<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUSQUEHANNA MEDIA CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 4841; 4832; 7379 23-2722964
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
CLASSIFICATION NUMBER)
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140 EAST MARKET STREET
YORK, PENNSYLVANIA 17401
(717) 848-5500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CRAIG W. BREMER
SECRETARY AND GENERAL COUNSEL
140 EAST MARKET STREET
YORK, PENNSYLVANIA 17401
(717) 848-5500
(NAMES AND ADDRESSES, INCLUDING ZIP CODES, AND TELEPHONE NUMBERS,
INCLUDING AREA CODES, OF AGENTS FOR SERVICE)
IT IS RESPECTFULLY REQUESTED THAT THE COMMISSION SEND COPIES OF ALL NOTICES,
ORDERS AND COMMUNICATIONS TO:
CHARLES R. MONROE, JR.
HUNTON & WILLIAMS
BANK OF AMERICA PLAZA, SUITE 3500
101 SOUTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28211
(704) 378-4700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE
OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1)
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8 1/2 Senior Subordinated Notes Due 2009........ $150,000,000 100% $150,000,000
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TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE
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<S> <C>
8 1/2 Senior Subordinated Notes Due 2009........ $41,700
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
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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 WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
PROSPECTUS Subject to Completion, dated June 11, 1999
$150,000,000
LOGO
OFFER TO EXCHANGE ALL OUTSTANDING
$150,000,000 8 1/2% SENIOR SUBORDINATED NOTES DUE 2009
FOR $150,000,000 8 1/2% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2009
INTEREST PAYABLE MAY 15 AND NOVEMBER 15, BEGINNING ON NOVEMBER 15, 1999
MATERIAL TERMS OF THE EXCHANGE OFFER
- - We are offering to exchange all validly tendered and not validly withdrawn
outstanding notes for an equal amount of a new series of notes that are
registered under the Securities Act of 1933.
- - The exchange offer will expire at 5:00 P.M., New York City time, on
, 1999, unless extended.
- - You may withdraw tenders of outstanding notes at any time before the
expiration of the exchange offer.
- - We will not receive any proceeds from the exchange offer.
- - The terms of the exchange notes are substantially identical to the terms of
the outstanding notes, except that the registration rights and related
liquidated damages provisions, and the transfer restrictions, applicable to
the outstanding notes are not applicable to the exchange notes.
- - We do not intend to list the exchange notes on any national securities
exchange or Nasdaq.
- - The exchange of notes should not be a taxable exchange for U.S. federal income
tax purposes.
- - The exchange offer is subject to certain customary conditions, which we may
waive.
- - Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes that it acquired 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 the exchange notes. See "Plan of
Distribution."
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 15 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER OR INVESTING IN THE
EXCHANGE NOTES ISSUED IN THE EXCHANGE OFFER.
We are not making this exchange offer in any state or jurisdiction where it
is not permitted.
Neither the U.S. Securities and Exchange Commission nor any other federal
or state securities commission has approved or disapproved the notes to be
distributed in the exchange offer, nor have any of these organizations
determined that this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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PAGE
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Where You Can Get More Information.......................... i
Cautionary Statement Regarding Forward-Looking Statements... ii
Certain Market and Industry Data............................ iii
Use of Certain Terms........................................ iii
Prospectus Summary.......................................... 1
Risk Factors................................................ 15
The Exchange Offer.......................................... 23
Use of Proceeds............................................. 32
Capitalization.............................................. 32
Unaudited Consolidated as Adjusted Financial Data........... 33
Selected Historical Consolidated Financial and Operating
Data...................................................... 34
Management's Discussion and Analysis of Financial Conditions
and Results of Operation.................................. 36
Business.................................................... 43
Regulation.................................................. 60
Management.................................................. 66
Beneficial Ownership of Susquehanna Media's and Susquehanna
Pfaltsgraff 's............................................ 69
Certain Transactions........................................ 72
Description of Certain Indebtedness......................... 74
Description of the Exchange Notes........................... 76
Certain U.S. Federal Income Tax Considerations.............. 105
Plan of Distribution........................................ 108
Legal Matters............................................... 108
Experts..................................................... 108
Index to Annual Audited Consolidated Financial Statements... F-1
Index to Interim Unaudited Condensed Consolidated Financial
Statements................................................ F-20
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WHERE YOU CAN GET MORE INFORMATION
This prospectus is part of a registration statement on Form S-4 that we
have filed with the SEC. This prospectus does not contain all of the information
set forth in the registration statement. For further information about us and
the exchange notes, you should refer to the registration statement. This
prospectus summarizes material provisions of contracts and other documents.
Since these summaries may not contain all of the information that you may find
important, you should review the full text of these documents. We have filed
certain of these documents as exhibits to our registration statement.
You should direct any request for information to Craig W. Bremer, our
corporate Secretary, at least 10 business days before you tender your exchange
notes in the exchange offer. Our mailing address and telephone number are:
Susquehanna Media Co.
140 East Market Street
York, Pennsylvania 17401
(717) 848-5500
As a result of the exchange offer, we will be subject to the periodic
reporting and other informational requirements of the Securities Exchange Act of
1934. In addition, under the indenture
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governing the outstanding notes and the exchange notes, we have agreed that
until we are subject to the reporting and informational requirements of the
Exchange Act and during any other period in which we are not subject to those
requirements, so long as the outstanding notes or the exchange notes remain
outstanding, we will distribute to the holders of the notes, copies of the
financial information that we would have been required to file with the SEC
pursuant to the Exchange Act. This financial information shall include annual
reports containing consolidated financial statements and notes thereto, together
with an opinion thereon expressed by an independent public accounting firm,
management's discussion and analysis of financial condition and results of
operations, as well as quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year. We have also agreed to furnish to holders of outstanding notes and
prospective purchasers of the exchange notes upon their request, the information
required to be delivered pursuant to Rule 144(d)(4) under the Securities Act
during any period in which we are not subject to the reporting and informational
requirements of the Exchange Act.
The registration statement, as well as such reports, exhibits and other
information filed by us with the SEC can be inspected and copied, at prescribed
rates, at the public reference facilities maintained by the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the SEC at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the
SEC at 1-800-SEC-0330 for additional information about its public reference
room. Our SEC filings are also available without charge on the SEC's Internet
site at http://www.sec.gov.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, including statements
about our acquisitions and business strategy, our expected financial position
and operating results, and our financing plans and similar matters. We have
based these forward-looking statements largely on our current expectations and
projections about future events and financial trends affecting the financial
condition of our business. These forward-looking statements are subject to
risks, uncertainties and assumptions about Susquehanna Media, including, among
other things:
- General economic and business conditions, both nationally and in our
markets.
- Our acquisition opportunities.
- Our expectations and estimates concerning future financial performance,
financing plans and the impact of competition.
- Anticipated trends in our business, including those described in
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
- Existing and future regulations affecting our business.
- Other risk factors set forth in "Risk Factors."
In addition, in those and other portions of this prospectus, the words
"believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar expressions, as they relate to Susquehanna Media or our
management, are intended to identify forward-looking statements. All
forward-looking statements attributable to us or to persons acting on our behalf
are expressly qualified in their entirety by this cautionary statement.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus might not transpire.
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CERTAIN MARKET AND INDUSTRY DATA
Unless we indicate otherwise, the market data and industry forecasts that
we refer to in this prospectus were obtained from publicly available
information, industry publications and management estimates. All data concerning
station rank and station audience share in primary demographic market or target,
except where otherwise stated to the contrary, have been derived from surveys of
people ages 12 and over ("Adults 12+"), listening Monday through Sunday, 6 a.m.
to 12 midnight, as reported in the Winter 1999 Arbitron Market Report pertaining
to each market. Data concerning market ranking by, and share of, radio
advertising revenue by market has been obtained from Duncan's Radio Market
Guide, 1998 Edition. Certain other radio market advertising data has been
obtained from BIA's Radio '98 Market Report, 1998 Fourth Edition, Fall 1998,
compiled by BIA Research, Inc. ("BIA"). Although we believe that such data,
information and estimates are materially correct, we have not verified and
cannot guarantee them. When we refer in this prospectus to the rank of a
particular radio broadcast market (such as "top 10" or "top 40"), we are
referring to such rank relative to the United States radio broadcast market
measured by amount of revenues.
USE OF CERTAIN TERMS
Unless the context otherwise requires, as used in this prospectus, the
terms "Susquehanna Media," "Company," "Issuer," "our," or "we" collectively
refer to Susquehanna Media Co. and its direct and indirect subsidiaries. The
term "Susquehanna Radio" refers to our direct subsidiary Susquehanna Radio
Corp., "Susquehanna Cable" refers to our direct subsidiary Susquehanna Cable Co.
and "Susquehanna Pfaltzgraff" refers to our parent company Susquehanna
Pfaltzgraff Co. The term "exchange notes" refers to the 8 1/2% Senior
Subordinated Notes due 2009 that we have registered under the Securities Act and
that we are offering in exchange for the outstanding 8 1/2% Senior Subordinated
Notes due 2009 that we issued on May 12, 1999. The term "notes" refers
collectively to the outstanding notes and the exchange notes.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that you
should consider before participating in the exchange offer or investing in the
exchange notes. To understand the exchange offer fully, you should read this
entire prospectus carefully, including the risk factors and financial statements
and related notes.
SUSQUEHANNA MEDIA CO.
We are a diversified communications company with operations in radio
broadcasting and cable television. We are the largest privately owned radio
broadcaster and the 9th largest radio broadcaster overall in the United States
based on revenues. We own and operate 15 FM and 8 AM stations that serve four of
the nation's ten largest radio markets (San Francisco, Dallas, Houston and
Atlanta), as well as three other significant markets (Cincinnati, Indianapolis
and York, Pennsylvania). We are also the 24th largest cable multiple system
operator ("MSO") in the United States with seven cable systems serving
approximately 186,000 subscribers. For the year ended December 31, 1998, we had
revenues and EBITDA of $223.4 million and $73.9 million, respectively, with
approximately 57% of EBITDA generated by our radio broadcast operations and 43%
by our cable television operations.
RADIO BROADCASTING
Our radio broadcasting business focuses on acquiring, developing and
operating radio stations in the 40 largest markets in the United States. We have
over 50 years of experience operating radio properties and currently own
stations serving the demographically attractive and fast-growing San Francisco,
Dallas, Houston and Atlanta markets, four of the top ten radio markets in the
United States. Our radio stations offer a broad range of programming formats,
such as country, top 40, adult contemporary, oldies, rock, and sports and talk
radio, each targeted to a specific demographic audience within a market. We
believe that our large market radio presence and variety of programming formats
makes us attractive to a diverse base of local and national advertisers and
enables us to leverage our ratings into higher market revenue share.
Our business strategy for radio includes the following key elements
intended to establish leadership positions in the markets we serve and to
enhance our operating and financial performance:
- - Focus on large markets. We generate approximately 73% of our radio revenue
from the ten largest markets in the United States and more than 90% from top
40 markets, and we intend to continue focusing on large markets. The 40
largest markets in the United States account for approximately one-half of
overall market revenue and experienced revenue growth of 10.3% annually from
1993 through 1997, compared to 8.4% growth in other measured markets over the
same period. We believe that advertisers are attracted to large markets
because of their population size, attractive demographic profile, and the
ability to target more narrowly certain demographic groups. We also believe
that it is more efficient for our management to focus on stations that are
capable of producing significant revenue as compared to stations in smaller
markets with less revenue potential.
- - Employ targeted programming and market research. We seek to maximize station
operating performance through extensive market research, innovative
programming, and distinctive marketing campaigns. We believe that,
collectively, these initiatives establish strong listener loyalty and steadily
increase audience share. We were one of the first radio broadcasting companies
to utilize market research to target specific demographic groups. We believe
that knowledge of local markets and innovative programming targeting specific
demographic groups are the most important determinants of individual radio
station success. We also believe that our commitment to high-
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quality, locally originated programming provides us with a competitive
advantage and increases each of our market audience shares.
- - Emphasize sales and marketing. We place great emphasis on being familiar with
our listening audience and their lifestyle characteristics in order to match
effectively our audience's demographics with the specific target audiences of
our advertisers. This strategy enables us to:
- partner with our advertisers to reach efficiently and effectively their
targeted audiences,
- attract more advertising revenues, and
- build audience loyalty.
Supporting this strategy, we offer a consumer card program, which provides
listeners with discounts and promotional offers at participating businesses.
The program has enabled us to build a proprietary database of more than 1.2
million of our listeners. We use this database to increase the effectiveness
of our programming and to enable advertisers to target more effectively their
desired audiences. We also seek to maximize sources of non-traditional,
non-spot revenue that promote the station's brand awareness, such as
sponsoring local events and creating newsletters and magazines.
- - Decentralize management. We believe that radio is primarily a local business
and that much of its success results from the efforts of regional and local
management and staff. Accordingly, we decentralize much of our operations to
these levels. Each of our regional and local station groups is managed by a
team of experienced broadcasters who understand the musical tastes,
demographics and competitive opportunities of the particular market. Our
regional and local managers are responsible for preparing annual operating
budgets and have an average of 16 years with the Company. Our corporate
management approves each station group's annual operating budget and imposes
strict financial reporting requirements to track station performance. Members
of corporate management are responsible for long-range planning, establishing
our policies and serving as a resource to local management and average more
than 26 years with the Company.
- - Selectively pursue strategic acquisitions. In addition to continuing our
rapid internal growth, we intend to pursue acquisition opportunities that
would allow us to continue to compete more effectively for advertising
revenues and to increase our growth rate of revenues and cash flow. Our
acquisition strategy is selectively to acquire radio stations in our existing
markets and in new, demographically attractive, fast-growing markets where we
believe that we can effectively apply our operating strategies. We will
primarily target stations in the top 40 markets of the United States.
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RADIO PROPERTIES
The following table sets forth certain information regarding our radio
stations and their respective markets:
<TABLE>
<CAPTION>
STATION
AUDIENCE
STATION RANK SHARE IN COMBINED COMBINED
MARKET STATION PRIMARY IN PRIMARY PRIMARY MARKET MARKET
RANK BY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC REVENUE REVENUE
MARKET AND STATIONS(1) REVENUE(2) FORMAT ACQUIRED TARGET TARGET(3) TARGET(3) SHARE(4) RANK(5)
- --------------------------- ---------- ------------ --------- ----------- ------------ ----------- -------- --------
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San Francisco, CA.......... 4 19.5% 3
KFOG/KFFG-FM(6).......... Adult Album 1983/1995 M 25-49 1 5.4%
Alternative
KNBR-AM.................. Sports/Talk 1989 M 25-54 1 5.3
KSAN-FM.................. Classic Rock 1997 M 25-44 17 2.3
KTCT-AM.................. Sports/Talk 1997 M 18-44 23 1.2
Dallas/Ft. Worth, TX....... 5 11.4 4
KTCK/KTBK-AM(6).......... Sports/Talk 1996 M 25-44 3 6.5
KPLX-FM.................. Country 1974 M 25-54 7 3.9
KLIF/KKLF-AM(6).......... Sports/Talk 1980/1998 M 25-54 20 1.7
KKZN/KXZN-FM(6).......... Adult Album 1996/1998 M 25-44 16 2.2
Alternative
Houston, TX................ 8 6.6 6
KRBE-FM.................. Contemporary 1986 W 18-44 1 9.1
Hit Radio
Atlanta, GA................ 9 6.5 6
WNNX-FM.................. Modern Rock 1974 M 18-34 1 16.6
WHMA-FM.................. Country 1997 -- -- --
(Anniston, AL)(7)
WHMA-AM.................. Sports/Talk 1997 -- -- --
(Anniston, AL)(7)
Cincinnati, OH............. 19 9.5 4
WRRM-FM.................. Adult 1972 W 35-54 1 12.6
Contemporary
WVAE-FM(8)............... New Adult 1997 W 35-54 5 5.9
Contemporary
Indianapolis, IN........... 30 19.8 3
WFMS-FM.................. Country 1972 W 35-54 1 13.3
WGLD-FM.................. Oldies 1993 A 35-54 3 8.8
WGRL-FM.................. Young 1997 W 18-34 12 2.5
Country
York, PA................... 101 56.1 1
WARM-FM.................. Adult 1962 W 25-54 1 15.7
Contemporary
WSBA-AM.................. Talk 1942 M 35-64 4 6.1
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(1) Excludes WABZ-FM in Albemarle, North Carolina, which we own but a third
party operates under a local marketing agreement.
(2) Ranked according to market revenue size of the primary radio market served
by the station among all radio markets in the United States, as reported in
Duncan's Radio Market Guide.
(3) Station rank and audience share are based upon a station's share of its
primary demographic target for the period Monday through Sunday, 6 a.m. to
12 midnight by market, as reported by Arbitron in Winter 1999.
(4) Represents our share of the total radio advertising revenue from the market,
as reported in Duncan's Radio Market Guide.
(5) Represents our rank in the market as measured by the amount of our radio
advertising revenue from the market, as reported in Duncan's Radio Market
Guide.
(6) These stations are simulcast and have been combined for market rank and
ratings.
(7) Both of these stations are located in Anniston, Alabama and do not currently
broadcast in the Atlanta market. We have pending before the FCC a petition
proposing to move WHMA-FM to the Atlanta market.
(8) This station was converted to a rhythmic oldies format with call letters
WMOJ on April 30, 1999.
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CABLE TELEVISION
We entered the cable television industry in 1965 when we were awarded the
franchise to operate in York, Pennsylvania. Our cable systems currently serve
approximately 186,000 subscribers through 16 headends in Pennsylvania,
Mississippi, Maine, Illinois and Indiana. We own, develop and operate
geographically clustered cable television systems in small and medium-sized
communities. We believe that these systems are less susceptible to competition
and subscriber turnover than urban cable television systems and result in more
predictable revenue and cash flow.
Our business strategy for cable television includes the following key
elements intended to enhance our operating and financial performance:
- - Build strategic clusters. We have pursued the development and acquisition of
cable television systems in communities that are within close proximity to our
existing systems to maximize economies of scale and operating efficiencies.
Such operating efficiencies include centralized billing and the sharing of
general management, customer service, marketing and technical support. We also
interconnect systems within a cluster with fiber optic cable, enabling the
consolidation of headend facilities. For example, we recently acquired a
system in Hanover, Pennsylvania, connected it to our York system with fiber
optic cable and eliminated a headend. This added nearly 17,000 subscribers to
our York system. We also recently exchanged a number of systems in Maine and
New Hampshire so that all of our customers in Maine can be served from one
headend by the end of 2000.
- - Focus on customer satisfaction. To maximize customer satisfaction, we strive
to provide reliable, high-quality service offerings, superior customer service
and attractive programming choices at reasonable rates. To meet this
objective, we utilize ongoing subscriber surveys and marketing studies to
determine how we can better meet the needs of our customers and implement
programs to improve the skills of our customer service and technical
employees. In an August 1998 customer survey conducted by Peter Hart Research
for the National Cable Television Association, we ranked 1st in operating
performance out of 13 MSOs, including TCI, Time Warner, MediaOne, Comcast,
Cox, Cablevision, and Adelphia. In 1997, we introduced the Opportunities to
Excel Program, which gives technical personnel the opportunity to improve
their earnings by successfully completing skills courses. In 1998, we
implemented a program entitled Sales Training for Excellence in Leadership,
Learning and Retention ("STELLAR"), which includes extensive training,
performance follow-up and standardized skills for all of our customer service
representatives. We believe that our customer service efforts have contributed
to our subscriber growth and position us to sell additional products and
services in the future.
- - Continue upgrade of technical facilities. We seek to provide reliable,
high-quality cable television services to our customers. To achieve this goal,
we are expanding and upgrading our cable systems to increase channel capacity,
enhance signal quality, improve technical reliability and reduce the number of
headends in our existing systems. Over the next three years, we intend to
spend approximately $34 million to upgrade our cable systems to serve
approximately 87% of our subscribers with cable plant of at least 550 MHz
bandwidth capacity and 76% of our subscribers with cable plant of 750 MHz
bandwidth capacity. A bandwidth capacity of 750 MHz enables us to offer our
customers up to 82 analog channels over 550 MHz of bandwidth and have 200 MHz
of bandwidth available for the digital spectrum. We believe that these
improvements enhance our position as the leading provider of multi-channel
television services in our markets and create additional revenue
opportunities. We also believe that the improvements enhance operating
efficiencies, increase customer satisfaction and improve relations with local
franchising authorities.
- - Develop new sources of revenues. We believe that the investment we have made
in our cable systems has enabled us to generate additional revenue by
providing expanded tiers of basic
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programming, premium services, and additional pay-per-view services. In
addition, we are expanding new services, such as Internet access, high speed
data, and video-on-demand and other interactive services. We believe that the
new, enhanced services will attract new subscribers, increase revenue and cash
flow per subscriber, improve customer loyalty and reduce churn.
CABLE PROPERTIES
The following table sets forth certain information regarding our cable
systems as of December 31, 1998:
<TABLE>
<CAPTION>
AVERAGE MONTHLY
REVENUE
HOMES BASIC BASIC PREMIUM PER BASIC
CABLE SYSTEMS PASSED SUBSCRIBERS PENETRATION(1) PENETRATION(2) SUBSCRIBER(3)
- ------------- ------- ----------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Pennsylvania
York(4)................. 112,241 87,180 77.7% 38.8% $36.98
Williamsport............ 44,414 34,951 78.7 31.8 33.89
Mississippi
Rankin.................. 29,882 21,998 73.6 45.4 36.35
Maine
Casco................... 26,365 19,099 72.4 32.0 33.94
Illinois/Indiana
SBC..................... 26,451 20,750 78.4 38.8 31.37
------- ------- ---- ---- ------
Totals.................... 239,353 183,978 76.9% 37.6% $35.18
======= ======= ==== ==== ======
</TABLE>
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(1) Basic penetration represents basic subscribers as a percentage of homes
passed.
(2) Premium penetration represents premium units as a percentage of basic
subscribers. Premium units represents the aggregate number of individual
premium services (e.g., HBO, Cinemax, Showtime) for which customers have
subscribed.
(3) Average monthly revenue per basic subscriber represents revenues divided by
12 divided by the weighted average number of subscribers for the year.
(4) Except for average monthly revenue per basic subscriber, information
includes Hanover Cable TV, which was acquired in January 1999.
OTHER SERVICES
We also provide Internet access and enhanced services to residential and
business customers under the tradename "BlazeNet." Our services include:
- Internet access via telephone dial-up service or cable modem,
- website creation, hosting and maintenance, and
- local and wide area network design, construction and operation.
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RECENT EVENTS
On January 29, 1999, we acquired Hanover Cable TV, Inc. for approximately
$33.4 million in cash. The purchase price was funded with borrowings under our
revolving credit facility. This system serves approximately 17,000 subscribers
in Hanover, Pennsylvania and surrounding communities and is adjacent to our
existing York, Pennsylvania cable system. We are serving the Hanover system with
our existing headend in York. In 1998, the Hanover Cable TV system generated
approximately $6.0 million in revenues.
THE REFINANCING AND THE ESOP LOAN
Concurrently with the completion of the offering of the outstanding notes,
we entered into a new $450 million senior credit facility with a group of
financial institutions arranged by First Union Capital Markets Corp. Our new
senior credit facility is comprised of a $250 million reducing revolving credit
facility that matures on June 30, 2007, a $100 million amortizing term loan A
that matures on June 30, 2007, and a $100 million amortizing term loan B that
matures on June 30, 2008.
We used borrowings under the new senior credit facility, together with the
net proceeds from the offering of the outstanding notes, to repay in full the
outstanding indebtedness under our old senior credit facility and to loan $116.9
million to Susquehanna Pfaltzgraff Co., our parent company, which it then loaned
to its newly formed employee stock ownership plan (the "ESOP"). The ESOP used
the proceeds of the loan to purchase approximately $116.9 million of Susquehanna
Pfaltzgraff's common stock from trusts for the benefit of Louis J. Appell, Jr.,
Chairman of Susquehanna Media, his siblings and certain members of their
families. Our employees will participate in the ESOP. The loan to Susquehanna
Pfaltzgraff bears interest at 6.0% per annum, and we expect the loan to be
repaid in annual installments of principal and interest.
---------------
Susquehanna Media is a Delaware corporation with principal executive
offices located at 140 East Market Street, York, Pennsylvania 17401. Our
telephone number is (717) 848-5500.
6
<PAGE> 12
SUMMARY OF THE EXCHANGE OFFER
THE EXCHANGE OFFER............ We are offering to exchange $1,000 principal
amount of our 8 1/2% Senior Subordinated Notes
due 2009, which have been registered under the
Securities Act, for each $1,000 principal
amount of our outstanding unregistered 8 1/2%
Senior Subordinated Notes due 2009, which were
issued by us on May 12, 1999 in a private
offering.
In order for your outstanding notes to be
exchanged, you must properly tender them prior
to the expiration of the exchange offer. All
outstanding notes that are validly tendered and
not validly withdrawn will be exchanged. We
will issue the exchange notes on or promptly
after the expiration of the exchange offer.
Outstanding notes may be tendered for exchange
in whole or in part in integral multiples of
$1,000 principal amount.
REGISTRATION RIGHTS
AGREEMENT..................... We sold the outstanding notes on May 12, 1999
to the initial purchasers of the outstanding
notes. Simultaneously with that sale we signed
a registration rights agreement with the
initial purchasers which requires us to conduct
this exchange offer.
You have the right pursuant to the registration
rights agreement to exchange your outstanding
notes for exchange notes with substantially
identical terms. This exchange offer is
intended to satisfy these rights. After the
exchange offer is complete, you will no longer
be entitled to any exchange or registration
rights with respect to your outstanding notes.
For a description of the procedures for
tendering outstanding notes, please refer to
"The Exchange Offer" on page 23.
CONSEQUENCES OF FAILURE TO
EXCHANGE YOUR OUTSTANDING
NOTES....................... If you do not exchange your outstanding notes
for exchange notes pursuant to the exchange
offer, you will continue to be subject to the
restrictions on transfer provided in the
outstanding notes and the indenture. In
general, the outstanding notes may not be
offered or sold unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws. We do not currently plan to register the
outstanding notes under the Securities Act. To
the extent that outstanding notes are tendered
and accepted in the exchange offer, the trading
market for untendered and tendered but
unaccepted outstanding notes will be adversely
affected.
EXPIRATION DATE............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 1999 unless
extended by us, in which case the term
"expiration date" shall mean the latest date
and time to which the exchange offer is
extended.
7
<PAGE> 13
CONDITIONS TO THE EXCHANGE
OFFER......................... The exchange offer is subject to certain
conditions that we may waive at our sole
discretion. The exchange offer is not
conditioned upon any minimum principal amount
of outstanding notes being tendered for
exchange.
We reserve the right in our sole and absolute
discretion, subject to applicable law, at any
time and from time to time:
- to delay the acceptance of the
outstanding notes;
- to terminate the exchange offer if
certain specified conditions have not
been satisfied;
- to extend the expiration date of the
exchange offer and retain all tendered
outstanding notes subject, however, to
the right of tendering holders to
withdraw their tender of outstanding
notes; and
- to waive any condition or otherwise
amend the terms of the exchange offer in
any respect.
PROCEDURES FOR TENDERING
OUTSTANDING NOTES........... If you wish to tender outstanding notes for
exchange, you must:
- complete and sign a letter of
transmittal in accordance with the
instructions contained in the letter of
transmittal; and
- forward the letter of transmittal by
mail, facsimile transmission or hand
delivery, together with any other
required documents, to the exchange
agent, either with the outstanding notes
to be tendered or in compliance with the
specified procedures for guaranteed
delivery of such outstanding notes.
Certain brokers, dealers, commercial banks,
trust companies and other nominees may also
effect tenders by book-entry transfer.
Please do not send your letter of transmittal
or certificates representing your outstanding
notes to us. Those documents should only be
sent to the exchange agent. Questions regarding
how to tender and requests for information
should be directed to the exchange agent.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. If your outstanding notes are registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee, we urge you to
contact such person promptly if you wish to
tender your outstanding notes pursuant to the
exchange offer.
WITHDRAWAL RIGHTS............. You may withdraw the tender of your outstanding
notes at any time prior to the expiration date
by delivering a written notice of your
withdrawal to the exchange agent in accor-
8
<PAGE> 14
dance with the withdrawal procedures set forth
in this prospectus.
CONSEQUENCES OF NOT COMPLYING
WITH EXCHANGE OFFER
PROCEDURES.................. You are responsible for complying with all
exchange offer procedures. You will only
receive exchange notes in exchange for your
outstanding notes if, prior to the expiration
date, you (1) deliver to the exchange agent the
letter of transmittal, properly completed and
duly executed, along with any other documents
or signature guarantees required by the letter
of transmittal, as well as certificates for the
outstanding notes or a book-entry confirmation
of a book-entry transfer of the outstanding
notes into the exchange agent's account at the
Depository Trust Company (DTC) or (2) comply
with the guaranteed delivery procedures set
forth in this prospectus.
Any outstanding notes you hold and do not
tender, or which you tender but which are not
accepted for exchange, will remain outstanding.
You will not have any appraisal or dissenters'
rights in connection with the exchange offer.
You should allow sufficient time to ensure that
the exchange agent receives all required
documents before the expiration of the exchange
offer. Neither we nor the exchange agent has
any duty to inform you of defects or
irregularities with respect to the tender of
your outstanding notes for exchange.
RESALES OF EXCHANGE NOTES..... We believe that you will be able to offer for
resale, resell or otherwise transfer exchange
notes issued in the exchange offer without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that:
- you are acquiring the exchange notes in
the ordinary course of your business;
- you are not participating, and have no
arrangement or understanding with any
person to participate, in the
distribution of the exchange notes; and
- you are not an affiliate of Susquehanna
Media under the definition of
"affiliate" contained in Rule 405 under
the Securities Act.
Our belief is based on interpretations by the
staff of the SEC, as set forth in no-action
letters issued to third parties unrelated to
us. The staff of the SEC has not considered our
exchange offer in the context of a no-action
letter, and we cannot assure you that the staff
of the SEC would make a similar determination
with respect to our exchange offer.
If our belief is not accurate and you transfer
an exchange note without delivering a
prospectus meeting the requirements of the
Securities Act or without an exemption from
such requirements, you may incur liability
under the Securities
9
<PAGE> 15
Act. We do not and will not assume or indemnify
you against such liability.
Each broker-dealer that receives exchange notes
for its own account in the exchange offer must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act
in connection with any resale of those exchange
notes. The letter of transmittal states that by
so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the
meaning of the Securities Act. This prospectus,
as it may be amended or supplemented from time
to time, may be used by a broker-dealer in
connection with resales of exchange notes
received in exchange for outstanding notes that
the broker-dealer acquired as a result of
market-making activities or other trading
activities. We have agreed that we will make
this prospectus available to any broker-dealer
to use for resales for a period of one year
from the expiration date.
The exchange offer is not being made to, nor
will we accept surrenders for exchange from,
holders of outstanding notes in any
jurisdiction in which this exchange offer or
the acceptance thereof would not be in
compliance with the securities or blue sky laws
of such jurisdiction.
EXCHANGE AGENT................ The exchange agent for the exchange offer is
Chase Manhattan Trust Company, N.A. The
address, telephone number and facsimile number
of the exchange agent are set forth in "The
Exchange Offer -- Exchange Agent" and in the
letter of transmittal.
USE OF PROCEEDS............... We will not receive any cash proceeds from the
issuance of the exchange notes offered hereby.
We used the net proceeds from the sale of the
outstanding notes, together with borrowings
under our new senior credit facility, to repay
all outstanding indebtedness under our old
senior credit facility and to make a $116.9
million loan to Susquehanna Pfaltzgraff to fund
its employee stock ownership plan.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES..... Your acceptance of the exchange offer and the
related exchange of your outstanding notes for
exchange notes will not be a taxable exchange
for United States federal income tax purposes.
You should not recognize any taxable gain or
loss or any interest income as a result of the
exchange.
Please refer to "The Exchange Offer" section of
this prospectus for more detailed information
concerning the exchange offer.
10
<PAGE> 16
SUMMARY TERMS OF THE EXCHANGE NOTES
The exchange offer relates to the exchange of up to $150 million principal
amount of exchange notes for an equal principal amount of outstanding notes. The
form and terms of the exchange notes are substantially identical to the form and
terms of the outstanding notes, except the exchange notes will be registered
under the Securities Act. Therefore, the exchange notes will not bear legends
restricting their transfer and will not be entitled to registration under the
Securities Act. The exchange notes will evidence the same debt as the
outstanding notes, which they replace, and both the outstanding notes and the
exchange notes are governed by the same indenture.
SECURITIES OFFERED............ $150 million principal amount of 8 1/2% Senior
Subordinated Exchange Notes due 2009.
ISSUER........................ Susquehanna Media Co.
MATURITY DATE................. May 15, 2009.
INTEREST PAYMENT DATES........ May 15 and November 15 of each year, beginning
on November 15, 1999.
OPTIONAL REDEMPTION........... We may redeem:
- all or part of the notes beginning on
May 15, 2004, at the redemption prices
stated in "Description of the
Notes -- Optional Redemptions," plus
accrued and unpaid interest on the notes
to be redeemed; and
- up to 35% of the notes at any time prior
to May 15, 2002 at a price of 108.50% of
their face amount, plus accrued and
unpaid interest, with the proceeds of
certain public equity offerings of our
company or our subsidiaries.
RANKING....................... The notes will be unsecured senior subordinated
obligations of Susquehanna Media. The notes
will rank behind all of our existing and future
senior debt, including indebtedness under the
new senior credit facility. The notes will
effectively rank behind any of our future
indebtedness that is secured by any of our
assets to the extent of the value of such
assets, even if such indebtedness expressly
provides that it is not senior to the notes. In
the future, we may issue debt that ranks
senior, equal or subordinate to the notes.
CHANGE OF CONTROL............. If a third party acquires control of
Susquehanna Media, you will have the right to
require us to repurchase your notes at a price
equal to 101% of the principal amount of your
notes plus accrued and unpaid interest to the
date of purchase.
ASSET SALE PROCEEDS........... In certain instances, we must use the net cash
proceeds of certain asset sales to offer to
purchase the notes at a price equal to 100% of
the principal amount of the notes plus accrued
and unpaid interest to the date of purchase.
11
<PAGE> 17
BASIC COVENANTS OF
INDENTURE..................... We will issue the exchange notes under an
indenture that also governs the outstanding
notes. The indenture contains covenants for
your benefit. Such covenants will, among other
things, restrict our ability to:
- incur additional debt;
- pay dividends and make distributions;
- repurchase securities;
- make certain investments;
- incur liens;
- transfer or sell assets;
- enter into transactions with affiliates;
- issue or sell stock of subsidiaries; and
- merge or consolidate.
These covenants are subject to a number of
important exceptions and qualifications that
are described under "Description of the
Exchange Notes -- Certain Covenants."
Please refer to the "Description of the
Exchange Notes" section of this prospectus for
more detailed information regarding the
exchange notes.
RISK FACTORS
You should read the "Risk Factors" section of this prospectus as well as
the other cautionary statements throughout this prospectus before making an
investment in the exchange notes or tendering your outstanding notes for
exchange notes.
12
<PAGE> 18
SUMMARY HISTORICAL AND UNAUDITED AS ADJUSTED
CONSOLIDATED FINANCIAL AND OPERATING DATA
We present below summary historical and as adjusted financial and operating
data. We derived the historical financial data as of and for the years ended
December 31, 1994 through December 31, 1998 from our audited consolidated
financial statements. We derived the historical financial data as of and for the
quarters ended March 31, 1998 and March 31, 1999 from our unaudited consolidated
financial statements. Our audited consolidated financial statements and related
notes for the years ended December 31, 1996, 1997 and 1998 and unaudited
consolidated financial statements and related notes for the quarters ended March
31, 1998 and March 31, 1999 are included elsewhere in this offering memorandum.
The unaudited as adjusted consolidated data presented below is based upon
our audited consolidated financial statements for the year ended December 31,
1998, after giving effect to the issuance and sale of the outstanding notes, the
closing of the new senior credit facility, the repayment of the old senior
credit facility, the prepayment of the senior notes, and the $116.9 million loan
to Susquehanna Pfaltzgraff to fund its ESOP. The unaudited as adjusted
consolidated income statement data presented below is based on certain
assumptions that we believe accurately represent the effect of such transactions
as if they had occurred on January 1, 1998, while the as adjusted balance sheet
data presented below assumes that such transactions occurred on December 31,
1998. By including unaudited as adjusted financial data, we do not suggest that
the data indicates what our results of operations or financial position actually
would have been had the transactions described above been completed on the
assumed dates. You should read this information and the accompanying notes in
conjunction with the consolidated financial statements and related notes and the
other financial information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED
------------------------------------------------------------------ MARCH 31,
AS ADJUSTED -------------------
1994 1995 1996 1997 1998 1998 1998 1999
-------- -------- -------- -------- -------- ----------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Radio............................ $ 93,967 $100,556 $116,300 $131,438 $151,170 $151,170 $ 28,742 $ 34,211
Cable............................ 45,010 48,544 55,791 65,122 70,641 70,641 16,895 19,188
Other............................ -- -- 85 539 1,616 1,616 294 632
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues..................... 138,977 149,100 172,176 197,099 223,427 223,427 45,931 54,031
Operating income................... 29,409 30,186 38,105 44,462 52,969 48,046 8,987 9,903
Net income......................... 9,135 9,213 11,665 17,444 13,860 6,909 1,579 2,340
OTHER DATA:
Radio broadcast cash flow(1)....... $ 28,747 $ 28,837 $ 35,896 $ 40,724 $ 49,659 $ 49,659 $ 8,032 $ 10,701
Cable cash flow(2)................. 21,688 23,011 26,392 32,432 34,952 34,952 8,312 9,143
EBITDA(3).......................... 42,688 42,917 52,500 62,881 73,866 73,866 13,983 17,678
Depreciation and amortization...... 12,271 11,402 13,217 17,992 20,563 20,563 4,942 6,192
Capital expenditures............... 11,113 12,899 12,073 22,610 29,592 29,592 5,979 6,593
Ratio of earnings to fixed
charges(4)....................... 2.4x 2.3x 2.7x 2.7x 2.3x 1.7x 1.6x 1.8x
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets....................... $125,582 $141,902 $218,314 $314,914 $336,391 $461,281 $315,726 $366,819
Total debt......................... 135,175 137,450 200,350 265,500 272,776 400,841 268,900 297,764
Stockholders' equity
(deficit)(5)..................... (48,776) (40,814) (30,176) (13,246) (1,861) (5,028) (11,628) 553
</TABLE>
13
<PAGE> 19
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED
------------------------------------------------------------------ MARCH 31,
AS ADJUSTED -------------------
1994 1995 1996 1997 1998 1998 1998 1999
-------- -------- -------- -------- -------- ----------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE OPERATING DATA:(6)
Homes passed....................... 173,674 182,465 215,715 211,808 214,650 239,353 214,959 240,435
Basic subscribers.................. 127,972 137,885 159,871 164,186 166,917 183,978 166,999 185,514
Basic penetration(7)............... 73.7% 75.6% 74.1% 77.5% 77.8% 76.9% 77.7% 77.2%
Premium units(8)................... 72,740 68,701 71,928 72,212 65,327 69,086 71,708 71,219
Premium penetration(9)............. 56.8% 49.8% 45.0% 44.0% 39.1% 37.6% 42.9% 38.4%
Average monthly revenue per basic
subscriber(10)................... $ 29.93 $ 30.42 $ 31.81 $ 33.49 $ 35.18 -- $ 34.64 $ 35.72
</TABLE>
- ---------------
(1) We define radio broadcast cash flow as radio EBITDA plus corporate overhead
allocated to our radio operations.
(2) We define cable cash flow as cable EBITDA plus corporate overhead allocated
to our cable operations.
(3) We define EBITDA as net income before income taxes, extraordinary items,
interest expense, interest income, depreciation and amortization, ESOP
expense, non-cash expenses, minority interest, and any gain or loss on the
disposition of assets. You should not consider EBITDA as an alternative to
operating income or to cash flows from operating activities (as determined
in accordance with generally accepted accounting principles), and EBITDA
should not be construed as an indication of a company's operating
performance, or as a measure of liquidity.
(4) The ratio of earnings to fixed charges is expressed as the ratio of income
before income taxes and extraordinary items plus fixed charges (excluding
capitalized interest) to fixed charges. Fixed charges consist of interest
expense, capitalized interest and one-third of rental expense (the portion
deemed representative of the interest factor).
(5) The 1998 as adjusted stockholders' deficit reflects the write-off of
unamortized debt issuance costs associated with the old senior credit
facility and the senior notes and the prepayment premium on the senior
notes, which total $5.5 million ($3.2 million net of income taxes).
(6) The 1998 as adjusted cable operating data gives effect to the January 29,
1999 acquisition of Hanover Cable TV.
(7) Basic penetration represents basic subscribers as a percentage of homes
passed.
(8) Premium units represents the aggregate number of individual premium
services (e.g., HBO, Cinemax, Showtime) for which customers have
subscribed.
(9) Premium penetration represents premium units as a percentage of basic
subscribers.
(10) Average monthly revenue per basic subscriber represents revenues divided by
12 divided by the weighted average number of subscribers for the year.
14
<PAGE> 20
RISK FACTORS
Before tendering your outstanding notes for exchange notes or investing in
the exchange notes, you should be aware that there are various risks involved in
your investment, including those we describe below. You should consider
carefully these risk factors, together with all of the other information
included in this prospectus.
RISKS RELATING TO OUR INDEBTEDNESS AND THE NOTES
WE HAVE SIGNIFICANT DEBT SERVICE OBLIGATIONS AND LIMITATIONS
We have a significant level of debt and debt service obligations. As of
June 30, 1999, we had approximately $ million of indebtedness. We also had
the ability to incur $ million of additional debt under our new senior
credit facility. In addition, the indenture governing the notes allows us to
incur additional indebtedness under certain circumstances. If we add new debt to
our current debt levels, the related risks that we now face could intensify.
Our substantial indebtedness poses important consequences to you, including
the risks that:
- we will use a substantial portion of our cash flow from operations to
pay principal and interest on our debt, thereby reducing the funds
available for working capital, capital expenditures, acquisitions and
other general corporate purposes;
- our indebtedness may limit our ability to obtain additional financing
on satisfactory terms and to otherwise fund working capital, capital
expenditures, acquisitions and other general corporate requirements;
- our level of indebtedness may make us more vulnerable to economic
downturns and may limit our ability to withstand competitive
pressures;
- indebtedness under the new senior credit facility bears interest at
variable rates which could create higher debt service requirements if
market interest rates increase; and
- our failure to comply with the financial and other covenants
applicable to our debt could result in an event of default, which, if
not cured or waived, could have a material adverse effect on us.
If we successfully implement our business and operating strategies, we
believe we will have enough capital to carry on our business and service our
debt requirements for the foreseeable future. However, if we cannot generate
sufficient cash flow from operations to meet our obligations, we may be forced
to reduce or delay capital expenditures, sell assets, restructure or refinance
our debt, or seek additional equity capital. We cannot assure you that any of
these remedies would be satisfactory or could be effected on satisfactory terms,
if at all. Our ability to pay principal and interest on the notes and to satisfy
our other debt obligations will depend on our future operating performance. Our
operating performance will be affected by prevailing economic conditions, and
financial, business and other factors that may be beyond our control.
THE NOTES WILL BE SUBORDINATED TO OUR SENIOR DEBT
Before paying principal and interest on the notes, we must first make
payments on our existing and future senior debt, including all outstanding
amounts under our new senior credit facility. As of June 30, 1999, we had
approximately $ million of senior indebtedness. In addition, we had
approximately $ million of additional borrowing availability under our new
senior credit facility.
Our obligations under the new senior credit facility are secured by
substantially all of the assets (excluding real property) that we use in our
business operations and by all of our voting common stock and the voting common
stock of our direct and indirect subsidiaries. The new senior credit
15
<PAGE> 21
facility is guaranteed by all of our direct and indirect subsidiaries. If we
default on any payments required under any of our secured debt, the secured
lenders could declare all amounts outstanding, together with accrued and unpaid
interest, immediately due and payable. If we are unable to repay amounts due,
the lenders could proceed against the collateral securing the debt. If the
lenders proceed against any of the collateral, we may not have enough assets
left to pay you or other noteholders. Moreover, if we become bankrupt or
similarly reorganize, we may not be able to use our assets to pay you or other
noteholders until after we pay all of our senior debt. In addition, the new
senior credit facility prohibits us from paying amounts due on the notes, or
from purchasing, redeeming or otherwise acquiring the notes if a default exists
under our senior debt. None of our subsidiaries guarantees the notes, and the
notes are effectively subordinated in right of payment to all debt and other
liabilities (including trade payables) of our subsidiaries.
WE DEPEND UPON OUR SUBSIDIARIES FOR OUR CASH FLOW; NOT ALL OF OUR SUBSIDIARIES
ARE WHOLLY-OWNED
The notes are obligations exclusively of Susquehanna Media, which is a
holding company. We conduct our business through our operating subsidiaries and
do not have any operations of our own. As a result, we are dependent upon the
ability of our subsidiaries to provide us with cash, in the form of dividends,
intercompany credits, loans or otherwise, to meet our debt service obligations,
including our obligations under the notes. These subsidiaries are separate and
distinct legal entities and have no obligations to pay any amounts due on the
notes or to make any funds available therefor. In addition, dividends, loans or
other distributions to us from our subsidiaries may be subject to contractual or
other restrictions, will depend upon the results of operations of such
subsidiaries and may be subject to other business considerations.
Not all of our subsidiaries are wholly-owned. Lenfest Communications, Inc.
holds minority ownership interests equal to 15.0% of Susquehanna Cable and
17.75% of each of its principal operating subsidiaries. In addition, employees
of Susquehanna Radio hold a minority interest equal to 7.28% of Susquehanna
Radio, and Susquehanna Pfaltzgraff and certain members of the family of Louis J.
Appell, Jr., Chairman of Susquehanna Media, own, either directly or through
trusts, minority interests ranging, in the aggregate, from 6.25% to 18.65% of
certain subsidiaries of Susquehanna Radio. To the extent that subsidiaries of
Susquehanna Media that are not wholly-owned declare dividends or make other
distributions to stockholders, these minority stockholders will receive their
shares of such payments, and such amounts will not be available to pay principal
or interest on the notes. The indenture governing the notes does, however, limit
the amount of dividends and other distributions that may be paid to these
minority stockholders.
Substantially all of our consolidated assets are held by our subsidiaries.
The notes are effectively subordinated to all existing and future indebtedness
and other liabilities (including trade payables) of each of our subsidiaries.
The indenture does, however, limit the amount of indebtedness that our
subsidiaries may incur. Any right we may have to receive assets of our
subsidiaries upon their liquidation or reorganization, and the resulting rights
of the holders of notes to participate in those assets, would be subordinated to
the claims of our subsidiaries' creditors except in certain limited
circumstances.
Under various circumstances, if any subsidiary of Susquehanna Media
guarantees the indebtedness of either Susquehanna Media or any other guarantor
of the notes, or grants or incurs any lien securing any such indebtedness, other
than liens securing indebtedness under the new senior credit facility or
indebtedness that replaces the new senior credit facility, such subsidiary will
be required to guarantee payment of the notes on a senior subordinated basis
with subordination provisions analogous to those applicable to the notes.
16
<PAGE> 22
OUR INDEBTEDNESS MAY PREVENT US FROM ENGAGING IN CERTAIN BENEFICIAL ACTIVITIES
Our new senior credit facility and the indenture governing the notes each
contain a number of significant covenants. These covenants limit or restrict our
ability to:
- incur additional debt;
- pay dividends and make distributions;
- repurchase securities;
- make certain investments;
- incur liens;
- transfer or sell assets;
- enter into transactions with affiliates;
- issue or sell stock of subsidiaries; or
- merge or consolidate.
These limitations and restrictions may adversely affect our ability to
finance our future operations or capital needs or engage in other business
activities that may be in our best interests. In addition, our new senior credit
facility also requires us to comply with certain financial ratios. Our ability
to comply with these ratios may be affected by events beyond our control. If we
breach any of the covenants in the new senior credit facility or the indenture,
or if we are unable to comply with the required financial ratios, we may be in
default under the new senior credit facility and the indenture. If we default
under the new senior credit facility, the lenders can declare all borrowings
outstanding, including accrued interest and other fees, due and payable. If we
use all of our available cash to repay borrowings under the new senior credit
facility, we may not be able to make payments on the notes.
WE MAY NOT HAVE SUFFICIENT FUNDS TO REPAY THE NOTES UPON A CHANGE OF CONTROL
If we experience certain changes of control, you will have the right to
require us to purchase your notes at a purchase price equal to 101% of the
principal amount of your notes plus accrued and unpaid interest. Under those
circumstances, we may also be required to (1) repay our outstanding senior debt
or (2) obtain our lenders' consent for our purchase of the notes. If we cannot
repay our debt or cannot obtain the required consents, we may be unable to
purchase the notes. This would be an event of default under the indenture. Upon
a change of control, we cannot guarantee that we will have sufficient funds to
make any debt payment, including purchases of the notes, as described above. To
avoid default, we would try to refinance our debt. We cannot guarantee, however,
that such refinancing, if available, would be on favorable terms.
The events that qualify as a change of control under the indenture may also
be events of default under the new senior credit facility or other indebtedness.
An event of default under the new senior credit facility would permit our
lenders to accelerate our indebtedness. If we cannot repay such borrowings when
due, the lenders could proceed against the collateral securing the debt.
THE FAILURE OF A MARKET TO DEVELOP COULD AFFECT THE LIQUIDITY AND PRICE OF YOUR
EXCHANGE NOTES
The exchange notes will be a new issue of securities for which there is no
existing trading market. We cannot assure you as to the liquidity of markets
that may develop for the exchange notes, your ability to sell the exchange notes
or the price at which you would be able to sell the exchange notes. If such
markets were to develop, the exchange notes could trade at prices that may be
lower than their principal amount or purchase price depending on many factors,
including prevailing interest rates and the markets for similar securities. In
addition, any market-making by the initial purchasers of the outstanding notes
may be limited during the exchange offer or the pendency of any resale
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registration statement and may be discontinued at any time without notice. We do
not intend to apply for listing of the exchange notes on any national securities
exchange or on Nasdaq. The liquidity of, and trading market for, the exchange
notes also may be adversely affected by changes in the market for high yield
securities and by changes in our financial performance or prospects or in the
prospects for companies in our industry generally. As a result, you cannot be
sure that an active trading market will develop for the exchange notes.
RISKS RELATING TO THE COMPANY
OUR COMPANY DEPENDS ON KEY MANAGERS AND PERSONNEL
Our success depends on the efforts, abilities and continued services of our
senior management. We do not have employment agreements with any members of our
senior management, and our business could suffer if we lost the services of any
one or more of such persons. Our future success also depends on our ability to
recruit, train, motivate and retain other highly skilled managerial, technical,
marketing and customer service personnel. Competition for such personnel is
intense, and we cannot be certain that we will meet our future personnel needs.
If we fail to meet such personnel needs, our business could be adversely
affected.
We also employ several on-air personalities with large, loyal audiences in
their respective markets. We generally enter into employment agreements with
these individuals to protect our interests in those relationships that we
believe are valuable. If, however, we lost one of these individuals, we might
suffer a short-term loss of audience share in the affected market.
WE MAY NOT SUCCESSFULLY INTEGRATE FUTURE ACQUISITIONS
As part of our business strategy, we intend to acquire suitable radio
stations and cable systems. In the event that we acquire additional radio
stations and cable systems, we may have difficulty integrating the operations,
systems and management of such businesses, and unforeseen integration
difficulties may require a disproportionate amount of management's attention and
our other resources. In addition, there can be no assurance that any future
acquisitions will achieve synergies comparable to those of recent acquisitions,
and future acquisitions may not increase our cash flow or yield other
anticipated benefits.
WE COULD BE AFFECTED BY "YEAR 2000" COMPUTER PROBLEMS
Many existing computer programs use only two digits to identify a year in
the computer's processing operations. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the year 2000. "Year 2000" issues affect virtually all companies and
organizations, including our company. We have established a Year 2000 Task Force
to manage an overall Year 2000 assessment, remediation, testing and contingency
planning project. The Year 2000 Task Force has developed and is implementing a
Year 2000 strategic plan. Our goal is to minimize the potential effects of the
Year 2000 problem on customers and business processes. Our internal information
technology, product delivery and support systems, as well as our key suppliers,
vendors and customers are included in the scope of the investigation.
We believe that the risk of non-compliant systems in our company is not
high and that our remediation and replacement program will adequately address
Year 2000 issues internal to our company. We have not, however, finished
assessing the Year 2000 readiness of our computer systems. As a result, there
can be no assurance that all of our systems will be Year 2000 compliant. In
addition, the ability of third parties with whom we transact business to
adequately address their Year 2000 issues is outside of our control. There can
be no assurance, therefore, that the failure of such third parties to adequately
address their Year 2000 issues will not have a material adverse effect on
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our business, results of operations and financial condition. We intend, under
our Year 2000 strategic plan, to develop contingency plans by October 31, 1999
to mitigate any possible disruption in business that may result if certain of
our systems or the systems of third parties are not Year 2000 compliant.
RISKS RELATING TO THE RADIO BROADCASTING INDUSTRY
WE ARE DEPENDENT UPON ADVERTISING REVENUES
We derive substantially all of our broadcast revenues from the sale of
advertising on our radio stations. Because advertisers generally reduce their
spending during economic downturns, we could be adversely affected by a future
national recession. In addition, because a substantial portion of our broadcast
revenues are derived from local advertisers, our ability to generate advertising
revenues in specific markets could be adversely affected by local or regional
economic downturns. We are particularly dependent on advertising revenue from
the San Francisco and Dallas markets, which generated 23.1% and 12.6%,
respectively, of our total revenue in 1998.
OUR RADIO STATIONS COMPETE WITH OTHER RADIO STATIONS AND MEDIA FORMS
The radio broadcasting industry is very competitive. The success of each of
our stations is dependent upon its audience ratings and share of the overall
advertising revenues within its market. Our stations compete for audiences and
advertising revenues directly with other radio stations, and some of the owners
of those competing stations have much greater financial resources than we do.
Our stations also compete with other media such as cable television, newspapers,
magazines, direct mail, compact discs, music videos, the Internet and outdoor
advertising. Although we believe that each of our stations can compete
effectively in its broadcast area, we cannot be sure that any of our stations
can maintain or increase its current audience ratings or market share. In
addition, other stations may change their format or programming to compete
directly with our stations for audience and advertisers, or engage in aggressive
promotional campaigns. If this happens, the ratings and advertising revenues of
our stations could decrease, the promotion and other expenses of our stations
could increase, and our stations would have lower broadcast cash flow.
New media technologies are also being introduced to compete with the radio
broadcasting industry. Some of these new technologies are:
- Digital audio broadcasting and satellite digital audio radio service,
which provide for the delivery of multiple new, high quality audio
programming formats to local and national audiences.
- Streaming audio delivered through the Internet.
We cannot predict at this time the effect, if any, that any of these new
technologies may have on the radio broadcasting industry in general or our
stations in particular.
LICENSING AND OWNERSHIP RULES MAY AFFECT OUR RADIO BROADCASTING OPERATIONS
The radio broadcasting industry is subject to extensive regulation by the
Federal Communications Commission under the Communications Act of 1934. FCC
approval is required for the issuance, renewal or transfer of radio broadcast
station operating licenses. We cannot operate our radio stations without FCC
licenses. The failure to renew our licenses on their expiration dates or the
inclusion of conditions or qualifications in our licenses could have a negative
impact on our business. The Communications Act and FCC rules impose specific
limits on the number of stations an entity can own in a single market. Ownership
rules may affect our acquisition strategy because they may prevent us from
acquiring additional stations in a particular market. We may also be prevented
from engaging in a swap transaction if the swap would cause us to violate these
rules. The FCC has recently issued public notices suggesting that it may examine
and impose limits upon the advertising revenue share
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acquired by one entity in a single market. It is not clear how the FCC will
proceed in this area. In addition, the Department of Justice, either directly
through its administration of the Hart-Scott-Rodino pre-merger notification
requirements, or generally, has taken an active role in reviewing acquisitions
of stations in particular markets and, in some instances, has conditioned its
clearance on the parties' agreement to limit market share to a level approved by
the Department.
RISKS RELATING TO THE CABLE TELEVISION INDUSTRY
OUR CABLE SYSTEMS COMPETE WITH OTHER COMMUNICATION SERVICE PROVIDERS
Our cable television systems face competition from:
- alternative methods of receiving and distributing television signals,
including direct broadcast satellite, or DBS, multichannel multipoint
distribution systems, or MMDS, satellite master antenna television, or
SMATV, systems and broadcast digital television, or BDT;
- data transmission and Internet service providers; and
- other sources of news, information and entertainment such as off-air
television broadcast programming, newspapers, movie theaters, live
sporting events and home video products, including videotape cassette
recorders and digital video disc players.
The FCC and Congress are expected to consider proposals to enhance the
ability of DBS providers to gain access to additional programming and to
authorize DBS carriers to transmit distant signals of the major television
networks or local signals to subscribers on a broader basis than permitted under
current law. If DBS providers gain permission and are able to deliver distant
signals of the major television networks or local or regional off-air signals,
cable television system operators may lose a competitive advantage over DBS
providers. In addition, some of the regional bell operating companies, or RBOCs,
other telephone companies, public utility companies and other entities are in
the process of entering the cable television business. The RBOCs, other
telephone companies, public utility companies and other entities that may enter
our business have significant access to capital, and several have expressed
their intention to enter the multichannel video programming distribution
business in addition to their existing voice and data transmission businesses.
Among other things, telephone companies have an existing relationship with the
households in their service areas, have substantial financial resources, and may
have an existing infrastructure capable of delivering cable television service.
Electric utilities also have the potential to become significant competitors in
the video marketplace, as many of them already possess fiber optic transmission
lines in certain of the areas they serve. In the last year, several utilities
have announced, commenced, or moved forward with ventures involving multichannel
video programming distribution.
Cable television systems operate in a very competitive business
environment, and we may compete against competitors with fewer regulatory
burdens, greater financial and personnel resources, greater brand name
recognition and long-standing relationships with regulatory authorities.
Moreover, mergers, joint ventures and alliances among franchise, wireless or
private cable television operators, RBOCs and others may result in providers
capable of offering cable television and other telecommunications services in
direct competition with us.
CABLE FRANCHISES ARE NON-EXCLUSIVE AND MAY NOT BE RENEWED
Cable television companies operate under non-exclusive franchises granted
by local authorities, which are subject to renewal and renegotiation from time
to time. Our business is dependent upon the retention and renewal of our local
franchises. A franchise is generally granted for a fixed term ranging from 5 to
15 years, but in many cases is terminable if the franchisee fails to comply with
the material provisions of the franchise agreement. Franchises typically impose
conditions relating to the use and operation of the cable television system,
including requirements relating to the payment of
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fees, system bandwidth capacity, customer service requirements, franchise
renewal and termination. The Cable Communications Policy Act of 1984 (the "1984
Cable Act") provides for an orderly franchise renewal process in which franchise
renewal will not be unreasonably withheld. If renewal is denied and the
franchising authority acquires ownership of the system or effects a transfer of
the system to another person, the operator generally is entitled to the "fair
market value" (but with no value allocated to the franchise itself in a
non-renewal situation) for the system covered by such franchise. Although we
believe that we generally have good relationships with our franchise
authorities, no assurances can be given that we will be able to retain or renew
our franchises or that the terms of any such renewals will be on terms as
favorable to the Company as our existing franchises. The non-renewal or
termination of franchises relating to a significant portion of our subscribers
could have a material adverse effect on our results of operations and financial
position.
The Communications Act and related FCC regulations contain a number of
provisions that encourage or facilitate competition to franchised cable systems.
The Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act" and collectively with the 1984 Cable Act, the "Cable Acts") prohibits
franchising authorities from granting exclusive cable television franchises and
from unreasonably refusing to award additional competitive franchises. It also
permits municipal authorities to operate cable television systems in their
communities without franchises. As franchises are non-exclusive, other cable
television companies can build their own systems and obtain franchises to
operate directly in competition with us. This type of competition is called
"overbuilding." We are aware of existing overbuild situations in our systems
that service less than 1% of our total basic subscribers. We cannot predict
whether competition from these or future competitors or from developing and
future technologies will have a material effect on us and our business and
operations. Moreover, as we expand and introduce new and enhanced services,
including additional telecommunications services, we will be subject to
increased competition from other telecommunications providers.
THE CABLE TELEVISION INDUSTRY IS HEAVILY REGULATED
The cable television industry is subject to extensive regulation by
federal, local and, in some instances, state governmental agencies. The Cable
Acts, both of which amended the Communications Act, established a national
policy to guide the development and regulation of cable television systems.
Recently, the Communications Act was substantially amended by the
Telecommunications Act of 1996 (the "1996 Telecom Act"). Principal
responsibility for implementing the policies of the Cable Acts and the 1996
Telecom Act has been allocated between the FCC and state or local regulatory
authorities. Advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environment, are constantly
occurring. It is therefore not possible to predict the effect that ongoing or
future developments might have on the cable communications industry or on the
operations of the Company.
Federal Law and Regulation. The 1992 Cable Act and the FCC's rules
implementing that act have increased the administrative and operational expenses
of cable television systems. The FCC and local or state franchise authorities
have also gained additional regulatory oversight powers under the act. The Cable
Acts and the corresponding FCC regulations have established, among other things:
- rate regulations,
- mandatory carriage and retransmission consent requirements that require a
cable system under certain circumstances to carry a local broadcast
station or to obtain consent to carry a local or distant broadcast
station,
- rules for franchise renewals and transfers, and
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- other requirements covering a variety of operational areas such as
provisions governing advertising and certain aspects of program content,
and technical standards and customer service requirements.
For certain small cable operators, the 1996 Telecom Act eliminated rate
regulation of cable programming service tiers, or CPSTs, and, in certain
circumstances, basic services and equipment immediately after passage, and, as
of March 31, 1999, deregulated rates for certain CPSTs for most multiple system
operators (including us). The FCC has played a significant role in implementing
the rate deregulation provisions of the 1996 Telecom Act.
The FCC and Congress continue to be concerned that rates for programming
services are rising at a rate exceeding inflation. It is therefore possible that
notwithstanding the recent elimination of CPST rate regulation, Congress may
enact legislation in the future to reimpose additional rate controls on cable
systems. We are currently unable to predict the ultimate effect of the 1992
Cable Act or the 1996 Telecom Act, the ultimate outcome of future FCC rulemaking
proceedings, or of litigation challenging various aspects of this federal
legislation and the FCC's regulations implementing the legislation.
Cable systems must obtain copyright licenses for the programming and
television signals they carry. Copyright authority for programming on
non-broadcast networks typically is obtained from the networks in question, and
copyright authority for programming originated locally by the cable system must
be obtained directly from copyright holders. The Copyright Act of 1976, as
amended (the "Copyright Act"), provides a blanket license for copyrighted
material on television stations whose signals a cable system retransmits. Cable
operators can obtain this license by filing semi-annual reports and paying a
percentage of their revenues as a royalty fee to the U.S. Copyright Office,
which then distributes the royalty pool to copyright holders. For larger cable
systems, these payments vary with the number and type of distant television
stations the system carries. From time to time, Congress considers proposals to
alter the blanket copyright license, some of which could make the license more
costly.
State and Local Regulation. Cable television systems generally operate
pursuant to non-exclusive franchises, permits or licenses granted by a
municipality or other state or local governmental entity. The terms and
conditions of franchises vary materially from jurisdiction to jurisdiction. A
number of states subject cable systems to the jurisdiction of centralized state
governmental agencies. No state in which we currently operate has enacted state
level regulation. We cannot predict whether any of the states in which we
currently operate will engage in such regulation in the future.
OUR PROGRAMMING COSTS ARE INCREASING
Our cable programming costs are increasing. Programming has been and is
expected to continue to be our largest single expense item and accounted for
approximately 39% of the Company's total operating costs for the year ended
December 31, 1998. In recent years, the cable industry has experienced a rapid
escalation in the cost of programming, particularly sports programming. This
escalation may continue, and we may not be able to pass programming cost
increases on to our subscribers. In addition, as we add programming to our
limited and "expanded basic" tiers, we may face additional market constraints on
our ability to pass these costs on to our subscribers.
We acquire approximately 67% of our cable programming through an
Affiliation Agreement with a subsidiary of AT&T. We receive favorable rates on
AT&T programming because Lenfest Communications, Inc., which is currently 50%
owned by AT&T, holds minority ownership interests in Susquehanna Cable and its
principal operating subsidiaries. We estimate that the favorable programming
rates saved us at least $2.0 million in 1998. If Lenfest ceases to hold a
significant interest in Susquehanna Cable, we may no longer receive the
favorable programing rates. In such event, our programming rates will increase
faster than they would otherwise, and we may not be able to pass such increases
on to our subscribers.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the outstanding notes, we agreed to register
the exchange notes. The exchange offer is being made to satisfy this contractual
obligation.
By tendering outstanding notes in exchange for exchange notes, each holder
represents to us that:
- any exchange notes to be received by a holder are being acquired in
the ordinary course of that holder's business;
- it has no arrangement or understanding with any person to participate
in a "distribution" of exchange notes under the Securities Act;
- it is not an "affiliate" of Susquehanna Media, as defined in Rule 405
under the Securities Act, or, if it is an affiliate, that it will
comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable;
- it has full power and authority to tender, exchange, sell, assign and
transfer the tendered outstanding notes;
- Susquehanna Media will acquire good, marketable and unencumbered title
to the tendered outstanding notes, free and clear of all liens,
restrictions, charges and encumbrances; and
- the outstanding notes tendered for exchange are not subject to any
adverse claims or proxies.
Each tendering holder also will warrant and agree that it will, upon
request, execute and deliver any additional documents that Susquehanna Media or
the exchange agent deems to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the outstanding notes tendered pursuant to the
exchange offer.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes pursuant to the exchange offer, where the
outstanding notes were acquired by such broker-dealer as a result of
market-making or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of exchange notes received in this
exchange offer.
The exchange offer is not being made to, nor will Susquehanna Media accept
tenders for exchange from, holders of outstanding notes in any jurisdiction in
which the exchange offer or the acceptance of the exchange notes would be in
violation of the securities or blue sky laws of that jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the exchange offer means any person in whose name the outstanding notes are
registered on the books of Susquehanna Media or any other person who has
obtained a properly completed bond power from the registered holder, or any
participant in DTC whose name appears on a security position listing as a holder
of outstanding notes (which, for purposes of the exchange offer, include
beneficial interests in the outstanding notes held by direct or indirect
participants in DTC and outstanding notes held in definitive form).
TERMS OF THE EXCHANGE OFFER
Susquehanna Media hereby offers, upon the terms and subject to the
conditions shown in this prospectus and in the accompanying letter of
transmittal, to exchange $1,000 principal amount of 8 1/2% Senior Subordinated
Exchange Notes due 2009 for each $1,000 principal amount of outstanding
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8 1/2% Senior Subordinated Notes due 2009 properly tendered before the
expiration date and not properly withdrawn according to the procedures described
below. Holders may tender their outstanding notes in whole or in part in
integral multiples of $1,000 principal amount.
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes except that:
- the exchange notes have been registered under the Securities Act and
therefore are not subject to the restrictions on transfer applicable to
the outstanding notes, and
- holders of the exchange notes will not be entitled to some of the rights
of holders of the outstanding notes under the registration rights
agreement.
The exchange notes evidence the same indebtedness as the outstanding notes and
will be issued pursuant to and entitled to the benefits of the indenture that
governs the outstanding notes.
The exchange offer is not conditioned upon any minimum principal amount of
outstanding notes being tendered for exchange. Susquehanna Media reserves the
right in its sole discretion to purchase or make offers for any outstanding
notes that remain outstanding after the expiration date or, as discussed under
"-- Conditions to the Exchange Offer," to terminate the exchange offer and, to
the extent permitted by applicable law, purchase outstanding notes in the open
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the exchange offer. As of the
date of this prospectus, $150 million principal amount of 8 1/2% Senior
Subordinated Notes due 2009 was outstanding.
Holders of outstanding notes do not have any appraisal or dissenters'
rights in connection with the exchange offer. Outstanding notes that are not
tendered for, or are tendered but not accepted in connection with, the exchange
offer will remain outstanding. See "Summary of the Exchange
Offer -- Consequences of Not Complying with Exchange Offer Procedures."
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of particular other events discussed herein or
otherwise, certificates for any such unaccepted outstanding notes will be
returned, without expense, to the tendering holder thereof promptly after the
expiration date.
Holders who tender outstanding notes in connection with 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 the outstanding notes in connection with the exchange offer.
Susquehanna Media will pay all charges and expenses, other than specified
applicable taxes. See "-- Fees and Expenses"
NEITHER SUSQUEHANNA MEDIA NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO HOLDERS OF THE OUTSTANDING NOTES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OUTSTANDING NOTES IN THE
EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF THE OUTSTANDING NOTES MUST MAKE THEIR OWN DECISION
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER, AND, IF SO, THE AGGREGATE
AMOUNT OF OUTSTANDING NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR
FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date for the exchange offer is 5:00 p.m., New York City
time, on , 1999 unless the exchange offer is extended by
Susquehanna Media. If Susquehanna Media does extend the exchange offer, the
expiration date will be the latest date and time to which the exchange offer is
extended.
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Susquehanna Media expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time:
- to delay the acceptance of the outstanding notes for exchange,
- to terminate the exchange offer, whether or not any outstanding notes
have already been accepted for exchange, if Susquehanna Media determines,
in its sole and absolute discretion, that any of the events or conditions
referred to under "-- Conditions to the Exchange Offer" has occurred or
exists or has not been satisfied with respect to the exchange offer,
- to extend the expiration date of the exchange offer and retain all
outstanding notes tendered pursuant to the exchange offer, subject,
however, to the right of holders of outstanding notes to withdraw their
tendered outstanding notes as described under "-- Withdrawal Rights," and
- to waive any condition or otherwise amend the terms of the exchange offer
in any respect.
If the exchange offer is amended in a manner determined by Susquehanna
Media to constitute a material change, or if Susquehanna Media waives a material
condition of the exchange offer, Susquehanna Media will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the affected outstanding notes, and Susquehanna Media will
extend the exchange offer to the extent required by Rule 14e-1 under the
Exchange Act.
Any such delay in acceptance, termination, extension or amendment will be
followed promptly by oral or written notice thereof to the exchange agent for
the exchange offer (any such oral notice to be promptly confirmed in writing)
and by making a public announcement, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. Without limiting
the manner in which Susquehanna Media may choose to make any public
announcement, and subject to applicable laws, Susquehanna Media shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the exchange offer,
promptly after the expiration date, Susquehanna Media will exchange, and will
issue to the exchange agent, exchange notes for outstanding notes validly
tendered and not withdrawn pursuant to the withdrawal rights described under
"-- Withdrawal Rights."
In all cases, delivery of exchange notes in exchange for outstanding notes
tendered and accepted for exchange pursuant to the exchange offer will be made
only after timely receipt by the exchange agent of:
- outstanding notes or a book-entry confirmation of a book-entry transfer
of outstanding notes into the exchange agent's account at DTC,
- the letter of transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees, and
- any other documents required by the letter of transmittal.
Accordingly, the delivery of exchange notes might not be made to all tendering
holders at the same time, and will depend upon when outstanding notes,
book-entry confirmations with respect to outstanding notes and other required
documents are received by the exchange agent.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of outstanding notes into the exchange agent's account at
DTC.
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Subject to the terms and conditions of the exchange offer, Susquehanna
Media will be deemed to have accepted for exchange, and thereby exchanged,
outstanding notes validly tendered and not withdrawn as, if and when Susquehanna
Media gives oral or written notice to the exchange agent (any such oral notice
to be promptly confirmed in writing) of Susquehanna Media's acceptance of such
outstanding notes for exchange pursuant to the exchange offer. Susquehanna
Media's acceptance for exchange of outstanding notes tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering holder and Susquehanna Media upon the terms and subject to the
conditions of the exchange offer. The exchange agent will act as agent for
Susquehanna Media for the purpose of receiving tenders of outstanding notes,
letters of transmittal and related documents, and as agent for tendering holders
for the purpose of receiving outstanding notes, letters of transmittal and
related documents and transmitting exchange notes to holders who validly
tendered outstanding notes. Such exchange will be made promptly after the
expiration date of the exchange offer. If for any reason the acceptance for
exchange or the exchange of any outstanding notes tendered pursuant to the
exchange offer is delayed (whether before or after Susquehanna Media's
acceptance for exchange of outstanding notes), or Susquehanna Media extends the
exchange offer or is unable to accept for exchange or exchange outstanding notes
tendered pursuant to the exchange offer, then, without prejudice to Susquehanna
Media's rights set forth herein, the exchange agent may, nevertheless, on behalf
of Susquehanna Media and subject to Rule 14e-1(c) under the Exchange Act, retain
tendered outstanding notes and such outstanding notes may not be withdrawn
except to the extent tendering holders are entitled to withdrawal rights as
described under "-- Withdrawal Rights."
PROCEDURES FOR TENDERING OUTSTANDING NOTES
Valid Tender. Except as set forth below, in order for outstanding notes to
be validly tendered pursuant to the exchange offer, either;
- a properly completed and duly executed letter of transmittal (or
facsimile thereof), with any required signature guarantees and any other
required documents, must be received by the exchange agent at the address
set forth under "-- Exchange Agent" prior to the expiration date and
tendered outstanding notes must be received by the exchange agent, or
such outstanding notes must be tendered pursuant to the procedures for
book-entry transfer set forth below and a book-entry confirmation must be
received by the exchange agent, in each case prior to the expiration
date, or
- the guaranteed delivery procedures described below must be complied with.
If less than all of the outstanding notes are tendered, a tendering holder
should fill in the amount of outstanding notes being tendered in the appropriate
box on the letter of transmittal. The entire amount of outstanding notes
delivered to the exchange agent will be deemed to have been tendered unless
otherwise indicated.
If any letter of transmittal, endorsement, bond power, power of attorney,
or any other document required by the letter of transmittal 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. Unless waived by Susquehanna Media,
evidence satisfactory to Susquehanna Media of such person's authority to so act
must also be submitted.
Any beneficial owner of outstanding notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the exchange offer.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER. DELIVERY WILL BE DEEMED MADE ONLY
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WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY AND PROPER
INSURANCE SHOULD BE OBTAINED. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES
SHOULD BE SENT TO SUSQUEHANNA MEDIA. HOLDERS MAY REQUEST THEIR RESPECTIVE
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THESE
TRANSACTIONS FOR THEM.
Book-Entry Transfer. The exchange agent will request the establishment of
an account with respect to the outstanding notes at DTC for purposes of the
exchange offer within two business days after the date of this prospectus. Any
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of the outstanding notes by
causing DTC to transfer such outstanding notes into the exchange agent's account
at DTC in accordance with DTC's procedures for transfers. However, although
delivery of outstanding notes may be effected through book-entry transfer into
the exchange agent's account at DTC, the letter of transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other required documents, must in any case be delivered to
and received by the exchange agent at its address set forth under "-- Exchange
Agent" prior to the expiration date, or the guaranteed delivery procedure set
forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
Signature Guarantees. Certificates for outstanding notes need not be
endorsed and signature guarantees on a letter of transmittal or a notice of
withdrawal, as the case may be, are unnecessary unless:
- a certificate for outstanding notes is registered in a name other than
that of the person surrendering the certificate, or
- a registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the letter of
transmittal.
In the case of (a) or (b) above, such certificates for outstanding notes must be
duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the letter of transmittal or
the notice of withdrawal, as the case may be, guaranteed by a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible
guarantor institution," including (as such terms are defined and each an
"Eligible Institution"):
- a bank,
- a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer,
- a credit union,
- a national securities exchange, registered securities association or
clearing agency, or
- a savings association that is a participant in a Securities Transfer
Association,
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the letter of transmittal.
Guaranteed Delivery. If a holder desires to tender outstanding notes
pursuant to the exchange offer and the certificates for such outstanding notes
are not immediately available or time will not permit all required documents to
reach the exchange agent before the expiration date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such outstanding
notes may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(1) such tenders are made by or through an Eligible Institution;
27
<PAGE> 33
(2) prior to the expiration date, the exchange agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying the letter of
transmittal, setting forth the name and address of the holder of
outstanding notes and the amount of outstanding notes tendered, stating
that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered
outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other documents required by the
letter of transmittal will be deposited by the Eligible Institution with
the exchange agent. The Notice of Guaranteed Delivery may be delivered by
hand, or transmitted by facsimile or mail to the exchange agent and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery; and
(3) the certificates (or book-entry confirmation) representing all
tendered outstanding notes, in proper form for transfer, together with a
properly completed and duly executed letter of transmittal, with any
required signature guarantees and any other documents required by the
Letter of Transmittal, are received by the exchange agent within three New
York Stock Exchange trading days after the date of execution of the Notice
of Guaranteed Delivery.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered outstanding notes will be determined by Susquehanna Media, in its
sole discretion, which determination shall be final and binding on all parties.
Susquehanna Media reserves the absolute right, in its sole and absolute
discretion, to reject any and all tenders it determines not to be in proper form
or the acceptance for exchange of which may, in the view of counsel to
Susquehanna Media, be unlawful. Susquehanna Media also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the exchange
offer as set forth under "-- Conditions to the Exchange Offer" or any defect or
irregularity in any tender of outstanding notes of any particular holder whether
or not similar defects or irregularities are waived in the case of other
holders.
Susquehanna Media's interpretation of the terms and conditions of the
exchange offer (including the letter of transmittal and the instructions
thereto) will be final and binding on all parties. No tender of outstanding
notes will be deemed to have been validly made until all defects or
irregularities with respect to such tender have been cured or waived. None of
Susquehanna Media, any affiliates of Susquehanna Media, the exchange agent or
any other person shall be under any duty to give any notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification.
RESALES OF EXCHANGE NOTES
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties unrelated to Susquehanna Media, Susquehanna
Media believes that holders of outstanding notes who exchange their outstanding
notes for exchange notes may offer for resale, resell and otherwise transfer
such exchange notes without compliance with the registration and prospectus
delivery provisions of the Securities Act. This would not apply, however, to any
holder that is a broker-dealer that acquired outstanding notes as a result of
market-making activities or other trading activities or directly from
Susquehanna Media for resale under an available exemption under the Securities
Act. Also, resale would only be permitted for exchange notes that are acquired
in the ordinary course of a holder's business, where such holder has no
arrangement or understanding with any person to participate in the distribution
of such exchange notes and such holder is not an "affiliate" of Susquehanna
Media. The staff of the SEC has not considered our exchange offer in the context
of a no-action letter, and there can be no assurance that the staff of the SEC
would make a
28
<PAGE> 34
similar determination with respect to our exchange offer. Each broker-dealer
that receives exchange notes for its own account in exchange for outstanding
notes under the exchange offer, where such outstanding notes were acquired by
such broker-dealer as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such exchange notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Except as otherwise provided, tenders of outstanding notes may be withdrawn
at any time prior to the expiration date of the exchange offer. In order for a
withdrawal to be effective, such withdrawal must be in writing and timely
received by the exchange agent at its address set forth under "-- Exchange
Agent" prior to the expiration date. Any such notice of withdrawal must specify
the name of the person who tendered the outstanding notes to be withdrawn, the
principal amount of outstanding notes to be withdrawn, and (if certificates for
such outstanding notes have been tendered) the name of the registered holder of
the outstanding notes as set forth on the outstanding notes, if different from
that of the person who tendered such outstanding notes. If certificates for
outstanding notes have been delivered or otherwise identified to the exchange
agent, the notice of withdrawal must specify the serial numbers on the
particular certificates for the outstanding notes to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of outstanding notes tendered for the account of
an Eligible Institution. If outstanding notes have been tendered pursuant to the
procedures for book-entry transfer set forth in "-- Procedures for Tendering
Outstanding Notes," the notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawal of outstanding notes and
must otherwise comply with the procedures of DTC. Withdrawals of tenders of
outstanding notes may not be rescinded. Outstanding notes properly withdrawn
will not be deemed validly tendered for purposes of the exchange offer, but may
be retendered at any subsequent time prior to the expiration date of the
exchange offer by following any of the procedures described above under
"-- Procedures for Tendering Outstanding Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by Susquehanna Media, in
its sole discretion, which determination shall be final and binding on all
parties. None of Susquehanna Media, any affiliates of Susquehanna Media, the
exchange agent or any other person shall be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. Any outstanding
notes which have been tendered but which are withdrawn will be returned to the
holder promptly after withdrawal.
INTEREST ON THE EXCHANGE NOTES
Interest on the exchange notes will be payable every six months on May 15
and November 15 of each year at a rate of 8 1/2% per annum, commencing November
15, 1999. The exchange notes will mature on May 15, 2009.
CONDITIONS TO THE EXCHANGE OFFER
If any of the following conditions has occurred or exists or has not been
satisfied prior to the expiration date, Susquehanna Media will not be required
to accept for exchange any outstanding notes and will not be required to issue
exchange notes in exchange for any outstanding notes. In addition, Susquehanna
Media may, at any time and from time to time, terminate or amend the exchange
offer, whether or not any outstanding notes have already been accepted for
exchange, or may waive any conditions to or amend the exchange offer.
29
<PAGE> 35
- A change in the current interpretation by the staff of the SEC that
permits resales of exchange notes as described above under "-- Resales
of Exchange Notes";
- The institution or threat of an action or proceeding in any court or
by or before any governmental agency or body with respect to the
exchange offer that, in Susquehanna Media's judgment, would reasonably
be expected to impair the ability of Susquehanna Media to proceed with
the exchange offer;
- The adoption or enactment of any law, statute, rule or regulation
that, in Susquehanna Media's judgment, would reasonably be expected to
impair the ability of Susquehanna Media to proceed with the exchange
offer;
- Any change or development involving a prospective change in the
business or financial affairs of Susquehanna Media that Susquehanna
Media believes might materially impair its ability to proceed with the
exchange offer.
If Susquehanna Media determines in its sole and absolute discretion that
any of the foregoing events or conditions has occurred or exists or has not been
satisfied at any time prior to the expiration date, Susquehanna Media may,
subject to applicable law, terminate the exchange offer, whether or not any
outstanding notes have already been accepted for exchange, or may waive any such
condition or otherwise amend the terms of the exchange offer in any respect. If
such waiver or amendment constitutes a material change to the exchange offer,
Susquehanna Media will promptly disclose such waiver or amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
outstanding notes. In this case, Susquehanna Media will extend the exchange
offer to the extent required by Rule 14e-1 under the Exchange Act.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of outstanding notes for exchange notes pursuant to the
exchange offer will not be considered a taxable exchange for U.S. federal income
tax purposes because the exchange notes will not differ materially in kind or
extent from the outstanding notes and because the exchange will occur by
operation of the terms of the outstanding notes. Accordingly, such exchange will
have no U.S. federal income tax consequences to holders of outstanding notes. A
holder's adjusted tax basis and holding period in an exchange note will be the
same as such holder's adjusted tax basis and holding period, respectively, in
the outstanding notes exchange therefor. All references to Notes under the
heading "Certain U.S. Federal Income Tax Considerations" in this prospectus
apply equally to exchange notes as to outstanding notes.
Holders considering the exchange of outstanding notes for exchange notes
should consult their own tax advisors concerning the U.S. federal income tax
consequences in light of their particular situations, as well as any
consequences arising under state, local or foreign income tax or other tax law.
EXCHANGE AGENT
Chase Manhattan Trust Company, National Association has been appointed as
the exchange agent for the exchange offer. Delivery of the letters of
transmittal and any other required documents,
30
<PAGE> 36
questions, requests for assistance, and requests for additional copies of this
prospectus or of the letter of transmittal should be directed to the exchange
agent as follows:
By Mail
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
1650 Market Street
One Liberty Place, Suite 5210
Philadelphia, PA 19103
Attention: Joseph C. Progar
By Facsimile
(215) 972-8372
Attention: Joseph C. Progar
Confirm by telephone: (215) 988-1317
DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by Susquehanna Media. The
principal solicitation is being made by mail. Additional solicitation may be
made personally or by telephone or other means by officers, directors or
employees of Susquehanna Media.
Susquehanna Media has not retained any dealer-manager or similar agent in
connection with the exchange offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the exchange offer. Susquehanna
Media has agreed to 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. Susquehanna Media will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus and related documents
to the beneficial owners of outstanding notes, and in handling or tendering for
their customers.
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that if
exchange notes are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the outstanding notes tendered, or if
a transfer tax is imposed for any reason other than the exchange of outstanding
notes in connection with the exchange offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such transfer tax or exemption therefrom is not submitted with the letter of
transmittal, the amount of such transfer tax will be billed directly to such
tendering holder.
31
<PAGE> 37
USE OF PROCEEDS
We are making the exchange offer to satisfy our obligation under the
registration rights agreement we entered into with the initial purchasers when
we first issued the outstanding notes. We will not receive any cash proceeds
from the issuance of the exchange notes. In consideration for issuing the
exchange notes, we will receive an equal principal amount of outstanding notes.
The outstanding notes surrendered in exchange for the exchange notes will be
retired and canceled. The proceeds from the offering of the outstanding notes,
together with borrowings under our new senior credit facility, were used to
repay in full our old senior credit facility and to make a loan of $116.9
million loan to Susquehanna Pfaltzgraff to fund its employee stock ownership
plan.
For a description of the new senior credit facility, see "Description of
Certain Indebtedness."
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999 and
as adjusted to give effect to the issuance and sale of the outstanding notes,
the closing of the new senior credit facility, the repayment of the old senior
credit facility, the prepayment of the senior notes, and the $116.9 million loan
to Susquehanna Pfaltzgraff to fund its ESOP. The following information should be
read in conjunction with the consolidated financial statements and related notes
thereto, the unaudited as adjusted financial data and related notes and the
other financial information contained elsewhere in this prospectus. See
"Unaudited Consolidated As Adjusted Financial Data," "Selected Historical
Consolidated Financial and Operating Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities:
Old senior credit facility................................ $251,100 $ --
New senior credit facility(1)............................. -- 275,665
Senior notes(2)........................................... 46,500 --
Notes offered hereby...................................... -- 150,000
Other..................................................... 164 164
-------- --------
Total long-term debt.............................. 297,764 425,829
Total stockholders' equity (deficit)(3)..................... 553 (2,614)
-------- --------
Total capitalization.............................. $298,317 $423,215
======== ========
</TABLE>
- ---------------
(1) The new senior credit facility provides for borrowings up to an aggregate of
$450 million. On an as adjusted basis, as of March 31, 1999, the Company
would have had $174.3 million of borrowing availability under the new senior
credit facility.
(2) The senior notes were prepaid on April 16, 1999 with borrowings under the
old senior credit facility.
(3) As adjusted reflects the write-off of the deferred financing fees and
recognition of prepayment premium related to the repayments of the senior
notes and the old senior credit facility, net of income taxes.
32
<PAGE> 38
UNAUDITED CONSOLIDATED AS ADJUSTED FINANCIAL DATA
The following unaudited consolidated as adjusted income statement is based
upon our historical financial statements. The unaudited adjustments are based
upon available information and certain assumptions that our management believes
are reasonable. This unaudited as adjusted income statement has been prepared to
illustrate the effects of the issuance and sale of the outstanding notes, the
closing of the new senior credit facility, the repayment of the old senior
credit facility, the prepayment of the senior notes, and the $116.9 million loan
to Susquehanna Pfaltzgraff to fund its ESOP (collectively, the "Transactions")
as if they had occurred on January 1, 1998. The unaudited as adjusted income
statement does not purport to be indicative of what our results of operations
would actually have been had the Transactions been completed on January 1, 1998,
or to project our results of operations for any future period. The as adjusted
financial information and the notes thereto should be read in conjunction with
our historical financial statements and the other financial information included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------
HISTORICAL TRANSACTIONS AS ADJUSTED
---------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................ $223,427 $223,427
Operating and programming expenses.................. 72,903 72,903
Selling, general and administrative expenses........ 76,992 4,923 (1) 81,915
Depreciation and amortization....................... 20,563 20,563
-------- --------
Operating income.................................... 52,969 48,046
Interest expense, net............................... 20,506 9,112 (2) 29,618
Other income........................................ 128 7,011 (3) 7,139
-------- --------
Income before income taxes, minority interests and
extraordinary item................................ 32,591 25,567
Provision for income taxes.......................... 14,446 (2,950)(4) 11,496
-------- --------
Income before minority interests and extraordinary
item.............................................. 18,145 14,071
Minority interests.................................. (4,285) 290 (5) (3,995)
-------- --------
Income before extraordinary item.................... 13,860 10,076
Extraordinary item.................................. -- (3,167)(6) (3,167)
-------- --------
Net income.......................................... $ 13,860 $ 6,909
======== ========
EBITDA(7)........................................... $ 73,866 $ 73,866
======== ========
</TABLE>
- ---------------
(1) Reflects increased benefit expense as a result of participation by our
employees in the ESOP.
(2) Reflects interest expense and amortization of deferred financing costs
associated with borrowings under the new senior credit facility and the
outstanding notes.
(3) Reflects interest earned on loan made to Susquehanna Pfaltzgraff ($116.9
million at 6%) to fund its ESOP.
(4) Reflects the income tax effect of the adjustments.
(5) Reflects the minority interest effect of the adjustments, net of income
taxes.
(6) Reflects the write-off of the deferred financing fees and recognition of
prepayment premium related to the repayments of the senior notes and the old
senior credit facility, net of income taxes.
(7) We define EBITDA as net income before income taxes, extraordinary items,
interest expense, interest income, depreciation and amortization, ESOP
expense, non-cash expenses, minority interest, and any gain or loss on the
disposition of assets. You should not consider EBITDA as an alternative to
operating income or to cash flows from operating activities (as determined
in accordance with generally accepted accounting principles), and EBITDA
should not be construed as an indication of a company's operating
performance, or as a measure of liquidity.
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<PAGE> 39
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
Selected historical financial and operating data is set forth below. The
financial data as of and for the years ended December 31, 1994 through December
31, 1998 is derived from our audited consolidated financial statements. The
financial data as of and for the quarters ended March 31, 1998 and March 31,
1999 is derived from our unaudited consolidated financial statements. Our
audited consolidated financial statements and related notes for the years ended
December 31, 1996, 1997 and 1998 and unaudited consolidated financial statements
and related notes for the quarters ended March 31, 1998 and March 31, 1999 are
included elsewhere in this prospectus. You should read this information and the
accompanying notes in conjunction with the consolidated financial statements and
related notes and the other financial information included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Radio................................. $ 93,967 $100,556 $116,300 $131,438 $151,170 $ 28,742 $ 34,211
Cable................................. 45,010 48,544 55,791 65,122 70,641 16,895 19,188
Other................................. -- -- 85 539 1,616 294 632
-------- -------- -------- -------- -------- -------- --------
Total revenues.......................... 138,977 149,100 172,176 197,099 223,427 45,931 54,031
Operating expenses:
Operating and programming............. 43,570 50,289 57,800 65,754 72,903 15,121 17,975
Selling, general and administrative... 53,727 57,223 63,054 68,891 76,992 16,881 19,961
Depreciation and amortization......... 12,271 11,402 13,217 17,992 20,563 4,942 6,192
-------- -------- -------- -------- -------- -------- --------
Total operating expenses................ 109,568 118,914 134,071 152,637 170,458 36,944 44,128
-------- -------- -------- -------- -------- -------- --------
Operating income........................ 29,409 30,186 38,105 44,462 52,969 8,987 9,903
Interest expense, net................... 11,644 12,111 13,797 18,890 20,506 5,198 4,952
Gain (loss) on sale of assets........... (160) (20) 140 9,451 (206) 0 0
Other income............................ 1,008 1,329 1,177 426 334 53 384
-------- -------- -------- -------- -------- -------- --------
Income before income taxes.............. 18,613 19,384 25,625 35,449 32,591 3,842 5,335
Provision for income taxes.............. 7,911 8,913 11,976 14,751 14,446 1,626 2,272
-------- -------- -------- -------- -------- -------- --------
Income before minority interests........ 10,702 10,471 13,649 20,698 18,145 2,216 3,063
Minority interests...................... (1,567) (1,258) (1,984) (3,254) (4,285) (637) (723)
-------- -------- -------- -------- -------- -------- --------
Net income.............................. $ 9,135 $ 9,213 $ 11,665 $ 17,444 $ 13,860 $ 1,579 $ 2,340
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Radio broadcast cash flow(1)............ $ 28,747 $ 28,837 $ 35,896 $ 40,724 $ 49,659 $ 8,032 $ 10,701
Cable cash flow(2)...................... 21,688 23,011 26,392 32,432 34,952 8,312 9,143
EBITDA:(3)
Radio................................. 23,844 22,997 29,761 34,062 42,553 6,734 9,082
Cable................................. 19,417 20,818 23,975 29,511 31,699 7,551 8,198
Other................................. (573) (898) (1,236) (692) (386) (302) 398
-------- -------- -------- -------- -------- -------- --------
Total EBITDA............................ 42,688 42,917 52,500 62,881 73,866 13,983 17,678
Cash flows related to:
Operating activities.................. 17,729 27,828 21,991 36,347 36,843 7,501 14,902
Investing activities.................. (1,669) (2,469) (81,868) (70,339) (38,842) (8,572) (39,752)
Financing activities.................. (16,060) (25,359) 60,595 33,334 3,941 3,328 24,875
Capital expenditures.................... 11,113 12,899 12,073 22,610 29,592 5,979 6,593
Ratio of earnings to fixed charges(4)... 2.4x 2.3x 2.7x 2.7x 2.3x 1.6x 1.8x
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................ $125,582 $141,902 $218,314 $314,914 $336,391 $315,726 $366,819
Total debt.............................. 135,175 137,450 200,350 265,500 272,776 268,900 297,764
Stockholders' equity (deficit).......... (48,776) (40,814) (30,176) (13,246) (1,861) (11,628) 553
</TABLE>
34
<PAGE> 40
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CABLE OPERATING DATA:
Homes passed............................ 173,674 182,465 215,715 211,808 214,650 214,959 240,435
Basic subscribers....................... 127,972 137,885 159,871 164,186 166,917 166,999 185,514
Basic penetration(5).................... 73.7% 75.6% 74.1% 77.5% 77.8% 77.7% 77.2%
Premium units(6)........................ 72,740 68,701 71,928 72,212 65,327 71,708 71,219
Premium penetration(7).................. 56.8% 49.8% 45.0% 44.0% 39.1% 42.9% 38.4%
Average monthly revenue per basic
subscriber(8)......................... $ 29.93 $ 30.42 $ 31.81 $ 33.49 $ 35.18 $ 34.64 $ 35.72
</TABLE>
- ---------------
(1) We define radio broadcast cash flow as radio EBITDA plus corporate overhead
allocated to our radio operations.
(2) We define cable cash flow as cable EBITDA plus corporate overhead allocated
to our cable operations.
(3) We define EBITDA as net income before income taxes, extraordinary items,
interest expense, interest income, depreciation and amortization, ESOP
expense, non-cash expenses, minority interest, and any gain or loss on the
disposition of assets. You should not consider EBITDA as an alternative to
operating income or to cash flows from operating activities (as determined
in accordance with generally accepted accounting principles), and EBITDA
should not be construed as an indication of a company's operating
performance, or as a measure of liquidity.
(4) The ratio of earnings to fixed charges is expressed as the ratio of income
before income taxes and extraordinary items plus fixed charges (excluding
capitalized interest) to fixed charges. Fixed charges consist of interest
expense, capitalized interest and one-third of rental expense (the portion
deemed representative of the interest factor).
(5) Basic penetration represents basic subscribers as a percentage of homes
passed.
(6) Premium units represents the aggregate number of individual premium services
(e.g., HBO, Cinemax, Showtime) for which customers have subscribed.
(7) Premium penetration represents premium units as a percentage of basic
subscribers.
(8) Average monthly revenue per basic subscriber represents revenues divided by
12 divided by the weighted average number of subscribers for the year.
35
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis should be read in conjunction with
"Selected Historical Consolidated Financial and Operating Data" and the
financial statements of the Company and the notes thereto included elsewhere in
this prospectus. Much of the discussion in this section involves forward-looking
statements. Our actual results may differ significantly from the results
suggested by these forward-looking statements.
OVERVIEW
The Company is a diversified communications company with operations in
radio broadcasting and cable television. The Company is the largest privately
owned radio broadcaster and the 9th largest radio broadcaster overall in the
United States based on revenues. The Company owns and operates 15 FM and 8 AM
stations that serve four of the nation's ten largest radio markets (San
Francisco, Dallas, Houston and Atlanta), as well as three other significant
markets (Cincinnati, Indianapolis and York, Pennsylvania). The Company is also
the 24th largest cable multiple system operator ("MSO") in the United States
with seven cable systems serving approximately 186,000 subscribers.
For the year ended December 31, 1998, the Company had revenues and EBITDA
of $223.4 million and $73.9 million, respectively, with approximately 57% of
EBITDA generated by its radio broadcast operations and 43% by its cable
television operations. For the three months ended March 31, 1999, the Company
had revenues and EBITDA of $54.0 million and $17.7 million, respectively, with
approximately 51% of EBITDA generated by its radio broadcast operations and 46%
by its cable television operations.
The Company also provides Internet access and enhanced services to
residential and business customers under the tradename "BlazeNet." The services
include:
- Internet access via telephone dial-up service or cable modem,
- website creation, hosting and maintenance, and
- local and wide area network design, construction and operation.
Revenues. The principal source of radio broadcasting revenue is the sale
of broadcasting time on the Company's stations for advertising. Radio revenue is
reported net of agency commissions. Sales of advertising are affected by changes
in demand for advertising time by national and local advertisers and by
advertising rates charged by the stations. Radio station advertising rates are
based on a station's ability to attract audiences that match the demographic
groups that advertisers want to reach, the number of stations competing in a
marketplace and economic conditions. Radio stations attempt to maximize revenue
by adjusting advertising rates based upon local market conditions, by
controlling inventory, by creating demand and by increasing audience ratings.
Radio stations sometimes use barter or trade agreements to exchange merchandise
or services for advertising time with advertisers, in lieu of cash. It is the
Company's policy not to preempt advertising paid in cash with advertising paid
in trade. For the years ended December 31, 1996, 1997 and 1998 and the three
months ended March 31, 1998 and 1999, cash advertising revenue was 97%, 98%,
98%, 97% and 98% of broadcasting revenue, respectively. Seasonal revenue
fluctuations are common in the radio broadcasting industry, due primarily to
fluctuations in expenditure levels by local and national advertisers. The
Company's radio revenues are lowest in the first quarter and are relatively
level in the other quarters.
Most cable revenues are derived from monthly subscriber fees for cable
television programming services and from fees incident to the provision of such
services, such as installation fees and fees for
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<PAGE> 42
converter rentals and rentals of remote control devices. Some revenues are
derived from advertising. Since cable is subject to regulation at the federal,
state and local levels, increases in rates charged for regulated services may be
governed by the 1992 Cable Act and the 1996 Telecom Act. Cable revenues are
affected by the timing of subscriber rate increases.
Operating Expenses. Radio operating expenses are comprised of employee
salaries and commissions, depreciation and amortization, programming expenses,
advertising expenses, promotion expenses and selling, general and administrative
expenses. General and administrative expenses include office administration and
other support functions that are handled on a centralized basis.
Cable operating expenses include programming expenses, employee salaries
and benefits, electricity, depreciation, amortization and selling, general and
administrative expenses for accounting and billing services, franchise fees,
office administration expenses and corporate charges.
Depreciation and amortization expense relates to the depreciation of
tangible assets used in the business and the amortization of franchise costs.
EBITDA. EBITDA is net income before income taxes, extraordinary items,
interest expense, interest income, depreciation and amortization, ESOP expense,
non-cash expenses, minority interest and any gain or loss on the disposition of
assets.
RESULTS OF OPERATIONS
The following table summarizes our consolidated historical results of
operations and consolidated historical results of operations as a percentage of
revenues for the quarters ended March 31, 1998 and 1999 and for the years ended
December 31, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
------------------------------------------------ -------------------------------
1996 1997 1998 1998 1999
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Radio...................... $116.3 67.6% $131.4 66.7% $151.2 67.7% $ 28.7 62.5% $ 34.2 63.3%
Cable...................... 55.8 32.4 65.1 33.0 70.6 31.6 16.9 36.8 19.2 35.6
Other...................... 0.1 0.0 0.6 0.3 1.6 0.7 0.3 0.7 0.6 1.1
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total revenue................ 172.2 100.0 197.1 100.0 223.4 100.0 45.9 100.0 54.0 100.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Operating expenses:
Operating and
programming.............. 57.8 33.6 65.7 33.3 72.9 32.6 15.1 32.9 18.0 33.3
Selling, general and
administrative........... 63.1 36.6 68.9 35.0 77.0 34.5 16.9 36.8 19.9 36.9
Depreciation and
amortization............. 13.2 7.7 18.0 9.1 20.6 9.2 4.9 10.7 6.2 11.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total operating expenses..... 134.1 77.9 152.6 77.4 170.5 76.3 36.9 80.4 44.1 81.7
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Operating income............. $ 38.1 22.1% $ 44.5 22.6% $ 52.9 23.7% $ 9.0 19.6% $ 9.9 18.3%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
EBITDA....................... $ 52.5 30.5% $ 62.9 31.9% $ 73.9 33.1% $ 14.0 30.5% $ 17.7 32.8%
</TABLE>
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998
Revenues. Revenues increased $8.1 million, or 18%, from 1998 to 1999.
Radio revenues increased $5.5 million, or 19%, from 1998 to 1999. A majority of
this increase was due to higher advertising rates for advertising time at
existing radio stations. Cable revenues increased $2.3 million, or 14%, from
1998 to 1999. The acquisition of Hanover Cable TV and internal subscriber growth
were primarily responsible for cable revenue growth.
Operating Expenses. Operating expenses increased $7.2 million, or 19%,
from 1998 to 1999. As a percentage of revenues, operating expenses were 80% in
1998 and 82% in 1999. Radio operating expenses increased $3.2 million, or 15%,
from 1998 to 1999. This increase was due to additional programming format
research, advertising and promotion for stations that adjusted their programming
37
<PAGE> 43
content, increased salaries for key personnel, and consolidation of station
office/studio space. As a percentage of broadcasting revenues, radio operating
expenses declined from 72% in 1998 to 70% in 1999. Cable operating expenses
increased $2.5 million, or 20%, from 1998 to 1999. The acquisition of Hanover
Cable TV and increased programming costs were primarily responsible for higher
operating expenses. As a percentage of cable revenues, cable operating expenses
were 74% in 1998 and 79% in 1999. Increased depreciation from the Hanover Cable
TV acquisition and increased programming costs were responsible for the
increase.
Operating Income. Operating income increased $0.9 million, or 10%, from
1998 to 1999. As a percentage of revenues, operating income decreased from 20%
in 1998 to 18% in 1999. Radio operating income grew $1.8 million, or 38%, from
1998 to 1999. This increase was due to internal revenue growth from established
stations and revenue from more recently acquired stations growing more rapidly
than operating expenses. Cable operating income decreased $0.2 million, or 5%,
from 1998 to 1999. This decrease was primarily due to Hanover Cable TV's
relatively low basic rate and low premium penetration coupled with increased
depreciation and amortization from the acquisition.
EBITDA. EBITDA increased $3.7 million, or 26%, from 1998 to 1999. EBITDA
as a percentage of revenues increased from 30% in 1998 to 33% in 1999. Radio
EBITDA increased $2.3 million, or 35%, from 1998 to 1999. Cable EBITDA increased
$0.6 million, or 9%, from 1998 to 1999. Radio EBITDA increased for the same
reasons that operating income increased. Cable EBITDA increased proportionately
less than revenues due to increased operating expenses discussed above.
Net Interest Expense. Net interest expense decreased $0.2 million, or 5%,
from 1998 to 1999. This decrease was due to the capitalization of interest on
major cable rebuild projects. Capital expenditures were also funded in part from
cash flow from operations.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues. Revenues increased $26.3 million, or 13%, from 1997 to 1998.
Radio revenues increased $19.7 million, or 15%, from 1997 to 1998. A majority of
this increase was due to higher advertising rates for advertising time at
existing radio stations. For stations operated for a full 12 months in both 1997
and 1998, revenues increased $11.9 million, or 10%, for the year. The balance of
the growth was attributable to a full year of operation for six radio stations
acquired in 1997 in San Francisco, Indianapolis, Cincinnati and Anniston,
Alabama. Cable revenues increased $5.5 million, or 9%, from 1997 to 1998.
Subscriber rate increases were primarily responsible for revenue growth.
Operating Expenses. Operating expenses increased $17.9 million, or 12%,
from 1997 to 1998. As a percentage of revenues, operating expenses declined from
77% in 1997 to 76% in 1998 primarily as a result of slower growth in operating
and programming expenses and selling, general and administrative expenses
relative to the growth in revenues. Radio operating expenses increased $13.3
million, or 13%, from 1997 to 1998. The increase was largely attributable to a
full year of operation for the six radio stations that were acquired in 1997.
Other factors included increases in expenses related to growing non-air revenue
activities, increased programming salaries for key talent and consolidation of
station office/studio space. As a percentage of broadcasting revenues, radio
operating expenses declined from 79% in 1997 to 77% in 1998. Cable's operating
expenses increased $3.7 million, or 8%, from 1997 to 1998. Increased programming
costs were primarily responsible for higher operating expenses. As a percentage
of cable revenues, cable operating expenses were 74% in both 1997 and 1998.
Operating Income. Operating income increased $8.4 million, or 19%, from
1997 to 1998. As a percentage of revenues, operating income increased from 23%
in 1997 to 24% in 1998. Radio
38
<PAGE> 44
operating income grew $6.4 million, or 23%, from 1997 to 1998. This increase was
due to internal revenue growth from existing stations and revenue from acquired
stations growing more rapidly than operating expenses. Cable operating income
increased $1.8 million, or 11%, from 1997 to 1998. This increase was primarily
due to revenue growth generated by rate increases and the addition of new
subscribers.
EBITDA. EBITDA increased $11.0 million, or 18%, from 1997 to 1998. EBITDA
as a percentage of revenues increased from 32% in 1997 to 33% in 1998. Radio
EBITDA increased $8.5 million, or 25%, from 1997 to 1998. Cable EBITDA increased
$2.2 million, or 7%, between 1997 and 1998. Radio EBITDA and cable EBITDA
increased for the same reasons that operating income increased.
Net Interest Expense. Net interest expense increased $1.6 million, or 9%,
between 1997 and 1998. This increase was due to the incurrence of additional
debt to acquire radio stations and fund cable system capital expenditures. These
acquisitions and capital expenditures were also funded in part from cash flow
from operations.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues. Revenues increased $24.9 million, or 15%, from 1996 to 1997.
Radio revenues grew $15.1 million, or 13%, from 1996 to 1997. Most of this
increase was due to higher rates for advertising time at existing radio
stations. Revenues increased $6.8 million, or 6%, at stations operated for a
full 12 months in both 1996 and 1997. The remaining growth was attributable to
six stations acquired in 1997 in San Francisco, Indianapolis, Cincinnati, and
Anniston, Alabama. Cable revenues increased $9.3 million, or 17%, from 1996 to
1997. A majority of cable's revenue growth was due to a full year of revenue
from the Williamsport, Pennsylvania system, which, along with some adjacent
subscribers, was acquired in 1996. The balance of this increase was attributable
to basic rate increases and subscriber growth in existing systems.
Operating Expenses. Operating expenses increased $18.5 million, or 14%,
from 1996 to 1997. As a percentage of revenues, operating expenses declined from
78% in 1996 to 77% in 1997 primarily as a result of slower growth in selling,
general and administrative expenses relative to the growth in revenues. As a
percentage of revenues, selling, general and administrative expenses declined
from 37% in 1996 to 35% in 1997. This decline was partially offset by an
increase in depreciation and amortization expense due primarily to increased
capital expenditures. Radio operating expenses increased $12.9 million, or 14%,
between 1996 and 1997. Higher radio operating expenses were due primarily to
station acquisitions made in 1997. As a percentage of broadcasting revenues,
radio operating expenses increased from 78% in 1996 to 79% in 1997. Cable's
operating expenses increased $6.0 million, or 14%, from 1996 to 1997. Increases
were due to a full year of operations from systems acquired during 1996 and
increased programming costs. As a percentage of cable revenues, cable operating
expenses declined from 76% in 1996 to 74% in 1997.
Operating Income. Operating income increased $6.4 million, or 17%, from
1996 to 1997. Operating income as a percentage of sales increased from 22% in
1996 to 23% in 1997. Radio operating income increased $2.3 million, or 9%, from
1997 to 1996. This increase was due to internal revenue growth from existing
stations and revenue from acquired stations growing more rapidly than operating
expenses. Cable operating income increased $3.3 million, or 25%, from 1996 to
1997. This increase was due to revenue growth generated primarily by rate
increases and the addition of new subscribers. In addition, the Williamsport
system generated higher operating income per subscriber than the system for
which it was exchanged.
EBITDA. EBITDA increased $10.4 million, or 20%, from 1996 to 1997. EBITDA
as a percentage of revenues increased from 30% in 1996 to 32% in 1997. Radio
EBITDA increased $4.3
39
<PAGE> 45
million, or 15%, between 1996 and 1997. Cable EBITDA increased $5.5 million, or
23%, between 1996 and 1997. Radio EBITDA and cable EBITDA increased for the same
reasons that operating income increased.
Net Interest Expense. Net interest expense increased $5.1 million, or 37%,
between 1996 and 1997. This increase was due to the incurrence of additional
debt to acquire radio stations and the Williamsport cable system and to rebuild
the York cable system. These acquisitions and rebuild were also funded in part
from cash flow from operations.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity have been cash
flow from operations and borrowings under the Company's senior credit
facilities. The Company's future needs for liquidity arise primarily from
capital expenditures, potential acquisitions of radio stations and cable
systems, potential repurchases of the Company's common stock, and interest
payable on the notes and the new senior credit facility.
Net cash provided by operating activities was $14.9 million and $7.5
million for the three months ended March 31, 1999 and 1998, respectively, and
$36.8 million, $36.3 million and $22.0 million for the years ended December 31,
1998, 1997 and 1996, respectively. The Company's net cash provided by operating
activities was generated primarily by net income, with depreciation and
amortization added back.
The Company's acquisitions of radio stations and cable systems and capital
expenditures have historically been financed with cash flow from operations and
borrowings under its senior credit facility. Capital expenditures, excluding
acquisitions, were $6.6 million and $6.0 million for the three months ended
March 31, 1999 and 1998, respectively, and $12.1 million, $22.6 million and
$29.6 million for the years ended December 31, 1998, 1997 and 1996,
respectively. Capital expenditures over this period were used primarily to
upgrade and maintain the Company's cable systems. The Company expects to make
capital expenditures of $31.3 million in 1999, primarily to continue upgrading
its current cable systems.
On May 12, 1999, the Company sold $150 million of 8.5% Senior Subordinated
Notes due 2009 at 99.75% of their face value. Proceeds to the Company were
$145.5 million.
On May 12, 1999, the Company also entered into a new senior credit facility
arranged by First Union Capital Markets Corp. The new senior credit facility
consists of a $250 million revolver, a $100 million term loan A, and a $100
million term loan B, all collateralized by a pledge of all material assets
(excluding real property) and voting common stock of the Company. The credit
agreement governing the new senior credit facility requires the Company to
maintain certain financial leverage and interest coverage ratios. See
"Description of Certain Indebtedness." If the offering of the notes, the
refinancing of the Company's old senior credit facility, the prepayment of the
senior notes, and the loan to Susquehanna Pfaltzgraff to fund its ESOP had been
consummated at March 31, 1999, $275.7 million would have been outstanding under
the new senior credit facility and the borrowing availability would have been
approximately $174.3 million. The refinancing of the Company's old senior credit
facility and prepayment of the senior notes will result in the recognition of an
extraordinary loss of $3.2 million (net of income taxes) in the second quarter
of 1999.
The Company believes that funds generated from operations and the borrowing
availability under the new senior credit facility will be sufficient to finance
its current operations, cash obligations in connection with potential
repurchases of the Company's common stock and planned capital expenditures. From
time to time, the Company evaluates potential acquisitions of radio stations and
cable television systems. In connection with future acquisition opportunities,
the Company may incur
40
<PAGE> 46
additional debt or issue additional equity or debt securities depending on
market conditions and other factors.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," is effective for fiscal years
beginning after June 15, 1999. The Company uses derivative financial instruments
solely to limit interest rate exposure on its variable rate debt. Derivative
financial instruments are not used for trading purposes. Two interest rate
collar agreements with an aggregate notional amount of $50.0 million were
effective at March 31, 1999. The agreements limit the Company's interest rate
exposure to rates between 7.5% and 8.0%, plus an applicable margin. No material
expense or income has been recognized for these derivative financial
instruments.
IMPACT OF YEAR 2000 ISSUES
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00." This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company recognizes the need to ensure that its operations will not be
adversely impacted by Year 2000 software failures and is in the process of
preparing for the Year 2000. The Company has established a Year 2000 Task Force
to manage an overall Year 2000 assessment, remediation, testing and contingency
planning project. The Year 2000 Task Force has developed and is implementing a
Year 2000 strategic plan. The Company's goal is to minimize the potential
effects of the Year 2000 problem on customers and business processes.
Our internal information technology, product delivery and support systems,
as well as our key suppliers, vendors and customers are included in the scope of
the investigation. The Company uses purchased software programs and systems for
a variety of functions including accounts payable and accounts receivable
accounting, inventory control and audio delivery. The Company has received Year
2000 compliance certificates from the vendors of these programs.
The Company has completed an inventory of its mission-critical systems and
has found no issues of significant consequence. The next steps are to complete:
- an inventory of all remaining systems by June 30, 1999,
- an impact assessment by July 15, 1999,
- remediation or replacement of material non-compliant system components by
August 31, 1999, and
- replacement of all computers and other equipment with embedded date chips
or processors having a material impact on operations by August 31, 1999.
Costs associated with ensuring that the Company's existing systems are Year
2000 compliant and replacing certain existing systems are currently expected to
be approximately $700,000 of which approximately $185,000 has been incurred to
date. These cost estimates are subject to change based on further analysis, and
any change in such costs may be material. The Company believes that the risk of
non-compliant systems in the Company is not high and that its remediation and
replacement program will adequately address Year 2000 issues internal to the
Company. The Company believes that the Year 2000 issue will not pose significant
operational problems for the Company's computer systems, and, therefore, will
not have a material impact on the Company's operations. The Company has not,
however, finished assessing the Year 2000 readiness of its computer systems. As
a result,
41
<PAGE> 47
there can be no assurance that all of the Company's systems will be Year 2000
compliant or that the Company will not be negatively affected thereby.
The ability of third parties with whom the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
There can be no assurance, therefore, that the failure of such third parties to
adequately address their Year 2000 issues will not have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company intends, under its Year 2000 strategic plan, to develop contingency
plans to mitigate any possible disruption in business that may result if certain
of the Company's systems or the systems of third parties are not Year 2000
compliant. The Company expects to complete its final Year 2000 implementation
review by November 30, 1999.
Estimates and conclusions related to our Year 2000 compliance program
contain forward-looking statements and are based on management's best estimates
of future events.
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<PAGE> 48
BUSINESS
COMPANY OVERVIEW
The Company is a diversified communications company with operations in
radio broadcasting and cable television. The Company is the largest privately
owned radio broadcaster and the 9th largest radio broadcaster overall in the
United States based on revenues. The Company owns and operates 15 FM and 8 AM
stations that serve four of the nation's ten largest radio markets (San
Francisco, Dallas, Houston and Atlanta), as well as three other significant
markets (Cincinnati, Indianapolis and York, Pennsylvania). The Company is also
the 24th largest cable multiple system operator ("MSO") in the United States
with seven cable systems serving approximately 186,000 subscribers. For the year
ended December 31, 1998, the Company had revenues and EBITDA of $223.4 million
and $73.9 million, respectively, with approximately 57% of EBITDA generated by
its radio broadcast operations and 43% by its cable television operations.
The Company also provides Internet access and enhanced services to
residential and business customers under the tradename "BlazeNet." The services
include (i) Internet access via telephone dial-up service or cable modem, (ii)
website creation, hosting and maintenance, and (iii) local and wide area network
design, construction and operation.
Susquehanna Media was incorporated in 1993 as an intermediate cable and
radio broadcasting holding company subsidiary of Susquehanna Pfaltzgraff.
Susquehanna Pfaltzgraff was founded in 1941 by Louis J. Appell, Sr. to own and
operate WSBA-AM, the Company's flagship radio station in York, Pennsylvania. In
1954, The Pfaltzgraff Co., a leading manufacturer of ceramic dinnerware, was
merged into Susquehanna Pfaltzgraff. The Pfaltzgraff Co. had been owned by the
family of Mrs. Louis J. Appell, Sr. The Company entered the cable television
business in 1965 when it was awarded the franchise to operate in York,
Pennsylvania.
RADIO BROADCASTING
The Company's radio broadcasting business focuses on acquiring, developing
and operating radio stations in the 40 largest markets in the United States. The
Company has over 50 years of experience operating radio properties and currently
owns stations serving the demographically attractive and fast-growing San
Francisco, Dallas, Houston and Atlanta markets, four of the top ten radio
markets in the United States. The Company's radio stations offer a broad range
of programming formats, such as country, top 40, adult contemporary, oldies,
rock, and sports and talk radio, each targeted to a specific demographic
audience within a market. The Company believes that its large market radio
presence and variety of programming formats makes the Company attractive to a
diverse base of local and national advertisers and enables it to leverage its
ratings into higher market revenue share.
The Company's business strategy for radio includes the following key
elements intended to establish leadership positions in the markets it serves and
to enhance its operating and financial performance:
- - Focus on large markets. The Company generates approximately 73% of its radio
revenue from the ten largest markets in the United States and more than 90%
from top 40 markets and intends to continue focusing on large markets. The 40
largest markets in the United States account for approximately one-half of
overall market revenue and experienced revenue growth of 10.3% annually from
1993 through 1997, compared to 8.4% growth in other measured markets over the
same period. The Company believes that advertisers are attracted to large
markets because of their population size, attractive demographic profile, and
the ability to target more narrowly certain demographic groups. The Company
also believes that it is more efficient for its management to focus on
stations that are capable of producing significant revenue as compared to
stations in smaller markets with less revenue potential.
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<PAGE> 49
- - Employ targeted programming and market research. The Company seeks to
maximize station operating performance through extensive market research,
innovative programming, and distinctive marketing campaigns. The Company
believes that, collectively, these initiatives establish strong listener
loyalty and steadily increase audience share. The Company was one of the first
radio broadcasting companies to utilize market research to target specific
demographic groups. The Company believes that knowledge of local markets and
innovative programming targeting specific demographic groups are the most
important determinants of individual radio station success. The Company also
believes that its commitment to high-quality, locally originated programming
provides it with a competitive advantage and increases each of the Company's
market audience shares.
- - Emphasize sales and marketing. The Company places great emphasis on being
familiar with its listening audience and their lifestyle characteristics in
order to match effectively the audience's demographics with the specific
target audiences of the Company's advertisers. This strategy enables the
Company to:
- partner with its advertisers to reach efficiently and effectively their
targeted audiences,
- attract more advertising revenues, and
- build audience loyalty.
Supporting this strategy, the Company offers a consumer card program, which
provides listeners with discounts and promotional offers at participating
businesses. The program has enabled the Company to build a proprietary database
of more than 1.2 million of the Company's listeners. The Company uses this
database to increase the effectiveness of its programming and to enable
advertisers to target more effectively their desired audiences. The Company also
seeks to maximize sources of non-traditional, non-spot revenue that promote the
station's brand awareness, such as sponsoring local events and creating
newsletters and magazines.
- - Decentralize management. The Company believes that radio is primarily a local
business and that much of its success results from the efforts of regional and
local management and staff. Accordingly, the Company decentralizes much of its
operations to these levels. Each of the Company's regional and local station
groups is managed by a team of experienced broadcasters who understand the
musical tastes, demographics and competitive opportunities of the particular
market. The Company's regional and local managers are responsible for
preparing annual operating budgets and have an average of 16 years with the
Company. The Company's corporate management approves each station group's
annual operating budget and imposes strict financial reporting requirements to
track station performance. Members of corporate management are responsible for
long-range planning, establishing Company policies and serving as a resource
to local management and average more than 26 years with the Company.
- - Selectively pursue strategic acquisitions. In addition to continuing rapid
internal growth, the Company intends to pursue acquisition opportunities that
would allow the Company to continue to compete more effectively for
advertising revenues and to increase its growth rate of revenues and cash
flow. The Company's acquisition strategy is selectively to acquire radio
stations in its existing markets and in new, demographically attractive,
fast-growing markets where the Company believes that it can effectively apply
its operating strategies. The Company will primarily target stations in the
top 40 markets of the United States.
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<PAGE> 50
THE RADIO BROADCASTING INDUSTRY
The radio broadcasting industry is characterized by the following key
factors:
Significant growth. The sale of advertising time to local and national
spot advertisers and to national network advertisers is the primary source of
revenues for radio stations. The growth in total radio advertising revenue tends
to be fairly stable, growing over the last 25 years at an 8.9% compound annual
rate, compared to a gross domestic product ("GDP") growth rate of 7.8%. With the
exception of 1991, when total radio advertising revenue fell by approximately
3.1% compared to the prior year, advertising revenue has increased more rapidly
than both inflation and the GDP in each of the past 15 years. More than 80% of
radio advertising revenue is generated by local advertising, with the balance
generated by national advertising. In addition, radio's percentage of local
advertising revenues has increased steadily from 14.7% in 1985 to 18.2% today.
The Company believes that local advertising revenue is more predictable and
resistant to ad cycles and economic downturns than national advertising revenue.
Broad market coverage. According to the Radio Advertising Bureau's Radio
Marketing Guide and Fact Book for Advertisers 1997, each week radio reaches
approximately 96% of all Americans over the age of 12. More than one-half of all
radio listening occurs outside the home, and three out of four adults are
reached by car radio each week. The average listener spends approximately three
hours and 20 minutes per day listening to radio. The highest portion of radio
listening occurs during the morning, particularly between the time a listener
wakes up and the time he reaches work. This "morning drive time" period reaches
more than 80% of people over 12 years of age, and as a result, radio advertising
sold during this period achieves premium advertising rates.
Low cost advertising. The cost to reach a thousand listeners, or
impressions, is the benchmark for comparing different media with different reach
and frequency aspects. Radio is recognized by the advertising community for its
ability to generate a high frequency of commercial impressions cost efficiently.
This is caused by its low cost per minute, or low cost per rating point.
Stations are generally classified by their on-air format, such as country, adult
contemporary, oldies and news/talk. A station's format and style of presentation
enables it to efficiently target certain demographics. By capturing a specific
share of a market's radio listening audience, with particular concentration in a
targeted demographic, a station is able to market its broadcasting time to
enable advertisers to maximize their reach for each dollar of advertising
expenditures.
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<PAGE> 51
RADIO PROPERTIES
Susquehanna Radio operates radio stations in San Francisco, Dallas, Houston
and Atlanta, all of which are top ten markets, as well as radio stations in
Cincinnati, Indianapolis and York, Pennsylvania. The following table sets forth
certain information regarding the Company's radio stations and their respective
markets:
<TABLE>
<CAPTION>
STATION
AUDIENCE
STATION RANK SHARE IN COMBINED COMBINED
MARKET STATION PRIMARY IN PRIMARY PRIMARY MARKET MARKET
RANK BY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC REVENUE REVENUE
MARKET AND STATIONS(1) REVENUE(2) FORMAT ACQUIRED TARGET TARGET(3) TARGET(3) SHARE(4) RANK(5)
- ---------------------- ---------- ------------ --------- ----------- ------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
San Francisco, CA......... 4 19.5% 3
KFOG/KFFG-FM(6)......... Adult Album 1983/1995 M 25-49 1 5.4%
Alternative
KNBR-AM................. Sports/Talk 1989 M 25-54 1 5.3
KSAN-FM................. Classic Rock 1997 M 25-44 17 2.3
KTCT-AM................. Sports/Talk 1997 M 18-44 23 1.2
Dallas/Ft. Worth, TX...... 5 11.4 4
KTCK/KTBK-AM(6)......... Sports/Talk 1996 M 25-44 3 6.5
KPLX-FM................. Country 1974 M 25-54 7 3.9
KLIF/KKLF-AM(6)......... Sports/Talk 1980/1998 M 25-54 20 1.7
KKZN/KXZN-FM(6)......... Adult Album 1996/1998 M 25-44 16 2.2
Alternative
Houston, TX............... 8 6.6 6
KRBE-FM................. Contemporary 1986 W 18-44 1 9.1
Hit Radio
Atlanta, GA............... 9 6.5 6
WNNX-FM................. Modern Rock 1974 M 18-34 1 16.6
WHMA-FM................. Country 1997 -- -- --
(Anniston, AL)(7)
WHMA-AM................. Sports/Talk 1997 -- -- --
(Anniston, AL)(7)
Cincinnati, OH............ 19 9.5 4
WRRM-FM................. Adult 1972 W 35-54 1 12.6
Contemporary
WVAE-FM(8).............. New Adult 1997 W 35-54 5 5.9
Contemporary
Indianapolis, IN.......... 30 19.8 3
WFMS-FM................. Country 1972 W 35-54 1 13.3
WGLD-FM................. Oldies 1993 A 35-54 3 8.8
WGRL-FM................. Young 1997 W 18-34 12 2.5
Country
York, PA.................. 101 56.1 1
WARM-FM................. Adult 1962 W 25-54 1 15.7
Contemporary
WSBA-AM................. Talk 1942 M 35-64 4 6.1
</TABLE>
- ---------------
(1) Excludes WABZ-FM in Albemarle, North Carolina, which is owned by the Company
but operated by a third party under a local marketing agreement.
(2) Ranked according to market revenue size of the primary radio market served
by the station among all radio markets in the United States, as reported in
Duncan's Radio Market Guide.
(3) Station rank and audience share are based upon a station's share of its
primary demographic target for the period Monday through Sunday, 6 a.m. to
12 midnight by market, as reported by Arbitron in Winter 1999.
(4) Represents the Company's share of the total radio advertising revenue from
the market, as reported in Duncan's Radio Market Guide.
(5) Represents the Company's rank in the market as measured by the amount of its
radio advertising revenue from the market, as reported in Duncan's Radio
Market Guide.
(6) These stations are simulcast and have been combined for market rank and
ratings.
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<PAGE> 52
(7) Both of these stations are located in Anniston, Alabama and do not currently
broadcast in the Atlanta market. The Company has pending before the FCC a
petition proposing to move WHMA-FM to the Atlanta market.
(8) This station was converted to a rythmic oldies format with call letters WMOJ
on April 30, 1999.
MARKET OVERVIEWS
The Company owns and operates radio stations in the following markets:
San Francisco. San Francisco is the 4th largest radio market in the United
States, and, with the highest per capita income in the United States, is one of
the most attractive. San Francisco's radio advertising revenue in 1997 was
$255.0 million and grew at a compound annual rate of 8.8% from 1992 through
1997. The Company has operated in the San Francisco market since 1983 and
currently owns three FM and two AM stations in the area. The Company owns
KNBR-AM, one of the original 50,000 watt, clear channel AM licenses, which
provides clear reception throughout northern California and inland as far as
eastern Nevada. The station is currently programmed with a sports talk format
and has the broadcast rights to the San Francisco Giants and the Golden State
Warriors. KFOG/KFFG-FM and KNBR-AM are both ranked 1st in their respective
target demographics.
Dallas/Ft. Worth. Dallas/Ft. Worth is the 5th largest radio market in the
United States and is expected to lead the nation in employment and population
gains through 2005. Dallas/Ft. Worth's radio advertising revenue in 1997 was
$249.5 million and grew at a compound annual rate of 12.8% from 1992 through
1997. The Company has been operating in the Dallas/Ft. Worth market since 1974
and currently owns three FM and four AM stations in the area. KTCK-AM and
KTBK-AM, which are programmed with a sports talk format and are simulcast, are
ranked 3rd in the market among males 25 to 44 and have the broadcast rights to
the Dallas Mavericks. The Company re-launched KPLX-FM as "The Wolf" in the
summer of 1998 with a regional country music format. Since this format change,
the station's ranking has increased from 13th to 7th in its target demographic.
Houston. Houston is the 8th largest radio market and 4th most populous
city in the United States. Houston's radio advertising revenue in 1997 was
$224.0 million and grew at a compound annual rate of 11.6% from 1992 through
1997. The Company entered the Houston market when it acquired KRBE-FM in 1986,
which serves the Houston market with a top 40 radio format. KRBE-FM has been a
dominant radio station in Houston since the 1970s and is ranked 1st among women
18 to 44 and 3rd overall.
Atlanta. Atlanta is the 9th largest radio market in the United States and
the commercial center of the southeast. Atlanta's radio advertising revenue in
1997 was $222.0 million and grew at a compound annual rate of 16.0% from 1992
through 1997. Atlanta represents one of the most desirable radio broadcast
markets in the country, with only 16 FM and 23 total radio stations serving the
market. The Company entered the Atlanta market in 1974 with the acquisition of
WNNX-FM, which is programmed with modern rock and ranked 1st among men 18 to 34.
The Company recently acquired WHMA-FM/AM in Anniston, Alabama, whose FM station
is formatted as country and whose AM station is programmed with a sports format.
The Company is pursuing a long-term strategy to obtain FCC approval to move the
FM station into the Atlanta market.
Cincinnati. Cincinnati is the 19th largest radio market in the United
States. Cincinnati's radio advertising revenue in 1997 was $100.2 million and
grew at a compound annual rate of 10.8% from 1992 through 1997. The Company has
operated in Cincinnati since 1972 and currently owns two FM stations in the
market. WRRM-FM, which is programmed with adult contemporary, is the sole adult
contemporary station in the market and is ranked 1st among women 35 to 54.
WVAE-FM was recently converted from a smooth jazz station to a rythmic oldies
station.
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<PAGE> 53
Indianapolis. Indianapolis is the 30th largest radio market in the United
States. Indianapolis' radio advertising revenue in 1997 was $70.8 million and
grew at a compound annual rate of 8.8% from 1992 through 1997. The Company has
operated in Indianapolis since 1972 and currently owns three FM stations in the
market. WFMS-FM, which is programmed with contemporary country, is the top
ranked station among women 35 to 54 and has ranked either 1st or 2nd in the
entire market since 1992.
York. York is the 101st largest radio market in the United States, and
ranks 16th in the nation for median household effective buying income. York's
radio advertising revenue in 1997 was $15.8 million and grew at a compound
annual rate of 5.5% from 1992 through 1997. The Company has operated in York
since 1942 and currently owns two stations in the market. WARM-FM, which is
programmed with an adult contemporary format, is the dominant station among
women 25 to 54. WSBA-AM, which is programmed with news and sports, is the AM
ratings leader in York.
ADVERTISING
Most of the Company's radio revenues are generated from the sale of local,
regional and national advertising for broadcast on its radio stations. In 1998,
approximately 81% of the Company's radio revenues were generated from the sale
of local and regional advertising. The Company generates additional radio
revenues by marketing its proprietary database of listeners, selling print
advertising and sponsoring local events. These important and growing sources of
revenue supplement the Company's traditional advertising revenues without
increasing on-air commercial time.
Each radio station's local sales staff solicits advertising either directly
from local advertisers or indirectly through advertising agencies. The Company
employs personnel in each of its markets to produce commercials for advertisers.
National ad sales are made by a firm specializing in such sales in exchange for
a commission from the Company based on the Company's gross revenue from the
advertising sold. Regional advertising sales, which the Company defines as sales
in regions surrounding the Company's markets to companies that advertise in the
Company's markets, are generally made by the Company's local sales staff.
The Company estimates the optimum number of advertisements available for
sale by a station for a particular time period. The number of advertisements
that can be broadcast without jeopardizing listening levels (and resulting
ratings) is limited in part by the programming format of a particular station.
The Company seeks to maximize revenue by managing on-air inventory of
advertising time and adjusting prices to local market conditions and to the
Company's ability, through its marketing efforts, to provide advertisers with an
effective means of reaching a targeted demographic group. Each of the Company's
stations has a general target level of on-air inventory that it makes available
for advertising. This target level may be different at different times of the
day but tends to remain stable over time. Much of the Company's selling activity
is based on demand for its on-air inventory, and in general, the Company
responds to this demand by varying prices rather than varying its target
inventory level for a particular station. As a result, most changes in revenue
are explained by demand-driven pricing changes rather than changes in available
inventory.
The Company believes that radio is one of the most efficient and
cost-effective means for advertisers to reach specific demographic groups.
Advertising rates charged by radio stations are based primarily on (i) a
station's share of audiences in the demographic groups targeted by advertisers,
(ii) the number of stations in the market competing for the same demographic
groups, (iii) the supply of and demand for radio advertising time and (iv)
certain qualitative factors. Rates are generally highest during morning and
afternoon commuting hours. A station's listenership is reflected in ratings
surveys that estimate the number of listeners tuned to the station and the time
they spend listening. Each station's ratings are used by its advertisers and
advertising representatives in connection with advertising sales and are used by
the Company to chart audience growth, set
48
<PAGE> 54
advertising rates and adjust programming. The radio broadcast industry's
principal rating agency is Arbitron, which publishes periodic ratings surveys
for significant domestic radio markets. They are the Company's primary source of
ratings data.
COMPETITION
The radio broadcasting industry is very competitive. The success of each of
the Company's stations depends largely upon its audience ratings and its share
of the overall advertising revenues within its market. The Company's audience
ratings and advertising revenue are subject to change, and any adverse change in
a particular market affecting advertising expenditures or an adverse change in
the relative market positions of the stations located in a particular market
could have a material adverse effect on the revenues of the Company's radio
stations located in that market. There can be no assurance that any one or all
of the Company's radio stations will be able to maintain or increase current
audience ratings or advertising revenue market share.
The Company's stations compete for listeners and advertising revenues
directly with other radio stations within their respective markets. Radio
stations compete for listeners primarily on the basis of program content that
appeals to a particular demographic group. By building a strong listener base
comprised of specific demographic groups in each of its markets, the Company is
able to attract advertisers seeking to reach those listeners. Radio stations
periodically change their formats to compete directly with other stations for
listeners and advertisers. Another station's decision to convert to a format
similar to that of one of the Company's radio stations in the same geographic
area or launch an aggressive promotional campaign may result in lower ratings
and advertising revenue, increased promotion and other expenses and,
accordingly, lower broadcast cash flow for the Company.
Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. The Company attempts to improve its competitive position in each of
its markets by extensively researching its stations' programming, by
implementing advertising campaigns aimed at the demographic groups for which its
stations program and by managing its sales efforts to attract a larger share of
advertising dollars for each individual station. In selling advertising,
however, the Company competes with many organizations that have substantially
greater financial and other resources than the Company.
Recent changes in the Communications Act and the FCC's rules and policies
permit increased ownership and operation of multiple local radio stations. As a
result, organizations are acquiring and operating larger blocks of radio
stations. The Company competes with these organizations, as well as other radio
station groups, to purchase additional stations. Some of these groups are owned
or operated by companies that have substantially greater financial and other
resources than the Company.
Although the radio broadcasting industry is highly competitive, and
competition is enhanced to some extent by changes in existing radio station
formats and upgrades of power, certain regulatory limitations on market entry
exist. The operation of a radio broadcast station requires a license from the
FCC, and the number of radio stations that an entity can operate in a given
market is limited by the availability of FM and AM radio frequencies allotted or
assigned by the FCC to communities in that market, as well as by the FCC's
multiple ownership rules regulating the number of stations that may be owned and
controlled by a single entity. See "Regulation -- Federal Regulation of Radio
Broadcasting."
In addition to other radio stations, the Company competes for advertising
revenues with other media, including newspapers, broadcast television, cable
television, magazines, direct mail, coupons
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<PAGE> 55
and outdoor advertising. The radio broadcasting industry also competes with new
media technologies, such as the delivery of audio programming by cable
television systems and by satellite digital audio radio services ("DARS"). DARS
may deliver by satellite to nationwide and regional audiences, multi-channel,
multi-format, digital radio services with sound quality equivalent to compact
discs. The delivery of information through the presently unregulated Internet
also could create a new form of competition. Despite the introduction of new
technologies for the delivery of entertainment and information, including
television broadcasting, cable television, audio tapes, compact discs, the radio
broadcasting industry historically has grown. A growing population and greater
availability of radios, particularly car and portable radios, have contributed
to this growth. There can be no assurance, however, that the introduction of new
media technology will not have an adverse effect on the radio broadcasting
industry.
The FCC has recently authorized spectrum for the use of DARS, a new
technology, to deliver audio programming. The FCC has also authorized two
companies to provide DARS service, and a third is seeking authorization. DARS
may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences. The
Company cannot predict whether this digital technology may be used in the future
by existing radio broadcast stations either on existing or alternate
broadcasting frequencies.
The FCC is seeking comments to a proposal to authorize three new classes of
low power and micropower FM stations. The Company cannot predict what other
matters might be considered in the future by the FCC, nor can it assess in
advance what impact, if any, the implementation of any of these proposals or
changes might have on its business. See "Regulation -- Federal Regulation of
Radio Broadcasting."
CABLE TELEVISION
The Company entered the cable television industry in 1965 when it was
awarded the franchise to operate in York, Pennsylvania. The Company's cable
systems currently serve approximately 186,000 subscribers through 16 headends in
Pennsylvania, Mississippi, Maine, Illinois and Indiana. The Company owns,
develops and operates geographically clustered cable television systems in small
and medium-sized communities. The Company believes that these systems are less
susceptible to competition and subscriber turnover than urban cable television
systems and result in more predictable revenue and cash flow.
The Company's business strategy for cable television includes the following
key elements intended to enhance its operating and financial performance:
- - Build strategic clusters. The Company has pursued the development and
acquisition of cable television systems in communities that are within close
proximity to its existing systems to maximize economies of scale and operating
efficiencies. Such operating efficiencies include centralized billing and the
sharing of general management, customer service, marketing and technical
support. The Company also interconnects systems within a cluster with fiber
optic cable, enabling the consolidation of headend facilities. For example,
the Company recently acquired a system in Hanover, Pennsylvania, connected it
to the York system with fiber optic cable and eliminated a headend. This added
nearly 17,000 subscribers to the York system. The Company also recently
exchanged a number of systems in Maine and New Hampshire so that all of its
customers in Maine can be served from one headend by the end of 2000.
- - Focus on customer satisfaction. To maximize customer satisfaction, the
Company strives to provide reliable, high-quality service offerings, superior
customer service and attractive programming choices at reasonable rates. To
meet this objective, the Company (i) utilizes ongoing subscriber surveys and
marketing studies to determine how it can better meet the needs of its
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<PAGE> 56
customers and (ii) implements programs to improve the skills of its customer
service and technical employees. In an August 1998 customer survey conducted
by Peter Hart Research for the National Cable Television Association, the
Company ranked 1st in operating performance out of 13 MSOs, including TCI,
Time Warner, MediaOne, Comcast, Cox, Cablevision, and Adelphia. In 1997, the
Company introduced the Opportunities to Excel Program, which gives technical
personnel the opportunity to improve their earnings by successfully completing
skills courses. In 1998, the Company implemented a program entitled Sales
Training for Excellence in Leadership, Learning and Retention (STELLAR), which
includes extensive training, performance follow-up and standardized skills for
all of the Company's customer service representatives. The Company believes
that its customer service efforts have contributed to subscriber growth and
position the Company to sell additional products and services in the future.
- - Continue upgrade of technical facilities. The Company seeks to provide
reliable, high-quality cable television services to its customers. To achieve
this goal, the Company is expanding and upgrading its cable systems to
increase channel capacity, enhance signal quality, improve technical
reliability and reduce the number of headends in existing systems. Over the
next three years, the Company intends to spend approximately $34 million to
upgrade its cable systems to serve approximately 87% of its subscribers with
cable plant of at least 550 MHz bandwidth capacity and 76% of its subscribers
with cable plant of 750 MHz bandwidth capacity. A bandwidth capacity of 750
MHz enables the Company to offer its customers up to 82 analog channels over
550 MHz of bandwidth and have 200 MHz of bandwidth available for the digital
spectrum. The Company believes that these improvements enhance its position as
the leading provider of multi-channel television services in its markets and
create additional revenue opportunities. The Company also believes that these
improvements enhance operating efficiencies, increase customer satisfaction
and improve relations with local franchising authorities.
- - Develop new sources of revenues. The Company believes that the investment it
has made in its cable systems has enabled the Company to generate additional
revenue by providing expanded tiers of basic programming, premium services,
and additional pay-per-view services. In addition, the Company is expanding
new services, such as Internet access, high speed data, and video-on-demand
and other interactive services. The Company believes that the new, enhanced
services will attract new subscribers, increase revenue and cash flow per
subscriber, improve customer loyalty and reduce churn.
THE CABLE TELEVISION INDUSTRY
A cable customer generally pays an initial installation charge and fixed
monthly fees for cable television services and for other services (such as the
rental of converters and remote control devices). Such monthly service fees
constitute the primary source of revenue for cable television operators. In
addition to these services, cable television operators generate revenue from
additional fees paid by customers for pay-per-view programming of movies and
special events and from the sale of available advertising spots on
advertiser-supported programming. Cable television operators frequently also
offer to their customers home shopping services, which pay the systems a share
of revenue from sales of products in the systems' service areas. Cable
television operators are also generating increasing revenues from the sale of
enhanced data services. Cable television revenues tend to be stable, growing
over the last 14 years at an 11.7% compound annual rate, compared to a GDP
growth rate of 6.2%. Cable television did not experience a single down year in
revenue during this period of time. See "-- Programming" and "-- Marketing,
Customer Service and Community Relations."
Cable television systems offer customers various levels (or "tiers") of
cable television services consisting of: (i) a limited basic service comprised
of off-air broadcast television signals, local
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<PAGE> 57
origination programming produced by the cable system and/or public access
groups, and a limited number of satellite services such as home shopping
channels and C-Span; and (ii) an expanded basic service comprised of satellite
delivered, non-broadcast channels such as: Cable News Network (CNN),
Entertainment and Sports Programming Network (ESPN) and Turner Network
Television (TNT). For an extra monthly charge, cable television systems also
offer premium television services to their customers. These services (such as
Home Box Office and Showtime) are satellite delivered channels offering feature
films, live sporting events, concerts and other special entertainment features
presented without commercial interruption.
A cable television system receives television, radio and data signals that
are transmitted to the system's headend site by means of off-air antennae,
microwave relay systems and satellite earth stations. These signals are then
modulated, amplified and distributed, primarily through coaxial and in some
instances fiber optic cable, to customers who pay a fee for this service. Cable
television systems may also originate their own television programming and other
information services for distribution through the system. Cable television
systems generally are constructed and operated pursuant to non-exclusive
franchises or similar licenses granted by local governmental authorities for a
specified term of years, generally for extended periods of up to 15 years.
CABLE SYSTEMS
The following table sets forth selected technical, operating and financial
data for each of the Company's cable systems as of and for the year ended
December 31, 1998:
SELECTED TECHNICAL, OPERATING AND FINANCIAL DATA BY CABLE SYSTEM
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YORK(1) WILLIAMSPORT RANKIN CASCO SBC TOTAL
-------- ------------ ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
TECHNICAL DATA:
Miles of Plant....................... 1,546 702 562 715 518 4,043
Density(2)........................... 73 63 53 37 51 59
Headends............................. 1 3 2 4 6 16
Planned 1999 Headend eliminations.... 0 1 0 3 1 5
Plant Bandwidth(3)
330 MHz or less.................... 0.0% 67.1% 5.2% 17.5% 40.7% 20.7%
400-450MHz......................... 36.7% 0.0% 83.6% 32.3% 29.2% 35.1%
550 MHz............................ 0.0% 0.0% 11.2% 34.4% 30.1% 11.5%
750 MHz............................ 63.3% 32.9% 0.0% 15.8% 0.0% 32.7%
OPERATING DATA:
Homes passed......................... 112,241 44,414 29,882 26,365 26,451 239,353
Basic subscribers.................... 87,180 34,951 21,998 19,099 20,750 183,978
Basic penetration(4)................. 77.7% 78.7% 73.6% 72.4% 78.4% 76.9%
Premium units(5)..................... 33,820 11,119 9,984 6,115 8,048 69,086
Premium penetration(6)............... 38.8% 31.8% 45.4% 32.0% 38.8% 37.6%
FINANCIAL DATA:
Revenue (in thousands)............... $30,805 $14,229 $ 9,356 $ 8,445 $ 7,806 $70,641
Average monthly revenue per basic
subscriber(7)...................... $ 36.98 $ 33.89 $ 36.35 $ 33.94 $ 31.37 $ 35.18
</TABLE>
- ---------------
(1) Except for financial data, information includes Hanover Cable TV, which was
acquired in January 1999.
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(2) Density represents homes passed divided by miles of plant.
(3) Represents percentage of basic subscribers within a system served by the
indicated plant bandwidth.
(4) Basic penetration represents basic subscribers as a percentage of homes
passed.
(5) Represents the aggregate number of individual premium services (e.g., HBO,
Cinemax, Showtime) for which customers have subscribed.
(6) Premium penetration represents premium units as a percentage of basic
subscribers.
(7) Represents revenues divided by 12 divided by the weighted average number of
subscribers for the year.
The following descriptions of the Company's cable clusters include
information as of December 31, 1998 as adjusted for the January 1999 acquisition
of Hanover Cable TV.
York. The York, Pennsylvania cable system is the Company's largest,
serving subscribers in 34 municipalities and accounting for 47% of the Company's
total subscribers. On January 29, 1999, the Company acquired neighboring Hanover
Cable TV, which serves 17,000 customers in 17 municipalities. A hybrid
fiber/coaxial rebuild of the York system began in 1995, and approximately 63% of
the system (including Hanover) has cable plant with bandwidth capacity of 750
MHz. The rebuild is expected to be completed by the end of 2001. The Company has
constructed a fiber optic link from York to Hanover, which enables the Company
to serve York and Hanover from one headend. The York system is two-way capable.
Williamsport. The Williamsport, Pennsylvania cable system was acquired in
a swap with Cox Communications, Inc. for the Company's East Providence, Rhode
Island system in April 1996. The Company also acquired two adjacent systems in
December 1996. The Williamsport system accounts for 19% of the Company's total
subscribers. Approximately 33% of the system has been rebuilt to 750 MHz, and
the rebuild is expected to be completed by the second quarter of 2000. The
system is two-way capable.
Rankin. The Rankin County, Mississippi cable system encompasses three
small towns, many upscale suburban developments and the southeastern shore of an
attractive reservoir recreation area just east of the state capitol of Jackson.
The area continues to experience explosive housing growth. Over the past five
years, the average annual internal growth rate of new subscribers to the Rankin
system has been 6.1%, and the system accounts for 12% of the Company's total
subscribers. Approximately 95% of the Rankin system currently has a bandwidth of
450 MHz or greater. The system is planning to introduce digital technology in
1999, enabling it to add new programming services without having to rebuild the
system.
Casco. The Casco cable system serves the communities of Brunswick,
Freeport, Harpswell and Woolwich, Maine and accounts for 10% of the Company's
total subscribers. Approximately 50% of the Casco system has been rebuilt to a
minimum of 550 MHz. The primary headend in Brunswick serves approximately 79% of
the subscribers. Three smaller headends, which were acquired in December 1998,
will be eliminated over the next 18 months and linked to the Brunswick headend.
The Casco system is two-way capable.
SBC. The SBC cable system serves Shelbyville, Indiana and Olney and
DuQuoin, Illinois. Shelbyville offers attractive demographics and growth
opportunities as a result of its proximity to the growing Indianapolis market.
The SBC system accounts for 12% of the Company's total subscribers. The system
currently has bandwidth ranging from 330 MHz to 550 MHz.
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PROGRAMMING
The Company has various contracts to obtain basic, satellite and premium
programming for its cable systems from program suppliers, including, in limited
circumstances, some broadcast stations, with compensation generally based on a
fixed fee per customer or a percentage of the gross receipts for the particular
service. Some program suppliers provide volume discount pricing structures and
some offer marketing support. The Company acquires a portion of its programming
through an Affiliation Agreement with a subsidiary of AT&T. Rates for
programming obtained through AT&T are generally lower than rates that would be
charged to the Company as a stand alone MSO. The Company receives favorable
rates on AT&T programming because Lenfest Communications, Inc. ("Lenfest"),
which currently is 50% owned by AT&T, has minority ownership interests in
Susquehanna Cable and its principal operating subsidiaries. See "Certain
Transactions -- The Lenfest Agreement." In January 1999, calculated on a cost
basis, the Company acquired 67% of its programming through AT&T, 32% through
individual contracts and 1% through Lenfest.
Programming costs are expected to increase in the ordinary course of the
Company's business as a result of increases in the number of basic subscribers,
increased costs to purchase cable programming, expansion of the number of
channels provided to customers and contractual rate increases from programming
suppliers. In the event that the Company acquires Lenfest's ownership interests
in Susquehanna Cable, the Company's programming costs will increase faster than
they would otherwise. See "Risk Factors -- Risks Relating to the Cable
Television Industry -- Our Programming Costs Are Increasing" and "Certain
Transactions -- The Lenfest Agreement."
MARKETING, CUSTOMER SERVICE AND COMMUNITY RELATIONS
The Company's cable marketing strategy is designed to increase total
revenues and revenues per subscriber by (i) aggressively promoting and marketing
its current services, (ii) expanding its product offerings, and (iii) providing
superior customer service. The Company believes that this strategy will enable
it to acquire new customers and maintain a positive relationship with existing
customers to retain their business and sell them additional products.
Implementation strategies include: (i) targeted marketing campaigns using
door-to-door sales, direct mail and telemarketing; (ii) price promotions, such
as installation specials, to attract new subscribers and discounts for premium
packages for multi-pay customers; (iii) introduction of multiplexed premium
channels to improve their price/value perception; and (iv) advertisement and
sponsorship of community-based events to enhance the Company's local presence.
The Company believes that providing superior customer service is a key
element of its long-term success because the quality of customer service affects
its ability to retain customers. The Company believes that it also contributes
to subscriber growth and positions the Company to sell additional products and
services. To enhance customer service, the Company has initiated programs to
improve the skills of its employees. In 1997, the Company introduced the
Opportunities to Excel Program, which gives technical personnel the opportunity
to improve their earnings by successfully completing courses that enhance their
on-the-job skills. In 1998, the Company introduced a parallel initiative for
customer service employees entitled Sales Training for Excellence in Leadership,
Learning and Retention (STELLAR), which includes extensive training, performance
follow-up and standardized skills for all customer service representatives.
Recognizing that positive franchise and public relations are crucial to the
overall success of the Company, the Company emphasizes maintaining good working
relationships with municipal officials in the Company's franchise areas and with
the communities that it serves. The Company's local management meets regularly
with municipal officials to keep them informed of both the Company's activities,
as well as trends in the industry. As a result of these working relationships,
the Company receives valuable feedback on its standing with the municipalities
and the satisfaction of its
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customers. Local management is also responsible for maintaining a high level of
visibility for the Company, which is accomplished through active involvement in
various community and nonprofit organizations.
TECHNOLOGY
As part of its commitment to customer service, the Company seeks to provide
reliable, high-quality cable television service. As such, its primary objective
with respect to Susquehanna Cable's capital expenditures is to maintain, expand
and upgrade its cable plant to improve and expand its cable television services.
Through a capital investment program, the Company is expanding channel capacity,
enhancing signal quality, improving technical reliability and providing a
platform to deliver high-speed data services, including Internet access. The
Company believes that such technical improvements and upgrades create additional
revenue opportunities, enhance operating efficiencies, improve franchising
relations and increase customer satisfaction.
The following table summarizes, as of December 31, 1998, (i) the Company's
existing bandwidth profile and (ii) the Company's bandwidth profile upon
completion of work-in-progress projects (which are generally expected to be
completed by the end of 2001).
<TABLE>
<CAPTION>
330 MHZ OR LESS 400 TO 450 MHZ 550 MHZ 750 MHZ
(APPROXIMATELY (APPROXIMATELY (APPROXIMATELY (APPROXIMATELY
40 ANALOG 60 ANALOG 82 ANALOG 82 ANALOG
CHANNELS) CHANNELS) CHANNELS) CHANNELS(1))
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
EXISTING BANDWIDTH PROFILE
Miles of plant.................. 836 1,419 465 1,323
% miles of plant................ 20.7% 35.1% 11.5% 32.7%
BANDWIDTH PROFILE UPON
COMPLETION OF WORK-IN-PROGRESS
Miles of plant.................. 29 529 465 3,319
% miles of plant................ 0.7% 12.2% 10.7% 76.4%
</TABLE>
- ---------------
(1) Plus 200 MHz of additional bandwith for digital programming and other
enhanced services.
The Company's use of fiber optic technology as an enhancement to coaxial is
enabling the Company to consolidate headend facilities and reduce amplifier
cascades, thereby improving picture quality and system reliability and reducing
headend and maintenance expenditures. Fiber optic strands are capable of
carrying hundreds of video, data and voice channels over extended distances
without the extensive signal amplification typically required for coaxial cable.
The Company anticipates that the installation of fiber optic cable will allow it
to consolidate from 16 headends as of December 31, 1998 to approximately 11
headends by the end of 1999. In the Company's larger systems, fiber optic
technology is deployed in a "ring" design providing a redundant path for video
and data signals being delivered to large subscriber groups. This approach
provides an extra degree of reliability in the event that fiber optic cable is
damaged on the primary path.
The Company has been closely monitoring developments in the area of digital
compression, a technology that enables cable operators to increase the channel
capacity of cable television systems by permitting a significantly increased
number of digitized video signals to fit in a cable television system's existing
bandwidth. The Company believes that the utilization of digital compression
technology in the future could enable it to increase channel capacity in certain
systems in a cost efficient manner. Such utilization of digital compression
would generally be implemented as part of system upgrades, where some portion of
the additional analog channels would be allocated to additional tiers of cable
services. The use of digital compression will expand the number and types of
services offered and enhance the development of current and future revenue
sources.
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The provision of high-speed cable modems to residential and business
customers has recently become a source of additional revenue to the cable
industry. Cable modems provide Internet access at higher speeds and lower costs
than the technologies offered by other communication providers. For example, a
10 megabit cable modem provides Internet access at download speeds 350 times
faster than typical 28.8 kilobit dial-up telephone modem connections. The
Company, through BlazeNet, is developing high speed data revenues from both
commercial and consumer accounts. Cable modem service is now available in York,
Pennsylvania and Brunswick, Maine and on a more limited basis in Rankin County,
Mississippi and Shelbyville, Indiana. In addition, the Company plans to launch
modem service in the Williamsport market in 1999.
OTHER SERVICES
Susquehanna Data Services. Susquehanna Data Services, Inc., a wholly-owned
subsidiary of Susquehanna Media, was formed in 1996 to provide Internet and data
networking services to residential and business customers. Marketing its
products and services under the tradename "BlazeNet," Susquehanna Data offers
Internet access over both telephone and cable modems, website creation, hosting
and maintenance, local and wide area network design, construction and operation,
and telecommunications products from Hyperion Susquehanna Telecommunications and
other local telephone companies. As of December 31, 1998, BlazeNet provided
access service to approximately 5,000 business and consumer accounts.
Approximately 13% of these accounts access the Internet using cable modems. The
access business continues to grow rapidly, with an increase in accounts of over
160% in 1998.
In addition to synergies created with Susquehanna Cable, BlazeNet is
actively working with both Susquehanna Radio and The Pfaltzgraff Co. to host
their websites. BlazeNet has also made progress developing an electronic
commerce product.
Hyperion Partnership. In 1997, Susquehanna Media, through its wholly-owned
subsidiary Susquehanna Fiber Systems, Inc., entered into a 50/50 partnership
with Hyperion Telecommunications of Pennsylvania, Inc., a subsidiary of Adelphia
Communications Corp., to enter the competitive local exchange carrier ("CLEC")
business in the York, Pennsylvania market. The partnership provides long
distance access circuits to businesses bypassing the local telephone company,
point-to-point data circuits and switched business access services. Susquehanna
Cable has constructed and maintains a 125 mile fiber optic SONET ring network
that is leased to the partnership under a long-term contract. As of December 31,
1998, the partnership provided service to 66 buildings in the York area and had
over 2,400 access lines installed.
FRANCHISES
Cable television systems are constructed and operated under fixed-term
non-exclusive franchises or other types of operating permits that are granted by
local governmental authorities. These franchises contain many conditions, such
as (i) time limitations on commencement and completion of construction, (ii)
conditions of service, including mix of programming required to meet the needs
and interests of the community, (iii) the provision of free service to schools
and certain other public institutions, (iv) the maintenance of insurance and
indemnity bonds, and (v) the payment of fees to communities. Certain of these
franchises may require the imposition of penalties if the franchise agreements
are violated. Certain provisions of these local franchises are subject to limits
imposed by federal law.
As of May 31, 1999, the Company held a total of 124 franchises. Many of
these franchises require the payment of fees to the issuing authorities ranging
from 1% to 5% of gross revenues (as defined by each franchise agreement) from
the related cable system. The 1984 Cable Act prohibits franchising authorities
from imposing annual franchise fees in excess of 5% of gross annual revenues
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and permits the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances
that render performance commercially impracticable.
The Company's cable franchises expire at various times through 2012. The
following table sets forth certain information relating to the Company's
franchises (including Hanover Cable TV):
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
YEAR OF FRANCHISE NUMBER OF TOTAL TOTAL BASIC
EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS
- ----------------- ------------- ------------- -------------
<S> <C> <C> <C>
1999-2001............................ 18 15% 11%
2002 and after....................... 106 85% 89%
--- ---- ----
Total................................ 124 100% 100%
=== ==== ====
</TABLE>
The Cable Acts provide, among other things, for an orderly franchise
renewal process, which limits a franchising authority's ability to deny a
franchise renewal if the incumbent operator follows prescribed renewal
procedures. In addition, the Cable Acts establish comprehensive renewal
procedures, which require, when properly elected by an operator, that an
incumbent franchisee's renewal application be assessed on its own merits and not
as part of a comparative process with competing applications.
COMPETITION
Cable television systems face competition from alternative methods of
distributing video programming and from other sources of news, information and
entertainment. These sources include off-air television broadcast programming,
newspapers, movie theaters, live sporting events, interactive online computer
services and home video products, including videotape cassette recorders. The
extent to which a cable television system is competitive depends, in part, upon
that system's ability to provide, at a reasonable price to customers, a greater
variety of programming and other communications services than those available
off-air or through alternative delivery sources and upon superior technical
performance and customer service.
Competing Franchises. Cable television systems generally operate pursuant
to franchises granted on a non-exclusive basis. Franchising authorities may not
unreasonably deny requests for additional franchises and may operate cable
television systems themselves. Well-financed businesses from outside the cable
television industry (such as the public utilities that own the poles to which
cable is attached) may become competitors for franchises or providers of
competing services. The Company is aware of direct competition from other
franchised cable television operators (called "overbuilding") in systems that
service less than 1% of its total basic subscribers. Additional cable television
systems may be constructed in other franchise areas of the Company.
DBS. The fastest growing method of satellite distribution is by
high-powered direct broadcast satellites ("DBS") utilizing video compression
technology, which provides more than 100 channels of programming over a single
high-powered DBS satellite. DBS service can be received virtually anywhere in
the United States through small rooftop or side-mounted antennae and is not
subject to certain local restrictions on the location and use of DBS and other
satellite receiver dishes. DBS service is presently being heavily marketed on a
nationwide basis by three service providers. DBS systems offer more programming
and with digital quality, but have high upfront costs and a lack of local
programming, service and equipment distribution. One DBS provider has announced
plans to offer some local signals in a limited number of markets.
SMATV Systems. Cable television operators also face competition from
private satellite master antenna television ("SMATV") systems that serve
condominiums, apartment and office complexes and private residential
developments. Like cable television systems, SMATV systems offer both
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improved reception of local television stations and many of the same
satellite-delivered program services. SMATV operators often enter into exclusive
agreements with building owners or homeowners associations, although some states
have enacted laws that authorize franchised cable television operators access to
such private complexes. Packages of data and video services are also being
offered to private residential and commercial developments. As long as they do
not use public rights-of-way, SMATV systems can interconnect non-commonly owned
buildings without having to comply with local, state and federal regulations
that are imposed on cable television systems. The ability of the Company to
compete for customers in residential and commercial developments served by SMATV
operators is uncertain.
LMDS. Local multipoint distribution service ("LMDS"), a new wireless
service, can deliver over 100 channels of programming directly to consumers'
homes. A large amount of this spectrum was auctioned in March 1998, and cable
television operators and local telephone companies were restricted in their
participation in this auction. It is uncertain whether this spectrum will be
used to deliver multichannel video programming and other services to subscribers
and thereby compete with franchised cable television systems.
MMDS. Multichannel multipoint distribution systems ("MMDS") use low power
microwave frequencies to transmit video programming over the air to customers.
Wireless distribution services provide many of the same programming services as
cable television systems, and digital compression technology is likely to
increase significantly the channel capacity of their systems. MMDS service
requires unobstructed "line of sight" transmission paths. In the majority of the
Company's franchise service areas, prohibitive topography and "line of sight"
access have limited, and are likely to continue to limit, competition from MMDS
systems. Moreover, in the majority of the Company's franchise areas, MMDS
operators face significant barriers to growth because lower population densities
make these areas less attractive. The Company is not aware of any significant
MMDS operation currently within its cable television franchise service areas,
other than Wireless One, Inc., which competes with the Company in Rankin County,
Mississippi.
LECs. The 1996 Telecom Act allows local exchange carriers ("LECs") and
others to compete with cable television systems and other video services in
their telephone service territory, subject to certain regulatory requirements.
LECs use a variety of distribution methods, including both broadband wire
facilities and wireless transmission facilities within and outside of their
telephone service areas. Unlike cable television systems, LECs are not required,
under certain circumstances, to obtain local franchises to deliver video
services and are not subject to certain obligations imposed under such
franchises. The Company believes that its rural markets are unlikely to support
competition in the provision of video and telecommunications broadband services
given the lower population densities and higher capital costs per household of
installing plant.
Public Utilities. Registered utility holding companies and their
subsidiaries may provide telecommunications services (including cable
television). Electric utilities must establish separate subsidiaries known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Due to their resources, electric utilities could be formidable
competitors to traditional cable television systems.
Other New Technologies. Other new technologies, including Internet-based
services, may compete with cable television systems. Incumbent television
broadcast licensees may obtain licenses for digital television ("DTV"), which
can deliver high definition television pictures, multiple digital-quality
program streams, as well as CD-quality audio programming and advanced digital
services, such as data transfer or subscription video. Television broadcast
stations are authorized to transmit textual and graphic information. Commercial
and noncommercial FM stations may use their subcarrier frequencies to provide
nonbroadcast services, including data transmissions. In addition, over-the-air
interactive video and data service permits two-way interaction with commercial
and
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educational programming, along with informational and data services. LECs and
other common carriers provide facilities for the transmission and distribution
of video services, including interactive computer-based services like the
Internet, data and other nonvideo services.
Advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environments, are constantly
occurring. The Company is not, therefore, able to predict the effect that
current or future developments might have on the cable industry or on the
operations of the Company.
PROPERTIES
The headquarters of the Company's cable television operations is located in
York, Pennsylvania in office space leased from an affiliate. The Company does
not have a separate headquarters for its radio broadcast operations.
The Company leases nine studio facilities for its radio operations. The
Company owns broadcast towers for 11 of its radio stations and leases 13 other
broadcast towers. The Company owns the real property under nine of its broadcast
towers and leases the land under its other 15 towers. The Company owns three,
and leases seven, office and headend facilities for its cable television
operations. In connection with its cable operations, the Company owns eight
tower locations and leases eight others.
The Company's principal physical assets with respect to its cable
operations consist of cable television operating plant and equipment, including
signal receiving, encoding and decoding devices, headends and distribution
systems and customer house drop equipment for each of its cable television
systems. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution system consists primarily of
coaxial and fiber optic cables and related electronic equipment.
The Company believes that its properties are suitable for its operations
and are in good condition.
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not currently a
party to any lawsuit or proceeding which, in the opinion of the Company, is
likely to have a material adverse effect on the Company.
EMPLOYEES
The Company has approximately 1,314 employees. None of these employees are
covered by collective bargaining agreements, and the Company considers its
relations with its employees to be good.
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REGULATION
FEDERAL REGULATION OF RADIO BROADCASTING
INTRODUCTION
The ownership, operation and sale of broadcast stations, including those
licensed to the Company, are subject to the jurisdiction of the FCC, which acts
under authority derived from the Communications Act. The Communications Act was
amended in 1996 by the 1996 Telecom Act to make changes in several broadcast
laws. Among other things, the FCC grants permits and licenses to construct and
operate radio stations; assigns frequency bands for broadcasting; determines
whether to approve changes in ownership or control of station licenses;
regulates equipment used by stations and the operating power and other technical
parameters of stations; adopts and implements regulations and policies that
directly or indirectly affect the ownership, operation and employment practices
of stations; regulates some forms of radio broadcasting programming; and has the
power to impose penalties for violations of its rules under the Communications
Act.
LICENSE GRANT AND RENEWAL
Radio broadcast licenses are granted and renewed for maximum terms of eight
years. Licenses may be renewed through an application to the FCC. The
Communications Act requires that the FCC grant the renewal of a station's
license if the FCC finds that, during the preceding term of the license, the
station has served the public interest, convenience and necessity, that there
have been no serious violations by the licensee of the Communications Act or the
rules and regulations of the FCC, and that there have been no other violations
by the licensee of the Communications Act or the rules and regulations of the
FCC that, when taken together, would constitute a pattern of abuse.
Petitions to deny license renewal applications can be filed by interested
parties, including members of the public. Such petitions may raise various
issues before the FCC. The FCC is required to hold hearings on renewal
applications if it is unable to determine that renewal of a license would serve
the public interest, convenience and necessity, or if a petition to deny raises
a "substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license may be
restricted. Historically, the Company has not experienced any material problems
renewing its licenses to operate its radio stations and is not currently aware
of any facts that would prevent the timely renewal of its licenses. There can be
no assurance, however, that the Company's licenses will be renewed.
The following table sets forth certain regulatory information regarding
each of the stations owned by the Company:
<TABLE>
<CAPTION>
FREQUENCY
CITY OF (FM-MHZ) FCC HAAT(1) POWER IN EXPIRATION DATE
MARKETS AND STATIONS LICENSURE (AM-KHZ) CLASS (METERS) KILOWATTS (DAY) OF LICENSE
- ------------------------------- ---------------- --------- ----- -------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
San Francisco, CA
KNBR-AM...................... San Francisco 680 KHz A -- 50 KW December 1, 2005
KFOG-FM...................... San Francisco 104.5 MHz B 459 7.1 KW December 1, 2005
KFFG-FM...................... Los Altos 97.7 MHz A 137 1.6 KW December 1, 2005
KSAN-FM...................... San Mateo 107.7 MHz B 354 8.9 KW December 1, 2005
KTCT-AM...................... San Mateo 1050 KHz B -- 50 KW December 1, 2005
Dallas/Ft. Worth,TX
KLIF-AM...................... Dallas 570 KHz B -- 5 KW August 1, 2005
KKLF-AM...................... Dennison/Sherman 950 KHz B -- .5 KW August 1, 2005
KTCK-AM...................... Dallas 1310 KHz B -- 5 KW August 1, 2005
KPLX-FM...................... Ft. Worth 99.5 MHz C 511 100 KW August 1, 2005
KKZN-FM...................... Halton City 93.3 MHz C2 133 50 KW August 1, 2005
KXZN-FM...................... Sanger 104.1 MHz C3 150 11 KW August 1, 2005
KTBK-AM...................... Sherman 1700 KHz B -- 10 KW Pending
</TABLE>
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<TABLE>
<CAPTION>
FREQUENCY
CITY OF (FM-MHZ) FCC HAAT(1) POWER IN EXPIRATION DATE
MARKETS AND STATIONS LICENSURE (AM-KHZ) CLASS (METERS) KILOWATTS (DAY) OF LICENSE
- ------------------------------- ---------------- --------- ----- -------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Houston, TX
KRBE-FM...................... Houston 104.1 MHz C 585 100 KW August 1, 2005
Atlanta, GA
WNNX-FM...................... Atlanta 99.7 MHz C 315 100 KW April 1, 2004
WHMA-FM...................... Anniston, AL 100.5 MHz C 348 100 KW April 1, 2003
WHMA-AM...................... Anniston, AL 1390 KHz B -- 5 KW April 1, 2003
Cincinnati, OH
WRRM-FM...................... Cincinnati 98.5 MHz B 246 18 KW October 1, 2004
WVAE-FM...................... Fairfield 94.9 MHz B 322 10.5 KW October 1, 2004
Indianapolis, IN
WFMS-FM...................... Indianapolis 95.5 MHz B 302 13 KW August 1, 2004
WGRL-FM...................... Noblesville 93.9 MHz A 150 2.75 KW August 1, 2004
WGLD-FM...................... Indianapolis 104.5 MHz B 150 50 KW August 1, 2004
York/Lancaster, PA
WSBA-AM...................... York 910 KHz B -- 5 KW August 1, 2006
WARM-FM...................... York 103.3 MHz B 398 6.4 KW August 1, 2006
Albemarle, NC
WABZ-FM(2)................... Albemarle 100.9 MHz A 61 3 KW December 1, 2003
</TABLE>
- ---------------
(1) Height above average terrain (for FM stations only).
(2) Operated by a third party under a local marketing agreement.
REGULATORY APPROVALS
Broadcast licenses may not be assigned nor may the control of broadcast
licenses be transferred without the prior approval of the FCC. In determining
whether to assign, transfer, grant or renew a broadcast license, the FCC
considers a number of factors pertaining to the licensee, including limits on
common ownership of media properties, financial qualifications of the proposed
licensee, the "character" of the licensee (including that no party to the
application (i.e. officer, director, or 10% or greater owner) is subject to the
denial of federal benefits that include FCC benefits pursuant to Section 5301 of
the Anti-Drug Abuse Act of 1988, 21 U.S.C. sec.862), limitations on alien
ownership, and compliance with programming, filing and anti-discrimination
requirements.
Assigning a license or transferring control requires the filing of an
application with the FCC. The FCC staff reviews the application and determines
whether to grant the application. This process generally takes about four
months. During the application process, interested parties and the public may
file petitions, during specific periods of time, to deny or raise objections to
the application. A full FCC review of staff action can be requested, and final
FCC approval or disapproval is subject to judicial review.
Absent a timely request for reconsideration, administrative review or
judicial review, the FCC staff's grant of an application becomes final by
operation of law and generally is no longer subject to administrative or
judicial review.
The pendency of a license renewal application may alter the aforementioned
timetables, because the FCC might not issue an unconditional assignment grant if
the station's license renewal is pending.
OWNERSHIP MATTERS
The 1996 Telecom Act and the FCC's broadcast multiple ownership rules do
not restrict the number of radio stations one person or entity may own, operate
or control on a national level, but do impose restrictions on a local level.
These restrictions are:
(i) in a market with 45 or more commercial radio signals, an entity
may own up to eight commercial radio stations, not more than five of which
are in the same service (FM or AM);
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(ii) in a market with between 30 and 44 (inclusive) commercial radio
signals, an entity may own up to seven commercial radio stations, not more
than four of which are in the same service;
(iii) in a market with between 15 and 29 (inclusive) commercial radio
signals, an entity may own up to six commercial radio stations, not more
than four of which are in the same service; and
(iv) in a market with 14 or fewer commercial radio signals, an entity
may own up to five commercial radio stations, not more than three of which
are in the same service, except that an entity may not own more than 50% of
the stations in such market.
The foregoing does not purport to describe all present and proposed
regulations and legislation relating to the radio broadcasting industry, some of
which may be subject to judicial and legislative review and change, and their
impact on the radio broadcasting industry or the Company cannot be predicted at
this time.
REGULATION OF CABLE TELEVISION
The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
the Congress and various federal agencies have in the past, and may in the
future, materially affect the Company and the cable television industry. The
following is a summary of federal laws and regulations materially affecting the
growth and operation of the cable television industry and a description of
certain state and local laws. The Company believes that the regulation of its
industry remains a matter of interest to Congress, the FCC and other regulatory
authorities. There can be no assurance as to what, if any, future actions such
legislative and regulatory authorities may take or the effect thereof on the
Company.
FEDERAL LEGISLATION
The principal federal statute governing the cable television industry is
the Communications Act. As it affects the cable television industry, the
Communications Act has been significantly amended on three occasions, by the
1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom
Act altered the regulatory structure governing the nation's telecommunications
providers. It removed barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduced the
scope of cable rate regulation. In addition, the 1996 Telecom Act required the
FCC to undertake a host of rulemakings to implement the 1996 Telecom Act, the
final outcome of which cannot yet be determined.
FEDERAL REGULATION
The FCC is the principal federal regulatory agency with jurisdiction over
cable television. It has adopted regulations covering such areas as
cross-ownership between cable television systems and other communications
businesses, carriage of television broadcast programming, cable rates, consumer
protection and customer service, leased access, indecent programming, programmer
access to cable television systems, programming agreements, technical standards,
consumer electronics equipment compatibility, ownership of home wiring, program
exclusivity, equal employment opportunity, consumer education and lockbox
enforcement, origination cablecasting and sponsorship identification, political
programming and advertising, advertising during children's programming, signal
leakage and frequency use, maintenance of various records, and antenna structure
notification, marking and lighting. The FCC has the authority to enforce these
regulations through the imposition of substantial fines, the issuance of cease
and desist orders and/or the imposition of other administrative sanctions, such
as the revocation of FCC licenses needed to operate certain transmission
facilities often used in
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connection with cable operations. A brief summary of certain of these federal
regulations as adopted to date follows.
RATE REGULATION
Substantial federal legislation and regulations have governed cable
television rates since 1984. Since that time, basic cable rates have been
deregulated for cable television systems that the FCC has determined to be
subject to effective competition. The 1996 Telecom Act expanded the definition
of effective competition to cover situations where a local telephone company or
its affiliate, or any multichannel video provider using telephone company
facilities, offers comparable video service by any means except DBS.
Satisfaction of this test deregulates both basic and nonbasic tiers.
Local franchising authorities have authority to order reductions and, in
certain circumstances, refunds of existing rates for the basic service tier and
associated equipment. In carrying out their rate regulatory authority, however,
local officials are subject to certain FCC standards. As an alternative to the
FCC's benchmark price cap system for measuring the reasonableness of existing
rates, cable operators may make cost-of-service showings which may justify rates
above the applicable benchmarks. Future rate increases may not exceed an
inflation-indexed amount, plus increases in certain costs beyond the cable
operator's control, such as taxes, franchise fees and increased programming
costs. Cost-based adjustments to these capped rates also can be made in the
event a cable television operator adds or deletes channels. There is also a
streamlined cost-of-service methodology available to justify a rate increase for
"significant" system rebuilds or upgrades. The 1992 Cable Act authorized the FCC
to enforce similar regulations governing rates for the cable programming service
(i.e., expanded) tier ("CPST"). FCC review of CPST rates was triggered by
request from the local franchising authority based on its receipt of two or more
subscriber complaints. The 1996 Telecom Act eliminated CPST rate regulation as
of March 31, 1999. Premium programming offered on a per-channel or pay-per-view
basis has always been exempt from rate regulation. New product tiers consisting
of services new to the cable system can be created free of rate regulation as
long as certain conditions are met, such as not moving services from existing
tiers to the new tier.
Existing regulations require cable television systems to permit customers
to purchase video programming on a per channel or a per program basis without
the necessity of subscribing to any tier of service, other than the basic
service tier, unless the cable television system is technically incapable of
doing so. Generally, this exemption from compliance with the statute for cable
television systems that do not have such technical capability is available until
a cable television system obtains the capability, but not later than December
2002.
CARRIAGE OF BROADCAST TELEVISION SIGNALS
The 1992 Cable Act contains signal carriage requirements which allow
commercial television broadcast stations that are "local" to a cable television
system (i.e., the system is located in the station's area of dominant influence)
to elect every three years whether to require the cable television system to
carry the station, subject to certain exceptions, or whether the cable
television system will have to negotiate for "retransmission consent" to carry
the station. The next election between must-carry and retransmission consent
will be October 1, 1999. A cable television system is generally required to
devote up to one-third of its activated channel capacity for the carriage of
local commercial television stations whether pursuant to the mandatory carriage
requirements or retransmission consent requirements of the 1992 Cable Act. Local
non-commercial television stations are also given mandatory carriage rights,
subject to certain exceptions, on cable systems with the principal headend
located within the larger of: (i) a 50-mile radius from the station's city of
license; or (ii) the station's Grade B contour (a measure of signal strength).
Unlike commercial stations,
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noncommercial stations are not given the option to negotiate retransmission
consent for the carriage of their signal. In addition, cable television systems
have to obtain retransmission consent for the carriage of all "distant"
commercial broadcast stations, except for certain "superstations" (i.e.,
commercial satellite-delivered independent stations such as WGN). To date,
compliance with the "retransmission consent" and "must carry" provisions of the
1992 Cable Act has not had a material effect on the Company, although this
result may change in the future depending on such factors as market conditions,
channel capacity and similar matters when such arrangements are renegotiated.
The FCC has initiated a rulemaking proceeding on the carriage of television
signals in high definition and digital formats. The outcome of this proceeding
could have a material effect on the number of services that a cable operator
will be required to carry.
RENEWAL OF FRANCHISES AND FRANCHISE FEES
The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. While these
formal procedures are not mandatory unless timely invoked by either the cable
television operator or the franchising authority, they can provide substantial
protection to incumbent franchisees. Even after the formal renewal procedures
are invoked, franchising authorities and cable television operators remain free
to negotiate a renewal outside the formal process. Nevertheless, renewal is by
no means assured, as the franchisee must meet certain statutory standards. Even
if a franchise is renewed, a franchising authority may impose new and more
onerous requirements such as upgrading cable-related facilities and equipment
and complying with voluntary commitments, although the municipality must take
into account the cost of meeting such requirements. In the case of franchises in
effect prior to the effective date of the 1984 Cable Act, franchising
authorities may enforce requirements contained in the franchise relating to
facilities, equipment and services, whether or not cable-related. The 1984 Cable
Act, under certain limited circumstances, permits a cable operator to obtain
modifications of franchise obligations. Franchises have generally been renewed
for cable television operators that have provided satisfactory services and have
complied with the terms of their franchises. Historically, the Company has not
experienced any material problems renewing its franchises for its cable
television systems. The Company is not aware of any current or past material
failure on its part to comply with its franchise agreements. The Company
believes that it has generally complied with the terms of its franchises and has
provided quality levels of service.
The 1992 Cable Act makes several changes to the process under which a cable
television operator seeks to enforce his renewal rights which could make it
easier in some cases for a franchising authority to deny renewal. Franchising
authorities may consider the "level" of programming service provided by a cable
television operator in deciding whether to renew. For alleged franchise
violations occurring after December 29, 1984, franchising authorities are no
longer precluded from denying renewal based on failure to substantially comply
with the material terms of the franchise where the franchising authority has
"effectively acquiesced" to such past violations. Rather, the franchising
authority is estopped if, after giving the cable television operator notice and
opportunity to cure, it fails to respond to a written notice from the cable
television operator of its failure or inability to cure. Courts may not reverse
a denial of renewal based on procedural violations found to be "harmless error."
Franchising authorities may generally impose franchise fees of up to 5% of
a cable television system's annual gross revenues, excluding revenues derived
from telecommunications services. However, they may be able to exact some
compensation for the use of public rights-of-way.
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<PAGE> 70
CHANNEL SET-ASIDES
The 1984 Cable Act permits local franchising authorities to require cable
television operators to set aside certain television channels for public,
educational and governmental access programming. The 1984 Cable Act further
requires cable television systems with thirty-six or more activated channels to
designate a portion of their channel capacity for commercial leased access by
unaffiliated third parties to provide programming that may compete with services
offered by the cable television operator. The 1992 Cable Act requires leased
access rates to be set according to a formula determined by the FCC.
COPYRIGHT MATTERS
Cable systems must obtain copyright licenses for programming and television
signals they carry. Copyright authority for programming on non-broadcast
networks typically is obtained from the networks in question, and copyright
authority for programming originated locally by the cable system must be
obtained directly from copyright holders. The Copyright Act provides a blanket
license for copyrighted material on television stations whose signals a cable
system retransmits. Cable operators can obtain this license by filing
semi-annual reports and paying a percentage of their revenues as a royalty fee
to the U.S. Copyright Office, which then distributes the royalty pool to
copyright holders. For larger cable systems, these payments vary with the
numbers and type of distant television stations the system carries. From time to
time, Congress considers proposals to alter the blanket copyright license, some
of which could make the license more costly.
STATE AND LOCAL REGULATION
Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. The terms and conditions of franchises vary materially
from jurisdiction to jurisdiction. Franchises generally contain provisions
governing fees to be paid to the franchising authority, length of the franchise
term, renewal, sale or transfer of the franchise, territory of the franchise,
design and technical performance of the system, use and occupancy of public
streets and number and types of cable television services provided. The 1992
Cable Act prohibits exclusive franchises, and allows franchising authorities to
regulate customer service and rates. Franchising authorities may operate their
own multichannel video distribution system without a franchise. States and local
franchising authorities may adopt certain restrictions on cable television
systems ownership. See "Risk Factors -- Risks Relating To The Cable Television
Industry -- The Cable Television Industry is Heavily Regulated."
The foregoing does not purport to describe all present and proposed
federal, state and local regulations and legislation relating to the cable
television industry, some of which are subject to judicial and legislative
review and change, and their impact on the cable television industry or the
Company cannot be predicted at this time.
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<PAGE> 71
MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers and other key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Louis J. Appell, Jr................... 74 Chairman of the Board of Directors
Peter P. Brubaker..................... 52 Director, Chief Executive Officer and
President
Craig W. Bremer....................... 50 Director, Secretary and General
Counsel
William H. Simpson.................... 57 Director
John L. Finlayson..................... 57 Director and Vice President
Alan L. Brayman....................... 47 Treasurer
David E. Kennedy...................... 46 Director and Vice President
James D. Munchel...................... 44 Senior Vice President/Operations,
Susquehanna Cable
</TABLE>
Louis J. Appell, Jr. is the Chairman of the Board of Directors of
Susquehanna Media, a position he has held since 1993. He is also Director,
President and Chief Executive Officer of Susquehanna Pfaltzgraff. He has over
fifty years of experience in the communications industry. Mr. Appell holds a BA
degree from Harvard College.
Peter P. Brubaker is a Director, Chief Executive Officer and President of
Susquehanna Media. He has been a director and officer of Susquehanna Media since
1993. Prior to 1995, Mr. Brubaker was Vice President/Finance of Susquehanna
Pfaltzgraff. He joined Susquehanna Pfaltzgraff in 1977 and assumed
responsibility for the cable operations in 1979. He holds a BA degree from
Wesleyan University and an MBA degree from the Harvard Business School. Mr.
Brubaker serves as a director of the National Cable Television Association.
Craig W. Bremer is a Director and the Secretary and General Counsel of
Susquehanna Media, positions he has held since 1993. He is also the Secretary of
Susquehanna Pfaltzgraff. Mr. Bremer has been employed by Susquehanna Pfaltzgraff
since 1978. Prior to joining Susquehanna Pfaltzgraff, Mr. Bremer was an
associate with the law firm of Beckley & Madden, Harrisburg, Pennsylvania. He
holds a JD degree from Dickinson School of Law and is a member of the
Pennsylvania Bar. He earned a BS degree in History from Washington & Lee
University.
William H. Simpson has been a Director of Susquehanna Media since 1993. He
has been employed by Susquehanna Pfaltzgraff or an affiliated corporation since
1971 and was promoted to his current position as President of The Pfaltzgraff
Co. in 1988. He was formerly Vice President and General Counsel of Susquehanna
Pfaltzgraff from 1971 to 1981. Mr. Simpson is a graduate of the United States
Air Force Academy and Harvard Law School.
John L. Finlayson is a Director and Vice President of Susquehanna Media and
the Chief Financial Officer of Susquehanna Pfaltzgraff, where he has been
employed since 1978. He has been a Vice President of Susquehanna Media since
1993. Prior to 1978, Mr. Finlayson was an audit manager with Arthur Andersen &
Co. He is a CPA and a graduate of Franklin and Marshall College.
Alan L. Brayman is the Treasurer of Susquehanna Media. He is also Vice
President, Treasury Operations, of Susquehanna Pfaltzgraff. Mr. Brayman joined
the Company in February 1998. Prior to that, he was a principal of Global
Treasury Solutions from 1996 through January 1998. Mr. Brayman was also
Assistant Treasurer and an officer of VF Corporation, an apparel manufacturer,
from January 1993 to December 1995. Prior to that, Mr. Brayman was employed by
Armstrong World Industries Inc., a diversified manufacturer, from 1973 to 1992,
where he was Assistant Treasurer.
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<PAGE> 72
Mr. Brayman is a graduate of the University of Delaware and has an MBA from
Shippensburg University.
David E. Kennedy is a Director and a Vice President of Susquehanna Media.
He has also been President of Susquehanna Radio since 1993. Mr. Kennedy joined
the Company in 1973 as an on-air personality of the Company's former Toledo,
Ohio station. He has held positions in programming, planning and research during
his career. Mr. Kennedy is a graduate of the University of Toledo and holds
masters and doctoral degrees from Bowling Green State University. He serves as a
director of the Radio Advertising Bureau and as a director of the National
Association of Broadcasters.
James D. Munchel is Senior Vice President/Operations for Susquehanna Cable.
Mr. Munchel oversees the operations of all Susquehanna Cable systems. He joined
the Company in 1981 and was promoted to General Manager of the York cable system
in 1986. Mr. Munchel was promoted to his current position in 1993. He is a
graduate of Shippensburg University.
BOARD COMPOSITION
Our by-laws provide that the number of directors shall not be less than
three nor more than seven and may be fixed from time to time by resolution of
our board of directors. Our board is currently comprised of six directors. All
members of our board of directors are elected annually by our parent,
Susquehanna Pfaltzgraff.
DIRECTOR COMPENSATION
Susquehanna Media does not compensate its directors for services provided
in that capacity.
EXECUTIVE SERVICES AND COMPENSATION
Susquehanna Media has no employees. All of the executive officers of
Susquehanna Media are also executive officers of Susquehanna Pfaltzgraff, our
parent company. Prior to and following the issuance of the exchange notes,
Susquehanna Pfaltzgraff paid all compensation of Susquehanna Media's executive
officers under a management agreement between Susquehanna Media and Susquehanna
Pfaltzgraff. Under that agreement, Susquehanna Media pays a fee to Susquehanna
Pfaltzgraff for executive office space, services of the legal department and
management services, including compensation for the services rendered to
Susquehanna Media by the executive officers of Susquehanna Pfaltzgraff. Under
the agreement, Susquehanna Media paid a management fee in the amount of $2.7
million in 1998. As executive officers of Susquehanna Pfaltzgraff, the executive
officers of Susquehanna Media will continue to render services to Susquehanna
Pfaltzgraff and its other subsidiaries in addition to Susquehanna Media. See
"Certain Transactions -- Related Party Transactions."
BENEFIT PLANS
Susquehanna Media does not maintain any employee benefit plans. Susquehanna
Pfaltzgraff maintains various employee benefit plans in which the employees of
the Company participate. The Company compensates Susquehanna Pfaltzgraff for
participation by its employees in the employee benefit plans maintained by
Susquehanna Pfaltzgraff, including:
- an employee stock ownership plan;
- a 401(k) plan;
- health, disability and life insurance plans; and
- supplemental executive retirement plans for senior and executive
management.
Susquehanna Radio Corp. maintains an employee stock purchase/option plan
covering key employees, and Susquehanna Cable Co. maintains a performance share
plan covering key employees.
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<PAGE> 73
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, Susquehanna Media's
charter eliminates personal liability of Susquehanna Media's directors to
Susquehanna Media and its stockholders for monetary damages for breaches of
fiduciary duty except for:
- any breach of the director's duty of loyalty to Susquehanna Media or its
shareholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- any transaction from which the director derived an improper personal
benefit; and
- acts covered by Section 174 of the Delaware General Corporation Law
relating to unlawful dividends or distributions or stock repurchases or
redemptions.
As a result of these provisions, Susquehanna Media and its stockholders may be
unable to obtain monetary damages from a director for breach of his fiduciary
duties.
Susquehanna Media's by-laws require Susquehanna Media to indemnify
directors and officers to the extent permitted under the Delaware General
Corporation Law. As permitted by the Delaware General Corporation Law, the
by-laws provide for indemnification of the Company's directors and officers
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by them in connection with any
action, suit or proceeding if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful.
Susquehanna Pfaltzgraff maintains insurance covering expenditures that may
be incurred in connection with the lawful indemnification of the Company's
directors and officers for their liabilities and expenses.
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<PAGE> 74
BENEFICIAL OWNERSHIP OF SUSQUEHANNA MEDIA
AND SUSQUEHANNA PFALTZGRAFF
SUSQUEHANNA MEDIA
We have the authority under our charter to issue 1,100,000 shares of common
stock, par value $1.00 per share, and 110,000 shares of 7% cumulative preferred
voting stock, par value $100.00 per share. We currently have outstanding
1,100,000 shares of common stock and 70,499.22 shares of preferred stock. The
holders of our preferred stock are entitled to an annual cumulative preferential
dividend of $7.00 per share. After payment of the preferred stock dividend,
holders of our preferred stock do not participate in dividends on our common
stock. In the event of a liquidation of our company, our preferred stockholders
are entitled to a $100.00 liquidation preference and any accrued and unpaid
preferred stock dividends. Thereafter, only common stockholders are entitled to
distributions. Our preferred stock is not convertible into our common stock. The
holders of our preferred stock and common stock vote together as one class on
all matters voted upon by our stockholders. Both classes receive one vote per
share.
All of the outstanding common stock of Susquehanna Media is owned by our
parent, Susquehanna Pfaltzgraff. The following table sets forth certain
information regarding the beneficial ownership of our preferred stock as of June
1, 1999 by (1) each of our directors and executive officers, (2) all of our
directors and executive officers as a group and (3) each person (or group of
affiliated persons) known by us to beneficially own more than 5% of our
outstanding preferred stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
--------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
- --------------------------- --------- -------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Louis J. Appell, Jr.(2)..................................... 5,095.98 7.2%
Peter P. Brubaker........................................... 793.77 1.1%
Craig W. Bremer............................................. -- --
William H. Simpson.......................................... -- --
John L. Finlayson........................................... -- --
Alan L. Brayman............................................. -- --
David E. Kennedy............................................ -- --
All directors and executive officers as a group (7
persons).................................................. 5,889.75 8.3%
OTHER 5% HOLDERS
Louis J. Appell, III(3)..................................... 7,513.71 10.7%
Helen F. Appell, II(4)...................................... 7,513.71 10.7%
Barbara F. Appell(5)........................................ 7,513.71 10.7%
Walter M. Norton(6)......................................... 32,085.41 45.5%
</TABLE>
- ---------------
(1) Unless otherwise indicated, each person has sole voting and investment power
with respect to the preferred shares shown as beneficially owned by such
person.
(2) Shares held by Louis J. Appell, Jr. and Josephine S. Appell, as trustees of
the Louis J. Appell, Jr. revocable trust. Address is 140 East Market Street,
York, PA 17401.
(3) Address is 1331 Via Colonna Terrace, Davis, CA 95616.
(4) Address is 1700 Powder Mill Road, York, PA 17403.
(5) Address is 306 West Princess Street, York, PA 17404.
(6) Of these shares, (a) 8,324.26 are held jointly with Helen A. Norton; (b)
5,109.81 are held individually; (c) 277.48 are held by Helen A. and Walter
M. Norton as trustees of the
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<PAGE> 75
Helen A. Norton revocable trust; and (d) 18,373.86 are held in trust by
Walter M. Norton. Address is RFD #1, Box 59, South Harpswell, ME 04079.
SUSQUEHANNA PFALTZGRAFF
Susquehanna Pfaltzgraff has the authority under its charter to issue
40,000,000 shares of common stock, par value $.01 per share, 50,000,000 shares
of ESOP common stock, par value $.01 per share, and 10,000,000 shares of Class A
nonvoting common stock, par value $.01 per share. We currently have outstanding
18,251,601 shares of common stock, 6,702,146 shares of ESOP common stock and
2,301,955 shares of Class A nonvoting common stock. The holders of the ESOP
common stock are entitled to an annual cumulative preferential dividend of
approximately $1.05 per share. After payment of the ESOP common stock dividend,
the ESOP common stock, the common stock and the Class A nonvoting common stock
share equally and ratably on a share for share basis in dividends. In the event
of a liquidation of Susquehanna Pfaltzgraff, the holders of ESOP common stock
are entitled to the payment of all accrued and unpaid dividends before any
distributions to holders of common stock or Class A common stock. Thereafter,
all three classes of stock share in distributions on a pro rata basis. Except as
required by law, the holders of Class A nonvoting common stock have no voting
rights. Each share of common stock and ESOP common stock is entitled to one vote
on all matters submitted to a vote of stockholders.
The following table sets forth certain information regarding the beneficial
ownership of Susquehanna Pfaltzgraff's common stock, ESOP common stock and Class
A nonvoting common stock as of June 1, 1999 by (1) each of our directors and
executive officers, (2) all of our directors and executive officers as a group
and (3) each person (or group of affiliated persons) known by us to beneficially
own more than 5% of our outstanding common stock.
<TABLE>
<CAPTION>
PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
NUMBER OF OF ESOP OF ESOP CLASS A OF CLASS A
COMMON COMMON COMMON COMMON COMMON COMMON
SHARES SHARES SHARES SHARES SHARES SHARES TOTAL
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY VOTING
NAME OF BENEFICIAL OWNER(1) OWNED OWNED OWNED OWNED OWNED OWNED POWER
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS AND
EXECUTIVE OFFICERS
Louis J. Appell, Jr.(2)........ -- -- -- -- 1,252,900 54.4% --
William H. Simpson(2).......... -- -- -- -- 426,085 18.5% --
Peter P. Brubaker(2)........... -- -- -- -- 311,485 13.5% --
John L. Finlayson(2)........... -- -- -- -- 311,485 13.5% --
Craig W. Bremer(2)............. -- -- -- --
Alan L. Brayman(2)............. -- -- -- --
David E. Kennedy(2)............ -- -- -- --
Officers and directors as a
group (7 persons)............ -- -- -- -- 2,301,955 100.0% --
OTHER 5% HOLDERS
Louis J. Appell Trusts(3)...... 16,824,300 92.2% -- -- -- -- 67.4%
Susquehanna Pfaltzgraff
ESOP(4)...................... -- -- 6,702,146 100.0% -- -- 26.9%
</TABLE>
- ---------------
(1) Unless otherwise indicated, each person has sole voting and investment power
with respect to the shares shown as beneficially owned by such person.
(2) All addresses are 140 East Market Street, York, PA 17401.
(3) Includes shares held as follows: (a) Louis J. Appell residuary trust for the
benefit of Louis J. Appell, Jr. (5,861,800 shares); (b) Louis J. Appell
residuary trust for the benefit of Helen A. Norton (5,968,900 shares); and
(c) Louis J. Appell residuary trust for the benefit of George N. Appell and
his descendants (4,993,600 shares). Addresses for each trust are 140 East
Market Street, York, PA 17401.
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<PAGE> 76
(4) Held of record by State Street Bank and Trust Co., as trustee of the
Susquehanna Pfaltzgraff Co. Employee Stock Ownership Plan. Address is P.O.
Box 1521, Boston, MA 02104-9818.
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<PAGE> 77
CERTAIN TRANSACTIONS
RELATED PARTY TRANSACTIONS
Susquehanna Pfaltzgraff, the parent company of Susquehanna Media, provides
the Company with management services, executive office space and services of the
legal department. Under an agreement between Susquehanna Pfaltzgraff and
Susquehanna Media, the Company paid a management fee for such services in 1998
in the amount of $2.7 million. Susquehanna Pfaltzgraff also provides to the
Company, at cost, accounting and tax services, human resources services,
treasury services and administrative services. For such services in 1998, the
Company paid Susquehanna Pfaltzgraff an aggregate of $2.0 million.
Certain direct and indirect subsidiaries of Susquehanna Media lease three
office properties and one broadcast tower under lease agreements with L.A.B.
Realty Company ("LAB"). The aggregate amount paid to LAB under such agreements
in 1998 was approximately $355,000. LAB is owned directly and indirectly by
Louis J. Appell, Jr., Chairman of Susquehanna Media, his siblings, certain
members of their families and trusts of which such persons or members of their
families are trustees or beneficiaries. Mr. Appell and John L. Finlayson are
officers and directors of both LAB and Susquehanna Media. Craig W. Bremer is an
officer of LAB and an officer and director of Susquehanna Media.
An indirect subsidiary of Susquehanna Media leases vehicles and equipment
from Queen Street Leasing. Susquehanna Radio leases a studio property from G-III
Partners. The Company paid Queen Street Leasing and G-III Partners approximately
$45,000 and $176,000, respectively, in 1998 under such leases. Queen Street
Leasing and G-III Partners are limited partnerships owned directly and
indirectly by Mr. Appell, his siblings, certain members of their families and
trusts of which such persons or members of their families are trustees or
beneficiaries. An indirect subsidiary of Susquehanna Media pays an aggregate
monthly amount of $5,357 to three members of the Appell family under separate
agreements for salary, consulting and rent. The Company paid such individuals an
aggregate of $64,284 in 1998.
Susquehanna Media and certain of its subsidiaries have entered into a Tax
Sharing Agreement with Susquehanna Pfaltzgraff, The Pfaltzgraff Co. and certain
subsidiaries of The Pfaltzgraff Co. for the payment of federal income tax
returns on a consolidated basis. The Tax Sharing Agreement establishes a method
for the computation, collection and payment of taxes by Susquehanna Pfaltzgraff
and the contribution to such payment by the Company and The Pfaltzgraff Co.
Upon completion of the offering of the outstanding notes, the Company
loaned $116.9 million to Susquehanna Pfaltzgraff, which it then loaned to its
newly formed employee stock ownership plan. The ESOP used the proceeds of the
loan to purchase approximately $116.9 million of Susquehanna Pfaltzgraff's
common stock from trusts for the benefit of Mr. Appell, his siblings and certain
members of their families. Employees of the Company will participate in the
ESOP. The loan to Susquehanna Pfaltzgraff bears interest at a per annum rate of
6.0%, and the Company expects the loan to be repaid in annual installments of
principal and interest.
Susquehanna Media has outstanding 70,499.22 shares of voting preferred
stock, $100 par value per share. The holders of the preferred stock are entitled
to a cumulative annual dividend of 7.0%. The total amount of dividends paid on
the preferred stock in 1998 was $634,769. The preferred stock is held by certain
members of Mr. Appell's family, trusts of which such persons are trustees or
beneficiaries and Peter P. Brubaker. The holders of the preferred stock have no
right to require Susquehanna Media to redeem their preferred stock.
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<PAGE> 78
THE LENFEST AGREEMENT
Pursuant to an agreement among Lenfest Communications, Inc. ("Lenfest"),
Susquehanna Cable and certain of its subsidiaries (as amended, the "Lenfest
Agreement"), Lenfest holds minority ownership interests equal to 15.0% of
Susquehanna Cable and 17.75% of each of its principal operating subsidiaries.
Lenfest is currently 50% owned by AT&T and 50% owned by H.F. Lenfest and members
of his family. The ownership interests were acquired by Lenfest in exchange for
capital contributions of $11.0 million in cash in May 1993 and cable television
systems in December 1993 valued at $14.0 million. The cable systems are located
in Red Lion and Mount Wolf, Pennsylvania and are now part of the York system.
Under the Lenfest Agreement, Susquehanna Cable may acquire cable programming and
cable equipment at AT&T rates. The Company estimates that the favorable
programming rates saved the Company at least $2.0 million in 1998.
The Lenfest Agreement provides for a right of first refusal whereby neither
Lenfest nor Susquehanna Cable may sell its ownership interests without offering
them first to the other party. In addition, Susquehanna Cable may not sell any
cable television systems without offering them first to Lenfest. If Susquehanna
Cable decides to sell the assets of a cable system and Lenfest does not exercise
its right of first refusal, Susquehanna Cable must offer to repurchase Lenfest's
shares in the subsidiary that is selling assets.
The Lenfest Agreement contains a buy-sell provision granting Susquehanna
Media, Susquehanna Cable or Lenfest the right to make an offer to purchase the
other party's ownership interests in Susquehanna Cable and its subsidiaries. If
such an offer is made and rejected, the party to whom the offer was made is then
obligated to purchase the offering party's ownership interests in Susquehanna
Cable and its subsidiaries on the same terms and conditions. If the Company
purchases Lenfest's interests pursuant to the buy-sell agreement, Lenfest is
entitled to receive a fee equal to 3.0% of Lenfest's original $25.0 million
investment compounded annually. This fee is not payable if Lenfest buys
Susquehanna Cable's interests. If the buy-sell provision has not been triggered
by December 1, 2000, Susquehanna Cable may pay Lenfest a fee equal to 1.5% of
Lenfest's original investment compounded annually and have no further
obligations under the fee arrangement. The buy-sell provision will, however,
remain in place.
The Lenfest Agreement grants Lenfest the right to resell to the Company
(the "Put Right") all of its ownership interests in Susquehanna Cable and its
subsidiaries for a three-year period beginning 18 months after the closing on
the new senior credit facility. The Put Right may not be exercised during any
period when a default exists under the new senior credit facility or if
consummation of the Put Right would create a default under the new senior credit
facility or under the covenant described under "Description of the
Notes -- Certain Covenants -- Limitation of Indebtedness." The value of
Lenfest's ownership interests in Susquehanna Cable and its subsidiaries upon
exercise of the Put Right would be the average of the values determined by two
independent appraisers with expertise in the cable industry. In exchange for its
ownership interests upon exercise of the Put Right, Lenfest would receive cash
up to the amount of borrowing availability under the new senior credit facility
and would receive a note for the balance, so long as the issuance of such note
would comply with the terms of the new senior credit facility and the covenant
described above. Upon Lenfest's exercise of the Put Right, the Company would
have the right, in its sole discretion and in lieu of acquiring Lenfest's
ownership interests, to sell Susquehanna Cable and its subsidiaries to a third
party and Lenfest would receive a pro rata share of the proceeds of such sale.
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<PAGE> 79
DESCRIPTION OF CERTAIN INDEBTEDNESS
GENERAL
The Company recently entered into a new $450 million senior credit facility
with a group of financial institutions arranged by First Union Capital Markets
Corp. and for which First Union National Bank serves as agent. The new senior
credit facility is comprised of a $250 million reducing revolving credit
facility (the "Revolver"), a $100 million amortizing term loan A ("Term Loan
A"), and a $100 million amortizing term loan B ("Term Loan B"). The Company used
borrowings under the new senior credit facility, together with the net proceeds
from the offering of the outstanding notes, to repay in full outstanding
indebtedness under its old senior credit facility and to make a $116.9 million
loan to Susquehanna Pfaltzgraff to fund its ESOP.
The new senior credit facility is secured by substantially all of the
Company's assets (excluding real property) and by all of the voting common stock
of Susquehanna Media and its direct and indirect subsidiaries. Such subsidiaries
also guaranteed the new senior credit facility.
Interest on the Revolver and Term Loan A is payable at rates per annum
equal to, at the Company's option: (1) a base rate (the "Base Rate") equal to
the higher of (a) First Union National Bank's prime rate or (b) 0.50% plus the
overnight federal funds rate, plus 0% to 1.25% depending on the Company's
leverage ratio or (2) the London Interbank Offered Rate ("LIBOR") plus 0.875% to
2.50% depending on the leverage ratio. Interest on Term Loan B will be payable
at a rate per annum equal to LIBOR plus 2.50% to 2.75% depending on the
Company's leverage ratio, or the Base Rate plus 1.25% to 1.50% depending on the
leverage ratio. The Company may also access the new senior credit facility
through letters of credit. The Company will pay certain customary fees in
connection with maintenance of the new senior credit facility.
The Revolver and Term Loan A amortize quarterly at variable rates beginning
in 2002 until maturity on June 30, 2007 as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR ANNUAL REDUCTION % AMORTIZATION
- ------------- ---------------- --------------
<S> <C> <C>
2002........................... $ 28,000,000 8%
2003........................... 56,000,000 16%
2004........................... 70,000,000 20%
2005........................... 70,000,000 20%
2006........................... 84,000,000 24%
2007........................... 42,000,000 12%
------------ ---
$350,000,000 100%
</TABLE>
Term Loan B amortizes quarterly at a rate of 1% per year beginning June 30, 2002
until June 30, 2007, with the remaining balance of $95.0 million then amortizing
in equal quarterly installments until maturity on June 30, 2008.
Base Rate loans under the new senior credit facility may be prepaid at any
time without a premium or penalty. LIBOR loans may be prepaid prior to the end
of the applicable interest period upon the Company's reimbursement of breakage
costs.
COVENANTS AND EVENTS OF DEFAULT
The new senior credit facility restricts the ability of the Company to:
- incur additional indebtedness,
- make investments,
- incur liens,
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- acquire new lines of business, whether related or unrelated,
- make payments to stockholders in the form of dividends, loans, advances
or redemptions of stock (other than a loan or dividend to Susquehanna
Pfaltzgraff to fund its ESOP within 60 days of closing not to exceed $120
million or other payments not to exceed a basket of $10 million plus 5%
of EBITDA (as defined) beginning January 1, 1999), or issue capital
stock,
- consolidate, merge or sell all or any substantial part of its assets,
- change its business, and
- pay management fees to Susquehanna Pfaltzgraff.
The Company is also required to comply with certain financial tests and
maintain certain financial ratios. These financial tests and ratios include
requirements to maintain:
- a maximum Consolidated Total Leverage Ratio,
- a maximum Consolidated Senior Leverage Ratio,
- a minimum Interest Coverage Ratio,
- a minimum Debt Service Coverage Ratio, and
- a minimum Fixed Charge Coverage Ratio (in each case as defined in the new
senior credit facility).
The new senior credit facility also includes customary events of default.
An event of default under the new senior credit facility permits the lenders to
accelerate (or, in certain events, triggers an automatic acceleration of) the
maturity of the indebtedness under the new senior credit facility, may result in
cross defaults under other debt of the Company, including the notes, and may
restrict the ability of the Company to meet its obligations under the notes. A
default on the notes constitutes an event of default under the new senior credit
facility.
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DESCRIPTION OF THE EXCHANGE NOTES
We issued the outstanding notes and will issue the exchange notes under an
Indenture dated May 12, 1999, among us and Chase Manhattan Trust Company,
National Association, as Trustee. The terms of the exchange notes include those
stated in the Indenture and those made a part of the Indenture by reference to
the Trust Indenture Act of 1939 (the "TIA").
Key terms used in this section are defined under "--Certain Definitions."
When we refer to "Notes" in this section, we mean the exchange notes and also
the outstanding notes and any Additional Notes.
WE SUMMARIZE BELOW CERTAIN PROVISIONS OF THE INDENTURE, BUT DO NOT RESTATE
THE INDENTURE IN ITS ENTIRETY. WE URGE YOU TO READ THE INDENTURE BECAUSE IT, AND
NOT THIS DESCRIPTION, DEFINES YOUR RIGHTS AS A HOLDER OF THE NOTES. YOU CAN
OBTAIN A COPY OF THE INDENTURE IN THE MANNER DESCRIBED UNDER "AVAILABLE
INFORMATION."
GENERAL
The exchange notes will be issued solely in exchange for an equal principal
amount of outstanding notes pursuant to the exchange offer. The form and terms
of the exchange notes will be identical in all material respects to the form and
terms of the outstanding notes except that (i) the exchange notes will have been
registered under the Securities Act and (ii) the registration rights and
contingent liquidated damages provisions applicable to the outstanding notes are
not applicable to the exchange notes.
The Notes are general unsecured senior subordinated obligations of
Susquehanna Media. This means that the Notes are subordinate to Senior
Indebtedness of Susquehanna Media and rank equal or prior to other Indebtedness
of Susquehanna Media. In addition, the Notes are effectively subordinated to
secured Indebtedness of Susquehanna Media to the extent of the assets securing
such Indebtedness and to all Indebtedness of Susquehanna Media's subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
Susquehanna Media will issue exchange notes in denominations of $1,000 and
integral multiples of $1,000. The Notes will be limited to $250.0 million in
principal amount, of which $150.0 million are being offered hereby, and will
mature on May 15, 2009.
Interest on the Notes will accrue at the rate of 8 1/2% per annum and will
be payable semi-annually in arrears on each May 15 and November 15, commencing
on November 15, 1999. Payments will be made to the persons who are registered
Holders at the close of business on May 1 and November 1, respectively,
immediately preceding the applicable interest payment date. 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 and including the date of issuance. The Notes
will not be entitled to the benefit of any mandatory sinking fund. The
redemption of Notes with unpaid and accrued interest to the date of redemption
will not affect the right of Holders of record on a record date to receive
interest due on an interest payment date.
Initially, the Trustee will act as Paying Agent and Registrar for the
Notes. Susquehanna Media may change the Paying Agent and Registrar without
notice to Holders. If a Holder has given wire transfer instructions to the
Paying Agent, the Paying Agent will make all principal, premium, if any, and
interest payments on those Notes in accordance with those instructions. All
other payments on the Notes will be made at the office or agency of the Paying
Agent and Registrar in New York City unless Susquehanna Media elects to cause
the Paying Agent to make interest payments by check mailed to the registered
Holders at their registered addresses.
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ADDITIONAL NOTES
Subject to the limitations set forth under "-- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness," Susquehanna
Media may incur additional Indebtedness which, at its option, may consist of
additional Notes, in one or more series, having identical terms as outstanding
notes issued on the Issue Date or exchange notes (the "Additional Notes").
Holders of such Additional Notes will have the right to vote together with
Holders of Notes issued on the Issue Date and the exchange notes as one class.
No offering of any such Additional Notes is being or shall be deemed to be made
by this offering memorandum. In addition, there can be no assurance as to when
or whether Susquehanna Media will issue any such Additional Notes or as to the
aggregate principal amount of such Additional Notes.
BOOK-ENTRY; DELIVERY AND FORM
The exchange notes will be issued in the form of a global note (the "Global
Note"). The Global Note will be deposited with, or on behalf of, DTC and
registered in the name of DTC or its nominee. Except as set forth below, the
Global Note may be transferred in whole and not in part, only to DTC or another
nominee of DTC. Investors may hold their beneficial interests in the Global Note
directly through DTC if they have an account with DTC or indirectly through
organizations which have accounts with DTC.
Exchange notes that are issued as described below under "-- Certificated
Exchange Notes" will be issued in definitive form. Upon the transfer of an
exchange note in definitive form, such exchange note will, unless the Global
Note has previously been exchanged for exchange notes in definitive form, be
exchanged for an interest in the Global Note representing the principal amount
of exchange notes being transferred.
Certain Book-Entry Procedures for the Global Note
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel Bank set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. The
Company takes no responsibility for these operations or procedures, and
investors are urged to contact the relevant system or its participants directly
to discuss these matters.
DTC has advised the Company that it is:
- a limited purpose trust company organized under the laws of the State
of New York,
- a "banking organization" within the meaning of the New York Banking
Law,
- a member of the Federal Reserve System,
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended and
- a "clearing agency" registered pursuant to Section 17A of the Exchange
Act.
DTC was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. DTC's Participants include securities brokers and
dealers (including the initial purchasers of the outstanding notes), banks and
trust companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,
either
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directly or indirectly. Investors who are not Participants may beneficially own
securities held by or on behalf of DTC only through Participants or Indirect
Participants.
The Company expects that pursuant to procedures established by DTC
- upon deposit of the Global Note, DTC will credit the accounts of
Participants with an interest in the Global Note, and
- ownership of the exchange notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by
DTC (with respect to the interests of Participants) and the records of
Participants and the Indirect Participants (with respect to the
interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in exchange notes represented by a Global Note to pledge or transfer such
interest to persons or entities that do not participate in DTC's system, or to
otherwise take actions in respect of such interest, may be affected by the lack
of a physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the exchange notes represented by the Global Note for all purposes
under the Indenture. Except as provided below, owners of beneficial interests in
the Global Note will not be entitled to have exchange notes represented by such
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated notes, and will not be considered the
owners or holders thereof under the Indenture for any purpose, including with
respect to the giving of any direction, instruction or approval to the Trustee
thereunder. Accordingly, each holder owning a beneficial interest in the Global
Note must rely on the procedures of DTC and, if such holder is not a Participant
or an Indirect Participant, on the procedures of the Participant through which
such holder owns its interest, to exercise any rights of a holder of exchange
notes under the Indenture or such Global Note. The Company understands that
under existing industry practice, in the event that the Company requests any
action of holders of exchange notes, or a holder that is an owner of a
beneficial interest in the Global Note desires to take any action that DTC, as
the holder of such Global Note, is entitled to take, DTC would authorize the
Participants to take such action and the Participants would authorize holders
owning through such Participants to take such action or would otherwise act upon
the instruction of such holders. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of exchange notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such exchange notes.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal of or interest on the Global Note, will credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the Global Note as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Note held through such participants will be
governed by standing instructions and customary practices and will be the
responsibility of such participants. The Company will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global Note
for any Note or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests or for any other aspect of the
relationship between DTC and its participants or the relationship between such
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participants and the owners of beneficial interests in the Global Note owning
through such participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel Bank will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Cedel Bank participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel Bank,
as the case may be, by its respective depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel Bank,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel Bank, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel Bank
participants may not deliver instructions directly to the depositaries for
Euroclear or Cedel Bank.
Because of time zone differences, the securities account of a Euroclear or
Cedel Bank participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel Bank participant, during the securities
settlement processing day (which must be a business day for Euroclear and Cedel
Bank) immediately following the settlement date of DTC. Cash received in
Euroclear or Cedel Bank as a result of sales of interest in a Global Security by
or through a Euroclear or Cedel Bank participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel Bank cash account only as of the business day for
Euroclear or Cedel Bank following DTC's settlement date.
DTC, Euroclear and Cedel Bank are under no obligation to perform or to
continue to perform the foregoing procedures to facilitate transfers of
interests in the Global Note among participants in DTC, Euroclear and Cedel, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC, Euroclear or
Cedel Bank or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
The information in this prospectus concerning DTC, Euroclear and Cedel and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Certificated Exchange Notes
If
- the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered
as a clearing agency under the Exchange Act and a successor depositary
is not appointed within 90 days of such notice or cessation,
- the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of exchange notes in definitive form
under the Indenture, or
- upon the occurrence of certain other events as provided in the
Indenture,
then, upon surrender by DTC of the Global Note, certificated exchange notes in
definitive form in denominations of U.S. $1,000 and integral multiples thereof
will be issued to each person that DTC
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identifies as the beneficial owner of the Notes represented by the Global Note.
Upon any such issuance, the Trustee is required to register such certificated
exchange notes in the name of such person or persons (or the nominee of any
thereof) and cause the same to be delivered thereto. Subject to the foregoing,
the Global Note is not exchangeable, except for a Global Note of the same
aggregate denomination to be registered in the name of DTC or its nominee.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related exchange notes and the Company and the Trustee may conclusively rely
on, and shall be protected in relying on, instructions from DTC for all
purposes, including with respect to the registration and delivery, and the
respective principal amounts, of the exchange notes to be issued.
OPTIONAL REDEMPTIONS
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of Susquehanna Media prior to May 15, 2004. Beginning
May 15, 2004 the Notes will be redeemable in cash, at Susquehanna Media's
option, in whole or in part, upon 20 to 60 days' prior notice mailed to each
Holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest thereon to
the redemption date, if redeemed during the 12-month period commencing on May 15
of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ------ ----------------
<S> <C>
2004........................................................ 104.250%
2005........................................................ 102.833%
2006........................................................ 101.417%
2007 and thereafter......................................... 100.000%
</TABLE>
In addition, prior to May 15, 2002, Susquehanna Media, at its option, may
redeem up to 35.0% of the original principal amount of the Notes with the Net
Cash Proceeds of one or more Public Equity Offerings following which there is a
Public Market, at a redemption price (expressed as a percentage of principal
amount) of 108.50% of the aggregate principal amount so redeemed, plus accrued
and unpaid interest thereon to the redemption date; provided, that:
(1) after each such redemption at least 65.0% of the original
principal amount of the Notes must remain outstanding; and
(2) Susquehanna Media shall make each such redemption within 60 days
of the date of closing of the related Public Equity Offering.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, although no Note of
$1,000 in principal amount or less will be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note will
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note.
RANKING OF THE NOTES
The Indebtedness evidenced by the Notes will be senior subordinated,
unsecured obligations of Susquehanna Media. The payment of principal, premium,
if any, and interest on the Notes is subordinated in right of payment to the
prior payment of all existing and future Senior Indebtedness. In addition, if
and when any Guarantees are entered into, such Guarantees will be subordinated
to all Senior Indebtedness of any such Guarantors.
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Only Indebtedness of Susquehanna Media that is Senior Indebtedness will
rank senior to the Notes. The Notes will rank equal with or be senior to all
other Indebtedness of Susquehanna Media. Although the Indenture limits the
aggregate amount of additional Indebtedness that Susquehanna Media may incur,
the Indenture does not limit the amount of such Indebtedness that may be Senior
Indebtedness.
In the event of any distribution of the assets of Susquehanna Media upon a
liquidation, dissolution or reorganization of Susquehanna Media, the holders of
Senior Indebtedness will be entitled to receive payment in full of such Senior
Indebtedness before the Noteholders are entitled to receive any payment. Until
the Senior Indebtedness is paid, any payment to which Noteholders would be
entitled but for the subordination provisions of the Indenture will be made to
holders of such Senior Indebtedness. If a distribution is made to Noteholders
that, due to the subordination provisions, should not have been made to them,
such Noteholders are required to hold it in trust for the holders of Senior
Indebtedness and pay it over to them.
Notwithstanding anything herein to the contrary, Susquehanna Media may not
pay principal, premium, if any, or interest on the Notes or make any deposit
pursuant to the provisions described under "-- Defeasance" below if any
principal, interest, fees or other obligations in respect of Designated Senior
Indebtedness is not paid when due, unless the default has been cured or waived.
However, Susquehanna Media may pay the Notes without regard to the foregoing if
Susquehanna Media and the Trustee receive written notice approving such payment
from the representative of the Designated Senior Indebtedness. During the
continuance of any default (other than a default described in the first sentence
of this paragraph) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately, Susquehanna Media
may not pay the Notes for a period (a "Payment Blockage Period") commencing upon
the receipt by the Trustee (with a copy to Susquehanna Media) of written notice
(a "Blockage Notice") and ending 179 days thereafter (or earlier under certain
circumstances described in the Indenture). The Blockage Notice must be sent by a
representative of the holders of such Designated Senior Indebtedness and must
specify that a default has occurred and that the representative is electing to
effect a Payment Blockage Period. Subject to the first sentence of this
paragraph, unless the holders of such Designated Senior Indebtedness or the
representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, Susquehanna Media may resume payments on the Notes after
the end of such Payment Blockage Period. The Notes will not be subject to more
than one Payment Blockage Period in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness during
such period.
If payment of the Notes is accelerated because of an Event of Default,
Susquehanna Media will promptly notify the holders of Designated Senior
Indebtedness or the representative of such holders of the acceleration.
By reason of these subordination provisions, in the event of an insolvency,
bankruptcy, reorganization, or liquidation of Susquehanna Media, or upon the
occurrence of a Change of Control or an Asset Sale requiring repurchase by
Susquehanna Media of any Notes, there may not be sufficient assets remaining to
satisfy the claims of the Holders after satisfying the claims of creditors of
Susquehanna Media who are holders of Senior Indebtedness and claims of creditors
of Susquehanna Media's subsidiaries. See "Risk Factors -- Risk Factors Relating
to Our Indebtedness and the Notes -- The Notes Will Be Subordinated to Our
Senior Debt." As of June 30, 1999 after giving effect to the offering and the
refinancing, Susquehanna Media's Senior Indebtedness would have been $
million. Although the Indenture contains limitations on the amount of additional
Indebtedness that Susquehanna Media and its Restricted Subsidiaries may incur,
under certain circumstances the amount of such Indebtedness could be substantial
and, in any case, such
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Indebtedness may be Senior Indebtedness. See "-- Certain Covenants -- Limitation
on Indebtedness."
The terms of the subordination provisions described above will not apply to
money or the proceeds of U.S. government obligations held in trust by the
Trustee for the payment of principal of and interest on the Notes pursuant to
the provisions described under "-- Defeasance."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder will have the right
to require that Susquehanna Media repurchase such Holder's Notes at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest thereon to the purchase date. Any of the following events shall
constitute a "Change in Control":
(1) (A) the Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate of at least 50.1% of the total voting power of
the voting stock of Susquehanna Media or (B) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, is or becomes the "beneficial owner" (except that
for purposes of this clause (B) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 25% of the total
voting power of the voting stock of Susquehanna Media (for purposes of this
clause (1) the Permitted Holders shall be deemed to beneficially own any
voting stock of a corporation held by any other corporation so long as the
Permitted Holders beneficially own, directly or indirectly, in the
aggregate at least 50.1% of the voting power of the voting stock of such
other corporation);
(2) Susquehanna Media merges with or into another Person or sells or
disposes of all or substantially all of its assets to any Person, or any
Person merges with Susquehanna Media, in any such event pursuant to a
transaction in which the outstanding voting stock of Susquehanna Media is
converted into or exchanged for cash, securities or other property, other
than any such transaction where (A) the outstanding voting stock of
Susquehanna Media is converted into or exchanged for (i) voting stock
(other than Disqualified Stock) of the surviving or transferee corporation
and/or (ii) cash, securities or other property in an amount which could be
paid by Susquehanna Media as a Restricted Payment under the Indenture and
(B) immediately after such transaction no person or group (other than the
Permitted Holders) is the beneficial owner of 25% or more of the voting
power of the voting stock of the surviving or transferee corporation on a
fully diluted basis;
(3) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of Susquehanna
Media (together with any new directors whose election by such board of
directors or whose nomination for election by the shareholders of
Susquehanna Media was approved by a vote of 66 2/3% of the directors of
Susquehanna Media at the time of such approval 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 the board of directors then in office; or
(4) the liquidation or dissolution of Susquehanna Media.
Within 30 days following any Change of Control, Susquehanna Media will mail
a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require Susquehanna Media to purchase such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of purchase;
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(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which will be between 30 and 60 days from the
date such notice is mailed); and
(4) the instructions that a Holder must follow in order to have its
Notes purchased.
Susquehanna Media will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes upon a Change of
Control. To the extent that the provisions of any securities laws or regulations
conflict with Susquehanna Media's obligation to repurchase the Notes upon a
Change of Control, Susquehanna Media will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
under this covenant by virtue thereof.
Subject to the limitations discussed below, Susquehanna Media could, in the
future, enter into certain transactions that would not constitute a Change of
Control under the Indenture, but that could increase the amount of Indebtedness
outstanding at such time or otherwise affect Susquehanna Media's capital
structure or credit ratings. Restrictions on the ability of Susquehanna Media to
incur additional Indebtedness are contained in the covenant described under
"-- Certain Covenants -- Limitation on Indebtedness." Such restrictions can be
waived only with the consent of the Holders of a majority in principal amount of
the Notes then outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants or provisions
that may afford Holders protection in the event of a highly leveraged
transaction.
The Senior Credit Facility contains, and future Senior Indebtedness of
Susquehanna Media may contain, prohibitions on the occurrence of certain events
that would constitute a Change of Control or require such Senior Indebtedness to
be repaid or repurchased upon a Change of Control. Moreover, the exercise by the
Holders of their right to require Susquehanna Media to repurchase the Notes
would cause a default under the Senior Credit Facility and could cause a default
under such other Senior Indebtedness even if the Change of Control itself does
not, due to the financial effect of such repurchase on Susquehanna Media. If an
offer to purchase the Notes pursuant to a Change of Control is made, there can
be no assurance that Susquehanna Media will have available funds sufficient to
pay the Change of Control purchase price for all the Notes that might be
delivered by Holders seeking to accept the offer to purchase the Notes pursuant
to a Change of Control. In the event Susquehanna Media is required to purchase
outstanding Notes pursuant to a Change of Control, Susquehanna Media expects
that it would seek third-party financing to the extent it does not have
available funds to meet its purchase obligations and any other obligations in
respect of Senior Indebtedness. However, there can be no assurance that
Susquehanna Media would be able to obtain such financing.
CERTAIN COVENANTS
The Indenture contains certain covenants including the following:
LIMITATION ON INDEBTEDNESS
Susquehanna Media will not, and will not permit any Restricted Subsidiary
to, incur any Indebtedness (including any Acquired Indebtedness) other than
Permitted Indebtedness. Notwithstanding the foregoing, in addition to Permitted
Indebtedness, Susquehanna Media may incur Indebtedness (including Acquired
Indebtedness), and any Restricted Subsidiary may incur Acquired Indebtedness and
guarantee Senior Credit Facility obligations, if, in either case:
(1) no Default or Event of Default exists on the date of the proposed
incurrence of Indebtedness or would result as a consequence of such
proposed incurrence, and
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(2) immediately after giving effect to such incurrence of
Indebtedness, the Consolidated Leverage Ratio of Susquehanna Media is less
than 7.0 to 1.0.
LIMITATION ON RESTRICTED PAYMENTS
Susquehanna Media will not, and will not permit any Restricted Subsidiary
to, make a Restricted Payment if at the time Susquehanna Media or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default or Event of Default exists (or would result therefrom);
(2) Susquehanna Media or such Restricted Subsidiary is not able to
incur, after giving effect to such Restricted Payment, an additional $1.00
of Indebtedness pursuant to clause (2) under "-- Limitation on
Indebtedness"; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date (other than Restricted Payments
referred to in items (1) and (2)) would exceed the sum of:
(A) 100% of Consolidated EBITDA, accrued on a cumulative basis
during the period beginning on the first day of the fiscal quarter
beginning immediately following the Issue Date to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated EBITDA shall be a
deficit, minus 100% of such deficit) less 1.4 times Consolidated
Interest Expense for the same period; plus
(B) the aggregate Net Cash Proceeds received by Susquehanna Media
from issuances or sales of its capital stock (other than Disqualified
Stock) subsequent to the Issue Date or the amount by which Indebtedness
of Susquehanna Media is reduced on Susquehanna Media's balance sheet
upon the conversion or exchange subsequent to the Issue Date of any
Indebtedness of Susquehanna Media convertible or exchangeable for
capital stock (other than Disqualified Stock) of Susquehanna Media; plus
(C) an amount equal to the sum of (i) the net reduction in
Investments in any Person resulting from dividends, repayments of loans
or advances or other transfers of assets, in each case to Susquehanna
Media or any Restricted Subsidiary from such Person, plus (ii) the
portion (proportionate to Susquehanna Media's equity interest in such
subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary. Notwithstanding the foregoing, the
foregoing sum will not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made (and treated as a
Restricted Payment) by Susquehanna Media or any Restricted Subsidiary in
such Unrestricted Subsidiary; plus
(D) $5.0 million.
The foregoing provisions will not prohibit:
(1) if no Default or Event of Default exists, any purchase or
redemption of capital stock or Subordinated Obligations of Susquehanna
Media made out of the proceeds of the concurrent sale of capital stock of
Susquehanna Media (other than Disqualified Stock and other than capital
stock issued or sold to a subsidiary of Susquehanna Media); provided, that
(A) such purchase or redemption will be excluded in the calculation
of the amount of Restricted Payments, and
(B) the Net Cash Proceeds from such sale or capital contribution
will be excluded from the calculation of amounts under clause (3)(B)
above;
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(2) if no Default or Event of Default exists, any purchase or
redemption of Subordinated Obligations made out of the proceeds of the
concurrent sale of Indebtedness of Susquehanna Media which is permitted to
be incurred under the "Limitation on Indebtedness" covenant; provided,
however, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments;
(3) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that at the time of payment of such
dividend, no other Default will exist (or result therefrom); provided
further, that such dividend will be included in the calculation of the
amount of Restricted Payments; and
(4) if no other Default or Event of Default will exist or would result
therefrom, any purchase of any fractional share of capital stock of
Susquehanna Media resulting from:
(A) any dividend or other distribution on outstanding shares of
capital stock that is payable in shares of such capital stock,
(B) any combination of all of the outstanding shares of capital
stock of Susquehanna Media,
(C) any reorganization or consolidation of Susquehanna Media in any
merger of Susquehanna Media with or into any other Person, or
(D) the conversion of any securities of Susquehanna Media into
shares of capital stock of Susquehanna Media;
provided, however, that such purchases of fractional shares will be
included in the calculation of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES
Susquehanna Media will not, and will not permit any Restricted Subsidiary
to, create or permit to exist any restriction on the ability of any Restricted
Subsidiary:
(1) to pay dividends or make any other distributions on its capital
stock or pay any Indebtedness owed to Susquehanna Media;
(2) to make any loans to Susquehanna Media or to any Restricted
Subsidiary; or
(3) to transfer any of its property or assets to Susquehanna Media or
to any Restricted Subsidiary.
The Indenture shall not prohibit:
(1) the Senior Credit Facility as in effect on the Issue Date and as
the same may be amended, modified, restated, supplemented or refinanced
from time to time; provided, however, that the restrictions contained in
any such amendment, modification, restatement, supplement or other
agreement are no less favorable in any material respect to the Noteholders
than restrictions contained in the Senior Credit Facility on the Issue
Date;
(2) any encumbrances or restrictions existing as of the Issue Date or
pursuant to any agreement governing Indebtedness in existence on the Issue
Date, in each case as in effect on the Issue Date;
(3) the Notes or the Indenture, or any Guarantee;
(4) any instrument governing Acquired Indebtedness,
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(5) Refinancing Indebtedness incurred pursuant to an agreement
referred to in clause (2) or (4); provided, however, that the restrictions
contained in any such refinancing agreement are no less favorable to the
Noteholders than restrictions contained in such agreements governing the
Indebtedness being refinanced;
(6) customary nonassignment provisions in leases to the extent such
provisions restrict the transfer of the lease or the property leased
thereunder;
(7) security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the transfer
of the property subject to such security agreements or mortgages;
(8) restrictions with respect to a Restricted Subsidiary imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of capital stock or assets of such Restricted Subsidiary;
provided, that such restrictions apply solely to the capital stock or
assets of such Restricted Subsidiary;
(9) liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described in "Limitation on
Liens" that limit the right of Susquehanna Media or any of its Restricted
Subsidiaries to dispose of the assets subject to such lien; and
(10) applicable law.
LIMITATION ON LIENS
Other than Permitted Liens, Susquehanna Media will not, and will not permit
any Restricted Subsidiary to, create any lien on any property or asset of
Susquehanna Media or of any Restricted Subsidiary or assign or convey any right
to receive any income or profits therefrom, or file or permit the filing of any
financing statement or other similar notice of any lien with respect to any such
property or asset under the Uniform Commercial Code of any State or under any
similar statute unless:
(1) in the case of liens securing Indebtedness that is expressly
junior in right of payment to the Notes, the Notes are secured by a lien on
such property or assets that is senior to such liens, and
(2) in all other cases, the Notes are equally and ratably secured.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK
Susquehanna Media will not, and will not permit any Restricted Subsidiary
to, consummate any Asset Sale unless:
(1) Susquehanna Media or such Restricted Subsidiary receives
consideration at least equal to the fair market value of the shares and
assets subject to such Asset Sale (which fair market value will be
determined in good faith by the board of directors of Susquehanna Media for
any transaction involving in excess of $1.0 million);
(2) at least 75% of the consideration received by Susquehanna Media or
such Restricted Subsidiary is in the form of (A) cash and is received at
the time of such sale or (B) (1) long-term assets to be used by Susquehanna
Media or any Restricted Subsidiary in a Permitted Business or (2) capital
stock of a Restricted Subsidiary or a Person engaged primarily in a
Permitted Business that will become, upon such purchase, a Restricted
Subsidiary (collectively, "Replacements Assets"); and
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(3) 100% of the Net Available Cash from such Asset Sale is applied by
Susquehanna Media or such Restricted Subsidiary:
(A) first, to the extent Susquehanna Media elects (or is required
by the terms of the Senior Credit Facility) to repay borrowings under
the Senior Credit Facility; provided, that there is a permanent
reduction in the availability under the Senior Credit Facility in an
amount equal to such repayment and such repayment is made within 365
days from the date of such Asset Sale; and
(B) second, to the extent Susquehanna Media elects, and within 365
days from the date of such Asset Sale, to purchase, construct or improve
Replacement Assets.
Any Net Available Cash not applied within 365 days after the consummation
of an Asset Sale as provided above will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
Susquehanna Media will be obligated to make offers to purchase the Notes in an
amount equal to the amount of Excess Proceeds (and not just the amount thereof
that exceeds $5.0 million) at a purchase price equal to 100% of the principal
amount thereof plus accrued and unpaid interest thereon to the purchase date in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an offer to purchase made
pursuant to this paragraph is less than the amount of Excess Proceeds,
Susquehanna Media may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders is greater than the
amount of Excess Proceeds, the Trustee will select the Notes to be purchased on
a pro rata basis.
In the event of the transfer of substantially all (but not all) of the
assets of Susquehanna Media and its Subsidiaries to a Person in a transaction
permitted under the caption "Certain Covenants -- Merger and Consolidation"
below, the successor corporation will be deemed to have sold the assets of
Susquehanna Media and its Subsidiaries not so transferred for purposes of this
covenant, and will comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market value
of such assets of Susquehanna Media or its Subsidiaries deemed to be sold will
be deemed to be Net Available Cash for purposes of this covenant.
If any non-cash consideration received by Susquehanna Media or any
subsidiary in connection with any Asset Sale is disposed of for cash, then such
disposition will be deemed to constitute an Asset Sale hereunder and the Net
Available Cash thereof will be applied in accordance with this covenant.
Susquehanna Media will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, Susquehanna Media will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this clause by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS
Except for Excluded Transactions, Susquehanna Media will not, and will not
permit any Restricted Subsidiary to, enter into any transaction with any
affiliate of Susquehanna Media unless the terms thereof:
(1) are no less favorable to Susquehanna Media or such Restricted
Subsidiary than those that could be obtained from a non-affiliate;
(2) if such affiliate transaction is in excess of $1.0 million,
(A) are set forth in writing, and
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(B) have been approved by a majority of the disinterested members
of the board of directors of Susquehanna Media; and
(3) if such affiliate transaction is in excess of $5.0 million, has
been determined by a nationally recognized investment banking or accounting
firm to be fair to Susquehanna Media and its Restricted Subsidiaries.
This covenant will not prohibit or apply to:
(1) any Restricted Payment permitted to be paid pursuant to the
covenant described under "-- Limitation on Restricted Payments" so long as
any payment to a Permitted Holder is made ratably to all stockholders of
the applicable class of capital stock;
(2) any issuance of securities or payments of cash pursuant to
employee benefit plans or arrangements approved by the board of directors
of Susquehanna Media;
(3) the grant of stock options or similar rights to employees and
directors of Susquehanna Media pursuant to plans in existence on the Issue
Date and plans approved by the board of directors of Susquehanna Media;
(4) loans or advances to employees in the ordinary course of business;
(5) the payment of reasonable fees to directors of Susquehanna Media
and its Restricted Subsidiaries who are not employees of Susquehanna Media
or its Restricted Subsidiaries; and
(6) any affiliate transaction (A) between Susquehanna Media and a
Restricted Subsidiary or (B) between Restricted Subsidiaries.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
Susquehanna Media will not sell any shares of capital stock of a Restricted
Subsidiary, and will not permit any Restricted Subsidiary to issue or sell any
shares of its capital stock except to Susquehanna Media or a wholly-owned
Restricted Subsidiary; provided, however, that this covenant will not prohibit
(1) the sale of all of the shares of the capital stock owned at the time of such
sale by Susquehanna Media or a Restricted Subsidiary of any other Restricted
Subsidiary effected in accordance with the covenants described under "Limitation
on Sales of Assets and Subsidiary Stock" and "-- Merger and Consolidation," (2)
the issuance of shares of capital stock of a Restricted Subsidiary pursuant to
employee benefit plans or arrangements approved by the board of directors of
Susquehanna Media or the applicable Restricted Subsidiary, (3) the sale,
pursuant to an underwritten registered public offering, of shares of capital
stock of a Restricted Subsidiary effected in accordance with the covenant
described in "Limitation on Sales of Assets and Subsidiary Stock" or (4) the
issuance of capital stock to Susquehanna Media or a Restricted Subsidiary in an
Investment described by clause (1) in the definition of "Permitted Investment."
MERGER AND CONSOLIDATION
Susquehanna Media will not, in a single transaction or series of related
transactions, consolidate or merge with any Person, or sell or dispose of (or
permit any Restricted Subsidiary to sell or dispose of) all or substantially all
of the combined assets of Susquehanna Media and its Restricted Subsidiaries to
any Person, unless:
(1) Susquehanna Media, in the case of a transaction involving
Susquehanna Media, or such Restricted Subsidiary in the case of a
transaction involving a Restricted Subsidiary, will be the surviving or
transferee Person or the surviving or transferee Person (in either case,
the "Successor Company") will be a U.S. Person and the Successor Company
(if not Susquehanna Media or such Restricted Subsidiary) will expressly
assume, by an indenture supplemental
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thereto, all the obligations of Susquehanna Media under the Notes and the
Indenture, or the obligation of such Restricted Subsidiary under its
Guarantee (if any shall then exist), as the case may be;
(2) immediately after giving effect to such transaction, no Default
will exist;
(3) immediately after giving effect to such transaction, Susquehanna
Media, if the transaction involves a Restricted Subsidiary, or the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to clause (2) under "-- Limitation on Indebtedness;"
(4) in the case of a transaction involving Susquehanna Media,
immediately after giving effect to such transaction, the Successor Company
will have Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of Susquehanna Media prior to such transaction;
(5) if, as a result of any transaction, property or assets of
Susquehanna Media or a Restricted Subsidiary would become subject to a lien
securing Indebtedness not excepted from the provisions of the Indenture
described above under the caption "-- Limitation on Liens," Susquehanna
Media, any such Restricted Subsidiary or the Successor Company, as the case
may be, will have secured the Notes (and, if applicable, the relevant
Guarantees) as required by such provisions; and
(6) Susquehanna Media will have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
The Successor Company will be the successor to Susquehanna Media or such
Restricted Subsidiary, as the case may be, and will succeed to, and may exercise
every right and power of Susquehanna Media or such Restricted Subsidiary under,
the Indenture, but the predecessor Company or Restricted Subsidiary in the case
of a conveyance, transfer or lease will not be released from the obligation to
pay the principal of and interest on the Notes.
LIMITATION ON LAYERED INDEBTEDNESS
Other than in connection with the Senior Credit Facility or the purchase or
redemption of minority equity interests in any Restricted Subsidiary from
non-affiliates of the Company, Susquehanna Media will not, and, if at any time
Restricted Subsidiaries become Guarantors, will not permit any Guarantor to,
incur any Indebtedness that is subordinate in right of payment to any other
Indebtedness, unless such Indebtedness is subordinate in right of payment to, or
ranks equal with, the Notes or, in the case of Restricted Subsidiaries that are
Guarantors, such Indebtedness is subordinate in right of payment to, or ranks
equal with, the Guarantees of such Guarantors.
The Guarantors will not guarantee any Indebtedness of Susquehanna Media
that is subordinate in right of payment to any other Indebtedness of Susquehanna
Media unless such guarantee is subordinate in right of payment to, or ranks
equal with, the Guarantees of such Guarantors.
GUARANTEES OF CERTAIN INDEBTEDNESS
Susquehanna Media will not permit any of its Restricted Subsidiaries,
directly or indirectly, to guarantee or otherwise become liable for, or incur
any lien securing, the payment of any Indebtedness of Susquehanna Media (other
than obligations under the Senior Credit Facility from time to time or other
Indebtedness not to exceed $2,000,000 in aggregate at any one time outstanding
as to all of the Restricted Subsidiaries) unless such Restricted Subsidiary,
Susquehanna Media, and the Trustee execute and deliver a supplemental indenture
pursuant to which such Restricted Subsidiary becomes a Guarantor of the Notes
and which evidences such Restricted Subsidiary's Guarantee of the Notes. Such
Guarantee shall be a senior subordinated unsecured obligation of such Restricted
Subsidiary.
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Neither Susquehanna Media nor any such Guarantor shall be required to make a
notation on the Notes or its Guarantee to reflect any such subsequent Guarantee.
Nothing in this covenant shall be construed to permit any Restricted Subsidiary
of Susquehanna Media to incur Indebtedness otherwise prohibited by the
"Limitation on Indebtedness" covenant.
The Indebtedness evidenced by any Guarantee (including the payment of
principal of, premium, if any, and interest on the Notes) will be subordinated
to Senior Indebtedness of such Guarantor on terms analogous to those applicable
to the Notes. See "Ranking of the Notes."
The obligations of each Guarantor under its Guarantee will be limited to
the maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Guarantor (including, without limitation, any
guarantees under the Senior Credit Facility) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, result in the
obligations of the Guarantor under the Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law.
Any Guarantor may consolidate with or merge into or sell its assets to
Susquehanna Media or to another Guarantor without limitation. Any Guarantor may
consolidate with or merge into or sell all or substantially all its assets to a
corporation, partnership, or trust other than Susquehanna Media or another
Guarantor (whether or not affiliated with the Guarantor). Upon the sale or
disposition of a Guarantor (or of all or substantially all of its assets) to a
Person (whether or not an affiliate of such Guarantor) that is not a Restricted
Subsidiary of Susquehanna Media, which is otherwise in compliance with the
Indenture, such Guarantor shall be deemed released from all its obligations
under the Indenture and its Guarantee and such Guarantee shall terminate;
provided that any such termination shall occur only to the extent that all
obligations of such Guarantor under the Senior Credit Facility, as applicable,
and all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, Indebtedness of Susquehanna Media shall also
terminate upon such release, sale, or transfer; provided, further, that the
consideration received by Susquehanna Media in connection with such sale or
other disposition shall be applied in accordance with the Indenture.
CONDUCT OF BUSINESS
Susquehanna Media and its Restricted Subsidiaries will not engage in any
business other than a Permitted Business.
COMMISSION REPORTS
Notwithstanding that Susquehanna Media may not be subject to the reporting
requirements of the Exchange Act, Susquehanna Media will file with the
Commission and provide the Trustee and Noteholders with such annual reports and
such information, documents and other reports as are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections. In addition, Susquehanna Media will make available to any holder
and any prospective purchaser of Notes the information required pursuant to Rule
144A(d)(4) under the Securities Act during any period in which Susquehanna Media
is not subject to Section 13 or 15(d) of the Exchange Act.
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DEFAULTS
An Event of Default is defined in the Indenture as:
(1) a default in the payment of interest on the Notes when due,
continued for 30 days;
(2) a default in the payment of principal of any Note when due at its
stated maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise;
(3) the failure by Susquehanna Media to comply with its obligations
under "-- Change of Control," and under "-- Certain Covenants" under
"-- Merger and Consolidation," "-- Limitation on Sales of Assets and
Subsidiary Stock," "-- Limitation on Indebtedness," or "-- Limitation on
Restricted Payments" above;
(4) the failure by Susquehanna Media to comply with its other
agreements contained in the Indenture within 45 days after receipt by
Susquehanna Media of notice of such default from the Trustee or the Holders
of 25% in principal amount of the outstanding Notes;
(5) Indebtedness of Susquehanna Media or any subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $5.0 million (the "cross
acceleration provision");
(6) certain events of bankruptcy, insolvency or reorganization of
Susquehanna Media or a subsidiary (the "bankruptcy provisions");
(7) any judgment or decree for the payment of money in excess of $5.0
million (to the extent not covered by third-party insurance as to which a
financially sound insurer has not disclaimed coverage) is rendered against
Susquehanna Media or a subsidiary, remains outstanding for a period of 60
days following the date such judgment becomes final and non-appealable (the
"judgment default provision"); or
(8) at any time that a Guarantee is required to be in effect under the
Indenture, the Guarantee of any Guarantor ceases to be in full force and
effect or any Guarantor denies or disaffirms its obligations under its
Guarantee.
If an Event of Default occurs and is continuing (other than an Event of
Default described in clause (6) with respect to Susquehanna Media), the Trustee
or the Holders of at least 25% in principal amount of the outstanding Notes may
declare the principal of and accrued but unpaid interest on all the Notes to be
due. Upon such a declaration, such principal and interest will be due
immediately. If an Event of Default described in clause (6) occurs and is
continuing with respect to Susquehanna Media, the principal of and interest on
all the Notes will become immediately due without any declaration or other act
on the part of the Trustee or any Holders of the Notes. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium, if any, or interest when due, no Holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless:
(1) such Holder has previously given the Trustee notice that an Event
of Default is continuing;
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(2) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy;
(3) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the outstanding
Notes have not given the Trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder of a Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default exists and is known to the
Trustee, the Trustee must mail to each Holder of the Notes notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any Note, the Trustee may withhold notice so long
as a committee of its trust officers determines that withholding notice is not
opposed to the interest of the Holders of the Notes. In addition, Susquehanna
Media is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. Susquehanna Media also is
required to deliver to the Trustee, within 30 days after the occurrence thereof,
written notice of any event which would constitute certain Defaults, their
status and what action Susquehanna Media is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may also be
waived with the consent of the Holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each Holder of an
outstanding Note affected thereby, no amendment may:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Note;
(3) reduce the principal of or extend the stated maturity of any Note;
(4) reduce the premium, if any, payable upon the redemption of any
Note or change the time at which any Note may be redeemed as described
under "-- Optional Redemptions";
(5) make any Note payable in money other than that stated in the Note;
(6) impair the right of any Holder of the Notes to receive payment of
principal and interest on such Holder's Notes after the due dates therefor
or to institute suit for the enforcement of any payment on such Holder's
Notes;
(7) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions;
(8) make any change to the subordination provisions of the Indenture
that would adversely affect the Noteholders; or
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(9) make any change in the Guarantees (if any should then exist) that
would adversely affect the Noteholders.
Without the consent of any Holder of the Notes, Susquehanna Media and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of Susquehanna Media under the Indenture, to add Guarantees with
respect to the Notes, to secure the Notes, to add to the covenants of
Susquehanna Media for the benefit of the Holders of the Notes or to surrender
any right or power conferred upon Susquehanna Media, to make any change that
does not adversely affect the rights of any Holder of the Notes or to comply
with any requirement of the Commission in connection with the qualification of
the Indenture under the TIA. However, no amendment may be made to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Senior Indebtedness of Susquehanna Media or a Guarantor then
outstanding unless the holders of such Senior Indebtedness (or their
representative) consent to such change.
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, Susquehanna Media
is required to mail to Holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all Holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
DEFEASANCE
Susquehanna Media at any time may terminate all its obligations under the
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. Susquehanna Media at any time may terminate its obligations under "Change
of Control" and under the covenants described under "-- Certain Covenants"
(other than the covenant described under "-- Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to subsidiaries and the judgment default provision described under
"-- Defaults" above and the limitations contained in clauses (3) and (4) under
"-- Certain Covenants -- Merger and Consolidation" (and clause (3) of the first
paragraph under "-- Defaults" as it relates to clauses (3) and (4) under
"-- Certain Covenants -- Merger and Consolidation") above ("covenant
defeasance").
Susquehanna Media may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If Susquehanna Media
exercises its legal defeasance option, payment of the Notes may not be
accelerated because of an Event of Default with respect thereto. If Susquehanna
Media exercises its covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in clause (3) (other than
the breach of the covenant described under "-- Certain Covenants -- Merger and
Consolidation"), (4), (5) or (8) under "-- Defaults" above or because of the
failure of Susquehanna Media to comply with clause (3) or (4) under "-- Certain
Covenants -- Merger and Consolidation" above. If Susquehanna Media exercises its
legal defeasance option or its covenant defeasance option, each Guarantor will
be released from all its obligations with respect to its Guarantee (if any
should then exist).
In order to exercise either defeasance option, Susquehanna Media must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money or
U.S. government obligations for the payment of principal and interest on the
Notes to redemption or maturity, as the case may be, and
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must comply with certain other conditions, including delivery to the Trustee of
an opinion of counsel to the effect that Holders of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such opinion of counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable federal income tax law).
CONCERNING THE TRUSTEE
Chase Manhattan Trust Company, National Association is to be the Trustee
under the Indenture and has been appointed by Susquehanna Media as Registrar and
Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder will have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense and then only to the extent required by the terms of
the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by the laws
of the State of New York.
CERTAIN DEFINITIONS
In addition to the other defined terms used herein, the following terms
have the meanings set forth below when used in this offering memorandum.
"Acquired Indebtedness" means, with respect to any Person:
(1) any Indebtedness or Disqualified Stock of any other Person
existing at the time such Person is merged with or becomes a Restricted
Subsidiary of such specified Person, and
(2) Indebtedness secured by a lien encumbering any asset acquired by
such specified Person.
"Asset Acquisition" means
(1) an Investment by Susquehanna Media or any Restricted Subsidiary in
any other Person pursuant to which such Person will be merged with
Susquehanna Media or any Restricted Subsidiary, or
(2) the acquisition by Susquehanna Media or any Restricted Subsidiary
of the assets of any Person which constitute all or substantially all of
the assets of such Person or comprises any division or line of business of
such Person or any other properties or assets of such Person other than in
the ordinary course of business.
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"Asset Sale" means any sale or other disposition (including by way of
merger) by Susquehanna Media or by any of its Restricted Subsidiaries to any
Person of:
(1) any of the stock of any of Susquehanna Media's Subsidiaries,
(2) substantially all of the assets of any division or line of
business of Susquehanna Media or of any of its Subsidiaries, or
(3) any other material amount of assets of Susquehanna Media or of any
of its Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated EBITDA" means, for any period, the sum of:
(1) Consolidated Net Income, plus
(2) to the extent Consolidated Net Income has been reduced thereby,
(A) all income taxes of Susquehanna Media and its Restricted
Subsidiaries paid or accrued for such period, plus
(B) Consolidated Interest Expense, plus
(C) Consolidated Non-Cash Charges less any non-cash items
increasing Consolidated Net Income for such period; plus
(D) Minority interests; plus
(E) ESOP Expense; less
(3) to the extent Consolidated Net Income has been increased thereby,
the interest income received by Susquehanna Media as a result of the
repayment of the ESOP Loan.
"Consolidated Interest Expense" means, for any period, the sum of:
(1) all interest expense of Susquehanna Media and its Restricted
Subsidiaries for such period; and
(2) the interest component of capitalized lease obligations paid or
scheduled to be paid or accrued by Susquehanna Media and its Restricted
Subsidiaries during such period.
"Consolidated Leverage Ratio" as of any date of determination means the
ratio of:
(1) the sum of the aggregate outstanding amount of Indebtedness of
Susquehanna Media and its Restricted Subsidiaries as of the date of
calculation on a consolidated basis in accordance with GAAP to
(2) Consolidated EBITDA of Susquehanna Media during the four full
fiscal quarters ending on or prior to the date of the transaction giving
rise to the need to calculate the Consolidated Leverage Ratio.
For purposes of this definition, Consolidated Leverage Ratio will be calculated
after giving effect on a pro forma basis for the period of such calculation to
(A) the incurrence or repayment of any Indebtedness of Susquehanna Media or any
of its Restricted Subsidiaries giving rise to the need to make such calculation
and any incurrence or repayment of other Indebtedness, other than the incurrence
or repayment of Indebtedness in the ordinary course of business for working
capital purposes, occurring during the four quarter period or at any time
subsequent to the last day of the four quarter period and on or prior to the
date of determination, as if such incurrence or repayment occurred on the first
day of the four quarter period and (B) any Asset Sales or Asset Acquisitions
(including any Asset Acquisition giving rise to the need to make such
calculation as a result of
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Susquehanna Media or one of its Restricted Subsidiaries (including any Person
who becomes a Restricted Subsidiary as a result of such Asset Acquisition)
incurring or otherwise becoming liable for Acquired Indebtedness) occurring
during the four quarter period or at any time subsequent to the last day of the
four quarter period and on or prior to the transaction date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or liability for
any Acquired Indebtedness and also including any Consolidated EBITDA associated
with such Asset Acquisition) occurred on the first day of the four quarter
period. If Susquehanna Media or any of its Restricted Subsidiaries guarantees
Indebtedness of a third Person, the preceding sentence will give effect to the
incurrence of such guaranteed Indebtedness as if Susquehanna Media or such
Restricted Subsidiary, as the case may be, had directly incurred such guaranteed
Indebtedness. Furthermore, in calculating Consolidated Interest Expense for the
purposes of the calculation of Consolidated EBITDA, (X) interest on Indebtedness
determined on a fluctuating basis as of the date of determination (including
Indebtedness actually incurred on the date of the transaction giving rise to the
need to calculate the Consolidated Leverage Ratio) and which will continue to be
so determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness as in effect on the
date of determination and (Y) notwithstanding (X) above, interest determined on
a fluctuating basis, to the extent such interest is covered by interest rate
protection agreements, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of Susquehanna Media and its Restricted Subsidiaries for such period
on a consolidated basis; provided, the following items shall be excluded from
the calculation of Consolidated Net Income:
(1) after-tax gains and losses from Asset Sales or abandonment or
reserves relating thereto;
(2) items classified as extraordinary, nonrecurring or unusual gains,
losses or charges, and the related tax effects, each determined in
accordance with GAAP;
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of
Susquehanna Media or is merged or consolidated with Susquehanna Media or
any Restricted Subsidiary of Susquehanna Media;
(4) the net income (but not loss) of any Restricted Subsidiary of
Susquehanna Media to the extent that the declaration of dividends, the
making of intercompany loans or similar payments by that Restricted
Subsidiary of that income is restricted by a contract, operation of law or
otherwise;
(5) the net income of any Person, other than a Restricted Subsidiary
of Susquehanna Media, except to the extent of cash dividends or
distributions paid to Susquehanna Media or a Restricted Subsidiary of
Susquehanna Media by such Person;
(6) any restoration to income of any contingency reserve, except to
the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time after December 31, 1998;
(7) income or loss attributable to discontinued operations (including
operations disposed of during such period whether or not such operations
were classified as discontinued); and
(8) in the case of a successor to Susquehanna Media by consolidation
or merger or as a transferee of Susquehanna Media's assets, any earnings of
the successor corporation prior to such consolidation, merger or transfer
of assets.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Susquehanna Media and its consolidated Restricted Subsidiaries,
as of the end of the most recent
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fiscal quarter of Susquehanna Media ending at least 45 days prior to the taking
of any action for the purpose of which the determination is being made, as:
(1) the par or stated value of all outstanding capital stock of
Susquehanna Media, plus
(2) paid-in capital or capital surplus relating to such capital stock,
plus
(3) any retained earnings or earned surplus less (A) any accumulated
deficit and (B) any amounts attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" means with respect to Susquehanna Media,
for any period, the aggregate depreciation, amortization and other non-cash
expenses (excluding any non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or amortization of
a prepaid cash expense that was paid in a prior period) of Susquehanna Media and
its Restricted Subsidiaries reducing Consolidated Net Income of Susquehanna
Media for such period.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means all obligations under or arising out
of the Senior Credit Facility and any other Senior Indebtedness of Susquehanna
Media which, at the date of determination, has an aggregate principal amount
outstanding of, or under which the holders thereof are committed to lend up to,
at least $5.0 million and is specifically designated by Susquehanna Media in the
instrument or agreement evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" and, in respect of any Guarantor, any guarantee
by such Guarantor of Designated Senior Indebtedness of Susquehanna Media.
"Disqualified Stock" means, with respect to any Person, any capital stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable):
(1) matures or is mandatorily redeemable for any reason,
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock or
(3) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the stated
maturity of the Notes.
"ESOP" means the Susquehanna Pfaltzgraff Co. Employee Stock Ownership Plan.
"ESOP Expense" means, for any period without duplication, (1) to the extent
such expense is in the form of a cash payment, the amount of cash actually paid
by Susquehanna Media to Susquehanna Pfaltzgraff for the purpose of funding share
allocations in the ESOP; provided, that such amount shall be limited to the
lesser of (i) the amount of such cash payment and (ii) the amount of cash
received by Susquehanna Media from Susquehanna Pfaltzgraff within two business
days of any such payment as repayment of principal and interest on the ESOP
Loan; plus (2) to the extent such expense funding share allocations under the
ESOP is a non-cash expense, the amount of such non-cash expense.
"ESOP Loan" means the $116.9 million loan made by Susquehanna Media to
Susquehanna Pfaltzgraff Co. on or about the Issue Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Transactions" means (1) agreements in existence on or prior to
the Issue Date, (2) the ESOP Loan, (3) payments of management fees by
Susquehanna Media to Susquehanna Pfaltzgraff in an amount not to exceed 4.0% of
the consolidated net revenues of Susquehanna Media, (4) payments by Susquehanna
Media to Susquehanna Pfaltzgraff pursuant to any tax sharing agreement, (5)
payments to Susquehanna Pfaltzgraff constituting reimbursements of actual
out-of-
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pocket expenses reasonably incurred on behalf of Susquehanna Media and its
Restricted Subsidiaries in the ordinary course of their businesses and (6) the
annual cash payment from Susquehanna Media to Susquehanna Pfaltzgraff for the
purpose of funding share allocations in the ESOP.
"GAAP" means generally accepted accounting principles in the United States
as in effect as of the Issue Date.
"Guarantee" means any guarantee of the Notes, on a senior subordinated
basis, by a Restricted Subsidiary of Susquehanna Media that may be issued in
accordance with the covenant "Guarantees of Certain Indebtedness."
"Guarantor" means any Restricted Subsidiary of Susquehanna Media that in
the future executes a supplemental indenture in which such Restricted Subsidiary
agrees to be bound by the terms of the Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance with the
terms thereof.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Indebtedness" means, with respect to any Person on any date of
determination:
(1) all indebtedness of such Person for borrowed money;
(2) all indebtedness of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all indebtedness of such Person for capitalized lease obligations;
(4) all indebtedness of such Person upon notes payable and drafts
accepted representing extensions of credit of such Person;
(5) all indebtedness of such Person for all or any part of the
deferred purchase price of property or services which purchase price is (a)
due more than six months (or a longer period of up to one year, if such
terms are available from suppliers in the ordinary course of business) from
the date of incurrence of the obligation in respect thereof or (b)
evidenced by a note or similar written instrument;
(6) all indebtedness secured by any lien on any property or asset
owned or held by that Person;
(7) all guarantees of such Person in respect of Indebtedness of other
Persons; and
(8) all Disqualified Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, but excluding accrued dividends, if any.
Indebtedness will not include trade payables and accrued liabilities incurred in
the ordinary course of business for the purchase of goods or services which are
not secured by a lien other than a lien permitted pursuant to clause (2) of the
definition of Permitted Liens and obligations under interest rate protection
agreements.
"Investment" in any Person means any advance, loan or other extension of
credit or capital contribution to, or any purchase, redemption or acquisition of
capital stock, indebtedness or other similar instruments issued by, such Person.
"Issue Date" means the date on which the Notes are originally issued.
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"Net Available Cash" means, with respect to any Asset Sale, payments in
cash or cash equivalents received therefrom net of bona fide direct costs of
sale, including:
(1) income taxes reasonably estimated to be actually payable as a
result of such Asset Sale within two years of the date of such Asset Sale;
(2) payment of any Indebtedness that is secured by a lien on the stock
or assets in question and that is required to be repaid as a result of such
Asset Sale;
(3) out-of-pocket expenses and fees relating to such Asset Sale; and
(4) any portion of cash proceeds which Susquehanna Media determines in
good faith should be reserved for post-closing adjustments or liabilities
relating to the Asset Sale retained by Susquehanna Media or any of its
Restricted Subsidiaries.
Additionally, in connection with any Asset Sale of Susquehanna Cable and
its Subsidiaries, Net Available Cash will be reduced by that amount required to
be paid to holders or former holders of minority equity interests in Susquehanna
Cable and its Subsidiaries who were not affiliates of the Company in connection
with any sale, purchase or redemption of those interests or pursuant to the
terms of any Indebtedness relating to the deferred payment of any applicable
purchase or redemption price.
"Net Cash Proceeds" means, with respect to any sale of capital stock, the
proceeds of such sale in the form of cash or cash equivalents net of fees,
discounts or commissions actually incurred in connection with such sale.
"Permitted Business" means any business conducted by Susquehanna Media and
its Restricted Subsidiaries on the Issue Date and any business ancillary or
complementary or reasonably related thereto.
"Permitted Holders" means (1) descendants, and spouses of descendants, of
Louis J. Appell, Sr. (including any trusts established for the benefit of one or
more such descendants or spouses of such descendants so long as (i) one or more
of such descendants or spouses of such descendants, (ii) officers of Susquehanna
Pfaltzgraff or its Subsidiaries, or (iii) the trust department of a financial
institution is a trustee of any such trusts) and (2) the ESOP so long as
executive officers of Susquehanna Pfaltzgraff constitute the majority of the
ESOP Committee under the ESOP.
"Permitted Indebtedness" means each of the following:
(1) Indebtedness of Susquehanna Media and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(2) Indebtedness under the Indenture with respect to the Notes offered
hereby, and under any Guarantees;
(3) Indebtedness under the Senior Credit Facility (including any
guarantees thereof); provided that the aggregate principal amount of
Indebtedness outstanding under the Senior Credit Facility at any one time
will not exceed (A) $450.0 million less (B) the amount of any permanent
reductions to the Senior Credit Facility made in accordance with
"-- Limitation on Sales of Assets and Subsidiary Stock."
(4) interest rate protection agreements of Susquehanna Media and its
Restricted Subsidiaries covering their Indebtedness;
(5) Indebtedness of a Restricted Subsidiary to Susquehanna Media or to
a Restricted Subsidiary so long as such Indebtedness is held by Susquehanna
Media or a Restricted
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Subsidiary, in each case subject to no lien (other than liens under the
Senior Credit Facility) held by a Person other than Susquehanna Media or a
Restricted Subsidiary;
(6) Indebtedness of Susquehanna Media to a Restricted Subsidiary so
long as such Indebtedness is held by a Restricted Subsidiary, subject to no
lien (other than liens under the Senior Credit Facility); provided that any
Indebtedness of Susquehanna Media to any Restricted Subsidiary is
subordinated to Susquehanna Media's obligations under the Notes;
(7) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business;
(8) Indebtedness of Susquehanna Media or any of its Restricted
Subsidiaries represented by letters of credit in order to provide security
for workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(9) Refinancing Indebtedness incurred in respect of Indebtedness
originally incurred pursuant to the second sentence under "Limitation on
Indebtedness" or pursuant to this clause (9) or clause (1) or (3) of this
definition;
(10) Indebtedness of Susquehanna Media or any Restricted Subsidiary
incurred in respect of performance and payment bonds (other than in respect
of Indebtedness);
(11) additional Indebtedness of Susquehanna Media and its Restricted
Subsidiaries not to exceed $10.0 million at any one time outstanding for
capitalized lease obligations or for purposes of financing the purchase
price or construction cost of equipment, fixtures or similar property;
(12) additional Indebtedness of Susquehanna Media and its Restricted
Subsidiaries not to exceed $15.0 million at any one time outstanding; and
(13) Indebtedness in the form of guarantees of other Indebtedness
permitted to be incurred by any Restricted Subsidiary under this
definition, so long as such guarantees do not increase the principal amount
of such Indebtedness.
"Permitted Investment" means any of the following:
(1) Investments by Susquehanna Media or any Restricted Subsidiary in
any Person that is a Restricted Subsidiary or will become immediately after
such Investment a Restricted Subsidiary that is wholly-owned by the Person
making such Investment or that will merge or consolidate into Susquehanna
Media or a Restricted Subsidiary;
(2) Investments in Susquehanna Media by any Restricted Subsidiary;
provided that any Indebtedness evidencing such Investment is unsecured and
subordinated to Susquehanna Media's obligations under the Notes and the
Indenture;
(3) the purchase or redemption by Susquehanna Media or any Restricted
Subsidiary of any minority equity interests in any Restricted Subsidiary.
(4) Investments in cash and cash equivalents;
(5) loans and advances to employees and officers of Susquehanna Media
and its Subsidiaries in the ordinary course of business;
(6) interest rate protection agreements entered into in the ordinary
course of Susquehanna Media's or its Restricted Subsidiaries' businesses;
(7) sales on credit by Susquehanna Media or any Restricted Subsidiary
in the ordinary course of business;
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(8) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(9) consideration other than cash or cash equivalents received by
Susquehanna Media or its Restricted Subsidiaries in connection with an
Asset Sale made in compliance with the "Limitation on Sales of Assets and
Subsidiary Stock" covenant;
(10) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (10) since the date of the
Indenture, not to exceed $10.0 million in the aggregate; and
(11) the ESOP Loan.
"Permitted Liens" means any of the following:
(1) liens for taxes, assessments or governmental charges or claims
either (A) not delinquent or (B) contested in good faith by appropriate
proceedings and as to which Susquehanna Media or its Subsidiaries will have
set aside on its books such reserves as may be required pursuant to GAAP;
(2) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith;
(3) liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(4) judgment liens not giving rise to an Event of Default so long as a
stay of execution has been entered or such lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for
the review of such judgment will not have been finally terminated or the
period within which such proceedings may be initiated will not have
expired;
(5) easements, leases, subleases, 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 Susquehanna Media or any of its subsidiaries;
(6) any interest or title of a lessor under any capitalized lease
obligation;
(7) purchase money liens to finance property or assets of Susquehanna
Media or a Restricted Subsidiary acquired in the ordinary course of
business;
(8) liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(9) 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;
(10) liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements or appeal
or similar bonds of Susquehanna Media or a Restricted Subsidiary;
(11) liens securing Senior Indebtedness, including Indebtedness under
the Senior Credit Facility;
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(12) liens existing on the Issue Date and liens to secure any
Refinancing Indebtedness which is incurred to refinance any Indebtedness
which has been secured by a lien permitted under the "Limitation on Liens"
covenant and which Indebtedness has been incurred in accordance with the
"Limitation on Indebtedness" covenant;
(13) liens securing Acquired Indebtedness incurred in accordance with
clause (2) of the "Limitation on Indebtedness" covenant; provided that (A)
such liens secured such Acquired Indebtedness prior to the incurrence of
such Acquired Indebtedness by Susquehanna Media or a Restricted Subsidiary
and were not granted in connection with the incurrence of such Acquired
Indebtedness by Susquehanna Media or a Restricted Subsidiary and (B) such
liens do not extend to or cover any property or assets of Susquehanna Media
or any Restricted Subsidiary other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of Susquehanna Media or a Restricted Subsidiary and
are no more favorable to the lienholders than the liens securing the
Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness
by Susquehanna Media or a Restricted Subsidiary; and
(14) liens securing Indebtedness incurred in connection with the
purchase or redemption of minority equity interests in any Restricted
Subsidiary, so long as such liens (A) are in favor of the holder of the
equity interests being purchased or redeemed and (B) encumber only those
equity interests purchased or redeemed.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Public Equity Offering" means an underwritten primary public offering of
any class of common stock of Susquehanna Media or any of its subsidiaries
pursuant to an effective registration statement under the Securities Act.
"Public Market" means any time after (A) an underwritten Public Equity
Offering of Susquehanna Media or any of its subsidiaries has been consummated
and (B) at least 10% of the total issued and outstanding common stock of
Susquehanna Media or such subsidiary has been distributed by means of an
effective registration statement under the Securities Act or sales pursuant to
Rule 144 under the Securities Act.
"Refinancing Indebtedness" means any Indebtedness of Susquehanna Media or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to refinance other Indebtedness of Susquehanna Media or any of
its Restricted Subsidiaries; provided that:
(1) the principal amount of such Refinancing Indebtedness does not
exceed the principal amount of the Indebtedness so refinanced;
(2) such Refinancing Indebtedness has a weighted average life to
maturity equal to or greater than the weighted average life to maturity of
the Indebtedness being refinanced;
(3) if the Indebtedness being refinanced is subordinated in right of
payment to the Notes, such Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and is subordinated in right of
payment to, the Notes on terms at least as favorable to the Holders of
Notes as those relating to the Indebtedness being refinanced; and
(4) such Indebtedness is incurred either by Susquehanna Media or by
the Restricted Subsidiary of Susquehanna Media that is the obligor on the
Indebtedness being refinanced.
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"Restricted Payment" means, with respect to any Person:
(1) the declaration or payment of any dividends or any other
distributions in respect of its capital stock or similar payment to the
holders of its capital stock other than (A) dividends or distributions
payable solely in its capital stock (other than Disqualified Stock) and (B)
dividends or distributions payable solely to Susquehanna Media or a
Restricted Subsidiary;
(2) the redemption or acquisition of any capital stock of Susquehanna
Media or any Restricted Subsidiary held by any Person (other than a
Permitted Investment and other than redemptions in which the redemption
price is payable solely in capital stock (other than Disqualified Stock));
(3) the redemption or other acquisition prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations; or
(4) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any subsidiary of Susquehanna Media that is
not an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the Credit Agreement dated as of May 12,
1999 among Susquehanna Media, the lenders who are or may become a party thereto
and First Union National Bank ("FUNB"), as administrative agent, pursuant to
which certain financial institutions agreed to make loans and issue letters of
credit, together with the pledges, guarantees and other documents related
thereto, as such agreements may be amended or modified, refinanced, supplemented
or restated from time to time, including any agreement increasing the amount,
extending the maturity of, refinancing or otherwise restructuring all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Senior Indebtedness" means, with respect to any Person,
(1) Indebtedness (which for this purpose shall include letters of
credit and interest rate hedging agreements and other types of credit
referred to in the Senior Credit Facility) of such Person, whether
outstanding on the Issue Date or thereafter incurred, and
(2) accrued and unpaid interest and fees and other obligations
(including interest and fees and other obligations accruing after
commencement of an insolvency or liquidation proceeding) in respect of
(A) indebtedness of such Person for money borrowed, letters of
credit and interest rate hedging agreements and other types of credit
referred to in the Senior Credit Facility and
(B) indebtedness evidenced by notes or other similar instruments
for the payment of which such Person is responsible or liable;
unless, in the instrument evidencing any of the obligations referred to in
clauses (1) or (2) or pursuant to which any such obligations are outstanding, it
is provided that such obligations are subordinate in right of payment to the
Notes.
Notwithstanding the foregoing, Senior Indebtedness shall not include:
(1) any obligation of such Person to any of its subsidiaries;
(2) any liability for federal, state, local or other taxes owed or
owing by such Person;
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<PAGE> 109
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
(4) any Indebtedness of such Person (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect
to any other Indebtedness or other obligation of such Person (other than
Indebtedness incurred in connection with the purchase or redemption of
minority equity interests in any Restricted Subsidiary from non-affiliates
of the Company); or
(5) that portion of any Indebtedness which at the time of incurrence
is incurred in violation of the "Limitation on Indebtedness" covenant.
"Subordinated Obligation" means any Indebtedness of Susquehanna Media or a
Restricted Subsidiary (whether outstanding on the Issue Date or thereafter
incurred) which is subordinate in right of payment to the Notes or any
Guarantees that may be issued.
"Subsidiary," with respect to any Person, means (1) any corporation of
which the outstanding capital stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person, or (2) any
other Person of which at least a majority of the voting interests under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Susquehanna Media" means Susquehanna Media Co., a Delaware corporation.
"Unrestricted Subsidiary" means (1) any subsidiary of Susquehanna Media
that at the time of determination will be designated an Unrestricted Subsidiary
by the board of directors of Susquehanna Media in the manner provided below and
(2) any subsidiary of an Unrestricted Subsidiary. The board of directors of
Susquehanna Media may designate any subsidiary of Susquehanna Media to be an
Unrestricted Subsidiary unless such subsidiary or any of its subsidiaries owns
any capital stock or Indebtedness of, or holds any lien on any property of,
Susquehanna Media or any other subsidiary of Susquehanna Media that is not a
subsidiary of the subsidiary to be so designated; provided, however, that (A)
either (i) the subsidiary to be so designated has total assets of $1,000 or less
or (ii) if such subsidiary has assets greater than $1,000, such designation
would be permitted under the covenant described under "-- Limitation on
Restricted Payments" and (B) such subsidiary to be so designated and each of its
subsidiaries has not at the time of such designation, and does not thereafter,
incur any Indebtedness pursuant to which the lender has recourse to any of the
assets or properties of Susquehanna Media or any of its Restricted Subsidiaries.
The board of directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (X) Susquehanna Media could incur $1.00 of additional
Indebtedness pursuant to the second sentence under "-- Certain
Covenants -- Limitation on Indebtedness" and (Y) no Default will exist.
104
<PAGE> 110
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain material U.S. federal
income tax consequences of the purchase, ownership and disposition of Notes by
corporate and individual investors that acquire Notes at original issuance for
cash at their face value. This discussion does not address the tax consequences
to subsequent purchasers of Notes and is limited to investors who hold Notes as
capital assets. Furthermore, this discussion does not address all aspects of
U.S. federal income taxation that may be applicable to investors in light of
their particular circumstances or to investors subject to special treatment
under U.S. federal income tax law (including, without limitation, certain
financial institutions, insurance companies, tax-exempt entities, dealers in
securities, persons that acquire Notes as part of a straddle, hedge, conversion
transaction or other integrated investment or persons whose functional currency
is not the U.S. dollar), nor does it address the U.S. federal income tax
consequences to any investors that are trusts, estates or partnerships (or other
pass-through entities) or any beneficiaries, partners or members thereof. This
discussion is based on provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), United States Treasury Department ("Treasury") regulations
promulgated thereunder, and administrative and judicial interpretations thereof,
all as in effect on the date hereof and all of which are subject to change,
possibly with retroactive effect. This discussion does not describe any tax
consequences arising under U.S. federal gift and estate taxes (except to the
limited extent set forth below under "U.S. Taxation of Non-U.S. Holders") or
under the tax laws of any state, local or foreign jurisdiction.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR
GIFT TAX LAWS, ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN APPLICABLE
TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
U.S. TAXATION OF U.S. HOLDERS
As used herein, the term "U.S. Holder" means a holder of a Note that is,
for United States federal income tax purposes, (i) an individual citizen or
resident (as defined in Section 7701(b)(1) of the Code) of the United States, or
(ii) a corporation created or organized in or under the laws of the United
States or of any political subdivision thereof, and the term "Non-U.S. Holder"
means an individual or corporate holder of a Note that is not a U.S. Holder.
PAYMENTS OF INTEREST
Stated interest payable on the Notes generally will be included in the
gross income of a U.S. Holder as ordinary interest income at the time accrued or
received, in accordance with such U.S. Holder's method of accounting for U.S.
federal income tax purposes.
DISPOSITION OF THE NOTES
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a Note (any of the foregoing being a "Disposition"), a U.S.
Holder generally will recognize capital gain or loss equal to the difference
between the amount realized by such U.S. Holder (except to the extent such
amount is attributable to accrued interest, which will be treated as ordinary
interest income) and such U.S. Holder's adjusted tax basis in the Note. Such
capital gain or loss generally will be long-term capital gain or loss if the
holding period for the Note exceeds one year at the time of the Disposition.
Individual taxpayers may be taxed at reduced rates of federal income tax in
respect of long-term capital gains realized on a Disposition of Notes (e.g.,
generally, long-term capital gain recognized by an individual U.S. Holder would
be subject to a maximum tax rate of 20.0%).
105
<PAGE> 111
Prospective investors should consult their own tax advisors regarding the tax
consequences of realizing long-term capital gains.
The exchange of a Certificated Note for an interest in a Global Note, the
exchange of a Note for an Exchange Note in the Registered Exchange Offer, and
the exchange of a new Note for the unredeemed portion of an original Note
partially redeemed with the proceeds of one or more Public Equity Offerings
pursuant to the terms of the Indenture, will not constitute a "significant
modification" of the Note for U.S. federal income tax purposes and, accordingly,
the Certificated Note, Exchange Note or new Note received (as the case may be)
would be treated as a continuation of the original Note in the hands of such
U.S. Holder. As a result, there would be no material U.S. federal income tax
consequences to a U.S. Holder who exchanges a Certificated Note for an interest
in a Global Note, exchanges a Note for an Exchange Note in the Registered
Exchange Offer, or exchanges the unredeemed portion of an original Note for a
new Note as part of a partial redemption of Notes with the proceeds of one or
more Public Equity Offerings.
U.S. TAXATION OF NON-U.S. HOLDERS
PAYMENTS OF INTEREST
In general, payments of interest received by a Non-U.S. Holder will not be
subject to U.S. federal income tax (including the withholding tax imposed on
certain foreign investors, the "U.S. Withholding Tax"), provided that (i) the
Non-U.S. Holder (a) does not actually or constructively own 10.0% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (b) is not a controlled foreign corporation that is related to the Company
actually or constructively through stock ownership and (c) provides, under
penalties of perjury (either directly or through a financial institution that
holds the Note on behalf of the Non-U.S. Holder and that holds customers'
securities in the ordinary course of its trade or business), the Company or its
agent with the Non-U.S. Holder's (or, if different, the beneficial owner's) name
and address and certifies, under penalties of perjury, that it is not a United
States person (as defined by Section 7701(a)(30) of the Code), or (ii) the
Non-U.S. Holder is entitled to the benefits of an income tax treaty under which
the interest is exempt from such tax and the Non-U.S. Holder complies with
certain certification and reporting requirements. In addition, payments of
interest received by a Non-U.S. Holder will not be subject to U.S. Withholding
Tax if the interest received on the Note is effectively connected with the
conduct by the Non-U.S. Holder of a trade or business within the United States
and the Non-U.S. Holder complies with certain certification and reporting
requirements. Payments of interest received by a Non-U.S. Holder that are not
exempt from U.S. Withholding Tax as described above will be subject to such
withholding tax at the rate of 30.0% of the gross amount of such payment
(subject to reduction under an applicable income tax treaty if applicable
certification and reporting requirements are met).
In October 1997, the Treasury issued final regulations (the "New
Regulations") that provide alternative methods of satisfying the beneficial
ownership certification requirements described above. The New Regulations are
effective January 1, 2000, although valid withholding certificates held on
December 31, 1999 will remain valid until the earlier of December 31, 2000 or
the expiration date of the certificate under the current rules. Non-U.S. Holders
should consult their own tax advisors concerning the application of the New
Regulations to an investment in the Notes.
DISPOSITION OF THE NOTES
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
(and generally no tax will be withheld) with respect to gain realized on the
Disposition of a Note, unless (i) the gain is effectively connected with a U.S.
trade or business conducted by the Non-U.S. Holder or (ii) the Non-U.S. Holder
is an individual who is present in the United States for 183 or more days during
106
<PAGE> 112
the taxable year of the Disposition and certain other requirements are
satisfied. In addition, an exchange of a Certificated Note for an interest in a
Global Note, an exchange of a Note for an Exchange Note in the Registered
Exchange Offer, or an exchange of the unredeemed portion of an original Note for
a new Note as part of a partial redemption of Notes with the proceeds of one or
more Public Equity Offerings will not constitute a taxable exchange of the note
for Non-U.S. Holders. See "U.S. Taxation of U.S. Holders -- Disposition of the
Notes."
EFFECTIVELY CONNECTED INCOME
If interest and other payments received by a Non-U.S. Holder with respect
to the Notes (including proceeds from the Disposition of the Notes) are
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the United States (or the Non-U.S. Holder is otherwise subject
to U.S. federal income taxation on a net basis with respect to such Holder's
ownership of the Notes), such Non-U.S. Holder will generally be subject to the
rules described above under "U.S. Taxation of U.S. Holders" (subject to possible
modification provided under an applicable income tax treaty). Such Non-U.S.
Holder also may be subject to the U.S. "branch profits tax" if such Holder is a
corporation.
U.S. FEDERAL ESTATE TAXES
A Note beneficially owned by an individual who is a Non-U.S. Holder at the
time of his or her death generally will not be subject to U.S. federal estate
tax as a result of such death if (i) the Non-U.S. Holder does not actually or
constructively own 10.0% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and (ii) interest payments with
respect to the Note would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a U.S. trade or
business.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain individual U.S. Holders may be subject to backup withholding at a
rate of 31.0% on payments of principal, premium and interest on, and the
proceeds of the Disposition of, the Notes. In general, backup withholding only
will be imposed on an individual U.S. Holder if he or she (i) fails to furnish a
taxpayer identification number ("TIN"), which would be his or her Social
Security number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS
that he or she has failed to report payments of interest or dividends or (iv)
under certain circumstances, fails to certify, under penalty of perjury, that he
or she (a) has furnished a correct TIN and (b) has not been notified by the IRS
that he or she is subject to backup withholding tax for failure to report
interest or dividend payments. In addition, such payments of principal and
interest to U.S. Holders will generally be subject to information reporting.
Backup withholding generally will not apply to payments made to a Non-U.S.
Holder of a Note who provides the certification described under "U.S. Taxation
of Non-U.S. Holders -- Payments of Interest" or otherwise establishes an
exemption from backup withholding. Payments by a U.S. office of a broker of the
proceeds of a Disposition of the Notes generally will be subject to backup
withholding at a rate of 31.0% unless the Non-U.S. Holder certifies that it is a
Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption.
The amount of any backup withholding imposed on a payment to a Holder will
be allowed as a credit against such Holder's U.S. federal income tax liability
and may entitle such Holder to a refund, provided the required information is
furnished to the IRS. The New Regulations change certain of the rules relating
to backup withholding and information reporting. Holders should consult their
own tax advisors regarding the application to them of backup withholding and
information reporting.
107
<PAGE> 113
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. Susquehanna
Media has agreed that, starting on the expiration date and ending on the close
of business one year after the expiration date, it will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1999, all dealers
effecting transactions in the exchange notes may be required to deliver a
prospectus.
Susquehanna Media will not receive any proceeds from the issuance of the
exchange notes offered hereby or any sale of exchange notes by broker-dealers.
Exchange notes received by broker-dealers for their own account pursuant to the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the exchange notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit from any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the expiration date, Susquehanna Media will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. Susquehanna Media has agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
holders of the outstanding notes) other than dealers' and brokers' discounts,
commissions and counsel fees and will indemnify the holders of the outstanding
notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the exchange notes offered by this
prospectus will be passed upon for us by Hunton & Williams, Charlotte, North
Carolina.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1997 and
for each of the three years in the period ended December 31, 1998, included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
108
<PAGE> 114
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Income Statements.............................. F-4
Consolidated Statements of Stockholders' Deficit............ F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 115
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Susquehanna Media Co.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, stockholders' deficit, and of cash
flows present fairly, in all material respects, the financial position of
Susquehanna Media Co. and Subsidiaries (Company) at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
One South Market Square
Harrisburg, Pennsylvania
February 8, 1999, except for
Notes 8 and 13 for which the
date is March 24, 1999 and
Note 14 for which the date is
April 22, 1999
F-2
<PAGE> 116
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 1,942 $ --
Accounts receivable, less allowance for doubtful accounts
of $1,259 in 1998 and $1,120 in 1997................... 32,324 29,070
Deferred income taxes (Note 4)............................ 262 214
Other current assets...................................... 4,223 5,217
-------- --------
Total Current Assets.............................. 38,751 34,501
-------- --------
Property, Plant and Equipment, at cost
Land...................................................... 3,586 3,533
Buildings and improvements................................ 9,498 6,032
Equipment................................................. 146,628 127,330
Construction-in-progress.................................. 19,470 15,233
-------- --------
179,182 152,128
Accumulated depreciation and amortization................. 82,575 72,816
-------- --------
96,607 79,312
-------- --------
Intangible Assets, net (Notes 2, 3 and 5)................... 185,830 189,417
-------- --------
Investments and Other Assets (Notes 2, 3 and 6)............. 15,203 11,684
-------- --------
$336,391 $314,914
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Cash overdrafts........................................... $ -- $ 279
Accounts payable.......................................... 10,115 10,364
Current portion of long-term debt (Note 3)................ 12,054 12,600
Accrued interest.......................................... 1,691 2,587
Accrued income taxes...................................... 890 3,675
Other accrued expenses.................................... 8,350 8,245
-------- --------
Total Current Liabilities......................... 33,100 37,750
-------- --------
Long-term Debt (Note 3)..................................... 260,722 252,900
-------- --------
Deferred Compensation Liability............................. 776 1,186
-------- --------
Deferred Income Taxes (Note 4).............................. 26,431 23,519
-------- --------
Minority Interests.......................................... 17,223 12,805
-------- --------
Stockholders' Deficit (Notes 3 and 7)
Preferred stock -- voting, 7% cumulative with par value of
$100, authorized 110,000 shares, 70,499.22 and
97,408.71 issued and outstanding in 1998 and 1997,
respectively........................................... 7,050 9,740
Common stock -- voting, $1 par value, authorized 1,100,000
shares, 1,100,000 shares issued and outstanding........ 1,100 1,100
Accumulated deficit....................................... (10,011) (24,086)
-------- --------
Total Stockholders' Deficit....................... (1,861) (13,246)
-------- --------
$336,391 $314,914
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 117
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues
Radio.................................................... $151,170 $131,438 $116,300
Cable.................................................... 70,641 65,122 55,791
Other.................................................... 1,616 539 85
-------- -------- --------
Total revenues................................... 223,427 197,099 172,176
======== ======== ========
Operating Expenses
Operating and programming................................ 72,903 65,754 57,800
Selling.................................................. 36,675 32,139 28,281
General and administrative............................... 40,317 36,752 34,773
Depreciation and amortization............................ 20,563 17,992 13,217
-------- -------- --------
Total operating expenses......................... 170,458 152,637 134,071
-------- -------- --------
Operating Income........................................... 52,969 44,462 38,105
-------- -------- --------
Other Income (Expense):
Interest, net............................................ (20,506) (18,890) (13,797)
Gain (loss) on sale of assets............................ (206) 9,451 140
Other income............................................. 334 426 1,177
-------- -------- --------
Income Before Income Taxes and Minority Interests.......... 32,591 35,449 25,625
Provision for Income Taxes (Note 4)........................ 14,446 14,751 11,976
-------- -------- --------
Income Before Minority Interests........................... 18,145 20,698 13,649
Minority Interests......................................... (4,285) (3,254) (1,984)
-------- -------- --------
Net Income................................................. 13,860 17,444 11,665
Preferred Dividends Declared............................... (635) (682) (682)
-------- -------- --------
Net Income Available for Common Shares..................... $ 13,225 $ 16,762 $ 10,983
======== ======== ========
Basic Net Income Per Share................................. $ 12.02 $ 15.24 $ 9.98
======== ======== ========
Diluted Net Income Per Share............................... $ 11.23 $ 14.27 $ 9.33
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 118
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------- ---------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNTS SHARES AMOUNTS DEFICIT DEFICIT
------ ------- ------ ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996................ 97 $ 9,740 1,100 $1,100 $(51,654) $(40,814)
Net income............................ 11,665 11,665
Preferred dividends declared.......... (682) (682)
Adjustment of minority interest
value.............................. (345) (345)
--- ------- ----- ------ -------- --------
Balance, January 1, 1997................ 97 9,740 1,100 1,100 (41,016) (30,176)
--- ------- ----- ------ -------- --------
Net income............................ 17,444 17,444
Preferred dividends declared.......... (682) (682)
Adjustment of minority interest
value.............................. 168 168
--- ------- ----- ------ -------- --------
Balance, December 31, 1997.............. 97 9,740 1,100 1,100 (24,086) (13,246)
--- ------- ----- ------ -------- --------
Net income............................ 13,860 13,860
Preferred dividends declared.......... (635) (635)
Repurchase of preferred stock......... (27) (2,690) (2,690)
Adjustment of minority interest
value.............................. 850 850
--- ------- ----- ------ -------- --------
Balance, December 31, 1998.............. 70 $ 7,050 1,100 $1,100 $(10,011) $ (1,861)
=== ======= ===== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 119
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income............................................... $ 13,860 $ 17,444 $ 11,665
Adjustments to reconcile net income to net cash:
Depreciation and amortization......................... 20,563 17,992 13,217
Deferred income taxes................................. 2,862 2,018 3,167
Minority interest..................................... 4,285 3,254 1,984
Equity in earnings of investees....................... 534 281 (522)
Imputed deferred compensation......................... 200 318 678
Deferred financing amortization....................... 791 703 522
Loss (gain) on sale of assets......................... 205 (9,451) 140
-------- -------- --------
43,300 32,559 30,851
Changes in assets and liabilities:
Increase in accounts receivable, net.................. (2,550) (3,140) (4,803)
Decrease (increase) in other current assets........... 209 (637) (1,052)
Increase (decrease) in accounts payable............... (526) 1,157 2,878
Increase (decrease) in accrued interest............... (896) 1,345 (470)
Increase (decrease) in accrued income taxes........... (2,784) 3,362 (5,039)
Increase (decrease) in other accrued expenses......... 90 1,701 (374)
-------- -------- --------
Net cash provided by operating activities........ 36,843 36,347 21,991
-------- -------- --------
Cash Flows from Investing Activities
Purchase of property, plant and equipment, net........... (29,592) (22,610) (12,073)
Purchase of radio assets................................. (7,970) (68,649) (24,600)
Proceeds from sale of radio stations..................... -- 26,523 --
Acquisition of HCI, Inc.................................. -- (1,500) (13,705)
Proceeds related to exchange of cable assets............. 3,203 -- --
Purchase of cable assets................................. (2,161) (1,160) (30,994)
Increase in investments and other assets................. (3,250) (3,000) (1,166)
Other.................................................... 928 (3) 670
-------- -------- --------
Net cash used by investing activities............ (38,842) (70,399) (81,868)
-------- -------- --------
Cash Flows from Financing Activities
Increase (decrease) in revolving credit borrowing........ 49,700 (53,600) 72,500
Proceeds from long-term debt............................. -- 100,000 --
Repayments of long-term debt............................. (42,600) (11,250) (9,600)
Repurchase of preferred stock............................ (2,690) -- --
Payment of deferred financing costs...................... -- (1,088) (1,169)
Payments of preferred dividends.......................... (635) (682) (682)
Sale (repurchase) of non-voting subsidiary common
stock................................................. 444 (325) 201
Increase (decrease) in cash overdrafts................... (278) 279 (655)
-------- -------- --------
Net cash provided by financing activities........ 3,941 33,334 60,595
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents....... 1,942 (718) 718
Cash and Cash Equivalents, January 1,...................... -- 718 --
-------- -------- --------
Cash and Cash Equivalents, December 31,.................... $ 1,942 $ -- $ 718
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 120
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations -- Susquehanna Media Co. ("Media") and its
subsidiaries, Susquehanna Radio Corp. ("SRC"), Susquehanna Cable Co. ("SCC"),
Susquehanna Data Services, Inc. ("BlazeNet"), Susquehanna Fiber Systems, Inc.
and Media PCS Ventures, Inc. (collectively, the "Company"), are primarily in the
businesses of radio broadcasting, cable television services, Internet services
and other communications related services. Susquehanna Fiber Systems, Inc. is a
50% general partner in Hyperion Susquehanna Telecommunications, a competitive
access provider.
Through its subsidiaries, the Company operates radio stations in major U.S.
markets and cable television systems in Pennsylvania, Maine, Mississippi,
Illinois and Indiana. Internet services are provided in Pennsylvania, Maryland
and Mississippi.
Principles of Consolidation -- The consolidated financial statements
include the accounts of Media and its subsidiaries. All significant intercompany
accounts and transactions are eliminated. Media is a wholly-owned subsidiary of
Susquehanna Pfaltzgraff Co. (the "Parent").
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 that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
Credit Risk -- The Company's accounts receivable are largely from consumers
and consumer businesses whose ability to pay is subject to changes in general
economic conditions.
Media's revenues were concentrated in the following radio markets:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
San Francisco................................... 23% 21% 20%
Dallas-Fort Worth............................... 13% 14% 12%
</TABLE>
Property, Plant and Equipment -- These assets are stated at cost.
Depreciation and amortization are computed on the straight-line method for
financial statement purposes based on the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements.................... 10 to 40 years
Equipment..................................... 3 to 20 years
</TABLE>
Depreciation expense was approximately $12 million, $10.2 million and $7.9
million for the years ended December 31, 1998, 1997 and 1996, respectively.
Asset additions and major renovations are capitalized and depreciated over
their estimated useful lives. Costs of maintenance, repairs and minor
renovations are charged against income. Gains or losses on dispositions are
credited to or charged against income and the related costs and accumulated
depreciation are removed from the balance sheet.
Impairment of Long-Lived Assets -- When events or changes in circumstances
indicate that the carrying value of an asset or group of assets may be impaired,
the estimated fair market value or the
F-7
<PAGE> 121
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimated future undiscounted pretax cash flows from the affected asset(s) are
compared with carrying value to determine if an impairment loss must be
recorded.
Disclosures About Fair Value of Financial Instruments -- Financial
instruments include cash and cash equivalents, investments and long-term debt.
The fair value of these financial instruments approximate their carrying values.
Investments and Other Assets -- The Company's investments of less than 20%
in other entities are reported on the cost method of accounting. Investments in
other entities which are at least 20% owned are reported on the equity method.
Net Income Per Share -- Basic net income per share excludes dilution and is
computed by dividing consolidated net income available for common shareholders
by the weighted-average number of common shares outstanding for the period (1.1
million shares for the years ended December 31, 1998, 1997 and 1996). Diluted
net income per share reflects the potential dilution that could occur if SRC
common stock options were exercised, resulting in the issuance of additional SRC
common stock that would then share in its earnings.
Revenues -- Radio revenues have been reported net of agency commissions.
Interest -- Interest paid was $21.8 million, $16.9 million and $13.9
million for the years ended December 31, 1998, 1997 and 1996, respectively.
Interest relating to construction of buildings and equipment is capitalized as
part of the related asset's cost. Approximately $1.2 million, $118 thousand and
$202 thousand of interest was capitalized during the years ended December 31,
1998, 1997 and 1996, respectively.
Deferred financing costs are included in Investments and Other Assets and
are being amortized straight-line over the repayment period of the related debt.
Income Taxes -- Income taxes are based on the liability method of
accounting. Deferred income taxes reflects the future tax consequences of
temporary differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end. Changes in enacted tax rates are
reflected in the tax provision as they occur.
2. ACQUISITIONS, EXCHANGES AND DISPOSITIONS
On January 29, 1999, a Cable subsidiary purchased assets serving
approximately 17,000 cable subscribers in the Hanover, Pennsylvania area for
$33.4 million cash. Investments and Other Assets included a $1 million escrowed
purchase deposit at December 31, 1998.
On November 30, 1998, a cable subsidiary exchanged assets serving
approximately 6,600 subscribers in Newcastle, Maine, Warren, Maine, and New
London, New Hampshire for assets serving approximately 4,500 subscribers in
Woolwich, Harpswell, and Freeport, Maine plus $3.2 million cash. A gain of $1.1
million was recognized on the transaction.
On June 15, 1998, Susquehanna Radio Corp. purchased the assets of KXIL-FM
and KDSX-AM in North Dallas for $3.6 million and $2.6 million, respectively.
On June 2, 1998, Susquehanna Radio Corp purchased the assets of WABZ-FM in
Albermarle, North Carolina for $1.7 million. The Company will not operate the
station, but rather will attempt to relocate the signal into the Charlotte,
North Carolina market and ultimately sell or swap the station to facilitate a
move of WHMA to the Atlanta market. The purchase price has been included in
Investments and Other Assets.
F-8
<PAGE> 122
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 8, 1997, Susquehanna Radio Corp. purchased the assets of radio
station KTCT-AM (formerly KOFY-AM) in the San Francisco, California area for
$14.5 million.
On September 30, 1997, a cable subsidiary acquired assets serving
approximately 970 subscribers in Warren, Maine for $1.2 million cash. Assets
serving approximately 1,700 subscribers in New London and Wilmot, New Hampshire
were acquired for $2.2 million as of February 1, 1998.
On July 14, 1997, a radio subsidiary purchased the assets of WGLD-FM in
Indianapolis, Indiana for $4.3 million cash.
On July 7, 1997, Susquehanna Radio Corp. purchased the assets of KSAN-FM in
San Francisco, California for $44.5 million cash.
Susquehanna Radio Corp. purchased the assets of WHMA-AM/FM, licensed to
Anniston, Alabama for $15.3 million on May 22, 1997. If the Company is permitted
to relocate the FM transmitting facilities within the next six years, the
WHMA-AM/FM purchase agreement provides for an additional payment to the sellers
of up to $20 million. It is not possible to determine whether relocation will be
approved or to estimate any additional cost at this time.
In 1996, a radio subsidiary acquired a 49% interest in Hispanic Coalition,
Inc. ("HCI") for $1.5 million and agreed to construct a radio station for HCI in
exchange for a note. As part of the agreement, the subsidiary was granted an
option to purchase the remaining 51% interest for $4.3 million. In March 1997,
the remaining 51% interest was purchased. Costs incurred in this acquisition
were $1.5 million in 1997 and $13.7 million in 1996.
On June 10, 1997, Susquehanna Radio Corp. exchanged its Norfolk, Virginia
radio stations and $5 million cash for WVAE-FM in Cincinnati, Ohio. The $5
million was allocated to the FCC license.
Susquehanna Radio Corp. purchased the assets of WVCL-FM in Norfolk,
Virginia on October 17, 1996 and the assets of KTCK-AM in Dallas, Texas on
October 18, 1996 for $6.5 million and $13.8 million cash, respectively.
On April 2, 1996, a cable subsidiary serving approximately 15,600
subscribers in East Providence, Rhode Island exchanged its assets and $13.6
million cash for assets serving approximately 24,800 subscribers in the
Williamsport, Pennsylvania area. In December 1996, Susquehanna Cable Co.
purchased assets serving 11,200 subscribers in nearby Avis/Hughesville,
Pennsylvania for $17.4 million cash.
All radio and cable properties acquired during the years ended December 31,
1998, 1997 and 1996 have been accounted for as purchases. The results of their
operations have been included in the
F-9
<PAGE> 123
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidated Income Statements since acquisition. The Company has allocated the
costs of purchased assets, at their fair market values, as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Radio
Property, plant and equipment............ $ 630 $ 1,648 $ 3,657
Investments and other assets (WABZ-FM)... 1,703 -- --
Intangible assets........................ 5,637 98,501 20,943
-------- -------- --------
Total............................ $ 7,970 $100,149 $ 24,600
======== ======== ========
Cable and Other
Property, plant and equipment............ $ 1,328 $ -- $ 8,088
Intangible assets........................ 833 1,160 22,906
-------- -------- --------
Total............................ $ 2,161 $ 1,160 $ 30,994
======== ======== ========
</TABLE>
In December 1998, a cable subsidiary completed the rebuild of its
distribution system in Williamsport, Pennsylvania. Assets replaced in the
rebuild were retired. Retirement of these assets resulted in a $1.3 million
charge against 1998 operations. The rebuild of the Mount Wolf, Pennsylvania area
resulted in a similar charge of $0.7 million against 1997 operations.
On May 22, 1997, a radio subsidiary purchased the assets of KBYA-FM,
licensed to Carson City, Nevada for $15.1 million. On November 26, 1997, the
radio subsidiary sold the assets of KBYA-FM for $15.9 million. A $0.7 million
gain, net of selling expenses, was recognized.
On April 18, 1997, Susquehanna Radio Corp. sold the assets of WARM-AM and
WMGS-FM for $10.6 million cash. A gain of $9.8 million was recognized on the
sale.
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Long-term debt includes (in thousands):
Term Loan................................................. $100,000 $100,000
Reducing Revolver Commitment.............................. 126,100 76,400
6.375% Note............................................... -- 30,000
8.61% Senior Notes, Series A.............................. 19,500 22,000
8.41% Senior Notes, Series B.............................. 19,500 22,000
11.15% Senior Notes, Series C............................. 7,500 12,500
8% Promissory Note........................................ -- 1,500
8.5% Note................................................. -- 1,100
Other..................................................... 176 --
-------- --------
272,776 265,500
Less amounts payable within one year...................... 12,054 12,600
-------- --------
$260,722 $252,900
======== ========
</TABLE>
On July 17, 1997, the Company's collateralized Reducing Revolver Commitment
was increased to $225 million. The commitment begins reducing in 2000 and
matures in 2005. Under terms of the amended and restated loan agreement, the
Company utilized a $100 million Term Loan commitment which matures in 2004 and
2005. Both the Reducing Revolver and Term Loan bear interest priced at
F-10
<PAGE> 124
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the prime rate or a LIBOR rate plus applicable margin based on certain ratios.
The interest rate on the Term Loan was 6.98% and 7.49% at December 31, 1998 and
1997, respectively. The interest rate on the Reducing Revolver Commitment was
6.74% and 7.25% at December 31, 1998 and 1997, respectively. Deferred financing
expenses of approximately $1.1 million were incurred in connection with the
increased commitment.
The 6.375% Note was repaid in January 1998 by using the Reducing Revolver
Commitment. The $30 million was classified as long-term at December 31, 1997.
For disclosures related to the Consolidated Statements of Cash Flows, the Note
and corresponding cost of assets acquired are treated as non-cash.
The 8.61% Series A and 8.41% Series B Senior Notes with insurance companies
began amortizing in 1996 and mature in 2002. The interest rates on the Senior
Notes are fixed to maturity.
The 11.15% Series C Senior Notes which are held by an insurance company
mature through 2000.
The Company has commenced efforts to replace its existing bank and
insurance company debt with a new bank credit facility and a debt offering. This
refinancing will result in the recognition of an extraordinary loss of
approximately $3.2 million (net of income taxes) in 1999.
The banks and insurance companies have collateralized interests in certain
FCC licenses and stock pledges from shareholders of the Company and its
subsidiaries. The Company has agreed to maintain debt coverage and financial
ratios at prescribed levels. The Company has further agreed to restrict payment
of common stock dividends, investment transactions with affiliates, ownership
changes, sale of assets and issuance of additional debt.
The Company uses derivative financial instruments solely to limit interest
rate exposure on its Reducing Revolver Commitment. Financial instruments are not
used for trading purposes. During 1997, the Company entered into three interest
rate collar agreements expiring in 2001 with an aggregate notional amount of $75
million. The effect of these agreements limits the interest rate exposure on the
notional amount to between 7.5% and 8%, plus an applicable margin. No income or
loss was recognized related to these instruments.
The non-current portion of long-term debt matures in the following years
(in thousands):
<TABLE>
<S> <C>
2000.................. $ 10,561
2001.................. $ 12,061
2002.................. $ 12,000
2003.................. $ 45,100
2004.................. $104,000
2005.................. $ 77,000
</TABLE>
F-11
<PAGE> 125
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
The provision for income taxes is summarized as follows for the year ended
December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current
Federal............................. $ 8,637 $ 9,756 $ 6,615
State............................... 2,946 2,977 2,194
------- ------- -------
Total current............... 11,583 12,733 8,809
------- ------- -------
Deferred
Federal............................. 2,606 1,683 2,906
State............................... 257 335 261
------- ------- -------
Total deferred.............. 2,863 2,018 3,167
------- ------- -------
Provision for Income Taxes............ $14,446 $14,751 $11,976
======= ======= =======
</TABLE>
The Company is included in the consolidated federal income tax return of
its Parent. The Company's tax provision is computed on a separate return basis.
Losses utilized in the consolidated return may reduce the Company's tax payments
on a pro rata basis.
Cash paid for income taxes was $14.5 million, $10.4 million and $13.8
million in 1998, 1997 and 1996, respectively.
Reconciliations of the difference between the U.S. statutory income tax
rate and the annual effective book income tax rate follow:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate................................ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax
benefit.......................................... 6.4 6.1 6.2
Non-deductible amortization and expense............ 1.5 1.2 1.7
Other, net......................................... 1.4 (0.7) 3.8
---- ---- ----
Annual effective book income tax rate.............. 44.3% 41.6% 46.7%
==== ==== ====
</TABLE>
F-12
<PAGE> 126
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998 and 1997, deferred tax assets and liabilities result
from the following temporary differences (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Allowance for bad debts........................ $ 86 $ 30
Investment in partnerships..................... 359 235
Self insurance................................. 159 161
Accruals not recognized for tax purposes....... 135 86
Stock option benefits.......................... 343 513
Deferred revenue............................... 733 649
Other assets................................... 51 42
------- -------
Total deferred tax assets........................ 1,866 1,716
------- -------
Deferred tax liabilities:
Pension benefits............................... 656 691
Tax over book depreciation..................... 17,352 17,012
Tax over book amortization..................... 8,576 5,915
Investment in partnerships..................... 1,448 1,309
Other liabilities.............................. 3 94
------- -------
Total deferred tax liabilities................... 28,035 25,021
------- -------
Net deferred tax liabilities..................... $26,169 $23,305
======= =======
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets at cost, net of accumulated amortization, are comprised
of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Federal Communications Commission licenses..... $146,656 $143,039
Cable franchise values......................... 26,749 31,467
Goodwill....................................... 6,577 9,003
Favorable leases............................... 1,833 1,964
Cable subscriber lists......................... 1,549 1,887
Other intangible assets........................ 2,466 2,057
-------- --------
$185,830 $189,417
======== ========
</TABLE>
Cable franchise values and cable subscriber lists are being amortized
through 2011 and 2003, respectively. Favorable leases and covenants
not-to-compete are amortized according to the life of the agreements. Federal
Communications Commission (FCC) licenses and goodwill are amortized over periods
up to 40 years. Most intangible assets are being amortized using primarily the
straight-line method. Amortization for the years ended December 31, 1998, 1997
and 1996 was $8.5 million, $7.7 million and $5.8 million, respectively.
F-13
<PAGE> 127
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVESTMENTS AND OTHER ASSETS
KNBR, Inc., a subsidiary, is a limited partner in San Francisco Baseball
Associates L.P. In July 1998, KNBR, Inc. entered into a rights agreement that
extends radio station KNBR-AM's right to broadcast Giants' baseball games
through the 2004 baseball season. The agreement requires annual rights payments
ranging from $4.8 million in 1999 to $6 million in 2004. An $800 thousand
contract fee was paid at signing. KNBR, Inc. expensed rights payments and
contract fees of $4.7 million, $4.6 million and $4.5 million in 1998, 1997 and
1996, respectively. The investment in San Francisco Baseball Associates L.P. and
prepaid rights fees was $3.2 million at December 31, 1998 and $2.5 million at
December 31, 1997.
A subsidiary is a 50% general partner in Hyperion Susquehanna
Telecommunications ("Hyperion"), a competitive access provider partnership.
Capital contributions totaling $2.3 million and $3 million were made during the
years ended December 31, 1998 and 1997, respectively. The investment's carrying
value was $4.1 million at December 31, 1998 and $2.5 million at December 31,
1997.
Unamortized deferred financing expenses were $2.8 million at December 31,
1998 and $3.6 million at December 31, 1997.
7. STOCKHOLDERS' DEFICIT
On October 21, 1998, the Company repurchased and retired $2.7 million of
preferred stock at par. The Company had offered to repurchase up to $3 million
of preferred stock at par.
Certain minority interests are valued using a contractual formula, which
differs from a pro-rata valuation. Accordingly, the contractual value is used to
determine the liability and any adjustment to the pro-rata amount is charged or
credited to accumulated deficit. Other minority interest expense recognized in
the income statement is also adjusted for subsidiaries with a stockholders'
deficit.
SRC maintains an Employee Stock Plan to compensate certain key employees
who may purchase SRC Class "B" non voting common stock at a formula value based
on stockholders' equity and earnings. With each share purchased, participants
receive options to purchase two additional shares at the same formula value.
Options expire ten years and one month after the grant date. Total shares and
options offered may not exceed 400,000 shares. Options awarded are subject to
settlement in cash. Shares are subject to repurchase by SRC, generally at
formula value, which is determined annually in accordance with the Plan
Agreement. The Plan's transaction year is April 1 through March 31. Although SRC
may modify, suspend or terminate the Plan at any time, previously offered
purchase rights or options are not subject to change.
In 1998, SRC Class "B" non-voting common stock was split 4 for 1.
Outstanding options were also split 4 to 1. All stock and options for 1997 and
1996 have been restated to reflect the split.
F-14
<PAGE> 128
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Option activity in the Employee Stock Plan was as follows:
<TABLE>
<CAPTION>
SHARES OPTION PRICE
------- --------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995....................... 145,120 $ .84 - $ 3.45
Granted.......................................... 26,136 $ 9.54
Exercised........................................ (29,040) $ .84 - $ 9.54
-------
Balance at December 31, 1996....................... 142,216 $1.26 - $ 9.54
Granted.......................................... 20,688 $14.24
Exercised........................................ (68,040) $1.26 - $14.24
-------
Balance at December 31, 1997....................... 94,864 $1.26 - $14.24
Granted.......................................... 22,440 $18.82
Exercised........................................ (44,944) $1.26 - $14.24
-------
Balance at December 31, 1998....................... 72,360 $1.26 - $18.82
=======
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Total compensation expense (in thousands)........... $203 $318 $678
Risk free rate...................................... 5.73% 6.88% 6.35%
</TABLE>
An expected duration of six years, no expected dividends and no volatility
were used as factors in determining the compensation expense recognized for
options granted and not immediately exercised.
On April 2, 1997, SRC repurchased 29,820 shares of Class "B" non-voting
common stock at the formula share price of $18.82 from its former president. The
approximately $499,000 excess of formula share price over issue cost was charged
to minority interests.
8. NET INCOME PER SHARE
The Company computes basic and diluted net income per share in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings per Share".
The following table provides a reconciliation of the computation from basic to
diluted net income per share (in thousands, except for per share data):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net income............................ $13,860 $17,444 $11,665
Preferred dividends declared.......... (635) (682) (682)
------- ------- -------
Basic net income available for common
shares.............................. 13,225 16,762 10,983
Dilutive effect of potential issuance
of SRC common stock................. (877) (1,062) (717)
------- ------- -------
Diluted net income available for
common shares....................... $12,348 $15,700 $10,266
======= ======= =======
Basic and diluted weighted-average
shares.............................. 1,100 1,100 1,100
Basic net income per share............ $ 12.02 $ 15.24 $ 9.98
Diluted net income per share.......... $ 11.23 $ 14.27 $ 9.33
</TABLE>
F-15
<PAGE> 129
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. EMPLOYEE BENEFITS
Full-time employees of the Company and its subsidiaries are covered by the
Susquehanna Pfaltzgraff Co. Pension Plan (the Plan), a noncontributory qualified
defined benefit pension plan. Benefits under the Plan are based on employees'
years of service and earnings over part or all of their careers. The Company's
funding policy is to make contributions, as required by various regulations, not
to exceed the maximum amounts deductible for federal income tax purposes. Plan
assets, primarily listed bonds and stocks, are held by independent trustees.
The funded status of the Plan at December 31, follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Benefit obligation, beginning of year............ $26,503 $22,902
Service cost................................... 1,838 1,538
Interest cost.................................. 1,798 1,599
Actuarial losses............................... 2,621 1,206
Benefits paid.................................. (884) (742)
------- -------
Benefit obligation, end of year.................. 31,876 26,503
------- -------
Fair value of plan assets, beginning of year..... 32,247 25,440
Actual return on plan assets................... 3,627 6,249
Employer contributions......................... 740 1,300
Benefits paid.................................. (884) (742)
------- -------
Fair value of plan assets, end of year........... 35,730 32,247
------- -------
Excess of fair value of plan assets over benefit
obligation at end of year...................... 3,854 5,744
Unrecognized net actuarial gain................ (3,386) (4,773)
Unrecognized prior service costs............... 1,276 1,423
Unrecognized transition obligation............. 115 128
------- -------
Prepaid pension cost at December 31,............. $ 1,859 $ 2,522
======= =======
</TABLE>
The Plan had net periodic benefit cost for the years ended December 31, as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost.......................... $ 1,838 $ 1,538 $ 1,815
Interest cost......................... 1,798 1,599 1,538
Expected return on plan assets........ (2,393) (2,038) (1,716)
Amortization of net asset............. 13 13 13
Amortization of prior service cost.... 147 146 147
Amortization of loss.................. -- -- 94
------- ------- -------
Net periodic benefit cost for Plan.... $ 1,403 $ 1,258 $ 1,891
======= ======= =======
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of projected benefit obligations was 6.5% for 1998 and 7% 1997.
The assumed rate of increase in future compensation levels was 5.0% for both
1998 and 1997. The expected long-term rate of return on Plan assets was 9% for
both 1998 and 1997.
F-16
<PAGE> 130
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company was allocated $1 million, $0.8 million and $1.0 million pension
cost for the years ended December 31, 1998, 1997 and 1996, respectively.
Included in the Company's other current assets are prepaid pension costs of
$411 thousand and $586 thousand at December 31, 1998 and 1997, respectively.
The Parent also sponsors a defined contribution (401k) plan which covers
all full-time employees. The plan matches 75% of the first 2% of salary
contributed by a participant. The Company contributed approximately $446
thousand, $407 thousand and $255 thousand to the plan for the years ended
December 31, 1998, 1997 and 1996, respectively.
10. LEASE COMMITMENTS
Rental expenses for operating leases were $4.5 million, $3.5 million and
$2.6 million for the years ended December 31, 1998, 1997 and 1996, respectively.
Annual aggregate minimum rental commitments under non-cancelable operating
leases are as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
1999..................... $3,425 2002..................... $ 2,452
2000..................... $2,932 2003..................... $ 2,452
2001..................... $2,643 2004 and beyond.......... $12,649
</TABLE>
11. RELATED PARTIES
The Company purchases management services, office space and administrative
services from related parties, primarily its Parent. Included in general and
administrative expenses for the years ended December 31, are charges for (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Management fees.................................. $2,722 $2,566 $3,916
Accounting and tax services...................... 589 498 479
Human resources.................................. 863 824 734
Treasury......................................... 270 262 175
Occupancy, administrative services and vehicle
rentals........................................ 815 608 565
------ ------ ------
$5,259 $4,758 $5,869
====== ====== ======
</TABLE>
12. CONTINGENCIES AND COMMITMENT
An unrelated cable television Multiple System Operator (MSO) owns a 15.0%
interest in Susquehanna Cable Co. and a 17.75% interest in each of Susquehanna
Cable Co.'s cable television operating subsidiaries. Susquehanna Cable Co.
receives favorable program rates due to the MSO's ownership.
The MSO may offer to purchase the Company's interest in its cable
television operations. The Company must either accept or reject an offer within
sixty days. If the Company rejects the offer, the MSO may require the Company to
repurchase the MSO's holdings at the offer price plus a fee equal to 3% of the
MSO's $25 million investment, compounded annually from 1993.
If the MSO does not offer to purchase the Company's cable television
operations by December 1, 2000, the Company may elect to pay the MSO a fee equal
to 1 1/2% of the MSO's
F-17
<PAGE> 131
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$25 million investment compounded annually from 1993 and avoid any further fee
obligation. No liability has been recorded due to the uncertainty of future
events.
The Company is involved in litigation and administrative proceedings
primarily arising in the normal course of its business. In the opinion of
management, the Company's recovery, if any, or the Company's liability, if any,
under any pending litigation or administrative proceeding would not materially
affect its financial condition or operations.
13. SEGMENTS
Effective January 1, 1997, the Company adopted SFAS No. 131, Disclosures
About Segments of an Enterprise and Related Information, which changes the
method in which the Company reports information about its operating segments.
The Company's five business units have separate management teams and
infrastructures that offer different products and services. The business units
have been aggregated into three reportable segments: Radio, Cable and Other.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on operating income of the respective business units.
Segment information for the years ended December 31, 1998, 1997 and 1996
was as follows (in thousands):
<TABLE>
<CAPTION>
RADIO CABLE OTHER CONSOLIDATED
-------- -------- ------- ------------
<S> <C> <C> <C> <C>
1998
Operating income (loss)........................ $ 34,406 $ 18,711 $ (148) $ 52,969
Interest expense, net.......................... 8,210 9,390 2,906 20,506
Depreciation and amortization.................. 7,281 12,843 439 20,563
Income (loss) before income taxes and minority
interests.................................... 27,062 9,260 (3,730) 32,592
Provision (benefit) for income taxes........... 11,928 3,830 (1,312) 14,446
Identifiable assets............................ 211,842 117,177 7,372 336,391
Capital expenditures........................... 7,727 20,737 1,128 29,592
1997
Operating income (loss)........................ $ 27,991 $ 16,913 $ (442) $ 44,462
Interest expense, net.......................... 5,852 10,626 2,412 18,890
Depreciation and amortization.................. 5,542 12,197 253 17,992
Income (loss) before income taxes and minority
interests.................................... 33,207 5,600 (3,358) 35,449
Provision (benefit) for income taxes........... 13,385 2,507 (1,141) 14,751
Identifiable assets............................ 201,527 109,871 3,516 314,914
Capital expenditures........................... 6,994 12,667 2,949 22,610
</TABLE>
F-18
<PAGE> 132
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
RADIO CABLE OTHER CONSOLIDATED
-------- -------- ------- ------------
<S> <C> <C> <C> <C>
1996
Operating income (loss)........................ $ 25,740 $ 13,575 $(1,210) $ 38,105
Interest expense, net.......................... 2,141 9,536 2,120 13,797
Depreciation and amortization.................. 3,308 9,837 72 13,217
Income (loss) before income taxes and minority
interests.................................... 24,311 4,742 (3,428) 25,625
Provision (benefit) for income taxes........... 10,959 2,112 (1,095) 11,976
Identifiable assets............................ 112,663 101,362 4,289 218,314
Capital expenditures........................... 4,880 5,533 1,660 12,073
</TABLE>
14. SUBSEQUENT EVENTS
On March 19, 1999, the Parent's Board of Directors approved a cessation of
benefit accruals under its defined benefit pension plans effective April 30,
1999. Based on preliminary information, the curtailment will not have a material
effect on the Company's financial position or its results of operations.
On April 16, 1999, the Company prepaid all outstanding indebtedness under
its senior notes using borrowings under the existing senior credit facility.
On April 22, 1999, a three year "Put Right" was granted to the MSO holding
a minority interest in SCC. After an eighteen month period beginning with the
closing of a new senior credit facility, the MSO may require the Company to
repurchase its ownership interests at a price determined by independent
appraisers. This "Put Right" may not be exercised if exercise would create a
default under certain debt agreements. In exchange for its ownership interests,
the MSO would receive cash up to the amount of borrowing availability under the
new senior credit facility and a note for the balance. The note would be
subordinate to the senior credit facility. If the "Put Right" is exercised, the
Company may, at its sole discretion and in lieu of acquiring the MSO's ownership
interests, sell SCC and pay the MSO its pro rata share of net proceeds.
F-19
<PAGE> 133
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE QUARTER ENDED MARCH 31, 1999
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Consolidated Balance Sheets....................... F-21
Condensed Consolidated Income Statements.................... F-22
Condensed Consolidated Statements of Cash Flows............. F-23
Notes to Condensed Consolidated Financial Statements........ F-24
</TABLE>
F-20
<PAGE> 134
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 1,967 $ 1,942
Accounts receivable, net.................................. 27,192 32,324
Deferred income taxes..................................... 297 262
Other current assets...................................... 6,207 4,223
-------- --------
Total Current Assets.............................. 35,663 38,751
Property, Plant and Equipment, net.......................... 115,756 96,607
Intangible Assets, net...................................... 200,679 185,830
Investments and Other Assets................................ 14,721 15,203
-------- --------
$366,819 $336,391
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable.......................................... $ 7,705 $ 10,115
Current portion of long-term debt......................... 52 12,054
Accrued interest.......................................... 2,673 1,691
Accrued income taxes...................................... 2,482 890
Other accrued expenses.................................... 10,142 8,350
-------- --------
Total Current Liabilities......................... 23,054 33,100
-------- --------
Long-term Debt.............................................. 297,712 260,722
-------- --------
Deferred Compensation Liability............................. 806 776
-------- --------
Deferred Income Taxes....................................... 26,947 26,431
-------- --------
Minority Interests.......................................... 17,747 17,223
-------- --------
Stockholders' Equity (Deficit)
Preferred stock -- Voting, 7% cumulative with par value of
$100, authorized 110,000 shares, 70,449.22 issued and
outstanding............................................ 7,050 7,050
Common stock -- Voting, $1 par value, authorized 1,100,000
shares, 1,100,000 shares issued and outstanding........ 1,100 1,100
Accumulated Deficit....................................... (7,597) (10,011)
-------- --------
Total Stockholders' Equity (Deficit).............. 553 (1,861)
-------- --------
$366,819 $336,391
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE> 135
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues
Radio..................................................... $34,211 $28,742
Cable..................................................... 19,188 16,895
Other..................................................... 632 294
------- -------
Total revenues.................................... 54,031 45,931
------- -------
Operating Expenses
Operating and programming................................. 17,975 15,121
Selling................................................... 8,855 7,918
General and administrative................................ 11,106 8,963
Depreciation and amortization............................. 6,192 4,942
------- -------
Total operating expenses.......................... 44,128 36,944
------- -------
Operating Income............................................ 9,903 8,987
Other Income (Expense)
Interest, net............................................. (4,952) (5,198)
Other income.............................................. 384 53
------- -------
Income Before Income Taxes and Minority Interests........... 5,335 3,842
Provision for Income Taxes.................................. 2,272 1,626
------- -------
Income Before Minority Interests............................ 3,063 2,216
Minority Interests.......................................... (723) (637)
------- -------
Net Income.................................................. 2,340 1,579
Preferred Dividends Declared................................ (123) (171)
------- -------
Net Income Available for Common Shares...................... $ 2,217 $ 1,408
======= =======
Basic Net Income Per Share.................................. $ 2.02 $ 1.28
======= =======
Diluted Net Income Per Share................................ $ 1.87 $ 1.20
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE> 136
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from Operating Activities
Income before minority interests.......................... $ 3,063 $2,216
Adjustments to reconcile net income to net cash:
Depreciation and amortization.......................... 6,192 4,942
Deferred income taxes.................................. 481 358
Equity in earnings of investees........................ (162) 267
Imputed deferred compensation.......................... 30 61
Deferred financing amortization........................ 195 196
-------- ------
9,799 8,040
Changes in assets and liabilities:
Decrease in accounts receivable, net................... 5,132 6,124
Increase in other current assets....................... (1,984) (1,299)
Decrease in accounts payable........................... (2,410) (3,205)
Increase in accrued interest........................... 982 1,027
Increase (decrease) in accrued income taxes............ 1,592 (2,579)
Increase (decrease) in other accrued expenses.......... 1,791 (607)
-------- ------
Net cash provided by operating activities............ 14,902 7,501
-------- ------
Cash Flows from Investing Activities
Purchase of property, plant and equipment, net............ (6,593) (5,979)
Purchase of cable assets............................... (32,400) (2,161)
Increase in investments, other assets and intangible
assets................................................ (359) (82)
Partnership capital contribution....................... (400) (500)
Proceeds from partnership distribution................. -- 150
-------- ------
Net cash used in investing activities................ (39,752) (8,572)
-------- ------
Cash Flows from Financing Activities
Increase in revolving credit borrowing.................... 25,000 3,400
Payments of preferred dividends........................ (123) (171)
Sale (repurchase) of non-voting subsidiary common
stock................................................. (2) 378
Decrease in cash overdrafts............................ -- (279)
-------- ------
Net cash provided by financing activities............ 24,875 3,328
-------- ------
Net Increase in Cash and cash equivalents................... 25 2,257
Cash and cash equivalents, January 1,.................. 1,942 --
-------- ------
Cash and cash equivalents, March 31,................... $ 1,967 $2,257
======== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE> 137
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements (the
"financial statements") include the accounts of Susquehanna Media Co. and all
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.
The balance sheet as of March 31, 1999 and the related statements of income
and cash flows for the three month periods ended March 31, 1999 and 1998, have
been prepared by the Company without audit. In the opinion of management, the
financial statements include all of the adjustments necessary for fair
presentation. All adjustments made were of a normal recurring nature. Interim
results are not necessarily indicative of results for a full year. These
financial statements should be read in conjunction with the audited financial
statements of the Company and the notes thereto for the year ended December 31,
1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. RECENT DEVELOPMENTS
Acquisition of Hanover Cable -- On January 29, 1999, a Cable subsidiary
purchased assets serving approximately 16,700 cable subscribers in the Hanover,
Pennsylvania area for $33.4 million cash. Pending completion of an acquisition
valuation, the purchase price has been equally allocated to property, plant and
equipment and intangible assets. Operating results for Hanover have been
included in the Company's results of operations since acquisition.
Financing Changes -- On April 16, 1999, the Company repaid its $46.5
million of insurance company notes with borrowings from its then existing senior
bank credit facility. Prepayment penalties of $2.9 million were incurred.
On May 12, 1999, the Company entered into a new $450 million senior credit
facility with a group of financial institutions which replaced its prior senior
bank credit facility. The new facility is comprised of a $250 million reducing
revolver maturing on June 30, 2007, a $100 million amortizing term loan A
maturing on June 30, 2007, and a $100 million amortizing term loan B maturing on
June 30, 2008.
Media simultaneously issued $150 million of 8.5% Senior Subordinated Notes
due 2009 at 99.75% of its face amount. Proceeds to Media totaled $145.5 million.
Employee Stock Ownership Plan (ESOP) -- On March 19, 1999, Susquehanna
Pfaltzgraff Co.'s (the Parent) Board of Directors approved creation of an
Employee Stock Ownership Plan (ESOP) for Susquehanna Pfaltzgraff Co.
Substantially all Media employees will participate in the ESOP. Although the
ESOP was not formed as of March 31, 1999, an estimated ESOP expense of $1.2
million was recorded for the three months ended March 31, 1999, since ESOP
employee allocations are based on compensation for the entire year.
On March 19, 1999, the Parent's Board of Directors also approved a
cessation of benefit accruals under the Susquehanna Pfaltzgraff Co. Pension Plan
effective April 30, 1999. Preliminary actuarial calculations indicate no
curtailment loss.
F-24
<PAGE> 138
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. NET INCOME PER SHARE
The Company computes basic and diluted net income per share in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings per Share".
The following table provides a reconciliation of the computation from basic to
diluted net income per share (in thousands, except for per share data):
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Net income.................................................. $2,340 $1,579
Preferred dividends declared................................ (123) (171)
------ ------
Basic net income available for common shares................ 2,217 1,408
Dilutive effect of potential issuance of SRC
Non-voting common stock................................... (159) (88)
------ ------
Dilutive net income available for common shares............. $2,058 $1,320
====== ======
Basic and diluted weighted-average shares................... 1,100 1,100
Basic net income per share.................................. $ 2.02 $ 1.28
Diluted net income per share................................ $ 1.87 $ 1.20
</TABLE>
SRC refers to Susquehanna Radio Corp., a Company subsidiary.
4. SEGMENT INFORMATION
The Company's five business units have separate management teams and
infrastructures that offer different products and services. The business units
have been aggregated into three reportable segments: Radio, Cable and Other.
Segment information for the three months ended March 31, 1999 and 1998 was as
follows (in thousands):
<TABLE>
<CAPTION>
RADIO CABLE OTHER CONSOLIDATED
------- ------- ------ ------------
<S> <C> <C> <C> <C>
1999
Operating income (loss)................... 6,535 4,119 (751) 9,903
Interest expense, net..................... 1,772 2,386 794 4,952
Depreciation and amortization............. 2,009 4,009 174 6,192
Income (loss) before income taxes and
minority interests...................... 4,985 1,733 (1,383) 5,335
Provision (benefit) for income taxes...... 1,991 1,181 (900) 2,272
Identifiable assets....................... 207,352 151,530 7,937 366,819
Capital expenditures...................... 973 5,323 297 6,593
1998
Operating income (loss)................... 4,749 4,325 (87) 8,987
Interest expense, net..................... 2,075 2,474 649 5,198
Depreciation and amortization............. 1,669 3,190 83 4,942
Income (loss) before income taxes and
minority interests...................... 2,990 1,887 (1,035) 3,842
Provision (benefit) for income taxes...... 1,212 870 (456) 1,626
Identifiable assets....................... 197,105 112,178 6,443 315,726
Capital expenditures...................... 1,517 3,846 616 5,979
</TABLE>
F-25
<PAGE> 139
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. CONTINGENCIES AND COMMITMENTS
Susquehanna Radio Corp. purchased the assets of WHMA-AM/FM, licensed to
Anniston, Alabama for $15.3 million on May 22, 1997. If SRC is permitted to
relocate the FM transmitting facilities within six years of acquisition, the
purchase agreement provides for an additional payment to the sellers of up to
$20 million. It is not possible to determine whether relocation will be approved
or to estimate any additional cost at this time.
An unrelated cable television Multiple System Operator (MSO) owns a 14.9%
interest in Susquehanna Cable Co. and a 17.75% interest in each of Susquehanna
Cable Co.'s cable television operating subsidiaries. Susquehanna Cable Co.
receives a pass-through of the MSO's program rates plus a fee.
The MSO may offer to purchase the Company's interest in its cable
television operations. The Company must either accept or reject an offer within
sixty days. If the Company rejects the offer, the MSO may require the Company to
repurchase the MSO's holdings at the offer price plus a fee equal to 3% of the
MSO's $25 million investment, compounded annually from 1993.
If the MSO does not offer to purchase the Company's cable television
operations by May 28, 2000, the Company may elect to pay the MSO a fee equal to
1 1/2% of the MSO's $25 million investment compounded annually from 1993 and
avoid any further fee obligation. No liability has been recorded due to the
uncertainty of future events.
On April 22, 1999, the MSO was granted a three year "Put Right". After an
eighteen month holding period beginning May 12, 1999, the MSO may require the
Company to repurchase its ownership interest at a price to be determined by
independent appraisers. The "Put Right" could not be exercised if exercise would
create default under certain debt agreements. If the "Put Right" would be
exercised, the Company may, at its sole discretion and in lieu of acquiring the
MSO's ownership interests, sell Cable and pay the MSO its pro rata share of net
proceeds.
The Company is involved in litigation and administrative proceedings
arising in the normal course of its business. In the opinion of management, the
Company's recovery, if any, or the Company's liability, if any, under any
pending litigation or administrative proceeding would not materially affect its
financial condition or operations.
F-26
<PAGE> 140
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The by-laws of Susquehanna Media provide for the indemnification of
Susquehanna Media's directors and officers to the fullest extent permitted by
law. Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of Susquehanna Media
pursuant to Susquehanna Media's by-laws and the Delaware General Corporation Law
(the "DGCL"), Susquehanna Media is aware that it is the opinion of the SEC that
such indemnification is against public policy as expressed in such Act and is
therefore unenforceable.
As permitted by the DGCL, Susquehanna Media's charter eliminates personal
liability of Susquehanna Media's directors to Susquehanna Media and its
stockholders for monetary damages for breaches of fiduciary duty except for (i)
any breach of the director's duty of loyalty to Susquehanna Media or its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) any transaction from
which the director derived an improper personal benefit; and (iv) acts covered
by Section 174 of the DGCL relating to unlawful dividends or distributions or
stock repurchases or redemptions. As a result of these provisions, Susquehanna
Media and its stockholders may be unable to obtain monetary damages from a
director for breach of his fiduciary duties.
Susquehanna Media's by-laws require Susquehanna Media to indemnify
directors and officers to the extent permitted under the DGCL. As permitted by
the DGCL, the by-laws provide for indemnification of the Company's directors and
officers against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by them in
connection with any action, suit or proceeding if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Susquehanna Pfaltzgraff maintains insurance covering expenditures that may
be incurred in connection with the lawful indemnification of the Company's
directors and officers for their liabilities and expenses.
II-1
<PAGE> 141
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1* - Certificate of Incorporation of Susquehanna Media Co., as
amended
3.2* - By-laws of Susquehanna Media Co.
4.1* - Indenture for the 8 1/2% Senior Subordinated Notes due
2009, dated as of May 12, 1999, between Susquehanna Media
Co. and Chase Manhattan Trust Company, National
Association, as Trustee
4.2* - Form of Exchange Global Note for 8 1/2% Senior
Subordinated Note due 2009
4.3* - Form of Exchange Certificated Note for 8 1/2% Senior
Subordinated Note due 2009
5 - Opinion of Hunton & Williams regarding the legality of
the 8 1/2% Senior Subordinated Notes being registered
10.1 - $450 million syndicated credit facility arranged by First
Union Capital Markets Corp.
10.2 - Letter Agreement dated August 25, 1994, by and between
Susquehanna Cable Co. and Satellite Services, Inc. with
respect to the distribution and costs of certain cable
television programming services
10.3 - Agreement dated November 6, 1992, by and among Lenfest
Communications, Inc., Susquehanna Cable Co. and certain
subsidiaries of Susquehanna Cable Co., as amended
10.4 - Management Agreement dated May 24, 1993 by and between
Susquehanna Pfaltzgraff Co. and Susquehanna Media Co.
12* - Computation of ratios of earnings to fixed charges
21 - Subsidiaries of Susquehanna Media Co.
23.1* - Consent of PricewaterhouseCoopers LLP
23.2 - Consent of Hunton & Williams (included in Exhibit 5)
24* - Power of attorney is contained on the signature page of
this Registration Statement
25 - Statement of the eligibility and qualification on Form
T-1 of Chase Manhattan Trust Company, National Association,
as Trustee under the Indenture
27 - Financial Data Schedule
99.1 - Form of letter of transmittal
99.2 - Form Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.3 - Form of Letter to Clients
99.4 - Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Filed herewith.
ITEM 22. UNDERTAKINGS.
A. 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 the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total
dollar value of the 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
II-2
<PAGE> 142
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 this
Registration Statement or any material change to such
information in this Registration Statement.
2. That, for the purpose 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.
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.
B. 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.
C. 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 this form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of this Registration
Statement through the date of responding to the request.
D. 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 this Registration Statement when it became effective.
II-3
<PAGE> 143
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 York, State of
Pennsylvania, on this 11th day of June, 1999.
SUSQUEHANNA MEDIA CO.
/s/ PETER P. BRUBAKER
--------------------------------------
Peter P. Brubaker,
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Peter P. Brubaker and Craig W. Bremer, and each
of them (with full power to act alone) as true and lawful attorneys-in-fact, and
stead, in any and all capacities, to sign any 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, hereby
ratifying and confirming all that said attorney-in-fact, or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ LOUIS J. APPELL, JR. Chairman of the Board of June 11, 1999
- --------------------------------------------------- Directors
Louis J. Appell, Jr.
/s/ PETER P. BRUBAKER Director, Chief Executive June 11, 1999
- --------------------------------------------------- Officer and President
Peter P. Brubaker
/s/ DAVID E. KENNEDY Director, Vice President June 11, 1999
- ---------------------------------------------------
David E. Kennedy
/s/ CRAIG W. BREMER Director, Secretary and June 11, 1999
- --------------------------------------------------- General Counsel
Craig W. Bremer
/s/ WILLIAM H. SIMPSON Director June 11, 1999
- ---------------------------------------------------
William H. Simpson
/s/ JOHN L. FINLAYSON Director, Vice President (and June 11, 1999
- --------------------------------------------------- principal financial and
John L. Finlayson accounting officer)
</TABLE>
II-4
<PAGE> 144
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1* - Certificate of Incorporation of Susquehanna Media Co., as
amended
3.2* - By-laws of Susquehanna Media Co.
4.1* - Indenture for the 8 1/2% Senior Subordinated Notes due
2009, dated as of May 12, 1999, between Susquehanna Media
Co. and Chase Manhattan Trust Company, National
Association, as Trustee
4.2* - Form of Exchange Global Note for 8 1/2% Senior
Subordinated Note due 2009
4.3* - Form of Exchange Certificated Note for 8 1/2% Senior
Subordinated Note due 2009
5 - Opinion of Hunton & Williams regarding the legality of
the 8 1/2% Senior Subordinated Notes being registered
10.1 - $450 million syndicated credit facility arranged by First
Union Capital Markets Corp.
10.2 - Letter Agreement dated August 25, 1994, by and between
Susquehanna Cable Co. and Satellite Services, Inc. with
respect to the distribution and costs of certain cable
television programming services
10.3 - Agreement dated November 6, 1992, by and among Lenfest
Communications, Inc., Susquehanna Cable Co. and certain
subsidiaries of Susquehanna Cable Co., as amended
10.4 - Management Agreement dated May 24, 1993 by and between
Susquehanna Pfaltzgraff Co. and Susquehanna Media Co.
12* - Computation of ratios of earnings to fixed charges
21 - Subsidiaries of Susquehanna Media Co.
23.1* - Consent of PricewaterhouseCoopers LLP
23.2 - Consent of Hunton & Williams (included in Exhibit 5)
24* - Power of attorney is contained on the signature page of
this Registration Statement
25 - Statement of the eligibility and qualification on Form
T-1 of Chase Manhattan Trust Company, National Association,
as Trustee under the Indenture
27 - Financial Data Schedule
99.1 - Form of letter of transmittal
99.2 - Form Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.3 - Form of Letter to Clients
99.4 - Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Filed herewith.
II-5
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
Susquehanna Media Co.
* * * * *
1. The name of the corporation is
Susquehanna Media Co.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Hundred Ten Thousand (110,000) of which stock Ten
Thousand (10,000) shares of the par value of One Dollar ($1.00) each, amounting
in the aggregate to Ten Thousand Dollars ($10,000) shall be common stock
("Common Stock") and of which One Hundred Thousand (100,000) shares of the par
value of One Hundred Dollars ($100.00) each, amounting in the aggregate to Ten
Million Dollars ($10,000,000) shall be 7% cumulative preferred stock ("Preferred
Stock").
<PAGE> 2
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the above classes of stock shall
be as follows:
(a) The Preferred Stock shall be entitled, in preference to the
Common Stock, when and as declared by the board of directors of the
corporation from funds legally available therefor, to cash dividends at
the rate of seven percentum (7%) per annum, and no more, payable
quarterly, on the first days of January, April, July and October (said
dates being herein referred to as "dividend payment dates" and the periods
between said dates commencing on said dates being herein referred to as
"dividend periods"). Such dividends on shares of the Preferred Stock shall
be cumulative from, and only from, the beginning of the dividend period
during which such shares are issued, unless such shares are issued after
the record date for the determination of stockholders entitled to receive
dividends on the Preferred Stock payable on the dividend date next
succeeding the date of issuance of such shares, in which event dividends
on such shares, shall be cumulative from, and only from, such next
succeeding dividend payment date. No dividend shall be paid or set apart
for the payment on the Common Stock at any time unless the total amount of
dividends theretofore paid or declared and set apart for the payment on
the then outstanding Preferred Stock shall be equal to seven percentum
(7%) per annum for each share of such Preferred Stock from the date when
it became cumulative to the end of the current dividend periods. Whenever
full cumulative dividends, as aforesaid, on all shares of Preferred Stock
then outstanding for all
2
<PAGE> 3
past dividend periods and for the current dividend period shall have been
paid or declared and set apart for payment, dividends may be declared and
paid or set apart for payment on the Common Stock when and to the extent
that the board of directors of the corporation shall determine, and out of
any funds legally available for the payment of dividends, and the
Preferred Stock shall not be entitled to participate in any such
dividends.
(b) In the event of liquidation, dissolution or winding up of the
affairs of the corporation, before any distribution or payment shall be
made to the holders of the Common Stock, the holders of the Preferred
Stock shall be entitled to be paid the sum of $100 per share, plus the
amount per share, if any, by which seven percentum (7%) per annum from
the date on which dividends on such shares become cumulative to the date
of such payment may exceed the total amount of dividends actually paid or
declared and set apart for payment on such share. After the making of such
payment to the holders of the Preferred Stock, the remaining assets and
funds of the corporation shall be distributed solely among the holders of
the Common Stock, who shall share equally according to their respective
rights and interests. Neither a consolidation nor a merger of the
corporation with or into one or more corporations, nor a sale of all or
substantially all of the property of the corporation to another
corporation shall be deemed to be a liquidation, dissolution or winding
up within the meaning of this subdivision (b).
(c)(1) Except as otherwise required by law, the Common Stock shall
have the exclusive right to vote for The election
3
<PAGE> 4
of directors and for all other purposes, each holder of Common Stock being
entitled to one vote for each share thereof held.
(2) Except as otherwise required by law, no holder of Preferred
Stock shall have any right to vote for the election of directors or for
any other purpose. In any case in which the holders of the Preferred Stock
shall be entitled to vote pursuant to law, each holder of Preferred Stock,
shall be entitled to one vote for each share thereof held.
(3) The holders of Preferred Stock shall not be entitled to notice
of meetings of shareholders, unless such notice is expressly required by
law.
(4) The Preferred Stock shall not be convertible to Common Stock
under any circumstances.
5. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
M. A. Brzoska Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
K. A. Widdoes Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
L. J. Vitalo Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
4
<PAGE> 5
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by statue,
the board of directors is expressly authorized to make, alter or repeal the
by-laws of the corporation.
8. Elections of directors need not be by written ballot unless the by-laws
of the corporation shall so provide. Meetings of stockholders may be held within
or without the State of Delaware, as the by-laws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the board of directors or in the by-laws of the corporation.
9. The corporation reserves the right to alter, amend, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
10. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for broach of fiduciary
duty as a director except to the extent that Section 102(b)(7) (or any successor
provision) of the Delaware General Corporation Law, as amended from time to time
expressly provides (that the liability of a director may not be eliminated or
limited.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this Certificate, hereby declaring and
certifying that this is our act and deed and the facts herein stated are true,
and accordingly have hereunto set our hands this 6th day of May, 1993.
5
<PAGE> 6
/s/ M. A. Brzoska
_______________________________
/s/ K. A. Widdoes
_______________________________
/s/ L. J. Vitalo
_______________________________
6
<PAGE> 7
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
Susquehanna Media Co., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of Susquehanna Media Co., by the
unanimous written consent of its members, filed with the minutes of the board,
duly adopted a resolution setting forth a proposed amendment to the Certificate
of Incorporation of said corporation, declaring said amendment to be advisable
and calling a meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation
be amended by changing paragraph 4 thereof so that, as amended said
Article shall be and read as follows:
"4. The total number of shares of stock which the corporation shall
have authority to issue is One Million Two Hundred Ten Thousand
(1,210,000) of which stock One Million One Hundred Thousand (1,100,000)
shares of the par value of One Dollar ($1.00) each, amounting in the
aggregate to One Million One Hundred Thousand Dollars ($1,100,000) shall
be common stock ("Common Stock") and of which One Hundred Ten Thousand
(110,000) shares of the par value of One Hundred Dollars ($100.00) each,
amounting in the aggregate to Eleven Million Dollars ($11,000,000) shall
be 7% cumulative preferred voting stock ("Preferred Stock").
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the above classes of stock
shall be as follows:
(a) The Preferred Stock shall be entitled, in preference to
the Common Stock, when and as declared by the board of directors of
the corporation from funds legally available therefor, to cash
dividends at the rate of seven percentum (7%) per annum, and no
more, payable quarterly, on the first days of January, April, July
and October (said dates being herein referred to as "dividend
payment
1
<PAGE> 8
dates" and the periods between said dates commencing an said dates
being herein referred to as "dividend periods"). Such dividends on
shares of the Preferred Stock shall be cumulative from, and only
from, the beginning of the dividend period during which such shares
are issued, unless such shares are issued after the record date for
the determination of stockholders entitled to receive dividends on
the Preferred Stock payable on the dividend date next succeeding the
date of issuance of such shares, in which event dividends on such
shares, shall be cumulative from, and only from, such next
succeeding dividend payment date. No dividend shall be paid or set
apart for the payment on the Common Stock at any time unless the
total amount of dividends theretofore paid or declared and set apart
for the payment on the then outstanding Preferred Stock shall be
equal to seven percentum (7%) per annum for each share of such
Preferred Stock from the date when it became cumulative to the end
of the current dividend periods. Whenever full cumulative dividends,
as aforesaid, on all shares of Preferred Stock then outstanding for
all past dividend periods and for the current dividend period shall
have been paid or declared and set apart for payment, dividends may
be declared and paid or set apart for payment on the Common Stock
when and to the extent that the board of directors of the
corporation shall determine, and out of any funds legally available
for the payment of dividends, and the Preferred Stock shall not be
entitled to participate in any such dividends.
(b) In the event of liquidation, dissolution or winding up of
the affairs of the corporation, before any distribution or payment
shall be made to the holders of the Common Stock, the holders of the
Preferred Stock shall be entitled to be paid the sum of $100 per
share, plus the amount per share, if any, by which seven percentum
(7%) per annum from the date on which dividends on such shares
become cumulative to the date of such payment may exceed the total
amount of dividends actually paid or declared and set apart for
payment on such share. After the making of such payment to the
holders of the Preferred Stock, the remaining assets and funds of
the corporation shall be distributed solely among the holders of the
Common Stock, who shall share equally according to their respective
rights and interests. Neither a consolidation nor a merger of the
corporation with or into one or more corporations, nor a sale of all
or substantially all of the property of the corporation to another
corporation shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this subdivision (b).
(c)(1) Except as required by law, the holders of Preferred
Stock and the holders of Common Stock share vote together as one
class on all matters voted upon by stockholders. Each holder of
record of Preferred Stock shall be entitled to one vote for each
share of Preferred Stock held by such holder, and each holder of
Common Stock shall be entitled to one vote for each share of Common
Stock held by such holder.
(2) The Preferred Stock shall not be convertible to Common
Stock under any circumstances."
2
<PAGE> 9
SECOND; That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted In accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Susquehanna Media Co. has caused this certificate
to be signed by Louis J. Appell, Jr., its President and attested by Craig W.
Bremer, its Secretary, this 14th day of May, 1993.
SUSQUEHANNA MEDIA CO.
BY: /s/ Louis J. Appell, Jr.
------------------------------
President
ATTEST:
BY: /s/ Craig W. Bremer
------------------------------
Secretary
3
<PAGE> 1
EXHIBIT 3.2
Susquehanna Media Co.
* * * * *
BY - LAWS
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Wilmington, State of Delaware, at such place as may
be fixed from time to
<PAGE> 2
time by the board of directors, or at such other place either within or without
the State of Delaware as shall be designated from time to time by the board of
directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. The annual meeting of the stockholders shall be held on the
second Monday in January each year if not a legal holiday, and if a legal
holiday, then on the next secular day following at 10:00 a.m., or at such other
date and time as shall be designated from time to time by the board of directors
and stated in the notice of the meeting, at which they shall elect by a
plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of
<PAGE> 3
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 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire 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> 4
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than sixty days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as
<PAGE> 5
originally notified. If the adjournment is for more than thirty 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 at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided-in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the
<PAGE> 6
corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than three nor more than seven. The first board shall consist
of six directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting. 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
<PAGE> 7
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors
<PAGE> 8
which may exercise all such powers of the corporation and do all such lawful
acts and things as are not by statute or by the certificate of incorporation or
by these by-laws directed or required to be exercised or done by the
stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting 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. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
<PAGE> 9
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president on
ten days' notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors unless the board
consists of only one director; in which case special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of the sole director.
Section 8. At all meetings of the board four directors 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
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
<PAGE> 10
Section 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may
<PAGE> 11
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion
<PAGE> 12
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation) adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the
<PAGE> 13
certificate of incorporation or these by-laws, the board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or
<PAGE> 14
stockholder, it shall not be construed to mean personal notice, but such notice
may be given in writing, by mail, addressed to such director or stockholder, at
his address as it appears on the records of the corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Notice to directors may
also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the
<PAGE> 15
certificate of incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief
<PAGE> 16
executive officer of the corporation, shall preside at all meetings of the
stockholders and the board of directors, shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the board of directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have
<PAGE> 17
such other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate 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,
it 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 by his
signature.
<PAGE> 18
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and 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 be designated by the board of directors.
Section 12. He 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 president and the board of directors, at
its regular meetings, or when the board of directors so requires,
<PAGE> 19
an account of all his transactions as treasurer and of the financial condition
of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
<PAGE> 20
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president and the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement that
the corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be facsimile.
In case any officer, transfer
<PAGE> 21
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may
<PAGE> 22
be made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a
<PAGE> 23
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days PRIOR TO 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: provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other
<PAGE> 24
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
<PAGE> 25
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
<PAGE> 26
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
<PAGE> 1
EXHIBIT 4.1
INDENTURE
INDENTURE dated as of May 12, 1999, between Susquehanna Media Co., a
Delaware corporation (the "Issuer"), and Chase Manhattan Trust Company, National
Association, a national banking association (the "Trustee").
RECITALS
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the holders (the "Holders" or "Noteholders")
of: (i) the Issuer's 8-1/2% Senior Subordinated Notes due 2009 being issued on
the date hereof, (ii) any Add-On Notes (as hereinafter defined) that may be
issued after the Issue Date (as hereinafter defined) (all such securities in
clauses (i) and (ii) being referred to collectively as "Initial Notes") and
(iii) if and when issued in exchange for Initial Notes as provided in the
Registration Rights Agreement or a similar agreement relating to Add-On Notes,
the Issuer's 8-1/2% Senior Subordinated Notes due 2009 (the "Exchange Notes",
and together with the Initial Notes, the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means, with respect to any Person, (i) any
Indebtedness or Disqualified Stock of any other Person existing at the time such
other Person is merged with or into or becomes a Restricted Subsidiary of such
specified Person, including Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person, and in either
case for purposes of this Indenture such Indebtedness shall be deemed to be
incurred by such specified Person at the time such other Person is merged with
or into or becomes a Restricted Subsidiary of such specified Person or at the
time such asset is acquired by such specified Person, as the case may be.
"Add-On Notes" has the meaning assigned to it in Section 2.13.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person, including any director or executive officer
of such specified Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), when used with respect to any Person, means
(i) the power to direct the management and policies of such Person, directly or
indirectly,
<PAGE> 2
whether through the ownership of voting securities, by contract or otherwise, or
(ii) the beneficial ownership of 10% or more of the total voting power of the
Voting Stock (on a Fully Diluted basis) of such Person.
"Affiliate Transaction" has the meaning assigned to it in Section 4.12.
"Agent Members" has the meaning assigned to it in Section 2.06(a).
"Asset Acquisition" means (i) an Investment by the Issuer or any
Restricted Subsidiary in any other Person pursuant to which such Person shall be
merged with or into the Issuer or any Restricted Subsidiary, or (ii) the
acquisition by the Issuer or any Restricted Subsidiary of the assets of any
Person (other than a Subsidiary of the Issuer) which constitutes all or
substantially all of the assets of such Person or comprises any division or line
of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
lease, assignment, transfer or other disposition for value (including, without
limitation, pursuant to any amalgamation, merger or consolidation or pursuant to
any sale and leaseback transaction) by the Issuer or by any of its Restricted
Subsidiaries to any Person other than the Issuer or any of its Restricted
Subsidiaries (any such transaction, a "disposition") of (i) any of the stock of
any of the Issuer's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of the Issuer or of any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of the Issuer or of any
of its Subsidiaries; excluding (a) any disposition of Cash Equivalents or
inventory in the ordinary course of business or obsolete equipment in the
ordinary course of business consistent with past practices of the Issuer or any
of its Subsidiaries or the lease or sublease of any real or personal property in
the ordinary course of business, (b) dispositions of stock or assets the
aggregate value of which does not exceed $1,000,000 less the aggregate value of
all other dispositions of stock or assets made subsequent to the Issue Date
pursuant to this clause (b), (c) exchanges of properties or assets for other
properties or assets, excluding cash or Cash Equivalents but including the
Capital Stock of a Person if, as a result of such exchange, such Person becomes
a Restricted Subsidiary; provided, that the property or assets so acquired, or
the property or assets of the Person the Capital Stock of which is so acquired
(1) are used in a Related Business and (2) have a fair market value at least
equal to the fair market value of the assets or properties being exchanged (as
evidenced by a resolution of the Issuer's Board of Directors) and (d) for
purposes of Section 4.11 only, a disposition made in accordance with Section
4.09.
"Asset Sale Offer" has the meaning assigned to it in Section 4.11.
"Asset Sale Offer Amount" has the meaning assigned to it in Section 4.11.
"Asset Sale Purchase Date" has the meaning assigned to it in Section 4.11.
2
<PAGE> 3
"Bankruptcy Law" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Blockage Notice" has the meaning assigned to it in Section 10.03.
"Board of Directors" means, as the context requires, the Board of
Directors or comparable governing body of the Issuer or the applicable
Restricted Subsidiary, as the case may be, or any committee thereof duly
authorized to act on behalf of such Board. In the case of a partnership or
limited liability company, the comparable governing body shall be partners or
members of such partnership or limited liability company or such other body as
may be duly authorized by such partners or members generally to manage the
business and affairs of the partnership or limited liability company.
"Board Resolution" means a copy of a resolution certified pursuant to an
Officers' Certificate to have been duly adopted by the Board of Directors of the
Issuer or a Guarantor, as appropriate, and to be in full force and effect, and
delivered to the Trustee.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of New York, New York or is a day on which
banking institutions therein or banking institutions located in the city in
which the Corporate Trust Office is located are authorized or required by law or
other governmental action to close.
"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) the equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be capitalized and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either S&P or Moody's, (iii) commercial paper maturing no more than one
year from the date of creation thereof and, at the time of acquisition,
3
<PAGE> 4
having the highest rating obtainable from either S&P's or Moody's, (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia that (a) is at least "adequately capitalized" (as defined in the
regulations of its primary Federal banking regulator) and (b) has Tier 1 capital
(as defined in such regulations) of not less than $100,000,000, (v) shares of
any money market mutual fund that (a) has its assets invested continuously in
the types of investments referred to in clauses (i) and (ii) above, (b) has net
assets of not less than $500,000,000, and (c) has the highest rating obtainable
from either S&P's or Moody's, and (vi) repurchase agreements with respect to,
and which are fully secured by a perfected security interest in, obligations of
a type described in clause (i) or clause (ii) above and are with any commercial
bank described in clause (iv) above.
"Certificated Notes" means Notes in certificated form.
"Change of Control" has the meaning assigned to it in Section 4.14.
"Change of Control Offer" has the meaning assigned to it in Section 4.14.
"Change of Control Payment Date" has the meaning assigned to it in Section
4.14.
"Change of Control Purchase Price" has the meaning assigned to it in
Section 4.14.
"Consolidated EBITDA" means, with respect to the Issuer for any period,
without duplication, (i) the sum of (a) Consolidated Net Income and (b) to the
extent Consolidated Net Income has been reduced thereby, (1) all income taxes of
the Issuer and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (2) Consolidated Interest
Expense, (3) Consolidated Non-Cash Charges less any non-cash items increasing
Consolidated Net Income for such period, (4) minority interests and (5) ESOP
Expense, less (ii) to the extent Consolidated Net Income has been increased
thereby, the interest income received by the Issuer as a result of the repayment
of the ESOP Loan, all as determined on a consolidated basis for the Issuer and
its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Issuer for any
period, the sum without duplication of: (i) the aggregate of all cash and
non-cash interest expense (minus amortization or write-off of deferred financing
costs included in cash or non-cash interest expense) of the Issuer and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including (a) any amortization of debt discount, (b) the
net costs under Interest Rate Protection Agreements, (c) all capitalized
interest and (d) the interest portion of any deferred payment obligation, and
(ii) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Issuer and its Restricted
Subsidiaries during such period as determined on a consolidated basis in
4
<PAGE> 5
accordance with GAAP.
"Consolidated Leverage Ratio" means, as of any date of determination, the
ratio of (i) the sum of the aggregate outstanding amount of Indebtedness of the
Issuer and its Restricted Subsidiaries as of the date of calculation as
determined on a consolidated basis in accordance with GAAP to (ii) Consolidated
EBITDA of the Issuer during the four full fiscal quarters ending on or prior to
the date of the transaction giving rise to the need to calculate the
Consolidated Leverage Ratio. For purposes of this definition, Consolidated
Leverage Ratio will be calculated after giving effect on a pro forma basis for
the period of such calculation to (A) the incurrence or repayment of any
Indebtedness of the Issuer or any of its Restricted Subsidiaries giving rise to
the need to make such calculation and any incurrence or repayment of other
Indebtedness, other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes, occurring during the
four quarter period or at any time subsequent to the last day of the four
quarter period and on or prior to the date of determination, as if such
incurrence or repayment occurred on the first day of the four quarter period and
(B) any Asset Sales or Asset Acquisitions (including any Asset Acquisition
giving rise to the need to make such calculation as a result of the Issuer or
one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of such Asset Acquisition) incurring or
otherwise becoming liable for Acquired Indebtedness) occurring during the four
quarter period or at any time subsequent to the last day of the four quarter
period and on or prior to the transaction date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for any Acquired
Indebtedness and also including any Consolidated EBITDA associated with such
Asset Acquisition) occurred on the first day of the four quarter period. If the
Issuer or any of its Restricted Subsidiaries guarantees Indebtedness of a third
Person, the preceding sentence will give effect to the incurrence of such
guaranteed Indebtedness as if the Issuer or such Restricted Subsidiary, as the
case may be, had directly incurred such guaranteed Indebtedness. Furthermore, in
calculating Consolidated Interest Expense for the purposes of the calculation of
Consolidated EBITDA, (X) interest on Indebtedness determined on a fluctuating
basis as of the date of determination (including Indebtedness actually incurred
on the date of the transaction giving rise to the need to calculate the
Consolidated Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (Y) notwithstanding (X) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Rate
Protection Agreements, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Issuer and its Restricted Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP; provided, that there
shall be excluded therefrom (i) after-tax gains and losses from Asset Sales or
abandonment or reserves relating thereto, (ii) items classified as
extraordinary, nonrecurring or unusual gains, losses or charges, and the related
tax effects, each determined in accordance with GAAP, (iii) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the Issuer
5
<PAGE> 6
or is merged or consolidated with the Issuer or any Restricted Subsidiary of the
Issuer, (iv) the net income (but not loss) of any Restricted Subsidiary of the
Issuer to the extent that the declaration of dividends, the making of
intercompany loans or similar payments by that Restricted Subsidiary of that
income is restricted by a contract, operation of law or otherwise, (v) the net
income of any Person, other than a Restricted Subsidiary of the Issuer, except
to the extent of cash dividends or distributions paid to the Issuer or to a
Restricted Subsidiary of the Issuer by such Person, (vi) any restoration to
income of any contingency reserve, except to the extent that provision for such
reserve was made out of Consolidated Net Income accrued at any time after
December 31, 1998, (vii) income or loss attributable to discontinued operations
(including operations disposed of during such period whether or not such
operations were classified as discontinued), and (viii) in the case of a
successor to the Issuer by consolidation or merger or as a transferee of the
Issuer's assets, any earnings of the successor corporation prior to such
consolidation, merger or transfer of assets.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Issuer and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Issuer ending at least forty-five (45) days
prior to the taking of any action for the purpose of which the determination is
being made, as (i) the par or stated value of all outstanding Capital Stock of
the Issuer plus (ii) paid-in capital or capital surplus relating to such Capital
Stock plus (iii) any retained earnings or earned surplus less (a) any
accumulated deficit and (b) any amounts attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" means with respect to the Issuer, for any
period, the aggregate depreciation, amortization and other non-cash expenses
(excluding any non-cash expense to the extent that it represents an accrual of
or reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of the Issuer and its Restricted
Subsidiaries reducing Consolidated Net Income of the Issuer for such period,
determined on a consolidated basis in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time this Indenture shall be principally administered, which office
is, at the date of execution of this Indenture, One Liberty Place, 1650 Market
Street, Suite 5210, Philadelphia, PA 19103, Attention: Capital Market Fiduciary
Services (Susquehanna Media Co. 8 1/2% Senior Subordinated Notes due 2009).
"Custodian" means any receiver, trustee, assignee, liquidator, custodian
or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.12 hereof.
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"Depositary" means The Depository Trust Company, its nominees, and their
respective successors.
"Designated Senior Indebtedness" means, in respect of the Issuer, all
obligations under or arising out of the Senior Credit Facility and any other
Senior Indebtedness of the Issuer which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least
$5,000,000 and is specifically designated by the Issuer in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" and, in respect of any Guarantor, any Guarantee by such Guarantor
of Designated Senior Indebtedness of the Issuer.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which 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 (i) matures
or is mandatorily redeemable for any reason, (ii) is convertible or exchangeable
for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of
the holder thereof, in whole or in part, in each case on or prior to the first
anniversary of 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 such Person to repurchase or
redeem such Capital Stock upon the occurrence of an Asset Sale or Change of
Control occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Disqualified Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are not more favorable to
the holders of such Capital Stock than the provisions described under Section
4.11 and Section 4.14.
"ESOP" means the Susquehanna Pfaltzgraff Co. Employee Stock Ownership Plan
dated May 12, 1999.
"ESOP Expense" means, for any period without duplication, the sum of (i)
to the extent such expense is in the form of a cash payment, the amount of cash
actually paid by the Issuer to Susquehanna Pfaltzgraff Co. for the purpose of
funding share allocations in the ESOP; provided, that such amount shall be
limited to the lesser of (a) the amount of such cash payment and (b) the amount
of cash received by the Issuer from Susquehanna Pfaltzgraff Co. within two
Business Days of any such payment as repayment of principal and interest on the
ESOP Loan; plus (ii) to the extent such expense funding share allocations under
the ESOP is a non-cash expense, the amount of such non-cash expense.
"ESOP Loan" means the $116.9 million loan made by the Issuer to
Susquehanna Pfaltzgraff Co. on May 12, 1999.
"Event of Default" has the meaning assigned to it in Section 6.01.
"Excess Proceeds" has the meaning assigned to it in Section 4.11.
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<PAGE> 8
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Certificated Notes" has the meaning assigned to it in Section
2.01.
"Exchange Global Note" has the meaning assigned to it in Section 2.01.
"Exchange Note" has the meaning assigned to it in the recital hereto.
"Excluded Transactions" means (i) agreements in existence on or prior to
the Issue Date, (ii) the ESOP Loan, (iii) payments of management fees by the
Issuer to Susquehanna Pfaltzgraff Co. in an amount not to exceed 4.0% of the
consolidated net revenues of the Issuer, (iv) payments by the Issuer to
Susquehanna Pfaltzgraff Co. pursuant to any tax sharing agreement, (v) payments
to Susquehanna Pfaltzgraff Co. constituting reimbursements of actual
out-of-pocket expenses reasonably incurred on behalf of the Issuer and its
Restricted Subsidiaries in the ordinary course of their businesses and (vi) the
annual cash payment from the Issuer to Susquehanna Pfaltzgraff Co. for the
purpose of funding share allocations in the ESOP.
"Fully Diluted" means all shares of common stock, computed as if all
warrants, options and other securities exercisable for, convertible into or
otherwise having the right to acquire common stock had been exercised or
converted.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth (i) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the published rules and regulations of the
SEC governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the accounting staff of
the SEC.
"Global Notes" means the Initial Global Notes and the Exchange Global
Note.
"Guarantee" means any guarantee of the Notes, on a senior subordinated
basis, by a Restricted Subsidiary of the Issuer that may be issued in accordance
with Section 4.21.
"Guarantor" means any Restricted Subsidiary of the Issuer that executes a
supplemental indenture in accordance with Section 4.21.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
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"incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, that any Indebtedness or Capital Stock of a Person existing at
the time such Person becomes a Restricted Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be incurred by such
Subsidiary at the time it becomes a Restricted Subsidiary. The term "incurrence"
when used as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination, (i) all indebtedness, obligations and liabilities of such Person
for borrowed money, (ii) all indebtedness, obligations and liabilities of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all indebtedness, obligations and liabilities of such Person evidenced by
Capitalized Lease Obligations, (iv) all indebtedness, obligations and
liabilities of such Person evidenced by notes payable and drafts accepted
representing extensions of credit, whether or not representing obligations for
borrowed money, of such Person, (v) all indebtedness, obligations or liabilities
of such Person owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months (or a longer period of up
to one year, if such terms are available from suppliers in the ordinary course
of business) from the date of incurrence of the obligation in respect thereof or
(b) evidenced by a note or similar written instrument, (vi) all indebtedness,
obligations and liabilities secured by any Lien on any property or asset owned
or held by that Person (including any Lien arising under any conditional sale or
other title retention agreement, any sale-leaseback arrangement or any other
lease in the nature thereof and any agreement to give any security interest)
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person, (vii) guarantee
obligations of such Person in respect of Indebtedness of other Persons and
(viii) all Disqualified Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Stock being equal to the greater
of its voluntary or involuntary liquidation preference and its maximum fixed
repurchase price, but excluding accrued dividends, if any. Indebtedness shall
not include (a) trade payables and accrued liabilities incurred in the ordinary
course of business for the purchase of goods or services which are not secured
by a Lien other than a Lien permitted pursuant to clause (ii) of the definition
of Permitted Liens and (b) obligations under Interest Rate Protection
Agreements. 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 this Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Stock, such
fair market value to be determined reasonably and in good faith by the board of
directors of the issuer of such Disqualified Stock.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Initial Certificated Notes" has the meaning assigned to it in Section
2.01.
"Initial Global Notes" means the Rule 144A Global Note, the Regulation S
Temporary
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Global Note and the Regulation S Permanent Global Note.
"Initial Notes" has the meaning assigned to it in the recital hereto.
"Initial Purchasers" means First Union Capital Markets Corp. and
NationsBanc Montgomery Securities LLC.
"Insolvency or Liquidation Proceeding" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Issuer or its assets, or (ii) any liquidation, dissolution or other winding up
of the Issuer, whether voluntary or involuntary or whether or not involving
insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors
or any other marshaling of assets or liabilities of the Issuer.
"Institutional Accredited Investors" means institutional "accredited
investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act, other than QIBs.
"Interest Payment Date" means each semiannual Interest Payment Date on May
15 and November 15 of each year, commencing November 15, 1999, in respect of the
Notes.
"Interest Rate Protection Agreement" of any Person means any interest rate
protection agreement (including interest rate swaps, caps, floors, collars,
derivative instruments and similar agreements) in support of the Issuer's
business and not of a speculative nature.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are,
in conformity with GAAP, recorded as accounts receivable on the balance sheet of
such Person) or other extensions of credit (including by way of a guarantee
obligation or similar arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase, redemption or
acquisition of Capital Stock, indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted Subsidiary," the
definition of "Restricted Payment" and Section 4.09, (i) "Investment" shall
include the portion (proportionate to the Issuer's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Issuer at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Issuer shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (a) the Issuer's "Investment" in such Unrestricted Subsidiary
at the time of such redesignation as a Restricted Subsidiary less (b) the
portion (proportionate to the Issuer's equity interest in such Unrestricted
Subsidiary) of the fair market value of the net assets of such Unrestricted
Subsidiary at the time of such redesignation as a Restricted Subsidiary, and
(ii) any
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property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means May 12, 1999.
"Issuer" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
indenture securities.
"Issuer Order" means a written order signed in the name of the Issuer by
(i) the Chairman of the Board, Chief Executive Officer, President, Chief
Financial Officer or any Vice President of the Issuer and (ii) the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Issuer, and
delivered to the Trustee.
"Legal Holiday" has the meaning assigned to it in Section 13.08.
"Lien" means any mortgage, pledge, assignment, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement, any sale-leaseback arrangement or any other lease in
the nature thereof and any agreement to give any security interest) and any
option, trust or other preferential arrangement having the practical effect of
any of the foregoing.
"Liquidated Damages" has the meaning assigned to it in the Registration
Rights Agreement.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" means, with respect to any Asset Sale, payments in
cash or Cash Equivalents received therefrom, net of bona fide direct costs of
sale, including, but not limited to, (i) income taxes reasonably estimated to be
actually payable as a result of such Asset Sale within two years of the date of
such Asset Sale, (ii) payment of the outstanding principal amount of, premium or
penalty, if any, and interest on, any Indebtedness that is secured by a Lien on
the stock or assets in question and that is required to be repaid under the
terms thereof as a result of such Asset Sale, (iii) out-of-pocket expenses and
fees relating to such Asset Sale (including legal, accounting and investment
banking fees and sales commissions) and (iv) any portion of cash proceeds which
the Issuer determines in good faith should be reserved for post-closing
adjustments or liabilities relating to the Asset Sale retained by the Issuer or
any of its Restricted Subsidiaries, it being understood and agreed that on the
day that all such post-closing adjustments have been finally determined, the
amount (if any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing adjustments, payable by the Issuer or any of its
Restricted Subsidiaries, shall constitute Net Available Cash on such date.
Additionally, in connection with an Asset Sale of Susquehanna Cable Co. and its
direct and indirect Subsidiaries, Net Available Cash shall be reduced by that
amount required to be paid to
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holders or former holders of minority equity interests in Susquehanna Cable Co.
and its direct and indirect Subsidiaries who were not Affiliates of the Issuer
in connection with any sale, purchase or redemption of those interests or
pursuant to the terms of any Indebtedness relating to the deferred payment of
any applicable purchase or redemption price.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
mean the proceeds of such issuance or sale in the form of cash or Cash
Equivalents net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Non-U.S. Person" means any Person who is not a "U.S. person," as defined
in Rule 902(k) under the Securities Act.
"Note Custodian" means, with respect to each Global Note, the custodian
with respect to such Global Note (as appointed by the Depositary), or any
successor Person thereto and shall initially be the Trustee.
"Note Register" has the meaning assigned to it in Section 2.03.
"Notes" has the meaning assigned to it in the recital hereto.
"Obligation" has the meaning assigned to it in Section 11.01.
"Officer" means the Chairman of the Board, the President, Chief Financial
Officer, any Vice President, the Treasurer, or the Secretary of the Issuer or
any Restricted Subsidiary, as the case may be (or, in the case of any Restricted
Subsidiary that is not a corporation, the respective Persons having the duties
and authority correlative to the foregoing officers of a corporation).
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from outside legal counsel
who is reasonably acceptable to the Trustee.
"Paying Agent" has the meaning assigned to it in Section 2.03.
"Payment Blockage Period" has the meaning assigned to it in Section 10.03.
"Permitted Holders" means (i) descendants, and spouses of descendants, of
Louis J. Appell, Sr. (including any trusts established for the benefit of one or
more such descendants or spouses of such descendants so long as (A) one or more
of such descendants or spouses of such descendants, (B) officers of Susquehanna
Pfaltzgraff Co. or its Subsidiaries or (C) the trust department of a financial
institution is a trustee of any such trusts) and (ii) the ESOP so long as
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executive officers of Susquehanna Pfaltzgraff Co. constitute the majority of the
ESOP Committee under the ESOP.
"Permitted Indebtedness" means each of the following:
(i) Indebtedness of the Issuer and its Restricted Subsidiaries outstanding
on the Issue Date reduced by the amount of any scheduled amortization payments
or mandatory prepayments when actually paid or permanent reductions thereon;
(ii) Indebtedness under the Indenture with respect to the Initial Notes
offered and sold on the Issue Date (together with any Exchange Notes issued in
exchange for such Initial Notes) and under any Guarantees;
(iii) Indebtedness under the Senior Credit Facility (including any
guarantees thereof); provided, that the aggregate principal amount of
Indebtedness outstanding under the Senior Credit Facility at any one time shall
not exceed (a) $450.0 million less (b) the amount of any permanent reductions to
the Senior Credit Facility made in accordance with Section 4.11.
(iv) Interest Rate Protection Agreements of the Issuer covering
Indebtedness of the Issuer or any of its Restricted Subsidiaries and Interest
Rate Protection Agreements of any Restricted Subsidiary covering Indebtedness of
such Restricted Subsidiary; provided, that (a) such Interest Rate Protection
Agreements are entered into to protect the Issuer and its Subsidiaries from
fluctuations in interest rates on Indebtedness incurred either in accordance
with this Indenture or in accordance with the Senior Credit Facility to the
extent the notional principal amount of such Interest Rate Protection Agreements
does not exceed the principal amount of the Indebtedness to which such Interest
Rate Protection Agreements relates and (b) such Interest Rate Protection
Agreements do not increase the Indebtedness of the Issuer and its Restricted
Subsidiaries outstanding other than by reason of fees, indemnities and
compensation payable thereunder;
(v) Indebtedness of a Restricted Subsidiary to the Issuer or to a
Restricted Subsidiary so long as such Indebtedness is held by the Issuer or a
Restricted Subsidiary, in each case subject to no Lien (other than a Lien under
the Senior Credit Facility) held by a Person other than the Issuer or a
Restricted Subsidiary; provided, that if as of any date any Person other than
the Issuer or a Restricted Subsidiary owns or holds any such Indebtedness or
holds a Lien (other than a Lien under the Senior Credit Facility) in respect of
such Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(vi) Indebtedness of the Issuer to a Restricted Subsidiary so long as such
Indebtedness is held by Restricted Subsidiary, subject to no Lien (other than a
Lien under the Senior Credit Facility); provided, that (a) any Indebtedness of
the Issuer to any Restricted Subsidiary is subordinated, pursuant to a written
agreement, to the Issuer's obligations under the Notes and (b)
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if as of any date any Person other than a Restricted Subsidiary owns or holds
any such Indebtedness or any Person holds a Lien (other than a Lien under the
Senior Credit Facility) in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by
the Issuer;
(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in the
case of day-light overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, that such Indebtedness is extinguished within two
Business Days of incurrence;
(viii) Indebtedness of the Issuer or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Issuer or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(ix) Refinancing Indebtedness incurred in respect of Indebtedness
originally incurred pursuant to the second sentence of Section 4.08 or pursuant
to this clause (ix) or clause (i) or (iii) of this definition;
(x) Indebtedness of the Issuer or any Restricted Subsidiary incurred in
respect of performance and payment bonds (other than in respect of
Indebtedness);
(xi) Additional Indebtedness of the Issuer and its Restricted Subsidiaries
in an aggregate principal amount not to exceed $10,000,000 at any one time
outstanding for Capitalized Lease Obligations or for purposes of financing the
purchase price or construction cost of equipment, fixtures or similar property;
(xii) Additional Indebtedness of the Issuer and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15,000,000 at any
one time outstanding; and
(xiii) Indebtedness in the form of guarantees of other Indebtedness
permitted to be incurred by any Restricted Subsidiary under this definition, so
long as such guarantees do not increase the principal amount of such
Indebtedness.
"Permitted Investment" means any of the following:
(i) Investments by the Issuer or any Restricted Subsidiary in any Person
that is a Restricted Subsidiary or will become immediately after such Investment
a Restricted Subsidiary that is wholly-owned by the Person making such
Investment or that will merge or consolidate into the Issuer or a Restricted
Subsidiary;
(ii) Investments in the Issuer by any Restricted Subsidiary; provided,
that any Indebtedness evidencing such Investment is unsecured and subordinated,
pursuant to a written
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agreement, to the Issuer's obligations under the Notes and this Indenture;
(iii) the purchase or redemption by the Issuer or any Restricted
Subsidiary of any minority equity interests in any Restricted Subsidiary;
(iv) Investments in cash and Cash Equivalents;
(v) loans and advances to employees and officers of the Issuer and its
Subsidiaries in the ordinary course of business for bona fide business purposes
not, in the aggregate, in excess of $1,000,000 at any one time outstanding;
(vi) Interest Rate Protection Agreements entered into in the ordinary
course of the Issuer's or its Restricted Subsidiaries' businesses and otherwise
in compliance with this Indenture;
(vii) sales on credit by the Issuer or any Restricted Subsidiary in the
ordinary course of business;
(viii) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(ix) consideration other than cash or Cash Equivalents received by the
Issuer or its Restricted Subsidiaries in connection with an Asset Sale made in
compliance with Section 4.11;
(x) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (x) since the Issue Date, not to exceed $10,000,000
at any one time outstanding; and
(xi) the ESOP Loan.
"Permitted Liens" means any of the following:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate proceedings and
as to which the Issuer or the Subsidiaries shall have set aside on its books
such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made in
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respect thereof,
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as a
stay of execution has been entered or such Lien is adequately bonded and any
appropriate legal proceedings which may have been duly initiated for the review
of such judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(v) easements, leases, subleases, 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 Issuer or any of its Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, that such Liens do not extend to any property or assets
which is not leased property subject to such Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of the Issuer or
a Restricted Subsidiary acquired in the ordinary course of business; provided,
that (a) the related purchase money Indebtedness shall not exceed the cost of
such property or assets and shall not be secured by any property or assets of
the Issuer or any Restricted Subsidiary other than the property and assets so
acquired and (b) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(ix) 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,
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements or appeal or
similar bonds of the Issuer or a Restricted Subsidiary, including rights of
offset and set-off,
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(xi) Liens securing Senior Indebtedness, including Indebtedness under the
Senior Credit Facility;
(xii) Liens existing on the Issue Date and Liens to secure any Refinancing
Indebtedness which is incurred to refinance any Indebtedness which has been
secured by a Lien permitted under Section 4.15 and which Indebtedness has been
incurred in accordance with Section 4.08; provided, that such new Liens (a) are
no less favorable to the Holders of Notes and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (b) do not extend to any property or assets
other than the property or assets securing the Indebtedness refinanced or
replaced by such Refinancing Indebtedness;
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
the second sentence of Section 4.08; provided, that (a) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Issuer or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of the incurrence of such
Acquired Indebtedness by the Issuer or a Restricted Subsidiary and (b) such
Liens do not extend to or cover any property or assets of the Issuer or any
Restricted Subsidiary other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Issuer or a Restricted Subsidiary and are no more favorable
to the lienholders than the Liens securing the Acquired Indebtedness prior to
the incurrence of such Acquired Indebtedness by the Issuer or a Restricted
Subsidiary; and
(xiv) Liens securing Indebtedness incurred in connection with the purchase
or redemption of minority equity interests in any Restricted Subsidiary so long
as such Liens (a) are only in favor of the holder of the equity interests being
purchased or redeemed and (b) encumber only those equity interests purchased or
redeemed.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Post-Petition Interest" means all interest and fees and other obligations
accrued or accruing after the commencement of any Insolvency or Liquidation
Proceeding (and interest and fees and other obligations that would accrue but
for the commencement of any Insolvency or Liquidation Proceeding) in accordance
with and at the contract rate (including any rate applicable upon default)
specified in the agreement or instrument creating, evidencing or governing any
Indebtedness, whether or not, pursuant to applicable law or otherwise, the claim
for such interest and fees and other obligations is allowed as a claim in such
Insolvency or Liquidation Proceeding.
"Preferred Stock" means, as applied to the Capital Stock of any
corporation, Capital
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Stock of any class or classes (however designated) which is preferred as to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such corporation, over shares of
Capital Stock of any other class of such corporation.
"Private Placement Legend" has the meaning assigned to it in Section 2.01.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, tangible or
intangible.
"Public Equity Offering" means an underwritten primary public offering of
any class of common stock of the Issuer or any of its Subsidiaries pursuant to
an effective registration statement under the Securities Act.
"Public Market" means any time after (i) an underwritten Public Equity
Offering of the Issuer or any of its Subsidiaries has been consummated and (ii)
at least 10% of the total issued and outstanding common stock of the Issuer or
such Subsidiary (as determined on a Fully Diluted basis) has been distributed by
means of an effective registration statement under the Securities Act or sales
pursuant to Rule 144 under the Securities Act.
"Purchase Agreement" means the purchase agreement relating to the Notes,
dated May 6, 1999, among the Issuer and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Record Date" means, for the interest payable on any Interest Payment
Date, the date specified in Section 2.12 hereof.
"Redemption Date" means, when used with respect to any Note or part
thereof to be redeemed hereunder, the date fixed for redemption of such Notes
pursuant to the terms of the Notes and this Indenture.
"Redemption Price" means, when used with respect to any Note or part
thereof to be redeemed hereunder, the price fixed for redemption of such Note
pursuant to the terms of the Notes and this Indenture, plus accrued and unpaid
interest thereon, if any, and Liquidated Damages, if any, to the Redemption
Date.
"Refinancing Indebtedness" means any Indebtedness of the Issuer or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Issuer or any of its Restricted Subsidiaries; provided that:
(i) the principal amount of such Refinancing Indebtedness does not exceed the
principal amount of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith),
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(ii) such Refinancing Indebtedness has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded, (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded, and (iv) such Indebtedness is incurred either by the
Issuer or by the Restricted Subsidiary of the Issuer that is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Registered Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Registrar" has the meaning assigned to it in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
relating to the Notes, dated May 12, 1999 among the Issuer and the Initial
Purchasers, in substantially the form of Exhibit J hereto.
"Regulation S" means Regulation S under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"Regulation S Certification" has the meaning assigned to it in Section
2.01.
"Regulation S Global Note" has the meaning assigned to it in Section 2.01.
"Regulation S Permanent Global Note" has the meaning assigned to it in
Section 2.01.
"Regulation S Temporary Global Note" has the meaning assigned to it in
Section 2.01.
"Related Business" means the businesses of the Issuer and the Restricted
Subsidiaries on the Issue Date and any business reasonably related, ancillary or
complementary to the businesses of the Issuer and the Restricted Subsidiaries on
the Issue Date.
"Replacement Assets" has the meaning assigned to it in Section 4.11.
"Representative" means any trustee, agent or representative (if any) for
an issue of Senior Indebtedness of the Issuer.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions in respect of its Capital
Stock (including any payment in connection with any merger or consolidation
involving such Person) or similar payment to the
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direct or indirect holders of its Capital Stock (other than (a) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (b) dividends or distributions payable solely to the Issuer or a
Restricted Subsidiary), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Issuer or any Restricted
Subsidiary held by any Person (other than the Issuer or a Restricted
Subsidiary), or any warrants, rights or options to acquire shares of any class
of such Capital Stock (other than (x) Permitted Investments and (y) purchases,
redemptions, other acquisitions or other retirements in which the price is
payable solely in Capital Stock (other than Disqualified Stock)), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Period" means, with respect to any Initial Notes offered and
sold to Non-U.S. Persons in reliance on Regulation S, the 40 consecutive days
beginning on and including the later of (A) the day on which such Initial Notes
are offered to persons other than distributors (as defined in Regulation S under
the Securities Act) and (B) the date on which such Initial Notes are originally
issued.
"Restricted Subsidiary" means any Subsidiary of the Issuer that is not an
Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act (including any
successor regulation thereto), as it may be amended from time to time.
"Rule 144A Global Note" has the meaning assigned to it in Section 2.01(c).
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the Credit Agreement, dated as of May 12,
1999 among the Issuer, the lenders who are or may become party thereto and First
Union National Bank, as administrative agent, pursuant to which certain
financial institutions agreed to make loans and issue letters of credit,
together with the pledges, guarantees and other documents related thereto
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as such agreements may be amended or modified, refinanced, supplemented or
restated from time to time, including any agreement increasing the amount,
extending the maturity of, refinancing or otherwise restructuring all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
"Senior Indebtedness" means, with respect to any Person, (i) Indebtedness
(which for this purpose shall include letters of credit and Interest Rate
Protection Agreements and other types of credit referred to in the Senior Credit
Facility) of such Person, whether outstanding on the Issue Date or thereafter
incurred, and (ii) accrued and unpaid interest and fees and other obligations
(including Post-Petition Interest) in respect of (A) indebtedness of such Person
for money borrowed, letters of credit and Interest Rate Protection Agreements
and other types of credit referred to in the Senior Credit Facility and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable unless, in the
instrument creating or evidencing any of the obligations referred to in clauses
(i) or (ii) or pursuant to which any such obligations are outstanding, it is
provided that such obligations are subordinate in right of payment to the Notes;
provided, however, that Senior Indebtedness shall not include (1) any obligation
of such Person to any of its Subsidiaries, (2) any liability for Federal, state,
local or other taxes owed or owing by such Person, (3) any accounts payable or
other liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of such Person (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect to any other Indebtedness
or other obligation of such Person (other than Indebtedness incurred in
connection with the purchase or redemption of minority equity interests in any
Restricted Subsidiary from non-Affiliates of the Issuer) or (5) that portion of
any Indebtedness which at the time of incurrence is incurred in violation of
Section 4.08.
"Shelf Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Special Record Date" means a date fixed by the Trustee pursuant to
Section 2.12 for the payment of Defaulted Interest.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Issuer or a
Restricted Subsidiary of the Issuer (whether outstanding on the Issue Date or
thereafter incurred) which is subordinate or junior in right of payment to the
Notes or any Guarantees that may be issued pursuant to a written agreement to
that effect.
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"Subordinated Reorganization Securities" has the meaning assigned to it
in Section 10.02.
"Subsidiary" means, in respect of any Person, any corporation, limited
liability company, association, partnership or other business entity of which
more than fifty percent (50%) of the total Voting Stock or other interests
(including partnership and membership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
(i) such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Successor Company" has the meaning assigned to it in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer in the Corporate Trust Office of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code in
effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Issuer that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Issuer (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the
Subsidiary to be so designated; provided, that (a) either (1) the Subsidiary to
be so designated has total assets of $1,000 or less or (2) if such Subsidiary
has assets greater than $1,000, such designation would be permitted under
Section 4.09 and (b) such Subsidiary to be so designated and each of its
Subsidiaries has not at the time of such designation, and does not thereafter,
incur any Indebtedness pursuant to which the lender has recourse to any of the
assets or properties of the Issuer or any of its Restricted Subsidiaries. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, that immediately after giving effect to such designation
(x) the Issuer could incur $1.00 of additional Indebtedness pursuant to the
second sentence of Section 4.08 and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced by
the Issuer to the Trustee
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by promptly filing with the Trustee a copy of the board resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Government Obligation" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership or member interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"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 product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payments at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes; "indenture security holder"
means a Noteholder; "indenture to be qualified" means this Indenture; "indenture
trustee" or "institutional trustee" means the Trustee;
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
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(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or
junior to secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(g) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be shown
on a balance sheet of the issuer dated such date prepared in accordance with
GAAP and accretion of principal on such security shall be deemed to be the
incurrence of Indebtedness;
(h) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such Preferred Stock,
whichever is greater; and
(i) all references to the date the Notes were originally issued shall
refer to the Issue Date or the date the Add-On Notes were originally issued, as
applicable.
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating.
(a) Initial Notes (except for Add-On Notes, which may differ as
provided in Section 2.13) and the certificate of authentication of the Trustee
thereon shall be substantially in the form of Exhibit A or Exhibit B hereto, as
applicable, which are hereby incorporated in and expressly made a part of this
Indenture. The Exchange Notes and the certificate of authentication of the
Trustee thereon shall be substantially in the form of Exhibit C or Exhibit D
hereto, as applicable, which are hereby incorporated in and expressly made a
part of this Indenture.
(b) The Notes may have such letters, numbers or other marks of
identification and such legends and endorsements, stamped, printed, lithographed
or engraved thereon, (i) as the Issuer may deem appropriate and as are not
inconsistent with the provisions of this Indenture, (ii)
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as may be required to comply with this Indenture, any law, any rule of the
Depositary or any rule of any securities exchange on which the Notes may be
listed and (iii) as may be necessary to conform to customary usage. Each Note
shall be dated the date of its authentication by the Trustee. The Notes shall be
issued only in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof; provided that Initial Certificated Notes
transferred to Institutional Accredited Investors shall be subject to a minimum
denomination of $250,000. Definitive Notes shall be typed, printed, lithographed
or engraved or produced by any combination of such methods or produced in any
other manner permitted by the rules of any securities exchange on which such
Notes may be listed, all as determined by the officers of the Issuer executing
such Notes, as evidenced by their execution of such Notes.
(c) Initial Notes offered and sold to QIBs in the United States of
America in reliance on Rule 144A will be issued in the form of a permanent
global Note, without interest coupons, substantially in the form of Exhibit A
(the "Rule 144A Global Note"). The Rule 144A Global Note will be duly executed
by the Issuer, authenticated by the Trustee as herein provided, registered in
the name of the Depositary or its nominee and deposited with the Trustee, as
Note Custodian. The rule 144A Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate. The aggregate
principal amount of the Rule 144A Global Note may from time to time be increased
or decreased by adjustments made to Schedule A thereof, as provided herein.
(d) Initial Notes offered and sold to Non-U.S. Persons in reliance on
Regulation S will be issued in the form of a temporary global Note, in fully
registered form without interest coupons, substantially in the form set forth in
Exhibit A (the "Regulation S Temporary Global Note"). All beneficial interests
in the Regulation S Temporary Global Note will be exchanged for beneficial
interests in a single permanent global Note, in fully registered form without
interest coupons (the "Regulation S Permanent Global Note," and together with
the Regulation S Temporary Global Note, the "Regulation S Global Note") on or
after the expiration of the Restricted Period upon the receipt by the Trustee or
its agent of a written certification from the Depositary that it or its agents
have received certification of Non-U.S. Person beneficial ownership of 100% of
the aggregate principal amount of the Regulation S Temporary Global Note (the
"Regulation S Certification"). Upon receipt by the Trustee or its agent of
Regulation S Certification, the Issuer shall execute and, upon receipt of an
Issuer Order for authentication, the Trustee shall authenticate and deliver to
the Note Custodian the Regulation S Permanent Global Note.
Each Regulation S Global Note will be duly executed by the Issuer,
authenticated by the Trustee as herein provided, registered in the name of the
Depositary or its nominee and deposited with the Trustee, as Note Custodian. The
Regulation S Global Note may be represented by more than one certificate, if so
required by the Depositary's rules regarding the maximum principal amount to be
represented by a single certificate. The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments to
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Schedule A thereof as provided herein.
(e) Initial Notes offered and sold or otherwise transferred to
Institutional Accredited Investors in the United States of America will be
issued in non-global, fully registered form, without interest coupons,
substantially in the form set forth in Exhibit B, duly executed by the Issuer
and authenticated by the Trustee as herein provided (together with interests in
the Initial Global Notes that are subsequently transferred or exchanged pursuant
to Sections 2.07(b)(iii), 2.07(b)(vii), 2.07(b)(ix), 2.07(b)(x) and 2.07(c), the
"Initial Certificated Notes.") Upon such issuance, the trustee shall register
such Initial Certificated Notes in the name of the beneficial owner or owners of
such Notes (or the nominee of such beneficial owner or owners) and deliver the
certificates for such Initial Certificated Notes to, or as directed by, the
respective beneficial owner or owners.
(f) If the Initial Global Notes are tendered in a Registered Exchange
Offer, they shall all be exchanged for a single, permanent global note in
definitive, fully registered form, without coupons, substantially in the form
set forth in Exhibit C hereto and shall bear the legends set forth in Section
2.01(g)(ii) and Section 2.01(g)(iv) hereof (the "Exchange Global Note"). Upon
issuance, such Exchange Global Note shall be registered in the name of the
Depositary or its nominee, duly executed by the Issuer and authenticated by the
Trustee as herein provided and deposited with the Trustee, as Note Custodian.
The Exchange Global Note may be represented by more than one certificate, if so
required by the Depositary's rules regarding the maximum principal amount to be
represented by a single certificate. The aggregate principal amount of the
Exchange Global Note may from time to time be increased or decreased by
adjustments to Schedule A thereof as provided herein.
If Initial Certificated Notes are tendered in a Registered Exchange
Offer, they will be exchanged for Certificated Notes in definitive, fully
registered form, without coupons and without legends, substantially in the form
set forth in Exhibit D hereto ("Exchange Certificated Notes"). Upon issuance,
any such Exchange Certificated Note shall be duly executed by the Issuer and
authenticated by the Trustee as hereinafter provided.
At the option of the Holder thereof, Exchange Notes may be held either
in the form of a beneficial interest in the Exchange Global Note or as Exchange
Certificated Notes.
(g) The following legends shall appear on each Global Note and each
Certificated Note as indicated below:
(i) Except as provided in Section 2.07(a) hereof, each Initial
Global Note and Initial Certificated Note shall bear the following legend (the
"Private Placement Legend") on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY
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NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE ACT) OR (B) IT IS AN "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (a)(1), (2), (3) OR (7)
UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS
BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE)
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
NOTE WITHIN TWO YEARS AFTER ORIGINAL ISSUANCE OF THIS NOTE, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE
REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANING GIVEN TO THEM
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BY REGULATION S UNDER THE ACT.
(ii) Each Global Note shall bear the following legend on the
face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO SUSQUEHANNA MEDIA CO. OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(iii) The Initial Global Notes shall bear the following legend
on the face thereof:
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE
AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.07 OF THE INDENTURE, DATED AS OF MAY
12, 1999 BETWEEN SUSQUEHANNA MEDIA CO., AS ISSUER, AND CHASE
MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE,
PURSUANT TO WHICH THIS NOTE WAS ISSUED.
(iv) The Exchange Global Note shall bear the following legend
on the face thereof:
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE.
SECTION 2.02. Execution and Authentication.
The aggregate principal amount of Notes outstanding at any time shall not exceed
$250,000,000 except as provided in Section 2.08 hereof. The Notes shall be
executed on behalf of the Issuer by its Chief Executive Officer, President,
Chief Operating Officer, Treasurer or any Vice President,
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and shall be attested by the Issuer's Secretary or one of its Assistant
Secretaries, in each case by manual or facsimile signature. The Notes shall be
authenticated by manual signature of an authorized signatory of the Trustee and
shall not be valid for any purpose unless so authenticated.
In case any officer of the Issuer whose signature shall have been
placed upon any of the Notes shall cease to be such officer of the Issuer before
authentication of such Notes by the Trustee and the issuance and delivery
thereof, such Notes may, nevertheless, be authenticated by the Trustee and
issued and delivered with the same force and effect as though such Person had
not ceased to be such an officer of the Issuer.
The Trustee shall, upon receipt of an Issuer Order requesting such
action, authenticate (a) Initial Notes for original issue on the Issue Date in
an aggregate principal amount of $150,000,000, (b) Exchange Notes for issue
pursuant to a Registered Exchange Offer for such Initial Notes in a principal
amount equal to the principal amount of Initial Notes exchanged in such
Registered Exchange Offer, or (c) Add-On Notes in a maximum aggregate principal
amount of $100,000,000, and (d) if applicable, the related Exchange Notes for
any such Add-On Notes. Such Issuer Order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated and shall
further provide instructions concerning registration, amounts for each Holder
and delivery. Except as permitted by Sections 2.13 and 2.14(b), all Notes
originally issued on the Issue Date and all Add-On Notes shall be identical in
all respects other than issue dates, the dates from which interest accrues and
any other changes relating thereto. Notwithstanding anything to the contrary
contained in this Indenture, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
Upon the occurrence of any event specified in Section 2.07(c) hereof,
the Issuer shall execute and the Trustee shall authenticate and make available
for delivery to each beneficial owner identified by the Depositary, in exchange
for such beneficial owner's interest in the Initial Global Notes or Exchange
Global Note, as the case may be, Initial Certificated Notes or Exchange
Certificated Notes, as the case may be, representing Notes theretofore
represented by the Initial Global Notes or Exchange Global Note, as the case may
be.
A Note shall not be valid or entitled to any benefits under this
Indenture or obligatory for any purpose unless executed by the Issuer and
authenticated by the manual signature of one of the authorized signatories of
the Trustee as provided herein. Such signature upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered under this Indenture and is entitled to the benefits of this
Indenture.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Issuer to authenticate the Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Any authenticating agent of the
Trustee shall have the same rights hereunder as any Registrar or Paying Agent.
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Notwithstanding the foregoing, if any Note shall have been
authenticated and delivered hereunder but never issued and sold by the Issuer,
and the Issuer shall deliver such Note to the Trustee for cancellation as
provided in Section 2.11 together with a written statement (which need not be
accompanied by an Opinion of Counsel) stating that such Note has never been
issued and sold by the Issuer, for all purposes of this Indenture such Note
shall be deemed never to have been authenticated and delivered hereunder and
shall not be entitled to the benefits of this Indenture.
SECTION 2.03. Registrar and Paying Agent.
The Issuer shall maintain, pursuant to Section 4.02 hereof, an office or agency
where the Notes may be presented for registration of transfer or for exchange
(the "Registrar"), an office or agency where Notes may be presented for payment
(the "Paying Agent") and an office or agency where notices and demands to or
upon the Issuer in respect of the Notes and this Indenture may be served.
The Issuer shall cause to be kept at such office a register (the "Note
Register") in which, subject to such reasonable regulations as it may prescribe,
the Issuer shall provide for the registration of Notes and of transfers of Notes
entitled to be registered or transferred as provided herein. The Trustee, at its
Dallas, Texas office, is initially appointed Registrar for the purpose of
registering Notes and transfers of Notes as herein provided. The Issuer may,
upon written notice to the Trustee, change the designation of the Trustee as
Registrar and appoint another Person to act as Registrar for purposes of this
Indenture. If any Person other than the Trustee acts as Registrar, the Trustee
shall have the right at any time, upon reasonable notice, to inspect or examine
the Note Register and to make such inquiries of the Registrar as the Trustee
shall in its discretion deem necessary or desirable in performing its duties
hereunder.
The Issuer shall enter into an appropriate agency agreement with any
Person designated by the Issuer as Registrar or Paying Agent that is not a party
to this Indenture, which agreement shall incorporate the provisions of the TIA
and shall implement the provisions of this Indenture that relate to such
Registrar or Paying Agent. Prior to the designation of any such Person, the
Issuer shall, by written notice (which notice shall include the name and address
of such Person), inform the Trustee of such designation. The Trustee, at its
Dallas, Texas office, is initially appointed Paying Agent under this Indenture.
If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such.
Subject to Section 2.07 hereof, upon surrender for registration of
transfer of any Note at an office or agency of the Issuer designated for such
purpose, the Issuer shall execute, and the Trustee shall authenticate and make
available for delivery, in the name of the designated transferee or transferees,
one or more new Initial Notes or Exchange Notes, as the case may be, of any
authorized denomination or denominations, of like tenor and aggregate principal
amount, all as requested by the transferor.
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Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Issuer, the Trustee or the Registrar) be
duly endorsed, or be accompanied by a duly executed instrument of transfer in
form satisfactory to the Issuer, the Trustee and the Registrar, by the Holder
thereof or such Holder's attorney duly authorized in writing.
SECTION 2.04. Paying Agent To Hold Money in Trust.
On or prior to each due date of the principal, premium, if any, or any payment
of interest or Liquidated Damages, if any, with respect to any Note, the Issuer
shall deposit with the Paying Agent a sum sufficient to pay such principal,
premium, if any, or interest or Liquidated Damages, if any, when so becoming
due.
The Issuer shall require each Paying Agent (other than the Trustee) to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by such Paying Agent for the payment of
principal, premium, if any, or interest or Liquidated Damages, if any, with
respect to the Notes, shall notify the Trustee of any default by the Issuer in
making any such payment and at any time during the continuance of any such
default, upon the written request of the Trustee, shall forthwith pay to the
Trustee all sums held in trust by such Paying Agent.
The Issuer at any time may require a Paying Agent to pay all money held
by it to the Trustee and to account for any funds disbursed by such Paying
Agent. Upon complying with this Section 2.04, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
SECTION 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of all Holders and
shall otherwise comply with TIA Section 312(a). If the Trustee is not the
Registrar, the Issuer shall furnish to the Trustee at least seven Business Days
before each Interest Payment Date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Notes and the
Issuer shall otherwise comply with TIA Section 312(a).
SECTION 2.06. Global Notes.
(a) So long as a Global Note is registered in the name of the Depositary or its
nominee, members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary or the Trustee as its custodian, and the
Depositary may be treated by the Issuer, the Guarantors, if any, the Trustee and
any agent of the Issuer, the Guarantors, if any, or the Trustee as the absolute
owner of such Global Note for all purposes. Notwithstanding the foregoing,
nothing herein shall (i) prevent the Issuer, the Guarantors, if any, the Trustee
or any agent of the Issuer, the Guarantors, if any, or the Trustee, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or (ii) impair, as between the Depositary and its Agent Members,
the
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operation of customary practices governing the exercise of the rights of a
Holder.
(b) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests in such Global Note through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Notes.
(c) Whenever, as a result of an optional redemption of Notes by the
Issuer, a Change of Control Offer, an Asset Sale Offer, a Registered Exchange
Offer or an exchange pursuant to the provisions of Section 2.07(b) or Section
2.07(c) hereof, a Global Note is redeemed, repurchased or exchanged in part,
such Global Note shall be surrendered by the Holder thereof to the Trustee who
shall cause an adjustment to be made to Schedule A thereof so that the principal
amount of such Global Note will correctly reflect such redemption, repurchase or
exchange and shall thereafter return such Global Note to such Holder, provided
that each such Global Note shall be in a principal amount of $1,000 or an
integral multiple thereof.
SECTION 2.07. Transfer and Exchange
(a) By its acceptance of any Initial Note represented by a certificate bearing
the Private Placement Legend, each Holder of, and beneficial owner of an
interest in, such Initial Note acknowledges the restrictions on transfer of such
Initial Note set forth in the Private Placement Legend and agrees that it will
transfer such Initial Note only in accordance with the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of an Initial Note
not bearing the Private Placement Legend, the Trustee shall deliver an Initial
Note or Initial Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of an Initial Note bearing the Private
Placement Legend, the Trustee shall deliver an Initial Note or Initial Notes
bearing the Private Placement Legend, unless such legend may be removed from
such Note as provided in this Section 2.07(a). If the Private Placement Legend
has been removed from an Initial Note, as provided herein, no other Initial Note
issued in exchange for all or any part of such Initial Note shall bear such
legend, unless the Issuer has reasonable cause to believe that such other
Initial Note represents a "restricted security" within the meaning of Rule 144
and instructs the Trustee in writing to cause a legend to appear thereon. Each
Initial Note shall bear the Private Placement Legend unless and until:
(i) a transfer of such Initial Note is made pursuant to an effective
Shelf Registration Statement, in which case the Private Placement
Legend shall be removed from such Initial Note so transferred at the
request of the Holder; or
(ii) there is delivered to the Issuer such satisfactory evidence, which
may include an opinion of independent counsel, as may reasonably be
requested by the Issuer confirming that neither such legend nor the
restrictions on transfer set forth therein are required to ensure that
transfers of such Initial Note will not violate the registration and
prospectus delivery requirements of the Securities Act; provided, that
the Trustee shall not be required to determine (but may rely on a
determination made by the Issuer with respect
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to) the sufficiency of any such evidence; and upon provision of such
evidence, the Trustee shall authenticate and deliver in exchange for
such Initial Note, an Initial Note or Initial Notes (representing the
same aggregate principal amount of the Initial Note being exchanged)
without such legend.
(b) The following provisions of this paragraph (b) are applicable only
to Initial Notes bearing the Private Placement Legend:
(i) if the Holder of one or more Initial Certificated Notes wishes to
transfer such Initial Certificated Note(s) (or a portion thereof) to a
QIB pursuant to Rule 144A, (x) upon receipt by the Trustee, as
Registrar, of:
(A) such Initial Certificated Note(s), duly endorsed as
provided herein,
(B) written instructions from such Holder directing the
Trustee, as Registrar, to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to the
principal amount (or portion thereof) of such Initial
Certificated Note(s) to be transferred, specifying the
participant account at the Depositary to be credited with such
increase, and, if the entire principal amount of such Initial
Certificated Note(s) is not being transferred, to issue one or
more Initial Certificated Notes to the transferor in a
principal amount equal to the principal amount not
transferred, and
(C) a certificate in the form of Exhibit E duly executed by
the transferor,
and (y) subject to the rules and procedures of the Depositary, the
Trustee, as Registrar, shall:
(1) cancel the Initial Certificated Note(s) delivered to it;
(2) increase the Rule 144A Global Note by adjustment to
Schedule A thereto and credit or cause to be credited the
specified participant account at the Depositary in accordance
with the foregoing; and
(3) if applicable, authenticate and deliver to the transferor
one or more Initial Certificated Notes in accordance with the
foregoing.
(ii) If the Holder of one or more Initial Certificated Notes wishes to
transfer such Initial Certificated Note(s) (or any portion thereof) to
an Institutional Accredited Investor, upon receipt by the Trustee, as
Registrar, of:
(A) such Initial Certificated Note(s), duly endorsed as
provided herein;
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(B) written instructions from such Holder directing the
Trustee, as Registrar, to issue one or more Initial
Certificated Notes in the amounts specified to the transferee
and, if the entire principal amount of such Initial
Certificated Note(s) is not being transferred, the transferor
in an amount equal to the principal amount not transferred;
and
(C) a certificate in the form of Exhibit F duly executed by
the transferor and a certificate in the form of Exhibit G duly
executed by the transferee,
the Trustee, as Registrar, shall:
(1) cancel the Initial Certificated Note(s) delivered to it;
(2) authenticate and deliver to the transferee Initial
Certificated Note(s) in a principal amount equivalent to the
principal amount of the Initial Certificated Notes being
transferred in accordance with the foregoing; and
(3) if applicable, authenticate and deliver to the transferor
one or more Initial Certificated Notes in accordance with the
foregoing.
(iii) If the Holder of a beneficial interest in a Rule 144A Global Note
wishes to transfer such interest (or a portion thereof) to an
Institutional Accredited Investor, (x) upon receipt by the Trustee, as
Registrar, of:
(A) written instructions from the Holder of the Rule 144A
Global Note directing the Trustee, as Registrar, to issue one
or more Initial Certificated Notes in the amounts specified to
the transferee, debit or cause to be debited an equivalent
amount of beneficial interest in the Rule 144A Global Note and
specifying the participant account at the Depositary to be
debited with such decrease, and
(B) a certificate in the form of Exhibit F from the transferor
and a certificate in the form of Exhibit G from the transferee
and (y) subject to the rules and procedures of the Depositary, the
Trustee, as Registrar, shall:
(1) authenticate and deliver to the transferee Initial
Certificated Note(s) in a principal amount equivalent to the
principal amount of the beneficial interest in the Rule 144A
Global Note being transferred in accordance with the foregoing
and
(2) decrease the Rule 144A Global Note by adjustment to
Schedule A thereof
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and debit or cause to be debited the specified participant
account at the Depositary for such amount in accordance with
the foregoing.
(iv) If the Holder of a beneficial interest in a Rule 144A Global Note
wishes to transfer such interest (or any portion thereof) to a Non-U.S.
Person pursuant to Regulation S, (x) upon receipt by the Trustee, as
Registrar, of:
(A) written instructions from the Holder of the Rule 144A
Global Note directing the Trustee, as Registrar, to credit or
cause to be credited a beneficial interest in the Regulation S
Global Note equal to the principal amount of the beneficial
interest in the Rule 144A Global Note to be transferred,
specifying the participant accounts with the Depositary to be
credited and debited and
(B) a certificate in the form of Exhibit H from the transferor
and a certificate in the form of Exhibit I from the transferee
and (y) subject to the rules and procedures of the Depositary, the
Trustee, as Registrar, shall:
(1) increase the Regulation S Global Note by adjustment to
Schedule A thereof and credit or cause to be credited the
specified participant account at the Depositary for such
amount in accordance with the foregoing, and
(2) decrease the Rule 144A Global Note for such amount by
adjustment to Schedule A thereof and debit or cause to be
debited the specified participant account at the Depositary
for such amount in accordance with the foregoing.
(v) If the Holder of one or more Initial Certificated Notes wishes to
transfer such Initial Certificated Note(s) (or any portion thereof) to
a Non-U.S. Person pursuant to Regulation S, (x) upon receipt by the
Trustee, as Registrar, of:
(A) such Initial Certificated Note(s), duly endorsed as
provided herein,
(B) written instructions from such Holder directing the
Trustee, as Registrar, to credit or cause to be credited a
beneficial interest in the Regulation S Global Note equal to
the principal amount (or portion thereof) of such Initial
Certificated Note(s) to be transferred, specifying the
participant account at the Depositary to be credited with such
increase, and, if the entire principal amount of such Initial
Certificated Note(s) is not being transferred, to issue one or
more Initial Certificated Notes to the transferor in a
principal amount equal to the principal amount not
transferred, and
(C) a certificate in the form of Exhibit H from the transferor
and a certificate
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in the form of Exhibit I from the transferee
and (y) subject to the rules and procedures of the Depositary, the
Trustee, as Registrar, shall:
(1) cancel the Initial Certificated Notes delivered to it;
(2) increase the Regulation S Global Note by adjustment to
Schedule A thereof and credit or cause to be credited the
specified participant account at the Depositary in accordance
with the foregoing; and
(3) if applicable, authenticate and deliver to the transferor
one or more Initial Certificated Notes in accordance with the
foregoing.
(vi) if the Holder of a beneficial interest in the Regulation S
Permanent Global Note wishes to transfer such interest (or any portion
thereof) to a QIB pursuant to Rule 144A, (x) upon receipt by the
Trustee, as Registrar, of:
(A) written instructions from the Holder of the Regulation S
Permanent Global Note directing the Trustee, as Registrar, to
credit or cause to be credited a beneficial interest in the
Rule 144A Global Note equal to the principal amount of the
beneficial interest in the Regulation S Permanent Global Note
to be transferred, specifying the participant accounts at the
Depositary to be credited and debited and
(B) a certificate in the form of Exhibit E duly executed by
the transferor,
and (y) in accordance with the rules and procedures of the Depositary,
the Trustee, as Registrar, shall:
(1) increase the Rule 144A Global Note by adjustment to
Schedule A thereto and credit or cause to be credited the
specified participant account at the Depositary for such
amount in accordance with the foregoing and
(2) decrease the Regulation S Permanent Global Note by
adjustment to Schedule A thereof and debit or cause to be
debited the specified participant account at the Depositary
for such amount in accordance with the foregoing.
(vii) if the Holder of a beneficial interest in the Regulation S
Permanent Global Note wishes to transfer such interest (or a portion
thereof) to an Institutional Accredited Investor, (x) upon receipt by
the Trustee, as Registrar, of:
(A) written instructions from the Holder of the Regulation S
Permanent Global
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Note directing the Trustee, as Registrar, to issue one or more
Initial Certificated Notes in specified amounts in the name of
the transferee, debit or cause to be debited an equivalent
amount of beneficial interest in the Regulation S Permanent
Global Note and specifying the participant account with the
Depositary to be debited with such decrease and
(B) a certificate in the form of Exhibit F from the transferor
and a certificate in the form of Exhibit G from the
transferee,
and (y) subject to the rules and procedures of the Depositary, the
Trustee, as Registrar, shall:
(1) authenticate and deliver to the transferee Initial
Certificated Note(s) in an equivalent amount to the beneficial
interest in the Regulation S Permanent Global Note being
transferred in accordance with the foregoing and
(2) decrease the Regulation S Permanent Global Note by
adjustment to Schedule A thereto and debit or cause to be
debited the specified participant account for such amount at
the Depositary in accordance with the foregoing.
(viii) beneficial interests in the Regulation S Temporary Global Note
cannot be transferred to anyone but Non-U.S. Persons in accordance with
the rules and procedures of the Depositary.
(ix) (A) If a Holder of a beneficial interest in an Initial Global Note
wishes at any time to transfer its interest in such Initial Global Note
pursuant to another applicable exemption from the registration
requirements of the Securities Act, such Holder may, subject to the
rules and procedures of the Depositary, cause the exchange of such
interest for one or more Initial Certificated Notes of any authorized
denomination or denominations and of the same aggregate principal
amount. Upon receipt by the Trustee, as Registrar, of (I) written
instructions from the Holder of such Initial Global Note directing the
Trustee, as Registrar, to authenticate and deliver one or more Initial
Certificated Notes of the same aggregate principal amount as the
beneficial interest in the Initial Global Note to be exchanged, such
instructions to contain the name or names of the designated transferee
or transferees, the authorized denomination or denominations of the
Initial Certificated Notes to be so issued and appropriate delivery
instructions and (II) such certifications, legal opinions or other
information as the Issuer or the Trustee may reasonably require to
confirm that such transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of
the Securities Act, then the Trustee, as Registrar, will reduce such
Initial Global Note by the aggregate principal amount of the beneficial
interest therein to be exchanged by adjustment to Schedule A thereof
and debit or cause to be debited from the specified participant account
in accordance with the foregoing and concurrently with such reduction
and debit the
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Issuer shall execute, and the Trustee shall authenticate and deliver,
one or more Initial Certificated Notes of the same aggregate principal
amount in accordance with the foregoing; and
(B) if a Holder of one or more Initial Certificated Notes
wishes to transfer such Initial Certificated Note(s) pursuant to
another applicable exemption from the registration requirements of the
Securities Act, such Holder may, subject to the restrictions on
transfer set forth herein and in such Initial Certificated Note(s),
cause the exchange of such Initial Certificated Note(s) for one or more
Initial Certificated Notes of any authorized denomination or
denominations and of the same aggregate principal amount. Upon receipt
by the Trustee, as Registrar, of (I) such Initial Certificated Note(s),
duly endorsed as provided herein, (II) written instructions from such
Holder directing the Trustee, as Registrar, to authenticate and deliver
one or more Initial Certificated Notes of the same aggregate principal
amount as the Initial Certificated Note(s) to be exchanged, such
instructions to contain the name or names of the designated transferee
or transferees, the authorized denomination or denominations of the
Initial Certificated Note(s) to be so issued and appropriate delivery
instructions and (III) such certifications, legal opinions or other
information as the Issuer or the Trustee may reasonably require to
confirm that such transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of
the Securities Act, then the Trustee, as Registrar, shall cancel or
cause to be canceled such Initial Certificated Note(s) and concurrently
therewith, the Issuer shall execute, and the Trustee shall authenticate
and deliver, one or more Initial Certificated Notes of the same
aggregate principal amount, in accordance with the foregoing.
(x) If the Holder of a beneficial interest in an Initial Global Note
(other than the holder of a beneficial interest in the Regulation S
Temporary Global Note) wishes to exchange such interest for an Initial
Certificated Note evidencing such interest, such Holder may, subject to
the rules and procedures of the Depositary, cause the exchange of such
interest for one or more Initial Certificated Notes of any authorized
denomination or denominations and of the same aggregate principal
amount. Upon receipt by the Trustee, as Registrar, of written
instructions from the Holder directing the Trustee, as Registrar, to
authenticate and deliver one or more Initial Certificated Notes of the
same aggregate principal amount as the beneficial interest in the
Initial Global Note to be transferred, such instructions to contain the
authorized denomination or denominations of the Initial Certificated
Notes to be so issued and appropriate delivery instructions, then the
Trustee, as Registrar, will reduce such Initial Global Note by the
aggregate principal amount of the beneficial interest therein to be
transferred by adjustment to Schedule A thereof and to debit or cause
to be debited from the specified participant account in accordance with
the foregoing, and concurrently with such reduction the Issuer shall
execute, and the Trustee shall authenticate and deliver, one or more
Initial Certificated Notes of the same aggregate principal amount in
accordance with the foregoing.
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The Issuer shall deliver to the Trustee, and the Trustee shall retain
for two (2) years, copies of all documents received pursuant to this Section
2.07(b). The Issuer shall have the right to inspect and make copies of all such
documents at its sole expense at any reasonable time upon the giving of
reasonable written notice to the Trustee.
(c) The Initial Global Notes or Exchange Global Note, as the case may
be, shall be exchanged by the Issuer for one or more Initial Certificated Notes
or Exchange Certificated Notes, as the case may be, if (i) the Depositary has
notified the Issuer that it is unwilling or unable to continue as, or ceases to
be, a clearing agency registered under Section 17A of the Exchange Act and a
successor to the Depositary registered as a clearing agency under Section 17A of
the Exchange Act is not able to be appointed by the Issuer within ninety (90)
calendar days, or (ii) the Depositary is at any time unwilling or unable to
continue as Depositary and a successor to the Depositary is not able to be
appointed by the Issuer within ninety (90) calendar days, or (iii) the Issuer,
at its option, notifies the Trustee in writing that it elects to cause the
issuance of Notes in the form of Certificated Notes. If an Event of Default
occurs and is continuing, the Issuer shall, at the request of the Holder
thereof, exchange all or part of the Initial Global Notes or Exchange Global
Note, as the case may be, for one or more Initial Certificated Notes or Exchange
Certificated Notes, as the case may be; provided that the principal amount of
each of such Initial Certificated Note or Exchange Certificated Note, as the
case may be, and such Global Note, after such exchange, shall be $1,000 or an
integral multiple thereof. Whenever a Global Note is exchanged as a whole for
one or more Initial Certificated Notes or Exchange Certificated Notes, as the
case may be, it shall be surrendered by the Holder thereof to the Trustee for
cancellation. Whenever a Global Note is exchanged in part for one or more
Initial Certificated Notes or Exchange Certificated Notes, as the case may be,
it shall be surrendered by the Holder thereof to the Trustee and the Trustee
shall make the appropriate notations thereon pursuant to Section 2.06(c) hereof.
All Initial Certificated Notes or Exchange Certificated Notes, as the case may
be, issued in exchange for a Global Note or any portion thereof shall be
registered in such names, and delivered, as the Depositary shall instruct the
Trustee in writing. Any Initial Certificated Notes issued pursuant to this
Section 2.07(c) shall include the Private Placement Legend, except as set forth
in Section 2.07(a) hereof.
(d) Any Initial Notes that are presented to the Registrar for exchange
pursuant to a Registered Exchange Offer shall be exchanged for Exchange Notes of
equal principal amount upon surrender to the Registrar of the Initial Notes to
be exchanged in accordance with the terms of the Registered Exchange Offer;
provided that the Initial Notes so surrendered for exchange are accompanied by a
letter of transmittal and duly endorsed or accompanied by a written instrument
of transfer in form satisfactory to the Issuer, the Trustee and the Registrar
and duly executed by the Holder thereof or such Holder's attorney who shall be
duly authorized in writing to execute such document on behalf of such Holder.
Whenever any Initial Notes are so surrendered for exchange, the Issuer shall
execute, and the Trustee shall authenticate and deliver to the surrendering
Holder thereof, Exchange Notes in the same aggregate principal amount as the
Initial Notes so surrendered.
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(e) A Holder may transfer a Note only upon the surrender of such Note
for registration of transfer. No such transfer shall be effected until, and the
transferee shall succeed to the rights of a Holder only upon, final acceptance
and registration of the transfer in the Note Register by the Registrar. When
Notes are presented to the Registrar with a request to register the transfer of,
or to exchange, such Notes, the Registrar shall register the transfer or make
such exchange as requested if its requirements for such transactions and any
applicable requirements hereunder are satisfied. To permit registrations of
transfers and exchanges, the Issuer shall execute and the Trustee shall
authenticate and deliver Certificated Notes at the Registrar's request.
(f) The Issuer shall not be required to make and the Registrar need not
register the transfer or exchange of Certificated Notes or portions thereof
selected for redemption (except, in the case of a Certificated Note to be
redeemed in part, the portion of such Note not to be redeemed) or any
Certificated Notes for a period of fifteen (15) calendar days before a selection
of Notes to be redeemed.
(g) No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer of Notes (other than in respect of a
Registered Exchange Offer, except as provided in the Registration Rights
Agreement).
(h) All Notes issued upon any registration of transfer or exchange
pursuant to the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Notes surrendered for
such registration of transfer or exchange.
(i) Any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Depositary (or its
agent), and that ownership of a beneficial interest in the Notes represented
thereby shall be required to be reflected in book-entry form. Transfers of a
Global Note shall be limited to transfers, in whole and not in part, to the
Depositary, its successors, and their respective nominees. Interests of
beneficial owners in a Global Note shall be transferred in accordance with the
rules and procedures of the Depositary (or its successors), which shall, in the
case of the Initial Global Notes, include restrictions designed to ensure that
the beneficial owners of such Initial Global Notes are QIBs or Non-U.S. Persons.
SECTION 2.08. Replacement Notes.
If a mutilated Note is surrendered to the Registrar or if the Holder of a Note
claims that the Note has been lost, destroyed or wrongfully taken, the Issuer
shall issue and the Trustee shall authenticate a replacement Note if the
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee. If required
by the Trustee or the Issuer, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Issuer and the Trustee to protect the Issuer,
the Trustee, the Paying Agent,
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the Registrar and any co-registrar from any loss or liability which any of them
may suffer if a Note is replaced. The Issuer and the Trustee may charge the
Holder for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Issuer.
SECTION 2.09. Outstanding Notes.
Notes outstanding at any time are all Notes authenticated by the Trustee except
for those canceled by it, those delivered to it for cancellation and those
described in this Section as not outstanding. A Note does not cease to be
outstanding because the Issuer or an Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee and the Issuer receive proof satisfactory to them
that the replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a Redemption Date or maturity date money sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
payable on that date with respect to the Notes (or portions thereof) to be
redeemed or maturing, as the case may be, and the Paying Agent is not prohibited
from paying such money to the Noteholders on that date pursuant to the terms of
this Indenture, then on and after that date such Notes (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Issuer may prepare and the
Trustee shall authenticate and deliver temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Issuer considers appropriate for temporary Notes. Without unreasonable delay,
the Issuer shall prepare and the Trustee shall authenticate definitive Notes and
deliver them in exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Issuer at any time may deliver Notes to the Trustee for cancellation. The
Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel and destroy (subject to the record
retention requirements of the Exchange Act) all Notes surrendered for
registration of transfer, exchange, payment or cancellation and deliver a
certificate of such destruction to the Issuer unless the Issuer directs the
Trustee to deliver canceled Notes to the Issuer; provided, that the Trustee
shall not be required to destroy any Notes. The Issuer may not issue new Notes
to replace Notes it has redeemed, paid or delivered to the Trustee for
cancellation.
SECTION 2.12. Payment of Interest, Interest Rights Preserved.
Interest on any Note which is payable, and is paid or duly provided for, on any
Interest
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Payment Date shall be paid to the Person in whose name such Note is registered
at the close of business on the Record Date for such interest payment, which
shall be the May 1 or November 1 (whether or not a Business Day) immediately
preceding such Interest Payment Date.
Any interest on any Note which is payable, but is not paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the registered Holder on the relevant
Record Date, and, except as hereinafter provided, such Defaulted Interest, and
any interest payable on such Defaulted Interest, may be paid by the Issuer, at
its election, as provided in clause (a) or (b) below:
(a) The Issuer may elect to make payment of any Defaulted Interest, and
any interest payable on such Defaulted Interest, to the Persons in whose names
the Notes are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Issuer shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on the Notes and the date of the proposed
payment, and at the same time the Issuer shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as provided in this Section 2.12(a). Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest which
shall be not more than fifteen (15) calendar days and not less than ten (10)
calendar days prior to the date of the proposed payment and not less than ten
(10) calendar days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Issuer of such Special
Record Date and, in the name and at the expense of the Issuer, shall cause
notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be sent, first-class mail, postage prepaid, to each Holder at
such Holder's address as it appears in the Note Register, not less than ten (10)
calendar days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in
whose names the Notes are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following clause (b);
or
(b) The Issuer may make payment of any Defaulted Interest, and any
interest payable on such Defaulted Interest, on the Notes in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Issuer to the Trustee of the proposed
payment pursuant to this clause (b), such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each Note
delivered under this Indenture upon registration of transfer of, or in exchange
for, or in lieu of, any other Note, shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other
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Note.
SECTION 2.13 Add-On Notes.
The Issuer may, from time to time, subject to compliance with any other
applicable provisions of this Indenture (including but not limited to Section
4.08), without the consent of the Holders, create and issue pursuant to this
Indenture additional notes having terms and conditions identical to those of the
Notes except for issue date ("Add-On Notes") (or the same except for the payment
of interest accruing prior to the issue date of such Add-On Notes and as
otherwise provided in the following sentence), which Add-On Notes will be
treated, together with any other outstanding Notes, as a single issue of
securities. The Issuer may, in connection with the issuance of any Add-On Notes,
by Board Resolution or supplemental indenture make appropriate adjustments to
this Article II applicable to such Add-On Notes in order to ensure compliance
with the Securities Act and any registration rights or similar agreement
applicable to such Add-On Notes.
SECTION 2.14. CUSIP or ISIN Numbers.
(a) The Issuer in issuing the Notes may use CUSIP or ISIN numbers (if then
generally in use) and, if so, the Trustee shall use CUSIP or ISIN numbers, as
applicable, in notices of redemption as a convenience to Holders; provided, that
any such notice may state that no representation is made as to the correctness
of such numbers either as printed on the Notes or as contained in any notice of
a redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers.
(b) In the event that the Issuer shall issue and the Trustee shall
authenticate any Add-On Notes pursuant to Section 2.02, the Issuer shall use its
best efforts to obtain the same CUSIP or ISIN number for such Add-On Notes as is
printed on the Notes outstanding at such time; provided, however, that if any
Add-On Notes are determined, pursuant to an Opinion of Counsel, to be a
different class of security than the Notes outstanding at such time for federal
income tax purposes, the Issuer may obtain a CUSIP or ISIN number for such
series of Add-On Notes that is different from the CUSIP or ISIN number printed
on the Notes then outstanding and if any Add-On Notes are required to carry a
Private Placement Legend and other Notes outstanding at such time are not or
vice versa, the Issuer may obtain and use a different CUSIP or ISIN number for
such Add-On Notes for such time as such difference applies.
SECTION 2.15. Transfers, etc. Each Holder of a Note agrees to indemnify
the Issuer and the Trustee against any liability that may result from the
transfer, exchange or assignment by such Holder of such Holder's Note in
violation of any provision of this Indenture or applicable U.S. Federal or state
securities law.
ARTICLE 3
REDEMPTION
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SECTION 3.01. Notices to Trustee.
If the Issuer elects to redeem Notes pursuant to paragraph 8 of the Initial
Notes or paragraph 7 of the Exchange Notes, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Notes to be redeemed.
The Issuer shall give each notice to the Trustee provided for in this
Section 3.01 not less than thirty (30) days nor more than sixty (60) days before
the Redemption Date unless the Trustee consents to a shorter period. Such notice
shall be accompanied by an Officers' Certificate and an Opinion of Counsel from
the Issuer to the effect that such redemption will comply with the conditions
herein.
SECTION 3.02. Selection of Notes To Be Redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall select the
Notes to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Notes not previously called
for redemption. The Trustee may select for redemption portions of the principal
of Notes that have denominations larger than $1,000. Notes and portions of them
the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Issuer promptly of the Notes or portions of Notes to be redeemed.
SECTION 3.03. Notice of Redemption.
At least twenty (20) days but not more than sixty (60) days before a Redemption
Date, the Issuer shall mail a notice of redemption by first-class mail, postage
prepaid, to each Holder of Notes to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price;
(e) if any Global Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, such Global Note, with a notation on Schedule A thereof adjusting the
principal amount thereof to be equal to the
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unredeemed portion, will be returned to the Holder thereof,
(f) if any Certificated Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the Redemption
Date, a new Certificated Note or Certificated Notes in principal amount equal to
the unredeemed portion will be issued;
(g) if fewer than all the outstanding Notes are to be redeemed, the
identification and principal amounts of the particular Notes to be redeemed;
(h) that, unless the Issuer defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the terms
of this Indenture, interest on Notes (or portion thereof) called for redemption
ceases to accrue on and after the Redemption Date; and
(i) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at the Issuer's expense. In such event, the
Issuer shall provide the Trustee with the information required by this Section
3.03.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become due and
payable on the Redemption Date and at the Redemption Price stated in the notice.
Upon surrender to the Paying Agent, such Notes shall be paid at the Redemption
Price stated in the notice, plus accrued interest to the Redemption Date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price.
On or prior to the Redemption Date, the Issuer shall deposit with the Paying
Agent (or, if the Issuer or a domestically incorporated wholly-owned Subsidiary
is the Paying Agent, shall segregate and hold in trust) money in immediately
available funds, sufficient to pay the Redemption Price of and accrued interest
on all Notes to be redeemed on that date other than Notes or portions of Notes
called for redemption which have been delivered by the Issuer to the Trustee for
cancellation.
So long as the Issuer complies with the preceding paragraph and the
other provisions of this Article 3, interest on the Notes or portions thereof to
be redeemed on the applicable Redemption Date shall cease to accrue from and
after such date and such Notes or portions thereof shall be deemed not to be
entitled to any benefit under this Indenture except to receive payment of the
Redemption Price on the Redemption Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the relevant
Interest Payment Date). If any Note called for redemption shall not be so paid
upon surrender for redemption, then, from
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the Redemption Date until such Redemption Price is paid, interest shall be paid
on the unpaid principal and premium, if any, and, to the extent permitted by
law, on any accrued but unpaid interest thereon, in each case at the rate
prescribed therefor by such Notes.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Issuer shall execute and
the Trustee shall authenticate for the Holder of the Note being surrendered (at
the Issuer's expense) a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes.
The Issuer shall promptly pay the principal of, premium, if any, and interest
and Liquidated Damages, if any, on the Notes on the dates and in the manner
provided in the Notes and in this Indenture. Principal, premium, if any, and
interest and Liquidated Damages, if any, shall be considered paid on the date
due if on such date the Trustee or the Paying Agent holds in accordance with
this Indenture money sufficient to pay all principal, premium, if any, and
interest and Liquidated Damages, if any, then due and the Trustee or the Paying
Agent, as the case may be, is not prohibited from paying such money to the
Noteholders on that date pursuant to the terms of this Indenture.
To the extent lawful, the Issuer shall pay interest on overdue
principal, overdue premium, Defaulted Interest and Liquidated Damages (without
regard to any applicable grace period) at the interest rate borne on the Notes.
The Issuer's obligation pursuant to the previous sentence shall apply whether
such overdue amount is due at its maturity, as a result of the Issuer's
obligations pursuant to Sections 3.05, Section 4.11 or Section 4.14 hereof, or
otherwise.
All payments with respect to a Global Note or a Certificated Note
(including principal, premium, if any, interest and Liquidated Damages, if any)
the Holders of which have given wire transfer instructions to the Issuer will be
required to be made by wire transfer of immediately available funds to the
account or (in the case of a Global Note) accounts specified by the Holders
thereof or, if no such account is specified, by sending via first-class mail,
postage prepaid, a check to each such Holders' registered address.
SECTION 4.02. Maintenance of Office or Agency.
The Issuer shall maintain an office or agency where Notes may be presented or
surrendered for payment and where Notes may be surrendered for registration of
transfer or exchange, which shall initially be the office of the Trustee in
Dallas, Texas. The Issuer shall maintain an office where notices and demands to
or upon the Issuer in respect of the Notes and this Indenture may be served,
which office shall be initially the Corporate Trust Office designated in the
definition of "Corporate Trust Office." The Issuer shall give prompt written
notice to the Trustee of the
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location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the designated office
of the Trustee, and the Issuer hereby appoints the Trustee its agent to receive
all presentations, surrenders, notices and demands.
The Issuer may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all of such purposes, and may from time to time rescind such designations;
provided, that no such designation or rescission shall in any manner relieve the
Issuer of its obligation to maintain an office or agency for such purposes. The
Issuer shall give prompt written notice to the Trustee of any such designation
and any change in the location of any such other office or agency.
The Issuer hereby designates the Dallas, Texas office of the Trustee as
one such office or agency of the Issuer in accordance with Section 2.03 hereof.
SECTION 4.03. Money for the Notes to be Held in Trust.
If the Issuer, any Subsidiary of the Issuer or any of their respective
Affiliates shall at any time act as Paying Agent with respect to the Notes, such
Paying Agent shall, on or before each due date of the principal of, premium, if
any, or interest or Liquidated Damages, if any, on any of the Notes, segregate
and hold in trust for the benefit of the Persons entitled thereto money
sufficient to pay the principal, premium, if any, or interest or Liquidated
Damages, if any, so becoming due until such money shall be paid to such Persons
or otherwise disposed of as herein provided, and shall promptly notify the
Trustee of its action or failure so to act.
Whenever the Issuer shall have one or more Paying Agents with respect
to the Notes, it shall, prior to 10:00 a.m. New York, New York time on each due
date of the principal of, premium, if any, or interest or Liquidated Damages, if
any, on any of the Notes, deposit with a Paying Agent a sum sufficient to pay
the principal, premium, if any, or interest or Liquidated Damages, if any, so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium, if any, or interest or Liquidated Damages,
if any, and (unless such Paying Agent is the Trustee) the Paying Agent shall
promptly notify the Trustee of the Issuer's action or failure so to act.
SECTION 4.04. Corporate Existence.
Subject to the provisions of Article 5 hereof, the Issuer shall do or cause to
be done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the Issuer
and each of its Restricted Subsidiaries; provided, that the Issuer and any such
Restricted Subsidiary shall not be required to preserve the corporate existence
of any such Restricted Subsidiary or any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Issuer and that the loss thereof is not
disadvantageous in any material respect to the Holders.
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SECTION 4.05. Maintenance of Property.
The Issuer shall cause all Property used in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as, in the judgment of the Issuer, may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, that nothing in
this Section 4.05 shall prevent the Issuer from discontinuing the operation or
maintenance of any of such Property if such discontinuance is, in the judgment
of the Issuer, desirable in the conduct of its business or the business of any
of its Subsidiaries and not disadvantageous in any material respect to the
Holders.
SECTION 4.06. Payment of Taxes and Other Claims.
The Issuer and its Subsidiaries shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent (a) all material obligations
and liabilities, (b) all taxes, assessments and governmental charges levied or
imposed upon the Issuer or any of its Subsidiaries or upon the income, profits
or Property of the Issuer or any of its Subsidiaries and (c) all material lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
Lien upon the Property of the Issuer or any of its Subsidiaries; provided, that
the Issuer shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP or other appropriate provision
has been made.
SECTION 4.07. SEC and Other Reports.
Notwithstanding that the Issuer may not be subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, the Issuer shall (a) provide the
Trustee, the Initial Purchasers and Noteholders with such annual reports,
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections and (b) beginning on the earlier of the date that the Exchange Offer
Registration Statement or the Shelf Registration Statement (as both terms are
defined in the Registration Rights Agreement) is declared effective by the SEC,
file with the SEC, to the extent permitted, the annual reports, information,
documents and other reports described in clause (a), in each case, such
information, documents and reports to be so provided and filed at the times
specified for the filing of such information, documents and reports under such
Section. In addition, the Issuer will make available, upon request, to any
Holder and any prospective purchaser of Notes the information required pursuant
to Rule 144A(d)(4) under the Securities Act during any period in which the
Issuer is not subject to Section 13 or 15(d) of the Exchange Act. The Issuer
also shall comply with the provisions of Section 314(a) of the TIA. Delivery of
such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein, including the Issuer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to
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rely exclusively on Officers' Certificates).
SECTION 4.08. Limitation on Indebtedness.
The Issuer shall not, and shall not permit any Restricted Subsidiary to, incur,
directly or indirectly, any Indebtedness (including any Acquired Indebtedness)
other than Permitted Indebtedness. Notwithstanding the foregoing, in addition to
Permitted Indebtedness, the Issuer may incur Indebtedness (including Acquired
Indebtedness) and any Restricted Subsidiary may incur Acquired Indebtedness and
guarantee Senior Credit Facility obligations, if, in either case, (i) no Default
or Event of Default shall have occurred and be continuing on the date of the
proposed incurrence of Indebtedness or would result as a consequence of such
proposed incurrence and (ii) immediately after giving effect to such proposed
incurrence, the Consolidated Leverage Ratio of the Issuer is less than 7.0 to
1.0.
SECTION 4.09. Limitation on Restricted Payments.
(a) The Issuer shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to, make a Restricted Payment if at the time
the Issuer or such Restricted Subsidiary makes such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing (or would result therefrom); or
(ii) the Issuer or such Restricted Subsidiary is not able to
incur, after giving effect to such Restricted Payment, an additional
$1.00 of Indebtedness pursuant to the second sentence of Section 4.08;
or
(iii) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date (other than Restricted
Payments referred to in items (b)(i) and (b) (ii) below) would exceed
the sum of:
(A) one hundred percent (100%) of the Consolidated
EBITDA accrued on a cumulative basis during the period
(treated as one accounting period) beginning on the first day
of the fiscal quarter beginning immediately following the
Issue Date to the end of the most recent fiscal quarter ending
at least forty-five (45) days prior to the date of such
Restricted Payment (or, in case such Consolidated Net EBITDA
shall be a deficit, minus 100% of such deficit) less 1.4 times
Consolidated Interest Expense for the same period;
(B) the aggregate Net Cash Proceeds received by the
Issuer from the issuance or sale of, or as a capital
contribution in respect of, its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than
an issuance or sale to
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a Subsidiary of the Issuer and other than an issuance or sale
to an employee stock ownership plan or to a trust established
by the Issuer or any of its Subsidiaries for the benefit of
their employees);
(C) the amount by which Indebtedness of the Issuer is
reduced on the Issuer's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Issuer) subsequent
to the Issue Date of any Indebtedness of the Issuer
convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Issuer (less the amount of any
cash, or the fair value of any other property, distributed by
the Issuer upon such conversion or exchange);
(D) an amount equal to the sum of (i) the net
reduction in Investment in any Person resulting from
dividends, repayments of loans or advances or other transfers
of assets, in each case to the Issuer or any Restricted
Subsidiary from such Person, and (ii) the portion
(proportionate to the Issuer's equity interest in such
Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously
made (and treated as a Restricted Payment) by the Issuer or
any Restricted Subsidiary in such Unrestricted Subsidiary; and
(E) $5.0 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) if no Default or Event of Default shall have occurred and
be continuing, any purchase or redemption of Capital Stock or
Subordinated Obligations of the Issuer made by exchange for, or out of
the proceeds of the substantially concurrent sale of, or capital
contribution in respect of, Capital Stock of the Issuer (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Issuer); provided, that (A) such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale or
capital contribution shall be excluded from the calculation of amounts
under clause (iii) (B) of paragraph (a) above;
(ii) if no Default or Event of Default exists, any purchase,
repurchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Obligations made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Indebtedness of
the Issuer which is permitted to be incurred under Section 4.08;
provided, that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments;
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(iii) dividends paid within sixty (60) days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this covenant; provided, however, that at the time
of payment of such dividend, no other Default shall have occurred and
be continuing (or result therefrom); provided further, that such
dividend shall be included in the calculation of the amount of
Restricted Payments; and
(iv) if no other Default or Event of Default shall have
occurred and be continuing or would result therefrom, any purchase of
any fractional share of Capital Stock of the Issuer resulting from (A)
any dividend or other distribution on outstanding shares of Capital
Stock that is payable in shares of such Capital Stock (including any
stock split or subdivision of the outstanding Capital Stock of the
Issuer), (B) any combination of all of the outstanding shares of
Capital Stock of the Issuer, (C) any reorganization or consolidation of
the Issuer in any merger of the Issuer with or into any other Person or
(D) the conversion of any securities of the Issuer into shares of
Capital Stock of the Issuer; provided, however, that all such purchases
of fractional shares shall be included in the calculation of the amount
of Restricted Payments.
SECTION 4.10. Limitation on Restrictions on Distributions from
Restricted Subsidiaries.
The Issuer shall not, and shall not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary:
(a) to pay dividends or make any other distributions on its Capital
Stock or any other interest or participation in, or measured by the profits of
the Issuer or such Restricted Subsidiary or pay any Indebtedness owed to the
Issuer;
(b) to make any loans or advances to the Issuer or to any Restricted
Subsidiary; or
(c) to transfer any of its property or assets to the Issuer or to any
Restricted Subsidiary.
Notwithstanding the foregoing, this covenant shall not prohibit any
encumbrance or restriction existing under or by reason of:
(i) the Senior Credit Facility as in effect on the Issue Date
and as the same may be amended, modified, restated, supplemented or
refinanced from time to time; provided, however, that the restrictions
contained in any such amendment, modification, restatement, supplement
or other agreement are no less favorable in any material respect to the
Noteholders than restrictions contained in the Senior Credit Facility
on the Issue Date;
(ii) any encumbrances or restrictions existing as of the Issue
Date or pursuant
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to any agreement governing Indebtedness in existence on the Issue Date,
in each case as in effect on the Issue Date;
(iii) the Notes, this Indenture or any Guarantee;
(iv) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person or the
properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired;
(v) Refinancing Indebtedness incurred to refinance
Indebtedness referred to in clause (ii) or (iv); provided, however,
that the encumbrances and restrictions contained in any such
refinancing agreement are no less favorable to the Noteholders than
encumbrances and restrictions contained in such agreements governing
the Indebtedness being refinanced;
(vi) customary nonassignment provisions in leases governing
leasehold interests to the extent such provisions restrict the transfer
of the lease or the property leased thereunder;
(vii) security agreements or mortgages securing Indebtedness
of a Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements or
mortgages;
(viii) restrictions with respect to a Restricted Subsidiary
imposed pursuant to a binding agreement which has been entered into for
the sale or disposition of capital stock or assets of such Restricted
Subsidiary; provided, that such restrictions apply solely to the
capital stock or assets of such Restricted Subsidiary;
(ix) Liens securing Indebtedness otherwise permitted to be
incurred by Section 4.15 that limit the right of the Issuer or any of
its Restricted Subsidiaries to dispose of the assets subject to such
Lien; and
(x) applicable law.
SECTION 4.11. Limitation on Sales of Assets and Subsidiary Stock
(a) The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Sale unless:
(i) the Issuer or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the fair
market value (including as to the value of all non-cash consideration)
of the shares and assets subject to such Asset Sale (which fair
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market value shall be determined in good faith by the Board of
Directors for any transaction (or series of transactions) involving in
excess of $1,000,000) and at least 75% of the consideration received
therefor by the Issuer or such Restricted Subsidiary is in the form of
(A) cash or Cash Equivalents and is received at the time of such sale
or (B) (1) long-term assets to be used by the Issuer or any Restricted
Subsidiary in a Related Business or (2) capital stock of a Restricted
Subsidiary or a Person engaged primarily in a Related Business that
will become, upon such purchase, a Restricted Subsidiary (collectively,
"Replacement Assets"); and
(ii) an amount equal to 100% of the Net Available Cash from
such Asset Sale is applied by the Issuer (or such Restricted
Subsidiary, as the case may be):
(A) first, to the extent the Issuer elects (or is
required by the terms of the Senior Credit Facility or other
Senior Indebtedness), to prepay or repay outstandings under
the Senior Credit Facility or such other Senior Indebtedness;
provided, that (1) there is a permanent reduction in the
availability of funds under the Senior Credit Facility or such
other Senior Indebtedness in an amount equal to such
prepayment or repayment and (2) such prepayment or repayment
is made within three hundred sixty-five (365) days from the
date of such Asset Sale; and
(B) second, to the extent the Issuer elects, and
within three hundred sixty-five (365) days from the date of
such Asset Sale, to purchase, construct or improve Replacement
Assets.
(b) Any Net Available Cash not applied within three hundred sixty-five
(365) days after the consummation of an Asset Sale as provided in clauses (A) or
(B) of paragraph (ii) above will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5,000,000, the Issuer will be
required to make an offer to all Holders (an "Asset Sale Offer"), to purchase,
on a pro rata basis the principal amount of Notes equal in amount to the Excess
Proceeds (and not just the amount thereof that exceeds $5,000,000) (the "Asset
Sale Offer Amount"), at a purchase price in cash in an amount equal to one
hundred percent (100%) of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon to the date of purchase (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), in accordance with the procedures
set forth in this Indenture, and in accordance with the following standards:
(i) If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee
shall select the Notes (or portions thereof) to be purchased on a pro
rata basis, based on the principal amount of Notes tendered, with such
adjustments as may be deemed appropriate by the Trustee, so that only
Notes (or portions thereof) in denominations of $1,000 or integral
multiples thereof shall be purchased.
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(ii) If the aggregate principal amount of Notes tendered
pursuant to such Asset Sale Offer is less than the Excess Proceeds, the
Issuer may use any remaining Excess Proceeds following the completion
of the Asset Sale Offer for general corporate purposes (subject to the
other provisions of this Indenture).
Upon completion of an Asset Sale Offer, the amount of Excess Proceeds
then required to be otherwise applied in accordance with this covenant shall be
reset to zero, subject to any subsequent Asset Sale.
(c) In the event of the transfer of substantially all (but not all) of
the property and assets of the Issuer and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01 below, the successor
corporation shall be deemed to have sold the properties and assets of the Issuer
and its Subsidiaries not so transferred for purposes of this covenant, and shall
comply with the provisions of this covenant with respect to such deemed sale as
if it were an Asset Sale. In addition, the fair market value of such properties
and assets of the Issuer or its Subsidiaries deemed to be sold shall be deemed
to be Net Available Cash for purposes of this covenant.
(d) If at any time any non-cash consideration received by the Issuer or
any Subsidiary in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Available Cash thereof
shall be applied in accordance with this covenant.
(e) Within thirty (30) calendar days after the date the amount of
Excess Proceeds exceeds $5,000,000, the Issuer, or the Trustee at the written
request and expense of the Issuer, shall send to each Holder by first-class
mail, postage prepaid, a notice prepared by the Issuer stating:
(i) that an Asset Sale Offer is being made pursuant to this
Section 4.11 and that all Notes that are timely tendered will be
accepted for payment, subject to proration if the amount of Excess
Proceeds is less than the aggregate principal amount of all Notes
timely tendered pursuant to the Asset Sale Offer;
(ii) the Asset Sale Offer Amount, the amount of Excess
Proceeds that are available to be applied to purchase tendered Notes,
and the date Notes are to be purchased pursuant to the Asset Sale Offer
(the "Asset Sale Purchase Date"), which date shall be a Business Day no
earlier than thirty (30) calendar days nor later than sixty (60)
calendar days subsequent to the date such notice is mailed;
(iii) that any Notes or portions thereof not tendered or
accepted for payment will continue to accrue interest;
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(iv) that, unless the Issuer defaults in the payment of the
Asset Sale Offer Amount with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest from and after the Asset Sale Purchase Date;
(v) that any Holder electing to have any Notes or portions
thereof purchased pursuant to the Asset Sale Offer will be required to
surrender such Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of such Notes completed, to the Paying Agent
at the address specified in the notice prior to the close of business
on the third Business Day preceding the Asset Sale Purchase Date;
(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close of
business on the fifth Business Day preceding the Asset Sale Purchase
Date, a facsimile transmission or letter, setting forth the name of the
Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing such Holder's election to
have such Notes or portions thereof purchased pursuant to the Asset
Sale Offer;
(vii) that any Holder electing to have Notes purchased
pursuant to the Asset Sale Offer must specify the principal amount that
is being tendered for purchase, which principal amount must be $1,000
or an integral multiple thereof;
(viii) if Certificated Notes have been issued hereunder, that
any Holder of Certificated Notes whose Certificated Notes are being
purchased only in part will be issued new Certificated Notes equal in
principal amount to the unpurchased portion of the Certificated Note or
Notes surrendered, which unpurchased portion will be equal in principal
amount to $1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the Holder of a Global
Note that is being purchased in part, such Global Note with a notation
on Schedule A thereof adjusting the principal amount thereof to be
equal to the unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to
tender Notes and to have such Notes purchased pursuant to this Section
4.11.
(f) On the Asset Sale Purchase Date, the Issuer shall (i) accept for
payment any Notes or portions thereof properly tendered and selected for
purchase pursuant to the Asset Sale Offer and Section 4.11(e) hereof, (ii)
irrevocably deposit with the Paying Agent, by 10:00 a.m., New York City time, on
such date, in immediately available funds, an amount equal to the Asset Sale
Offer Amount in respect of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee the Notes so accepted together
with an Officers' Certificate listing the Notes or portions thereof tendered to
the Issuer and accepted for payment. Subject to the provisions of Section 4.01,
the Paying Agent shall promptly send by first class mail, postage
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prepaid, to each Holder of Notes or portions thereof so accepted for payment the
Asset Sale Offer Amount for such Notes or portions thereof. The Issuer shall
publicly announce the results of the Asset Sale Offer on or as soon as
practicable after the Asset Sale Purchase Date. For purposes of this Section
4.11, the Trustee shall act as the Paying Agent.
(g) Upon surrender and cancellation of a Certificated Note that is
purchased in part, the Issuer shall promptly issue and the Trustee shall
authenticate and deliver to the surrendering Holder of such Certificated Note, a
new Certificated Note equal in principal amount to the unpurchased portion of
such surrendered Certificated Note; provided that each such new Certificated
Note shall be in a principal amount of $1,000 or an integral multiple thereof.
(h) Upon surrender of a Global Note that is purchased in part, the
Paying Agent shall forward such Global Note to the Trustee who shall make a
notation on Schedule A thereof to reduce the principal amount of such Global
Note, as provided in Section 2.06(c) hereof.
(i) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.11. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Issuer shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 4.11 by virtue thereof.
SECTION 4.12. Limitation on Affiliate Transactions
(a) Except for Excluded Transactions, the Issuer shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Issuer (an "Affiliate Transaction") unless the terms thereof:
(i) are no less favorable to the Issuer or such Restricted
Subsidiary than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an
Affiliate;
(ii) if such Affiliate Transaction involves an amount in
excess of $1,000,000, (A) are set forth in writing and (B) have been
approved by a majority of the disinterested members of the Board of
Directors; and
(iii) if such Affiliate Transaction involves an amount in
excess of $5,000,000, have been determined by a nationally recognized
investment banking or accounting firm having experience in such matters
to be fair, from a financial point of view, to the Issuer and its
Restricted Subsidiaries.
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(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to
Section 4.09 so long as any payment to a Permitted Holder is made
ratably to all stockholders of the applicable class of Capital Stock;
(ii) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans or
similar employee benefit plans or arrangements approved by the Board of
Directors;
(iii) the grant of stock options or similar rights to
employees and directors of the Issuer pursuant to plans in existence on
the Issue Date and plans approved by the Board of Directors;
(iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Issuer or its
Restricted Subsidiaries, but in any event not to exceed $1,000,000 in
the aggregate outstanding at any one time;
(v) the payment of reasonable fees to directors of the Issuer
and its Restricted Subsidiaries who are not employees of the Issuer or
its Restricted Subsidiaries; and
(vi) any Affiliate Transaction (x) between the Issuer and a
Restricted Subsidiary or (y) between Restricted Subsidiaries.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries
The Issuer shall not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except to the Issuer or a wholly-owned Restricted
Subsidiary; provided, that this covenant will not prohibit (i) the sale of all
of the shares of the Capital Stock of any Restricted Subsidiary owned at the
time of such sale by the Issuer or any other Restricted Subsidiary effected in
accordance with Section 4.11 and Section 5.01, (ii) the issuance of shares of
Capital Stock of a Restricted Subsidiary pursuant to employee benefit plans or
arrangements approved by the Board of Directors of the Issuer or the applicable
Restricted Subsidiary, (iii) the sale, pursuant to an underwritten registered
public offering, of shares of Capital Stock of a Restricted Subsidiary effected
in accordance with Section 4.11 or (iv) the issuance of Capital Stock to the
Issuer or a Restricted Subsidiary in an Investment described by clause (i) in
the definition of "Permitted Investment."
SECTION 4.14. Change of Control
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(a) Upon the occurrence of any of the following events (each a "Change
of Control"), each Holder shall have the right to require that the Issuer
repurchase such Holder's Notes pursuant to the offer described in Section
4.14(b) hereof (the "Change of Control Offer") at a purchase price (the "Change
of Control Purchase Price") in cash equal to one hundred and one percent (101%)
of the aggregate principal amount of such Notes (or portions thereof) to be
redeemed plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the purchase date (the "Change of Control Payment Date") (subject to
the right of holders of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date):
(i) (A) the Permitted Holders cease to be the "beneficial
owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, in the aggregate of at least 50.1% of the total
voting power of the Voting Stock of the Issuer or (B) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than one or more Permitted Holders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and l3d-5 under the Exchange Act,
provided, that for purposes of this clause (B) such person shall be
deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of more than twenty-five percent (25%) of the total voting power of the
Voting Stock of the Issuer (for the purposes of this clause (i) the
Permitted Holders shall be deemed to beneficially own any Voting Stock
of a Person held by any other Person so long as the Permitted Holders
beneficially own, directly or indirectly in the aggregate at least
50.1% of the voting power of the Voting Stock of such other Person);
(ii) the Issuer merges with or into another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person merges
with or into the Issuer, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Issuer is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (x) the outstanding Voting Stock of the Issuer is
converted into or exchanged for (1) Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation or (2)
cash, securities or other property in an amount which could be paid by
the Issuer as a Restricted Payment under Section 4.09 and (y)
immediately after such transaction no "person" or "group" (within the
meaning of Section 13(d) or 14(d) of the Exchange Act) (other than the
Permitted Holders) is the "beneficial owner" (as defined in Rules 13d-3
and l3d-5 under the Exchange Act, except that a person shall be deemed
to have "beneficial ownership" of all shares that any such Person has
the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of twenty-five
percent (25%) or more of the voting power of the Voting Stock of the
surviving or transferee corporation on a Fully Diluted basis;
(iii) during any period of two consecutive years, individuals
who at the
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beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Issuer was
approved by a vote of sixty-six and two-thirds percent (66K%) of
the directors of the Issuer at the time of such approval 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 the Board of Directors then in
office; or
(iv) the liquidation or dissolution of the Issuer.
(b) Within 30 days following any Change of Control, the Issuer shall
mail a notice to each Holder with a copy to the Trustee stating:
(i) that a Change of Control has occurred, the circumstances
and relevant facts with respect to such Change of Control and that a
Change of Control Offer is being made pursuant to this Section 4.14,
and that all Notes (or portions thereof) that are timely tendered will
be accepted for payment;
(ii) the Change of Control Purchase Price and the Change of
Control Payment Date, which date shall be a Business Day no earlier
than thirty (30) calendar days nor later than sixty (60) calendar days
subsequent to the date such notice is mailed;
(iii) that any Notes or portions thereof not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Issuer defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or
portions thereof accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest from and after the Change of
Control Payment Date;
(v) that any Holder electing to have any Notes or portions
thereof purchased pursuant to a Change of Control Offer will be
required to tender such Notes, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of such Notes completed, to the
Paying Agent at the address specified in the notice prior to the close
of business on the third Business Day preceding the Change of Control
Payment Date;
(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close of
business on the fifth Business Day preceding the Change of Control
Payment Date, a facsimile transmission or letter, setting forth the
name of the Holder, the principal amount of Notes delivered for
purchase, and a statement that such Holder is withdrawing such Holder's
election to have such Notes or portions thereof purchased pursuant to
the Change of Control Offer;
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(vii) that any Holder electing to have Notes purchased
pursuant to the Change of Control Offer must specify the principal
amount that is being tendered for purchase, which principal amount must
be $1,000 or an integral multiple thereof,
(viii) if Certificated Notes have been issued, that any Holder
of Certificated Notes whose Certificated Notes are being purchased only
in part will be issued new Certificated Notes equal in principal amount
to the unpurchased portion of the Certificated Note or Notes
surrendered, which unpurchased portion will be equal in principal
amount to $1,000 or an integral multiple thereof,
(ix) that the Trustee will return to the Holder of a Global
Note that is being purchased in part, such Global Note with a notation
on Schedule A thereof adjusting the principal amount thereof to be
equal to the unpurchased portion of such Global Note; and
(x) any other information necessary to enable any Holder to
tender Notes and to have such Notes purchased pursuant to this Section
4.14.
(c) On the Change of Control Payment Date, the Issuer shall (i) accept
for payment all Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) irrevocably deposit with the Paying Agent, by
10:00 a.m., New York City time, on such date, in immediately available funds, an
amount equal to the Change of Control Purchase Price in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so tendered together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuer. Subject to the provisions of Section 4.01 hereof, the Paying Agent shall
promptly send by first class mail, postage prepaid, to each Holder of Notes or
portions thereof so accepted for payment the Change of Control Purchase Price
for such Notes or portions thereof. The Issuer shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. For purposes of this Section 4.14, the Trustee
shall act as the Paying Agent.
(d) Upon surrender and cancellation of a Certificated Note that is
purchased in part pursuant to the Change of Control Offer, the Issuer shall
promptly issue and the Trustee shall authenticate and deliver to the
surrendering Holder of such Certificated Note a new Certificated Note equal in
principal amount to the unpurchased portion of such surrendered Certificated
Note; provided, that each such new Certificated Note shall be in a principal
amount of $1,000 or an integral multiple thereof.
(e) Upon surrender of a Global Note that is purchased in part pursuant
to a Change of Control Offer, the Paying Agent shall forward such Global Note to
the Trustee who shall make a notation on Schedule A thereof to reduce the
principal amount of such Global Note to an amount equal to the unpurchased
portion of such Global Note, as provided in Section 2.06(c) hereof.
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(f) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.14. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.14, the Issuer shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.14 by virtue
thereof
(g) Prior to complying with the provisions of this Section 4.14, but in
any event within 30 days following a Change of Control, the Issuer shall, to the
extent required, either repay all outstanding Senior Indebtedness or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Indebtedness to permit the repurchase of Notes required by this Section 4.14.
SECTION 4.15. Limitation on Liens.
Other than Permitted Liens, the Issuer shall not, and shall not cause or permit
any Restricted Subsidiary to, directly or indirectly, create, incur, assume or
permit to exist any Lien on or with respect to any property or asset (including
any document or instrument in respect of goods or accounts receivable) of the
Issuer or of any Restricted Subsidiary, whether now owned or hereafter acquired,
or assign or otherwise convey any right to receive any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, unless (i) in the case
of Liens securing Indebtedness that is expressly subordinate or junior in right
of payment to the Notes, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Liens and (ii) in all
other cases, the Notes are equally and ratably secured.
SECTION 4.16. Limitation on Layered Indebtedness.
Other than in connection with (a) the Senior Credit Facility or (b) the purchase
or redemption of minority equity interests in any Restricted Subsidiary from
non-Affiliates of the Issuer, the Issuer shall not, and, if at any time
Restricted Subsidiaries become Guarantors, shall not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness that is
subordinate in right of payment to any other Indebtedness, unless such
Indebtedness is subordinate in right of payment to, or ranks pari passu with,
the Notes or, in the case of Restricted Subsidiaries that are Guarantors, such
Indebtedness is subordinate in right of payment to, or ranks pari passu with,
the Guarantees of such Guarantors.
The Guarantors, if any, will not, directly or indirectly, guarantee any
Indebtedness of the Issuer that is subordinate in right of payment to any other
Indebtedness of the Issuer unless such guarantee is subordinate in right of
payment to, or ranks pari passu with, the Guarantees of such Guarantors.
SECTION 4.17. Compliance Certificate
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The Issuer shall deliver to the Trustee within one hundred twenty (120) days
after the end of each fiscal year of the Issuer an Officers' Certificate stating
that in the course of the performance by the signers of their duties as Officers
of the Issuer they would normally have knowledge of any Default and whether or
not the signers know of any Default that occurred during such period. If they
do, the certificate shall describe the Default, its status and what action the
Issuer is taking or proposes to take with respect thereto. The Issuer also shall
comply with TIA Section 314(a)(4).
SECTION 4.18. Waiver of Stay, Extension or Usury Laws
Neither the Issuer nor any Guarantor, if any, will at any time, to the extent
that they may lawfully not do so, insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Issuer or its
Subsidiaries from paying all or any portion of the principal of or premium, if
any, or interest or Liquidated Damages, if any, on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and, to the extent
that they may lawfully do so, the Issuer and the Guarantors hereby expressly
waive all benefit or advantage of any such law and expressly agree that they
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.19. Investment Company Act
None of the Issuer or its Subsidiaries shall become an investment company
subject to registration under the Investment Company Act of 1940, as amended.
SECTION 4.20. Limitation on Conduct of Business
The Issuer and its Restricted Subsidiaries will not engage in any business other
than a Related Business.
SECTION 4.21 Guarantees of Certain Indebtedness
The Issuer will not permit any of its Restricted Subsidiaries, directly or
indirectly, to guarantee or otherwise become liable for, or incur any lien
securing, the payment of any Indebtedness of the Issuer (other than obligations
under the Senior Credit Facility from time to time outstanding or other
Indebtedness not to exceed $2,000,000 in aggregate at any one time outstanding
as to all of the Restricted Subsidiaries) unless such Restricted Subsidiary, the
Issuer, and the Trustee execute and deliver a supplemental indenture pursuant to
which such Restricted Subsidiary becomes a Guarantor of the Notes and otherwise
becomes obligated hereunder. Neither the Issuer nor any such Guarantor shall be
required to make a notation on the Notes or its Guarantee to reflect any such
subsequent Guarantee. Nothing in this covenant shall be construed to permit any
Restricted Subsidiary of Susquehanna Media to incur Indebtedness otherwise
prohibited by Section 4.08.
SECTION 4.22. Further Instruments and Acts
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Upon request of the Trustee, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. When Issuer May Merge or Transfer Assets
(a) The Issuer shall not, in a single transaction or series of related
transactions, consolidate with or merge with or into any Person, or sell or
dispose of (or permit any Restricted Subsidiary to sell or dispose of) all or
substantially all of the combined assets of the Issuer and its Restricted
Subsidiaries to any Person, unless:
(i) the Issuer, in the case of a transaction involving the
Issuer, or such Restricted Subsidiary in the case of a transaction
involving a Restricted Subsidiary, shall be the resulting, surviving or
transferee Person or the resulting, surviving or transferee Person (in
either case, the "Successor Company") shall be a Person organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if not
the Issuer or such Restricted Subsidiary) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of the Issuer
under the Notes and this Indenture, or the obligation of such
Restricted Subsidiary under its Guarantee (if any shall then exist), as
the case may be;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company as a result of such transaction as having been incurred by such
Successor Company at the time of such transaction), no Default shall
have occurred and be continuing,
(iii) immediately after giving effect to such transaction, the
Issuer, if the transaction involves a Restricted Subsidiary, or the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to the second sentence of Section 4.08,
(iv) in the case of a transaction involving the Issuer,
immediately after giving effect to such transaction, the Successor
Company shall have Consolidated Net Worth in an amount that is not less
than the Consolidated Net Worth of the Issuer prior to such
transaction;
(v) if, as a result of any such transaction, property or
assets of the Issuer or a Restricted Subsidiary would become subject
to a Lien securing Indebtedness not
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excepted from the provisions of this Indenture described above under
Section 4.15, the Issuer, any such Restricted Subsidiary or the
Successor Company, as the case may be, shall have secured the Notes
(and, if applicable, the relevant Guarantees), as required by such
provisions; and
(vi) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture
(if any) comply with this Indenture.
(b) the Successor Company shall be the successor to the Issuer or such
Restricted Subsidiary, as the case may be, and shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer or such
Restricted Subsidiary under the Indenture, but the predecessor Issuer or
Restricted Subsidiary in the case of a conveyance, transfer or lease shall not
be released from the obligation to pay the principal of and interest on the
Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default
The term "Event of Default," wherever used herein with respect to the Notes,
means any one of the following events (whatever the reason for such event, and
whether it shall be voluntary or involuntary, or be effected by operation of
law, pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(a) the Issuer defaults in any payment of interest on or Liquidated
Damages with respect to any Note when the same becomes due and payable, whether
or not such payment shall be prohibited by Article 10, and such default
continues for a period of thirty (30) days;
(b) the Issuer (i) defaults in the payment of the principal of, or
premium, if any, on any Note when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise, whether or not such
payment shall be prohibited by Article 10, or (ii) fails to redeem or purchase
Notes when required pursuant to this Indenture or the Notes, whether or not such
payment shall be prohibited by Article 10;
(c) the Issuer fails to observe or perform any covenant, condition or
agreement on the part of the Issuer to be observed or performed pursuant to
Sections 4.08, 4.09, 4.11, 4.14 and 5.01;
(d) the Issuer fails to comply with any of its other agreements or
covenants in or provisions of the Notes or this Indenture and such failure
continues for forty-five (45) days after the receipt by the Issuer of notice of
such Default from the Trustee or the Holders of at least twenty-five percent
(25%) in principal amount of the outstanding Notes;
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(e) Indebtedness of the Issuer or any Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $5,000,000 or its foreign currency equivalent at the time;
(f) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Issuer or any Subsidiary of the
Issuer in an involuntary case or proceeding under any Bankruptcy Law or (ii) a
decree or order (A) adjudging the Issuer or any Subsidiary of the Issuer a
bankrupt or insolvent, or (B) approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of, or in respect of, the
Issuer or any Subsidiary of the Issuer under any Bankruptcy Law, or (C)
appointing a Custodian of the Issuer or any Subsidiary of the Issuer or of any
substantial part of the Property of the Issuer or any Subsidiary of the Issuer,
or (D) ordering the winding-up or liquidation of the affairs of the Issuer or
any Subsidiary of the Issuer, and in each case, the continuance of any such
decree or order for relief or any such other decree or order unstayed and in
effect for a period of sixty (60) consecutive calendar days; or
(g) (i) the commencement by the Issuer or any Subsidiary of the Issuer of
a voluntary case or proceeding under any Bankruptcy Law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent; or (ii) the consent by the
Issuer or any Subsidiary of the Issuer to the entry of a decree or order for
relief in respect of the Issuer or any Subsidiary of the Issuer in an
involuntary case or proceeding under any Bankruptcy Law or to the commencement
of any bankruptcy or insolvency case or proceeding against the Issuer or any
Subsidiary of the Issuer; or (iii) the filing by the Issuer or any Subsidiary of
the Issuer of a petition or answer or consent seeking reorganization or relief
under any Bankruptcy Law; or (iv) the consent by the Issuer or any Subsidiary of
the Issuer to the filing of such petition or to the appointment of or taking
possession by a Custodian of the Issuer or any Subsidiary of the Issuer or of
any substantial part of the Property of the Issuer or any Subsidiary of the
Issuer; or (v) the making by the Issuer or any Subsidiary of the Issuer of an
assignment for the benefit of creditors; or (vi) the admission by the Issuer or
any Subsidiary of the Issuer in writing of its inability to pay its debts
generally as they become due; or (vii) the approval by stockholders of the
Issuer or any Subsidiary of the Issuer of any plan or proposal for the
liquidation or dissolution of the Issuer or any Subsidiary of the Issuer; or
(viii) the taking of corporate action by the Issuer or any Subsidiary of the
Issuer in furtherance of any such action; or
(h) any judgment or decree for the payment of money in excess of
$5,000,000 or its foreign currency equivalent at the time (to the extent not
covered by third-party insurance as to which a financially sound insurer has not
disclaimed coverage) is entered against the Issuer or any Subsidiary and remains
outstanding for a period of sixty (60) days following the date such judgment or
decree becomes final and non-appealable; or
(i) at any time that a Guarantee is required to be in effect under the
Indenture, the
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Guarantee of any Guarantor ceases to be in full force and effect (other than in
accordance with the terms of such Guarantee) or any Guarantor denies or
disaffirms its obligations under its Guarantee.
The Issuer shall deliver to the Trustee, within thirty (30) days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (c), (e), (h) or (i) and any event which with
the giving of notice or the lapse of time would become an Event of Default under
clause (d), its status and what action the Issuer is taking or proposes to take
with respect thereto.
SECTION 6.02. Acceleration
If an Event of Default (other than an Event of Default specified in Section
6.01(f) or (g) with respect to the Issuer) occurs and is continuing, the Trustee
by written notice to the Issuer, or the Holders of at least twenty-five percent
(25%) in principal amount of the Notes by written notice to the Issuer and the
Trustee, may declare the principal of, premium, if any, and accrued but unpaid
interest and Liquidated Damages, if any, on all the Notes to be due and payable.
Upon such a declaration, such principal, premium, if any, and interest and
Liquidated Damages, if any, shall be due and payable immediately. If an Event of
Default specified in Section 6.01(f) or (g) with respect to the Issuer occurs,
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on all the Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Noteholders. The Holders of a majority in principal amount of the Notes by
written notice to the Trustee and the Issuer may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal, premium, if any, or interest and Liquidated Damages, if
any, that has become due solely because of such acceleration. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies
The Issuer covenants that if an Event of Default specified in Section 6.01(a)
or 6.01(b) occurs, the Issuer shall, upon demand of the Trustee, pay to the
Trustee, for the benefit of the Holders, the whole amount then due and payable
on the Notes for principal, premium, if any, and interest and Liquidated
Damages, if any, and, to the extent that payment of such interest shall be
legally enforceable, interest upon the overdue principal (and premium, if any)
and upon Defaulted Interest (and Liquidated Damages, if any) at the rate or
rates prescribed therefor in the Notes, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, including the allocated reasonable costs of
its in-house counsel and legal staff, and all other amounts due to the Trustee
pursuant to Section 7.07 hereof.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, premium, if any, or
interest or Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this
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Indenture. The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults
The Holders of not less than a majority in principal amount of the Notes by
written notice to the Trustee may, on behalf of the Holders of all the Notes,
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default (i) in the payment of the principal of,
premium, if any or interest or Liquidated Damages, if any, on a Note (except a
payment default resulting from an acceleration that has been rescinded) or (ii)
in respect of a provision that under Section 9.02 cannot be amended without the
consent of each Noteholder affected.
SECTION 6.05. Control by Majority
The Holders of not less than a majority in principal amount of the Notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture or, subject to Section 7.01, that the Trustee
determines is unduly prejudicial to the rights of other Noteholders or would
involve the Trustee in personal liability; provided, that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits
A Noteholder may not pursue any remedy with respect to this Indenture or the
Notes unless:
(a) the Holder has previously given to the Trustee written notice stating
that an Event of Default is continuing;
(b) the Holders of at least twenty-five percent (25%) in principal amount
of the Notes have made a written request to the Trustee to pursue the remedy in
respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable security
or indemnity against any loss, liability or expense to be incurred in compliance
with such request;
(d) the Trustee has not complied with the request within sixty (60) days
after receipt of the request and the offer of security or indemnity; and
(e) the Holders of a majority in principal amount of the Notes have not
given the
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Trustee a direction inconsistent with the request during such sixty (60) day
period.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
SECTION 6.07. Rights of Holders To Receive Payment
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes held by such Holder, on or after the
respective due dates expressed in the Notes, or the Redemption Dates or purchase
dates provided for therein or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Issuer for the whole amount then due and owing on
the Notes for principal, premium, if any, and interest and Liquidated Damages,
if any, and, to the extent that payment of such interest shall be legally
enforceable, interest upon the overdue principal (and premium, if any) and upon
Defaulted Interest (and Liquidated Damages, if any) and the amounts provided for
in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
Noteholders allowed in any judicial proceedings relative to the Issuer, its
creditors or its property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities
If the Trustee collects any money or property pursuant to this Article 6, it
shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Issuer to the
extent required by Article 10 or Article 12;
THIRD: to Noteholders for amounts due and unpaid on the Notes
for principal of,
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premium, if any, and interest and Liquidated Damages, if any, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for principal and interest, respectively; and
FOURTH: to the Issuer.
The Trustee may fix a Record Date and payment date for any payment to
Noteholders pursuant to this Section 6.10. At least fifteen (15) days before
such Record Date, the Issuer shall mail to each Noteholder and the Trustee a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit initiated by the Trustee, a suit initiated by a Holder
pursuant to Section 6.07 or a suit initiated by Holders of more than ten percent
(10%) in principal amount of the Notes.
SECTION 6.12. Waiver of Stay or Extension Laws
The Issuer (to the extent it may lawfully do so) shall not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture, and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
(b) Except during the continuance of an Event of Default:
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(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuer.
(e) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee
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(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on any
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, that the Trustee's conduct does not constitute willful
misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the advice
or opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) Any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Officers' Certificate and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution.
(g) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction.
SECTION 7.03. Individual Rights of Trustee
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer, the Guarantors or their
Affiliates with the same rights it would have if it were not Trustee. Any Paying
Agent, Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuer's use of the
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proceeds from the Notes, and it shall not be responsible for any statement of
the Issuer in this Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults
If a Default occurs and is continuing and if it is actually known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in the payment of
principal of, premium, if any, or interest or Liquidated Damages, if any, on any
Note (including payments pursuant to the mandatory redemption provisions of such
Note, if any), the Trustee may withhold the notice if and so long as a committee
of its Trust Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
SECTION 7.06. Reports by Trustee to Holders
As promptly as practicable after each April 15 beginning with the April 15
following the date of this Indenture, and in any event prior to July 15 in each
year, the Trustee shall mail to each Noteholder a brief report dated as of April
15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed with the SEC and each stock exchange (if any) on which the Notes are
listed. The Issuer agrees to notify promptly the Trustee in writing whenever the
Notes become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity
The Issuer shall pay to the Trustee from time to time compensation for its
services as the Issuer and the Trustee shall from time to time agree in writing.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee upon request
for all reasonable out-of-pocket expenses incurred or made by it, including
costs of collection, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee's agents and counsel, including the allocated
reasonable costs of its in-house counsel and legal staff. The Issuer hereby
agrees to indemnify and hold the Trustee and its directors, officers, agents and
employees (collectively, the "Indemnitees") harmless from and against any and
all claims, liabilities, losses, damages, fines, penalties, and expenses,
including out-of-pocket, incidental expenses, legal fees and expenses, and the
allocated reasonable costs and expenses of in-house counsel and legal staff
("Losses") that may be imposed on, incurred by, or asserted against, the
Indemnitees or any of them for following any instruction or other direction upon
which the Trustee is authorized to rely pursuant to the terms of this Indenture.
In addition to and not in limitation of the immediately preceding sentence, the
Issuer also agrees to indemnify and hold the Indemnitees and each of them
harmless from and against any and all Losses that may be imposed on, incurred
by, or asserted against the Indemnitees or any of them in connection with or
arising out of the Trustee's performance under this Indenture, provided the
Trustee has not acted with negligence or engaged in willful misconduct. The
provisions of this Section 7.07
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shall survive the termination of this Indenture and the resignation or removal
of the Trustee for any reason. The Trustee shall notify the Issuer promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer
shall defend the claim and the Trustee shall cooperate in the defense of the
claim; provided that the Trustee may have separate counsel and the Issuer shall
pay the reasonable fees and expenses of such counsel if the actual or potential
defendants in, or the targets of, any such claim include both the Trustee and
the Issuer and the Trustee shall have reasonably concluded that there may be
legal defenses available to it which are different from or additional to those
available to the Issuer. The Trustee will not, without the prior written consent
of the Issuer, settle or compromise or consent to the entry of any judgment with
respect to any claim in respect of which indemnification may be sought
hereunder. The Issuer need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of, premium, if any, and interest and Liquidated Damages, if any, on
particular Notes.
The Issuer's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(f) or (g) with respect to
the Issuer, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee
The Trustee may resign at any time by so notifying the Issuer. The Holders of
not less than a majority in principal amount of the Notes may remove the Trustee
by so notifying the Trustee in writing and may appoint a successor Trustee. The
Issuer shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuer or by the Holders of a
majority in principal amount of the Notes and such Holders do not reasonably
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Noteholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the Lien provided for in Section 7.07.
If a successor Trustee does not take office within thirty (30) days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of not less than ten percent (10%) in principal amount of the Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section
7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger
Any corporation or association into which the Trustee in its individual
capacity may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee in its individual capacity shall be a party
or any corporation or association to which all or substantially all the
corporate trust business of the Trustee in its individual capacity may be sold
or otherwise transferred, shall be the Trustee hereunder without further act.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee, and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of authentication of the Trustee
shall have.
SECTION 7.10. Eligibility; Disqualification
The Trustee shall at all times satisfy the requirements of TIA Section
310(a). The Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA Section 310(b); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of interest
or participation in
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other securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Issuer
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 7.12. Trustee's Application for Instructions from the Issuer
Any application by the Trustee for written instructions from the Issuer may,
at the option of the Trustee, be set forth in writing and shall state any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any Officer of the Issuer actually receives
such application, unless any such Officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Notes; Defeasance.
(a) When
(i) the Issuer delivers to the Trustee all outstanding Notes (other
than Notes replaced pursuant to Section 2.08) for cancellation or
(ii) all outstanding Notes have become due and payable, whether at
Stated Maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Issuer irrevocably deposits with the
Trustee funds sufficient to pay at Stated Maturity or upon redemption all
outstanding Notes, including interest accrued and unpaid thereon to Stated
Maturity or such Redemption Date (other than Notes replaced pursuant to
Section 2.08), and if in either case the Issuer pays all other sums
payable hereunder by the Issuer, then this Indenture shall, subject to
Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Issuer accompanied by an Officers' Certificate and an Opinion of Counsel
addressed to the Trustee and at the cost and expense of the Issuer.
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(b) Subject to Sections 8.01(c) and 8.02, the Issuer at any time may
terminate:
(i) all its obligations under the Notes and this Indenture ("legal
defeasance option") subject to the following which shall survive until
otherwise terminated or discharged hereunder:
(A) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and
interest and Liquidated Damages, if any, on such Notes when payments
are due from the trust referred to below,
(B) the Issuer's obligations with respect to such Notes under
Sections 2.03, 2.04, 2.07, 2.08, 2.10, 4.02, 4.03 and 4.04 hereof,
(C) the Issuer's obligations under the Registration Rights
Agreement,
(D) the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture and the Issuer's obligations in
connection therewith,
(E) Article 3 hereof, and
(F) this Article 8; or
(ii) its obligations under Sections 4.05 through 4.16, 4.20 and 4.21
and the operation of Section 6.01(c) (but only as it applies to Section
5.01(a)(iii) and (iv)), 6.01(e), 6.01(f), 6.01(g) and 6.01(h) (but with
respect to Section 6.01(f) and 6.01(g) only as they apply to Subsidiaries
of the Issuer) or its obligations contained in Section 5.01(a)(iii) and
(iv) ("covenant defeasance option"). The Issuer may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Issuer exercises its legal defeasance option, payment of the Notes
may not be accelerated because of an Event of Default. If the Issuer exercises
its covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in Sections 6.01(c) (except with
respect to violations of Section 5.01), 6.01(d), 6.01(e), 6.01(f), 6.01(g),
6.01(h) and 6.01(i) (but with respect to Section 6.01(f) and 6.01(g) only as
they apply to Subsidiaries of the Issuer) or because of the failure of the
Issuer to comply with Section 5.01(a)(iii) and (iv). If the Issuer exercises its
legal defeasance option or its covenant defeasance option, each Guarantor shall
be released from all of its obligations under its Guarantee (if any should then
exist).
Upon satisfaction of the conditions set forth herein and upon request of
the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's obligations in
Sections
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8.04, 8.05 and 8.06 shall survive.
SECTION 8.02. Conditions to Defeasance
The Issuer may exercise its legal defeasance option or its covenant
defeasance option only if
(a) the Issuer irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal of and interest on the
Notes to maturity or redemption, as the case may be;
(b) the Issuer delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay principal of, premium, if any, and interest and Liquidated
Damages, if any, when due on all the Notes to Stated Maturity or redemption, as
the case may be;
(c) one hundred twenty-three (123) days pass after the deposit is made and
during the one hundred twenty-three (123) day period no Default specified in
Sections 6.01(f) or (g) with respect to the Issuer occurs which is continuing at
the end of the period;
(d) the deposit does not result in a breach or violation of, or constitute
a default under any other agreement or instrument binding on the Issuer or any
of its Subsidiaries and is not prohibited by Article 10;
(e) the Issuer delivers to the Trustee an Opinion of Counsel addressed to
the Trustee to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;
(f) in the case of the legal defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel addressed to the Trustee stating
that (i) the Issuer has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this Indenture
there has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Noteholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred;
(g) in the case of the covenant defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel addressed to the Trustee to the
effect that the Noteholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such covenant defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not occurred;
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(h) the Issuer delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel addressed to the Trustee, each stating that all conditions
precedent to the defeasance and discharge of the Notes as contemplated by this
Article 8 have been complied with;
(i) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuer with the intent
of preferring the Holders over any other creditors of the Issuer or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Issuer or others; and
(j) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the TIA (assuming
for the purpose of this clause (j) that all Notes are in default within the
meaning of such Act).
Before or after a deposit, the Issuer may make arrangements satisfactory
to the Trustee for the redemption of Notes at a future date in accordance with
Article 3.
SECTION 8.03. Application of Trust Money
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of, premium, if any,
and interest and Liquidated Damages, if any, on the Notes.
Money and securities so held in trust are not subject to Article 10.
SECTION 8.04. Repayment to Issuer
The Trustee and the Paying Agent shall promptly turn over to the Issuer upon
written request any excess money or securities held by them at any time. Subject
to any applicable abandoned property law, the Trustee and the Paying Agent shall
pay to the Issuer upon written request any money held by them for the payment of
principal of, premium, if any, or interest or Liquidated Damages, if any, that
remains unclaimed for two years, and, thereafter, Noteholders entitled to the
money must look to the Issuer for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligation
The Issuer shall pay and shall indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
SECTION 8.06. Reinstatement
If the Trustee or Paying Agent is unable to apply any money or U. S.
Government Obligations in accordance with this Article 8 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Issuer's obligations under this Indenture and the Notes shall be revived and
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reinstated as though no deposit had occurred pursuant to this Article 8 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with this Article 8; provided, that,
if the Issuer has made any payment of interest on or principal of any Notes
because of the reinstatement of its obligations, the Issuer shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders
The Issuer and the Trustee may amend this Indenture (including any supplement
thereto) or the Notes without notice to or consent of any Noteholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article 5;
(c) to provide for uncertificated Notes in addition to or in place of
Certificated Notes; provided, that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Internal Revenue Code or
in a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Internal Revenue Code;
(d) to make any change in Article 10 or Article 12 that would limit or
terminate the benefits available to any holder of Senior Indebtedness (or
Representatives thereof) under Article 10 or Article 12;
(e) to add Guarantees with respect to the Notes or to secure the Notes;
(f) to add to the covenants of the Issuer for the benefit of the Holders
or to surrender any right or power herein conferred upon the Issuer;
(g) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the TIA;
or
(h) to make any change that does not adversely affect the rights of any
Noteholder.
An amendment under this Section 9.01 may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or Representative thereof authorized to give a
consent) consent in writing to such change.
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After an amendment under this Section 9.01 becomes effective, the Issuer
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.01.
SECTION 9.02. With Consent of Holders
The Issuer and the Trustee may amend this Indenture or the Notes without
notice to any Noteholder but with the written consent of the Holders of at least
a majority in principal amount of the Notes then outstanding and any past
Default or compliance with any provisions may also be waived with the consent of
the Holders of not less than a majority of the principal amount of Notes then
outstanding. However, without the consent of each Noteholder affected, an
amendment may not:
(a) reduce the amount of Notes whose Holders must consent to an amendment;
(b) reduce the rate of or extend the time for payment of interest on any
Note;
(c) reduce the principal of or extend the Stated Maturity of any Note;
(d) reduce the premium, if any, payable upon the redemption of any Note or
change the time at which any Note may be redeemed in accordance with Article 3;
(e) make any Note payable in money other than that stated in the Note;
(f) make any change in Article 10 or Article 12 that adversely affects the
rights of any Noteholder under Article 10 or Article 12;
(g) make any change in Section 6.04 or 6.07 or the second sentence of this
Section 9.02; or
(h) make any change in any Guarantee (if any should then exist) that would
adversely affect the Noteholders.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof
An amendment under this Section 9.02 may not make any change that
adversely affects the rights under Article 10 or any supplemental indenture
executed pursuant to Section 4.21 of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or any group or
Representative thereof authorized to give a consent) consent in writing to such
change. The holders of Senior Indebtedness are intended third party
beneficiaries of this Indenture and the terms of the preceding sentence may not
be amended without the
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consent of the holders of such Senior Indebtedness (or any group or
Representative thereof authorized to give consent).
After an amendment under this Section 9.02 becomes effective, the Issuer
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act
Every amendment to this Indenture or the Notes shall comply with the TIA as
then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers
A consent to an amendment or a waiver by a Holder of a Note shall bind the
Holder and every subsequent Holder of that Note or portion of the Note that
evidences the same debt as the consenting Holder's Note, even if notation of the
consent or waiver is not made on the Note. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Note or
portion of the Note if the Trustee receives the notice of revocation before the
date the amendment or waiver becomes effective. After an amendment or waiver
becomes effective, it shall bind every Noteholder. An amendment or waiver
becomes effective upon the execution of such amendment or waiver by the Trustee.
The Issuer may, but shall not be obligated to, fix a Record Date for the
purpose of determining the Noteholders entitled to give their consent or take
any other action described above or required or permitted to be taken pursuant
to this Indenture. If a Record Date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Noteholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such Record Date.
SECTION 9.05. Notation on or Exchange of Notes
If an amendment changes the terms of a Note, the Trustee may require the
Holder of the Note to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note regarding the changed terms and return it to
the Holder. Alternatively, if the Issuer or the Trustee so determines, the
Issuer in exchange for the Note shall issue and the Trustee shall authenticate
and deliver a new Note that reflects the changed terms. Failure to make the
appropriate notation or to issue a new Note shall not affect the validity of
such amendment.
SECTION 9.06. Trustee To Sign Amendments
The Trustee shall sign any amendment authorized pursuant to this Article 9 if
the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may but need not sign it. In
signing such amendment the Trustee shall be entitled to receive indemnity
reasonably satisfactory to it and to receive, and (subject to Section 7.01)
shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that
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such amendment is authorized or permitted by this Indenture and that such
amendment constitutes the legal, valid and binding obligation of the Issuer and
each Guarantor, subject to customary exceptions.
SECTION 9.07. Payment for Consent
Neither the Issuer nor any Affiliate of the Issuer shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Notes unless such consideration is offered to be paid to all Holders that
so consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
ARTICLE 10
SUBORDINATION OF THE NOTES
SECTION 10.01. Agreement To Subordinate
The Issuer agrees, and each Noteholder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes is subordinated in right of payment, to the
extent and in the manner provided in this Article 10, to the prior payment of
all Senior Indebtedness of the Issuer and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. Only
Indebtedness that is Senior Indebtedness will rank senior to the Notes in
accordance with the provisions set forth herein. The Notes shall in all respects
rank pari passu with, or be senior to, all other Indebtedness of the Issuer. All
provisions of this Article 10 shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy
Upon any payment or distribution of the assets of the Issuer to creditors
upon a total or partial liquidation or a total or partial dissolution of the
Issuer or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Issuer or its property:
(a) holders of Senior Indebtedness of the Issuer shall be entitled to
receive payment in full of such Senior Indebtedness in cash or cash equivalents
before Noteholders shall be entitled to receive any payment of principal of,
premium, if any, or interest or Liquidated Damages, if any, on the Notes; and
(b) until such Senior Indebtedness is paid in full in cash or cash
equivalents, any distribution to which Noteholders would be entitled but for
this Article 10 shall be made to holders of such Senior Indebtedness as their
interests may appear, except that Noteholders may receive (i) securities of a
Person that are approved by a court of competent jurisdiction and are
subordinated ("Subordinated Reorganization Securities") to such Senior
Indebtedness to at least the same extent as the Notes are subordinated to (A)
Senior Indebtedness of the Issuer and (B) any securities issued in exchange for
Senior Indebtedness, and (ii) payments and other
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distributions made from any defeasance trust created pursuant to Section 8.01
hereof.
SECTION 10.03. Default on Senior Indebtedness of the Issuer
The Issuer may not pay the principal of, premium, if any, or interest or
Liquidated Damages, if any, on the Notes or make any deposit pursuant to Section
8.01 and may not repurchase, redeem or defease any Notes (collectively, "pay the
Notes") (other than Subordinated Reorganization Securities and payments and
other distributions made from any defeasance trust created pursuant to Section
8.01 hereof) if (i) any principal, interest, fees or other obligations in
respect of Designated Senior Indebtedness of the Issuer is not paid when due
unless the default has been cured or waived; provided, however, that the Issuer
may pay the Notes without regard to the foregoing if the Issuer and the Trustee
receive written notice approving such payment from the Representative of such
Designated Senior Indebtedness. During the continuance of any default (other
than a default described in the preceding sentence) with respect to any
Designated Senior Indebtedness of the Issuer pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Issuer may not pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the Issuer and the
Trustee of written notice (a "Blockage Notice") of such default from the
Representative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Issuer from the Person or Persons who gave such Blockage Notice, (ii) by
repayment in full of such Designated Senior Indebtedness or (iii) because the
Representative of the holders of such Designated Senior Indebtedness shall have
notified the Trustee in writing that the default giving rise to such Blockage
Notice is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section 10.03), unless the holders of such Designated
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Designated Senior Indebtedness, the Issuer may resume
payments on the Notes after such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period. For purposes of this Section 10.03, no default or event of default
which existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Notes
If payment of the Notes is accelerated because of an Event of Default, the
Issuer shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representative) of the acceleration.
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SECTION 10.05. When Distribution Must Be Paid Over
If a distribution is made to Noteholders that because of this Article 10
should not have been made to them, the Issuer shall so notify the Noteholders
who receive the distribution, which Noteholders shall hold it in trust for
holders of Senior Indebtedness of the Issuer and pay it over to them as their
interests may appear.
SECTION 10.06. Subrogation
After all Senior Indebtedness of the Issuer is paid in full and until the
Notes are paid in full, Noteholders shall be subrogated to the rights of holders
of such Senior Indebtedness to receive distributions applicable to such Senior
Indebtedness. A distribution made under this Article 10 to holders of such
Senior Indebtedness which otherwise would have been made to Noteholders is not,
as between the Issuer and Noteholders, a payment by the Issuer on such Senior
Indebtedness.
SECTION 10.07. Relative Right
This Article 10 defines the relative rights of Noteholders and holders of
Senior Indebtedness of the Issuer. Nothing in this Indenture shall:
(a) impair, as between the Issuer and Noteholders, the obligation of the
Issuer, which is absolute and unconditional, to pay principal of, premium, if
any, and interest and Liquidated Damages, if any, on the Notes in accordance
with their terms; or
(b) prevent the Trustee or any Noteholder from exercising its available
remedies upon a Default, subject to the rights of holders of Senior Indebtedness
of the Issuer to receive distributions otherwise payable to Noteholders.
SECTION 10.08. Subordination May Not Be Impaired by Issuer
No right of any holder of Senior Indebtedness of the Issuer to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Issuer or by its failure to comply with this
Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to
make payments on the Notes and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice from a holder of Designated
Senior Indebtedness that it is exercising its rights under Section 10.03. The
Issuer, the Registrar or co-registrar, the Paying Agent, a Representative or a
holder of Senior Indebtedness may give the notice; provided, however, that, if
the holders of an issue of Senior Indebtedness of the Issuer have a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Issuer with the same rights it would have if it were not
Trustee. The Registrar and coregistrar and the Paying Agent may do the same with
like rights. The Trustee shall be entitled to all the rights
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set forth in this Article 10 with respect to any Senior Indebtedness of the
Issuer which may at any time be held by it, to the same extent as any other
holder of such Senior Indebtedness, and nothing in Article 7 shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article 10 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07.
SECTION 10.10. Distribution or Notice to Representative
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of the Issuer, the distribution may be made and the notice given to
their Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right
To Accelerate
The failure to make a payment pursuant to the Notes by reason of any
provision in this Article 10 shall not be construed as preventing the occurrence
of a Default. Nothing in this Article 10 shall have any effect on the right of
the Noteholders or the Trustee to accelerate the maturity of the Notes.
SECTION 10.12. Trust Moneys Not Subordinated
Notwithstanding anything contained herein to the contrary, payments from
money or the proceeds of U.S. Government Obligations held in trust under Article
8 by the Trustee for the payment of principal of, premium, if any, and interest
and Liquidated Damages, if any, on the Notes shall not be subordinated to the
prior payment of any Senior Indebtedness or subject to the restrictions set
forth in this Article 10, and none of the Noteholders or Trustee shall be
obligated to pay over any such amount to the Issuer or any holder of Senior
Indebtedness of the Issuer or any other creditor of the Issuer.
SECTION 10.13. Trustee Entitled To Rely
Upon any payment or distribution pursuant to this Article 10, the Trustee and
the Noteholders shall be entitled to rely (i) upon any order or decree of a
court of competent jurisdiction in which any proceedings of the nature referred
to in Section 10.02 are pending, (ii) upon a certificate of the liquidating
trustee or agent or other Person making such payment or distribution to the
Trustee or to the Noteholders or (iii) upon the Representative for the holders
of Senior Indebtedness of the Issuer for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of such
Senior Indebtedness and other Indebtedness of the Issuer, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Issuer to participate in
any payment or distribution pursuant to this Article 10, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of such Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
other facts pertinent to the rights of such Person under this Article 10, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02
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shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination
Each Noteholder by accepting a Note authorizes and directs the Trustee on
such Noteholder's behalf to take such action as may be necessary or appropriate
to acknowledge or effectuate the subordination between the Noteholders and the
holders of Senior Indebtedness of the Issuer as provided in this Article 10 and
appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Noteholders or the Issuer or any other
Person, money or assets to which any holders of Senior Indebtedness of the
Issuer shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination
Provisions
Each Noteholder by accepting a Note acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness of the Issuer,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and such holder of such Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE 11
GUARANTEES; RELEASE OF GUARANTEES;
ADDITIONAL GUARANTEES
SECTION 11.01. Guarantees
(a) Each Guarantor hereby unconditionally and irrevocably guarantees to
each Holder and to the Trustee and its successors and assigns (i) the full and
punctual payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Issuer under
this Indenture and the Notes and (ii) the full and punctual performance within
applicable grace periods of all other obligations of the Issuer under this
Indenture and the Notes (all the foregoing being hereinafter collectively called
the "Obligations"). Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without
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notice or further assent from such Guarantor and that such Guarantor will remain
bound under this Article 11 notwithstanding any extension or renewal of any
Obligation.
(b) Each Guarantor waives presentation to, demand of, payment from and
protest to the Issuer of any of the Obligations and also waives notice of
protest for nonpayment. Each Guarantor waives notice of any default under the
Notes or the Obligations. The obligations of each Guarantor hereunder shall not
be affected by (i) the failure of any Holder or the Trustee to assert any claim
or demand or to enforce any right or remedy against the Issuer or any other
Person under this Indenture, the Notes or any other agreement or otherwise, (ii)
any extension or renewal of any thereof, (iii) any rescission, waiver, amendment
or modification of any of the terms or provisions of this Indenture, the Notes
or any other agreement, (iv) the release of any security held by any Holder or
the Trustee for the Obligations or any of them, (v) the failure of any Holder or
Trustee to exercise any right or remedy against any other guarantor of the
Obligations, or (vi) any change in the ownership of any Guarantor.
(c) Each Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Obligations.
(d) Each Guarantee is, to the extent and in the manner set forth in
Article 12, subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness of such Guarantor and is made subject to such
provisions of this Indenture.
(e) Except as expressly set forth in Section 8.01(b), the obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Obligations or
otherwise. Without limiting the generality of the foregoing, (i) the obligations
of each Guarantor herein shall not be discharged or impaired or otherwise
affected by the failure of any Holder or the Trustee to assert any claim or
demand or to enforce any remedy under this Indenture, the Notes or any other
agreement, by any waiver or modification of any thereof, by any default, failure
or delay, willful or otherwise, in the performance of the Obligations, or by any
other act or thing or omission or delay to do any other act or thing which may
or might in any manner or to any extent vary the risk of each Guarantor or would
otherwise operate as a discharge of such Guarantor as a matter of law or equity
and (ii) each Guarantor hereby waives any right such Guarantor may have under
Sections 26.7 through 26.9 of the North Carolina General Statutes.
(f) Each Guarantor further agrees that its Guarantee herein shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal, premium, if any, or interest or Liquidated
Damages, if any, on any Obligation is rescinded or must otherwise be restored by
any Holder or the Trustee upon the bankruptcy or
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reorganization of the Issuer or otherwise.
(g) In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal
of, premium, if any or interest or Liquidated damages, if any, on any Obligation
when and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, or to perform or comply with any other Obligation, each
Guarantor hereby promises to and will, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations,
(ii) accrued and unpaid interest on such Obligations (but only to the extent not
prohibited by law) and (iii) all other monetary Obligations of the Issuer to the
Holders and the Trustee.
(h) Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Obligations guaranteed hereby until payment in
full of all Obligations and all obligations to which the Obligations are
subordinated as provided in Article 12. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article 6 for the purposes of such Guarantor's Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Guarantor for the purposes of this Section 11.01.
(i) Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses, including the allocated
reasonable costs and expenses of its in-house counsel and legal staff) incurred
by the Trustee or any Holder in enforcing any rights under this Section 11.01.
(j) This Article 11 does not apply unless a supplemental joinder is
executed pursuant to Section 4.21.
SECTION 11.02. Successors and Assigns
This Article 11 shall be binding upon each Guarantor and its successors and
assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges conferred upon
that party in this Indenture and in the Notes shall automatically extend to and
be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.
SECTION 11.03. No Waiver
Neither a failure nor a delay on the part of either the Trustee or the
Holders in exercising any right, power or privilege under this Article 11 shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege.
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The rights, remedies and benefits of the Trustee and the Holders herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article 11 at law, in
equity, by statute or otherwise.
SECTION 11.04. Modification
No modification, amendment or waiver of any provision of this Article 11, nor
the consent to any departure by any Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Trustee, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on any Guarantor in any
case shall entitle such Guarantor to any other or further notice or demand in
the same, similar or other circumstances.
SECTION 11.05. Limitation of Guarantor's Liability
Each Guarantor, the Trustee, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the Guarantee of such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, federal and state fraudulent conveyance laws or any similar
federal, state or foreign law. To effectuate the foregoing intention, the
Holders, the Trustee and each Guarantor hereby irrevocably agree that the
obligations of each Guarantor under this Article 11 shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 11, result in the
obligations of such Guarantor under its Guarantee not constituting a fraudulent
transfer or conveyance under applicable federal, state or foreign law.
SECTION 11.06. Release of Guarantees
In the event of a sale or other disposition of all or substantially all of
the assets of any Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all of the Capital Stock of any Guarantor, by way
of merger, consolidation or otherwise, such Guarantor (in the event of a sale or
other disposition of all of the Capital Stock of such Guarantor) will be
released and relieved of any obligations under its Guarantee or the Person
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will not be required to enter
into a Guarantee; provided, in each case, that such transaction is carried out
pursuant to and in accordance with Section 4.11 and Section 5.01 (if applicable)
hereof. Upon delivery by the Issuer to the Trustee of an Officers' Certificate
and Opinion of Counsel addressed to the Trustee, to the effect that such sale or
other disposition was made by the Issuer in accordance with the provisions of
this Indenture, including without limitation Section 4.11 and Section 5.01 (if
applicable) hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any such Guarantor from its obligations
under its Guarantee.
ARTICLE 12
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SUBORDINATION OF THE GUARANTEES
SECTION 12.01. Agreement To Subordinate
Each Guarantor agrees, and each Noteholder by accepting a Note agrees, that
the obligations of such Guarantor are subordinated in right of payment, to the
extent and in the manner provided in this Article 12, to the prior payment of
all Senior Indebtedness of such Guarantor and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. Only
Senior Indebtedness of each Guarantor shall rank senior to the obligations of
such Guarantor in accordance with the provisions set forth herein. The
obligations of each Guarantor shall in all respects rank pari passu with, or be
senior to, all other Indebtedness of such Guarantor.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy
Upon any payment or distribution of the assets of any Guarantor to creditors
upon a total or partial liquidation or a total or partial dissolution of such
Guarantor or in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the such Guarantor or its property:
(1) holders of Senior Indebtedness of such Guarantor shall be entitled to
receive payment in full of such Senior Indebtedness in cash or cash equivalents
before Noteholders shall be entitled to receive any payment pursuant to the
Guarantee of such Guarantor; and
(2) until the Senior Indebtedness of such Guarantor is paid in full in
cash or cash equivalents, any distribution to which Noteholders would be
entitled but for this Article 12 shall be made to holders of such Senior
Indebtedness as their interests may appear, except that Noteholders may receive
Subordinated Reorganization Securities and payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof.
SECTION 12.03. Default on Senior Indebtedness of Guarantor
No Guarantor may make any payment pursuant to any of its obligations or
repurchase, redeem or otherwise retire or defease any Notes or other Obligations
(collectively, "pay its Guarantee") (other than Subordinated Reorganization
Securities and payments and other distributions from any defeasance trust
created pursuant to Section 8.01 hereof) if any principal, interest, fees or
other obligations in respect of Designated Senior Indebtedness of the relevant
Guarantor is not paid when due unless the default has been cured or waived.
However, such Guarantor may pay its Guarantee without regard to the foregoing if
such Guarantor and the Trustee receive written notice approving such payment
from the Representative of the Designated Senior Indebtedness of such Guarantor
with respect to which the event set forth in the immediately preceding sentence
has occurred and is continuing. During the continuance of any default (other
than a default described in the second preceding sentence) with respect to any
Designated Senior Indebtedness of such Guarantor pursuant to which the maturity
thereof may be accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, such Guarantor may not pay its
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Guarantee for the Payment Blockage Period commencing upon the receipt by the
Trustee (with a copy to such Guarantor) of a Blockage Notice from the
Representative of the holders of such Designated Senior Indebtedness and ending
179 days thereafter (or earlier if such Payment Blockage Period is terminated
(i) by written notice to the Trustee and such Guarantor from the Person or
Persons who gave such Blockage Notice, (ii) because a Representative of the
holders of such Designated Senior Indebtedness has notified the Trustee that the
default giving rise to such Blockage Notice is no longer continuing or (iii)
because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the first sentence of this paragraph), unless the holders of
such Designated Senior Indebtedness of such Guarantor or the Representative of
such holders have accelerated the maturity of such Designated Senior
Indebtedness, such Guarantor may resume payments on its Guarantee after the end
of such Payment Blockage Period. Each Guarantee shall not be subject to more
than one Payment Blockage Period in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness of a
Guarantor during such period. For purposes of this Section 12.03, no default or
event of default which existed or was continuing on the date of the commencement
of any Payment Blockage Period with respect to the Designated Senior
Indebtedness initiating such Payment Blockage Period shall be, or be made, the
basis of the commencement of a subsequent Payment Blockage Period by the
Representative of such Designated Senior Indebtedness, whether or not within a
period of 360 consecutive days, unless such default or event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
SECTION 12.04. Demand for Payment
If a demand for payment is made on any Guarantor pursuant to Article 11, such
Guarantor shall promptly notify the holders of the Designated Senior
Indebtedness (or their Representatives) of such Guarantor of such demand.
SECTION 12.05. When Distribution Must Be Paid Over
If a distribution is made to Noteholders that because of this Article 12
should not have been made to them, the applicable Guarantor shall notify the
Noteholders who receive the distribution, which Noteholders shall hold it in
trust for holders of the relevant Senior Indebtedness of such Guarantor and pay
it over to them or their Representative as their interests may appear.
SECTION 12.06. Subrogation
After all Senior Indebtedness of each Guarantor is paid in full and until the
Notes are paid in full, Noteholders shall be subrogated to the rights of holders
of such Senior Indebtedness to receive distributions applicable to such Senior
Indebtedness. A distribution made under this Article 12 to holders of such
Senior Indebtedness which otherwise would have been made to Noteholders is not,
as between each Guarantor and Noteholders, a payment by such Guarantor on such
Senior Indebtedness.
SECTION 12.07. Relative Rights
This Article 12 defines the relative rights of Noteholders and holders of
Senior Indebtedness of
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each Guarantor. Nothing in this Indenture shall:
(1) impair, as between each Guarantor and the Noteholders, the obligation
of the such Guarantor, which is absolute and unconditional, to pay its
obligations to the extent set forth in Article 11; or
(2) prevent the Trustee or any Noteholder from exercising its available
remedies upon a default by any Guarantor under its obligations, subject to the
rights of holders of Senior Indebtedness of such Guarantor to receive
distributions otherwise payable to Noteholders.
SECTION 12.08. Subordination May Not Be Impaired by Guarantor
No right of any holder of Senior Indebtedness of any Guarantor to enforce the
subordination of the obligations of such Guarantor shall be impaired by any act
or failure to act by such Guarantor or by its failure to comply with this
Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent
Notwithstanding Section 12.03, the Trustee or Paying Agent may continue to
demand payments on each Guarantee and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives written notice from a holder of Designated
Senior Indebtedness that it is exercising its rights under Section 12.03. The
Issuer, each Guarantor, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of any Guarantor may give the
notice; provided, however, that, if an issue of Senior Indebtedness of any
Guarantor has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of any Guarantor with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article 12 with respect to any Senior Indebtedness of any Guarantor which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 12 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness of any Guarantor, the distribution may be made and the notice given
to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Defaults Under the Guarantees or
Limit Right To Demand Payment
The failure to make a payment pursuant to any Guarantee by reason of any
provision in this Article 12 shall not be construed as preventing the occurrence
of a default under such Guarantee.
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Nothing in this Article 12 shall have any effect on the right of the Noteholders
or the Trustee to make a demand for payment on any Guarantor pursuant to Article
11.
SECTION 12.12. Trustee Entitled To Rely
Upon any payment or distribution pursuant to this Article 12, the Trustee and
the Noteholders shall be entitled to rely (i) upon any order or decree of a
court of competent jurisdiction in which any proceedings of the nature referred
to in Section 12.02 are pending, (ii) upon a certificate of the liquidating
trustee or agent or other Person making such payment or distribution to the
Trustee or to the Noteholders or (iii) upon the Representative for the holders
of Senior Indebtedness of any Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other indebtedness of such Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 12. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of such Guarantor to
participate in any payment or distribution pursuant to this Article 12, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness of such
Guarantor held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 12, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination
Each Noteholder by accepting a Note authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Noteholders and the holders of Senior
Indebtedness of any Guarantor as provided in this Article 12 and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of
Guarantors
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness of any Guarantor and shall not be liable to any such holders
if it shall mistakenly pay over or distribute to Noteholders or the Issuer or
any other Person, money or assets to which any holders of such Senior
Indebtedness shall be entitled by virtue of this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness on Subordination
Provisions.
Each Noteholder by accepting a Note acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Indebtedness of any Guarantor,
whether such Senior Indebtedness was
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created or acquired before or after the issuance of the Notes, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
SECTION 13.02. Notices
Any notice or communication by the Issuer, any Guarantor or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telecopier
or overnight air courier guaranteeing next day delivery, to the others' address
as follows:
if to the Issuer or any Guarantor:
Susquehanna Media Co.
140 East Market Street
York, PA 17401
Attention: Mr. Craig W. Bremer
if to the Trustee:
Chase Manhattan Trust Company, National Association
One Liberty Place
1650 Market Street, Suite 5210
Philadelphia, PA 19103
Attention: Capital Markets Fiduciary Services
Telephone: (215) 988-1317
Telecopy: (215) 972-8372
(Susquehanna Media Co. 8-1/2% Senior Subordinated Notes
due 2009)
The Issuer, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communication.
All notices and communications (other than those sent to Holders) 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 receipt acknowledged, if
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telecopied; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, to its address shown on
the register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Issuer mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each agent at the same time.
SECTION 13. 03. Communication by Holders with Other Holders
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Issuer, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent
Upon any request or application by the Issuer to the Trustee to take or
refrain from taking any action under this Indenture, the Issuer shall furnish to
the Trustee:
(1) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made such
examination
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or investigation as is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such individual,
such covenant or condition has been complied with.
SECTION 13.06. When Notes Disregarded
In determining whether the Holders of the required principal amount of Notes
have concurred in any direction, waiver or consent, Notes owned by the Issuer or
by any Affiliate of the Issuer shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Notes outstanding at the time shall be considered
in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar
The Trustee may make reasonable rules for action by or a meeting of
Noteholders. The Registrar and the Paying Agent may make reasonable rules for
their functions.
SECTION 13.08. Legal Holidays
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required or are not authorized to be open in the State of
New York or the State in which the Corporate Trust Office is located. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
SECTION 13.09. Governing Law
(a) THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.
(b) Each of the Issuer and each Guarantor hereby (i) agrees that any suit,
action or proceeding against it arising out of or relating to this Indenture or
the Notes, as the case may be, may be instituted in any Federal or state court
sitting in The City of New York, (ii) waives, to the extent permitted by
applicable law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding, and any claim that any suit,
action or proceeding in such a court has been brought in an inconvenient forum,
(iii) irrevocably submits to the non-exclusive jurisdiction of such courts in
any suit, action or proceeding, (iv) agrees that final judgment in any such
suit, action or proceeding brought in such a court shall be conclusive and
binding upon each and may be enforced in the courts of the jurisdiction of which
each is subject, respectively, by a suit upon judgment, (v) agrees that service
of process by mail to the addressed specified in Section 13.02 hereof shall
constitute personal service of such process on it
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in any such suit, action or proceeding.
SECTION 13.10. No Recourse Against Others
No director, officer, employee, incorporator or stockholder of the Issuer or
any Guarantor, as such, shall have any liability for any obligations of the
Issuer or such Guarantor under the Notes, the Guarantees or this Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation, solely by reason of its status as a director, officer, employee,
incorporator or stockholder of the Issuer or such Guarantor. By accepting a
Note, each Holder waives and releases all such liability (but only such
liability) as part of the consideration for issuance of such Note to such
Holder.
SECTION 13.11. Successors, Assigns and Transferees
All agreements of the Issuer and each Guarantor in this Indenture and the
Notes shall bind their respective successors and assigns. All agreements of the
Trustee and the Initial Purchasers in this Indenture shall bind their respective
successors, assigns and transferees.
SECTION 13.12. Multiple Originals
The parties may sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same agreement. One
signed copy is enough to prove this Indenture.
SECTION 13.13. Table of Contents, Headings
The table of contents, cross-reference table and headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference only,
are not intended to be considered a part hereof and shall not modify or restrict
any of the terms or provisions hereof.
SECTION 13.14. Severability
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 13.15. Further Instruments and Acts
Upon request of the Trustee, the Issuer and each Guarantor will execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purposes of this
Indenture.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
SUSQUEHANNA MEDIA CO.,
as Issuer,
By: /s/ Peter P. Brubaker
---------------------
Peter P. Brubaker
Chief Executive Officer and President
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee,
By: /s/ J.C. Progar
Name: J.C. Progar
Title: Vice President
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SUSQUEHANNA MEDIA CO.
Issuer
$150,000,000
8-1/2% Senior Subordinated Notes due 2009
INDENTURE
Dated as of May 12, 1999
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
Trustee
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CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
310(a)(5) 7.10
(b) 7.08; 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.05
(b) 13.03
(c) 13.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 13.02
(d) 7.06
314(a) 4.07;13.02
(b) N.A.
(c)(1) 13.04
(c)(2) 13.04
(c)(3) N.A.
(d) N.A.
(e) 13.05
(f) 4.11
315(a) 7.01
(b) 7.05; 13.02
(c) 7.01
(d) 7.01
(e) 6.11
316(a)(last sentence) 13.06
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
316(c) 9.04
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
</TABLE>
100
<PAGE> 101
<TABLE>
<S> <C>
318(a) 13.01
</TABLE>
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be part of this Indenture.
101
<PAGE> 102
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1
SECTION 1.01. Definitions 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act 22
SECTION 1.03. Rules of Construction 22
ARTICLE 2 THE NOTES 23
SECTION 2.01. Form and Dating 23
SECTION 2.02. Execution and Authentication 27
SECTION 2.03. Registrar and Paying Agent 28
SECTION 2.04. Paying Agent To Hold Money in Trust 29
SECTION 2.05. Holder Lists 29
SECTION 2.06. Global Notes 29
SECTION 2.07. Transfer and Exchange 30
SECTION 2.08. Replacement Notes 38
SECTION 2.09. Outstanding Notes 38
SECTION 2.10. Temporary Notes 38
SECTION 2.11. Cancellation 39
SECTION 2.12. Payment of Interest, Interest Rights Preserved 39
SECTION 2.13. Add-On Notes 40
SECTION 2.15. Transfers, etc 41
ARTICLE 3 REDEMPTION 41
SECTION 3.01. Notices to Trustee 41
SECTION 3.02. Selection of Notes To Be Redeemed 41
SECTION 3.03. Notice of Redemption 41
SECTION 3.04. Effect of Notice of Redemption 42
SECTION 3.05. Deposit of Redemption Price 42
SECTION 3.06. Notes Redeemed in Part 43
ARTICLE 4 COVENANTS 43
SECTION 4.01. Payment of Notes 43
</TABLE>
102
<PAGE> 103
<TABLE>
<S> <C>
SECTION 4.02. Maintenance of Office or Agency 43
SECTION 4.03. Money for the Notes to be Held in Trust 44
SECTION 4.04. Corporate Existence 44
SECTION 4.05. Maintenance of Property 44
SECTION 4.06. Payment of Taxes and Other Claims 45
SECTION 4.07. SEC and Other Reports 45
SECTION 4.08. Limitation on Indebtedness 45
SECTION 4.09. Limitation on Restricted Payments 46
SECTION 4.10. Limitation on Restrictions on Distributions from
Restricted Subsidiaries 47
SECTION 4.11. Limitation on Sales of Assets and Subsidiary
Stock 49
SECTION 4.12. Limitation on Affiliate Transactions 52
SECTION 4.13. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries 53
SECTION 4.14. Change of Control 54
SECTION 4.15. Limitation on Liens 57
SECTION 4.16. Limitation on Layered Indebtedness 57
SECTION 4.17. Compliance Certificate 57
SECTION 4.18. Waiver of Stay, Extension or Usury Laws 58
SECTION 4.19. Investment Company Act 58
SECTION 4.20. Limitation on Conduct of Business 58
SECTION 4.21. Guarantees of Certain Indebtedness 58
SECTION 4.22. Further Instruments and Acts 58
ARTICLE 5 SUCCESSOR COMPANY 58
SECTION 5.01. When Issuer May Merge or Transfer Assets 58
ARTICLE 6 DEFAULTS AND REMEDIES 60
SECTION 6.01. Events of Default 60
SECTION 6.02. Acceleration 61
SECTION 6.03. Other Remedies 62
SECTION 6.04. Waiver of Past Defaults 62
</TABLE>
103
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<TABLE>
<S> <C>
SECTION 6.05. Control by Majority 62
SECTION 6.06. Limitation on Suits 63
SECTION 6.07. Rights of Holders To Receive Payment 63
SECTION 6.08. Collection Suit by Trustee 63
SECTION 6.09. Trustee May File Proofs of Claim 63
SECTION 6.10. Priorities 64
SECTION 6.11. Undertaking for Costs 64
SECTION 6.12. Waiver of Stay or Extension Laws 64
ARTICLE 7 TRUSTEE 64
SECTION 7.01. Duties of Trustee 65
SECTION 7.02. Rights of Trustee 66
SECTION 7.03. Individual Rights of Trustee 66
SECTION 7.04. Trustee's Disclaimer 66
SECTION 7.05. Notice of Defaults 67
SECTION 7.06. Reports by Trustee to Holders 67
SECTION 7.07. Compensation and Indemnity 67
SECTION 7.08. Replacement of Trustee 68
SECTION 7.09. Successor Trustee by Merger 69
SECTION 7.10. Eligibility; Disqualification 69
SECTION 7.11. Preferential Collection of Claims Against Issuer 69
SECTION 7.12. Trustee's Application for Instructions from the
Issuer 70
ARTICLE 8 DISCHARGE OF INDENTURE; DEFEASANCE 70
SECTION 8.01. Discharge of Liability on Notes; Defeasance 70
SECTION 8.02. Conditions to Defeasance 71
SECTION 8.03. Application of Trust Money 73
SECTION 8.04. Repayment to Issuer 73
SECTION 8.05. Indemnity for Government Obligation 73
SECTION 8.06. Reinstatement 73
ARTICLE 9 AMENDMENTS 73
</TABLE>
104
<PAGE> 105
<TABLE>
<S> <C>
SECTION 9.01. Without Consent of Holders 73
SECTION 9.02. With Consent of Holders 74
SECTION 9.03. Compliance with Trust Indenture Act 75
SECTION 9.04. Revocation and Effect of Consents and Waivers 75
SECTION 9.05. Notation on or Exchange of Notes 76
SECTION 9.06. Trustee To Sign Amendments 76
SECTION 9.07. Payment for Consent 76
ARTICLE 10 SUBORDINATION OF THE NOTES 76
SECTION 10.01. Agreement To Subordinate 76
SECTION 10.02. Liquidation, Dissolution, Bankruptcy 76
SECTION 10.03. Default on Senior Indebtedness of the Issuer 77
SECTION 10.04. Acceleration of Payment of Notes 78
SECTION 10.05. When Distribution Must Be Paid Over 78
SECTION 10.06. Subrogation 78
SECTION 10.07. Relative Right 78
SECTION 10.08. Subordination May Not Be Impaired by Issuer 78
SECTION 10.09. Rights of Trustee and Paying Agent 78
SECTION 10.10. Distribution or Notice to Representative 79
SECTION 10.11. Article 10 Not To Prevent Events of Default or
Limit Right To Accelerate 79
SECTION 10.12. Trust Moneys Not Subordinated 79
SECTION 10.13. Trustee Entitled To Rely 79
SECTION 10.14. Trustee To Effectuate Subordination 80
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness 80
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions 80
ARTICLE 11 GUARANTEES; RELEASE OF GUARANTEES; ADDITIONAL GUARANTEES 80
SECTION 11.01. Guarantees 80
SECTION 11.02. Successors and Assigns 82
</TABLE>
105
<PAGE> 106
<TABLE>
<S> <C>
SECTION 11.03. No Waiver 82
SECTION 11.04. Modification 82
SECTION 11.05. Limitation of Guarantor's Liability 82
SECTION 11.06. Release of Guarantees 83
ARTICLE 12 SUBORDINATION OF THE GUARANTEES 83
SECTION 12.01. Agreement To Subordinate 83
SECTION 12.02. Liquidation, Dissolution, Bankruptcy 83
SECTION 12.03. Default on Senior Indebtedness of Guarantor 84
SECTION 12.04. Demand for Payment 85
SECTION 12.05. When Distribution Must Be Paid Over 85
SECTION 12.06. Subrogation 85
SECTION 12.07. Relative Rights 85
SECTION 12.08. Subordination May Not Be Impaired by Guarantor 85
SECTION 12.09. Rights of Trustee and Paying Agent 85
SECTION 12.10. Distribution or Notice to Representative 86
SECTION 12.11. Article 12 Not To Prevent Defaults Under the
Guarantees or Limit Right To Demand Payment 86
SECTION 12.12. Trustee Entitled To Rely 86
SECTION 12.13. Trustee To Effectuate Subordination 86
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Guarantors 87
SECTION 12.15. Reliance by Holders of Senior Indebtedness on
Subordination Provisions 87
ARTICLE 13 MISCELLANEOUS 87
SECTION 13.01. Trust Indenture Act Controls 87
SECTION 13.02. Notices 87
SECTION 13.03. Communication by Holders with Other Holders 88
SECTION 13.04. Certificate and Opinion as to Conditions
Precedent 88
SECTION 13.05. Statements Required in Certificate or Opinion 88
SECTION 13.06. When Notes Disregarded 89
</TABLE>
106
<PAGE> 107
<TABLE>
<S> <C>
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar 89
SECTION 13.08. Legal Holidays 89
SECTION 13.09. Governing Law 89
SECTION 13.10. No Recourse Against Others 90
SECTION 13.11. Successors, Assigns and Transferees 90
SECTION 13.12. Multiple Originals 90
SECTION 13.13. Table of Contents, Headings 90
SECTION 13.14. Severability 90
SECTION 13.15. Further Instruments and Acts 90
</TABLE>
107
<PAGE> 108
EXHIBITS
Exhibit A - Form of Initial Global Note
Exhibit B - Form of Initial Certificated Note
Exhibit C - Form of Exchange Global Note
Exhibit D - Form of Exchange Certificated Note
Exhibit E - Form of Transfer Certificate For Transfer to a QIB
Exhibit F - Form of Transfer Certificate for Transfer to an
Institutional Accredited Investor
Exhibit G - Form of Investment Letter for Institutional Accredited
Investors
Exhibit H - Form of Transfer Certificate for Transfer to a Non-U.S.
Person
Exhibit I - Form of Investment Letter for Regulation S Purchasers
Exhibit J - Form of Registration Rights Agreement
108
<PAGE> 1
EXHIBIT 4.2
FORM OF EXCHANGE GLOBAL NOTE
FACE OF EXCHANGE GLOBAL NOTE
SUSQUEHANNA MEDIA CO.
No. ____ CUSIP No._________________
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO SUSQUEHANNA MEDIA CO. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFER OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, AND NOT IN
PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE.
GLOBAL NOTE
REPRESENTING 8-1/2% SENIOR SUBORDINATED NOTES DUE 2009
Susquehanna Media Co., a Delaware corporation, for value received, hereby
promises to pay to Cede & Co., or its registered assigns, the principal sum
indicated on Schedule A hereof, on May 15, 2009.
Interest Payment Dates: May 15 and November 15, commencing November 15,
1999.
Record Dates: May 1 and November 1.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
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<PAGE> 2
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
C-2
<PAGE> 3
IN WITNESS WHEREOF, Susquehanna Media Co. has caused this Note to be
duly executed.
SUSQUEHANNA MEDIA CO.
By:__________________________________
Name:_____________________________
Title:____________________________
Attest:____________________________
Dated:_____________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee, certifies that this is one of
the Notes referred to in the Indenture.
By:_______________________________
Authorized Signatory
C-3
<PAGE> 4
REVERSE SIDE OF EXCHANGE GLOBAL NOTE
SUSQUEHANNA MEDIA CO.
GLOBAL NOTE
REPRESENTING 8-1/2% SENIOR SUBORDINATED NOTES DUE 2009
1. Indenture.
This Note is one of a duly authorized issue of debt securities of the
Issuer (as defined below) designated as its "8-1/2% Senior Subordinated Notes
due 2009" (herein called the "Notes") limited in aggregate principal amount to
$250,000,000, issued under an indenture dated as of May 12, 1999 (as amended or
supplemented from time to time, the "Indenture") between the Issuer, as issuer,
and Chase Manhattan Trust Company, National Association, as trustee (the
"Trustee," which term includes any successor trustee under the Indenture). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms,
and Holders of Notes are referred to the Indenture and such Act for a statement
of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Guarantors (if any), the Trustee and each Holder
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The summary of the terms of this Note contained herein does not
purport to be complete and is qualified by reference to the Indenture. To the
extent permitted by applicable law, in the event of any inconsistency between
the terms of this Note and the terms of the Indenture, the terms of the
Indenture shall control. All capitalized terms used in this Note which are not
defined herein shall have the meanings assigned to them in the Indenture.
The Indenture restricts, among other things, the Issuer's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness, sell
stock of Restricted Subsidiaries, apply net proceeds from certain asset sales,
merge or consolidate with any other person, sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Issuer,
enter into certain transactions with affiliates or incur indebtedness that is
subordinate in right of payment to any Senior Indebtedness and senior in right
of payment to the Notes. The Indenture permits, under certain circumstances,
Restricted Subsidiaries of the Issuer to be deemed Unrestricted Subsidiaries and
thus not subject to the restrictions of the Indenture.
2. Principal and Interest.
Susquehanna Media Co., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay the principal amount set forth on Schedule
A of this Note to the Holder hereof on May 15, 2009.
The Issuer shall pay interest at a rate of 8-1/2% per annum, from the
Issue Date or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided
C-4
<PAGE> 5
for, semiannually in arrears on May 15 and November 15 of each year, commencing
on November 15, 1999, in cash, to the Holder hereof until the principal amount
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions provided in the Indenture, be paid to the Person in whose
name this Note (or the Note in exchange or substitution for which this Note was
issued) is registered at the close of business on the Record Date for interest
payable on such Interest Payment Date. The Record Date for any interest payment
is the close of business on May 1 or November 1, as the case may be, whether or
not a Business Day, immediately preceding the Interest Payment Date on which
such interest is payable. Any such interest not so punctually paid or duly
provided for ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Record Date and shall be paid as provided in Section 2.12 of the
Indenture. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is issued pursuant to a Registered Exchange Offer on or prior
to the Record Date for the first Interest Payment Date following such exchange,
accrued and unpaid interest, if any, on the equivalent principal amount of the
Initial Note in exchange for which this Note was issued, up to but not including
the date of issuance of this Note, shall be paid on the first Interest Payment
Date for this Note to the Holder of this Note on the first Record Date with
respect to this Note. If this Note is issued pursuant to a Registered Exchange
Offer subsequent to the Record Date for the first Interest Payment Date
following such exchange but on or prior to such Interest Payment Date, then any
such accrued and unpaid interest with respect to the equivalent principal amount
of the Initial Note in exchange for which this Note was issued and any accrued
and unpaid interest on this Note, through the day before such Interest Payment
Date, shall be paid on such Interest Payment Date to the Holder of such Initial
Note on such Record Date.
To the extent lawful, the Issuer shall pay interest on overdue principal,
overdue premium, if any, Defaulted Interest and overdue Liquidated Damages, if
any, (without regard to any applicable grace period) at the interest rate borne
on this Note. The Issuer's obligation pursuant to the previous sentence shall
apply whether such overdue amount is due at its maturity, as a result of the
Issuer's obligations pursuant to Section 3.05, Section 4.11 or Section 4.14 of
the Indenture, or otherwise.
3. Method of Payment.
The Issuer, through the Paying Agent, shall pay interest on this Note to
the registered Holder of this Note, as provided above. The Holder must surrender
this Note to a Paying Agent to collect principal payments. The Issuer will pay
principal, premium, if any, and interest and Liquidated Damages, if any, in
money of the United States of America that at the time of payment is legal
tender for payment of all debts public and private. Principal, premium, if any,
C-5
<PAGE> 6
and interest and Liquidated Damages, if any, shall be paid by check mailed to
the registered Holders at their registered addresses; provided, that all
payments with respect to Notes the Holders of which have given wire transfer
instructions to the Issuer will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
4. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under the
Indenture. The Issuer may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Issuer or any of its Affiliates may
act as Paying Agent or Registrar; provided , that if the Issuer or such
Affiliate is acting as Paying Agent, the Issuer or such Affiliate shall
segregate all funds held by it as Paying Agent and hold them in trust for the
benefit of the Holders or the Trustee.
5. Guarantees.
This Note in the future may be entitled to Guarantees made by Guarantors
for the benefit of the Holders of Notes. Each Guarantor (if any) will,
irrevocably and unconditionally, jointly and severally, guarantee on a senior
subordinated basis the punctual payment when due, whether at Stated Maturity, by
acceleration, in connection with a Change of Control Offer, an Asset Sale Offer
or redemption, or otherwise, of all obligations of the Issuer under the
Indenture and this Note, whether for payment of principal of, premium, if any,
interest or Liquidated Damages, if any, on the Notes, expenses, indemnification
or otherwise. A Guarantor shall be released from its Guarantee upon the terms
and subject to the conditions set forth in the Indenture.
6. Subordination.
This Note and the Guarantees (if any) are subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full of all
existing and future Senior Indebtedness. The Issuer agrees, and each Holder by
accepting a Note agrees, to the subordination provisions set forth in the
Indenture, authorizes the Trustee to give them effect and appoints the Trustee
as attorney-in-fact for such purpose.
7. Redemption.
Except as set forth in the following paragraph, the Notes are not
redeemable at the option of the Issuer prior to May 15, 2004. Thereafter, the
Notes will be subject to redemption at the option of the Issuer, in whole or in
part, on at least 20 calendar days, but not more than 60 calendar days, prior
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, and
Liquidated Damages, if any, to the applicable Redemption Date (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), if redeemed during the twelve-month
period beginning May 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004 104.250%
</TABLE>
C-6
<PAGE> 7
<TABLE>
<S> <C>
2005 102.833%
2006 101.417%
2007 and thereafter 100.000%
</TABLE>
In addition, at any time and from time to time prior to May 15, 2002 the
Issuer, at its option, may redeem in the aggregate up to 35. 0% of the original
principal amount of the Notes with the Net Cash Proceeds of one or more Public
Equity Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 108.500% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable Redemption Date (subject to the right
of Holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date); provided, however, that at least 65.0% of the
original principal amount of the Notes must remain outstanding after each such
redemption; and provided, further, that each such redemption shall occur within
60 days of the date of closing of the related Public Equity Offering.
8. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before a
Redemption Date, the Issuer shall deliver to the Trustee a notice of redemption.
At least 20 calendar days but not more than 60 calendar days before a Redemption
Date, the Issuer shall send, by first-class mail, postage prepaid, to Holders of
Notes to be redeemed at the addresses of such Holders as they appear in the Note
Register, a notice of redemption.
If fewer than all the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed pro rata or by lot or by a method that
complies with applicable legal and securities exchange requirements, if any, and
that the Trustee considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Notes not previously
called for redemption; provided, that the Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000 (Notes in denominations of
$1,000 may be redeemed only in whole). If any Note is redeemed subsequent to a
Record Date with respect to any Interest Payment Date specified above and on or
prior to such Interest Payment Date, then any accrued interest will be paid on
such Interest Payment Date to the Holder of the Note on such Record Date. If
money in an amount sufficient to pay the Redemption Price of all Notes (or
portions thereof) to be redeemed on the Redemption Date is deposited with the
Paying Agent on or before the applicable Redemption Date and certain other
conditions are satisfied, interest on the Notes or portions thereof to be
redeemed on the applicable Redemption Date will cease to accrue.
C-7
<PAGE> 8
9. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right in accordance with the terms hereof and the Indenture to require the
Issuer to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Issuer shall
send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder with a copy to the Trustee.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Issuer defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture governing Change
of Control Offers, but in any event within 30 calendar days following a Change
of Control, the Issuer shall, to the extent required, either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by the provisions of the Indenture governing Change
of Control Offers.
10. Repurchase at the Option of Holders upon Asset Sale.
If at any time the Issuer or any Restricted Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the Asset Sale Purchase Date (subject to the right of each
Holder of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date). Upon completion of an Asset Sale Offer
(including payment of the Asset Sale Purchase Price for accepted Notes), any
surplus Excess Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Issuer may then use such amounts for general corporate
purposes.
Within 30 calendar days of the date the amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Asset Sale Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale
C-8
<PAGE> 9
Offer. Unless the Issuer defaults in the payment of the Asset Sale Purchase
Price with respect thereto, all Notes, or portions thereof selected for payment
pursuant to the Asset Sale Offer will cease to accrue interest from and after
the Asset Sale Purchase Date.
11. The Global Note.
So long as this Global Note is registered in the name of the Depositary or
its nominee, members of, or participants in, the Depositary ("Agent Members")
shall have no rights under the Indenture with respect to this Global Note held
on their behalf by the Depositary or the Trustee as its custodian, and the
Depositary may be treated by the Issuer, the Guarantors (if any), the Trustee
and any agent of the Issuer, the Guarantors (if any) or the Trustee as the
absolute owner of this Global Note for all purposes. Notwithstanding the
foregoing, nothing herein shall (i) prevent the Issuer, the Guarantors (if any),
the Trustee or any agent of the Issuer, the Guarantors (if any) or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or (ii) impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a Holder.
The Holder of this Global Note may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests in this
Global Note through Agent Members, to take any action which a Holder is entitled
to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the Issuer, a Change of
Control Offer, an Asset Sale Offer, a Registered Exchange Offer or an exchange
for Certificated Notes, this Global Note is redeemed, repurchased or exchanged
in part, this Global Note shall be surrendered by the Holder thereof to the
Trustee who shall cause an adjustment to be made to Schedule A hereof so that
the principal amount of this Global Note will be equal to the portion not
redeemed, repurchased or exchanged and shall thereafter return this Global Note
to such Holder; provided, that this Global Note shall be in a principal amount
of $1,000 or an integral multiple of $1,000.
12. Transfer and Exchange.
A Holder may transfer or exchange Notes as provided in the Indenture and
subject to certain limitations therein set forth. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes, fees and expenses required by law or permitted
by the Indenture.
13. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
14. Discharge and Defeasance.
Subject to certain conditions, the Issuer at any time may terminate some
or all of the obligations of the Issuer and the Guarantors (if any) under the
Notes, the Guarantees (if any) and the Indenture if the Issuer irrevocably
deposits in trust with the Trustee cash or U.S. Government
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Obligations for the payment of principal, premium, if any, interest and
Liquidated Damages, if any, on the Notes to redemption or maturity, as the case
may be.
15. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (which consent
may, but need not, be given in connection with any tender offer or exchange
offer for the Notes) and (ii) any past Default and its consequences or any
compliance with any provisions of the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Issuer and the Trustee may amend the
Indenture or the Notes (i) to evidence the succession of another Person to the
Issuer and the assumption by such successor of the covenants of the Issuer under
the Indenture and contained in the Notes; (ii) to add to the covenants of the
Issuer, for the benefit of the Holders of all of the Notes, or to surrender any
right or power conferred on the Issuer under the Indenture; (iii) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (iv) to
secure the Notes; (v) to cure any ambiguity, omission, defect or inconsistency
in the Indenture; (vi) to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the TIA; or (vii) to
evidence the agreement or acknowledgment of a Restricted Subsidiary that it is a
Guarantor for all purposes under the Indenture (including, without limitation,
any supplemental indenture executed pursuant to Section 4.21 thereof).
16. Defaults and Remedies.
Under the Indenture, Events of Default include: (i) a default for 30 days
in the payment when due of interest on, or Liquidated Damages, if any, with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) a default in the payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Issuer to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued after written notice by the Trustee or
the Holders of at least 25% in principal amount of the Notes for a time period
of forty-five (45) days); (iv) a default in the payment of Indebtedness of the
Issuer or any of its Subsidiaries within any applicable grace period after final
maturity or acceleration of such Indebtedness in an amount in excess of $5.0
million in the aggregate; (v) certain events of bankruptcy or insolvency with
respect to the Issuer or any of its Subsidiaries; (vi) certain undischarged
judgments in excess of $5.0 million against the Issuer or any of its
Subsidiaries; or (vii) the Guarantee, if any, of any Guarantor ceasing for any
reason to be in full force and effect (other than in accordance with the terms
of the Indenture) or any Guarantor, if any, denying or disaffirming its
obligations under its Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency shall result in the
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Notes being immediately due and payable upon the occurrence of such Events of
Default without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the then outstanding Notes, by
written notice to the Trustee and the Issuer, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived, except nonpayment of principal, interest, premium, if any, or Liquidated
Damages, if any, that has become due solely because of acceleration. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
17. Individual Rights of Trustee.
Subject to certain limitations imposed by the TIA, the Trustee or any
Paying Agent or Registrar, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Issuer, the
Guarantors (if any) or their Affiliates with the same rights it would have if it
were not Trustee, Paying Agent or Registrar, as the case may be, under the
Indenture.
18. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the Issuer
or any Guarantor (if any), as such, shall have any liability for any obligations
of the Issuer or such Guarantor (if any) under the Notes, the Guarantees (if
any) or the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation, solely by reason of its status as a
director, officer, employee, incorporator or stockholder of the Issuer or such
Guarantor. By accepting a Note, each Holder waives and releases all such
liability (but only such liability) as part of the consideration for issuance of
such Note to such Holder.
19. Authentication.
This Note shall not be valid until the Trustee or an authenticating agent
signs the certificate of authentication on the other side of this Note.
20. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
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21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
22. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE.
The Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made to:
Susquehanna Media Co.
140 East Market Street
York, PA 17401
Attention: Mr. Craig W. Bremer
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SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be $______________.
The following decreases/increases in the principal amount in denominations of $
1,000 or integral multiples thereof at maturity of this Note have been made:
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
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ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
______________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________________________ Attorney to
transfer this Note on the Note Register, with full power of substitution.
Dated:_________________________
________________________________ ______________________________________
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
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OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
[ ] In connection with the Change of Control Offer made pursuant to Section
4.14 of the Indenture, the undersigned hereby elects to have
[ ] the entire principal amount
[ ] $______________________ ($1,000 in principal amount or an integral
multiple thereof) of this Note repurchased by the Issuer. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
___________________________ an amount in cash equal to 101% of the
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
[ ] In connection with the Asset Sale Offer made pursuant to Section 4.11 of
the Indenture, the undersigned hereby elects to have
[ ] the entire principal amount
[ ] $_______________ ($1,000 in principal amount or an integral multiple
thereof) of this Note repurchased by the Issuer. The undersigned hereby
directs the Trustee or Paying Agent to pay it or _______________________
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated: _______________
________________________________ ______________________________________
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as written
upon the face of this Note in every particular, without alteration or any change
whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
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EXHIBIT 4.3
FORM OF EXCHANGE CERTIFICATED NOTE
FACE OF EXCHANGE CERTIFICATED NOTE
SUSQUEHANNA MEDIA CO.
No. _____ CUSIP No._____________
8-1/2% SENIOR SUBORDINATED NOTE DUE 2009
Susquehanna Media Co., a Delaware corporation, for value received, hereby
promises to pay to ______________________, or its registered assigns, the
principal amount of _____________ on May 15, 2009.
Interest Payment Dates: May 15 and November 15, commencing November 15,
1999.
Record Dates: May 1 and November 1.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purposes.
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IN WITNESS WHEREOF, Susquehanna Media Co. has caused this Note to be duly
executed.
SUSQUEHANNA MEDIA CO.
By: ___________________________________
Name: _____________________________
Title: ____________________________
Attest: ________________________
Dated: _________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee, certifies that
this is one of the Notes referred to in the Indenture.
By: ____________________________
Authorized Signatory
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REVERSE SIDE OF EXCHANGE CERTIFICATED NOTE
SUSQUEHANNA MEDIA CO.
8-1/2% SENIOR SUBORDINATED NOTE DUE 2009
1. Indenture.
This Note is one of a duly authorized issue of debt securities of the
Issuer (as defined below) designated as its "8-1/2% Senior Subordinated Notes
due 2009" (herein called the "Notes") limited in aggregate principal amount to
$250,000,000, issued under an indenture dated as of May 12, 1999 (as amended or
supplemented from time to time, the "Indenture") between the Issuer, as issuer,
and Chase Manhattan Trust Company, National Association, as trustee (the
"Trustee," which term includes any successor trustee under the Indenture). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms,
and Holders of Notes are referred to the Indenture and such Act for a statement
of the respective rights, limitations of rights, duties and immunities
thereunder of the Issuer, the Guarantors (if any), the Trustee and each Holder
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. The summary of the terms of this Note contained herein does not
purport to be complete and is qualified by reference to the Indenture. To the
extent permitted by applicable law, in the event of any inconsistency between
the terms of this Note and the terms of the Indenture, the terms of the
Indenture shall control. All capitalized terms used in this Note which are not
defined herein shall have the meanings assigned to them in the Indenture.
The Indenture restricts, among other things, the Issuer's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, incur liens to secure pari passu or subordinated indebtedness, sell
stock of Restricted Subsidiaries, apply net proceeds from certain asset sales,
merge or consolidate with any other person, sell, assign, transfer, lease,
convey or otherwise dispose of substantially all of the assets of the Issuer,
enter into certain transactions with affiliates or incur indebtedness that is
subordinate in right of payment to any Senior Indebtedness and senior in right
of payment to the Notes. The Indenture permits, under certain circumstances,
Restricted Subsidiaries of the Issuer to be deemed Unrestricted Subsidiaries and
thus not subject to the restrictions of the Indenture.
2. Principal and Interest.
Susquehanna Media Co., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Issuer"), promises to pay the principal amount set forth on the face
of this Note to the Holder hereof on May 15, 2009.
The Issuer shall pay interest at a rate of 8-1/2% per annum, from the
Issue Date or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided for, semiannually in arrears on May 15
and November 15 of each year, commencing on
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November 15, 1999, in cash, to the Holder hereof until the principal amount
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions provided in the Indenture, be paid to the Person in whose
name this Note (or the Note in exchange or substitution for which this Note was
issued) is registered at the close of business on the Record Date for interest
payable on such Interest Payment Date. The Record Date for any interest payment
is the close of business on May 1 or November 1, as the case may be, whether or
not a Business Day, immediately preceding the Interest Payment Date on which
such interest is payable. Any such interest not so punctually paid or duly
provided for ("Defaulted Interest") shall forthwith cease to be payable to the
Holder on such Record Date and shall be paid as provided in Section 2.12 of the
Indenture. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
Each payment of interest in respect of an Interest Payment Date will
include interest accrued through the day before such Interest Payment Date. If
an Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
If this Note is issued pursuant to a Registered Exchange Offer on or prior
to the Record Date for the first Interest Payment Date following such exchange,
accrued and unpaid interest on the equivalent principal amount of the Initial
Note in exchange for which this Note was issued, up to but not including the
date of issuance of this Note, shall be paid on the first Interest Payment Date
for this Note to the Holder of this Note on the first Record Date with respect
to this Note. If this Note is issued pursuant to a Registered Exchange Offer
subsequent to the Record Date for the first Interest Payment Date following such
exchange but on or prior to such Interest Payment Date, then any such accrued
and unpaid interest with respect to the equivalent principal amount of the
Initial Note in exchange for which this Note was issued and any accrued and
unpaid interest on this Note through the day before such Interest Payment Date
shall be paid on such Interest Payment Date to the Holder of such Initial Note
on such Record Date.
To the extent lawful, the Issuer shall pay interest on overdue principal,
overdue premium, if any, Defaulted Interest and overdue Liquidated Damages, if
any, (without regard to any applicable grace period) at the interest rate borne
on this Note. The Issuer's obligation pursuant to the previous sentence shall
apply whether such overdue amount is due at its maturity, as a result of the
Issuer's obligations pursuant to Section 3.05, Section 4.11 or Section 4.14 of
the Indenture, or otherwise.
3. Method of Payment.
The Issuer, through the Paying Agent, shall pay interest on this Note to
the registered Holder of this Note, as provided above. The Holder must surrender
this Note to a Paying Agent to collect principal payments. The Issuer will pay
principal, premium, if any, and interest and Liquidated Damages, if any, in
money of the United States of America that at the time of payment is legal
tender for payment of all debts public and private. Principal, premium, if any,
and interest and Liquidated Damages, if any, shall be paid by check mailed to
the registered
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Holders at their registered addresses; provided, that all payments with respect
to Notes the Holders of which have given wire transfer instructions to the
Issuer will be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
4. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar under the
Indenture. The Issuer may, upon written notice to the Trustee, appoint and
change any Paying Agent or Registrar. The Issuer or any of its Affiliates may
act as Paying Agent or Registrar; provided, that if the Issuer or such Affiliate
is acting as Paying Agent, the Issuer or such Affiliate shall segregate all
funds held by it as Paying Agent and hold them in trust for the benefit of the
Holders or the Trustee.
5. Guarantees.
This Note in the future may be entitled to Guarantees made by Guarantors
for the benefit of the Holders of Notes. Each Guarantor (if any) will,
irrevocably and unconditionally, jointly and severally, guarantee on a senior
subordinated basis the punctual payment when due, whether at Stated Maturity, by
acceleration, in connection with a Change of Control Offer, an Asset Sale Offer
or redemption, or otherwise, of all obligations of the Issuer under the
Indenture and this Note, whether for payment of principal of, premium, if any,
interest or Liquidated Damages, if any, on the Notes, expenses, indemnification
or otherwise. A Guarantor shall be released from its Guarantee upon the terms
and subject to the conditions set forth in the Indenture.
6. Subordination.
This Note and the Guarantees (if any) are subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full of all
existing and future Senior Indebtedness. The Issuer agrees, and each Holder by
accepting a Note agrees, to the subordination provisions set forth in the
Indenture, authorizes the Trustee to give them effect and appoints the Trustee
as attorney-in-fact for such purpose.
7. Redemption.
Except as set forth in the following paragraph, the Notes are not
redeemable at the option of the Issuer prior to May 15, 2004. Thereafter, the
Notes will be subject to redemption at the option of the Issuer, in whole or in
part, on at least 20 calendar days, but not more than 60 calendar days, prior
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest thereon, if any, and
Liquidated Damages, if any, to the applicable Redemption Date (subject to the
right of each Holder of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date), if redeemed during the twelve-month
period beginning May 15 of the years indicated below:
Year Percentage
---- ----------
2004 104.250%
2005 102.833%
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2006 101.417%
2007 and thereafter 100.000%
In addition, at any time and from time to time prior to May 15, 2002 the
Issuer, at its option, may redeem in the aggregate up to 35.0% of the original
principal amount of the Notes with the Net Cash Proceeds of one or more Public
Equity Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 108.500% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable Redemption Date (subject to the right
of Holders of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date); provided, however, that at least 65.0% of the
original principal amount of the Notes must remain outstanding after each such
redemption; and provided, further, that each such redemption shall occur within
60 days of the date of closing of the related Public Equity Offering.
8. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar days before a
Redemption Date, the Issuer shall deliver to the Trustee a notice of redemption.
At least 20 calendar days but not more than 60 calendar days before a Redemption
Date, the Issuer shall send, by first-class mail, postage prepaid, to Holders of
Notes to be redeemed at the addresses of such Holders as they appear in the Note
Register, a notice of redemption.
If fewer than all the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed pro rata or by lot or by a method that
complies with applicable legal and securities exchange requirements, if any, and
that the Trustee considers fair and appropriate and in accordance with methods
generally used at the time of selection by fiduciaries in similar circumstances.
The Trustee shall make the selection from outstanding Notes not previously
called for redemption; provided, that the Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000 (Notes in denominations of
$1,000 may be redeemed only in whole). If any Note is redeemed subsequent to a
Record Date with respect to any Interest Payment Date specified above and on or
prior to such Interest Payment Date, then any accrued interest will be paid on
such Interest Payment Date to the Holder of the Note on such Record Date. If
money in an amount sufficient to pay the Redemption Price of all Notes (or
portions thereof) to be redeemed on the Redemption Date is deposited with the
Paying Agent on or before the applicable Redemption Date and certain other
conditions are satisfied, interest on the Notes or portions thereof to be
redeemed on the applicable Redemption Date will cease to accrue.
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9. Repurchase at the Option of Holders upon Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the
right in accordance with the terms hereof and the Indenture to require the
Issuer to purchase such Holder's Notes, in whole or in part, in a principal
amount that is an integral multiple of $1,000, pursuant to a Change of Control
Offer, at a purchase price in cash equal to 101% of the principal amount of such
Notes (or portions thereof) plus accrued and unpaid interest and Liquidated
Damages, if any, to the Change of Control Payment Date.
Within 30 calendar days following any Change of Control, the Issuer shall
send, or cause to be sent, by first-class mail, postage prepaid, a notice
regarding the Change of Control Offer to each Holder with a copy to the Trustee.
The Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Change of Control Offer. Unless the Issuer defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes or portions
thereof accepted for payment pursuant to the Change of Control Offer will cease
to accrue interest from and after the Change of Control Payment Date.
Prior to complying with the provisions of the Indenture governing Change
of Control Offers, but in any event within 30 calendar days following a Change
of Control, the Issuer shall, to the extent required, either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by the provisions of the Indenture governing Change
of Control Offers.
10. Repurchase at the Option of Holders upon Asset Sale.
If at any time the Issuer or any Restricted Subsidiary engages in any
Asset Sale, as a result of which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall, within 30 calendar days of the date the amount
of Excess Proceeds exceeds $5.0 million, use the then-existing Excess Proceeds
to make an offer to purchase from all Holders of Notes, on a pro rata basis,
Notes in an aggregate principal amount equal in amount to the then-existing
Excess Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the Asset Sale Purchase Date (subject to the right of each
Holder of record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date). Upon completion of an Asset Sale Offer
(including payment of the Asset Sale Purchase Price for accepted Notes), any
surplus Excess Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Issuer may then use such amounts for general corporate
purposes.
Within 30 calendar days of the date the amount of Excess Proceeds exceeds
$5.0 million, the Issuer shall send, or cause to be sent, by first-class mail,
postage prepaid, a notice regarding the Asset Sale Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion hereof in an
authorized denomination purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below and tendering this Note pursuant to
the Asset Sale
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Offer. Unless the Issuer defaults in the payment of the Asset Sale Purchase
Price with respect thereto, all Notes or portions thereof selected for payment
pursuant to the Asset Sale Offer will cease to accrue interest from and after
the Asset Sale Purchase Date.
11. Transfer and Exchange.
A Holder may transfer or exchange Notes as provided in the Indenture and
subject to certain limitations therein set forth. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes, fees and expenses required by law or permitted
by the Indenture. The Registrar need not register the transfer or exchange of
Certificated Notes or portions thereof selected for redemption (except, in the
case of a Certificated Note to be redeemed in part, the portion of such
Certificated Note not to be redeemed) or any Certificated Notes for a period of
15 calendar days before a selection of Notes to be redeemed.
12. Denominations.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof of principal amount.
13. Discharge and Defeasance.
Subject to certain conditions, the Issuer at any time may terminate some
or all of the obligations of the Issuer and the Guarantors (if any) under the
Notes, the Guarantees (if any) and the Indenture if the Issuer irrevocably
deposits in trust with the Trustee cash or U.S. Government Obligations for the
payment of principal, premium, if any, interest and Liquidated Damages, if any,
on the Notes to redemption or maturity, as the case may be.
14. Amendment, Waiver.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the outstanding Notes (which consent
may, but need not, be given in connection with any tender offer or exchange
offer for the Notes) and (ii) any past Default and its consequences or any
compliance with any provisions of the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the
outstanding Notes. Subject to certain exceptions set forth in the Indenture,
without the consent of any Holder, the Issuer and the Trustee may amend the
Indenture or the Notes (i) to evidence the succession of another Person to the
Issuer and the assumption by such successor of the covenants of the Issuer under
the Indenture and contained in the Notes; (ii) to add to the covenants of the
Issuer, for the benefit of the Holders of all of the Notes, or to surrender any
right or power conferred on the Issuer under the Indenture; (iii) to provide for
uncertificated Notes in addition to or in place of Certificated Notes; (iv) to
secure the Notes; (v) to cure any ambiguity, omission, defect or inconsistency
in the Indenture; (vi) to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the TIA; or (vii) to
evidence the agreement or acknowledgment of a Restricted Subsidiary that it is a
Guarantor for all purposes under the
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Indenture (including, without limitation, any supplemental indenture executed
pursuant to Section 4.21 thereof).
15. Defaults and Remedies.
Under the Indenture, Events of Default include: (i) a default for 30 days
in the payment when due of interest on, or Liquidated Damages, if any, with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) a default in the payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture), (iii) failure by the Issuer to observe or perform
certain covenants, conditions, agreements or other provisions of the Indenture
or this Note (and, in the case of certain covenants, agreements or other
provisions, such failure has continued after written notice by the Trustee or
the Holders of at least 25% in principal amount of the Notes for a time period
of forty-five (45) days); (iv) a default in the payment of Indebtedness of the
Issuer or any of its Subsidiaries within any applicable grace period after final
maturity or acceleration of such Indebtedness in an amount in excess of $5.0
million in the aggregate; (v) certain events of bankruptcy or insolvency with
respect to the Issuer or any of its Subsidiaries, (vi) certain undischarged
judgments in excess of $5.0 million against the Issuer or any of its
Subsidiaries; or (vii) the Guarantee, if any, of any Guarantor ceasing for any
reason to be in full force and effect (other than in accordance with the terms
of the Indenture) or any Guarantor, if any, denying or affirming its obligations
under its Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes, subject to certain
limitations, may declare all the Notes to be immediately due and payable.
Certain events of bankruptcy or insolvency shall result in the Notes being
immediately due and payable upon the occurrence of such Events of Default
without any further act of the Trustee or any Holder.
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power under the Indenture.
The Holders of a majority in principal amount of the then outstanding Notes, by
written notice to the Trustee and the Issuer, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived, except nonpayment of principal, interest, premium, if any, or Liquidated
Damages, if any, that has become due solely because of acceleration. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
16. Individual Rights of Trustee.
Subject to certain limitations imposed by the TIA, the Trustee or any
Paying Agent or Registrar, in its individual or any other capacity, may become
the owner or pledgee of Notes and may otherwise deal with the Issuer, the
Guarantors (if any) or their Affiliates with the same
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<PAGE> 10
rights it would have if it were not Trustee, Paying Agent or Registrar, as the
case may be, under the Indenture.
17. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of the Issuer
or any Guarantor (if any), as such, shall have any liability for any obligations
of the Issuer or such Guarantor (if any) under the Notes, the Guarantees (if
any) or the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation, solely by reason of its status as a
director, officer, employee, incorporator or stockholder of the Issuer or such
Guarantor. By accepting a Note, each Holder waives and releases all such
liability (but only such liability) as part of the consideration for issuance of
such Note to such Holder.
18. Authentication.
This Note shall not be valid until the Trustee or an authenticating agent
manually signs the certificate of authentication on the other side of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
21. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SAID STATE.
The Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made to:
Susquehanna Media Co.
140 East Market Street
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York, PA 17401
Attention: Mr. Craig W. Bremer
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<PAGE> 12
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED _________________________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Note, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________________________ Attorney to
transfer this Note on the Note Register, with full power of substitution.
Dated:_________________________
____________________________________ ________________________________________
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must correspond to the Name as
written upon the face of this Note in every particular, without alteration or
any change whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
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<PAGE> 13
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
[ ] In connection with the Change of Control Offer made pursuant to Section
4.14 of the Indenture, the undersigned hereby elects to have
[ ] the entire principal amount
[ ] $______________________ ($1,000 in principal amount or an integral
multiple thereof) of this Note repurchased by the Issuer. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
___________________________ an amount in cash equal to 101% of the
principal amount indicated in the preceding sentence plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the Change of
Control Payment Date.
[ ] In connection with the Asset Sale Offer made pursuant to Section 4.11 of
the Indenture, the undersigned hereby elects to have
[ ] the entire principal amount
[ ] $_______________ ($1,000 in principal amount or an integral multiple
thereof) of this Note repurchased by the Issuer. The undersigned hereby
directs the Trustee or Paying Agent to pay it or _______________________
an amount in cash equal to 100% of the principal amount indicated in the
preceding sentence plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Asset Sale Purchase Date.
Dated: ________________
________________________________ ______________________________________
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the Name as written
upon the face of this Note in every particular, without alteration or any change
whatsoever.
SIGNATURE GUARANTEED: Signature must be guaranteed by an Eligible Guarantor
Institution (banks, stockbrokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule 17Ad-15.
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<PAGE> 1
Exhibit 12
SUSQUEHANNA MEDIA CO.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(000's)
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------------------- ---------------
1994 1995 1996 1997 1998 AS ADJUSTED 1998 1999
----------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings, as Defined:
Income before income taxes
and minority interests............... $18,613 $19,384 $25,625 $35,449 $32,591 $25,577 $3,842 $ 5,335
Interest including interest
in leases............................ 12,738 13,197 14,658 20,042 22,013 31,125 5,539 5,327
Amortization of capitalized interest.. 14 63 107 123 190 180 48 54
------- ------- ------- ------- ------- ------- ------ -------
Total earnings, as defined........... (A) $31,365 $32,644 $40,390 $55,614 $54,794 $56,882 $9,429 $10,716
======= ======= ======= ======= ======= ======= ====== =======
Fixed Changes, as Defined:
Interest including interest........... $12,738 $13,197 $14,658 $20,042 $22,013 $31,125 $5,539 $ 5,327
Capitalized interest.................. 277 690 202 118 1,216 1,215 203 463
Amortization of capitalized interest.. 14 83 107 123 190 180 48 54
------- ------- ------- ------- ------- ------- ------ -------
Total fixed changes, as defined..... (B) $13,029 $13,950 $14,967 $20,283 $23,419 $32,520 $5,790 $ 5,844
======= ======= ======= ======= ======= ======= ====== =======
Ratio of Earnings to Fixed
Charges(A)/(B)....................... 2.4 2.3 2.7 2.7 2.3 1.7 1.6 1.8
</TABLE>
<PAGE> 1
Exhibit 23.1
We hereby consent to the use in this Registration Statement on Form S-4 of
Susquehanna Media Co. and subsidiaries of our report dated February 8, 1999,
except for Notes 8 and 13 for which the date is March 24, 1999 and Note 14 for
which the date is April 22, 1999 relating to the consolidated financial
statements of Susquehanna Media Co. and subsidiaries, which appear in such
Registration Statement. We also consent to the references to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
June 11, 1999
