<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1998
REGISTRATION NO. 333-44177
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BRILL MEDIA COMPANY, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 52-2071822
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
BRILL MEDIA MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1877458
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
ADVERTISERS P.S., LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 7398 38-3393217
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
BMC HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1889308
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
BMC HOLDINGS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 52-2071824
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
BRILL NEWSPAPERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1170289
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
BRILL RADIO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1148743
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CADILLAC NEWSPAPERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 54-1170305
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<PAGE>
CENTRAL MICHIGAN DISTRIBUTION CO., INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-2438162
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CENTRAL MICHIGAN DISTRIBUTION CO., L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 7398 62-1356763
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CENTRAL MICHIGAN NEWSPAPERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 54-1170307
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CENTRAL MISSOURI BROADCASTING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 4830 54-1163979
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CENTRAL PRINTING SERVICE, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-3393221
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CMB II, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 43-1671356
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CMN ASSOCIATED PUBLICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-2438130
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CMN HOLDING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1170293
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
GLADWIN NEWSPAPERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 54-1170304
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
GRAPH ADS PRINTING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-2438126
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
HURON HOLDINGS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1867829
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<PAGE>
HURON HOLDINGS MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1889311
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
HURON NEWSPAPERS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-3372402
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
HURON NEWSPAPERS MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1889312
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
HURON P.S., LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 7398 38-3372410
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
HURON P.S. MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1889314
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
MIDLAND BUYERS GUIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-2438164
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NB II, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 41-1803205
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NCH II, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1851918
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NCR II, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 4830 84-1347311
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NCR III, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 4830 54-1851920
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NORTHERN COLORADO HOLDINGS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1862076
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<PAGE>
NORTHERN COLORADO HOLDINGS MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1889315
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NORTHERN COLORADO RADIO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 4830 84-1091274
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NORTHLAND BROADCASTING, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 4830 41-1862832
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NORTHLAND BROADCASTING MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1889316
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NORTHLAND HOLDINGS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1838750
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
NORTHLAND HOLDINGS MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1889317
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
READING RADIO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 4830 54-1163978
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
<PAGE>
ST. JOHNS NEWSPAPERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-3299223
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
TRI-STATE BROADCASTING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 4830 35-1888093
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
UPPER MICHIGAN HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1882775
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
UPPER MICHIGAN HOLDINGS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1882773
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
UPPER MICHIGAN MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 6749 54-1882776
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
UPPER MICHIGAN NEWSPAPERS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 2710 38-3393224
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
420 N.W. FIFTH STREET, EVANSVILLE, INDIANA 47708
(812) 423-6200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ALAN R. BRILL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BRILL MEDIA MANAGEMENT, INC.
420 N.W. FIFTH STREET, EVANSVILLE, INDIANA 47708
(812) 423-6200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
THOMPSON & MCMULLAN, P.C. CARTER, LEDYARD & MILBURN
100 Shockoe Slip 2 Wall Street
Richmond, Virginia 23219 New York, New York 10005
(804) 649-7545 (212) 732-3200
Attention: Charles W. Laughlin Attention: John K. Whelan
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 2, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
BRILL MEDIA COMPANY, LLC
[LOGO]
BRILL MEDIA MANAGEMENT, INC.
OFFER TO EXCHANGE
12% SENIOR NOTES DUE 2007
FOR
12% SERIES B SENIOR NOTES DUE 2007
AND APPRECIATION NOTES DUE 2007
FOR
SERIES B APPRECIATION NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
Brill Media Company, LLC, a Virginia limited liability company ("BMC") and
Brill Media Management, Inc., a Virginia corporation (collectively with BMC, the
"Issuer"), hereby offers, upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letters of Transmittal (the "Exchange
Offer"), to exchange (i) its 12% Series B Senior Notes due 2007 (the "Exchange
Notes") for an equal principal amount of its outstanding 12% Senior Notes due
2007 (the "Original Notes" and collectively with the Exchange Notes, the
"Notes"), of which an aggregate of $105,000,000 in principal is outstanding as
of the date hereof, and (ii) its Series B Appreciation Notes due 2007 (the
"Exchange Appreciation Notes") for an equal principal amount of its outstanding
Appreciation Notes due 2007 (the "Original Appreciation Notes" and, collectively
with the Exchange Appreciation Notes, the "Appreciation Notes"), of which an
aggregate of $3,000,000 in principal is outstanding as of the date hereof. The
form and the terms of each of the Exchange Notes and the Exchange Appreciation
Notes will be the same as the form and terms of each of the Original Notes and
the Original Appreciation Notes, respectively, except that (i) each of the
Exchange Notes and the Exchange Appreciation Notes will bear a "Series B"
designation and will bear different CUSIP Numbers from the Original Notes and
the Original Appreciation Notes, (ii) the Exchange Notes and the Exchange
Appreciation Notes will have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and, therefore, will not bear legends
restricting their transfer, and (iii) holders of the Exchange Notes and the
Exchange Appreciation Notes will not be entitled to certain rights of holders of
Notes and Appreciation Notes, respectively, under the Registration Rights
Agreements (as defined), which rights will terminate as to holders of the
Exchange Notes and Exchange Appreciation Notes upon consummation of the Exchange
Offer. Exchange Notes will evidence the same debt as the Original Notes and will
be entitled to the benefits of the indenture (the "Indenture") dated as of
December 30, 1997 governing the Original Notes and the Exchange Notes. Exchange
Appreciation Notes will evidence the same debt as the Original Appreciation
Notes and will be entitled to the benefits of the indenture (the "Appreciation
Note Indenture") dated as of December 30, 1997 governing the Appreciation Notes
and the Exchange Appreciation Notes. The Original Notes and the Original
Appreciation Notes are sometimes referred to herein collectively as the
"Original Securities." The Exchange Notes and the Exchange Appreciation Notes
are sometimes referred to herein collectively as the "Exchange Securities." The
Original Securities and the Exchange Securities are sometimes referred to herein
collectively as the "Securities."
Interest on the Exchange Notes will accrue from and include their issuance
date. Additionally, interest on the Exchange Notes will accrue from the last
interest payment date on which interest was paid on the Original Notes
surrendered in exchange therefor or, if no interest has been paid on the
Original Notes, from the date of original issuance of such Original Notes to but
not including the issuance date of the Exchange Notes. Accordingly, holders who
exchange their Original Notes will receive the same interest payment on the next
interest payment date (expected to be June 15, 1998) that they would have
received had they not accepted the Exchange Offer.
The Notes will bear interest at a rate of 7 1/2% per annum from the date of
original issue until December 15, 1999 and at a rate of 12% from and after such
date until maturity. Interest on the Notes will be payable in cash semi-annually
on June 15 and December 15 of each year, commencing June 15, 1998. The Notes
will mature on December 15, 2007. Except as described below, the Issuer may not
redeem the Notes prior to December 15, 2002. On or after such date, the Issuer
may redeem the Notes, in whole or in part, at any time, at the redemption prices
set forth herein, together with accrued and unpaid interest, if any, to the date
of redemption. In addition, at any time and from time to time on or prior to
December 15, 2000, in the event of the sale by BMC of at least $25.0 million of
its equity securities in one or more Public Equity Offerings (as defined), the
Issuer may, at its option, use the net proceeds of such sale to redeem up to 25%
of the aggregate principal amount of the Notes, at a redemption price equal to
112.0% of the Accreted Value (as defined) of the Notes to be redeemed, together
with accrued and unpaid interest, if any, to the date of redemption; PROVIDED,
HOWEVER, that after any such redemption the aggregate principal of the Notes
outstanding must be at least $79.0 million. The Notes will not be subject to any
sinking fund requirement. Upon the occurrence of a Change of Control (as
defined), the Issuer will be required to make an offer to repurchase the Notes
at a price equal to 101% of the Accreted Value in the case of an offer to
purchase occurring prior to December 15, 1999, and thereafter at a purchase
price equal to 101% of the principal amount thereof, in each case plus accrued
and unpaid interest thereon to the date of repurchase. See "Description of Notes
- -- Optional Redemption" and "--Change of Control."
The Notes will be senior unsecured obligations of the Issuer. The Notes will
rank PARI PASSU with all existing and future senior indebtedness of the Issuer
and will rank senior in right of payment to any future subordinated indebtedness
of the Issuer. The Notes will be unconditionally guaranteed (the "Subsidiary
Guarantees"), jointly and severally, by each of the Issuer's subsidiaries, all
of which are wholly-owned, on the issue date of the Notes and by each Restricted
Subsidiary (as defined) of the Issuer organized or acquired thereafter
(collectively the "Subsidiary Guarantors"). The Guarantees will be senior
unsecured obligations of the Subsidiary Guarantors and will rank PARI PASSU in
right of payment with all other existing and future senior indebtedness of the
respective Subsidiary Guarantors and senior in right of payment to all existing
and future subordinated indebtedness of the respective Subsidiary Guarantors and
may be released upon the occurence of certain events. The Notes and Subsidiary
Guarantees will be effectively subordinated in right of payment to any secured
debt of the Issuer and the Subsidiary Guarantors to the extent of the assets
serving as security therefor. The Indenture permits the Issuer and its
Subsidiaries to incur additional indebtedness (including senior indebtedness),
subject to certain limitations. As of November 30, 1997, on a pro forma basis
after giving effect to the Transactions, the Issuer had no outstanding secured
indebtedness to which the Notes would have been effectively subordinated, and
the aggregate amount of the Subsidiary Guarantors' outstanding senior secured
indebtedness to which the Subsidiary Guarantees would have been effectively
subordinated was approximately $4.8 million. See "Description of Notes."
Each Appreciation Note will entitle the holder thereof to receive on
December 15, 2007 a cash payment of principal and interest in an amount equal to
(i) the principal amount thereof plus (ii) the amount by which the Specified
Percentage (as defined) of the Value (as defined) of BMC on such date exceeds
the principal amount of such Appreciation Note. The Appreciation Notes will be
subject to mandatory and optional redemption under certain circumstances. The
Appreciation Notes will be senior subordinated obligations of the Issuer. The
Appreciation Notes will be subordinated in right of payment to all existing and
future Senior Indebtedness (as defined) of the Issuer, including the Notes, and
will rank senior in right of payment to any subordinated indebtedness of the
Issuer. The Appreciation Notes will be unconditionally guaranteed, jointly and
severally, by each of the Subsidiary Guarantors. The Guarantees of the
Appreciation Notes will be senior subordinated obligations of the Subsidiary
Guarantors and will be subordinated in right of payment to all existing and
future Guarantor Senior Indebtedness (as defined) of the respective Subsidiary
Guarantor, including the Subsidiaries Guarantees of the Notes. See "Description
of the Appreciation Notes."
SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR ORIGINAL SECURITIES IN THE
EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
(CONTINUED FROM FRONT COVER)
The Issuer will accept for exchange any and all validly tendered Original
Securities not withdrawn prior to 5:00 p.m., New York City time, on ,
1998, unless extended by the Issuer in its sole discretion (the "Expiration
Date"). Tenders of Original Securities may be withdrawn at any time prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Original Notes or any minimum aggregate principal
amount of Original Appreciation Notes being tendered for exchange. In the event
the Issuer terminates the Exchange Offer and does not accept for exchange any
Original Securities, the Issuer will promptly return all previously tendered
Original Securities to the holders thereof. The Exchange Offer is subject to
certain customary conditions. See "The Exchange Offer--Conditions." The Issuer
has agreed to pay all expenses incident to the Exchange Offer. The Issuer will
not receive any proceeds from the Exchange Offer.
The Original Securities were originally issued and sold on December 30, 1997
in transactions (the "Offering") which were not registered under the Securities
Act in reliance upon exemptions from the registration requirements of the
Securities Act. Accordingly, the Original Securities may not be reoffered,
resold or otherwise pledged, hypothecated or transferred in the United States
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Securities are being offered hereunder to satisfy the obligations of
the Issuer under the Registration Rights Agreements. See "The Exchange
Offer--Purpose and Effect of Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Issuer believes the
Exchange Notes and the Exchange Appreciation Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
any holder thereof (other than any such holder that is an "affiliate" of the
Issuer within the meaning of Rule 405 under the Securities Act), without further
registration under the Securities Act and without delivery of a prospectus that
satisfies the requirements of Section 10 of the Securities Act, provided that
such Exchange Securities are acquired in the ordinary course of such holder's
business and that such holder does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of such Exchange Securities. Eligible holders wishing to accept the Exchange
Offer must represent to the Issuer that such conditions have been met. Each
broker-dealer that receives Exchange Securities pursuant to the Exchange Offer
in exchange for Securities acquired for its own account as a result of
market-making or other trading activities (a "Participating Broker-Dealer") may
be a statutory underwriter and must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Securities. The Letters of Transmittal state that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Securities received in exchange for Original Securities where such
Original Securities were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities. The Issuer has
agreed that, for a period of 180 days after consummation of the Exchange Offer,
it will make this Prospectus available to any Participating Broker-Dealer for
use in connection with any such resale. See "Plan of Distribution."
Holders of Original Securities whose Original Securities are not tendered
and accepted in the Exchange Offer will continue to hold such Original
Securities and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture and the
Appreciation Note Indenture, respectively. Following consummation of the
Exchange Offer, the holders of Original Securities will continue to be subject
to the existing restrictions upon transfer thereof under the Securities Act.
There has been no previous public market for the Securities. The Issuer does
not intend to list the Exchange Securities on any securities exchange or to seek
approval for quotation through any automated quotation system. There can be no
assurance that an active market for the Exchange Securities will develop. See
"Risk Factors--Lack of Established Trading Market." Moreover, to the extent that
Original Securities are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Original Securities could be
adversely affected.
The Original Securities were issued as units, each of which was immediately
separable into one Original Note and one Original Appreciation Note (the
"Units"). The Exchange Notes and Exchange Appreciation Notes are being offered
separately, and not as units. By submitting a Letter of Transmittal to tender
Original Securities, or by electronically transmitting its acceptance of the
Exchange Offer through ATOP (as defined), a holder of Units will request the
separation of such Units into their component parts. See "The Exchange
Offer--Procedures for Tendering."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF ORIGINAL SECURITIES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
CERTAIN OF THE MATTERS DISCUSSED UNDER "PROSPECTUS SUMMARY," "RISK FACTORS,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS CONTAIN FORWARD-LOOKING
STATEMENTS CONCERNING THE ISSUER'S OPERATIONS, ECONOMIC PERFORMANCE AND
FINANCIAL CONDITION, INCLUDING, AMONG OTHER THINGS, THE ISSUER'S BUSINESS
STRATEGY. THESE STATEMENTS ARE BASED ON THE ISSUER'S EXPECTATIONS AND ARE
SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING THOSE
IDENTIFIED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
<PAGE>
RADIO INDUSTRY DATA
Unless otherwise indicated herein, audience ratings and market radio
advertising revenues have been obtained from INVESTING IN RADIO, 1997 MARKET
REPORT--THIRD EDITION, BIA Publications Inc. ("BIA"). Revenue rankings in the
Company's radio markets have been derived by comparing the Company's revenues in
each market to the revenues for the Company's competitors (utilizing the
estimated revenues for each competing radio station as provided by BIA). Metro
rank for the Company's markets have been obtained from ARBITRON, RADIO MARKET
REPORT, the Arbitron Company ("Arbitron").
Audience rankings for the Fort Collins/Greeley/Loveland, Colorado market
("Fort Collins") and the Jefferson City/Columbia/Lake of Ozarks, Missouri market
("Jefferson City") have been taken from ARBITRON RADIO CUSTOM SURVEY RADIO AREA
REPORT, MAY 1997. No published market revenues or revenue rankings on the Fort
Collins and Jefferson City markets are available, and market revenues and
revenue ranking in such markets have been estimated by the Company, without the
benefit of any independent investigation or confirmation, on the basis of its
knowledge of each market and published retail sales statistics.
CERTAIN DEFINITIONS
Brill Media Company, LLC, a Virginia limited liability company ("BMC"), and
its wholly-owned subsidiary, Brill Media Management, Inc., a Virginia
corporation ("Media" and, collectively with BMC, the "Issuer"), are the
co-issuers of the Securities. Media and BMC, collectively with BMC's direct
subsidiary BMC Holdings, LLC, a Virginia limited liability company ("Holdings"),
and the direct and indirect subsidiaries of Holdings, are referred to herein as
the "Company." Certain management services are provided to the Company by Brill
Media Company, L.P., a Virginia limited partnership and an affiliate of the
Company ("BMCLP"). Radio station and newspaper affiliates that are managed by
the Company pursuant to Managed Affiliates Management Agreements (as defined)
are referred to collectively as "Managed Affiliates." See "Business--Structure
and Governance," "Certain Transactions" and "Description of Notes--Certain
Definitions."
The subsidiaries of BMC (the "Subsidiaries") presently include the following
entities, all of which are wholly-owned and organized under the laws of
Virginia: BMC Holdings, Inc.; Holdings; Brill Newspapers, Inc.; Brill Radio
Inc.; Advertisers P.S., LLC; Cadillac Newspapers, Inc.; Central Michigan
Distribution Co., Inc.; Central Michigan Distribution Co., L.P.; Central
Michigan Newspapers, Inc.; Central Missouri Broadcasting, Inc.; Central Printing
Service, LLC; CMB II, Inc.; CMN Associated Publications, Inc.; CMN Holding,
Inc.; Gladwin Newspapers, Inc.; Graph Ads Printing, Inc.; Huron Holdings, LLC;
Huron Holdings Management, Inc.; Huron Newspapers, LLC; Huron Newspapers
Management, Inc.; Huron P.S. Management, Inc.; Huron P.S., LLC; Midland Buyer's
Guide, Inc.; NB II, Inc.; NCH II, LLC; NCR II, Inc.; NCR III, LLC; Northern
Colorado Holdings, LLC; Northern Colorado Holdings Management, Inc.; Northern
Colorado Radio, Inc.; Northland Broadcasting, LLC; Northland Broadcasting
Management, Inc.; Northland Holdings, LLC; Northland Holdings Management, Inc.;
Reading Radio, Inc.; St. Johns Newspapers, Inc.; Tri-State Broadcasting, Inc.;
Upper Michigan Holdings, Inc.; Upper Michigan Holdings, LLC; Upper Michigan
Management, Inc.; and Upper Michigan Newspapers, LLC.
"EBITDA" means operating income before depreciation and amortization
expenses. References to "Media Cashflow" refer to EBITDA plus management fees,
incentive plan expense, time brokerage agreement fees, acquisition related
consulting expense and interest income from loans made by the Company to Managed
Affiliates. Management fees payable to BMCLP are subordinated, to the extent
provided in the Indenture, to the prior payment of the Issuer's obligations on
the Notes. Although Media Cashflow and EBITDA are not measures of performance
calculated in accordance with GAAP, management believes that these measures are
useful to an investor in evaluating the Company because these measures are
widely used in the media industry to evaluate a media company's operating
performance. However, Media Cashflow and EBITDA should not be considered in
isolation or as substitutes for net
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income, cash flows from operating activities and other income or cash flow
statements prepared in accordance with GAAP as measures of liquidity or
profitability.
"New Credit Facility" means a new senior secured credit facility which may
be entered into by the Company in the aggregate principal amount not to exceed
$15.0 million, as permitted by the Indenture. No assurances can be given that
such New Credit Facility will be extended to the Company by any lender or that
it will be made available to the Company on terms acceptable to the Company.
The terms local marketing agreement ("LMA"), time brokerage agreement ("Time
Brokerage Agreement") and joint sales agreement ("JSA") are referred to in
various places in this Prospectus. An LMA or Time Brokerage Agreement refers to
an agreement, although it may take various forms, under which one party agrees
in consideration of a fee paid to provide, on a cooperative basis, the
programming, sales, marketing and similar services for a separately owned radio
station located in the same radio market and realize the financial benefit of
such activities. A JSA refers to an agreement, similar to an LMA or Time
Brokerage Agreement, under which a radio station agrees to provide the sales and
marketing services for another station while the owner of such other radio
station provides the programming for such other radio station. LMAs, Time
Brokerage Agreements and JSAs are more fully described in "Business--Federal
Regulation of Radio Broadcasting."
The Company generally considers radio "middle markets" to be markets ranked
80 to 200 by Arbitron. The Company considers "middle markets" for purposes of
its newspaper operations to be generally comparable to the smaller markets in
such range.
All references in this Prospectus to "senior" in reference to the Notes or
other obligations of the Issuer or a Subsidiary Guarantor means obligations that
are not subordinated to other unsecured obligations of the Issuer or such
Subsidiary Guarantor but which may be subordinate to secured obligations of the
Issuer to the extent of the security therefor.
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO APPEARING ELSEWHERE HEREIN.
INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK
FACTORS" PRIOR TO MAKING A DECISION TO TENDER ANY ORIGINAL SECURITIES IN
EXCHANGE FOR EXCHANGE SECURITIES HEREUNDER.
THE COMPANY
The Company is a diversified media enterprise that acquires, develops,
manages, and operates radio stations, newspapers and related businesses in
middle markets. The Company presently owns, operates, or manages fifteen radio
stations serving five markets located in Pennsylvania, Kentucky/Indiana,
Colorado, Minnesota/Wisconsin, and Missouri, including three radio stations
located in the Kentucky/Indiana market that are owned by Managed Affiliates (the
twelve such stations which are not owned by Managed Affiliates being referred to
herein as the "Stations"). The group of Stations and Managed Affiliates'
stations operated by the Company in each market holds a first or second ranking
in both combined audience ratings and combined revenues, compared to other
groups, in such market. In addition, in each of its markets, the Stations and
Managed Affiliates' stations individually have at least one of the top two
rankings in both audience ratings and revenues. The Company's newspaper
businesses (the "Newspapers") operate integrated newspaper publishing, printing
and print advertising distribution operations, providing total-market print
advertising coverage throughout a seventeen-county area in central Michigan.
This operation offers a two-edition daily newspaper, thirteen weekly
publications, a web offset printing operation for Newspapers' publications and
outside customers, and a private distribution company. The Company, each of its
Subsidiaries, BMCLP and the Managed Affiliates are wholly owned directly or
indirectly by Alan R. Brill ("Mr. Brill" or the "Stockholder"), who founded the
business and began its operations in 1981.
For the year ended February 28, 1997, the Company's pro forma combined
revenues, net loss and Media Cashflow, excluding the Missouri Properties which
are under contract to be sold (see "Recent or Pending Transactions"), were $27.4
million, $8.5 million and $10.2 million, respectively. For the nine months ended
November 30, 1997, such pro forma combined revenues, net loss and Media Cashflow
were $22.6 million, $5.6 million and $8.7 million, respectively. The financial
statements of the Managed Affiliates are not combined with those of the Company.
Historically, the Company has focused on media properties located in middle
markets, which the Company believes offer greater opportunities than larger
markets to build and maintain consistently high market and revenue shares at
reasonable costs. The Company believes its markets are generally less
competitive than major markets and are characterized by a limited number of
direct competitors, local owner/operators that are less sophisticated and have
less financial resources, and fewer alternative advertising media. In such
markets, the Company is able to target broader demographic groups and to sell
its advertising to a wider customer base than in major markets. The Company
believes that, relative to larger markets, a higher percentage of revenues in
middle markets is derived from local advertising and therefore a correspondingly
higher portion of its revenues can be directly generated by its own sales
efforts. The Company believes that local advertisers in middle markets often
make advertising decisions based primarily on customer relationships and service
and advertising results. The Company's primary focus is to provide high-quality
customer service with promotional activities that yield results for advertisers
and to build and maintain superior local advertiser relationships.
The Company's overall operations, including its sales and marketing
strategy, long-range planning, and management support services are managed by
BMCLP, a limited partnership indirectly owned by Mr. Brill (see "Certain
Transactions"). The management support provided by BMCLP has been a key element
in the Company's ability to achieve significant increases in Media Cashflow at
each of its
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properties following their acquisition. Each of the Company's properties is
managed on a day-to-day basis by an experienced local president/general manager.
As of September 30, 1997, the Company had a workforce of approximately 340
full-time and 100 part-time employees, none of whom is unionized.
The principal executive offices of the Company are located at 420 N.W. Fifth
Street, Evansville, Indiana 47708, and its telephone number is (812) 423-6200.
RADIO PROPERTY OVERVIEW
In each of its markets, the Company's Stations and the Managed Affiliates'
stations as a group hold at least one of the top two rankings in both combined
audience ratings and combined revenues. Furthermore, in each of its markets the
Company's Stations and the Managed Affiliates' stations individually hold at
least one of the top two audience and revenues rankings. Set forth below is a
list of the Stations and the Managed Affiliates' stations specifying their
broadcasting frequency, Federal Communications Commission ("FCC") class, format,
control, market, market rank and group rank by ratings and revenues.
<TABLE>
<CAPTION>
STATION GROUP
ARBITRON RANK
FCC OWNED/ MARKET --------------------------
STATION FREQUENCY CLASS FORMAT MANAGED MARKET(S) RANK RATINGS REVENUES
- ------------- ----------- --------- ----------- ------------ ------------------ ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WIOV-FM 105.1 FM-B Country Owned Lancaster, PA(1) 110 1 1
Reading, PA 130 2 2
WBKR-FM 92.5 FM-C Country Owned Evansville, IN 125(2) 1 1
WKDQ-FM 99.5 FM-C Country Managed(3) and Owensboro/
WSTO-FM 96.1 FM-C Adult Hits Managed(3) Henderson, KY
WOMI-AM 1490 AM-C News/Talk Owned
WVJS-AM 1420 AM-B News/Talk Managed(3)
KTRR-FM 102.5 FM-C2 Adult Hits Managed(4) Fort Collins/ 135 1 1
KUAD-FM 99.1 FM-C1 Country Owned Greeley/
Loveland, CO
KKCB-FM 105.1 FM-C1 Country Owned Duluth, MN/ 207 1 1
KLDJ-FM 101.7 FM-C2 Oldies Owned Superior, WI
WEBC-AM 560 AM-B News/Talk Owned
KATI-FM 94.3 FM-C2 Country Owned(5) Jefferson City/ NR(6) 2 2
KTXY-FM 106.9 FM-C Adult Hits Owned(5) Columbia/
KLIK-AM 950 AM-B Country Owned(5) Lake of the
Ozarks, MO
</TABLE>
- --------------------------
(1) WIOV-FM serves both Lancaster and Reading. The Company also owns and
operates WIOV-AM, an AM-C station in Reading. Ratings and revenues ranks for
WIOV-FM include WIOV-AM.
(2) The Company estimates that on a combined basis the
Evansville/Owensboro/Henderson market would have an Arbitron rank of 125
based on separate rankings of 151 and 255 for Evansville and Owensboro,
respectively.
(3) WKDQ-FM, WSTO-FM and WVJS-AM are owned by Managed Affiliates.
(4) The Company manages KTRR-FM pursuant to a Time Brokerage Agreement pending
completion of its acquisition.
(5) Missouri Properties are under contract for sale. See "Recent or Pending
Transactions." Accordingly, the pro forma financial statements presented
herein do not include the operating results of such stations.
(6) The Jefferson City/Columbia/Lake of the Ozarks, Missouri market is not
ranked by Arbitron. Columbia separately is ranked 237 by Arbitron, and
KTXY-FM is the top-rated station by audience ranking in such market.
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LANCASTER AND READING, PENNSYLVANIA, which the Company estimates combined
would have an Arbitron rank of 60, are served by WIOV-FM and WIOV-AM. WIOV-FM
programs a Country music format and consistently is one of the region's top
rated stations. WIOV-FM is the top-ranked radio station based on combined
revenues in the Lancaster market. WIOV-AM serves the Reading market with a
News/Talk format.
EVANSVILLE, INDIANA, AND OWENSBORO/HENDERSON, KENTUCKY, which the Company
estimates combined would have an Arbitron rank of 125, are served by WBKR-FM and
WOMI-AM. These stations broadcast to the Tri-State area of southwestern Indiana,
southern Illinois, and western Kentucky, which the Company believes is
undergoing significant economic expansion. WBKR-FM is the region's most powerful
and most listened to radio station. The five stations operated by the Company
(including the Managed Affiliates' stations, WKDQ-FM, WSTO-FM and WVJS-AM) rank
first in the market in terms of both their combined revenues and their combined
ratings, and individually hold three of the top four audience and revenues
rankings in the market.
FORT COLLINS/GREELEY/LOVELAND, COLORADO, which has recently been designated
as a market by Arbitron and is ranked 135, is served by KUAD-FM and KTRR-FM.
KUAD-FM is northern Colorado's leading radio station in terms of audience
ratings and advertising revenues, and in the nineteen months since the Company
began operating it pursuant to a Time Brokerage Agreement, KTRR-FM has
established a significant presence in the market. These Stations primarily serve
Larimer and Weld counties in northern Colorado, which comprise a distinct market
approximately 65 miles north of Denver. The Company believes that radio
advertising in the area is significantly underutilized by potential advertisers
based on national norms. The Stations focus on the Fort Collins/Greeley/Loveland
"triangle," and reach a listener base that the Company believes is
well-educated, has significant disposable income, and is served locally by few
other radio stations.
DULUTH, MINNESOTA AND SUPERIOR, WISCONSIN, which have a combined Arbitron
rank of 207, are served by KKCB-FM, KLDJ-FM and WEBC-AM, which the Company
believes is the premier combination of radio stations in this market based on
revenues and audience ratings. KKCB-FM, which operates a Country format, is the
highest-rated station in its market.
JEFFERSON CITY/COLUMBIA/LAKE OF THE OZARKS, MISSOURI, is served by KATI-FM,
KTXY-FM and KLIK-AM. These stations are currently under contract for sale and
pending closing are being operated by the purchaser under the terms of a Time
Brokerage Agreement. See "Recent or Pending Transactions."
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PUBLICATIONS OVERVIEW
Set forth below is a list of the Newspaper publications specifying the
location and circulation of each.
<TABLE>
<CAPTION>
NEWSPAPER LOCATION CIRCULATION
- ------------------------------------------------- ------------------- -----------
<S> <C> <C> <C>
MORNING SUN...................................... Mt. Pleasant, MI 12,700
MT. PLEASANT BUYERS GUIDE........................ Mt. Pleasant, MI 28,400
CLARE COUNTY BUYERS GUIDE........................ Clare, MI 13,000
ALMA REMINDER.................................... Alma, MI 20,600
CADILLAC BUYERS GUIDE............................ Cadillac, MI 21,700
CARSON CITY REMINDER............................. Carson City, MI 11,000
EDMORE ADVERTISER................................ Edmore, MI 17,500
HEMLOCK SHOPPERS GUIDE........................... Hemlock, MI 12,500
GLADWIN BUYERS GUIDE............................. Gladwin, MI 16,800
ISABELLA COUNTY HERALD........................... Mt. Pleasant, MI 16,200
MIDLAND BUYERS GUIDE............................. Midland, MI 28,000
ST. JOHNS REMINDER............................... St. Johns, MI 16,200
THE NORTHEASTERN SHOPPER
(NORTH EDITION)................................ Tawas City, MI 24,400
THE NORTHEASTERN SHOPPER
(SOUTH EDITION)................................ Tawas City, MI 15,600
-----------
Total Circulation 254,600
-----------
-----------
</TABLE>
The Newspapers serve a seventeen county area of small communities in central
Michigan, where there are few other newspapers, no local television stations,
and few radio stations. The Company has central offices and production
facilities in Mt. Pleasant, Michigan and leads the central Michigan market in
media billings.
The Company's daily newspaper, the MORNING SUN, has a paid subscription base
of 12,700 readers and is the only daily newspaper published in Gratiot, Isabella
and southern Clare counties. The Company's weekly newspaper and twelve weekly
shopping guides are delivered free to more than 240,000 households in the
central Michigan area. The Company's multiple products and private delivery
system permit advertisers to buy customized advertising coverage for the portion
of the local market that best reaches their potential customers. The Company
also publishes numerous niche publications such as vacation guides and a monthly
business report. The Newspapers have a widely diversified base of advertising
and printing customers and during the year ended February 28, 1997 no one
customer represented more than 2% of the Company's revenues.
STRUCTURE AND GOVERNANCE
In anticipation of the Offering, the ownership of the Stations and
Newspapers was restructured to preserve certain historical tax benefits while
permitting Mr. Brill the flexibility required to continue growing the business
through acquisitions.
Set forth below is a chart outlining the ownership of the Company and its
principal affiliates. Certain intermediate entities have been omitted.
[The chart, which is on file with the Issuer, shows that Mr. Brill is the
sole ultimate owner of (i) BMCLP, (ii) the Managed Affiliates, (iii) the
Subsidiaries (indirectly through BMC and Holdings) and (iv) Media (indirectly
through BMC).]
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The Exchange Securities will be issued jointly by Brill Media Company, LLC,
a Virginia limited liability company ("BMC"), and its wholly-owned subsidiary,
Brill Media Management, Inc., a Virginia corporation ("Media"; collectively with
BMC, the "Issuer"). BMC through Subsidiaries indirectly owns radio and newspaper
properties, including those previously identified. The historical financial
statements of The Radio and Newspaper Businesses of Alan R. Brill included
elsewhere in this Prospectus include the financial position and results of
operations of the radio and newspaper Subsidiaries on a combined basis. Each
Subsidiary is wholly-owned directly or indirectly by BMC.
The Managed Affiliates are not subsidiaries of the Company, but are managed
by the Company pursuant to Managed Affiliates Management Agreements. As of the
date of this Prospectus, the Managed Affiliates operate radio stations WKDQ-FM,
WSTO-FM and WVJS-AM in Evansville, Indiana and Owensboro/Henderson, Kentucky,
which were acquired by Mr. Brill in 1997. While subject to a Managed Affiliate
Management Agreement, funds may be advanced from time to time to these and
future Managed Affiliates by the Company or its Subsidiaries in the form of
unsecured loans ("Managed Affiliate Notes") subject to certain limitations. See
"Description of Notes--Limitations on Affiliate Transactions."
Local general managers operate the Stations and Newspapers on a day-to-day
basis. Other management services, including benefit plan administration, risk
management, finance, tax management, and strategic planning and operations
oversight are provided to the Subsidiaries and the affiliates by BMCLP, which is
owned indirectly by Mr. Brill. The fees charged by BMCLP are established on a
contractual basis and, as set forth more fully under "Certain Transactions,"
such fees are payable to the extent set forth in the Description of the Notes.
BUSINESS STRENGTHS
MIDDLE MARKET FOCUS. The Company operates media businesses in middle
markets which generally are less competitive than larger markets and are
characterized by a limited number of direct competitors, local owner/operators
which are less sophisticated and have less financial resources, and fewer
alternative media. The Company believes that in its markets the majority of its
revenues are directly generated by its own sales efforts.
STRONG AND GROWING MARKET SHARE. In each of its radio markets the Company's
Stations or the Managed Affiliates' stations hold at least one of the top two
rankings in both audience ratings and revenues. The Company believes that it is
the leading advertising provider in its newspaper markets. The Company believes
the Stations and Newspapers have strong community support and work to build and
maintain strong middle market franchises.
SUCCESSFUL ACQUISITION HISTORY. Mr. Brill has a history of identifying
acquisition opportunities, initiating negotiations to buy such properties and
developing creative structures by which to meet the requirements of the sellers
of such properties. Mr. Brill and the management team have successfully
developed acquired radio stations and newspapers and have improved Media
Cashflow at each of the Company's properties following their acquisition.
CONSISTENT MEDIA CASHFLOWS. The Company's Subsidiaries have a history of
consistent media cashflows. The Company's Subsidiaries generated Media Cashflow
margins (on a combined basis) of approximately 24%, 26%, and 30% for the
one-year periods ended February 28, 1995, February 29, 1996, and February 28,
1997, respectively, and 39% for the nine-month period ended November 30, 1997.
The Company believes that its Media Cashflow will continue to be strong and will
enable the Company to continue its acquisition strategy. Furthermore, the
Company's continuing operations currently require relatively small capital
expenditures.
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EXPERIENCED AND COMMITTED MANAGEMENT TEAM. The Company's senior management
team, provided by BMCLP, is highly experienced in the radio and newspaper
industries. BMCLP has experienced little management turnover, and BMCLP's four
senior operating executives have an average of 22 years each of experience in
the media industry and have worked together since 1988. The Company has a
decentralized management structure in which general managers make the key local
operating decisions for each station or newspaper with support from BMCLP
management.
STRONG LOCAL ADVERTISER RELATIONSHIPS. Historically, the Company has
created and maintained relationships directly with local advertisers in its
markets, which enable the Company to respond immediately and creatively to meet
customer needs. The Company believes that its marketing approach and customer
relationships enable the Stations to generate greater revenues and margins than
comparably ranked stations in their markets and enable the Newspapers to
increase revenues and margins. To further strengthen its relationships with
advertisers, the Company also offers and markets its ability to create customer
traffic through on-site events staged at, and broadcast from, an advertiser's
business.
ACQUISITION STRATEGY
The Company seeks to acquire underperforming middle market media businesses
whose acquisition costs are low relative to potential revenues and cashflow. The
Company focuses on developing significant long-term franchises in middle
markets. The Company then seeks to improve revenues and cashflow, using its
particular promotional, marketing, sales, programming and editorial approaches.
The Company targets businesses that it believes operate in underdeveloped market
segments with a low level of competition and a strong economic base, as well as
stations with competitive technical facilities and businesses that are located
in areas deemed desirable for relocation in terms of personnel recruitment.
The Company believes that its acquisition strategy, properly implemented,
has a number of specific benefits, including (i) diversification of revenues and
cashflow across a broader base of industries, properties and markets, (ii)
geographic clustering which has allowed improved cashflow margins through the
consolidation of facilities, centralized newsgathering, cross-selling of
advertising, elimination of redundant expenses, (iii) improved access to
consultants and other industry resources, (iv) greater appeal to qualified
industry management talent and (v) efficiencies from economies of scale.
OPERATING STRATEGY
In order to appeal to advertising customers and maximize the revenues and
cashflow of its properties, the Company's strategy is as follows:
MARKETING PARTNERSHIPS. The Company believes that advertisers in its
markets are attracted and retained through value-added customer services. While
the Company seeks and achieves audience ratings and circulation as a means of
attracting advertisers, its operations are distinguished by a particular
emphasis on soliciting advertisers directly. The Company believes that in many
middle markets the decision to advertise on a given radio station or in a given
newspaper is driven in large measure by direct customer relationships and the
level of customer success with past advertising programs and the marketing and
sales effectiveness of the station or newspaper staff. The Company believes that
building and solidifying marketing partnerships with advertisers and retaining
such customers through effective results and high quality customer service are
significant factors in maintaining leading revenue shares in its markets.
OWNERSHIP OF STRONG MEDIA GROUPS. In each of its markets, the Company seeks
to maintain and enhance its position as a market leader through its ownership of
groups of stations or publications. Its ownership of groups of stations and
publications allows the Company a variety of sales opportunities and customer
demographics. By strategically coordinating customized programming, publishing,
promotional,
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and selling strategies among a group of local stations or newspapers, the
Company attempts to reach a wide range of demographic groups that appeal to
advertisers. The Company believes that its wide range of advertising options
permits it to offer pricing choices to suit customer needs and strengthen
advertiser relationships.
AGGRESSIVE SALES AND MARKETING. The Company seeks to maximize its share of
local advertising revenues in each of its markets by implementing and
maintaining strong direct sales and marketing programs. The Company tends to
maintain separate sales forces for each of its Stations or Newspapers. The
Company's Stations strive to maximize revenues by managing the on-air inventory
of advertising time and adjusting prices based on local market conditions.
Through its marketing efforts, the Company provides advertisers with an
effective means of reaching a targeted demographic group. To further strengthen
its relationships with radio advertisers, the Company also offers and markets
its ability to create customer traffic through on-site events staged at, and
broadcast from, an advertiser's place of business and promotions in which
listeners are encouraged to participate by visiting such place of business.
EXPERIENCED LOCAL MANAGEMENT. The Company believes that each of its
Stations and Newspapers is primarily a local business and that much of its
success is the result of the efforts of local management and staff. Accordingly,
the Company decentralizes its operations. Each of the Company's local media
groups is managed by a team of experienced managers who understand the trends,
demographics, and competitive opportunities of the particular market. Local
managers are responsible for developing annual operating budgets, and a major
portion of their compensation is linked to performance against operating
targets. BMCLP approves each station or newspaper group's annual operating
budgets and imposes strict financial reporting requirements to track performance
and monitor operating trends. The Company seeks and motivates managers who
thrive on the challenges presented by such autonomy. Its success in finding and
developing such managers has enabled the Company to compete successfully in each
of its local markets.
CENTRALIZED SUPPORT AND OVERSIGHT. The Company believes that its ability to
utilize existing senior management and sales resources of its media groups
enhances the growth potential of both acquired start-up and underperforming
properties. Additionally, this support reduces the risks associated with
undertaking new means of improving performance, such as launching new formats.
Furthermore, the Company seeks to achieve substantial cost savings through the
consolidation of facilities, management and administrative personnel and human
resources, as well as through the reduction of redundant expenses. BMCLP
personnel regularly visit the Stations and Newspapers to review performance,
assist local management with their programming, editorial, sales, recruiting and
training efforts, and to develop and verify overall operating and marketing
strategies, including cost management, designed to improve cashflow. These
visits enable the Company to remain aware of developments in each Station's and
Newspaper's market and to control and monitor costs while providing useful input
to each local manager.
COMMUNITY INVOLVEMENT. The Company believes that its marketing, sales and
promotion efforts create direct relationships with its advertisers and
audiences, making its Stations and Newspapers significant participants in the
middle markets they serve. Each of the Company's Newspapers and Stations
participates in numerous community programs, fund-raisers and activities that
benefit a wide variety of organizations and produce revenues for the Company.
RECENT OR PENDING TRANSACTIONS
The Offering, together with the transactions briefly described below,
collectively comprise the "Transactions" as referred to in this Prospectus.
The Company's Subsidiaries, Central Missouri Broadcasting, Inc. and CMB II,
Inc. (collectively the "Missouri Properties") have entered into agreements for
the sale of substantially all of the assets of the Missouri Properties for a net
cash purchase price of approximately $7.4 million, plus assumed liabilities of
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$256,000. The net book value of the assets is approximately $1.8 million at
November 30, 1997. The Company expects to record a pre-tax gain of approximately
$5.5 million after expenses. Pursuant to the terms of a Time Brokerage Agreement
("TBA") which provides for monthly payments of $50,000 to the Missouri
Properties, the purchaser is providing operating and management services to the
Missouri Properties pending closing of the purchase. Closing of the sale and
purchase is expected to occur immediately upon the FCC granting requisite
approval for transfer of the broadcast licenses associated with these Stations.
Applications for transfer of the broadcast licenses of the Missouri Properties
have been filed with the FCC by the purchasers. A local market competitor has
objected to the transfer of the licenses and on December 12, 1997, filed with
the FCC a Petition to Deny the license transfers and to terminate the Time
Brokerage Agreement. No action has been taken on the Petition to Deny by the
FCC, and the Company believes that even if the Petition to Deny were granted,
the consequences would not be material to the Company. The Attorney General of
the State of Missouri on January 9, 1998 filed a civil investigative demand on
the Company to provide documents in order to consider whether the proposed
transaction would violate federal or Missouri antitrust laws. The Company has
complied with the demand.
The Company's Subsidiary, NCR II Inc., presently provides management and
programming services to radio station KTRR-FM in Loveland, Colorado pursuant to
a Time Brokerage Agreement with Onyx Broadcasting, Inc., has executed an option
to purchase substantially all of the assets of KTRR-FM for a purchase price of
$2.0 million, and will enter into a covenant not to compete with the sellers,
with a stated consideration of $500,000, payable over its five year term. It is
expected that closing of the purchase of KTRR-FM will occur shortly after
execution of a definitive asset purchase agreement for this transaction and
required approval for transfer of the broadcast licenses by the FCC.
Certain of the Subsidiaries and other affiliates were indebted under the
terms of certain senior secured obligations guaranteed by Mr. Brill and payable
to AMRESCO Funding Corporation ("Amresco") and Goldman Sachs Credit Partners
L.P. ("Goldman Sachs"). These obligations were paid, along with accrued interest
thereon and the applicable prepayment premium of $2.8 million, from the proceeds
of the Offering as reflected in the pro forma combined financial statements
contained in this Prospectus.
On October 1, 1997 two of the Company's newspaper Subsidiaries acquired the
assets of Huron Postal Service, Inc. ("Huron") and Northeastern Printers, Inc.
("Northeastern"), newspapers located on the coast of Lake Huron, Michigan for
total consideration of $2.8 million.
The Company loaned approximately $900,000 of the proceeds of the Offering to
Managed Affiliates and received in return therefor Managed Affiliate Notes which
are unsecured, mature on January 1, 2001 and bear interest at a rate of 12% per
annum. Such amounts are in addition to the $15.4 million already loaned by the
Company to the Managed Affiliates at November 30, 1997. The proceeds of such
loans were used by the Managed Affiliates to purchase property, equipment, and
intangibles and to provide working capital for operations. It is anticipated
that similar relationships may be initiated with other affiliates in the future.
No transaction may cause the aggregate principal amount of Managed Affiliate
Notes then outstanding to exceed $20.0 million unless: (i) the Board of
Directors, including a majority of the disinterested members of the Board,
determines that the terms of the transaction are no less favorable than those
that could be obtained at the time of such transaction in arms-length dealings
with a person who is not an "Affiliate"; (ii) the Issuer obtains a written
opinion of an independent investment bank of nationally recognized standing that
the transaction is fair to the Issuer from a financial point of view; and (iii)
the Issuer at the time of the transaction is able to make a "Restricted Payment"
in an amount equal to such excess amount (as such terms are defined herein).
On February 24, 1998 the Company completed the asset acquisition of certain
newspaper, printing and distribution operations located in northern Michigan.
Total consideration amounted to approximately $8.5 million and included cash of
$5.5 million and seller notes of $3.0 million. In addition, the Company entered
into a non-compete agreement totaling approximately $365,000.
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The financial statements and pro forma impacts of this acquisition are
expected to be included in a future filing on Form 8-K by the Company and
accordingly are not included in the pro forma financial information included
herein or in the definition of Transactions. In conjunction with such
acquisition, the Company formed six new wholly-owned subsidiaries of Holdings,
all of which are Subsidiary Guarantors of the Securities.
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THE EXCHANGE OFFER
CERTAIN CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS
GIVEN THEM IN "DESCRIPTION OF NOTES--CERTAIN DEFINITIONS."
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ISSUER............................ Brill Media Company, LLC and Brill Media Management,
Inc., as co-issuers.
REGISTRATION RIGHTS AGREEMENT..... The Original Securities were originally sold by the
Issuer on December 30, 1997 in transactions exempt from
the registration requirements of the Securities Act. The
$3,000,000 aggregate principal amount of Original
Appreciation Notes and $105,000,000 aggregate principal
amount of the Original Notes were sold to NatWest
Capital Markets Limited (the "Initial Purchaser")
pursuant to a Purchase Agreement dated as of December
22, 1997 by and among the Issuer, the Subsidiary
Guarantors and the Initial Purchaser (the "Purchase
Agreement"). The Initial Purchaser subsequently sold
such Original Securities. The Issuer, the Subsidiary
Guarantors and the Initial Purchaser entered into a
Registration Rights Agreement dated December 30, 1997
(the "Note Registration Rights Agreement") and an
Appreciation Note Registration Rights Agreement dated
December 30, 1997 (the "Appreciation Note Registration
Rights Agreement" and, together with the Note
Registration Rights Agreement, the "Registration Rights
Agreements"), which grant the holders of the Original
Securities certain exchange and registration rights. The
Exchange Offer is intended to satisfy such rights. The
holders of the Exchange Securities are not entitled to
any exchange or registration rights with respect to the
Exchange Securities. See "Notes Exchange Offer and
Registration Rights" and "Appreciation Notes Exchange
Offer and Registration Rights."
THE EXCHANGE OFFER................ The Issuer and the Subsidiary Guarantors are offering to
exchange (i) an equal principal amount of Exchange Notes
for each such principal amount of Original Notes that
are properly tendered and accepted and (ii) an equal
principal amount of Exchange Appreciation Notes for each
such principal amount of Original Appreciation Notes
that are properly tendered and accepted. The Issuer will
issue Exchange Securities on or promptly after the
Expiration Date. As of the date hereof, there is
$105,000,000 aggregate principal amount of Original
Notes outstanding and there is $3,000,000 aggregate
principal amount of Original Appreciation Notes
outstanding. The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of Original Notes
or any minimum aggregate principal amount of Original
Appreciation Notes being tendered for exchange. Based on
no-action letters issued by the staff of the Commission
to third parties, the Issuer believes the Exchange Notes
and the Exchange Appreciation Notes issued pursuant to
the Exchange Offer may be offered for resale, resold and
otherwise transferred by any holder thereof (other than
any such
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holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without
further registration under the Securities Act and
without delivery of a prospectus that satisfies the
requirements of Section 10 of the Securities Act,
provided that such Exchange Securities are acquired in
the ordinary course of such holder's business and that
such holder does not intend to participate, and has no
arrangement or understanding with any person to
participate, in the distribution of such Exchange
Securities.
Each Participating Broker-Dealer that receives Exchange
Securities for its own account pursuant to the Exchange
Offer in exchange for Original Securities where such
Original Securities were acquired by such Participating
Broker-Dealer as a result of market-making activities or
other trading activities may be a statutory underwriter
and must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange
Securities. The Letters of Transmittal state that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by
Participating Broker-Dealers in connection with such
resales of Exchange Securities. The Issuer has agreed
that, for a period of 180 days after consummation of the
Exchange Offer, it will make this Prospectus available
to any Participating Broker-Dealer for use in connection
with any such resale. See "The Exchange Offer."
Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Securities should not rely on the position of the staff
of the Commission communicated in no-action letters and,
in the absence of an exception therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with
any resale transaction. Failure to comply with such
requirements in such instance may result in such holder
incurring liability under the Securities Act for which
the holder is not indemnified by the Issuer.
The Original Securities were issued as units, each of
which was immediately separable into one Original Note
and one Original Appreciation Note (the "Units"). The
Exchange Notes and Exchange Appreciation Notes are being
offered separately, and not as units. By submitting a
Letter of Transmittal to tender Original Securities, or
by electronically transmitting its acceptance of the
Exchange Offer through ATOP (as defined), a holder of
Units will request the separation of such Units into
their component parts. See "The Exchange
Offer--Procedures for Tendering."
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EXPIRATION DATE................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless the Exchange Offer is
extended by the Issuer in its reasonable discretion, in
which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is
extended.
ACCRUED INTEREST ON THE EXCHANGE
NOTES........................... Interest on the Exchange Notes will accrue from and
include their issuance date. Additionally, interest on
the Exchange Notes will accrue from the last interest
payment date on which interest was paid on the Original
Notes surrendered in exchange therefor or, if no
interest has been paid on the Original Notes, from the
date of original issuance of such Original Notes to but
not including the issuance date of the Exchange Notes.
Accordingly, holders who exchange their Original Notes
will receive the same interest payment on the next
interest payment date (expected to be June 15, 1998)
that they would have received had they not accepted the
Exchange Offer.
CONDITIONS TO THE EXCHANGE
OFFER........................... The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer--Conditions." The
Issuer reserves the right to terminate or amend the
Exchange Offer at any time prior to the Expiration Date
upon the occurrence of any such conditions.
PROCEDURES FOR TENDERING ORIGINAL
SECURITIES...................... Each participant (a "DTC Participant") in the Depository
Trust Company ("DTC") holding Original Securities
through DTC must (i) electronically transmit its
acceptance to DTC through the DTC Automated Tender Offer
Program ("ATOP"), for which the transaction will be
eligible, and DTC will then edit and verify the
acceptance, execute a book-entry delivery to the
Exchange Agent's account at DTC and send an Agent's
Message (as defined herein) to the Exchange Agent for
its acceptance, or (ii) comply with the guaranteed
delivery procedures set forth in this Prospectus and in
the Letter of Transmittal. By tendering through ATOP,
DTC Participants will expressly acknowledge receipt of
the accompanying Letter of Transmittal and agree to be
bound by its terms and the Company will be able to
enforce such agreement against such DTC participants.
See "The Exchange Offer--Procedures for
Tendering--Original Securities held through DTC," and
"--Guaranteed Delivery Procedures-- Original Securities
held through DTC." Each holder of Original Securities
wishing to accept the Exchange Offer must complete, sign
and date the respective Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile,
together with the Original Securities and any other
required documentation to the Exchange Agent at the
address set forth herein. A separate Letter of
Transmittal is required for the tender of Original Notes
and Original Appreciation Notes. Original Securities may
be physically delivered, but
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physical delivery is not required if a confirmation of a
book-entry transfer of such Original Securities to the
Exchange Agent's account at The Depository Trust Company
is delivered in a timely fashion. By executing a Letter
of Transmittal, each holder will represent to the Issuer
that, among other things, the Exchange Securities
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such Exchange Securities, whether or
not such person is the holder, that neither the holder
nor any such other person is engaged in, or intends to
engage in, or has an arrangement or understanding with
any person to participate in, the distribution of such
Exchange Securities and that neither the holder nor any
such person is an "affiliate," as defined under Rule 405
of the Securities Act, of the Issuer. Each Participating
Broker-Dealer that receives Exchange Securities for its
own account in exchange for Original Securities where
such Original Securities were acquired by such
Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any
resale of such Exchange Securities. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and
"Plan of Distribution."
SPECIAL PROCEDURES FOR BENEFICIAL
OWNER........................... Any beneficial owner whose Original Securities are
registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to
tender should contact such registered holder promptly
and instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing a Letter of
Transmittal and delivering its Original Securities,
either make appropriate arrangements to register
ownership of the Original Securities in such owner's
name or obtain a properly completed bond power for both
the Original Notes and Original Appreciation Notes from
the registered holder. The Transfer of registered
ownership may take considerable time and may not be
completed prior to the Expiration Date and if the
beneficial owner has not instructed the record owner to
tender its Original Securities, the beneficial owner
will be unable to participate in the Exchange Offer and
thereafter will have no registration rights. See "The
Exchange Offer--Procedures for Tendering."
GUARANTEED DELIVERY PROCEDURES.... DTC Participants holding Original Securities through DTC
who wish to cause their Original Securities to be
tendered, but who cannot transmit their acceptances
through ATOP prior to the Expiration Date, may effect a
tender in accordance with the procedures set forth in
this Prospectus and in the Letters of Transmittal. See
"Exchange Offer--Guaranteed Delivery Procedures."
Holders of Original Securities who wish to tender their
Original Securities and whose Original Securities are
not immediately available or who cannot deliver their
Original Securities,
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the Letters of Transmittal or any other documents
required by the Letters of Transmittal to the Exchange
Agent prior to the Expiration Date, must tender their
Original Securities according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
ACCEPTANCE OF THE ORIGINAL
SECURITIES AND DELIVERY OF THE
EXCHANGE
SECURITIES...................... Subject to the satisfaction of the conditions to the
Exchange Offer, the Issuer will accept for exchange any
and all Original Securities which are properly tendered
in the Exchange Offer prior to the Expiration Date. The
Exchange Securities issued pursuant to the Exchange
Offer will be delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
WITHDRAWAL RIGHTS................. Tenders of Original Securities may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange Offer--Withdrawal of
Tenders."
EFFECT ON HOLDERS OF THE
SECURITIES...................... Following consummation of the Exchange Offer, holders of
the Original Securities eligible to participate in the
Exchange Offer but who do not tender their Original
Securities will not have further exchange rights and
such Original Securities will continue to be subject to
certain restrictions on transfer. To the extent that
Original Securities are tendered and accepted in the
Exchange Offer, the liquidity of untendered Original
Securities could be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE........................ The Original Securities that are not exchanged pursuant
to the Exchange Offer will remain restricted securities.
Accordingly, such Original Securities may be resold only
(i) to the Issuer, (ii) pursuant to Rule 144A or Rule
144 under the Securities Act or pursuant to another
exemption under the Securities Act, (iii) outside the
United States to a foreign person pursuant to the
requirements of Rule 904 under the Securities Act or
(iv) pursuant to an effective registration statement
under the Securities Act. See "The Exchange
Offer--Consequences of Failure to Exchange."
SHELF REGISTRATION STATEMENT...... In the event that (i) applicable law or interpretations
of the staff of the Commission do not permit the Company
to effect the Exchange Offer, (ii) for any other reason
the Exchange Offer is not consummated on or before June
26, 1998, (iii) under certain circumstances upon the
request of the Initial Purchaser or (iv) any holder of
Original Securities (other than the Initial Purchaser)
is not able to make the representations set forth in the
Letters of Transmittal and described above, the Issuer
will, at its expense, register the Original Securities
with a shelf registration statement and use its best
efforts to cause it to be declared effective by the
Commission. The Company has agreed to maintain the
effectiveness of any such shelf registration statement
for, under certain circumstances, a maximum of two
years, to
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cover resales of the Original Securities held by any
such holders. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer."
EXCHANGE AGENT.................... The United States Trust Company of New York is serving
as the Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer--Exchange Agent."
THE NOTES
GENERAL........................... The Exchange Offer applies to $105 million aggregate
principal amount of the Original Notes. The form and
terms of the Exchange Notes will be the same as the form
and terms of the Original Notes except that (i) the
Exchange Notes will bear a "Series B" designation and a
different CUSIP Number from the Notes, (ii) the Exchange
Notes will have been registered under the Securities Act
and, therefore, will not bear legends restricting the
transfer thereof and (iii) holders of the Exchange Notes
will not be entitled to certain rights of holders of
Original Notes under the Note Registration Rights
Agreement which rights will terminate as to holders of
the Exchange Notes upon consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as
the Original Notes, will be entitled to the benefits of
the Indenture and will be treated as a single class
thereunder with the Original Notes. See "Description of
Notes."
SECURITIES OFFERED................ $105 million principal amount of 12% Series B Senior
Notes due 2007 (the "Exchange Notes").
INTEREST RATE..................... The Notes will bear cash interest at a rate of 7 1/2%
per annum on their principal amount until December 15,
1999, and at a rate of 12% per annum on their principal
amount from and after such date until maturity.
MATURITY.......................... December 15, 2007.
INTEREST PAYMENT DATES............ June 15 and December 15 of each year, commencing on June
15, 1998.
RANKING........................... The Notes are senior unsecured obligations of the
Issuer. The Notes rank PARI PASSU in right of payment
with all existing and future senior indebtedness of the
Issuer and rank senior in right of payment to any
subordinated indebtedness of the Issuer. The Notes (and
the Subsidiary Guarantees) are effectively subordinated
in right of payment to any secured debt of the Issuer
and the Subsidiary Guarantors to the extent of the
assets serving as security therefor. As of November 30,
1997, on a pro forma basis after giving effect to the
Transactions, the Issuer had no outstanding secured
indebtedness to which the Notes would have been
effectively subordinated, and the aggregate amount of
the Subsidiary Guarantors' outstanding senior secured
indebtedness to which the Subsidiary Guarantees would
have been effectively subordinated was approximately
$4.8 million. See "Description of Notes--Ranking" and
"--Subordination."
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GUARANTEES........................ The Notes are unconditionally guaranteed, jointly and
severally, by each of the Subsidiary Guarantors, all of
which are wholly-owned. The Subsidiary Guarantees are
senior unsecured obligations of the Subsidiary
Guarantors and rank PARI PASSU in right of payment with
all other existing and future senior indebtedness of the
respective Subsidiary Guarantors and senior in right of
payment to all existing and future subordinated
indebtedness of the respective Subsidiary Guarantors and
may be released upon the occurrence of certain events.
The Subsidiary Guarantees are effectively subordinated
to any secured debt of the Subsidiary Guarantors to the
extent of the assets serving as security therefor. See
"Description of Notes--Ranking" and "--Subsidiary
Guarantees."
OPTIONAL REDEMPTION............... Except as described below and under "Change of Control,"
the Issuer may not redeem the Notes prior to December
15, 2002. On or after such date, the Issuer may redeem
the Notes, in whole or in part, at any time at the
redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of
redemption. In addition, in the event of the sale by the
Issuer prior to December 15, 2000, of its Capital Stock
(other than Disqualified Stock) in one or more Public
Equity Offerings the net cash proceeds of which are at
least $25.0 million in the aggregate, the Issuer may, at
its option, use the net cash proceeds of such sale or
sales of Capital Stock to redeem up to 25% of the
aggregate principal amount of the Notes at a redemption
price in the case of a redemption date prior to December
15, 1999, equal to 112% of the Accreted Value (as
defined) of the Notes to be redeemed, together with
accrued and unpaid interest, if any, to the date of
redemption and for any redemption date on or after
December 15, 1999, at a redemption price equal to 112%
of the principal amount thereof plus accrued interest
thereon, if any, to the date of redemption, PROVIDED,
HOWEVER that after any such redemption the aggregate
principal of the Notes outstanding must equal at least
$79 million. See "Description of Notes--Optional
Redemption."
CHANGE OF CONTROL................. Upon the occurrence of a Change of Control, each holder
will have the right to require the Issuer to repurchase
all or any part of such holder's Notes, in the case of a
repurchase date prior to December 15, 1999, at a
purchase price in cash equal to 101% of the Accreted
Value thereof plus any accrued and unpaid interest, if
any, to the date of repurchase and for any repurchase
date on or after December 15, 1999, at a purchase price
in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes--Optional
Redemption" and "--Change of Control."
RESTRICTIVE COVENANTS............. The indenture under which the Original Notes were issued
and the Exchange Notes will be issued (the "Indenture")
contains certain covenants that, among other things,
will limit (i) the
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incurrence of additional indebtedness by the Company,
(ii) distributions and withdrawals of the capital of the
Company and the redemption of certain subordinated
obligations of the Company, (iii) investments, (iv)
sales of assets and subsidiary stock, (v) transactions
with affiliates and (vi) consolidations, mergers and
transfers of all or substantially all the assets of the
Company. The Indenture also contains certain
restrictions on distributions by Subsidiaries. However,
all of these limitations and prohibitions are subject to
a number of important qualifications and exceptions. See
"Description of Notes--Certain Covenants."
ORIGINAL ISSUE DISCOUNT........... The Notes were considered to be issued with original
issue discount ("OID") for United States federal income
tax purposes. As a result, a U.S. Holder (defined in
"Certain United States Federal Income Tax Consequences")
generally will be required to include OID in gross
income for United States federal income tax purposes as
it accrues, in advance of the receipt of cash
attributable to such income. See "Certain United States
Federal Income Tax Consequences."
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THE APPRECIATION NOTES
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GENERAL........................... The Exchange Offer applies to $3 million aggregate
principal amount of the Original Appreciation Notes. The
form and terms of the Exchange Appreciation Notes are
the same as the form and terms of the Original
Appreciation Notes except that (i) the Exchange
Appreciation Notes will bear a "Series B" designation
and a different CUSIP Number from the Original
Appreciation Notes, (ii) the Exchange Appreciation Notes
will have been registered under the Securities Act and,
therefore, will not bear legends restricting the
transfer thereof and (iii) holders of Exchange
Appreciation Notes will not be entitled to certain
rights of holders of Original Appreciation Notes under
the Appreciation Note Registration Rights Agreement
which rights will terminate as to holders of the
Exchange Appreciation Notes upon consummation of the
Exchange Offer. See "Description of the Appreciation
Notes."
SECURITIES OFFERED................ $3 million principal amount of Series B Appreciation
Notes due 2007 (the "Exchange Appreciation Notes"). Each
Appreciation Note will entitle the holder thereof to
receive on the Maturity Date (as defined) a cash payment
of principal and interest in the amount equal to the
greater of (i) the principal amount thereof or (ii) the
Specified Percentage (as defined) of the Value (as
defined) of BMC on the Maturity Date. The "Value" of BMC
on the Maturity Date means an amount equal to the sum of
(i) 12 times Media Cashflow (as defined) for the then
most recent four fiscal quarters for which financial
statements of BMC are available plus (ii) the cash and
cash equivalents of BMC and its Subsidiaries on the
Maturity Date, less the aggregate amount of
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Indebtedness (as defined) of BMC and its Subsidiaries on
a consolidated basis outstanding on the Maturity Date.
"Specified Percentage" of an Appreciation Note with a
principal amount of $28.57 means 0.0000004761904761%, so
that holders of all Appreciation Notes will be entitled
to receive, in the aggregate, 5% of the Value of BMC.
MATURITY DATE..................... December 15, 2007.
RANKING........................... The Appreciation Notes are senior subordinated
obligations of the Issuer. The Appreciation Notes are
subordinated in right of payment to all existing and
future Senior Indebtedness (as defined) of the Issuer,
including the Notes, and rank senior in right of payment
to any subordinated indebtedness of the Issuer. See
"Description of Appreciation Notes--Ranking and Subordi-
nation."
GUARANTEES........................ The Appreciation Notes are unconditionally guaranteed,
jointly and severally, by each of the Subsidiary
Guarantors, all of which are wholly-owned. The
guarantees of the Appreciation Notes are senior
subordinated obligations of the Subsidiary Guarantors
and are subordinated in right of payment to all existing
and future Guarantor Senior Indebtedness (as defined) of
the respective Subsidiary Guarantor, including the
Subsidiary Guarantees of the Notes, and senior in right
of payment to all existing and future subordinated
indebtedness of the respective Subsidiary Guarantor and
may be released upon the occurrence of certain events.
See "Description of Appreciation Notes--Ranking and
Subordination" and "--Subsidiary Guarantees."
MANDATORY REDEMPTION AT THE OPTION
OF THE HOLDERS UPON THE OCCUR-
RENCE OF A SPECIFIED EVENT...... The Appreciation Notes will be redeemable, at the option
of the holders, upon the occurrence of (a) an Initial
Public Offering (as defined), (b) a Sale of the Company
(as defined), or (c) the liquidation of the Issuers in
each case at the redemption price (the "Specified Event
Redemption Price") equal to (i) in the case of a
redemption with respect to an Initial Public Offering,
the product of the imputed value of BMC, as established
by the price at which membership interests in BMC (the
"Membership Interests") are sold in such Initial Public
Offering (less underwriting discounts and commissions,
if any), multiplied by the Specified Percentage of the
Appreciation Note being redeemed, (ii) in the case of a
Sale of the Company covering assets (as defined in
clause (i) of the definition thereof) the amount equal
to the Specified Percentage of the Appreciation Note
being redeemed of the sum of the aggregate fair market
value of all consideration received by the Issuer and
its Subsidiaries, net of any debt repaid therewith, net
of ordinary and customary transaction expenses of the
related transfer and the fair market value of BMC as
determined after giving effect to such sale, (iii) in
the case of a redemption with respect to a Sale of the
Company
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
concerning securities (as defined in clause (ii) of the
definition thereof), the product of the imputed value of
BMC, as established by the price at which Membership
Interests are sold in such Sale of the Company, or in
the transaction which resulted in such Sale of the
Company, multiplied by the Specified Percentage of the
Appreciation Note being redeemed, and (iv) in the case
of a redemption with respect to a liquidation of the
Issuer, an amount equal to the greater of (A) the fair
market value of the distribution received by Membership
Interests, multiplied by the Specified Percentage of the
Appreciation Note being redeemed and (B) the Pro Rata
Percentage (as defined) of such Appreciation Note of
$3.0 million. See "Description of the Appreciation
Notes--Mandatory Redemption at the Option of the Holders
upon the Occurrence of Certain Events."
MANDATORY REDEMPTION AT THE OPTION
OF THE HOLDERS ON SPECIFIED
DATE............................ In addition, if an Initial Public Offering has not
occurred on or before a date set forth below, the
holders may require the Issuer to redeem its
Appreciation Notes at a redemption price equal to the
Pro Rata Percentage of such Appreciation Note of the
amount set forth below opposite such date:
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION DATE AMOUNT
---------------- ---------------
<S> <C> <C>
June 30, 2003.. $ 24.0 million
June 30, 2004.. $ 20.0 million
June 30, 2005.. $ 13.0 million
</TABLE>
<TABLE>
<S> <C>
If a holder so elects the Issuer shall redeem the
relevant Appreciation Notes no later than the 90th day
after the relevant redemption date. See "Description of
the Appreciation Notes-- Mandatory Redemption at the
Option of Holders on Specified Dates."
OPTIONAL REDEMPTION............... The Issuer may not redeem the Appreciation Notes prior
to June 15, 1999. Thereafter, if an Initial Public
Offering has not occurred on or before a date set forth
below, the Issuer may redeem the Appreciation Notes (in
whole but not in part) on any date set forth below at a
redemption price equal to the Pro Rata Percentage of
each Appreciation Note of the amount the price set forth
below opposite such date. See "Description of the
Appreciation Notes--Optional Redemption."
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION DATE AMOUNT
---------------- ----------------
<S> <C> <C>
June 15, 1999.. $ 3.0 million
June 15, 2000.. $ 8.3 million
June 15, 2001.. $ 12.8 million
June 15, 2002.. $ 18.0 million
June 15, 2003.. $ 24.0 million
June 15, 2004 $ 31.0 million
June 15, 2005.. $ 39.0 million
June 15, 2006.. $ 48.0 million
June 15, 2007.. $ 58.0 million
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
ORIGINAL ISSUE DISCOUNT........... The Appreciation Notes were considered to be issued with
original issue discount ("OID") for United States
federal income tax purposes. As a result, a U.S. Holder
(defined in "Certain United States Federal Income Tax
Consequences") generally will be required to include OID
in gross income for United States federal income tax
purposes as it accrues, in advance of the receipt of
cash attributable to such income. See "Certain United
States Federal Income Tax Consequences."
</TABLE>
20
<PAGE>
PRO FORMA MEDIA CASHFLOW AND OTHER DATA
The following pro forma Media Cashflow and Other Data give effect to the
Transactions as if they had been completed as of March 1, 1996 for results of
operations data or on November 30, 1997 for balance sheet data. The information
presented may not be indicative of the actual results had the Transactions
occurred on such dates, and there can be no assurance that the Company will be
able to achieve such results in the future. The pro forma Media Cashflow and
Other Data presented below should be read in conjunction with the information
contained in the combined financial statements of The Radio and Newspaper
Businesses of Alan R. Brill, "Pro Forma Financial Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------
(DOLLARS IN THOUSANDS)
----------------------------------
YEAR ENDED
FEBRUARY 28, NINE MONTHS ENDED
1997 NOVEMBER 30, 1997
--------------- -----------------
<S> <C> <C>
Net loss................................................. $ 8,457 $ 5,629
Media Cashflow (a)....................................... 10,226 8,734
EBITDA (a)............................................... 5,771 5,204
Net interest expense (b)................................. 12,721 9,551
Net cash interest expense (c)............................ 7,362 5,532
Net debt (d)............................................. 79,981 79,981
Ratio of Media Cashflow to net interest expense.......... 0.80x 0.91x
Ratio of Media Cashflow to net cash interest expense..... 1.39x 1.58x
Ratio of net debt to Media Cashflow...................... 7.82x 6.87(e)x
</TABLE>
(a) "EBITDA" is defined as operating income before depreciation and amortization
expenses. "Media Cashflow" is defined as EBITDA plus management fees,
incentive plan expense, time brokerage agreement fees, acquisition related
consulting expense and interest income from loans made by the Company to
Managed Affiliates. Management fees payable to BMCLP are subordinated, to
the extent provided in the Indenture, to the prior payment of the Issuer's
obligations on the Notes. Although Media Cashflow and EBITDA are not
measures of performance calculated in accordance with GAAP, management
believes that these measures are useful to an investor in evaluating the
Company because these measures are widely used in the media industry to
evaluate a media company's operating performance. However, Media Cashflow
and EBITDA should not be considered in isolation or as substitutes for net
income, cash flows from operating activities and other income or cash flow
statements prepared in accordance with GAAP as measures of liquidity or
profitability.
(b) Reflects interest expense on the Notes and Appreciation Notes and on other
debt and capitalized leases. Net interest expense excludes $555,000 and
$413,000 in non-cash amortization of deferred financing fees for the year
ended February 28, 1997 and the nine months ended November 30, 1997,
respectively. Net interest expense is also net of expected interest income,
calculated at 5.5% on excess proceeds from the Transactions estimated to be
$22.4 million at November 30, 1997, of $1,232,000 and $924,000 for the year
ended February 28, 1997 and the nine months ended November 30, 1997,
respectively.
(c) Reflects interest expense on the Notes and Appreciation Notes and on other
debt and capitalized leases. Net cash interest expense excludes $555,000 and
$413,000 in non-cash amortization of deferred financing fees for the year
ended February 28, 1997 and nine months ended November 30, 1997,
respectively and also excludes interest accrued at the effective rate of
12.2%, which is in excess of the current pay rate of 7.5% in each of years
one and two by $4,960,000 ($3,720,000 for nine months) and excludes interest
on the Appreciation Notes accreted at 17% totaling $399,000 for the year
ended February 28, 1997 ($299,000 for nine months). Net cash interest
expense is also net of expected interest income, calculated at 5.5% on
excess proceeds from the Transactions estimated to be $22.4 million at
November 30, 1997, of $1,232,000 and $924,000 for the year ended February
28, 1997 and the nine months ended November 30, 1997, respectively.
(d) Net debt includes total debt less the incentive plan liability and less cash
and cash equivalents, all as of November 30, 1997, as significant portions
of the cash and cash equivalents are held for future acquisitions.
(e) For purposes of this ratio the Media Cashflow for the nine months ended
November 30, 1997 has been annualized. No assurance can be provided that
such results will be achieved.
21
<PAGE>
SUMMARY COMBINED FINANCIAL DATA
The summary combined financial data presented below should be read in
conjunction with the combined financial statements of The Radio and Newspaper
Businesses of Alan R. Brill and notes thereto included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The summary combined financial data (except for the
other financial and operating data) of The Radio and Newspaper Businesses of
Alan R. Brill (i) as of and for the years ended February 28, 1993 and 1994 have
been derived from schedules which primarily include information from the
separate audited combined financial statements of The Broadcasting Businesses of
Alan R. Brill and the separate audited consolidated financial statements of
Central Michigan Newspapers, Inc., (ii) as of and for the years ended February
28, 1995, February 29, 1996 and February 28, 1997 have been derived from the
audited combined financial statements of The Radio and Newspaper Businesses of
Alan R. Brill and (iii) as of and for the nine months ended November 30, 1996
and 1997 have been derived from the unaudited condensed combined financial
statements of The Radio and Newspaper Businesses of Alan R. Brill. The summary
pro forma data presented below should be read in conjunction with the
information contained in the historical financial statements included elsewhere
herein and "Pro Forma Financial Information."
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------
NINE
MONTHS
ENDED
FISCAL YEAR ENDED FEBRUARY 28 OR 29 NOVEMBER
------------------------------------------------ 30,
1993 1994 1995 1996 1997 1996
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenues:
Radio..................... $ 9,764 $ 10,961 $ 12,650 $ 13,096 $ 13,596 $ 10,483
Newspapers................ 10,877 10,499 10,537 12,217 13,440 10,458
-------- -------- -------- -------- -------- ----------
Total revenues........ 20,641 21,460 23,187 25,313 27,036 20,941
Operating expenses:
Operating departments..... 16,644 16,352 17,530 18,640 19,043 14,641
Incentive plan............ 25 176 634 1,467 628 471
Other..................... -- -- -- 37 86 17
Management fees........... 897 1,521 1,679 1,833 1,945 1,502
Depreciation and
amortization............ 1,306 1,277 1,111 1,312 1,395 1,022
-------- -------- -------- -------- -------- ----------
Total operating
expenses.............. 18,872 19,326 20,954 23,289 23,097 17,653
-------- -------- -------- -------- -------- ----------
Operating income............ 1,769 2,134 2,233 2,024 3,939 3,288
Other income (expense):
Interest expense, net..... (4,484) (4,645) (5,842) (7,130) (7,432) (5,565)
Other, net................ (148) 3,463 (144) (80) 1,007 1,018
-------- -------- -------- -------- -------- ----------
Total other income
(expense)........... (4,632) (1,182) (5,986) (7,210) (6,425) (4,547)
-------- -------- -------- -------- -------- ----------
Income (loss) before income
taxes and extraordinary
item...................... (2,863) 952 (3,753) (5,186) (2,486) (1,259)
Income tax provision
(benefit)................. 112 168 68 (39) 286 121
-------- -------- -------- -------- -------- ----------
Income (loss) before
extraordinary item........ (2,975) 784 (3,821) (5,147) (2,772) (1,380)
Extraordinary item (b)...... -- 245 -- 6,915 -- --
-------- -------- -------- -------- -------- ----------
Net income (loss)........... $ (2,975) $ 1,029 $ (3,821) $ 1,768 $ (2,772) $ (1,380)
-------- -------- -------- -------- -------- ----------
-------- -------- -------- -------- -------- ----------
OTHER FINANCIAL AND
OPERATING DATA:
Media Cashflow (c).......... $ 3,997 $ 5,108 $ 5,657 $ 6,673 $ 7,993 $ 6,300
EBITDA (c).................. 3,075 3,411 3,344 3,336 5,334 4,310
Capital expenditures
excluding acquisitions.... 410 833 974 977 1,269 543
Net interest expense (d)....
Net cash interest
expense (e)...............
Net debt (f)................
Ratio of Media Cashflow to
net interest expense......
Ratio of Media Cashflow to
net cash interest
expense...................
Ratio of net debt to Media
Cashflow..................
Ratio of earnings to fixed
charges (h)............... -- 1.20x -- -- -- --
<CAPTION>
PRO FORMA
-------------------------
NINE NINE
MONTHS MONTHS
ENDED YEAR ENDED
NOVEMBER ENDED NOVEMBER
30, FEBRUARY 28, 30,
1997 1997 (A) 1997 (A)
---------- ------------ ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues:
Radio..................... $ 11,854 $ 11,644 $10,210
Newspapers................ 11,121 15,771 12,373
---------- ------------ ----------
Total revenues........ 22,975 27,415 22,583
Operating expenses:
Operating departments..... 15,685 19,147 15,317
Incentive plan............ 545 628 545
Other..................... 217 -- --
Management fees........... 1,598 1,869 1,517
Depreciation and
amortization............ 1,298 1,358 1,259
---------- ------------ ----------
Total operating
expenses.............. 19,343 23,002 18,638
---------- ------------ ----------
Operating income............ 3,632 4,413 3,945
Other income (expense):
Interest expense, net..... (6,519) (12,550) (9,420)
Other, net................ (51) (48) (42)
---------- ------------ ----------
Total other income
(expense)........... (6,570) (12,598) (9,462)
---------- ------------ ----------
Income (loss) before income
taxes and extraordinary
item...................... (2,938) (8,185) (5,517)
Income tax provision
(benefit)................. 103 272 112
---------- ------------ ----------
Income (loss) before
extraordinary item........ (3,041) (8,457) (5,629)
Extraordinary item (b)...... -- -- --
---------- ------------ ----------
Net income (loss)........... $ (3,041) $ (8,457) $(5,629)
---------- ------------ ----------
---------- ------------ ----------
OTHER FINANCIAL AND
OPERATING DATA:
Media Cashflow (c).......... $ 8,510 $ 10,226 $ 8,734
EBITDA (c).................. 4,930 5,771 5,204
Capital expenditures
excluding acquisitions.... 610 1,336 601
Net interest expense (d).... 12,721 9,551
Net cash interest
expense (e)............... 7,362 5,532
Net debt (f)................ 79,981 79,981
Ratio of Media Cashflow to
net interest expense...... 0.80x 0.91x
Ratio of Media Cashflow to
net cash interest
expense................... 1.39x 1.58x
Ratio of net debt to Media
Cashflow.................. 7.82x 6.87x (g)
Ratio of earnings to fixed
charges (h)............... -- -- --
</TABLE>
- ----------------------------------
22
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -------------
-----------------------------------------------------------------------------------
AS OF AS OF AS OF
AS OF FEBRUARY 28 OR 29 NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
----------------------------------------------------- ------------- ------------- -------------
1993 1994 1995 1996 1997 1996 1997 1997 (A)
--------- --------- --------- --------- --------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL
POSITION DATA:
Cash and cash
equivalents.......... $ 104 $ 202 $ 550 $ 2,075 $ 775 $ 567 $ 109 $ 22,639
Working capital
(deficit)............ (3,469) (1,881) (334) 2,398 1,014 2,227 1,859 24,486
Intangible assets...... 4,103 5,219 5,099 7,374 7,583 7,547 12,174 17,415
Total assets........... 16,454 21,938 21,784 26,011 26,442 27,674 41,675 69,091
Total debt including
due to affiliates
(i).................. 49,796 55,160 58,715 61,636 50,475 49,782 81,106 107,320
Net capital deficiency
(j).................. (37,153) (36,302) (40,123) (38,354) (26,610) (27,838) (41,858) (40,526)
</TABLE>
- ------------------------
(a) The pro forma statement of operations and other financial and operating data
for the year ended February 28, 1997 and for the nine months ended November
30, 1997 give effect to the Transactions as if they occurred March 1, 1996.
The pro forma statement of financial position data give effect to the
Transactions as if they had occurred on November 30, 1997. See "Pro Forma
Financial Information."
(b) The extraordinary item in fiscal 1996 reflects an adjustment of accrued
interest in the amount of $7.0 million related to subordinated debt for
which contingent interest had been accrued at the maximum rate but was
reduced at maturity pursuant to terms of an alternative valuation formula,
as defined in the agreement. The gain was offset by the write-off of certain
previously deferred financing fees of $131,000.
(c) "EBITDA" is defined as operating income before depreciation and amortization
expenses. "Media Cashflow" is defined as EBITDA plus management fees,
incentive plan expense, time brokerage agreement fees, acquisition related
consulting expense and interest income from loans made by the Company to
Managed Affiliates. Management fees payable to BMCLP are subordinated, to
the extent provided in the Indenture, to the prior payment of the Issuer's
obligations on the Notes. Although Media Cashflow and EBITDA are not
measures of performance calculated in accordance with GAAP, management
believes that these measures are useful to an investor in evaluating the
Company because these measures are widely used in the media industry to
evaluate a media company's operating performance. However, Media Cashflow
and EBITDA should not be considered in isolation or as substitutes for net
income, cash flows from operating activities and other income or cash flow
statements prepared in accordance with GAAP as measures of liquidity or
profitability.
(d) Reflects interest expense on the Notes and Appreciation Notes and on other
debt and capitalized leases. Net interest expense excludes $555,000 and
$413,000 in non-cash amortization of deferred financing fees for the year
ended February 28, 1997 and the nine months ended November 30, 1997,
respectively. Net interest expense is also net of expected interest income,
calculated at 5.5% on excess proceeds from the Transactions estimated to be
$22.4 million at November 30, 1997, of $1,232,000 and $924,000 for the year
ended February 28, 1997 and the nine months ended November 30, 1997,
respectively.
(e) Reflects interest expense on the Notes and Appreciation Notes and on other
debt and capitalized leases. Net cash interest expense excludes $555,000 and
$413,000 in non-cash amortization of deferred financing fees for the year
ended February 28, 1997 and nine months ended November 30, 1997,
respectively and also excludes interest accrued at the effective rate of
12.2%, which is in excess of the current pay rate of 7.5% in each of years
one and two by $4,960,000 ($3,720,000 for nine months) and excludes interest
on the Appreciation Notes accreted at 17% totaling $399,000 for the year
ended February 28, 1997 ($299,000 for nine months). Net cash interest
expense is also net of expected interest income, calculated at 5.5% on
excess proceeds from the Transactions estimated to be $22.4 million at
November 30, 1997, of $1,232,000 and $924,000 for the year ended February
28, 1997 and nine months ended November 30, 1997, respectively.
(f) Net debt includes total debt less the incentive plan liability and less cash
and cash equivalents, all as of November 30, 1997, as significant portions
of the cash and cash equivalents are held for future acquisitions.
(g) For purposes of this ratio the Media Cashflow for the nine months ended
November 30, 1997 has been annualized. No assurance can be provided that
such results will be achieved.
(h) For purposes of this calculation, earnings are defined as income (loss)
before income taxes and extraordinary item and fixed charges. Fixed charges
are the sum of (i) interest costs (including the interest portion of
operating leases) and (ii) amortization of deferred financing costs.
Earnings were inadequate to cover fixed charges by approximately $2,863,000,
$3,753,000, $5,186,000, $2,486,000, $1,259,000, $2,938,000, $8,185,000 and
$5,517,000 for the historical fiscal years 1993, 1995, 1996, 1997, the
historical nine months ended November 30, 1996 and 1997, the pro forma year
ended February 28, 1997 and the pro forma nine months ended November 30,
1997, respectively.
(i) Total debt including due to affiliates includes the senior note, obligations
under capital leases, unsecured and subordinated obligations, debt due to
affiliates and, on a pro forma basis, the Notes and Appreciation Notes.
(j) The net capital deficiency as of November 30, 1997 and the pro forma net
capital deficiency as of November 30, 1997 reflect the declaration and
payment of distributions in the amount of $12.2 million, $8.0 million in
cash and $4.2 million for purposes of satisfaction of affiliate notes
receivable.
23
<PAGE>
RISK FACTORS
Investors should carefully examine this entire Prospectus and should give
particular attention to the risk factors set forth below in evaluating whether
to tender their Original Securities for Exchange Securities in the Exchange
Offer.
COMPANY STRUCTURE
BMC is a holding company with no business operations of its own. Media, a
wholly owned Subsidiary of BMC, is BMC's manager and, with BMC, co-issuer of the
Securities (collectively, the "Issuer").
BMC has lent the proceeds received by it from the Offering to Holdings in
exchange for Holdings' unsecured promissory note (the "Holdings' Note"). BMC's
only material assets are the Holdings' Note and its ownership of all membership
interests of BMC Holdings, LLC ("Holdings"), a Subsidiary that directly and
indirectly owns all equity and membership interests in all of the other
Subsidiaries. Accordingly, BMC will be dependent upon the earnings and cashflows
of, and dividends and distributions from, its direct and indirect Subsidiaries
to pay its expenses, meet its obligations and pay interest and principal on the
Securities. There can be no assurance that these Subsidiaries will generate
earnings and cashflows sufficient to pay dividends or distribute funds to BMC
that will enable it to pay its expenses and meet its obligations to pay interest
and principal on the Securities.
Subject to applicable restrictions in the Indenture or the proposed New
Credit Facility, acting pursuant to a revolving credit agreement (the "Revolving
Credit Agreement") entered into by and among Holdings as lender and Holdings'
Subsidiaries as borrowers thereunder, from time to time Holdings will lend and
relend available funds to such Subsidiaries, in exchange for the Subsidiaries'
unsecured promissory note (the "Subsidiaries' Note") payable to Holdings. From
time to time Holdings and the Subsidiaries also will lend and relend available
funds to the Managed Affiliates in exchange for the Managed Affiliates'
unsecured notes. See "Description of Notes."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS; NET LOSSES
As of November 30, 1997, after giving effect to the Transactions on a pro
forma basis, the Company had outstanding approximately $107 million of long term
obligations. See "Capitalization." Holdings is a holding company with no
business operations of its own, and the Newspapers' and Stations' operations are
conducted through the Subsidiaries. The Subsidiaries are not required to make
capital or other contributions to BMC or Holdings, and BMC's expected revenues
and assets will consist almost entirely of interest, principal, and dividend or
other payments or distributions to be received by BMC from the Subsidiaries
through their payments to Holdings on the Subsidiaries' Note and Holdings'
payments to BMC on the Holdings' Note. Media is a new corporation with
negligible assets and no material sources of income and will be only an
accommodation maker on the Securities, and BMC will be expected to pay all
obligations on the Securities and to reimburse Media for any amounts it may pay
on the Securities. BMC's ability to pay interest on the Securities when due and
to satisfy its other obligations ultimately depends, therefore, in large part
upon the future operating performance of the Subsidiaries, which ability
necessarily will be affected by prevailing economic conditions, which in turn
will depend upon and be affected by financial, business, market, technological,
competitive, and other conditions, developments, pressures, and factors, many of
which are and will continue to be beyond their knowledge or control. BMC,
Holdings, and the Subsidiaries are and will be highly leveraged, and many of
their competitors are believed to operate with much less leverage and to have
significantly greater operating and financial flexibility and resources.
The Company and its Subsidiaries are organized under the laws of the
Commonwealth of Virginia. In addition to restrictions contained in agreements to
which they are parties, due to restrictions imposed by applicable law on the
payment of dividends or other distributions on capital stock (in the case of
corporations) or membership interests (in the case of limited liability
companies), a corporation or limited liability company may not make a
distribution or dividend, if, after giving effect to such dividend or
distribution, the corporation or limited liability company, as applicable, would
not be able to pay its debts
24
<PAGE>
as they become due in the usual course of business or if the corporation's or
limited liability company's total assets would then be less than the sum of its
then total liabilities. In making such a determination of the ability of a
corporation or limited liability company to make a dividend or distribution,
applicable Virginia law permits the board of directors (in the case of a
corporation) or the manager (in the case of a limited liability company) to base
its determination in part on its determination of a then fair valuation of the
entity's assets. There can be no assurance that any such dividends or
distributions to BMC or Holdings will be allowed.
While net income or loss may not be considered a meaningful measure of
performance for media properties, in the past, depreciation, amortization, and
interest charges have contributed significantly to periodic net losses suffered
by the Subsidiaries, and it is expected that such net losses will continue in
the future. On a combined basis, the Company and its predecessors reported a net
loss in three of their last five fiscal years. In the fiscal year ended February
28, 1997, the Company and its predecessors reported a net loss of $2.8 million.
While the Company expects that the Subsidiaries' cashflow will improve, the
Company nonetheless expects that the Subsidiaries will continue to incur
substantial net losses. There can be no assurance that the Subsidiaries will not
continue to generate further net losses in the future, which ultimately could
have a material, adverse effect on the Issuer's ability to pay interest or
principal on the Securities when due.
Media has nominal assets and no operations, and all representations as to
Media's solvency are based upon the assumption that BMC will hold Media harmless
from any claims asserted against Media on the Securities. The future of the
Company and its Subsidiaries involves a high degree of risk.
DEPENDENCE ON SUBSIDIARIES' OPERATING RESULTS; EFFECTIVE SUBORDINATION
While Holdings' Subsidiaries are obligated to pay principal and interest on
the Subsidiaries' Note, as and to the extent therein provided, Holdings'
Subsidiaries are legally distinct from Holdings and the Issuer, and none of the
Subsidiaries has or has now undertaken any obligation, direct, indirect,
contingent, or otherwise, to pay to holders of the Securities any amounts due
thereon or to secure payment thereof, or to make any funds available to the
Issuer or Holdings for any such purpose other than as may be required under each
Subsidiary's guarantees of the Securities. Additionally, since the Subsidiaries
own all operating assets of the Newspapers and Stations, the rights of holders
of the Securities effectively will be subordinate and inferior to the rights of
the secured creditors of each of the Subsidiaries to the extent of such
Subsidiary's assets.
Current levels of the Subsidiaries' operating results may not result in
dividend, distribution, or debt service payments to BMC or Holdings in amounts
sufficient, from that source alone, to meet all of BMC's expenses and debt
service requirements on the Securities, and the Subsidiaries may need to achieve
future increases in their operating results if BMC is to repay the Securities or
its other obligations when due. There can be no assurance that the Subsidiaries
can achieve such necessary increases or can sustain historical rates of growth
in revenues and operating results.
If the Company is unable to service its obligations in the ordinary course,
inevitably it will be forced to adopt alternative financial or operating
strategies, which may include using its working capital, reducing or delaying
capital expenditures, selling assets, restructuring or refinancing obligations,
or seeking equity capital. There can be no assurance that the Company can effect
any of these strategies on satisfactory terms, if at all.
RANKING OF THE SECURITIES AND THE SUBSIDIARY GUARANTEES, ABILITY TO INCUR
ADDITIONAL SECURED DEBT;
PRIORITY OF LIEN CREDITORS
The Notes are senior unsecured obligations of the Issuer and rank junior to
all secured indebtedness of the Issuer to the extent of the assets serving as
security therefor. As senior unsecured obligations of the Issuer, the Notes rank
PARI PASSU in right of payment with all other existing and future senior
unsecured indebtedness of the Issuer. Under the terms of the Indenture and the
Appreciation Note Indenture, the
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Company is permitted, upon the satisfaction of certain conditions, to incur
secured indebtedness. The rights of holders of the Notes as against the
Company's assets will be subordinate and inferior to all existing and future
liens or secured indebtedness or other secured obligations of the Company or any
Subsidiary, including any secured indebtedness under the proposed New Credit
Facility, the rights of judgment or other secured or lien creditors as against
the assets of the Company or any Subsidiary, and any prior, secured, or judgment
liens against the Company's assets, or any part thereof. In certain
circumstances, provisions of applicable secured indebtedness effectively could
prohibit or prevent either or both of (a) the Subsidiaries making debt service
or other payments to Holdings on the Subsidiaries' Note or (b) Holdings making
debt service or other payments to BMC on the Holdings' Note, and, as a result,
the Issuer might have insufficient funds available to make required payments due
to holders of the Notes. The Subsidiary Guarantors, all of which are
wholly-owned, have unconditionally guaranteed the payment of principal and
interest on the Notes when due. The Subsidiary Guarantees rank PARI PASSU with
all existing and future senior indebtedness of the Issuer and the Subsidiary
Guarantors. The Subsidiary Guarantees are unsecured and thus, in effect, would
rank junior to any secured indebtedness of the Subsidiary Guarantors. Upon
completion of the Transactions, the Subsidiary Guarantors will have
approximately $4.8 million in aggregate principal amount of secured indebtedness
outstanding. The Indenture permits the Issuer and its Subsidiaries (including
the Subsidiary Guarantors) to incur additional secured debt under certain
circumstances. Some or all of such additional indebtedness may rank PARI PASSU
with the Subsidiary Guarantees, and the holders of such indebtedness may have a
claim to assets of a Subsidiary Guarantor superior to that of the holders of the
Notes because such additional indebtedness is secured by liens on assets of such
Subsidiary Guarantor. Although there are certain limitations on the ability of
the Subsidiary Guarantors to secure such debt, the incurrence of such additional
debt might adversely affect the Subsidiary Guarantors' ability to meet their
obligations under the Subsidiary Guarantees. See "Description of the
Notes--Subsidiary Guarantees." Consequently, in the event of dissolution,
liquidation or reorganization of, or similar proceeding relating to, any
Subsidiary Guarantor, such Subsidiary Guarantor's secured lenders would be
entitled to receive payment to the extent of the value of their collateral or in
full, whichever is less, prior to any payment in respect of such Subsidiary
Guarantee.
The Appreciation Notes are unsecured, subordinated obligations of the Issuer
and are subordinated in right of payment to all existing and future Senior
Indebtedness of the Issuer. Similarly, the Indebtedness evidenced by the
Guarantees of the Appreciation Notes by the Subsidiary Guarantors is
subordinated to the prior payment in full of all existing and future Guarantor
Senior Indebtedness (as defined under "Description of Appreciation Notes"). As
of November 30, 1997, after giving effect to the Offering and the use of
proceeds therefrom, the Issuer and the Subsidiary Guarantors would have had
approximately $99.3 million of Senior Indebtedness outstanding. The Issuer and
the Subsidiary Guarantors can also incur additional Senior Indebtedness under
the terms of the Appreciation Notes. In the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Issuer and
the Subsidiary Guarantors, assets of the Issuer and the Subsidiary Guarantors
will be available to pay obligations on the Appreciation Notes only after all
Senior Indebtedness has been paid in full, and there can be no assurance that
there will be sufficient assets to pay amounts due on all or any of the
Appreciation Notes. See "Description of Appreciation Notes--Ranking and
Subordination" and "--Subsidiary Guarantees."
In the event of bankruptcy, liquidation, dissolution and winding up, or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes or the Appreciation Notes only after all secured
indebtedness of the Company (or effectively any indebtedness of its
Subsidiaries) has been paid in full, and there may not be sufficient assets then
remaining to pay amounts due on any or all Notes or Appreciation Notes then
outstanding. Also, in any bankruptcy proceeding the rights of the holders of the
Notes or the Appreciation Notes as against the Company's assets are subject to
being equitably subordinated to the rights of other creditors. In like fashion,
the rights of BMC on the Holdings' Note and of Holdings on the Subsidiaries'
Note effectively will be subordinate and inferior to the rights of all holders
of secured indebtedness of the Company. Secured indebtedness may be incurred by
the Company from time to time in an aggregate amount up to $15.0 million under
the proposed New Credit Facility, subject to
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certain restrictions, and may be secured by substantially all of the Company's
assets. In addition, the Company may incur additional indebtedness in accordance
with the terms of the Notes and the Indenture, the proceeds of which
indebtedness may or may not benefit the Company's future operating results. See
"Description of Notes--Certain Covenants--Limitations on Indebtedness."
FRAUDULENT CONVEYANCE
The incurrence and servicing by the Issuer of the obligations evidenced by
the Notes and the Appreciation Notes, the Issuer's and Holdings' use of the
proceeds of the Offering, Holdings' incurrence and servicing of obligations to
BMC on Holdings' Note, and the Subsidiaries' incurrence and servicing of
obligations to Holdings on the Subsidiaries' Note, each may be subject to review
under applicable federal and state fraudulent or voluntary conveyance laws and
similar laws and statutes enacted for the protection of creditors, and such laws
and statutes may be utilized by a court to subordinate or avoid such
obligations, payments, and transfers in favor of other existing or future
creditors of the Company.
If a court or other tribunal were to find (a) that when any of the Notes,
the Appreciation Notes, Holdings' Note, or the Subsidiaries' Note (collectively
and individually, the "Obligations"), as the case may be, were entered into or
issued, or (b) that when any advance or any payment of principal or interest was
made on any of them, that Media, the Company, or any Subsidiary taking such
action then was acting (i) with the intent of hindering, delaying, or defrauding
such actor's current or future creditors or (ii) that (x) such entity received
less than reasonably equivalent value or fair consideration for taking such
actions, making any such advance, transfer, or payment, or issuing such
indebtedness, or for issuing or paying interest or principal on any of the
Obligations, and that (y) Media, the Company or its Subsidiary or Subsidiaries,
as then applicable, then either (1) was insolvent or was rendered insolvent by
reason of such actions, (2) was engaged, or was about to engage, in a business
or transaction for which its assets constituted unreasonably small capital or
(3) intended to incur or believed that it would incur debts beyond its ability
to pay as such debts matured (as all of the foregoing terms are defined in or
interpreted under relevant fraudulent or voluntary conveyance or bankruptcy laws
or statutes), such court could, among other things, declare void, voidable, or
avoid one or more of such payments, advances, transfers, or indebtednesses, or
the Obligations, or any one or more of them, or subordinate, avoid, or postpone
the enforcement thereof, in whole or in part, in favor of other creditors.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the laws being applied. Generally, however, any one of
Media, the Company or its Subsidiaries would be considered insolvent if, at the
relevant time, either (a) the fair market value of its assets was less than the
amount required to pay the probable liability on its total existing debts and
liabilities (including contingent liabilities) as they became absolute and
matured or (b) that it was incurring debt beyond its ability to pay at maturity.
As described above, a court could, therefore, declare void, avoid, or
subordinate or postpone payment or enforcement of the Obligations, or any of
them, to the prior satisfaction of other obligations or other creditors, the
satisfaction of which obligations or creditors may be beyond the capacity of the
Company.
As to these transactions, Media, the Company and the Subsidiaries believe
that at all relevant times each was and will be (a) neither insolvent nor
rendered insolvent thereby, (b) in possession of sufficient capital to pay its
debts as the same mature or become due and to operate its business effectively,
and (c) incurring debt within its ability to pay as it matures in the ordinary
course. In reaching the foregoing conclusions, the Company has relied upon
analyses of financial and other information currently available to it and upon
internal projections and estimated values and amounts of assets and liabilities
of the Company and its Subsidiaries (including any applicable rights of
contribution, or indemnification as between them). There can be no assurance,
however, that such conclusions and assumptions are correct or that a court or
other tribunal passing on such questions would reach the same results.
In addition, the Guarantees of the Notes and the Appreciation Notes by the
Subsidiary Guarantors may be subject to review under relevant federal and state
fraudulent conveyance and similar statues in a
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bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
any of the Subsidiary Guarantors. In such a case, the analysis set forth above
would generally apply, except that such Guarantees could also be subject to the
claim that, since such Guarantees were incurred for the benefit of the Issuer
(and only indirectly for the benefit of the Subsidiary Guarantors), the
obligations of the Subsidiary Guarantors thereunder were incurred for less than
reasonably equivalent value or fair consideration. A court could avoid a
Subsidiary Guarantor's obligation under its Guarantees, subordinate such
Guarantee to other indebtedness of a Subsidiary Guarantor or take other action
detrimental to the holders of the Notes and/or the Appreciation Notes.
To the extent any Guarantee of a Subsidiary Guarantor was avoided as a
fraudulent conveyance, limited as described above, or held unenforceable for any
other reason, holders of the Notes and the Appreciation Notes would, to such
extent, cease to have a claim in respect of such Subsidiary Guarantee and, to
such such extent, would be creditors solely of the Issuer and any Subsidiary
Guarantor whose Guarantee was not avoided, limited or held unenforceable. In
such event, the claims of the holders of the Notes and the Appreciation Notes
against the issuer of an avoided, limited or unenforceable Guarantee would be
subject to the prior payment of all liabilities of such Subsidiary Guarantor.
There can be no assurance that, after providing for all prior claims, there
would be sufficient assets to satisfy the claims of the holders of Notes and/or
the Appreciation Notes.
ABILITY TO EXECUTE ACQUISITION STRATEGY
Historically, the Company has achieved significant growth through
acquisitions. In order for the Company to achieve needed future growth in
revenues and earnings and to replace the revenues and earnings of properties
that may be sold by one or more of the Subsidiaries from time to time,
additional acquisitions may be necessary. Meeting this need for acquisitions
will depend upon several factors, including the continued availability of
suitable financing and the ability to identify and acquire businesses on a
cost-effective basis, as well as the Company's ability effectively to integrate
acquired personnel, operations, products, and technologies, to retain and
motivate key personnel, and to retain the goodwill and customers of acquired
properties. There can be no assurance that the Company can or will successfully
acquire and integrate future operations. In connection with future acquisition
opportunities, the Company, or one or more of its Subsidiaries, may need to
incur additional indebtedness or issue additional equity or debt instruments.
There can be no assurance that debt or equity financing for such acquisitions
will be available on acceptable terms, or that the Company will be able to
identify or consummate any new acquisitions.
If and when achieved, new acquisitions may adversely affect near-term
operating results due to increased capital requirements, transitional management
and operating adjustments, increased interest costs associated with acquisition
debt, and other factors. Any future acquisitions may be highly-leveraged, and
such acquisitions well may increase the Company's overall leveraged position.
Any failure to make necessary acquisitions, or the making of unsuccessful
acquisitions, could have a material, adverse effect on the future financial
condition and operating results of the Company and each of its Subsidiaries.
To date, the Company's principal investments and acquisitions have been
confined to acquiring newspaper publishing, printing, and radio broadcasting
properties and related businesses as sole owners in middle markets. See
"Business."
RESTRICTIVE DEBT COVENANTS; PROPOSED NEW CREDIT FACILITY
It is expected that the proposed New Credit Facility, if and when put in
place, will contain certain restrictive covenants that, among other things, may
limit the Company's ability to incur additional indebtedness, create liens, or
make investments and capital expenditures. The proposed New Credit Facility also
may require that the Company comply with certain financial ratios and tests
requiring that the Company achieve certain financial and operating results. The
Company's ability to meet such financial ratios and tests may be affected by
events beyond its control, and there can be no assurance that such ratios
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and tests will be met. In the event of such a failure or a default under the
proposed New Credit Facility, the lenders thereunder may terminate their lending
commitments and may declare any indebtedness then existing under the proposed
New Credit Facility to be immediately due and payable, which could result in a
default on the Notes. As a result of the priority and security to be afforded to
others under the proposed New Credit Facility, to prior liens of secured
creditors, and to prior rights of the Subsidiaries' creditors by reason of
effective subordination as described above, in such circumstances there can be
no assurance that the Issuer then would have sufficient assets remaining and
available to pay indebtedness then outstanding under the Securities. Any
refinancing of the proposed New Credit Facility is likely to contain similar
restrictive covenants. See "Description of Notes--Restrictions on Indebtedness."
DEPENDENCE ON KEY PERSONNEL; CONTROL BY MR. BRILL
The Company's businesses depend to a significant extent upon the efforts,
abilities, and expertise of Mr. Brill, Donald C. TenBarge, Alan L. Beck, and
Clifton E. Forrest. The loss of any of these executives of BMCLP potentially
would have an adverse effect on the Company. Moreover, Mr. Brill owns and
controls the Company, and such control may have the effect of discouraging
transactions involving a potential change of control of the Company. Neither
BMCLP, the Issuer, Holdings nor any of the Subsidiaries has any long-term
employment contract with Mr. Brill or any other executive officer. Mr. Brill has
procured key man insurance on his life in the face amount of $5.0 million for
the Company's benefit.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control as defined in the Indenture, each
holder of a Note may seek to require the Issuer to repurchase all or a portion
of such holder's Notes. If a Change of Control were to occur, there can be no
assurance that the Issuer would then have sufficient financial resources (or
would be able to arrange financing) to pay the repurchase price for all Notes
tendered by holders thereof. Further, the Indenture's provisions may not afford
protection to holders of Notes in the event of a highly leveraged transaction,
reorganization, debt restructuring, merger, or similar transaction involving the
Company that ultimately may adversely affect holders of the Notes, even though
such a transaction may not have resulted in a Change of Control as such. In
addition, terms of the proposed New Credit Facility may limit the Issuer's
ability to purchase any Notes and also may identify certain events that would
constitute a Change of Control, as well as certain other events with respect to
the Company that would constitute an event of default under any New Credit
Facility. Any future credit or other agreements relating to other Indebtedness
to which the Company, or any of them, may become a party may contain similar
restrictions and provisions. See "Description of Notes."
In the event a Change of Control occurs at a time when the Issuer is
contractually prohibited from purchasing Notes, the Issuer could seek consent
for the Issuer to purchase Notes, or could attempt to refinance any borrowings
containing such prohibitions. If the Issuer does not obtain such consent or
effect such a refinancing, the Issuer could remain prohibited from purchasing
Notes. In such case, the Issuer's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture, which may, in turn,
constitute a default under the terms of other indebtedness that the Issuer may
have entered into from time to time, including secured indebtedness.
LACK OF ESTABLISHED TRADING MARKET
There has not been any public market for the Original Securities. The
Exchange Securities will constitute a new issue of securities with no
established trading market. The Issuer does not intend to list the Exchange
Securities on any securities exchange or to seek their admission to trading in
any automated quotation system. The Initial Purchaser has advised the Issuer
that it currently intends to make a market in the Exchange Securities, but it is
not obligated to do so and may discontinue such market-making at any time
without notice. In addition, such market-making activity will be subject to the
limits imposed by the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and may be limited during the Exchange Offer and
at certain other times. Accordingly, no assurance can be given that
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an active public or other market will develop for the Exchange Securities or as
to the liquidity of the trading market for the Exchange Securities. If a trading
market does not develop or is not maintained, holders of the Exchange Securities
may experience difficulty in reselling the Exchange Securities or may be unable
to sell them at all. If a market for the Exchange Securities develops, any such
market may be discontinued at any time.
If a public trading market develops for the Exchange Securities, future
trading prices of the Exchange Securities will depend on many factors,
including, among other things, prevailing interest rates, the Issuer's operating
results and the market for similar securities. Depending on prevailing interest
rates, the market for similar securities and other factors, including the
financial condition of the Issuer, the Exchange Securities may trade at a
discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Securities in exchange for the Original Securities
pursuant to the Exchange Offer will be made only after a timely receipt by the
Issuer of such Original Securities, properly completed and duly executed Letters
of Transmittal and all other required documents. Therefore, holders of the
Original Securities desiring to tender such Original Securities in exchange for
Exchange Securities should allow sufficient time to ensure timely delivery. The
Issuer is under no duty to give notification of defects or irregularities with
respect to the tenders of Original Securities for exchange. Original Securities
that are not tendered or are tendered but not accepted will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, upon consummation of the Exchange Offer,
certain registration rights under the Registration Rights Agreements will
terminate. In addition, any holder of Original Securities who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Securities may be deemed to have received restricted securities and, if
so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transactions.
Each holder of the Original Securities (other than certain specified holders)
who wishes to exchange the Original Securities for Exchange Securities in the
Exchange Offer will be required to represent in the Letters of Transmittal that
(i) it is not an affiliate of the Issuer, (ii) the Exchange Securities to be
received by it are being acquired in the ordinary course of its business and
(iii) at the time of commencement of the Exchange Offer, it has no arrangement
with any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Securities. Each Participating Broker-Dealer
that receives Exchange Securities for its own account in exchange for Original
Securities, where such Original Securities were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution." To the
extent that Original Securities are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Original
Securities could be adversely affected. See "The Exchange Offer."
ORIGINAL ISSUE DISCOUNT
The Exchange Securities will be considered to be issued with original issue
discount (the difference between the stated redemption price at maturity of a
debt instrument and the issue price of such debt instrument) for United States
federal income tax purposes. The Original Notes had original issue discount of
approximately $10.5 million and the Original Appreciation Notes had original
issue discount of approximately $651,000, both as of December 30, 1997. Original
issue discount will accrue from the issue date of the Exchange Securities and
generally will be includable as interest income in the U.S. Holder's (defined in
"Certain United States Federal Income Tax Consequences") gross income for United
States federal income tax purposes in advance of the cash payments to which the
income is attributable. For a more detailed discussion of the United States
federal income tax consequences to the holders of the purchase, ownership and
disposition of the Exchange Securities, see "Certain United States Federal
Income Tax Consequences."
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If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the
Exchange Securities, the claim of a holder of any of the Exchange Securities
with respect to the principal amount thereof may be limited to an amount equal
to the sum of (i) the initial offering price allocable to such debt instrument
and (ii) the portion of original issue discount which is not deemed to
constitute "unmatured interest" for purposes of the Bankruptcy Code. Any
original issue discount that was not amortized as of any such bankruptcy filing
would constitute "unmatured interest."
GOVERNMENTAL REGULATIONS
The radio broadcasting industry is subject to extensive and changing
regulation. Among other things, the Communications Act of 1934, as amended (the
"Communications Act"), and rules, regulations, and policies of the Federal
Communication Commission (the "FCC") require FCC consent to assignments of FCC
licenses or transfers of control of FCC licensees. Each of the Stations operates
pursuant to one or more licenses issued by the FCC, which expire at different
times. Each licensee may apply to renew applicable licenses prior to their
expiration. Third parties may challenge these applications or file competing
applications by filing petitions with the FCC seeking to deny the renewal
application. The FCC must grant the renewal application if it determines that
during the preceding license term: (i) the station served the public interest,
convenience and necessity; (ii) the licensee has committed no serious violation
of the Communications Act or the FCC's rules; and (iii) there have been no other
violations of the Act or such rules which taken together would indicate a
pattern of abuse.
If a substantial and material question of fact concerning a renewal
application is raised by the FCC or other interested parties, or if for any
reason the FCC cannot determine on the basis of the application and related
pleadings that renewal would serve the public interest, convenience and
necessity, the FCC will hold an evidentiary hearing on the application. If the
FCC denies the renewal application upon conclusion of the hearing, third parties
may then file applications for a license to operate those facilities. In
determining whether to renew a station license, the FCC may not consider whether
the public interest, convenience, and necessity would be better served by the
grant of a license to a party other than the renewal applicant.
In connection with the Company's proposed sale of the Missouri Properties, a
competitor of the purchaser has filed a Petition to Deny the FCC's approval of
the requisite transfer of the broadcast licenses of the Missouri Properties. The
Company cannot now predict the outcome of such petition with any certainty. See
"Recent or Pending Transactions."
There have been a number of petitions to deny and competing applications
filed with respect to broadcast license renewal applications. In the vast
majority of cases, the FCC has renewed incumbent operators' station licenses.
Such a filing presently is pending against station KUAD-FM located in Windsor,
Colorado, which is owned and operated by Northern Colorado Radio, Inc., one of
the Subsidiaries, which filing the Company believes is without a significant
basis. Although the Company believes that this and the Stations' other licenses
will be renewed, there can be no assurance that this will occur.
The Company is aware that the U.S. Federal Trade Commission (the "FTC") and
the Antitrust Division of the U.S. Department of Justice (the "DOJ"), which
evaluate transactions to determine whether those transactions should be
challenged under the federal antitrust laws, have been increasingly active
recently in their review of radio station acquisitions, particularly where an
operator proposes to acquire additional stations in its existing markets.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino
Act (the "HSR Act") and the rules promulgated thereunder require the parties to
file Notification and Report Forms with the FTC and the DOJ and to observe
specified waiting period requirements before consummating the acquisition.
During the initial 30 day period after the filing, the agencies decide which of
them will investigate the transaction. If the investigating agency determines
that the transaction does not raise significant antitrust issues, then it will
either terminate the waiting period or allow it to expire after the initial 30
days. On the
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other hand, if the agency determines that the transaction requires a more
detailed investigation, then prior to or at the conclusion of the initial 30 day
period, it will issue a formal request for additional information ("Second
Request"). The issuance of a Second Request extends the waiting period until the
twentieth calendar day after the date of substantial compliance by all parties
to the acquisition. Thereafter, such waiting period may only be extended by
court order or with the consent of the parties. In practice, complying with a
Second Request can take a significant amount of time. In addition, if the
investigating agency raises substantive issues in connection with a proposed
transaction, then the parties frequently engage in lengthy discussions or
negotiations with the investigating agency concerning possible means of
addressing those issues, including but not limited to persuading the agency that
the proposed acquisition would not violate the antitrust laws, restructuring the
proposed acquisition, divestiture of other assets of one or more parties, or
abandonment of the transaction. Such discussions and negotiations can be time
consuming, and the parties may agree to delay consummation of the acquisition
during their pendency.
At any time before or after the consummation of a proposed acquisition, the
FTC or the DOJ could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business acquired or other assets of
the acquiring company. Acquisitions that are not required to be reported under
the HSR Act may be investigated by the FTC or the DOJ under the antitrust laws
before or after consummation. In addition, private parties may under certain
circumstances bring legal action to challenge an acquisition under the antitrust
laws.
As part of its increased scrutiny of radio station acquisitions, the DOJ has
stated publicly that it believes that LMAs, JSAs and other similar agreements
customarily entered into in connection with radio station transfers prior to the
expiration of the waiting period under the HSR Act could violate the HSR Act
because they may constitute acquisitions or joint ventures subject to the filing
and waiting period provisions of the HSR Act.
If the Company should grow in size, whether through acquisitions or
otherwise, it will become increasingly vulnerable to scrutiny under various
antitrust and similar regulatory laws administered by various federal and state
authorities, laws and regulations in which considerations of absolute or
relative size or market share may be relevant if not controlling. Such laws and
regulations are quite complex and subject to amendment and to frequent
variations in interpretation or enforcement. The radio broadcast industry has
been subject to increased scrutiny by the Antitrust Division of the DOJ. As a
result of such increased scrutiny, the Company could experience delays,
increased costs, and compelled changes in connection with future transactions.
If it were to be determined that one or more of the Company or its Subsidiaries
had violated or were violating one or more of such laws or regulations, in
addition to liability for resulting damages, any affected entity could face
potential regulatory or court-ordered divestiture of one or more properties. Any
such result could have a material, adverse effect upon the Company. See
"Business--Federal Regulation of Radio Broadcasting--Federal Antitrust
Considerations."
CHANGES IN THE RADIO BROADCASTING INDUSTRY
The profitability of the Stations is subject to various factors that
influence the radio broadcasting industry as a whole. The Stations may be
affected by changes in audience taste, priorities of advertisers, new laws and
governmental regulations and policies, changes in broadcast technical
requirements, proposals to limit the tax deductibility of expenses incurred by
advertisers, changes in the willingness of financial institutions and other
lenders to finance radio station acquisitions and operations, and the
development of competitive technologies. The Company cannot predict which, if
any, of these factors might have a significant impact on the radio broadcasting
industry in the future, nor can it predict what impact, if any, the occurrence
of these events might have on the Company or on the Subsidiaries' operations.
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ECONOMIC CONDITIONS; SEASONALITY
Radio broadcasting is a highly competitive business, and the Stations
operate in highly competitive markets. Their financial success in each market
depends, to a significant degree, upon audience characteristics and ratings,
signal strength, each operator's share of the overall radio sales within its
geographic market, the number and economic strength of other stations in the
market, the economic health of the market, in particular its retailers, and the
popularity and audience ratings of each competitor in the market. Any material
adverse change in one or more of these conditions in a particular market
ultimately could have a material effect on the Company's resulting revenues and
cashflow. There can be no assurance that the Stations will be able to maintain
or increase their current audience ratings or revenues. During a general
economic recession or downturn, advertising expenditures tend to decline. In
addition, because substantial portions of the Stations' or Newspapers' revenues
are derived from local advertisers, operating results in individual geographic
markets could be adversely affected by short or long-term local or regional
economic downturns. See "Business."
Seasonal revenue fluctuations also are common in the newspaper and radio
broadcasting industries, caused by localized fluctuations in advertising
expenditures. Accordingly, the Stations' and Newspapers' quarterly operating
results have fluctuated in the past and will fluctuate in the future as a result
of various factors, including seasonal demands of retailers and the timing and
size of advertising purchases. Generally, in each calendar year the lowest level
of advertising revenues occurs in the first quarter and the highest levels occur
in the second and fourth quarters.
COMPETITION; NEW TECHNOLOGIES; PROPOSED REGULATIONS
The Stations and Newspapers compete for audience share and advertising
revenues with other newspapers, magazines, direct mail, free shoppers, outdoor
advertising, other FM and AM radio stations, television and cable television
stations, and other media present within their respective markets. Radio
broadcasting and newspaper distribution also are exposed to competition from
developing media technologies, such as the delivery of audio programming through
cable television or telephone wires, the introduction of digital radio
broadcasting, which may provide a medium for the delivery by satellite or
terrestrial means of multiple audio programming formats to local and national
audiences, the increasing development and use of direct mail advertising, the
growth of wireless communications and fiber optic delivery systems, the
development of televised shopping programs, the potential for televised
"newspapers," and the increasing growth of the internet. The Stations and
Newspapers also may encounter competition from future, unforeseen developments
in technology that subsequently may be commercialized, and at all times they
will face potential, additional competition from new or expanding market
entrants. The Company cannot predict what effect, if any, these or other new
technologies or competitors may have on the Company. See
"Business--Competition."
From time to time, the Congress and the FCC have considered, and in the
future may consider and adopt, new or revised laws, regulations, and policies
regarding a wide variety of matters that, directly or indirectly, could affect
the operation, ownership, and profitability of the Stations, result in the loss
of audience share and advertising revenues for the Stations, or affect the
Company's ability to acquire additional radio stations or to finance such
acquisitions. Such matters include: proposals to impose spectrum use or other
fees on FCC licensees; the FCC's equal employment opportunity rules and matters
relating to political broadcasting; technical and frequency allocation matters;
proposals to restrict or prohibit the advertising of beer, wine, and other
alcoholic beverages on radio; changes in the FCC's cross-interest, multiple
ownership, and cross-ownership policies; changes to broadcast technical
requirements; proposals to allow telephone or cable television companies to
deliver audio and video programming to the home through existing phone lines;
proposals to limit the tax deductibility of advertising expenses by advertisers;
and proposals to auction the right to use the radio broadcast spectrum to the
highest bidder, instead of granting FCC licenses and subsequent license renewals
without such bidding.
33
<PAGE>
On April 2, 1997, the FCC awarded two licenses for the provision of
satellite digital audio radio services ("DARS"). Under rules adopted for this
service, licensees must begin construction of their space stations within one
year, begin operating within four years, and be operating their entire system
within six years. The Company cannot predict whether the service will be
subscription or advertiser supported. Digital technology also may be used in the
future by terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and, on March 17,
1997, adopted an allotment plan for the expanded band that identified the 88 AM
radio stations selected to move into the band. At the end of a five-year
transition period, those licensees will be required to return to the FCC either
the license for their existing AM band station or the license for the expanded
AM band station.
The Company cannot predict whether any proposed changes will be adopted or
what other matters might be considered in the future, nor can it judge in
advance what impact, if any, the implementation of any of these proposals or
changes might have on the Company.
The foregoing brief description does not purport to be comprehensive and
reference should be made to the Communications Act, the FCC's rules, and the
public notices and rulings of the FCC for further information concerning the
nature and extent of federal regulation of radio broadcast stations.
COST OF NEWSPRINT
Newsprint represents the Newspapers' single largest raw material expense and
is one of the Newspapers' most significant operating costs. Newsprint costs are
cyclical and vary widely from period to period. For example, newsprint costs
increased approximately 40% per metric ton in late 1994 and 1995 on an
industry-wide basis. Newsprint costs decreased significantly, however, in the
second half of 1996. Future increases in the price of newsprint may have an
adverse effect on the Newspapers' operating results. The Newspapers have no
effective ability to hedge their exposure to such price fluctuations.
POTENTIAL CONFLICTS OF INTEREST
BMCLP will provide management services to certain of the Subsidiaries, and
Holdings will provide loans to the Subsidiaries. In addition, BMCLP may provide
such services to other affiliates, and Holdings or the Subsidiaries are expected
to provide loans to the Managed Affiliates. Mr. Brill owns and controls,
directly or indirectly, all of such entities, which also may enter into other
contractual relationships from time to time. Such relationships may present a
conflict between Mr. Brill's interests, as the ultimate owner of all parties to
such relationships, and the interest of the holders of the Securities. The
Indenture includes certain provisions that are intended to prevent unfair
transactions between the Issuer and affiliates. See "Certain Transactions" and
"Description of Notes--Certain Covenants--Limitation on Affiliate Transactions."
BMCLP, which provides management services, including benefit plan
administration, risk management, finance and tax management services and
strategic planning and operations oversight, is owned by Mr. Brill, directly or
indirectly, and provides similar services to other entities owned by Mr. Brill.
The fees charged by BMCLP are established on a contractual basis, as set forth
more fully under "Certain Transactions," and are payable to the extent set forth
in the "Description of Notes." BMCLP charged the Company approximately $1.6
million and $1.9 million for the nine months ended November 30, 1997 and year
ended February 28, 1997, respectively, for such services. Any failure by BMCLP
(and its management team) to continue providing such services to the Company or
the diversion of BMCLP's efforts to other businesses of Mr. Brill could have a
material adverse effect upon the Company.
In addition, from time to time certain of the Subsidiaries will enter into
management agreements (the "Managed Affiliate Management Agreements") with
certain affiliates of the Company. The Company
34
<PAGE>
charged the Managed Affiliates $180,000 and $40,000 for the nine months ended
November 30, 1997 and year ended February 28, 1997, respectively, for such
services.
Such Managed Affiliates also will issue Managed Affiliate Notes payable to
certain of the Subsidiaries. As of November 30, 1997, the Company had loaned
$15.4 million to the Managed Affiliates. Total interest income earned by the
Company on these loans totalled $1,220,225 and $3,606 for the nine months ended
November 30, 1997 and year ended February 28, 1997, respectively. The aggregate
amount of the Managed Affiliate Notes may not exceed $20 million unless the
Issuer first obtains a written opinion of an independent investment bank of
recognized national standing that such transaction is fair to the issuer from a
financial point of view. See "Description of Notes--Certain
Covenants--Limitation on Affiliate Transactions." Any default in payment of one
or more of the Managed Affiliate Notes or under any Managed Affiliate Management
Agreement could have a material adverse effect on the Company.
The Company is subject to provisions of Virginia law that restrict
transactions between the Company and its directors and officers, but the Company
does not additionally have a conflicts policy.
FORWARD-LOOKING STATEMENTS
The forward-looking statements contained in this Prospectus are subject to
certain risks and uncertainties. Such statements are based on the Company's and
its Subsidiaries' past experience and what they believe to be reasonable
assumptions. Past experience does not necessarily accurately foretell future
events. Also, such statements are based upon the underlying fundamental
assumptions that business, economic, and regulatory conditions over the
foreseeable future will remain relatively stable. There can be no assurance that
this will occur or that actual results will not differ materially and adversely
from those suggested by or inherent in such forward-looking statements as a
result of various factors, including, but not limited to: risks associated with
acquisitions and expansions of operations, unforeseen inability to obtain or
retain competent personnel, intense competition, unaccounted-for variations in
national or local markets, unpredictable market or regulatory developments,
unforeseen or unaccounted-for economic changes, unexpected management mistakes
or failures, unexpected variations in operating results or technological
changes, unforeseen cash or capital shortages or requirements, unforeseen and
unexpected uninsured torts or breaches of contract, and uncertainties as to the
nature and extent of future governmental regulation.
Such forward-looking statements are not statements of fact but of the
Company's and Issuer's opinions as to future events, opinions held, in their
view, with a reasonable degree of certainty based upon assumptions and
information then available to them, assumptions that, while considered by the
Company to be reasonable, are inherently subject to significant business,
economic, competitive, and regulatory uncertainty and contingencies that are
subject to change and beyond control of the Company. Such forward-looking
statements may prove to have been materially incorrect when made and may not
properly have reflected all variables that may turn out to have been material,
including unexpected material deviations in assumed general economic trends,
events, or components. Inevitably, certain of these expectations will not
materialize or will prove to have been materially unfounded, and unanticipated
events may materially and adversely affect actual results. The Company's actual
results of operations in future years undoubtedly will vary from that inherent
in such statements, and such variations may be negative or positive and well may
be material. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
It is vital that all forward-looking statements be understood and considered
only in context with all other information contained in this Prospectus and that
such statements not be considered in isolation or taken out of context. While
the Company believes such statements have a reasonable basis, these statements
may prove to have been materially incorrect when made and in no way are they, or
are they to be taken as, predictions or forecasts of future results.
35
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Issuer's
obligations under the Registration Rights Agreements. The Issuer will not
receive any cash proceeds from the issuance of the Exchange Securities in the
Exchange Offer. The net proceeds to the Issuer from the issuance of $105,000,000
aggregate principal amount of the Original Notes and $3,000,000 aggregate
principal amount of the Original Appreciation Notes, and the sale of the
Missouri Properties, and the uses of such proceeds on a pro forma basis as of
November 30, 1997 are summarized below:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Source of Funds:
Proceeds from issuance of Original Securities....................................................... $ 96,810
Proceeds from sale of Missouri Properties (a)....................................................... 6,366
Available cash on hand.............................................................................. 109
-----------
$ 103,285
-----------
-----------
Uses of Funds:
Repayment of existing senior note and related fees and expenses (b)................................. $ 73,704
Loans to Managed Affiliates (b)..................................................................... 893
Payment for acquisition of KTRR-FM.................................................................. 549
Fees and expenses related to the issuance of Original Securities (c)................................ 5,500
Cash available for operations and acquisitions (d).................................................. 22,639
-----------
$ 103,285
-----------
-----------
</TABLE>
- ------------------------
(a) Applications for transfer of the broadcast licenses of the Missouri
Properties have been filed with the FCC by the buyers. A local market
competitor has objected to the transfer of the licenses and on December 12,
1997, filed with the FCC a Petition to Deny the license transfers and to
terminate the Time Brokerage Agreement. No action has been taken on the
Petition to Deny by the FCC, and the Company believes that, even if the
Petition to Deny were granted, the consequences to the Company would not be
material.
(b) Certain of the Subsidiaries and other affiliates were indebted, as
co-obligors, under the terms of certain senior secured obligations payable
to Amresco and Goldman Sachs. The senior note bore interest at 10% payable
monthly and additional interest at 7.5% due upon final maturity of the
senior note. Proceeds from the senior note originally executed in February,
1996 (approximately $40 million) were used to refinance then existing
indebtedness which was owed to unaffiliated lenders. Subsequent borrowings
under the senior note were used to loan funds to the Managed Affiliates, pay
dividends to the Stockholder (see "Certain Transactions") and for general
corporate and working capital purposes. As of November 30, 1997, the Company
had loaned $15.4 million of the proceeds of such obligations to the Managed
Affiliates. The proceeds of such loans were used by the Managed Affiliates
to purchase property, equipment and intangibles and to provide working
capital for operations. On a pro forma basis as of November 30, 1997, the
Company used $73.7 million of the proceeds of the Offering to repay such
obligations to Amresco and Goldman Sachs, including the $2.8 million
prepayment penalty, and amended the terms of its loans to the Managed
Affiliates to provide for an interest rate of 12.0% per annum. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(c) Includes Initial Purchaser's fee ($4.2 million), legal, accounting, printing
and other costs associated with the issuance of the Original Securities.
(d) Represents cash available on a pro forma basis as of November 30, 1997.
36
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 30, 1997 (a) on a historical basis, and (b) on a pro forma basis to
give effect to the Transactions as if the Transactions had been consummated on
November 30, 1997. This table should be read in conjunction with the Pro Forma
Financial Statements and notes thereto and the separate historical combined
financial statements of The Radio and Newspaper Businesses of Alan R. Brill and
notes thereto included elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1997
-----------------------
<S> <C> <C>
ACTUAL PRO FORMA
---------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................................. $ 109 $ 22,639
---------- -----------
---------- -----------
12% Senior notes due 2007................................................................. $ -- $ 94,461
Senior notes (a).......................................................................... 70,904 --
Other senior secured obligations.......................................................... 1,311 2,356
Mortgages and purchase money.............................................................. 1,049 876
Obligations under capital leases.......................................................... 868 506
Subordinated secured obligations.......................................................... 1,055 1,055
Appreciation Notes........................................................................ -- 2,349
Unsecured obligations..................................................................... 1,219 1,017
Incentive plan liability.................................................................. 4,700 4,700
---------- -----------
Total long-term debt (including current maturities)................................... 81,106 107,320
Capital................................................................................... 8 7
Additional paid in capital................................................................ 1,793 1,793
Accumulated deficit....................................................................... (43,659) (42,326)
---------- -----------
Net capital deficiency (b)............................................................ (41,858) (40,526)
---------- -----------
Total capitalization.................................................................. $ 39,248 $ 66,794
---------- -----------
---------- -----------
</TABLE>
(a) Interest only payable monthly at the rate of 10% per annum, due September
30, 1999. Additional interest accrues at the rate of 7.5% per annum, due
September 30, 1999.
(b) The net capital deficiency as of November 30, 1997 and the pro forma net
capital deficiency as of November 30, 1997, reflect the declaration and
payment of distributions in the amount of $12.2 million, $8.0 million in
cash and $4.2 million for purposes of satisfaction of affiliate notes
receivable.
37
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined balance sheet of the
Company gives effect to the Transactions as if they had occurred on November 30,
1997. The following unaudited condensed combined statements of operations for
the year ended February 28, 1997 and the nine months ended November 30, 1997
give effect to the Transactions as if they had occurred March 1, 1996.
The acquisitions which comprise part of the Transactions will be accounted
for using the purchase method of accounting. The total cost of such acquisitions
will be allocated to the tangible and intangible assets acquired and liabilities
assumed based upon their respective fair values. The allocation of the
respective purchase prices of such acquisitions included in the pro forma
financial information is preliminary and is subject to revisions when additional
information concerning certain asset valuations is obtained and such revisions
could be material.
The pro forma adjustments are based on available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The pro forma financial information should be read in conjunction with the
separate historical combined financial statements of The Radio and Newspaper
Businesses of Alan R. Brill, and related notes thereto, included elsewhere in
this Prospectus. The unaudited pro forma condensed combined financial statements
are presented for illustrative purposes only, and do not purport to be
indicative of the results that actually would have been obtained had the
Transactions occurred as of the assumed dates and for the periods presented, and
are not intended to be a projection of future results or trends.
38
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997
<TABLE>
<CAPTION>
ACQUISITIONS
AND
DISPOSITIONS--
COMPANY-- HISTORICAL PRO FORMA COMBINED PRO
HISTORICAL (A) ADJUSTMENTS FORMA
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Broadcasting............................... $ 13,555,820 $(2,151,413) $ -- $ 11,404,407
Newspaper.................................. 13,440,395 2,330,070 -- 15,770,465
Management fees............................ 40,000 -- 200,000(k) 240,000
------------ ------------ ------------ --------------
Total revenues........................... 27,036,215 178,657 200,000 27,414,872
Operating expenses:
Operating departments...................... 19,042,885 317,397 (213,372)(g) 19,146,910
Incentive plan............................. 627,966 -- -- 627,966
Management fees............................ 1,944,699 (192,047) 116,504(e) 1,869,156
Time brokerage agreement fee, net.......... (54,500) 82,500 (28,000)(f) --
Consulting................................. 140,992 (22,992) (118,000)(f) --
Depreciation............................... 1,025,543 (180,082) (26,615)(h) 818,846
Amortization............................... 369,484 (83,929) 253,928(i) 539,483
------------ ------------ ------------ --------------
Total operating expenses................. 23,097,069 (79,153) (15,555) 23,002,361
------------ ------------ ------------ --------------
Operating income............................. 3,939,146 257,810 215,555 4,412,511
Other income (expense):
Interest--Managed Affiliates............... -- -- 1,957,915(d) 1,957,915
Interest--stockholder and affiliates,
net...................................... 246,909 133,937 (380,846)(l) --
Interest--other, net....................... (7,190,504) 961,656 (7,724,607)(b)(c)(j) (13,953,455)
Amortization of deferred financing costs... (488,712) 76,348 (142,540)(b)(c) (554,904)
Gain on sale of assets, net................ 1,076,181 (1,067,360) -- 8,821
Other, net................................. (68,689) 13,095 -- (55,594)
------------ ------------ ------------ --------------
Total other income (expense)............. (6,424,815) 117,676 (6,290,078) (12,597,217)
------------ ------------ ------------ --------------
Loss before income taxes..................... (2,485,669) 375,486 (6,074,523) (8,184,706)
Income tax provision......................... 286,504 (14,300) -- 272,204
------------ ------------ ------------ --------------
Net loss..................................... $ (2,772,173) $ 389,786 $ (6,074,523) $ (8,456,910)
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations
39
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997
(a) To reflect the inclusion of the results of operations of Clinton
Distribution, Inc. ("Clinton") (acquisitions closed July, 1996) and Huron Postal
Service, Inc. ("Huron") and Northeastern Printers, Inc. ("Northeastern")
(acquisitions closed October, 1997) in the period prior to their respective
acquisitions and combination with the Company. To reflect the elimination of the
results of operations of radio stations KQWB-FM and KQFN-AM located in Fargo,
North Dakota and Moorhead, Minnesota (sale closed August, 1996). To reflect the
elimination of the results of operations of Central Missouri Broadcasting, Inc.
and CMB II, Inc. in the period prior to their respective sales and dissolution
with the Company. Applications for transfer of the broadcast licenses of the
Missouri Properties have been filed with the FCC by the buyers. A local market
competitor has objected to the transfer of the licenses and on December 12,
1997, filed with the FCC a Petition to Deny the license transfers and to
terminate the Time Brokerage Agreement. No action has been taken on the Petition
to Deny by the FCC and the Company believes that even if the Petition to Deny
were granted, the consequences would not be material to the Company. The
Attorney General of the State of Missouri on January 9, 1998 filed a civil
investigative demand on the Company to provide documents in order to consider
whether the proposed transaction would violate federal or Missouri antitrust
laws. The Company has complied with the demand.
(b) To reflect the elimination of interest expense in the amount of
$5,891,548 and deferred financing amortization of $407,460 relating to the
existing senior notes.
(c) To reflect interest expense of $12,834,872 (at 12.2% assumed effective
rate) associated with the Notes and $399,283 (at 17% assumed effective rate)
associated with the Appreciation Notes and deferred financing amortization of
$550,000.
(d) To reflect a $16.3 million loan made during fiscal 1998 and related
interest income at the assumed effective rate of 12% of $1,957,915 related to
the Managed Affiliates (WSTO-FM, WVJS-AM and WKDQ-FM).
(e) To reflect the additional management fee expense calculated at 5% of
revenues in the period prior to the acquisition and combination with the Company
for Clinton, Huron and Northeastern.
(f) To reflect the elimination of time brokerage and consulting expenses
recorded in operations for KTRR-FM prior to the acquisition and combination with
the Company.
(g) To reflect the elimination of operating expenses which represent prior
owners' compensation and benefits totalling $213,372 of Huron and Northeastern
prior to acquisition and combination with the Company.
(h) To reflect depreciation expense for purchase accounting allocations made
for the acquisitions based on preliminary allocations of consideration as
follows:
<TABLE>
<CAPTION>
KTRR-FM HURON AND NORTHEASTERN
------------------------- ------------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST DEPRECIATION COST DEPRECIATION
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Property and equipment......................................... $ -- $ -- $ 275,000 $ 19,000
----------- ----------
----------- ----------
Less depreciation reported..................................... -- 45,615
------------ ------------
Pro forma adjustment........................................... $ -- $ (26,615)
------------ ------------
------------ ------------
</TABLE>
40
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED FEBRUARY 28, 1997
(i) To reflect amortization expense for purchase accounting allocations made
for the acquisitions based on preliminary allocations of consideration as
follows:
<TABLE>
<CAPTION>
KTRR-FM HURON AND NORTHEASTERN
-------------------------- --------------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST AMORTIZATION COST AMORTIZATION
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FCC licenses and/or goodwill............................. $ 2,000,000 $ 50,000 $ 1,339,037 $ 33,476
Noncompete agreements.................................... 179,850 35,970 672,411 134,482
------------ ------------ ------------ ------------
$ 2,179,850 85,970 $ 2,011,448 167,958
------------ ------------
------------ ------------
Less amortization reported............................... -- --
------------ ------------
Pro forma adjustment..................................... $ 85,970 $ 167,958
------------ ------------
------------ ------------
</TABLE>
(j) To reflect interest expense for Huron and Northeastern in the amount of
$214,000 and KTRR-FM in the amount of $168,000 related to debt incurred to
finance their respective acquisitions.
(k) To reflect income from the Managed Affiliates Management Agreements with
the Managed Affiliates prior to their respective effective dates of December 1,
1996 for the WSTO-FM and WVJS-AM stations and February 1, 1997 for the WKDQ-FM
station.
(l) To reflect the elimination of interest income from affiliate notes
receivable satisfied through distributions to the Stockholder.
41
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ACQUISITIONS
AND
DISPOSITIONS--
COMPANY-- HISTORICAL PRO FORMA COMBINED
HISTORICAL (A) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Broadcasting............................... $ 11,674,292 $(1,643,944) $ -- $ 10,030,348
Newspaper.................................. 11,120,715 1,251,816 -- 12,372,531
Management fees............................ 180,000 -- -- 180,000
------------ ------------ ------------ --------------
Total revenues........................... 22,975,007 (392,128) -- 22,582,879
Operating expenses:
Operating departments...................... 15,685,093 (247,440) (120,625)(g) 15,317,028
Incentive plan............................. 545,000 -- -- 545,000
Management fees............................ 1,598,431 (143,695) 62,591(e) 1,517,327
Time brokerage agreement fee, net.......... 36,000 -- (36,000)(f) --
Consulting................................. 180,994 (14,994) (166,000)(f) --
Depreciation............................... 772,720 (134,268) (5,367)(h) 633,085
Amortization............................... 525,165 (61,838) 162,454(i) 625,781
------------ ------------ ------------ --------------
Total operating expenses................. 19,343,403 (602,235) (102,947) 18,638,221
------------ ------------ ------------ --------------
Operating income............................. 3,631,604 210,107 102,947 3,944,658
Other income (expense):
Interest--Managed Affiliates............... 1,220,225 -- 248,212(d) 1,468,437
Interest--stockholder and affiliates,
net...................................... 193,318 93,391 (286,709)(k) --
Interest--other, net....................... (7,450,455) 879,928 (3,904,853)(b)(c)(j) (10,475,380)
Amortization of deferred financing costs... (481,824) 81,388 (12,064)(b)(c) (412,500)
Loss on sale of assets, net................ (6,592) -- -- (6,592)
Other, net................................. (44,808) 9,238 -- (35,570)
------------ ------------ ------------ --------------
Total other income (expense)............. (6,570,136) 1,063,945 (3,955,414) (9,461,605)
------------ ------------ ------------ --------------
Loss before income taxes..................... (2,938,532) 1,274,052 (3,852,467) (5,516,947)
Income tax provision......................... 102,750 9,275 -- 112,025
------------ ------------ ------------ --------------
Net loss..................................... $ (3,041,282) $ 1,264,777 $ (3,852,467) $ (5,628,972)
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations
42
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1997
(a) To reflect the inclusion of the results of operations of Huron and
Northeastern in the period prior to their respective acquisitions and
combination with the Company (acquisition closed October, 1997). To reflect the
elimination of the results of operations of Central Missouri Broadcasting, Inc.
and CMB II, Inc. in the period prior to their sale and dissolution with the
Company. Applications for transfer of the broadcast licenses of the Missouri
Properties have been filed with the FCC by the buyers. A local market competitor
has objected to the transfer of the licenses and on December 12, 1997, filed
with the FCC a Petition to Deny the license transfers and to terminate the Time
Brokerage Agreements. No action has been taken on the Petition to Deny by the
FCC, and the Company believes that, even if the Petition to Deny were granted,
the consequences to the Company would not be material. The Attorney General of
the State of Missouri on January 9, 1998 filed a civil investigative demand on
the Company to provide documents in order to consider whether the proposed
transaction would violate federal or Missouri antitrust laws. The Company has
complied with the demand.
(b) To reflect the elimination of interest expense in the amount of
$6,271,597 and deferred financing amortization of $400,436 related to the
existing senior notes.
(c) To reflect interest expense of $9,626,154 (at 12.2% assumed effective
rate) associated with the Notes and $299,463 (at 17% assumed effective rate)
associated with the Appreciation Notes and deferred financing amortization of
$412,500.
(d) To reflect a $16.3 million loan made during fiscal 1998 and additional
related interest income at the assumed effective rate of 12% of $248,212 related
to the Managed Affiliates (WSTO-FM, WVJS-AM and WKDQ-FM).
(e) To reflect the additional management fee expense calculated at 5% of
revenues in the period prior to the acquisition and combination with the Company
for Huron and Northeastern.
(f) To reflect the elimination of time brokerage and consulting expenses
recorded in operations for KTRR-FM prior to the acquisition and combination with
the Company.
(g) To reflect the elimination of operating expenses which represent prior
owners' compensation and benefits totalling $120,625 of Huron and Northeastern
prior to acquisition and combination with the Company.
(h) To reflect depreciation expense for purchase accounting allocations made
for the acquisitions based on preliminary allocations of consideration as
follows:
<TABLE>
<CAPTION>
KTRR-FM HURON AND NORTHEASTERN
---------------------------- --------------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST DEPRECIATION COST DEPRECIATION
----------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Property and equipment....................................... $ -- $ -- $ 275,000 $ 11,083
----- ------------
----- ------------
Less depreciation reported................................... -- 16,450
----- ------------
Pro forma adjustment......................................... $ -- $ (5,367)
----- ------------
----- ------------
</TABLE>
43
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED NOVEMBER 30, 1997
(i) To reflect amortization expense for purchase accounting allocations made
for the acquisitions based on preliminary allocations of consideration as
follows:
<TABLE>
<CAPTION>
KTRR-FM HURON AND NORTHEASTERN
-------------------------- --------------------------
ALLOCATED PRO FORMA ALLOCATED PRO FORMA
COST AMORTIZATION COST AMORTIZATION
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FCC licenses and/or goodwill............................. $2,000,000 $ 37,500 $1,339,037 $ 19,528
Noncompete agreements.................................... 179,850 26,978 672,411 78,448
------------ ------------ ------------ ------------
$2,179,850 64,478 $2,011,448 97,976
------------ ------------
------------ ------------
Less amortization reported............................... -- --
------------ ------------
Pro forma adjustment..................................... $ 64,478 $ 97,976
------------ ------------
------------ ------------
</TABLE>
(j) To reflect interest expense for Huron and Northeastern in the amount of
$124,833 and KTRR-FM in the amount of $126,000 related to debt incurred to
finance their respective acquisitions.
(k) To reflect the elimination of the interest income from affiliate notes
receivable satisfied through distributions to the Stockholder.
44
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
AS OF NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ACQUISITIONS
AND
COMPANY-- DISPOSITIONS-- PRO FORMA COMBINED
HISTORICAL HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 109,155 $ 5,816,205 $16,713,211(b)(c)(d) $ 22,638,571
Accounts receivable, net of allowance for
doubtful accounts........................ 4,026,176 (186,874) -- 3,839,302
Inventories................................ 483,374 -- -- 483,374
Other current assets....................... 412,553 (75,727) -- 336,826
------------ ------------ ------------ --------------
Total current assets................... 5,031,258 5,553,604 16,713,211 27,298,073
Notes receivable from Managed Affiliates..... 15,423,339 -- 892,623(d) 16,315,962
Property and equipment....................... 17,383,715 (2,613,302) -- 14,770,413
Less accumulated depreciation................ (8,561,054) 1,844,659 -- (6,716,395)
------------ ------------ ------------ --------------
Net property and equipment............. 8,822,661 (768,643) -- 8,054,018
Goodwill and FCC licenses, net............... 6,670,508 1,253,221 -- 7,923,729
Covenants not to compete, net................ 3,650,786 99,960 -- 3,750,746
Other assets, net............................ 1,852,769 (150,790) 4,038,133(b)(c) 5,740,112
Other long term assets....................... 223,349 (214,672) -- 8,677
------------ ------------ ------------ --------------
12,397,412 987,719 4,038,133 17,423,264
------------ ------------ ------------ --------------
Total assets................................. $ 41,674,670 $ 5,772,680 $21,643,967 $ 69,091,317
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Short term notes........................... $ 500,000 $ -- $ -- $ 500,000
Due to affiliates.......................... 110,245 (2,845) -- 107,400
Accounts payable........................... 1,199,183 (112,287) -- 1,086,896
Other accrued expenses..................... 617,254 (13,692) -- 603,562
Current maturities of long-term
obligations.............................. 745,855 (232,031) -- 513,824
------------ ------------ ------------ --------------
Total current liabilities.............. 3,172,537 (360,855) -- 2,811,682
Long-term obligations:
Senior notes............................... 70,904,166 -- 23,557,110(b)(c) 94,461,276
Secured seller obligations................. 1,311,138 1,045,217 -- 2,356,355
Mortgages and purchase money............... 1,048,712 (173,174) -- 875,538
Obligations under capital leases........... 868,267 (362,095) -- 506,172
Secured subordinated obligations........... 1,055,050 -- -- 1,055,050
Appreciation Notes......................... -- -- 2,348,724 2,348,724
Unsecured obligations...................... 1,218,900 (202,515) -- 1,016,385
Incentive plan liability................... 4,700,000 -- -- 4,700,000
Less current maturities of long-term
obligations.............................. (745,855) 232,031 -- (513,824)
------------ ------------ ------------ --------------
80,360,378 539,464 25,905,834 106,805,676
Capital deficiency:
Capital.................................... 7,770 (1,100) -- 6,670
Additional paid-in capital................. 1,792,852 -- -- 1,792,852
Accumulated deficit........................ (43,658,867) 5,595,171 (4,261,867)(b) (42,325,563)
------------ ------------ ------------ --------------
Net capital deficiency................. (41,858,245) 5,594,071 (4,261,867) (40,526,041)
------------ ------------ ------------ --------------
$ 41,674,670 $ 5,772,680 $21,643,967 $ 69,091,317
------------ ------------ ------------ --------------
------------ ------------ ------------ --------------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
45
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED BALANCE SHEET
AS OF NOVEMBER 30, 1997
(a) To reflect the purchase of assets of KTRR-FM for $2 million and the sale of
all of the operating assets of Central Missouri Broadcasting, Inc. and CMB
II, Inc. for a net cash price of $7,419,000 and assumed liabilities of
$256,000. The $2 million purchase price of KTRR-FM will be allocated to
goodwill and FCC licenses. The acquisition will be financed with cash of
$750,000 ($200,000 already on deposit) and a $1,250,000 note payable to the
seller. The Company will also enter into a 5 year $500,000 covenant not to
compete. In connection with the sale of the Missouri Properties, the Company
will repay approximately $1.1 million of long-term debt. The pretax gain on
the sale is expected to be approximately $5.5 million, net of related
expenses. Applications for transfer of the broadcast licenses of the
Missouri Properties have been filed with the FCC by the buyers. A local
market competitor has objected to the transfer of the licenses and on
December 12, 1997, filed with the FCC a Petition to Deny the license
transfers and to terminate the TBA. No action has been taken on the Petition
to Deny by the FCC, and the Company believes that, even if the Petition to
Deny were granted, the consequences to the Company would not be material.
The Attorney General of the State of Missouri on January 9, 1998 filed a
civil investigative demand on the Company to provide documents in order to
consider whether the proposed transaction would violate federal or Missouri
antitrust laws. The Company has complied with the demand.
(b) To reflect payment of the senior note in the amount of $70,904,166, related
prepayment penalty of $2,800,000 and corresponding write-off of net book
value of deferred financing costs of $1,461,867.
(c) To reflect proceeds from the Notes and Appreciation Notes of $96,810,000 net
of $5,500,000 to be applied towards deferred financing costs. The
Appreciation Notes have been valued at an estimated fair value of $2,348,724
based on an assumed 17% discount rate and $3,000,000 payout on the first
call date of June 15, 1999.
(d) To reflect an additional loan of $892,623 to the Managed Affiliates
(WSTO-FM, WVJS-AM, and WKDQ-FM).
<TABLE>
<S> <C> <C>
CASH TRANSACTIONS
- -----------------------------------------------------------------------------------
Payment of senior note............................................... $(70,904,166) (see b)
Payment of senior note--prepayment penalty........................... (2,800,000) (see b)
Net proceeds from the Notes and Appreciation Notes................... 91,310,000 (see c)
Loans to Managed Affiliates.......................................... (892,623) (see d)
------------
$ 16,713,211
------------
------------
ACCUMULATED DEFICIT TRANSACTIONS
- ----------------------------------------------------------------------------------------------
Senior note--prepayment penalty...................................... $ 2,800,000 (see b)
Write-off of deferred financing costs................................ 1,461,867 (see b)
------------
$ 4,261,867
------------
------------
</TABLE>
46
<PAGE>
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data presented below should be read in
conjunction with the combined financial statements of The Radio and Newspaper
Businesses of Alan R. Brill and notes thereto included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The selected combined financial data (except for the
other financial and operating data) of The Radio and Newspaper Businesses of
Alan R. Brill (i) as of and for the years ended February 28, 1993 and 1994 have
been derived from schedules which primarily include information from the
separate audited combined financial statements of The Broadcasting Businesses of
Alan R. Brill and the separate audited consolidated financial statements of
Central Michigan Newspapers, Inc., (ii) as of and for the years ended February
28, 1995, February 29, 1996 and February 28, 1997 have been derived from the
audited combined financial statements of The Radio and Newspaper Businesses of
Alan R. Brill and (iii) as of and for the nine months ended November 30, 1996
and 1997 have been derived from the unaudited condensed combined financial
statements of The Radio and Newspaper Businesses of Alan R. Brill. The selected
pro forma data presented below should be read in conjunction with the
information contained in the historical financial statements included elsewhere
herein and "Pro Forma Financial Information."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------------------------------------------------------- ------------
NINE MONTHS NINE MONTHS YEAR
FISCAL YEAR ENDED FEBRUARY 28 OR 29 ENDED ENDED ENDED
----------------------------------------------------- NOVEMBER 30, NOVEMBER 30, FEBRUARY 28,
1993 1994 1995 1996 1997 1996 1997 1997 (A)
--------- --------- --------- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenues:
Radio....................... $ 9,764 $ 10,961 $ 12,650 $ 13,096 $ 13,596 $ 10,483 $ 11,854 $ 11,644
Newspapers.................. 10,877 10,499 10,537 12,217 13,440 10,458 11,121 15,771
--------- --------- --------- --------- --------- ------------ ------------ ------------
Total revenues.......... 20,641 21,460 23,187 25,313 27,036 20,941 22,975 27,415
Operating expenses:
Operating departments....... 16,644 16,352 17,530 18,640 19,043 14,641 15,685 19,147
Incentive plan.............. 25 176 634 1,467 628 471 545 628
Other....................... -- -- -- 37 86 17 217 --
Management fees............. 897 1,521 1,679 1,833 1,945 1,502 1,598 1,869
Depreciation and
amortization.............. 1,306 1,277 1,111 1,312 1,395 1,022 1,298 1,358
--------- --------- --------- --------- --------- ------------ ------------ ------------
Total operating
expenses.............. 18,872 19,326 20,954 23,289 23,097 17,653 19,343 23,002
--------- --------- --------- --------- --------- ------------ ------------ ------------
Operating income.............. 1,769 2,134 2,233 2,024 3,939 3,288 3,632 4,413
Other income (expense):
Interest expense, net......... (4,484) (4,645) (5,842) (7,130) (7,432) (5,565) (6,519) (12,550)
Other, net.................... (148) 3,463 (144) (80) 1,007 1,018 (51) (48)
--------- --------- --------- --------- --------- ------------ ------------ ------------
Total other income
(expense)............. (4,632) (1,182) (5,986) (7,210) (6,425) (4,547) (6,570) (12,598)
--------- --------- --------- --------- --------- ------------ ------------ ------------
Income (loss) before income
taxes and extraordinary
item........................ (2,863) 952 (3,753) (5,186) (2,486) (1,259) (2,938) (8,185)
Income tax provision
(benefit)................... 112 168 68 (39) 286 121 103 272
--------- --------- --------- --------- --------- ------------ ------------ ------------
Income (loss) before
extraordinary item.......... (2,975) 784 (3,821) (5,147) (2,772) (1,380) (3,041) (8,457)
Extraordinary item (b)........ -- 245 -- 6,915 -- -- -- --
--------- --------- --------- --------- --------- ------------ ------------ ------------
Net income (loss)............. $ (2,975) $ 1,029 $ (3,821) $ 1,768 $ (2,772) $ (1,380) $ (3,041) $ (8,457)
--------- --------- --------- --------- --------- ------------ ------------ ------------
--------- --------- --------- --------- --------- ------------ ------------ ------------
OTHER FINANCIAL AND OPERATING
DATA:
Net cash provided by (used in)
Operating activities........ $ 810 $ 79 $ 920 $ 37 $ (513) $ (1,500) $ 654 $ na
Investing activities........ (363) (3,377) (120) (1,167) 59 940 (15,035) na
Financing activities........ 59 3,377 (452) 2,654 (845) (948) 13,715 na
Cash dividends declared....... 60 500 -- -- 520 -- 12,215 na
Media Cashflow (c)............ 3,997 5,108 5,657 6,673 7,993 6,300 8,510 10,226
EBITDA (c).................... 3,075 3,411 3,344 3,336 5,334 4,310 4,930 5,771
Capital expenditures excluding
acquisitions................ 410 833 974 977 1,269 543 610 1,336
Net interest expense (d)...... 12,721
Net cash interest
expense (e)................. 7,362
Net debt (f).................. 79,981
Ratio of Media Cashflow to net
interest expense............ 0.80x
Ratio of Media Cashflow to net
cash interest expense....... 1.39x
Ratio of net debt to Media
Cashflow (f)................ 7.82x
Ratio of earnings to fixed
charges (h)................. -- 1.20x -- -- -- -- -- --
<CAPTION>
NINE MONTHS
ENDED
NOVEMBER 30,
1997 (A)
-------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Radio....................... $ 10,210
Newspapers.................. 12,373
-------------
Total revenues.......... 22,583
Operating expenses:
Operating departments....... 15,317
Incentive plan.............. 545
Other....................... --
Management fees............. 1,517
Depreciation and
amortization.............. 1,259
-------------
Total operating
expenses.............. 18,638
-------------
Operating income.............. 3,945
Other income (expense):
Interest expense, net......... (9,420)
Other, net.................... (42)
-------------
Total other income
(expense)............. (9,462)
-------------
Income (loss) before income
taxes and extraordinary
item........................ (5,517)
Income tax provision
(benefit)................... 112
-------------
Income (loss) before
extraordinary item.......... (5,629)
Extraordinary item (b)........
-------------
Net income (loss)............. $ (5,629)
-------------
-------------
OTHER FINANCIAL AND OPERATING
DATA:
Net cash provided by (used in)
Operating activities........ $ na
Investing activities........ na
Financing activities........ na
Cash dividends declared....... na
Media Cashflow (c)............ 8,734
EBITDA (c).................... 5,204
Capital expenditures excluding
acquisitions................ 601
Net interest expense (d)...... 9,551
Net cash interest
expense (e)................. 5,532
Net debt (f).................. 79,981
Ratio of Media Cashflow to net
interest expense............ 0.91x
Ratio of Media Cashflow to net
cash interest expense....... 1.58x
Ratio of net debt to Media
Cashflow (f)................ 6.87x(g)
Ratio of earnings to fixed
charges (h)................. --
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
-------------
AS OF AS OF AS OF
AS OF FEBRUARY 28 OR 29 NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
----------------------------------------------------- ------------- ------------- -------------
1993 1994 1995 1996 1997 1996 1997 1997 (A)
--------- --------- --------- --------- --------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL POSITION
DATA:
Cash and cash equivalents....... $ 104 $ 202 $ 550 $ 2,075 $ 775 $ 567 109 $ 22,639
Working capital (deficit)....... (3,469) (1,881) (334) 2,398 1,014 2,227 1,859 24,486
Intangible assets............... 4,103 5,219 5,099 7,374 7,583 7,547 12,174 17,415
Total assets.................... 16,454 21,938 21,784 26,011 26,442 27,674 41,675 69,091
Total debt including due to
affiliates (i)................ 49,796 55,160 58,715 61,636 50,475 49,782 81,106 107,320
Net capital deficiency (j)...... (37,153) (36,302) (40,123) (38,354) (26,610) (27,838) (41,858) (40,526)
</TABLE>
- ------------------------
(a) The pro forma statement of operations and other financial and operating data
for the year ended February 28, 1997 and for the nine months ended November
30, 1997 give effect to the Transactions as if they occurred March 1, 1996.
The pro forma statement of financial position data give effect to the
Transactions as if they had occurred on November 30, 1997. See "Pro Forma
Financial Information."
(b) The extraordinary item in fiscal 1996 reflects an adjustment of accrued
interest in the amount of $7.0 million related to subordinated debt for
which contingent interest had been accrued at the maximum rate but was
reduced at maturity pursuant to terms of an alternative valuation formula,
as defined in the agreement. The gain was offset by the write-off of certain
previously deferred financing fees of $131,000.
(c) "EBITDA" is defined as operating income before depreciation and amortization
expenses. "Media Cashflow" is defined as EBITDA plus management fees,
incentive plan expense, time brokerage agreement fees, acquisition related
consulting expense and interest income from loans made by the Company to
Managed Affiliates. Management fees payable to BMCLP are subordinated, to
the extent provided in the Indenture, to the prior payment of the Issuer's
obligations on the Notes. Although Media Cashflow and EBITDA are not
measures of performance calculated in accordance with GAAP, management
believes that these measures are useful to an investor in evaluating the
Company because these measures are widely used in the media industry to
evaluate a media company's operating performance. However, Media Cashflow
and EBITDA should not be considered in isolation or as substitutes for net
income, cash flows from operating activities and other income or cash flow
statements prepared in accordance with GAAP as measures of liquidity or
profitability. In addition, "EBITDA" and "Media Cashflow" as determined by
the Company may not be comparable to related or similar measures as reported
by other companies and do not represent funds available for discretionary
use.
(d) Reflects interest expense on the Notes and Appreciation Notes and on other
debt and capitalized leases. Net interest expense excludes $555,000 and
$413,000 in non-cash amortization of deferred financing fees for the year
ended February 28, 1997 and the nine months ended November 30, 1997,
respectively. Net interest expense is also net of expected interest income,
calculated at 5.5% on excess proceeds from the Transactions estimated to be
$22.4 million at November 30, 1997, of $1,232,000 and $924,000 for the year
ended February 28, 1997 and the nine months ended November 30, 1997,
respectively.
(e) Reflects interest expense on the Notes and Appreciation Notes and on other
debt and capitalized leases. Net cash interest expense excludes $555,000 and
$413,000 in non-cash amortization of deferred financing fees for the year
ended February 28, 1997 and nine months ended November 30, 1997,
respectively and also excludes interest accrued at the effective rate of
12.2%, which is in excess of the current pay rate of 7.5% in each of years
one and two by $4,960,000 ($3,720,000 for nine months) and excludes interest
on the Appreciation Notes accreted at 17% totaling $399,000 for the year
ended February 28, 1997 ($299,000 for nine months). Net cash interest
expense is also net of expected interest income, calculated at 5.5% on
excess proceeds from the Transactions estimated to be $22.4 million at
November 30, 1997, of $1,232,000 and $924,000 for the year ended February
28, 1997 and nine months ended November 30, 1997, respectively.
(f) Net debt includes total debt less the incentive plan liability and less cash
and cash equivalents, all as of November 30, 1997, as significant portions
of the cash and cash equivalents are held for future acquisitions.
(g) For purposes of this ratio the Media Cashflow for the nine months ended
November 30, 1997 has been annualized. No assurance can be provided that
such results will be achieved.
(h) For purposes of this calculation, earnings are defined as income (loss)
before income taxes and extraordinary item and fixed charges. Fixed charges
are the sum of (i) interest costs (including the interest portion of
operating leases) and (ii) amortization of deferred financing costs.
Earnings were inadequate to cover fixed charges by approximately $2,863,000,
$3,753,000, $5,186,000, $2,486,000, $1,259,000, $2,938,000, $8,185,000 and
$5,517,000 for the historical fiscal years 1993, 1995, 1996, 1997, the
historical nine months ended November 30, 1996 and 1997, the pro forma year
ended February 28, 1997 and the pro forma nine months ended November 30,
1997, respectively.
(i) Total debt including due to affiliates includes the senior note, obligations
under capital leases, unsecured and subordinated obligations, debt due to
affiliates and, on a pro forma basis, the Notes and Appreciation Notes.
(j) The net capital deficiency as of November 30, 1997 and the pro forma net
capital deficiency as of November 30, 1997 reflect the declaration and
payment of distributions in the amount of $12.2 million, $8.0 million in
cash and $4.2 million for purposes of satisfaction of affiliate notes
receivable.
48
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of the financial condition and results
of operations of the Company should be read in conjunction with the combined
financial statements of The Radio and Newspaper Businesses of Alan R. Brill and
notes thereto included elsewhere in this Prospectus. This Prospectus contains
forward-looking statements, including statements regarding, among other items,
(i) the realization of the Company's business strategy, (ii) the sufficiency of
cashflow to fund the Company's debt service requirements and working capital
needs and (iii) anticipated trends in the radio broadcasting and newspaper
industries. Forward-looking statements are typically identified by the words
"believe," "expect," "anticipate," "intend," "estimate" and similar expressions.
These forward-looking statements are subject to a number of risks and
uncertainties, many of which are beyond the Company's control. Actual results
could differ materially from those contemplated by these forward-looking
statements as a result of factors including those described herein. In light of
these risks and uncertainties, there can be no assurance that the results and
events contemplated by the forward-looking information contained in this
Prospectus will in fact transpire. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. The Company undertakes no obligation to update or revise any
forward-looking statements. See "Risk Factors."
BMC was organized in 1997 to be an Issuer of the Notes and to own numerous
companies (C-corporations, S-corporations, limited partnerships and limited
liability companies) that were previously owned separately by Mr. Brill. The
Subsidiaries, all of which are wholly-owned, include various radio, newspaper
and related businesses. The Stations own and operate FM and AM radio stations in
Pennsylvania, Colorado, Indiana/Kentucky, Minnesota/Wisconsin, and Missouri. The
Newspapers own and operate a daily and numerous weekly publications in Michigan
along with printing and advertising distribution businesses. The historical
financial statements of The Radio and Newspaper Businesses of Alan R. Brill
included elsewhere in this Prospectus include the financial position and results
of operations of the Subsidiaries on a combined basis.
The Stations' revenues are derived primarily from advertising revenues. In
general, each Station receives revenues for advertising sold for placement
within the Station's programming. Advertising is sold in time increments and is
priced primarily based on a Station's program's popularity within the
demographic group an advertiser desires to reach, as well as quality of service
provided to the customer, creativity in marketing the client's products and
services, the personal relationship between the Station's account executive and
the client, and the client's view of the popularity of the Station among its
target customer base. In addition, advertising rates are affected by the number
of advertisers competing for available time, the size and demographic make-up of
the markets served by the Stations and the availability of alternative
advertising media in the market area. Rates are highest during the most
desirable listening hours, with corresponding reductions during other hours.
During the year ended February 28, 1997, over 90% of the Stations' revenues
were generated from local advertising, which is sold primarily by a Station's
sales staff. The remainder of the advertising revenues represent national
advertising and network compensation payments. In addition to any commissions
paid to its sales staff, the Stations generally pay commissions to advertising
agencies on local and national advertising and to sales representation firms on
national advertising. The advertising revenues of a Station generally are
highest in the second and fourth calendar quarters of each year, due in part to
increases in consumer advertising in the spring and retail advertising in the
period leading up to and including the holiday season. During the year ended
February 28, 1997, no single customer in any of the Stations' markets provided
more than 2% of the Company's revenues.
49
<PAGE>
In the broadcasting industry, radio stations often utilize trade (or barter)
agreements to exchange advertising time for goods or services (such as other
media advertising, travel or lodging), in lieu of cash. In order to preserve
most of its on-air inventory for cash advertising, the Company generally enters
into trade agreements only if the goods or services bartered to the Company will
be used in the Company's business. The Company has minimized its use of trade
agreements and has sold over 90% of its advertising time for cash for the year
ended February 28, 1997. In addition, it is the Company's general policy not to
pre-empt advertising spots paid for in cash with advertising spots paid for in
trade.
Each Station's financial results depend on a number of factors, including
the general strength of the local and national economies, population growth, the
ability to provide popular programming, local market and regional competition,
the relative efficiency of radio broadcasting compared to other advertising
media, signal strength and government regulation and policies.
The Newspapers' revenues are derived primarily from advertising and
subscription revenues and to a lesser extent, from printing revenues. In
general, newspaper publications receive revenue for advertising sold to reach
readership within its geographical distribution area and its customers'
marketing areas. The combined coverage and timing of the numerous weekly
publications and the daily publications provide the Newspapers with flexibility
and efficiencies to create a competitive advantage in attracting advertisers. As
an inducement to its customers, the Newspapers offer advertisers more efficient
buys when they purchase ad placement in multiple publications. The Newspapers
have a widely diversified customer base, and for the year ended February 28,
1997, no single customer of the Newspapers represented more than 2% of the
Company's revenues. The Newspapers' financial results are dependent on a number
of factors, particularly those that impact local retail sales, including the
general strength of the local and national economies, population growth, local
and regional market competition and the perceived relative efficiency of
newspapers compared to other advertising media.
The following table sets forth the percentage of revenues generated by the
Company's Stations and Newspapers.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
---------------------------------------------------------------
REVENUES 1993 1994 1995 1996 1997
- -------------------------------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Stations................................................ 47% 51% 55% 52% 50%
Newspapers.............................................. 53 49 45 48 50
--- --- --- --- ---
100 100 100 100 100
--- --- --- --- ---
--- --- --- --- ---
<CAPTION>
NINE MONTHS ENDED
REVENUES NOVEMBER 30, 1997
- -------------------------------------------------------- ---------------------
<S> <C>
Stations................................................ 52%
Newspapers.............................................. 48
---
100
---
---
</TABLE>
The primary operating expenses incurred in the ownership and operation of
the Stations include employee salaries and commissions, programming expenses and
advertising and promotion expenses. For the Newspapers the primary operating
expenses are employee salaries and commissions, newsprint and delivery charges.
The Company also incurs and will continue to incur significant depreciation,
amortization and interest expense as a result of completed and future
acquisitions of radio stations and newspapers and due to existing borrowings and
future borrowings, including the Notes and any borrowings under the New Credit
Facility. The combined financial statements of The Radio and Newspaper
Businesses of Alan R. Brill tend not to be directly comparable from period to
period due to the Company's acquisition activity.
INCOME TAXES
The Company includes "C" corporations, "S" corporations, limited
partnerships and limited liability companies. The taxable income or loss for
federal and state income tax purposes of the S Corporations, limited
partnerships and limited liability companies is passed through to the
stockholders, partners and members, respectively. The "C" corporations are in
loss carryforward positions at February 28, 1997 for income tax purposes.
Accordingly, the Company will not have a statutory rate income tax provision for
the entire group due to the tax consequences of the individual companies.
50
<PAGE>
IMPACT OF YEAR 2000
The Company has developed a plan to modify its information technology to
recognize the year 2000 and has identified critical data processing systems
which will be replaced with new systems. The Company expects the project to be
substantially complete by 1999 and the cost is not expected to be material as a
portion of the upgrades are covered by software support agreements with the
vendors. The Company does not expect the project to have a significant effect on
its operations.
RESULTS OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED NOVEMBER 30,
1996.
Revenues for the nine months ended November 30, 1997 totaled $23.0 million,
a 10.0% increase over $20.9 million for the nine months ended November 30, 1996.
Of this $2.1 million increase, the Stations contributed $1.4 million and the
Newspapers contributed approximately $700,000. The Stations' revenues for the
nine months ended November 30, 1997 totaled $11.9 million, a 13.1% increase
compared to the nine months ended November 30, 1996, due to the development of
new Stations in Minnesota, Missouri and Colorado, which increased revenues by
approximately $1,060,000 and revenue growth of the existing Stations which
increased by $312,000 due to increased demand for advertising at those Stations.
Operating expenses for the nine months ended November 30, 1997 totaled $19.3
million, an increase of $1.6 million or 9.0% over $17.7 million for the nine
months ended November 30, 1996, primarily due to increases in operating
department expenses, incentive plan expenses, other operating expenses,
management fees and amortization expense. Operating department expenses
increased $1,044,000 largely due to the commencement of operations at the newly
acquired Stations described above and a newly acquired Newspaper. Incentive plan
expenses increased $74,000 in connection with improvements in performance at
certain Subsidiaries which increased incentive plan accruals under the
performance incentive plan. Other operating expenses increased $200,000 due to
consulting and Time Brokerage Agreement payments for a radio station in Colorado
partially offset by other operating income in connection with a Time Brokerage
Agreement for radio stations in Fargo, North Dakota and Moorhead, Minnesota
("Fargo/Moorhead"), which were sold in August 1996. Management fees increased
$96,000 due to increased revenues during the period. Amortization expense
increased by $241,000 due mainly to amortization of a non-compete agreement
entered into in July 1997.
Operating income for the nine months ended November 30, 1997 totaled
approximately $3.6 million, a 9.1% increase over $3.3 million for the nine
months ended November 30, 1996, primarily due to increased revenues.
Interest expense, net for the nine months ended November 30, 1997 totaled
$6.5 million, an increase of $953,000 or 17.0% over $5.6 million for the nine
months ended November 30, 1996, due to increased borrowing levels to fund
acquisitions and capital expenditures as well as higher effective interest rates
during the period.
Other income, net for the nine months ended November 30, 1996 of $1.1
million includes the $1.1 million gain on the sale of the Fargo/Moorhead
stations.
YEAR ENDED FEBRUARY 28, 1997 COMPARED TO YEAR ENDED FEBRUARY 29, 1996.
Revenues for the year ended February 28, 1997 totaling $27.0 million
increased $1.7 million or 6.8% from $25.3 million for the year ended February
29, 1996. The Stations' revenues totaled $13.6 million, an increase of $500,000
or 3.8% from $13.1 million for the prior period, and the Newspapers' revenues
totaled $13.4 million, an increase of $1.2 million or 10% from $12.2 million for
the prior period. The increase in the Stations' revenues can be attributed
primarily to overall revenue growth of $1.4 million or 11.4% in connection with
continuing operations which was partially offset by the loss of revenues of
$895,000 for stations in Fargo/Moorhead which were sold in 1996.
51
<PAGE>
Operating expenses for the year ended February 28, 1997 totaled $23.1
million, a decrease of $192,000 or 0.8% from $23.3 million for the year ended
February 29, 1996. This decrease was primarily attributed to a $839,000 decrease
in incentive plan expense in connection with a lower rate of operating
performance growth at certain Subsidiaries, offset by increased operating
department expenses of $403,000 due primarily to additional operating expenses
of acquired companies which more than offset the reductions of operating
expenses on the other companies including the Fargo/Moorhead stations sold in
1996 and increased management fees of $112,000, resulting from increased
revenues.
Operating income for the year ended February 28, 1997 totaling $3.9 million
increased $1.9 million or 94.6% from $2.0 million for the year ended February
29, 1996. This increase was due primarily to increased operating revenues and
decreased charges for incentive plan expense as noted previously.
Interest expense, net for the year ended February 28, 1997 totaled $7.4
million, an increase of $302,000 or 4.2% over $7.1 million for the year ended
February 29, 1996, due to increased borrowing levels to fund the acquisition of
Stations located in Missouri and Minnesota and the acquisition of a Newspaper in
Michigan as well as higher effective interest rates during the period.
Other income, net for the six months ended August 31, 1996 of $1.0 million
includes the $1.1 million gain on the sale of the Fargo/Moorhead stations.
The extraordinary item in fiscal 1996 reflects an adjustment of accrued
interest in the amount of $7.0 million related to subordinated debt for which
contingent interest had been accrued at the maximum rate but was reduced at
maturity pursuant to terms of an alternative valuation formula, as defined in
the agreement. The gain was partially offset by the write-off of certain
previously deferred financing fees of $131,000.
YEAR ENDED FEBRUARY 29, 1996 COMPARED TO YEAR ENDED FEBRUARY 28, 1995
Revenues for the year ended February 29, 1996 totaling $25.3 million
increased $2.1 million, or 9.2% from $23.2 million for the year ended February
28, 1995. The Stations' revenues increased $446,000 or 3.5% from $12.7 million
for the prior period, and the Newspapers' revenues increased $1.7 million, or
15.9% from $10.5 million for the prior period. The net increase in the Stations'
revenues was composed primarily of additional revenues from the acquisition of
Stations in Missouri and Minnesota. The increase in the Newspapers' revenues
resulted primarily from operating growth and price increases passed through to
customers due to increased newsprint costs.
Operating expenses for the year ended February 29, 1996 totaled $23.3
million, an increase of $2.3 million or 11.1% over $21.0 million for the year
ended February 28, 1995 primarily due to increases in operating department
expenses, incentive plan expenses and management fees. Operating department
expenses for fiscal 1996 increased $1.1 million, or 6.3%, from $17.5 million for
fiscal 1995. This increase results primarily from increased newsprint costs,
additional operating expenses of three new Stations and increased promotional
and other expenses due to a new direct competitor in Duluth, Minnesota.
Incentive plan expense for fiscal 1996 increased $833,000 from $634,000 for
fiscal 1995, in connection with improvements in the performance at certain
Subsidiaries which increased incentive plan accruals under the performance
incentive plan. Management fees in fiscal 1996 increased $154,000 or 9.2% from
$1.7 million in fiscal 1995 due to a corresponding increase in operating
revenues in fiscal 1996. Depreciation and amortization for the year ended
February 29, 1996 totaled $1.3 million, a $201,000 increase over $1.1 million
for the year ended February 28, 1995 due to the acquisitions of stations in
Minnesota and Missouri and increased capital expenditures in fiscal 1995.
Operating income for fiscal 1996 totaled $2.0 million, a decrease of
$209,000, or 9.4% from $2.2 million in fiscal 1995. This decrease was due
primarily to increased charges for incentive plan expense noted above.
52
<PAGE>
Interest expense for the year ended February 29, 1996 increased $1.3
million, or 22.1%, over $5.8 million for the year ended February 28, 1995 due to
increased borrowings to finance the acquisitions in Missouri and Minnesota and
an increase in interest accruals on subordinated debt.
The extraordinary item in fiscal 1996 reflects an adjustment of accrued
interest in the amount of $7.0 million related to subordinated debt, for which
contingent interest had been accrued at the maximum rate but was reduced at
maturity pursuant to the terms of an alternative valuation formula, as defined
in the agreement. The gain was partially offset by a write-off of certain
previously deferred financing fees of $131,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund capital expenditures,
provide working capital, meet debt service requirements and make acquisitions.
The Company's principal sources of liquidity are expected to be cashflow from
operations, excess proceeds from borrowings under the Notes and the New Credit
Facility, and consummation of the sale of the Missouri Properties.
Generally the Company's operating expenses are paid more quickly than its
advertising revenues are collected. As a result of this time lag, working
capital requirements have increased as the Company has grown and will likely
increase further in the future.
Net cash provided by (used in) operating activities was $(513,000), $37,000
and $920,000 for the years ended February 28, 1997, February 29, 1996 and
February 28, 1995, respectively. The decrease in cash provided from operating
activities over the three years resulted primarily from increased payments for
management fees and interest.
Net cash provided by (used in) operating activities was $654,000 and
($1,500,000) for the nine months ended November 30, 1997 and 1996, respectively.
The improvement in the 1997 period is primarily the result of improvements in
operations and reduced payments for management fees.
Net cash provided by (used in) investing activities was $59,000,
($1,167,000), and $120,000 for the years ended February 28, 1997, February 29,
1996 and February 28, 1995, respectively. The cash generated in 1997 compared to
the cash used in 1996 is due to the $1.9 million of proceeds on the sale of a
radio station in 1997 offset by increased capital expenditures and loans to
managed affiliates. The 1995 balance benefited from the increase in restricted
cash balances.
Net cash provided by (used in) investing activities was ($15,035,000) and
$940,000 for the nine months ended November 30, 1997 and 1996, respectively. The
uses in 1997 consisted primarily of $14.6 million in loans to Managed Affiliates
and $3.0 million in payment of a non-competition agreement, neither of which
occured in 1996, offset by radio station sales proceeds of $1.9 million in 1996.
Net cash provided by (used in) financing activities was ($845,000),
$2,654,000 and ($452,000) for the years ended February 28, 1997, February 29,
1996 and February 28, 1995, respectively. The cash provided in 1996 is basically
attributable to higher net borrowings during the period as compared to other
years.
Net cash provided by (used in) financing activities was $13,715,000 and
($948,000) for the nine months ended November 30, 1997 and 1996, respectively.
The additional proceeds in the 1997 period were generated from additional
borrowings of $26.8 million offset by $12.2 million of dividends.
The Company loaned approximately $900,000 of the proceeds of the Offering to
Managed Affiliates and received in return therefor Managed Affiliate Notes which
are unsecured, mature on January 1, 2001 and bear interest at a rate of 12% per
annum. Such amounts are in addition to the $15.4 million already loaned by the
Company to the Managed Affiliates at November 30, 1997. The proceeds of such
loans were used by the Managed Affiliates to purchase property, equipment, and
intangibles and to provide working capital for operations. It is anticipated
that similar relationships may be initiated with other affiliates in the future.
The aggregate amount of Managed Affiliate Notes may not exceed $20 million
unless the Issuer
53
<PAGE>
first obtains a written opinion of an independent investment bank of nationally
recognized standing that such transaction is fair to the Issuer from a financial
point of view.
The sale of the Original Securities resulted in refinancing the Company's
indebtedness with Amresco and Goldman Sachs. Because of a reduction in the
interest rate, the Company's cash interest requirements will increase only
marginally for each of the first two years following the sale of the Original
Securities, even with a substantial increase in the Company's overall debt.
Additionally, the added borrowings and completion of the Transactions resulted
in approximately $22.4 million of excess cash on a pro forma basis as of
November 30, 1997.
In addition to its debt service obligations, the Company will require
liquidity for capital expenditures and working capital needs. Capital
expenditures in fiscal 1997 totaled approximately $1,269,000 of which
approximately $337,000 related to existing Station operations and approximately
$932,000 related to existing Newspaper operations. The Newspaper expenditures,
which were financed with insurance proceeds, included approximately $500,000 to
replace fire damaged property. The Company has budgeted $900,000 for capital
expenditures of existing operations in fiscal 1998, approximately $610,000 of
which had been expended as of November 30, 1997. Of the budgeted fiscal 1998
expenditures, approximately $450,000 are dedicated to Stations and $450,000 to
Newspapers. The Company anticipates that capital expenditures in fiscal 1999 and
fiscal 2000 will approximate $600,000 each year for existing properties.
The Indenture limits the Company's ability to incur additional indebtedness.
In addition to certain other permitted Indebtedness, the Indenture permits the
Company to incur Indebtedness under revolving credit facilities. Limitations in
the Indenture on the Company's ability to incur additional Indebtedness,
together with the highly leveraged nature of the Company, could limit operating
activities, including the Company's ability to respond to market conditions, to
provide for unanticipated capital investments or to take advantage of business
opportunities. However, the Company believes that its significant cash balances
will currently enable it to continue significant growth through acquisitions as
well as provide ample working capital for contingencies. See "Description of
Notes--Certain Covenants."
The Company believes that its cash on hand and cashflow from operations will
be sufficient to enable the Company to meet all of its cash operating
requirements for the next twelve months.
SEASONALITY
The advertising revenues of the Company generally are lowest in the first
calendar quarter and highest in the second and fourth calendar quarters of each
year, due in part to increases in consumer advertising in the spring and retail
advertising in the period leading up to and including the holiday season.
INFLATION
The Company believes that inflation affects its business no more than it
generally affects other similar businesses.
54
<PAGE>
BUSINESS
THE COMPANY
The Company is a diversified media enterprise that acquires, develops,
manages, and operates radio stations, newspapers and related businesses in
middle markets. The Company presently owns, operates, or manages fifteen radio
stations serving five markets located in Pennsylvania, Kentucky/Indiana,
Colorado, Minnesota/Wisconsin, and Missouri, including three radio stations
located in the Kentucky/Indiana market that are owned by Managed Affiliates. The
group of Stations and Managed Affiliates' stations operated by the Company in
each market holds a first or second ranking in both combined audience ratings
and combined revenues, compared to other groups, in such market. In addition, in
each of its markets, the Stations and Managed Affiliates' stations individually
have at least one of the top two rankings in both audience ratings and revenues.
The Newspapers operate integrated newspaper publishing, printing and print
advertising distribution operations, providing total-market print advertising
coverage throughout a seventeen-county area in central Michigan. This operation
offers a two-edition daily newspaper, thirteen weekly publications, a web offset
printing operation for Newspapers' publications and outside customers, and a
private distribution company. The Company, each of its Subsidiaries, BMCLP and
the Managed Affiliates are wholly owned directly or indirectly by Mr. Brill, who
founded the business and began its operations in 1981.
For the year ended February 28, 1997, the Company's pro forma combined
revenues, net loss and Media Cashflow, excluding the Missouri Properties which
are under contract to be sold (see "Recent or Pending Transactions"), were $27.4
million, $8.5 million and $10.2 million, respectively. For the nine months ended
November 30, 1997, such pro forma combined revenues, net loss and Media Cashflow
were $22.6 million, $5.6 million and $8.7 million, respectively. The financial
statements of the Managed Affiliates are not combined with those of the Company.
Historically, the Company has focused on media properties located in middle
markets, which the Company believes offer greater opportunities than larger
markets to build and maintain consistently high market and revenue shares at
reasonable costs. The Company believes its markets are generally less
competitive than major markets and are characterized by a limited number of
direct competitors, local owner/operators that are less sophisticated and have
less financial resources, and fewer alternative advertising media. In such
markets, the Company is able to target broader demographic groups and to sell
its advertising to a wider customer base than in major markets. The Company
believes that, relative to larger markets, a higher percentage of revenues in
middle markets is derived from local advertising and therefore a correspondingly
higher portion of its revenues can be directly generated by its own sales
efforts. The Company believes that local advertisers in middle markets often
make advertising decisions based primarily on customer relationships and service
and advertising results. The Company's primary focus is to provide high-quality
customer service with promotional activities that yield results for advertisers
and to build and maintain superior local advertiser relationships.
The Company's overall operations, including its sales and marketing
strategy, long-range planning, and management support services are managed by
BMCLP, a limited partnership indirectly owned by Mr. Brill (see "Certain
Transactions"). The management support provided by BMCLP has been a key element
in the Company's ability to achieve significant increases in Media Cashflow at
each of its properties following their acquisition. Each of the Company's
properties is managed on a day-to-day basis by an experienced local
president/general manager. As of September 30, 1997, the Company had a workforce
of approximately 340 full-time and 100 part-time employees, none of whom is
unionized.
The principal executive offices of the Company are located at 420 N.W. Fifth
Street, Evansville, Indiana 47708, and its telephone number is (812) 423-6200.
55
<PAGE>
RADIO PROPERTY OVERVIEW
In each of its markets, the Company's Stations and the Managed Affiliates'
stations as a group hold at least one of the top two rankings in both combined
audience ratings and combined revenues. Furthermore, in each of its markets the
Company's Stations and the Managed Affiliates' stations individually hold at
least one of the top two audience and revenues rankings. Set forth below is a
list of the Stations and the Managed Affiliates' stations specifying their
broadcasting frequency, FCC class, format, control, market, market rank and
group rank by ratings and revenues.
<TABLE>
<CAPTION>
STATION GROUP
STATION ARBITRON RANK
FCC OWNED/ MARKET --------------------------
FREQUENCY CLASS FORMAT MANAGED MARKET(S) RANK RATINGS REVENUES
- ---------------------- --------- ----------- ------------ --------------------- ----------- --------- ---------------
- ----------------------
<C> <S> <C> <C> <C> <C> <C> <C>
WIOV-FM 105.1 FM-B Country Owned Lancaster, PA(1) 110 1 1
Reading, PA 130 2 2
WBKR-FM 92.5 FM-C Country Owned Evansville, IN 125(2) 1 1
WKDQ-FM 99.5 FM-C Country Managed(3) and Owensboro/
WSTO-FM 96.1 FM-C Adult Hits Managed(3) Henderson, KY
WOMI-AM 1490 AM-C News/Talk Owned
WVJS-AM 1420 AM-B News/Talk Managed(3)
KTRR-FM 102.5 FM-C2 Adult Hits Managed(4) Fort Collins/ 135 1 1
KUAD-FM 99.1 FM-C1 Country Owned Greeley/
Loveland, CO
KKCB-FM 105.1 FM-C1 Country Owned Duluth, MN/ 207 1 1
KLDJ-FM 101.7 FM-C2 Oldies Owned Superior, WI
WEBC-AM 560 AM-B News/Talk Owned
KATI-FM 94.3 FM-C2 Country Owned(5) Jefferson City/ NR(6) 2 2
KTXY-FM 106.9 FM-C Adult Hits Owned(5) Columbia/
KLIK-AM 950 AM-B Country Owned(5) Lake of the
Ozarks, MO
</TABLE>
- --------------------------
(1) WIOV-FM serves both Lancaster and Reading. The Company also owns and
operates WIOV-AM, an AM-C station in Reading. Ratings and revenues ranks for
WIOV-FM include WIOV-AM.
(2) The Company estimates that on a combined basis the
Evansville/Owensboro/Henderson market would have an Arbitron rank of 125
based on separate rankings of 151 and 255 for Evansville and Owensboro,
respectively.
(3) WKDQ-FM, WSTO-FM and WVJS-AM are owned by Managed Affiliates.
(4) The Company manages KTRR-FM pursuant to a Time Brokerage Agreement pending
completion of its acquisition.
(5) The Missouri Properties are under contract for sale. See "Certain
Transactions." Accordingly, the pro forma financial statements presented
herein do not include the operating results of such stations.
(6) The Jefferson City/Columbia/Lake of the Ozarks, Missouri market is not
ranked by Arbitron. Columbia separately is ranked 237 by Arbitron, and
KTXY-FM is the top-rated station by audience ranking in such market.
LANCASTER AND READING, PENNSYLVANIA, which the Company estimates combined
would have an Arbitron rank of 60, are served by WIOV-FM and WIOV-AM. WIOV-FM
programs a Country music format and consistently is one of the region's top
rated stations. WIOV-FM is the top-ranked radio station based on combined
revenues in the Lancaster market. WIOV-AM serves the Reading market with a
News/Talk format.
EVANSVILLE, INDIANA, AND OWENSBORO/HENDERSON, KENTUCKY, which the Company
estimates combined would have an Arbitron rank of 125, are served by WBKR-FM and
WOMI-AM. These stations broadcast to the Tri-State area of southwestern Indiana,
southern Illinois, and western Kentucky, which the Company
56
<PAGE>
believes is undergoing significant economic expansion. WBKR-FM is the region's
most powerful and most listened to radio station. The five stations operated by
the Company (including the Managed Affiliates' stations, WKDQ-FM, WSTO-FM and
WVJS-AM) rank first in the market in terms of both their combined revenues and
their combined ratings, and individually hold three of the top four audience and
revenues rankings in the market.
FORT COLLINS/GREELEY/LOVELAND, COLORADO, which has recently been designated
as a market by Arbitron and is ranked 135, is served by KUAD-FM and KTRR-FM.
KUAD-FM is northern Colorado's leading radio station in terms of audience
ratings and advertising revenues, and in the nineteen months since the Company
began operating it pursuant to a Time Brokerage Agreement, KTRR-FM has
established a significant presence in the market. These Stations primarily serve
Larimer and Weld counties in northern Colorado, which comprise a distinct market
approximately 65 miles north of Denver. The Company believes that radio
advertising in the area is significantly underutilized by potential advertisers
based on national norms. The Stations focus on the Fort Collins/Greeley/Loveland
"triangle," and reach a listener base that the Company believes is
well-educated, has significant disposable income, and is served locally by few
other radio stations.
DULUTH, MINNESOTA AND SUPERIOR, WISCONSIN, which have a combined Arbitron
rank of 207, are served by KKCB-FM, KLDJ-FM and WEBC-AM, which the Company
believes is the premier combination of radio stations in this market based on
revenues and audience ratings. KKCB-FM, which operates a Country format, is the
highest-rated station in its market.
JEFFERSON CITY/COLUMBIA/LAKE OF THE OZARKS, MISSOURI, is served by KATI-FM,
KTXY-FM and KLIK-AM. These stations are currently under contract for sale and
pending closing are being operated by the purchaser under the terms of a Time
Brokerage Agreement. See "--Recent or Pending Transactions."
PUBLICATIONS OVERVIEW
Set forth below is a list of the Newspaper publications specifying the
location and circulation of each.
<TABLE>
<CAPTION>
NEWSPAPER LOCATION CIRCULATION
- ------------------------------------------------- ------------------- -----------
<S> <C> <C> <C>
MORNING SUN...................................... Mt. Pleasant, MI 12,700
MT. PLEASANT BUYERS GUIDE........................ Mt. Pleasant, MI 28,400
CLARE COUNTY BUYERS GUIDE........................ Clare, MI 13,000
ALMA REMINDER.................................... Alma, MI 20,600
CADILLAC BUYERS GUIDE............................ Cadillac, MI 21,700
CARSON CITY REMINDER............................. Carson City, MI 11,000
EDMORE ADVERTISER................................ Edmore, MI 17,500
HEMLOCK SHOPPERS GUIDE........................... Hemlock, MI 12,500
GLADWIN BUYERS GUIDE............................. Gladwin, MI 16,800
ISABELLA COUNTY HERALD........................... Mt. Pleasant, MI 16,200
MIDLAND BUYERS GUIDE............................. Midland, MI 28,000
ST. JOHNS REMINDER............................... St. Johns, MI 16,200
THE NORTHEASTERN SHOPPER
(NORTH EDITION)................................ Tawas City, MI 24,400
THE NORTHEASTERN SHOPPER
(SOUTH EDITION)................................ Tawas City, MI 15,600
-----------
Total Circulation 254,600
-----------
-----------
</TABLE>
The Newspapers serve a seventeen county area of small communities in central
Michigan , where there are few other newspapers, no local television stations,
and few radio stations. The Company has central offices and production
facilities in Mt. Pleasant, Michigan and leads the central Michigan market in
media billings.
57
<PAGE>
The Company's daily newspaper, the MORNING SUN, has a paid subscription base
of 12,700 readers and is the only daily newspaper published in Gratiot, Isabella
and southern Clare counties. The Company's weekly newspaper and twelve weekly
shopping guides are delivered free to more than 240,000 households in the
central Michigan area. The Company's multiple products and private delivery
system permit advertisers to buy customized advertising coverage for the portion
of the local market that best reaches their potential customers. The Company
also publishes numerous niche publications such as vacation guides and a monthly
business report. The Newspapers have a widely diversified base of advertising
and printing customers and during the year ended February 28, 1997 no one
customer represented more than 2% of the Company's revenues.
STRUCTURE AND GOVERNANCE
In anticipation of the Offering, the ownership of the Stations and
Newspapers was restructured to preserve certain historical tax benefits while
permitting Mr. Brill the flexibility required to continue growing the business
through acquisitions.
Set forth below is a chart outlining the ownership of the Company and its
principal affiliates. Certain intermediate entities have been omitted.
[The chart, which is on file with the Issuer, shows that Mr. Brill is the
sole ultimate owner of (i) BMCLP, (ii) the Managed Affiliates, (iii) the
Subsidiaries (indirectly through BMC and Holdings) and (iv) Media (indirectly
through BMC).]
The Exchange Securities will be issued jointly by the Issuer. BMC through
Subsidiaries directly and indirectly owns radio and newspaper properties,
including those previously identified. The historical financial statements of
The Radio and Newspaper Businesses of Alan R. Brill included elsewhere in this
Prospectus include the financial position and results of operations of the radio
and newspaper Subsidiaries on a combined basis. Each Subsidiary is wholly-owned
directly or indirectly by BMC.
The Managed Affiliates are not subsidiaries of the Company, but are managed
by the Company pursuant to Managed Affiliates Management Agreements. As of the
date of this Prospectus, the Managed Affiliates operate radio stations WKDQ-FM,
WSTO-FM and WVJS-AM in Evansville, Indiana and Owensboro/Henderson, Kentucky,
which were acquired by Mr. Brill in 1997. While subject to a Managed Affiliate
Management Agreement, funds may be advanced from time to time to these and
future Managed Affiliates by the Company or its Subsidiaries in the form of
Managed Affiliate Notes. See "Description of Notes--Limitations on Affiliate
Transactions."
Local general managers operate the Stations and Newspapers on a day-to-day
basis. Other management services, including benefit plan administration, risk
management, finance, tax management, and strategic planning and operations
oversight are provided to the Subsidiaries and the affiliates by BMCLP, which is
owned indirectly by Mr. Brill. The fees charged by BMCLP are established on a
contractual basis and, as set forth more fully under "Certain Transactions,"
such fees are payable to the extent set forth in the Description of the Notes.
A table setting forth the revenues, operating income, identifiable assets,
depreciation and amortization expense and capital expenditures of the Company's
two business segments is included in Note 11 of the Combined Financial
Statements included in this Prospectus.
BUSINESS STRENGTHS
MIDDLE MARKET FOCUS. The Company operates media businesses in middle
markets which generally are less competitive than larger markets and are
characterized by a limited number of direct competitors, local owner/operators
which are less sophisticated and have less financial resources, and fewer
alternative media. The Company believes that in its markets the majority of its
revenues are directly generated by its own sales efforts.
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STRONG AND GROWING MARKET SHARE. In each of its radio markets the Company's
Stations or the Managed Affiliates' stations hold at least one of the top two
rankings in both audience ratings and revenues. The Company believes that it is
the leading advertising provider in its newspaper markets. The Company believes
the Stations and Newspapers have strong community support and work to build and
maintain strong middle market franchises.
SUCCESSFUL ACQUISITION HISTORY. Mr. Brill has a history of identifying
acquisition opportunities, initiating negotiations to buy such properties and
developing creative structures by which to meet the requirements of the sellers
of such properties. Mr. Brill and the management team have successfully
developed acquired radio stations and newspapers and have improved Media
Cashflow at each of the Company's properties following their acquisition.
CONSISTENT MEDIA CASHFLOWS. The Company's Subsidiaries have a history of
consistent media cashflows. The Company's Subsidiaries generated Media Cashflow
margins (on a combined basis) of approximately 24%, 26%, and 30% for the
one-year periods ended February 28, 1995, February 29, 1996, and February 28,
1997, respectively, and 39% for the nine-month period ended November 30, 1997.
The Company believes that its Media Cashflow will continue to be strong and will
enable the Company to continue its acquisition strategy. Furthermore, the
Company's continuing operations currently require relatively small capital
expenditures.
EXPERIENCED AND COMMITTED MANAGEMENT TEAM. The Company's senior management
team, provided by BMCLP, is highly experienced in the radio and newspaper
industries. BMCLP has experienced little management turnover, and BMCLP's four
senior operating executives have an average of 22 years each of experience in
the media industry and have worked together since 1988. The Company has a
decentralized management structure in which general managers make the key local
operating decisions for each station or newspaper with support from BMCLP
management.
STRONG LOCAL ADVERTISER RELATIONSHIPS. Historically, the Company has
created and maintained relationships directly with local advertisers in its
markets, which enable the Company to respond immediately and creatively to meet
customer needs. The Company believes that its marketing approach and customer
relationships enable the Stations to generate greater revenues and margins than
comparably ranked stations in their markets and enable the Newspapers to
increase revenues and margins. To further strengthen its relationships with
advertisers, the Company also offers and markets its ability to create customer
traffic through on-site events staged at, and broadcast from, an advertiser's
business.
ACQUISITION STRATEGY
The Company seeks to acquire underperforming middle market media businesses
whose acquisition costs are low relative to potential revenues and cashflow. The
Company focuses on developing significant long-term franchises in middle
markets. The Company then seeks to improve revenues and cashflow, using its
particular promotional, marketing, sales, programming and editorial approaches.
The Company targets businesses that it believes operate in underdeveloped market
segments with a low level of competition and a strong economic base, as well as
stations with competitive technical facilities and businesses that are located
in areas deemed desirable for relocation in terms of personnel recruitment.
The Company believes that its acquisition strategy, properly implemented,
has a number of specific benefits, including (i) diversification of revenues and
cashflow across a broader base of industries, properties and markets, (ii)
geographic clustering which has allowed improved cashflow margins through the
consolidation of facilities, centralized newsgathering, cross-selling of
advertising, elimination of redundant expenses, (iii) improved access to
consultants and other industry resources, (iv) greater appeal to qualified
industry management talent and (v) efficiencies from economies of scale.
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OPERATING STRATEGY
In order to appeal to advertising customers and maximize the revenues and
cashflow of its properties, the Company's strategy is as follows:
MARKETING PARTNERSHIPS. The Company believes that advertisers in its
markets are attracted and retained through value-added customer services. While
the Company seeks and achieves audience ratings and circulation as a means of
attracting advertisers, its operations are distinguished by a particular
emphasis on soliciting advertisers directly. The Company believes that in many
middle markets the decision to advertise on a given radio station or in a given
newspaper is driven in large measure by direct customer relationships and the
level of customer success with past advertising programs and the marketing and
sales effectiveness of the station or newspaper staff.
The Company believes that building and solidifying marketing partnerships
with advertisers and retaining such customers through effective results and high
quality customer service are significant factors in maintaining leading revenue
shares in its markets.
OWNERSHIP OF STRONG MEDIA GROUPS. In each of its markets, the Company seeks
to maintain and enhance its position as a market leader through its ownership of
groups of stations or publications. Its ownership of groups of stations and
publications allows the Company a variety of sales opportunities and customer
demographics. By strategically coordinating customized programming, publishing,
promotional, and selling strategies among a group of local stations or
newspapers, the Company attempts to reach a wide range of demographic groups
that appeal to advertisers. The Company believes that its wide range of
advertising options permits it to offer pricing choices to suit customer needs
and strengthen advertiser relationships.
AGGRESSIVE SALES AND MARKETING. The Company seeks to maximize its share of
local advertising revenues in each of its markets by implementing and
maintaining strong direct sales and marketing programs. The Company tends to
maintain separate sales forces for each of its Stations or Newspapers. The
Company's Stations strive to maximize revenues by managing the on-air inventory
of advertising time and adjusting prices based on local market conditions.
Through its marketing efforts, the Company provides advertisers with an
effective means of reaching a targeted demographic group. To further strengthen
its relationships with radio advertisers, the Company also offers and markets
its ability to create customer traffic through on-site events staged at, and
broadcast from, an advertiser's place of business and promotions in which
listeners are encouraged to participate by visiting such place of business.
EXPERIENCED LOCAL MANAGEMENT. The Company believes that each of its
Stations and Newspapers is primarily a local business and that much of its
success is the result of the efforts of local management and staff. Accordingly,
the Company decentralizes its operations. Each of the Company's local media
groups is managed by a team of experienced managers who understand the trends,
demographics, and competitive opportunities of the particular market. Local
managers are responsible for developing annual operating budgets, and a major
portion of their compensation is linked to performance against operating
targets. BMCLP approves each station or newspaper group's annual operating
budgets and imposes strict financial reporting requirements to track performance
and monitor operating trends. The Company seeks and motivates managers who
thrive on the challenges presented by such autonomy. Its success in finding and
developing such managers has enabled the Company to compete successfully in each
of its local markets.
CENTRALIZED SUPPORT AND OVERSIGHT. The Company believes that its ability to
utilize existing senior management and sales resources of its media groups
enhances the growth potential of both acquired start-up and underperforming
properties. Additionally, this support reduces the risks associated with
undertaking new means of improving performance, such as launching new formats.
Furthermore, the Company seeks to achieve substantial cost savings through the
consolidation of facilities, management and administrative personnel and human
resources, as well as through the reduction of redundant expenses. BMCLP
personnel regularly visit the Stations and Newspapers to review performance,
assist local management with
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their programming, editorial, sales, recruiting and training efforts, and to
develop and verify overall operating and marketing strategies, including cost
management, designed to improve cashflow. These visits enable the Company to
remain aware of developments in each Station's and Newspaper's market and to
control and monitor costs while providing useful input to each local manager.
COMMUNITY INVOLVEMENT. The Company believes that its marketing, sales and
promotion efforts create direct relationships with its advertisers and
audiences, making its Stations and Newspapers significant participants in the
middle markets they serve. Each of the Company's Newspapers and Stations
participates in numerous community programs, fund-raisers and activities that
benefit a wide variety of organizations and produce revenues for the Company.
RADIO INDUSTRY OVERVIEW
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. During
the past decade, local advertising revenue as a percentage of total radio
advertising revenue has ranged from approximately 74% to 78%. The growth in
total radio advertising revenue tends to be fairly stable and has generally
grown at a rate faster than the Gross Domestic Product. Total radio advertising
revenue in 1996 of $12.4 billion represented an 8.2% increase over 1995, as
reported by the Radio Advertising Bureau ("RAB").
Radio is considered an efficient means of reaching specifically identified
demographic groups. Stations are typically classified by their on-air format,
such as country, adult contemporary, oldies or news/ talk. A station's format
and style of presentation enable it to target certain demographic and geographic
groups. By capturing a specific listening audience share of a market's radio
audience, with particular concentration in a targeted demographic group, a
station is able to market its broadcasting time to advertisers seeking to reach
a specific audience. Advertisers and stations utilize data published by audience
measuring services, such as Arbitron, to estimate how many people within
particular geographic markets and demographic groups listen to specific
stations.
Stations determine the number of advertisements broadcast hourly that will
maximize available revenue dollars without jeopardizing listening levels.
Although the number of advertisements broadcast during a given time period may
vary, the total number of advertisements broadcast on a particular station
generally does not vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station will
engage a firm that specializes in soliciting radio advertising sales on a
national level. National sales representatives obtain advertising principally
from advertising agencies located outside the station's market and receive
commissions based on the revenue from the advertising obtained.
According to the RAB'S RADIO MARKETING GUIDE AND FACT BOOK FOR ADVERTISERS,
1997, radio reaches approximately 95% of all Americans over the age of 12 each
week. More than one-half of all radio listening is done outside the home, in
contrast to other advertising media, and three out of four adults are reached by
car radio each week. Industry studies indicate that the average listener spends
approximately three hours and 20 minutes per day listening to radio. The highest
portion of radio listenership occurs during the morning, particularly between
the time a listener wakes up and the time the listener 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 commands premium
advertising rates.
Radio listeners have gradually shifted over the years from AM (amplitude
modulation) to FM (frequency modulation) stations. FM reception, as compared to
AM, is generally clearer and provides greater tonal range and higher fidelity.
FM's listener share is now in excess of 75%, despite the fact that the number of
AM and FM commercial stations in the United States is approximately equal.
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While this description is representative of the radio industry as a whole on
a national basis, the Company believes that the description characterizes
particularly that portion of the industry that operates in major markets. It
believes that the radio business in middle markets differs significantly from
that of the major markets.
This distinction is characterized by the fewer number of radio stations in
smaller markets, the fewer number of advertising alternatives, the greater
relevance of any single business (or radio station) to the market's life, the
greater proportion of advertising that is sold locally as opposed to national
accounts and the much smaller proportion of advertising that is controlled by
agencies. For these reasons, in middle markets a radio station has greater
flexibility in competitive and sales strategy and has greater control, through
its own direct marketing efforts, on its own outcome, as compared to major
markets.
With fewer competitors in a middle market a station can pursue listeners on
a broader basis and serve a broader spectrum of advertisers, be less subject to
competitive changes of competitors and, most importantly, deal directly with
customers and around agencies if necessary to demonstrate and convince
advertisers of the effectiveness of advertising on the station. The station does
not have to wait for programming to be successful to draw customers when it can
deal with potential clients directly on an effectiveness basis.
As a result of ownership deregulation (see "--Federal Regulation of Radio
Broadcasting" and "Risk Factors--Governmental Regulation"), middle market owners
also can achieve the mass and efficiencies of major market operations through
multiple station ownership. Such deregulation has greatly increased
opportunities for ownership of stations in middle markets and has greatly
increased the liquidity of station trading in the marketplace and, therefore,
the liquidity that the financing markets are willing to offer.
The Company believes that these factors and distinctions have greatly
enhanced the ability of middle market broadcasters to achieve very favorable
operating margins with attractive revenue levels on a reasonable cost basis and
with fewer disruptions caused by radio competitors and other advertising
alternatives. Furthermore, the greater relevance in a middle market of a single
radio business offers great opportunities for the radio station to interact
directly with its potential customers.
NEWSPAPER INDUSTRY OVERVIEW
Newspaper publishing is one of the oldest and largest segments of the media
industry. Newspapers are an important medium for local advertising. The
newspaper industry in the United States is comprised of the following segments:
national and major metropolitan dailies; small metropolitan suburban dailies;
suburban and community non-dailies; and free circulation "total market coverage"
publications and shoppers ("Shoppers").
In many communities, the local newspapers provide a combination of social
and economic linkages which make it attractive for readers and advertisers
alike. The Company believes that small metropolitan and suburban dailies as well
as suburban and community non-dailies and Shoppers are generally effective in
addressing the needs of local readers and advertisers under widely varying
economic conditions. The Company believes that because small metropolitan and
suburban daily newspapers rely on a broad base of local retail and local
classified advertising rather than more volatile national and major account
advertising, their advertising revenues tend to be relatively stable. In
addition, the Company believes such newspapers tend to publish information which
is of particular interest to the local reader and which national and major
metropolitan newspapers, television and radio generally do not report to the
same extent. Most small metropolitan and suburban daily newspapers are the only
daily local newspaper in the communities they serve. The Company believes that
relatively few daily newspapers have been established in recent years due to the
high cost of starting a daily newspaper operation and building a franchise
identity.
Shoppers provide nearly 100% penetration in their areas of distribution and
generally derive revenues solely from advertising. These publications have
limited or no news or editorial content.
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The newspaper industry, as represented by larger markets at one end and
smaller markets on the other, is composed of two distinct sub-industries. They
differ particularly because of the influences of size, alternative claims on
readers' attention, alternative advertising vehicles, alternative newspaper
competitors, methods and costs of distribution, labor costs and flexibility,
other cost structures, and significance of the product to its readers and
customers. In all of these parameters the Company believes that in middle
markets, these factors are more favorable to the financial results and stability
of a newspaper business. These factors also create a more vital product for the
readers in a middle market than newspapers may be in a major market, which
typically has numerous and diverse information and entertainment sources.
DESCRIPTION OF THE STATIONS AND THEIR MARKETS
LANCASTER AND READING, PENNSYLVANIA. The Company owns and operates one FM
and one AM radio station serving Lancaster and Reading, Pennsylvania.
<TABLE>
<CAPTION>
STATION
PROGRAMMING YEAR
STATION CALL LETTERS FORMAT ACQUIRED/LMA
- ----------------------------------------------------------------------------- ------------------- ---------------
<S> <C> <C>
WIOV-FM...................................................................... Country 1984
WIOV-AM...................................................................... News/Talk 1981
</TABLE>
Lancaster has an Arbitron rank of 110 and Reading has an Arbitron rank of
130. The Company estimates that combined, Lancaster and Reading would have an
Arbitron rank of 60, with an age 12+ metro population of 663,600. Lancaster and
Reading had market revenues of approximately $20.0 million in 1996, an increase
of approximately 7.0% over 1995. There are 18 stations in the Lancaster and
Reading market, but only (by the Company's estimates) two fully competitive FM
stations in Reading and 6 fully competitive FM stations in Lancaster. The two
stations owned and operated by the Company rank first in Lancaster in audience
ratings and revenues and second in Reading in such categories.
The licensed location of WIOV-FM in Ephrata, Pennsylvania provides the
Station with the unique capability to broadcast with a "city grade" signal into
both Lancaster and Reading from its transmitter site. Due to the limited
availability of frequencies in the Pennsylvania area, such opportunity is not
available to the Company's competitors. Nevertheless, mountains between the two
markets hamper the Station's signal in Reading. The Station is now building a
booster transmitter to establish a parity signal in the Reading market.
WIOV-AM in 1994 took the call letters of its sister FM station to exploit
the popularity of the FM station. Also in 1994, WIOV changed its format from
Country to News/Talk.
WIOV-FM has achieved a high level of recognition by listeners and
advertisers in the Lancaster and Reading community through numerous promotional
activities, including its sponsorship of an annual free Country music concert,
which in 1997 was attended by approximately 55,000 people. The Company believes
the Lancaster region represents one of the best middle markets in the country
due to the region's strong and vibrant economy, attractive demographics, and
desirable competitive environment.
EVANSVILLE, INDIANA AND OWENSBORO/HENDERSON, KENTUCKY. The Company owns and
operates one FM and one AM radio station and manages two FM radio stations and
one AM radio station in the region of
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southwestern Indiana, western Kentucky and southern Illinois, surrounding
Evansville, Indiana and Owensboro, Kentucky (the "Tri-State Region").
<TABLE>
<CAPTION>
STATION
PROGRAMMING YEAR
STATION CALL LETTERS FORMAT ACQUIRED/LMA
- ----------------------------------------------------------------------------- ------------------- ---------------
<S> <C> <C>
WBKR-FM...................................................................... Country 1993
WSTO-FM...................................................................... Adult Hits 1997
WKDQ-FM...................................................................... Country 1997
WOMI-AM...................................................................... News/Talk 1993
WVJS-AM...................................................................... News/Talk 1997
</TABLE>
Evansville has an Arbitron rank of 151 and Owensboro has an Arbitron rank of
255. The Company believes that the Tri-State Region comprises a single economic
market, and estimates that the combined Tri-State Region would have an Arbitron
rank of 125, with an age 12+ metro population of 310,600. The Tri-State Region
had market revenues of approximately $17.1 million in 1996, an approximate 3.6%
increase over 1995. There are 33 stations in the Tri-State Region market of
which, the Company estimates, 8 to 10 are fully competitive commercial FM
stations. The five stations operated by the Company (including the Managed
Affiliates WKDQ-FM, WSTO-FM and WVJS-AM) rank first in the market in terms of
both combined gross revenues and combined ratings, and individually hold three
of the top four ratings ranking in the market.
The Company entered the market in 1993 with the purchase of WBKR-FM and
WOMI-AM, and more than tripled the Media Cashflow of those Stations by the end
of its first full fiscal year of ownership, principally by implementing its
aggressive direct sales strategies.
In addition, the Company has entered into Managed Affiliate Management
Agreements with the Managed Affiliates, and had loaned, as of November 30, 1997,
$15.4 million to them. See "Certain Transactions."
The Company believes that the Managed Affiliates complement its existing
strengths in the Tri-State Region. WBKR-FM ranks first in the Owensboro metro
and regional markets and in the Evansville regional market, while such
affiliated stations rank first in the Evansville metro market. Management
believes that WBKR-FM, WSTO-FM and WKQD-FM have the best technical facilities in
the greater Evansville and Owensboro market, providing strong regional signal
coverage to the Tri-State Region.
FORT COLLINS/GREELEY/LOVELAND, COLORADO. The Company owns and operates one
FM radio station and manages one FM radio station in the area of Fort Collins,
Greeley and Loveland, Colorado ("Fort Collins/ Greeley/Loveland"), approximately
65 miles north of Denver.
<TABLE>
<CAPTION>
STATION
PROGRAMMING YEAR
STATION CALL LETTERS FORMAT ACQUIRED/LMA
- ------------------------------------------------------------------------------------ ------------ ---------------
<S> <C> <C>
KUAD-FM............................................................................. Country 1988
KTRR-FM............................................................................. Adult Hits 1996
</TABLE>
Fort Collins/Greeley/Loveland has recently been designated an Arbitron
market and ranked 135. The Company believes that there are only four fully
competitive local commercial FM stations in the market. While market information
has not been published for this market, the Company believes that KUAD-FM would
be ranked first in the market in ratings and revenues, and that its Stations as
a group would be ranked first in ratings and revenues in the market.
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The Company entered the market in 1988 with the purchase of KUAD-FM, and
shortly afterward changed the format of that Station to Country in order to
distinguish it from a number of competing stations in the market. The Company
found a high level of resistance to the use of radio advertising among potential
advertisers in Fort Collins/Greeley/Loveland, which the Company believes
resulted from a failure of other radio station operators in the region to
develop trust and recognition of the effectiveness of radio among the market's
retailers. To address such resistance, the Company has sponsored seminars,
educational programs and media consultants for potential advertisers,
distributed newsletters to potential advertisers and persistently pursued
advertiser relationships. In part because of such customer education efforts,
the Company has increased the Media Cashflow of KUAD-FM by more than ten times
since its acquisition. The Company began to program KTRR-FM of Loveland,
Colorado, in August, 1996 under a Time Brokerage Agreement and has developed it
from a "stick" into a significant station in the market. The Company has
exercised an option to purchase the assets of KTRR-FM, and expects to close the
transaction in the near future (subject to the timely receipt of necessary
regulatory approvals). The level of radio advertising revenue in the Fort
Collins/Greeley/Loveland market, as a percentage of retail sales, remains
significantly below national levels, and the Company believes that significant
increases in market radio revenue are possible as it develops the market.
The license location of KUAD-FM in Windsor, Colorado, enables the Station to
broadcast into all of Fort Collins, Greeley and Loveland without being
identified with any one of such communities to the exclusion of the others.
DULUTH, MINNESOTA AND SUPERIOR, WISCONSIN. The Company owns and operates
two FM radio stations and one AM radio station in Duluth, Minnesota.
<TABLE>
<CAPTION>
STATION
PROGRAMMING YEAR
STATION CALL LETTERS FORMAT ACQUIRED/LMA
- ------------------------------------------------------------------------------------ ------------ ---------------
<S> <C> <C>
KKCB-FM............................................................................. Country 1984
KLDJ-FM............................................................................. Oldies 1995
WEBC-AM............................................................................. News/Talk 1984
</TABLE>
The market of Duluth, Minnesota and Superior, Wisconsin ("Duluth") has an
Arbitron rank of 207. Duluth had market revenue of approximately $6.6 million in
1996, an approximate 4.8% increase over 1995. There are 24 stations in the
Duluth market, of which, the Company believes, only 8 are fully competitive
commercial FM stations. The three stations owned and operated by the Company
rank first in the market in terms of their combined ratings and revenues, and
KKCB-FM ranks first in the market in ratings and revenues.
The Company entered the market in 1984 with the purchase of KKCB-FM and
WEBC-AM, and additionally acquired KLDJ in 1995, which it has developed from a
"stick." By aggressively implementing its strategies of developing marketing
partnerships with advertisers, assembling an experienced local management team
and providing centralized support and oversight, the Company has built the
Stations into the leading stations in the Duluth market according to revenue
share and ratings.
JEFFERSON CITY/COLUMBIA/LAKE OF THE OZARKS, MISSOURI. The Company has
entered into definitive agreements to sell substantially all of the Missouri
Properties (including market-leading KTXY-FM) for a net cash purchase price of
$7,419,000, plus $256,000 of assumed liabilities. See "Recent or Pending
Transactions."
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THE NEWSPAPER OPERATIONS
GENERAL.
Central Michigan Newspapers, Inc. and its affiliates ("CMN," or
"Newspapers") own and operate an integrated newspaper publishing, printing, and
advertising distribution operation in central Michigan. CMN was founded in 1981,
and the Company believes that CMN is the leading media company in its central
Michigan market. CMN offers a two-edition daily newspaper, thirteen weekly
publications, a web offset printing operation for Newspapers' publications and
outside customers, and a private distribution company for its products and those
of varied customers. Due to the close integration of all its operations and its
private distribution system, CMN can provide customized market coverage to its
advertisers to efficiently reach any of the more than 240,000 homes in its 120
mile by 140 mile market through its multiple product advertising buys.
CMN relies on aggressively selling comprehensive total-market advertising
coverage through its multiple publications and seeks to support its products
with an aggressive operating strategy which emphasizes quality, consistency,
creativity and integrity. The Newspapers operate in an attractive market with
very favorable economic conditions and trends and a favorable competitive
environment.
CMN's superior operating capabilities were demonstrated in February 1994,
when a fire destroyed its printing equipment, yet all the publications were
printed and delivered on time the next day, even though CMN was forced to use
outside printers. Another key to CMN's success is the strength of its
distribution system, providing on-time, reliable and independently audited
delivery service to more than 240,000 homes in its market place at a fraction of
the cost of the U.S. post office. The distribution system includes several
hundred well-supervised independent contractor delivery personnel and enables an
advertiser to buy any part of the company's distribution area that best serves
the advertiser's needs.
The economic recession and loss of a major client had a dampening effect on
financial results during the early 1990s. Although a major customer representing
several million dollars of revenues went out of business, management was able to
maintain overall Newspaper revenues and results, delivering increased cash flow
in that year and the following year. No single customer of the Newspapers
represented more than 2% of the Company's revenues, for the year ended February
28, 1997. Further, its cash flow has steadily increased from its fiscal 1993
low.
Recently purchased printing and production equipment as a result of the fire
loss has added new production and press capacity and doubled the printing speed
of CMN, providing the Newspapers with much greater scheduling and technical
flexibility and cost competitiveness. The new equipment has lead to increased
printing jobs produced more efficiently for the Newspapers and their customers.
DESCRIPTION OF NEWSPAPERS
MORNING SUN. The MORNING SUN, published every day except Saturday, is
delivered in Gratiot, Isabella and southern Clare counties. The service area has
a combined household count of approximately 32,000. The MORNING SUN appears in
two editions for each of the area's primary communities, Mt. Pleasant and Alma.
According to an audit by Audit Bureau of Circulations, paid circulation is
approximately 12,000 daily and 13,000 Sunday. As the area's only local, daily
newspaper, the MORNING SUN is the local community's principal medium for news
and information. Although approximately 80 percent of its articles, written by
staff writers, concern matters of local interest, the Newspaper carries articles
from the Associated Press, as well as syndicated features, including Clarence
Page, Andy Rooney, and George Will.
The MORNING SUN is staffed by 42 employees, including 18 in the editorial
department and 14 in the display and classified advertising department. The
Newspaper is established in the area and is widely recognized as the source for
local news, sports, and coverage of a variety of opinions. It has won numerous
awards, including awards from the Associated Press and Michigan Press
Association, such as first place for sports coverage and second place for local
news reporting and photography, and first place in the overall newspaper awards
for the last two years.
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WEEKLY SHOPPERS AND WEEKLY NEWSPAPER. The Newspapers publish thirteen
weekly publications in contiguous markets, including twelve weekly shopping
guides ("Shoppers") and a weekly newspaper, the ISABELLA COUNTY HERALD. The
Shoppers provide advertisers weekly contact with many households at the lowest
possible cost. While the Shoppers contain minimal news content, consumers rely
mainly on them for retail information, given the absence of other media. The
Shoppers are delivered free to more than 224,000 households in the Newspapers'
market area. The ISABELLA COUNTY HERALD offers local news and information and is
delivered free to approximately 16,200 households in the Mt. Pleasant area.
By pooling together numerous Shoppers in contiguous areas, Newspapers derive
economies of scale in printing, publishing, sales, and distribution to benefit
both itself and its customers.
ST. JOHNS REMINDER. ST. JOHNS REMINDER, published continuously since
September 1947, was acquired by the Company in 1996. The ST. JOHNS REMINDER is
distributed free each Sunday to 16,200 homes primarily in Clinton County and
serves a growing agrarian market near Michigan's state capital, Lansing.
Benefitting from an already strong retail business base, the ST. JOHNS REMINDER
is positioned to capture the considerable retail growth taking place between
Lansing and St. Johns.
Significant revenues are expected to come from cross sales to existing
advertisers of other Newspapers into St. Johns, because of its proximity to
other Company markets and publications. Additionally, St. Johns is included in
the Newspapers' classified and telemarketing network, offering its advertisers
up to 240,000 Michigan households.
NORTHEASTERN SHOPPER (NORTH AND SOUTH EDITION). In October 1997 the Company
acquired the NORTHEASTERN SHOPPER, expanding the Newspapers' core market area by
40,000 households to the northeast. Established in 1954, these shopping guides,
in separate northern and southern editions, are delivered free each Sunday in
the central Michigan counties of Iosco, Ogemaw, Alcona, Arenac, and a portion of
Bay County. The NORTHEASTERN SHOPPER serves an area with a flourishing retail
market and strong year-round tourism appeal and fits strategically with the
Company's other properties in the region.
OTHER PUBLICATIONS. The Company also publishes COUNTRY ROADS, a monthly
publication focusing on agriculture, and CENTRAL MICHIGAN BUSINESS, a monthly
publication which is delivered to area businesses and which reports on
activities and events of particular interest to the business community.
The Newspapers use state-of-the-art web printing capabilities to perform
commercial printing for third parties, typically in press runs of 30,000 to
200,000 copies. Much of this commercial printing is performed for the
publications' advertising customers. Other commercial printing customers include
other publishers of newspapers and shopping guides, specialty publications such
as real estate guides, entertainment publications, and publications of national
associations and schools. Examples of third party printing are CENTRAL MICHIGAN
UNIVERSITY LIFE, a school newspaper, and AUTO SHOPPER, a weekly classified
paper.
MARKET OVERVIEW. The Newspapers' market covers an area approximately 120
miles by 140 miles, containing a total population in excess of 700,000 people.
The area's relatively low population density makes print the only medium to
serve the market efficiently. The Newspapers' market coverage consists of a
seventeen-county area in central Michigan with Isabella and Gratiot counties at
its core and includes the Michigan counties of Clare, Gladwin, Midland, Saginaw,
Montcalm, Mecosta, Osceola, Wexford, Missaukee, Iosco, Clinton, Arenac, Ogemaw,
Alcona, and part of Bay.
With a population in excess of 100,000, the area of Isabella and Gratiot
counties enjoys a thriving economy and a high quality of life. Mt. Pleasant, a
city of 25,000 is home to Central Michigan University and its 17,000 students
and has enjoyed steady population growth over the past two decades. Alma, a
small college community of nearly 10,000 people in Gratiot County, is
approximately 20 miles south of Mt. Pleasant. The area is diversified
economically and industrially, including major employers in retail trade,
agriculture, oil and gas production and field service, diversified
manufacturing, tourism, and education. Traditionally, unemployment in the area
has been much lower than average for the State of Michigan.
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CUSTOMER BASE. The Newspapers are well-positioned to prosper in the future,
particularly with an improving economy and increasing advertising spending. The
customer base is diversified and dispersed with both local and regional
businesses, including retail, food, automotive, furniture, lumber companies, and
education industries. The Company's reputation for service and quality is
evidenced by the long-term and expanding relationships it has with many of its
customers, as well as the numerous awards the Newspapers have received.
SALES AND PROMOTION. The Newspapers currently employ 43 sales
representatives who are responsible for generating display and supplement
advertising sales from customers. Each Shopper has at least one salesperson
located in the area where the weekly is distributed. Each salesperson seeks to
maximize advertising revenues by maintaining a local presence and establishing
relationships with area businesses. In addition to a significant promotion
budget the Company also participates in over 20 county fairs, the United Way,
the Downtown Business Association, and numerous Chambers of Commerce.
FACILITIES. As a result of a fire in 1994, the Newspapers had to purchase a
full line of new equipment. The printing operation was moved to a temporary
facility in Mt. Pleasant that has several truck docks for shipping and receiving
and is used to store paper and finished goods.
The Newspapers' office in Mt. Pleasant is located in leased space, which
houses management, sales, marketing, editorial, composition, accounting, and
other administrative functions. The Company believes that major savings can be
achieved annually by relocating to a single plant, gaining efficiency in
operations, improving communications and interaction among the departments, and
saving by elimination of duplicate staffs and supervisory functions, and has
identified a prospective facility for such a plant. See "Certain Transactions."
EQUIPMENT. The Newspapers have new state-of-the-art press, editorial,
classified, composing, and camera equipment. An investment of approximately $3
million was made in 1994 to acquire a new Goss Community press line and new
production equipment. The web press doubles the speed at which the Newspapers
can print jobs, thereby making the Newspapers much more competitive for contract
printing opportunities. This new equipment has resulted in reduced labor
requirements and greatly improved efficiency and financial performance.
DISTRIBUTION. In addition to delivering its publications, the Newspapers
also deliver over 60 million advertising insert pieces per year to residents in
central Michigan. Customized delivery to a particular zone can be specifically
created for an advertiser to reach as few as 150 households or more than 240,000
households on a given day at less than half the cost charged by the post office.
MANAGEMENT AND STAFF. Under the Company's guidance, the Newspapers operate
autonomously, with their staff directly responsible for most managerial,
operating, and administrative decisions and functions. The Newspapers'
activities are organized into approximately sixteen profit centers participating
in a fully integrated print marketing operation. Each management team is
experienced, capable, and committed to the growth and profitability of the
company. In addition to experience gained in growing a highly successful
company, most managers have substantial prior experience in the newspaper
business.
As of September 30, 1997, the Newspapers had 194 full-time employees and 51
part-time employees. This number does not include the several hundred
independent contractor delivery personnel that distribute the Newspapers'
publications.
The Company has not experienced problems in securing qualified labor from
the central Michigan area. There are no unions at the Newspapers, and all sales
representatives and department heads are under non-competition agreements. The
Company believes the salary and benefit structure has been effective in reducing
supervisory costs and improving productivity.
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ADVERTISING SALES
Virtually all of the Company's revenue is generated from local, regional and
national advertising for its Stations and Newspapers. During the year ended
February 28, 1997, approximately 90% of the Company's revenues were generated
from the sale of local and regional advertising. Additional revenue is generated
from the sale of national advertising, network compensation payments and other
miscellaneous transactions. The major categories of the Company's advertisers
include retailers, restaurants, fast food, automotive and grocery. Each local
sales staff solicits advertising either directly from the local advertiser or
indirectly through an advertising agency with emphasis placed on direct contact.
In so doing, the Company seeks to address individual advertiser needs and more
effectively design an advertising campaign to help the advertiser sell its
product. The Company employs personnel in each of its markets to produce
advertisements for the customers. National sales are made by a firm specializing
in advertising sales on the national level in exchange for a commission from the
Company that is based on the Company's gross revenues from the advertising
obtained. Regional and local 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.
RADIO STATIONS. The Company's Stations strive to maximize revenue by
managing the on-air inventory of advertising time and adjusting prices based on
local market conditions and by utilizing 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 of inventory for sale may vary at different times of the day but tends to
remain stable over time. Much of the Company's radio advertising pricing is
based on demand for its radio stations' on-air inventory and, in general, the
Company responds to this demand by varying prices rather than by varying its
target inventory level for a particular station. Therefore, most changes in
revenue in a mature station are explained by demand-driven pricing changes
rather than by changes in the 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) the
effectiveness of a station's sales staff, (ii) the station's share of audiences
in the demographic groups targeted by advertisers (as measured by ratings
surveys estimating the number of listeners tuned to the station at various
times), (iii) the number of stations in the market competing for the same
demographic groups, (iv) the supply of and demand for radio advertising time and
(v) 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 may be used by its advertisers and advertising representatives
to consider advertising with the station and are used by the Company to chart
audience growth, set advertising rates and adjust programming. The radio
broadcast industry's principal ratings service is Arbitron, which publishes
periodic ratings surveys for significant domestic radio markets. These surveys
are the Company's primary source of ratings data. While the Company seeks and
achieves ratings as a means of attracting advertisers, its operations are
distinguished by a particular emphasis on soliciting advertisers directly.
NEWSPAPERS. The Company believes that the combined coverage of the
Newspapers is an important competitive advantage in attracting advertisers
because it permits them to cover the entire market area or specifically target
any part of the market in central Michigan. The Company offers discounts on
combination buys and coordination of all orders through one central office. The
Newspapers are recognized as the number one medium for advertising throughout
central Michigan, and the marketing focus is to generate revenues from each
potential advertiser. The Company is focused on raising rates when appropriate,
increasing volume, generating new business, and gaining additional market share.
Some of the Newspapers have been in existence for over 50 years, with the ALMA
REMINDER beginning in 1938, the MT. PLEASANT BUYERS GUIDE in 1946, and ST.
JOHN'S REMINDER in 1947.
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COMPETITION
GENERAL. Each of the Company's Stations and Newspapers competes in varying
degrees with radio, television, newspapers, direct marketing and other
communications and advertising media having local, regional or national
audiences.
RADIO. The radio broadcasting industry is highly competitive. The success
of each of the Company's Stations in its middle markets depends largely upon its
direct marketing and sales efforts supported by its audience ratings and its
share of the overall advertising revenue within its market. The Company's
audience ratings and advertising revenues are subject to change, and any adverse
change in a particular market affecting advertising expenditures or in the
relative market positions of the stations located in that market could have a
material adverse effect on the revenue of the Company's Stations located in that
market. There can be no assurance that any one of the Company's Stations will be
able to maintain or increase its current audience ratings or advertising revenue
market share.
The Company's Stations compete for listeners and advertising revenue
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
consisting of a specific demographic group in each of its markets, the Company
provides support to its sales and marketing efforts to attract advertisers
seeking to reach those listeners. Operators of radio stations must be alert to
the possibility of another station changing its format to compete directly 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 may result in lower ratings and advertising revenue, increased promotion
and other expenses and, consequently, lower broadcast cashflow for the Company,
but in middle markets with fewer stations the frequency of such events may be
less than in major markets.
Factors that are material to a radio station's competitive position include
management experience, the effectiveness of its marketing plan and sales force,
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 market by constantly building its
sales staff, 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.
However, the Company competes with some organizations that have greater
financial resources than the Company.
Recent changes in the FCC's policies and rules permit increased ownership
and operation of multiple local radio stations. Management believes that radio
stations that operate under common management or elect to take advantage of
joint arrangements such as LMAs or JSAs may in certain circumstances have lower
operating costs and may be able to offer advertisers more attractive rates and
services. Although the Company currently operates multiple stations in each of
its markets and intends to pursue the creation of additional multiple station
groups, the Company's competitors in certain markets include operators of
multiple stations or operators who already have entered into LMAs or JSAs. The
Company also competes with 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, some
barriers to entry exist (which can be mitigated to some extent by changing
existing radio station formats and upgrading power, among other actions). The
operation of a radio broadcast station requires a license from the FCC, and the
number of radio stations that can operate in a given market is limited by the
availability of FM and AM radio frequencies allotted 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. The
FCC's multiple ownership rules have changed significantly as a result of the
Telecommunications Act. For a discussion of FCC regulation and the provisions of
the Telecommunications Act, see "--Federal Regulation of Radio Broadcasting."
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The Company's stations also compete for advertising revenue with other
media, including newspapers, broadcast television, cable television, magazines,
direct mail, coupons and outdoor advertising. In addition, the radio
broadcasting industry is subject to competition from new media technologies that
are being developed or introduced, such as the delivery of audio programming by
cable television systems, by satellite and by digital audio broadcasting
("DAB"). DAB 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. The radio
broadcasting industry historically has grown despite the introduction of new
technologies for the delivery of entertainment and information, such as
broadcast television, cable television, audio tapes and compact disks. 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 development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcasting industry.
The FCC has recently authorized a spectrum for the use of a new technology,
satellite digital audio radio services ("DARS"), to deliver audio programming.
DARS may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences. It is
not known at this time whether this digital technology also may be used in the
future by existing radio broadcast stations either on existing or alternate
broadcasting frequencies.
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 "--Federal Regulation of Radio Broadcasting."
NEWSPAPERS. The Company's Newspapers compete primarily with other daily and
weekly newspapers, shoppers, shared mail packages and other local advertising
media. The Newspapers also compete in varying degrees for advertisers and
readers with magazines, radio, broadcast television, directories and other
communications media that operate in their markets. The Company believes that
its production systems and technologies, which enable it to publish separate
editions in narrowly targeted zones, allow it to compete effectively in its
markets.
FEDERAL REGULATION OF RADIO BROADCASTING
GENERAL. 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 Telecommunications Act to make changes in several
broadcast laws. Among other things, the FCC assigns frequency bands for
broadcasting; issues station licenses; determines whether to approve changes in
ownership or control of station licensees; regulates equipment used by stations;
adopts and implements regulations and policies that directly or indirectly
affect the ownership, operation and employment practices of stations; and has
the power to impose penalties for violations of its rules under the
Communications Act.
The following is a brief summary of certain provisions of the Communications
Act and of specific FCC regulations and policies. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, the grant of "short" (less than the maximum)
license renewal terms or, for particularly egregious violations, the denial of a
license renewal application, the revocation of a license or the denial of FCC
consent to acquire additional broadcast properties. Reference should be made to
the Communications Act, FCC rules and the public notices and rulings of the FCC
for further information concerning the nature and extent of federal regulation
of broadcast stations.
LICENSE GRANT AND RENEWAL. Until recently, radio broadcast licenses were
granted for maximum terms of seven years but, acting under the authority of the
Telecommunications Act, the FCC recently revised its rules to extend the maximum
term for future renewals to eight years. Licenses may be renewed through an
application to the FCC. Prior to the Telecommunications Act, during certain
periods when a
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renewal application was pending, competing applicants could file for the radio
frequency being used by the renewal applicant. The Telecommunications Act
prohibits the FCC from considering such competing applications if the FCC finds
that 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 renewals 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 the FCC
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 is
restricted. Such a petition presently is pending against KUAD-FM, one of the
Company's Stations, which broadcasts from Windsor, Colorado. The Company is not
currently aware of any facts that would prevent the timely renewal of its
licenses to operate any of its other Stations and Managed Affiliates, although
there can be no assurance that the Company's licenses will be renewed.
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; and Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, B, C3, C2, C1 and C. The parameters for each classification
are as follows:
<TABLE>
<CAPTION>
MAXIMUM ANTENNA HEIGHT
MAXIMUM (HAAT)*
CLASS POWER IN METERS
----- ----------- ---------------------------
<S> <C> <C>
A 6 kw 100
B1 25 kw 100
B 50 kw 150
C3 25 kw 100
C2 50 kw 150
C1 100 kw 299
C 100 kw 600
</TABLE>
- ------------------------
* Height Above Average Terrain
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The following table sets forth the market, call letters, FCC license
classification, HAAT, power and frequency of each of the stations owned,
operated or managed by the Company, assuming the consummation of the Pending
Transactions, and the date on which each station's FCC license expires.
<TABLE>
<CAPTION>
HAAT EXPIRATION
FCC IN POWER IN DATE OF
MARKET STATION CLASS METERS KILOWATTS FREQUENCY FCC LICENSE
- ------------------------------------- ---------------- --------- ------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Lancaster/Reading WIOV-FM B 212 25 105.1 mhz 8/1/98
Pennsylvania WIOV-AM C NA 1 1240 khz 8/1/98
Evansville, Indiana/ WBKR-FM C 320 100 92.5 mhz 8/1/04
Owensboro/Henderson, WOMI-AM C NA 1 1490 khz 8/1/04
Kentucky WVJS-AM B NA 5 1420 khz 8/1/03
WSTO-FM C 303 100 96.1 mhz 8/1/03
WKDQ-FM C 300 100 99.5 mhz 8/1/03
Fort Collins/Greeley/Loveland, KUAD-FM C1 200 100 99.1 mhz 4/1/97*
Colorado KTRR-FM C2 150 50 102.5 mhz 8/2/04
Duluth, WEBC-AM B NA 5 560 khz 4/1/05
Minnesota/Superior, KKCB-FM C1 240 100 105.1 mhz 4/1/05
Wisconsin KLDJ-FM C2 251 25 101.7 mhz 4/1/05
</TABLE>
- ------------------------
* Renewal application pending
OWNERSHIP MATTERS. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast licensee 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 compliance with various rules limiting common ownership
of media properties, the "character" of the licensee and those persons holding
"attributable" interests therein, compliance with the Communications Act,
including the limitation on alien ownership, as well as compliance with other
FCC rules and policies, including equal employment opportunity requirements.
Once a station purchase agreement has been signed, an application for FCC
consent to assignment of license or transfer of control (depending upon whether
the underlying transaction is an asset purchase or stock acquisition) is filed
with the FCC. Approximately 10 to 15 days after this filing, the FCC publishes a
notice assigning a file number to the application and advising that the
application has been "accepted for filing." This notice begins a 30-day
statutory waiting period, which provides the opportunity for third parties to
file formal petitions to deny the transaction; informal objections may be filed
any time prior to grant of an application. The FCC staff will normally review
the application in this period and seek further information and amendments to
the application if it has questions.
Once the 30-day public notice period ends, the FCC's staff will complete its
processing, assuming that no formal petitions or informal objections were
received and that the application is otherwise consistent with FCC rules. The
staff often grants the application by delegated authority approximately 10 days
after the public notice period ends. At this point, the parties are legally
authorized to close the purchase, although the FCC action is not legally a
"final order." If there is a backlog of applications, the 10-day period can
extend to 30 days or more.
Public notice of the FCC staff grant is usually issued about a week after
the grant is made, stating that the grant was effective when the staff made the
grant. On the date of this notice, another 30-day period begins, within which
time interested parties can file petitions seeking either staff reconsideration
or full FCC review of the staff action. During this time the grant can still be
modified, set aside or stayed, and is not a "final order." In the absence of a
stay, however, the seller and buyer are not prevented from closing, at their own
risk, despite the absence of a final order. Also, within 40 days after the
public notice of the grant, the full FCC can review and reconsider the staff's
grant on its own motion. Thus, during the additional 10 days beyond the 30-day
period available to third parties, the grant is still not "final." In the event
that review by the full FCC is requested and the FCC subsequently affirms the
staff's grant of the
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application, interested parties may thereafter seek judicial review in the
United States Court of Appeals for the District of Columbia Circuit within
thirty days of public notice of the full FCC's action. In the event the Court
affirms the FCC's action, further judicial review may be sought by seeking
rehearing en banc from the Court of Appeals or by certiorari from the United
States Supreme Court.
In the absence of the submission of a timely request for reconsideration,
administrative review or judicial review, the FCC staff's grant of an
application becomes final by operation of law. Upon the occurrence of that
event, counsel is able to deliver an opinion that the FCC's grant is no longer
subject to administrative or judicial review, although such action can
nevertheless be set aside in rare circumstances, such as fraud on the agency by
a party to the application.
The pendency of a license renewal application will alter the aforementioned
timetables because the FCC will not issue an unconditional assignment grant if
the station's license renewal is pending.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
absent waivers, the Company would not be permitted to acquire any daily
newspaper or television broadcast station (other than low power television) in a
local market where it then owned any radio broadcast station. The FCC's rules
provide for the liberal grant of a waiver of the rule prohibiting common
ownership of radio and television stations in the same geographic market in the
top 25 television markets if certain conditions are satisfied. The
Telecommunications Act extends this waiver policy to stations in the top 50
television markets, although the FCC has not yet implemented this change.
In response to the Telecommunications Act, the FCC amended its multiple
ownership rules to eliminate the national limits on ownership of AM and FM
stations. The FCC's broadcast multiple ownership rules restrict the number of
radio stations one person or entity may own, operate or control on a local
level. These limits are:
(i) in a market with 45 or more commercial radio stations, an entity may
own up to eight commercial radio stations, not more than five of which are
in the same service (FM or AM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio
stations, 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
stations, an entity may own up to six commercial radio stations, not more
than four of which are in the same service;
(iv) in a market with 14 or fewer commercial radio stations, 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.
None of these multiple ownership rules requires any change in the Company's
current ownership of radio broadcast stations or precludes consummation of the
Transactions. However, these rules will limit the number of additional stations
which the Company may acquire in the future in its markets.
The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable," or cognizable interests held by a person or entity. A person or
entity can have an attributable interest in a radio station, television station
or daily newspaper by being an officer, director, partner or shareholder of a
company that owns that station or newspaper. Whether that interest is cognizable
under the FCC's ownership rules is determined by the FCC's attribution rules. If
an interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
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With respect to a corporation, officers and directors and persons or
entities that directly or indirectly can vote 5% or more of the corporation's
stock (10% or more of such stock in the case of insurance companies, investment
companies, bank trust departments and certain other "passive investors" that
hold such stock for investment purposes only) generally are attributed with
ownership of whatever radio stations, television stations and daily newspapers
the corporation owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
nonvoting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership, and
minority (under 5%) voting stock, generally do not subject their holders to
attribution. However, the FCC is currently reviewing its rules on attribution of
broadcast interests, and it may modify its criteria. See "--Proposed Changes"
below.
Since under the doctrine of attributed ownership all of the Company's
Stations are deemed to be owned by Alan R. Brill, the FCC multiple ownership
rules could serve to limit to some extent the ability of the Company to acquire
additional stations in some markets.
PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to
serve the "public interest." Since 1981, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. However, licensees continue to be required to present
programming that is responsive to community problems, needs and interests and to
maintain records demonstrating such responsiveness. Complaints from listeners
concerning a station's programming will be considered by the FCC when it
evaluates the licensee's renewal application, but such complaints also may be
filed and considered at any time.
Stations also must pay regulatory and application fees and follow various
FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification and
technical operations (including limits on radio frequency radiation). In
addition, licensees must develop and implement programs designed to promote
equal employment opportunities for women and minorities and must submit reports
to the FCC on these matters annually and in connection with a renewal
application. The broadcast of contests and lotteries is regulated by FCC rules.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the maximum) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
In 1985, the FCC adopted rules regarding human exposures to levels of radio
frequency radiation. These rules require applicants for new broadcast stations,
renewals of broadcast licenses or modifications of existing licenses to inform
the FCC at the time of filing such applications whether a new or existing
broadcast facility would expose people to radio frequency radiation in excess of
certain guidelines. More restrictive radiation limits became effective on
October 15, 1997. The Company anticipates that such regulations will not have a
material effect on its business.
LOCAL MARKETING AGREEMENTS. Over the past five years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "local marketing agreements" ("LMAs") or "time
brokerage agreements." These agreements take various forms. Separately-owned and
licensed stations may agree to function cooperatively in terms of programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each station maintain independent control over the programming and
other operations of its own station. The FCC has held that such agreements do
not violate the Communications Act as long as the licensee of the station that
is being substantially programmed by another entity maintains complete
responsibility for, and control over, operations of its broadcast station and
otherwise
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ensures compliance with applicable FCC rules and policies and that the entity
providing the programming is in compliance with the FCC local ownership rules.
A station that brokers substantial time on another station in its market or
engages in an LMA with a station in the same market will be considered to have
an attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into an LMA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit the broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns one and programs the other through an LMA arrangement.
Another example of a cooperative agreement between differently owned radio
stations in the same market is a joint sales agreement ("JSA"), whereby one
station sells advertising time in combination, both on itself and on a station
under separate ownership. In the past, the FCC has determined that issues of
joint advertising sales should be left to antitrust enforcement. Currently, JSAs
are not deemed by the FCC to be attributable for the purpose of its multiple
ownership rules. However, the FCC has outstanding a notice of proposed
rulemaking, which, if implemented, could require certain radio station operators
to terminate any JSA it might have with a radio station with which such operator
could not have an LMA.
PROPOSED CHANGES. In December, 1994, the FCC initiated a proceeding to
solicit comment on whether it should revise its radio and television ownership
"attribution" rules by among other proposals (i) raising the basic benchmark for
attributing ownership in a corporate licensee from 5% to 10% of the licensee's
voting stock, (ii) increasing from 10% to 20% of the licensee's voting stock the
attribution benchmark for "passive investors" in corporate licensees, (iii)
restricting the availability of the attribution exemption when a single party
controls more than 50% of the voting stock; and (iv) considering LMAs, JSAs,
debt and non-voting stock interests to be attributable under certain
circumstances. No decision has been made by the FCC in these matters. At this
time, no determination can be made as to what effect, if any, this proposed
rulemaking will have on the Company.
EMPLOYEES
At September 30, 1997, the Company employed approximately 340 persons
full-time and 100 persons part-time. None of such employees is covered by
collective bargaining agreements, and the Company considers its relations with
its employees to be good.
The Company employs several on-air personalities with large loyal audiences
in their respective markets. The Company generally enters into employment
agreements with these personalities to protect its interests in those
relationships that it believes to be valuable. The loss of one of these
personalities could result in a short-term loss of audience share, but the
Company does not believe that any such loss would have a material adverse effect
on the Company's financial condition or results of operations.
PROPERTIES AND FACILITIES
The types of properties required to support the Stations include offices,
studios, transmitter sites and antenna sites. A Station's studios are generally
housed with its offices in business districts, while transmitter sites and
antenna sites are generally located so as to provide maximum market coverage.
After giving effect to the Transactions, the Company will own studio
facilities in Ephrata, Pennsylvania; Owensboro, Kentucky; Windsor, Colorado; and
Duluth, Minnesota; and own transmitter and antenna sites in Reading,
Pennsylvania; Owensboro; and Duluth. The Company leases its remaining studio and
office facilities, and leases certain transmitter and antenna sites. The Company
does not anticipate any difficulties in renewing any facility leases or in
leasing alternative or additional space, if required. The Company owns
substantially all of its other equipment, consisting principally of transmitting
antennae, transmitters, studio equipment and general office equipment.
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Substantially all of the Company's properties and equipment may be
encumbered and serve as collateral for the Company's obligations hereinafter
incurred by the Company under the New Credit Facility.
No one property is material to the Company's operations. The Company
believes that its properties are generally in good condition and suitable for
its operations; however, it continually looks for opportunities to upgrade its
properties and intends to upgrade studios, office space, and transmission
facilities in certain markets.
LEGAL PROCEEDINGS
Currently and from time to time the Company is involved in litigation
incidental to the conduct of its business, but it is not a party to any lawsuit
or proceeding that, in the opinion of the Company, is likely to have a material
adverse effect on the Company.
MANAGEMENT
Directors of the Company's corporate manager, Brill Media Management, Inc.
("Media"), are elected annually by its sole shareholder, Alan R. Brill.
Executive officers of Media are elected by, and serve at the pleasure of,
Media's board of directors. The following table sets forth certain information
with regard to Media's principal executive officers and directors as of the date
of this Offering Memorandum:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Alan R. Brill 55 Director, President, Chief Executive Officer and
Treasurer
Robert M. Leich 54 Director
Philip C. Fisher 59 Director
Clifton E. Forrest 49 Director, Vice President (Newspapers), and
Assistant Secretary
Charles W. Laughlin 69 Director
Alan L. Beck 46 Vice President (Radio)
Donald C. TenBarge 40 Vice President, Controller, Secretary and
Assistant Treasurer
</TABLE>
Information concerning the experience and affiliations of the directors and
executive officers of Media is as set forth below.
ALAN R. BRILL, DIRECTOR, PRESIDENT, CHIEF EXECUTIVE OFFICER AND TREASURER.
Mr. Brill founded the Company's predecessor beginning in 1981 and has worked in
the media industry for 24 years. Prior to starting the Company, after Peace
Corps service in Ecuador, Mr. Brill joined Arthur Young & Co. in New York City
where he practiced as a CPA with a diversified clientele. In 1972, he joined a
new, publicly-traded real estate investment trust in Atlanta as a senior
financial and administrative executive. The trust was involved in short and
long-term real estate loans, primarily to proprietary hospitals. In 1973, he was
recruited by Worrell Newspapers, Inc., a large, privately-owned newspaper group
headquartered in Charlottesville, Virginia, as its chief financial officer and
named to the company's Board of Directors. As a senior executive in the company,
Mr. Brill was involved in or responsible for all the company's numerous
acquisitions and financings, had a role in most significant operating matters
and built a small television group for the company. Soon after the founder
transferred his ownership interest to his son and withdrew from the business,
Mr. Brill left Worrell to form Brill Media Company, Inc. in 1981. Mr. Brill
earned a B.A. in economics and mathematics from DePauw University and an M.B.A.
from Harvard Business School. Mr. Brill is a Certified Public Accountant.
ROBERT M. LEICH, DIRECTOR. Mr. Leich is President of Diversified Healthcare,
Inc., successor to Charles Leich & Co., one of the country's largest independent
drug distributors. He is a director of Old National
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Bank, Evansville, Indiana and of the National Wholesale Druggists Association.
He has served on the board of numerous civic and business organizations. Mr.
Leich graduated from Yale University and received his M.B.A. degree from Indiana
University at Bloomington.
PHILIP C. FISHER, DIRECTOR. Dr. Fisher is Dean of Business, University of
Southern Indiana and has published extensively on the case study method for
entrepreneurial businesses. He has held numerous civic and business posts,
including the board of the Evansville Chamber of Commerce and the executive
committee of the Indiana Council for Economic Education. He received his
undergraduate degree from Wayne State College, an M.B.A. from the University of
South Dakota, and a Ph.D. from the Graduate School of Business of Stanford
University.
CLIFTON E. FORREST, DIRECTOR, VICE PRESIDENT (NEWSPAPERS) AND ASSISTANT
SECRETARY. Mr. Forrest joined the Company's predecessors in 1981 as publisher of
CMN. In 1987, he moved to Evansville to become a senior officer of BMCLP. His
responsibilities consist of managing the publishing, printing and distribution
areas and overseeing employee benefit plans, risk management programs, personnel
issues, and certain other matters. Mr. Forrest has 33 years of industry
experience including 10 years at Worrell Newspapers, Inc. where he served in
various roles publishing daily and weekly newspapers in five different states.
Mr. Forrest earned a B.A. degree with an emphasis in journalism, marketing,
advertising and industrial sociology from Wichita State University.
CHARLES W. LAUGHLIN, DIRECTOR. Mr. Laughlin is a lawyer and presently of
counsel to Thompson & McMullan, P.C., a law firm in Richmond, Virginia. Mr.
Laughlin received his undergraduate degree from the College of William & Mary
and his J.D. from the University of Virginia. After completing a clerkship with
the United States Court of Appeals for the Fourth Circuit, he has practiced law
in Richmond, Virginia since 1956 and has served as counsel to the Company since
its inception.
ALAN L. BECK, VICE PRESIDENT (RADIO). Mr. Beck joined the Company's
predecessor in 1985 as President/General Manager of the Pennsylvania Stations.
After two years, he moved to the BMCLP where he became Vice President-Radio
Group Operations. Currently, his major responsibilities include supervising the
Stations and promotional companies through the general managers, and acting as a
resource for other operations. Mr. Beck has 22 years of experience in all facets
of the radio and television industries. Mr. Beck earned a B.A. degree in
marketing from Southern Illinois University.
DONALD C. TENBARGE, VICE PRESIDENT, CONTROLLER, SECRETARY AND ASSISTANT
TREASURER. Mr. TenBarge joined BMCLP in 1988. He is responsible for the
financial management and reporting of all operations and companies. In addition
to managing the information systems, Mr. TenBarge also participates in financing
activities and acquisitions. Prior to joining BMCLP, Mr. TenBarge was a manager
in a regional CPA firm where he spent nine years engaged in many aspects of
audit, tax, systems, and financial planning. Mr. TenBarge earned a B.S. in
Accounting from the University of Evansville and is a Certified Public
Accountant.
To the full extent permitted by applicable Virginia law, Media is obligated
to indemnify its officers and directors for liabilities and expenses incurred by
them because of their status as officers or directors of Media.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to Mr.
Brill, as its President, Chief Executive Officer and Treasurer, in all
capacities during the periods indicated. The Company did not pay any of its
executive officers salary and bonus in excess of $100,000 in fiscal 1997.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------
OTHER
ANNUAL
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ $ $
- ----------------------------------------------------------- --------- ------ ------ -------------------
<S> <C> <C> <C> <C>
Alan R. Brill.............................................. 1997 0 0 0
President, Chief Executive Officer,
Treasurer and Director(1)
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION $
- ----------------------------------------------------------- -------------------
<S> <C>
Alan R. Brill.............................................. 0
President, Chief Executive Officer,
Treasurer and Director(1)
</TABLE>
- ------------------------
(1) Mr. Brill received no compensation from the Company, and the other executive
officers of the Company received no significant compensation from the
Company. All such persons also serve as officers of, and receive
compensation from, BMCLP. BMCLP provides management services to the Company
and also to affiliated and unaffiliated entities other than the Company
pursuant to administrative management agreements. During fiscal 1995, fiscal
1996 and fiscal 1997, BMCLP earned approximately $1.7 million, $1.8 million
and $1.9 million, respectively, for such services to the Company. See
"Certain Transactions."
OPTIONS/SAR GRANTS IN FISCAL 1997
The following table sets forth certain information with respect to option
grants made to Mr. Brill for the fiscal year ended February 28, 1997.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL RATES OF
STOCK
PRICE
NUMBER PERCENT OF TOTAL APPRECIATION
OF SECURITIES OPTIONS/SARS FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS/ SARS EMPLOYEES IN PRICE EXPIRATION ---------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%
- ----------------------------------------------- ------------------- ----------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Alan R. Brill.................................. 0 N/A N/A N/A $ 0
<CAPTION>
NAME 10%
- ----------------------------------------------- ---------------
<S> <C>
Alan R. Brill.................................. $ 0
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1997 AND 1997
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
SHARES OPTIONS/SARS AT
ACQUIRED ON FISCAL YEAR-END,
EXERCISE VALUE EXERCISABLE/UNEXERCISABLE
NAME (#)(1) REALIZED ($) (#)
- ------------------------------------------ ----------------- ----------------- -----------------------------
<S> <C> <C> <C>
Alan R. Brill............................. 0 $ 0 0
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR-END,
NAME EXERCISABLE/UNEXERCISABLE
- ------------------------------------------ -------------------------------
<S> <C>
Alan R. Brill............................. $ 0
</TABLE>
Media made no grants to Mr. Brill of options or stock appreciation rights,
and Mr. Brill did not exercise any stock or appreciation rights, in the fiscal
year ended February 28, 1997. Mr. Brill held no options or SARs of Media as of
February 28, 1997.
INCENTIVE PLAN AGREEMENTS AND COMPENSATION OF DIRECTORS
The Company has entered into performance incentive plan agreements (the
"Plans") with Clifton E. Forrest with respect to the Newspapers business and
Alan L. Beck with respect to the Stations' business (the "Executives") in their
capacities as executives of the Company. The Plans accumulate increments
annually based on certain defined performance criteria. As of February 28, 1997,
vested interests of the Executives in the Plans totaled $1,785,000 for Mr.
Forrest, and $1,700,000 for Mr. Beck. Payments under the Plans will commence
only upon fulfillment of certain contingencies, including the Executive's death,
disability, retirement, or employment termination and can be paid, at the
Company's option, in amounts
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not to exceed quarterly payments of 2.5% of the Executive's vested amount. The
Company also participates in a defined contribution profit sharing plan to which
all Company employees may make voluntary contributions.
In the year ended February 28, 1997, Thompson & McMullan, P.C. (to which Mr.
Laughlin is of counsel) received approximately $170,000 in fees from the
Company.
CERTAIN TRANSACTIONS
Alan R. Brill directly or indirectly owns and controls the Issuer, the
Company and each of the Company's Subsidiaries, Managed Affiliates and other
affiliates.
BMCLP is a limited partnership whose limited partners are Alan R. Brill and
Northwest Radio, Inc., an affiliate owned by Mr. Brill, and whose general
partner is Brill Media Company, Inc., also an affiliate of the Company. Since
their organization or acquisition, each Subsidiary or affiliate owner of a
Newspaper or Station has paid management fees to BMCLP pursuant to management
agreements (the "Administrative Management Agreements"). Acting pursuant to such
Administrative Management Agreements, BMCLP is responsible for and provides to
the Stations and Newspapers long-range strategic planning, management support
and oversight, establishment of primary policies and procedures, resource
allocation, accounting and auditing, regulatory and legal compliance and
support, license renewals and the evaluation of potential acquisitions. In
addition, executives of BMCLP visit the Company's Stations and Newspapers on a
frequent basis to review performance, to assist local management with
programming, production, sales, and recruiting efforts, to develop, implement,
and verify overall Station and Newspaper operating and marketing strategies,
and, most importantly, to remain aware of developments in each market. The
executives of BMCLP are the same persons that are executives of BMC (see
"Management"), for which they presently receive no compensation from the Issuer
or the Company. None of these executives has any interest in such Administrative
Management Agreements, except for Alan R. Brill's indirect interest as owner of
BMCLP, as indicated.
Pursuant to such Administrative Management Agreements, BMCLP earns an annual
fee, paid monthly as permitted, equal to ten percent of each Station's net cash
revenues and five percent of each of the Newspapers' net cash revenues.
Non-operating Subsidiaries and affiliates pay a nominal flat fee for any such
service received. For the Company's nine months ended November 30, 1997 and
years ended February 28, 1997, February 29, 1996 and February 28, 1995 the
aggregate amount of such Administrative Management Agreement fees charged to
Subsidiaries was approximately $1.6 million, $1.9 million, $1.8 million and $1.7
million, respectively. As and to the extent provided in the Indenture, the
future payment of such fees will be subordinate to the prior payment of the
Company's obligations on the Notes. See "Description of Notes--Certain
Covenants--Limitations on Restricted Payments."
Pursuant to reimbursement agreements, from time to time third-party services
or products (such as insurance coverage) may be provided to one or more of the
Company, its Subsidiaries, or their affiliates, in which case such costs are
reimbursed on a ratable basis to the provider, which may be BMCLP, the Company,
or another Subsidiary or affiliate.
Pursuant to Managed Affiliate Management Agreements from time to time one or
more of the Subsidiaries may provide management services to a Managed Affiliate
on an agreed fee basis for services rendered. Such fees generally consist of a
nominal fixed fee plus a variable additional fee based upon the Managed
Affiliate's performance. One of the Company's Subsidiaries, Tri-State
Broadcasting, Inc. ("Tri-State") has entered into such Managed Affiliate
Management Agreements (the "Tri-State Agreements") with two Managed Affiliates,
TSB III, LLC, the owner and operator of radio stations WSTO-FM and WVJS-AM
licensed to Owensboro, Kentucky and TSB IV, LLC, the owner and operator of radio
station WKDQ-FM, licensed to Henderson, Kentucky, each an entity wholly owned by
Mr. Brill. Pursuant to the Tri-State Agreements, Tri-State will receive from
each of the Managed Affiliates a monthly fee of $10,000 and an additional annual
fee based upon such Managed Affiliate's financial performance. The Company
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charged the Managed Affiliates $180,000 and $40,000 for the nine months ended
November 30, 1997 and year ended February 28, 1997, respectively.
Prior to November 30, 1997, the Company declared and paid a distribution of
$8.0 million in cash to Mr. Brill and $4.2 million for purposes of satisfaction
of affiliate notes receivable owing from Mr. Brill. See "Capitalization."
Pursuant to Member Management Agreements, Huron Management, Inc., an
affiliate owned and controlled by Mr. Brill, acts as member-manager of two of
the Company's Subsidiaries, Huron P.S., LLC, and Huron Newspapers, LLC. Nominal
charges are made by the management company for this management oversight and for
the costs associated therewith. In a like arrangement, Northland Management,
Inc., an affiliate controlled by Mr. Brill, is manager on a fee basis to another
Subsidiary, Northland Broadcasting, LLC.
On a temporary basis, at a present cost of approximately $70,000 per year, a
Subsidiary, Central Michigan Newspapers, Inc. ("CMN"), presently leases space
from the current owner of a facility that will be owned by CMR Investments, L.P.
("CMR") a limited partnership affiliate of the Company (in which BMCLP's and the
Company's executives, Mr. Brill, Clifton E. Forrest, and Alan L. Beck each has
an interest as a limited partner) after closing of the purchase of such property
by CMR. CMN has advanced to CMR the sum of $500,000 (a portion of the insurance
proceeds resulting from a fire loss at CMN's prior production facilities) for
CMN's share of the "build out" costs of new quarters that CMN will lease from
CMR and will occupy after CMR has acquired and renovated the property. After
renovation is complete, CMR and CMN will effect the long-term lease for
occupancy of the improved property for use as the Newspapers' main office and
production facility, all at a cost no greater than that required for comparable
space elsewhere in that market, if available, and CMN will be relieved of its
present several facility commitments.
DRI, LLC, an affiliate owned indirectly by Mr. Brill, recently acquired
title to a building in Duluth, Minnesota (the "Duluth Building"). It is
anticipated that DRI, LLC will enter into a lease on market rental terms with
the Subsidiaries Northland Broadcasting, LLC and NBII, Inc. for use of a portion
of the Duluth Building as a studio facility for the Duluth, Minnesota/Superior
Wisconsin Stations.
From time to time various Company Subsidiaries and affiliates have entered
into loan transactions between themselves, which transactions are duly recorded
in the appropriate Company books and records and the annual effects of which are
fully reflected in the Company's financial statements.
Certain of the Subsidiaries and other affiliates were indebted under the
terms of certain senior secured obligations guaranteed by Mr. Brill and payable
to AMRESCO Funding Corporation ("Amresco") and Goldman Sachs Credit Partners
L.P. ("Goldman Sachs"). These obligations were paid, along with accrued interest
thereon and a prepayment premium of $2.8 million, from the proceeds of the
Offering as reflected in the pro forma combined financial statements contained
in this Prospectus.
The Company loaned approximately $900,000 of the proceeds of the Offering to
Managed Affiliates and received in return therefor Managed Affiliate Notes which
are unsecured, mature on January 1, 2001 and bear interest at a rate of 12% per
annum. Such amounts are in addition to the $15.4 million already loaned by the
Company to the Managed Affiliates at November 30, 1997. The proceeds of such
loans were used by the Managed Affiliates to purchase property, equipment, and
intangibles and to provide working capital for operations. Total interest income
earned by the Company on these loans totalled $1,220,225 and $3,606 for the nine
months ended November 30, 1997 and year ended February 28, 1997, respectively.
It is anticipated that similar relationships may be initiated with other
affiliates in the future. No transaction may cause the aggregate principal
amount of Managed Affiliate Notes then outstanding to exceed $20.0 million
unless: (i) the Board of Directors, including a majority of the disinterested
members of the Board, determines that the terms of the transaction are no less
favorable than those that could be obtained at the time of such transaction in
arms-length dealings with a person who is not an Affiliate; (ii) the Issuer
obtains a written opinion of an independent investment bank of nationally
recognized standing that the
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transaction is fair to the Issuer from a financial point of view; and (iii) the
Issuer at the time of the transaction is able to make a Restricted Payment in an
amount equal to such excess amount.
The Company is subject to provisions of Virginia law that restrict
transactions between the Company and its directors and officers, but the Company
does not additionally have a conflicts policy.
RECENT OR PENDING TRANSACTIONS
On February 24, 1998 the Company completed the asset acquisition of certain
newspaper, printing and distribution operations located in northern Michigan.
Total consideration amounted to approximately $8.5 million and included cash of
$5.5 million and seller notes of $3.0 million. In addition, the Company entered
into a non-compete agreement totaling approximately $365,000.
The financial statements and pro forma impacts of this acquisition are
expected to be included in a future filing on Form 8-K by the Company and
accordingly are not included in the pro forma financial information included
herein or in the definition of Transactions. In conjunction with such
acquisition, the Company formed six new wholly-owned subsidiaries of Holdings,
all of which are guarantors of the Securities.
The Missouri Properties have entered into agreements for the sale of
substantially all of the assets of the Missouri Properties for a net cash
purchase price of approximately $7.4 million, plus assumed liabilities of
$256,000. The net book value of the Assets is approximately $1.8 million at
November 30, 1997. The Company expects to record a pretax gain of approximately
$5.5 million after expenses. Pursuant to the terms of a Time Brokerage Agreement
which provides for monthly payments of $50,000 to the Missouri Properties, the
purchaser is operating and managing the Missouri Properties pending closing of
the purchase. Closing of the sale and purchase is expected to occur immediately
upon the FCC granting requisite approval for transfer of the broadcast licenses
associated with these Stations. Applications for transfer of broadcast licenses
of the Missouri Properties have been filed with the FCC by the purchasers. A
local market competitor has objected to the transfer of the licenses and on
December 12, 1997, filed with the FCC a Petition to Deny the license transfers
and to terminate the Time Brokerage Agreement. No action has been taken on the
Petition to Deny by the FCC, and the Company believes that even if the Petition
to Deny were granted, the consequences would not be material to the Company. The
Attorney General of the State of Missouri on January 9, 1998 filed a civil
investigative demand on the Company to provide documents in order to consider
whether the proposed transaction would violate federal or Missouri antitrust
laws. The Company has complied with the demand.
The Company's Subsidiary, NCR II Inc., presently manages and programs radio
station KTRR-FM in Loveland, Colorado pursuant to a Time Brokerage Agreement
with Onyx Broadcasting, Inc., has executed an option to purchase substantially
all of the assets of KTRR-FM for a purchase price of $2.0 million, and will
enter into a covenant not to compete with the sellers, with a stated
consideration of $500,000, payable over its five year term. It is expected that
closing of the purchase of KTRR-FM will occur shortly after execution of a
definitive asset purchase agreement for this transaction and required approval
for transfer of the broadcast licenses by the FCC.
On October 1, 1997 two of the Company's newspaper Subsidiaries acquired the
assets of Huron and Northeastern, newspapers located on the coast of Lake Huron,
Michigan, for a total consideration of $2.8 million.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Securities were originally sold by the Issuer on December 30,
1997 in transactions exempt from the registration requirements of the Securities
Act. The $3,000,000 aggregate principal amount of the Original Appreciation
Notes and $105,000,000 aggregate principal amount of the Original Notes were
sold to the Initial Purchaser pursuant to the Purchase Agreement. The Initial
Purchaser subsequently resold such Securities. The Issuer, the Subsidiary
Guarantors, and the Initial Purchaser entered into the Registration Rights
Agreements pursuant to which the Issuer and the Subsidiary Guarantors agreed,
for the benefit of the holders, that they would, at their own expense, (i) file
within 60 days after December 30, 1997, the original issue date of the
Securities (the "Issue Date"), one or more registration statements (the
"Exchange Offer Registration Statement") with the Commission with respect to the
Exchange Offer for the Exchange Securities and (ii) use their reasonable best
efforts to cause the Exchange Offer Registration Statement to be declared
effective by the Commission under the Securities Act within 150 days after the
Issue Date and (iii) use their reasonable best efforts to cause such Exchange
Offer Registration Statement to remain effective until the closing of the
Exhange Offer and (iv) use their reasonable best efforts to consummate the
Exchange Offer no later than 180 days after the Issue Date. Upon the Exchange
Offer Registration Statement being declared effective, the Issuer will commence
the Exchange Offer. The Issuer will keep the Exchange Offer open for not less
than 20 business days (or longer if required by applicable law) after the date
that notice of the Exchange Offer is mailed to the holders of the Securities.
For each Original Note surrendered pursuant to the Exchange Offer, the holder
who surrendered such Original Note will receive an Exchange Note having a
principal amount equal to that of the surrendered Original Note. Interest on
each Exchange Note will accrue from the last date on which interest was paid on
the Original Note surrendered in exchange therefor or, if no interest has been
paid on such Original Note, from the Issue Date. For each Original Appreciation
Note surrendered pursuant to the Exchange Offer, the holder who surrendered such
Original Appreciation Note will receive an Exchange Appreciation Note having a
principal amount equal to that of the surrendered Original Appreciation Note.
Under existing interpretations of the staff to the Commission contained in
several no-action letters to third parties, the Exchange Securities would
generally be freely transferable by holders thereof other than Affiliates of the
Issuer after the Exchange Offer without further registration under the
Securities Act only if (i) the Exchange Securities were acquired in the ordinary
course of business of such holder or such other person, (ii) neither such holder
nor such other person is engaging in or intends to engage in a distribution of
the Exchange Securities and (iii) neither such holder nor such other person has
an arrangement or understanding with any person to participate in the
distribution of the Exchange Securities. However, any purchaser of Securities
who is an Affiliate of the Issuer or who intends to participate in the Exchange
Offer for the purpose of distribution of the Exchange Securities (i) will not be
able to rely on the position of the staff of the Commission, (ii) will not be
able to tender its Securities in the Exchange Offer and (iii) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Securities, unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Original Securities that wishes to exchange such Original
Securities for Exchange Securities in the Exchange Offer will be required to
represent in the Letters of Transmittal that (i) the Exchange Securities are to
be acquired by the holder or the person receiving such Exchange Securities,
whether or not such person is the holder, in the ordinary course of business,
(ii) the holder or any such other person (other than a broker-dealer referred to
in the next sentence) is not engaging, and does not intend to engage, in the
distribution of the Exchange Securities, (iii) the holder or any such other
person has no arrangement or understanding with any person to participate in the
distribution of the Exchange Securities, (iv) neither the holder nor any such
other person is an "affiliate" of the Issuer within the meaning of Rule 405
under the Securities Act and (v) the holder or any such other person
acknowledges that if such holder or other person participates in the Exchange
Offer for the purpose of distributing the
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Exchange Securities it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Securities and cannot rely on those no-action letters. As indicated above, in
connection with any resales of Exchange Securities, any broker-dealer (a
"Participating Broker-Dealer") that acquired the Original Securities for its own
account as a result of market-making or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. Based on existing
interpretations of the staff of the Commission, the Company believes that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Securities (other than a resale of an unsold
allotment from the original sale of the Securities) with this Prospectus. Under
the Registration Rights Agreements, the Issuer is required to make this
Prospectus available to Participating Broker-Dealers and other persons, if any,
with similar prospectus delivery requirements, for a period of 180 days after
consummation of the Exchange Offer for use in connection with the resale of
Exchange Securities. See "Plan of Distribution."
In the event that (i) applicable law or interpretations of the staff of the
Commission do not permit the Company to effect such an Exchange Offer, (ii) for
any other reason the Exchange Offer is not consummated within 180 days after the
Issue Date, (iii) under certain circumstances upon the request of the Inital
Purchaser or (iv) any holder of Original Securities (other than the Initial
Purchaser) is not able to make the representations set forth in the Letter of
Transmittal and described above, the Issuer will, at its expense, (a) as
promptly as reasonably practicable file a registration statement (the "Shelf
Registration Statement") relating to the offer and sale of the then outstanding
Original Securities, (b) use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act by the
180th day after the Issue Date (or promptly in the event of a request by the
Initial Purchaser pursuant to clause (iii) above) and (c) use its reasonable
best efforts to keep the Shelf Registration Statement effective until the
earlier of two years from the Issue Date (or one year from the date the Shelf
Registration Statement is declared effective if such Shelf Registration
Statement is filed upon the request of the Initial Purchaser pursuant to clause
(iii) above) or such shorter period which will terminate when all of the
Original Securities become eligible for resale pursuant to Rule 144 under the
Securities Act without volume restriction (the "Effectiveness Period").
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letters of Transmittal, the Issuer will accept any and all Original
Securities validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Issuer will issue an equal principal amount of
Exchange Notes in exchange for such principal amount of outstanding Original
Notes accepted in the Exchange Offer and an equal principal amount of Exchange
Appreciation Notes in exchange for such principal amount of outstanding Original
Appreciation Notes accepted in the Exchange Offer. Holders may tender some or
all of their Original Securities pursuant to the Exchange Offer. Notes may be
tendered only in integral multiples of $1,000; provided, however, that a holder
holding any Original Note in a denomination of other than an integral multiple
of $1,000 may tender the principal amount of such Original Note that is not an
integral multiple of $1,000 in addition to tendering, in integral multiples of
$1,000, the remaining principal amount, if any, of such Original Note.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes and the form and terms of the Exchange Appreciation Notes
are the same as the form and terms of the Original Appreciation Notes except
that (i) the Exchange Notes and the Exchange Appreciation Notes will bear a
"Series B" designation and different CUSIP Numbers from the Securities, (ii) the
Exchange Notes and the Exchange Appreciation Notes will have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (iii) the holders of the Exchange Notes and the Exchange
Appreciation Notes will not be entitled to certain rights of holders of Notes
and Appreciation Notes under the Registration Rights Agreements, which rights
will terminate as to holders of the Exchange Securities when the Exchange Offer
is consummated. The Exchange Notes will evidence the same debt as
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the Original Notes and will be entitled to the benefits of the Notes Indenture.
The Exchange Appreciation Notes will evidence the same debt as the Original
Appreciation Notes and will be entitled to the benefits of the Appreciation
Notes Indenture.
As of the date of this Prospectus, $105,000,000 aggregate principal amount
of Original Notes are outstanding and $3,000,000 aggregate principal amount of
Original Appreciation Notes are outstanding. The Issuer has fixed the close of
business on , 1998 as the date for purposes of determining the
persons to whom this Prospectus and the Letters of Transmittal will be mailed
initially.
The Issuer shall be deemed to have accepted validly tendered Original
Securities when, as and if the Issuer has given oral or written notice thereof
to the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Exchange Securities from the Issuer.
If any tendered Original Securities are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Original Securities will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Original Securities in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letters of Transmittal, transfer taxes with respect to the exchange of
Original Securities pursuant to the Exchange Offer. The Issuer will pay all
charges and expenses, other than transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Issuer, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
The Exchange Offer may be extended as necessary to resolve whether holders
who participate in the Exchange Offer will receive freely tradeable securities,
and if an extension occurs, tendered securities may be withdrawn after the
original Expiration Date but before the expiration of the extended period.
In order to extend the Exchange Offer, the Issuer will notify the Exchange
Agent of any extension by written notice and will mail to the registered holders
an announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
The Issuer reserves the right, in its sole discretion, (i) to delay
accepting any Original Securities, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by written notice thereof
to the registered holders.
INTEREST ON THE EXCHANGE SECURITIES
Interest on each Exchange Note will accrue from the last date on which
interest was paid on the Original Note surrendered in exchange therefor or, if
no interest has been paid on such Original Note, from the Issue Date. Holders
whose Original Notes are accepted for exchange will be deemed to have waived the
right to receive interest accrued on such Original Notes. Accordingly, holders
who exchange their Original Notes will receive the same interest payment on the
next interest payment date (expected to be June 15, 1998) that they would have
received had they not accepted the Exchange Offer. Interest on the Exchange
Notes is payable semi-annually on each June 15 and December 15 commencing on
June 15, 1998.
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PROCEDURES FOR TENDERING
Only a holder of Original Securities may tender such Original Securities in
the Exchange Offer. To tender in the Exchange Offer, a holder must complete,
sign and date the appropriate Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal
and mail or otherwise deliver such Letter of Transmittal, or such facsimile,
together with the Original Securities and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. A
separate Letter of Transmittal is required for the tender of Original Notes and
for the tender of Original Appreciation Notes. To be tendered effectively, the
Original Securities, Letters of Transmittal and other required documents must be
completed and received by the Registrar at the address set forth below under
"--Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration
Date. Delivery of the Original Securities may be made by book-entry transfer in
accordance with the procedures described below. Confirmation of such book-entry
transfer must be received by the Exchange Agent prior to the Expiration Date.
Notwithstanding the foregoing, DTC Participants tendering through ATOP will be
deemed to have made valid delivery where the Exchange Agent receives an Agent's
Message (defined below) prior to the Expiration Date.
The Exchange Agent will review Letters of Transmittal and inform the
tendering parties of defects therein.
By executing a Letter of Transmittal, each holder will make to the Issuer
the representations set forth above in the second paragraph under the heading
"--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuer will
constitute the agreement between such holder and the Issuer in accordance with
the terms and subject to the conditions set forth herein and in the Letters of
Transmittal.
The Original Securities were issued as units, each of which was immediately
separable into one Original Note and one Original Appreciation Note (the
"Units"). The Exchange Notes and Exchange Appreciation Notes are being offered
separately, and not as units. By submitting a Letter of Transmittal to tender
Original Securities, or by electronically transmitting its acceptance of the
Exchange Offer through ATOP, a holder of Units will request the separation of
such Units into their component parts.
THE METHOD OF DELIVERY OF ORIGINAL SECURITIES AND THE LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH
TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR SECURITIES SHOULD BE SENT TO THE ISSUER.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
ORIGINAL SECURITIES HELD THROUGH DTC. Each beneficial owner holding
Original Securities through a DTC Participant must instruct such DTC Participant
to cause its Original Securities to be tendered in accordance with the
procedures set forth in this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants, each DTC
Participant holding Original Securities through DTC must (i) electronically
transmit its acceptance through ATOP, and DTC will then edit and verify the
acceptance, execute a book-entry delivery to the Exchange Agent's account at DTC
and send an Agent's Message to the Exchange Agent for its acceptance, or (ii)
comply with the guaranteed delivery procedures set forth below and in the Notice
of Guaranteed Delivery. See "--Guaranteed Delivery Procedures."
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The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect to
Original Securities held through DTC, and any financial institution that is a
DTC Participant may make book-entry delivery of interests in Original Securities
into the Exchange Agent's account through ATOP. However, although delivery of
interests in the Original Securities may be effected through book-entry transfer
into the Exchange Agent's account through ATOP, an Agent's Message in connection
with such book-entry transfer, and any other required documents, must be, in any
case, transmitted to and received by the Exchange Agent at its address set forth
under "--Exchange Agent," or the guaranteed delivery procedures set forth below
must be complied with, in each case, prior to the Expiration Date. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent. The
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
as described above is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each DTC Participant tendering through ATOP that such DTC Participants have
received a Letter of Transmittal and agree to be bound by the terms of the
Letter of Transmittal and that the Issuer may enforce such agreement against
such DTC Participants.
Cede & Co., as the Holder of the global certificates representing the
Original Notes and the Original Appreciation Notes (each a "Global Security," or
together, the "Global Securities"), will tender a portion of each of the Global
Securities equal to the aggregate principal amount due at the stated maturity or
number of shares for which instructions to tender are given by DTC Participants.
ORIGINAL SECURITIES HELD BY HOLDERS. Any beneficial owner whose Original
Securities are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to tender should contact such
registered holder promptly and instruct such registered holder to tender on such
beneficial owner's behalf. See "Instructions to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" included with
the Letters of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined) unless the
Original Securities tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by a
member firm of the Medallion System (an "Eligible Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any Original Securities listed therein, such Original Securities must
be endorsed or accompanied by a properly completed bond power for both the
Original Notes and Original Appreciation Notes, signed by such registered holder
as such registered holder's name appears on such Original Securities with the
signature thereon guaranteed by an Eligible Institution.
If a Letter of Transmittal or any Original Securities or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Issuer of their authority to so act must be submitted with
the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Original Securities and withdrawal of
tendered Original Securities will be determined by the Issuer in its sole
discretion, which determination will be final and binding. The Issuer reserves
the absolute right to reject any and all Original Securities not properly
tendered or any Original Securities the Issuer's acceptance of which would, in
the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves the
right in its sole discretion to waive any defects, irregularities or conditions
of tender as to particular Original Securities. The Issuer's interpretation of
the terms and conditions of the Exchange Offer
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(including the instructions in the Letters of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Securities must be cured within such time as
the Issuer shall determine. Although the Issuer intends to notify holders of
defects or irregularities with respect to tenders of Original Securities,
neither the Issuer, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Original Securities
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Original Securities received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering holders, unless otherwise provided in the Letters of Transmittal, as
soon as practicable following the Expiration Date.
Any beneficial owner whose Original Securities are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing a Letter of Transmittal and delivering its
Original Securities, either make appropriate arrangements to register ownership
of the Original Securities in such owner's name or obtain a properly completed
bond power for both the Original Notes and Original Appreciation Notes from the
registered holder. The Transfer of registered ownership may take considerable
time and may not be completed prior to the Expiration Date and if the beneficial
owner has not instructed the record owner to tender its Original Securities, the
beneficial owner will be unable to participate in the Exchange Offer and
thereafter will have no registration rights.
GUARANTEED DELIVERY PROCEDURES
ORIGINAL SECURITIES HELD THROUGH DTC. DTC Participants holding Original
Securities through DTC who wish to cause their Original Securities to be
tendered, but who cannot transmit their acceptances through ATOP prior to the
Expiration Date, may cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by mail, hand delivery,
facsimile transmission or overnight courier) substantially in the form
provided by the Company herewith; and
(c) Book-Entry Confirmation and an Agent's Message in connection
therewith (as described above) are received by the Exchange Agent within
three NYSE trading days after the date of the execution of the Notice of
Guaranteed Delivery.
ORIGINAL SECURITIES HELD BY HOLDERS. Holders who wish to tender their
Original Securities and (i) whose Original Securities are not immediately
available, (ii) who cannot deliver their Original Securities, the Letters of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Registrar receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Original Securities and the principal amount of Original Notes
and/or principal amount of Original Appreciation Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five New
York Stock Exchange trading days after the Expiration Date, the Letters of
Transmittal (or facsimiles thereof) together with the certificate(s)
representing the Original Securities, and any other
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documents required by the Letters of Transmittal will be deposited by the
Eligible Institution with the Registrar; and
(c) such properly completed and executed Letters of Transmittal (or
facsimiles thereof), as well as the certificate(s) representing all tendered
Original Securities in proper form for transfer, and all other documents
required by the Letters of Transmittal are received by the Exchange Agent
within five New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Securities according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Original Securities in the Exchange Offer, a letter
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal by a DTC Participant must
contain the name and number of the DTC Participant, the principal amount due at
the stated maturity of Original Appreciation Notes to which such withdrawal
relates and the signature of the DTC Participant. Any such notice of withdrawal
by a Holder of Original Securities must (i) specify the name of the person
having deposited the Original Securities to be withdrawn (the "Depositor"), (ii)
identify the Original Securities to be withdrawn (including the certificate
number(s) and principal amount of Original Notes and/ or principal amount of
Original Appreciation Notes) (iii) be signed by the holder in the same manner as
the original signature on the Letters of Transmittal by which such Original
Securities were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Exchange Agent with
respect to the Original Notes and the Original Appreciation Notes register the
transfer of such Original Securities into the name of the person withdrawing the
tender and (iv) specify the name in which any such Original Securities are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Issuer, whose determination shall be final and binding on
all parties. Any Original Securities so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer, and no Exchange
Securities will be issued with respect thereto unless the Original Securities so
withdrawn are validly retendered. Any Original Securities which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Original Securities may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuer shall not
be required to accept for exchange, or exchange Exchange Securities for, any
Original Securities, and may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Original Securities, if the Exchange Offer,
or the making of any exchange by a holder of Original Securities, violates
applicable law or any applicable interpretation of the staff of the Commission.
EXCHANGE AGENT
The United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or
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of the Letters of Transmittal and requests for Notice of Guaranteed Delivery
should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
For Information by Telephone:
1-800-548-6565
By Registered or Certified Mail: By Hand Before 4:30 p.m.:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 Cooper Station 111 Broadway
New York, New York 10276 New York, New York 10006
Attention: Corporate Trust Services Attention: Lower Level Corporate
Trust Window
By Overnight Courier and By Facsimile Transmission:
By Hand After 4:30 p.m.: (212) 780-0592
United States Trust Company of New York Attention: Customer Service
770 Broadway, 13th Floor
New York, New York 10003 Confirm by Telephone to:
(800) 548-6565
</TABLE>
Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.
Delivery to an address or transmission of instructions via facsimile other
than as set forth above will not constitute a valid delivery.
The United States Trust Company of New York also acts as Trustee under the
Note Indenture and as Appreciation Note Indenture and as Registrar and Paying
Agent with regard to the Notes and the Appreciation Notes.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuer. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuer and its affiliates.
The Issuer has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuer. Such expenses include fees and expenses of the Exchange
Agent, Trustee, Registrar and Paying Agent, accounting and legal fees and
printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes and the Exchange Appreciation Notes will be recorded at
the same carrying value as the Original Notes and the Original Appreciation
Notes as reflected in the Issuer's accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Issuer. The expenses of the Exchange Offer will be amortized over the remaining
term of the Securities.
CONSEQUENCES OF FAILURE TO EXCHANGE
Original Securities that are not exchanged for Exchange Securities pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Original Securities may be resold only (i) to the Issuer (upon redemption
thereof or otherwise), (ii) so long as the Securities are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person inside the United
States whom the seller reasonably
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believes is a qualified institutional buyer within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A, (iii) in accordance with Rule
144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Issuer), (iv) outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act or (v) pursuant to an effective registration statement under the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States.
RESALE OF THE EXCHANGE SECURITIES
With respect to resales of Exchange Securities, based on no-action letters
issued by the staff of the Commission to third parties, the Issuer believes that
a holder or other person who receives Exchange Securities, whether or not such
person is the holder (other than a person who is an "affiliate" of the Issuer
within the meaning of Rule 405 under the Securities Act), who receives Exchange
Securities in exchange for Original Securities in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Securities, will be allowed to resell the Exchange
Notes and Exchange Appreciation Notes to the public without further registration
under the Securities Act and without delivering to the purchasers of the
Exchange Securities a prospectus that satisfies the requirements of Section 10
of the Securities Act. However, if any holder acquires Exchange Securities in
the Exchange Offer for the purpose of distributing or participating in a
distribution of Exchange Securities, such holder cannot rely on the position of
the staff of the Commission enunciated in such no-action letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating
Broker-Dealer that receives Exchange Securities for its own account in exchange
for Original Securities where such Original Securities were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, may be a statutory underwriter and must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letters of Transmittal state that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
As contemplated by these no-action letters and the Registration Rights
Agreements, each holder accepting the Exchange Offer is required to represent to
the Issuer in the Letter of Transmittal that (i) the Exchange Securities are to
be acquired by the holder or the person receiving such Exchange Securities,
whether or not such person is the holder, in the ordinary course of business,
(ii) the holder or any such other person (other than a broker-dealer referred to
in the next sentence) is not engaging, and does not intend to engage, in the
distribution of the Exchange Securities, (iii) the holder or any such other
person has no arrangement or understanding with any person to participate in the
distribution of the Exchange Securities, (iv) neither the holder nor any such
other person is an "affiliate" of the Issuer within the meaning of Rule 405
under the Securities Act and (v) the holder or any such other person
acknowledges that if such holder or other person participates in the Exchange
Offer for the purpose of distributing the Exchange Securities it must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale of the Exchange Securities and cannot rely on
those no-action letters. As indicated above, each Participating Broker-Dealer
that receives Exchange Securities for its own account in exchange for Original
Securities must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Securities. For a description of the procedures for
such resales by Participating Broker-Dealers, see "Plan of Distribution."
The Issuer, will, in the event of the filing of the Shelf Registration
Statement, provide to each holder of the Original Notes copies of the prospectus
which is a part of the Shelf Registration Statement, notify each such holder
when the Shelf Registration Statement has become effective and take certain
other actions as are required to permit unrestricted resales of the Original
Notes. A holder of Original Notes
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that sells its Original Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver such prospectus to purchasers, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a holder (including
certain indemnification rights and obligations thereunder).
If the Issuer and the Subsidiary Guarantors fail to comply with the above
provisions or if such registration statements fail to become effective, then, as
the sole liquidated damages for such failure by the Issuer and the Subsidiary
Guarantors, additional interest (the "Additional Interest") shall become payable
with respect to the Securities as follows:
(i) if the Exchange Offer Registration Statement or Shelf Registration
Statement is not declared effective within 150 days following the Issue
Date, Additional Interest shall accrue on the Notes over and above the
stated interest, and Appreciation Notes Additional Interest shall accrue on
$3,000,000, in each case at a rate of 0.50% per annum for the first 120 days
commencing on the 151st day after the Issue Date, such Additional Interest
rate and Appreciation Notes Additional Interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 30-day
period; or
(ii) if (A) the Issuer has not exchanged all Securities validly tendered
in accordance with the terms of the Exchange Offer on or prior to 180 days
after the Issue Date or (B) the Exchange Offer Registration Statement ceases
to be effective at any time prior to the time that the Exchange Offer is
consummated or (C) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of the Issue Date
(unless all the Securities have been sold thereunder) then Additional
Interest shall accrue on the Notes over and above the stated interest, and
Appreciation Notes Additional Interest shall accrue on $3,000,000, in each
case at a rate of 0.50% per annum for the first 30 days commencing on (x)
the 181st day after the Issue Date with respect to the Notes or Appreciation
Notes, as the case may be, validly tendered and not exchanged by the Issuer,
in the case of (A) above, or (y) the day the Exchange Offer Registration
ceases to be effective or usable for its intended purpose in the case of (B)
above, or (z) the day such Shelf Registration Statement ceases to be
effective in the case of (C) above, such Additional Interest rate increasing
by an additional 0.50% per annum at the beginning of each subsequent 30-day
period;
PROVIDED HOWEVER, that in no event may the rate of interest for any Additional
Interest on the Notes or Appreciation Notes Additional Interest on the
Appreciation Notes exceed, in the aggregate, 1.5% per annum; and PROVIDED
FURTHER, that (1) upon the effectiveness of the Exchange Offer Registration
Statement or Shelf Registration Statement (in the case of (i) above), or (2)
upon the exchange of Exchange Offer Notes for all Notes tendered (in the case of
clause (ii)(A) above), or upon the effectiveness of the Exchange Offer
Registration Statement which had ceased to remain effective in the case of
clause (ii)(B) above, or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (in the case of clause (ii)(C)
above), Additional Interest on the Notes as a result of such clause or the
relevant subclause thereof, as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clauses (i) or (ii) above
will be payable and will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Notes multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
While the Company believes that the foregoing summary of certain provisions
of the Registration Rights Agreements is materially complete, it is subject to,
and is qualified in its entirety by, all the provisions of the Registration
Rights Agreements, which are filed as exhibits to the Registration Statement of
which this Prospectus is a part.
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DESCRIPTION OF NOTES
GENERAL
The Original Notes were issued, and the Exchange Notes are to be issued,
under an indenture, dated as of December 30, 1997 (the "Indenture"), between the
Issuer and United States Trust Company of New York, as trustee (the "Trustee"),
a copy of which is available upon request to the Issuer. The following is a
summary of certain provisions of the Indenture and the Notes and does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture (including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended) and the Notes. The definition of certain capitalized
terms used in the following summary are set forth below under "Certain
Definitions".
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Issuer in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee in New York, New York), except
that, at the option of the Issuer, payment of interest may be made by check
mailed to the address of the holders of the Notes as such address appears in the
Note Register. Initially, the Trustee will act as Paying Agent and Registrar for
the Notes. The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar, which initially will be the Trustee's corporate
trust office. The Issuer may change any Paying Agent and Registrar without
notice to holders of the Notes.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Issuer may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Notes are limited to $105.0 million in aggregate principal amount and
will mature on December 15, 2007. The Notes will bear cash interest at a rate of
7 1/2% per annum from the date of original issuance until December 15, 1999, and
at a rate of 12% per annum from and including December 15, 1999 until maturity.
Interest on each Note will be payable semiannually on June 15 and December 15 of
each year (each an "Interest Payment Date"), commencing on June 15, 1998, to
holders of record at the close of business on the June 1st or December 1st
immediately preceding the Interest Payment Date. In addition, prior to December
15, 1999, original issue discount will accrete on the Notes such that the yield
to maturity will be 12% per annum, compounded on the basis of semi-annual
compounding. The interest rate on the Notes is subject to increase under certain
circumstances. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Any Original Notes that remain outstanding
after consummation of the Exchange Offer and any Exchange Notes issued in
connection with the Exchange Offer will be treated as a single class of
securities under the Note Indenture. The Notes will not be entitled to the
benefit of any mandatory sinking fund.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option of
the Issuer prior to December 15, 2002. On and after such date, the Notes will be
redeemable, at the Issuer's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), if redeemed during the 12-month period
commencing on December 15th of the years
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set forth below, plus accrued and unpaid interest to the 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):
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2002............................................................................. 106.00%
2003............................................................................. 104.00%
2004............................................................................. 102.00%
2005 and thereafter.............................................................. 100.00%
</TABLE>
OPTIONAL REDEMPTION UPON EQUITY OFFERING. In addition, in the event of the
sale by the Issuer prior to December 15, 2000 of its Capital Stock (other than
Disqualified Stock) in one or more Public Equity Offerings the Net Cash Proceeds
of which are at least $25.0 million in the aggregate, the Issuer may, at its
option, use the Net Cash Proceeds of such sale or sales of Capital Stock to
redeem up to 25% of the aggregate principal amount of the Notes at a redemption
price in the case of a redemption date prior to December 15, 1999, equal to
112.0% of the Accreted Value thereof plus accrued and unpaid interest thereon,
if any, to the 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) and for any redemption date on or after December 15, 1999, at a redemption
price equal to 112.0% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the 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 after any such
redemption the aggregate principal amount of the Notes outstanding must equal at
least $79.0 million. In order to effect the foregoing redemption with the
proceeds of any such sale of Capital Stock, the Issuer shall make such
redemption not more than 90 days after the consummation of any such sale or
sales of Capital Stock.
SELECTION. In the case of any partial redemption, selection of the Notes
for redemption will be made by the Trustee on a PRO RATA basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; PROVIDED, HOWEVER, that if a partial redemption is made with
proceeds of a sale of Capital Stock, selection of the Notes or portion thereof
for redemption shall be made by the Trustee only on a PRO RATA basis, unless
such method is otherwise prohibited. Notes may be redeemed in part in multiples
of $1,000 principal amount only. Notice of redemption will be sent, by first
class mail, postage prepaid, at least 30 but not more than 60 days (unless a
shorter period is acceptable to the Trustee) prior to the date fixed for
redemption to each holder whose Notes are to be redeemed at the last address for
such holder then shown on the registry books. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. 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. On and after any
redemption date, interest will cease to accrue on the Notes or part thereof
called for redemption as long as the Issuer has deposited with the Paying Agent
funds in satisfaction of the redemption price pursuant to the Indenture.
RANKING
The Notes will be senior unsecured obligations of the Issuer. The Notes will
rank PARI PASSU in right of payment with all existing and future senior
unsecured indebtedness of the Issuer and will rank senior in right of payment to
any subordinated indebtedness of the Issuer (including the Appreciation Notes).
The Notes and the Subsidiary Guarantees will be effectively subordinated in
right of payment to secured debt of the Issuer and the Subsidiary Guarantors to
the extent of the assets serving as security therefor. As of November 30, 1997
on a pro forma basis, after giving effect to the Transactions, the Issuer had no
outstanding secured indebtedness to which the Notes would have been effectively
subordinated, and the aggregate amount of the Subsidiary Guarantors' outstanding
senior secured indebtedness to which the Subsidiary Guarantees would have been
effectively subordinated was approximately $4.8 million.
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SUBSIDIARY GUARANTEES
Each Subsidiary Guarantor unconditionally guarantees, jointly and severally,
to each holder and the Trustee, on a senior basis, the full and prompt payment
of principal of and interest on the Notes, and of all other obligations of the
Issuer under the Indenture.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Subsidiary Guarantor that makes a
payment or distribution under a Subsidiary Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor in a PRO RATA amount based on
the Adjusted Net Assets of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Issuer or another Subsidiary Guarantor without limitation. Upon
the sale or disposition of a Subsidiary Guarantor (or all or substantially all
of its assets) to a Person which is not a Subsidiary Guarantor, which sale or
disposition is otherwise in compliance with the Indenture (including the
covenant described under "Certain Covenants--Limitations on Sales of Assets and
Subsidiary Stock"), such Subsidiary Guarantor shall be deemed released from all
its obligations under the Indenture and its Subsidiary Guarantee and such
Subsidiary Guarantee shall terminate; PROVIDED, HOWEVER, that any such
termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under all of its Subsidiary Guarantors of, and under all of
its pledges of assets or other security interests which secure any other
Indebtedness of the Issuer shall also terminate upon such release, sale or
transfer.
BMC owns, directly or indirectly, 100% of the equity interests of each
Subsidiary Guarantor. Subsequent to the Issue Date, separate financial
information for the Subsidiary Guarantors will not be provided except to the
extent required by Regulation S-X under the Securities Act.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder will have the right
to require the Issuer to purchase all or any part of such holder's Notes, in the
case of a repurchase date prior to December 15, 1999, at a purchase price in
cash equal to 101% of the Accreted Value thereof plus any accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
Interest Payment Date) and for any repurchase date on or after December 15,
1999, at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant Interest Payment Date) (such applicable purchase price being
here in after referred to as the "Change of Control Purchase Price").
Within 30 days following any Change of Control, unless the Issuer has mailed
a redemption notice with respect to all the outstanding Notes in connection with
such Change of Control, the Issuer shall 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 the Issuer to repurchase such holder's
Notes at a purchase price in cash equal to the Change of Control Purchase Price;
(2) the repurchase date (which shall be no earlier than 30 days nor later than
60 days from the date such notice is mailed); and (3) the procedures determined
by the Issuer, consistent with the Indenture, that a holder must follow in order
to have its Notes repurchased.
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 covenant. To the
extent that the provisions of any securities laws or regulations conflict
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with provisions of the Indenture, the Issuer will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the Issuer
and its Subsidiaries. With respect to the disposition of property or assets, the
phrase "all or substantially all" as used in the Indenture varies according to
the facts and circumstances of the subject transaction, has no clearly
established meaning under New York law (which is the law which governs the
Indenture) and is subject to judicial interpretation. Accordingly, in certain
circumstances there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially all"
of the property or assets of a Person, and therefore it may be unclear as to
whether a Change of Control has occurred and whether the Issuer is required to
make an offer to repurchase the Notes as described above.
There can be no assurance that the Issuer will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required under the Indenture upon a Change of
Control (as well as may be required pursuant to other securities of the Issuer
which might be outstanding at the time). The above provisions requiring the
Issuer to repurchase the Notes pursuant to a Change of Control will, unless
consents are obtained, require the Issuer to repay all indebtedness then
outstanding which by its terms would prohibit such Note repurchase, either prior
to or concurrently with such Note repurchase.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
LIMITATION ON INDEBTEDNESS.
(a) The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; PROVIDED, HOWEVER, that: (i) the Issuer
and its Restricted Subsidiaries may Incur Indebtedness which is expressly
subordinated to the Notes and the Subsidiary Guarantees if no Default or Event
of Default shall have occurred and be continuing at the time of such Incurrence
or would occur as a consequence of such Incurrence and the Consolidated Leverage
Ratio would not be greater than 7.00 to 1.00 and (ii) the Issuer and its
Restricted Subsidiaries may Incur unsecured Indebtedness ranking on a parity
with the Notes if no Default or Event of Default shall have occurred and be
continuing at the time of such Incurrence or would occur as a consequence of
such Incurrence and the Consolidated Senior Leverage Ratio would not be greater
than 6.50 to 1.00, PROVIDED, HOWEVER, that as provided in the definition of
Permitted Liens Indebtedness Incurred pursuant to this clause (ii) may be
secured by a Lien if at the time of such Incurrence the Consolidated Senior
Secured Leverage Ratio would not be greater than 3.00 to 1.00.
(b) Notwithstanding the foregoing paragraph (a), the Issuer and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred which does not exceed $15.0 million at any
time outstanding, less the aggregate principal amount thereof permanently
repaid with the net proceeds of Asset Dispositions;
(ii) Indebtedness of the Issuer owing to and held by any Wholly-Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by
the Issuer or any Wholly-Owned Subsidiary; PROVIDED, HOWEVER, that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Issuer or any Wholly-Owned Subsidiary) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
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(iii) Indebtedness represented by (A) the Notes and the Subsidiary
Guarantees, (B) the Appreciation Notes and the Guarantees thereof, (C)
Existing Indebtedness and (D) any Refinancing Indebtedness Incurred in
respect of any Indebtedness described in this clause (iii) (other than
clause (B)) or Incurred pursuant to paragraph (a) above.
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired ,
directly or indirectly, by the Issuer (other than Indebtedness Incurred in
anticipation of, or to provide all or any portion of the funds or credit
support utilized to consummate the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Subsidiary or was otherwise acquired by the Issuer); PROVIDED, HOWEVER, that
at the time such Restricted Subsidiary is acquired by the Issuer, the Issuer
would have been able to Incur $1.00 of additional Indebtedness pursuant to
clause (ii) of paragraph (a) above after giving effect to the Incurrence of
such Indebtedness pursuant to this clause (iv) and (B) Refinancing
Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness
Incurred by such Restricted Subsidiary pursuant to this clause (iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Issuer or any of its
Restricted Subsidiaries to their customers in the ordinary course of their
business, (B) in respect of performance bonds or similar obligations of the
Issuer or any of its Restricted Subsidiaries for or in connection with
pledges, deposits or payments made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations and (C) arising from Guarantees to suppliers, lessors,
licensees, contractors, franchises or customers of obligations (other than
Indebtedness) incurred in the ordinary course of business;
(vi) Indebtedness under Currency Agreements and Interest Rate
Agreements; PROVIDED, HOWEVER, that such Currency Agreements and Interest
Rate Agreements are entered into for BONA FIDE hedging purposes of the
Issuer or its Restricted Subsidiaries (as determined in good faith by the
Board of Directors of the Issuer) and correspond in terms of notional
amount, duration, currencies and interest rates as applicable, to
Indebtedness of the Issuer or its Restricted Subsidiaries Incurred without
violation of the Indenture or to business transactions of the Issuer or its
Restricted Subsidiaries on customary terms entered into in the ordinary
course of business;
(vii) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Issuer or any of its Restricted Subsidiaries
pursuant to such agreements, in each case Incurred in connection with the
disposition of any business assets or Restricted Subsidiary of the Issuer or
(other than Guarantees of Indebtedness or other obligations incurred by any
Person acquiring all or any portion of such business assets or Restricted
Subsidiary of the Issuer for the purpose of financing such acquisition) in a
principal amount not to exceed the gross proceeds actually received by the
Issuer or any of its Restricted Subsidiaries in connection with such
disposition; PROVIDED, HOWEVER, that the principal amount of any
Indebtedness Incurred pursuant to this clause (vii) when taken together with
all Indebtedness Incurred pursuant to this clause (vii) and then
outstanding, shall not exceed $1.0 million;
(viii) Indebtedness consisting of (A) Guarantees by the Issuer (so long
as the Issuer could have Incurred such Indebtedness directly without
violation of the Indenture) and (B) Guarantees by a Restricted Subsidiary of
Indebtedness Incurred by the Issuer without violation of the Indenture (so
long as such Restricted Subsidiary could have Incurred such Indebtedness
directly without violation of the Indenture);
(ix) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument issued by the Issuer or
any of its Subsidiaries drawn against insufficient
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funds in the ordinary course of business in an amount not to exceed $250,000
at any time, PROVIDED, HOWEVER that such Indebtedness is extinguished within
two business days of its incurrence; and
(x) Indebtedness (other than Indebtedness described in clauses (i)-(ix))
in a principal amount which, when taken together with the principal amount
of all other Indebtedness Incurred pursuant to this clause (x) and then
outstanding, will not exceed $5.0 million (it being understood that any
Indebtedness Incurred under this clause (x) shall cease to be deemed
Incurred or outstanding for purposes of this clause (x) (but shall be deemed
to be Incurred for purposes of paragraph (a)) from and after the first date
on which the Issuer or its Restricted Subsidiaries could have Incurred such
Indebtedness under the foregoing paragraph (a) without reliance upon this
clause (x)).
(c) Notwithstanding the foregoing, neither the Issuer nor any Restricted
Subsidiary shall Incur any Indebtedness under paragraph (b) above if the
proceeds thereof are used, directly or indirectly, to refinance any Subordinated
Obligations of the Issuer or a Restricted Subsidiary unless such Indebtedness
shall be subordinated to the Notes to at least the same extent as such
Subordinated Obligations.
(d) Notwithstanding the foregoing, no Restricted Subsidiary shall incur any
Indebtedness under clause (i) of paragraph (a) if such Indebtedness is sold
pursuant to Rule 144A under the Securities Act or a public offering registered
under the Securities Act.
(e) The Issuer will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt.
(f) For purposes of determining any particular amount of Indebtedness under
the "Limitation on Indebtedness" covenant, Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included. For purposes of
determining compliance with the "Limitation on Indebtedness" covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described in the above clauses, the Issuer, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Issuer shall not, and shall not
permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Issuer or any of its Restricted Subsidiaries) except
(A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock and (B) dividends or distributions payable to the Issuer or a
Restricted Subsidiary of the Issuer which holds any equity interest in the
paying Restricted Subsidiary (and if the Restricted Subsidiary paying the
dividend or making the distribution is not a Wholly-Owned Subsidiary, to its
other holders of Capital Stock on a PRO RATA basis), (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Issuer held by
Persons other than a Wholly-Owned Subsidiary of the Issuer or any Capital Stock
of a Restricted Subsidiary of the Issuer held by any Affiliate of the Issuer,
other than a Wholly-Owned Subsidiary (in either case, other than in exchange for
its Capital Stock (other than Disqualified Stock)), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, 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 purchase, repurchase or acquisition), (iv)
make any Investment (other than a Permitted Investment) in any Person, (v) make
any payment under any Performance Compensation Agreement or (vi) make any
payment to Alan R. Brill (including under a Performance Compensation Agreement
or in his capacity as an employee of the Issuer or any Subsidiary) except for
reimbursement for advances or other out-of-pocket costs and expenses incurred in
the ordinary course of business (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement, Investment or
payment as described in preceding clauses (i) through (vi) being referred to as
a "Restricted
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Payment"); if at the time the Issuer or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); or (2) the Issuer is not able to incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) (ii) under "--Limitation on
Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum of (A) 50% of (x) the Consolidated Net Income accrued during the
period (treated as one accounting period) from the first day of the fiscal
quarter beginning on or after the Issue Date to the end of the most recent
fiscal quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days prior
to the date of such Restricted Payment) (or, in case such Consolidated Net
Income shall be a deficit, minus 100% of such deficit) less (y) the aggregate
amount of Restricted Payments made pursuant to clause (v) of paragraph (b); (B)
the aggregate Net Cash Proceeds received by the Issuer from the issue or sale of
its Capital Stock (other than Disqualified Stock) or other capital contributions
subsequent to the Issue Date (other than net proceeds received from an issuance
or sale of such Capital Stock to (x) a Subsidiary of the Issuer, (y) an employee
stock ownership plan or similar trust or (z) management employees of the Issuer
or any Subsidiary of the Issuer (other than sales of Capital Stock (other than
Disqualified Stock) to management employees of the Issuer pursuant to BONA FIDE
employee stock option plans of the Issuer); PROVIDED, HOWEVER, that the value of
any non-cash net proceeds shall be as determined by the Board of Directors in
good faith, except that in the event the value of any non-cash net proceeds
shall be $1.0 million or more, the value shall be as determined in writing by an
independent investment banking firm of nationally recognized standing; (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 Restricted 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 other property, distributed by the
Issuer upon such conversion or exchange); and (D) the amount equal to the net
reduction in Investments (other than Permitted Investments) made after the Issue
Date by the Issuer or any of its Restricted Subsidiaries in any Person resulting
from (i) repurchases or redemptions of such Investments by such Person, proceeds
realized upon the sale of such Investment to an unaffiliated purchaser,
repayments of loans or advances or other transfers of assets by such Person to
the Issuer or any Restricted Subsidiary of the Issuer or (ii) the redesignation
of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously included in the
calculation of the amount of Restricted Payments; PROVIDED, HOWEVER, that no
amount shall be included under this clause (D) to the extent it is already
included in Consolidated Net Income.
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations (including, without
limitation, the Appreciation Notes) of the Issuer made by exchange for, or out
of the proceeds of the substantially concurrent sale of, Capital Stock of the
Issuer (other than Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary, an employee stock ownership plan or similar trust for
management employees of the Issuer or any Subsidiary of the Issuer); PROVIDED,
HOWEVER, that (A) such purchase or redemption shall be excluded in the
calculation of the aggregate amount of Restricted Payments for purposes of
clause (3) of paragraph (a) and (B) the Net Cash Proceeds from such sale shall
be excluded in the calculation of the amount of aggregate Net Cash Proceeds from
clause (3) (B) of paragraph (a); (ii) any purchase or redemption of Subordinated
Obligations of the Issuer made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of the Issuer in
compliance with the "Limitation on Indebtedness" covenant; PROVIDED, HOWEVER,
that such purchase or redemption shall be excluded in the calculation of the
aggregate amount of Restricted Payments for purposes of clause (3) of paragraph
(a); (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under "-- Limitation on Sales of Assets
and Subsidiary Stock" below; PROVIDED, HOWEVER, that such purchase or redemption
shall be excluded in the calculation of the aggregate amount of Restricted
Payments for
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purposes of clause (3) of paragraph (a); (iv) dividends paid within 60 days
after the date of declaration if at such date of declaration such dividend would
have complied with this provision; PROVIDED, HOWEVER, that such dividend shall
be included in the calculation of the amount of Restricted Payments for purposes
of clause (3) of paragraph (a); (v) for so long as the Issuer is not treated for
tax purposes as a corporation or an association taxable as a corporation or
other entity that is subject to an entity level tax for income tax purposes,
distributions to each Member, as soon as practicable after the end of each
calendar quarter, of an amount reasonably determined to be necessary to permit
such Member to pay any federal, state or local income taxes imposed on such
Member's allocable share of income from the Issuer; PROVIDED, HOWEVER, that in
no event shall any distribution to a Member exceed the Tax Allowance Amount for
such Member in respect of such quarter and the Issuer shall cause the
Accountants to deliver to the Trustee a certificate setting forth the
determination of each Member's Tax Allowance Amount within 60 days of the end of
each fiscal year; (vi) payments under the Performance Compensation Agreements
(other than any Performance Compensation Agreement with Alan R. Brill) not
exceeding in the aggregate $500,000 in any fiscal year PROVIDED, HOWEVER, that
any such payment pursuant to this clause (vi) shall be included in the
calculation of the aggregate amount of Restricted Payments for purposes of
clause 3 of paragraph (a); and (vii) payments in respect of the redemption of
the Appreciation Notes under the Appreciation Note Indenture, PROVIDED, HOWEVER,
that the Issuer is able to Incur an additional $1.00 of Subordinated
Indebtedness pursuant to (a) (i) under "--Limitation on Indebtedness", and
PROVIDED, FURTHER, that such payments shall be included in the calculation of
the aggregate amount of Restricted Payments for purposes of clause (3) of
paragraph (a); and PROVIDED, FURTHER, that in the case of clauses (i), (ii),
(iii) and (vii) and clause (vi) with respect to Performance Compensation
Agreements entered into after the Issue Date, no Event of Default shall have
occurred or be continuing at the time of such payment or as a result thereof.
(c) For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, PROVIDED, HOWEVER,
that any Restricted Payment made other than in cash shall be valued at the fair
market value (determined, subject to the additional requirements of the
immediately succeeding proviso, in good faith by the Board of Directors) of the
assets so utilized in making such Restricted Payment, PROVIDED, FURTHER, that
(i) in the case of any Restricted Payment made with Capital Stock or
Indebtedness, such Restricted Payment shall be deemed to be made in an amount
equal to the greater of the fair market value thereof and the liquidation
preference (if any) or principal amount of the Capital Stock or Indebtedness, as
the case may be, so utilized, and (ii) in the case of any Restricted Payment in
an aggregate amount in excess of $1.0 million, a written opinion as to the
fairness of the valuation thereof (as determined by the Issuer) for purposes of
determining compliance with the "Limitation on Restricted Payments" covenant in
the Indenture shall be issued by an independent investment banking firm of
national standing.
(d) Not later than the date of making any Restricted Payment or Permitted
Investment described in clause (xii) of the definition thereof, the Issuer shall
deliver to the Trustee an Officer's Certificate stating that such Restricted
Payment or Permitted Investment, as the case may be, complies with the Indenture
and setting forth in reasonable detail the basis upon which the required
calculations were computed, which calculations may be based upon the Issuer's
latest available quarterly financial statements and a copy of any required
investment banker's opinion.
LIMITATION ON LIENS. The Issuer will not and will not permit any Restricted
Subsidiary to, directly or indirectly, create or permit to exist any Liens
except for Permitted Liens.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Restricted Subsidiary to
(i) pay dividends or make any other distributions on its Capital Stock or pay
any Indebtedness or other obligation owed to the Issuer or another Restricted
Subsidiary, (ii) make any loans or advances to the Issuer or another Restricted
Subsidiary or (iii) transfer any of its property or assets to the Issuer or
another Restricted Subsidiary, except: (a) any encumbrance or restriction
pursuant to an agreement in effect at or entered
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into on the Issue Date; (b) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Issuer and outstanding on such date
(other than Indebtedness Incurred in anticipation of, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary of the Issuer or was acquired by the Issuer); (c)
any encumbrance or restriction with respect to a Restricted Subsidiary pursuant
to an agreement evidencing Indebtedness Incurred without violation of the
Indenture or effecting a refinancing of Indebtedness issued pursuant to an
agreement referred to in clauses (a) or (b) or this clause (c) or contained in
any amendment to an agreement referred to in clauses (a) or (b) or this clause
(c); PROVIDED, HOWEVER, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any of such agreement, refinancing
agreement or amendment, taken as a whole, are no less favorable to the holders
of the Notes in any material respect, as determined in good faith by the Board
of Directors of the Issuer, than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in agreements in effect at, or entered into
on, the Issue Date; (d) in the case of clause (iii), any encumbrance or
restriction (A) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is a lease, license, conveyance or
contract or similar property or asset, (B) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any property
or assets of the Issuer or any Restricted Subsidiary not otherwise prohibited by
the Indenture, (C) that is included in a licensing agreement to the extent such
restrictions limit the transfer of the property subject to such licensing
agreement or (D) arising or agreed to in the ordinary course of business and
that does not, individually or in the aggregate, detract from the value of
property or assets of the Issuer or any of its Restricted Subsidiaries in any
manner material to the Issuer or any such Restricted Subsidiary; (e) in the case
of clause (iii) above, restrictions contained in security agreements, mortgages
or similar documents securing Indebtedness of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements; (f) in the case of clause (iii) above, any instrument
governing or evidencing Indebtedness of a Person acquired by the Issuer or any
Restricted Subsidiary of the Issuer at the time of such acquisition, which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person so acquired; PROVIDED, HOWEVER, that
such Indebtedness is not incurred in connection with or in contemplation of such
acquisition; (g) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (h) encumbrances or
restrictions arising or existing by reason of applicable law.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a)The Issuer shall
not, and shall not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless (i) the Issuer or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Issuer's Board of Directors
(including as to the value of all non-cash consideration), of the shares and
assets subject to such Asset Disposition, (ii) at least 80% of the consideration
thereof received by the Issuer or such Restricted Subsidiary is in the form of
cash or Cash Equivalents other than in the case where the Issuer or a Restricted
Subsidiary is exchanging all or substantially all of the assets of one or more
broadcast stations operated by the Issuer or such Restricted Subsidiary, as the
case may be, (including by way of the transfer of Capital Stock) for all or
substantially all of the assets (including by way of the transfer of Capital
Stock) constituting one or more broadcast stations operated by another Person
(an "Asset Swap"), PROVIDED, HOWEVER, that at least 80% of the consideration, if
any, received by the Issuer and its Restricted Subsidiaries in such Asset Swap,
other than the stock and assets of broadcast station(s), is in the form of cash
or Cash Equivalents and (iii) an amount equal to 100% of the Net Available Cash
from such Asset Disposition is applied by the Issuer (or such Restricted
Subsidiary, as the case may be) (A) FIRST, to the extent the Issuer or any
Restricted Subsidiary elects (or is required by the terms of any Senior Secured
Indebtedness), (x) to prepay, repay or purchase senior
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secured indebtedness in each case owing to a Person other than the Issuer or any
of its Subsidiaries or (y) to the investment in or acquisition of Additional
Assets within 365 days from the later of the date of such Asset Disposition or
the receipt of such Net Available Cash; (B) SECOND, within 365 days from the
receipt of such Net Available Cash, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), to make an offer
to purchase Notes, at 100% of Accreted Value thereof if such purchase date
occurs prior to December 15, 1999, and at 100% of the principal amount thereof
if such purchase date occurs on or after December 15, 1999, in each case plus
accrued and unpaid interest, if any, thereon; (C) THIRD, within 90 days after
the later of the application of Net Available Cash in accordance with clauses
(A) and (B) and the date that is 365 days from the receipt of such Net Available
Cash, to the extent of the balance of such Net Available Cash after application
in accordance with clauses (A) and (B), to prepay, repay or repurchase
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary (in each
case other than Indebtedness owed to the Issuer or a Subsidiary); and (D)
FOURTH, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to (w) the investment
in or acquisition of Additional Assets, (x) the making of Temporary Cash
Investments, (y) the prepayment, repayment or purchase of Indebtedness of the
Issuer (other than Indebtedness owing to any Subsidiary of the Issuer) or
Indebtedness of any Subsidiary (other than Indebtedness owed to the Issuer or
any of its Subsidiaries) or (z) any other purpose otherwise permitted under the
Indenture, in each case within the later of 45 days after the application of Net
Available Cash in accordance with clauses (A), (B) and (C) or the date that is
365 days from the receipt of such Net Available Cash; PROVIDED, HOWEVER, that,
in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (B), (C) or (D) above, the Issuer or such Restricted
Subsidiary shall retire such Indebtedness and shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions, the Issuer and its Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance herewith except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this covenant at any time exceeds $10.0 million. The
Issuer shall not be required to make an offer for Notes pursuant to this
covenant if the Net Available Cash available therefor (after application of the
proceeds as provided in clause (A)) is less than $10.0 million for any
particular Asset Disposition (which lesser amounts shall be carried forward for
purposes of determining whether an offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition). Notwithstanding the
foregoing, the Issuer will not be required to comply with the terms of this
covenant to the extent such Asset Disposition consists of a sale of the Missouri
Properties; PROVIDED, HOWEVER, that if the Net Available Cash from such Asset
Disposition exceeds $7.5 million, the Issuer will be required to apply the
amount of such excess in accordance with the provision of this covenant.
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Senior Secured Indebtedness of the
Issuer, or Senior Secured Indebtedness of any Restricted Subsidiary of the
Issuer and the release of the Issuer or such Restricted Subsidiary from all
liability on such Senior Secured Indebtedness in connection with such Asset
Disposition (in which case the Issuer shall, without further action, be deemed
to have applied such assumed Indebtedness in accordance with clause (A) of the
preceding paragraph) and (y) securities received by the Issuer or any Restricted
Subsidiary of the Issuer from the transferee that are promptly (and in any event
within 60 days) converted by the Issuer or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a) (iii) (B), the Issuer will be required to purchase Notes
tendered pursuant to an offer by the Issuer for the Notes at a purchase price of
101% of the Accreted Value thereof or 101% of the principal amount thereof, as
applicable under clause (a)(iii)(B), and in each case plus accrued and unpaid
interest, if any, to the purchase date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notes tendered pursuant to the
offer is less than the Net Available Cash allotted to the purchase of the Notes,
the Issuer will apply the remaining Net Available Cash in accordance with
clauses (a) (iii) (C) or (D) above.
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(c) The Issuer 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 the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Issuer will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Issuer shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or conduct any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any Affiliate of the Issuer, other than a
Wholly-Owned Subsidiary (an "Affiliate Transaction") unless: (i) the terms of
such Affiliate Transaction are no less favorable to the Issuer or such
Restricted Subsidiary, as the case may be, 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) in the event such Affiliate Transaction involves an
aggregate amount in excess of $200,000, the terms of such transaction have been
approved by a majority of the members of the Board of Directors of the Issuer
and by a majority of the disinterested members of such Board, if any (and such
majority or majorities, as the case may be, determines that such Affiliate
Transaction satisfies the criteria in (i) above); and (iii) in the event such
Affiliate Transaction involves an aggregate amount in excess of $1.0 million,
the Issuer has received a written opinion from an independent investment banking
firm of nationally recognized standing that such Affiliate Transaction is fair
to the Issuer or such Restricted Subsidiary, as the case may be, from a
financial point of view.
(b) The foregoing paragraph (a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under
"--Limitation on Restricted Payments," (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, or any stock options and stock ownership
plans for the benefit of employees, officers and directors, consultants and
advisors approved by the Board of Directors of the Issuer, (iii) loans or
advances to employees in the ordinary course of business of the Issuer or any of
its Restricted Subsidiaries in aggregate amount outstanding not to exceed
$250,000 to any employee or $1.0 million in the aggregate at any time, (iv) any
transaction between Wholly-Owned Subsidiaries, (v) indemnification agreements
with, and the payment of fees and indemnities to, directors, officers and
employees of the Issuer and the Issuer's Restricted Subsidiaries and
indemnification agreements with, or for the benefit of, officers and employees
of BMCLP to the extent related to the performance of management services for the
Issuer or any of its Subsidiaries, in each case in the ordinary course of
business, (vi) transactions pursuant to agreements in existence on the Issue
Date (other than with BMCLP) which are (x) described in this Offering Memorandum
or (y) otherwise, in the aggregate, immaterial to the Issuer and its Restricted
Subsidiaries taken as a whole, (vii) any employment, non-competition or
confidentiality agreements entered into by the Issuer or any of its Restricted
Subsidiaries with its employees in the ordinary course of business, (viii) the
issuance of Capital Stock of the Issuer (other than Disqualified Stock); (ix)
the acquisition of Managed Affiliate Notes provided that the aggregate principal
amount thereof (including the Managed Affiliate Notes outstanding on the Issue
Date) does not exceed $20 million at any time outstanding ; (x) the Managed
Affiliate Management Agreements; and (xi) provided that no Default or Event of
Default shall have occurred and be continuing, payments to BMCLP for services
rendered to the Issuer and the Restricted Subsidiaries under the Administrative
Management Agreements not to exceed in any fiscal year in the aggregate the
remainder of (A) the lesser of (1) the greater of $2 million or 15% of Media
Cashflow for such fiscal year or (2) $5 million over (B) the payments to BMCLP
under management agreements between BMCLP and Managed Affiliates in such fiscal
year provided that the obligations to make such payments to BMCLP under the
Administrative Management Agreements constitute Subordinated Obligations and the
terms of such subordination are no less favorable to the holders of senior
indebtedness (including the Notes) than the terms set forth in the
Administrative Management Agreements between the Issuer and BMCLP on the Issue
Date.
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LIMITATION ON ISSUANCES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The
Issuer shall not permit any of its Restricted Subsidiaries to issue any Capital
Stock to any Person (other than to the Issuer or a Wholly-Owned Subsidiary of
the Issuer) or permit any Person (other than the Issuer or a Wholly-Owned
Subsidiary of the Issuer) to own any Capital Stock of a Restricted Subsidiary of
the Issuer, if in either case as a result thereof such Restricted Subsidiary
would no longer be a Restricted Subsidiary of the Issuer; PROVIDED, HOWEVER,
that this provision shall not prohibit (x) the Issuer or any of its Restricted
Subsidiaries from selling, leasing or otherwise disposing of all of the Capital
Stock of any Restricted Subsidiary or (y) the designation of a Restricted
Subsidiary as an Unrestricted Subsidiary in compliance with the Indenture.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. Issuer shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, enter into,
Guarantee or otherwise become liable with respect to any Sale/Leaseback
Transaction with respect to any property or assets unless (i) the Issuer or such
Restricted Subsidiary, as the case may be, would be entitled, pursuant to the
Indenture, to Incur Indebtedness secured by a Permitted Lien on such property or
assets in an amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction, (ii) the net cash proceeds from such Sale/Leaseback
Transaction are at least equal to the fair market value of the property or
assets subject to such Sale/Leaseback Transaction (such fair market value
determined, in the event such property or assets have a fair market value in
excess of $1.0 million, no more than 30 days prior to the effective date of such
Sale/Leaseback Transaction, by the Board of Directors of the Issuer as evidenced
by a resolution of such Board) and (iii) the net cash proceeds of such
Sale/Leaseback Transaction are applied in accordance with the provisions
described under "--Limitation on Sales of Assets and Subsidiary Stock."
SEC REPORTS. The Issuer will file with the Trustee and provide to the
holders of the Notes, within 15 days after it files them with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) which the Issuer files with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. In the event that the
Issuer is not required to file such reports with the Commission pursuant to the
Exchange Act, the Issuer will nevertheless deliver such Exchange Act information
to the holders of the Notes within 15 days after it would have been required to
file it with the Commission.
LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Issuer may
designate any Subsidiary of the Issuer (other than a Subsidiary of the Issuer
which owns Capital Stock of a Restricted Subsidiary) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Issuer would be permitted under the Indenture to make an
Investment in Unrestricted Subsidiaries at the time of Designation (assuming
the effectiveness of such Designation) in an amount (the "Designation
Amount") equal to the sum of (i) fair market value of the Capital Stock of
such Subsidiary owned by the Issuer and the Restricted Subsidiaries on such
date and (ii) the aggregate amount of other Investments of the Issuer and
the Restricted Subsidiaries in such Subsidiary on such date; and
(c) except in the case of a newly formed or a newly acquired Subsidiary,
the Issuer would be permitted to incur $1.00 of additional Indebtedness
pursuant to clause (a)(ii) of the covenant described under "--Limitation on
Indebtedness" at the time of Designation (assuming the effectiveness of such
Designation).
In the event of any such Designation, the Issuer shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described under "--Limitation on Restricted Payments" for all purposes of the
Indenture (including, without limitation, the definition of Permitted
Investment) in the Designation Amount. The Indenture will further provide that
the Issuer shall not, and
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shall not permit any Restricted Subsidiary to, at any time (x) provide direct or
indirect credit support for or a guarantee of any Indebtedness of any
Unrestricted Subsidiary (including of any undertaking, agreement or instrument
evidencing such Indebtedness), (y) be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly
liable for any Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity upon
the occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary (including any right to take enforcement action against such
Unrestricted Subsidiary), except, in the case of clause (x) or (y), to the
extent permitted under the covenant described under "--Limitation on Restricted
Payments."
The Issuer may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation"), whereupon such Subsidiary shall then constitute a
Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at such
time, have been permitted to be Incurred for all purposes of the Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Issuer delivered to the Trustee certifying compliance with the foregoing
provisions.
FUTURE NOTE GUARANTORS. The Issuer will cause each newly organized or
acquired Restricted Subsidiary to execute and deliver to the Trustee a
Subsidiary Guarantee.
LIMITATION ON BUSINESS. The Issuer will not and will not permit any of its
Restricted Subsidiaries to directly or indirectly engage in any business other
than a Permitted Business.
MERGER AND CONSOLIDATION. The Issuer shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all of its
assets to, any Person, unless: (i) the resulting, surviving or transferee Person
(the "Successor Company") shall be a corporation, partnership, trust or limited
liability company 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) shall expressly assume, by supplemental indenture, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Issuer under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction (and treating any Indebtedness that
becomes an obligation of the Successor Company or any Subsidiary of the
Successor Company as a result of such transaction as having been incurred by the
Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction, the
Successor Company (A) shall have a Consolidated Net Worth equal or greater to
the Consolidated Net Worth of the Issuer immediately prior to such transaction
and (B) shall be able to incur at least an additional $1.00 of Indebtedness
pursuant to paragraph (a)(ii) of the covenant described under "Limitation on
Indebtedness"; (iv) 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 the
Indenture; and (v) there has been delivered to the Trustee an Opinion of Counsel
to the effect that holders of Notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such consolidation, merger,
conveyance, transfer or lease and will be subject to U.S. 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 consolidation, merger, conveyance, transfer or lease had not
occurred.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Issuer will not be
released from the obligation to pay the principal of and interest on the Notes.
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Notwithstanding the foregoing clauses (ii) and (iii), any Restricted
Subsidiary of the Issuer may consolidate with, merge into or transfer all or
part of its properties and assets to the Issuer or any other Restricted
Subsidiary.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due, continued for 30
days, (ii) a default in the payment of principal or premium of any Note when due
at its Stated Maturity, upon optional or mandatory redemption, upon required
repurchase, upon declaration or otherwise, (iii) the failure by the Issuer to
comply with its obligations under the "--Mergers and Consolidations" covenant
described under "--Certain Covenants" above or the failure to make or consummate
an offer to purchase the Notes in accordance with the "-- Change of Control" or
"--Limitations on Sale of Assets and Subsidiary Stock" covenants described under
"--Certain Covenants" above, (iv) the failure by the Issuer to comply for 30
days after notice with any of its obligations under the covenants described
under "--Certain Covenants" above, other than "Merger and Consolidation," (v)
the failure by the Issuer to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) Indebtedness of the Issuer or any
Restricted 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 $1.0 million and
such default shall not have been cured after a 10-day period, (vii) certain
events of bankruptcy, insolvency or reorganization of the Issuer or a
Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or
decree for the payment of money in excess of $1.0 million (to the extent not
covered by insurance) is rendered against the Issuer or a Significant Subsidiary
and such judgment or decree shall remain undischarged or unstayed for a period
of 60 days after such judgment becomes final and non-appealable (the "judgment
default provision") or (ix) any Subsidiary Guarantee by a Significant Subsidiary
ceases to be in full force and effect (except as contemplated by the terms of
the Indenture) or any Subsidiary Guarantor that is a Significant Subsidiary
denies or disaffirms its obligations under the Indenture or its Subsidiary
Guarantee and such Default continues for 10 days. However, a default under
clause (iv) or (v) will not constitute an Event of Default until the Trustee or
the holders of 25% in principal amount of all outstanding series of Notes,
voting as a single class, notify the Issuer of the default and the Issuer does
not cure such default within the time specified in clause (iv) or (v) after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of all outstanding series of Notes, voting
as a single class, by notice to the Issuer may declare to be immediately due and
payable, (i) in the case of a declaration that occurs prior to December 15,
1999, the Accreted Value of all the Notes then outstanding plus accrued interest
on the Notes to the date of acceleration, and (ii) in the case of a declaration
that occurs on or after December 15, 1999, the entire principal amount of all
the Notes then outstanding plus accrued interest to the date of acceleration.
Upon such a declaration, such principal and premium and accrued and unpaid
interest shall be due and payable immediately. If an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Issuer
occurs, the principal of and premium and accrued and unpaid interest on all the
Notes will become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holders. Under certain
circumstances, the holders of a majority in principal amount of all outstanding
series of Notes, voting as a single class, may rescind any such acceleration
with respect to the Notes and its consequences.
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Subject to the provisions of the Indenture relating to the duties of the
Trustee, if 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 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 may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of all outstanding series of Notes,
voting as a single class, have requested the Trustee to pursue the remedy, (iii)
such holders have offered the Trustee reasonable security or indemnity against
any loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt of the request and the offer of
security or indemnity and (v) the holders of a majority in principal amount of
all series of outstanding Notes, acting as a single class, have not given the
Trustee a direction that, in the opinion of the Trustee, is inconsistent with
such request within such 60-day period. Subject to certain restrictions, the
holders of a majority in principal amount of all outstanding series of Notes,
voting as a single class, 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 Notes. 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
or that would involve the Trustee in personal liability. Prior to taking any
action under the Indenture, 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.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder 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 on any Note, the Trustee may
withhold notice if and so long as its board of directors, a committee of its
board of directors or a committee of its Trust officers in good faith determines
that withholding notice is in the interests of the Noteholders. In addition, the
Issuer is required to deliver to the Trustee, within 90 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. The Issuer also is required
to deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any events which would constitute certain Defaults.
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 all outstanding series of
Notes, voting as a single class, then outstanding and any past default or
compliance with any provisions may be waived with the consent of the holders of
a majority in principal amount of all outstanding series of Notes, voting as a
single class. However, without the consent of each holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose holders must consent to an amendment, (ii) reduce the stated rate of or
extend the stated time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption or repurchase of any Note or change the time at
which any Note may be redeemed as described under "--Optional Redemption" above,
(v) make any note payable in money other than that stated in the Note, (vi)
impair the right of any holder to receive payment of principal of and interest
on such holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such holder's Notes or
(vii) make any change in the amendment provisions which require each holder's
consent or in the waiver provisions.
Without the consent of any holder, the Issuer and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation, partnership, trust or limited
liability company of the obligations of the Issuer under the Indenture (provided
that there has been delivered to the Trustee an Opinion of Counsel to the effect
that holders of
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Notes will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such assumption and will be subject to U.S. 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 assumption had not occurred), 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 Code, or in a manner such that the uncertificated Notes
are described in Section 163 (f) (2) (B) of the Code), to the Notes, to secure
the Notes, to add to the covenants of the Issuer for the benefit of the holders
or to surrender any right or power conferred upon the Issuer, to make any change
that does not adversely affect the rights of any holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act.
The consent of the holders 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, the Issuer is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Issuer 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. The Issuer
at any time may terminate its obligations under covenants described under
"--Certain Covenants" (other than "Merger and Consolidation"), the operation of
the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"--Events of Default" above and the limitations contained in clauses (iii) and
(iv) under "--Certain Covenants--Merger and Consolidation" above ("covenant
defeasance").
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 with respect thereto. If the Issuer exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries), (viii) or (ix) under "--Events of Default" above or
because of the failure of the Issuer to comply with clause (iii) or (iv) under
"--Certain Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Issuer must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and 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).
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect (except as otherwise
expressly provided for in the Indenture) when either (i) all outstanding Notes
have been delivered (other than lost, stolen or destroyed Notes which have been
replaced) to the Trustee for cancellation or (ii) all outstanding Notes have
become
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due and payable, whether at maturity or as a result of the mailing of a notice
of redemption pursuant to the terms of the Indenture and the Issuer has
irrevocably deposited with the Trustee funds sufficient to pay at maturity or
upon redemption all outstanding Notes, including interest thereon (other than
lost, stolen, mutilated or destroyed Notes which have been replaced), and, in
either case, the Issuer has paid all other sums payable under the Indenture. The
Trustee is required to acknowledge satisfaction and discharge of the Indenture
on demand of the Issuer accompanied by an Officer's Certificate and an Opinion
of Counsel at the cost and expense of the Issuer.
TRANSFER AND EXCHANGE
Upon any transfer of a Note, the registrar may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The registrar
is not required to transfer or exchange any Notes selected for redemption nor is
the registrar required to transfer or exchange any Notes for a period of 15 days
before a selection of Notes to be redeemed. The registered holder of a Note may
be treated as the owner of it for all purposes.
CONCERNING THE TRUSTEE
United States Trust Company of New York is the Trustee under the Indenture
and has been appointed by the Issuer as Registrar and Paying Agent with regard
to the Notes. The Trustee's current address is 114 West 47th Street, New York,
New York.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim, as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest (as
defined) it must eliminate such conflict or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Trustee will be required, in
the exercise of its power, to use the degree of care that a prudent man in the
conduct of his own affairs would use. 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 of the holders of the Notes issued thereunder
unless they shall have offered to the Trustee security and indemnity
satisfactory to it.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Accountants" means Ernst & Young LLP or such other nationally recognized
firm of independent certified public accountants that is reasonably acceptable
to the Trustee.
"Accreted Value" means, as of any date, with respect to each $1,000
principal amount at maturity of Notes: (A) if such date is prior to December 15,
1999, the sum of (1) the initial offering price of such Notes and (2) the
portion of the original issue discount for such Notes (which for this purpose
shall be deemed to be the excess of the principal amount over such initial
offering price) which shall be amortized with respect to such Notes to but not
including such date, such original issue discount to be so amortized at a rate,
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which together with cash interest paid on the Notes, represents a yield to
maturity of 12% per annum using semiannual compounding of such rate on each June
15 and December 15, commencing June 15, 1998 (the "Semi-Annual Accrual Date")
from the Issue Date but not including the date of determination (the following
table indicates the Accreted Value at the semiannual compounding dates of the
Notes:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
- ------------------------------------------------------------------------------- -------------
<S> <C>
June 15, 1998.................................................................. $ 939.82
December 15, 1998.............................................................. $ 958.71
June 15, 1999.................................................................. $ 978.73
December 15, 1999.............................................................. $ 1,000.00
</TABLE>
and (B) if such date occurs on or after December 15, 1999, $1,000.
At any time prior to December 15, 1999 and between two Semi-Annual Accrual
Dates, the Accreted Value will be the sum of (1) the Accreted Value for the
Semi-Annual Accrual Date immediately preceding the date of determination, and
(2) the Proportionate Share (as defined below). The "Proportionate Share" is an
amount equal to the product of (i) the Accreted Value for the immediately
following Semi-Annual Accrual Date less the Accreted Value for the immediately
preceding Semi-Annual Date times (ii) a fraction, the numerator of which is the
number of days from the immediately preceding Semi-Annual Accrual Date to the
date of such determination, using a 360-day year of twelve 30-day months, and
the denominator of which is 180.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Permitted Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Issuer or a Restricted Subsidiary of the Issuer;
(iii) Capital Stock constituting a minority interest in any person that at such
time is a Restricted Subsidiary of the Issuer; or (iv) Permitted Investments of
the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Permitted Business.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date means the lesser
of the amount by which (x) the fair value of the property of such Subsidiary
Guarantor exceeds the total amount of liabilities, including, without
limitation, the probable liability of such Subsidiary Guarantor with respect to
its contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Subsidiary Guarantee of such Subsidiary Guarantor at such
date and (y) the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary by such
Subsidiary Guarantor in respect of the obligations of such Subsidiary under the
Subsidiary Guarantee), excluding debt in respect of the Subsidiary Guarantee, as
they become absolute and matured.
"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. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Appreciation Notes" means the Appreciation Notes due 2007.
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"Appreciation Note Indenture" means the Indenture, dated as of the Issue
Date, between the Issuer and the United States Trust Company of New York
relating to the Appreciation Notes as in effect on the Issue Date and without
giving effect to any modification or amendment thereto made after the Issue
Date.
"Asset Acquisition" means (i) an investment by the Issuer or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Issuer or any of its Restricted Subsidiaries or (ii) an acquisition by the
Issuer or any of its Restricted Subsidiaries of the property and assets of any
Person other than the Issuer or any of its Restricted Subsidiaries that
constitute substantially all of a division or line of business of such Person.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of (or
any other equity interests in) a Restricted Subsidiary (other than directors'
qualifying shares) or of any other property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Issuer or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary
to a Wholly-Owned Subsidiary, (ii) a disposition of inventory in the ordinary
course of business, (iii) a disposition of obsolete or worn out equipment or
equipment that is no longer useful in the conduct of the business of the Issuer
and its Restricted Subsidiaries and that is disposed of in each case in the
ordinary course of business, (iv) dispositions of property for net proceeds
which, when taken collectively with the net proceeds of any other such
dispositions under this clause (iv) that were consummated since the beginning of
the calendar year in which such disposition is consummated, do not exceed $1.0
million, and (v) transactions permitted under "--Certain Covenants-- Merger and
Consolidation" above. Notwithstanding anything to the contrary contained above,
a Restricted Payment made in compliance with the "Limitation on Restricted
Payments" covenant shall not constitute an Asset Disposition except for purposes
of determinations of the Consolidated Leverage Ratio.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the product of
the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Board of Directors" means, as to the Issuer (i) so long as BMC or any
successor to BMC is a limited liability company or partnership, the board of
directors of Brill Media Management, Inc. which is the manager of BMC and (ii)
at any other time the Board of Directors of the Issuer.
"Capital Stock" of any Person means any and all shares, membership and other
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank
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deposits, in each case with any commercial bank having capital and surplus in
excess of $500 million, (iv) repurchase obligations for underlying securities of
the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper rated A-1 or the equivalent thereof by Moody's or S&P and in
each case maturing within one year after the date of acquisition, (iv)
investment funds investing 95% of their assets in securities of the types
described in clauses (i)-(v) above, (vii) readily marketable direct obligations
issued by any state of the United States of America or any political subdivision
thereof having one of the two highest rating categories obtainable from either
Moody's or S&P and (viii) Indebtedness or preferred stock issued by Persons with
a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"Change of Control" means, (i) any sale, lease, exchange or other transfer
(collectively, a "Transfer") (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Issuer or the
Issuer and its Restricted Subsidiaries on a consolidated basis or (ii) a
majority of the Board of Directors of the Issuer or of any direct or indirect
holding company thereof shall consist of Persons who are not Continuing
Directors of the Issuer; or (iii) the acquisition by any Person or Group (other
than Alan R. Brill or any Related Brill Party) of the power, directly or
indirectly, to vote or direct the voting of securities having more than 35% of
the ordinary voting power for the election of directors of the Issuer, or any
direct or indirect holding company thereof; PROVIDED, HOWEVER that no Change of
Control shall be deemed to occur pursuant to this clause (iii), so long as Alan
R. Brill and the Related Brill Parties collectively own an amount of securities
representing the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the election of
directors of the Issuer or of any direct or indirect holding company thereof.
"Consolidated EBITDA" means, for any period an amount equal to Consolidated
Net Income for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) the provision for taxes for such
period based on income or profits and any provision for taxes utilized in
computing net loss, (ii) Consolidated Interest Expense, (iii) depreciation
expense, (iv) amortization expense (including the amortization of debt issuance
costs), (v) all other non-cash items reducing Consolidated Net Income for such
period (excluding any non-cash item to the extent it represents an accrual of or
reserve for cash disbursements for any subsequent period prior to the Stated
Maturity of the Notes or amortization of a pre-paid cash expense that was paid
in a prior period), minus (b) all non-cash items increasing Consolidated Net
Income for such period, in each case for the Issuer and its Restricted
Subsidiaries for such period determined in accordance with GAAP, PROVIDED,
HOWEVER, that, for purposes of calculating Consolidated EBITDA during any fiscal
quarter, cash income from a particular Investment (other than a Managed
Affiliate Note) of such Person shall be included only (x) if cash income has
been received by such Person with respect to such Investment during each of the
previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Temporary Cash Investments.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Issuer and its Restricted Subsidiaries determined in accordance
with GAAP, PLUS, to the extent not included in such interest expense (i)
interest expense attributable to Capitalized Lease Obligations, (ii) capitalized
interest, (iii) non-cash interest expense, (iv) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (v) interest actually paid by the Issuer or any such Restricted
Subsidiary under any Guarantee of Indebtedness or other obligation of any other
Person, (vi) net payments (whether positive or negative) pursuant to Interest
Rate Agreements, (vii) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Issuer) in
connection with Indebtedness Incurred by such plan or trust and (viii) cash and
Disqualified Stock dividends in respect of all Preferred Stock of Subsidiaries
and Disqualified Stock of the Issuer held by Persons other than the Issuer or a
Wholly-Owned Subsidiary and less (a) to the extent included in such interest
expense, the amortization of capitalized debt issuance costs and (b) interest
income. Notwithstanding the foregoing, the Consolidated Interest Expense with
respect to any Restricted Subsidiary of the Issuer, that was not a
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Wholly-Owned Subsidiary, shall be included only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Issuer and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date (other
than Indebtedness under the Appreciation Notes) less the cash and Cash
Equivalents held by the Issuer and its Restricted Subsidiaries on a consolidated
basis on such Transaction Date to (ii) the amount of Media Cashflow for the then
most recent four fiscal quarters for which financial statements of the Issuer
have been filed with the Commission or provided to the Trustee pursuant to the
"SEC Reports" covenant described in the Indenture (such four fiscal quarter
period being the "Four Quarter Period"); PROVIDED, HOWEVER that, in making the
foregoing calculation, (A) PRO FORMA effect shall be given to any Indebtedness
to be Incurred or repaid on the Transaction Date; (B) PRO FORMA effect shall be
given to Asset Dispositions and Asset Acquisitions (including giving PRO FORMA
effect to the application of proceeds of any Asset Disposition) that occur from
the beginning of the Four Quarter Period through and including the Transaction
Date (the "Reference Period"), as if they had occurred and such proceeds had
been applied on the first day of such Reference Period; and (C) PRO FORMA effect
shall be given to asset dispositions and asset acquisitions (including giving
PRO FORMA effect to the application of proceeds of any asset disposition) that
have been made by any Person that has become a Restricted Subsidiary or has been
merged with or into the Issuer or any Restricted Subsidiary during such
Reference Period and that would have constituted Asset Dispositions or Asset
Acquisitions had such transactions occurred when such Person was a Restricted
Subsidiary as if such asset disposition or asset acquisitions were Asset
Dispositions or Asset Acquisitions that occurred on the first day of such
Reference Period; PROVIDED, FURTHER that to the extent that clause (B) or (C) of
this sentence requires that PRO FORMA effect be given to an Asset Acquisition or
Asset Disposition, such PRO FORMA calculation shall be based upon the four full
fiscal quarters immediately preceding the Transaction Date of the Person, or
division or line of business of the Person, that is acquired or disposed of for
which financial information is available.
"Consolidated Net Income" means, for any period, the consolidated net income
(loss) of the Issuer and its consolidated Restricted Subsidiaries determined in
accordance with GAAP; PROVIDED, HOWEVER, that there shall not be included in
such Consolidated Net Income: (i) any net income (loss) of any person acquired
by the Issuer or any of its Restricted Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (ii) any net
income of any Restricted Subsidiary of the Issuer if such Restricted Subsidiary
is subject to restrictions, directly or indirectly, on the payment of dividends
or the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Issuer (other than restrictions in effect on the Issue Date
with respect to a Restricted Subsidiary of the Issuer and other than
restrictions that are created or exist in compliance with the "Limitation on
Restrictions on Distributions from Restricted Subsidiaries" covenant), (iii) any
gain or loss realized upon the sale or other disposition of any assets of the
Issuer or its consolidated Restricted Subsidiaries (including pursuant to any
Sale/ Leaseback Transaction) which are not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any Person, (iv) any extraordinary gain or
loss, (v) the cumulative effect of a change in accounting principles, (vi) the
net income of any Person, other than a Restricted Subsidiary, except to the
extent of the lesser of (A) cash dividends or distributions actually paid to the
Issuer or any of its Restricted Subsidiaries by such Person and (B) the net
income of such Person (but in no event less than zero), and the net loss of such
Person (other than an Unrestricted Subsidiary) shall be included only to the
extent of the aggregate Investment of the Issuer or any of its Restricted
Subsidiaries in such Person and (vii) any non-cash expenses attributable to
grants or exercises of employee stock options. Notwithstanding the foregoing,
for the purpose of the covenant described under "--Certain Covenants--Limitation
on Restricted Payments" only, (x) there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other transfers of
assets from Unrestricted Subsidiaries to the Issuer or a Restricted Subsidiary
to the extent such dividends, repayments or transfers increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a) (3) (D)
thereof and (y) there shall be added to Consolidated Net Income
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the amount of any accruals under the Performance Compensation Agreements to the
extent deducted in determining such Consolidated Net Income.
"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 prior to the taking of any action for the
purpose of which the determination is being made and for which financial
statements are available (but in no event ending more than 135 days prior to the
taking of such action), 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 Senior Leverage Ratio" means, on any Transaction Date, the
Consolidated Leverage Ratio on such Transaction Date; PROVIDED, HOWEVER, that
the reference to "Indebtedness" in clause (i) of the definition of Consolidated
Leverage Ratio shall be deemed to be a reference to "Senior Indebtedness."
"Consolidated Senior Secured Leverage Ratio" means, on any Transaction Date,
the Consolidated Leverage Ratio on such Transaction Date; PROVIDED, HOWEVER,
that the reference to "Indebtedness" in clause (i) of the definition of
Consolidated Leverage Ratio shall be deemed to be a reference to "Senior Secured
Indebtedness."
"Consolidated Unrestricted Subsidiary Advance Leverage Ratio" means, on any
Transaction Date, the Consolidated Leverage Ratio on such Transaction Date;
PROVIDED, HOWEVER, that clause (i) of the definition of Consolidated Leverage
Ratio shall be deemed to be a reference to "Unrestricted Subsidiary Advances."
"Continuing Director" of any Person means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of such Person on the
date of the Indenture or (ii) was nominated for election or elected to the Board
of Directors of such Person with the affirmative vote of a majority of the
Continuing Directors of such Person who were members of such Board of Directors
at the time of such nomination or election.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means 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 (other than an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final Stated Maturity of the Notes, or (ii) is convertible into or exchangeable
(unless at the sole option of the issuer thereof) for (a) debt securities or (b)
any Capital Stock referred to in (i) above, in each case at any time prior to
the final Stated Maturity of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder, or any
successor statute or statutes thereto.
"Existing Indebtedness" means Indebtedness of the Issuer or its Restricted
Subsidiaries in existence on the Issue Date, plus interest accrued thereon,
after application of the net proceeds of the Notes as described in this Offering
Memorandum.
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"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Issuer acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Issuer delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture shall be computed in conformity with GAAP.
"Group" means any "group" for purposes of Section 13(d) of the Exchange Act.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, 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 Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v) ) entered into in the
ordinary course of business of such Person to the extent that such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such Person
of a demand for reimbursement following payment on the letter of credit), (iv)
all obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except (x) trade payables and accrued expenses (including
accrued management fees under the Administrative Managment Agreements) incurred
in the ordinary course of business and (y) contingent or "earnout" payment
obligations in respect of any Permitted Business acquired by the Issuer or any
Restricted Subsidiary), which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, (v) all Capitalized Lease
Obligations and all Attributable Indebtedness of such Person, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of other Persons to the extent Guaranteed by such Person, (viii)
the amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Restricted Subsidiary of the Issuer, any Preferred Stock of such Restricted
Subsidiary to the extent such obligation arises on or before the final Stated
Maturity of the Notes (but excluding, in each case, accrued dividends) with the
amount of
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Indebtedness represented by such Disqualified Stock or Preferred Stock, as the
case may be, being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price; PROVIDED,
HOWEVER, that, for purposes hereof the "maximum fixed repurchase price" of any
Disqualified Stock or Preferred Stock, as the case may be, which does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock or Preferred Stock, as the case may be, as if such
Disqualified Stock or Preferred Stock, as the case may be, were purchased on any
date on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based on the fair market value of such
Disqualified Stock or Preferred Stock, as the case may be, such fair market
value shall be determined in good faith by the Board of Directors of the Issuer
and (ix) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. Unless specifically set
forth above, the amount of Indebtedness of any Person at any date shall be the
outstanding principal amount of all unconditional obligations as described
above, as such amount would be reflected on a balance sheet prepared in
accordance with GAAP, and the maximum liability of such Person, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations described above at such date. Notwithstanding the foregoing,
Indebtedness shall not include any accrued obligations under Performance
Compensation Agreements.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts payable on the balance sheet of such Person) or other extension of
credit (including by way of Guarantee or similar arrangement, but excluding any
debt or extension of credit represented by a bank deposit other than a time
deposit) 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 or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person. For purposes of the "Limitation
on Restricted Payments" covenant, (i) "Investment" shall include the portion
(proportionate to the Issuer's equity interest in a Restricted Subsidiary to be
designated as an Unrestricted Subsidiary) of the fair market value of the net
assets of such Restricted Subsidiary of the Issuer at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary; PROVIDED,
HOWEVER, 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 in an amount (if positive) equal to
(x) the Issuer's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Issuer's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so redesignated a Restricted
Subsidiary; and (ii) any 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 and
evidenced by a resolution of such Board of Directors certified in an Officers'
Certificate to the Trustee.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Managed Affiliate", solely for purposes of this Description of Notes, means
a Person at least 90% of the Capital Stock of which is owned, directly or
indirectly, by Alan R. Brill; PROVIDED HOWEVER, that (i) such Person is engaged
solely in a Permitted Business, (ii) such Person is a party to a Managed
Affiliate Management Agreement and (iii) except in the case of TSB III, LLC and
TSB IV, LLC the business of such Person is acquired by Alan R. Brill, directly
or indirectly, after the Issue Date.
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"Managed Affiliate Notes" mean any promissory notes of a Managed Affiliate,
issued to the Issuer or a Restricted Subsidiary, each of which promissory notes
shall (i) mature on a day no later than the third anniversary of the date of
issuance thereof, (ii) become immediately due and payable upon (w) the default
by such Managed Affiliate under the Managed Affiliate Management Agreement to
which it is party or (x) the issuer thereunder ceasing to constitute a Managed
Affiliate or (y) the acceleration of the Notes or (z) on the bankruptcy,
insolvency or reorganization of the Issuer and (iii) bear interest payable in
cash no less often than semi-annually at a rate per annum no less than the rate
of interest payable on the Notes. Each Managed Affiliate Note shall provide that
the payment of any management fee by the relevant Managed Affiliate pursuant to
any management agreement (other than a Managed Affiliate Management Agreement)
with an Affiliate of the Issuer or such Managed Affiliate shall be subordinated
to the obligations of the relevant Managed Affiliate under such Managed
Affiliate Note to the same extent as the obligations of the Issuer and the
Subsidiary Guarantors under the Administrative Management Agreements are
subordinated to the obligations of such persons under the Notes and the
Subsidiary Guarantees.
"Managed Affiliate Management Agreement" means any agreement between a
Restricted Subsidiary, on the one hand, and a Managed Affiliate, on the other
hand, providing for the payment by such Managed Affiliate to one or more
Restricted Subsidiaries of a cash management fee payable at least semi annually
equal to a specified percentage of the excess cash flow of such Managed
Affiliate as defined in such agreement.
"Media Cashflow" for any period means for any Person an amount equal to
Consolidated EBITDA for such period plus interest income received in respect of
the Managed Affiliate Notes during such period and the following to the extent
deducted in calculating such Consolidated EBITDA (i) management fees charged by
BMCLP under the Administrative Management Agreements, (ii) expenses accruing
under Performance Compensation Agreements , (iii) consulting fees payable in
connection with acquisitions and (iv) fees paid under Time Brokerage Agreements.
"Member" means any Person who holds a membership interest in the Issuer.
"Missouri Properties" means the radio stations KLIK-AM, KTXY-FM and KATI-FM
serving Jefferson City, MO.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets subject to such Asset Disposition) therefrom in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all distributions
and other payments required to be made to any Person owning a beneficial
interest in assets subject to sale or minority interest holders in Subsidiaries
or joint ventures as a result of such Asset Disposition, (iv) the deduction of
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Disposition and retained by the Issuer or any Restricted Subsidiary
of the Issuer after such Asset Disposition, PROVIDED, HOWEVER, that upon any
reduction in such reserves (other than to the extent resulting from payments of
the respective reserved liabilities), Net Available Cash shall be increased by
the amount of such reduction to reserves, and (v) any portion of the purchase
price from an Asset Disposition placed in escrow (whether as a reserve for
adjustment of the purchase price, for satisfaction of indemnities in respect of
such Asset Disposition or otherwise in connection with such Asset Disposition);
PROVIDED, HOWEVER, that upon the termination of such escrow, Net Available Cash
shall be increased by any portion of funds therein released to the Issuer or any
Restricted Subsidiary.
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"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees or expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuer
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor, general partner or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuer or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Officer" means the Chairman of the Board, the Vice-Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the President, any
Vice-President, the Treasurer or the Secretary of the Issuer.
"Officer's Certificate" means a certificate signed by two Officers of the
Issuer at least one of whom shall be the principal executive, financial or
accounting officer of the Issuer.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to the Trustee, from legal counsel who is acceptable to the Trustee.
"Paying Agent" means United States Trust Company of New York.
"Performance Compensation Agreement" means any agreements between the Issuer
or any Restricted Subsidiary and any executive officer of such Subsidiary
pursuant to which such Subsidiary provides deferred compensation to such officer
by crediting amounts (as determined under a formula set forth in such agreement)
to an identified account for the benefit of such executive officer. Future
Performance Compensation Agreements shall provide that no payment shall be
required to be made by the Issuer or any Restricted Subsidiary thereunder if
such payment is not permitted under the Indenture and that the Issuer's and the
Restricted Subsidiary's obligations to make payments thereunder shall be
subordinated to (i) the obligations of the Issuer and the Subsidiary Guarantors
under the Notes and the Subsidiary Guarantees and (ii) the obligations of the
Issuer and the Subsidiary Guarantors under the Appreciation Notes and the
Guarantees thereof.
"Permitted Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Issuer and its
Restricted Subsidiaries on the date of the Indenture, as reasonably determined
by the Issuer's Board of Directors.
"Permitted Investment" means an Investment by the Issuer or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Issuer;
PROVIDED, HOWEVER, that the primary business of such Wholly-Owned Subsidiary is
a Permitted Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Issuer or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Issuer or a Wholly-Owned Subsidiary of the Issuer; PROVIDED,
HOWEVER, that in each case such Person's primary business is a Permitted
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the Issuer
or any of its Restricted Subsidiaries, created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (v) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business; (vi)
loans and advances to employees made in the ordinary course of business
consistent with past practices of the Issuer or such Restricted Subsidiary in an
aggregate amount outstanding at any one time not to exceed $250,000 to any one
employee or $1.0 million in the aggregate; (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
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business and owing to the Issuer or any of its Restricted Subsidiaries or in
satisfaction of judgments or claims; (viii) a Person engaged in a Permitted
Business or a loan or advance by the Issuer the proceeds of which are used
solely to make an investment in a Person engaged in a Permitted Business or a
Guarantee by the Issuer of Indebtedness of any Person in which such Investment
has been made PROVIDED, HOWEVER, that no Permitted Investments may be made
pursuant to this clause (viii) to the extent the amount thereof would, when
taken together with all other Permitted Investments made pursuant to this clause
(viii), exceed $5.0 million in the aggregate (plus, to the extent not previously
reinvested, any return of capital realized on Permitted Investments made
pursuant to this clause (viii), or any release or other cancellation of any
Guarantee constituting such Permitted Investment); (ix) Persons to the extent
such Investment is received by the Issuer or any Restricted Subsidiary as
consideration for asset dispositions effected in compliance with the covenant
described under "Certain Covenants--Limitations on Sales of Assets and
Subsidiary Stock"; (x) prepayments and other credits to suppliers made in the
ordinary course of business consistent with the past practices of the Issuer and
its Restricted Subsidiaries, (xi) the Managed Affiliate Note; PROVIDED, HOWEVER,
that the aggregate principal amount thereof (including any Managed Affiliate
Notes outstanding on the Issue Date) does not exceed $20 million at any time
outstanding, (xii) loans to Unrestricted Subsidiaries; PROVIDED, HOWEVER, that
(1) no Default or Event of Default shall have occurred and be continuing at the
time of the Incurrence thereof by the relevant Unrestricted Subsidiary or would
occur as a consequence thereof and the Consolidated Unrestricted Subsidiary
Advance Leverage Ratio would not be greater than 2.00 to 1.00, (2) such advances
are senior to all other Indebtedness of the relevant Unrestricted Subsidiary
other than Capitalized Lease Obligations, mortgage financing or purchase money
obligations outstanding on the date on which such Unrestricted Subsidiary was
acquired, directly or indirectly, by the Issuer or the date such Subsidiary was
designated an Unrestricted Subsidiary (other than Indebtedness Incurred in
anticipation of, or to provide all or any portion of the funds or credit support
utilized to consummate the transaction or series of related transactions
pursuant to which such Unrestricted Subsidiary became a Subsidiary or was
otherwise acquired by the Issuer or was designated as an Unrestricted
Subsidiary) and (3) such Unrestricted Subsidiary is engaged primarily in a
Permitted Business; and (xiii) Investments in connection with pledges, deposits,
payments or performance bonds made or given in the ordinary course of business
in connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations.
"Permitted Liens" means: (i) pledges or deposits by the Issuer or any
Restricted Subsidiary under workmen's compensation laws, unemployment insurance
laws, other types of social security benefits or similar legislation, or good
faith deposits in connection with bids, tenders or contracts (other than for the
payment of Indebtedness) or leases to which the Issuer or any Restricted
Subsidiary is a party, or deposits to secure public or statutory obligations or
deposits of cash or United States government bonds to secure surety or appeal
bonds to which the Issuer or any Restricted Subsidiary is a party, or deposits
as security for contested taxes or import duties or for the payment of rent, in
each case incurred by the Issuer or any Restricted Subsidiary in the ordinary
course of business consistent with past practice; (ii) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due from the Issuer or any Restricted Subsidiary or being contested in
good faith by appropriate proceedings by the Issuer or any Restricted
Subsidiary, as the case may be, or other Liens arising out of judgments or
awards against the Issuer or any Restricted Subsidiary with respect to which the
Issuer or such Restricted Subsidiary, as the case may be, will then be
prosecuting an appeal or other proceedings for review; (iii) Liens for property
taxes or other taxes, assessments or governmental charges of the Issuer or any
Restricted Subsidiary not yet due or payable or subject to penalties for
nonpayment or which are being contested by the Issuer or such Restricted
Subsidiary, as the case may be, in good faith by appropriate proceedings; (iv)
Liens in favor of issuers of performance bonds and surety bonds issued pursuant
to clause (b)(v) under "--Certain Covenants--Limitation on Indebtedness"; (v)
survey exceptions, encumbrances, easements or, reservations of, or rights of
others for, licenses, rights-of-way, sewers, electric lines, telegraph and
telephone lines and other similar purposes or zoning or other restrictions as to
the use of real property of the Issuer or any Restricted Subsidiary incidental
to the ordinary course of conduct of the business of
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the Issuer or such Restricted Subsidiary or as to the ownership of properties of
the Issuer or any Restricted subsidiary, which, in either case, were not
incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of the Issuer or any Restricted
subsidiary; (vi) Liens to secure Indebtedness permitted under clause (b)(i)
under "--Certain Covenants--Limitation on Indebtedness"; (vii) Liens outstanding
immediately after the Issue Date as set forth on Schedule II to the Indenture
(and not otherwise permitted by clause (vi)); (viii) Liens on property, assets
or shares of stock of any Restricted Subsidiary at the time such Restricted
Subsidiary became a Subsidiary of the Issuer; PROVIDED, HOWEVER, that (A) if any
such Lien has been Incurred in anticipation of such transaction, such property,
assets or shares of stock subject to such Lien will have a fair market value at
the date of the acquisition thereof not in excess of the lesser of (1) the
aggregate purchase price paid or owed by the Issuer in connection with the
acquisition of such Restricted Subsidiary and (2) the fair market value of all
property and assets of such Restricted Subsidiary and (B) any such Lien will not
extend to any other assets owned by the Issuer or any Restricted Subsidiary;
(ix) Liens on property or assets at the time the Issuer or any Restricted
Subsidiary acquired such assets, including any acquisition by means of a merger
or consolidation with or into the Issuer or such Restricted Subsidiary;
PROVIDED, HOWEVER, that (A) if any such Lien is Incurred in anticipation of such
transaction, such property or assets subject to such Lien will have a fair
market value at the date of the acquisition thereof not in excess of the lesser
of the aggregate purchase price paid or owed by the Issuer or such Restricted
Subsidiary in connection with the acquisition thereof and of any other property
and assets acquired simultaneously therewith and (2) the fair market value of
all such property and assets acquired by the Issuer or such Restricted
Subsidiary and (B) any such Lien will not extend to any other property or assets
owned by the Issuer or any Restricted Subsidiary; (x) Liens securing
Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer
or a Wholly Owned Subsidiary; (xi) Liens to secure any extension, renewal,
refinancing, replacement or refunding (or successive extensions, renewals,
refinancings, replacements or refundings), in whole or in part, of any
Indebtedness secured by Liens referred to in any of clauses (vii), (viii) and
(ix); PROVIDED, HOWEVER, that any such Lien will be limited to all or part of
the same property or assets that secured the original Lien (plus improvements on
such property) and the aggregate principal amount of Indebtedness that is
secured by such Lien will not be increased to an amount greater than the sum of
(A) the outstanding principal amount, or, if greater, the committed amount, of
the Indebtedness described under clauses (vii), (viii) and (ix) at the time the
original Lien became a Permitted Lien under the Indenture and (B) an amount
necessary to pay any premiums, fees and other expenses Incurred by the Issuer in
connection with such refinancing, refunding, extension, renewal or replacement;
(xii) Liens on property or assets of the Issuer securing Interest Rate
Agreements and Currency Agreements, permitted under "--Certain
Covenants--Limitation on Indebtedness", so long as the related Indebtedness is
secured by a Lien on the same property securing the relevant Interest Rate
Agreement or Currency Agreement; (xiii) Liens on property or assets of the
Issuer or any Restricted Subsidiary securing Indebtedness under Sale/Leaseback
Transactions permitted under "--Certain Covenants--Limitation on Sale/Leaseback
Transactions"; PROVIDED, HOWEVER, that (A) the amount of Indebtedness Incurred
in any specific case does not, at the time such Indebtedness is Incurred, exceed
the lesser of the cost or fair market value of the property or asset subject to
such Sale/Leaseback Transaction, (B) such Lien will attach to such property or
asset upon commencement of such Sale/Leaseback Transaction and (C) no property
or asset of the Issuer or any Restricted Subsidiary (other than the property
subject to such Sale/Leaseback Transaction) are subject to any Lien securing
such Indebtedness; and (ix) Liens securing Indebtedness permitted to be secured
pursuant to the proviso to clause (ii) of paragraph (a) under "-- Certain
Covenants--Limitation on Indebtedness."
"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.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the
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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.
"Public Equity Offering," means underwritten public offerings or quotations
or placements of Capital Stock of the Issuer (other than Disqualified Stock)
which has been registered with the Commission under the Securities Act.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Issuer
that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of
any Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness;
PROVIDED, HOWEVER, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the earlier of (A) the first anniversary of the Stated Maturity
of the Notes and (B) Stated Maturity of the Indebtedness being refinanced, (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the lesser of (A) the
Average Life of the Notes and (B) the Average Life of the Indebtedness being
refinanced; and (iii) the Refinancing Indebtedness is in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to (or 101% of, in the case of a refinancing of the Notes in
connection with a Change of Control) or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced (plus the
amount of any premium required to be paid in connection therewith and reasonable
fees and expenses therewith); PROVIDED, HOWEVER, that if the Indebtedness being
refinanced is Existing Indebtedness which was a purchase money obligation,
mortgage or Capital Lease the Refinancing Indebtedness is an aggregate principal
amount that is equal to or less than the lesser of the original principal amount
of such Existing Indebtedness and the fair market value (determined on the date
of such Refinancing Indebtedness is Incurred) of the personal property securing
such Existing Indebtedness or the personal property of similar nature and
quality replacing such personal property; PROVIDED, FURTHER, that Refinancing
Indebtedness shall not include Indebtedness of a Subsidiary which refinances
Indebtedness of the Issuer.
"Related Brill Party" means (A) the spouse or immediate family member of
Alan R. Brill or (B) any trust, corporation, partnership or other entity, the
beneficiaries, shareholders, partners, members, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of Alan R. Brill
and/or such other Persons referred to in the immediately preceding clause (A).
"Restricted Subsidiary" means any Subsidiary of the Issuer other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Issuer or a Restricted Subsidiary
transfers such property to a Person and the Issuer or a Subsidiary leases it
from such Person.
"Senior Indebtedness" means all Indebtedness of the Issuer and its
Restricted Subsidiaries other than Subordinated Obligations.
"Senior Secured Indebtedness" means Indebtedness of the Issuer and its
Restricted Subsidiaries which is secured by a Lien; PROVIDED, HOWEVER, that for
purposes of the Consolidated Senior Secured Leverage Ratio the full amount of
Senior Secured Indebtedness permitted to be outstanding under clause (i) of
paragraph (b) under "--Certain Covenants--Limitation on Indebtedness" shall be
deemed to be outstanding.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
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"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Obligation" means any Indebtedness of the Issuer or a
Restricted Subsidiary (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the Notes and
the Subsidiary Guarantees pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership 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. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Issuer.
"Subsidiary Guarantee" means the Guarantee of the Notes by a Subsidiary
Guarantor.
"Subsidiary Guarantor" means each Subsidiary of the Issuer on the Issue Date
and each newly organized or acquired Restricted Subsidiary.
"Tax Allowance Amount" means, with respect to any Member, for any calendar
quarter, (i) forty percent (40%) of the excess of (a) the estimated taxable
income allocable to such Member arising from its ownership of an interest in the
Issuer for the fiscal year through such calendar quarter over (b) any losses of
the Issuer for prior fiscal years and such fiscal year that are allocable to
such Member that were not previously utilized in the calculation of Tax
Allowance Amounts for any period minus (ii) prior distributions of Tax Allowance
Amounts for such fiscal year, all as determined by the Accountants in good
faith. The amount so determined by the Accountants shall be the Tax Allowance
Amount for such period and shall be final and binding on all Members.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 365 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 365
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Issuer) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group, (v) Investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc. and (vi) Investments in mutual funds whose investment
guidelines restrict such funds' investments to those satisfying the provisions
of clauses (i) through (v) above.
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"Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Issuer or any of its Subsidiaries, the date such Indebtedness is to be
Incurred.
"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 of the
Issuer) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Issuer or any Restricted Subsidiary of the Issuer
that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED,
HOWEVER, that each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of such designation, and does not thereafter create, Incur,
issue, assume, guarantee or otherwise becomes liable with respect to any
Indebtedness other than Non-Recourse Debt and either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under "--Certain Covenants--Limitation on Restricted
Payments." The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary subject to the limitations contained in "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"Unrestricted Subsidiary Advance" means loans made by the Issuer and its
Restricted Subsidiaries to Unrestricted Subsidiaries.
"U.S. Government Obligations" 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 or redeemable at the issuer's option.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Issuer, at
least 95% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Issuer or another Wholly-Owned Subsidiary.
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DESCRIPTION OF APPRECIATION NOTES
GENERAL
The Original Appreciation Notes were issued, and the Exchange Appreciation
Notes are to be issued, under an indenture, dated as of December 30, 1997 (the
"Appreciation Note Indenture"), between the Issuer and United States Trust
Company of New York, as trustee (the "Trustee"), a copy of which is available
upon request to the Issuer. The following is a summary of certain provisions of
the Appreciation Note Indenture and the Appreciation Notes and does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Appreciation Note Indenture (including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended) and the Appreciation Notes. The
definition of certain capitalized terms used in the following summary are set
forth below under "Certain Definitions".
Principal of, and interest and premium, if any, on the Appreciation Notes
will be payable, and the Appreciation Notes may be exchanged or transferred, at
the office or agency of the Issuer in the Borough of Manhattan, The City of New
York (which initially shall be the corporate trust office of the Trustee in New
York, New York). Initially, the Trustee will act as Paying Agent and Registrar
for the Appreciation Notes. The Appreciation Notes may be presented for
registration of transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Issuer may change
any Paying Agent and Registrar without notice to holders of the Appreciation
Notes.
The Appreciation Notes will be issued only in fully registered form, without
coupons, in denominations of any integral multiple of approximately $28.57. No
service charge will be made for any registration of transfer or exchange of
Appreciation Notes, but the Issuer may require payment of a sum sufficient to
cover any transfer tax or other similar governmental charge payable in
connection therewith.
TERMS OF APPRECIATION NOTES
The Appreciation Notes will mature on December 15, 2007 (the "Maturity
Date"). Each Appreciation Note will entitle the holder thereof to receive on the
Maturity Date a cash payment of principal and interest in the amount equal to
the greater of (i) the principal amount thereof or (ii) the Specified Percentage
(as defined) of the Value (as defined) of BMC on the Maturity Date. "Specified
Percentage" of an Appreciation Note with a principal amount of $28.57 means
.0000004761904761% (5% DIVIDED BY 105,000 Units), so that the holders of all
Appreciation Notes will be entitled to receive, in the aggregate, 5% of the
Value of BMC. The "Value" of BMC on the Maturity Date means an amount equal to
the sum of (i) 12 times Media Cashflow for the then most recent four fiscal
quarters for which financial statements of BMC are available plus (ii) the cash
and Cash Equivalents of BMC and its Subsidiaries on the Maturity Date, less the
aggregate amount of Indebtedness (as defined) of BMC and its Subsidiaries on a
consolidated basis outstanding on the Maturity Date. Any Original Appreciation
Notes that remain outstanding after consummation of the Exchange Offer and any
Exchange Appreciation Notes issued in connection with the Exchange Offer will be
treated as a single class of securities under the Appreciation Note Indenture.
The Appreciation Notes will not be entitled to the benefit of any mandatory
sinking fund.
OPTIONAL REDEMPTION
Except as set forth below, the Appreciation Notes will not be redeemable at
the option of the Issuer prior to June 15, 1999. Thereafter, if an Initial
Public Offering has not occurred on or before a date set forth below, the
Appreciation Notes will be redeemable, at the Issuer's option, in whole but not
in part, on such date upon not less than 30 nor more than 60 days' prior notice
mailed by first-class mail to each holder's registered address, at a redemption
price equal to the Pro Rata Percentage of each Appreciation
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Note of the amount set forth below opposite such redemption date (which amount,
in each case, represents payment in full of all principal and interest on the
Appreciation Notes):
<TABLE>
<CAPTION>
DATE AMOUNT
- ----------------------------------------------------------------------------- ---------------
<S> <C>
June 15, 1999................................................................ $ 3.0 million
June 15, 2000................................................................ $ 8.3 million
June 15, 2001................................................................ $ 12.8 million
June 15, 2002................................................................ $ 18.0 million
June 15, 2003................................................................ $ 24.0 million
June 15, 2004................................................................ $ 31.0 million
June 15, 2005................................................................ $ 39.0 million
June 15, 2006................................................................ $ 48.0 million
June 15, 2007................................................................ $ 58.0 million
</TABLE>
"Pro Rata Percentage" of an Appreciation Note having a principal value of
$28.57 means .000009523809522.
MANDATORY REDEMPTION AT THE OPTION OF THE HOLDERS UPON THE OCCURRENCE OF CERTAIN
EVENTS
Upon the occurrence of an Initial Public Offering, a Sale of the Company or
the liquidation of the Issuer (each such event, a "Specified Event"), each
holder will have the right to require the Issuer to redeem all or any part of
such holder's Appreciation Notes at the relevant Specified Event Purchase Price
(as defined below) (which amount, in each case, represents payment in full of
all principal and interest on the Appreciation Notes).
Within 30 days following any Specified Event, unless the Issuer has mailed a
redemption notice with respect to all the outstanding Appreciation Notes in
connection with such Specified Event, the Issuer shall mail a notice to each
holder with a copy to the Trustee stating: (1) that a Specified Event has
occurred and that such holder has the right to require the Issuer to redeem such
holder's Appreciation Notes at a purchase price in cash equal to the relevant
Specified Event Purchase Price; (2) the redemption date (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed); and (3) the procedures determined by the Issuer, consistent with the
Appreciation Note Indenture, that a holder must follow in order to have its
Appreciation Notes redeemed.
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 redemption of Appreciation Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of the Appreciation Note Indenture, the
Issuer will comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations described in the Appreciation
Note Indenture by virtue thereof.
The definition of "Sale of Company" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the Issuer
and its Subsidiaries. With respect to the disposition of property or assets, the
phrase "all or substantially all" as used in the Appreciation Note Indenture
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under New York law (which is the law which
governs the Appreciation Note Indenture) and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the property or assets of a Person,
and therefore it may be unclear as to whether a Sale of the Company has occurred
and whether the Issuer is required to make an offer to redeem the Appreciation
Notes as described above.
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MANDATORY REDEMPTION AT THE OPTION OF THE HOLDERS ON SPECIFIED DATES
In addition, if an Initial Public Offering has not occurred on or before a
date set forth below, the holders may require the Issuer to redeem its
Appreciation Notes, in whole or in part, on such date at a redemption price
equal to the Pro Rata Percentage of such Appreciation Note of the amount set
forth below opposite such date (which amount, in each case, represents payment
in full of all principal and interest thereon):
<TABLE>
<CAPTION>
DATE AMOUNT
- ----------------------------------------------------------------------------- ---------------
<S> <C>
June 30, 2003................................................................ $ 24.0 million
June 30, 2004................................................................ $ 20.0 million
June 30, 2005................................................................ $ 13.0 million
</TABLE>
A holder may exercise its rights to require the redemption of the
Appreciation Notes held by such holder by mailing a notice to the Trustee on or
before a date as set forth above stating that such holder is demanding that the
Issuer redeem the Appreciation Notes and the portion of the Appreciation Notes
to be redeemed. Upon receipt of such notice the Issuer shall redeem the
Appreciation Notes for which such notice has been received by no later than the
90th day following the relevant date.
There can be no assurance that the Issuer shall have sufficient funds
available at the time of any mandatory redemption of the Appreciation Notes to
make any debt payment (including repurchases of Appreciation Notes) required
under the Appreciation Note Indenture (as well as may be required pursuant to
the other securities of the Issuer which might be outstanding at the time). The
exercise by the holders of their right to require the Issuer to redeem the
Appreciation Notes could cause a default under Senior Indebtedness of the Issuer
and its Subsidiaries.
RANKING AND SUBORDINATION
The payment of the principal on the Appreciation Notes is subordinated in
right of payment, as set forth in the Appreciation Note Indenture, to the
payment when due of all existing and future Senior Indebtedness of the Issuer,
including the Notes. As of November 30, 1997, on a pro forma basis after giving
effect to the Offering and the Transaction, the outstanding Senior Indebtedness
and Guarantor Senior Indebtedness of the Issuer and the Subsidiary Guarantors to
which the Appreciation Notes and the Guarantees thereof would have been
subordinated would have been $99.3 million. The Appreciation Note Indenture does
not contain any limitation on the amount of additional Indebtedness that the
Issuer may incur.
The Issuer may not pay the Appreciation Notes and may not otherwise
purchase, redeem or otherwise retire any Appreciation Note (collectively, "pay
the Appreciation Notes") if (i) any Designated Senior Indebtedness is not paid
when due or (ii) any other default on Designated Senior Indebtedness occurs and
the maturity of such Designated Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Designated Senior Indebtedness
has been paid in full in cash. However, the Issuer may pay the Appreciation Note
without regard to the foregoing if the Issuer and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing.
By reason of such subordination provisions contained in the Appreciation
Note Indenture, in the event of insolvency, creditors who are holders of Senior
Indebtedness (including holders of the Notes) may recover more, ratably, than
the holders of the Appreciation Notes, and creditors who are not holders of
Senior Indebtedness (including holders of the Appreciation Notes) may recover
less, ratably, than holders of Senior Indebtedness.
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SUBSIDIARY GUARANTEES
Each Subsidiary Guarantor unconditionally guarantees, jointly and severally,
to each holder and the Trustee, on a subordinated basis, the full and prompt
payment of principal of and interest on the Appreciation Notes, and of all other
obligations of the Issuer under the Appreciation Note Indenture.
The Indebtedness evidenced by each Guarantee of the Appreciation Notes will
be subordinated to Guarantor Senior Indebtedness on substantially the same basis
as the Appreciation Notes are subordinated to Senior Indebtedness. The
Appreciation Note Indenture does not contain any limitations on the amount of
additional Indebtedness that the Issuer's Subsidiaries may incur.
The obligations of each Subsidiary Guarantor under its Guarantee of the
Appreciation Notes are limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
its contribution obligations under the Appreciation Note Indenture, result in
the obligations of such Subsidiary Guarantor under its Guarantee of the
Appreciation Notes not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Subsidiary Guarantor that makes a
payment or distribution under a Guarantee of the Appreciation Notes shall be
entitled to a contribution from each other Subsidiary Guarantor in a PRO RATA
amount based on the Adjusted Net Assets of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Issuer or another Subsidiary Guarantor without limitation. Upon
the sale or disposition of a Subsidiary Guarantor (or all or substantially all
of its assets) to a Person which is not a Subsidiary Guarantor, such Subsidiary
Guarantor shall be deemed released from all its obligations under the
Appreciation Note Indenture and its Guarantee of the Appreciation Notes and such
Guarantee shall terminate; PROVIDED, HOWEVER, that any such termination shall
occur only to the extent that all obligations of such Subsidiary Guarantor under
all of its Guarantees of, and under all of its pledges of assets or other
security interests which secure any other Indebtedness of the Issuer shall also
terminate upon such release, sale or transfer.
BMC owns, directly or indirectly, 100% of the equity interests of each
Subsidiary Guarantor. Subsequent to the Issue Date, separate financial
information for the Subsidiary Guarantors will not be provided except to the
extent required by Regulation S-X under the Securities Act.
CERTAIN COVENANTS
The Appreciation Note Indenture contains certain covenants including, among
others, the following:
MERGER AND CONSOLIDATION. The Issuer shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all of its
assets to, any Person, unless: (i) the resulting, surviving or transferee Person
(the "Successor Company") shall be a corporation, partnership, trust or limited
liability company 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) shall expressly assume, by supplemental indenture, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Issuer under the Appreciation Notes and the Appreciation Note
Indenture; (ii) immediately after giving effect to such transaction, the
Successor Company shall have a Consolidated Net Worth equal or greater to the
Consolidated Net Worth of the Issuer immediately prior to such transaction;
(iii) 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 the Appreciation
Note Indenture; and (iv) there has been delivered to the Trustee an Opinion of
Counsel to the effect that holders of Appreciation Notes will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
consolidation, merger, conveyance, transfer or lease and will be subject to U.S.
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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 consolidation, merger, conveyance,
transfer or lease had not occurred.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under the Appreciation Note
Indenture, but, in the case of a lease of all or substantially all its assets,
the Issuer will not be released from the obligation to pay the principal of and
interest on the Appreciation Notes.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Appreciation Note Indenture may be
amended with the consent of the holders of a majority in principal amount of all
outstanding series of Appreciation Notes then outstanding and any past default
or compliance with any provisions may be waived with the consent of the holders
of a majority in principal amount of all outstanding series of Appreciation
Notes. However, without the consent of each holder of an outstanding
Appreciation Note affected, no amendment may, among other things, (i) reduce the
amount of Appreciation Notes whose holders must consent to an amendment, (ii)
reduce the stated rate of or extend the stated time for payment of interest on
any Appreciation Note, (iii) reduce the principal of or extend the Stated
Maturity of any Appreciation Note, (iv) reduce the premium payable upon the
redemption or repurchase of any Appreciation Note or change the time at which
any Appreciation Note may be redeemed as described above, (v) make any
Appreciation Note payable in money other than that stated in the Appreciation
Note, (vi) impair the right of any holder to receive payment of principal of and
interest on such holder's Appreciation Notes on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect to
such holder's Appreciation Notes or (vii) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions.
Without the consent of any holder, the Issuer and the Trustee may amend the
Appreciation Note Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation,
partnership, trust or limited liability company of the obligations of the Issuer
under the Appreciation Note Indenture (provided that there has been delivered to
the Trustee an Opinion of Counsel to the effect that holders of Appreciation
Notes will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such assumption and will be subject to U.S. 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 assumption had not occurred), to provide for
uncertificated Appreciation Notes in addition to or in place of certificated
Appreciation Notes (provided that the uncertificated Appreciation Notes are
issued in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Appreciation Notes are described in Section
163 (f) (2) (B) of the Code), to the Appreciation Notes, to secure the
Appreciation Notes, to add to the covenants of the Issuer for the benefit of the
holders or to surrender any right or power conferred upon the Issuer, to make
any change that does not adversely affect the rights of any holder or to comply
with any requirement of the Commission in connection with the qualification of
the Appreciation Note Indenture under the Trust Indenture Act.
The consent of the holders is not necessary under the Appreciation Note
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 Appreciation Note Indenture becomes effective,
the Issuer is required to mail to the holders a notice briefly describing such
amendment. However, the failure to give such notice to all the holders or any
defect therein, will not impair or affect the validity of the amendment.
SATISFACTION AND DISCHARGE OF THE APPRECIATION NOTE INDENTURE
The Appreciation Note Indenture will cease to be of further effect (except
as otherwise expressly provided for in the Appreciation Note Indenture) when
either (i) all outstanding Appreciation Notes have
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been delivered (other than lost, stolen or destroyed Appreciation Notes which
have been replaced) to the Trustee for cancellation or (ii) all outstanding
Appreciation Notes have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to the terms of the
Appreciation Note Indenture and the Issuer has irrevocably deposited with the
Trustee funds sufficient to pay at maturity or upon redemption all outstanding
Appreciation Notes, including interest thereon (other than lost, stolen,
mutilated or destroyed Appreciation Notes which have been replaced), and, in
either case, the Issuer has paid all other sums payable under the Appreciation
Note Indenture. The Trustee is required to acknowledge satisfaction and
discharge of the Appreciation Note Indenture on demand of the Issuer accompanied
by an Officer's Certificate and an Opinion of Counsel at the cost and expense of
the Issuer.
TRANSFER AND EXCHANGE
Upon any transfer of an Appreciation Note, the registrar may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents, and to pay any taxes and fees required by law or permitted by the
Appreciation Note Indenture. The registrar is not required to transfer or
exchange any Appreciation Notes selected for redemption nor is the registrar
required to transfer or exchange any Appreciation Notes for a period of 15 days
before a selection of Appreciation Notes to be redeemed. The registered holder
of an Appreciation Note may be treated as the owner of it for all purposes.
CONCERNING THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Appreciation Note Indenture and has been appointed by the Issuer as Registrar
and Paying Agent with regard to the Appreciation Notes. The Trustee's current
address is 114 West 47th Street, New York, New York.
The Appreciation Note Indenture contains certain limitations on the rights
of the Trustee, should it become a creditor of the Issuer, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim, as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
(as defined) it must eliminate such conflict or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Appreciation Notes issued under the Appreciation Note Indenture will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee. The Appreciation Note
Indenture provides that in case a default shall occur (which shall not be cured)
the Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs would use. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Appreciation Note Indenture at the request of any of
the holders of the Appreciation Notes issued thereunder unless they shall have
offered to the Trustee security and indemnity satisfactory to it.
GOVERNING LAW
The Appreciation Note Indenture provides that it and the Appreciation Notes
will be governed by, and construed in accordance with, the laws of the State of
New York without giving effect to applicable principles of conflicts of law to
the extent that the application of the law of another jurisdiction would be
required thereby.
CERTAIN DEFINITIONS
"Board of Directors" means, as to the Issuer (i) so long as BMC or any
successor to BMC is a limited liability company or partnership, the board of
directors of Brill Media Management, Inc. which is the manager of BMC and (ii)
at any other time the Board of Directors of the Issuer.
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"Capital Stock" of any Person means any and all shares, membership and other
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95% of their assets in securities
of the types described in clauses (i)-(v) above, (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's or S&P and (viii) Indebtedness or preferred stock issued by
Persons with a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"Consolidated EBITDA" means, for any period an amount equal to Consolidated
Net Income for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) the provision for taxes for such
period based on income or profits and any provision for taxes utilized in
computing net loss, (ii) Consolidated Interest Expense, (iii) depreciation
expense, (iv) amortization expense (including the amortization of debt issuance
costs), (v) all other non-cash items reducing Consolidated Net Income for such
period (excluding any non-cash item to the extent it represents an accrual of or
reserve for cash disbursements for any subsequent period prior to the Stated
Maturity of the Appreciation Notes or amortization of a pre-paid cash expense
that was paid in a prior period), minus (b) all non-cash items increasing
Consolidated Net Income for such period, in each case for the Issuer and its
Subsidiaries for such period determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Issuer and its Subsidiaries determined in accordance with GAAP,
PLUS, to the extent not included in such interest expense (i) interest expense
attributable to Capitalized Lease Obligations, (ii) capitalized interest, (iii)
non-cash interest expense, (iv) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (v) interest actually paid by the Issuer or any such Subsidiary under
any Guarantee of Indebtedness or other obligation of any other Person, (vi) net
payments (whether positive or negative) pursuant to Interest Rate Agreements and
(vii) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Issuer) in connection with
Indebtedness incurred by such plan or trust and less (a) to the extent included
in such interest expense, the amortization of capitalized debt issuance costs
and (b) interest income.
"Consolidated Net Income" means, for any period, the consolidated net income
(loss) of the Issuer and its consolidated Subsidiaries determined in accordance
with GAAP.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Issuer and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the
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end of the most recent fiscal quarter of the Issuer ending prior to the taking
of any action for the purpose of which the determination is being made and for
which financial statements are available (but in no event ending more than 135
days prior to the taking of such action), 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.
"Designated Senior Indebtedness" means any Senior Indebtedness in the case
of the Issuer, or Guarantor Senior Indebtedness in the case of a Subsidiary
Guarantor 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 million and is specifically
designated by the Issuer or such Subsidiary Guarantor in the instrument
evidencing or governing such Senior Indebtedness or Guarantor Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of the
Appreciation Note Indenture; PROVIDED, HOWEVER, that the Indebtedness of the
Company under the Notes, and the Subsidiary Guarantee of each Subsidiary
Guarantor under its Subsidiary Guarantee, shall always constitute Designated
Senior Indebtedness.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder, or any
successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Issuer acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Issuer delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Appreciation Note Indenture,
including those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All computations based on GAAP contained in the
Indenture shall be computed in conformity with GAAP.
"Group" means any "group" for purposes of Section 13(d) of the Exchange Act.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to a Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter issued, all
Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the Issuer and
all other Indebtedness of such Subsidiary Guarantor, including interest and fees
thereon, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is expressly provided that the obligations
of such Subsidiary Guarantor in respect of such Indebtedness are not superior in
right of payment to the obligations of such Subsidiary Guarantor under the
Guarantee of the Appreciation Notes; PROVIDED, HOWEVER, that Guarantor Senior
Indebtedness shall not include (1) any obligations of such Subsidiary Guarantor
to the Issuer or any other Subsidiary of the Issuer
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or (2) any Indebtedness, Guarantee or obligation of such Subsidiary Guarantor
that is expressly subordinate or junior in right of payment to any other
Indebtedness, Guarantee or obligation of such Subsidiary Guarantor, including
any Guarantor Subordinated Indebtedness of such Subsidiary Guarantor.
"Guarantor Subordinated Indebtedness" means, with respect to a Subsidiary
Guarantor, the obligations of such Subsidiary Guarantor under the Guarantee of
the Appreciation Notes and any other Indebtedness of such Subsidiary Guarantor
that specifically provides that such Indebtedness is to rank PARI PASSU in right
of payment with the obligations of such Subsidiary Guarantor under the Guarantee
of the Appreciation Notes.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v) ) entered into in the
ordinary course of business of such Person to the extent that such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such Person
of a demand for reimbursement following payment on the letter of credit), (iv)
all obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except (x) trade payables and accrued expenses (including
accrued management fees under the Administrative Managment Agreements) incurred
in the ordinary course of business and (y) contingent or "earnout" payment
obligations in respect of any business acquired by the Issuer or any Restricted
Subsidiary), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, (vii) all Indebtedness of other Persons to the extent
Guaranteed by such Person, (viii) the amount of all obligations of such Person
with respect to the redemption, repayment or other and (viii) to the extent not
otherwise included in this definition, obligations under Currency Agreements and
Interest Rate Agreements.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Initial Public Offering" means an offering or offerings of Capital Stock of
the Issuer under one or more effective registration statements under the
Securities Act such that, after giving effect thereto, such offerings result in
aggregate cash proceeds being received by the Issuer and the persons selling
such Capital Stock of at least $25 million before deduction of underwriter's
discounts and other expenses, as a result of such Capital Stock is listed or
admitted to trading on a national securities exchange or quoted by NASDAQ.
"Issue Date" means the date on which the Appreciation Notes are originally
issued.
"Managed Affiliate," solely for purposes of this Description of Appreciation
Notes, means a Person at least 90% of the Capital Stock of which is owned,
directly or indirectly, by Alan R. Brill.
"Managed Affiliate Notes" mean any promissory notes of a Managed Affiliate,
issued to the Issuer or a Subsidiary.
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"Media Cashflow" for any period means for any Person an amount equal to
Consolidated EBITDA for such period plus interest income received in respect of
the Managed Affiliate Notes during such period and the following to the extent
deducted in calculating such Consolidated EBITDA (i) management fees charged by
BMCLP under the Administrative Management Agreements, (ii) expenses accruing
under Performance Compensation Agreements , (iii) consulting fees payable in
connection with acquisitions and (iv) fees paid under Time Brokerage Agreements.
"Membership Interests" means ownership interests in BMC.
"Officer" means the Chairman of the Board, the Vice-Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the President, any
Vice-President, the Treasurer or the Secretary of the Issuer.
"Officer's Certificate" means a certificate signed by two Officers of the
Issuer at least one of whom shall be the principal executive, financial or
accounting officer of the Issuer.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to the Trustee, from legal counsel who is acceptable to the Trustee.
"Paying Agent" means United States Trust Company of New York.
"Performance Compensation Agreement" means any agreements between the Issuer
or any Restricted Subsidiary and any executive officer of such Subsidiary
pursuant to which such Subsidiary provides deferred compensation to such officer
by crediting amounts (as determined under a formula set forth in such agreement)
to an identified account for the benefit of such executive officer.
"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.
"Related Brill Party" means (A) the spouse or immediate family member of
Alan R. Brill or (B) any trust, corporation, partnership or other entity, the
beneficiaries, shareholders, partners, members, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of Alan R. Brill
and/or such other Persons referred to in the immediately preceding clause (A).
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Issuer or a Subsidiary transfers such
property to a Person and the Issuer or a Subsidiary leases it from such Person.
"Sale of the Company" means (i) any sale, lease, exchange or other transfer
(in one transaction or in a series of transactions) of all or substantially all
of the assets of the Issuer or the Issuer and its Subsidiaries on a consolidated
basis or (ii) the acquisition by any Person or Group (other than Alan R. Brill
or any Related Brill Party) of the power, directly or indirectly, to vote or
direct the voting of securities having more than 50% of the ordinary voting
power for the election of directors of the Issuer, or any direct or indirect
holding company thereof.
"Senior Indebtedness" in the case of the Appreciation Notes means, whether
outstanding on the Issue Date or thereafter issued, all obligations under the
Notes and all other Indebtedness of the Issuer, including interest and fees
thereon, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that the obligations in respect
of such Indebtedness are not superior in right of payment to the Appreciation
Notes; PROVIDED, HOWEVER, that Senior Indebtedness will not include any
obligation of the Issuer to any Subsidiary or any Subordinated Obligations.
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"Specified Event Purchase Price" means for an Appreciation Note a redemption
price equal to (i) in the case of a redemption with respect to an Initial Public
Offering, the price at which Membership Interests are sold in such Initial
Public Offering (less underwriting discounts and commissions, if any), which
represent a percentage interest in BMC equal to the Specified Percentage of such
Appreciation Note, (ii) in the case of a Sale of the Company as defined in
clause (i) of the definition thereof, the amount equal to the Specified
Percentage of such Appreciation Note of the sum of the aggregate fair market
value of all consideration received by the Issuer and its Subsidiaries, net of
any debt repaid therewith, net of ordinary and customary transaction expenses of
the related transfer and the fair market value of the Issuer as determined after
giving effect to such sale, and (iii) in the case of a redemption with respect
to Sale of the Company defined in clause (ii) of the definition thereof, the
price at which Membership Interests are sold in such Sale of the Company or in
the transaction which resulted in such Sale of the Company, which represent a
percentage interest in BMC equal to the Specified Percentage of such
Appreciation Notes, and (iv) in the case of a redemption with respect to a
liquidation of the Company, an amount equal to the fair market value of the
distribution received by Membership Interests in an amount equal to the
Specified Percentage of such Appreciation Note in connection with such
liquidation.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Obligations" means, with respect to the Issuer or any
Subsidiary Guarantor, any Indebtedness of the Issuer or such Subsidiary
Guarantor, as the case may be (whether outstanding on the Issue Date or
thereafter incurred) which is expressly subordinate or junior in right of
payment to the Appreciation Notes or such Subsidiary Guarantor's Guarantee of
the Appreciation Notes, as the case may be, in each case pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership 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. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Issuer.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Carter, Ledyard & Milburn, the following summary describes
the material United States federal income tax consequences of the ownership and
disposition of the Securities. This summary is based on the Internal Revenue
Code of 1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed United States
Treasury Regulations, changes to any of which subsequent to the date of this
Prospectus may affect the tax consequences described herein (possibly
retroactively). This summary discusses only Securities held as capital assets
within the meaning of Section 1221 of the Code. It does not discuss all of the
tax consequences that may be relevant to a holder in light of its particular
circumstances or to holders subject to special rules such as certain financial
institutions, insurance companies, tax-exempt organizations, dealers or traders
in securities or currencies, holders who hold Securities as a position in a
"straddle" or as part of a "hedging," "conversion" or "integrated" transaction,
holders whose functional currency is other than the U.S. dollar or holders that
are not U.S. Holders (as defined below). Persons considering the Exchange Offer
should consult their own tax advisors with regard to the application of the
United States federal income tax laws to their particular situations as well as
any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a holder of a Note or
Appreciation Note, as the case may be, that for United States federal income tax
purposes is (i) a citizen or resident of the United States, (ii) a corporation
or partnership created or organized in or under the laws of the United States or
of any State thereof (including the District of Columbia), (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source or (iv) a trust if (A) a U.S. court is able to exercise primary
supervision over the trust's administration and (B) one or more United States
persons have the authority to control all of the trust's substantial decisions.
Notwithstanding the preceding sentence, to the extent provided in United States
Treasury Regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such dates, that elect to continue to
be treated as United States persons also will be U.S. Holders.
ALLOCATION OF THE ISSUE PRICE BETWEEN A NOTE AND AN APPRECIATION NOTE
The Original Notes and Original Appreciation Notes initially were issued
together as units (the "Units"). The "issue price" of a Unit for United States
federal income tax purposes was $922. the Company intends to treat $899.63 of
the issue price of a Unit as allocable to the Note (which amount the Company
will therefore treat as its "issue price" for United States federal income tax
purposes) and $22.37 as allocable to the Appreciation Note (which amount the
Company will therefore treat as its "issue price" for United States federal
income tax purposes). The Company intends to file information returns with the
Internal Revenue Service (the "IRS") based on such allocation.
The Company's allocation of the issue price is binding on a U.S. Holder for
United States federal income tax purposes unless the holder discloses the use of
a different allocation in its United States federal income tax return for the
year in which the Unit was acquired. However, the Company's allocation is not
binding on the IRS, and there can be no assurance that the IRS will not
challenge such allocation.
EXCHANGE OFFER
The exchange of Original Securities for Exchange Securities by a U.S. Holder
pursuant to the Exchange Offer will not constitute a taxable exchange for United
States federal income tax purposes. A U.S. Holder will not recognize gain or
loss upon the receipt of an Exchange Security pursuant to the Exchange Offer and
should be required to continue to include interest on the Exchange Security in
gross income for United States federal income tax purposes in the manner and to
the extent described below. A U.S. Holder's holding period for an Exchange will
include the holding period for the original note
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exchanged pursuant to the Exchange Offer and such holder's adjusted basis in an
Exchange Security will be the same as such holder's adjusted basis in such
Original Security.
ORIGINAL ISSUE DISCOUNT
BMC agrees, and each holder of an Appreciation Note by acceptance of an
Appreciation Note will agree, to treat the Appreciation Notes as indebtedness
for all United States federal income tax purposes and the following discussion
assumes that the classification of the Appreciation Notes as indebtedness will
be respected for United States federal income tax purposes. Due to significant
legal and factual uncertainties, Carter, Ledyard & Milburn have not opined as to
such classification. See "--Potential Classification as Membership Interests."
Solely for purposes of the rules regarding original issue discount ("OID"),
as such term is defined in the Internal Revenue Code of 1986, as amended, and
the U.S. Treasury Regulations issued thereunder, the Notes and the Appreciation
Notes will likely be aggregated and treated as a single debt instrument (the
"Aggregated Note"). For all other purposes under the Code, the Notes and the
Appreciation Notes will be treated as separate instruments.
The Aggregated Note will be considered to be issued with OID. As a result, a
U.S. Holder generally will be required to include in gross income (as interest)
the sum of the "daily portions" of OID on such Aggregated Note calculated under
a constant yield method for all days during the taxable year that the U.S.
Holder owns such Note. In addition, a U.S. Holder will be required to include
"qualified stated interest" (defined below) on such Aggregated Note in gross
income (as interest) under such U.S. Holder's regular method of tax accounting.
The amount of OID on the Aggregated Note allocable to an accrual period
generally is determined by multiplying the "adjusted issue price" (as defined
below) of such Note at the beginning of the accrual period by the yield to
maturity of such Note (adjusting the yield to take into account the length of
the particular accrual period) and subtracting from that product the amount
payable as qualified stated interest during such accrual period. Generally, an
accrual period is any period elected by a U.S. Holder, provided that each
accrual period is no longer than one year and that each interest payment date is
the first or last day of the accrual period. The "adjusted issue price" of the
Aggregated Note at the beginning of any accrual period will be the sum of its
issue price and the amount of OID allocable to all prior accrual periods,
reduced by the amount of all payments other than qualified stated interest
payments made with respect to such Note in all prior accrual periods. The "issue
price" of the Aggregated Note for this purpose generally is the first price at
which a substantial amount of the Units are sold to the public (excluding bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). "Qualified stated interest"
generally is stated interest that is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually at a single fixed
rate during the entire term of the debt instrument. The "stated redemption price
at maturity" of the Aggregated Note will be the sum of all payments provided for
under such Note other than qualified stated interest payments.
Accordingly, a U.S. Holder will be required to include in gross income (as
interest), in the manner set forth above, (i) qualified stated interest payments
on the Aggregated Note and (ii) OID accruing on such Note. Stated interest on
the Aggregated Note should be treated as qualified stated interest for United
States federal income tax purposes to the extent of 7.5% per annum on the Note
("QSI"). The total amount of OID on the Aggregated Note will equal the total of
(i) the amount by which the issue price of the Note is less than the principal
amount thereof and (ii) the amount by which stated interest payments payable
under the Aggregated Note exceed QSI. BMC believes that it is significantly more
likely than not that the call option on the Appreciation Notes will be exercised
on June 15, 1999. Accordingly, the yield to maturity of the Aggregated Note will
be determined as if such option were exercised on such date, thus ignoring
possible payments in excess of $3 million. If such call is not exercised, solely
for purposes of the OID rules, the Appreciation Notes would be treated as
retired and then reissued on such date at the adjusted issue price thereof and
the amount of OID on the Aggregated Note would increase substantially.
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Moreover, due to the interaction of the put and call provisions, if an
Appreciation Note remains outstanding after June 15, 2002, a deemed disposition
of such Note could occur for U.S. federal income tax purposes.
A U.S. Holder's tax basis in a Note will be increased by the amount of any
OID included in the U.S. Holder's gross income with respect to such Note under
the rules discussed above and decreased by the amount of any payment with
respect to such Note other than qualified stated interest payments.
While each U.S. Holder will be required to accrue OID income under a
constant yield method, as described above, a U.S. Holder may also elect to
include in gross income all income that accrues on the Aggregated Note
(including stated interest and OID) under a constant yield method.
It is possible that the Internal Revenue Service (the "IRS") could assert
that the Additional Interest which BMC would be obligated to pay if the Exchange
Offer Registration Statement is not filed or declared effective within the time
periods set forth herein (or certain other actions are not taken) (as described
above under "Exchange Offer and Registration Rights") are "contingent payments"
for United States federal income tax purposes. If so treated, the Aggregated
Note would be treated as a contingent payment debt instrument and certain
adverse United States federal income tax consequences could result. However, the
United States Treasury Regulations issued by the IRS regarding debt instruments
that provide for one or more contingent payments provide that, for purposes of
determining whether a debt instrument is a contingent payment debt instrument,
remote or incidental contingencies are ignored. BMC believes that the
possibility of the payment of Additional Interest is remote and, accordingly,
does not intend to treat the Aggregated Note as a contingent payment debt
instrument.
BMC does not intend to treat the possibility of an optional or provisional
redemption or repurchase of the Notes or the Appreciation Notes as giving rise
to any additional accrual of OID or recognition of ordinary income upon
redemption, sale of exchange.
SALE, EXCHANGE OR RETIREMENT
Subject to the discussion of the Exchange Offer below, upon the sale,
exchange or retirement of a Note or an Appreciation Note (other than a
redemption of an Appreciation Note by BMC), a U.S. Holder would recognize gain
or loss, if any, equal to the difference between the amount realized on the
sale, exchange or retirement and the holder's adjusted tax basis in such Note.
Gain or loss recognized on the sale, exchange or retirement of such a Note will
generally be capital gain or loss. In the case of a noncorporate U.S. Holder,
the maximum marginal United States federal income tax rate applicable to such
gain will be lower than the maximum marginal United States federal income tax
rate applicable to ordinary income if such U.S. Holder's holding period for such
Notes exceeds one year and will be further reduced if such Notes were held for
more than 18 months. The use of capital losses by a U.S. Holder may be limited.
POTENTIAL CLASSIFICATION AS EQUITY INTERESTS
The IRS may assert that an Appreciation Note represents an equity interest
in BMC. In such case, a U.S. Holder of an Appreciation Note would be required to
include in gross income such U.S. Holder's distributive share of income, gain,
loss or deduction of BMC. Any amount so included in such U.S. Holder's gross
income will increase its adjusted tax basis in its equity interest and any
amount distributed to such U.S. Holder will reduce its adjusted tax basis.
Alternatively, payments under an Appreciation Note may be treated as a
"guaranteed payment" within the meaning of Section 707(c) of the Code. A member
receiving a "guaranteed payment" must include in gross income as ordinary income
the amount of such payment. U.S. Holders should consult their tax advisors
regarding the complex rules addressing United States federal income taxation
regarding interests in a partnership.
137
<PAGE>
Holders of Appreciation Notes that are tax-exempt entities should note that
if the Appreciation Notes are treated as an equity interest in BMC for United
States federal income tax purposes that, as holders of a membership interest,
they may be subject to United States federal income tax on their distributive
share of BMC's income due to the application of Section 512 of the Code.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A 31% backup withholding tax and information reporting requirements apply to
certain payments of principal of, and premium, if any, and interest on, a
security and to the proceeds of the sale or redemption of an obligation, to
certain non-corporate U.S. Holders. Backup withholding will apply only if a U.S.
Holder (other than an exempt recipient, such as a corporation) (i) fails to
furnish its Taxpayer Identification Number ("TIN") which, in the case of an
individual, would be his or her Social Security number, (ii) furnishes an
incorrect TIN, (iii) is notified by the IRS that is has failed to properly
report payments of interest and dividends or (iv) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN
and has not been notified by the IRS that it is subject to backup withholding.
The amounts withheld under the backup withholding rules are not an additional
tax and may be refunded, or credited against the U.S. Holder's United States
federal income tax liability provided that the required information is furnished
to the IRS.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. HOLDERS OF
ORIGINAL SECURITIES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO SPECIFIC
CONSEQUENCES TO SUCH PURCHASER OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
SECURITIES INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Securities 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 Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange
Securities received in exchange for Original Securities where such Original
Securities were acquired as a result of market-making activities or other
trading activities. The Issuer has agreed that, for a period of 180 days after
consummation of the Exchange Offer, it will make this Prospectus, as amended or
supplemented, available to any Participating Broker-Dealer for use in connection
with any such resale. In addition, for a period of 90 days after the date of
this Prospectus, all dealers effecting transactions in the Exchange Securities
may be required to deliver a prospectus.
The Issuer will not receive any proceeds from any sales of Exchange
Securities by Participating Broker-Dealers. Exchange Securities received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the Exchange Securities or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-Dealer
and/or the purchasers of any such Exchange Securities. Any Participating
Broker-Dealer that resells the Exchange Securities 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 Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Exchange Securities and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letters of Transmittal state that, by acknowledging that it
will deliver and by delivering a prospectus, a
138
<PAGE>
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuer will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such documents
in the Letters of Transmittal.
BOOK-ENTRY; DELIVERY AND FORM
The Original Securities were each issued in part as single, permanent global
certificates in definitive, fully registered form (the "Original Global
Securities") and in part in registered certificated form ("Certificated
Securities"). Except for Exchange Securities issued to Non-Global Purchasers (as
defined below), the Exchange Securities will each initially be issued in the
form of one or more global certificates (collectively, the "Exchange Global
Securities"). The Original Global Securities were deposited on the date of the
closing of the Offering, and the Exchange Global Securities will be deposited on
the date of closing of the Exchange Offer with, or on behalf of, the Depository
and registered in the name of a nominee of DTC.
Securities (i) originally purchased by or transferred to foreign purchasers
or Accredited Investors who are not QIBs or (ii) held by QIBs who elect to take
physical delivery of their certificates instead of holding their interest
through Global Securities (and which are thus ineligible to trade through DTC)
(collectively referred to herein as the "Non-Global Purchasers") will be issued
as Certificated Securities. Upon the transfer to a QIB of any Certificated
Security initially issued to a Non-Global Purchaser, such Certificated Security
will, unless the transferee requests otherwise or such Global Security has
previously been exchanged in whole for Certificated Securities, be exchanged for
an interest in such Global Security. "Global Securities" means the Original
Global Securities or the Exchange Global Securities, as the case may be.
THE GLOBAL SECURITIES
The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Securities, DTC or its custodian will credit, on its
internal system, the principal amount of Notes or Appreciation Notes, as the
case may be, of the individual beneficial interest represented by such Global
Security to the respective accounts for persons who have accounts with DTC and
(ii) ownership of beneficial interests in the Global Securities will be shown
on, and the transfer of such ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of persons who have
accounts with DTC ("Participants")) and the records of Participants (with
respect to interests of persons other than Participants). Ownership of
beneficial interests in the Global Securities will be limited to Participants or
persons who hold interests through Participants. QIBs may hold their interests
in the Global Securities directly through DTC, if they are Participants in such
system, or indirectly through organizations which are Participants in such
system.
So long as DTC or its nominee is the registered owner or holder of any of
the Global Securities, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Note or Appreciation Note represented
by the applicable Global Security for all purposes under the Indenture or
Appreciation Note Indenture, as the case may be. No beneficial owner of an
interest in the Global Securities will be able to transfer that interest except
in accordance with DTC's procedures, in addition to those provided for under the
Indenture or Appreciation Note Indenture, as the case may be.
Payments on the Global Securities will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. None of the Company, the Trustee
or the Transfer Agent will 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 Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interest.
139
<PAGE>
The Company expects that DTC or its nominee, upon receipt of any payment in
respect of a Global Security, will credit Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
applicable Global Security 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 Securities held through such Participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell such Security to persons in states which require physical
delivery of Certificated Securities, or to pledge such securities, such holder
must transfer its interest in the applicable Global Security in accordance with
the normal procedures of DTC.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Securities (including the presentation of the Securities
for exchange as described below) only at the direction of one or more
Participants to whose account the DTC interests in the Global Securities are
credited and only in respect of such portion of the Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global
Securities representing Notes for Certificated Securities, which it will
distribute to its Participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Securities among Participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Initial Purchaser or any
other person will have any responsibility for the performance by DTC or its
Participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as depositary for the
Global Securities and a successor depositary is not appointed by the Company
within 90 days, Certificated Securities will be issued in exchange for the
Global Securities.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes and the Exchange
Appreciation Notes offered hereby, including federal income tax consequences,
will be passed upon for the Issuer by Carter, Ledyard & Milburn, New York, New
York. As to matters of Virginia law, Carter, Ledyard & Milburn will rely upon
the opinion of Thompson & McMullan, P.C., Richmond, Virginia.
140
<PAGE>
EXPERTS
The balance sheet of BMC as of November 30, 1997 and the combined financial
statements of The Radio and Newspaper Businesses of Alan R. Brill at February
28, 1997 and February 29, 1996, and for each of the three years in the period
ended February 28, 1997, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Issuer has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Exchange Securities
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made. Statements contained in this Prospectus as to the contents of any
contract, agreement or any other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to such exhibit
to the Registration Statement for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
The Registration Statement can be inspected and copied at the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at Seven World Trade Center,
Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of the Registration Statement can be obtained
from the Public Reference Section of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20459, at prescribed rates. The Issuer is filing
the Registration Statement with the Commission electronically. The Commission
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of that Web site is http://www.sec.gov.
The Issuer intends, and is required by the terms of the Indenture and the
Appreciation Note Indenture as long as the Securities are outstanding to furnish
the holders of the Exchange Notes and Exchange Appreciation Notes, respectively,
with annual reports containing consolidated financial statements audited by its
independent certified public accountants and with quarterly reports containing
unaudited condensed consolidated financial statements for each of the first
three quarters of each fiscal year.
141
<PAGE>
BRILL MEDIA COMPANY, LLC
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
BRILL MEDIA COMPANY, LLC
FINANCIAL STATEMENTS--NOVEMBER 30, 1997
Report of Independent Auditors............................................................................. F-2
Balance Sheet.............................................................................................. F-3
Notes to Balance Sheet..................................................................................... F-4
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
CONDENSED COMBINED FINANCIAL STATEMENTS--NOVEMBER 30, 1996 AND 1997 (UNAUDITED)
Condensed Combined Statements of Financial Position (February 28 and November 30, 1997).................... F-5
Condensed Combined Statements of Operations................................................................ F-6
Condensed Combined Statement of Stockholder's and Members' Deficiency...................................... F-7
Condensed Combined Statements of Cash Flows................................................................ F-8
Notes to Condensed Combined Financial Statements........................................................... F-9
COMBINED FINANCIAL STATEMENTS--FEBRUARY 28, 1995, FEBRUARY 29, 1996 AND FEBRUARY 28, 1997
Report of Independent Auditors............................................................................. F-11
Combined Statements of Financial Position.................................................................. F-12
Combined Statements of Operations.......................................................................... F-13
Combined Statements of Stockholder's and Members' Deficiency............................................... F-14
Combined Statements of Cash Flows.......................................................................... F-15
Notes to Combined Financial Statements..................................................................... F-16
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND MEMBERS
BRILL MEDIA COMPANY, LLC
We have audited the accompanying balance sheet of Brill Media Company, LLC
(the Company), as of November 30, 1997. This balance sheet is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Company at November 30, 1997,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 16, 1998
F-2
<PAGE>
BRILL MEDIA COMPANY, LLC
BALANCE SHEET
NOVEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Total Assets....................................................................... $ --
---------
---------
LIABILITIES AND MEMBERS' EQUITY
Members' equity.................................................................... $ 1,000
Notes receivable from members (Note 2)............................................. (1,000)
---------
Total Liabilities and Members' Equity.............................................. $ --
---------
---------
</TABLE>
See accompanying notes.
F-3
<PAGE>
BRILL MEDIA COMPANY, LLC
NOTES TO BALANCE SHEET
NOVEMBER 30, 1997
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
FORMATION AND OWNERSHIP
Brill Media Company, LLC (the Company) was formed November 5, 1997 to effect
the transactions described in Note 3. Through November 30, 1997 the Company had
no operations.
The Company's members are BH One, LLC and BH Two, LLC, which are both
indirectly wholly owned by Alan R. Brill.
ACCOUNTING PERIOD
The Company's fiscal year is the last day of February.
2. NOTE RECEIVABLE
In conjunction with the original issuance of the membership interests, notes
due from the original members for $1,000 in total were issued and have been
presented as a reduction to members' equity.
3. SUBSEQUENT EVENTS
Effective December 30, 1997, certain radio and newspaper businesses of Alan
R. Brill were contributed, at historical cost, to a newly formed limited
liability company, BMC Holdings, LLC, which is a wholly-owned subsidiary of the
Company.
F-4
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
CONDENSED COMBINED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
FEBRUARY 28,
1997 NOVEMBER 30, 1997
---------------- -----------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 775,363 $ 109,155
Accounts receivable, net.................................................. 3,165,668 4,026,176
Inventories............................................................... 323,483 483,374
Other current assets...................................................... 208,598 412,553
---------------- -----------------
Total current assets........................................................ 4,473,112 5,031,258
Notes receivable from managed affiliates.................................... 412,007 15,423,339
Property and equipment...................................................... 16,398,115 17,383,715
Less: Accumulated depreciation.............................................. 7,831,300 8,561,054
---------------- -----------------
Net property and equipment.................................................. 8,566,815 8,822,661
Goodwill and FCC licenses, net.............................................. 5,407,598 6,670,508
Covenants not to compete, net............................................... 284,414 3,650,786
Other assets, net........................................................... 1,891,090 1,852,769
Other....................................................................... 271,553 223,349
---------------- -----------------
7,854,655 12,397,412
Due from affiliates......................................................... 5,135,648 --
---------------- -----------------
$ 26,442,237 $ 41,674,670
---------------- -----------------
---------------- -----------------
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Short-term note........................................................... $ 500,000 $ 500,000
Amounts payable to stockholder and affiliates............................. 378,637 110,245
Accounts payable.......................................................... 701,826 1,199,183
Accrued expenses.......................................................... 996,319 617,254
Current maturities of long-term obligations............................... 882,439 745,855
---------------- -----------------
Total current liabilities................................................... 3,459,221 3,172,537
Long-term obligations....................................................... 49,592,989 80,360,378
Capital deficiency:
Capital................................................................... 4,960 7,770
Additional paid-in capital................................................ 15,984,309 1,792,852
Accumulated deficit....................................................... (42,599,242) (43,658,867)
---------------- -----------------
Net capital deficiency...................................................... (26,609,973) (41,858,245)
---------------- -----------------
$ 26,442,237 $ 41,674,670
---------------- -----------------
---------------- -----------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
NOVEMBER 30
----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Revenues........................................................................... $ 20,941,200 $ 22,975,007
Operating expenses:
Operating departments............................................................ 14,641,072 15,685,093
Incentive plan................................................................... 470,975 545,000
Management fees.................................................................. 1,502,202 1,598,431
Time brokerage agreement fee, net................................................ (66,500) 36,000
Consulting....................................................................... 83,661 180,994
Depreciation..................................................................... 738,159 772,720
Amortization..................................................................... 283,876 525,165
------------- -------------
17,653,445 19,343,403
------------- -------------
Operating income................................................................... 3,287,755 3,631,604
Other income (expense):
Interest--managed affiliates..................................................... -- 1,220,225
Interest--stockholder and affiliates, net........................................ 153,864 193,318
Interest--other, net............................................................. (5,303,735) (7,450,455)
Amortization of deferred financing costs......................................... (415,487) (481,824)
Gain (loss) on sale of assets, net............................................... 1,066,215 (6,592)
Other, net....................................................................... (48,145) (44,808)
------------- -------------
(4,547,288) (6,570,136)
------------- -------------
Loss before income taxes........................................................... (1,259,533) (2,938,532)
Income tax provision............................................................... 121,018 102,750
------------- -------------
Net loss........................................................................... $ (1,380,551) $ (3,041,282)
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
CONDENSED COMBINED STATEMENT OF STOCKHOLDER'S AND MEMBERS' DEFICIENCY
(UNAUDITED)
NINE MONTHS ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ADDITIONAL NET
PAID-IN ACCUMULATED CAPITAL
CAPITAL CAPITAL DEFICIT DEFICIENCY
--------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at February 28, 1997........................... $ 4,960 $ 15,984,309 $ (42,599,242) $ (26,609,973)
Capital contributions.................................. 3,010 -- -- 3,010
Net loss............................................... -- -- (3,041,282) (3,041,282)
Liquidation of combined companies...................... (200) (14,191,457) 14,191,657 --
Dividends.............................................. -- -- (12,210,000) (12,210,000)
--------- -------------- -------------- --------------
Balance at November 30, 1997........................... $ 7,770 $ 1,792,852 $ (43,658,867) $ (41,858,245)
--------- -------------- -------------- --------------
--------- -------------- -------------- --------------
</TABLE>
See accompanying notes.
F-7
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
NOVEMBER 30
-----------------------------
1996 1997
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss........................................................................... $ (1,380,551) $ (3,041,282)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization.................................................. 1,437,522 1,779,709
Management fees accrual........................................................ (844,474) 553,933
Affiliate interest accrual..................................................... (142,289) (198,235)
Additional interest accrual.................................................... 1,276,115 2,020,592
Incentive plan accrual......................................................... 470,975 545,000
(Gain) loss on sale of assets, net............................................. (1,066,215) 6,592
Changes in operating assets and liabilities:
Accounts receivable............................................................ (664,544) (720,295)
Other current assets........................................................... 56,548 (344,196)
Accounts payable............................................................... (178,857) 445,010
Other accrued expenses......................................................... (464,462) (392,971)
------------- --------------
Net cash provided by (used in) operating activities................................ (1,500,232) 653,857
INVESTING ACTIVITIES
Purchase of property and equipment................................................. (543,423) (609,885)
Purchase of newspaper, net of cash acquired........................................ (17,222) (899,642)
Proceeds from sale of radio station................................................ 1,917,544 --
Proceeds from sale of assets....................................................... 12,190 30,415
Payment for non-competition agreement.............................................. -- (3,000,000)
Increase in other assets........................................................... (428,594) (127,295)
Loans to managed affiliates........................................................ -- (14,585,868)
Decrease in amounts due from affiliates............................................ -- 4,157,453
------------- --------------
Net cash provided by (used in) investing activities................................ 940,495 (15,034,822)
FINANCING ACTIVITIES
Increase (decrease) in amounts due to stockholder and affiliates................... (143,494) 353,108
Increase in deferred financing costs............................................... (304,077) (518,025)
Principal payments on long-term obligations........................................ (614,203) (695,324)
Proceeds from long-term borrowings................................................. 113,890 26,781,988
Capital contributions.............................................................. 200 3,010
Distributions...................................................................... -- (12,210,000)
------------- --------------
Net cash provided by (used in) financing activities................................ (947,684) 13,714,757
------------- --------------
Net decrease in cash and cash equivalents.......................................... (1,507,421) (666,208)
Cash and cash equivalents at beginning of period................................... 2,074,739 775,363
------------- --------------
Cash and cash equivalents at end of period......................................... $ 567,318 $ 109,155
------------- --------------
------------- --------------
Supplemental disclosures of cash flow information:
Interest paid.................................................................... $ 2,665,156 $ 5,363,589
Income taxes paid................................................................ 40,018 97,800
</TABLE>
See accompanying notes.
F-8
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed combined financial statements as of November 30,
1996 and 1997, and for the periods then ended are unaudited and include the
accounts of the following radio and newspaper businesses (collectively referred
to herein as the Company) which are owned directly or indirectly by Alan R.
Brill (Stockholder). The radio businesses include: Brill Radio, Inc. and its
subsidiary, Reading Radio, Inc.; Northland Broadcasting, Inc.; Northland
Broadcasting, LLC; Northland Holdings, LLC; NB II, Inc.; Fargo-Moorhead Radio,
Inc.; Central Missouri Broadcasting, Inc.; CMB II, Inc.; Northern Colorado
Radio, Inc.; NCR II, Inc.; Northern Colorado Holdings, LLC; NCH II, LLC; NCR
III, LLC; and Tri-State Broadcasting, Inc. The newspaper businesses
(collectively referred to herein as News) include St. Johns Newspapers, Inc.;
Huron P.S., LLC; Huron Newspapers, LLC; Huron Holdings, LLC; Brill Newspapers,
Inc., and its subsidiaries, which include CMN Holding, Inc., Central Michigan
Distribution Co., L.P., and Central Michigan Newspapers, Inc. and its
subsidiaries which include Cadillac Newspapers, Inc.; CMN Associated
Publications, Inc.; Gladwin Newspapers, Inc.; Midland Buyer's Guide, Inc.;
Central Michigan Distribution Co., Inc.; and Graph Ads Printing, Inc. All
significant intercompany balances and transactions have been eliminated in
combination.
These statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. These statements should
be read in conjunction with the Company's audited combined financial statements
for the year ended February 28, 1997, and the notes therein. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of the Company's
management, the condensed combined financial statements for the unaudited
interim periods presented include all adjustments of a normal recurring nature
necessary to fairly present the results of such interim periods and the
financial position as of the end of said periods. Results for such interim
periods are not necessarily indicative of the results for the respective entire
years.
2. SUBSEQUENT EVENTS
On December 30, 1997, Brill Media Company, LLC (BMC) and Brill Media
Management, Inc. issued $105,000,000 of 12% Senior Notes (Senior Notes) due in
2007 and $3,000,000 of Appreciation Notes (Appreciation Notes) due in 2007. The
Senior Notes bear cash interest, payable semiannually, at a rate of 7 1/2%
through December 15, 1999, and at 12% after such date until maturity. The
Appreciation Notes entitle the holder to a cash payment, at maturity, equal to
the principal amount plus the amount by which the Specified Percentage, as
defined, of the Value, as defined, of BMC at maturity, exceeds the principal
amount. The Specified Percentage is approximately 5% and the Value of BMC is
equal to 12 times Media Cashflow, as defined, for the most recent four fiscal
quarters plus the cash and cash equivalents less the aggregate amount of
Indebtedness, as defined, of BMC and its subsidiaries.
In conjunction with the issuance of the Senior Notes and the Appreciation
Notes, the radio and newspaper businesses were contributed, at historical cost,
to a newly formed limited liability company, BMC Holdings, LLC (Holdings), which
is a wholly owned subsidiary of another newly formed limited liability company,
BMC. BMC is indirectly owned by the Stockholder. BMC and Holdings were formed
with minimal capital contributions and had no operations prior to the
contribution of the radio and newspaper businesses.
BMC received proceeds of approximately $96.8 million from the issuance of
the Senior Notes and the Appreciation Notes. BMC subsequently loaned the $96.8
million to Holdings which loaned the $96.8
F-9
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SUBSEQUENT EVENTS (CONTINUED)
million to the Company. The loans between BMC and Holdings and Holdings and the
Company are due in 2007, bear cash interest at 7 1/2% through December 15, 1999,
and at 12% after such date until maturity. The Company used approximately $5.5
million of the proceeds for fees and expenses associated with the Senior Notes
and the Appreciation Notes and $74.7 million of the proceeds to refinance its
existing senior note of $70 million, pay accrued interest of approximately $1.9
million and pay a prepayment penalty of $2.8 million.
The Senior Notes are senior unsecured obligations of BMC and Brill Media
Management, Inc. (combined - the Issuer). The Senior Notes are unconditionally
guaranteed, fully, jointly and severally, by each of the Issuer's subsidiaries
(the Guarantors), all of which are wholly-owned. BMC is a holding company and
has no operations, assets or cash flows separate from its investments in its
subsidiaries. Accordingly, separate financial statements and other disclosures
concerning the Guarantors have not been presented because management has
determined that they would not be material to investors.
On February 24, 1998 the Company completed the asset acquisition of certain
newspaper, printing and distribution operations located in northern Michigan.
Total consideration amounted to approximately $8.5 million and included cash of
$5.5 million and seller notes of $3.0 million. In addition, the Company entered
into a non-compete agreement totaling approximately $365,000. The acquisition
will be accounted for as a purchase and the Company's financial statements will
include the respective results of operations of the newly acquired entities from
February 24, 1998. In conjunction with such acquisition, the Company formed six
new wholly-owned subsidiaries of Holdings, all of which are guarantors of the
Senior Notes and Appreciation Notes.
F-10
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Alan R. Brill
We have audited the accompanying combined statements of financial position
of The Radio and Newspaper Businesses of Alan R. Brill as of February 28, 1997
and February 29, 1996, and the related combined statements of operations,
stockholder's and members' deficiency, and cash flows for each of the three
years in the period ended February 28, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of The Radio
and Newspaper Businesses of Alan R. Brill at February 28, 1997 and February 29,
1996, and the combined results of their operations and their cash flows for each
of the three years in the period ended February 28, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 14, 1997,
except for Note 2 as to which
the date is December 12, 1997
and Note 10 and Note 12,
as to which the date is
December 30, 1997
F-11
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
COMBINED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
FEBRUARY 29 FEBRUARY 28
1996 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 2,074,739 $ 775,363
Accounts receivable, net of allowance for doubtful accounts of 1996-- $184,902
and 1997--$112,192............................................................. 2,967,540 3,165,668
Inventories...................................................................... 443,678 323,483
Other current assets............................................................. 193,249 208,598
------------- -------------
Total current assets............................................................... 5,679,206 4,473,112
Notes receivable from managed affiliates........................................... -- 412,007
Property and equipment............................................................. 17,991,335 16,398,115
Less: Accumulated depreciation..................................................... 9,177,746 7,831,300
------------- -------------
Net property and equipment......................................................... 8,813,589 8,566,815
Goodwill and FCC licenses, net of accumulated amortization of 1996-- $1,619,481 and
1997--$1,779,785................................................................. 5,298,744 5,407,598
Covenants not to compete, net of accumulated amortization of 1996-- $147,714 and
1997--$236,706................................................................... 247,575 284,414
Other assets, net of accumulated amortization of 1996--$831,843 and
1997--$1,250,740................................................................. 1,827,844 1,891,090
Other.............................................................................. 37,032 271,553
------------- -------------
7,411,195 7,854,655
Due from affiliates................................................................ 4,106,551 5,135,648
------------- -------------
$ 26,010,541 $ 26,442,237
------------- -------------
------------- -------------
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Short-term note.................................................................. $ 500,000 $ 500,000
Notes payable to stockholder..................................................... 209,000 378,637
Accounts payable................................................................. 1,122,273 701,826
Accrued payroll and related expenses............................................. 397,362 399,131
Accrued interest................................................................. 327,853 372,394
Other accrued expenses........................................................... 172,516 224,794
Current maturities of long-term obligations...................................... 552,358 882,439
------------- -------------
Total current liabilities.......................................................... 3,281,362 3,459,221
Long-term obligations:
Senior notes..................................................................... 42,253,160 44,502,075
Obligations under capital leases................................................. 906,905 971,966
Unsecured and subordinated obligations........................................... 915,555 846,387
Incentive plan liability......................................................... 3,527,034 4,155,000
Less:Current maturities of long-term obligations................................. (552,358) (882,439)
------------- -------------
47,050,296 49,592,989
Due to affiliates.................................................................. 14,033,350 --
Capital deficiency:
Capital.......................................................................... 3,750 4,960
Additional paid-in capital....................................................... 948,852 15,984,309
Accumulated deficit.............................................................. (39,307,069) (42,599,242)
------------- -------------
Net capital deficiency............................................................. (38,354,467) (26,609,973)
------------- -------------
$ 26,010,541 $ 26,442,237
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-12
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
<S> <C> <C> <C>
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28
1995 1996 1997
-------------- -------------- --------------
Revenues......................................................... $ 23,186,957 $ 25,312,931 $ 27,036,215
Operating expenses:
Operating departments.......................................... 17,530,406 18,639,701 19,042,885
Incentive plan................................................. 633,688 1,467,034 627,966
Management fees................................................ 1,678,771 1,832,703 1,944,699
Time brokerage agreement fee, net.............................. -- -- (54,500)
Consulting..................................................... -- 37,493 140,992
Depreciation................................................... 896,885 995,414 1,025,543
Amortization................................................... 214,223 316,558 369,484
-------------- -------------- --------------
20,953,973 23,288,903 23,097,069
-------------- -------------- --------------
Operating income................................................. 2,232,984 2,024,028 3,939,146
Other income (expense):
Interest--stockholder and affiliates, net...................... (348,399) (293,956) 246,909
Interest--other, net........................................... (5,287,211) (6,338,941) (7,190,504)
Amortization of deferred financing costs....................... (205,851) (497,198) (488,712)
Gain (loss) on sale of assets, net............................. (55,783) 3,780 1,076,181
Other, net..................................................... (88,419) (84,067) (68,689)
-------------- -------------- --------------
(5,985,663) (7,210,382) (6,424,815)
-------------- -------------- --------------
Loss before income taxes and extraordinary item.................. (3,752,679) (5,186,354) (2,485,669)
Income tax provision (benefit)................................... 68,324 (38,869) 286,504
-------------- -------------- --------------
Loss before extraordinary item................................... (3,821,003) (5,147,485) (2,772,173)
Extraordinary item............................................... -- 6,915,435 --
-------------- -------------- --------------
Net income (loss)................................................ $ (3,821,003) $ 1,767,950 $ (2,772,173)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes.
F-13
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
COMBINED STATEMENTS OF STOCKHOLDER'S AND MEMBERS' DEFICIENCY
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
<TABLE>
<CAPTION>
ADDITIONAL NET
PAID-IN ACCUMULATED CAPITAL
CAPITAL CAPITAL DEFICIT DEFICIENCY
--------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at February 28, 1994............................ $ 3,550 $ 948,852 $ (37,254,016) $ (36,301,614)
Capital contribution.................................... 100 -- -- 100
Net loss................................................ -- -- (3,821,003) (3,821,003)
--------- ------------- -------------- --------------
Balance at February 28, 1995............................ 3,650 948,852 (41,075,019) (40,122,517)
Capital contribution.................................... 100 -- -- 100
Net income.............................................. -- -- 1,767,950 1,767,950
--------- ------------- -------------- --------------
Balance at February 29, 1996............................ 3,750 948,852 (39,307,069) (38,354,467)
Capital contributions................................... 1,210 15,035,457 -- 15,036,667
Net loss................................................ -- -- (2,772,173) (2,772,173)
Dividends............................................... -- -- (520,000) (520,000)
--------- ------------- -------------- --------------
Balance at February 28, 1997............................ $ 4,960 $ 15,984,309 $ (42,599,242) $ (26,609,973)
--------- ------------- -------------- --------------
--------- ------------- -------------- --------------
</TABLE>
See accompanying notes.
F-14
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................................... ($3,821,003) $ 1,767,950 ($2,772,173)
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization........................................... 1,111,108 1,311,972 1,395,027
Amortization of deferred financing costs................................ 205,851 313,481 488,712
Management fees accrual................................................. 590,851 293,806 (620,451)
Affiliate interest accrual.............................................. 599,216 463,594 1,842
Additional interest accrual............................................. 1,864,997 2,215,159 1,817,674
Incentive plan accrual.................................................. 633,688 1,467,034 627,966
(Gain) loss on sale of assets, net...................................... 55,783 (3,780) (1,076,181)
Extraordinary item...................................................... -- (6,915,435) --
Changes in operating assets and liabilities:
Accounts receivable................................................... (190,587) (251,820) (135,593)
Other current assets.................................................. (260,546) (192,561) 109,418
Accounts payable...................................................... 304,899 (480,039) (440,686)
Other accrued expenses................................................ (174,393) 47,805 91,521
----------- ----------- -----------
Net cash provided by (used in) operating activities....................... 919,864 37,166 (512,924)
INVESTING ACTIVITIES
Change in restricted cash................................................. 1,157,955 -- --
Insurance proceeds on destroyed assets.................................... 2,674,326 -- 244,293
Purchase of replacement assets............................................ (2,654,623) -- --
Purchase of property and equipment........................................ (973,805) (976,938) (1,268,847)
Purchase of newspaper, net of cash acquired............................... -- -- (17,222)
Purchase of radio stations................................................ -- (55,000) --
Proceeds from sale of radio station....................................... -- -- 1,917,544
Proceeds from sale of assets.............................................. 25,096 13,280 44,003
Loans to managed affiliates............................................... -- -- (408,401)
Increase in other assets.................................................. (349,225) (147,904) (452,554)
----------- ----------- -----------
Net cash provided by (used in) investing activities....................... (120,276) (1,166,562) 58,816
FINANCING ACTIVITIES
Increase (decrease) in amounts due to stockholder and affiliates.......... (592,216) 32,254 (79,309)
Increase in deferred financing costs...................................... -- (1,616,923) (491,168)
Principal payments on long-term obligations............................... (1,038,824) (36,241,465) (742,698)
Proceeds from long-term borrowings........................................ 1,179,247 40,479,877 142,697
Capital contributions..................................................... 100 100 845,210
Dividends................................................................. -- -- (520,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities....................... (451,693) 2,653,843 (845,268)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents...................... 347,895 1,524,447 (1,299,376)
Cash and cash equivalents at beginning of year............................ 202,397 550,292 2,074,739
----------- ----------- -----------
Cash and cash equivalents at end of year.................................. $ 550,292 $ 2,074,739 $ 775,363
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosures of cash flow information:
Interest paid........................................................... $4,099,643 $ 4,161,993 $6,116,898
Income taxes paid:
Federal............................................................... -- 646 80,000
State................................................................. 68,085 117,485 136,046
</TABLE>
See accompanying notes.
F-15
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The combined financial statements include the accounts of the following
radio and newspaper businesses (collectively referred to herein as the Company)
which are owned directly or indirectly by Alan R. Brill (Stockholder). The radio
businesses (collectively referred to herein as Radio) include: Brill Radio, Inc.
(BRI) and its subsidiary, Reading Radio, Inc. (RRI); Northland Broadcasting,
Inc. (NBI); Northland Broadcasting, LLC (NBL); Northland Holdings, LLC (NHL); NB
II, Inc. (NB2); Fargo-Moorhead Radio, Inc. (FMR); Central Missouri Broadcasting,
Inc. (CMB); CMB II, Inc. (CB2); Northern Colorado Radio, Inc. (NCR); NCR II,
Inc. (NR2); and Tri-State Broadcasting, Inc. (TSB). The newspaper businesses
(collectively referred to herein as News) include St. Johns Newspapers, Inc.
(SJN); Brill Newspapers, Inc. (BNI) and its subsidiaries, which include CMN
Holding, Inc. (CMNH), Central Michigan Distribution Co., L.P. (CMDLP), and
Central Michigan Newspapers, Inc. (CMN) and its subsidiaries which include
Cadillac Newspapers, Inc.; CMN Associated Publications, Inc.; Gladwin
Newspapers, Inc.; Midland Buyer's Guide, Inc.; Central Michigan Distribution
Co., Inc.; and Graph Ads Printing, Inc. News publishes one daily newspaper with
circulation of approximately 12,000 and eleven separate weekly publications with
circulation exceeding 185,000. All significant intercompany balances and
transactions have been eliminated in combination.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories, consisting primarily of newsprint, are stated at the lower of
cost (first in, first out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided under
the straight-line method over the estimated useful lives of the various assets
as follows:
<TABLE>
<S> <C>
10 to 40
Buildings and improvements................................... years
10 to 40
Leasehold improvements....................................... years
Towers and antennae.......................................... 20 years
Machinery and equipment...................................... 3 to 12 years
Broadcast equipment.......................................... 3 to 13 years
Furniture and fixtures....................................... 3 to 10 years
</TABLE>
INTANGIBLE ASSETS
Goodwill and FCC licenses are being amortized as required by generally
accepted accounting principles. Amortization is calculated on the straight-line
basis over a period of 40 years.
Covenants not to compete are being amortized on the straight-line basis over
the agreements' terms of three to five years.
F-16
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred financing costs and favorable leasehold rights are being amortized
on the straight-line basis over the terms of the underlying debt (36 to 44
months) or leases (3-20 years).
LONG-LIVED ASSETS
The Company annually considers whether indicators of impairment of
long-lived assets held for use (including intangibles) are present, determines
that if such indicators are present whether the sum of the estimated
undiscounted future cash flows attributable to such assets is less than their
carrying amounts, and if so, would recognize an impairment loss based on the
excess of the carrying amount of the assets over their fair value. The Company
evaluated the ongoing value of its property and equipment and other long-lived
assets as of February 28, 1997. From this evaluation, the Company determined
that there were no indications of impairment and as such, no impairment loss has
been recognized for the year ended February 28, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
ADVERTISING
Advertising costs are expensed as incurred and totaled $783,879, $801,356,
and $838,534 for the years ended February 28, 1995, February 29, 1996, and
February 28, 1997, respectively.
REVENUE RECOGNITION
The Company recognizes advertising revenue when an ad is aired by Radio or
printed by News. Radio also receives fees under time brokerage agreements, which
are recognized based on a stated amount per month.
RECLASSIFICATIONS
Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform to the 1997 presentation.
2. DESCRIPTION OF THE COMPANY, ACQUISITIONS AND DISPOSITIONS
The businesses of the Company are operating entities affiliated with Brill
Media Company, L.P. (BMCLP), a group executive management operation which
provides supervisory activities and certain corporate-wide services to the
operating units. The management operation is compensated on a fee basis by the
operating units under standard contractual arrangements. The Company was
organized by the Stockholder in 1980 to own and operate media properties
including radio stations, television stations, newspapers and related
businesses, with a medium-market emphasis. The Company is structured with each
operating unit self-contained in its own entity with respect to its assets,
operations, and management.
F-17
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
2. DESCRIPTION OF THE COMPANY, ACQUISITIONS AND DISPOSITIONS (CONTINUED)
On May 1, 1995, CB2, a newly formed corporation owned by the Stockholder,
acquired radio station KZMO-FM located in California, Missouri. CB2 paid cash of
$25,000 and entered into note payable agreements with the seller of $250,000 and
$149,500. CB2 also entered into a covenant not to compete agreement with the
previous owner for $300,000, discounted at 11% to $165,290 for financial
statement purposes -- see Note 7. The acquisition was accounted for as a
purchase. Assets acquired include goodwill, FCC license, and tower lease of
$50,000, $274,500, and $100,000, respectively. The financial statements include
the results of operations of CB2 from May 1, 1995.
On November 1, 1995, NB2, a newly formed corporation owned by the
Stockholder, acquired radio station KLXK-FM located in Duluth, Minnesota. NB2
paid cash of $30,000 and entered into a note payable with the seller of
$670,000. The acquisition was accounted for as a purchase. Assets acquired
include goodwill, FCC license, and equipment of $50,000, $550,000, and $100,000,
respectively. The financial statements include the results of operations of NB2
from November 1, 1995.
On July 9, 1996, SJN, a newly formed corporation owned by the Stockholder,
acquired the common stock of Clinton Distribution, Inc. (Clinton), which owned
and operated the St. Johns Reminder, a weekly newspaper located in St. Johns,
Michigan. SJN paid cash of $50,000 and entered into a note payable with the
seller of $340,704. SJN also entered into a covenant not to compete with the
Seller for $200,000, discounted at 12% to $127,430 for financial statement
purposes -- see Note 7. On July 31, 1996, Clinton was merged into SJN under a
tax-free liquidation. The acquisition of Clinton was accounted for as a
purchase. The financial statements include the results of operations of
Clinton/SJN from July 9, 1996.
Pro forma combined operating results reflecting these acquisitions as if
they had occurred at the beginning of the respective periods would not have been
materially different from reported amounts.
In February, 1996, FMR entered into a contract to sell all operating assets
of its radio stations KQWB-FM and KQFN-AM located in Fargo, North Dakota, and
Moorhead, Minnesota, for $2,000,000 in cash. The pretax gain was approximately
$1,065,000, net of related expenses. FMR further contracted to lease the
programming of the radio stations to the buyer under a time brokerage agreement
(TBA) beginning March 1, 1996, for $15,000 per month, until transfer of the FCC
license on August 13, 1996. Accordingly, no broadcast revenue or operating
expense is recorded for FMR subsequent to February 29, 1996.
On June 27, 1996, NR2, a newly formed corporation owned by the Stockholder
executed a TBA effective August 5, 1996, to operate radio station KTRR-FM
located in Loveland, Colorado. The financial statements include the results of
operations of NR2 from August 5, 1996. The TBA also gives the Company an option
to purchase KTRR-FM. In connection with this option, NR2 made a nonrefundable
deposit of $200,000 to the owner of KTRR-FM.
In May 1997, NR2 exercised its option to purchase KTRR-FM for $2,000,000.
The purchase price includes the $200,000 already on deposit, $550,000 in cash
payable at closing, and a note payable to the seller in the amount of
$1,250,000. NR2 will also enter into a five-year, $500,000 covenant not to
compete. The purchase is pending various approvals.
On July 25, 1997 the Company paid $3,000,000 for a non-competition agreement
among the Company, one of the managed affiliates (see Note 10) and the seller of
the related radio stations.
F-18
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
2. DESCRIPTION OF THE COMPANY, ACQUISITIONS AND DISPOSITIONS (CONTINUED)
On October 1, 1997, Huron P.S., LLC (HPL) and Huron Newspapers, LLC (HNL),
newly formed limited liability companies owned principally by the Stockholder,
entered into contracts to purchase the assets of Huron Postal Service, Inc.,
which owned and operated a 40,000-household distribution system for advertising
supplements, newspapers, and shopping guides located in Tawas City, Michigan,
and Northeastern Printers, Inc., which owned and operated two editions of the
Northeastern Shopper, distributed to 40,000 households located in Tawas City,
Michigan (collectively, Tawas) for $1,600,000. HPL and HNL paid combined cash of
$900,000 at closing and entered into notes payable with the seller totaling
$700,000. The notes bear interest at 10% and are due in October 2004. HPL and
HNL also entered into six-year covenants not to compete, totaling $1,200,000.
On October 24, 1997, CMB and CB2 entered into contracts to sell the
operating assets of radio stations KTXY-FM and KLIK-AM located in Jefferson
City, Missouri, and radio station KATI-FM located in California, Missouri, (the
Missouri Properties) for a net cash price of $7,419,000, plus assumed
liabilities of $256,000. The expected pretax gain will be approximately $5
million, net of related expenses. CMB and CB2 further contracted to lease the
programming of the combined radio stations to the buyer under a TBA beginning
November 1, 1997, for $50,000 per month, until transfer of the FCC licenses is
complete. Accordingly, no broadcast revenue or operating expenses will be
recorded for CMB or CB2 subsequent to October 31, 1997. The gain will be
recognized upon transfer of the FCC licenses. Applications for transfer of the
broadcast licenses of the Missouri Properties have been filed with the FCC by
the buyers. A local market competitor has objected to the transfer of the
licenses and on December 12, 1997, filed with the FCC a Petition to Deny the
license transfers and to terminate the TBA. No action has been taken on the
Petition to Deny by the FCC, and the Company believes that, even if the Petition
to Deny were granted, the consequences to the Company would not be material.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at February 29, 1996 and
February 28, 1997:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Land............................................................................... $ 748,255 $ 646,647
Buildings and improvements......................................................... 2,564,698 1,604,922
Leasehold improvements............................................................. 846,826 989,586
Towers and antennae................................................................ 1,939,158 1,962,264
Machinery and equipment............................................................ 3,771,769 4,162,151
Broadcast equipment................................................................ 4,968,828 4,106,725
Furniture and fixtures............................................................. 2,907,508 2,425,820
Construction in progress........................................................... 244,293 500,000
------------- -------------
$ 17,991,335 $ 16,398,115
------------- -------------
------------- -------------
</TABLE>
F-19
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
3. PROPERTY AND EQUIPMENT (CONTINUED)
Property and equipment includes the following assets under capital leases at
February 28, 1997:
<TABLE>
<S> <C>
Buildings and improvements...................................................... $ 828,337
Towers and antennae............................................................. 1,050,000
Machinery and equipment......................................................... 277,661
Broadcast equipment............................................................. 212,168
Furniture and fixtures.......................................................... 180,559
---------
$2,548,725
---------
---------
</TABLE>
4. INCOME TAXES
The Company accounts for income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
NCR, TSB, CB2, NB2, NR2, and SJN are "S" corporations whose taxable income
or loss for federal and state income tax purposes is passed through to the
Stockholder. NBL and NHL are limited liability companies whose taxable income or
loss for federal and state income tax purposes is passed through to their
members. CMDLP is a limited partnership whose taxable income or loss for federal
and state income tax purposes is passed through to its partners. BRI, RRI, NBI,
FMR, CMB, BNI, CMNH, and CMN are "C" corporations. RRI is included in the
consolidated income tax return of BRI. CMNH and CMN are included in the
consolidated income tax return of BNI. NBI and FMR are included in the
consolidated income tax return of their parent. The Company calculates its
current and deferred income tax provisions for NBI and FMR on a separate return
basis (i.e., as if the corporations had not been included in the consolidated
income tax return of their parent).
At February 28, 1997, the "C" corporations noted above had net operating
loss carryforwards of approximately $13 million for federal income tax purposes
which expire in fiscal years 1998 through 2012.
F-20
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
4. INCOME TAXES (CONTINUED)
As a result of net operating loss carryforwards and temporary differences,
the Company has net deferred tax assets and has established a valuation
allowance at February 29, 1996 and February 28, 1997, as follows:
<TABLE>
<CAPTION>
1996 1997
-------------- -------------
<S> <C> <C>
Gross deferred tax assets:
Incentive plan expense........................................................... $ 1,448,043 $ 1,685,877
Net operating loss carryforwards................................................. 9,720,061 5,281,599
Other............................................................................ 281,472 313,814
-------------- -------------
11,449,576 7,281,290
Gross deferred tax liabilities:
Deferred gain on replacement assets.............................................. (1,154,401) (1,154,401)
Other............................................................................ (255,113) (104,786)
-------------- -------------
(1,409,514) (1,259,187)
-------------- -------------
Net deferred tax asset............................................................. 10,040,062 6,022,103
Valuation allowance................................................................ (10,040,062) (6,022,103)
-------------- -------------
Net deferred tax asset recognized in the balance sheet............................. $ -- $ --
-------------- -------------
-------------- -------------
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The provision (benefit) for income taxes for the "C" corporations differs
from the amount of income tax benefit computed by applying the United States
federal income tax rate to loss before income taxes and extraordinary item. A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
<S> <C> <C> <C>
FEBRUARY 28 FEBRUARY 29 FEBRUARY 28
1995 1996 1997
------------- ------------- -------------
"C" corporations income tax benefit at statutory federal tax rate.... $ (1,366,137) $ (1,838,365) $ (870,606)
Increase (decrease) resulting from:
State income taxes, net of federal benefit......................... (195,989) (350,071) (17,343)
Change in valuation allowance...................................... 1,607,220 2,162,782 1,024,242
Other, net......................................................... 23,230 (13,215) 150,211
------------- ------------- -------------
Income tax provision (benefit)....................................... $ 68,324 $ (38,869) $ 286,504
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-21
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
5. OTHER ASSETS
Other assets consist of the following at February 29, 1996 and February 28,
1997:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Deferred financing costs.............................................................. $ 1,614,046 $ 2,105,218
Broadcasting contracts................................................................ 120,000 --
Favorable leasehold rights............................................................ 434,728 384,728
Other................................................................................. 490,913 651,884
------------ ------------
2,659,687 3,141,830
Less:Accumulated amortization......................................................... 831,843 1,250,740
------------ ------------
$ 1,827,844 $ 1,891,090
------------ ------------
------------ ------------
</TABLE>
6. SHORT-TERM NOTE
Short-term note at February 29, 1996 and February 28, 1997, consists of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Note payable, interest payable annually at 6.85%.......................................... $ 500,000 $ 500,000
</TABLE>
F-22
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
7. LONG-TERM OBLIGATIONS
Senior notes payable at February 29, 1996 and February 28, 1997, consist of
the following:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Senior note, interest only payable monthly at 12%, due September 30, 1999. Includes
additional interest accrued at 5.5%, payable September 30, 1999.................. $ 40,000,000 $ 41,824,718
Mortgage note, payable in monthly installments of $7,645, including interest at 8%
through September 1, 1997, then interest adjusted to prime lending rate plus 2%,
due September 1, 2001............................................................ 723,500 688,367
Mortgage note, interest at 11%..................................................... 113,683 --
Senior note, payable in monthly installments of $3,033 including interest at 8%,
due May 1, 2005.................................................................. 237,369 219,307
Senior note, payable in monthly installments of $3,850, including interest at bank
prime lending rate plus 1%, due February 28, 2002................................ 197,690 168,870
Senior note, payable in monthly installments of $9,074, including interest at 9%,
due October 31, 2005............................................................. 670,000 653,622
Senior note, interest only payable monthly at 8% until July 9, 1997, thereafter
payable in monthly installments of $4,436, including interest, due July 9,
2006............................................................................. -- 340,010
Senior secured noncompetition agreement, payable in quarterly installments of
$6,250, including imputed interest at 12%, due July 1, 2004...................... -- 122,503
Other.............................................................................. 310,918 484,678
------------- -------------
$ 42,253,160 $ 44,502,075
------------- -------------
------------- -------------
</TABLE>
The bank prime lending rate at February 28, 1997, was 8.25%.
In February 1996, the Company and two managed affiliates under common
control (collectively referred to herein as the Borrowers) jointly entered into
a senior note agreement which provided $40 million of borrowings. In September
1996, the senior note was extended to September 1999. The note bears interest at
12%, payable monthly. Beginning May 1996, additional interest accrues at 5.5%
and is payable in September 1999. At February 28, 1997, $1,824,718 of additional
interest was accrued by the Company. On September 30, 1996, the Company entered
into a $16 million line of credit to provide acquisition financing. The line has
the same terms as the $41,824,718 senior note described above. In May 1997 and
July 1997, the Company borrowed against the $16 million line of credit.
On September 30, 1997, the Company refinanced its outstanding senior note
with its existing lender and received additional financing of $14 million. The
refinanced senior note bears interest at 10%, payable monthly. Additional
interest accrues at 7.5%. Principal and additional interest are payable in
September 1999. The Company is required to pay a 4% penalty in the event of
prepayment of the outstanding senior note.
The Borrowers are jointly and individually responsible for the full amount
of the senior note. Accordingly, the Company has recorded the entire amount of
the senior note in the accompanying statement of financial position and has
recorded notes receivable from managed affiliates for the managed
F-23
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
7. LONG-TERM OBLIGATIONS (CONTINUED)
affiliates' portion of the borrowings under the agreement. The note restricts
the Borrowers from the following: (a) sale or disposition of a subsidiary or
significant assets other than in the normal course of business; (b) incurring
additional indebtedness in excess of limitations; (c) payment of management
fees, dividends, and payments to affiliates in excess of certain limitations
and; (d) making aggregate capital expenditures or aggregate lease payments in
excess of annual limitations. The note also requires attaining minimum
cumulative operating cash flows, as defined. The common stock, membership
interest, and assets of each operating entity and ARB Finance-One, Inc. (an
affiliate) are pledged as security for the senior note. In addition, the
Company's Stockholder has personally guaranteed the senior note.
Obligations under capital leases relate to certain operating facilities and
equipment. The future minimum lease payments and the present value of capital
lease payments are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1998............................................................................ $ 394,202
1999............................................................................ 322,483
2000............................................................................ 259,862
2001............................................................................ 144,391
2002............................................................................ 62,979
------------
Total minimum obligations....................................................... 1,183,917
Less: Interest.................................................................. 211,951
------------
Present value of future minimum lease payments.................................. $ 971,966
------------
------------
</TABLE>
During fiscal 1997, the Company entered into new capital leases totaling
approximately $347,000. The present value of obligations under capital leases at
February 28, 1997, includes $606,884 in amounts due to affiliates of the
Company.
Unsecured and subordinated obligations at February 29, 1996 and February 28,
1997, consist of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Subordinated notes, payable in monthly installments including interest at 9%, due November
3, 2000................................................................................. $ 458,131 $ 401,448
Unsecured noncompetition agreement, payable in monthly installments of $1,666 through May
1, 2000, then beginning June 1, 2000, payable in monthly installments of $3,333,
including imputed interest at 11%, due May 1, 2005...................................... 163,881 161,814
Unsecured note, payable in monthly installments of $3,790, including interest at 8%, due
October 1, 2004......................................................................... 200,717 170,192
Other..................................................................................... 92,826 112,933
---------- ----------
$ 915,555 $ 846,387
---------- ----------
---------- ----------
</TABLE>
In conjunction with the $40 million senior note refinancing in February
1996, the Company paid $3,250,000 to a subordinated note holder. This payment
reflected the original principal only, and $7,046,813 of contingent interest
which had been accrued at the maximum rate was reduced at maturity pursuant to
the terms of an alternative valuation formula, as defined in the agreement. The
Company also
F-24
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
7. LONG-TERM OBLIGATIONS (CONTINUED)
wrote off certain previously deferred financing costs at the time of the
refinancing totaling $131,378. The net gain of $6,915,435 related to these
transactions has been reflected as an extraordinary item in the accompanying
1996 statement of operations.
The Company has performance incentive plans with certain executives. Such
plans accumulate value based on certain defined performance factors. The
executives were vested to the extent of $3,527,034, and $4,155,000 as of
February 29, 1996 and February 28, 1997, respectively, which was recorded as a
long-term obligation. Payments under the terms of the plans would commence only
upon the death, disability, retirement, or termination of employment of an
executive, and can be made at the discretion of the Company in amounts and on
terms no less favorable to the executive than quarterly payments of 2.5% of the
vested amount.
Aggregate maturities of long-term obligations during the next five years are
as follows:
<TABLE>
<CAPTION>
OBLIGATIONS UNSECURED
UNDER AND
SENIOR CAPITAL SUBORDINATED
FISCAL YEAR NOTES LEASES OBLIGATIONS TOTAL
- -------------------------------------------------------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
1998.................................................... $ 531,531 $ 279,576 $ 71,332 $ 882,439
1999.................................................... 349,219 246,617 74,310 670,146
2000.................................................... 41,363,333 220,314 81,290 41,664,937
2001.................................................... 285,949 125,329 220,481 631,759
2002.................................................... 246,736 53,655 98,697 399,088
</TABLE>
8. COMMITMENTS
The Company leases certain land, buildings, and equipment. Rent expense for
fiscal years 1995, 1996, and 1997 was $119,998, $210,998, and $247,328,
respectively. Future minimum lease payments under operating leases that have
initial or remaining noncancelable terms in excess of one year as of February
28, 1997, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
1998.............................................................................. $ 181,388
1999.............................................................................. 127,789
2000.............................................................................. 40,477
2001.............................................................................. 16,093
2002.............................................................................. 8,792
----------
Total minimum payments required................................................... $ 374,539
----------
----------
</TABLE>
F-25
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
9. CAPITAL
The authorized and issued common stock and membership interest of the
individual companies included in the combined financial statements consists of
the following at February 28, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------------- ADDITIONAL
ISSUED AND PAID-IN
AUTHORIZED OUTSTANDING AMOUNT CAPITAL
----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Northland Broadcasting, Inc.:
Common, $1 par value......................................... 1,000 100 $ 100 $ 5,653,505
Northland Broadcasting, LLC:
Membership interest.......................................... N/A N/A 10 --
Northland Holdings, LLC:
Membership interest.......................................... N/A N/A 1,000 --
NB II, Inc.:
Common, $1 par value......................................... 1,000 100 100 63,000
Fargo-Moorhead Radio, Inc.:
Common, $1 par value......................................... 1,000 100 100 8,537,952
Central Missouri Broadcasting, Inc.:
Common, $1 par value......................................... 1,000 1,000 1,000 --
CMB II, Inc.:
Common, $1 par value......................................... 1,000 100 100 --
Northern Colorado Radio, Inc.:
Common, $1 par value......................................... 1,000 100 100 1,064,500
NCR II, Inc.:
Common, $1 par value......................................... 5,000 100 100 16,000
St. Johns Newspapers, Inc.:
Common, $1 par value......................................... 5,000 100 100 --
Tri-State Broadcasting, Inc.:
Common, $1 par value......................................... 5,000 100 100 40,000
Brill Radio, Inc.:
Common, $1 par value......................................... 1,000 1,000 1,000 --
Brill Newspapers, Inc.:
Class A common stock, $1 par value, voting................... 1,000 1,000 1,000 --
Class B common stock, $1 par value, nonvoting................ 2,000 150 150 609,352
--------- -------------
$ 4,960 $ 15,984,309
--------- -------------
--------- -------------
</TABLE>
CMB II, Inc. was organized during the year ended February 28, 1995; NB II,
Inc. was organized during the year ended February 29, 1996, Northland
Broadcasting, LLC, Northland Holdings, LLC, NCR II, Inc., and St. Johns
Newspapers, Inc. were organized during the year ended February 28, 1997.
During the year ended February 28, 1997, the Company received capital
contributions of $15,036,667 (Northland Broadcasting, LLC--$10, Northland
Holdings, LLC--$1,000, NBII, Inc.--$63,000, Northern Colorado Radio,
Inc.--$725,000, NRII, Inc.--$16,100, Tri-State Broadcasting, Inc.--$40,000, St.
Johns Newspapers, Inc.--$100, Northland Broadcasting, Inc.--$5,653,505, and
Fargo-Moorhead Radio, Inc.-- $8,537,952), primarily from BMCLP, of which
$14,191,457 were outstanding affiliate receivables owed to
F-26
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
9. CAPITAL (CONTINUED)
BMCLP and were offset by affiliate payables to Media. During 1997, Brill
Newspapers, Inc. paid dividends of $520,000.
There were no other changes to capital for each of the three years in the
period ended February 28, 1997.
10. TRANSACTIONS WITH AFFILIATES
BMCLP provides certain administrative services to the Company for which it
receives a management fee based on a percentage of revenue. The Company incurred
management fees to BMCLP in fiscal years 1995, 1996, and 1997 of approximately
$1,679,000, $1,833,000, and $1,945,000, respectively.
The Company has operating management agreements and loans with managed
affiliates who operate radio stations in the same markets as the Company. In
accordance with the operating management agreements, the managed affiliates pay
management fees based on a fixed amount plus a variable fee based on
performance, as defined. The Company earned $40,000 in management fees from
these managed affiliates for the year ended February 28, 1997, which is included
in due from affiliates in the accompanying statement of financial position.
At February 28, 1997, notes receivable from these managed affiliates include
notes totaling $408,401 plus additional accrued interest of $3,606. The notes
receivable bear interest at 12%, payable monthly. Additional interest accrues at
5.5%. Principal and additional interest are payable in September 1999.
In connection with the borrowings under the $16 million line of credit
subsequent to February 28, 1997--see Note 7, the Company made additional loans
to managed affiliates totaling $13,903,955. In connection with the Company's
refinancing of its outstanding senior note on September 30, 1997--see Note 7,
the Company refinanced the outstanding notes receivable from managed affiliates.
The refinanced notes receivable from managed affiliates bear interest at 10%,
payable monthly. Additional interest accrues at 7.5%. Principal and additional
interest are payable in September 1999.
Through December 1997, the Company made additional loans to managed
affiliates totaling $2 million. On December 30, 1997, the Company refinanced
notes receivable from managed affiliates totaling approximately $16.3 million.
The refinanced notes receivable from managed affiliates bear interest at 12%,
payable semi-annually, and are due January 1, 2001.
At February 29, 1996 and February 28, 1997, notes payable to stockholder
include notes payable of $206,000 and $374,779, respectively, plus accrued
interest of $3,000 and $3,858, respectively. At February 28, 1997, notes
totaling $74,779 bear interest at 12% and notes totaling $300,000 bear interest
at prime plus 1%. Notes payable to stockholder are subordinated to the notes
payable to the respective senior lenders.
At February 29, 1996 and February 28, 1997, due from affiliates includes
notes receivable from stockholder totaling $4,106,551 and $3,966,194,
respectively, plus accrued interest of $84,244 at February 28, 1997. The notes
receivable bear interest at 5.5% and are due at various dates through 2001.
At February 28, 1997, due from affiliates also includes $1,886,909 of
affiliate notes receivable plus accrued interest of $28,840, accrued management
fees payable of $144,153, and operating payables due to affiliates of $726,386.
F-27
<PAGE>
THE RADIO AND NEWSPAPER BUSINESSES OF ALAN R. BRILL
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 1995, FEBRUARY 29, 1996, AND FEBRUARY 28, 1997
10. TRANSACTIONS WITH AFFILIATES (CONTINUED)
At February 29, 1996, due to affiliates includes accrued management fees
payable of $2,972,870, various notes payable of $8,821,031 plus accrued interest
on these notes totaling $4,923,144, affiliate notes receivable of $1,888,909
plus accrued interest on these notes of $115,541, and operating receivables due
from affiliates of $679,245.
11. BUSINESS SEGMENTS
The Company has been engaged in two principal businesses: operation of AM
and FM radio stations (Radio) and publication of daily and weekly newspapers and
shoppers (News).
Information for the years ended February 28, 1995, February 29, 1996, and
February 28, 1997, regarding the Company's major business segments is presented
in the following table:
<TABLE>
<CAPTION>
RADIO NEWS TOTAL
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
1995.............................................................. $ 12,649,594 $ 10,537,363 $ 23,186,957
1996.............................................................. 13,095,663 12,217,268 25,312,931
1997.............................................................. 13,595,820 13,440,395 27,036,215
Operating income:
1995.............................................................. 999,703 1,233,281 2,232,984
1996.............................................................. 883,897 1,140,131 2,024,028
1997.............................................................. 1,897,712 2,041,434 3,939,146
Identifiable assets:
1995.............................................................. 11,195,756 10,588,032 21,783,788
1996.............................................................. 14,499,338 11,511,203 26,010,541
1997.............................................................. 11,074,545 15,367,692 26,442,237
Depreciation and amortization expense:
1995.............................................................. 751,407 359,701 1,111,108
1996.............................................................. 807,917 504,055 1,311,972
1997.............................................................. 917,438 477,589 1,395,027
Capital expenditures:
1995.............................................................. 276,427 697,378 973,805
1996.............................................................. 819,440 157,498 976,938
1997.............................................................. 336,952 931,895 1,268,847
</TABLE>
12. SUBSEQUENT EVENT
Effective December 30, 1997, the radio and newspaper businesses were
contributed, at historical cost, to a newly formed limited liability company,
BMC Holdings, LLC (Holdings), which is a wholly-owned subsidiary of another
newly formed limited liability company, Brill Media Company, LLC (BMC). BMC is
indirectly owned by the Stockholder. BMC and Holdings were formed with minimal
capital contributions and had no operations prior to the contribution of the
radio and newspaper businesses.
F-28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 24
Use of Proceeds....................... 36
Capitalization........................ 37
Pro Forma Financial Information....... 38
Selected Combined Financial Data...... 47
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 49
Business.............................. 55
Legal Proceedings..................... 77
Management............................ 77
Executive Compensation................ 78
Certain Transactions.................. 80
Recent or Pending Transactions........ 82
The Exchange Offer.................... 83
Description of Notes.................. 93
Description of Appreciation Notes..... 124
Certain Federal Income Tax
Considerations...................... 135
Plan of Distribution.................. 138
Book-Entry; Delivery and Form......... 139
Legal Matters......................... 140
Experts............................... 141
Available Information................. 141
Index of Financial Statements......... F-1
</TABLE>
[LOGO]
BRILL MEDIA COMPANY, LLC
BRILL MEDIA MANAGEMENT, INC.
OFFER TO EXCHANGE
12% SENIOR NOTES DUE 2007
FOR
12% SERIES B SENIOR NOTES DUE 2007
AND APPRECIATION NOTES DUE 2007
FOR
SERIES B APPRECIATION NOTES DUE 2007
------------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 13.1-697 of the Virginia Stock Corporation Act (the "SCA") empowers
a corporation to indemnify an individual made a party to a proceeding because he
is or was a director against liability incurred in the proceeding if: (i) he
conducted himself in good faith; and (ii) he believed: (a) in the case of
conduct in his official capacity with the corporation, that his conduct was in
its best interests; and (b) in all other cases, that his conduct was at least
not opposed to its best interests; and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
The termination of a proceeding by judgment, order, settlement or conviction
is not, of itself, determinative that the director did not act in good faith and
believed that his conduct was not in the corporation's best interests or that
his conduct was opposed to the corporation's best interests, or with respect to
any criminal proceeding, that he had reasonable cause to believe his conduct was
unlawful.
A corporation may not indemnify a director in connection with a proceeding
by or in the right of the corporation in which the director was adjudged liable
to the corporation or in connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his official
capacity, in which he was adjudged liable on the basis that personal benefit was
improperly received by him.
Indemnification with respect to a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in connection with the
proceeding.
Section 13.1-698 of the SCA also requires a corporation, unless limited by
its articles of incorporation, to indemnify a director who entirely prevails in
the defense of any proceeding to which he was a party because he is or was a
director of the corporation against reasonable expenses incurred by him in
connection with the proceeding.
Section 13.1-699 of the SCA provides that a corporation may pay for or
reimburse the reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding if: (i) the
director furnishes the corporation a written statement of his good faith belief
that he has met the standard of conduct described in SCA Section 13.1-697 above;
(ii) the director furnishes the corporation a written undertaking, executed
personally or on his behalf, to repay the advance if it is ultimately determined
that he did not meet the standard of conduct; and (iii) a determination is made
that the facts then known to those making the determination would not preclude
indemnification under this article.
The undertaking required in clause (ii) above shall be an unlimited general
obligation of the director but need not be secured and may be accepted without
reference to financial ability to make repayment. Furthermore, determinations
and authorizations of payments under this Section 13.1-699 shall be made in the
manner specified in SCA Section 13.1-701 below.
Section 13.1-700.1 provides that an individual who is made a party to a
proceeding because he is or was a director of a corporation may apply to a court
for an order directing the corporation to make advances or reimbursement for
expenses or to provide indemnification. Such application may be made to the
court conducting the proceeding or to another court of competent jurisdiction.
The court shall order the corporation to make advances and/or reimbursement
for expenses or to provide indemnification if it determines that the director is
entitled to such advances, reimbursement or indemnification and shall also order
the corporation to pay the director's reasonable expenses incurred to obtain the
order.
With respect to a proceeding by or in the right of the corporation, the
court may (i) order indemnification of the director to the extent of his
reasonable expenses if it determines that, considering all the relevant
circumstances, the director is entitled to indemnification even though he was
adjudged liable
II-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (CONTINUED)
to the corporation and (ii) also order the corporation to pay the director's
reasonable expenses incurred to obtain the order of indemnification.
Neither (i) the failure of the corporation, including its board of
directors, its independent legal counsel and its shareholders, to have made an
independent determination prior to the commencement of any action permitted by
this section that the applying director is entitled to receive advances and/or
reimbursement nor (ii) the determination by the corporation, including its board
of directors, its independent legal counsel and its shareholders, that the
applying director is not entitled to receive advances and/or reimbursement or
indemnification shall create a presumption to that effect or otherwise of itself
be a defense to that director's application for advances for expenses,
reimbursement or indemnification.
Section 13.1-701 of the SCA provides that a corporation may not indemnify a
director unless authorized in the specific case after a determination has been
made that indemnification of the director is permissible in the circumstances
because he has conducted himself in good faith and he believed: (a) in the case
of conduct in his official capacity with the corporation, that his conduct was
in its best interests; and (b) in all other cases, that his conduct was at least
not opposed to its best interests; and in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful.
Such determination shall be made: (i) by the board of directors by a
majority vote of a quorum consisting of directors not at the time parties to the
proceeding; (ii) if a quorum cannot be obtained under paragraph 1 of this
subsection, by majority vote of a committee duly designated by the board of
directors (in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to the
proceeding; (iii) by special legal counsel: (a) selected by the board of
directors or its committee in the manner prescribed in paragraph 1 or 2 of this
subsection; or (b) if a quorum of the board of directors cannot be obtained
under paragraph 1 of this subsection and a committee cannot be designated under
paragraph 2 of this subsection, selected by majority vote of the full board of
directors, in which selection directors who are parties may participate; or (iv)
by the shareholders, but shares owned by or voted under the control of directors
who are the time parties to the proceeding may not be voted on the
determination.
Authorization of indemnification and evaluation as to reasonable-ness of
expenses shall be made in the same manner as the determination that
indemnification is permissible except that if the determination is made by
special legal counsel, authorization or indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under clause (a) and
(b) above to select counsel.
Section 13.01-702 of the SCA provides that unless limited by a corporation's
articles of incorporation, (i) an officer of the corporation is entitled to
mandatory indemnification under Section 13.1-698, and is entitled to apply for
court-ordered indemnification under Section 13.1-700, in each case to the same
extent as a director; and (ii) the corporation may indemnify and advance
expenses under this article to an officer, employee, or agent of the corporation
to the same extent as to a director.
Section 13.1-703 of the SCA provides that a corporation may purchase and
maintain insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by him in that capacity or arising from his status as a director,
officer, employee, or agent, whether or not the corporation would have power to
indemnify him against the same liability under Section 13.1-697 or Section
13.1-698 above.
Section 13.1-704 of the SCA provides that any corporation shall have power
to make any further indemnity, including indemnity with respect to a proceeding
by or in the right of the corporation, and to
II-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (CONTINUED)
make additional provision for advances and reimbursement of expenses, to any
director, officer, employee or agent that may be authorized by the articles of
incorporation or any bylaw made by the shareholders or any resolution adopted,
before or after the event, by the shareholders, except an indemnity against (i)
his willful misconduct, or (ii) a knowing violation of the criminal law. Unless
the articles of incorporation, or any such bylaw or resolution expressly provide
otherwise, any determination as to the right to any further indemnity shall be
made in accordance with Section13.1-701B. Each such indemnity may continue as to
a person who has ceased to have the capacity referred to above and may inure to
the benefit of the heirs, executors and administrators of such a person.
Article X of the Bylaws of Brill Media Management, Inc. provides as follows:
Any person (the "indemnitee") who, because he is or was an officer or
director of the corporation, is, was, or is threatened to be made a party to
any threatened, pending, or completed action, suit, proceeding, or appeal
whether civil, criminal, administrative, or investigative and whether formal
or informal (the "proceeding") (including any proceeding by or in the right
of the corporation) shall be indemnified by the corporation against all
liability (including the obligation to pay all or any part of a judgment,
decree, settlement, penalty, fine or other such obligation) and reasonable
expenses (including counsel fees, expert witness fees, and costs of
investigation, litigation, and appeal, as well as any amounts expended in
asserting any counterclaim or claim for indemnification from others)
incurred in or as a result of the proceeding except such liability and
expenses as are incurred because of his willful misconduct or a knowing
violation of the criminal law. The corporation shall pay for or reimburse
the reasonable expenses incurred by any indemnitee in advance of final
disposition of any proceeding upon receipt of an unsecured undertaking from
him to repay the sums if ultimately it is determined that he is not entitled
to indemnification. A director shall be so indemnified without the necessity
of any further determination or authorization, but in the case of an
officer, the determination that indemnification is permissible and an
evaluation as to the reasonableness of expenses in a specific case shall be
made as authorized from time to time by general or specific actions of the
board of directors. The termination of a proceeding by a judgment, decree,
order, settlement, or conviction, or upon a plea of NOLO CONTENDERE or its
equivalent shall not of itself create a presumption that an indemnitee acted
in such a manner as to make him ineligible for indemnification.
In any proceeding brought by a shareholder in the right of the
corporation or brought by or on behalf of shareholders of the corporation,
the aggregate amount of all damages that may be assessed against an officer
or director of the corporation arising out of any single transaction,
occurrence, or course of conduct shall be limited to one dollar. This bylaw
is adopted by the shareholders as a limitation on the liability of the
corporation's officers and directors, and this limitation shall not apply if
the officer or director engaged in willful misconduct or a knowing violation
of the criminal law or of any state securities law.
This Article shall be applicable in and to all proceedings commenced
after its adoption even though arising, in whole or in part, from conduct,
actions, or events occurring or taken before its adoption. No amendment,
modification, or repeal of this Article shall diminish the rights provided
hereby with respect to any claim, issue, or matter in any then pending or
subsequent proceeding that is based in any material respect on any alleged
action or failure to act occurring prior to such amendment, modification, or
repeal. Reference herein to any director or officer shall include a former
director or officer who has ceased to have the capacity of director or
officer, as the case may be, and his heirs, executors, and administrators.
The corporation may purchase and maintain insurance to indemnify it against
all or any part of the liability to indemnify assumed by it in accordance
with this Article.
II-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 22. UNDERTAKINGS.
The Registrants hereby undertake:
(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, as amended (the "Securities Act");
(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 volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission (the "Commission") pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities act, each such post-effective amendment shall be deemed to be a
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 other securities being registered which remain unsold at the
termination of the offering.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the Registrants 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 Securities Act and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, BRILL MEDIA COMPANY, LLC
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
BRILL MEDIA COMPANY, LLC
By: BRILL MEDIA MANAGEMENT, INC.,
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting Officer)
Donald C. TenBarge
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-5
<PAGE>
Pursuant to the requirements of the Securities Act, BRILL MEDIA MANAGEMENT,
INC. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
BRILL MEDIA MANAGEMENT, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting Officer)
Donald C. TenBarge
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-6
<PAGE>
Pursuant to the requirements of the Securities Act, ADVERTISERS P.S., LLC
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
ADVERTISERS P.S., LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC. Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-8
<PAGE>
Pursuant to the requirements of the Securities Act, BMC HOLDINGS, LLC has
duly caused this Amendment No. 3 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
BMC HOLDINGS, LLC
By: BRILL MEDIA COMPANY, LLC,
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND
TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting Officer)
Donald C. TenBarge
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-9
<PAGE>
Pursuant to the requirements of the Securities Act, BRILL NEWSPAPERS, INC.
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
BRILL NEWSPAPERS, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-10
<PAGE>
Pursuant to the requirements of the Securities Act, BRILL RADIO, INC. has
duly caused this Amendment No. 3 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
BRILL RADIO, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-11
<PAGE>
Pursuant to the requirements of the Securities Act, CADILLAC NEWSPAPERS,
INC. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
CADILLAC NEWSPAPERS, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-12
<PAGE>
Pursuant to the requirements of the Securities Act, CENTRAL MICHIGAN
DISTRIBUTION CO., INC. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
CENTRAL MICHIGAN DISTRIBUTION CO., INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-13
<PAGE>
Pursuant to the requirements of the Securities Act, CENTRAL MICHIGAN
DISTRIBUTION CO., L.P. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
CENTRAL MICHIGAN DISTRIBUTION CO., L.P.
By: CENTRAL MICHIGAN DISTRIBUTION CO., INC.
General Partner
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-14
<PAGE>
Pursuant to the requirements of the Securities Act, CENTRAL MICHIGAN
NEWSPAPERS, INC. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
CENTRAL MICHIGAN NEWSPAPERS, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-15
<PAGE>
Pursuant to the requirements of the Securities Act, CENTRAL MISSOURI
BROADCASTING, INC. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
CENTRAL MISSOURI BROADCASTING, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-16
<PAGE>
Pursuant to the requirements of the Securities Act, CENTRAL PRINTING
SERVICE, LLC has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
CENTRAL PRINTING SERVICE, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC. Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-17
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-18
<PAGE>
Pursuant to the requirements of the Securities Act, CMB II, INC. has duly
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cruz Bay,
in the U.S. Virgin Islands, on April 1, 1998.
CMB II, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-19
<PAGE>
Pursuant to the requirements of the Securities Act, CMN ASSOCIATED
PUBLICATIONS, INC. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
CMN ASSOCIATED PUBLICATIONS, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-20
<PAGE>
Pursuant to the requirements of the Securities Act, CMN HOLDING, INC. has
duly caused this Amendment No. 3 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
CMN HOLDING, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-21
<PAGE>
Pursuant to the requirements of the Securities Act, GLADWIN NEWSPAPERS, INC.
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
GLADWIN NEWSPAPERS, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-22
<PAGE>
Pursuant to the requirements of the Securities Act, GRAPH ADS PRINTING, INC.
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
GRAPH ADS PRINTING, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill DIRECTOR, VICE PRESIDENT AND
TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-23
<PAGE>
Pursuant to the requirements of the Securities Act, HURON HOLDINGS, LLC has
duly caused this Amendment No. 3 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
HURON HOLDINGS, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.,
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-24
<PAGE>
Pursuant to the requirements of the Securities Act, HURON NEWSPAPERS, LLC
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
HURON NEWSPAPERS, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC. Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-25
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-26
<PAGE>
Pursuant to the requirements of the Securities Act, HURON P.S., LLC has duly
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cruz Bay,
in the U.S. Virgin Islands, on April 1, 1998.
HURON P.S., LLC
By: HURON HOLDINGS, LLC
Manager
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-27
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-28
<PAGE>
Pursuant to the requirements of the Securities Act, MIDLAND BUYERS GUIDE,
INC. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
MIDLAND BUYERS GUIDE, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-29
<PAGE>
Pursuant to the requirements of the Securities Act, NB II, INC. has duly
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cruz Bay,
in the State of U.S. Virgin Islands, on April 1, 1998.
NB II, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-30
<PAGE>
Pursuant to the requirements of the Securities Act, NCH II, LLC has duly
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cruz Bay,
in the U.S. Virgin Islands, on April 1, 1998.
NCH II, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-31
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-32
<PAGE>
Pursuant to the requirements of the Securities Act, NCR II, INC. has duly
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cruz Bay,
in the U.S. Virgin Islands, on April 1, 1998.
NCR II, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-33
<PAGE>
Pursuant to the requirements of the Securities Act, NCR III, LLC has duly
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cruz Bay,
in the U.S. Virgin Islands, on April 1, 1998.
NCR III, LLC
By: NCH II, LLC
Manager
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-34
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-35
<PAGE>
Pursuant to the requirements of the Securities Act, NORTHERN COLORADO
HOLDINGS, LLC has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
NORTHERN COLORADO HOLDINGS, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting Officer)
Donald C. TenBarge
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-36
<PAGE>
Pursuant to the requirements of the Securities Act, NORTHERN COLORADO RADIO,
INC. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
NORTHERN COLORADO RADIO, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-37
<PAGE>
Pursuant to the requirements of the Securities Act, NORTHLAND BROADCASTING,
LLC has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
NORTHLAND BROADCASTING, LLC
By: NORTHLAND HOLDINGS, LLC,
Manager
By: BMC HOLDINGS, LLC,
Manager
By: BRILL MEDIA COMPANY, LLC,
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-38
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting Officer)
Donald C. TenBarge
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-39
<PAGE>
Pursuant to the requirements of the Securities Act, NORTHLAND HOLDINGS, LLC
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
NORTHLAND HOLDINGS, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC.
Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-40
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting Officer)
Donald C. TenBarge
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-41
<PAGE>
Pursuant to the requirements of the Securities Act, READING RADIO, INC. has
duly caused this Amendment No. 3 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
READING RADIO, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill DIRECTOR, VICE PRESIDENT AND
TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer
------------------------------------------ (Principal Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-42
<PAGE>
Pursuant to the requirements of the Securities Act, ST. JOHNS NEWSPAPERS,
INC. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
ST. JOHNS NEWSPAPERS, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-43
<PAGE>
Pursuant to the requirements of the Securities Act, TRI-STATE BROADCASTING,
INC. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
TRI-STATE BROADCASTING, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill DIRECTOR, VICE PRESIDENT AND
TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-44
<PAGE>
Pursuant to the requirements of the Securities Act, UPPER MICHIGAN HOLDINGS,
INC. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
UPPER MICHIGAN HOLDINGS, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-45
<PAGE>
Pursuant to the requirements of the Securities Act, UPPER MICHIGAN HOLDINGS,
LLC has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
UPPER MICHIGAN HOLDINGS, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC. Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-46
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-47
<PAGE>
Pursuant to the requirements of the Securities Act, UPPER MICHIGAN
MANAGEMENT, INC. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
UPPER MICHIGAN MANAGEMENT, INC.
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, Vice President and Treasurer (Principal
------------------------------------------ Executive Officer)
Alan R. Brill
By * Assistant Treasurer (Principal Financial and
------------------------------------------ Accounting Officer)
Donald C. TenBarge
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-48
<PAGE>
Pursuant to the requirements of the Securities Act, UPPER MICHIGAN
NEWSPAPERS, LLC has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
UPPER MICHIGAN NEWSPAPERS, LLC
By: BMC HOLDINGS, LLC
Manager
By: BRILL MEDIA COMPANY, LLC
Manager
By: BRILL MEDIA MANAGEMENT, INC., Manager
By /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
II-49
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL Director, President, Chief Executive Officer and
------------------------------------------ Treasurer (Principal Executive Officer)
Alan R. Brill
By * Vice President, Controller, Secretary and Assistant
------------------------------------------ Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
By * Director
------------------------------------------
Robert M. Leich
By * Director
------------------------------------------
Philip C. Fisher
By * Director, Vice President, and Assistant Secretary
------------------------------------------
Clifton E. Forrest
By * Director
------------------------------------------
Charles W. Laughlin
*By /s/ ALAN R. BRILL Attorney-in-Fact
------------------------------------------
Alan R. Brill
</TABLE>
II-50
<PAGE>
Pursuant to the requirements of the Securities Act, BMC Holdings, Inc. has
duly caused this Amendment No. 3 to the Registration Statement to be signed on
its behalf by the undersigned thereunto duly authorized, in the City of Cruz
Bay, in the U.S. Virgin Islands, on April 1, 1998.
<TABLE>
<S> <C> <C>
BMC HOLDINGS, INC.
By: /s/ ALAN R. BRILL
-----------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL
------------------------------------------- Director, Vice President and Treasurer
Alan R. Brill (Principal Executive Officer)
By *
------------------------------------------- Assistant Treasurer (Principal Financial and
Donald C. TenBarge Accounting Officer)
*By /s/ ALAN R. BRILL
------------------------------------------- Attorney-in-Fact
Alan R. Brill
</TABLE>
II-51
<PAGE>
Pursuant to the requirements of the Securities Act, Huron Holdings
Management, Inc. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
<TABLE>
<S> <C> <C>
HURON HOLDINGS MANAGEMENT, INC.
By: /s/ ALAN R. BRILL
-----------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL
------------------------------------------- Director, Vice President and Treasurer
Alan R. Brill (Principal Executive Officer)
By *
------------------------------------------- Assistant Treasurer (Principal Financial and
Donald C. TenBarge Accounting Officer)
*By /s/ ALAN R. BRILL
------------------------------------------- Attorney-in-Fact
Alan R. Brill
</TABLE>
II-52
<PAGE>
Pursuant to the requirements of the Securities Act, Huron Newspapers
Management, Inc. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
<TABLE>
<S> <C> <C>
HURON NEWSPAPERS MANAGEMENT, INC.
By: /s/ ALAN R. BRILL
-----------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL
------------------------------------------- Director, Vice President and Treasurer
Alan R. Brill (Principal Executive Officer)
By *
------------------------------------------- Assistant Treasurer (Principal Financial and
Donald C. TenBarge Accounting Officer)
*By /s/ ALAN R. BRILL
------------------------------------------- Attorney-in-Fact
Alan R. Brill
</TABLE>
II-53
<PAGE>
Pursuant to the requirements of the Securities Act, Huron P.S. Management,
Inc. has duly caused this Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, in the City
of Cruz Bay, in the U.S. Virgin Islands, on April 1, 1998.
<TABLE>
<S> <C> <C>
HURON P.S. MANAGEMENT, INC.
By: /s/ ALAN R. BRILL
-----------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL
------------------------------------------- Director, Vice President and Treasurer
Alan R. Brill (Principal Executive Officer)
By *
------------------------------------------- Assistant Treasurer (Principal Financial and
Donald C. TenBarge Accounting Officer)
*By /s/ ALAN R. BRILL
------------------------------------------- Attorney-in-Fact
Alan R. Brill
</TABLE>
II-54
<PAGE>
Pursuant to the requirements of the Securities Act, Northern Colorado
Holdings Management, Inc. has duly caused this Amendment No. 3 to the
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April
1, 1998.
<TABLE>
<S> <C> <C>
NORTHERN COLORADO HOLDINGS MANAGEMENT, INC.
By: /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL
------------------------------------------- Director, Vice President and Treasurer
Alan R. Brill (Principal Executive Officer)
By *
------------------------------------------- Assistant Treasurer (Principal Financial and
Donald C. TenBarge Accounting Officer)
*By /s/ ALAN R. BRILL
------------------------------------------- Attorney-in-Fact
Alan R. Brill
</TABLE>
II-55
<PAGE>
Pursuant to the requirements of the Securities Act, Northland Broadcasting
Management, Inc. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
<TABLE>
<S> <C> <C>
NORTHLAND BROADCASTING MANAGEMENT, INC.
By: /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL
------------------------------------------- Director, Vice President and Treasurer
Alan R. Brill (Principal Executive Officer)
By *
------------------------------------------- Assistant Treasurer (Principal Financial and
Donald C. TenBarge Accounting Officer)
*By /s/ ALAN R. BRILL
------------------------------------------- Attorney-in-Fact
Alan R. Brill
</TABLE>
II-56
<PAGE>
Pursuant to the requirements of the Securities Act, Northland Holdings
Management, Inc. has duly caused this Amendment No. 3 to the Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Cruz Bay, in the U.S. Virgin Islands, on April 1,
1998.
<TABLE>
<S> <C> <C>
NORTHLAND HOLDINGS MANAGEMENT, INC.
By: /s/ ALAN R. BRILL
------------------------------------------
Alan R. Brill
DIRECTOR, VICE PRESIDENT AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement and the foregoing Power of
Attorney has been signed by the following persons in the capacities indicated on
April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------------------ --------------------------------------------------
<S> <C> <C>
By /s/ ALAN R. BRILL
------------------------------------------- Director, Vice President and Treasurer
Alan R. Brill (Principal Executive Officer)
By *
------------------------------------------- Assistant Treasurer (Principal Financial and
Donald C. TenBarge Accounting Officer)
*By /s/ ALAN R. BRILL
------------------------------------------- Attorney-in-Fact
Alan R. Brill
</TABLE>
II-57
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
3(i)(a) Articles of Organization of Brill Media Company, LLC*
3(i)(b) Articles of Incorporation of Brill Media Management, Inc.*
3(i)(c) Articles of Organization of BMC Holdings, LLC*
3(i)(d) Articles of Incorporation of Reading Radio, Inc.*
3(i)(e) Articles of Incorporation of Tri-State Broadcasting, Inc.*
3(i)(f) Articles of Incorporation of Northern Colorado Radio, Inc.*
3(i)(g) Articles of Incorporation of NCR II, Inc.*
3(i)(h) Articles of Incorporation of Central Missouri Broadcasting, Inc.*
3(i)(i) Articles of Incorporation of CMB II, Inc.*
3(i)(j) Articles of Organization of Northland Broadcasting, LLC*
3(i)(k) Articles of Incorporation of NB II, Inc.*
3(i)(l) Articles of Incorporation of Central Michigan Newspapers, Inc.*
3(i)(m) Articles of Incorporation of Cadillac Newspapers, Inc.*
3(i)(n) Articles of Incorporation of CMN Associated Publications, Inc.*
3(i)(o) Articles of Limited Partnership of Central Michigan Distribution Co., L.P.*
3(i)(p) Articles of Incorporation of Central Michigan Distribution Co., Inc.*
3(i)(q) Articles of Incorporation of Gladwin Newspapers, Inc.*
3(i)(r) Articles of Incorporation of Graph Ads Printing, Inc.*
3(i)(s) Articles of Incorporation of Midland Buyers Guide, Inc.*
3(i)(t) Articles of Incorporation of St. Johns Newspapers, Inc.*
3(i)(u) Articles of Organization of Huron P.S., LLC*
3(i)(v) Articles of Organization of Huron Newspapers, LLC*
3(i)(w) Articles of Organization of Huron Holdings, LLC*
3(i)(x) Articles of Organization of Northern Colorado Holdings, LLC*
3(i)(y) Articles of Organization of NCR III, LLC*
3(i)(z) Articles of Organization of NCH II, LLC*
3(i)(aa) Articles of Organization of Northland Holdings, LLC*
3(i)(bb) Articles of Incorporation of CMN Holding, Inc.*
3(i)(cc) Articles of Incorporation of Brill Radio, Inc.*
3(i)(dd) Articles of Incorporation of Brill Newspapers, Inc.*
3(i)(ee) Articles of Organization of Advertisers P.S., LLC*
3(i)(ff) Articles of Organization of Central Printing Service, LLC*
3(i)(gg) Articles of Incorporation of Upper Michigan Management, Inc.*
3(i)(hh) Articles of Organization of Upper Michigan Holdings, LLC*
3(i)(ii) Articles of Incorporation of Upper Michigan Holdings, Inc.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
3(i)(jj) Articles of Organization of Upper Michigan Newspapers, LLC*
3(i)(kk) Articles of Incorporation of BMC Holdings, Inc.*
3(i)(ll) Articles of Incorporation of Huron Holdings Management, Inc.*
3(i)(mm) Articles of Incorporation Huron Newspapers Management, Inc.*
3(i)(nn) Articles of Incorporation of Huron P.S. Management, Inc.*
3(i)(oo) Articles of Incorporation of Northern Colorado Holdings Management, Inc.*
3(i)(pp) Articles of Incorporation of Northland Broadcasting Management, Inc.*
3(i)(qq) Articles of Incorporation of Northland Holdings Management, Inc.*
3(ii)(a) Operating Agreement of Brill Media Company, LLC*
3(ii)(b) By-laws of Brill Media Management, Inc.*
3(ii)(c) Operating Agreement of BMC Holdings, LLC*
3(ii)(d) By-laws of Reading Radio, Inc.*
3(ii)(e) By-laws of Tri-State Broadcasting, Inc.*
3(ii)(f) By-laws of Northern Colorado Radio, Inc.*
3(ii)(g) By-laws of NCR II, Inc.*
3(ii)(h) By-laws of Central Missouri Broadcasting, Inc.*
3(ii)(i) By-laws of CMB II, Inc.*
3(ii)(j) Operating Agreement of Northland Broadcasting, LLC*
3(ii)(k) By-laws of NB II, Inc.*
3(ii)(l) By-laws of Central Michigan Newspapers, Inc.*
3(ii)(m) By-laws of Cadillac Newspapers, Inc.*
3(ii)(n) By-laws of CMN Associated Publications, Inc.*
3(ii)(o) Partnership Agreement of Central Michigan Distribution Co., L.P.*
3(ii)(p) By-laws of Central Michigan Distribution Co., Inc.*
3(ii)(q) By-laws of Gladwin Newspapers, Inc.*
3(ii)(r) By-laws of Graph Ads Printing, Inc.*
3(ii)(s) By-laws of Midland Buyers Guide, Inc.*
3(ii)(t) By-laws of St. Johns Newspapers, Inc.*
3(ii)(u) Operating Agreement of Huron P.S., LLC**
3(ii)(v) Operating Agreement of Huron Newspapers, LLC*
3(ii)(w) Operating Agreement of Huron Holdings, LLC*
3(ii)(x) Operating Agreement of Northern Colorado Holdings, LLC*
3(ii)(y) Operating Agreement of NCR III, LLC*
3(ii)(z) Operating Agreement of NCH II, LLC*
3(ii)(aa) Operating Agreement of Northland Holdings, LLC*
3(ii)(bb) By-laws of CMN Holding, Inc.*
3(ii)(cc) By-laws of Brill Radio, Inc.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
3(ii)(dd) By-laws of Brill Newspapers, Inc.*
3(ii)(ee) Operating Agreement of Advertisers P.S., LLC*
3(ii)(ff) Operating Agreement of Central Printing Service, LLC*
3(ii)(gg) By-laws of Upper Michigan Management, Inc.*
3(ii)(hh) Operating Agreement of Upper Michigan Holdings, LLC*
3(ii)(ii) By-laws of Michigan Holdings, Inc.*
3(ii)(jj) Operating Agreement of Upper Michigan Newspapers, LLC*
3(ii)(kk) By-laws of BMC Holdings, Inc.*
3(ii)(ll) By-laws of Huron Holdings Management, Inc.*
3(ii)(mm) By-laws of Huron Newspapers Management, Inc.*
3(ii)(nn) By-laws of Huron P.S. Management, Inc.*
3(ii)(oo) By-laws of Northern Colorado Holdings Management, Inc.*
3(ii)(pp) By-laws of Northland Broadcasting Management, Inc.*
3(ii)(qq) By-laws of Northland Holdings Management, Inc.*
4.1 Indenture dated as of December 30, 1997 among Brill Media Company, LLC, Brill Media Management,
Inc., the Subsidiary Guarantors named therein, and United States Trust Company of New York, as
Trustee, with the forms of 12% Senior Notes due 2007 and Series B 12% Senior Notes due 2007
included therein*
4.2 Indenture dated as of December 30, 1997 among Brill Media Company, LLC, Brill Media Management,
Inc., the Subsidiary Guarantors named therein, and United States Trust Company of New York, as
Trustee, with the forms of Appreciation Notes due 2007 and Series B Appreciation Notes due 2007
included therein*
4.3 First Supplemental Indenture among Brill Media Company, LLC, Brill Media Management, Inc., the
Subsidiary Guarantors named therein, and United States Trust Company of New York, as Trustee,
relating to the Appreciation Notes due 2007*
4.4 First Supplemental Indenture among Brill Media Company, LLC, Brill Media Management, Inc., the
Subsidiary Guarantors named therein, and United States Trust Company of New York, as Trustee,
relating to the 12% Senior Notes due 2007*
5.1 Opinion of Carter, Ledyard & Milburn including consent*
5.2 Opinion of Thompson & McMullan, P.C. including consent*
8 Opinion of Carter, Ledyard & Milburn regarding certain Federal income tax matters, including
consent*
10.1(a) Performance Incentive Plan Agreement dated November 26, 1985 between Central Michigan Newspapers,
Inc. and Clifton E. Forrest*
10.1(b) Performance Incentive Plan Agreement dated November 26, 1985 between WIOV, Inc. and Alan L. Beck*
10.2 Managed Affiliates Subordination Agreement dated December 30, 1997 among Brill Media Company, L.P.
and certain Subsidiaries*
10.3 Management Agreements dated December 30, 1987 between various subsidiaries of Brill Media Company,
LLC and Brill Media Company, L.P.*
10.4(a) Managed Affiliate Management Agreement dated December 30, 1997 between Tri-State Broadcasting,
Inc. and TSB III, LLC*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
10.4(b) Managed Affiliate Management Agreement dated December 30, 1997 between Tri-State Broadcasting,
Inc. and TSB IV, LLC*
10.5(a) Managed Affiliate Promissory Note dated December 30, 1997 of TSB III, LLC in favor of Tri-State
Broadcasting, Inc.*
10.5(b) Managed Affiliate Promissory Note dated December 30, 1997 of TSB IV, LLC in favor of Tri-State
Broadcasting, Inc.*
10.6(a) Asset Purchase Agreement dated October 24, 1997 between CMBH, Inc. and MVP Radio, Inc.*
10.6(b) Asset Purchase Agreement dated October 24, 1997 between Central Missouri Broadcasting, Inc. and
Zimmer Radio of Mid-Missouri, Inc.*
10.7 Amended and Restated Credit Agreement dated as of September 30, 1997 by and among the Borrowers
named therein, Amresco Funding Corporation and Goldman Sachs Credit Partners L.P.*
10.8(a) Time Brokerage Agreement dated November 1, 1997 between CMB II, Inc. and MVP Radio, Inc.*
10.8(b) Time Brokerage Agreement dated November 1, 1997 between Central Missouri Broadcasting, Inc. and
Zimmer Radio of Mid-Missouri, Inc.*
10.8(c) Time Brokerage Agreement dated June 27, 1996 between NCR II, Inc. and Onyx, Inc.*
10.9 Purchase Agreement dated December 22, 1997 by and among Brill Media Company, LLC, Brill Media
Management, Inc., the Subsidiary Guarantors named therein, and NatWest Capital Markets Limited*
10.10(a) Registration Rights Agreement dated as of December 30, 1997 by and among Brill Media Company, LLC,
Brill Media Management, Inc., the Subsidiary Guarantors named therein, and NatWest Capital Markets
Limited*
10.10(b) Appreciation Notes Registration Rights Agreement dated as of December 30, 1997 by and among Brill
Media Company, LLC, Brill Media Management, Inc., the Subsidiary Guarantors named therein, and
NatWest Capital Markets Limited*
10.11(a) Revolving Credit Agreement dated December 30, 1997 between various Subsidiary Guarantors and BMC
Holdings, LLC*
10.11(b) Revolving Credit Note dated December 30, 1997 between various Subsidiary Guarantors and BMC
Holdings, LLC*
10.11(c) Promissory Note dated December 30, 1997 between BMC Holdings, LLC and Brill Media Company, LLC*
12.1 Ratio of Earnings to Fixed Charges*
21 Subsidiaries of Brill Media Company, LLC*
23.1 Consent of Carter, Ledyard & Milburn (included in its opinions filed as Exhibits 5.1 and 8)*
23.2 Consent of Ernst & Young LLP**
23.3 Consent of Thompson & McMullan, P.C. (included in its opinion filed as Exhibit 5.2)*
24 Power of Attorney (included on signature page)*
25.1 Statement of Eligibility on Form T-1 of Trustee (Series B 12% Senior Notes Due 2007)*
25.2 Statement of Eligibility on Form T-1 of Trustee (Series B Appreciation Notes Due 2007)*
27 Financial Data Schedule*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
99.1 Form of Letter of Transmittal to Tender for Exchange 12% Senior Notes due 2007*
99.2 Form of Letter of Transmittal to Tender for Exchange Appreciation Notes due 2007*
99.3 Form of Exchange Agency Agreement among Brill Media Company, LLC, Brill Media Management, Inc.,
the Subsidiary Guarantors named therein and United States Trust Company of New York, as Exchange
Agent*
</TABLE>
- ------------------------
* Previously filed
** Filed herewith
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 16, 1998, with respect to the balance sheet of
Brill Media Company, LLC, and our report dated November 14, 1997, except for
Note 2 as to which the date is December 12, 1997 and Note 10 and Note 12 as to
which the date is December 30, 1997, with respect to the financial statements of
The Radio and Newspaper Businesses of Alan R. Brill, both included in the
Registration Statement (Form S-4) and related Prospectus of Brill Media Company,
LLC and Brill Media Management, Inc. for the registration of $105,000,000 of
their 12% Senior Notes due 2007 and $3,000,000 of Appreciation Notes due 2007,
and the guarantees thereof issued by the subsidiaries of Brill Media Company,
LLC.
Ernst & Young LLP
Chicago, Illinois
March 30, 1998
