 free
MACOMB Macomb Daily Journal Daily (M-F & Sunday) 6,658 paid
Business News 1x week 8,106 free
INDIANA
JEFFERSONVILLE The Evening News Daily (M-Sat.) 10,828 paid
Clark County Journal 1x week 11,341 free
Golden Opportunities 1x week 20,000 free
PLYMOUTH The Pilot-News Daily (M-Sat.) 6,449 paid
Bremen Bremen Enquirer 1x week 1,554 paid
Bourbon Bourbon News-Mirror 1x week 1,245 paid
Nappanee Nappanee Advance News 1x week 1,939 paid
Farm and Home News 1x week 18,500 free
KENTUCKY
RUSSELLVILLE News-Democrat & Leader 2x week 6,486 paid
The Logan Advertiser 1x week 7,177 free
The Peddler 1x week 26,000 free
Leitchfield Grayson County News-Gazette 2x week 5,157 paid
The Grayson County Advertiser 1x week 3,069 free
LONDON Sentinel Echo 3x week 5,288 paid
The Laurel Neighbor 1x week 8,097 free
MOREHEAD The Morehead News 2x week 5,048 paid
Carlisle The Carlisle Mercury 1x week 1,503 paid
Mercury Plus 1x week 1,380 free
Frenchburg Menifee County News 3x week 734 paid
Grayson The Grayson Journal-Enquirer 1x week 4,849 paid
Greenup The Greenup County News 1x week 2,748 paid
Olive Hill Shopping News 1x week 19,027 free
SOMERSET Commonwealth Journal Daily (M-F & Sunday) 8,651 paid
McCreary County Record 1x week 4,895 paid
Lake Cumberland Shopper 1x week 31,603 free
MICHIGAN
COLDWATER Coldwater Daily Reporter Daily (M-Sat.) 6,166 paid
The Reporter Extra 1x week 11,500 free
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
STATE AND COMMUNITY PUBLICATION FREQUENCY CIRCULATION
- ------------------- ---------------------------- -------------------- -----------
<S> <C> <C> <C>
MINNESOTA
BEMIDJI The Pioneer Daily (M-F) 8,296 paid
The Pioneer Sunday 8,797 paid
The Advertiser 1x week 13,073 free
The Mid-Week Advertiser 1x week 8,608 free
Blackduck The American 1x week 1,122 paid
NEW YORK
HUDSON Register-Star Daily (M-F & Sunday) 6,767 paid
Northeast 1x month 13,000 free
Columbia Views 1x week 1,409 free
The Courier 1x week 800 free
Chatham The Chatham Courier 1x week 2,837 paid
LOCKPORT Union-Sun & Journal Daily (M-Sat.) 17,009 paid
Tri-County News 1x week 8,000 free
MEDINA The Journal Register Daily (M-F) 4,554 paid
Eastern Niagra Edition 1x week 6,968 free
Pennysaver 1x week 3,000 free
TV Signals 1x week 9,400 free
Albion Albion Advertiser 1x week 1,792 paid
OGDENSBURG The Journal Daily (M-F) 4,744 paid
Rural News 1x week 5,785 free
The Advance News Sunday 10,606 paid
Canton St. Lawrence Plaindealer 1x week 2,195 paid
Massena The Courier-Observer Daily (T-Sat.) 5,225 paid
NORTH CAROLINA
AHOSKIE Advantage 1x week 12,293 free
Scotland Enfield News Review 1x week 1,492 paid
Gates County News Review 1x week 2,052 paid
Jackson News Review 1x week 2,196 paid
News-Herald 3x week 6,494 paid
CLINTON The Sampson Independent Daily (M-F & Sunday) 7,861 paid
Sampson County Shopping
Guide and TV Schedule 1x week 12,826 free
CONCORD/KANNAPOLIS The Concord Tribune Daily (M-F & Sunday) 13,527 paid
The Daily Independent Daily (M-F & Sunday) 8,943 paid
The Cabarrus Observer
Nugget 1x week 3,361 free
The Edge 1x week 19,014 free
Aberdeen Sandhills Living 2x week 15,000 free
The Golf Outlook 1x month 15,000 free
EDEN Daily News Daily (M-F) 5,976 paid
The Virginia Carolina
Beacon 1x week 3,570 free
LUMBERTON The Robesonian Daily 14,125 paid
The Robesonian Sunday Sunday 16,160 paid
The Robesonian Mid-Weekly 1x week 23,595 free
Elizabethtown Bladen Daily Journal 3x week 3,889 paid
The Southeastern Times 1x week 3,850 free
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
STATE AND COMMUNITY PUBLICATION FREQUENCY CIRCULATION
- ------------------- -------------------------- -------------------- -----------
<S> <C> <C> <C>
MARION The McDowell News Daily (M-F) 4,206 paid
McDowell Express 1x week 8,250 free
The Old Fort Post 1x week 2,450 free
MOORESVILLE Mooresville Tribune 1x week 6,130 paid
Shoppers Guide 1x week 11,500 free
Davidson Mecklenburg Gazette 1x week 2,195 paid
MORGANTON The News Herald Daily (M-F & Sunday) 11,757 paid
The Burke County Observer 1x week 8,423 free
Valdese News 1x week 15,528 free
ROCKINGHAM The Richmond County Daily
Journal Daily (M-F & Sunday) 8,460 paid
The Journal Advantage 1x week 7,200 free
STATESVILLE Statesville Record &
Landmark Daily (M-F & Sunday) 16,907 paid
Landmark Extra 1x week 9,500 free
NORTH DAKOTA
DEVILS LAKE Devil's Lake Daily Journal Daily (M-F) 4,450 paid
The Country Peddler 1x week 22,500 free
OKLAHOMA
MCALESTER News Capital & Democrat Daily (M-F & Sunday) 12,282 paid
Southeast Oklahoma
Shopping News 1x week 6,045 free
Hartshorne Hartshorne Sun 1x week 1,178 paid
SAPULPA Sapulpa Daily Herald Daily (M-F & Sunday) 6,411 paid
Herald Extra 1x week 13,754 free
VIRGINIA
MANASSAS The Journal Messenger Daily (M-Sat.) 7,348 paid
The Journal Reach 1x week 45,000 free
WAYNESBORO The News-Virginian Daily (M-Sat.) 9,391 paid
Shenandoah Shopper 1x week 10,179 free
TOTAL PAID DAILY 242,350
TOTAL PAID NON-DAILY 77,861
TOTAL SHOPPERS 549,087
</TABLE>
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<PAGE>
The Company believes that the geographic diversity of its publications
mitigates the effect of regional economic cycles on its business. No one
publication accounted for more than 6.0% of the Company's revenue or 10.0% of
its Newspaper Cash Flow in 1995. The following table shows the relative
proportion by state of the Company's 1995 revenue and Newspaper Cash Flow.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF 1995
STATE 1995 REVENUE NEWSPAPER CASH FLOW
----- ------------- -------------------
<S> <C> <C>
Georgia...................................... 3.2% 3.3%
Idaho........................................ 3.5 3.1
Illinois..................................... 6.5 5.6
Indiana...................................... 5.7 6.1
Kentucky..................................... 9.7 9.8
Michigan..................................... 1.8 1.5
Minnesota.................................... 3.4 3.9
New York..................................... 13.9 11.7
North Carolina............................... 38.3 39.6
North Dakota................................. 2.1 2.0
Oklahoma..................................... 5.4 7.2
Virginia..................................... 6.5 6.2
----- -----
100.0% 100.0%
===== =====
</TABLE>
SOURCES OF REVENUE
Substantially all of the Company's publishing revenue is derived from
advertising and circulation, with lesser amounts derived from commercial print
jobs and other sources. The following table sets forth the sources and amounts
of the Company's revenue for the years ended December 31, 1993, 1994 and 1995:
REVENUE BY SOURCE--YEAR ENDED DECEMBER 31 (IN THOUSANDS)
<TABLE>
<CAPTION>
1993(A) 1994 1995
------------ ------------ ------------
SOURCE OF REVENUE % AMOUNT % AMOUNT % AMOUNT
- -------------------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Advertising:
Daily Newspapers....................... 55.0 $40,907 57.0 $43,763 56.3 $44,424
Non-daily Newspapers................... 9.2 6,826 9.2 7,094 9.1 7,226
Shoppers............................... 7.2 5,387 7.2 5,509 6.9 5,411
------- ------- -------
Total Advertising.................... 71.4 53,120 73.4 56,366 72.3 57,061
------- ------- -------
Circulation:
Daily Newspapers....................... 21.0 15,541 20.3 15,624 21.5 16,967
Non-daily Newspapers................... 2.2 1,665 2.2 1,657 2.2 1,759
------- ------- -------
Total Circulation.................... 23.2 17,206 22.5 17,281 23.7 18,726
------- ------- -------
Other.................................... 5.4 4,040 4.1 3,163 4.0 3,117
------- ------- -------
Total.................................... $74,366 $76,810 $78,904
======= ======= =======
</TABLE>
- --------
(a) Excludes revenue from 33 publications sold in November 1993.
Advertising. Advertising rates and rate structures vary among the Company's
publications and are based, among other things, on circulation and type of
advertising (classified or display, and national or local). Historically,
substantially all of the Company's total publication advertising revenue has
been derived from
42
<PAGE>
local retail and classified advertising, which management believes are less
subject to fluctuation than national advertising. Many local retailers in the
small communities served by the Company's publications are unable to advertise
in larger non-local publications or electronic media because of their
generally higher advertising rates. During the year ended December 31, 1995,
local and regional advertising accounted for 67% of advertising revenue,
classified advertising accounted for 22% and pre-printed inserts and national
advertising accounted for 10% and 1%, respectively.
The Company has recently increased its focus on national advertising
programs in an effort to generate increased volume and revenue from pre-
printed inserts and shoppers, although the revenue from such programs is
relatively small, amounting to approximately $523,000, or 0.7% of the
Company's total revenue, in 1995. The Company has also recently begun to offer
new regional advertising programs to chain stores. Management believes that
the regional clustering of the Company's publications parallels an emerging
trend of larger retailers to advertise on a regional basis and positions the
Company to benefit from this trend.
The Company has also introduced category selling, single sheet and other
free standing advertising and a top of mind awareness program (TOMA) whereby
an advertiser can develop a cost effective long-term frequency advertising
program designed to get the advertiser's name and product or service out in
the market and create top of mind awareness of the product or service.
Management intends to continue to develop additional advertising revenue
sources such as co-op advertising, national classified advertising and other
targeted advertising.
Shoppers are generally growing faster and have higher margins than daily
newspapers. Management believes there are opportunities to increase the
Company's revenue through shoppers and has focused on training its sales force
to sell a combination of newspaper and shopper advertising space.
Circulation. Circulation revenue is derived from home delivery sales of the
Company's paid dailies and non-dailies to subscribers and single copy sales
made through retailers and vending racks. Of circulation revenue for 1995,
over 80% was derived from subscription sales and the balance was derived from
single copy sales. Single copy rates for paid daily and non-daily publications
currently range from 25c to 50c per copy and from 50c to $1.00 for Sunday
newspapers. Subscriptions are generally offered at a discount from single copy
rates. The Company periodically reviews the subscription and single copy rates
for potential increases.
The Company's newspapers ended 1995 with an aggregate 47% penetration of the
occupied households in its defined market areas. The Company has begun to
pursue a strategy targeted at increasing circulation revenue by increasing
aggregate market penetration to 70% of the occupied households in its
newspapers' defined markets, rather than relying on increases in subscription
and single copy rates. The Company has launched an aggressive marketing effort
to improve market penetration which includes door-to-door marketing,
telemarketing, sampling and direct response marketing programs. The mechanical
mailroom and distribution aspects of circulation have now been separated from
sales and marketing activities to enhance and afford focus to the circulation
sales effort. Mailroom activity will become a function of production, and
management believes that distribution has the capacity to evolve into a
separate source of revenue. See "Production and Distribution" below.
Other Revenue Sources. Commercial printing job revenue is derived from
utilizing available press capacity for printing customers' order for
newspapers, fliers, retail store advertisements and similar products.
The Company has introduced new informational products and services,
including an audiotext service whereby a customer can call an audiotext line
to access various kinds of information, generally from newspaper databases
(such as weather), but also from other sources (such as the ability to hear a
message from a child's teacher about the day's homework assignments); voice
personals, which generate revenue from a portion of the cost of telephone
calls made in response to free personal ads placed in newspapers; and
incentive marketing such as the printing and distribution of fishing maps. The
Company believes that voice personals will contribute new revenue beginning in
1996, while audiotext and incentive marketing will fully develop as sources of
revenue in 1997 and beyond.
43
<PAGE>
PRODUCTION AND DISTRIBUTION
All of the Company's publications are produced using photocomposition
technology and printed using an offset method. Automated text editing and
classified advertising systems are in operation at all of the newspapers. As
part of a program to improve operating efficiency and to enhance product
quality, the Company engages in a continuing process of updating its printing
facilities. Four such upgrades are scheduled to be completed in 1996.
Additionally, the geographic proximity of groups of the Company's publications
has enabled the Company to consolidate certain operations in centralized
production plants thereby facilitating quality improvements that would
otherwise be prohibitively expensive for a single publication. For example, in
1994, the Company implemented greater process color capabilities at 17 of its
33 plants where a total of 22 of the Company's daily newspapers are printed.
These improvements enable the Company to offer color ads and editorial
materials to advertisers and subscribers. Additionally, the Company has
recently completed a review of its daily newspapers' layouts and has
instituted a layout redesign program for all of its daily newspapers to ensure
that each newspaper offers attractive layout, design and color enhancement,
while remaining easily readable. The Company believes that it will be able to
continue to improve the quality of its publications as technological
improvements continue to become economically viable for small publications.
The Company's daily and non-daily newspapers are published primarily for
home delivery and are generally sold by independent carriers and circulation
dealers. Adults comprise approximately 70% of Park Newspapers' home delivery
network, which management believes enables the Company to engage in other home
distribution activities on behalf of unaffiliated parties and generate
additional revenue for the Company. Shoppers are generally distributed free,
on a weekly basis, by various delivery methods, including third-class mail.
RAW MATERIALS
The basic raw material of newspaper publishing operations is newsprint. The
Company believes that effective management of newsprint costs is an important
factor in the success of its business. Newsprint costs increased approximately
40% per metric ton in 1995 on an industry-wide basis and may continue to
increase in 1996, although any such increases in 1996 are not anticipated to
be as significant as the 1995 increases. Newsprint expenses represented 12%,
12% and 15% of the Company's total operating costs and expenses for the years
ended December 31, 1993, 1994 and 1995, respectively. The Company believes
that this compares favorably with cost of newsprint to other publishers
throughout the country.
The Company currently purchases newsprint from various suppliers in the
United States and Canada. As of May 6, 1996, the Company was a party to long-
term supply contracts with several such suppliers, the largest of which will
provide approximately 50% of the tonnage used by the Company in 1996. In
accordance with industry practice, the Company's newsprint supply contracts
provide for tonnage at prices determined from time to time by the suppliers.
The Company believes that sources of newsprint supply are adequate for its
anticipated needs and that there are adequate alternative sources of supply.
See "Regulation of Newspaper Operations" below for a discussion of state laws
which regulate the recycled content of newsprint.
COMPETITION
While the Company's daily newspapers are the only daily newspapers of
general circulation published in their respective cities or towns, each of
these publications and each of the Company's non-daily newspapers and shoppers
competes in varying degrees with other newspapers having a regional or
national circulation, as well as with magazines, radio, television, direct
marketing and other advertising media. In addition, certain of the Company's
daily newspapers compete within their own markets with other daily newspapers
of general circulation published in adjacent or nearby cities and towns. There
are no local television stations in any of the Company's 28 daily newspaper
markets, although each community receives television service through cable or
regional broadcast signals. The Company believes that its significant presence
in the towns served by its community publications has enabled it to compete
effectively.
44
<PAGE>
Although published in a different location, a competitor has recently begun
publication of a daily newspaper serving the Warner Robins, Georgia market.
The Company is unable to predict the effect that this publication will have on
its Warner Robins daily newspaper. However, management does not believe that
this competing daily will have a material effect on the Company's operations.
Although there can be no assurance that a competitor will not enter one or
more of the Company's markets and become successful, the Company believes that
entry by a direct competitor in most of its daily newspaper markets is likely
to be cost prohibitive. Additionally, the prevailing trend in newspaper
publishing has been for consolidation down to one dominant daily newspaper in
a particular community or city. The Company believes that distribution of its
shoppers in conjunction with community daily newspapers enhances its
competitive position in such market areas.
REGULATION OF NEWSPAPER OPERATIONS
Park Broadcasting's television and radio broadcasting operations are subject
to the jurisdiction of the Federal Communications Commission (the "FCC") under
the Communications Act of 1934, as amended (the "Communications Act"). Because
of the common ownership of the Company and Park Broadcasting, certain rules of
the FCC and/or the Communications Act affect the Company's publication
operations as well as Park Broadcasting's operations by placing certain
limitations on common ownership, operation and other interests in, among other
things, broadcast stations and newspapers serving the same area. This may
affect the number, type and location of newspapers that the Company may
acquire in the future. These rules do not currently require any change in the
Company's present ownership of newspapers.
Additionally, the Company is required to obtain a permit from, and to file
an annual statement of ownership and circulation with, the U.S. Postal Service
for paid circulation newspapers that are delivered by second class mail.
Certain of the Company's paid publications are currently delivered by second
class mail. Free circulation publications such as shoppers are delivered to
subscribers and nonsubscribers by mail or in other ways.
Certain states in which the Company publishes its newspapers have enacted
legislation concerning the percentage of recycled content of newsprint.
Certain of these states mandate that newsprint contain a minimum amount of
recycled material, while others have developed voluntary recycled content
guidelines for newsprint. Newsprint suppliers are not currently able to
deliver the requisite recycled-content newsprint, and there can be no
assurance that the suppliers will be able to supply such newsprint upon
implementation of the various state laws. The Company, like other newspaper
publishers, is exploring alternative compliance methods permitted under
certain of these laws, including recycling and other programs intended to
divert newspapers from being disposed of in landfills. The Company is unable
to predict the impact that these laws will have on its business.
ENVIRONMENTAL REGULATION
The Company, like other companies engaged in similar operations, is subject
to a wide variety of federal, state and local laws and regulations, including
those governing the use, storage, handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes,
the remediation of contaminated soil and groundwater, and the health and
safety of employees. As such, the nature of the Company's operations exposes
it to the risk of claims with respect to environmental matters, and there can
be no assurance that material costs or liabilities will not be incurred in
connection with such claims. Based upon its experience to date, the Company
believes that the future cost of compliance with existing environmental laws
and regulations, and liability for known environmental claims, will not have a
material adverse effect on the Company's business or financial position.
However, future events, such as changes in existing laws and regulations or
their interpretation, and more vigorous enforcement policies of regulatory
agencies, may give rise to additional expenditures that could be material.
SEASONALITY
The Company's advertising revenue is generally the highest in the second and
fourth quarters of each year. The increase is due to increased advertising in
the spring and in the period leading up to and including the
45
<PAGE>
Christmas holiday season. In addition, political advertising increases the
Company's revenue during election years and is typically heaviest during the
fourth quarters of those years. However, management believes that fluctuations
in its political advertising revenues are tempered by the levels of political
activity in the areas in which it operates.
EMPLOYEES
As of March 1, 1996, the Company had approximately 1,648 employees, 1,175 of
whom were full-time employees. None of the Company's employees is represented
by a labor union or covered by a collective bargaining agreement. The Company
has never experienced a strike or work stoppage and believes its relationship
with its employees to be good.
TAX SHARING AGREEMENT
PAI, through its ownership of 100% of Park Communications, currently
beneficially owns 100% of the stock of the Company, Park Broadcasting and
their respective subsidiaries. Each such corporation is, for federal income
tax purposes, part of the affiliated group of which PAI is the common parent,
and the results of operations of that affiliated group are reported in PAI's
consolidated federal income tax return. PAI and each member of its affiliated
group are parties to a tax sharing agreement pursuant to which, respectively,
the Company and its subsidiaries and Park Broadcasting and its subsidiaries
are obligated to make tax sharing payments to Park Communications in amounts
equal to the federal income taxes which the Company and Park Broadcasting
would have paid for such taxable year if each of the Company and Park
Broadcasting were the highest-tier common parent of a group of includible
corporations and filed separate consolidated tax returns for itself and its
subsidiaries. (Each group of companies composed of (i) the Company and its
subsidiaries or (ii) Park Broadcasting and its subsidiaries is hereinafter
called a "Subgroup," and each of the Company and Park Broadcasting is called a
"Subparent.") The tax sharing agreement also provides that if any consolidated
or combined state income tax return is filed by PAI or Park Communications
which includes income of the Park Newspapers Subgroup or Park Broadcasting
Subgroup, then the Company and Park Broadcasting each will be obligated to
make tax sharing payments to Park Communications in an amount equal to the
state income taxes which its respective Subgroup would have paid if it as
Subparent filed a consolidated or combined state income tax return for the
Subgroup with the respective state. Park Communications is permitted and
obligated to pay to PAI, or directly to the relevant taxing authority, the
consolidated or combined income tax liabilities of PAI's affiliated group for
the taxable year. Subject to certain exceptions, Park Communications may waive
the requirement that payments be made to it under the tax sharing agreement.
Tax sharing payments, to the extent owed and not waived, are required to be
made not later than the tenth day of April, June, September and December, as
well as not later than the fifth day prior to: PAI's filing of any
consolidated or combined income tax return (including an amended return) or
PAI's payment of additional income tax pursuant to (i) an administrative
adjustment agreed with the Internal Revenue Service or applicable state taxing
authority or (ii) an unappealable final determination of a court of competent
jurisdiction.
The Indenture restricts the ability of the Company to amend the tax sharing
agreement.
PROPERTIES
The Company's daily newspaper operations, both production and
administration, are typically housed in one-story buildings in which the
Company uses from 8,200 to 35,860 square feet. Of the 28 daily newspaper
buildings, 27 are owned and one is leased under a lease expiring in 1998. All
of the Company's daily newspapers are printed on printing presses owned by the
Company. The Company owns and leases various other properties in connection
with its non-daily newspaper and shopper operations.
The Company's principal executive offices are located in premises leased by
Park Communications in Lexington, Kentucky. The Company owns certain other
properties which are not used in its business operations. These properties are
generally leased to unaffiliated third parties. It is anticipated that all of
the Company's
46
<PAGE>
owned properties will serve as collateral for the Company's obligations under
the Revolving Credit Facility. The Company believes that its properties are
generally adequate for its operations, although opportunities to upgrade
facilities are continuously reviewed.
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. There are no pending legal
proceedings to which the Company or any of its subsidiaries is a party, or to
which any of their respective properties is subject, which, in the opinion of
Company management, are likely to have a material adverse effect on the
Company's business or financial condition.
47
<PAGE>
MANAGEMENT
The following table sets forth, as of March 28, 1996, the names of the
directors and executive officers of the Company, their ages and their
positions with the Company and Park Communications:
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME AGE THE COMPANY PARK COMMUNICATIONS
--------------------- --- --------------- ----------------------------
<S> <C> <C> <C>
Ralph J. Martin 42 Chief Operating Vice President--
Officer Newspaper Operations
Randel N. Stair 45 Treasurer Vice President, Chief
Financial Officer, Treasurer
Wright M. Thomas 60 President President and Chief
Operating Officer
Dr. Gary B. Knapp 52 Director Director
Donald R. Tomlin, Jr. 48 Director Director
</TABLE>
Each director of Park Communications and the Company holds office until the
next annual meeting of stockholders and until his successor has been elected
and qualified. Officers are elected by the Board of Directors and serve at its
discretion.
Ralph J. Martin joined Park Communications and the Company in September 1995
as Vice President--Newspaper Operations of Park Communications and chief
operating officer of the Company. Prior to joining Park Communications and the
Company, Mr. Martin was employed for 19 years by Thomson Newspapers, Inc.,
where he held various senior management positions, including, most recently,
President of Thomson Newspapers/Eastern Group from 1993 to 1995 and Vice
President of the Metro Division from 1990 to 1993.
Randel N. Stair has been Chief Financial Officer and Treasurer of Park
Communications since May 1994, Vice President since 1980. Mr. Stair served as
Controller of Park Communications from 1980 to 1995. Mr. Stair has served as
Treasurer of the Company since 1983. Prior to joining Park Communications in
1979, Mr. Stair was employed by Multimedia, Inc. as Assistant Corporate
Controller.
Wright M. Thomas has been President and Chief Operating Officer of Park
Communications since July 1987. Mr. Thomas has served as President of the
Company since 1987. Mr. Thomas served as a director of Park Communications
from 1983 to 1995, Assistant Secretary from 1974 to 1995, Treasurer from 1983
to 1994, Executive Vice President from 1986 to 1987, Senior Vice President--
Finance from 1979 to 1986, and Vice President--Finance from 1974 to 1979.
Prior to joining Park Communications, he was employed by INA Corporation and
Coopers & Lybrand.
Dr. Gary B. Knapp became a director of each of Park Communications and the
Company in May 1995. Dr. Knapp has been a principal of Knapp Securities, Inc.,
a firm offering investment advisory and consulting services, since 1982.
Donald R. Tomlin, Jr. became a director of each of Park Communications and
the Company in May 1995. Mr. Tomlin has been president of Tomlin and Company,
Inc., a financial services and asset management firm, since December 1986.
Messrs. Knapp and Tomlin receive no compensation for serving as directors of
either Park Communications or the Company. However, they are reimbursed for
expenses incurred in acting in such capacities.
48
<PAGE>
The following table sets forth, as of March 28, 1996, the names and ages of
the Regional Managers of the Company's operations:
<TABLE>
<CAPTION>
YEARS OF EMPLOYMENT POSITION WITH
NAME AGE WITH THE COMPANY THE COMPANY
------------------- --- ------------------- --------------------------
<C> <C> <C> <S>
Tim Dearman 43 33 Mid-Atlantic West Region
Manager
John Kennedy 59 40 Mid-Atlantic East Region
Manager
David E. Thornberry 30 1 Ohio Valley Region Manager
Paul E. Semple 38 17 Mid-Western Region Manager
Thomas N. Ceravolo 64 40 Eastern Region Manager
Charles S. Lake 61 40 Western Region Manager
</TABLE>
Tim Dearman has been General Manager of the Statesville Record & Landmark
since 1985. He started with the newspaper as a paperboy at age 10, and has
since worked in every department. He has been the Mid-Atlantic Western
Regional Manager of the Company since 1986.
John Kennedy has been General Manager of The Concord Tribune since 1987 and
The Daily Independent of Kannapolis since January 1996. He joined The Concord
Tribune in 1956 and has served in various positions. He has been Mid-Atlantic
Eastern Regional Manager of the Company since 1986.
David E. Thornberry has been General Manager of The Morehead News and
Regional Manager of the Ohio Valley Group since January 1996. Prior to joining
the Company, he was Division Publisher of Wyoming Newspapers, Inc. from 1989
to 1995, and also served various management roles for the its parent company,
News Media Corporation from 1985 to 1995.
Paul E. Semple has been General Manager of the Effingham Daily News since
1993 and Mid-Western Regional Manager of the Company since 1995. He has been
with the paper since 1979, serving as Business Manager from 1979 to 1985 and
Controller from 1986 to 1992.
Thomas N. Ceravolo has been with the Lockport Union-Sun & Journal since
1956. He served as General Manager of WUSJ Radio until 1970, and became
Assistant to the Publisher of the paper in 1970. He became General Manager of
the Company's Lockport paper and Eastern Regional Manager in 1986.
Charles S. Lake has been General Manager of the Sapulpa Daily Herald since
1979. He has been Western Division Manager of the Company since 1995. Mr. Lake
has been associated with the Sapulpa Daily Herald for 40 years in various
positions.
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities rendered to Park Communications
and the Company for the fiscal years ended December 31, 1995, 1994 and 1993 of
(i) Wright M. Thomas, President and Chief Operating Officer of Park
Communications and President of the Company, (ii) Randel N. Stair, Vice
President, Chief Financial Officer and Treasurer of Park Communications and
Treasurer of the Company and (iii) Robert J. Rossi, who served as Vice
President--Newspaper Operations of Park Communications until July 31, 1995.
All such compensation was paid by Park Communications and, in the case of
Messrs. Thomas and Stair, relates to services performed in connection with all
of Park Communication's businesses; no specific allocation is made of such
compensation to the Company's business. No other executive officer of the
Company had aggregate salary and bonus during 1995 in excess of $100,000.
49
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------
NAME AND
PRINCIPAL POSITION YEAR SALARY(A) BONUS
---------------------------------------- ---- ----------- ---------
<S> <C> <C> <C>
Wright M. Thomas 1995 $ 252,226(b) $ 140,125
President and Chief 1994 241,384(b) --
Operating Officer of Park Communications 1993 184,440(b) --
and President of the Company
Randel N. Stair 1995 $ 131,306 $ 157,450(c)
Vice President and 1994 126,621 10,000
Chief Financial Officer of Park 1993 122,258 --
Communications and Treasurer of the
Company
Robert J. Rossi 1995 $ 110,296 $ 170,000(c)
Former Vice President-- 1994 162,589 36,999
Newspaper Operations of Park 1993 162,630 --
Communications
</TABLE>
- --------
(a) The amounts shown are after voluntary salary reductions associated with
the election to treat health insurance premiums on a pre-tax basis.
(b) Pursuant to a deferred compensation arrangement with Park Communications,
Mr. Thomas may elect to defer a portion of his annual salary, not to
exceed the greater of $30,000 or 25% of his salary. Such deferred
compensation is payable with interest in installments upon retirement or
termination of employment. Such deferred compensation is included in the
amount shown.
(c) The amount shown includes $134,000 and $170,000 paid to Messrs. Stair and
Rossi, respectively, under the Company's Retention Incentive Plan
following the acquisition of Park Communications by PAI in May 1995. See
"Employment and Severance Arrangements" below.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
Effective July 1, 1994, Park Communications entered into an employment
agreement with Wright M. Thomas which provides for (i) an annual salary of
$250,000 for three years and (ii) a non-competition/consulting period
commencing on the earlier of July 1, 1997 or termination of Mr. Thomas'
employment for specified reasons, and ending on June 30, 2000, with a fee of
$100,000 per year payable in monthly increments commencing on the earlier of
July 1, 1997 or, following termination of Mr. Thomas' employment for specified
reasons, on the date Mr. Thomas obtains other employment. In the event of
termination of Mr. Thomas' employment for specified reasons, Mr. Thomas will
be paid an amount equal to his salary under the agreement for the period
ending on the earlier June 30, 1997 or the date Mr. Thomas obtains other
employment. The specified reasons for termination of employment include
termination by Park Communications other than for cause and resignation
following a change in circumstances that significantly diminish Mr. Thomas'
position with Park Communications.
Pursuant to a contingent retirement agreement, Wright M. Thomas is entitled
to receive certain payments in the event of retirement at age 65 if he is then
employed by, or providing consulting services under his employment contract
to, Park Communications. The annual amount of such payments will be 50% of his
average net salary during the five-year period immediately preceding
retirement (not including any consulting period), less the annual amount of
retirement income payable to him under the federal Social Security Act or any
other similar plan which is a substitute for that Act that may be established
under federal law. Net salary, for this purpose, means Mr. Thomas' annual
gross salary less amounts withheld from such salary for the payment of Social
Security and other federal or state taxes (other than income taxes). Although
his future salary cannot be predicted with certainty, if the payments under
this plan would have been based on his salary during the previous five years,
such payments would be approximately $84,000 per year during his lifetime.
50
<PAGE>
Pursuant to Park Communications' Retention Incentive Plan, Messrs. Stair and
Rossi received a bonus of $134,000 and $170,000, respectively, as a result of
their being employed by Park Communications on the date PAI acquired Park
Communications. Under this plan, Mr. Stair is also entitled to severance
benefits if, prior to May 11, 1997, (i) his employment is involuntarily
terminated other than for cause or (ii) he refuses a position that is not
comparable to his current position. The severance benefit would be the greater
of Mr. Stair's annual salary or one-twelfth of his annual salary for each year
of service.
In June 1995, Park Communications and Robert J. Rossi, a former executive
officer of Park Communications, entered into a consulting and non-competition
agreement, under which Mr. Rossi has agreed to provide up to 50 days of
consulting services to Park Communications during the 12-month period ending
in June 1996, for which Park Communications has agreed to pay to Mr. Rossi an
aggregate of $50,000, with payments commencing in January 1996. Under the
agreement, Park Communications has also agreed to compensate Mr. Rossi at the
rate of $1,000 per day for each day worked in excess of 50 days during the 12-
month period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the following former directors served as members of the
Compensation Committee of the Board of Directors of Park Communications: John
F. McNair III, former President of Wachovia Bank and Trust Company of North
Carolina, N.A., and the Honorable Senator Harry F. Byrd, Jr. of Virginia. In
addition, Dorothy D. Park, a former director, served as an ex-officio member
of the Park Communications Compensation Committee. The Board of Directors
currently has no Compensation Committee and compensation matters are decided
by the two current directors. There were no interlocking relationships between
members of the Compensation Committee and directors or officers of Park
Communications or the Company.
During the fiscal years ended December 31, 1994 and 1993, the Company leased
certain operating facilities and equipment from RHP Incorporated ("RHP"),
which was wholly owned by the estate of Roy H. Park, by Mr. Park's widow,
Dorothy D. Park, and by a marital trust for the benefit of Mrs. Park. Until
his death in October 1993, Mr. Park was Chairman of the Board, Chief Executive
Officer and the majority stockholder of Park Communications. In November 1993,
Mrs. Park became Chairman of the Board of Park Communications and, in her
capacity as personal representative of the Estate of Roy H. Park, controlled
the shares of common stock of Park Communications formerly owned by Mr. Park
until May 1995. Each of Mrs. Park, Roy H. Park, Jr. and Wright M. Thomas was a
director and officer of RHP. Such lease payments to RHP were $271,476 and
$527,949 in 1994 and 1993, respectively. On November 30, 1994, the Company
purchased five previously leased properties from RHP for $600,000. The price
paid for these properties was based on independent appraisals.
CERTAIN TRANSACTIONS
In connection with the relocation of Park Communications' and the Company's
headquarters in 1995 from New York to Kentucky, Park Communications purchased
the homes of Messrs. Thomas and Stair in New York for $176,950 and $175,667,
respectively, and reimbursed such individuals for certain moving expenses
incurred. The purchase price for each of the homes was based on the average of
three independent appraisals of each house. Each of Messrs. Thomas and Stair
also received $5,000 from Park Communications to assist in locating and
purchasing a new home in Kentucky. Such payments and the reimbursement of
relocation expenses were made available to all Park Communications employees
who relocated to Kentucky and who purchased a home.
PAI and each of its direct subsidiaries (including the Company) are parties
to a management services agreement pursuant to which Park Communications will
pay to PAI for management advisory services $250,000 (of which $125,000 will
be contributed by each of the Company and Park Broadcasting and their
respective subsidiaries) on the business day after each semiannual interest
payment date on the Notes; provided that such payments will not be due or made
unless all interest accrued on the Notes, the Communications Notes and the
Broadcasting Notes due on such semiannual interest payment date has been paid
in cash and no default or event of default has occurred and is continuing on
any such Notes at the time of such payment.
51
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Park Communications owns 4,150 shares, or 100%, of the outstanding common
stock of the Company, and PAI owns all of the outstanding common stock of Park
Communications. None of the Company, Park Communications or PAI has a class of
equity or voting securities other than common stock. PAI has an authorized
class of non-voting common stock. The address of Park Communications and PAI
is 1700 Vine Center Office Tower, 333 West Vine Street, Lexington, Kentucky
40507. Except as set forth below, no director or executive officer of the
Company beneficially owns or is deemed to beneficially own any shares of
common stock (voting or non-voting) of any of the Company, any subsidiary of
the Company, Park Communications or PAI.
The following table sets forth information as of June 14, 1996 concerning
the beneficial ownership of the outstanding shares of common stock of PAI:
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
---------------------------- ------------------ ----------------
<S> <C> <C>
Gary B. Knapp(a) 100 50%
333 West Vine Street,
#300
Lexington, KY 40507
Tomlin Family Trust II(b) 100 50%
1401 Main Street, Suite 825
Columbia, SC 29201
</TABLE>
- --------
(a) Mr. Knapp is a director of Park Communications and the Company and a
director and officer of PAI.
(b) Donald R. Tomlin, Jr., 1401 Main Street, Suite 825, Columbia, SC 29201, a
director of Park Communications and the Company and a director and officer
of PAI, is a trustee of the Tomlin Family Trust II.
All of the outstanding shares of common stock of each of Park
Communications, Park Newspapers, Inc., Park Broadcasting and the subsidiaries
of Park Broadcasting (other than the subsidiary which holds the Radio Station
Assets relating to stations KEZX-AM and KWJZ-FM) are pledged to secure
indebtedness under the Communications Senior Credit Facility.
52
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
SALES OF RADIO STATION ASSETS; COMMUNICATIONS SENIOR CREDIT FACILITY
Park Broadcasting is in the process of selling the Radio Station Assets and
discontinuing its radio broadcasting operations. As of May 6, 1996, the sale
of two radio stations had been completed resulting in gross proceeds to the
Company of $103.0 million, of which $100.5 million has been used to pay
principal and interest on the Prior Term Loan.
As of May 6, 1996, Park Broadcasting had entered into definitive agreements
with prospective purchasers for the sale of all of its remaining Radio Station
Assets. Between May 6, 1996 and June 14, 1996, Park Broadcasting had sold 12
of its radio stations for aggregate gross proceeds of $62.0 million, of which
$35.8 million was used to pay principal and interest due under the
Communications Senior Credit Facility. The aggregate proceeds from the sale of
the remaining Radio Station Assets are currently expected to be $68.2 million,
before deducting expenses relating to the sale of such remaining Radio Station
Assets estimated to be $0.8 million and income taxes resulting from such sales
estimated to be $23.0 million.
Consummation of the sales of the remaining Radio Station Assets is subject
to the satisfaction of customary conditions, including approval of transfer of
the broadcasting licenses by the FCC and, with respect to certain of the sale
transactions, receipt of satisfactory title and environmental reports,
completion of due diligence investigation by the buyer, receipt of zoning
approvals and expiration of applicable waiting periods under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended. Although there can be
no assurance that the sale of the remaining Radio Station Assets will occur,
Park Broadcasting currently contemplates that the sale of four of its eight
remaining individual radio stations will be completed by June 30, 1996, the
sale of an additional two of its individual radio stations will be completed
by July 31, 1996 and the sale of its last two individual radio stations will
be completed by August 31, 1996. In order to permit payment in full of the
Prior Term Loan certain lenders extended to Park Communications the
Communications Senior Credit Facility in an amount equal to $58.0 million. The
Communications Senior Credit Facility bears interest at a rate per annum
equal, at Park Communications' option, to Adjusted LIBOR (as defined in the
Communications Senior Credit Facility) plus an applicable margin or the
Alternate Base Rate (as defined in the Communications Senior Credit Facility)
plus an applicable margin. The Communications Senior Credit Facility matures
six months after the Closing Date and may be extended for an additional six
months on the satisfaction of certain conditions. At June 14, 1996, the
outstanding principal amount due under the Communications Senior Credit
Facility was $22.2 million.
The Communications Senior Credit Facility is guaranteed by Park Broadcasting
and each direct or indirect subsidiary of Park Broadcasting, whether presently
existing or thereafter created or acquired, other than the subsidiary which
held the Radio Station Assets relating to stations KEZX-AM and KWJZ-FM in
Seattle, Washington (such subsidiaries, the "Guarantors"). The Communications
Senior Credit Facility and the guarantee obligations are secured by a lien on
the assets of the Guarantors and by pledges of the capital stock of Park
Communications, the Company, Park Broadcasting and the Guarantors. The
Communications Senior Credit Facility provides for the release of any security
interest in capital stock or assets to be sold after May 13, 1996
simultaneously with the consummation of such sale.
In addition, the Communications Senior Credit Facility contains various
covenants that limit, among other things, mergers, acquisitions and asset
sales, indebtedness, liens, dividends on and issuances of capital stock of
Park Communications' subsidiaries, creation or acquisition of additional
subsidiaries, amendments to debt or other capitalization documents (including
amendments to the Indenture), prepayments of debt (including prepayments of
the Notes), transactions with affiliates and certain other business
activities. The Communications Senior Credit Facility also contains certain
financial covenants, including a Consolidated Total Debt to Consolidated
EBITDA ratio and a Consolidated EBITDA to Consolidated Cash Interest Expense
Ratio (such terms as defined in the Communications Senior Credit Facility)
determined, in each case, for Park Broadcasting and its Subsidiaries.
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Mandatory prepayments are required to be made under the Communications
Senior Credit Facility from the proceeds of any sale or disposition of any
assets (other than KEZX-AM and KWJZ-FM) by Park Communications or any of its
subsidiaries; certain excess cash flow of the Guarantors; the proceeds of
sales or issuances of equity securities by Park Communications or any of its
subsidiaries and the proceeds from the incurrence of indebtedness by Park
Communications or its subsidiaries on or after May 13, 1996 (other than in
connection with the Refinancing Transactions and certain other permitted
indebtedness).
The Communications Senior Credit Facility provides for events of default,
which include the termination or renewal on material adverse terms of any
broadcast license, interruption of broadcasting operations, repudiation of any
material provision of any agreement of sale of Radio Station Assets owned by
any of the Guarantors, or an injunction with respect to any sale of Radio
Station Assets owned by any of the Guarantors occurring after May 13, 1996,
payment defaults, breach of representations and warranties, covenant defaults,
cross-defaults to certain other indebtedness, certain events of bankruptcy and
insolvency, ERISA events, judgment defaults, failure of any guaranty or
security agreement supporting the Communications Senior Credit Facility to be
in full force and effect and change of control of Park Communications.
SENIOR PAY-IN-KIND NOTES OF PARK COMMUNICATIONS
Simultaneously with the sale of Notes, Park Communications offered and sold
the Communications Notes as part of the Communications Units. The
Communications Notes were issued pursuant to an Indenture dated as of May 13,
1996 between Park Communications and IBJ Schroder Bank & Trust Company, as
Trustee (the "Communications Indenture"). Interest on the Communications Notes
is payable semi-annually at a rate of 13.75% per annum. Through May 15, 1999,
interest on the Communications Notes is payable, at the option of Park
Communications, by the issuance of additional Communications Notes in lieu of
cash interest. After May 15, 1999, interest on the Communications Notes is
payable solely in cash. The Communications Senior Credit Facility requires
that, so long as any indebtedness is outstanding thereunder, all interest on
the Communications Notes will be payable solely by the issuance of additional
Communications Notes.
The Communications Indenture provides that upon repayment of the
Communications Senior Credit Facility, Park Communications will be obligated
to grant to the holders of the Communications Notes a first priority lien on
and security interest in all of the capital stock of the Company and Park
Broadcasting owned by Park Communications. The Communications Notes mature on
May 15, 2004.
The Communications Notes are redeemable on or after May 15, 1999 at the
redemption prices set forth in the Communications Indenture plus, in each
case, accrued and unpaid interest, if any, to the date of redemption. Prior to
December 31, 1997, Park Communications has the right to redeem all or any
portion of the Communications Notes with the net proceeds of certain public
equity offerings or strategic equity investments, at 112.0% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
redemption. In addition, on or after December 31, 1997 and prior to May 15,
1999, Park Communications has the right to redeem up to 50% of the aggregate
principal amount of Communications Notes then outstanding with the net
proceeds of certain public equity offerings or strategic equity investments,
at 113.0% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of redemption. In addition, at any time prior to May 15,
1999, Park Communications has the right, subject to certain limitations
described in the Communications Indenture, to redeem the Communications Notes,
in whole or in part, at a redemption price equal to the principal amount
thereof plus the Applicable Premium (as defined in the Communications
Indenture) plus accrued and unpaid interest, if any, to the date of
redemption.
Park Communications is obligated to make an offer to repurchase all or a
portion of the Communications Notes then outstanding at a price equal to
112.0% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase with the net proceeds of any
public equity offering or strategic equity investment consummated on or prior
to December 31, 1997 to the extent that the proceeds therefrom have not been
(or will not be pursuant to a notice of redemption given) utilized to effect a
redemption of the Communications Notes and the amount not so utilized exceeds
$2.0 million. The Communications Indenture contains change of control
provisions similar to those applicable to the Notes requiring Park
Communications to
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offer to repurchase the Communications Notes upon a change of control
triggering event, which includes both a change of control and a ratings
decline.
Park Communications also is required to offer to repurchase Communications
Notes at 100% of their principal amount plus accrued and unpaid interest to
the date of redemption in the event that the net proceeds of certain asset
sales of Park Communications or its restricted subsidiaries (including the
Company and its subsidiaries) are not used within 360 days after the
occurrence of such sales to permanently reduce senior debt of Park
Communications or Park Broadcasting and/or to make an investment in, or
acquire assets directly related to, the same lines of business being conducted
by Park Communications or such restricted subsidiaries.
The Communications Indenture imposes certain limitations on the ability of
Park Communications and its restricted subsidiaries to, among other things,
(i) incur additional indebtedness, (ii) pay dividends or make certain other
restricted payments, (iii) restrict the ability of a restricted subsidiary to
pay dividends or make certain payments to Park Communications, (iv) consummate
certain asset sales, (v) enter into certain transactions with affiliates, (vi)
incur liens, (vii) merge or consolidate with any other person or (viii) sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of the assets of Park Communications.
Events of default under the Communications Indenture include, among other
things, payment defaults, covenant defaults, cross-defaults to certain other
indebtedness, judgment defaults and certain events of bankruptcy and
insolvency.
The Communications Notes were issued as part of units consisting of the
Communications Notes and the Communications Warrants, which warrants will have
a nominal exercise price. The Communications Warrants will be initially
exercisable for 7.0% of the common stock of Park Communications on a fully-
diluted basis. The Communications Warrants and the common stock issued upon
exercise thereof will have the benefit of certain registration rights.
In connection with the offering of the Communications Units, Park
Communications has agreed that, unless on or prior to December 31, 1997 it
receives proceeds of at least $40.0 million from a public equity offering or
strategic equity investment (or series of substantially concurrent strategic
equity investments), it will be obligated to issue additional warrants
initially exercisable for 3.0% of the common stock of Park Communications on a
fully-diluted basis as of the date of such issuance.
SENIOR NOTES OF PARK BROADCASTING
Simultaneously with the sale of Notes, Park Broadcasting offered and sold
the Broadcasting Notes. The Broadcasting Notes were issued pursuant to an
Indenture dated as of May 13, 1996 between Park Broadcasting and IBJ Schroder
Bank & Trust Company, as Trustee (the "Broadcasting Indenture"). Interest on
the Broadcasting Notes is payable semi-annually at a rate of 11.75% per annum,
and the Broadcasting Notes mature on May 15, 2004. The Broadcasting Notes were
issued at a discount to result in an effective yield to maturity of 12.25%.
The Broadcasting Notes are redeemable on or after May 15, 2001 at a
redemption premium of 6.0% in excess of par, declining ratably to par at
maturity, plus, in each case, accrued and unpaid interest to the date of
redemption. In addition, at any time prior to May 15, 1999, Park Broadcasting
has the right to redeem up to 35% of the original principal amount of the
Broadcasting Notes with the net proceeds of certain public equity offerings or
strategic equity investments at 111.75% of the aggregate principal amount
thereof plus accrued and unpaid interest to the date of redemption; provided
that not less than $155.0 million in principal amount of Broadcasting Notes is
outstanding immediately after giving effect to such redemption (other than
Broadcasting Notes held by Park Broadcasting or any of its affiliates).
The Broadcasting Indenture contains change of control provisions similar to
those applicable to the Notes requiring Park Broadcasting to offer to
repurchase the Broadcasting Notes upon a change of control triggering event,
which includes both a change of control and a rating decline.
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<PAGE>
Park Broadcasting also is required to offer to repurchase Broadcasting Notes
at 100% of their principal amount plus accrued and unpaid interest to the date
of redemption in the event that the net proceeds of certain asset sales of
Park Broadcasting or its restricted subsidiaries are not used within 360 days
after the occurrence of such sales to permanently reduce senior debt of Park
Broadcasting and/or to make an investment in or acquire assets directly
related to, the same lines of business being conducted by Park Broadcasting or
such restricted subsidiary.
The Broadcasting Indenture imposes certain limitations on the ability of
Park Broadcasting and its restricted subsidiaries to, among other things, (i)
incur additional indebtedness, (ii) pay dividends or make certain other
restricted payments, (iii) restrict the ability of a restricted subsidiary to
pay dividends or make certain payments to Park Broadcasting, (iv) consummate
certain asset sales, (v) enter into certain transactions with affiliates, (vi)
incur liens securing certain indebtedness, (vii) merge or consolidate with any
other person or (viii) sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of Park Broadcasting.
Events of default under the Broadcasting Indenture include, among other
things, payment defaults, covenant defaults, cross-defaults to certain other
indebtedness, judgment defaults and certain events of bankruptcy and
insolvency.
REVOLVING CREDIT FACILITY
It is contemplated that the Company will have commitments for a senior
revolving credit facility in an amount not to exceed $10.0 million for future
working capital and general corporate purposes (the execution and delivery of
which will be subject to negotiation of satisfactory documentation and other
customary conditions). Under the terms of the Communications Senior Credit
Facility, the Company will not be permitted to borrow funds under the
Revolving Credit Facility until such time as all indebtedness under the
Communications Senior Credit Facility has been repaid. The Revolving Credit
Facility is expected to bear interest at a rate per annum equal, at the
Company's option, to Adjusted LIBOR plus an applicable margin or the Alternate
Base Rate plus an applicable margin.
The Revolving Credit Facility is expected to be guaranteed by each of the
direct or indirect subsidiaries of the Company thereunder. The obligations
under the Revolving Credit Facility are expected to be secured by a lien on
the assets of the guarantors thereunder and by pledges of the capital stock of
the guarantors thereunder.
In addition, it is anticipated that the Revolving Credit Facility will
contain various covenants that limit, among other things, subject to certain
exceptions, restricted payments and investments, mergers, acquisitions and
asset sales, indebtedness, liens, dividends on and issuance of capital stock
of the Company's subsidiaries, creation or acquisition of additional
subsidiaries, amendments to debt or other capitalization documents,
prepayments of debt, transactions with affiliates and certain other business
activities. The revolving credit facilities will also contain certain
financial covenants, including a Total Debt to EBITDA ratio, an EBITDA to
Fixed Charge Ratio, an EBITDA to Cash Interest Expense ratio and a limit on
the amount of Capital Expenditures which the borrower may make (all such terms
as defined in the Revolving Credit Facility).
Mandatory prepayments will be required to be made under the Revolving Credit
Facility from the net cash proceeds from any sale or disposition of any assets
of the Company or the guarantors thereunder not reinvested in the business of
such borrower within twelve months of such sale and, following repayment of
all obligations under the Communications Senior Credit Facility, from any sale
or issuance of equity by the Company.
The Revolving Credit Facility is expected to provide for events of default,
which may include payment defaults, breach of representations and warranties,
covenant defaults, cross-defaults to certain other indebtedness, certain
events of bankruptcy and insolvency, ERISA events, environmental events,
failure of any guaranty or security agreement supporting the revolving credit
facilities to be in force and effect, change of control of the borrower
thereunder.
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DESCRIPTION OF THE NOTES
GENERAL
The Series A Notes were, and the Series B Notes will be, issued under an
Indenture (the "Indenture"), dated as of May 13, 1996, by and between the
Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee").
Upon the issuance of the Series B Notes, the Indenture will be subject to and
governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). As used in this "Description of the Notes" section, references to the
"Company" means Park Newspapers, Inc., but not any its subsidiaries (unless
the context otherwise requires).
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
Trust Indenture Act, the Notes and the Indenture, including the definitions of
certain terms contained therein and including those terms made part of the
Indenture by reference to the Trust Indenture Act. 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
The Notes are general unsecured unsubordinated obligations of the Company
limited in aggregate principal amount to $155,000,000 and mature on May 15,
2004. Interest on the Notes accrues at the rate of 11.875% per annum and is
payable semi-annually in arrears on May 15 and November 15 in each year,
commencing on November 15, 1996, to holders of record on the immediately
preceding May 1 and November 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 is 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 is 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 Series A Notes were,
and the Series B Notes will be, issued in fully registered form, without
coupons, and in denominations of $1,000 and integral multiples thereof, except
that Notes issued to investors that are institutional accredited investors and
that are not "qualified institutional buyers" (as defined in Rule 144A under
the Securities Act) ("QIBs") will be issued only in minimum denominations of
$100,000 and integral multiples of $1,000 in excess thereof.
RANKING
The Notes rank pari passu in right of payment with all existing and future
unsecured and unsubordinated indebtedness of the Company and senior in right
of payment to all existing and future subordinated indebtedness of the
Company. The Notes are effectively subordinated to all secured indebtedness of
the Company to the extent of the assets securing such indebtedness and to all
existing and future indebtedness and other obligations of the subsidiaries of
the Company. As of December 31, 1995, on a pro forma basis after giving effect
to the sale of Notes, the other Refinancing Transactions and the application
of the net proceeds therefrom, the Company would have had no secured
indebtedness outstanding and the subsidiaries of the Company would have had
$0.4 million of indebtedness outstanding.
REDEMPTION
Mandatory Redemption. The Notes are not subject to any mandatory sinking
fund redemption prior to maturity.
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Optional Redemption. The Notes are redeemable 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, if any, to the date of redemption, if redeemed during the twelve-
month period beginning on May 15 of the years indicated below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001......................................................... 105.938%
2002......................................................... 103.958
2003......................................................... 101.979
2004......................................................... 100.0
</TABLE>
In addition, at any time prior to May 15, 1999, the Company may, at its
option, redeem up to $50.0 million of the aggregate principal amount of Notes
originally issued with the net proceeds of one or more Public Equity Offerings
or Strategic Equity Investments where the proceeds to the Company of any such
Public Equity Offering or Strategic Equity Investment are at least $40.0
million, at 111.875% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption; provided, however, that not less
than $100.0 million principal amount of the Notes is outstanding immediately
after giving effect to such redemption (other than any Notes owned by the
Company or any of its Affiliates) and such redemption is effected within 60
days of such issuance or investment.
In addition, at any time prior to May 15, 2001, upon the occurrence of a
Change of Control, the Company may redeem the Notes, in whole but not in part,
at a redemption price equal to the principal amount thereof plus the
Applicable Premium plus accrued and unpaid interest, if any, to the date of
redemption. Notice of redemption of the Notes pursuant to this paragraph shall
be mailed to holders of the Notes not more than 30 days following the
occurrence of a Change of Control. The Company may not redeem Notes pursuant
to this paragraph if it has made an offer to repurchase Notes with respect to
such Change of Control.
Selection and Notice. If less than all of the Notes are to be redeemed at
any time, selection of the Notes to be redeemed will be made by the Company in
compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not
listed on a securities exchange, on a pro rata basis or by lot; provided,
however, 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 Triggering Event, each holder of Notes
will have the right, unless the Company has given a notice of redemption,
subject to the terms and conditions of the Indenture, to require the Company
to offer to purchase 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, if any, to the date of purchase, in accordance with the terms set
forth below (a "Change of Control Offer").
The Revolving Credit Facility will likely prohibit the Company from
purchasing any Notes pursuant to a Change of Control Offer prior to repayment
in full of indebtedness under the Revolving Credit Facility. If a Change of
Control Triggering Event were to occur, there can be no assurance that the
Company will have sufficient assets to satisfy its obligations under the
Revolving Credit Facility or, thereafter, to purchase any of the Notes. Any
additional credit agreements or other agreements relating to unsubordinated
indebtedness to
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which the Company becomes a party may contain similar restrictions and
provisions. Moreover, the Communications Senior Credit Facility contains and
the Revolving Credit Facility will likely contain a "change of control"
provision that is similar to the provision in the Indenture relating to a
Change of Control, and the occurrence of such a "change of control" would
constitute a default under the Communications Senior Credit Facility or the
Revolving Credit Facility, as the case may be.
If the Company is unable to obtain the requisite consents and/or repay all
indebtedness which prohibits the repurchase of Notes upon the occurrence of a
Change of Control Triggering Event, the Company would remain prohibited by
such indebtedness from purchasing any Notes and, as a result, the Company
could not commence a Change of Control Offer to purchase the Notes within 30
days of the occurrence of the Change of Control Triggering Event, which would
constitute an Event of Default under the Indenture. The Company's failure to
commence such a Change of Control Offer likely would constitute an event of
default under the Revolving Credit Facility which would permit the lenders
thereunder to accelerate all of the Company's indebtedness under the Revolving
Credit Facility. If a Change of Control Triggering Event were to occur, there
can be no assurance that the Company would have sufficient assets to first
satisfy its obligations under the Revolving Credit Facility or other
agreements relating to indebtedness, if accelerated, and then to purchase all
of the Notes that might be delivered by holders seeking to accept a Change of
Control Offer.
On or before the 30th day following the occurrence of any Change of Control
Triggering Event, the Company shall mail to each holder of Notes at such
holder's registered address a notice stating: (i) that a Change of Control
Triggering Event has occurred and that such holder has the right to require
the Company to purchase 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, if any, 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, if any, 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 validly tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent an amount in cash equal
to the aggregate purchase price of all Notes or portions thereof accepted for
payment and any accrued 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. The Paying Agent shall
promptly mail to each holder of Notes or portions thereof accepted for payment
an amount in cash equal to the purchase price for such Notes plus accrued and
unpaid interest, if any, thereon, and the Trustee shall promptly authenticate
and mail to each 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 and will be deemed not to be in violation of any of the
covenants under the Indenture to the extent such compliance is in conflict
with such covenants.
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CERTAIN COVENANTS
Limitation on Incurrence of Indebtedness. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary 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), except that the Company may incur Indebtedness if, at the time
of, and immediately after giving pro forma effect to, such incurrence of
Indebtedness, the Debt to Operating Cash Flow Ratio is not more than (i) 6.0:1
for any incurrence on or prior to November 15, 1997 and (ii) 5.5:1 for any
incurrence after November 15, 1997.
The foregoing limitations will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be
given independent effect:
(i)Indebtedness of the Company represented by the Notes;
(ii)Indebtedness of the Company and the Restricted Subsidiaries under the
Revolving Credit Facility, not to exceed $10.0 million in aggregate
principal amount outstanding at any time;
(iii)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, however, 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;
provided, further, however, that upon either (a) the transfer or other
disposition of any such Indebtedness to a Person other than the Company or
another Wholly Owned Restricted Subsidiary or (b) the sale, lease, transfer
or other disposition of shares of Capital Stock (including by consolidation
or merger) of any such Wholly Owned Restricted Subsidiary to a Person other
than the Company or another Wholly Owned Restricted Subsidiary, the
incurrence of such Indebtedness shall be deemed to be an incurrence that is
not permitted by this clause (iii);
(iv)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;
(v)any Indebtedness incurred in connection with or given in exchange for
the renewal, extension, substitution, refunding, defeasance, refinancing or
replacement (a "refinancing") of any Indebtedness described in clause (i)
above or incurred under the first paragraph of this covenant ("Refinancing
Indebtedness"); provided, however, that (a) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount (or accrued
amount, if less) of the Indebtedness so refinanced (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 refinanced) and
the reasonable expenses incurred in connection therewith); (b) such
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 refinanced; (c) such Refinancing Indebtedness shall be
at least as subordinated in right of payment to the Notes as the
Indebtedness being renewed, extended, substituted, refunded, defeased,
refinanced or replaced; and (d) the obligor on such Refinancing
Indebtedness shall be the obligor on the Indebtedness being refinanced or
the Company; and
(vi)in addition to the items referred to in clauses (i) through (v)
above, Indebtedness of the Company and payment and performance bonds not to
exceed $10.0 million in aggregate principal amount at any time outstanding.
Indebtedness of any Person which is outstanding at the time such Person
becomes a Restricted Subsidiary or is merged with or into or consolidated with
the Company or a Restricted Subsidiary shall be deemed to have been incurred
at the time such Person becomes a Restricted Subsidiary or is merged with or
into or consolidated
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with the Company or a Restricted Subsidiary, and Indebtedness which is assumed
at the time of the acquisition of any asset shall be deemed to have been
incurred at the time of such acquisition.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary 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 reasonably and
in good faith by the Board of Directors of the Company, whose determination
shall be conclusive, and evidenced by (A) a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee and
(B) if the value of any such Restricted Payment is greater than $5.0 million,
an opinion issued by an investment banking or appraisal firm of national
standing), (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 the 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 "--Limitation on Incurrence of Indebtedness" and (iii)
the aggregate amount of all Restricted Payments made after the Issue Date
shall not exceed the sum of (a) an amount equal to 50% of the Company's
aggregate cumulative Consolidated Net Income from the Issue Date (or, if the
aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss), plus (b) the aggregate amount of all net cash proceeds received
since the Issue Date by the Company 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 (it being
understood that no capital contributions attributable to the Offering and the
consummation of the Refinancing Transactions (including the repayment of the
Prior Term Loan) shall be deemed for any purpose to be net cash proceeds
received by the Company within the contemplation of this clause (b)). For the
purposes of clause (iii) of this paragraph only, any payment made pursuant to
clauses (v) and (viii) under "--Limitation on Transactions with Affiliates"
shall be included as if it were a Restricted Payment in the calculation of the
aggregate amount of all Restricted Payments made since the Issue Date.
The foregoing provisions will not prohibit, so long as (other than with
respect to clause (i) below) 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;
(ii)the redemption, repurchase, retirement or other acquisition of any
Capital Stock or any Indebtedness of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary) of Capital Stock of the Company (other than any
Disqualified Stock); and
(iii)the payment of dividends to Park Communications on the Issue Date in
an amount equal to the gross proceeds of the Offering of the Notes less
expenses thereof actually paid by the Company.
For purposes of clause (iii) of the first paragraph of this covenant,
Permitted Payments made pursuant to clause (i) of the immediately preceding
paragraph shall be included as of the date of declaration as a Restricted
Payment made since the Issue Date, and Permitted Payments made pursuant to
clauses (ii) and (iii) of the immediately preceding paragraph shall not be
included as Restricted Payments.
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) a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee and (B) if the fair market
value is greater than $5.0 million, an opinion issued by an investment banking
or appraisal firm of national standing) of the assets or other property sold
or disposed of in the Asset Sale, and (ii) at least 85% of such consideration
consists of either (a) cash or Cash Equivalents; provided, however, that for
purposes of this covenant "cash" shall include the amount of any Indebtedness
(other than any Indebtedness that is by its
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terms subordinated to the Notes) of the Company or such Restricted Subsidiary
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 the Restricted Subsidiaries with respect to such
liabilities or (b) properties and capital assets (including franchises and
licenses required to own or operate such properties) to be used in the same
lines of business being conducted by the Company or such Restricted Subsidiary
on the Issue Date.
Within 360 days after any Asset Sale, the Company may elect to apply the Net
Proceeds from such Asset Sale to (a) permanently repay any Indebtedness of the
Company or its Restricted Subsidiaries, other than any Indebtedness of the
Company or any Restricted Subsidiary which expressly ranks subordinate to any
other Indebtedness, and/or (b) make an investment in, or acquire capital
assets or property directly related to, the newspaper publishing business.
Pending the final application of any such Net Proceeds, the Company may
temporarily invest such Net Proceeds in any Investments described under
clauses (i) through (iv) of the definition of Permitted Investments. 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."
Each date on which the aggregate amount of Excess Proceeds in respect of
which an Asset Sale Offer has not been made exceeds $5.0 million shall be
deemed an "Asset Sale Offer Trigger Date." Within 30 days of each Asset Sale
Offer Trigger Date, the Company shall commence an offer (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes and other
Indebtedness of the Company that ranks pari passu in right of payment with the
Notes (to the extent required by the instrument governing such other
Indebtedness) that may be purchased out of the Excess Proceeds. Any Notes to
be purchased pursuant to an Asset Sale Offer shall be purchased pro rata based
on the aggregate principal amount of Notes and all 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, if any, 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 otherwise permitted by the
Indenture. Upon the consummation of any Asset Sale Offer, the amount of Excess
Proceeds from the Asset Sale in question to be the subject of future Asset
Sale Offers shall be deemed to be zero.
Notice of an Asset Sale Offer shall be mailed by the Company not later than
the 30th day after the related Asset Sale Offer Trigger Date to each holder of
Notes at such holder's registered address, 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 to be applied to an offer to purchase Notes (as
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, if any, to the date of the 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, if any, 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 that are to be applied to an Asset Sale Offer (to the
extent provided in the second preceding paragraph), (ii) deposit with the
Paying Agent an amount in cash equal to 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
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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 or by lot; provided, however, 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 in cash equal to the purchase price for
such Notes plus any accrued and unpaid interest, if any, 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 and will be deemed not to be in violation of any of the covenants under
the Indenture to the extent such compliance is in conflict with such
covenants.
Limitation on Liens Securing Certain Debt. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) on any properties or assets of the Company or any Restricted
Subsidiary (other than the Capital Stock of Unrestricted Subsidiaries) 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,
unless the Notes are equally and ratably secured thereby.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary 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)
applicable law, (b) 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 or in contemplation
of such acquisition); provided, however, 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 such 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, (c) by reason of customary non-assignment provisions in leases
entered into the ordinary course of business, (d) Purchase Money Indebtedness
for property acquired in the ordinary course of business that only impose
restrictions on the property so acquired, (e) an agreement for the sale or
disposition of the Capital Stock or assets of such Restricted Subsidiary;
provided, however, that such restriction is only applicable to such Restricted
Subsidiary or assets, as applicable, and such sale or disposition otherwise is
permitted under "--Limitation on Assets Sales" above; provided, further,
however, 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, (f)
Refinancing Indebtedness permitted under the Indenture; provided, however,
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, (g) the Indenture or (h) the Revolving Credit Facility,
and any amendments, restatements, renewals, replacements or refinancings
thereof.
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Limitation on Transactions with Affiliates. The Indenture provides that 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 (1) 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 (2)(a) with respect to any
transaction or series of transactions involving aggregate payments in excess
of $1.0 million, the Company delivers an Officers' Certificate to the Trustee
certifying that such transaction or series of related transactions complies
with clause (1) 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 $5.0 million or any transaction or
series of related transactions referred to in clause (2)(a) above where there
are no Independent Directors, an opinion as to the fairness to the Company or
such Restricted Subsidiary from a financial point of view issued by an
investment banking or appraisal firm of national standing. Notwithstanding the
foregoing, this covenant 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 (it being understood that benefits of
the nature in place as of the Issue Date shall be deemed permissible
hereunder)), (ii) any transaction entered into by or among the Company or one
of its Wholly Owned Restricted Subsidiaries with one or more Wholly Owned
Restricted Subsidiaries of the Company, (iii) any Restricted Payment made in
compliance with "--Limitation on Restricted Payments," (iv) any Permitted
Investments other than Investments permitted by clause (vii) of the definition
of Permitted Investments, (v) payments to Park Communications on the business
day after each semi-annual interest payment date for the Notes for the payment
of management advisory fees in an amount not to exceed $125,000 on each such
date; provided, however, that no such payment shall be made unless (A) the
Company has paid all accrued interest on the Notes due on such semi-annual
interest payment date and (B) no Default or Event of Default shall have
occurred and be continuing at the time of such payment, (vi) payments to Park
Communications or PAI pursuant to the Tax Sharing Agreement, (vii) the pledge
of Capital Stock of Unrestricted Subsidiaries by the Company or any Restricted
Subsidiary to support such Unrestricted Subsidiaries' Indebtedness, and (viii)
payments to Park Communications in respect of the Company's allocable portion
of the consolidated legal, tax, accounting and other administrative expenses
of Park Communications, not to exceed $1.0 million during any consecutive six-
month period; provided, however, that no such payment shall be made unless no
Default or Event of Default shall have occurred and be continuing at the time
of such payment.
Limitation on Subsidiary Capital Stock. The Indenture provides that the
Company will not permit any Restricted Subsidiary 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, however, that such Capital Stock
was not issued by such Person in anticipation of the type of transaction
contemplated by clauses (a), (b) or (c).
Limitation on Lines of Business. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, engage in any
business other than newspaper publishing and businesses directly related
thereto.
Limitation on Amendments to the Tax Sharing Agreement. The Indenture
provides that the Company will not, and will not permit any Restricted
Subsidiary to, (i) amend, supplement or modify the Tax Sharing Agreement,
unless any such amendment, supplement or modification is no less favorable to
the Holders than the terms thereof on the Issue Date or (ii) assign the Tax
Sharing Agreement or the benefits and obligations thereunder to any other
Person.
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
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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, commencing with the quarter ended September 30, 1996, 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 Sections 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.
Certain Exceptions for Capital Contributions. Any other provision of the
Indenture to the contrary notwithstanding, any capital contribution made on
the Issue Date in any Subsidiary of the Company to effect the repayment of the
Prior Credit Agreement from the proceeds of the offering of the Notes and the
consummation of the other financing transactions taking place on the Issue
Date in connection therewith shall not be deemed to be a violation of any
covenant of the Indenture (and the aggregate amount of any such capital
contribution shall not be counted as a Restricted Investment).
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture provides that the Company shall not, in any single transaction
or series of related transactions, 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 to, another Person, and the Company will not permit any Restricted
Subsidiary to enter into any such transaction or series of related
transactions if such transaction or series of related transactions, in the
aggregate, would result in a sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the properties and assets of
the Company and the Restricted Subsidiaries, taken as a whole, 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, the Indenture and, if then in
effect, the Registration Rights Agreement pursuant to a supplemental indenture
or other written agreement, as the case may be, 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 (A) 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, the Surviving Person would be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the first
paragraph of the covenant described under "--Certain Covenants--Limitation on
Incurrence of Indebtedness."
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 is not the Surviving Person and the Surviving Person is
to assume all the obligations of the Company under the Notes, the Indenture
and, if then in effect, the Registration Rights Agreement pursuant to a
supplemental indenture or other written agreement, as the case may be, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company and the Company would be discharged from
its obligations under the Indenture, the Notes and the Registration Rights
Agreement.
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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 (including
any "additional interest" (as described below under "The Exchange Offer--
Purpose and Effect of the Exchange Offer")) on any Note;
(ii) a default in the payment when due of principal on any Note, whether
upon maturity, acceleration, redemption, required repurchase or otherwise;
(iii) failure to perform or comply with any covenant, agreement or
warranty in the Indenture (other than the defaults specified in clauses (i)
and (ii) above) which failure continues (A) in the case of any such
covenant, agreement or warranty described herein under "--Certain
Covenants--Limitation on Incurrence of Indebtedness," "--Certain
Covenants--Limitation on Restricted Payments," "--Certain Covenants--
Limitation on Asset Sales," and "--Merger, Consolidation and Sale of
Assets," for 30 days after written notice thereof has been given to the
Company by the Trustee or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the then outstanding Notes
and (B) in the case of any other such covenant, agreement or warranty
contained in the Indenture, for 60 days after written notice thereof has
been given to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the then
outstanding Notes;
(iv) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company or any Restricted
Subsidiary then has outstanding Indebtedness in excess of $5.0 million
individually or in the aggregate and, if not already matured at its final
maturity in accordance with its terms, such Indebtedness shall have been
accelerated and such Indebtedness shall not have been repaid or such
acceleration rescinded within 20 days;
(v) one or more judgments, orders or decrees for the payment of money in
excess of $5.0 million either individually or in the aggregate (net of
amounts covered by a reputable and creditworthy insurance company, or by
bond, surety or similar instrument) shall be entered against the Company or
any Restricted Subsidiary or any of their respective properties and which
judgments, orders or decrees are not paid, discharged, bonded or stayed or
stayed pending appeal for a period of 60 days after their entry;
(vi) there shall have been entered by a court of competent jurisdiction
(a) a decree or order for relief in respect of the Company or any
Restricted Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or (b) a decree or order adjudging the Company or
any Restricted Subsidiary bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or
any 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 or any Restricted
Subsidiary or of any substantial part of their respective properties, or
ordering the winding up or liquidation of their affairs, and any such
decree or order for relief shall continue to be in effect, or any such
other decree or order shall be unstayed and in effect, for a period of 60
days; or
(vii) (a) the Company or any 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 or any
Restricted Subsidiary consents to the entry of a decree or order for relief
in respect of the Company 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 or any Restricted Subsidiary files a petition or answer or
consent seeking reorganization or relief under any applicable federal or
state law, (d) the Company or any 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 or such Restricted Subsidiary or of any
substantial part of their respective property, (y) makes an assignment for
the benefit of creditors or (z) admits in writing its inability to pay its
debts generally as they become due or (e) the Company or any Restricted
Subsidiary takes any corporate action in furtherance of any such actions in
this paragraph (vii).
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If any Event of Default (other than as specified in clauses (vi) or (vii) of
the preceding paragraph with respect to the Company) 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 by notice in
writing to the Company, and to the Company and the Trustee if by the Holders,
specifying the respective Event of Default and that it is a "notice of
acceleration," and the Notes shall become immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
the events specified in clauses (vi) or (vii) of the preceding paragraph with
respect to the Company, the principal of, premium, if any, and any accrued
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.
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 OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company discharged with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the outstanding
Notes and to have satisfied all other obligations under the Notes and the
Indenture except for (i) the rights of holders of the outstanding Notes to
receive, solely from the trust fund described below, payments in respect of
the principal of, premium, if any, and interest on such Notes when such
payments are due, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes, and the maintenance of an office or agency
for payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee under the Indenture, and
(iv) the defeasance provisions of the Indenture. In addition, the Company may,
at its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("covenant defeasance") and any omission to comply with such obligations shall
not constitute a Default or an Event of Default with respect to the Notes. In
the event that a covenant defeasance occurs, certain events (not including
non-payment, bankruptcy and insolvency events) described under "--Events of
Default" will no longer constitute Events of Default with respect to the
Notes.
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In order to exercise either defeasance or covenant defeasance, (i) the
Company shall irrevocably deposit with the Trustee, as trust funds in trust,
for the benefit of the holders of the Notes, cash in United States dollars,
U.S. Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the report of a nationally
recognized firm of independent public accountants or a nationally recognized
investment banking firm, to pay and discharge the principal of, premium, if
any, and interest on the outstanding Notes to redemption or maturity; (ii) the
Company shall have delivered to the Trustee an opinion of counsel in the
United States to the effect that the holders of the outstanding Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance or covenant defeasance, as the case may be, and will be
subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance, as the case may be, had not occurred (in the case of defeasance,
such opinion must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable Federal income tax laws); (iii) no Default
or Event of Default shall have occurred and be continuing on the date of such
deposit or insofar as clauses (vi) and (vii) under the first paragraph under
"--Events of Default" is concerned, at any time during the period ending on
the 91st day after the date of deposit; (iv) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
Default under, the Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound; (v) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Indebtedness
(other than holders of the Notes) and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (vi) the Company shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with and that no violations
under agreements governing any other outstanding Indebtedness would result
therefrom.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (i) either (a)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee an amount in
United States dollars sufficient to pay and discharge the entire indebtedness
on the Notes not theretofore delivered to the Trustee for cancellation, for
the principal of, premium, if any, and interest to the date of deposit; (ii)
the Company has paid or caused to be paid all other sums payable under the
Indenture by the Company; and (iii) the Company has delivered to the Trustee
an Officers' Certificate and an opinion of counsel each stating that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
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.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two paragraphs, the Indenture or the Notes
may be amended or supplemented with the written consent of the holders of at
least a majority in aggregate principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange
offer for the Notes), and any existing Default or Event of Default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver shall
not: (i) reduce the principal amount of the Notes whose holders must consent
to an amendment, supplement or waiver, (ii) reduce the principal of or change
the fixed maturity of any Note, or alter the provisions with respect to the
redemption or repurchase 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 Notes, (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 (other than to add sections of the Indenture subject
thereto) 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 obligation of
the Company to make and consummate (a) a Change of Control Offer in the event
of a Change of Control Triggering Event or (b) an Asset Sale Offer as and when
required by "--Certain Covenants--Limitation on Asset Sales" or (ix) make any
change in the foregoing amendment and waiver provisions (except to increase
the percentage of outstanding Notes required for such actions or to provide
that certain other provisions of the Indenture cannot be modified or waived
without the consent of the holder of each Note affected thereby).
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; provided, however, that
such amendment or supplement does not adversely affect the rights of any
holder, (ii) to comply with "--Merger, Consolidation and Sale of Assets,"
(iii) to provide for uncertificated Notes in addition to or in place of
certificated Notes, (iv) to comply with requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act, (v) 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
rights of any such holder, (vi) to add to the covenants of the Company for the
benefit of the holders, or to surrender any right or power herein conferred
upon the Company, or (vii) to secure the Notes as provided in "--Certain
Covenants--Limitation on Liens Securing Certain Debt."
THE TRUSTEE
In the event that the Trustee becomes a creditor of the Company, the
Indenture contains certain limitations on the rights of the Trustee to obtain
payment of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as Trustee, or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
has occurred and has not been cured, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. The Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
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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 Restricted 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
Restricted Subsidiary of, such specified Person.
"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 and policies of such Person, whether through
the ownership of voting securities, by agreement or otherwise.
"Applicable Premium" means, with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note and (ii) (a) the present
value of all remaining required interest and principal payments due on such
Note and all premium payments relating thereto assuming a redemption date of
May 15, 2001, computed using a discount rate equal to the Treasury Rate plus
75 basis points minus (b) the then outstanding principal amount of such Note
minus (c) accrued interest paid on the date of redemption.
"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 or (ii) the
issuance or sale of Capital Stock of any Restricted Subsidiary (but not the
Capital Stock of any Unrestricted Subsidiary), in the case of each of (i) and
(ii), 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); provided, however, that for purposes of the covenant described
under "--Certain Covenants--Limitation on Asset Sales" above, Asset Sales
shall not include: (a) a transaction or series of related transactions for
which the Company or the applicable Restricted Subsidiary receives aggregate
consideration of less than $500,000 in any fiscal year; (b) transactions
complying with the covenant described under "--Merger, Consolidation and Sale
of Assets" above; (c) any Lien securing Indebtedness to the extent that such
Lien is granted in compliance with the covenant described under "--Certain
Covenants--Limitation on Liens Securing Certain Debt" above; (d) any
Restricted Payment (or Permitted Investment) permitted by the covenant
described under "--Certain Covenants--Limitation on Restricted Payments"
above; and (e) any disposition of assets or property to the extent such
property or assets are obsolete, worn out or no longer useful in the Company's
or any Restricted Subsidiary's business; provided, however, that the fair
market value (determined reasonably and in good faith by the Board of
Directors of the Company) of any assets or property so disposed shall not
exceed $500,000 in the aggregate in any given year.
"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 (a) 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, (b) 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, (c) commercial paper of an
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issuer rated at least A-2 by Standard & Poor's Corporation or at least 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 (d) money market accounts or funds with
or issued by Qualified Issuers.
"Change of Control" means the occurrence of any 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 50%
or more of the voting power of the total outstanding Voting Stock of the
Company, Park Communications or PAI, as the case may be; (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company, Park Communications
or PAI, as the case may be (together with any new directors whose election to
such Board of Directors, or whose nomination for election by the stockholders
of the Company, Park Communications or PAI, as the case may be, was approved
by a vote of the Permitted Holders who at the time of the vote are
stockholders of the Company, Park Communications or PAI, as the case may be,
or either (A) 66 2/3% or (B) all remaining members of the Board of Directors
of the Company, Park Communications or PAI, as the case may be, 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 of the Company,
Park Communications or PAI, as the case may be, then in office; (iii) the sale
of all or substantially all of the Capital Stock or assets of the Company,
Park Communications or PAI, as the case may be, to any Person or Group (as
defined in Rule 13d-5 of the Exchange Act), other than to the Permitted
Holders, as an entirety or substantially as an entirety in a single
transaction or a series of related transactions or (iv) the Company, Park
Communications or PAI, as the case may be, consolidates with or merges with or
into another Person other than in any such event where immediately after such
transaction the stockholders immediately prior to such transaction or the
Permitted Holders hold at least a majority of the voting power of the
outstanding Voting Stock of the Surviving Person immediately after the
consummation of such transaction. For purposes of the foregoing definition of
Change of Control, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of related transactions) of all or substantially
all of the properties or assets of one or more Subsidiaries of the Company,
the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline.
"Communications Notes" means the $80.0 million aggregate principal amount of
13 3/4% Senior Pay-in-Kind Notes due 2004 of Park Communications issued under
an indenture dated May 13, 1996 between Park Communications and IBJ Schroder
Bank & Trust Company, as trustee, including the Series B 13 3/4% Senior Pay-
in-Kind Notes due 2004 of Park Communications issued in exchange therefor.
"Communications Senior Credit Facility" means the Credit Agreement dated as
of May 10, 1996, among Park Communications, the Subsidiaries of Park
Communications named therein and the lenders named therein.
"Company" means Park Newspapers, 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 the Restricted Subsidiaries for
such period (other than the amortization of issuance costs related to the
Notes), 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 Agreement
Obligations (including amortization of discounts), (c) the interest portion of
any deferred payment obligation and (d) accrued interest, plus (ii) the
interest component of all Capital Lease Obligations paid, accrued
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and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period, and all capitalized interest of the Company
and the 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 the 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), (i) by adding the amount of corporate overhead for such period of Park
Communications allocated to the Company and its Subsidiaries in accordance
with GAAP consistently applied and deducted in calculating such net income (or
loss), and (ii) by adding the amount of interest expense for such period
calculated in accordance with GAAP attributable to debt issuance costs related
to the Notes (to the extent deducted in calculating such net income (or
loss)), (iii) by adding the amount of management advisory fees paid by the
Company to Park Communications for such period and deducted in calculating
such net income (or loss) and (iv) to the extent included in calculating such
net income (or loss), by excluding, without duplication, (a) all extraordinary
gains but not losses (less all fees and expenses relating thereto) together
with any related provisions for taxes, (b) the portion of net income (or loss)
of the Company and the Restricted Subsidiaries allocable to interests in
unconsolidated Persons or Unrestricted Subsidiaries, except to the extent of
the amount of dividends or distributions actually paid in cash to the Company
or the Restricted Subsidiaries by such other Person during such period
(subject in the case of any such dividend or distribution to any Restricted
Subsidiary to the limitations set forth in clause (e) below), (c) net income
(or loss) of any Person combined with the Company or any Restricted Subsidiary
on a "pooling of interests" basis attributable to any period prior to the date
of combination, (d) net gains 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, together with any related provisions for taxes,
and (e) 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
(regardless of any waiver in respect thereof).
"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.
"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 the 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 the
Restricted Subsidiaries (other than any Disqualified Stock owned by the
Company or any Wholly-Owned Restricted Subsidiary) determined in accordance
with GAAP, to (ii) Operating Cash Flow of the Company and the 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 (without giving effect to clause (iv) (c) of the definition of
Consolidated Net Income) after giving pro forma effect to (A) the incurrence
of any Indebtedness being incurred on such date of determination and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness; (B) in the case of Acquired Debt, the related
acquisition as if such acquisition had occurred at the beginning of such four-
quarter period; and (C) any acquisition or disposition by the Company and the
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, with respect to any
acquisition, on the first day of, and with respect to any disposition,
immediately prior to 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.
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"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 (i) any Preferred Stock of any Restricted
Subsidiary and (ii) any Capital Stock of the Company that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part on or
prior to the stated maturity of the Notes; provided, however, that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require the Company to purchase or redeem
such Capital Stock upon the occurrence of a change of control occurring prior
to the final maturity date of the Notes shall not constitute Disqualified
Stock if the change of control provisions applicable to such Capital Stock are
no more favorable to the holders of such Capital Stock than the provisions
described under "--Change of Control" and such Capital Stock specifically
provides that the Company will not purchase or redeem any such Capital Stock
pursuant to such provisions prior to the Company's purchase of the Notes as
are required to be purchased pursuant to the provisions described under "--
Change of Control."
"Dollars" and "$" means lawful money of the United States of America.
"Equity Market Capitalization" of any Person means the aggregate market
value of the outstanding Capital Stock (other than Preferred Stock and
excluding any Capital Stock held in treasury by such Person) of such Person of
a class that is listed or admitted to unlisted trading privileges on a United
States national securities exchange or included for trading on the Nasdaq
National Market System. For purposes of this definition the "market value" of
any such Capital Stock shall be the average of the high and low sale prices,
or if no sales are reported, the average of the high and low bid prices, as
reported on the principal national securities exchange on which such Capital
Stock is listed or admitted to trading or, if such Capital Stock is not listed
or admitted to trading on a national securities exchange, as reported by
Nasdaq, for each trading day in a 20 consecutive trading day period ending not
more than 45 days prior to the date such Person commits to make an investment
in the Capital Stock of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means, as of any date, generally accepted accounting principles in
the United States and not including any interpretations or regulations that
have been proposed but that have not become effective.
"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 (other than any Permitted
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 lesser
of the amount of the debt secured thereby or the value of the property subject
to such Lien (it being understood that if such debt exceeds the value of such
property, the full amount thereof shall be included in this definition), (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 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)
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through (vii) above. "Indebtedness" of the Company and the Restricted
Subsidiaries (i) shall be determined in accordance with GAAP and (ii) shall
not include current trade payables incurred in the ordinary course of business
and payable in accordance with customary practices and non-interest bearing
installment obligations and accrued liabilities incurred in the ordinary
course of business which are not more than 90 days past due. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Stock which
does not have a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Stock as if such Disqualified Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by the
fair market value of, such Disqualified Stock, such fair market value is to be
determined reasonably and 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 (other than the Company or
any of its Subsidiaries) to the transaction in question.
"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.
"Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such ratings by S&P or Moody's or in the event S&P or
Moody's shall cease rating the Notes and the Company shall select any other
Rating Agency, the equivalent of such ratings by such other Rating Agency.
"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.
"Issue Date" means May 13, 1996, the date on which Notes were first issued
under the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Proceeds" means, with respect to any Asset Sale by any Person, the
aggregate cash proceeds received by such Person and/or its Affiliates in
respect of such Asset Sale, which amount is equal to the excess, if any, of
(i) the cash received by such Person and/or its Affiliates (including any cash
payments received by way of deferred payment pursuant to, or monetization of,
a note or installment receivable or otherwise, but only as and when received)
in connection with such Asset Sale, over (ii) the sum of (a) the amount of any
Indebtedness that is secured by such asset and which is required to be repaid
by such Person in connection with such Asset Sale, plus (b) all fees,
commissions and other expenses incurred by such Person in connection with such
Asset Sale, plus (c) provision for taxes, including income taxes, attributable
to the Asset Sale or attributable to required prepayments or repayments of
Indebtedness with the proceeds of such Asset Sale, plus (d) a reasonable
reserve for the after-tax cost of any indemnification payments (fixed or
contingent) attributable to seller's indemnities to purchaser in respect of
such Asset Sale undertaken by the Company or any of the 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.
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"Newspaper Operations" means all property and assets used in the newspaper
operations of the Company as more fully set forth in the Indenture.
"Obligations" means any principal, 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 the Restricted Subsidiaries for such period,
plus, without duplication, (i) extraordinary net losses and net losses
realized on any sale or other disposition 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 the
Restricted Subsidiaries for such period, plus (iv) depreciation, amortization
and all other non-cash charges (excluding non-cash charges associated with
changes in working capital and other balance sheet changes in the ordinary
course of business), 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).
"PAI" means Park Acquisitions, Inc., a Delaware corporation, and its
successors and assigns.
"Park Communications" means Park Communications, Inc., a Delaware
corporation, and its successors and assigns.
"Permitted Holders" means (i) each of (A) Gary B. Knapp, (B) Donald R.
Tomlin, Jr. and (C) PAI and Park Communications so long as PAI and Park
Communications are controlled by Persons who would otherwise be Permitted
Holders hereunder; (ii) the spouse, ancestors, siblings, descendants
(including children or grandchildren by adoption) of (A) any of the Persons
described in clause (i) or (B) any spouse, ancestor, sibling or descendent
(including children or grandchildren by adoption) 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 elect or
appoint not less than a majority of the members of the Board of Directors of
such Person.
"Permitted Investments" means (i) any Investment in the Company or any
Wholly Owned Restricted Subsidiary; (ii) any Investment 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, or (b) the Acquired Person either (1) is merged or consolidated
with or into the Company or any Wholly Owned Restricted Subsidiary and the
Company or such Wholly Owned Restricted Subsidiary is the Surviving Person, or
(2) transfers or conveys all or substantially all of its assets to, or is
liquidated into, the Company or any Wholly Owned Restricted Subsidiary; (iv)
Investments in accounts and notes receivable acquired in the ordinary course
of business; (v) any securities received in connection with an Asset Sale that
complies with the covenant described under "--Certain Covenants--Limitation on
Asset Sales" above; provided, however, the fair market value of such
securities does not exceed 15% of the aggregate consideration received at the
time of such Asset Sale; (vi) Interest Rate Agreement Obligations permitted
pursuant to the second paragraph of the covenant described under "--Certain
Covenants--Limitation on Incurrence of Indebtedness" above; (vii) any other
Investments that do not exceed $5.0 million in amount in the aggregate at any
one time outstanding; (viii) Investments for which the sole consideration
provided is Capital Stock (other than Disqualified Stock ) of the Company; and
(ix) Investments existing on the Issue Date.
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"Permitted Liens" means (i) 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, however, 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; (ii) Liens on
property acquired by the Company or a Restricted Subsidiary, provided,
however, that such Liens were in existence prior to the contemplation of such
acquisition and do not extend to any other property; (iii) Liens in favor of
the Company or any Restricted Subsidiary; (iv) 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; (v) 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; (vi) 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;
(vii) Liens arising from Capital Lease Obligations permitted under the
Indenture; (viii) Liens securing any Indebtedness (including Purchase Money
Indebtedness) of the Company or the Restricted Subsidiaries (other than any
Indebtedness which is expressly subordinated to any other Indebtedness)
permitted under the Indenture; provided, however, that such Liens are granted
not later than 360 days after the incurrence of such Indebtedness; (ix) Liens
in respect of Interest Rate Agreement Obligations permitted under the
Indenture; (x) easements, reservations, licenses, rights-of-way, zoning
restrictions and other similar charges or encumbrances in respect of real
property not interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Restricted Subsidiaries; (xi) Liens
securing reimbursement obligations with respect to commercial letters of
credit which encumber documents and other property relating to such letters of
credit and products and proceeds thereof; (xii) Liens existing on the Issue
Date; and (xiii) any Lien to secure the refinancing of any Indebtedness
described in the foregoing clauses; provided, however, that to the extent any
such clause limits the amounts secured or the assets subject to such Liens, no
refinancing shall increase the assets subject to such Liens or the amounts
secured thereby beyond the assets or amounts set forth in such clause.
"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, Park Communications or
PAI, pursuant to an effective registration statement filed under the
Securities Act; provided, however, that with respect to any such public equity
offering by Park Communications or PAI, cash proceeds from such public equity
offering equal to not less than 111.875% of the aggregate principal amount of
the Notes to be redeemed is received by the Company as a capital contribution
immediately prior to such redemption.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in connection with the purchase of property
or assets for the business of the Company and its Restricted Subsidiaries.
"Qualified Issuer" means (A) any lender that is a party to the
Communications Senior Credit Facility; and (B) any commercial bank (i) which
has capital and surplus in excess of $80,000,000, 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 a nationally recognized rating agency if both
the two named rating agencies cease publishing ratings of investments.
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"Rating Agency" means any of (i) S&P, (ii) Moody's or (iii) if S&P or
Moody's or both shall not make a rating of the Notes publicly available, a
security rating agency or agencies, as the case may be, nationally recognized
in the United States, selected by the Company which shall be substituted for
S&P or Moody's or both, as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's, any of the following categories:
Aaa, Aa, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
and (iii) the equivalent of any such category of S&P or Moody's used by
another Rating Agency. In determining whether the rating of the Notes has
decreased by one or more gradation, gradations within Rating Categories (+ and
- - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another
Rating Agency) shall be taken into account (e.g., with respect to S&P, a
decline in rating from BB+ to BB, as well as from BB- to B+, will constitute a
decrease of one gradation).
"Rating Decline" means the occurrence on, or within 60 days after, the date
of public notice of the occurrence of a Change of Control or of the intention
of the Company or Persons controlling the Company to effect a Change of
Control (which period shall be extended so long as the rating of the Notes is
under publicly announced consideration for possible downgrade by any of the
Rating Agencies) of the following: (i) if the Notes are rated by either Rating
Agency as Investment Grade immediately prior to the beginning of such period,
the rating of the Notes by both Rating Agencies shall be below Investment
Grade; or (ii) if the Notes are rated below Investment Grade by both Rating
Agencies immediately prior to the beginning of such period, the rating of the
Notes by either (or both) Rating Agency shall be decreased by one or more
gradations (including gradations within Rating Categories as well as between
Rating Categories).
"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, defease or
otherwise acquire or retire for value any Capital Stock of the Company or any
Restricted Subsidiary or other Affiliate of the Company (other than any
Capital Stock owned by the Company or any Wholly Owned Restricted Subsidiary);
(iii) any payment to purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness that is subordinated in right of payment to the
Notes other than a purchase, redemption, defeasance or other acquisition or
retirement for value that is paid for with the proceeds of Refinancing
Indebtedness that is permitted under the covenant described under "--Certain
Covenants--Limitation on Incurrence of Indebtedness"; or (iv) any Restricted
Investment.
"Restricted Subsidiary" means each direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Revolving Credit Facility" means any credit facility entered into by the
Company, the Subsidiaries of the Company named therein and the lenders named
therein, as the same may be amended, modified, renewed, refunded, replaced or
refinanced (collectively, "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 or refinanced from time to time, and (ii) any notes,
guarantees, collateral documents, instruments and agreements executed in
connection with any such amendment, modification or refinancing.
"Strategic Equity Investment" means the issuance and sale of Capital Stock
(other than Disqualified Stock) of the Company, Park Communications or PAI to
a Person substantially engaged in the newspaper publishing business or any
other business reasonably related to the Company's business that has an Equity
Market Capitalization of at least $350.0 million; provided, however, that with
respect to such issuance by Park
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Communications or PAI, cash proceeds from such issuance equal to not less than
111.875% of the aggregate principal amount of Notes to be redeemed is received
by the Company as a capital contribution immediately prior to any such
redemption.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or controlled,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries thereof, or
(ii) any limited partnership of which such Person or any Subsidiary of such
Person is a general partner, or (iii) any other Person (other than a
corporation or limited partnership) in which such Person, or one or more other
Subsidiaries of such Person, or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has more than 50% of the outstanding
partnership or similar interests or has the power, by contract or otherwise,
to direct or cause the direction of the policies, management and affairs
thereof.
"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.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two business days prior to the
date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then remaining term to May 15, 2001; provided, however, that if
the then remaining term to May 15, 2001 is not equal to the constant maturity
of a United States Treasury security for which a weekly average yield is
given, the Treasury Rate shall be obtained by linear interpolation (calculated
to the nearest one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given, except that if the
then remaining term to May 15, 2001 is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (a) each Subsidiary listed on an officers'
certificate delivered to the Trustee on the Closing Date and (b) any
Subsidiary of the Company designated as an Unrestricted Subsidiary by the
Board of Directors of the Company; provided, however, that, for purposes of
this clause (b), (i) the Subsidiary to be so designated (x) (I) has total
assets with a fair market value at the time of such designation of $1,000 or
less or (II) is being so designated prior to the acquisition by the Company of
such Subsidiary by merger or consolidation with an Unrestricted Subsidiary,
and (y) 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 Default or Event of Default shall
have occurred and be continuing, (iv) 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, (v) 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 (vi) neither the
Company nor any of its Restricted Subsidiaries has any obligations (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 certificate stating that such designation
complies with the foregoing conditions. The Company's Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation, no Default
or Event of Default shall have occurred and be continuing, including, without
limitation, under the covenants described above under the captions "--
Limitation on Incurrence of Indebtedness" and "--Limitation on Liens Securing
Certain Debt," assuming the incurrence by the Company and its Restricted
Subsidiaries at the time of such designation of all existing Indebtedness and
Liens of the Unrestricted Subsidiary to be so designated as a Restricted
Subsidiary. Notwithstanding the foregoing or any
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other provision of the Indenture to the contrary, no assets of the Newspaper
Operations may be held at any time by an Unrestricted Subsidiary, other than
assets transferred to Unrestricted Subsidiaries that in the aggregate are not
material to such publishing 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 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.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Series A Notes were originally sold by the Company on May 13, 1996 to
the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Series A Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act and to institutional
accredited investors in a manner exempt from the registration requirements of
the Securities Act. As a condition to the Purchase Agreement, the Company and
the Initial Purchasers entered into the Registration Rights Agreement pursuant
to which the Company agreed, for the benefit of the holders, that it would, at
its own cost, (i) use its best efforts to file, within 45 days after May 13,
1996, the original issue date of the Series A Notes (the "Issue Date"), a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to the Exchange Offer for the Series B Notes and (ii)
use its best efforts to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act within 120 days after the Issue
Date. Upon the Exchange Offer Registration Statement being declared effective,
the Company will offer the Series B Notes in exchange for surrender of the
Series A Notes. The Company will keep the Exchange Offer open for not less
than 30 days (or longer if required by applicable law) after the date notice
of the Exchange Offer is mailed to the holders of the Series A Notes. For each
of the Series A Notes surrendered pursuant to the Exchange Offer, the holder
who surrendered such Series A Note will receive a Series B Note having a
principal amount equal to that of the surrendered Series A Note. Based on no-
action letters issued by the staff of the Commission to third parties, the
Company believes the Series B Notes will be freely transferable by holders
thereof and any person who receives the Series B Notes after the Exchange
Offer without further registration under the Securities Act only if (i) the
Series B Notes were acquired in the ordinary course of business of such holder
or such other person, (ii) neither such holder nor such other person is
engaging in or intends to engage in a distribution of the Series B Notes and
(iii) neither such holder nor such other person has an arrangement or
understanding with any person to participate in the distribution of the Series
B Notes. However, any purchaser of Series A Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the Series B Notes (i) will not be able to rely on the position
of the staff of the Commission, (ii) will not be able to tender its Series A
Notes in the Exchange Offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the Series A Notes, unless such sale or transfer is made
pursuant to an exemption from such requirements.
Each holder of the Series A Notes who wishes to exchange the Series A Notes
for Series B Notes in the Exchange Offer will be required to represent in the
Letter of Transmittal that (i) the Series B Notes are to be acquired by the
holder or the person receiving such Series B Notes, whether or not such person
is the holder, in the ordinary course of business, (ii) the holder or any such
other person (other than a broker-dealer referred to in the next sentence) is
not engaging, and does not intend to engage, in the distribution of the Series
B Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the Series
B Notes, (iv) neither the holder nor any such other person is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act and (v)
the holder or any such other person acknowledges that if such holder or other
person participates in the Exchange Offer for the purpose of distributing the
Series B Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Series
B Notes and cannot rely on those no-action letters. As indicated above, in
connection with any resales of Series B Notes, any Participating Broker-Dealer
who acquired the Series A Notes for its own account as a result of market-
making or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act. The Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Series B Notes (other than a resale of an
unsold allotment from the original sale of the Series A Notes) with this
Prospectus. Under the Registration Rights Agreement, the Company is required
to allow Participating Broker-Dealers and other persons, if any, subject to
similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such Series B Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect such an Exchange Offer, or, under certain
other circumstances, including if for any other reason the
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Exchange Offer is not consummated within 150 days after the Issue Date, the
Company will, at its cost, (a) use its best efforts to file, as promptly as
practicable and, in any event, within 45 days after such Shelf Registration
Event Date (as defined in the Registration Rights Agreement), a shelf
registration statement covering resales of the Series A Notes (the "Shelf
Registration Statement"), (b) use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act and
(c) use its best efforts to keep effective the Shelf Registration Statement
until the earlier of three years after the Issue Date and such time as all of
the applicable Series A Notes have been sold thereunder. The Company will, in
the event of the filing of the Shelf Registration Statement, provide to each
holder of the Series A 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 Series A Notes. A holder
that sells its Series A 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).
If, on or prior to 45 days following the Issue Date, an Exchange Offer
Registration Statement has not been filed with the Commission, additional
interest will accrue on the Series A Notes from and including the 46th day
following the Issue Date until, but excluding, the date such registration
statement is filed. In addition, if, on or prior to 120 days following the
Issue Date, such Exchange Offer Registration Statement is not declared
effective, additional interest will accrue on the Series A Notes from and
including the 121st day following the Issue Date until, but excluding, the
date such registration statement is declared effective. Further, if, on or
prior to 150 days following the Issue Date, the Exchange Offer is not
consummated, additional interest will accrue on the Series A Notes from and
including the 151st day following the Issue Date until, but excluding, the
date of consummation of the Exchange Offer. If a Shelf Registration Event (as
defined in the Registration Rights Agreement) shall have occurred, and if, by
150 days after the Issue Date, a Shelf Registration Statement is not declared
effective, additional interest will accrue on the Series A Notes not exchanged
as a result of such law or interpretation from and including the 151st day
after the Issue Date, until the effective date of the Shelf Registration
Statement. In each case, additional interest will be payable semi-annually in
arrears, with the first semiannual payment due on the first interest payment
date in respect of the Series A Notes following the date from which additional
interest begins to accrue, and will accrue at a rate per annum equal to an
additional one-quarter of one percent (0.25%) of the principal amount of the
Series A Notes upon the occurrence of each such circumstance, which rate will
increase by one-quarter of one percent (0.25%) for each 90-day period that
such additional interest continues to accrue under any such circumstance, with
an aggregate maximum increase in the interest rate per annum equal to one
percent (1.00%).
If applicable, in the event that the Shelf Registration Statement ceases to
be effective prior to the third anniversary of the Issue Date for a period in
excess of 45 days, whether or not consecutive, in any given year, then the
interest rate borne by the Series A Notes shall increase by an additional one-
quarter of one percent (0.25%) per annum on the 46th day in the applicable
year such Shelf Registration Statement ceases to be effective. Such interest
rate will increase by an additional one-quarter of one percent (0.25%) per
annum for each additional 90 days that such Shelf Registration Statement is
not effective, subject to the same aggregate maximum increase in the interest
rate per annum of one percent (1.00%) referred to above. Upon the filing of
the Exchange Offer Registration Statement, the effectiveness of the Exchange
Offer Registration Statement, or the consummation of the Exchange Offer, as
the case may be, the interest rate borne by the Notes will be reduced by the
full amount of any such increase to the extent that such increase related to
the failure of any such event to have occurred. Upon the effectiveness of a
Shelf Registration Statement, the interest rate borne by the Series A Notes
shall be reduced to the original interest rate of the Series A Notes unless
and until increased as described above.
Any amounts of additional interest due as described above will be payable in
cash on the same interest payment dates as the Series A Notes.
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The summary herein 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 filed as an exhibit to the Exchange Offer Registration Statement
of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of Series A Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Series A Notes will not have any further registration rights, and such
Series A Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Series A Notes
could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series A
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Series B Notes in exchange for each $1,000 principal amount of outstanding
Series A Notes accepted in the Exchange Offer. Holders may tender some or all
of their Series A Notes pursuant to the Exchange Offer. However, Series A
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Series B Notes are the same as the form and terms
of the Series A Notes except that (i) the Series B Notes bear a "Series B"
designation and a different CUSIP Number from the Series A Notes, (ii) the
Series B Notes have been registered under the Securities Act and hence will
not bear legends restricting the transfer thereof and (iii) the holders of the
Series B Notes will not be entitled to certain rights under the Registration
Rights Agreement, which rights will terminate when the Exchange Offer is
terminated. The Series B Notes will evidence the same debt as the Series A
Notes and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $155,000,000 aggregate principal amount
of Series A Notes were outstanding. The Company has fixed the close of
business on , 1996 as the record date for the Exchange Offer for purposes
of determining the persons to whom this Prospectus and the Letter of
Transmittal will be mailed initially.
Holders of Series A Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Series A Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Series B Notes from the Company.
If any tendered Series A Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Series A Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Series A Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Series A
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
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In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series A Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE SERIES B NOTES
The Series B Notes will bear interest from their date of issuance. Holders
of Series A Notes that are accepted for exchange will receive accrued interest
thereon to, but not including, the date of issuance of the Series B Notes.
Such interest will be paid in cash with the first interest payment on the
Series B Notes on November 15, 1996. Interest on the Series A Notes accepted
for exchange will cease to accrue upon issuance of the Series B Notes.
Interest on the Series B Notes is payable semi-annually on each May 15 and
November 15, commencing on November 15, 1996.
PROCEDURES FOR TENDERING
Only a holder of Series A Notes may tender such Series A Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder much complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal and
mail or otherwise deliver such Letter of Transmittal, or such facsimile,
together with the Series A Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
To be tendered effectively, the Series A Notes, Letter of Transmittal and
other required documents much be completed and received by the Exchange Agent
at the address set forth below under "--Exchange Agent" prior to 5:00 p.m.,
New York City time, on the Expiration Date. Delivery of the Series A Notes may
be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the
Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Company
the representations set forth above in the second paragraph under the heading
"--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute the agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
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Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Series A Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantee must be by a member firm of the Medallion System (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Series A Notes listed therein, such Series A Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Series A
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Series A Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Series A Notes at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Series A Notes by causing such Book-Entry
Transfer Facility to transfer such Series A Notes into the Exchange Agent's
account with respect to the Series A Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
Series A Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Series A Notes and withdrawal of tendered
Series A Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Series A Notes not properly tendered or any Series
A Notes the Company's acceptance of which would, in the opinion of counsel for
the Company, be unlawful. The Company also reserves the right in its sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Series A Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Series A Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Series A Notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification.
Tenders of Series A Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Series A Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering holders, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration
Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (i) whose Series A Notes
are not immediately available, (ii) who cannot deliver their Series A Notes,
the Letter of Transmittal or any other required documents
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to the Exchange Agent or (iii) who cannot complete the procedures for book-
entry transfer, prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate
number(s) of such Series A Notes and the principal amount of Series A
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Series A
Notes (or a confirmation of book-entry transfer of such Series A Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility),
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Series A Notes in proper form for transfer (or a confirmation
of book-entry transfer of such Series A Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and all other documents
required by the Letter of Transmittal are received by the Exchange
Agent within five New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Series A Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Series A Notes to be
withdrawn (the "Depositor"), (ii) identify the Series A Notes to be withdrawn
(including the certificate number(s) and principal amount of such Series A
Notes, or, in the case of Series A Notes transferred by book-entry transfer,
the name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Series A Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Series A Notes register the transfer of such Series A Notes into the name of
the person withdrawing the tender and (iv) specify the name in which any such
Series A Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Series A Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer, and no Series B Notes will be issued with respect thereto
unless the Series A Notes so withdrawn are validly retendered. Any Series A
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Series A Notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Series B Notes for, any Series
A Notes, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Series A Notes, if:
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(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company; or
(b) any law, rule, regulation or interpretation by the staff of the
Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the
Company to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer and as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Series A Notes and
return all tendered Series A Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Series A Notes tendered prior to the expiration
of the Exchange Offer, subject, however, to the rights of holders to withdraw
such Series A Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Series A Notes which have not been withdrawn.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
For Information by Telephone: (212) 858-2103
By Registered or Certified Mail: By Hand or Overnight Delivery
Service:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street New York, New York
Bowling Green Station 10004
New York, New York 10274-0084 Attention: Securities Processing
Attention: Reorganization Operations Window,
Department Subcellar One (SC-1)
By Facsimile Transmission: (212) 858-2611
(Facsimile Confirmation) (212) 858-2103
Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.
Delivery to an address or transmission of instructions via facsimile other
than as set forth above will not constitute a valid delivery.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses includes fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Series B Notes will be recorded at the same carrying value as the Series
A Notes as reflected in the Company's accounting records on the date of
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be
amortized over the term of the Series B Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series A Notes that are not exchanged for Series B Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) so long as the Series A Notes are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person inside the United
States whom the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A, (iii) in accordance with Rule 144 under the Securities Act, or
pursuant to another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel reasonably acceptable to
the Company), (iv) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act or
(v) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALE OF THE SERIES B NOTES
With respect to resales of Series B Notes, based on no-action letters issued
by the staff of the Commission to third parties, the Company believes that a
holder or other person who receives Series B Notes, whether or not such person
is the holder (other than a person that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act), who receives Series
B Notes in exchange for Series A Notes in the ordinary course of business and
who is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of the Series B Notes, will be allowed to resell the Series B
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Series B Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if
any holder acquires Series B Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Series B Notes, such
holder cannot rely on the position of the staff of the Commission enunciated
in such no-action letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. Further, each Participating Broker-Dealer that receives Series B
Notes for its own account in exchange
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for Series A Notes, where such Series A Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Series B Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the Series B Notes are to
be acquired by the holder or the person receiving such Series B Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging, and does not intend to engage, in the
distribution of the Series B Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Series B Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act and (v) the holder or any such other person acknowledges
that if such holder or other person participates in the Exchange Offer for the
purpose of distributing the Series B Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Series B Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives a Series B Note for its own account in exchange for Series A Notes
must acknowledge that it will deliver a prospectus in connection with any
resale of such Series B Notes. For a description of the procedures for such
resales by Participating Broker-Dealers, see "Plan of Distribution."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is intended only as a
summary and does not purport to be a complete analysis or listing of all
potential tax considerations that may be relevant and is generally limited to
those persons who are original purchasers of the Notes and who hold the Notes
as capital assets ("Holders"). The discussion does not include special rules
that may apply to certain Holders (including insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign persons and
persons in special situations such as those who hold the Notes as part of a
straddle, hedge or conversion transaction), and does not address the tax
consequences of the laws of any state, locality or foreign jurisdiction. The
discussion (including the opinion of counsel described below) is based upon
currently existing provisions of the Internal Revenue Code of 1986, as
amended, existing and proposed Treasury regulations promulgated thereunder and
current administration rulings and court decisions. All of the foregoing are
subject to change and any such change could affect the continuing validity of
this discussion.
THE FOLLOWING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF SUCH
HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF
NOTES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES TO SUCH HOLDER OF THE OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
Eckert Seamans Cherin & Mellott, counsel to the Company, has advised the
Company that, in its opinion, the exchange of the Series A Notes for Series B
Notes pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Series B Notes will not be considered
to differ materially in kind or extent from the Series A Notes. Rather, the
Series B Notes received by a holder will be treated as a continuation of the
Series A Notes in the hands of such holder. As a result, there will be no
federal income tax consequences to holders exchanging Series A Notes for
Series B Notes pursuant to the Exchange Offer. Therefore, the same tax
consequences apply to the Series B Notes as are applicable to the Series A
Notes.
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Series B Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Series B
Notes received in exchange for Series A Notes where such Series A Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the date of this
Prospectus, it will make this Prospectus, as amended or supplemented,
available to any Participating Broker-Dealer for use in connection with any
such resale. In addition, until , 1996, all dealers effecting
transactions in the Series B Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of Series B Notes
by Participating Broker-Dealers. Series B Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Series B 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 at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Series B Notes. Any Participating
Broker-Dealer that resells the Series B 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 Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Series B Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
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LEGAL MATTERS
Certain legal matters with respect to the Series B Notes offered hereby will
be passed upon for the Company by Eckert Seamans Cherin & Mellott, Pittsburgh,
Pennsylvania. Stephen I. Burr, a partner in such firm, is the Secretary of
each of PAI, Park Communications, the Company and each of its subsidiaries and
Park Broadcasting and each of its subsidiaries.
EXPERTS
The consolidated balance sheets as of December 31, 1995 and the consolidated
statements of income and retained earnings and cash flows for the period from
May 11, 1995 to December 31, 1995 and for the period from January 1, 1995 to
May 10, 1995 of Park Newspapers, Inc. and Subsidiaries and Park
Communications, Inc. and Subsidiaries, included in this Prospectus, have been
included herein in reliance on the reports, which include a paragraph
explaining certain financial reporting implications related to the
Acquisition, of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Park Newspapers, Inc.
and Subsidiaries and Park Communications, Inc. and Subsidiaries as of December
31, 1994 and for the two years then ended, appearing in this Prospectus and
the Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the Series
B Notes offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements contained in this Prospectus as to the
contents of any contract, agreement or any other document referred to are not
necessarily complete. With respect to each such contact, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to such exhibit to the Registration Statement for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
The Registration Statement can be inspected and copied at the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20459, and at the Commission's regional offices at Seven
World Trade Center, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the
Registration Statement can be obtained from the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20459,
at prescribed rates.
The Company intends, and is required by the terms of the Indenture, to
furnish the holders of the Series B Notes with annual reports containing
consolidated financial statements audited by its independent certified public
accountants and with quarterly reports containing unaudited condensed
consolidated financial statements for each of the first three quarters of each
fiscal year.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
Reports of Independent Accountants................................... F-2, 3
Consolidated Balance Sheets as of December 31, 1995 and 1994......... F-4
Consolidated Statements of Income and Retained Earnings for the
period from May 11, 1995 to December 31, 1995, the period from
January 1, 1995 to May 10, 1995 and the years ended December 31,
1994 and 1993....................................................... F-5
Consolidated Statements of Cash Flows for the period from May 11,
1995 to December 31, 1995, the period from January 1, 1995 to May
10, 1995 and the years ended December 31, 1994 and 1993............. F-6
Notes to Consolidated Financial Statements........................... F-7
Unaudited Interim Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995.................................................. F-14
Condensed Consolidated Statements of Income and Retained Earnings
for the three months ended March 31, 1996 and March 31, 1995....... F-15
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and March 31, 1995............................ F-16
Notes to Condensed Consolidated Unaudited Financial Statements...... F-17
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
Reports of Independent Accountants................................... F-18, 19
Consolidated Balance Sheets as of December 31, 1995 and 1994......... F-20
Consolidated Statements of Income and Retained Earnings for the
period from May 11, 1995 to December 31, 1995, the period from
January 1, 1995 to May 10, 1995 and the years ended December 31,
1994 and 1993....................................................... F-21
Consolidated Statements of Cash Flows for the period from May 11,
1995 to December 31, 1995, the period from January 1, 1995 to May
10, 1995 and the years ended December 31, 1994 and 1993............. F-22
Notes to Consolidated Financial Statements........................... F-23
Unaudited Interim Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995.................................................. F-34
Condensed Consolidated Statements of Income and Retained Earnings
for the three months ended March 31, 1996 and March 31, 1995....... F-35
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and March 31, 1995............................ F-36
Notes to Condensed Consolidated Unaudited Financial Statements...... F-37
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Park Newspapers, Inc.
We have audited the accompanying consolidated balance sheet of Park
Newspapers, Inc. and Subsidiaries (a wholly-owned subsidiary of Park
Communications, Inc.) as of December 31, 1995 and the related consolidated
statements of income and retained earnings and cash flows for the period from
May 11, 1995 to December 31, 1995 and for the period from January 1, 1995 to
May 10, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As discussed in Note 2 to the consolidated financial statements, the Company
was acquired by Park Acquisitions, Inc. on May 11, 1995 in a transaction
accounted for as a purchase. The purchase price and an allocable portion of
debt have been "pushed down" to the financial statements of the Company and as
a result, the post-acquisition consolidated financial statements are not
comparable to the pre-acquisition consolidated financial statements.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Park
Newspapers, Inc. and Subsidiaries as of December 31, 1995 and the consolidated
results of their operations and their cash flows for the period from May 11,
1995 to December 31, 1995 and for the period from January 1, 1995 to May 10,
1995 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Lexington, Kentucky
February 2, 1996
F-2
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Board of Directors
Park Newspapers, Inc.
We have audited the accompanying consolidated balance sheet of Park
Newspapers, Inc. and subsidiaries (a wholly-owned subsidiary of Park
Communications, Inc.) as of December 31, 1994 and the related consolidated
statements of income and retained earnings, and cash flows for each of the two
years in the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Park
Newspapers, Inc. and subsidiaries at December 31, 1994 and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the Company
changed its method of accounting for income taxes, as required by FASB
Statement No. 109, "Accounting for Income Taxes."
Ernst & Young LLP
Syracuse, New York
January 27, 1995
F-3
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS (NOTE 6)
Current Assets:
Cash.................................................. $ 710 $ 1,937
Accounts receivable, less allowance for doubtful ac-
counts of $289 in 1995
and $314 in 1994..................................... 7,563 6,691
Inventory............................................. 1,089 1,000
Consulting/non-compete contracts...................... -- 763
Other................................................. 912 508
-------- --------
Total current assets................................. 10,274 10,899
-------- --------
Property, Plant & Equipment:
Land and improvements................................. 3,481 2,269
Buildings and leasehold improvements.................. 9,939 15,731
Newspaper equipment................................... 12,045 23,516
Furniture and fixtures................................ 1,879 3,051
Autos and trucks...................................... 449 918
-------- --------
27,793 45,485
Less accumulated depreciation and amortization........ (1,562) (24,266)
-------- --------
26,231 21,219
Intangible assets, net................................. 183,029 57,472
Consulting/non-compete contracts....................... -- 3,267
Other assets........................................... 204 203
-------- --------
Total assets......................................... $219,738 $ 93,060
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt.................. $ 126 $ 392
Accounts payable...................................... 900 718
Consulting/non-compete contracts...................... 787 815
Interest.............................................. 7,642 9
Income taxes.......................................... -- 63
Accrued liabilities................................... 1,072 1,209
Deferred income....................................... 3,157 2,909
-------- --------
Total current liabilities............................ 13,684 6,115
Long-term debt......................................... 168,305 360
Consulting/non-compete contracts....................... 2,778 3,582
Deferred income taxes.................................. 41,972 1,490
-------- --------
Total liabilities.................................... 226,739 11,547
-------- --------
Commitments
Stockholder's Equity:
Common Stock-no par value:
Authorized 44,150 shares
Issued and outstanding 44,150 shares in 1995 and
1994................................................ 4,150 4,150
Paid in capital....................................... (4,150) 46,665
Intercompany receivables from parent.................. (3,355) (47,192)
Retained earnings..................................... (3,646) 77,890
-------- --------
Total stockholder's equity........................... (7,001) 81,513
-------- --------
Total liabilities and stockholder's equity........... $219,738 $ 93,060
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DEC.
PRO FORMA PERIOD 31
----------- -------------------- ------------------
NEW PARK OLD PARK OLD PARK
--------- --------- ------------------
05/11/95- 01/01/95-
1995 12/31/95 05/10/95 1994 1993
----------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Newspaper revenue......... $ 78,904 $ 51,723 $ 27,181 $ 76,810 $ 84,751
-------- -------- -------- -------- --------
Operating expenses:
Cost of sales............. 33,810 20,783 13,027 32,364 39,221
Selling, general and ad-
ministrative............. 21,869 15,107 6,762 22,216 27,155
-------- -------- -------- -------- --------
55,679 35,890 19,789 54,580 66,376
-------- -------- -------- -------- --------
Operating income before
depreciation
and amortization....... 23,225 15,833 7,392 22,230 18,375
-------- -------- -------- -------- --------
Depreciation and amortiza-
tion:
Depreciation.............. 2,537 1,621 833 2,260 2,577
Amortization.............. 3,688 2,356 524 1,775 2,395
Amortization of excess of
cost over net assets
acquired................. 1,942 1,241 664 1,781 1,923
-------- -------- -------- -------- --------
8,167 5,218 2,021 5,816 6,895
-------- -------- -------- -------- --------
Operating income........ 15,058 10,615 5,371 16,414 11,480
Interest expense........... (24,810) (15,851) (23) (76) (177)
Interest income............ 291 186 3 11 45
Other expense.............. (511) (26) (485) (832) (204)
-------- -------- -------- -------- --------
(Loss) income before in-
come taxes............. (9,972) (5,076) 4,866 15,517 11,144
Provision (benefit) for in-
come taxes................ (2,792) (1,430) 2,222 7,007 5,335
-------- -------- -------- -------- --------
Net (loss) income....... $ (7,180) (3,646) 2,644 8,510 5,809
========
Retained earnings, begin-
ning of period............ -- 77,890 69,380 63,571
-------- -------- -------- --------
Retained earnings, end of
period.................... $ (3,646) $ 80,534 $ 77,890 $ 69,380
======== ======== ======== ========
Loss per share............. $(162.63) $ (82.58)
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DEC.
PERIOD 31
-------------------- ----------------
NEW PARK OLD PARK OLD PARK
--------- --------- ----------------
05/11/95- 01/01/95-
12/31/95 05/10/95 1994 1993
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Operating Activities:
Net (loss) income...................................................................... $ (3,646) $ 2,644 $ 8,510 $ 5,809
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization......................................................... 5,218 2,021 5,816 6,895
Amortization of consulting/non-compete contracts
included in operating expenses....................................................... -- 292 1,142 1,161
Payments on consulting/non-compete contracts.......................................... (513) (320) (869) (1,175)
Provision for losses on accounts receivable........................................... 127 85 292 347
Provision for deferred income taxes................................................... (1,430) (122) (59) (326)
Loss on sale of property, plant and equipment......................................... -- 199 116 34
Changes in operating assets and liabilities net of effects
from the disposal of companies:
Accounts receivable.................................................................. (182) (902) 488 (524)
Inventory and other assets........................................................... (628) 134 488 625
Accounts payable and accrued liabilities............................................. 5,057 984 (6,214) 995
Deferred income...................................................................... (84) 332 128 169
-------- ------- ------- -------
Net cash provided by operating activities........................................... 3,919 5,347 9,838 14,010
-------- ------- ------- -------
Investing Activities:
Purchases of property, plant and equipment............................................. (1,691) (431) (3,458) (1,512)
Proceeds from sale of property, plant and equipment.................................... 8 -- 202 15
Proceeds from sales of companies....................................................... -- -- -- 6,336
-------- ------- ------- -------
Net cash provided by (used in) investing activities................................. (1,683) (431) (3,256) 4,839
-------- ------- ------- -------
Financing Activities:
Additional loan proceeds............................................................... 1,447 -- -- --
Principal payments on long-term debt................................................... (1,185) (122) (451) (1,580)
Net intercompany transfers to parent................................................... (3,355) (5,164) (6,400) (18,636)
-------- ------- ------- -------
Net cash used in financing activities............................................... (3,093) (5,286) (6,851) (20,216)
-------- ------- ------- -------
Decrease in cash...................................................................... (857) (370) (269) (1,367)
Cash beginning of period................................................................ 1,567 1,937 2,206 3,573
-------- ------- ------- -------
Cash end of period...................................................................... $ 710 $ 1,567 $ 1,937 $ 2,206
- --------------------------------------------------
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Park Newspapers, Inc. (the Company or PNI), through wholly owned subsidiary
companies, publishes paid circulation newspapers and non-paid controlled
distribution publications (shoppers). Substantially all of the Company's
newspaper revenues are derived from advertising and circulation.
Advertising rates and rate structures vary among the publications and are
based, among other things, on circulation and type of advertising.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. The Company, which is
a wholly owned subsidiary of Park Communications, Inc. (Parent or PCI),
became an indirect wholly owned subsidiary of Park Acquisitions, Inc. (PAI)
(see Note 2) as of May 11, 1995. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions (such as estimated lives of assets and allowance for doubtful
accounts) that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
Inventory Valuation
Inventories, consisting primarily of newsprint, are stated at the lower of
cost (primarily last-in; first-out method) or market. The effect of using
the last-in; first-out method (compared with the first-in; first-out
inventory method) is not considered significant.
Property, Plant, Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation for
financial reporting purposes is provided on the straight-line method over
the estimated useful lives of the assets except for leasehold improvements,
which are amortized on the straight-line method over the lease period or
the lives of the improvements, whichever is shorter. Accelerated methods
are used for income tax reporting purposes whenever available. Deferred
income taxes are provided for this temporary difference between financial
and income tax reporting methods.
Consulting/Non-Compete Contracts
Certain subsidiary companies have consulting/non-compete contracts expiring
through 2010. Prior to May 11, 1995, costs were amortized on a straight-
line basis over the terms of the related agreements. In connection with the
Acquisition, separate value was not assigned to those contracts. New Park
would not have entered into such contracts at the date of Acquisition (see
Note 2).
Intangible Assets
Intangible assets are stated at cost and consist primarily of advertising
contracts, subscription lists and excess of cost over net assets acquired.
Intangible assets are being amortized by the straight-line method over
estimated lives ranging primarily from 7 to 40 years.
F-7
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Carrying Value of Long Lived Assets
The carrying value of long lived assets is reviewed if the facts and
circumstances suggest that they may be impaired. If this review indicates
that such assets carrying value will not be recoverable, as determined
based on future expected, undiscounted cash flows, the carrying value is
reduced to fair market value.
Income Taxes
Effective January 1, 1993 the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
FASB Statement No. 109, "Accounting for Income Taxes." The cumulative
effect of the accounting change was not material to net income for 1993.
Deferred Income
Deferred income is recorded on subscriptions prepaid by customers. Such
income is recognized when earned.
Intercompany Accounts
The amount receivable from the Parent included in the balance sheet
represents a net balance as the result of various transactions between the
Company and its Parent. Since May 11, 1995 interest charges have been
associated with the account balance. The balance is primarily the result of
the Company's participation in the Parent's central cash management
program, wherein some of the Company's cash receipts are remitted to the
Parent and some of the cash disbursements are funded by the Parent. Other
transactions include the transfer to the Parent for payment of the
Company's prior year federal income tax liability, and miscellaneous other
administrative expenses incurred by the Parent on behalf of the Company.
Intercompany Expense Allocation
The Company's Parent provides various administrative services to the
Company including legal assistance, acquisitions analysis, and marketing
and advertising services. It is the Parent's policy to charge these
expenses and all other operating expense, on both a direct and indirect
cost basis. These expenses incurred by the Parent and allocated to the
Company (which are included in operating expenses) were $1,416,000 for the
period May 11 to December 31, 1995, $801,000 for the period January 1 to
May 10, 1995, $1,988,000 in 1994 and $2,102,000 in 1993.
2.ACQUISITION AND BASIS OF PRESENTATION
On May 11, 1995, the Company's parent, PCI, was sold to PAI (the
Acquisition), a private investment concern (organized August 4, 1994) owned
by investors Gary B. Knapp and the Tomlin Family Trust II, of which Donald
R. Tomlin, Jr. is a trustee. A significant portion of the purchase price
was paid from the proceeds of a $573,427,000 loan made to the acquiror, the
remainder of the purchase price ($138,000,000) was derived from existing
cash-on-hand at PCI at closing of the Acquisition.
As a consequence of the change in ownership of PCI, under generally
accepted accounting principles, the Company is deemed, for financial
reporting purposes, to have become a new reporting entity effective with
the change in ownership. The portion of the debt allocable to the Company
has been "pushed down" to the financial statements of the Company, and the
assets and liabilities have been adjusted to reflect their fair market
value as of May 11, 1995.
The accompanying financial statements reflect the operations of PNI prior
to the acquisition on May 11, 1995 (Old Park). Subsequent to that date the
financial statements reflect the operations of the Company utilizing the
new basis accounting (New Park).
F-8
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The pro forma income statement for 1995 reflects the operations of the
Company under the new basis of accounting and assumes the transaction
closed on January 1, 1995. Depreciation, amortization and interest expense
reflect those costs that would be charged to operations for a full year
based on the revised balance sheet amounts at May 11, 1995 for property,
plant and equipment, intangible assets and the long-term debt "push down"
to PNI. Pro forma income tax benefit has been computed at an effective rate
of 28%.
Following is a summary of adjustments made to historical costs of the
assets and liabilities of the Company as of May 10, 1995, as a result of
applying "push down" acquisition accounting at that date to arrive at the
new basis for the Company.
<TABLE>
<CAPTION>
MAY 10, 1995
--------------------------------------
PARK NEWSPAPERS, INC.
--------------------------------------
WITHOUT MERGER WITH MERGER
ADJUSTMENTS ADJUSTMENTS
-------------- MERGER -----------
OLD PARK ADJUSTMENTS NEW PARK
-------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets
Cash................................ $ 1,567 -- $ 1,567
Accounts receivable, net............ 7,508 -- 7,508
Inventory........................... 972 -- 972
Consulting/non-compete contracts.... 730 $ (730) --
Other............................... 406 -- 406
------- -------- --------
Total current assets.............. 11,183 (730) 10,453
------- -------- --------
Property, plant & equipment.......... 42,092 (15,926) 26,166
Less accumulated depreciation and
amortization...................... 21,474 (21,474) --
------- -------- --------
Net property, plant & equipment..... 20,618 5,548 26,166
Intangible assets, net............... 56,269 130,357 186,626
Consulting/non-compete contracts..... 3,009 (3,009) --
Other assets......................... 199 -- 199
------- -------- --------
$91,278 $132,166 $223,444
======= ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term
debt............................... $ 630 -- $ 630
Accounts Payable.................... 1,540 -- 1,540
Consulting/non-compete contracts.... 836 -- 836
Interest............................ 20 -- 20
Income taxes........................ 487 -- 487
Accrued liabilities................. 1,019 -- 1,019
Deferred income..................... 3,241 -- 3,241
------- -------- --------
Total current liabilities.......... 7,773 -- 7,773
Long term debt....................... -- $167,539 167,539
Consulting/non-compete contracts..... 3,241 -- 3,241
Deferred income taxes................ 1,271 43,620 44,891
------- -------- --------
Total liabilities................. 12,285 211,159 223,444
------- -------- --------
Stockholder's Equity:
Common stock........................ 4,150 -- 4,150
Paid in capital..................... 46,665 (50,815) (4,150)
Intercompany receivables from par-
ent................................ (52,356) 52,356 --
Retained earnings................... 80,534 (80,534) --
------- -------- --------
Total stockholder's equity........... 78,993 (78,993) --
------- -------- --------
$91,278 $132,166 $223,444
======= ======== ========
</TABLE>
F-9
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3.LOSS PER SHARE
Earnings per share of common stock is computed on the weighted average
number of common shares outstanding during each period (dollars and shares
in thousands except per share amounts):
<TABLE>
<CAPTION>
PRO FORMA NEW PARK
----------- -----------
NEW PARK PERIOD
----------- -----------
05/10/95-
1995 12/31/95
----------- -----------
(UNAUDITED)
-----------
<S> <C> <C>
Average shares...................................... 44 44
========= ========
Net loss............................................ $ (7,180) $ (3,646)
========= ========
Per share amount.................................... $ (162.63) $ (82.58)
========= ========
Earnings per share has not been shown prior to May 11, 1995 because such
information is not meaningful.
4.INTANGIBLE ASSETS
Intangible assets are comprised of the following (dollars in thousands):
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
Advertising contracts and subscription lists........ $ 109,303 $ 35,236
Other intangibles................................... -- 3,960
Excess of cost over net assets acquired............. 77,323 72,226
--------- --------
Total intangibles................................. 186,626 111,422
Less accumulated amortization....................... 3,597 53,950
--------- --------
$ 183,029 $ 57,472
========= ========
5.DISPOSITIONS AND DISCONTINUED PUBLICATION
On December 31, 1993, the Company sold newspaper publications in 13 of its
smaller markets. Of these, 11 were daily newspapers, all with paid
circulation under 6,000. The impact of the sale of these publications was
not material to net income in 1993. In 1995, the Company discontinued its
Research Triangle Park, Raleigh, North Carolina publication. The operating
losses for these newspaper publications (before depreciation and
amortization) were $145,000 in 1995 (pro forma unaudited), $235,000 in 1994
and $273,000 in 1993.
6.LONG-TERM DEBT
The Company's long-term debt is comprised of the following:
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Existing Credit Agreement........................... $ 168,065 --
Subordinated notes of certain newspaper subsidiaries
due to former owners............................... 360 $ 744
Promissory notes.................................... 6 8
--------- --------
Total debt.......................................... 168,431 752
Less:Current maturities of long-term debt........... 126 392
--------- --------
Long-term debt...................................... $ 168,305 $ 360
========= ========
</TABLE>
F-10
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On May 11, 1995, PAI entered into an agreement (Existing Credit Agreement)
to borrow up to $593.8 million, the proceeds of which were utilized to
finance the Acquisition and pay related expenses. The loan required that
the debt be directly assumed by PCI and its subsidiary companies and that
they be jointly and severally liable for the loan agreement. PAI, PCI and
PCI's subsidiaries' assets are pledged as collateral for the loan made
pursuant to the Existing Credit Agreement and PCI and its subsidiaries'
cash flow is utilized for debt service. Interest accrues at a base interest
rate (Base Rate) of 9.5% per annum, an additional interest rate (Additional
Rate) of 1.0% per annum, plus a yield maintenance interest rate (YMI) of
3.0% per annum. The Base Rate and Additional Rate interest are payable on
October 1 and April 1. Principal payments are required only to the extent
that PAI's cash balance, as defined in the Existing Credit Agreement,
exceeds $8.0 million (declining to $6.0 million at October 1, 1997) at each
interest payment date through October 1, 1997. Following is a table that
outlines these requirements:
<TABLE>
<CAPTION>
INTEREST PAYMENT DATE CASH RESERVE AMOUNT
--------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
October 1, 1995................................... $8,000
April 1, 1996..................................... 8,000
October 1, 1996................................... 7,000
April 1, 1997..................................... 7,000
October 1, 1997 and thereafter.................... 6,000
</TABLE>
Prepayment, in part or wholly, can be made at any time without penalty.
Ninety percent (90%) of the after tax proceeds as defined in the Existing
Credit Agreement of any asset sales of the Company are required to be
applied to the principal.
The YMI, which the Company is accruing, is payable upon achievement by PAI,
on or prior to May 11, 1998, of a Loan to Value Ratio (LTV) of 70% or less
(as defined in the Existing Credit Agreement). If the Company elects not to
pay the YMI when payable, then PAI would be required to issue to the lender
an exercisable warrant having the right to acquire non-voting common stock
in PAI in a sufficient amount to equal an 80% shareholders' equity
interest. On the earliest date that the Debt Service Coverage Ratio (DSC)
as defined in the Existing Credit Agreement is met, and either the LTV
ratio is met or by reason of non-payment of the YMI, the warrant is
required to be issued, the loan will become fully amortizable in equal
annual amounts over the remaining term ending on a maturity date of April
15, 2015 with interest at 10.5% per annum.
Substantially all of the Company's and its subsidiaries' tangible and
intangible assets are collateralized under the Existing Credit Agreement.
The Existing Credit Agreement contains covenants which, among other things,
limit or restrict payment of cash dividends, additional debt, repurchase of
common stock, capital expenditures, sales of the Company's common stock,
mergers, consolidations and sales of the Company's assets.
The subordinated notes are payable in various installments through 1998
with interest primarily from 6% to 9%. The promissory notes are payable in
various installments through 1998 with interest at 8%.
Cash payments of interest were $8,255,974 for the period of May 11 to
December 31, 1995, $43,552 for the period of January 1 to May 10, 1995,
$97,930 in 1994 and $185,041 in 1993.
F-11
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate annual maturities on long-term debt, assuming the Company
meets the LTV on May 11, 1998, payable over the next five years are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1996.............................................................. $ 126
1997.............................................................. 120
1998.............................................................. 52,155
1999.............................................................. 2,858
2000.............................................................. 3,166
</TABLE>
The fair value of the Company's long-term debt approximates $180,405,000.
7.INCOME TAXES
The Company determines its income tax expense on the separate return
method. Federal and state income tax expense (benefit) is summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
PERIOD YEAR ENDED DEC. 31
------------------- --------------------
NEW PARK OLD PARK OLD PARK
--------- --------- --------------------
05/11/95- 01/01/95-
12/31/95 05/10/95 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Federal:
Current.......................... -- $1,904 $ 5,662 $ 4,466
Deferred......................... $(1,208) (106) (58) (284)
------- ------ --------- ---------
$(1,208) 1,798 5,604 4,182
------- ------ --------- ---------
State:
Current.......................... -- 440 1,404 1,195
Deferred......................... (222) (16) (1) (42)
------- ------ --------- ---------
(222) 424 1,403 1,153
------- ------ --------- ---------
Total income tax expense (bene-
fit)........................... $(1,430) $2,222 $ 7,007 $ 5,335
======= ====== ========= =========
</TABLE>
The items comprising the differences in taxes on income computed at the
U.S. statutory rate and the amount provided by the Company are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DEC.
PERIOD 31
-------------------- ---------------
NEW PARK OLD PARK OLD PARK
--------- --------- ---------------
05/11/95- 01/01/95-
12/31/95 05/10/95 1994 1993
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Computed tax expense at U.S. statutory
rate................................... $ (1,777) $ 1,703 $ 5,431 $ 3,900
Increase in tax expense resulting from:
State income taxes, net of federal in-
come tax.............................. (144) 276 912 749
Amortization not tax deductible........ 434 231 623 673
Miscellaneous, net..................... 57 12 41 13
-------- ------- ------- -------
Total income tax expense (benefit).... $ (1,430) $ 2,222 $ 7,007 $ 5,335
======== ======= ======= =======
</TABLE>
F-12
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
Components of deferred taxes:
Property, plant & equipment, intangible assets...... $ 42,742 $ 1,490
Net operating loss carry forwards................... (770) --
Allowance for doubtful accounts and other........... (77) (96)
-------- -------
Net deferred tax liabilities....................... $ 41,895 $ 1,394
======== =======
Classification of deferred taxes:
Non-current liabilities............................. $ 41,972 $ 1,490
Current assets...................................... (77) (96)
-------- -------
$ 41,895 $ 1,394
======== =======
</TABLE>
Total cash payments of state income taxes were $135,000 for the period May
11 through December 31, 1995, $352,000 for the period January 1 through May
10, 1995, $1,391,143 in 1994 and $1,212,969 in 1993. Federal tax payments
are made by the Parent (see Note 1).
8. LEASES
Certain operating facilities and equipment (see Note 9) are leased under
noncancellable operating agreements. Certain of the leases require the
Company or its subsidiaries to pay property taxes, insurance and
maintenance costs.
Lease expense related to the above and charged to operations was
approximately $135,380 for the period May 11 through December 31, 1995,
$76,519 for the period January 1 through May 10, 1995, $463,000 in 1994 and
$749,000 in 1993.
The aggregate minimum rentals through dates of expiration amount to
approximately $227,076 and the amounts payable over the next five years are
as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1996.............................................................. $112
1997.............................................................. 76
1998.............................................................. 36
1999.............................................................. 3
2000.............................................................. --
</TABLE>
9. RELATED PARTY TRANSACTIONS
In 1993 and 1994, the Company, in the ordinary course of business, leased
and rented certain operating facilities and equipment (included in Note 8)
from RHP Incorporated and its subsidiaries. RHP Incorporated is wholly
owned by the estate of Roy H. Park, formerly the Chairman of the Board of
PCI, who died on October 25, 1993. Such lease and rent payments were
$271,476 in 1994 and $527,949 in 1993. In connection with these operating
facilities, in 1994 the Company purchased five buildings from RHP
Incorporated and its subsidiaries at the appraised fair market value of
$600,000 and such lease and rent payments ceased as of the date of
purchase.
F-13
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
-------- -----------
1996 1995
-------- -----------
ASSETS
<S> <C> <C>
Current Assets:
Cash................................................. $ 762 $ 710
Accounts receivable, less allowance for doubtful
accounts of $340 in 1996 and $314 in 1995............. 7,054 7,563
Inventory............................................ 919 1,089
Other................................................ 399 912
-------- --------
Total current assets................................ 9,134 10,274
-------- --------
Property, Plant & Equipment:
Property, plant & equipment.......................... 27,988 27,793
Less accumulated depreciation and amortization....... (2,316) (1,562)
-------- --------
25,672 26,231
Intangible assets, net................................ 181,857 183,029
Other assets.......................................... 304 204
-------- --------
$216,967 $219,738
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt................. $ 126 $ 126
Accounts payable..................................... 1,036 900
Consulting/non-compete contracts..................... 775 787
Interest............................................. 13,320 7,642
Income taxes......................................... 113 --
Accrued liabilities.................................. 1,113 1,072
Deferred income...................................... 3,265 3,157
-------- --------
Total current liabilities........................... 19,748 13,684
Long-term debt........................................ 168,089 168,305
Consulting/non-compete contracts...................... 2,596 2,778
Deferred income taxes................................. 42,011 41,972
-------- --------
Total liabilities................................... 232,444 226,739
-------- --------
Commitments
Stockholder's Equity:
Common Stock-no par value:
Authorized 44,150 shares, issued and outstanding
44,150 shares in 1996 and 1995........................ 4,150 4,150
Paid in capital...................................... (4,150) (4,150)
Intercompany receivables from Parent................. (9,340) (3,355)
Retained earnings (deficit).......................... (6,137) (3,646)
-------- --------
Total stockholder's equity............................ (15,477) (7,001)
-------- --------
$216,967 $219,738
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
F-14
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1996 1995
--------- ---------
NEW PARK OLD PARK
--------- ---------
<S> <C> <C>
Revenue:
Newspaper revenue..................................................................................... $ 18,342 $ 18,259
--------- ---------
Operating expenses:
Cost of sales......................................................................................... 8,584 8,043
Selling, general and administrative................................................................... 6,026 5,640
--------- ---------
14,610 13,683
--------- ---------
Operating income before depreciation and amortization................................................ 3,732 4,576
--------- ---------
Depreciation and amortization:
Depreciation.......................................................................................... 789 553
Amortization.......................................................................................... 900 375
Amortization of excess of cost over net assets acquired............................................... 482 392
--------- ---------
2,171 1,320
--------- ---------
Operating income..................................................................................... 1,561 3,256
Interest expense....................................................................................... (5,685) (17)
Interest income........................................................................................ 103 1
Other income........................................................................................... 82 15
--------- ---------
(Loss) income before income taxes.................................................................... (3,939) 3,255
Provision (benefit) for income taxes................................................................... (1,448) 1,473
--------- ---------
Net (loss) income...................................................................................... (2,491) 1,782
Retained earnings (deficit), beginning of period....................................................... (3,646) 77,890
--------- ---------
Retained earnings (deficit), end of period............................................................. $ (6,137) $ 79,672
========= =========
Loss per share......................................................................................... $ (56.42)
=========
Average shares......................................................................................... 44,150
--------------------------------------------------
=========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
F-15
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN
THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
1996 1995
--------- ---------
NEW PARK OLD PARK
--------- ---------
<S> <C> <C>
Operating Activities:
Net (loss) income...................................................................................... $ (2,491) $ 1,782
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization......................................................................... 2,171 1,320
Amortization of consulting/non-compete contracts included in operating expenses....................... -- 202
Payments on consulting/non-compete contracts.......................................................... (193) (212)
Provision for losses on accounts receivable........................................................... 129 43
Provision for deferred income taxes................................................................... (378) (121)
Loss (gain) on sale of property, plant and equipment.................................................. (158) 6
Changes in operating assets and liabilities:
Accounts receivable.................................................................................. 380 508
Inventory and other assets........................................................................... 471 227
Accounts payable and accrued liabilities............................................................. 6,385 7,174
Deferred income...................................................................................... 108 453
-------- ---------
Net cash provided by operating activities........................................................... 6,424 11,382
-------- ---------
Investing Activities:
Purchases of property, plant and equipment............................................................. (240) (336)
Proceeds from sale of property, plant, and equipment................................................... 169 --
Increase in long-term other assets..................................................................... (100) --
-------- ---------
Net cash (used in) investing activities............................................................... (171) (336)
-------- ---------
Financing Activities:
Principal payments on long-term debt................................................................... (216) (122)
Net intercompany transfers to Parent................................................................... (5,985) (11,466)
-------- ---------
Net cash (used in) financing activities.............................................................. (6,201) (11,588)
-------- ---------
Increase (decrease) in cash........................................................................... 52 (542)
Cash beginning of period................................................................................ 710 1,937
-------- ---------
Cash end of period...................................................................................... $ 762 $ 1,395
--------------------------------------------------
======== =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
F-16
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1.BASIS OF PRESENTATION
The accompanying condensed interim financial statements are unaudited;
however, in the opinion of the Company's management, all adjustments (which
comprise only normal and recurring accruals) necessary for a fair
presentation of the interim financial results have been included. The
results for the interim periods are not necessarily indicative of results
to be expected for the entire year. These financial statements and notes
should be read in conjunction with the Company's audited annual
consolidated financial statements for the year ended December 31, 1995.
2.SUBSEQUENT EVENTS
The Company sold $155.0 million in principal amount of 11 7/8% Senior
Notes due 2004 (the "Notes") on May 13, 1996 in one of a series of
transactions (the "Refinancing Transactions"), the purpose of which was to
refinance the indebtedness under a credit agreement among Park
Communications, Inc. ("Park Communications"), Park Acquisitions, Inc. and
the lenders thereunder, which was guaranteed by the Company. The
Refinancing Transactions consisted of (i) the sale of the Notes, (ii) the
establishment of and drawings under a Senior Credit Facility between Park
Communications and certain lenders in the amount of $58.0 million, (iii)
the sale, which was completed on May 13, 1996, of 80,000 Units consisting
of $80.0 million in principal amount of 13 3/4% Senior Pay-in-Kind Notes
due 2004 of Park Communications and Warrants to purchase 800,000 shares of
Common Stock of Park Communications, (iv) the sale, which was completed on
May 13, 1996, of $241.0 million in principal amount of 11 3/4% Senior Notes
due 2004 of Park Broadcasting, Inc. ("Park Broadcasting") and (v) the sale,
which was completed on March 25, 1996, of Park Broadcasting's WPAT-AM and
FM radio stations for aggregate gross proceeds of $103.0 million.
F-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Park Communications, Inc.
We have audited the accompanying consolidated balance sheet of Park
Communications, Inc. and Subsidiaries (a wholly-owned subsidiary of Park
Acquisitions, Inc.) as of December 31, 1995 and the related consolidated
statements of income and retained earnings and cash flows for the period from
May 11, 1995 to December 31, 1995 and for the period from January 1, 1995 to
May 10, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As discussed in Note 2 to the consolidated financial statements, the Company
was acquired by Park Acquisitions, Inc. on May 11, 1995 in a transaction
accounted for as a purchase. The purchase price and an allocable portion of
debt have been "pushed down" to the financial statements of the Company and as
a result, the post-acquisition consolidated financial statements are not
comparable to the pre-acquisition consolidated financial statements.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Park
Communications, Inc. and Subsidiaries as of December 31, 1995 and the
consolidated results of their operations and their cash flows for the period
from May 11, 1995 to December 31, 1995 and for the period from January 1, 1995
to May 10, 1995 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Lexington, Kentucky
February 2, 1996, except for Note
13, as to which the date is May 6,
1996
F-18
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Board of Directors
Park Communications, Inc.
We have audited the accompanying consolidated balance sheet of Park
Communications, Inc. and subsidiaries as of December 31, 1994 and the related
consolidated statements of income and retained earnings, and cash flows for
each of the two years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Park
Communications, Inc. and subsidiaries at December 31, 1994 and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the Company
changed its method of accounting for income taxes, as required by FASB
Statement No. 109, "Accounting for Income Taxes."
Ernst & Young LLP
Syracuse, New York
January 27, 1995
F-19
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS (NOTE 6)
Current Assets:
Cash.................................................................................................. $ 19,026 $ 84,069
Short-term investments................................................................................ -- 59,431
Accounts receivable, less allowance for doubtful accounts of $807 in 1995 and $1,598 in 1994.......... 26,544 22,235
Inventory............................................................................................. 1,265 1,170
Film contracts........................................................................................ 2,717 2,446
Consulting/non-compete contracts...................................................................... -- 825
Other................................................................................................. 2,844 3,597
-------- --------
Total current assets................................................................................. 52,396 173,773
-------- --------
Property, Plant & Equipment:
Land and improvements................................................................................. 13,475 13,431
Buildings and leasehold improvements.................................................................. 19,110 31,522
Newspaper equipment................................................................................... 12,037 23,752
Broadcast equipment................................................................................... 37,080 61,455
Furniture and fixtures................................................................................ 6,655 10,535
Autos and trucks...................................................................................... 2,106 3,956
-------- --------
90,463 144,651
Less accumulated depreciation and amortization........................................................ (6,068) (68,909)
-------- --------
84,395 75,742
Intangible assets, net................................................................................. 635,447 109,797
Film contracts......................................................................................... 2,787 2,777
Consulting/non-compete contracts....................................................................... -- 3,390
Other assets........................................................................................... 7,757 1,307
-------- --------
Total assets......................................................................................... $782,782 $366,786
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt.................................................................. $ 465 $ 713
Current maturities of film contracts.................................................................. 2,619 2,521
Accounts payable...................................................................................... 3,313 2,539
Consulting/non-compete contracts...................................................................... 849 877
Interest.............................................................................................. 26,391 944
Income taxes.......................................................................................... 2,124 2,959
Accrued liabilities................................................................................... 4,075 4,027
Deferred income....................................................................................... 7,705 2,909
-------- --------
Total current liabilities............................................................................ 47,541 17,489
Long-term debt......................................................................................... 584,085 49,248
Consulting/non-compete contracts....................................................................... 2,851 3,718
Deferred income taxes.................................................................................. 165,733 10,601
-------- --------
Total liabilities.................................................................................... 800,210 81,056
-------- --------
Commitments
Stockholder's Equity:
Common stock--$0.0001 par value in 1995 and no par value in 1994:
Authorized 15,000,000 shares in 1995 and 32,000,000 shares in 1994
Issued and outstanding 10,628,571 shares in 1995 and 20,961,205 in 1994.............................. -- 3,494
Paid in capital....................................................................................... -- 18,701
Retained earnings..................................................................................... (17,428) 263,535
-------- --------
Total stockholder's equity............................................................................ (17,428) 285,730
-------- --------
Total liabilities and stockholder's equity........................................................... $782,782 $366,786
- --------------------------------------------------
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-20
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PERIOD YEAR ENDED DECEMBER 31
----------- -------------------- ------------------------
NEW PARK OLD PARK OLD PARK
--------- --------- ------------------------
05/11/95- 01/01/95-
1995 12/31/95 05/10/95 1994 1993
----------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Broadcasting revenue............................................... $ 76,769 $ 50,033 $ 26,736 $ 77,749 $ 62,460
Newspaper revenue.................................................. 78,904 51,723 27,181 76,810 84,751
-------- -------- -------- ----------- -----------
Gross revenue...................................................... 155,673 101,756 53,917 154,559 147,211
Less agency and national representative commissions................ 11,361 7,360 4,001 12,128 9,867
-------- -------- -------- ----------- -----------
Net revenue......................................................... 144,312 94,396 49,916 142,431 137,344
-------- -------- -------- ----------- -----------
Operating expenses:
Cost of sales...................................................... 53,593 33,278 20,315 50,380 55,518
Selling, general and administrative................................ 36,069 24,561 11,508 37,051 39,561
-------- -------- -------- ----------- -----------
89,662 57,839 31,823 87,431 95,079
-------- -------- -------- ----------- -----------
Operating income before depreciation
and amortization................................................. 54,650 36,557 18,093 55,000 42,265
-------- -------- -------- ----------- -----------
Depreciation and amortization:
Depreciation....................................................... 8,083 5,164 2,499 6,524 6,268
Amortization....................................................... 8,756 5,594 786 2,541 2,725
Amortization of excess of cost over net assets acquired............ 7,197 4,598 715 1,972 2,095
-------- -------- -------- ----------- -----------
24,036 15,356 4,000 11,037 11,088
-------- -------- -------- ----------- -----------
Operating income.................................................. 30,614 21,201 14,093 43,963 31,177
Interest expense.................................................... (65,689) (41,968) (67) (279) (233)
Interest income..................................................... 1,355 866 3,181 5,561 4,952
Other expense....................................................... (280) (179) (10,693) (2,352) (431)
-------- -------- -------- ----------- -----------
(Loss) income before income taxes................................. (34,000) (20,080) 6,514 46,893 35,465
Provision (benefit) for income taxes................................ (10,880) (6,494) 5,954 19,519 14,849
-------- -------- -------- ----------- -----------
(Loss) income from continuing operations.......................... (23,120) (13,586) 560 27,374 20,616
(Loss) income from discontinued operations, net of income taxes
(benefit) of $(2,114), $243, $400 and ($597) respectively........ (6,014) (3,842) 125 (69) (1,836)
-------- -------- -------- ----------- -----------
Net (loss) income................................................. $(29,134) (17,428) 685 27,305 18,780
========
Retained earnings, beginning of period.............................. -- 263,535 236,230 217,450
-------- -------- ----------- -----------
Retained earnings, end of period.................................... $(17,428) $264,220 $ 263,535 $ 236,230
======== ======== =========== ===========
Loss per share:
Continuing operations.............................................. $ (2.18) $ (1.28)
Discontinued operations............................................ (0.56) (0.36)
-------- --------
Net loss........................................................... $ (2.74) $ (1.64)
- --------------------------------------------------
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-21
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD YEAR ENDED DECEMBER 31
-------------------- ------------------------
NEW PARK OLD PARK OLD PARK
--------- --------- ------------------------
05/11/95- 01/01/95-
12/31/95 05/10/95 1994 1993
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Activities:
Net (loss) income................................................................ $(17,428) $ 685 $ 27,305 $ 18,780
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation and amortization................................................... 18,678 5,485 14,443 14,787
Amortization of film contract rights and consulting/
non-compete contracts included in operating expenses........................... 1,799 2,352 4,194 3,842
Payments on film contract liabilities........................................... (1,889) (2,117) (2,955) (2,757)
Payments on consulting/non-compete contracts.................................... (544) (351) (932) (1,225)
Provision for losses on accounts receivable..................................... (183) (69) 897 919
Provision for deferred income taxes............................................. (8,591) (369) 982 272
Loss (gain) on sale of property, plant and equipment............................ (30) 856 48 291
Changes in operating assets and liabilities net of effects from the purchase and
disposal of companies:
Accounts receivable............................................................ (1,706) (2,351) (2,126) (1,738)
Inventory and other assets..................................................... (821) 605 181 277
Accounts payable and accrued liabilities....................................... 25,729 (295) (1,055) (1,139)
Deferred income................................................................ 4,464 332 128 169
-------- -------- ----------- ----------
Net cash provided by operating activities...................................... 19,478 4,763 41,110 32,478
-------- -------- ----------- ----------
Investing Activities:
Purchase of short term-investments............................................... (38,400) -- (241,954) (62,586)
Proceeds from short term-investments............................................. 38,400 59,431 277,843 66,929
Purchases of property, plant and equipment....................................... (6,174) (2,000) (12,517) (5,621)
Purchase of acquired companies, net of cash acquired............................. -- (19,184)
Proceeds from sale of property, plant, and equipment............................. 39 -- 448 86
Proceeds from sales of companies................................................. -- 6,336
(Increase) decrease in other assets.............................................. (6,120) 671 455 (464)
-------- -------- ----------- ----------
Net cash provided by (used in) investing activities............................ (12,255) 58,102 24,275 (14,504)
-------- -------- ----------- ----------
Financing Activities:
Additional loan proceeds......................................................... 6,758 -- -- --
Principal payments on long-term debt............................................. (3,622) (267) (2,757) (2,570)
Distribution to parent company................................................... (138,000) -- -- --
Proceeds from issuance of common stock........................................... -- -- 209 144
-------- -------- ----------- ----------
Net cash used in financing activities.......................................... (134,864) (267) (2,548) (2,426)
-------- -------- ----------- ----------
Increase (decrease) in cash.................................................... (127,641) 62,598 62,837 15,548
Cash and cash equivalents, beginning of period.................................... 146,667 84,069 21,232 5,684
-------- -------- ----------- ----------
Cash and cash equivalents, end of period.......................................... $ 19,026 $146,667 $ 84,069 $ 21,232
- --------------------------------------------------
======== ======== =========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-22
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements of Park Communications, Inc. (the
"Company" or "PCI") include the accounts of the Company and its
subsidiaries, all of which are wholly owned. The Company is a wholly owned
subsidiary of Park Acquisitions, Inc. ("Parent" or "PAI") (see Note 2) as
of May 11, 1995. All significant intercompany accounts and transactions
have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions (such as estimated lives of assets and allowance for doubtful
accounts) that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
Cash and Cash Equivalents
For purposes of reporting consolidated cash flows, the Company considers
cash, balances with banks, and interest-bearing cash deposits in other
depository institutions with maturities of three months or less to be cash
equivalents.
Inventory Valuation
Inventories, consisting primarily of newsprint, are stated at the lower of
cost (primarily last-in; first-out method) or market. The effect of using
the last-in; first-out method (compared with the first-in; first-out
inventory method) is not considered significant.
Property, Plant, Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation for
financial reporting purposes is provided on the straight-line method over
the estimated useful lives of the asset except for leasehold improvements,
which are amortized on the straight-line method over the lease period or
the lives of the improvements, whichever is shorter. Accelerated methods
are used for income tax reporting purposes whenever available. Deferred
income taxes are provided for this temporary difference between financial
and income tax reporting methods.
Investments
Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standard Board Statements No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No. 115). SFAS No. 115
requires that all investments in debt securities that management has the
positive intent and ability to hold until maturity be classified as held to
maturity. All other debt securities are classified as available for sale.
Securities classified as available for sale are carried at market value.
Unrealized holding gains and losses for available for sale securities are
reported as a net amount in a separate component of stockholders' equity
until realized. Investments classified as held to maturity are carried at
amortized cost. The Company has analyzed its debt securities portfolio at
December 31, 1994 and based on this analysis has determined to classify all
debt securities as held to maturity due to management's intent and ability
to hold all debt securities so classified until maturity.
Film Contract Rights
Film contract rights and the related liabilities are recorded at full
contract prices when purchased. The costs are charged to operations based
on a straight line basis over the life of the contracts.
F-23
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Consulting/Non-Compete Contracts
Certain subsidiary companies have consulting/non-compete contracts expiring
through 2010. Prior to May 11, 1995, costs were amortized on a straight-
line basis over the terms of the related agreements. In connection with the
Acquisition, separate value was not assigned to those contracts. New Park
would not have entered into such contracts at the date of Acquisition (see
Note 2).
Intangible Assets
Intangible assets are stated at cost and consist primarily of advertising
contracts, subscription lists and excess of cost over net assets acquired.
Intangible assets are being amortized by the straight-line method over
estimated lives ranging primarily from 7 to 40 years.
In the financial statements of Old Park, network contracts ($8,238,000)
acquired prior to October 31, 1970 were assigned a cost upon acquisition
and were not amortized since, in the opinion of management, there had been
no diminution of value of these acquired contracts. Also, excess of cost
($1,214,000) of businesses acquired prior to October 31, 1970 was not
amortized since, in the opinion of management, there had been no diminution
of value of these acquired businesses. Excess of cost incurred since
October 31, 1970 was amortized by the straight-line method over a period of
40 years.
Carrying Value of Long Lived Asset
The carrying value of long lived assets is reviewed if the facts and
circumstances suggest that they may be impaired. If this review indicates
that such assets carrying value will not be recoverable, as determined
based on future expected, undiscounted cash flows, the carrying value is
reduced to fair market value.
Income Taxes
Effective January 1, 1993 the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
FASB Statement No. 109, "Accounting for Income Taxes." The cumulative
effect of the accounting change was not material to net income for 1993.
Deferred Income
Deferred income is recorded on subscriptions prepaid by customers. Such
income is recognized when earned.
2.ACQUISITION AND BASIS OF PRESENTATION
On May 11, 1995, PCI was sold to PAI (the Acquisition), a private
investment concern (organized August 4, 1994) owned by Gary B. Knapp and
the Tomlin Family Trust II, of which Donald R. Tomlin, Jr. is a trustee. A
significant portion of the purchase price was paid from the proceeds of a
$573,427,000 loan. The remainder of the purchase price ($138,000,000) was
derived from existing cash-on-hand at PCI at closing of the Acquisition. On
May 11, 1995, additional loan proceeds of $2,629,000 were utilized to pay
Acquisition related expenses and $2,758,000 was placed in escrow to be
utilized for retirement of other long-term debt.
As a consequence of the change in ownership of PCI, under generally
accepted accounting principles, the Company is deemed, for financial
reporting purposes, to have become a new reporting entity effective with
the change in ownership. The portion of the debt allocable to the Company
has been "pushed down" to the financial statements of the Company, and the
assets and liabilities have been adjusted to reflect their fair market
value as of May 11, 1995.
The accompanying financial statements reflect the operations of PCI prior
to the acquisition on May 11, 1995 (Old Park). Subsequent to that date the
financial statements reflect the operations of the Company utilizing the
new basis accounting (New Park).
The pro forma income statement for 1995 reflects the operations of the
Company under the new basis of accounting and assumes the transaction
closed on January 1, 1995. Depreciation, amortization and interest
F-24
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
expense reflect those costs that would be charged to operations for a full
year based on the revised balance sheet amounts at May 11, 1995 for
property, plant and equipment, intangible assets and the long-term debt
"push down" to PCI. Historical interest income in the pro forma
presentation has been reduced to give effect to the $138,000,000 paid to
PCI stockholders as a portion of the consideration for the Acquisition.
Historical other expenses have been adjusted to eliminate incremental
expenses for selling the Company incurred by Old Park. Pro forma income tax
benefit has been computed at an effective rate of 32%. Following is a
summary of adjustments made to historical costs of the assets and
liabilities of the Company as of May 10, 1995, as a result of applying
"push down" acquisition accounting at that date to arrive at the new basis
for the Company:
<TABLE>
<CAPTION>
MAY 10, 1995
--------------------------------------
PARK COMMUNICATIONS, INC.
--------------------------------------
WITHOUT MERGER MERGER WITH MERGER
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
-------------- ----------- -----------
OLD PARK NEW PARK
-------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets
Cash................................ $146,667 $(135,242) $ 11,425
Accounts receivable, net............ 24,655 -- 24,655
Inventory........................... 1,137 -- 1,137
Film contracts...................... 2,557 -- 2,557
Consulting/non-compete contracts.... 792 (792) --
Other............................... 2,553 -- 2,553
-------- --------- --------
Total current assets............... 178,361 (136,034) 42,327
-------- --------- --------
Property, plant & equipment.......... 135,346 (51,168) 84,178
Less accumulated depreciation and
amortization...................... 61,551 (61,551) --
-------- --------- --------
Net property, plant & equipment..... 73,795 10,383 84,178
Intangible assets, net............... 107,403 540,431 647,834
Film contracts....................... 2,453 -- 2,453
Consulting/non-compete contracts..... 3,110 (3,110) --
Other assets......................... 637 1,000 1,637
-------- --------- --------
Total assets....................... $365,759 $412,670 $778,429
======== ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term
debt............................... $ 1,877 -- $ 1,877
Current maturities of film con-
tracts............................. 2,229 -- 2,229
Accounts payable.................... 3,467 -- 3,467
Consulting/non-compete contracts.... 898 -- 898
Interest............................ 29 -- 29
Income taxes........................ 2,820 $ 1,012 3,832
Accrued liabilities................. 3,276 582 3,858
Deferred income..................... 3,241 -- 3,241
-------- --------- --------
Total current liabilities.......... 17,837 1,594 19,431
Long-term debt....................... 2,467 578,814 581,281
Consulting/non-compete contracts..... 3,346 -- 3,346
Deferred income taxes................ 10,232 164,139 174,371
-------- --------- --------
Total liabilities.................. 33,882 744,547 778,429
-------- --------- --------
</TABLE>
F-25
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
MAY 10, 1995
--------------------------------------
PARK COMMUNICATIONS, INC.
--------------------------------------
WITHOUT MERGER MERGER WITH MERGER
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
-------------- ----------- -----------
OLD PARK NEW PARK
-------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Stockholder's Equity:
Common stock................... $ 3,889 $ (3,889) --
Paid in capital................ 63,768 (63,768) --
Retained earnings.............. 264,220 (264,220) --
-------- -------- --------
Total stockholder's equity...... 331,877 (331,877) --
-------- -------- --------
Total liabilities and stock-
holder's equity.............. $365,759 $412,670 $778,429
======== ======== ========
</TABLE>
3.LOSS PER SHARE
Loss per share of common stock is computed on the weighted average number
of common shares outstanding during each year (dollars and shares in
thousands except per share amounts):
<TABLE>
<CAPTION>
PRO FORMA NEW PARK
----------- ---------
NEW PARK PERIOD
----------- ---------
1995
----------- 05/11/95-
(UNAUDITED) 12/31/95
----------- ---------
<S> <C> <C>
Primary:
Average shares....................................... 10,629 10,629
======== ========
Continuing operations................................ $(23,120) $(13,586)
Discontinued operations.............................. (6,014) (3,842)
-------- --------
Net loss............................................. $(29,134) $(17,428)
======== ========
Loss per share:
Continuing operations................................ $ (2.18) $ (1.28)
Discontinued operations.............................. (0.56) (0.36)
-------- --------
Net loss............................................. $ (2.74) $ (1.64)
======== ========
</TABLE>
Earnings per share has not been shown prior to May 11, 1995 because such
information is not meaningful.
4.INTANGIBLE ASSETS
Intangible assets are comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
Advertising contracts and subscription lists......... $289,258 $ 42,240
Network contracts.................................... 14,183 10,688
FCC licenses and other intangibles................... 138,174 30,956
Excess of cost over net assets acquired.............. 206,219 102,813
-------- --------
Total intangibles................................... 647,834 186,697
Less accumulated amortization........................ 12,387 76,900
-------- --------
$635,447 $109,797
======== ========
</TABLE>
F-26
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5.DISPOSITIONS AND DISCONTINUED OPERATIONS
On December 26, 1995, the Company announced its intention to sell all of
its radio station operations on an individual basis. The segment has
produced operating profits before interest expense, depreciation and
amortization, and the Company estimates that the stations will each
generate operating profit before interest expense, depreciation and
amortization through the date of disposition. The Company currently has
signed agreements to sell each of its radio station operations. The Company
will realize gain on the dispositions assuming the contemplated
transactions receive FCC approval and are consummated at the price and
terms as set forth in the definitive agreements/letters of intent which
total approximately $230.0 million net of selling expenses but before
taxes. The Company estimates that all stations will be sold by October 31,
1996. The results of operations of the radio station operations are
included in the single line of the income statement labeled "(loss) income
from discontinued operations." The corporate operating expenses allocated
to radio are $325,676 for the period of 5/11/95--12/31/95, $184,078 for the
period of 1/1/95--5/10/95, $475,338 for 1994 and $403,021 for 1993. The
following is a summary of identifiable assets, liabilities and equity and
the related revenues and operating profits before interest, depreciation
and amortization of the radio station operations (dollars in thousands):
Radio Station Operations:
<TABLE>
<CAPTION>
PERIOD
-------------------
NEW PARK OLD PARK OLD PARK OLD PARK
--------- --------- -------- --------
05/11/95- 01/01/95-
12/31/95 05/10/95 1994 1993
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues.............................. $21,932 $11,137 $30,305 $24,861
======= ======= ======= =======
Operating profits before interest,
depreciation and amortization........ $ 5,506 $ 2,388 $ 7,106 $ 4,801
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NEW PARK
--------
12/31/95
--------
<S> <C>
Assets:
Current assets..................................................... $ 13,446
Property, plant, and equipment..................................... 19,935
Intangibles, net................................................... 102,830
Other assets....................................................... 9
--------
Total assets........................................................ 136,220
--------
Liabilities:
Current liabilities................................................ 13,299
Long-term debt..................................................... 96,803
Deferred income taxes.............................................. 30,204
--------
Total liabilities................................................... 140,306
--------
Net liabilities..................................................... $ 4,086
========
</TABLE>
On December 31, 1993, the Company sold newspaper publications in 13 of its
smaller markets. Of these, 11 were daily newspapers, all with paid
circulation under 6,000. The impact of the sale of these publications was
not material to net income in 1993. In 1995, the Company discontinued its
Research Triangle Park, Raleigh, North Carolina publication. The operating
losses (before depreciation and amortization) for these newspaper
publications were $145,000 in 1995 (pro forma), $235,000 in 1994 and
$273,000 in 1993.
F-27
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6.LONG-TERM DEBT
The Company's long-term debt is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Existing Credit Agreement........................... $580,632 --
Subordinated notes of certain newspaper subsidiaries
due to former owners................................ 360 $ 744
Promissory notes.................................... 1,077 1,400
6 7/8% Convertible subordinated debentures.......... -- 45,351
Film contracts...................................... 5,100 4,987
-------- --------
Total debt.................................... 587,169 52,482
Less:Current maturities of long-term debt........... 465 713
Current maturities of film contracts.............. 2,619 2,521
-------- --------
Long-term debt...................................... $584,085 $ 49,248
======== ========
</TABLE>
On May 11, 1995, PAI entered into an agreement (Existing Credit Agreement)
to borrow up to $593.8 million the proceeds of which were utilized to
finance the Acquisition and pay related expenses. The loan required that
the debt be directly assumed by PCI and its subsidiary companies and that
they be jointly and severally liable for the loan agreement. PAI, PCI and
PCI's subsidiaries' assets are pledged as collateral for the loan made
pursuant to the Existing Credit Agreement and PCI and its subsidiaries'
cash flow is utilized for debt service. Interest accrues at a base interest
rate (Base Rate) of 9.5% per annum, an additional interest rate (Additional
Rate) of 1.0% per annum, plus a yield maintenance interest rate (YMI) of
3.0% per annum. The Base Rate and Additional Rate interest are payable on
October 1 and April 1. Principal payments are required only to the extent
that PAI's cash balances, as defined in the Existing Credit Agreement,
exceeds $8.0 million (declining to $6.0 million at October 1, 1997) at each
interest payment date through October 1, 1997. Following is a table that
outlines these requirements:
<TABLE>
<CAPTION>
INTEREST
PAYMENT CASH
DATE RESERVE AMOUNT
-------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
October 1, 1995....... $8,000
April 1, 1996......... 8,000
October 1, 1996....... 7,000
April 1, 1997......... 7,000
October 1, 1997 and
thereafter........... 6,000
</TABLE>
Prepayment, in part or wholly, can be made at any time without penalty.
Ninety percent (90%) of the after tax proceeds as defined in the Existing
Credit Agreement of any asset sales of the Company are required to be
applied to the principal.
The YMI, which the Company is accruing, is payable upon achievement by PAI,
on or prior to May 11, 1998, of a Loan to Value Ratio (LTV) of 70% or less
(as defined in the Existing Credit Agreement). If the Company elects not to
pay the YMI when payable, then PAI would be required to issue to the lender
an exercisable warrant having the right to acquire non-voting common stock
in PAI in a sufficient amount to equal an 80% stockholder's equity
interest. On the earliest date that the Debt Service Coverage Ratio (DSC)
as defined in the Existing Credit Agreement is met, and either the LTV
ratio is met or by reason of non-payment of the YMI, the warrant is
required to be issued, the loan will become fully amortizable in equal
annual amounts over the remaining term ending on a maturity date of April
15, 2015 with interest at 10.5% per annum.
F-28
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Substantially all of the Company's and its subsidiaries' tangible and
intangible assets are collateralized under the Existing Credit Agreement.
The Existing Credit Agreement contains covenants which, among other things,
limit or restrict payment of cash dividends, additional debt, repurchase of
common stock, capital expenditures, sales of the Company's common stock,
mergers, consolidations and sales of the Company's assets.
The subordinated notes are payable in various installments through 1998
with interest primarily from 6% to 9%. The promissory notes are payable in
various installments through 1998 with interest at 8%.
On March 11, 1986, the Company issued $50,000,000 principal amount of 6
7/8% convertible subordinated debentures due March 15, 2011 (the
debentures). The debentures were convertible at anytime prior to maturity,
unless previously redeemed, into shares of common stock of the Company at a
conversion ratio of 52.1739 shares of common stock for each $1,000
principal amount of debentures. The debentures were called for redemption
by the Company on January 9, 1995, and subsequently redeemed.
Cash payments of interest were $24,049,000 for the period of May 11 to
December 31, 1995, $44,000 for the period of January 1 to May 10, 1995,
$3,788,000 in 1994 and $3,787,000 in 1993.
The aggregate annual maturities on long-term debt, assuming the Company
meets the LTV on May 11, 1998, payable over the next five years are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1996................................................................ $ 3,084
1997................................................................ 2,074
1998................................................................ 181,006
1999................................................................ 9,985
2000................................................................ 10,969
</TABLE>
The fair value of the Company's long-term debt approximates $628,537,000.
7.INCOME TAXES
The Company determines its income tax expense on the separate return
method. Federal and state income tax expense (benefit) is summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DEC
PERIOD 31
------------------- ---------------
NEW PARK OLD PARK OLD PARK
--------- --------- ---------------
05/11/95- 01/01/95-
12/31/95 05/10/95 1994 1993
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Federal:
Current................................ -- $5,176 $15,357 $11,989
Deferred............................... $(5,743) (347) 847 240
------- ------ ------- -------
(5,743) 4,829 16,204 12,229
------- ------ ------- -------
State:
Current................................ -- 1,146 3,119 2,588
Deferred............................... (751) (21) 196 32
------- ------ ------- -------
(751) 1,125 3,315 2,620
------- ------ ------- -------
Total income tax expense................ $(6,494) $5,954 $19,519 $14,849
======= ====== ======= =======
</TABLE>
F-29
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The items comprising the differences in taxes on income computed at the
U.S. statutory rate and the amount provided by the Company are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
NEW PARK OLD PARK OLD PARK
-------- -------- ---------------
05/11/95- 01/01/95-
12/31/95 05/10/95 1994 1993
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Computed tax expense at U.S. statutory
rate.................................... $(7,028) $2,280 $16,485 $12,413
Increase in tax expense resulting from:
State income taxes, net of federal in-
come tax............................. (488) 731 2,155 1,703
Amortization not tax deductible....... 1,022 250 879 733
Non-deductible merger related expense. -- 2,693 -- --
------- ------ ------- -------
Total income tax expense (benefit)... $(6,494) $5,954 $19,519 $14,849
======= ====== ======= =======
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
----------- -----------
NEW PARK OLD PARK
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
Components of deferred taxes:
Network revenue..................................... $ (1,820) --
Property, plant & equipment, intangible assets...... 172,933 $ 10,728
Net operating loss carry forwards................... (5,380) --
Allowance for doubtful accounts and other........... (196) (699)
-------- --------
Net deferred tax liabilities....................... $165,537 $ 10,029
======== ========
Classification of deferred taxes:
Non-current liabilities............................. $165,733 $ 10,601
Current assets...................................... (196) (572)
-------- --------
$165,537 $ 10,029
======== ========
</TABLE>
The Company has federal tax loss carryforwards of approximately $16.0
million that expire in 2010. Total cash payments of Federal and state
income taxes were $2,604,000 for the period May 11 to December 31, 1995,
$4,434,000 for the period January 1 to May 10, 1995, $20,011,000 in 1994
and $14,030,000 in 1993.
8.LEASES
Certain operating facilities and equipment (see Note 9) are leased under
noncancellable operating agreements. Certain of the leases require the
Company or its subsidiaries to pay property taxes, insurance and
maintenance costs.
Lease expense related to the above and charged to operations was
approximately $739,000 for the period May 11 through December 31, 1995,
$417,000 for the period January 1 through May 10, 1995, $1,743,000 in 1994
and $2,019,000 in 1993.
F-30
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate minimum rentals through dates of expiration amount to
approximately $6,179,574 and the amounts payable over the next five years
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1996............................................................... $ 796
1997............................................................... 708
1998............................................................... 660
1999............................................................... 562
2000............................................................... 397
Thereafter......................................................... 3,057
------
$6,180
======
</TABLE>
9.RELATED PARTY TRANSACTIONS
In 1993 and 1994, the Company, in the ordinary course of business, leased
and rented certain operating facilities and equipment from RHP Incorporated
and its subsidiaries. RHP Incorporated is wholly owned by the estate of Roy
H. Park, formerly the Chairman of the Board of PCI, who died on October 25,
1993. Such lease and rent payments were $977,000 in 1994 and $1,265,000 in
1993. In connection with these operating facilities, in 1994 the Company
purchased ten buildings and one tower from RHP Incorporated and its
subsidiaries at the appraised fair market value of $4,415,000 and such
lease and rent payments ceased as of the date of purchase.
Additionally, certain officers of the Company were compensated by RHP
Incorporated for the performance of part-time management services.
During 1994, the Company placed $85,298 of promotional advertising with
Park Outdoor Advertising of New York, Inc. which is controlled by Roy H.
Park, Jr., a Director of the Company prior to May 11, 1995.
10.ACQUISITIONS
In December 1995, the Company entered into an agreement in principle to
purchase WHOA-TV, the ABC affiliate in Montgomery, Alabama. The purchase
price, which will not be material, will be accounted for under the purchase
method, and accordingly, its results of operations will be included in the
Consolidated Financial Statements from the date of acquisition (which is
anticipated in 1996).
11.BUSINESS SEGMENTS
The Company operates in two business segments: television broadcasting and
newspaper publishing. The Company operates a third segment, radio station
operations, which the Company has determined to divest and has presented as
a discontinued operation (see Note 5). Television broadcasting operations
involve the sale of time to advertisers, network revenue and other revenue
arising primarily from programming and production. Newspaper operations
involve the publication and distribution of both paid daily and paid non-
daily newspapers and advertising publications (shoppers) from which revenue
is derived primarily from the sale of advertising lineage and circulation
revenue.
F-31
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of information by segment:
<TABLE>
<CAPTION>
PERIOD
--------------------
PRO FORMA NEW PARK OLD PARK OLD PARK OLD PARK
----------- --------- --------- -------- --------
(UNAUDITED) 05/11/95- 01/01/95-
1995 12/31/95 05/10/95 1994 1993
----------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gross Revenue:
Television broadcast-
ing................... $ 76,769 $ 50,033 $ 26,736 $ 77,749 $ 62,460
Newspaper publishing... 78,904 51,723 27,181 76,810 84,751
-------- -------- -------- -------- --------
$155,673 $101,756 $ 53,917 $154,559 $147,211
======== ======== ======== ======== ========
Operating income before
depreciation
and amortization:
Television
broadcasting.......... $ 31,425 $ 20,724 $ 10,701 $ 32,770 $ 23,890
Newspaper publishing... 23,225 15,833 7,392 22,230 18,375
-------- -------- -------- -------- --------
$ 54,650 $ 36,557 $ 18,093 $ 55,000 $ 42,265
======== ======== ======== ======== ========
Depreciation and
amortization:
Television
broadcasting.......... $ 15,869 $ 10,138 $ 1,979 $ 5,221 $ 4,193
Newspaper publishing... 8,167 5,218 2,021 5,816 6,895
-------- -------- -------- -------- --------
$ 24,036 $ 15,356 $ 4,000 $ 11,037 $ 11,088
======== ======== ======== ======== ========
Additions to property,
plant and equipment:
Television broadcast-
ing................... $ 3,160 $ 2,145 $ 1,015 $ 7,794 $ 11,956
Newspaper publishing... 2,122 1,691 431 3,458 1,512
-------- -------- -------- -------- --------
$ 5,282 $ 3,836 $ 1,446 $ 11,252 $ 13,468
======== ======== ======== ======== ========
Identifiable assets:
Television
broadcasting.......... $430,740 $ 95,146 $ 84,114 $ 81,733
Newspaper publishing... 223,772 167,960 92,653 97,583
Discontinued
operations............ 136,220 46,668 47,446 47,742
Corporate.............. (7,950) 55,985 142,573 115,563
-------- -------- -------- --------
$782,782 $365,759 $366,786 $342,621
======== ======== ======== ========
</TABLE>
Operating income before depreciation and amortization is gross revenue less
agency and national representative commissions and operating expenses.
Interest expense, interest income, income taxes and other income (expense)
have been excluded in computing operating income before depreciation and
amortization. Depreciation and amortization by segment are shown
separately.
Identifiable assets by industry segment represent those assets used in the
Company's operation of that segment. Corporate assets under Old Park
consisted principally of cash, cash equivalents and short-term investments.
F-32
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12.STOCKHOLDER'S EQUITY
Following is a reconciliation of stockholder's equity:
<TABLE>
<CAPTION>
COMMON STOCK
------------------- PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------- ------ ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993.. 20,700,167 $3,451 $13,781 $217,450 $234,682
Issue common stock........ 8,810 1 143 -- 144
Net income................ -- -- -- 18,780 18,780
----------- ------ ------- -------- --------
Balance, December 31,
1993..................... 20,708,977 3,452 13,924 236,230 253,606
Issue common stock........ 9,950 2 208 -- 210
Conversion of debentures.. 242,278 40 4,569 -- 4,609
Net income................ -- -- -- 27,305 27,305
----------- ------ ------- -------- --------
Balance, December 31,
1994..................... 20,961,205 3,494 18,701 263,535 285,730
Conversion of debentures.. 2,366,168 395 45,067 -- 45,462
Net income................ -- -- -- 685 685
----------- ------ ------- -------- --------
Balance, May 10, 1995..... 23,327,373 3,889 63,768 264,220 331,877
Merger adjustments (New
Park).................... (23,327,373) (3,889) (63,768) (264,220) (331,877)
Issue common stock........ 10,628,571 -- -- -- --
Net loss.................. -- -- -- (17,428) (17,428)
----------- ------ ------- -------- --------
Balance, December 31,
1995..................... 10,628,571 $ -- $ -- $(17,428) $(17,428)
=========== ====== ======= ======== ========
</TABLE>
13. SUBSEQUENT EVENT
On May 6, 1996, the Company's Board of Directors and sole stockholder
approved an amendment to the Company's certificate of incorporation to
authorize 15,000,000 shares of its Common Stock, and declare a stock split of
106,285.7143 to 1. Such amendment will become effective on May 7, 1996. All
references in the consolidated financial statements to number of shares,
average number of shares outstanding and per share amounts have been restated
to reflect this amendment.
F-33
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
-------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 63,041 $ 19,026
Accounts receivable, less allowance for doubtful
accounts of $870 in 1996
and $807 in 1995................................... 24,099 26,544
Inventory............................................ 1,069 1,265
Film contracts....................................... 2,554 2,717
Other................................................ 2,913 2,844
-------- --------
Total current assets................................ 93,676 52,396
-------- --------
Property, Plant & Equipment:
Property Plant & Equipment........................... 86,623 90,463
Less accumulated depreciation and amortization....... (8,502) (6,068)
-------- --------
78,121 84,395
Intangible assets, net................................ 581,403 635,447
Film contracts........................................ 2,346 2,787
Other assets.......................................... 8,225 7,757
-------- --------
$763,771 $782,782
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt................. $ 465 $ 465
Current maturities of film contracts................. 2,307 2,619
Accounts payable..................................... 3,328 3,313
Consulting/non-compete contracts..................... 837 849
Interest............................................. 45,850 26,391
Income taxes......................................... 21,830 2,124
Accrued liabilities.................................. 3,690 4,075
Deferred income...................................... 8,951 7,705
-------- --------
Total current liabilities........................... 87,258 47,541
Long-term debt........................................ 515,763 581,604
Long-term film contracts.............................. 2,170 2,481
Consulting/non-compete contracts...................... 2,654 2,851
Deferred income taxes................................. 153,976 165,733
-------- --------
Total liabilities................................... 761,821 800,210
-------- --------
Commitments
Stockholder's Equity:
Common Stock-- $0.0001 par value:
Authorized 15,000,000 shares; Issued and outstanding
10,628,571 shares..................................... -- --
Retained earnings (deficit).......................... 1,950 (17,428)
-------- --------
Total stockholder's equity............................ 1,950 (17,428)
-------- --------
$763,771 $782,782
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
F-34
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
1996 1995
--------- ---------
NEW PARK OLD PARK
--------- ---------
<S> <C> <C>
Revenue:
Broadcasting revenue................................................................................... $ 17,055 $ 17,619
Newspaper revenue...................................................................................... 18,342 18,259
-------- ---------
Gross revenue.......................................................................................... 35,397 35,878
Less agency and national representative commissions.................................................... 2,494 2,625
-------- ---------
Net revenue............................................................................................ 32,903 33,253
-------- ---------
Operating expenses:
Cost of sales.......................................................................................... 13,881 12,723
Selling, general and administrative.................................................................... 10,289 9,234
-------- ---------
24,170 21,957
Operating income before depreciation and amortization................................................. 8,733 11,296
-------- ---------
Depreciation and amortization:
Depreciation........................................................................................... 2,287 1,719
Amortization........................................................................................... 2,096 546
Amortization of excess of cost over net assets acquired................................................ 1,671 514
-------- ---------
6,054 2,779
-------- ---------
Operating income...................................................................................... 2,679 8,517
Interest expense........................................................................................ (15,735) (44)
Interest income......................................................................................... 384 2,180
Other expense........................................................................................... (92) (468)
-------- ---------
(Loss) income before income taxes..................................................................... (12,764) 10,185
Provision (benefit) for income taxes.................................................................... (4,638) 4,265
-------- ---------
(Loss) income from continuing operations.............................................................. (8,126) 5,920
(Loss) income from discontinued operations, net of income taxes (benefit)
of $(1,783) in 1996 and $248 in 1995................................................................... (2,397) 268
Gain on sale of discontinued operations, net of income taxes of $14,217 in 1996......................... 29,901
-------- ---------
Net income.............................................................................................. 19,378 6,188
Retained earnings (deficit), beginning of period........................................................ (17,428) 263,535
-------- ---------
Retained earnings, end of period........................................................................ $ 1,950 $ 269,723
======== =========
Earnings (loss) per share:
Continuing operations.................................................................................. $ (0.77)
Discontinued operations................................................................................ 2.59
--------
Net earnings........................................................................................... $ 1.82
========
Average shares.......................................................................................... 10,629
--------------------------------------------------
========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
F-35
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN
THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
1996 1995
--------- ---------
NEW PARK OLD PARK
--------- ---------
<S> <C> <C>
Operating Activities:
Net income............................................................................................. $ 19,378 $ 6,188
Adjustment to reconcile net income to net cash provided by operating activities:
Gain on sale of discontinued operations, exclusive of income tax...................................... (44,118)
Depreciation and amortization......................................................................... 7,552 3,783
Amortization of film contract rights and consulting/non-compete contracts included in operating
expenses........................................................................................... 784 986
Payments on film contract liabilities................................................................. (804) (810)
Payments on consulting/non-compete contracts.......................................................... (209) (228)
Provision for losses on accounts receivable........................................................... 194 (172)
Provision for deferred income taxes................................................................... (11,757) (64)
Loss(gain) on sale of property, plant and equipment................................................... (99) 6
Changes in operating assets and liabilities net of effects from the purchase and disposal of
companies:
Accounts receivable.................................................................................. 2,251 257
Inventory and other assets........................................................................... (1,033) 1,180
Accounts payable and accrued liabilities............................................................. 39,145 1,487
Deferred income...................................................................................... 1,246 1,590
--------- ---------
Net cash provided by operating activities........................................................... 12,530 14,203
--------- ---------
Investing Activities:
Proceeds from short term investments................................................................... -- 59,431
Purchases of property, plant and equipment............................................................. (3,414) (1,310)
Proceeds from sale of property, plant, and equipment................................................... 169 --
Proceeds from sales of discontinued operations, net of selling expenses................................ 101,039 --
Increase in other assets............................................................................... (468) --
--------- ---------
Net cash provided by investing activities........................................................... 97,326 58,121
--------- ---------
Financing Activities:
Principal payments on long-term debt................................................................... (65,841) (203)
--------- ---------
Net cash used in financing activities............................................................... (65,841) (203)
--------- ---------
Increase in cash...................................................................................... 44,015 72,121
Cash and cash equivalents beginning of period........................................................... 19,026 84,069
--------- ---------
Cash and cash equivalents end of period................................................................. $ 63,041 $ 156,190
--------------------------------------------------
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
unaudited financial statements.
F-36
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed interim financial statements are unaudited;
however, in the opinion of the Company's management, all adjustments
(which comprise only normal and recurring accruals) necessary for a fair
presentation of the interim financial results have been included. The
results for the interim periods are not necessarily indicative of results
to be expected for the entire year. These financial statements and notes
should be read in conjunction with the Company's audited annual
consolidated financial statements for the year ended December 31, 1995.
2. DISCONTINUED OPERATIONS
The Company sold two of its radio stations in March 1996. Proceeds of
approximately $66 million were utilized to reduce long-term debt. The net
gain on the sale of these stations was $29.9 million. The Company will
realize gain on the remaining radio station asset dispositions assuming
the contemplated transactions receive FCC approval and are consummated at
the prices and terms as set forth in the agreements, which total
approximately $128 million net of selling expenses but before taxes. The
Company estimates that all radio stations will be sold by October 1996.
The results of the radio division are included in the single line of the
income statement labeled "(Loss) income from discontinued operations."
The gain on the sale is included in the single line on the income
statement labeled "Gain from sale of discontinued operations, net of
tax." The corporate operating expenses allocated to the radio division
are $103,000 for the period of three months ended March 31, 1996, and
$127,000 for the three months ended March 31, 1995. The following is a
summary of revenue and operating profits before interest, depreciation
and amortization, of the radio broadcasting properties for the three
months ended March 31 (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Revenue...................................................... $7,563 $7,458
====== ======
Operating income before depreciation and amortization........ $1,563 $1,975
====== ======
</TABLE>
3. SUBSEQUENT EVENTS
On May 13, 1996, the Company sold $80,000,000 in principal amount of 13
3/4% Senior Pay-in-Kind Notes due 2004 (the "Notes") as part of units
(the "Units") consisting of the Notes and Warrants to purchase an
aggregate of 800,000 shares of Common Stock of the Company. The sale of
Units was one of a series of transactions (the "Refinancing
Transactions"), the purpose of which was to refinance the Company's
indebtedness under a credit agreement among the Company, Park
Acquisitions, Inc. and the lenders thereunder. The Refinancing
Transactions consisted of (i) the sale of Units, (ii) the establishment
of and drawings under a Senior Credit Facility between the Company and
certain lenders in the amount of $58.0 million, (iii) the sale, which was
completed on May 13, 1996, of $241.0 million in principal amount of 11
3/4% Senior Notes due 2004 of Park Broadcasting, Inc., (iv) the sale,
which was completed on May 13, 1996, of $155.0 million in principal
amount of 11 7/8% Senior Notes due 2004 of Park Newspapers, Inc. and (v)
the sale, which was completed on March 25, 1996, of the Company's WPAT-AM
and FM radio stations for aggregate gross proceeds of $103.0 million.
F-37
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY THE SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RE-
LATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURI-
TIES BY ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 15
The Company............................................................... 21
Use of Proceeds........................................................... 21
Capitalization............................................................ 22
Unaudited Pro Forma Condensed Consolidated Financial Statements........... 23
Selected Historical and Pro Forma Consolidated Financial Data............. 27
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 29
Business.................................................................. 35
Management................................................................ 48
Securities Ownership of Certain Beneficial Owners......................... 52
Description of Certain Indebtedness....................................... 53
Description of the Notes.................................................. 57
The Exchange Offer........................................................ 80
Certain Federal Income Tax Consequences................................... 89
Plan of Distribution...................................................... 90
Legal Matters............................................................. 91
Experts................................................................... 91
Available Information..................................................... 91
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$155,000,000
LOGO
PARK NEWSPAPERS, INC.
OFFER TO EXCHANGE SERIES B 11 7/8% SENIOR NOTES DUE 2004 FOR ALL OUTSTANDING
11 7/8 SENIOR NOTES DUE 2004
-------------------------
PROSPECTUS
-------------------------
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
corporation to indemnify any person who was or is a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 145 of the DGCL also empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted
in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
to the corporation unless, and only to the extent that, the Court of Chancery
or the court in which such action was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that, to the extent that a director
or officer of a corporation has been successful in the defense of any action,
suit or proceeding referred to above or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 of the DGCL shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that the corporation is empowered to purchase and maintain insurance on
behalf of a director or officer of the corporation against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145 of the DGCL.
Article VI of the Company's Amended and Restated Bylaws provides as follows:
The Corporation shall (and is hereby obligated to) indemnify all persons
who may be indemnified by a Delaware corporation pursuant to Delaware law
in each and every situation where, under Delaware law, the Corporation is
obligated to make such indemnification. Additionally, the Corporation shall
indemnify such persons in each and every situation where, under Delaware
law, the Corporation is not obligated, but is nevertheless permitted or
empowered, to make such indemnification.
The Company has purchased and maintains insurance to protect persons
entitled to indemnification pursuant to its Amended and Restated Bylaws and
the DGCL against expenses, judgments, fines and amounts paid in settlement, to
the fullest extent permitted by the DGCL.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3(i)(a) Certificate of Incorporation of the Company
3(i)(b) Certificate of Amendment of Certificate of Incorporation of the Company (filed
November 20, 1979)
3(i)(c) Certificate of Amendment of Certificate of Incorporation of the Company (filed
January 2, 1981)
3(i)(d) Certificate of Ownership and Merger
3(ii) Amended and Restated Bylaws of the Company
4.1 Indenture dated as of May 13, 1996 between the Company and IBJ Schroder Bank & Trust
Company, as Trustee, with the forms of Series A Note and Series B Note attached
thereto (Incorporated by reference to Exhibit 10.4 filed with Park Communications,
Inc.'s Form S-4 Registration Statement No. 333- )
5.1 Opinion of Eckert Seamans Cherin & Mellott regarding the validity of the Series B
Notes, including consent*
8.1 Opinion of Eckert Seamans Cherin & Mellott regarding certain Federal income tax
matters, including consent*
10.1 Registration Rights Agreement dated as of May 13, 1996 among the Company, Goldman,
Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
10.2 Credit Agreement dated as of May 10, 1996 among Park Communications, Inc., Merrill
Lynch & Co., as Arranger and Syndication Agent, First Union National Bank of North
Carolina, as Administrative Agent and Collateral Agent, and the lending institutions
listed therein (Incorporated by reference to Exhibit 10.5 filed with Park
Communications, Inc.'s Form S-4 Registration Statement No. 333- )
10.3 Tax Sharing Agreement executed as of May 13, 1996 among Park Acquisitions, Inc.,
Park Communications, Inc., Park Broadcasting, Inc., the Company and certain of the
other subsidiaries of Park Communications, Inc. (Incorporated by reference to
Exhibit 10.6 filed with Park Communications, Inc.'s Form S-4 Registration Statement
No. 333- )
10.4 Management Services Agreement dated as of May 13, 1996 among Park Acquisitions,
Inc., Park Communications, Inc., Park Broadcasting, Inc. and the Company
(Incorporated by reference to Exhibit 10.7 filed with Park Communications, Inc.'s
Form S-4 Registration Statement No. 333- )
10.5 Employment Agreement dated July 20, 1994 between Park Communications, Inc. and
Wright M. Thomas (Incorporated by reference to Exhibit 10.17 filed with Park
Communications, Inc.'s Form S-4 Registration Statement No. 333- )
10.6 Agreement dated May 1, 1986 between Park Communications, Inc. and Wright M. Thomas
regarding deferred compensation arrangement (Incorporated by reference to Exhibit
10.18 filed with Park Communications, Inc.'s Form S-4 Registration Statement No.
333- )
10.7 Letter Agreement dated February 16, 1979 between Park Communications, Inc. and
Wright M. Thomas regarding contingent retirement benefits (Incorporated by reference
to Exhibit 10.19 filed with Park Communications, Inc.'s Form S-4 Registration
Statement No. 333- )
10.8 Park Communications, Inc. Retention Incentive Plan (Incorporated by reference to
Exhibit 10.20 filed with Park Communications, Inc.'s Form S-4 Registration Statement
No. 333- )
10.9 Letter Agreement dated June 29, 1995 between Park Communications, Inc. and Robert J.
Rossi regarding consulting/non-competition arrangements (Incorporated by reference
to Exhibit 10.24 filed with Park Communications, Inc.'s Form S-4 Registration
Statement No. 333- )
12.1 Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP
23.3 Consents of Eckert Seamans Cherin & Mellott (included in Exhibits 5.1 and 8.1)*
24.1 Power of Attorney (included in the Signature Page)
25.1 Statement of Eligibility on Form T-1 of Trustee
27.1 Financial Data Schedule for 1993 and 1994
27.2 Financial Data Schedule for 1995
27.3 Financial Data Schedule for first quarter of 1995 and 1996
99.1 Form of Letter of Transmittal with respect to the Exchange Offer
99.2 Form of Exchange Agency Agreement between the Company and IBJ Schroder Bank & Trust
Company, as Exchange Agent
</TABLE>
- --------
* To be filed by amendment.
II-2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules are included in Part II of this
Registration Statement and should be read in conjunction with the Financial
Statements and notes thereto included elsewhere herein.
See Index to Financial Statement Schedules (page S-1)
Financial statement schedules other than those listed above are omitted as
not required or not applicable or because the information is included in the
financial statements or notes thereto.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of
1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement;
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
II-3
<PAGE>
The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to the immediately preceding paragraph or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) hereunder the Securities Act of 1933 shall
be deemed to be part of this Registration Statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Wright M.
Thomas his true and lawful attorney-in-fact and agent, acting alone, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent, acting alone, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lexington, State of
Kentucky on June 20, 1996.
PARK NEWSPAPERS, INC.
By: /s/ Wright M. Thomas
----------------------------------
Wright M. Thomas, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Wright M. Thomas President (principal executive officer)
June 20,
- ------------------------- 1996
Wright M. Thomas
/s/ Randel N. Stair Vice President and Chief Financial Officer
(principal financial officer and principal
accounting officer)
June 20,
- ------------------------- 1996
Randel N. Stair
/s/ Gary B. Knapp Director June 20,
- ------------------------- 1996
Gary B. Knapp
/s/ Donald R. Tomlin, Director June 20,
Jr. 1996
- -------------------------
Donald R. Tomlin, Jr.
II-5
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES*
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION SEQUENTIALLY
NUMBER OF SCHEDULE NUMBERED PAGE
- -------- ----------- -------------
<S> <C> <C>
II. Valuation and Qualifying Accounts:
Reports of Independent Accountants S-2, 3, 4
Park Newspapers, Inc. and Subsidiaries S-5
Park Communications, Inc. and Subsidiaries S-6
</TABLE>
- --------
* All other schedules are omitted as the required information is inapplicable
or the information is presented in the financial statements or related notes.
S-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
In connection with our audits of the consolidated financial statements of Park
Newspapers, Inc. and Subsidiaries and Park Communications, Inc. and
Subsidiaries as of December 31, 1995 and for the period from May 11, 1995 to
December 31, 1995 and for the period from January 1, 1995 to May 10, 1995,
which financial statements are included in the Prospectus, we have also
audited the financial statement schedules listed in Item 21(b) herein.
In our opinion, these financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly,
in all material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
Lexington, Kentucky
February 2, 1996
S-2
<PAGE>
Board of Directors
Park Newspapers, Inc.
We have audited the consolidated financial statements of Park Newspapers, Inc.
and Subsidiaries as of December 31, 1994, and for each of the two years in the
period ended December 31, 1994, and have issued our report thereon dated
January 27, 1995 (included elsewhere in this Registration Statement). Our
audits also included the financial statement schedule listed in Item 21(b) of
this Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Syracuse, New York
January 27, 1995
S-3
<PAGE>
Board of Directors
Park Communications, Inc.
We have audited the consolidated financial statements of Park Communications,
Inc. and Subsidiaries as of December 31, 1994, and for each of the two years
in the period ended December 31, 1994, and have issued our report thereon
dated January 27, 1995 (included elsewhere in this Registration Statement).
Our audits also included the financial statement schedule listed in Item 21(b)
of this Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Syracuse, New York
January 27, 1995
S-4
<PAGE>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COST & END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended 349,222 346,571 330,727 365,066
December 31, Allowance for
1993 Doubtful Accounts
Year Ended 365,066 291,568 342,163 314,471
December 31, Allowance for
1994 Doubtful Accounts
Period Ended Allowance for 314,471 84,557 71,333 327,695
May 10, 1995 Doubtful Accounts
Period Ended 327,695 127,636 192,671 262,660
December 31, Allowance for
1995 Doubtful Accounts
</TABLE>
S-5
<PAGE>
PARK COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COST & END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended 1,011,448 919,418 531,716 1,399,150
December 31, Allowance for
1993 Doubtful Accounts
Year Ended 1,399,150 896,917 697,734 1,598,333
December 31, Allowance for
1994 Doubtful Accounts
Period Ended Allowance for 1,598,333 -- 155,849 1,442,484
May 10, 1995 Doubtful Accounts
Period Ended 1,442,484 -- 635,138 807,346
December 31, Allowance for
1995 Doubtful Accounts
</TABLE>
S-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NO.
------- ----------------------- ----
<C> <S> <C>
3(i)(a) Certificate of Incorporation of the Company
3(i)(b) Certificate of Amendment of Certificate of Incorporation of the Company
(filed November 20, 1979)
3(i)(c) Certificate of Amendment of Certificate of Incorporation of the Company
(filed January 2, 1981)
3(i)(d) Certificate of Ownership and Merger
3(ii) Amended and Restated Bylaws of the Company
4.1 Indenture dated as of May 13, 1996 between the Company and IBJ Schroder Bank
& Trust Company, as Trustee, with the forms of Series A Note and Series B
Note attached thereto (Incorporated by reference to Exhibit 10.4 filed with
Park Communications, Inc.'s Form S-4 Registration Statement No. 333- )
5.1 Opinion of Eckert Seamans Cherin & Mellott regarding the validity of the
Series B Notes, including consent*
8.1 Opinion of Eckert Seamans Cherin & Mellott regarding certain Federal income
tax matters, including consent*
10.1 Registration Rights Agreement dated as of May 13, 1996 among the Company,
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
10.2 Credit Agreement dated as of May 10, 1996 among Park Communications, Inc.,
Merrill Lynch & Co., as Arranger and Syndication Agent, First Union National
Bank of North Carolina, as Administrative Agent and Collateral Agent, and
the lending institutions listed therein (Incorporated by reference to
Exhibit 10.5 filed with Park Communications, Inc.'s Form S-4 Registration
Statement No. 333- )
10.3 Tax Sharing Agreement executed as of May 13, 1996 among Park Acquisitions,
Inc., Park Communications, Inc., Park Broadcasting, Inc., the Company and
certain of the other subsidiaries of Park Communications, Inc. (Incorporated
by reference to Exhibit 10.6 filed with Park Communications, Inc.'s Form S-4
Registration Statement No. 333- )
10.4 Management Services Agreement dated as of May 13, 1996 among Park
Acquisitions, Inc., Park Communications, Inc., Park Broadcasting, Inc. and
the Company (Incorporated by reference to Exhibit 10.7 filed with Park
Communications, Inc.'s Form S-4 Registration Statement No. 333- )
10.5 Employment Agreement dated July 20, 1994 between Park Communications, Inc.
and Wright M. Thomas (Incorporated by reference to Exhibit 10.17 filed with
Park Communications, Inc.'s Form S-4 Registration Statement No. 333- )
10.6 Agreement dated May 1, 1986 between Park Communications, Inc. and Wright M.
Thomas regarding deferred compensation arrangement (Incorporated by
reference to Exhibit 10.18 filed with Park Communications, Inc.'s Form S-4
Registration Statement No. 333- )
10.7 Letter Agreement dated February 16, 1979 between Park Communications, Inc.
and Wright M. Thomas regarding contingent retirement benefits (Incorporated
by reference to Exhibit 10.19 filed with Park Communications, Inc.'s Form S-
4 Registration Statement No. 333- )
10.8 Park Communications, Inc. Retention Incentive Plan (Incorporated by
reference to Exhibit 10.20 filed with Park Communications, Inc.'s Form S-4
Registration Statement No. 333- )
10.9 Letter Agreement dated June 29, 1995 between Park Communications, Inc. and
Robert J. Rossi regarding consulting/non-competition arrangements
(Incorporated by reference to Exhibit 10.24 filed with Park Communications,
Inc.'s Form S-4 Registration Statement No. 333- )
12.1 Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP
23.3 Consents of Eckert Seamans Cherin & Mellott (included in Exhibits 5.1 and
8.1)*
24.1 Power of Attorney (included in the Signature Page)
25.1 Statement of Eligibility on Form T-1 of Trustee
27.1 Financial Data Schedule for 1993 and 1994
27.2 Financial Data Schedule for 1995
27.3 Financial Data Schedule for first quarter of 1995 and 1996
99.1 Form of Letter of Transmittal with respect to the Exchange Offer
99.2 Form of Exchange Agency Agreement between the Company and IBJ Schroder Bank
& Trust Company, as Exchange Agent
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 3(i)(a)
CERTIFICATE OF INCORPORATION
OF
PARK PUBLICATIONS, INC.
FIRST. -- The name of this Corporation is PARK PUBLICATIONS, INC.
SECOND. -- Its registered office in the State of Delaware is to be
located at 100 West Tenth Street, Wilmington, Delaware, in the County of New
Castle.
The Registered Agent in charge thereof is the Corporation Trust
Company at 100 West Tenth Street, Wilmington, Delaware.
THIRD. -- The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. -- The total authorized capital stock of the Corporation shall
be 10,000 shares, consisting of 10,000 shares of Common Stock without par value.
FIFTH. -- The name and mailing address of the incorporator is as
follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Jerome B. Libin 1666 K Street, N.W.
Washington, D. C. 20006
</TABLE>
SIXTH. -- The powers of the incorporator shall terminate upon the
filing of the certificate of incorporation.
The names and mailing addresses of each of the directors of the
initial Board of Directors who are to serve as directors until the first annual
meeting of the stockholders or until their successors are elected and qualify
are as follows:
<PAGE>
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Roy H. Park Terrace Hill, Ithaca, N. Y. 14850
Dorothy D. Park Terrace Hill, Ithaca, N. Y. 14850
Kenneth B. Skinner Terrace Hill, Ithaca, N. Y. 14850
</TABLE>
SEVENTH. -- The directors shall have power to make and to alter or
amend the by-laws, to fix the amount to be reserved as working capital, and to
authorize and cause to be executed mortgages and liens, without limit as to the
amount, upon the property and franchise of the Corporation.
With the consent in writing, and pursuant to a vote of the holders of
a majority of the capital stock issued and outstanding, the directors shall have
authority to dispose, in any manner, of the whole property of the Corporation.
The by-laws shall determine whether and to what extent the accounts
and books of the Corporation, or any of them, shall be open to the inspection of
the stockholders; and no stockholder shall have any right of inspecting any
account, or book or document of this corporation, except as conferred by law or
the by-laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings
and keep the books, documents and papers of the Corporation outside of the State
of Delaware, at such places as may be from time to time designated by the by-
laws or by resolution of the stockholders or directors, except as otherwise
required by the laws of the State of Delaware.
EIGHTH. -- The period for the duration of the corporation shall be
perpetual.
IN WITNESS WHEREOF, the undersigned, for the purposes of forming a
corporation under the laws of the State of Delaware, has executed this
Certificate of
-2-
<PAGE>
Incorporation and, under penalties of perjury, has acknowledged that it is his
act and deed and that the facts stated therein are true, this 28th day of
February, 1977.
---------------------------------------
Jerome B. Libin
DISTRICT OF COLUMBIA ) ss:
BE IT REMEMBERED, that on this, 28th day of February, 1977, A.D.,
Jerome B. Libin, personally appeared before me, SARAH P. LINDERMAN , a Notary
Public, as the party to the foregoing Certificate of Incorporation, known to be
personally to be such, and I have first made known to him the contents of said
certificate, he did acknowledge that he signed and delivered the same as his
voluntary act and deed, and he deposed that the facts therein stated were truly
set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
---------------------------------------
Notary Public
SARAH P. LINDERMAN
DISTRICT OF COLUMBIA
My Commission Expires October 31, 1979
-3-
<PAGE>
Exhibit 3(i)(b)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
PARK PUBLICATIONS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of PARK
PUBLICATIONS, INC. held on October 26, 1979, resolutions were duly adopted
setting forth a proposed amendment to the Certificate of Incorporation of said
corporation and declaring said amendment to be advisable. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the "Fourth" Article thereof so that, as amended
said Article shall be and read as follows:
"Fourth: The total authorized capital stock of the Corporation shall
be twenty thousand (20,000) shares, consisting of twenty thousand
(20,000) shares of Common Stock without Par value."
SECOND: That in lieu of a meeting and vote of shareholders, the
shareholders have given written consent to said amendment in accordance with the
provisions of section 228 of the General Corporation Law of the State of
Delaware, and said written consent was filed with the corporation.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, said PARK PUBLICATIONS, INC. has caused this
certificate to be signed by Roy H. Park its president, and attested by
-----------------
Wright M. Thomas , its assistant secretary, this 2nd day of November , 1979.
- ---------------- --- --------
PARK PUBLICATIONS, INC.
By ____________________________
President
ATTEST:
By____________________________
Asst.Secretary
-2-
<PAGE>
State of New York )
------------- )
) ss:
County of Tompkins )
------------
Be it remembered that on this 2nd day of November, 1979, personally
--- --------
came before me Susan K. Garey , a notary public in and for the county and
---------------------
state aforesaid, Roy H. Park , president of Park Publications, Inc., a Delaware
-------------
Corporation, the corporation described in and which executed the foregoing
certificate, known to me personally to be such, and he as such president duly
executed the said certificate before me and acknowledged the said certificate to
be his act and deed and the act and deed of said corporation and the facts
stated therein are true; that the signature of the said president of said
corporation to said foregoing certificate are in the handwriting of the said
president of said corporation.
In witness whereof, I have hereunto set my hand and seal of office the
day and year aforesaid.
_________________________________
Notary Public
Susan K. Garey
Notary Public, State of New York
No. 01 GA 4698907
Qualified in Cayuga County
Commission Expires March 30, 1981
<PAGE>
State of New York )
------------- )
) ss:
County of Tompkins )
------------
Be it remembered that on this 2nd day of November, 1979, personally
--- --------
came before me Susan K. Garey , a notary public in and for the county and
---------------------
state aforesaid, Wright M. Thomas, assistant secretary of Park Publications,
----------------
Inc., a Delaware Corporation, the corporation described in and which executed
the foregoing certificate, known to me personally to be such, and he as such
secretary duly executed the said certificate before me and acknowledged the said
certificate to be his act and deed and the act and deed of said corporation and
the facts stated therein are true; that the signature of the said secretary of
said corporation to said foregoing certificate are in the handwriting of the
said secretary of said corporation.
In witness whereof, I have hereunto set my hand and seal of office the
day and year aforesaid.
-----------------------------------
Notary Public
Susan K. Garey
Notary Public, State of New York
No. 01 GA 4698907
Qualified in Cayuga County
Commission Expires March 30, 1981
<PAGE>
Exhibit 3(i)(c)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
PARK PUBLICATIONS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of PARK
PUBLICATIONS, INC. held on December 30, 1980, resolutions were duly adopted
setting forth a proposed amendment to the Certificate of Incorporation of said
corporation and declaring said amendment to be advisable. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the "Fourth" Article thereof so that, as amended,
said Article shall be and read as follows:
"Fourth: The total authorized capital stock of the Corporation shall
be thirty thousand (30,000) shares, consisting of thirty thousand
(30,000) shares of Common Stock without par value."
SECOND: That in lieu of a meeting and vote of shareholders, the
shareholders have given written consent to said amendment in accordance with the
provisions of section 228 of the General Corporation Law of the State of
Delaware, and said written consent was filed with the corporation.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said PARK PUBLICATIONS, INC. has caused this
certificate to be signed by Roy H. Park, its president, and attested by Wright
M. Thomas, its assistant secretary, this 30th day of December, 1980.
<PAGE>
PARK PUBLICATIONS, INC.
______________________________________
President
ATTEST:
_________________________
Asst.Secretary
<PAGE>
State of New York )
ss:
County of Tompkins )
Be it remembered that on this 30th day of December, 1980, personally
came before me Patricia F. Morse, a notary public in and for the county
--------------------
and state aforesaid, Roy H. Park, president of Park Publications, Inc., a
Delaware corporation, the corporation described in and which executed the
foregoing certificate, known to me personally to be such, and he as such
president duly executed the said certificate before me and acknowledged the said
certificate to be his act and deed and the act and deed of said corporation and
the facts stated therein are true; that the signature of the said president of
said corporation to said foregoing certificate are in the handwriting of the
said president of said corporation.
In witness whereof, I have hereunto set my hand and seal of office the
day and year aforesaid.
---------------------
Notary Public
Patricia F. Morse
Notary Public, State of New York
No. 55-8031350
Qualified in Tompkins County
Commission Expires March 30, 1982
<PAGE>
State of New York )
ss:
County of Tompkins )
Be it remembered that on this 30th day of December, 1980, personally
came before me Patricia F. Morse, a notary public in and for the county
--------------------
and state aforesaid, Wright M. Thomas, assistant secretary of Park Publications,
Inc., a Delaware corporation, the corporation described in and which executed
the foregoing certificate, known to me personally to be such, and he as such
assistant secretary duly executed the said certificate before me and
acknowledged the said certificate to be his act and deed and the act and deed of
said corporation and the facts stated therein are true; that the signature of
the said assistant secretary of said corporation to said foregoing certificate
are in the handwriting of the said secretary of said corporation.
In witness whereof, I have hereunto set my hand and seal of office the
day and year aforesaid.
________________________________
Notary Public
Patricia F. Morse
Notary Public, State of New York
No. 55-8031350
Qualified in Tompkins County
Commission Expires March 30, 1982
<PAGE>
CONSENT OF STOCKHOLDERS
PARK PUBLICATIONS, INC.
Whereas, at a meeting of the Board of Directors of Park Publications,
Inc., a Delaware corporation, held on December 30, 1980, at which meeting at
least a majority of the members of said board of directors were present and
acting, the following resolution was duly adopted:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the "Fourth" Article thereof so that, as amended,
said Article shall be and read as follows:
"Fourth: The total authorized capital stock of the Corporation shall
be thirty thousand (30,000) shares, consisting of thirty thousand
(30,000) shares of Common Stock without par value."
Now, therefore, the undersigned shareholder of said corporation, being
the holder and owner of all of the outstanding stock of said corporation, does
hereby adopt, approve and consent to the foregoing amendment of said Certificate
of Incorporation, and does hereby consent that Article Fourth of said
Certificate of Incorporation be amended to read as herein set forth.
In witness whereof, the undersigned has hereunto signed his name, the
date of the signing, and the number of shares of said corporation held by him of
record on said date entitled to vote upon amendments of said Certificate of
Incorporation of the character of the foregoing amendment.
Name Date No. of Shares
---- ---- -------------
_________________________ _____________________ ____________________
Park Broadcasting, Inc.
by Roy H. Park, President
<PAGE>
Exhibit 3(i)(d)
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
PARK NEWSPAPERS, INC.
INTO
PARK PUBLICATIONS, INC.
Park Publications, Inc., a corporation organized and existing under
the laws of Delaware, does hereby certify pursuant to section 253 of the General
Corporation Law of the State of Delaware:
First: That this corporation was incorporated on the 28th day of
-----
February, 1977, pursuant to the General Corporation Law of the State of
Delaware.
Second: That this corporation owns all of the outstanding shares of
------
the stock of Park Newspapers, Inc., a corporation organized and existing under
the laws of Delaware, incorporated on the 25th day of October, 1972, pursuant to
the General Corporation Law of said state.
Third: That this corporation, by a resolution of its board of
-----
directors duly adopted at a meeting held on the 20th day of August, 1983,
determined to and did merge into itself said Park Newspapers, Inc., which
resolution provides as follows:
RESOLVED, that Park Publications, Inc. does hereby merge into
itself its wholly-owned subsidiary, Park Newspapers, Inc., and assumes
all of its liabilities and obligations;
<PAGE>
FURTHER RESOLVED, that the proper officers of this corporation be and
they hereby are directed to make and execute a Certificate of
Ownership and Merger setting forth a copy of the resolution to merge
said wholly-owned subsidiary into this corporation and assume its
liabilities and obligations, and the date of adoption thereof, and to
file the same in the office of the Secretary of State of Delaware, and
a certified copy thereof in the office of the recorder of deeds of New
Castle County;
FURTHER RESOLVED, that the officers of this corporation be and they
hereby are authorized and directed to do all acts and things
whatsoever, whether within or without the State of Delaware which may
be necessary or proper to effect said merger; and,
FURTHER RESOLVED, that this corporation relinquish its corporate name
and assume in place thereof, the name of said merged corporation,
namely "Park Newspapers, Inc."
In accordance with Section 103(a)(2) and Section 103(b)(2) of the
General Corporation Law of the State of Delaware, this corporation hereby
executes and acknowledges this Certificate of Ownership and Merger this 20th day
of August, 1983.
PARK PUBLICATIONS
By:___________________________
President
Attest:
_________________________
Secretary
-2-
<PAGE>
Exhibit 3(ii)
PARK NEWSPAPERS, INC.
(a Delaware corporation)
AMENDED AND RESTATED BYLAWS
As adopted on September 15, 1994.
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
PARK NEWSPAPERS, INC.
ARTICLE I
OFFICES
Section 1. Offices. The Corporation may have offices at such places, both
-------
within and without the State of Delaware, as the Board of Directors may from
time to time determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. A meeting of stockholders for any purpose may
--------------
be held at such time and place, within or without the State of Delaware, as the
Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders shall be held
--------------
in the month of November each year at a date and time to be fixed by the Board
of Directors, or in such other month at such other date and time as shall, from
time to time, be designated by the Board of Directors and stated in the notice
of the meeting. At such annual meeting, the stockholders shall elect a Board of
Directors and transact such other business as may properly be brought before the
meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
------------------------
meeting, stating the place, date and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) (unless a
longer period is required by law) nor more than fifty (50) days prior to the
meeting.
Section 4. Special Meetings. Special meetings of stockholders, for any
----------------
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or the President and shall be called by the President or Secretary upon the
written request of a majority of the Board of Directors, or at the request of
the stockholders owning a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
<PAGE>
Section 5. Notice of Special Meeting. Written notice of a special
-------------------------
meeting, stating the place, date and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten (10) (unless a longer period is required
by law) nor more than sixty (60) days prior to the meeting.
Section 6. List of Stockholders. The officer in charge of the stock
--------------------
ledger of the Corporation or the transfer agent shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting, at
a place within the city where the meeting is to be held, which place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present in person thereat.
Section 7. Presiding Officer; Order of Business.
------------------------------------
(a) Meetings of stockholders shall be presided over by the
Chairman of the Board, if any, or, if he is not present (or, if there is none),
by the President, or, if he is not present, by a Vice President, or, if he is
not present, by such person who may have been chosen by the Board of Directors,
or, if none of such persons is present, by a chairman to be chosen by the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting and who are present
in person or represented by proxy. The Secretary of the Corporation, or, if he
is not present, an Assistant Secretary, or, if he is not present, such person as
may be chosen by the Board of Directors, shall act as secretary of meetings of
stockholders, or, if none of such persons is present, the stockholders owning a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy shall choose any person present to act as secretary of the
meeting.
(b) The following order of business, unless otherwise ordered
at the meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the notice of
the meeting and, if the meeting is a special
meeting, the call thereof.
3. Presentation of proxies.
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<PAGE>
4. Announcement that a quorum is present.
5. Reading and approval of the minutes of the previous
meeting.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual
meeting or a meeting called for that purpose.
8. Consideration of the specific purpose or purposes
for which the meeting has been called (other than
the election of directors), if the meeting is a
special meeting.
9. Transaction of such other business as may properly
come before the meeting.
10. Adjournment.
Section 8. Quorum; Adjournments. The holders of a majority of the shares
--------------------
of capital stock of the Corporation issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall be necessary to, and
shall constitute a quorum for, the transaction of business at all meetings of
stockholders, except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, a quorum shall not be present or represented at any
meeting of stockholders, the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting,
from time to time, without notice of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken, until a
quorum shall be present or represented. Even if a quorum shall be present or
represented at any meeting of stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time for good cause, without notice of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken, until a date which is not more than thirty (30)
days after the date of the original meeting. At any such adjourned meeting, at
which a quorum shall be present in person or represented by proxy, any business
may be transacted which might have been transacted at the meeting as originally
called. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote thereat
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Section 9. Voting.
------
(a) At any meeting of stockholders, every stockholder having the right
to vote shall be entitled to vote in person or by proxy. Except as otherwise
provided by law or the Certificate of Incorporation, each stockholder of record
shall be entitled to one vote for each share of capital stock registered in his
or her name on the books of the Corporation.
(b) All elections of directors shall be determined by a plurality
vote, and, except as otherwise provided by law or the Certificate of
Incorporation, all other matters shall be determined by a vote of a majority of
the shares present in person or represented by proxy and voting on such other
matters.
Section 10. Action by Consent. Any action required or permitted by law or
-----------------
the Certificate of Incorporation to be taken at any meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if a
written consent, setting forth the action so taken, shall be signed by the
holders of all of the outstanding stock entitled to vote thereon. Every written
consent shall bear the date of signature of each stockholder who signs the
consent. Such written consent shall be filed with the minutes of meetings of
stockholders. Written notice of the taking of the corporate action without a
meeting by unanimous written consent shall be given to any stockholder not
entitled to vote on the action at least ten (10) days before the action is
taken.
ARTICLE III
DIRECTORS
Section 1. General Powers; Number; Tenure. The business of the
------------------------------
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and perform all lawful acts and things which are not
by law, the Certificate of Incorporation or these Amended and Restated Bylaws
(these "Bylaws") directed or required to be exercised or performed by the
stockholders. Within the limits specified in this Section 1, the number of
directors shall be as determined from time to time by the Board of Directors,
except that if no such determination is made, the number of directors shall be
three (3). The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his or her successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies. If any vacancies occur on the Board of Directors,
---------
or if any new directorships are created, they may be filled by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until the
next annual meeting of stockholders and until his or her successor is duly
elected and shall qualify. If there are no directors in office, any officer or
stockholder may
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call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or these Bylaws, at which meeting such vacancies
shall be filled.
Section 3. Removal; Resignation.
--------------------
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director, directors or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors at a meeting called for the purpose
of removing such director or directors, notice of which meeting shall state that
the purpose, or one of the purposes of the meeting, is removal of the director
or directors.
(b) Any director may resign at any time by giving written notice to
the Board of Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Unless otherwise specified in such written
notice, a resignation shall take effect upon delivery thereof to the Board of
Directors or the designated officer.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
-----------------
both regular and special, either within or without the State of Delaware.
Section 5. Annual Meeting. The annual meeting of each newly elected Board
--------------
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. Regular Meetings. Additional regular meetings of the Board of
----------------
Directors may be held at such time and place as may from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board, the President or by two (2) or more
directors on at least two (2) days' notice to each director, if such notice is
delivered personally or sent by telegram, or on at least three (3) days' notice
if sent by mail. Special meetings shall be called by the Chairman of the Board,
President, Secretary or two (2) or more directors in like manner and on like
notice on the written request of one-half or more of the number of directors
then in office.
Section 8. Quorum; Adjournments. At all meetings of the Board of
--------------------
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, from time to
time without notice other than announcement at the meeting, until a quorum shall
be present.
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Section 9. Compensation. Directors shall be entitled to such compensation
------------
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
a written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of its proceedings.
Section 11. Meetings by Telephone or Similar Communications. The Board of
-----------------------------------------------
Directors may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person by such director at such meeting.
ARTICLE IV
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of law, the
--------------
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his or her address as it
appears on the records of the Corporation, with postage thereon prepaid. Such
notices shall be deemed to be given at the time they are deposited in the United
States mail. Notice to a director may also be given personally or by telegram
sent to his address as it appears on the records of the Corporation.
Section 2. Waiver. Whenever any notice is required to be given under the
------
provisions of law, the Certificate of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person, or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting, at the
commencement of the meeting, such lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
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ARTICLE V
OFFICERS
Section 1. Designations. The officers of the Corporation shall be chosen
------------
by the Board of Directors. The Board of Directors may choose a Chairman of the
Board, a President, a Vice President or Vice Presidents, a Secretary, a
Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers and
other officers and agents as it shall deem necessary or appropriate. All
officers of the Corporation shall exercise such powers and perform such duties
as shall from time to time be determined by the Board of Directors. Any number
of offices may be held by the same person, unless the Certificate of
Incorporation or Delaware law otherwise provide.
Section 2. Term of Office: Removal. The Board of Directors at its annual
-----------------------
meeting after each annual meeting of stockholders shall choose a President, a
Secretary and a Treasurer. The Board of Directors may also choose a Chairman of
the Board, a Vice President or Vice Presidents, one or more Assistant
Secretaries and/or Assistant Treasurers, and such other officers and agents as
it shall deem necessary or appropriate. Each officer of the Corporation shall
hold office until his successor is chosen and shall qualify. Any officer
elected or appointed by the Board of Directors may be removed, with or without
cause, at any time by the affirmative vote of a majority of the directors then
in office. Such removal shall not prejudice the contract rights, if any, of the
person so removed. Any vacancy occurring in any office of the Corporation may
be filled for the unexpired portion of the term by the Board of Directors.
Section 3. Compensation. The salaries of all officers of the Corporation
------------
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
Section 4. The Chairman of the Board. The Chairman of the Board, if any,
-------------------------
shall be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory and management
functions and duties as may be assigned to him from time to time by the Board of
Directors. He or she shall, if present, preside at all meetings of stockholders
and of the Board of Directors.
Section 5. The President.
-------------
(a) The President shall be the chief executive officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its other officers and agents. In general, he or she
shall perform all duties incident to the office of President and shall see that
all orders and resolutions of the Board of Directors are carried into effect.
In addition to and not in limitation of the foregoing, the President shall be
empowered to authorize any change of the registered office or registered agent
(or both) of the Corporation in the State of Delaware.
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<PAGE>
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations in
which the Corporation may hold securities. At such meeting the President shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities that the Corporation might have possessed and exercised if it
had been present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
Section 6. The Vice Presidents. The Vice President, if any (or in the
-------------------
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election), shall, in the
absence of the President or in the event of his or her disability, perform the
duties and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 7. The Secretary. The Secretary shall attend all meetings of the
-------------
Board of Directors and all meetings of stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He or she shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix the same to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 8. The Assistant Secretary. The Assistant Secretary, if any (or
-----------------------
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his or her
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 9. The Treasurer. The Treasurer shall have the custody of the
-------------
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He or she shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the Chairman of the
Board, the President and the Board of Directors, at regular meetings of the
Board, or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation.
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<PAGE>
Section 10. The Assistant Treasurer. The Assistant Treasurer, if any (or
-----------------------
in the event there shall be more than one, the Assistant Treasurers in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his or her
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
The Corporation shall (and is hereby obligated to) indemnify all persons
who may be indemnified by a Delaware corporation pursuant to Delaware law in
each and every situation where, under Delaware law, the Corporation is obligated
to make such indemnification. Additionally, the Corporation shall indemnify such
persons in each and every situation where, under Delaware law, the Corporation
is not obligated, but is nevertheless permitted or empowered, to make such
indemnification.
ARTICLE VII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 1. Affiliated Transactions. No contract or transaction between
-----------------------
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or her or their
votes are counted for such purpose, if:
(a) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or
(b) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
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<PAGE>
(c) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Determining Quorum. Common or interested directors may be
------------------
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
ARTICLE VIII
STOCK CERTIFICATES
Section 1. Form; Signatures.
----------------
(a) Every holder of stock in the Corporation shall be entitled to have
a certificate, signed by the Chairman of the Board or the President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation, exhibiting the number and class (and series, if any) of
shares owned by him, and bearing the seal of the Corporation. Such signatures
and seal may be facsimile. A certificate may be manually signed by a transfer
agent or registrar other than the Corporation or its employee but may be a
facsimile. In case any officer who has signed, or whose facsimile signature was
placed on, a certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he or she were such officer at the date of its issue.
(b) All stock certificates representing shares of capital stock which
are subject to restrictions on transfer or to other restrictions may have
imprinted thereon such notation to such effect as may be determined by the Board
of Directors.
Section 2. Registration of Transfer. Upon surrender to the Corporation or
------------------------
any transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or its transfer agent to issue
a new certificate to the person entitled thereto, to cancel the old certificate
and to record the transaction upon its books.
Section 3. Registered Stockholders.
-----------------------
(a) Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person who is registered on its
books as the owner of shares of its capital stock to receive dividends or other
distributions, to vote as such owner, and to hold liable for calls and
assessments any person who is registered on its books as the owner of shares of
its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such shares on the part of any other
person.
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<PAGE>
(b) If a stockholder desires that notices and/or dividends shall be
sent to a name or address other than the name or address appearing on the stock
ledger maintained by the Corporation (or by the transfer agent or registrar, if
any), such stockholder shall have the duty to notify the Corporation (or the
transfer agent or registrar, if any) in writing, of such desire. Such written
notice shall specify the alternate name or address to be used.
Section 4. Record Date. In order that the Corporation may determine the
-----------
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution, or to make a determination of the
stockholders of record for any other proper purpose, the Board of Directors may,
in advance, fix a date as the record date for any such determination. Such date
shall not be more than fifty (50) nor less than ten (10) days before the date of
such meeting, nor more than fifty (50) days prior to the date of any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
taken pursuant to Section 8 of Article II; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. Lost, Stolen or Destroyed Certificates. The Board of Directors
--------------------------------------
may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of the Certificate of
---------
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
--------
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole
discretion, may fix a sum which may be set aside or reserved over and above the
paid-in capital
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of the Corporation for working capital or as a reserve for any proper purpose,
and may, from time to time, increase, diminish or vary such fund or funds.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be the
-----------
calendar year, or as determined from time to time by the Board of Directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the name
----
of the Corporation, the year of its incorporation and the words Corporate Seal
and Delaware.
ARTICLE X
AMENDMENTS
The Board of Directors shall have the power to make, alter and repeal these
Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of the
whole Board, provided that notice of the proposal to make, alter or repeal these
Bylaws, or to adopt new bylaws, must be included in the notice of the meeting of
the Board of Directors at which such action takes place.
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<PAGE>
Exhibit 10.1
REGISTRATION RIGHTS AGREEMENT
Dated May 13, 1996
between
PARK NEWSPAPERS, INC.
and
GOLDMAN, SACHS & CO.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is made and entered into May 13, 1996 between PARK NEWSPAPERS,
INC., a Delaware corporation (the "Company"), and GOLDMAN,
SACHS & CO. and MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED (the "Purchasers").
This Agreement is made pursuant to the Purchase
Agreement dated May 6, 1996 between the Company and the
Purchasers (the "Purchase Agreement"), which provides for,
among other things, the sale by the Company to the Purchasers
of an aggregate of $155,000,000 principal amount of the
Company's 11 7/8% Senior Notes due 2004 (the "Securities"). In
order to induce the Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide to the Purchasers
and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the closing under the
Purchase Agreement.
In consideration of the foregoing, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the
following capitalized defined terms shall have the following
meanings:
"Additional Interest" shall have the meaning set
forth in Section 2(e) hereof.
"Advice" shall have the meaning set forth in the last
paragraph of Section 3 hereof.
"Applicable Period" shall have the meaning set forth
in Section 3(t) hereof.
"Business Day" shall mean a day that is not a
Saturday, a Sunday, or a day on which banking institutions
in New York, New York are required to be closed.
"Closing Time" shall mean the Closing Time as defined
in the Purchase Agreement.
"Company" shall have the meaning set forth in the
preamble to this Agreement and also includes the Company's
successors and permitted assigns.
<PAGE>
"Depositary" shall mean The Depository Trust Company,
or any other depositary appointed by the Company;
provided, however, that such depositary must have an
address in the Borough of Manhattan, in The City of New
York.
"Effectiveness Period" shall have the meaning set
forth in Section 2(b) hereof.
"Event Date" shall have the meaning set forth in
Section 2(e) hereof.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
"Exchange Offer" shall mean the exchange offer by the
Company of Exchange Securities for Securities pursuant to
Section 2(a) hereof.
"Exchange Offer Registration" shall mean a
registration under the Securities Act effected pursuant to
Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an
exchange offer registration statement on Form S-4 (or, if
applicable, on another appropriate form), and all
amendments and supplements to such registration statement,
in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by
reference therein.
"Exchange Period" shall have the meaning set forth in
Section 2(a) hereof.
"Exchange Securities" shall mean the 11 7/8% Senior
Notes due 2004, Series B, issued by the Company under the
Indenture containing terms identical to the Securities
(except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Securities or,
if no such interest has been paid, from May 13, 1996 and
(ii) the transfer restrictions thereon shall be
eliminated) to be offered to Holders of Securities in
exchange for Securities pursuant to the Exchange Offer.
"Holder" shall mean the Purchasers, for so long as
they own any Registrable Securities, and each of their
successors, assigns and direct and indirect transferees
who become registered owners of Registrable Securities
under the Indenture.
<PAGE>
"Indenture" shall mean the Indenture relating to the
Securities dated as of May 13, 1996 between the Company,
as issuer, and IBJ Schroder Bank & Trust Company, as
trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"Inspectors" shall have the meaning set forth in
Section 3(n) hereof.
"Majority Holders" shall mean the Holders of a
majority of the aggregate principal amount of outstanding
Registrable Securities.
"Participating Broker-Dealer" shall have the meaning
set forth in Section 3(t) hereof.
"Person" shall mean an individual, partnership,
corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth
in Section 2(a) hereof.
"Private Exchange Securities" shall have the meaning
set forth in Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities
covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus,
including post-effective amendments, and in each case
including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth
in the preamble to this Agreement.
"Purchasers" shall have the meaning set forth in the
preamble to this Agreement.
"Records" shall have the meaning set forth in
Section 3(n) hereof.
"Registrable Securities" shall mean the Securities
and, if issued, the Private Exchange Securities; provided,
however, that Securities or Private Exchange Securities,
as the case may be, shall cease to be Registrable
Securities when (i) a Registration Statement with respect
<PAGE>
to such Securities or Private Exchange Securities for the
resale thereof, as the case may be, shall have been
declared effective under the Securities Act and such
Securities or Private Exchange Securities, as the case may
be, shall have been disposed of pursuant to such
Registration Statement, (ii) such Securities or Private
Exchange Securities, as the case may be, shall have been
sold to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the
Securities Act, (iii) such Securities or Private Exchange
Securities, as the case may be, shall have ceased to be
outstanding or (iv) with respect to the Securities, such
Securities have been exchanged for Exchange Securities
upon consummation of the Exchange Offer and are thereafter
freely tradeable by the holder thereof not an affiliate of
the Company.
"Registration Expenses" shall mean any and all
expenses incident to performance of or compliance by the
Company with this Agreement, including without limitation:
(i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and
filing fees, including, if applicable, the fees and
expenses of any "qualified independent underwriter" (and
its counsel) that is required to be retained by any Holder
of Registrable Securities in accordance with the rules and
regulations of the NASD, (ii) all fees and expenses
incurred in connection with compliance with state
securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters or Holders
in connection with blue sky qualification of any of the
Exchange Securities or Registrable Securities) and
compliance with the rules of the NASD, (iii) all expenses
of any Persons in preparing or assisting in preparing,
word processing, printing and distributing any
Registration Statement, any Prospectus and any amendments
or supplements thereto, and in preparing or assisting in
preparing, printing and distributing any underwriting
agreements, securities sales agreements and other
documents relating to the performance of and compliance
with this Agreement, (iv) all rating agency fees, (v) the
fees and disbursements of counsel for the Company and of
the independent certified public accountants of the
Company, including the expenses of any "cold comfort"
letters required by or incident to such performance and
compliance, (vi) the fees and expenses of the Trustee, and
any exchange agent or custodian, (vii) all fees and
expenses incurred in connection with the listing, if any,
of any of the Registrable Securities on any securities
exchange or exchanges, and (viii) any fees and
disbursements of any underwriter customarily required to
<PAGE>
be paid by issuers or sellers of securities and the
reasonable fees and expenses of any special experts
retained by the Company in connection with any
Registration Statement, but excluding fees of counsel to
the underwriters and underwriting discounts and
commissions and transfer taxes, if any, relating to the
sale or disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration
statement of the Company which covers any of the Exchange
Securities or Registrable Securities pursuant to the
provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including
post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange
Commission.
"Securities" shall have the meaning set forth in the
preamble to this Agreement.
"Securities Act" shall mean the Securities Act of
1933, as amended from time to time.
"Shelf Registration" shall mean a registration
effected pursuant to Section 2(b) hereof.
"Shelf Registration Event" shall have the meaning set
forth in Section 2(b) hereof.
"Shelf Registration Event Date" shall have the
meaning set forth in Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the
provisions of Section 2(b) hereof which covers all of the
Registrable Securities or all of the Private Exchange
Securities, as the case may be, on an appropriate form
under Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, and all amendments
and supplements to such registration statement, including
post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"TIA" shall have the meaning set forth in Section
3(l) hereof.
<PAGE>
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
2. Registration Under the Securities Act.
(a) Exchange Offer. To the extent not prohibited by
any applicable law or applicable interpretation of the staff of
the SEC, the Company shall, for the benefit of the Holders, at
the Company's cost, use its best efforts to (i) cause to be
filed with the SEC within 45 days after the Closing Time an
Exchange Offer Registration Statement on an appropriate form
under the Securities Act covering the offer by the Company to
the Holders to exchange all of the Registrable Securities
(other than Private Exchange Securities) for a like principal
amount of Exchange Securities, (ii) have such Exchange Offer
Registration Statement declared effective under the Securities
Act by the SEC not later than the date which is 120 days after
the Closing Time, (iii) have such Registration Statement remain
effective until the closing of the Exchange Offer and (iv)
cause the Exchange Offer to be consummated not later than 150
days after the Closing Time. The Exchange Securities will be
issued under the Indenture. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall
promptly commence the Exchange Offer, it being the objective of
such Exchange Offer to enable each Holder eligible and electing
to exchange Registrable Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company
within the meaning of Rule 405 under the Securities Act and is
not a broker-dealer tendering Registrable Securities acquired
directly from the Company for its own account, acquires the
Exchange Securities in the ordinary course of such Holder's
business and has no arrangements or understandings with any
Person to participate in the Exchange Offer for the purpose of
distributing (within the meaning of the Securities Act) the
Exchange Securities) to transfer such Exchange Securities from
and after their receipt without any limitations or restrictions
under the Securities Act and under state securities or blue sky
laws.
In connection with the Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and
related documents;
(ii) keep the Exchange Offer open for acceptance for
a period of not less than 30 days after the date notice
thereof is mailed to the Holders (or longer if required by
<PAGE>
applicable law) (such period referred to herein as the
"Exchange Period");
(iii) utilize the services of the Depositary for the
Exchange Offer;
(iv) permit Holders to withdraw tendered Securities
at any time prior to the close of business, New York time,
on the last Business Day of the Exchange Period, by
sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting
forth the name of such Holder, the principal amount of
Securities delivered for exchange, and a statement that
such Holder is withdrawing his election to have such
Securities exchanged;
(v) notify each Holder that any Security not
tendered will remain outstanding and continue to accrue
interest, but will not retain any rights under this
Agreement (except in the case of the Purchasers and
Participating Broker-Dealers as provided herein); and
(vi) otherwise comply in all respects with all
applicable laws relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer the
Purchasers hold any Securities acquired by them and having the
status of an unsold allotment in the initial distribution, the
Company upon the request of any Purchaser shall, simultaneously
with the delivery of the Exchange Securities in the Exchange
Offer, issue and deliver to such Purchaser in exchange (the
"Private Exchange") for the Securities held by such Purchaser,
a like principal amount of debt securities of the Company that
are identical (except that such securities shall bear
appropriate transfer restrictions) to the Exchange Securities
(the "Private Exchange Securities") and which are issued
pursuant to the Indenture (which will provide that the Exchange
Securities will not be subject to the transfer restrictions set
forth in the Indenture and that the Exchange Securities, the
Private Exchange Securities and the Securities will vote and
consent together on all matters as one class and that neither
the Exchange Securities, the Private Exchange Securities nor
the Securities will have the right to vote or consent as a
separate class on any matter). The Private Exchange Securities
shall be of the same series as and shall bear the same CUSIP
number as the Exchange Securities.
As soon as practicable after the close of the
Exchange Offer and/or the Private Exchange, as the case may be,
the Company shall:
<PAGE>
(i) accept for exchange all Securities or portions
thereof tendered and not validly withdrawn pursuant to the
Exchange Offer;
(ii) accept for exchange all Securities duly tendered
pursuant to the Private Exchange; and
(iii) deliver, or cause to be delivered, to the
Trustee for cancellation all Securities or portions
thereof so accepted for exchange by the Company, and
issue, and cause the Trustee under the Indenture to
promptly authenticate and deliver to each Holder, a new
Exchange Security or Private Exchange Security, as the
case may be, equal in principal amount to the principal
amount of the Securities surrendered by such Holder.
To the extent not prohibited by any law or applicable
interpretation of the staff of the SEC, the Company shall use
its best efforts to complete the Exchange Offer as provided
above, and shall comply with the applicable requirements of the
Securities Act, the Exchange Act and other applicable laws in
connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that the Exchange
Offer does not violate applicable law or any applicable
interpretation of the staff of the SEC. Each Holder of
Registrable Securities who wishes to exchange such Registrable
Securities for Exchange Securities in the Exchange Offer will
be required to make certain customary representations in
connection therewith, including representations that such
Holder is not an affiliate of the Company within the meaning of
Rule 405 under the Securities Act, that any Exchange Securities
to be received by it will be acquired in the ordinary course of
business and that at the time of the commencement of the
Exchange Offer it has no arrangement with any Person to
participate in the distribution (within the meaning of the
Securities Act) of the Exchange Securities. The Company shall
inform the Purchasers, after consultation with the Trustee and
the Purchasers, of the names and addresses of the Holders to
whom the Exchange Offer is made, and the Purchasers shall have
the right to contact such Holders and otherwise facilitate the
tender of Registrable Securities in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance
with this Section 2(a), the provisions of this Agreement shall
continue to apply, mutatis mutandis, solely with respect to
Registrable Securities that are Private Exchange Securities,
Registrable Securities as to which Section 2(b)(iii) hereof is
applicable and Exchange Securities held by Participating
Broker-Dealers, and the Company shall have no further
obligation to register Registrable Securities (other than
Private Exchange Securities or Securities as to which Section
<PAGE>
2(b)(iii) hereof is applicable) pursuant to Section 2(b)
hereof.
(b) Shelf Registration. In the event that (i) the
Company or the Majority Holders reasonably determine, after
conferring with counsel (which may be in-house counsel), that
the Exchange Offer Registration provided in Section 2(a) hereof
is not available or may not be consummated as soon as
practicable after the last day of the Exchange Period because
it would violate applicable securities laws or because the
applicable interpretations of the staff of the SEC would not
permit the Company to effect the Exchange Offer, or (ii) the
Exchange Offer is not for any other reason consummated within
150 days of the Closing Time, or (iii) the Company or the
Majority Holders reasonably determine, after conferring with
counsel (which may be in-house counsel), that the Exchange
Securities would not, upon receipt, be freely tradeable by such
Holders which are not affiliates of the Company without
restriction under the Securities Act and without restrictions
under applicable blue sky or state securities laws, or a Holder
is not permitted by applicable law to participate in the
Exchange Offer or (iv) upon the request of any Purchaser with
respect to any Registrable Securities which it acquired
directly from the Company and, with respect to other
Registrable Securities held by it, if such Purchaser is not
permitted, in the opinion of counsel to such Purchaser,
pursuant to applicable law or applicable interpretations of the
Staff of the SEC, to participate in the Exchange Offer and
thereby receive securities that are freely tradeable without
restriction under the Securities Act and applicable blue sky or
state securities laws (any of the events specified in (i)-(iv)
being a "Shelf Registration Event" and the date of occurrence
thereof, the "Shelf Registration Event Date"), the Company
shall, at its cost, use its best efforts to cause to be filed
as promptly as practicable after such Shelf Registration Event
Date, as the case may be, and, in any event, within 45 days
after such Shelf Registration Event Date, a Shelf Registration
Statement providing for the sale by the Holders of all of the
Registrable Securities, and shall use its best efforts to have
such Shelf Registration Statement declared effective by the SEC
as soon as practicable. No Holder of Registrable Securities
may include any of its Registrable Securities in any Shelf
Registration pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing such information as
the Company may, after conferring with counsel with regard to
information relating to Holders that would be required by the
SEC to be included in such Shelf Registration Statement or
Prospectus included therein, reasonably request for inclusion
in any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration is
being effected agrees to furnish to the Company all information
<PAGE>
with respect to such Holder necessary to make the information
previously furnished to the Company by such Holder not
materially misleading.
The Company agrees to use its best efforts to keep
the Shelf Registration Statement continuously effective for a
period of three years from the date of issuance of the
Securities (subject to extension pursuant to the last paragraph
of Section 3 hereof) or for such shorter period which will
terminate when all of the Registrable Securities covered by the
Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or cease to be outstanding (the
"Effectiveness Period"). The Company shall not permit any
securities other than Registrable Securities to be included in
the Shelf Registration. The Company further agrees, if
necessary, to supplement or amend the Shelf Registration
Statement, if required by the rules, regulations or
instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the
Securities Act or by any other rules and regulations thereunder
for shelf registrations, and the Company agrees to furnish to
the Holders of Registrable Securities copies of any such
supplement or amendment promptly after its being used or filed
with the SEC.
(c) Expenses. The Company shall pay all
Registration Expenses in connection with the registration
pursuant to Section 2(a) or 2(b) hereof and will reimburse the
Purchasers for the reasonable fees and disbursements of Cahill
Gordon & Reindel incurred in connection with the Exchange Offer
and any one counsel designated in writing by the Majority
Holders to act as counsel for the Holders of the Registrable
Securities in connection with a Shelf Registration Statement.
Except as provided herein, each Holder shall pay all expenses
of its counsel, underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to the Shelf
Registration Statement.
(d) Effective Registration Statement. An Exchange
Offer Registration Statement pursuant to Section 2(a) hereof or
a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been
declared effective by the SEC; provided, however, that if,
after it has been declared effective, the offering of
Registrable Securities pursuant to a Shelf Registration
Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not
to have been effective during the period of such interference.
The Company will be deemed not to have used its best efforts to
<PAGE>
cause the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, to become, or to
remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of
Registrable Securities covered thereby not being able to
exchange or offer and sell such Registrable Securities during
that period unless such action is required by applicable law.
(e) Additional Interest. In the event that (i) the
Exchange Offer Registration Statement is not filed with the SEC
on or prior to the 45th calendar day following the Closing
Time, (ii) the Exchange Offer Registration Statement is not
declared effective on or prior to the 120th calendar day
following the Closing Time, (iii) the Exchange Offer is not
consummated on or prior to the 150th calendar day following the
Closing Time or (iv) if a Shelf Registration Event shall have
occurred and if by 150 days after the Closing Time a Shelf
Registration Statement is not declared effective, in each case
(i)-(iv) the interest rate borne by the Securities shall be
increased (the "Additional Interest") by one-quarter of one
percent (0.25%) per annum from and including the 46th day
following the Closing Time in the case of (i) above, from and
including the 121st day following the Closing Time in the case
of clause (ii) above, from and including the 151st day
following the Closing Time in the case of (iii) above or,
solely with respect to Securities which could not be exchanged
as set forth above, Exchange Securities that are not freely
tradeable and Private Exchange Securities, from and including
the 151st day after the Closing Time in the case of clause (iv)
above. In addition, such interest rate shall be increased by
an additional one-quarter of one percent (0.25%) per annum for
each 90-day period that any Additional Interest continues to
accrue pursuant to this Section 2(e); provided, however, that
the aggregate increase in such interest rate pursuant to this
Section 2(e) will in no event exceed one percent (1.00%) per
annum. Upon (w) the filing of the Exchange Offer Registration
Statement in the case of clause (i) above, (x) the
effectiveness of the Exchange Offer Registration Statement in
the case of clause (ii) above, (y) the date of the consummation
of the Exchange Offer in the case of clause (iii) above or
(z) the effectiveness of a Shelf Registration Statement in the
case of clause (iv) above, provided that none of the conditions
set forth in clauses (i), (ii), (iii) and (iv) above continues
to exist, the interest rate borne by the Securities from the
date of such filing, effectiveness or consummation, as the case
may be, will be reduced to the original interest rate.
In the event that the Shelf Registration Statement
has been declared effective and subsequently ceases to be
effective prior to the end of the Effectiveness Period (subject
<PAGE>
to extension pursuant to the last paragraph of Section 3
hereof), for a period in excess of 45 days, whether or not
consecutive, in any given year, then, the interest rate borne
by the Securities, or the Private Exchange Securities, as the
case may be, shall be increased by an additional one-quarter of
one percent (0.25%) per annum on the 46th day in the applicable
year such Shelf Registration Statement ceases to be effective.
Such interest rate shall be increased by an additional
one-quarter of one percent (0.25%) per annum for each
additional 90 days that such Shelf Registration Statement is
not effective, subject to the same aggregate maximum increase
in the interest rate per annum of one percent (1.00%) per annum
referred to above. Upon the effectiveness of a Shelf
Registration Statement, the interest rate borne by the
Securities, or the Private Exchange Securities, as the case may
be, shall be reduced to their original interest rate unless and
until increased as described in this paragraph.
The Company shall notify the Trustee within three
Business Days after each and every date on which an event
occurs in respect of which Additional Interest is required to
be paid (an "Event Date"). Additional Interest shall be paid
by depositing with the Trustee, in trust, for the benefit of
the Holders of Securities or of Private Exchange Securities, as
the case may be, on or before the applicable semiannual
interest payment date, immediately available funds in sums
sufficient to pay the Additional Interest then due. The
Additional Interest due shall be payable on each interest
payment date to the record Holder of Securities entitled to
receive the interest payment to be paid on such date as set
forth in the Indenture. Each obligation to pay Additional
Interest shall be deemed to accrue from and including the day
following the applicable Event Date.
(f) Specific Enforcement. Without limiting the
remedies available to the Purchasers and the Holders, the
Company acknowledges that any failure by the Company to comply
with its obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Purchasers or
the Holders for which there is no adequate remedy at law, that
it would not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the
Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration
Statements pursuant to Sections 2(a) and 2(b) hereof, the
Company shall use its best efforts to:
<PAGE>
(a) prepare and file with the SEC a Registration
Statement or Registration Statements as prescribed by
Sections 2(a) and 2(b) hereof within the relevant time
period specified in Section 2 hereof on the appropriate
form under the Securities Act, which form (i) shall be
selected by the Company, (ii) shall, in the case of a
Shelf Registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and
(iii) shall comply as to form in all material respects
with the requirements of the applicable form and include
all financial statements required by the SEC to be filed
therewith; and use its best efforts to cause such
Registration Statement to become effective and remain
effective in accordance with Section 2 hereof; provided,
however, that if (1) such filing is pursuant to
Section 2(b), or (2) a Prospectus contained in an Exchange
Offer Registration Statement filed pursuant to Section
2(a) is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell
Exchange Securities, before filing any Registration
Statement or Prospectus or any amendments or supplements
thereto, the Company shall furnish to and afford the
Holders of the Registrable Securities and each such
Participating Broker-Dealer, as the case may be, covered
by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of
any documents to be incorporated by reference therein and
all exhibits thereto) proposed to be filed (at least 5
Business Days prior to such filing). The Company shall
not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to
the filing of such document if the Majority Holders or
such Participating Broker-Dealer, as the case may be,
their counsel or the managing underwriters, if any, shall
reasonably object;
(b) prepare and file with the SEC such amendments
and post-effective amendments to each Registration
Statement as may be necessary to keep such Registration
Statement effective for the Effectiveness Period or the
Applicable Period, as the case may be; and cause each
Prospectus to be supplemented by any required prospectus
supplement and as so supplemented to be filed pursuant to
Rule 424 (or any similar provision then in force) under
the Securities Act, and comply with the provisions of the
Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder applicable to it with
respect to the disposition of all securities covered by
each Registration Statement during the Effectiveness
<PAGE>
Period or the Applicable Period, as the case may be, in
accordance with the intended method or methods of
distribution by the selling Holders thereof described in
this Agreement (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify
each Holder of Registrable Securities, at least 20
Business Days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Securities is
being filed and advising such Holder that the distribution
of Registrable Securities will be made in accordance with
the method selected by the Majority Holders; and (ii)
furnish to each Holder of Registrable Securities and to
each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and
such other documents as such Holder or underwriter may
reasonably request, in order to facilitate the public sale
or other disposition of the Registrable Securities (it
being understood that the Company hereby consents to the
use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable
Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any
amendment or supplement thereto);
(d) in the case of a Shelf Registration, use its
best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue
sky" laws of such jurisdictions by the time the applicable
Registration Statement is declared effective by the SEC as
any Holder of Registrable Securities covered by a
Registration Statement and each underwriter of an
underwritten offering of Registrable Securities shall
reasonably request in advance of such date of
effectiveness, and do any and all other acts and things
which may be reasonably necessary or advisable to enable
such Holder and underwriter to consummate the disposition
in each such jurisdiction of such Registrable Securities
owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) file any general
consent to service of process or (iii) subject itself to
taxation in any such jurisdiction if it is not so subject;
(e) in the case of (1) a Shelf Registration or
(2) Participating Broker-Dealers who have notified the
<PAGE>
Company that they will be utilizing the Prospectus
contained in the Exchange Offer Registration Statement as
provided in Section 3(t) hereof, notify each Holder of
Registrable Securities, or such Participating Broker-
Dealers, as the case may be, their counsel and the
managing underwriters, if any, promptly and promptly
confirm such notice in writing (i) when a Registration
Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii)
of any request by the SEC or any state securities
authority for amendments and supplements to a Registration
Statement or Prospectus or for additional information
after the Registration Statement has become effective,
(iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if the Company receives
any notification with respect to the suspension of the
qualification of the Registrable Securities or the
Exchange Securities to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction or the
initiation of any proceeding for such purpose, (v) of the
happening of any event or the failure of any event to
occur or the discovery of any facts or otherwise, during
the period a Shelf Registration Statement is effective
which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material
respect or which causes such Registration Statement or
Prospectus to omit to state a material fact necessary to
make the statements therein, in the light of the
circumstances under which they were made, not misleading
and (vi) the Company's reasonable determination that a
post-effective amendment to the Registration Statement
would be appropriate;
(f) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment;
(g) in the case of a Shelf Registration, furnish to
each Holder of Registrable Securities, without charge, at
least one conformed copy of each Registration Statement
relating to such Shelf Registration and any post-effective
amendment thereto (without documents incorporated therein
by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate
with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be
sold and not bearing any restrictive legends; and cause
<PAGE>
such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and
registered in such names as the selling Holders or the
underwriters may reasonably request at least two Business
Days prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration or an
Exchange Offer Registration, upon the occurrence of any
circumstance contemplated by Section 3(e)(ii), 3(e)(iii),
3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use its best
efforts to prepare a supplement or post-effective
amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; and to notify each Holder to suspend use of
the Prospectus as promptly as practicable after the
occurrence of such an event, and each Holder hereby agrees
to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such
misstatement or omission;
(j) in the case of a Shelf Registration, a
reasonable time prior to the filing of any document which
is to be incorporated by reference into a Registration
Statement or a Prospectus after the initial filing of a
Registration Statement, provide a reasonable number of
copies of such document to the Holders; and make such of
the representatives of the Company as shall be reasonably
requested by the Holders of Registrable Securities or the
Purchasers on behalf of such Holders available for
discussion of such document;
(k) obtain a CUSIP number for all Exchange
Securities or Registrable Securities, as the case may be,
not later than the effective date of a Registration
Statement, and provide the Trustee with printed
certificates for the Exchange Securities or the
Registrable Securities, as the case may be, in a form
eligible for deposit with the Depositary;
(l) cause the Indenture to be qualified under the
Trust Indenture Act of 1939 (the "TIA") in connection with
the registration of the Exchange Securities or Registrable
Securities, as the case may be, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as
<PAGE>
may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and execute, and use
its best efforts to cause the Trustee to execute, all
documents as may be required to effect such changes, and
all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a
timely manner;
(m) in the case of a Shelf Registration, enter into
such agreements (including underwriting agreements) as are
customary in underwritten offerings and take all such
other appropriate actions as are reasonably requested in
order to expedite or facilitate the registration or the
disposition of such Registrable Securities, and in such
connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an
underwritten registration: (i) make such representations
and warranties to Holders of such Registrable Securities
and the underwriters (if any), with respect to the
business of the Company and its subsidiaries as then
conducted or proposed to be conducted and the Registration
Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters
in underwritten offerings, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the
Company and updates thereof in form and substance
reasonably satisfactory to the managing underwriters (if
any) and the Holders of a majority in principal amount of
the Registrable Securities being sold, addressed to each
selling Holder and the underwriters (if any) covering the
matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be
reasonably requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof in
form and substance reasonably satisfactory to the managing
underwriters from the independent certified public
accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company
for which financial statements and financial data are, or
are required to be, included in the Registration
Statement), addressed to the selling Holders of
Registrable Securities and to each of the underwriters,
such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings and such other
matters as reasonably requested by such selling Holders
and underwriters (including, without limitation, negative
assurance with respect to any interim financial period
included in the Registration Statement or the Prospectus
<PAGE>
and with respect to any period after the date of the
latest balance sheet included therein and up to five days
prior to the closing date in respect of any such sale);
and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and
procedures no less favorable than those set forth in
Section 4 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal
amount of Registrable Securities covered by such
Registration Statement and the managing underwriters or
agents) with respect to all parties to be indemnified
pursuant to said Section (including, without limitation,
such underwriters and selling Holders). The above shall
be done at each closing under such underwriting agreement,
or as and to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to
Section 2(b) or (2) a Prospectus contained in an Exchange
Offer Registration Statement filed pursuant to Section
2(a) is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the applicable period, make
available for inspection by any selling Holder of such
Registrable Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling
Holder or each such Participating Broker-Dealer, as the
case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other
records, pertinent corporate documents and properties of
the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them
to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the
Company and its subsidiaries to supply all information in
each case reasonably requested by any such Inspector in
connection with such Registration Statement. Records
which the Company determines, in good faith, to be
confidential and any Records which it notifies the
Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission
in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction or is necessary in
connection with any action, suit or proceeding or
(iii) the information in such Records has been made
generally available to the public. Each selling Holder of
<PAGE>
such Registrable Securities and each such Participating
Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the
Company unless and until such is made generally available
to the public. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will
be required to further agree that it will, upon learning
that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and
allow the Company at its expense to undertake appropriate
action to prevent disclosure of the Records deemed
confidential (it being understood that the Holders shall
at all times be unrestricted in complying with any order
of any court or tribunal of competent jurisdiction);
(o) comply with all applicable rules and regulations
of the SEC and make generally available to its security-
holders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after
the effective date of a Registration Statement, which
statements shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a
Private Exchange, obtain an opinion of counsel to the
Company addressed to the Trustee for the benefit of all
Holders of Registrable Securities participating in the
Exchange Offer or the Private Exchange, as the case may
be, and which includes an opinion that (i) the Company has
duly authorized, executed and delivered the Exchange
Securities and Private Exchange Securities and the
Indenture, and (ii) each of the Exchange Securities or the
Private Exchange Securities, as the case may be, and the
Indenture constitute a legal, valid and binding obligation
of the Company, enforceable against the Company in
accordance with its respective terms (in each case, with
customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to
be consummated, upon delivery of the Registrable
Securities by Holders to the Company (or to such other
<PAGE>
Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as
the case may be, the Company shall mark, or cause to be
marked, on such Registrable Securities delivered by such
Holders that such Registrable Securities are being
cancelled in exchange for the Exchange Securities or the
Private Exchange Securities, as the case may be; in no
event shall such Registrable Securities be marked as paid
or otherwise satisfied;
(r) cooperate with each seller of Registrable
Securities covered by any Registration Statement and each
underwriter, if any, participating in the disposition of
such Registrable Securities and their respective counsel
in connection with any filings required to be made with
the NASD;
(s) use its best efforts to take all other steps
necessary to effect the registration of the Registrable
Securities covered by a Registration Statement
contemplated hereby;
(t) (A) in the case of the Exchange Offer
Registration Statement (i) include in the Exchange Offer
Registration Statement a section entitled "Plan of
Distribution," which section shall be reasonably
acceptable to the Purchasers or another representative of
the Participating Broker-Dealers, and which shall contain
a summary statement of the positions taken or policies
made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer (a
"Participating Broker-Dealer") that holds Registrable
Securities acquired for its own account as a result of
market-making activities or other trading activities and
that will be the beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of Exchange Securities to be
received by such broker-dealer in the Exchange Offer,
whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or
policies, in the reasonable judgment of the Purchasers or
such other representative, represent the prevailing views
of the staff of the SEC, including a statement that any
such broker-dealer who receives Exchange Securities for
Registrable Securities pursuant to the Exchange Offer may
be deemed a statutory underwriter and must deliver a
prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Securities,
(ii) furnish to each Participating Broker-Dealer who has
delivered to the Company the notice referred to in Section
3(e), without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement,
<PAGE>
including any preliminary prospectus, and any amendment or
supplement thereto, as such Participating Broker-Dealer
may reasonably request (it being understood that the
Company hereby consents to the use of the Prospectus
forming part of the Exchange Offer Registration Statement
or any amendment or supplement thereto, by any Person
subject to the prospectus delivery requirements of the
SEC, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange
Securities covered by the Prospectus or any amendment or
supplement thereto), (iii) use its best efforts to keep
the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein in
order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time
as such Persons must comply with such requirements in
order to resell the Exchange Securities; provided,
however, that such period shall not be required to exceed
180 days (or such longer period if extended pursuant to
the last sentence of Section 3 hereof) (the "Applicable
Period"), and (iv) include in the transmittal letter or
similar documentation to be executed by an exchange
offeree in order to participate in the Exchange Offer (x)
the following provision:
"If the exchange offeree is a broker-dealer
holding Registrable Securities acquired for
its own account as a result of market-making
activities or other trading activities, it
will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of Exchange
Securities received in respect of such
Registrable Securities pursuant to the
Exchange Offer";
and (y) a statement to the effect that by a broker-dealer
making the acknowledgment described in clause (x) and by
delivering a Prospectus in connection with the exchange of
Registrable Securities, the broker-dealer will not be
deemed to admit that it is an underwriter within the
meaning
<PAGE>
of the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver to the Purchasers or to another representative of
the Participating Broker-Dealers on behalf of the Participating
Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of
counsel substantially in the form attached hereto as Exhibit A, (ii) an
officers' certificate containing certifications substantially similar to
those set forth in Section 7(f) of the Purchase Agreement and such
additional certifications as are customarily delivered in a public offering
of debt securities and (iii) as well as upon the effectiveness of the
Exchange Offer Registration Statement, a comfort letter, in each case, in
customary form if permitted by Statement on Auditing Standards No. 72 of
the American Institute of Certified Public Accountants.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the proposed distribution of such
Registrable Securities, as the Company may from time to time reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
In the case of (1) a Shelf Registration Statement or (2)
Participating Broker-Dealers who have notified the Company that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, each Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(e)(ii), 3(e)(iii), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder
will forthwith
<PAGE>
discontinue disposition of Registrable Securities pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
------
may be resumed, and, if so directed by the Company, such Holder will deliver to
the Company (at the Company's expense) all copies in such Holder's possession,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities or Exchange Securities, as the
case may be, current at the time of receipt of such notice. If the Company
shall give any such notice to suspend the disposition of Registrable Securities
or Exchange Securities, as the case may be, pursuant to a Registration
Statement, the Company shall use its best efforts to file and have declared
effective (if an amendment) as soon as practicable an amendment or supplement to
the Registration Statement and shall extend the period during which such
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days in the period from and including the date of the giving of
such notice to and including the date when the Company shall have made available
to the Holders (x) copies of the supplemented or amended Prospectus necessary to
resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. (a) The Company shall
--------------------------------
indemnify and hold harmless each Purchaser, each Holder, each Participating
Broker-Dealer, each underwriter who participates in an offering of Registrable
Securities, their respective affiliates, each Person, if any, who controls any
of such parties within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and each of their respective directors, officers,
employees and agents, as follows:
(i) from and against any and all loss, liability, claim, damage
and expense whatsoever, joint or several, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto), covering
Registrable Securities or Exchange Securities, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission
<PAGE>
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) from and against any and all loss, liability, claim,
damage and expense whatsoever, joint or several, as incurred, to
the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any court of
governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission,
of any such alleged untrue statement or omission, if such
settlement is effected with the prior written consent of the
Company (except as provided in Section 4(d) below); and
(iii) from and against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of counsel
chosen by the Purchasers, such Holder, such Participating Broker-
Dealer or any underwriter (except to the extent otherwise expressly
provided in Section 4(c) hereof)), reasonably incurred in
investigating, preparing or defending against any litigation, or
any investigation or proceeding by any court or governmental agency
or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense
is not paid under subparagragh (i) or (ii) of this Section 4(a);
provided, however, that this indemnity does not apply to any loss, liability,
- -------- -------
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished in writing to the Company by such
Purchaser, such Holder, such Participating Broker-Dealer or any underwriter with
respect to such Purchaser, Holder, Participating Broker-Dealer or underwriter,
as the case may be, expressly for use in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
Any amounts advanced by the Company to an indemnified party pursuant to this
Section 4 as a result of such losses shall be returned to the Company if it
shall be finally determined by such a court in a judgment not subject to appeal
or final review that such indemnified party was not entitled to indemnification
by the Company.
<PAGE>
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, each Purchaser, each underwriter who participates in
an offering of Registrable Securities and the other selling Holders and each of
their respective directors, officers (including each officer of the Company who
signed the Registration Statement), employees and agents and each Person, if
any, who controls the Company, any Purchaser, any underwriter or any other
selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all loss, liability,
claim, damage and expense whatsoever described in the indemnity contained in
Section 4(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such selling Holder with respect to
such Holder expressly for use in the Registration Statement (or any amendment
thereto), or any such Prospectus (or any amendment or supplement thereto);
provided, however, that, in the case of Shelf Registration Statement, no such
- -------- -------
Holder shall be liable for any claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Registrable Securities
pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability which it may
have other than on account of this indemnity agreement and shall not relieve the
indemnifying party from its obligation under this Section 4 unless materially
prejudiced thereby. An indemnifying party may participate at its own expense in
the defense of such action. Notwithstanding the foregoing, if it so elects
within a reasonable time after receipt of such notice, an indemnifying party,
jointly with any other indemnifying parties receiving such notice, may assume
the defense of such action with counsel chosen by it and approved by the
indemnified parties defendant in such action (such approval not to be
unreasonably withheld), unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and
<PAGE>
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying parties be
liable for the fees and expenses of more than one counsel (in addition to local
counsel) for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent includes an unconditional written release
in form and substance satisfactory to the indemnified parties of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel pursuant to Section 4(a)(iii) above, such indemnifying party
agrees that it shall liable for any settlement of the nature contemplated by
Section 4(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) If the indemnification provided for in Section 4(a) or (b)
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Holder of Registrable Securities, the Participating Broker-Dealer
or Purchaser, as the case may be, on the other hand from the offering of the
Securities pursuant to the Purchase
<PAGE>
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Holder of Registrable Securities, the
Participating Broker-Dealer or Purchaser, as the case may be, on the other hand
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of the Company on the one hand and the Holder of
Registrable Securities, the Participating Broker-Dealer or the Purchasers, as
the case may be, on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, or by the Holder of Registrable Securities,
the Participating Broker-Dealer or the Purchasers, as the case may be, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Holders of the Registrable Securities and the
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 4(e) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 4(e). The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in Section 4(c) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon such untrue or alleged untrue
statement or omission or alleged omission.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4(e), each Person, if any, who controls
a Holder of Registrable Securities, a Purchaser or a Participating Broker-Dealer
within the meaning of
<PAGE>
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such other Person, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each Person, if any, who controls the Company within the meaning of Section 15
of the Securities act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.
5. Participation in Underwritten Registrations. No Holder may
-------------------------------------------
participate in any underwritten registration hereunder unless such Holder
(a) agrees to sell such Holder's Registrable Securities on the basis provided
in any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents reasonable required under the terms of such
underwriting arrangements.
6. Selection of Underwriters. The Holders of Registrable
-------------------------
Securities covered by the Shelf Registration Statement who desire to do so may
sell the securities covered by such Shelf Registration in an underwritten
offering. In any such underwritten offering, the underwriter or underwriters
and manager or managers that will administer the offering will be selected by
the Holders of a majority in aggregate principal amount of the Registrable
Securities included in such offering; provided, however, that such underwriters
-------- -------
and managers must be reasonably satisfactory to the Company.
7. Miscellaneous.
-------------
(a) Rule 144 and Rule 144A. For so long as the Company is subject
----------------------
to the reporting requirements of Section 13 or 15 of the Exchange Act and any
Registrable Securities remain outstanding, the Company covenants that it will
file the reports required to be filed by it under the Securities Act and Section
13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the
SEC thereunder, that if it ceases to be so required to file such reports, it
will upon the request of any Holder of Registrable Securities (a) make publicly
available such information as is necessary to permit sales pursuant to Rule 144
under the Securities Act, (b) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the
Securities Act and it will take such further action as any Holder of Registrable
Securities may reasonably request, and (c) take such further
<PAGE>
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
rule may be amended from time to time, (ii) Rule 144A under the Securities Act,
as such rule may be amended from time to time, or (iii) any similar rules or
regulations hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into
--------------------------
nor will the Company on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's other issued and outstanding securities under any such
agreements.
(c) Amendments and Waivers. The provisions of this Agreement may
----------------------
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, otherwise than with the prior
written consent of (A) the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Securities and (B) in
circumstances that would adversely affect the Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Securities held by all Participating
Broker-Dealers; provided, however, that Section 4 and this Section 7(c) may not
-------- -------
be amended, modified or supplemented without the prior written consent of each
Holder and each Participating Broker-Dealer (including any Person who was a
Holder or Participating Broker-Dealer of Registrable Securities or Exchange
Securities, as the case may be, disposed of pursuant to any Registration
Statement). Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Securities may be given by Holders of at least a majority in aggregate principal
amount
<PAGE>
of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of
this Section 7(d), which address initially is, with respect to the Purchasers,
the address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of the
Purchasers, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
-------- -------
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and provisions
of this Agreement and such Person shall be entitled to receive the benefits
hereof.
<PAGE>
(f) Third Party Beneficiary. Each of the Purchasers shall be a third
-----------------------
party beneficiary of the agreements made hereunder between the Company, on the
one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN
-------------
THE STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(J) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company or Its Affiliates. Whenever the
------------------------------------------------
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
(l) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and
<PAGE>
understanding of the parties hereto in respect of the subject matter contained
herein and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings, correspondence,
conversation and memoranda between the Purchasers on the one hand and the
Company on the other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereof and thereof are merged herein and
replaced hereby.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PARK NEWSPAPERS, INC.
By:
---------------------------------
Name: Wright M. Thomas
Title: President
Confirmed and accepted as of
the date first above
written:
GOLDMAN, SACHS & CO.
By:
-------------------------------
Goldman, Sachs & Co.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-------------------------------
Name: Christopher S. Wilson
Title: Vice President
<PAGE>
Exhibit A
---------
Form of Opinion of Counsel
--------------------------
1. Each of the Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial and statistical information and supplemental schedules included
or referred to therein or omitted therefrom and the Form T-l, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Securities Act and the applicable rules
and regulations promulgated under the Securities Act.
2. In the course of such counsel's review and discussion of the
contents of the Exchange Offer Registration Statement and the Prospectus with
certain officers and other representatives of the Company and representatives of
the independent certified public accountants of the Company, but without
independent check or verification or responsibility for the accuracy,
completeness or fairness of the statements contained therein, on the basis of
the foregoing (relying as to materiality to a large extent upon representations
and opinions of officers and other representatives of the Company), no facts
have come to such counsel's attention which cause such counsel to believe that
the Exchange Offer Registration Statement (other than the financial statements,
notes and schedules thereto and other financial and statistical information
contained or referred to therein and the Form T-1, as to which such counsel need
express no belief), at the time the Exchange Offer Registration Statement became
effective and at the time of the consummation of the Exchange Offer, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading, or that the Prospectus (other than the financial
statements, notes and schedules thereto and other financial and statistical
information contained or referred to therein, as to which such counsel need
express no belief) contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading.
<PAGE>
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------
YEAR ENDED TWELVE MONTHS
DECEMBER 31, 1995 ENDED
------------------------ MARCH 31,
ACQUISITION TRANSACTIONS 1996
----------- ------------ -------------
<S> <C> <C> <C>
PARK NEWSPAPERS, INC. AND SUBSIDIARIES
Earnings:
Income (loss) from continuing operations
before income taxes.................... (9,972) (4,306) (5,228)
Fixed charges computed below............ 24,831 19,165 19,165
------- ------- -------
14,859 14,859 13,937
Fixed Charges:
Interest and amortization of debt ex-
pense.................................. 24,810 19,144 19,144
Interest factor related to rent expense. 21 21 21
------- ------- -------
24,831 19,165 19,165
Deficiency of earnings to cover fixed
charges................................ (9,972) (4,306) (5,228)
PARK COMMUNICATIONS, INC. AND SUBSIDIAR-
IES
Earnings:
Income (loss) from continuing operations
before income taxes.................... (34,000) (29,273) (31,405)
Fixed charges computed below............ 65,804 61,077 61,077
------- ------- -------
31,804 31,804 29,672
Fixed Charges:
Interest and amortization of debt ex-
pense.................................. 65,689 60,962 60,962
Interest factor related to rent expense. 115 115 115
------- ------- -------
65,804 61,077 61,077
Deficiency of earnings to cover fixed
charges................................ (34,000) (29,273) (31,405)
</TABLE>
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF PARK NEWSPAPERS, INC.
<TABLE>
<CAPTION>
State of Incorporation
===============================================================================
<S> <C>
PARK NEWSPAPERS, INC. Delaware
- -------------------------------------------------------------------------------
1. Park Newspapers of Clark County,
Inc. Indiana
- -------------------------------------------------------------------------------
a. The News & Journal, Inc. Indiana
- -------------------------------------------------------------------------------
2. Park Newspapers of Clinton, Inc. North Carolina
- -------------------------------------------------------------------------------
a. Clinton Newspapers, Inc. North Carolina
- -------------------------------------------------------------------------------
3. Park Newspapers of Concord, Inc. North Carolina
- -------------------------------------------------------------------------------
a. The Concord Tribune, Inc. North Carolina
- -------------------------------------------------------------------------------
4. Park Newspapers of Creek, Inc. Delaware
- -------------------------------------------------------------------------------
a. Park Newspapers of Sapulpa, Inc. Oklahoma
- -------------------------------------------------------------------------------
5. Park Newspapers of the Cumberlands, Inc. Kentucky
- -------------------------------------------------------------------------------
6. Park Newspapers of Devils Lake, Inc. North Dakota
- -------------------------------------------------------------------------------
7. Park Newspapers of Eden, Inc. North Carolina
- -------------------------------------------------------------------------------
8. Effingham Daily News Company Illinois
- -------------------------------------------------------------------------------
9. Park Newspapers of Georgia, Inc. Georgia
- -------------------------------------------------------------------------------
10. Park Newspapers of Hudson, Inc. New York
- -------------------------------------------------------------------------------
11. Park Newspapers of Idaho, Inc. Idaho
- -------------------------------------------------------------------------------
a. South Idaho Newspapers, Inc. Idaho
- -------------------------------------------------------------------------------
12. Park Newspapers of Illinois, Inc. Delaware
- -------------------------------------------------------------------------------
13. Park Newspapers of Indiana, Inc. Indiana
- -------------------------------------------------------------------------------
a. The Pilot Company, Inc. Indiana
- -------------------------------------------------------------------------------
14. Park Newspapers of Iredell, Inc. Delaware
- -------------------------------------------------------------------------------
a. Park Newspapers of Statesville, Inc. North Carolina
- -------------------------------------------------------------------------------
15. Kannapolis Publishing Company, Inc. North Carolina
- -------------------------------------------------------------------------------
16. Park Newspapers of Kentucky, Inc. Kentucky
- -------------------------------------------------------------------------------
17. Park Newspapers of Lumberton, Inc. North Carolina
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
State of Incorporation
===============================================================================
<S> <C>
18. Park Newspapers of Marion, Inc. North Carolina
- -------------------------------------------------------------------------------
19. Park Newspapers of Medina, Inc. New York
- -------------------------------------------------------------------------------
20. Park Newspapers of Michigan, Inc. Michigan
- -------------------------------------------------------------------------------
a. Coldwater Reporter Company Michigan
- -------------------------------------------------------------------------------
21. Park Newspapers of Minnesota, Minnesota
- -------------------------------------------------------------------------------
22. Park Newspapers of Moore County, Inc. North Carolina
- -------------------------------------------------------------------------------
23. Park Newspapers of Mooresville, Inc. North Carolina
- -------------------------------------------------------------------------------
a. Mooresville Tribune, Inc. North Carolina
- -------------------------------------------------------------------------------
24. Park Newspapers of Morehead, Inc Kentucky
- -------------------------------------------------------------------------------
25. Park Newspapers of Morganton, Inc. North Carolina
- -------------------------------------------------------------------------------
26. Park Newspapers of Northeastern
North Carolina, Inc. North Carolina
- -------------------------------------------------------------------------------
27. Park Newspapers of Oklahoma, Inc. Oklahoma
- -------------------------------------------------------------------------------
a. McAlester Publishing Company Oklahoma
- -------------------------------------------------------------------------------
28. RHP Newspapers, Inc. New York
- -------------------------------------------------------------------------------
a. Lockport Publications, Inc. Delaware
- -------------------------------------------------------------------------------
i. Lockport Union-Sun Journal, Inc. New York
- -------------------------------------------------------------------------------
29. Park Newspapers of Rockingham, Inc. North Carolina
- -------------------------------------------------------------------------------
30. Park Newspapers of St. Lawrence, Inc. New York
- -------------------------------------------------------------------------------
31. Park Newspapers of Virginia, Inc. Virginia
- -------------------------------------------------------------------------------
a. Prince William Publishing Company Virginia
- -------------------------------------------------------------------------------
32. Park Newspapers of Waynesboro, Inc. Virginia
- -------------------------------------------------------------------------------
33. Park Newspapers of Florida, Inc. Florida
- -------------------------------------------------------------------------------
34. Park Newspapers of Norwich, Inc. New York
- -------------------------------------------------------------------------------
35. Park Newspapers of Honesdale, Inc. Pennsylvania
- -------------------------------------------------------------------------------
36. Park Newspapers of Susquehanna, Inc. Pennsylvania
===============================================================================
</TABLE>
-2-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report, which includes an explanatory paragraph explaining certain financial
reporting implications related to the acquisition of Park Communications, Inc.
and Subsidiaries (the "Company") by Park Acquisitions, Inc., dated February 2,
1996, except for Note 13 as to which the date is May 6, 1996, on our audit of
the consolidated financial statements and the financial statement schedule of
the Company and to the inclusion in this registration statement on Form S-4 of
our reports which include an explanatory paragraph explaining certain
financial reporting implications related to the Acquisition of the Company by
Park Acquisitions, Inc. dated February 2, 1996 on our audit of the
consolidated financial statements and the financial statement schedule of Park
Newspapers, Inc. and Subsidiaries as of December 31, 1995 and for the period
from May 11, 1995 to December 31, 1995 and for the period from January 1, 1995
to May 10, 1995. We also consent to the reference to our firm under the
caption "Experts."
Coopers & Lybrand L.L.P.
Lexington, Kentucky
June 18, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated January 27, 1995, in the Registration Statement (Form
S-4) and related Prospectus of Park Newspapers, Inc. dated June 20, 1996.
Syracuse, New York
June 18, 1996 /s/ Ernst & Young LLP
<PAGE>
Exhibit 25.1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (b) (2)__
--------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Barbara McCluskey, Assistant Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
Park Newspapers, Inc.
(Exact name of obligor as specified in its charter)
Delaware 16-1087610
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 Vine Center Office Tower
333 West Vine Street
Lexington, KY 40507
(Address of principal executive office) (Zip code)
11 7/8% Senior Notes due 2004
(Title of Indenture Securities)
- --------------------------------------------------------------------------------
1
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of June 14, 1996
Col. A Col. B
Title of class Amount Outstanding
Not Applicable
2
<PAGE>
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each such
other indenture
Not Applicable
(b) A brief statement of the facts relied upon as a
basis for the claim that no conflicting interest within the
meaning of Section 310 (b) (1) of the Act arises as a result of
the trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the obligor
or underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner,
and executive officer of the obligor:
As of June 14, 1996
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented
by amount given in Col. C
- -------------- -------------------- ----------------- -------------------------
3
<PAGE>
Not Applicable
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and
each director, partner and executive officer of each such underwriter:
As of June 14, 1996
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented
by amount given in Col. C
- ---------------- ----------------- ---------------- -------------------------
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default
by the trustee:
As of June 14, 1996
Col A Col B Col C Col D
Name of Owner Title of class Amount owned Percent of voting
beneficially or securities
held as collateral represented by
security for amount given in
obligations in Col. C
default
- ------------- ------------------- ---------------------- --------------------
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee.
4
<PAGE>
If the trustee owns beneficially or holds as collateral security
for obligations in default any securities of an underwriter
for the obligor, furnish the following information as
to each class of securities of such underwriter any of which
are so owned or held by the trustee:
As of June 14, 1996
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or securities
held as collateral represented by
security for amount given in
obligations in Col. C
default
- -------------- ------------------ ---------------------- -------------------
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or Securityholders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to
the voting securities of such person:
As of June 14, 1996
Col A Col B Col C Col D
Name of Owner Title of class Amount owned Percent of voting
beneficially or securities
held as collateral represented by
security for amount given in
obligations in Col. C
default
- ------------- ------------------- ---------------------- --------------------
Not Applicable
5
<PAGE>
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the
knowledge of the trustee, owns 50 percent or more of the voting
securities of the obligor, furnish the following information as to
each class of securities of such any of which are so owned or held by
the trustee:
As of June 14, 1996
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
- ------------------------ -------------------------- -------------
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
As of June 14, 1996
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of
beneficially or voting securities
held as collateral represented by
security for amount given in
obligations in Col. C
default
--------------- -------------------- ------------------- -----------------
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with
respect to the securities under this indenture. Explain the
nature of any such default.
Not Applicable
6
<PAGE>
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether there has been a
default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
Not Applicable
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not Applicable
Item 15. Foreign Trustees.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee to Commence
Business (Included in Exhibit I above).
*3. A copy of the Authorization of the Trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
*4. A copy of the existing By-Laws of the Trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
7
<PAGE>
5. A copy of each Indenture referred to in Item 4, if the Obligor is
in default.
Not Applicable.
6. The consent of the United States institutional trustee required
by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
----
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated
in Item 13, the obligor is not in default under any indenture under which
the applicant is trustee.
8
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, IBJ Schroder Bank & Trust Company, a corporation
organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of New York, and State of New York, on the 14th day of
June, 1996.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Barbara McCluskey
------------------------------------
Barbara McCluskey
Assistant Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issue of Park
Newspapers, Inc., we hereby consent that reports of examinations by
Federal, State, Territorial, or District authorities may be furnished
by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Barbara McCluskey
-------------------------------------
Barbara McCluskey
Assistant Vice President
Dated: June 14, 1996
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of March 31, 1996
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
----------------
ASSETS
------
<S> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin ....................... $ 27,805
Interest-bearing balances ................................................ $ 142,919
Securities: Held to Maturity ............................................ $ 169,682
Available-for-sale ......................................... $ 23,665
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement
subsidiaries and in IBFs:
Federal Funds sold ....................................................... $ 63,801
Securities purchased under agreements to resell .......................... $ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income ..................... $ 1,575,250
LESS: Allowance for loan and lease losses .................... $ 55,396
LESS: Allocated transfer risk reserve ........................ $ -0-
Loans and leases, net of unearned income, allowance,
and reserve .............................................................. $ 1,519,854
Assets held in trading accounts ............................................ $ 489
Premises and fixed assets .................................................. $ 7,228
Other real estate owned .................................................... $ 397
Investments in unconsolidated subsidiaries and
associated companies ....................................................... $ -0-
Customers' liability to this bank on acceptances outstanding ............... $ 155
Intangible assets .......................................................... $ -0-
Other assets ............................................................... $ 60,135
TOTAL ASSETS $ 2,016,130
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
-----------
<S> <C>
Deposits:
In domestic offices ........................................................... $ 612,376
Noninterest-bearing ........................................... $ 174,044
Interest-bearing .............................................. $ 438,332
In foreign offices, Edge and Agreement subsidiaries, and IBFs ................. $ 793,288
Noninterest-bearing ............................................... $ 16,090
Interest-bearing ................................................... $ 777,198
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased ....................................................... $ 57,588
Securities sold under agreements to repurchase ................................ $ -0-
Demand notes issued to the U.S. Treasury ........................................ $ 24,522
Trading Liabilities ............................................................. $ 390
Other borrowed money:
a) With original maturity of one year or less ................................. $ 250,333
b) With original maturity of more than one year ............................... $ -0-
Mortgage indebtedness and obligations under capitalized leases .................. $ -0-
Bank's liability on acceptances executed and outstanding ........................ $ 155
Subordinated notes and debentures ............................................... $ -0-
Other liabilities ............................................................... $ 68,215
TOTAL LIABILITIES ............................................................... $ 1,806,867
Limited life preferred stock and related surplus ................................ $ -0-
EQUITY CAPITAL
Perpetual preferred stock ....................................................... $ -0-
Common Stock .................................................................... $ 29,649
Surplus ......................................................................... $ 217,008
Undivided profits and capital reserves .......................................... $ (37,419)
Plus: Net unrealized gains (losses) on marketable equity
securities ..................................................................... $ 25
Cumulative foreign currency translation adjustments ............................. $ -0-
TOTAL EQUITY CAPITAL ............................................................ $ 209,263
TOTAL LIABILITIES AND EQUITY CAPITAL ............................................ $ 2,016,130
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
DATA FOR YEARS 1993 & 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-END> DEC-31-1994 DEC-31-1993
<CASH> 1,937 0
<SECURITIES> 0 0
<RECEIVABLES> 7,005 0
<ALLOWANCES> 314 0
<INVENTORY> 1,000 0
<CURRENT-ASSETS> 10,899 0
<PP&E> 45,485 0
<DEPRECIATION> (24,266) 0
<TOTAL-ASSETS> 93,060 0
<CURRENT-LIABILITIES> 6,115 0
<BONDS> 0 0
0 0
0 0
<COMMON> 4,150 0
<OTHER-SE> 77,363 0
<TOTAL-LIABILITY-AND-EQUITY> 93,060 0
<SALES> 0 0
<TOTAL-REVENUES> 76,810 84,751
<CGS> 0 0
<TOTAL-COSTS> 32,364 39,221
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 76 177
<INCOME-PRETAX> 15,517 11,144
<INCOME-TAX> 7,007 5,335
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
DATA FOR PERIOD OF 1/1-5/10/95 & 5/11-12/31/95 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> DEC-31-1995 MAY-10-1995
<CASH> 710 1,567
<SECURITIES> 0 0
<RECEIVABLES> 7,852 7,508
<ALLOWANCES> 289 0
<INVENTORY> 1,089 972
<CURRENT-ASSETS> 10,274 11,183
<PP&E> 27,793 42,092
<DEPRECIATION> (1,562) (21,474)
<TOTAL-ASSETS> 219,738 91,278
<CURRENT-LIABILITIES> 13,684 12,285
<BONDS> 0 0
0 0
0 0
<COMMON> 4,150 4,150
<OTHER-SE> (11,151) 74,843
<TOTAL-LIABILITY-AND-EQUITY> 219,738 91,278
<SALES> 0 0
<TOTAL-REVENUES> 51,723 27,181
<CGS> 0 0
<TOTAL-COSTS> 20,783 13,027
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,851 23
<INCOME-PRETAX> (5,076) 4,866
<INCOME-TAX> (1,430) 2,222
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> (82.58) 0
<EPS-DILUTED> (82.58) 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
DATA FOR 1ST QUARTER OF 1995 & 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> MAR-31-1995 MAR-31-1996
<CASH> 0 762
<SECURITIES> 0 0
<RECEIVABLES> 0 7,394
<ALLOWANCES> 0 340
<INVENTORY> 0 919
<CURRENT-ASSETS> 0 9,134
<PP&E> 0 27,988
<DEPRECIATION> 0 (2,316)
<TOTAL-ASSETS> 0 216,967
<CURRENT-LIABILITIES> 0 19,748
<BONDS> 0 0
0 0
0 0
<COMMON> 0 4,150
<OTHER-SE> 0 (19,627)
<TOTAL-LIABILITY-AND-EQUITY> 0 216,967
<SALES> 0 0
<TOTAL-REVENUES> 18,259 18,342
<CGS> 0 0
<TOTAL-COSTS> 8,043 8,584
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 17 5,685
<INCOME-PRETAX> 3,255 (3,939)
<INCOME-TAX> 1,473 (1,448)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> 0 (56.42)
<EPS-DILUTED> 0 (56.42)
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 7/8% SENIOR NOTES DUE 2004
OF
PARK NEWSPAPERS, INC.
PURSUANT TO THE PROSPECTUS DATED , 1996
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1996, UNLESS EXTENDED (THE "EXPIRATION DATE").
- -------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed and submitted as follows:
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
(THE "EXCHANGE AGENT")
For Information by Telephone:
(212) 858-2103
By Registered or Certified Mail: By Hand or Overnight Delivery Service:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attention: Securities Processing Window,
Attention: Reorganization Operations Subcellar One (SC-1)
Department
By Facsimile Transmission:
(212) 858-2611
(Facsimile Confirmation)
(212) 858-2103
(ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY
REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1996 (the "Prospectus") of Park Newspapers, Inc., a Delaware corporation (the
"Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Issuer's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its Series B 11 7/8% Senior Notes due 2004 (the
"Exchange Notes"), which have been registered under the Securities Act (as
hereinafter defined) pursuant to a Registration Statement, for each $1,000 in
principal amount of its outstanding 11 7/8% Senior Notes due 2004 (the
"Notes"), of which $155,000,000 aggregate principal amount is outstanding.
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial
Owners") a duly completed and executed form of "Instruction to Registered
Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take
the action described in this Letter of Transmittal.
<PAGE>
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon
the order of, the Issuer, all rights, title, and interest in, to and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned
with respect to the Tendered Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Issuer or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Issuer,
on the books of the registrar for the Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Issuer
upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon acceptance by the
Issuer of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the procedures
described in the caption "The Exchange Offer" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer--Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any Beneficial
Owner(s), and every obligation of the undersigned or any Beneficial Owners
hereunder shall be binding upon the heirs, representatives, successors and
assigns of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances and adverse
claims when the Tendered Notes are acquired by the Issuer as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Issuer or the
Exchange Agent as necessary or desirable to complete and give effect to the
transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired
by the undersigned and any Beneficial Owner(s) in the ordinary course of
business of the undersigned and any Beneficial Owner(s), (ii) the undersigned
and each Beneficial Owner 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, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuer or
any of its subsidiaries and (iv) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), in connection with a secondary
resale of the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Securities and Exchange Commission (the
"Commission") set forth in the no-action letters that are discussed in the
section of the Prospectus entitled "The Exchange Offer."
2
<PAGE>
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"Use of Guaranteed Delivery" BELOW (Box 4).
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes.
All other tenders must be in integral multiples of $1,000 of principal
amount. Unless otherwise indicated in this column, the principal amount
of all Note Certificates identified in this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered. See Instruction 4.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BOX 2
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL OWNER(S)
- ------------------------------------------------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
BOX 3
---------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
---------------------------------------------------------------------------
(PLEASE PRINT)
Address:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Tax Identification or Social Security No.:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
BOX 4
---------------------------------------------------------------------------
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
---------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------
Name of Institution which Guaranteed Delivery:
---------------------------
---------------------------------------------------------------------------
BOX 5
---------------------------------------------------------------------------
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-
ENTRY TRANSFER.
Name of Tendering Institution:
--------------------------------------------
Account Number:
-----------------------------------------------------------
Transaction Code Number:
--------------------------------------------------
---------------------------------------------------------------------------
4
<PAGE>
BOX 6
- --------------------------------------------------------------------------------
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
X Signature Guarantee
---------------------------------
X (IF REQUIRED BY INSTRUCTION 5)
---------------------------------
(SIGNATURE OF REGISTERED HOLDER(S) Authorized Signature
OR AUTHORIZED SIGNATORY)
Note: The above lines must be X
signed by the registered holder(s) ---------------------------------
of Notes as their name(s) ap- Name:
pear(s) on the Notes or by per- -----------------------------
son(s) authorized to become regis- (PLEASE PRINT)
tered holder(s) (evidence of which
authorization must be transmitted Title:
with this Letter of Transmittal). ----------------------------
If signature is by a trustee, ex-
ecutor, administrator, guardian, Name of Firm:
attorney-in-fact, officer, or ----------------------
other person acting in a fiduciary (MUST BE AN ELIGIBLE
or representative capacity, such INSTITUTION AS DEFINED IN
person must set forth his or her INSTRUCTION 2)
full title below. See Instruction 5.
Name(s): Address:
--------------------------- ------------------------------
--------------------------- ------------------------------
Capacity:
--------------------------- ------------------------------
(INCLUDE ZIP CODE)
---------------------------
Street Address: Area Code and Telephone Number:
---------------------
---------------------------------------
---------------------------
Dated:
--------------------------- ---------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- ------------------------------------
Tax Identification or Social
Security Number:
- ------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE>
SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
PAYOR'S NAME: PARK NEWSPAPERS, INC.
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND
SUBSTITUTE CERTIFY BY SIGNING AND
FORM W-9 DATING BELOW.
PLEASE FILL IN YOUR NAME AND
ADDRESS BELOW. ----------------------
Social security number
- ----------------------------
NAME OR
- ----------------------------
ADDRESS (NUMBER AND STREET)
- ---------------------------- ----------------------
CITY, STATE AND ZIP CODE Employer identification
number
PART 2--Certification--Under Penalties of
Perjury, I certify that: PART 3 --
(1) The number shown on this form is my Awaiting
correct Taxpayer Identification Number TIN [_]
(or I am waiting for a number to be
issued to me) and
(2) I am not subject to back-up PART 4 --
withholding either because (a) I am
exempt from back-up withholding or (b) I Exempt [_]
have not been notified by the Internal
Revenue Service ("IRS") that I am
subject to back-up withholding as a
result of failure to report all interest
or dividends or (c) the IRS has notified
me that I am no longer subject to back-
up withholding.
DEPARTMENT OF THE Certification Instructions--you must cross out item
TREASURY INTERNAL (2) in Part 2 above if you have been notified by the
REVENUE SERVICE IRS that you are subject to back-up withholding be-
cause of underreporting interest or dividends on your
tax return. However, if after being notified by the
IRS that you were subject to back-up withholding, you
received another notification from the IRS stating
that you are no longer subject to back-up withhold-
ing, do not cross out item (2). If you are exempt
from backup withholding, check the box in Part 4
above.
PAYOR'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
SIGNATURE DATE , 1996
--------------------- ---------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT HERETO. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer
identification number within 60 days, 31% of all reportable payments
made to me thereafter will be withheld until I provide a number.
------------------------------------ -----------------------------, 1996
Signature Date
- --------------------------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute
Form W-9, and any other documents required by this Letter of Transmittal must
be received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant
to the procedures for book-entry transfer described in the Prospectus under
the caption "The Exchange Offer--Procedures for Tendering" (and a confirmation
of such transfer received by the Exchange Agent), in each case prior to 5:00
p.m., New York City time, on the Expiration Date. The method of delivery of
certificates for Tendered Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return-receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Notes should be sent to the
Issuer. Neither the Issuer nor the registrar is under any obligation to notify
any tendering holder of the Issuer's acceptance of Tendered Notes prior to the
closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date must tender their Notes
according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
by or through a firm which is a member of a recognized Medallion Program
approved by the Securities Transfer Association Inc. (an "Eligible
Institution") and the Notice of Guaranteed Delivery must be signed by the
holder; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of the
Tendered Notes and the principal amount of Tendered Notes, stating that the
tender is being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal
together with the certificate(s) representing the Tendered Notes and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal, as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all Tendered Notes in proper
form for transfer, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date. Any holder who wishes
to tender Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to such Notes prior to 5:00 p.m., New York City time, on the
Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by an
eligible holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of
Tendered Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of
Transmittal.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should
fill in the principal amount tendered in the column labeled "Aggregate
Principal Amount Tendered" of
7
<PAGE>
the box entitled "Description of Notes Tendered" (Box 1) above. The entire
principal amount of Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated. If the entire principal amount
of all Notes held by the holder is not tendered, then Notes for the principal
amount of Notes not tendered and Exchange Notes issued in exchange for any
Notes tendered and accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be
issued (and any untendered principal amount of Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In
any other case, such registered holder(s) must either properly endorse the
Tendered Notes or transmit a properly completed bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as
the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with
the signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Issuer, evidence satisfactory to the Issuer of their authority to so act
must be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Notes for principal amounts not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the taxpayer identification or social security number of the person
named must also be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer
and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
8
<PAGE>
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide
the Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Issuer is not provided with the correct TIN, the
holder may be subject to backup withholding and a $50 penalty imposed by the
Internal Revenue Service. (If withholding results in an over-payment of taxes,
a refund may be obtained.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result
of failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will
be determined by the Issuer in its sole discretion, which determination will
be final and binding. The Issuer reserves the right to reject any and all
Notes not validly tendered or any Notes the Issuer's acceptance of which
would, in the opinion of the Issuer or its counsel, be unlawful. The Issuer
also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Notes as to any ineligibility of any
holder who seeks to tender Notes in the Exchange Offer. The interpretation of
the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) by the Issuer shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Issuer
shall determine. Neither the Issuer, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Notes or transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address indicated
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange all validly tendered Notes as soon as
9
<PAGE>
practicable after the Expiration Date and will issue Exchange Notes therefor
as soon as practicable thereafter. For purposes of the Exchange Offer, the
Issuer shall be deemed to have accepted tendered Notes when, as and if the
Issuer has given written or oral notice (immediately followed in writing)
thereof to the Exchange Agent. If any Tendered Notes are not exchanged
pursuant to the Exchange Offer for any reason, such unexchanged Notes will be
returned, without expense, to the undersigned at the address shown in Box 1 or
at a different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer."
10
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
11 7/8% SENIOR NOTES DUE 2004
OF
PARK NEWSPAPERS, INC.
PURSUANT TO THE PROSPECTUS DATED , 1996
This form must be used by a holder of 11 7/8% Senior Notes due 2004 (the
"Notes") of Park Newspapers, Inc., a Delaware corporation (the "Company"), who
wishes to tender Notes to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer--Guaranteed Delivery
Procedures" of the Company's Prospectus dated , 1996 (the "Prospectus")
and in Instruction 2 to the related Letter of Transmittal. Any holder who
wishes to tender Notes pursuant to such guaranteed delivery procedures must
ensure that the Exchange Agent receives this Notice of Guaranteed Delivery
prior to the Expiration Date of the Exchange Offer. Capitalized terms used but
not defined herein have the meanings ascribed to them in the Prospectus or the
Letter of Transmittal.
- ------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1996 UNLESS EXTENDED (THE "EXPIRATION DATE").
- ------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
(THE "EXCHANGE AGENT")
For Information by Telephone:
(212) 858-2103
By Registered or Certified Mail: By Hand or Overnight Delivery
IBJ Schroder Bank & Trust Company Service:
P.O. Box 84 IBJ Schroder Bank & Trust Company
Bowling Green Station One State Street
New York, New York 10274-0084 New York, New York 10004
Attention: Reorganization Operations Attention: Securities Processing Window,
Department Subcellar One (SC-1)
By Facsimile Transmission:
(212) 858-2611
(Facsimile Confirmation)
(212) 858-2103
(ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY
REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR TRANSMISSION
OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus, and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
Signatures of Registered Holder(s)
or Authorized
Signatory:
-------------------------- Date: , 1996
-----------
- ------------------------------------ Address:
------------------------------
- ------------------------------------ ---------------------------------------
Name(s) of Registered Area Code and Telephone No.
Holder(s): ------------
--------------------------
- ------------------------------------
- ------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
---------------------------------------------------------------------
- ------------------------------------------------------------------------------
Capacity:
---------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
3
<PAGE>
- -------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent
of the Letter of Transmittal (or facsimile thereof), together with the Notes
tendered hereby in proper form for transfer (or confirmation of the book-
entry transfer of such Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility described in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures" and in the Letter of
Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, on the fifth New York Stock Exchange trading day following the
Expiration Date.
Name of firm
----------------------- ------------------------------------
(Authorized Signature)
Address Name
----------------------------- -------------------------------
(Please Print)
------------------------------------ Title
(Include Zip Code) -------------------------------
Area Code and Tel. No. Dated , 1996
-------------- ------------------------
- -------------------------------------------------------------------------------
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
4
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return-receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s)
appears on the Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Request for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus or the Letter
of Transmittal may be directed to the Exchange Agent at the address specified
in the Prospectus. Holders may also contact their broker, dealer, commercial
bank, trust company, or other nominee for assistance concerning the Exchange
Offer.
5
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY
PARTICIPANT FROM BENEFICIAL OWNER
OF
PARK NEWSPAPERS, INC.
11 7/8% SENIOR NOTES DUE 2004
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1996 (the "Prospectus") of Park Newspapers, Inc., a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 11 7/8% Senior Notes due 2004 (the "Notes") held by
you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 11 7/8% Senior Notes due 2004.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$ .
[_] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the Exchange Notes in the ordinary
course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate, in the distribution of the Exchange Notes,
(iv) the undersigned acknowledges that any person 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 of 1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer--Resale of the Series B Notes," and (v) the
undersigned is not an "affiliate," as defined in Rule 405 under the Act, of
the Company or any of its subsidiaries; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal, and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Notes.
- -------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
--------------------------------------------------
Signature(s):
-----------------------------------------------------------------
Name (please print):
----------------------------------------------------------
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Telephone number
-------------------------------------------------------------
Taxpayer Identification or Social Security Number:
----------------------------
Date:
-------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.2
EXCHANGE AGENCY AGREEMENT
This Agreement is entered into as of ______ __, 1996 between IBJ Schroder Bank &
Trust Company, a corporation organized under the laws of the State of New York,
as Exchange Agent (the "Agent") and Park Newspapers, Inc., a corporation
organized under the laws of the State of Delaware, (the "Company").
The Company proposes to exchange, upon terms and conditions set forth in a
Prospectus and Letter of Transmittal, $1,000.00 principal amount of its Series B
11 7/8% Senior Notes due 2004 (the "Series B Notes") which have been registered
under the Securities Act of 1933, for each $1,000.00 principal amount of its
outstanding 11 7/8% Senior Notes due 2004 (the "Series A Notes"), of which
$155,000,000 in aggregate principal amount will be outstanding as of the date
the exchange begins. The form and terms of the Series B Notes are the same as
the form and terms of the Series A Notes, except for their designation, for the
fact that the former are registered and thus will not bear legends restricting
their transfer, and for the fact that holders of the former will not be entitled
to certain rights under a registration rights agreement, which rights terminate
upon consummation of the exchange offer. The effective date of the exchange is
_____ __, 1996, and its termination date is _____ __, 1996.
Subject to the provisions hereof, the Company hereby appoints and the Agent
hereby accepts the appointment as Exchange Agent for the purposes of receiving,
accepting for delivery and otherwise acting upon tenders of Series A Notes (the
"Certificates") in accordance with the form of Letter of Transmittal attached
hereto (the "L/T") and with the terms and conditions set forth herein (the
"Exchange Offer").
The Agent has received the following documents in connection with its
appointment:
(1) L/T;
(2) Specimen Certificates;
(3) Notice of Guaranteed Delivery; and
(4) Prospectus.
The Agent shall receive from Depository Trust Company ("DTC") no later than 5:00
pm, New York City Time, on the effective date (as specified above), a list of
all holders of Certificates eligible to participate in the Exchange Offer, to
include the amount owned of record by each such holder.
The Agent is authorized and hereby agrees to act as follows:
(a) to mail copies of the Exchange Offer documents as provided by the
Company to all holders of the Certificates;
<PAGE>
(b) to receive all tenders of Certificates made pursuant to the Exchange
Offer and stamp the L/T with the day, month and approximate time of
receipt;
(c) to examine each L/T and Certificate received to determine that all
requirements necessary to constitute a valid tender have been met;
(d) to take such actions necessary and appropriate to correct any
irregularity or deficiency associated with any tender which does not
meet the requirements in the L/T;
(e) to follow instructions of Wright M. Thomas with respect to the waiver
of any irregularities or deficiencies associated with any tender;
(f) to hold all valid tenders subject to further instructions from Wright
M. Thomas;
(g) to render a written report, in the form of Exhibit A attached hereto,
on each business day during the Exchange Offer and promptly confirm,
by telephone or facsimile, the information contained therein to Wright
M. Thomas at telephone (606) 252-7275, facsimile (606) 226-9609;
(h) to follow and act upon any written amendments, modifications or
supplements to these instructions, any of which may be given to the
Agent by the President, any Vice President or the Secretary of the
Company or such other person or persons as they shall designate in
writing;
(i) to return to the presentors, in accordance with the provisions of the
L/T, any Certificates that were not received in proper order and as to
which the irregularities or deficiencies were not cured or waived;
The Agent shall:
(a) have no duties or obligations other than those specifically set forth
herein;
(b) not be required to refer to any documents for the performance of its
obligations hereunder other than this Agreement, the L/T and the
documents required to be submitted with the L/T; other than such
documents, the Agent will not be responsible or liable for any
directions or information in the Offering Circular or any other
document unless the Agent specifically agrees thereto in writing;
(c) not be required to act on the directions of any person, including the
persons named above, unless the Company provides a corporate
resolution to the Agent or other
<PAGE>
evidence satisfactory to the Agent of the authority of such person;
(d) not be required to and shall make no representations and have no
responsibilities as to the validity, accuracy, value or genuineness of
(i) the Exchange Offer, (ii) any Certificates, L/T's or documents
prepared by the Company in connection with the Tender Offer or (iii)
any signatures or endorsements, other than its own;
(e) be able to rely on and shall be protected in acting upon any
certificate, instrument, opinion, notice, letter, telegram or any
other document or security delivered to it and believed by it
reasonably and in good faith to be genuine and to have been signed by
the proper party or parties;
(f) not be responsible for or liable in any respect on account of the
identity, authority or rights of any person executing or delivering or
purporting to execute or deliver any document or property under this
Agreement and shall have no responsibility with respect to the use or
application of any property delivered by it pursuant to the provisions
hereof;
(g) be able to consult with counsel satisfactory to it (including counsel
for the Company) and the advice or opinion of such counsel shall be
full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with advice or opinion of such counsel;
(h) not be called on at any time to advise, and shall not advise, any
person delivering an L/T pursuant to the Exchange Offer as to the
value of the consideration to be received;
(i) not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own gross negligence,
willful misconduct or bad faith;
(j) not be bound by any notice or demand, or any waiver or modification of
this Agreement or any of the terms hereof, unless evidenced by a
writing delivered to the Agent signed by the proper authority or
authorities and, if the Agent's duties or rights are affected, unless
the Agent shall give its prior written consent thereto;
(k) have no duty to enforce any obligation of any person to make delivery,
or to direct or cause any delivery to be made, or to enforce any
obligation of any person to perform any other act;
3
<PAGE>
(l) have the right to assume, in the absence of written notice to the
contrary from the proper person or persons, that a fact or an event by
reason of which an action would or might be taken by the Agent does
not exist or has not occurred without incurring liability for any
action taken or omitted, or any action suffered by the Agent to be
taken or omitted, in good faith and in the exercise of the Agent's
best judgement, in reliance upon such assumption; and
(m) have no liability whatsoever in connection with Certificates tendered
to it which may have stops placed against them or in connection with
the payment made against stopped certificates unless it is furnished
with a stop list from the transfer agent.
The Agent shall be entitled to compensation as set forth in Exhibit B attached
hereto.
The Company covenants and agrees to reimburse the Agent for, indemnify it
against, and hold it harmless from any and all reasonable costs and expenses
(including reasonable fees and expenses of counsel) that may be paid or incurred
or suffered by it or to which it may become subject without gross negligence,
willful misconduct or bad faith on its part by reason of or as a result of its
compliance with the instructions set forth herein or with any additional or
supplemental written or oral instructions delivered to it pursuant hereto, or
which may arise out of or in connection with the administration and performance
of its duties under this Agreement.
This Agreement shall be construed and enforced in accordance with the laws of
the State of New York and shall inure to the benefit of, and the obligations
created hereby shall be binding upon, the successors and assigns of the parties
hereto.
Unless otherwise expressly provided herein, all notices, requests, demands and
other communications hereunder shall be in writing, shall be delivered by hand
or by First Class Mail, postage prepaid, shall be deemed given when received and
shall be addressed to the Agent and the Company at the respective addresses
listed below or to such other addresses as they shall designate from time to
time in writing, forwarded in like manner.
If to the Agent, to:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Agency Administration
Telephone: (212) 858-2103
Facsimile: (212) 858-2611
4
<PAGE>
If to the Company, to:
Wright M. Thomas, President
Park Newspapers, Inc.
1700 Vine Center Office Tower
333 West Vine Street
Lexington, Kentucky 40507
Telephone: (606) 252-7275
Facsimile: (606) 226-9609
with copies to:
Gregory A. Weingart, Esquire
Eckert Seamans Cherin & Mellott
600 Grant Street, 42nd Floor
Pittsburgh, PA 15219
Telephone: (412) 566-6062
Facsimile: (412) 566-6099
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on their behalf by their officers thereunto duly authorized, all as of the day
and year first above written.
IBJ Schroder Bank & Trust Company
By: _______________________________
Title:
Park Newspapers, Inc.
By: _______________________________
Title:
5
<PAGE>
EXHIBIT A
SAMPLE REPORT LETTER
Date: _________________
Report Number: _________________
As of Date: _________________
Name of Client
Address of Client
City, State, Zip
Re: Description of Offer
Gentlemen:
As Exchange Agent for the above Offer dated _______________, we hereby render
the following report:
Shares previously received: _______________________
Shares received today: _______________________
Total Shares received to date: _______________________
Very truly yours,
6
