As filed with the Securities and Exchange Commission on March 25, 1996
REGISTRATION NO. 33-01947
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENERAL ELECTRIC COMPANY
(Exact name of Registrant as specified in its charter)
NEW YORK 3724 14-0689340
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number) Number)
organization)
3135 Easton Turnpike
Fairfield, Connecticut 06431-0001
(203) 373-2211
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Robert E. Healing, Esq.
Corporate Counsel
3135 Easton Turnpike
Fairfield, Connecticut 06431-0001
(203) 373-2243
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES
TO THE PUBLIC: As soon as possible after this Registration Statement
becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE CONSENT SOLICATION STATEMENT/PROSPECTUS
OF THE INFORMATION REQUIRED BY PART 1 OF FORM S-4
LOCATION IN CONSENT SOLICITATION
FORM S-4 ITEM STATEMENT/PROSPECTUS
------------- --------------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Forepart of Registration Statement;
Statement and Outside Front Outside Front Cover Page
Cover Page of Prospectus
2. Inside Front and Outside Inside Front Cover Page; Available
Back Cover Pages of Prospectus Information; Incorporation of
Certain Documents by Reference
3. Risk Factors, Ratio of Summary; Selected Consolidated
Earnings to Fixed Charges, and Financial Information; Ratio of
Other Information Earnings to Fixed Charges
4. Terms of the Transaction Summary; The Proposed Amendment;
Description of the Guarantee; The
Solicitation; Federal Income Tax
Consequences
5. Pro Forma Financial Not Applicable
Information
6. Material Contacts with the Not Applicable
Company Being Acquired
7. Additional Information Not Applicable
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters
8. Interests of Named Experts Not Applicable
and Counsel
9. Disclosure of Commission Not Applicable
Position on Indemnification
for Securities Act Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to Available Information; Incorporation
S-3 Registrants of Certain Documents by Reference;
Summary; The Companies
11. Incorporation of Certain
Information by Reference Available Information; Incorporation
of Certain Documents by Reference
12. Information with Respect to Not Applicable
S-2 or S-3 Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
14. Information with Respect to Not Applicable
Registrants Other Than
S-2 or S-3 Registrants
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to Not Applicable
S-3 Companies
16. Information with Respect to Available Information; Incorporation
S-2 or S-3 Companies of Certain Documents by Reference;
Summary; The Companies
17. Information with Respect to Not Applicable
Companies Other than S-2 or
S-3 Companies
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,
Consents or Authorizations are Summary; Incorporation of Certain
to be Solicited Documents by Reference; The
Solicitation
19. Information if Proxies, Not Applicable
Consents or Authorizations are
not to be Solicited, or in an
Exchange Offer
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 19, 1996
CONSENT SOLICITATION STATEMENT/PROSPECTUS
OUTLET BROADCASTING, INC.
SOLICITATION OF CONSENTS TO AMENDMENT OF THE INDENTURE
GOVERNING ITS 10 7/8% SENIOR SUBORDINATED NOTES DUE 2003
(CUSIP NO. 690090)
-------------------
GENERAL ELECTRIC COMPANY
PROSPECTUS
-------------------
Outlet Broadcasting, Inc. ("Outlet") hereby solicits (the "Solicitation")
the consent ("Consent") of registered holders of its 10 7/8% Senior Subordinated
Notes due 2003 (the "Notes") as of April , 1996 (the "Record Date") to an
amendment (the "Proposed Amendment") to the indenture dated as of July 8, 1993,
(as amended or supplemented from time to time, the "Indenture"), between Outlet
and Bankers Trust Company, as trustee under the Indenture (the "Trustee"),
pursuant to which the Notes were issued. The purpose of the Solicitation and the
Proposed Amendment is to amend or eliminate substantially all the principal
restrictive covenants and certain events of default contained in the Indenture
to enable Outlet to be operated without the restrictions of such covenants as a
wholly owned indirect subsidiary of the General Electric Company, a New York
corporation ("GE"), and to make the obligations of Outlet and GE under the
Indenture more consistent with the terms of other indebtedness issued or
guaranteed by GE.
On February 2, 1996 (the "Merger Effective Date"), CO Acquisition
Corporation, a wholly owned subsidiary of National Broadcasting Company, Inc.
("NBC"), which is in turn an indirect wholly owned subsidiary of GE, was merged
(the "Merger") with and into Outlet Communications, Inc., a Delaware corporation
and the owner of all the outstanding capital stock of Outlet ("OCI"). As a
result of the Merger, OCI became a wholly owned subsidiary of NBC ("OCI").
IN THE EVENT THE PROPOSED AMENDMENT IS ADOPTED, (I) GE WILL FULLY AND
UNCONDITIONALLY GUARANTEE (THE "GUARANTEE") THE DUE AND PUNCTUAL PAYMENT OF THE
PRINCIPAL OF AND INTEREST ON THE NOTES AS AMENDED BY THE PROPOSED AMENDMENT (THE
"AMENDED NOTES") AND (II) OUTLET WILL PAY A CONSENT FEE TO EACH REGISTERED
HOLDER OF NOTES, AS OF THE RECORD DATE, WHO DELIVERS A VALID CONSENT IN FAVOR OF
THE PROPOSED AMENDMENT PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) AND DOES
NOT REVOKE SUCH CONSENT PRIOR TO THE EFFECTIVE TIME (AS DEFINED BELOW) IN AN
AMOUNT IN CASH EQUAL TO $1.00 FOR EACH $1,000 PRINCIPAL AMOUNT OF NOTES (THE
"CONSENT FEE"). SEE "THE SOLICITATION--CONSENT FEE."
As of December 31, 1995, GE had outstanding approximately $260 million of
secured indebtedness consisting of industrial development/pollution control
bonds. All other outstanding indebtedness of GE, constituting approximately $115
billion as of December 31, 1995, is unsecured and, therefore, has equal ranking
to the Guarantee. Neither the Guarantee nor the Indenture will restrict GE's
ability to create indebtedness ranking senior to the Guarantee.
This Consent Solicitation Statement/Prospectus is being furnished to
registered holders of Notes as of the Record Date in connection with the
Solicitation. This Consent Solicitation Statement/Prospectus constitutes (i) a
Prospectus of GE with respect to the Guarantee to be issued in the event the
Proposed Amendment is effected and (ii) the Solicitation Statement of Outlet
with respect to the Solicitation.
(Continued on following page)
-------------------
THE SECURITIES OFFERED PURSUANT TO THIS CONSENT SOLICITATION STATE-
MENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS CONSENT
SOLICITATION STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
The date of this Consent Solicitation Statement/Prospectus is April , 1996.
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 STATE.
<PAGE>
(Coninuation of cover page)
The Solicitation is being made upon the terms and is subject to the
conditions in this Consent Solicitation Statement/Prospectus and the
accompanying form of Consent. See "The Solicitation." Adoption of the Proposed
Amendment requires the Consents of the registered holders as of the Record Date
of at least a majority (the "Requisite Consents") in aggregate outstanding
principal amount of Notes. Pursuant to the terms of the Indenture, Notes owned
by Outlet or any "Affiliate" (as defined in the Indenture) of Outlet are deemed
not to be outstanding for purposes of determining whether the Requisite Consents
have been obtained. Only the persons in whose names the Notes are registered as
of the Record Date in the registry maintained by the Trustee under the
Indenture, or persons who hold valid proxies from such registered holders, will
be eligible to consent to the Proposed Amendment. FOR PURPOSES OF THIS CONSENT
SOLICITATION STATEMENT/PROSPECTUS, THE TERM "RECORD HOLDER" OR "REGISTERED
HOLDER" SHALL BE DEEMED TO INCLUDE THE PARTICIPANTS (THE "DTC PARTICIPANTS")
THROUGH WHICH A BENEFICIAL OWNER'S NOTES ARE HELD IN THE DEPOSITORY TRUST
COMPANY ("DTC"). SEE "THE SOLICITATION--CONSENT PROCEDURES."
If Outlet delivers the Requisite Consents to the Trustee and the Proposed
Amendment is to be effected, GE, Outlet and the Trustee will execute a
supplemental indenture (the "Supplemental Indenture") effecting the Proposed
Amendment and the Guarantee, whereupon the Proposed Amendment will be binding
upon and the Guarantee will inure to the benefit of each holder of the Notes,
whether or not such holder delivered a Consent. See "The Proposed Amendment" and
"Description of the Guarantee."
THE SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON MAY , 1996,
UNLESS EXTENDED FOR A SPECIFIED PERIOD OR ON A DAILY BASIS UNTIL THE REQUISITE
CONSENTS HAVE BEEN RECEIVED (THE "EXPIRATION DATE"). SEE "THE
SOLICITATION--EXPIRATION DATE; EXTENSIONS; AMENDMENT." HOLDERS AS OF THE RECORD
DATE MAY REVOKE THEIR CONSENTS AT ANY TIME UP TO THE EXPIRATION DATE, BUT SUCH
CONSENTS WILL BECOME IRREVOCABLE UPON THE EXECUTION OF THE SUPPLEMENTAL
INDENTURE BY OUTLET, GE AND THE TRUSTEE (THE "EFFECTIVE TIME"), WHICH WILL NOT
BE PRIOR TO THE EXPIRATION DATE. SEE "THE SOLICITATION--REVOCATION OF CONSENTS."
Holders who consent to the Proposed Amendment will be deemed to have waived
any defaults and their consequences under the Indenture or the Notes. As of the
date of this Consent Solicitation Statement/Prospectus, there were no uncured
defaults under the Indenture.
THE OFFER OF SECURITIES HEREUNDER IS NOT BEING MADE TO, AND OUTLET WILL NOT
SOLICIT CONSENTS FROM, HOLDERS OF NOTES IN ANY JURISDICTION IN WHICH THE OFFER
OF THE SECURITIES OR THE SOLICITATION OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH APPLICABLE SECURITIES OR BLUE SKY LAWS.
Questions and requests for assistance may be directed to the Company, at its
address and telephone number set forth on the last page of this Consent
Solicitation Statement/Prospectus. Additional copies of this Consent
Solicitation Statement/Prospectus and the Consent may be obtained from the
Company.
FOR FLORIDA INVESTORS
THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT.
IF SALES ARE MADE TO FIVE (5) OR MORE INVESTORS IN FLORIDA, ANY FLORIDA
INVESTOR MAY, AT HIS OPTION, VOID ANY PURCHASE HEREUNDER WITHIN A PERIOD OF
THREE (3) DAYS AFTER HE (A) FIRST TENDERS OR PAYS TO THE PARTNERSHIP, AN AGENT
OF THE PARTNERSHIP OR AN ESCROW AGENT THE CONSIDERATION REQUIRED HEREUNDER OR
(B) DELIVERS HIS EXECUTED SUBSCRIPTION AGREEMENT, WHICHEVER OCCURS LATER. TO
ACOMPLISH THIS, IT IS SUFFICIENT FOR A FLORIDA INVESTOR TO SEND A LETTER OR
TELEGRAM TO THE PARTNERSHIP WITHIN SUCH THREE (3) DAY PERIOD, STATING THAT HE
IS VOIDING AND RESCINDING THE PURCHASE. IF AN INVESTOR SENDS A LETTER, IT IS
PRUDENT TO DO SO BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO INSURE THAT
THE LETTER IS RECEIVED AND TO EVIDENCE THE TIME OF MAILING.
FOR NORTH CAROLINA RESIDENTS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER
OF INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF
INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS DOCUMENT.
<PAGE>
AVAILABLE INFORMATION
GE and Outlet are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements, and
other information may be inspected and copied or obtained by mail upon the
payment of the Commission's prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Seven World Trade Center, New York, New York 10048.
Copies of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. In addition, reports, proxy statements and other
information filed by GE can be inspected at the offices of the New York Stock
Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005, on which
exchange GE's common stock is listed.
Upon consummation of the Solicitation and the execution of the Supplemental
Indenture, Outlet will cease to be subject to the information and the reporting
requirements of the Exchange Act. GE expects to continue to make its Exchange
Act periodic report filings. Any financial statements provided in such filings
made by GE will include financial information of Outlet, presented on a
consolidated basis.
GE has filed with the Commission a Registration Statement on Form S-4
(together with all amendments, supplements and exhibits thereto, referred to
herein as the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Guarantee offered hereby.
This Consent Solicitation Statement/Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement and any amendments thereto, including exhibits filed as a
part thereof are available for inspection and copying as set forth above.
Statements contained in this Consent Solicitation Statement/Prospectus or in any
document incorporated in this Consent Solicitation Statement/Prospectus by
reference as to the contents of any contract, agreement or other document
referred to herein are not necessarily complete and in each instance reference
is made to the copy of such contract agreement or other document filed as an
exhibit to the Registration Statement or such document, each such statement
being qualified in all respects by such reference.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
CONSENT SOLICITATION STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING OF
SECURITIES DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GE OR
OUTLET OR ANY OTHER PERSON. THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE,
ANY SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
CONSENT SOLICITATION STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES
DESCRIBED HEREIN SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GE AND OUTLET SINCE THE DATE HEREOF
OR THAT THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS INCORPORATES CERTAIN
DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING
ANY
i
<PAGE>
BENEFICIAL OWNER, UPON REQUEST FROM, PHILIP D. AMEEN, VICE PRESIDENT,
COMPTROLLER AND PRINCIPAL ACCOUNTING OFFICER, GENERAL ELECTRIC COMPANY, 3135
EASTON TURNPIKE, FAIRFIELD, CT 06431-0001, TELEPHONE NUMBER (203) 373-2211. IN
ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, ANY REQUEST SHOULD BE
RECEIVED BY MAY , 1996.
The following documents, which have been filed with the Commission are
hereby incorporated herein by reference:
GE's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
(Commission File No.1-35).
Outlet's Annual Report on Form 10-K/A for its fiscal year ended December 31,
1995 (Commission File No. 33-62292)
Outlet's Annual Report on Form 10-K/A for its fiscal year ended December
31, 1995 is attached hereto as Appendix III.
All documents and reports filed by GE and Outlet pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the Solicitation shall be deemed to be incorporated by reference
herein and to be a part hereof from the respective dates of filing of such
documents or reports. All information appearing in this Consent Solicitation
Statement/Prospectus or in any document incorporated herein by reference is not
necessarily complete and is qualified in its entirety by the information and
financial statements (including notes thereto) appearing in the documents
incorporated herein by reference and should be read together with such
information and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Consent Solicitation Statement/Prospectus to the extent
that a statement contained herein (or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein) modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part hereof, except as so modified or superseded.
ii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and notes thereto contained elsewhere or
incorporated by reference in this Consent Solicitation Statement/Prospectus. See
"Incorporation of Certain Documents by Reference."
THE COMPANIES
GE (General Electric Company and consolidated affiliates) is one of the
largest and most diversified industrial corporations in the world. From the time
of GE's incorporation in 1892, GE has engaged in developing, manufacturing and
marketing a wide variety of products for the generation, transmission,
distribution, control and utilization of electricity. Through its wholly owned
subsidiaries, GE engages in financial services, multiple line property and
casualty reinsurance and furnishing network television services. Outlet is a
wholly owned subsidiary of NBC, which in turn is an indirect wholly owned
subsidiary of GE. NBC's principal businesses are the furnishing within the
United States of network television services to affiliated television stations,
the production of live and recorded television programs, the operation, under
licenses from the Federal Communications Commission (the "FCC"), of television
broadcasting stations, the operation of five cable/satellite networks around the
world, and invesment and programming activities in multimedia and cable
television.
On February 2, 1996, Outlet was acquired by NBC pursuant to a Merger
Agreement dated as of August 2, 1995 (the "Merger Agreement") among OCI, NBC and
CO Acquisition Corp., a wholly owned subsidiary of NBC ("Merger Sub"). Pursuant
to the Merger Agreement, Outlet, a wholly owned subsidiary of OCI, became a
wholly owned subsidiary of NBC, which is a wholly owned subsidiary of GE.
GE's principal executive offices are located at 3135 Easton Turnpike,
Fairfield, CT 06431-0001 and its telephone number is (203) 373-2211.
Outlet's principal executive offices are located at 23 Kenney Drive,
Cranston, RI 02920 and its telephone number is (401) 455-9200.
THE SOLICITATION
Outlet is soliciting the Consents of registered holders of the Notes as of
the Record Date to the Proposed Amendment. The purpose of the Solicitation and
the Proposed Amendment is to eliminate or amend certain restrictive covenants
and events of default contained in the Indenture to enable NBC to operate Outlet
as a wholly owned subsidiary without the restrictions and limitations contained
in such covenants and to make the obligations of Outlet and GE under the
Indenture more consistent with the terms of other indebtedness issued or
guaranteed by GE.
In the event the Proposed Amendment is effected, (i) GE will fully and
unconditionally guarantee the due and punctual payment of the principal of and
interest on the Amended Notes and (ii) Outlet will pay a Consent Fee to each
registered holder of Notes, as of the Record Date, who delivers a valid Consent
in favor of the Proposed Amendment prior to the Expiration Date and does not
revoke such Consent prior to the Effective Time in an amount in cash equal to
$1.00 for each $1,000 principal amount of Notes.
Holders as of the Record Date who fail to deliver valid Consents or who
revoke their Consent prior to the Effective Time will not receive a Consent Fee.
See "The Solicitation--Consent Fee."
PURPOSES AND EFFECTS OF THE SOLICITATION AND GUARANTEE OFFER
The Solicitation is intended to increase NBC's flexibility to operate Outlet
as a wholly owned subsidiary and to make the obligations of Outlet and GE under
the Indenture more consistent with the terms of other indebtedness issued or
guaranteed by GE. The Proposed Amendment would (1) eliminate the Maintenance of
Property obligations in Section 1005 of the Indenture, the Payment of Taxes and
Other Claims obligations in Section 1006 of the Indenture, the Limitation on
Transactions with Affiliates in Section 1007 of the Indenture, the Limitation on
Restricted Payments in Section 1008
1
<PAGE>
of the Indenture, the Limitation on Indebtedness in Section 1009 of the
Indenture, the Limitation Concerning Distributions or Transfers by Subsidiaries
in Section 1011 of the Indenture, the Limitation on Asset Sales in Section 1012
of the Indenture, the Limitations on Issuance and Sale of Capital Stock of
Subsidiaries in Section 1013 of the Indenture and the Restriction on Incurrence
of Senior Subordinated Indebtedness in Section 1014 of the Indenture; (2) amend
the reporting requirements in Section 704 of the Indenture to require that only
the reports and other information required to be filed with the Commission under
the Exchange Act by Outlet and GE be made available to holders of the Notes; (3)
amend the definition of "Events of Default" contained in Section 501 of the
Indenture to (i) extend the cure period for defaults under the Indenture (other
than payment defaults) from 30 days to 60 days, (ii) eliminate the "cross
default" Event of Default, (iii) eliminate the Event of Default relating to the
entry against Outlet of a judgment in excess of $1 million or any material
nonmonetary judgments which, in any such case, remains unsatisfied or unstayed
for a period of 60 days, and (iv) amend the bankruptcy default to eliminate the
bankruptcy of Outlet's subsidiaries as an Event of Default and to add the
bankruptcy of GE as an Event of Default; and (4) amend the Corporate Existence
obligations under Section 1004 of the Indenture to eliminate any obligation to
preserve the corporate, partnership or other existence of Outlet's subsidiaries.
If the Solicitation is effective, the Proposed Amendment will also add the
Guarantee to the Indenture (see "Description of the Guarantee") and make certain
other technical or conforming changes to the Indenture that result from the
Proposed Amendment and the addition of the Guarantee. TO ENCOURAGE HOLDERS OF
NOTES TO PARTICIPATE IN THE SOLICITATION, GE WILL FULLY AND UNCONDITIONALLY
GUARANTEE THE AMENDED NOTES PURSUANT TO THE GUARANTEE AND OUTLET WILL PAY THE
CONSENT FEE AS DISCUSSED ABOVE. See "The Proposed Amendment."
The Notes were issued on July 8, 1993. At that time, the Notes were rated
CCC- and B3 by Standard and Poor's Corporation ("S&P") and Moody's Investors
Service, Inc. ("Moody's"), respectively. After Outlet was acquired by NBC on
February 2, 1996, S&P raised its rating on the Notes from B- to AAA. THE
NOTES ARE NOT CURRENTLY GUARANTEED BY GE.
Upon receipt of the Requisite Consents and execution and delivery of the
Supplemental Indenture, the Proposed Amendment will become effective, and each
Note will be deemed amended thereby and will be governed by the Indenture as
amended by the Supplemental Indenture. Thereafter, all current holders of the
Notes, including non-consenting holders, and all subsequent holders of Notes
will be bound by the Proposed Amendment and will have the benefit of the
Guarantee.
CERTAIN CONSIDERATIONS RELATING TO THE PROPOSED AMENDMENT
Set forth below are certain considerations in voting for or against the
Proposed Amendment. The list is not all inclusive and there may be additional
advantages or disadvantages in voting for the Proposed Amendment not set forth
below.
Certain advantages in voting for the Proposed Amendment:
. If the Proposed Amendment is adopted, GE will fully and unconditionally
guarantee the Notes as amended.
. If the Proposed Amendment is adopted, consenting Noteholders will
receive a Consent Fee. Noteholders voting against the Proposed Amendment or
not voting at all will not receive the Consent Fee.
A Consideration for voting against the Proposed Amendment:
. If the Proposed Amendment is not approved, the existing covenants and
defaults will remain in effect and the Notes will be subject to the existing
restrictive covenants and defaults.
2
<PAGE>
REQUISITE CONSENTS
Adoption of the Proposed Amendment requires the receipt of the Requisite
Consents, consisting of the Consent of the registered holders of Notes, as of
the Record Date, of a majority in aggregate principal amount of the Notes
outstanding and not owned by Outlet or any of its Affiliates. As of the date of
this Consent Solicitation Statement/Prospectus, $59,950,000 of Notes were
outstanding and none was held by Outlet or its Affiliates.
The failure of a holder of Notes to deliver a Consent (including any
failures resulting from broker non-votes) will have the same effect as if such
holder had voted "Against" the Proposed Amendment. See "The
Solicitation--Requisite Consents."
EXPIRATION DATE AND EFFECTIVE TIME; EXTENSIONS
The term "Expiration Date" means 5:00 p.m., New York time, on May , 1996,
unless Outlet, in its sole discretion, extends the period during which the
Solicitation is open, in which event the term "Expiration Date" means the latest
time and date to which the Solicitation is so extended. Outlet reserves the
right to extend the Solicitation at any time, whether or not the Requisite
Consents have been received, by giving oral or written notice to the Trustee no
later than 9:00 a.m., New York time, on the next business day after the
previously announced Expiration Date. Any such extension will be followed as
promptly as practicable by notice thereof by press release or other public
announcement (or by written notice to the registered holders of the Notes as of
the Record Date). Such announcement or notice may state that Outlet is extending
the Solicitation for a specified period of time or on a daily basis until 5:00
p.m., New York time, on the date on which the Requisite Consents have been
received.
Consents will be irrevocable at the Effective Time (the time that GE, Outlet
and the Trustee execute the Supplemental Indenture, which will not be prior to
the Expiration Date). See "The Solicitation -- Revocation of Consents." Subject
to the satisfaction of certain conditions (see "The Solicitation--Conditions of
the Solicitation"), promptly after the Expiration Date, GE, Outlet and the
Trustee will execute the Supplemental Indenture, which will be effective upon
its execution. Thereafter, all current holders of the Notes, including
non-consenting holders, and all subsequent holders of the Notes will be bound by
the Proposed Amendment and will have the benefit of the Guarantee. See "The
Proposed Amendment" and "Description of the Guarantee."
CONSENT FEE
Registered holders of Notes as of the Record Date whose properly executed
Consents are received prior to the Expiration Date and not revoked prior to the
Effective Time will be eligible to receive the Consent Fee. The Consent Fee will
be $1.00 in cash for each $1,000 in principal amount of Notes with respect to
which a Consent is received and not revoked prior to the Effective Time. ONLY
HOLDERS OF NOTES AS OF THE RECORD DATE WHO TIMELY CONSENT WITHOUT REVOCATION TO
THE PROPOSED AMENDMENT WILL BE ELIGIBLE TO RECEIVE THE CONSENT FEE. ANY
SUBSEQUENT TRANSFEREES OF SUCH HOLDERS AND ANY HOLDERS OF NOTES AS OF THE RECORD
DATE WHO DO NOT TIMELY CONSENT TO THE PROPOSED AMENDMENT (AND THEIR TRANSFEREES)
WILL NOT BE ELIGIBLE TO RECEIVE THE CONSENT FEE EVEN THOUGH THE PROPOSED
AMENDMENT, IF APPROVED THROUGH THE RECEIPT OF THE REQUISITE CONSENTS, WILL BE
BINDING ON THEM. In the event the Requisite Consents are obtained and the
Proposed Amendment is effected, all holders of Notes, whether or not they
delivered Consents, will receive the benefit of the Guarantee.
Outlet's obligation to pay the Consent Fee is contingent upon receipt of the
Requisite Consents, the execution of the Supplemental Indenture and
effectiveness of the Proposed Amendment.
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CONSENT PROCEDURES
Only those persons who are registered holders of the Notes as of the Record
Date may execute and deliver a Consent. A beneficial owner of Notes who is not
the registered holder of such Notes (e.g., a beneficial holder whose Notes are
registered in the name of a nominee such as a bank or a brokerage firm) must
arrange for the registered holder either (i) to execute a Consent and deliver it
to Outlet on such beneficial owner's behalf or to such beneficial owner for
forwarding to Outlet by such beneficial owner or (ii) to forward a duly executed
proxy from the registered holder authorizing the beneficial holder to execute
and deliver a Consent with respect to the Notes on behalf of such registered
holder. A form of proxy that may be used for such purpose is included in the
Consent. For purposes of this Consent Solicitation Statement/Prospectus, (i) the
term "record holder" or "registered holder" shall be deemed to include DTC
Participants and (ii) DTC has authorized DTC Participants to execute Consents as
if they were registered holders.
Giving a Consent will not affect a registered holder's right to sell or
transfer the Notes. All Consents received and not revoked prior to the Effective
Time will be effective notwithstanding a record transfer of such Notes
subsequent to the Record Date, unless the registered holder of such Notes as of
the Record Date revokes such Consent prior to the Effective Time by following
the procedures set forth under "Revocation of Consents" below.
HOLDERS OF NOTES AS OF THE RECORD DATE WHO WISH TO CONSENT SHOULD MAIL, HAND
DELIVER, SEND BY OVERNIGHT COURIER OR FACSIMILE (CONFIRMED BY THE EFFECTIVE TIME
BY PHYSICAL DELIVERY) THEIR PROPERLY COMPLETED AND EXECUTED CONSENTS TO OUTLET
AT THE ADDRESS SET FORTH ON THE BACK COVER PAGE HEREOF AND ON THE CONSENT IN
ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN AND THEREIN. CONSENTS SHOULD
BE DELIVERED TO OUTLET, NOT TO GE OR THE TRUSTEE. HOWEVER, OUTLET RESERVES THE
RIGHT TO ACCEPT ANY CONSENT RECEIVED BY GE OR THE TRUSTEE.
UPON EXECUTION OF THE SUPPLEMENTAL INDENTURE, OUTLET WILL PROVIDE FOR THE
EXCHANGE OF NOTES FOR AMENDED NOTES ENDORSED WITH THE GUARANTEE.
REGISTERED HOLDERS SHOULD NOT TENDER OR DELIVER NOTES AT THIS
TIME.
The registered ownership of Notes as of the Record Date shall be proved by
the Trustee, as registrar of the Notes. All questions as to the validity, form
and eligibility (including time of receipt) regarding the Consent procedures
will be determined by Outlet in its sole discretion, which determination will be
conclusive and binding subject only to such final review as may be prescribed by
the Trustee concerning proof of execution and of ownership. Outlet reserves the
right to reject any or all Consents that are not in proper form or the
acceptance of which could, in the opinion of Outlet or its counsel, be unlawful.
None of GE or Outlet or any of their affiliates, the Trustee or any other person
shall be under any duty to give any notification of any defects or
irregularities in connection with deliveries of particular Consents, nor shall
any of them incur any liability for failure to give such notification.
REVOCATION OF CONSENTS
Prior to the Effective Time and notwithstanding any transfer of the Notes to
which such Consent relates, any registered holder of Notes as of the Record Date
may revoke any Consent given as to its Notes or any portion of such Notes (in
integral multiples of $1,000). A registered holder of Notes as of the Record
Date desiring to revoke a Consent must, prior to the Effective Time, deliver to
Outlet at the address set forth on the back cover page of this Consent
Solicitation Statement/Prospectus and on the Consent a written revocation of
such Consent (which may be in the form of a subsequent Consent
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marked with a specification, i.e., "For" or "Against," different from that set
forth on the Consent as to which the revocation is being given) containing the
name of such registered holder, the serial numbers of the Notes to which such
revocation relates, the principal amount of Notes to which such revocation
relates and the signature of such registered holder. See "The
Solicitation--Revocation of Consents."
CONDITIONS OF THE SOLICITATION
Consents will be irrevocable at the Effective Time, which will not be prior
to the Expiration Date. Subject to the satisfaction of certain conditions
described below, promptly after the Expiration Date, the Trustee, Outlet and GE
will execute the Supplemental Indenture, which will be effective upon its
execution. Execution of the Supplemental Indenture is conditioned upon (i) the
receipt of the Requisite Consents and (ii) at the election of Outlet, the
absence of any law or regulation which would, and the absence of any injunction
or action or other proceeding (pending or threatened) which (in the case of any
action or proceeding, if adversely determined) would, make unlawful or invalid
or enjoin the implementation of the Proposed Amendment, the entering into of the
Supplemental Indenture or the payment of the Consent Fees or question the
legality or validity thereof. The Solicitation may be abandoned by Outlet at any
time prior to the execution of the Supplemental Indenture, for any reason, in
which case all Consents will be voided and the Guarantee will not be issued and
the Consent Fee will not be paid.
FEDERAL INCOME TAX CONSEQUENCES
GE and Outlet intend to take the position that the adoption of the Proposed
Amendment and the Guarantee and the payment of the Consent Fee will not result
in a deemed exchange of the Notes for federal income tax purposes. In that
event, except for the payment of the Consent Fee, the transactions contemplated
by the Consent Solicitation would not result in any federal income tax
consequences to a holder of the Notes. GE and Outlet further intend to treat the
Consent Fee as a fee paid to holders that grant Consents pursuant to the Consent
Solicitation. Consistent with that treatment, a holder would recognize ordinary
income equal to the amount of cash received.
Should the adoption of the Proposed Amendment and the Guarantee and the
payment of the Consent Fee be deemed an exchange of the Notes for federal income
tax purposes, then the Notes would be deemed exchanged for new notes ("New
Notes"). If the Notes and the New Notes constitute securities (the determination
of "security" status is generally made by reference to the term of the debt
(i.e., the original term for the Notes and the remaining term for the New Notes)
with debt instruments with a term of ten years or more being treated as
securities, and with debt instruments with terms of less than five years
generally not being treated as securities) of Outlet for federal income tax
purposes, then a holder would recognize no gain or loss (except as noted below)
as a result of the transaction contemplated by the Consent Solicitation. If, as
is expected, the New Notes were not considered securities of Outlet for federal
income tax purposes, a holder would recognize gain or loss in the amount equal
to the difference between the trading price on the date of the deemed exchange
of the New Notes and the holder's adjusted tax basis in the Notes deemed
exchanged. Furthermore, if holders were treated as exchanging their Notes for
New Notes for federal tax purposes, the Consent Fee may be treated as additional
consideration received in such exchange.
Because of the absence of final Treasury Regulations, no opinion is
expressed by counsel to GE and Outlet as to whether the Proposed Amendment and
the Guarantee and the payment of the Consent Fee result in a deemed exchange for
federal tax purposes. In addition, because of the lack of direct authority
concerning the issue, no opinion is expressed as to the federal income tax
consequences of the receipt of the Consent Fee. Further, no ruling has been
requested from the Internal Revenue Service regarding the tax consequences of
the Proposed Amendment and the Guarantee and payment of the Consent Fee. No
assurance can be given that the positions intended to be taken by GE and Outlet
described above will be accepted by the Internal Revenue Service.
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For a summary of the material United States Federal income tax consequences
to holders of the Notes of the Proposed Amendment and the Guarantee, see
"Certain Federal Income Tax Consequences."
NO SOLICITING AGENT
Neither Outlet nor GE will pay or give directly or indirectly any commission
or other remuneration to any soliciting agent or other person in connection with
the Solicitation. Outlet and GE will solicit Consents and will attempt to
respond to inquiries of holders of Notes.
Requests for additional copies of this Consent Solicitation
Statement/Prospectus or the form of Consent may be directed to Outlet at its
address and telephone number set forth on the last page of this Consent
Solicitation Statement/Prospectus.
CURRENT MARKET FOR THE NOTES
The Notes have been registered under the Securities Act but are not listed
on any exchange. Prices for the Notes are determined in the marketplace and may
be influenced by many factors, including the breadth and liquidity of their
market, investor perception of the financial condition and business prospects of
GE and Outlet, the level of interest rates and general market conditions.
On March 2, 1996, pursuant to a Notice of Amended Change of Control and
Change of Control Offer and in accordance with the Indenture, Outlet commenced
an offer (the "Change of Control Offer") to repurchase each registered holder's
Notes in whole, or in part in integral multiples of $1,000, in cash in an amount
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon, if any, to the Change of Control Payment Date specified in the
Change of Control Offer. The expiration date of the Change of Control Offer was
5:00 P.M., New York time, on April 1, 1996. Pursuant to the Change of Control
Offer, $50,000 in aggregate principal amount of Notes were tendered. As a
result, as of the date of this Consent Solicitation Statement/Prospectus,
$59,950,000 of Notes were outstanding.
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INTRODUCTION
This Consent Solicitation Statement/Prospectus constitutes (i) a Prospectus
of GE with respect to the Guarantee to be issued in the event the Proposed
Amendment is effected and (ii) the Solicitation Statement of Outlet with respect
to the Solicitation. This Consent Solicitation Statement/Prospectus is first
being mailed on or about April , 1996 to registered holders of the Notes as of
the Record Date.
THE COMPANIES
GENERAL ELECTRIC COMPANY
GE is one of the largest and most diversified industrial corporations in the
world. From the time of its incorporation in 1892, it has engaged in developing,
manufacturing and marketing a wide variety of products for the generation,
transmission, distribution, control and utilization of electricity. Over the
years, development and application of related and new technologies have
broadened considerably the scope of the activities of GE and its affiliates.
GE's products include, but are not limited to, lamps and other lighting
products; major appliances for the home; industrial automation products and
components; motors; electrical distribution and control equipment; locomotives;
power generation and delivery products; nuclear reactors; nuclear power support
services and fuel assemblies; commercial and military aircraft jet engines;
materials, including engineered plastics, silicones and cutting materials; and a
wide variety of high technology products, including products used in medical
diagnostic applications.
GE also offers a broad variety of services including product support
services; electrical product supply houses; electrical apparatus installation,
engineering, repair and rebuilding services; and computer-related information
services. Through GE Capital Services ("GECS") and its two principal
subsidiaries, GE engages in a broad spectrum of financial services including
consumer financing, commercial and industrial financing, real estate financing,
asset management and leasing, annuity and mutual fund sales, specialty insurance
and reinsurance. Other services offered include U.S. satellite communications
furnished by GE Americom. Another wholly owned subsidiary, NBC, is engaged
principally in furnishing network television services to affiliated television
stations, in producing live and recorded television programs, in operating,
under licenses from the FCC, television broadcasting stations, in operating five
cable/satellite networks around the world and in investing and programming
activities in multi-media and cable television. GE also licenses patents and
provides technical know-how related to products it developed, but such
activities are not material to GE.
In November 1994, GE and GECS elected to terminate the operations of Kidder,
Peabody by initiating an orderly liquidation of its assets and liabilities. As
part of the liquidation plan, GECS received securities of Paine Webber Group
Inc. in exchange for certain broker-dealer assets and operations. Principal
activities that were discontinued include securities underwriting, sales and
trading of equity and fixed income securities, financial futures activities,
advisory services for mergers and acquisitions and other corporate finance
matters, research services and asset management. GE's Aerospace business
segment, its subsidiary GE Government Services, Inc., and a component of GE that
operated Knolls Atomic Power Laboratory under contract with the U.S. Department
of Energy (together, "GE Aerospace") were transferred on April 2, 1993, to a new
company controlled by the shareholders of Martin Marietta Corporation (a
predecessor company of Lockheed Martin, Inc.). The businesses transferred
provided high-technology products and services such as automated test systems,
electronics, avionic systems, computer software, armament systems, military
vehicle equipment, missile system components, simulation systems, spacecraft,
communication systems, radar, sonar and systems integration, and a variety of
specialized services for government customers. Kidder, Peabody and GE Aerospace
have been classified as discontinued operations in the financial statements of
GE.
GE has substantial export sales from the United States. In addition, GE has
majority and minority or other joint venture interests in a number of non-U.S.
companies engaged primarily in manufacturing
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and distributing products and providing nonfinancial services similar to those
sold within the United States. GECS' financial services operations outside of
the United States have expanded considerably over the past several years.
GE was incorporated in the State of New York in 1892. Its principal
executive offices are located at 3135 Easton Turnpike, Fairfield, Connecticut
06431, telephone number (203) 373-2211.
OUTLET
Outlet is a wholly owned subsidiary of OCI. The operations of Outlet, a
television broadcasting company, consist of three owned television stations
along and one television station for which Outlet supplies programming under a
time brokerage agreement. The owned stations include two NBC network-affiliated
VHF television stations and one NBC network-affiliated UHF television station.
Outlet has also entered into an agreement to supply programming under a time
brokerage agreement with the permittee of a station still under construction in
New Bedford, Massachusetts, WLWC(TV) (formerly WFDG(TV). The two VHF television
stations are WJAR(TV), Providence, Rhode Island, which serves the Providence-New
Bedford market area and WCMH(TV), which is located in Columbus, Ohio and serves
that market. The owned UHF television station is WNCN(TV), Goldsboro, North
Carolina which has studios and offices located in Raleigh, North Carolina and
broadcasts in the Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount),
North Carolina market area. Outlet acquired WNCN(TV) on August 10, 1994.
Since April 18, 1994, Outlet has also provided programming to UHF television
station WWHO(TV), Chillicothe, Ohio, under a time brokerage agreement with that
station's licensee. Outlet serves as a broker for the sale of that station's
advertising time and provides it with certain programming and operating
capabilities. In return, Outlet retains a substantial percentage of WWHO(TV)'s
net operating income to the extent that it exceeds cumulative net operating
losses. This station is an affiliate of The WB Television Network. By letters
dated March 7, 1996, the Licensee of WWHO(TV) and the permittee of WLWC(TV),
which are under common ownership, purported to terminate the two time brokerage
agreements referred to above on the basis of claims that Outlet had breached the
agreements. By letters dated March 11, 1996, Outlet advised the licensee of
WWHO(TV) and the permittee of WLWC(TV) that Outlet had not breached the
agreements, that the termination letters dated March 7 were therefore
ineffective, and that the agreements remain in full force and effect. This
dispute remains unresolved.
Pursuant to the Merger Agreement, Outlet, a wholly owned subsidiary of OCI,
became a wholly owned subsidiary of NBC, which is a wholly owned subsidiary of
GE.
Outlet's principal executive offices are located at 23 Kenney Drive,
Cranston, RI 02920 and its telephone number is (401) 455-9200.
THE PROPOSED AMENDMENT
The Solicitation is intended to increase NBC's flexibility to operate Outlet
as a wholly owned subsidiary and to make the obligations of Outlet and GE under
the Indenture more consistent with the terms of other indebtedness issued or
guaranteed by GE. The Proposed Amendment would (1) eliminate the Maintenance of
Property obligations in Section 1005 of the Indenture, the Payment of Taxes and
Other Claims obligations in Section 1006 of the Indenture, the Limitation on
Transactions with Affiliates in Section 1007 of the Indenture, the Limitation on
Restricted Payments in Section 1008 of the Indenture, the Limitation on
Indebtedness in Section 1009 of the Indenture, the Limitation Concerning
Distributions or Transfers by Subsidiaries in Section 1011 of the Indenture, the
Limitation on Asset Sales in Section 1012 of the Indenture, the Limitations on
Issuance and Sale of Capital Stock
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of Subsidiaries in Section 1013 of the Indenture and the Restriction on
Incurrence of Senior Subordinated Indebtedness in Section 1014 of the Indenture;
(2) amend the reporting requirements in Section 704 of the Indenture to require
that only the reports and other information required to be filed with the
Commission under the Exchange Act by Outlet and GE be made available to holders
of the Notes; (3) amend the definition of "Events of Default" contained in
Section 501 of the Indenture to (i) extend the cure period for defaults under
the Indenture (other than payment defaults) from 30 days to 60 days, (ii)
eliminate the "cross default" Event of Default, and (iii) eliminate the Event of
Default relating to the entry against Outlet of a judgment in excess of $1
million or any material nonmonetary judgments which, in any such case, remains
unsatisfied or unstayed for a period of 60 days; and (4) amend the Corporate
Existence obligations under Section 1004 of the Indenture to eliminate any
obligation to preserve the corporate, partnership or other existence of Outlet's
subsidiaries. If the Solicitation is effective, the Proposed Amendment will also
add the Guarantee to the Indenture (see "Description of the Guarantee") and make
certain other technical or conforming changes to the Indenture that result from
the Proposed Amendment and the addition of the Guarantee. TO ENCOURAGE HOLDERS
OF NOTES TO PARTICIPATE IN THE SOLICITATION, GE WILL FULLY AND UNCONDITIONALLY
GUARANTEE THE AMENDED NOTES PURSUANT TO THE GUARANTEE AND OUTLET WILL PAY THE
CONSENT FEE AS DISCUSSED ABOVE.
The text of the preceding Sections of the Indenture is attached to this
Consent Solicitation Statement/Prospectus as Appendix I. In the event the
Proposed Amendment is effected, GE will fully and unconditionally guarantee the
due and punctual payment of the principal of and interest on the Amended Notes.
The text of the Guarantee, which will be set forth in the Supplemental
Indenture, is attached to this Consent Solicitation Statement/Prospectus as
Appendix II.
THE FOLLOWING STATEMENTS, UNLESS THE CONTEXT OTHERWISE REQUIRES, ARE
SUMMARIES OF THE SUBSTANCE OR GENERAL EFFECT OF CERTAIN PROVISIONS OF THE
INDENTURE, OR THE PROPOSED AMENDMENT, AND ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO THE INDENTURE AND THE PROPOSED AMENDMENT.
Unless otherwise defined, capitalized terms used in the following
descriptions of current Indenture provisions are used as defined in the
Indenture and capitalized terms used in the following descriptions of proposed
Indenture provisions are used as defined in the Supplemental Indenture.
COVENANTS RELATING TO EVENTS OF DEFAULT AND ACCELERATION
Current Provision
Sections 501 and 502 of the Indenture currently define Events of Default and
remedies in respect thereof. Each of the following is an Event of Default under
the Indenture: (1) failure to pay any installment of interest on any Note when
due and payable, and the continuance of such default for a period of 30 days,
whether or not such payment shall be prohibited by the provisions of the
Indenture; (2) failure to pay principal or premium, if any, on any Note at its
maturity, upon repurchase, redemption, acceleration or otherwise, whether or not
such payment shall be prohibited by the provisions of the Indenture; (3) failure
by Outlet to perform or comply with any covenant, agreement or warranty in the
Indenture (other than the obligations specified in clauses (1) and (2) above)
and continuance of such default or breach for a period of 30 days after written
notice thereof has been given to Outlet by the Trustee or to Outlet and the
Trustee by the holders of at least 25% in principal amount of the outstanding
Notes, except in certain circumstances with respect to a covenant as to the
maintenance of certain property; (4) indebtedness of Outlet (other than the
Notes) or any subsidiary of Outlet is not paid when due within the applicable
grace period or is accelerated by the holders thereof and, in either case, the
total amount of such unpaid or accelerated debt exceeds $3 million; (5) the
entry by a court of competent jurisdiction of one or more judgments, decrees or
orders against Outlet or any of
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its subsidiaries in an aggregate amount in excess of $1 million or of any
material nonmonetary judgments, decrees or orders against Outlet or any of its
subsidiaries which remain unsatisfied or unstayed for a period of 60 days; (6)
the entry of a decree or order for relief in respect of Outlet or any of its
subsidiaries by a court of competent jurisdiction in an involuntary case under
the Federal bankruptcy laws, as now or hereafter constituted, or any other
Federal or State bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of Outlet or any such subsidiary or of any substantial part of
the property of Outlet or any such subsidiary, or ordering, the winding up or
liquidation of the affairs of Outlet or any such subsidiary, and the continuance
of any such decree or order unstayed and in effect for a period of 45
consecutive days after service of such decree or order; or (7) the commencement
by Outlet or any of its subsidiaries of a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or State bankruptcy, insolvency or other similar law, or the consent by
it to the entry of an order for relief in an involuntary case under any such law
or to the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Outlet or any such subsidiary or of
any substantial part of the property of Outlet or any such subsidiary, or the
making by Outlet or any such subsidiary of an assignment for the benefit of
creditors, or the failure of Outlet or any such subsidiary to pay its debts
generally as they become due, or the taking, of measures by Outlet or any such
subsidiary in furtherance of any such action. Upon the occurrence of an Event of
Default (other than an Event of Default of the type described in clauses (6) and
(7) above), either the Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Notes may declare the unpaid principal of,
premium, if any, and accrued and unpaid interest on all Notes then outstanding
to be due and payable immediately, by a notice in writing to Outlet (and to the
Trustee if given by the holders), and upon any such declaration such principal
amount, and premium, if any, and accrued interest shall become immediately due
and payable, notwithstanding anything contained in the Indenture or the Notes to
the contrary, but subject to the provisions limiting payment described in the
Indenture.
Upon the occurrence of an Event of Default of the type described in clauses
(6) and (7) above, all unpaid principal of (and premium, if any) and accrued
interest on the Notes then outstanding shall ipso facto become and be
----------
immediately due and payable, subject to prior payment in full of all senior
indebtedness, without any declaration or other action on the part of the Trustee
or any holder of Notes. With certain exceptions, the holders of a majority in
principal amount of the Notes may by notice to the Trustee rescind and annul an
acceleration and waive any existing Default.
Proposed Amendment
If the Requisite Consents are obtained, the provisions relating to Events of
Default and Acceleration will be amended and replaced in their entirety. Such
new provisions will provide that each of the following will constitute an Event
of Default under the Indenture: (1) failure to pay any installment of interest
on any Note when due and payable, and the continuance of such default for a
period of 30 days, whether or not such payment shall be prohibited by the
provisions of the Indenture; (2) failure to pay principal or premium, if any, on
any Note at its maturity, upon repurchase, redemption, acceleration or
otherwise, whether or not such payment shall be prohibited by the provisions of
the Indenture; (3) failure by Outlet or GE to perform or comply with any
covenant, agreement or warranty in the Indenture (other than the obligations
specified in clauses (1) and (2) above) and continuance of such default or
breach for a period of 60 days after written notice thereof has been given to
Outlet by the Trustee or to Outlet and the Trustee by the holders of at least
25% in principal amount of the outstanding Notes; (4) the entry of a decree or
order for relief in respect of Outlet or GE by a court of competent jurisdiction
in an involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other Federal or State bankruptcy, insolvency or other
similar law, or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Outlet or GE or of any substantial
part of the property of Outlet or GE, or ordering, the winding up or liquidation
of the affairs of Outlet or GE, and the continuance of any such decree or order
unstayed and in effect for a
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period of 45 consecutive days after service of such decree or order; or (5) the
commencement by Outlet or GE of a voluntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or other similar law, or the consent by it to the entry
of an order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Outlet or GE or of any substantial
part of the property of Outlet or GE, or the making by Outlet or GE of an
assignment for the benefit of creditors, or the failure of Outlet or GE to pay
its debts generally as they become due, or the taking of measures by Outlet or
GE in furtherance of any such action. Upon the occurrence of an Event of Default
(other than an Event of Default of the type described in clauses (4) and (5)
above), either the Trustee or the holders of at least 25% in aggregate principal
amount of the outstanding Notes may declare the unpaid principal of, premium, if
any, and accrued and unpaid interest on all Notes then outstanding to be due and
payable immediately, by a notice in writing to Outlet and GE (and to the Trustee
if given by the holders), and upon any such declaration such principal amount,
and premium, if any, and accrued interest shall become immediately due and
payable, notwithstanding anything contained in the Indenture or the Notes to the
contrary, but subject to the provisions limiting payment described in the
Indenture.
Upon the occurrence of an Event of Default of the type described in clauses
(4) and (5) above, all unpaid principal of (and premium, if any) and accrued
interest on the Notes then outstanding shall ipso facto become and be
----------
immediately due and payable, subject to prior payment in full of all senior
indebtedness, without any declaration or other action on the part of the Trustee
or any holder of Notes. With certain exceptions, the holders of a majority in
principal amount of the Notes may by notice to the Trustee rescind and annul an
acceleration and waive any existing Default.
COVENANT RELATING TO COMMISSION REPORTS
Current Provision
Section 704 of the Indenture currently requires that Outlet file with the
Trustee and provide, or cause the Trustee to provide, to all of the holders of
Notes, within 15 days after it files them with the Commission, copies of its
annual reports, quarterly reports and other information, documents and reports
("reports") which Outlet or any of its subsidiaries is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act or pursuant to
the provisions of the Trust Indenture Act. If, in the event Outlet is not
required to file any such reports with the Commission, Outlet is required to
file with the Trustee and provide, or cause the Trustee to provide, to the
holders of Notes within 15 days after the time such reports would have been
required to be filed with the Commission, such reports as Outlet or any such
Subsidiary would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act or pursuant to Section 314 of the Trust
Indenture Act if Outlet were subject to the reporting requirements of such
Sections.
Proposed Amendment
If the Requisite Consents are obtained, the covenant relating to providing
Commission reports will be amended to require that Outlet file with the Trustee
and provide, or cause the Trustee to provide, to all of the holders of Notes,
within 15 days after Outlet or GE files them with the Commission, copies of all
reports which Outlet or GE is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act or pursuant to the provisions of the
Trust Indenture Act.
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COVENANT RELATING TO CERTAIN MERGERS
Current Provisions
Section 801 of the Indenture currently provides that Outlet shall not, and
shall not permit any subsidiary to, enter into any transaction or series of
transactions, consolidate or merge with or into any other entity (other than the
merger of a wholly owned subsidiary of Outlet with another wholly owned
subsidiary of Outlet or the merger of a wholly owned subsidiary into Outlet), or
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets (determined on a consolidated
basis for Outlet and its subsidiaries taken as a whole), unless: (1) either (a)
Outlet shall be the continuing corporation or (b) the entity (if other than
Outlet) formed by such consolidation or into which Outlet is merged or the
entity that acquires, by sale, assignment, conveyance, transfer, lease or
disposition, all or substantially all of the properties and assets of Outlet
as an entirety shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia, and shall expressly assume by a supplemental indenture, the due
and punctual payment of the principal of and premium, if any, and interest
on all the Notes and all other obligations of Outlet pursuant to the Indenture;
(2) immediately before and after giving effect to such transaction or series of
transactions , on a pro forma basis (including, without limitation, any
---------
debt incurred or anticipated to be incurred in connection with or in respect of
such transactions or series of transactions) no Event of Default (and no event
that, after notice or lapse of time, or both, would become an Event of Default)
shall have occurred and be continuing; and (3) immediately after giving effect
to any such transaction or series of transactions on a pro forma basis
---------
(including, without limitation, any debt incurred or anticipated to be incurred
in connection with or in respect of such transactions or series of
transactions), Outlet or the surviving entity, as the case may be, shall
have a Consolidated Net Worth (as defined in the Indenture) equal to or
greater than the Consolidated Net Worth of Outlet immediately prior to such
transaction.
Proposed Amendment
If the Requisite Consents are obtained, the covenants relating to
permissible mergers involving Outlet will be deleted in its entirety and a new
covenant inserted instead. Such new covenant will provide that neither Outlet
nor GE will consolidate or merge into or sell, assign, transfer or lease all or
substantially all of its assets to another person unless (i) either Outlet or
GE, as the case may be, is the continuing corporation or the successor
corporation assumes by supplemental indenture all the obligations of either
Outlet or GE, as the case may be, relating to the Amended Notes, the Guarantee
and the Indenture and (ii) immediately after the transaction no default exists.
COVENANT RELATING TO CORPORATE EXISTENCE
Current Provisions
Section 1004 of the Indenture currently provides that, subject to Article
Eight of the Indenture, Outlet shall do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence and the
corporate, partnership or other existence of each of its subsidiaries, in
accordance with their respective organizational documents and its (and its
subsidiaries') rights (charter and statutory), licenses and franchises;
provided, however, that Outlet shall not be required to preserve any such right,
- - -----------------
license or franchise if the Board of Directors of Outlet shall determine that
the preservation thereof is no longer desirable in the conduct of the business
of Outlet and its subsidiaries taken as whole and the loss thereof is not
disadvantageous in any material respect to the holders of Notes.
12
<PAGE>
Proposed Amendment
If the Requisite Consents are obtained, the provisions of Section 1004 will
be amended and replaced in their entirety. Such new provisions will provide
that, subject to Article Eight of the Indenture, Outlet shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence in accordance with its organizational documents (as the same
may be amended from time to time) and its rights (character and statutory),
licenses and franchises; provided, however, that Outlet shall not be required to
-----------------
preserve any such right, license or franchise if the Board of Directors of
Outlet shall determine that the preservation thereof is no longer desirable in
the conduct of the business of Outlet and its subsidiaries taken as a whole and
that the loss thereof is not disadvantageous in any material respect to the
holders of Notes.
COVENANT RELATING TO MAINTENANCE OF PROPERTY
Current Provisions
Section 1005 of the Indenture currently provides that Outlet shall cause all
Property (as defined in the Indenture) used or useful in the conduct of its
business or the business of any of its subsidiaries to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
Outlet may be necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times; provided, however,
-----------------
that nothing in such Section shall prevent Outlet from discontinuing the
operation or maintenance of any of such Property if such discontinuance is, in
the judgment of the Board of Directors of Outlet, desirable in the conduct of
the business of Outlet and its subsidiaries and not disadvantageous in any
material respect to the holders of Notes.
Proposed Amendment
If the Requisite Consents are obtained, the Covenant relating to Maintenance
of Property will be deleted in its entirety.
COVENANT RELATING TO PAYMENT OF TAXES AND OTHER CLAIMS
Current Provisions
Section 1006 of the Indenture currently provides that Outlet shall, and
shall cause each of its subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon Outlet or any of its
subsidiaries or upon the income, profits or property of Outlet or any of its
subsidiaries and (2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of Outlet or the
property of any of its subsidiaries; provided, however, that Outlet and its
-----------------
subsidiaries shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings and for
which adequate provision has been made.
Proposed Amendment
If the Requisite Consents are obtained, the Covenant relating to Payment of
Taxes and Other Claims will be deleted in its entirety.
13
<PAGE>
COVENANT RELATING TO LIMITATION ON TRANSACTIONS WITH AFFILIATES
Current Provisions
Section 1007 of the Indenture currently provides that Outlet shall not, and
shall not permit any of its subsidiaries to, directly or indirectly, conduct any
business or enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, transfer, disposition,
purchase, exchange or lease of assets, property or services) with, or for the
benefit of, any affiliate of Outlet unless (i) such transaction or series of
transactions is pursuant to a contractual obligation which was incurred prior to
the date of the initial issuance of the Notes (the "Issue Date") or (ii) such
transaction or series of transactions (A) is on terms that are no less favorable
to Outlet or such subsidiary, as the case may be, than would be available in a
comparable transaction on an arm's length basis with an unrelated third party,
and (B) with respect to a transaction or series of transactions involving
aggregate payments or value in excess of $1 million, Outlet delivers an
officers' certificate to the Trustee certifying that such transaction or series
of transactions complies with clause (ii) (A) above and such transaction or
series of transactions was approved by a majority of the independent members of
the Board of Directors of Outlet, provided, however, that this covenant shall
-----------------
not limit, or be applicable to, any transaction or series of related
transactions between Outlet and any subsidiary or between subsidiaries, and
provided, further, that no member of the Board of Directors shall lose his or
- - ----------------
her status as an "independent" member for purposes of this covenant solely by
virtue of his or her nomination to the Board of Directors pursuant to the
Stockholders Agreement by an interested party, unless such member of the Board
of Directors is an officer, director, employee or partner of, or is otherwise
affiliated with, such interested party.
Proposed Amendment
If the Requisite Consents are obtained, the Covenant relating to Limitation
on Transactions with Affiliates will be deleted in its entirety.
COVENANTS RELATING TO LIMITATION ON RESTRICTED PAYMENTS, LIMITATIONS ON
INDEBTEDNESS AND RESTRICTION ON INCURRENCE OF SENIOR SUBORDINATED INDEBTEDNESS
Current Provisions
Section 1008 of the Indenture currently provides that Outlet shall not, and
shall not permit any of its subsidiaries to, directly or indirectly, (i) declare
or pay any dividend on, or make any distribution in respect of, or purchase,
redeem or otherwise acquire or retire for value any capital stock of Outlet or
any affiliate of Outlet, other than the declaration or payment of dividends from
a subsidiary to Outlet or dividends payable solely in the capital stock (other
than redeemable capital stock) of Outlet or such affiliate, as the case may be,
(ii) make any principal payment on, or redeem, repurchase, defease or otherwise
acquire or retire for value, prior to any scheduled principal payment, scheduled
sinking fund payment or other stated maturity, debt of Outlet or any subsidiary
which is subordinated in right of payment to the Notes whether pursuant to its
terms or by operation of law, or (iii) make any investment (other than Permitted
Investments and investments in its wholly owned subsidiaries) in any person
(such payments and investments described in clauses (i), (ii) and (iii),
collectively, "Restricted Payments") unless at the time of and after giving
effect to the proposed Restricted Payment (the value of any such payment, if
other than cash, to be determined by the Board of Directors of Outlet, whose
determination shall be conclusive and evidenced by a board resolution), (a) no
Event of Default (and no event that, after notice or lapse of time, or both,
would become an Event of Default) shall have occurred and be continuing, (b)
Outlet could incur at least $1.00 of debt under clause (c) of the definition of
Permitted Indebtedness under the Indenture, and (c) the aggregate amount of all
Restricted Payments declared or made after the Issue Date shall not exceed the
sum of (A) the remainder of (x) 100% of EBITDA (as defined in the Indenture) of
Outlet accrued during the period (treated as one accounting
14
<PAGE>
period) beginning on the last day of the fiscal quarter of Outlet immediately
preceding the Issue Date and ending on the last day of Outlet's last fiscal
quarter ending prior to the date of such proposed Restricted Payment (or if such
EBITDA shall be a deficit, less 100% of such deficit), minus (y) the product of
1.7 times the cumulative Consolidated Interest Expense (as defined in the
Indenture) during such period, plus (B) an amount equal to the aggregate net
cash proceeds received by Outlet from the issuance or sale (other than to an
affiliate of Outlet) of its capital stock (excluding redeemable capital stock,
but including capital stock issued upon conversion of convertible debt and from
the exercise of options, warrants or rights to purchase capital stock (other
than redeemable capital stock) of Outlet); provided, however, that the foregoing
-----------------
provisions will not prevent the payment of any dividend within 60 days after the
date of its declaration if at the date of its declaration such payment would be
permitted by such provisions.
For purposes of the prior paragraph, "Permitted Investments" means: (a) U.S.
Government Obligations or certificates of deposit or Eurodollar deposits in
commercial banks having capital and surplus of not less than $500 million having
a maturity of one year or less; (b) commercial paper issued by an issuer rated
at least A-1 or the equivalent thereof by Standard & Poor's Corporation or P-1
or the equivalent thereof by Moody's Investors Services, Inc.; and (c) other
investments that do not exceed $2 million at any time outstanding.
Section 1009 of the Indenture currently provides that Outlet shall not, and
shall not permit any of its subsidiaries to, directly or indirectly, incur any
indebtedness (including acquired debt) other than Permitted Indebtedness.
"Permitted Indebtedness" means: (a) indebtedness outstanding at any time under
Outlet's senior bank credit agreement (or any successor bank credit facility)
not to exceed $30 million aggregate principal amount and all accrued interest,
fees and other expenses thereunder; (b) indebtedness represented by the Notes;
(c) indebtedness incurred if, immediately after giving effect to the incurrence
of such indebtedness and the receipt and application of the proceeds thereof,
the Debt-to-Cash-Flow Ratio (as defined in the Indenture) would not exceed 6.5
to 1; (d) indebtedness owned by any wholly owned subsidiary to Outlet or owed by
Outlet to any wholly owned subsidiary of Outlet (provided that such indebtedness
is at all times held by a person which is a wholly owned subsidiary of Outlet),
and provided further that upon either (x) the transfer or other disposition by
such wholly owned subsidiary or Outlet of any indebtedness so permitted to a
person other than Outlet or another wholly owned subsidiary of Outlet or (y) the
sale, lease, transfer or other disposition of shares of capital stock (including
by consolidation or merger) of such wholly owned subsidiary to a person other
than Outlet or another wholly owned subsidiary, the provisions of this clause
(d) shall no longer be applicable to such indebtedness and such indebtedness
shall be deemed to have been incurred at the time of any such transfer or other
disposition or the sale, lease, transfer or other disposition of such capital
stock; (e) purchase money indebtedness and capital lease obligations whose
Attributable Value (as defined in the Indenture) will not exceed $5 million at
any one time outstanding; (f) indebtedness arising under interest rate
protection agreements; (g) indebtedness incurred in connection with a repurchase
of the Notes pursuant to a Change of Control (as defined in the Indenture),
provided that the principal amount of such indebtedness does not exceed 101% of
the principal amount of the Notes repurchased, and such indebtedness (x) has an
average life to stated maturity equal to or greater than the remaining average
life to maturity of the Notes, and (y) does not mature prior to the stated
maturity of the Notes; (h) any renewals, extensions, substitutions, refinancings
or replacements of any Indebtedness incurred pursuant to preceding clauses (a),
(b), (c) and (e), above, and (i), below, provided that such renewal, extension,
substitution, refunding, refinancing or replacement does not (x) result in an
increase in the aggregate principal amount of the outstanding Indebtedness
represented thereby, (y) reduce the average life to stated maturity of such
indebtedness, or (z) reduce the stated maturity of such indebtedness, and
provided, further, that subordinated indebtedness must be renewed, extended,
- - -----------------
substituted, refinanced or replaced with equally subordinated indebtedness; and
(i) indebtedness not otherwise permitted to be incurred pursuant to clauses (a)
through (h) above, which, together with any
15
<PAGE>
other outstanding indebtedness incurred pursuant to this clause (i), has an
aggregate principal amount not in excess of $5 million at any one time
outstanding.
Section 1014 of the Indenture currently provides that Outlet will not incur
any indebtedness which is subordinate to or junior in right of payment to senior
indebtedness and senior in right of payment to the Notes.
Proposed Amendment
If the Requisite Consents are obtained the covenants relating to Limitation
on Restricted Payments, Limitation on Indebtedness and Restriction on Incurrence
of Senior Subordinated Indebtedness will be deleted in their entirety.
COVENANT RELATING TO LIMITATION CONCERNING DISTRIBUTIONS OR TRANSFERS BY
SUBSIDIARIES
Current Provisions
Section 1011 of the Indenture currently provides that Outlet shall not, and
shall not permit any of its subsidiaries to, directly or indirectly, create,
cause or suffer to exist or become effective, or enter into any agreement with
any person that would cause to become effective, any consensual encumbrance or
restriction of any kind on the ability of any subsidiary of Outlet to (a) pay
dividends, in cash or otherwise, or make any other distribution on or in respect
of its capital stock, (b) pay any debt owed to Outlet or any subsidiary of
Outlet, (c) make loans or advances to Outlet or any subsidiary of Outlet, or (d)
transfer any of its property or assets to Outlet or any subsidiary of Outlet,
except for encumbrances or restrictions in existence as of the Issue Date.
Proposed Amendment
If the Requisite Consents are obtained, the covenant relating to Limitation
Concerning Distributions or Transfers By Subsidiaries will be deleted in its
entirety.
COVENANT RELATING TO LIMITATION ON ASSET SALES
Current Provisions
Section 1012 of the Indenture currently provides that Outlet shall not, and
shall not permit any subsidiary to, directly or indirectly, make any Asset Sale
(as defined in the Indenture) unless (i) Outlet or such subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors) of
the shares or assets sold or otherwise disposed of and (ii) at least 75% of such
consideration consists of cash or cash equivalents. Within 270 days after any
Asset Sale, Outlet or such subsidiary, as the case may be, may apply the net
cash proceeds from such Asset Sale to (x) an investment in properties and assets
(in the same line of business) that replaces the properties and assets that were
the subject of such Asset Sale or (y) a permanent reduction in the amount of
debt outstanding, under Outlet's senior bank credit agreement. Any net cash
proceeds from any Asset Sale (after paying or providing for the payment of taxes
payable on account of such Asset Sale) that are not used as provided in the
preceding sentence constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5 million, Outlet
shall make an offer to purchase, from all holders of the Notes, an aggregate
principal amount of Notes equal to the Excess Proceeds, at a price in cash equal
to 100% of the outstanding principal amount thereof plus accrued interest, if
any, to the purchase date, in accordance with the procedures to be set forth in
the Indenture. Upon completion of such offers to purchase, the amount of Excess
Proceeds shall be reset to zero.
16
<PAGE>
Proposed Amendment
If the Requisite Consents are obtained, the covenant relating to Limitation
on Asset Sales will be deleted in its entirety.
COVENANT RELATING TO LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF
SUBSIDIARIES
Current Provisions
Section 1013 of the Indenture currently provides that Outlet (i) shall not
permit any subsidiary to issue any stock (other than to Outlet or a wholly owned
subsidiary of Outlet) and (ii) shall not permit any person (other than Outlet or
a wholly owned subsidiary of Outlet) to own any capital stock of any subsidiary
of Outlet (other than directors' qualifying shares), except for a sale of 100%
of the capital stock of a subsidiary, effected in accordance with the
"Limitation on Asset Sales" described above.
Proposed Amendment
If the Requisite Consents are obtained, the covenant relating to Limitation
on Issuance and Sale of Capital Stock of Subsidiaries will be deleted in its
entirety.
OTHER PROVISIONS OF THE INDENTURE
Certain other provisions of the Indenture may be amended to make technical
and conforming changes resulting from the Proposed Amendment and the addition of
the Guarantee.
DESCRIPTION OF THE GUARANTEE
The text of the Guarantee, which will be set forth in the Supplemental
Indenture, is attached to this Consent Solicitation Statement/Prospectus as
Annex II. GE reserves the right, however, to amend, modify or otherwise
supplement the text of the Guarantee so long as any such amendment, modification
or supplement does not have an adverse effect on the holders of the Amended
Notes.
THE GUARANTEE WILL BE A DIRECT UNSECURED, UNSUBORDINATED, FULL AND
UNCONDITIONAL GUARANTEE BY GE of the due and punctual payment of the principal
of, premium, if any, and interest on the Amended Notes. The Guarantee will rank
equally in right of payment with all direct, unsecured and unsubordinated
indebtedness (including guarantees of the indebtedness of others) of GE. At
December 31, 1995, GE had approximately $260 million of secured indebtedness
consisting of industrial development/pollution control bonds. All other
indebtedness of approximately $115 billion is unsecured and, therefore, has
equal ranking to the Guarantee. Neither the Guarantee nor the Indenture will
restrict GE's ability to create indebtedness ranking senior to the Guarantee.
See "Capitalization."
As of the date of this Consent Solicitation Statement/Prospectus, the senior
long-term indebtedness of GE was rated AAA and Aaa by Standard & Poor's
Corporation and Moody's Investors Service, Inc., respectively. Neither the
Guarantee nor the Indenture will restrict GE's ability to incur secured or
unsecured indebtedness or to engage in any other transaction that could cause
such ratings to be reduced.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
for GE, which has been derived from GE's consolidated financial statements.
The following selected financial information should be read in conjunction
with the Consolidated Condensed Financial Statements contained in GE's Annual
Report on Form 10-K for the year ended December 31, 1995, which are incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE ITEMS)
<S> <C> <C> <C> <C> <C>
Revenues............................... $ 70,028 $ 60,109 $ 55,701 $ 53,051 $ 51,283
Earnings from continuing operations.... 6,573 5,915 4,184 4,137 3,943
Earnings (loss) from discontinued
operations........................... -- (1,189) 993 588 492
Earnings before accounting changes..... 6,573 4,726 5,177 $ 4,725 4,435
Net earnings........................... 6,573 4,726 4,315 4,725 2,636
Dividends declared..................... 2,838 2,546 2,229 1,985 1,808
Per Share
Earnings from continuing
operations......................... 3.90 3.46 2.45 2.41 2.27
Earnings (loss) from discontinued
operations......................... -- (0.69) 0.58 0.34 0.28
Earnings before accounting changes... 3.90 2.77 3.03 2.75 2.55
Net earnings......................... 3.90 2.77 2.52 2.75 1.51
Dividends declared................... 1.69 1.49 1.305 1.16 1.04
Total assets of continuing
operations........................... 228,035 185,871 166,413 135,472 123,115
Long-term borrowings................... 51,027 36,979 28,194 25,298 22,602
Total Share owners' equity............. 29,609 26,387 25,824 23,459 21,683
</TABLE>
18
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratio of earnings to fixed
charges for GE except for GECS and for General Electric Company and consolidated
affiliates for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
GE EXCEPT GECS
"Earnings"(a)....................................... $ 8,696 $ 7,828 $ 5,511 $ 5,582 $ 5,329
Less:
Equity in undistributed earnings of General
Electric Capital Services, Inc.(b).............. (1,324) (1,181) (957) (831) (871)
Plus:
Interest and other financial charges included
in expense...................................... 649 410 525 768 893
One-third of rental expense (c)................... 174 171 212 228 225
------- ------- ------- ------- -------
Adjusted "earnings"................................. $ 8,195 $ 7,228 $ 5,291 $ 5,747 $ 5,576
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Fixed Charges:
Interest and other financial charges.............. $ 649 $ 410 $ 525 $ 768 $ 893
Interest capitalized.............................. 13 21 21 29 33
One-third of rental expense (c)................... 174 171 212 228 225
------- ------- ------- ------- -------
Total fixed charges................................. $ 836 $ 602 $ 758 $ 1,025 $ 1,151
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of earnings to fixed charges.................. 9.80 12.01 6.98 5.61 4.84
------- ------- ------- ------- -------
------- ------- ------- ------- -------
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
"Earnings" (a)...................................... $ 9,941 $ 8,831 $ 6,287 $ 6,026 $ 5,679
Plus:
Interest and other financial charges included
in expense...................................... 7,336 4,994 4,096 4,512 5,270
One-third of rental expense (c)................... 349 327 349 320 261
------- ------- ------- ------- -------
Adjusted "earnings"................................. $17,626 $14,152 $10,732 $10,858 $11,210
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Fixed Charges:
Interest and other financial charges.............. $ 7,336 $ 4,994 $ 4,096 $ 4,512 $ 5,270
Interest capitalized.............................. 34 30 26 35 41
One-third of rental expense (c)................... 349 327 349 320 261
------- ------- ------- ------- -------
Total fixed charges................................. $ 7,719 $ 5,351 $ 4,471 $ 4,867 $ 5,572
------- ------- ------- ------- -------
Ratio of earnings to fixed charges.................. 2.28 2.64 2.40 2.23 2.01
------- ------- ------- ------- -------
------- ------- ------- ------- -------
<FN>
- - ------------
(a) Earnings for all years consist of earnings from continuing operations before
income taxes and minority interest. For 1991 and 1993, earnings are before
cumulative effects of changes in accounting principle.
(b) Earnings for all years consist of earnings from continuing operations after
income taxes, net of dividends. For 1991, earnings are before cumulative
effect of change in accounting principle.
(c) Considered to be representative of interest factor in rental expense.
</TABLE>
19
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of GE at
December 31, 1995. This table should be read in conjunction with the
Consolidated Financial Statements contained in GE's Annual Report on Form 10-K
for the year ended December 31, 1995, which are incorporated herein by
reference. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
DECEMBER 31 1995
----------------
(IN MILLIONS)
<S> <C>
Short-term Debt................................... $ 64,463
Long-term Debt.................................... 51,027
Minority Interest................................. 2,956
Share owners' equity
Common stock (1,857,013,000 shares issued)...... 594
Unrealized gains on investment securities....... 1,000
Other capital................................... 1,663
Retained earnings............................... 34,528
Treasury stock.................................. (8,176)
----------------
Total share owners' equity........................ 29,609
Total capitalization.............................. $148,055
----------------
----------------
</TABLE>
20
<PAGE>
THE SOLICITATION
GENERAL
Consents will become irrevocable at the Effective Time, the time that
Outlet, GE and the Trustee execute the Supplemental Indenture, which will not be
prior to the Expiration Date. Subject to the satisfaction of certain conditions
(see "Conditions of the Solicitation" below), promptly after the Expiration Date
the Trustee, Outlet and GE will execute the Supplemental Indenture, which will
be effective upon its execution. Thereafter, all current holders of the Amended
Notes, including non-consenting holders, and all subsequent holders of Amended
Notes will be bound by the Proposed Amendment and will have the benefit of the
Guarantee. If the Solicitation is terminated for any reason before the Effective
Time, the Consents will be voided, the Guarantee will not be issued, the
Proposed Amendment will not be effected and the Consent Fee will not be paid.
The Consents are being solicited by Outlet. Outlet recommends that all
holders of Notes as of the Record Date consent to the Proposed Amendment. All
costs of the Solicitation, including the Consent Fee, will be paid by Outlet. In
addition to the use of the mail, Consents may be solicited by officers and other
employees of Outlet or GE, without any additional remuneration, in person, or by
telephone, telegraph or facsimile transmission.
CONSENT FEE
If the Requisite Consents to the adoption of the Proposed Amendment are
obtained and the Supplemental Indenture becomes effective, Outlet will pay to
each holder of Notes as of the Record Date (other than Outlet or an Affiliate of
Outlet) who delivers a valid Consent in favor of the Proposed Amendment prior to
the Expiration Date and does not revoke such Consent prior to the Effective Time
a Consent Fee in the amount of $1.00 in cash for each $1,000 in principal amount
of Notes with respect to which such Consent was received and not revoked. No
accrued interest will be paid on the Consent Fee. Outlet reserves the right to
determine whether Notes are held or may be held by Outlet or Affiliates of
Outlet. Any such determination by Outlet shall be final and binding upon all
parties.
Notwithstanding any subsequent transfer of its Notes, any registered holder
of Notes as of the Record Date whose properly executed Consents have been
received prior to the Expiration Date and not revoked prior to the Effective
Time will be eligible to receive the Consent Fee. Holders, as of the Record
Date, who deliver Consents after the Expiration Date will not be entitled to
receive the Consent Fee, even though the Supplemental Indenture, if it becomes
effective, will be binding on them. Beneficial owners of Notes whose Notes are
registered, as of the Record Date, in the name of a broker, dealer, commercial
bank, trust company or nominee should contact such broker or nominee promptly
and instruct such person, as registered holder of such Notes, to execute and
then deliver the Consent on behalf of the beneficial owner in order to receive
the Consent Fee.
Outlet's obligation to pay the Consent Fee is contingent upon receipt of the
Requisite Consents, the execution of the Supplemental Indenture and
effectiveness of the Proposed Amendment. The Consent Fee will be paid as soon as
possible after the satisfaction of such conditions to the respective holders of
Notes entitled to receive the Consent Fee as such holders appear on the record
books of the Trustee as of the Record Date.
REQUISITE CONSENTS
Adoption of the Proposed Amendment requires the receipt, without revocation,
of the Requisite Consents, consisting of the Consents of the registered holders
of Notes as of the Record Date of a majority in aggregate principal amount of
the Notes outstanding and not owned by Outlet or any of its Affiliates. As of
the date of the Consent Solicitation Statement/Prospectus, $59,950,000 aggregate
principal amount of the Notes was so outstanding and none was held by Outlet or
its Affiliates.
21
<PAGE>
The failure of a holder of the Notes to deliver a Consent (including any
failures resulting from broker non-votes) will have the same effect as if such
holder had voted "Against" the Proposed Amendment.
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The term "Expiration Date" means 5:00 p.m., New York time, on May , 1996,
unless Outlet, in its sole discretion, extends the period during which the
Solicitation is open, in which event the term "Expiration Date" means the latest
time and date to which the Solicitation is so extended. Outlet reserves the
right to extend the Solicitation at any time and from time to time, whether or
not the Requisite Consents have been received, by giving oral or written notice
to the Trustee no later than 9:00 a.m., New York time, on the next business day
after the previously announced Expiration Date. Any such extension will be
followed as promptly as practicable by notice thereof by press release or other
public announcement (or by written notice to the registered holders of the Notes
as of the Record Date). Such announcement or notice may state that Outlet is
extending the Solicitation for a specified period of time or on a daily basis
until 5:00 p.m., New York time, on the date on which the Requisite Consents have
been received.
Outlet expressly reserves the right for any reason (i) to terminate the
Solicitation at any time prior to the execution of the Supplemental Indenture
(whether or not the Requisite Consents have been received) by giving oral or
written notice of such termination to the Trustee and (ii) not to extend the
Solicitation beyond the Expiration Date whether or not the Requisite Consents
have been received by such date. Any such action by Outlet will be followed as
promptly as practicable by notice thereof by press release or other public
announcement (or by written notice to the holders of Notes as of the Record
Date).
FAILURE TO OBTAIN REQUISITE CONSENTS
In the event the Requisite Consents are not obtained and the Solicitation is
terminated, the Guarantee will not be issued, the Consent Fee will not be paid
and the Proposed Amendment will not be effected.
CONSENT PROCEDURES
This Consent Solicitation Statement/Prospectus is being sent on or about
April , 1996 to all registered holders of Notes as of the Record Date.
Only those persons who are registered holders of the Notes as of the Record
Date may execute and deliver a Consent. A beneficial owner of Notes who is not
the registered holder as of the Record Date of such Notes (e.g., a beneficial
holder whose Notes are registered in the name of a nominee such as a bank or a
brokerage firm) must arrange for the registered holder either (i) to execute a
Consent and deliver it either to Outlet on such beneficial owner's behalf or to
such beneficial owner for forwarding to Outlet by such beneficial owner or (ii)
to forward a duly executed proxy from the registered holder authorizing the
beneficial holder to execute and deliver a Consent with respect to the Notes on
behalf of such registered holder. A form of proxy that may be used for such
purpose is included in the form of Consent. For purposes of this Consent
Solicitation Statement/Prospectus, (i) the term "record holder" or "registered
holder" shall be deemed to include DTC participants and (ii) DTC has authorized
DTC Participants to execute Consents as if they were registered holders.
Giving a Consent will not affect a registered holder's right to sell or
offer the Notes. All Consents received prior to the Expiration Date and not
revoked prior to the Effective Time will be effective notwithstanding a record
transfer of such Notes subsequent to the Record Date, unless the registered
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holder of such Notes as of the Record Date revokes such Consent prior to the
Effective Time by following the procedures set forth under "Revocation of
Consents" below.
HOLDERS OF NOTES AS OF THE RECORD DATE WHO WISH TO CONSENT SHOULD MAIL, HAND
DELIVER, SEND BY OVERNIGHT COURIER OR FACSIMILE (CONFIRMED BY THE EFFECTIVE TIME
BY PHYSICAL DELIVERY) THEIR PROPERLY COMPLETED AND EXECUTED CONSENTS TO OUTLET
AT THE ADDRESS SET FORTH ON THE BACK COVER PAGE HEREOF AND ON THE CONSENT IN
ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN AND THEREIN. CONSENTS SHOULD
BE DELIVERED TO OUTLET, NOT TO GE OR THE TRUSTEE. HOWEVER, OUTLET RESERVES THE
RIGHT TO ACCEPT ANY CONSENT RECEIVED BY GE OR THE TRUSTEE.
UPON EXECUTION OF THE SUPPLEMENTAL INDENTURE, OUTLET WILL PROVIDE FOR THE
EXCHANGE OF NOTES FOR AMENDED NOTES ENDORSED WITH THE GUARANTEE.
REGISTERED HOLDERS SHOULD NOT TENDER OR DELIVER NOTES AT THIS TIME.
All Consents that are properly completed, signed and delivered to Outlet,
and not revoked prior to the Effective Time, will be given effect in accordance
with the specifications thereof. Holders who desire to consent to the Proposed
Amendment should mark the "For" box on, and complete, sign and date, the Consent
included herewith and mail, deliver, send by overnight courier or facsimile
(confirmed by the Effective Time by physical delivery) the signed consent to
Outlet at the address listed on the back cover page of this Consent Solicitation
Statement/Prospectus and on the Consent, all in accordance with the instructions
contained herein and therein. If none of the boxes on the Consent are marked,
but the Consent is otherwise properly completed and signed, the registered
holder will be deemed to have consented to the Proposed Amendment.
Consents by the registered holder(s) of Notes as of the Record Date must be
executed in exactly the same manner as such registered holder(s) name(s)
appear(s) on the Notes. If Notes to which a Consent relates are held of record
by two or more joint holders, all such holders must sign the Consent. If a
Consent is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person must so indicate when signing and must
submit with the Consent form appropriate evidence of authority to execute the
Consent. In addition, if a Consent relates to less than the total principal
amount of Notes registered in the name of such registered holder, the registered
holder must list the serial numbers and principal amount of Notes registered in
the name of such holder to which the Consent relates. If Notes are registered in
different names, separate Consents must be executed covering each form of
registration. If a Consent is executed by a person other than the registered
holder, then it must be accompanied by the proxy set forth on the form of
Consent duly executed by the registered holder.
The registered ownership of a Note as of the Record Date shall be proved by
the Trustee, as registrar of the Notes. All questions as to the validity, form
and eligibility (including time of receipt) regarding the Consent procedures
will be determined by Outlet in its sole discretion, which determination will be
conclusive and binding subject only to such final review as may be prescribed by
the Trustee concerning proof of execution and of ownership. Outlet reserves the
right to reject any or all Consents that are not in proper form or the
acceptance of which could, in the opinion of Outlet or its counsel, be unlawful.
Outlet also reserves the right, subject to such final review as the Trustee
prescribes for proof of execution and ownership, to waive any defects or
irregularities in connection with deliveries of particular Consents. Unless
waived, any defects or irregularities in connection with deliveries of Consents
must be cured within such time as Outlet determines.
None of GE or Outlet or any of their affiliates, the Trustee or any other
person shall be under any duty to give any notification of any such defects or
irregularities or waiver, nor shall any of them incur
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any liability for failure to give such notification. Deliveries of Consents will
not be deemed to have been made until any irregularities or defects therein have
been cured or waived. Outlet's interpretations of the terms and conditions of
this Solicitation shall be conclusive and binding.
REVOCATION OF CONSENTS
Each properly completed and executed Consent will be counted,
notwithstanding any transfer of the Notes to which such Consent relates, unless
the procedure for revoking Consents described below has been followed.
Prior to the Effective Time, any registered holder of Notes as of the Record
Date may revoke any Consent given as to its Notes or any portion of such Notes
(in integral multiples of $1,000). A registered holder of Notes desiring to
revoke a Consent must, prior to the Effective Time, deliver to Outlet at the
address set forth on the back cover page of this Consent Solicitation
Statement/Prospectus and on the Consent a written revocation of such Consent
(which may be in the form of a subsequent Consent marked with a specification,
i.e., "For" or "Against", different than that set forth on the Consent as to
which the revocation is being given) containing the name of such registered
holder, the serial numbers of the Notes to which such revocation relates, the
principal amount of Notes to which such revocation relates and the signature of
such registered holder.
The revocation must be executed by such registered holder in the same manner
as the registered holder's name appears on the Consent to which the revocation
relates. If a revocation is signed by a trustee, partner, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must so
indicate when signing and must submit with the revocation appropriate evidence
of authority to execute the revocation. A revocation of the Consent shall be
effective only as to the Notes listed on the revocation and only if such
revocation complies with the provisions of this Consent Solicitation
Statement/Prospectus. Only a registered holder of Notes as of the Record Date as
reflected in the register of the Trustee is entitled to revoke a Consent
previously given. A beneficial owner of Notes who is not the registered holder
as of the Record Date of such Notes must arrange with the registered holder to
execute and deliver to Outlet on such beneficial owner's behalf, or to such
beneficial owner for forwarding to Outlet by such beneficial owner, either (i) a
revocation of any consent already given with respect to such Notes or (ii) a
duly executed proxy from the registered holder authorizing such beneficial
holder to act on behalf of the registered holder as to such Consent.
A revocation of a Consent may only be rescinded by the execution and
delivery of a new Consent, in accordance with the procedures herein described by
the holder who delivered such revocation.
Outlet reserves the right to contest the validity of any revocation and all
questions as to validity (including time of receipt) of any revocation will be
determined by Outlet in its sole discretion, which determination will be
conclusive and binding subject only to such final review as may be prescribed by
the Trustee concerning proof of execution and ownership. None of Outlet, GE, any
of their affiliates, the Trustee or any other person will be under any duty to
give notification of any defects or irregularities with respect to any
revocation nor shall any of them incur any liability for failure to give such
notification.
CONDITIONS OF THE SOLICITATION
Consents will become irrevocable at the Effective Time, which will not be
prior to the Expiration Date. Subject to the satisfaction of certain conditions
described below, promptly after the Expiration Date, the Trustee, Outlet and GE
will execute the Supplemental Indenture, which will be effective upon its
execution. Execution of the Supplemental Indenture is conditioned upon (i) the
receipt of the Requisite Consents and (ii) at the election of Outlet, the
absence of any law or regulation which would,
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and the absence of any injunction or action or other proceeding (pending or
threatened) which (in the case of any action or proceeding, if adversely
determined) would, make unlawful or invalid or enjoin the implementation of the
Proposed Amendment, the entering into of the Supplemental Indenture or the
payment of the Consent Fee or question the legality or validity thereof. The
Solicitation may be abandoned by Outlet at any time prior to the execution of
the Supplemental Indenture, for any reason, in which case Consents will be
voided, no Consent Fee will be paid and the Guarantee will not be issued.
NO SOLICITING AGENT
Neither Outlet nor GE will pay or give directly or indirectly any commission
or other remuneration to any soliciting agent or other person in connection with
the Solicitation. Outlet and GE will solicit Consents and will attempt to
respond to inquiries of holders of Notes.
Requests for additional copies of this Consent Solicitation
Statement/Prospectus or the form of Consent may be directed to Outlet at its
address and telephone number set forth on the back cover of this Consent
Solicitation Statement/Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material federal income tax consequences of the
Consent Solicitation is for general information only. It is based upon
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
applicable Treasury Regulations promulgated and proposed thereunder, judicial
authority and current administrative rulings and practice, all of which are
subject to change, possibly on a retroactive basis. This discussion does not
purport to address all aspects of federal income taxation that may be relevant
to particular holders in light of their individual circumstances or to certain
types of holders subject to special treatment under the Code (for example,
insurance companies, tax-exempt organizations, financial institutions, dealers
in securities, foreign corporations, nonresident alien individuals, employee
stock ownership plans, individual retirement and other tax-deferred accounts,
and persons who hold the Notes as a hedge, who have otherwise hedged the risk of
holding Notes, who held the Notes as part of a straddle with other investments,
or who hold the Notes in connection with a conversion transaction), nor does it
discuss any aspect of state, local or foreign taxation or estate and gift tax
considerations. This discussion assumes that the Notes are held as capital
assets (as defined by the Code) by the holder thereof.
This summary is based in part on certain proposed regulations addressing the
treatment of modifications of debt instruments (the "Proposed Regulations"). The
Proposed Regulations are proposed to be effective for debt instruments occurring
after their issuance in final form, accordingly, by their terms they will not
apply to the Consent Solicitation, although they are indicative of the position
of the Internal Revenue Service with regard to their subject matter. In any
event, prior to their issuance in temporary or final form, the Proposed
Regulations have no binding effect and may be withdrawn or revised at any time
on a retroactive basis, which could change the consequences described below.
Because of the absence of final Treasury Regulations, however, no opinion is
expressed as whether the Proposed Amendment and the Guarantee and the payment of
the Consent Fee result in a deemed exchange for federal income tax purposes.
Further, because of the lack of direct authority concerning the issue, no
opinion is expressed as to the federal income tax consequence of the receipt of
the Consent Fee. Further, no ruling has been requested from the Internal Revenue
Service regarding the tax consequences of the Proposed Amendment and the
Guarantee and payment of the Consent Fee. No assurance can be given that the
positions intended to be taken by GE and Outlet described below will be accepted
by the Internal Revenue Service.
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CONSEQUENCES OF THE CONSENT SOLICITATION
Although the issue is not free from doubt, GE and Outlet intend to take the
position that the adoption of the Proposed Amendment and the Guarantee and the
payment of the Consent Fee will not constitute significant modifications of the
terms of the Notes, and therefore will not result in a deemed exchange of the
Notes for federal income tax purposes. Under the Proposed Regulations, a
modification of a debt instrument that changes the annual yield of the debt
instrument will constitute a significant modification at the date of such
modification if the annual yield of the debt instrument after the modification,
measured from the date of the agreement to the final maturity date, varies from
the annual yield on the original unmodified debt instrument by more than 0.25
percent. Calculation of such yield is to take into account both accrued and
unpaid interest at such date and any payment, such as the Consent Fee, given as
consideration for the modification. Based on the Proposed Regulations, payment
of the Consent Fee should not result in a significant modification of the terms
of the Notes for federal income tax purposes. Further, under the Proposed
Regulations, the addition of a guarantee is not a significant modification
unless the guarantor is, in substance, substituted as the obligor on the debt
instrument and is intended to circumvent the rule that treats a change in
obligor of a recourse debt instrument (other than a change in obligor in
connection with certain reorganizations) as a significant modification. GE and
Outlet intend to take the position that the Guarantee and the adoption of the
Proposed Amendment does not result in a significant modification of the terms of
the Notes for federal income tax purposes. In that event, except as set forth
below with respect to the Consent Fee, the transactions contemplated by the
Consent Solicitation should not result in any federal income tax consequences to
a holder of Notes.
ALTERNATE TREATMENT
If the transactions contemplated by the Consent Solicitation were to
constitute a significant modification of the Notes for federal income tax
purposes, then the Notes would be deemed exchanged for new notes (the "New
Notes") for federal income tax purposes. If the Notes or the New Notes do not
constitute securities for federal income tax purposes, a holder would recognize
gain or loss in an amount equal to the difference between (i) the trading price
of the New Note on the date of the deemed exchange (plus the amount of the
Consent Fee received, if such amount is treated as additional consideration
for the Note as discussed below) and (ii) the holder's adjusted tax basis in
the Note deemed exchanged therefore. The determination of "security" status is
generally made by reference to the term of the debt instrument (i.e., the
original term in the case of the Notes and the remaining term in the case of
the New Notes), with debt instruments with terms of ten years or more generally
being treated as securities and debt instruments with terms of less than five
years generally not being treated as securities. Although not entirely clear,
for that purpose the term of the New Notes will likely be treated as the period
remaining term to the first call date, which is July, 1998. In that case, the
New Notes would probably not be considered securities and the amount of taxable
gain could be significant if, as expected, the New Notes trade above par on the
date of the deemed exchange. Except to the extent treated as accrued interest
not previously includible in income or ordinary income under the market discount
rules, such gain or loss generally would be long-term capital gain or loss if
the holding period of the Note exceeded one year. A holder's initial tax basis
in the New Note would be the trading price of the New Note on the date of the
deemed exchange, and the holding period of the New Note would begin on the day
after the deemed exchange.
If the Notes and the New Notes are considered securities for federal income
tax purposes, the deemed exchange could be treated as a tax-free
recapitalization, in which case the holder would recognize gain (but not loss)
to the extent of the lesser of (i) the amount of the Consent Fee received, if
such amount is treated as additional consideration for the Note as discussed
below, and (ii) the gain realized on the deemed exchange. The amount of gain
realized by a holder on such deemed exchange would equal the excess of (a) the
trading price of the New Note on the date of the deemed exchange (plus the
amount of the Consent Fee received, if such amount is treated as additional
consideration for
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the Note as discussed below) over (b) such holder's tax basis in the Note
exchange therefor. Except to the extent treated as ordinary income under the
market discount rules, recognized gain would generally be long-term capital gain
if the holding period of the Note exceeded one year. The holding period of a New
Note would include the holding period of the Note exchanged therefor.
If the adoption of the Proposed Amendment is treated as a deemed exchange, a
New Note would likely have a trading value greater than its principal amount. In
that event, holders should consult their tax advisers regarding the potential
application of rules relating to the amortization of bond premium. The "issue
price" of a New Note would equal its trading price on the date of the deemed
exchange.
CONSEQUENCES OF RECEIPT OF CONSENT FEE
There is no direct authority concerning the federal income tax consequences
of the receipt of the Consent Fee. GE and Outlet intend to treat the Consent Fee
for federal income tax purposes as a fee paid to holders that grant consents
pursuant to the Consent Solicitation. Accordingly, GE and Outlet generally would
be required to provide information statements to consenting holders and to the
Internal Revenue Service, reporting the payment of the Consent Fee. If such
treatment is respected, a holder would recognize ordinary income equal to the
amount of cash received. Alternative federal income tax treatments of the
Consent Fee may be applicable. If, as discussed above, holders were treated as
exchanging their Notes for New Notes for federal income tax purposes, the
Consent Fee may be treated as additional consideration received in such
exchange. Alternatively, a consenting holder may be treated as transferring a
portion of its rights under the Note in exchange for the Consent Fee, in which
case such holder should be permitted to reduce its adjusted tax basis in its
Notes (to the extent thereof) by the amount of the Consent Fee. Any such basis
reduction would cause a consenting holder to recognize additional gain (or
smaller loss) on a sale or disposition of the Notes.
BACKUP WITHHOLDING
Noteholders other than certain exempt recipients (such as corporations) may
be subject to backup withholding at the rate of 31% with respect to the Consent
Fee received by a holder pursuant to the Consent Solicitation unless the holder
(i) is a corporation or is otherwise exempt and, when required, demonstrates
this fact, or (ii) provides a correct taxpayer identification number, certifies
as to no loss of exemption from backup withholding and otherwise complies with
the applicable requirements of the backup withholding rules. If backup
withholding results in an overpayment of taxes, a refund or credit may be
obtained, provided the required information is furnished to the Internal Revenue
Service.
WITHHOLDING FOR NON-U.S. HOLDERS
Although it is not entirely clear that such tax is applicable to the Consent
Fee, U.S. Federal withholding tax will be withheld from a Consent Fee paid to a
non-United States person (within the meaning of the Code) at a 30% rate unless
(i) such non-United States person is engaged in the conduct of a trade or
business in the United States to which the receipt of the Consent Fee is
effectively connected and provides a properly executed IRS Form 4224 or (ii) a
tax treaty between the United States and the country of residence of the
non-United States person eliminates or reduces the withholding on other income
and such non-United States person provides a properly executed IRS Form 1001.
THE FOREGOING SUMMARY IS INCLUDED HEREIN SOLELY FOR GENERAL INFORMATION ONLY
AND DOES NOT CONSTITUTE TAX ADVICE. HOLDERS OF NOTES SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE CONSENT
SOLICITATION INCLUDING THE APPLICABILITY OF STATE, LOCAL, FOREIGN INCOME AND
OTHER TAX LAWS.
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LEGAL OPINION
Robert E. Healing, Corporate Counsel of GE, is passing upon the legality of
the Guarantee for GE. Mr. Healing, together with members of his family, owns,
has options to purchase and has other interests in shares of common stock of GE.
EXPERTS
The financial statements of General Electric Company and consolidated
affiliates as of December 31, 1995 and 1994, and for each of the years in the
three-year period ended December 31, 1995, appearing in General Electric
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
incorporated by reference herein, have been incorporated herein in reliance on
the report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. The report of KPMG Peat Marwick LLP covering the
December 31, 1995 financial statements refers to a change in 1993 in the method
for accounting for postemployment benefits.
The consolidated financial statements (including the schedule incorporated
by reference) of Outlet Broadcasting, Inc. at December 31, 1995 and 1994, and
for each of the three years in the period ended December 31, 1995, appearing in
Outlet Broadcasting, Inc.'s Annual Report on Form 10-K/A for its fiscal year
ended December 31, 1995 which has been attached hereto as Appendix III of this
Prospectus and Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon which contains an
explanatory paragraph with respect to changes in accounting in 1993 for income
taxes and postretirement benefits other than pensions mentioned in Notes 5 and
10 to the consolidated financial statements appearing elsewhere herein and in
the Registration Statement and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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APPENDIX I
PROPOSED AMENDMENTS TO THE INDENTURE
GOVERNING THE 10 7/8% SENIOR SUBORDINATED NOTES DUE 2003
OF OUTLET CORPORATION
The substantive text of the Proposed Amendments to the Indenture is shown
below, together with the corresponding provisions of the Indenture, as currently
in effect. The following is qualified in its entirety by reference to the form
of Supplemental Indenture and the Indenture, copies of which have been filed as
exhibits to the Registration Statement of which this Consent Solicitation
Statement/Prospectus forms a part. Capitalized terms not otherwise defined in
this Appendix I have the meanings assigned in the Indenture.
SECTION 105 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 105. Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 601) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than such signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof of the signer's
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the person executing the same, may also be proved in any
manner which the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Note shall bind every future Holder of the
same Note and the Holder of any Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
suffered or omitted to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Note.
(e) The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to take any action under this
Indenture by vote or consent. Such record date shall be the later of 30 days
prior to the first solicitation of such consent or vote or the date of the most
recent list of Holders furnished to the Trustee pursuant to Section 701 prior to
such solicitation. If a record date is fixed, those persons who were Holders of
Notes at such record date (or their duly designated proxies), and only those
persons, shall be entitled to take such action by vote or consent or to revoke
any vote or consent previously given, whether or not such persons continue to be
Holders after such record date; provided, however, that unless such vote or
consent is obtained from the Holders (or their duly designated proxies) of the
requisite principal amount of Notes that are Outstanding prior to
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the date which is the 120th day after such record date, any such vote or consent
previously given shall automatically and without further action by any Holder be
cancelled and of no further effect.
(f) In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company shall be disregarded
and deemed not to be Outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Notes Outstanding at the time
shall be considered in any such determination.
SECTION 105 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 105. Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company and/or the Parent Guarantor, as the case may be. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee, the Company and
the Parent Guarantor, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than such signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof of the signer's
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the person executing the same, may also be proved in any
manner which the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Note shall bind every future Holder of the
same Note and the Holder of any Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
suffered or omitted to be done by the Trustee, the Company or the Parent
Guarantor in reliance thereon, whether or not notation of such action is made
upon such Note.
(e) The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to take any action under this
Indenture by vote or consent. Such record date shall be the later of 30 days
prior to the first solicitation of such consent or vote or the date of the most
recent list of Holders furnished to the Trustee pursuant to Section 701 prior to
such solicitation. If a record date is fixed, those persons who were Holders of
Notes at such record date (or their duly designated proxies), and only those
persons, shall be entitled to take such action by vote or consent or to revoke
any vote or consent previously given, whether or not such persons continue to be
Holders after such record date; provided, however, that unless such vote or
consent is obtained from the Holders (or their duly designated proxies) of the
requisite principal amount of Notes that are Outstanding prior to the date which
is the 120th day after such record date, any such vote or consent previously
given shall automatically and without further action by any Holder be cancelled
and of no further effect.
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(f) In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company shall be disregarded
and deemed not to be Outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Notes Outstanding at the time
shall be considered in any such determination.
SECTION 106 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 106. Notices, etc., to Trustee and Company. Except as otherwise
provided in Article Five, any request, demand, authorization, direction, notice,
consent, waiver or other Act of Holders or other document provided or permitted
by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, the Company or the Representative for or
the holders of any Senior Indebtedness shall be sufficient for every purpose
hereunder if in writing and (a) delivered in person, (b) delivered by
telecopy or telex and sent by first class mail postage prepaid or (c)
delivered by overnight courier, to the Trustee at its Corporate Trust
Office, Attention: Corporate Trust and Agency Group, or
(2) the Company by the Trustee, by any Holder or the Representative for
or the holders of any Senior Indebtedness shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in writing
and (a) delivered in person, (b) delivered by telecopy or telex or (c)
delivered by overnight courier, to the Company, addressed to it at 23 Kenney
Drive, Cranston, Rhode Island 02920-4489, or at any other address previously
furnished in writing to the Trustee by the Company, Attention: Chief
Financial Officer.
Any such request, demand, authorization, direction, notice, consent, waiver or
other Act of Holders or other document provided or permitted by this Indenture
shall be deemed to have been made, given or furnished: (a) if delivered in
person, when delivered; (b) if delivered by telecopy or telex, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. or, if not, on
the next succeeding Business Day; or (c) if delivered by overnight courier, one
Business Day after delivery to such courier.
SECTION 106 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 106. Notices, etc., to Trustee, Company and Parent Guarantor. Except
as otherwise provided in Article Five, any request, demand, authorization,
direction, notice, consent, waiver or other Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or furnished to,
or filed with,
(1) the Trustee by any Holder, the Company, the Parent Guarantor or the
Representative for or the holders of any Senior Indebtedness shall be
sufficient for every purpose hereunder if in writing and (a) delivered in
person, (b) delivered by telecopy or telex and sent by first class mail
postage prepaid or (c) delivered by overnight courier, to the Trustee at its
Corporate Trust Office, Attention: Corporate Trust and Agency Group, or
(2) the Company by the Trustee, by the Parent Guarantor, by any Holder
or the Representative for or the holders of any Senior Indebtedness shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and (a) delivered in person, (b) delivered by
telecopy or telex or (c) delivered by overnight courier, to the Company,
addressed to it at 23 Kenney Drive, Cranston, Rhode Island 02920-4489, or at
any other address previously furnished in
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writing to the Trustee by the Company, Attention: Chief Financial Officer,
with, in each case, a copy to the Parent Guarantor, to the attention of its
Treasurer, or
(3) the Parent Guarantor by the Trustee, by the Company, by any Holder
or the Representative for or the holders of any Senior Indebtedness shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and (a) delivered in person, (b) delivered by
telecopy or telex or (c) delivered by overnight courier, to the Parent
Guarantor, addressed to General Electric Company, Attention: Treasurer, 3135
Easton Turnpike, Fairfield, Connecticut 06431, or at any other address
previously furnished in writing to the Trustee by the Parent Guarantor.
Any such request, demand, authorization, direction, notice, consent, waiver or
other Act of Holders or other document provided or permitted by this Indenture
shall be deemed to have been made, given or furnished: (a) if delivered in
person, when delivered; (b) if delivered by telecopy or Telex, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. or, if not, on
the next succeeding Business Day, or (c) if delivered by overnight courier, one
Business Day after delivery to such courier.
SECTION 110 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 110. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 110 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 110. Successors and Assigns. All covenants and agreements in this
Indenture, the Notes and the Parent Guarantee by the Company or the Parent
Guarantor, as the case may be, shall bind its successors and assigns, whether so
expressed or not.
SECTION 111 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 111. Separability Clause. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 111 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 111. Separability Clause. In case any provision in this Indenture,
in the Notes or in the Parent Guarantee, shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 112 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 112. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, any Paying Agent, the holders of Senior
Indebtedness and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 112 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 112. Benefits of Indenture. Nothing in this Indenture, in the Notes
or in the Parent Guarantee, express or implied, shall give to any Person, other
than the parties hereto and their
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successors hereunder, any Paying Agent, the holders of Senior Indebtedness and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 113 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 113. Governing Law. This Indenture and the Notes shall be governed
by and construed in accordance with the laws of the state of New York without
giving effect to the choice of laws provisions thereof.
SECTION 113 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 113. Governing Law. This Indenture, the Notes and the Parent
Guarantee shall be governed by and construed in accordance with the laws of the
state of New York without giving effect to the choice of laws provisions
thereof.
SECTION 309 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 309. Persons Deemed Owners. Prior to due presentment of a Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Note is registered as the
owner of such Note for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 308) interest on such Note and for all
other purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 309. Persons Deemed Owners. Prior to due presentment of a Note for
registration of transfer, the Company, the Parent Guarantor, the Trustee and any
agent of the Company, the Parent Guarantor or the Trustee may treat the Person
in whose name such Note is registered as the owner of such Note for the purpose
of receiving payment of principal of (and premium, if any) and (subject to
Section 308) interest on such Note and for all other purposes whatsoever,
whether or not such Note be overdue, and none of the Company, the Parent
Guarantor, the Trustee or any agent of the Company, the Parent Guarantor, the
Trustee or any agent of the Company, the Parent Guarantor or the Trustee shall
be affected by notice to the contrary.
SECTION 401 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 401. Satisfaction and Discharge of Indenture. (a) This Indenture
shall cease to be of further effect (except that the Company's obligations under
403, 404 and 607 shall survive) when all Outstanding Notes theretofore
authenticated and issued hereunder have been delivered (other than any Notes
which shall have been destroyed, lost or stolen and which shall have been
replaced or paid as provided in Section 307) to the Trustee for cancellation and
the Company has paid all sums payable hereunder and under the Notes.
(b) In addition to the provisions of Section 401(a), at the Company's
option, either (i) the Company shall be deemed to have been Discharged from its
obligations with respect to the Notes on the 91st day after the applicable
conditions set forth below have been satisfied or (ii) the Company shall cease
to be under any obligation to comply with any term, provision or condition set
forth in Sections 801, 1007, 1008, 1009, 1010, 1011, 1012, 1013 or 1014, or any
Event of Default relating thereto, with respect to the Notes at any time after
the applicable conditions set forth below have been satisfied:
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(1) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders (A)
money, (B) U.S. Government Obligations, which through the payment of
interest and principal in respect thereof in accordance with their terms
will provide (without any reinvestment of such interest or principal), not
later than one day before the due date of any payment, money or (C) a
combination of (A) and (B) in an amount sufficient, in the opinion (with
respect to (B) and (C) of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee at or prior to the time of such deposit, to pay and discharge each
installment of principal of, and interest on, the Outstanding Notes on the
dates such installments of interest or principal are due;
(2) no Default or Event of Default with respect to this Indenture or the
Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in
a breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which it is bound, as
evidenced to the Trustee in an Officers' Certificate delivered to the
Trustee concurrently with such deposit;
(3) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (and containing no qualification and no
assumption, other than an assumption of fact customarily contained in legal
opinions) the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its option
under this Section and will be subject to Federal income tax on the same
amount and in the same manner and at the same time as would have been the
case if such option had not been exercised, and, in the case of Notes being
Discharged, accompanied by a ruling (whether specific or general) to that
effect received from or published by the Internal Revenue Service (it being
understood that such Opinion shall also state that such ruling is consistent
with the conclusions reached in such Opinion);
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
provision will not result in any of the Company, the Trustee or the trust
created by the Company's deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company" under the Investment
Company Act of 1940, as amended;
(5) the Company shall have paid or duly provided for payment of all
amounts then due to the Trustee and Trustee's counsel pursuant to Section
607;
(6) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for herein relating to the satisfaction and discharge of
this Indenture have been complied with; and
(7) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Indebtedness including, without limitation,
those arising under Article Twelve hereof and (B) after the passage of 90
days after the deposit, the trust funds will not be subject to the effect of
any applicable Federal or State bankruptcy, insolvency or similar law.
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(c) The Company may make an irrevocable deposit pursuant to this Section 401
only if at such time it is not prohibited from doing so under the provisions of
Section 1008 or Article Twelve and the Company shall have delivered to the
Trustee and any Paying Agent an Officers' Certificate to that effect.
SECTION 401 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 401. Satisfaction and Discharge of Indenture. (a) This Indenture
shall cease to be of further effect (except that the Company's obligations under
Sections 403, 404 and 607 and the Parent Guarantor's obligations under Section
404 shall survive) when all Outstanding Notes theretofore authenticated and
issued hereunder have been delivered (other than any Notes which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as provided
in Section 307) to the Trustee for cancellation and the Company or the Parent
Guarantor has paid all sums payable hereunder and under the Notes and the Parent
Guarantee.
(b) In addition to the provisions of Section 401(a), at the Company's
option, either (i) each of the Company and the Parent Guarantor shall be deemed
to have been Discharged from its obligations with respect to the Notes and the
Parent Guarantee on the 91st day after the applicable conditions set forth below
have been satisfied or (ii) the Company and the Parent Guarantor shall cease to
be under any obligation to comply with any term, provision or condition set
forth in Sections 801 and 1010, or any Event of Default relating thereto, with
respect to the Notes or the Parent Guarantee at any time after the applicable
conditions set forth below have been satisfied:
(1) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders (A)
money, (B) U.S. Government Obligations, which through the payment of
interest and principal in respect thereof in accordance with their terms
will provide (without any reinvestment of such interest or principal), not
later than one day before the due date of any payment, money or (C) a
combination of (A) and (B) in an amount sufficient, in the opinion (with
respect to (B) and (C)) of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee at or prior to the time of such deposit, to pay and discharge
each installment of principal of, and interest on, the Outstanding Notes on
the dates such installments of interest or principal are due;
(2) no Default or Event of Default with respect to this Indenture or the
Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in
a breach or violation of, or constitute a default under, any other
instrument to which the Company or the Parent Guarantor is a party or by
which it is bound, as evidenced to the Trustee in an Officers' Certificate
delivered to the Trustee concurrently with such deposit;
(3) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (and containing no qualification and no
assumption, other than an assumption of fact customarily contained in legal
opinions) the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its option
under this Section and will be subject to Federal income tax on the same
amount and in the same manner and at the same time as would have been the
case if such option had not been exercised, and, in the case of Notes being
Discharged, accompanied by a ruling (whether specific or general) to that
effect received from or published by the Internal Revenue Service (it being
understood that such Opinion shall also state that such ruling is consistent
with the conclusions reached in such Opinion);
(4) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
Section will not result in any of the Company, the
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Parent Guarantor, the Trustee or the trust created by the Company's or the
Parent Guarantor's deposit of funds pursuant to this Section becoming or
being deemed to be an "investment company" under the Investment Company Act
of 1940, as amended;
(5) the Company or the Parent Guarantor shall have paid or duly provided
for payment of all amounts then due to the Trustee and Trustee's counsel
pursuant to Section 607;
(6) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for herein relating to the satisfaction and discharge of
this Indenture have been complied with; and
(7) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Indebtedness including, without limitation,
those arising under Article Twelve hereof and (B) after the passage of 90
days after the deposit, the trust funds will not be subject to the effect of
any applicable Federal or State bankruptcy, insolvency or similar law.
(c) The Company or the Parent Guarantor may make an irrevocable deposit
pursuant to this Section 401 only if at such time it is not prohibited from
doing so under the provisions of Article Twelve and the Company shall have
delivered to the Trustee and any Paying Agent an Officers' Certificate to that
effect.
SECTION 404 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 404. Reinstatement. If the Trustee is unable to apply any money or
U.S. Government Obligations in accordance with Section 401 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture with respect to the
Notes and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 401 until such time as the Trustee is permitted to
apply all such money or U.S. Governmental Obligations in accordance with Section
401; provided, however, that if the Company has made any payment of interest on
or principal of any such Notes because of the reinstatement of the Company's
obligations, the Company shall be subrogated to the rights of the Holders to
receive such payment from the money or U.S. Governmental Obligations held by the
Trustee.
SECTION 404 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 404. Reinstatement. If the Trustee is unable to apply any money or
U.S. Government Obligations in accordance with Section 401 by reason of any
legal proceeding or by reason or any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and the Parent Guarantor's respective obligations
under this Indenture with respect to the Notes and the Parent Guarantee shall be
revived and reinstated as though no deposit had occurred pursuant to Section 401
until such time as the Trustee is permitted to apply all such money or U.S.
Governmental Obligations in accordance with Section 401; provided however, that
if the Company or the Parent Guarantor has made any payment of interest on or
principal of any such Notes because of the reinstatement of the Company's and
the Parent Guarantor's obligations, the Company and the Parent Guarantor shall
be subrogated to the rights of the Holders to receive such payment from the
money or U.S. Government Obligations held by the Trustee.
SECTIONS 501 AND 502 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 501. Events of Default. "Event of Default", wherever used herein
with respect to each of the Notes, means any one of the following events
(whatever the reason for such event and whether it
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shall be voluntary or involuntary or be effected by operation of law, pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) failure to pay any installment of interest on any Note when due and
payable, and the continuance of such Default for a period of 30 days,
whether or not such payment shall be prohibited by the provisions of Article
Twelve;
(2) failure to pay principal or premium, if any, on any Note at its
Maturity, upon repurchase (including pursuant to a Change of Control Offer),
redemption, acceleration or otherwise, whether or not such payment shall be
prohibited by the provisions of Article Twelve;
(3) failure to perform or comply with any covenant, agreement or
warranty in this Indenture (other than the obligations specified in clauses
(1) and (2) above) and continuance of such default or breach for a period of
30 days after written notice thereof has been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Notes unless, with respect to the
covenant contained in Section 1005, the failure stated in the written notice
cannot be corrected within 30 days and the Company forthwith institutes
action to correct the same and thereafter diligently pursues the same
thereafter until the failure is corrected;
(4) Indebtedness of the Company (other than the Notes) or any Subsidiary
of the Company, is not paid when due within the applicable grace period or
is accelerated by the holders thereof and, in either case, the total amount
of such unpaid or accelerated debt exceeds $3,000,000, UNLESS (A) such
holders shall have entered into one or more binding forbearance or similar
agreements pursuant to which such holders agree to forbear from commencing
legal proceedings against the Company or such Subsidiary in respect of such
failure to pay or such acceleration or otherwise from exercising their
remedies against the Company or such Subsidiary arising therefrom and (B)
such forbearance shall not have expired, no such proceedings shall have been
commenced and no such remedies shall have been exercised;
(5) the entry by a court of competent jurisdiction of one or more
judgments, decrees or orders against the Company or any of its Subsidiaries
in an aggregate amount in excess of $1,000,000 or of any material
nonmonetary judgments, decrees or orders against the Company or any of its
Subsidiaries which remain unsatisfied or unstayed for a period of 60 days;
(6) the entry of a decree or order for relief in respect of the Company
or any of its Subsidiaries by a court of competent jurisdiction in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other Federal or State bankruptcy, insolvency or other
similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Company or any such
Subsidiary or of any substantial part of the Property of the Company or any
such Subsidiary, or ordering the winding up or liquidation of the affairs of
the Company or any such Subsidiary, and the continuance of any such decree
or order unstayed and in effect for a period of 45 consecutive days after
service thereof upon, or other actual notice thereof to, the Company; or
(7) the commencement by the Company or any of its Subsidiaries of a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency
or other similar law, or the consent by or to the entry of an order for
relief in an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or any such Subsidiary or of any
substantial part of the Property of the Company or any such Subsidiary, or
the making by the Company or any such Subsidiary of an assignment for the
benefit of creditors, or the failure of the Company or any such Subsidiary
to pay its debts generally as they become due, or the taking of measures by
the Company or any such Subsidiary in furtherance of any such action.
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SECTION 502. Acceleration of Maturity; Rescission and Annulment. Upon the
occurrence of an Event of Default (other than an Event of Default of the type
described in Sections 501(6) and (7) above), either the Trustee or the Holders
of at least 25% in aggregate principal amount of the outstanding Notes may
declare the unpaid principal of, premium, if any, and accrued and unpaid
interest on all Notes then Outstanding to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by the Holders),
and upon any such declaration such principal amount, and premium, if any, and
accrued interest shall become immediately due and payable, notwithstanding
anything contained in this Indenture or the Notes to the contrary, but subject
to the provisions limiting payment described under Article Twelve.
Upon the occurrence of an Event of Default of the type described in Section
501(6) and (7) above, all unpaid principal of (and premium, if any) and accrued
interest on the Notes then Outstanding shall ipso facto become and be
immediately due and payable, subject to prior payment in full of all Senior
Indebtedness, without any declaration or other action on the part of the Trustee
or any Holder.
At any time after a declaration of acceleration with respect to the Notes
has been made and before a judgment or decree for payment of the money due has
been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in principal amount of the Outstanding Notes, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(A) all overdue installments of interest on all Notes,
(B) the principal of (and premium, if any, on) any Notes that have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate then borne by the Notes,
(C) to the extent that payment of such interest is lawful, interest on
the Defaulted Interest at the rate then borne by the Notes and
(D) all moneys paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to such Notes, other than the
non-payment of the principal of Notes which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
SECTIONS 501 AND 502 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 501. Events of Default. "Event of Default", wherever used herein
with respect to each of the Notes, means any one of the following events
(whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law, pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any administrative or
governmental body):
(1) failure to pay any installment of interest on any Note when due and
payable, and the continuance of such Default for a period of 30 days,
whether or not such payment shall be prohibited by the provisions of Article
Twelve;
(2) failure to pay principal or premium, if any, of any Note at its
Maturity, upon repurchase (including pursuant to a Change of Control Offer),
redemption, acceleration or otherwise, whether or not such payment shall be
prohibited by the provisions of Article Twelve;
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(3) failure on the part of the Company or the Parent Guarantor, as the
case may be, to perform or comply with any covenant, agreement or warranty
in this Indenture (other than the obligations specified in clauses (1) and
(2) above) and continuance of such default or breach for a period of 60 days
after the date on which written notice has been given to the Company and the
Parent Guarantor by the Trustee or to the Company, the Parent Guarantor and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Notes;
(4) [Intentionally Omitted]
(5) [Intentionally Omitted]
(6) the entry of a decree or order for relief in respect of the Company
or the Parent Guarantor by a court of competent jurisdiction in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other Federal or State bankruptcy, insolvency or other
similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Company or the
Parent Guarantor or of any substantial part of the Property of the Company
or the Parent Guarantor, or ordering the winding up or liquidation of the
affairs of the Company or the Parent Guarantor, and the continuance of any
such decree or order unstayed and in effect for a period of 45 consecutive
days after service thereof upon, or other actual notice thereof to, the
Company or the Parent Guarantor, as the case may be; or
(7) the commencement by the Company or the Parent Guarantor of a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency
or other similar law, or the consent by or to the entry of an order for
relief in an involuntary case under any such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or the Parent Guarantor or of any
substantial part of the Property of the Company or the Parent Guarantor, or
the making by the Company or the Parent Guarantor of an assignment for the
benefit of creditors, or the failure of the Company or the Parent Guarantor
to pay its debts generally as they become due, or the taking of measures by
the Company or the Parent Guarantor in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment. Upon the
occurrence of an Event of Default (other than an Event of Default of the type
described in Sections 501(6) and (7) above), either the Trustee or the Holders
of at least 25% in aggregate principal amount of the Outstanding Notes may
declare the unpaid principal of, premium, if any, and accrued and unpaid
interest on all Notes then Outstanding to be due and payable immediately, by a
notice in writing to the Company and the Parent Guarantor (and to the Trustee if
given by the Holders), and upon any such declaration such principal amount, and
premium, if any, and accrued interest shall become immediately due and payable,
notwithstanding anything contained in this Indenture, the Notes or the Parent
Guarantee to the contrary, but subject to the provisions limiting payment
described under Article Twelve.
Upon the occurrence of an Event of Default of the type described in Section
501(6) and (7) above, all unpaid principal of (and premium, if any) and accrued
interest on the Notes then Outstanding shall ipso facto become and be
immediately due and payable, subject to prior payment in full of all Senior
Indebtedness, without any declaration or other action on the part of the Trustee
or any Holder.
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At any time after a declaration of acceleration with respect to the Notes
has been made and before a judgment or decree for payment of the money due has
been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in principal amount of the Outstanding Notes, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if
(1) the Company or the Parent Guarantor has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue installments of interest on all Notes,
(B) the principal of (and premium, if any, on) any Notes that have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate then borne by the Notes,
(C) to the extent that payment of such interest is lawful, interest on
the Defaulted Interest at the rate then borne by the Notes and
(D) all moneys paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to such Notes, other than the
non-payment of the principal of Notes which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
SECTION 506 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 506. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (premium, if any) or interest, upon presentation
of the Notes and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the payment of all Senior Indebtedness of the Company to the extent
required by Article Twelve;
THIRD: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest on the Notes in respect of which or
for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts
due and payable on such Notes for principal (and premium, if any) and
interest, respectively; and
FOURTH: To the Company.
SECTION 506 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 506. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (premium, if any) or interest, upon presentation
of the Notes and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the payment of all Senior Indebtedness of the Company to the extent
required by Article Twelve;
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THIRD: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest on the Notes in respect of which or
for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts
due and payable on such Notes for principal (and premium, if any) and
interest, respectively; and
FOURTH: To the Company or the Parent Guarantor, to the extent such moneys were
provided thereby, their respective successors or assigns or to
whomsoever may be lawfully entitled to receive the same, or as a court
of competent jurisdiction may direct.
SECTION 509 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 509. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 509 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 509. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case the Company, the Parent Guarantor, the Trustee and the Holders
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 611 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 611. Acceptance of Appointment by Successor. (a) In the event of an
appointment hereunder of a successor Trustee, each such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee
but, on request of the Company or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee, and shall duly assign, transfer and deliver to such successor
Trustee all Property and money held by such former Trustee hereunder, subject to
its lien, if any, provided for in Section 607.
(b) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article and under the Trust Indenture Act.
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SECTION 611 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 611. Acceptance of Appointment by Successor. (a) In the event of an
appointment hereunder of a successor Trustee, each such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company, the Parent
Guarantor and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee but, on request of the Company, the Parent Guarantor or
the successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all Property and money held by
such former Trustee hereunder, subject to its lien, if any, provided for in
Section 607.
(b) Upon request of any such successor Trustee, the Company and the Parent
Guarantor shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article and under the Trustee Indenture Act.
SECTION 702(C) OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 702. Preservation of Information; Communications to Holders....
(c) Each Holder of Notes, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Holders in accordance with Section 702(b), regardless of
the source from which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material pursuant to a request
made under Section 702(b).
SECTION 702(C) OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 702. Preservation of Information; Communications to Holders....
(c) Each Holder of Notes, by receiving and holding the same, agrees with the
Company, the Parent Guarantor and the Trustee that none of the Company, the
Parent Guarantor and the Trustee shall be held accountable by reason of the
disclosure of such information as to names and addresses of Holders in
accordance with Section 702(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 702(b).
SECTION 704 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 704. Reports by the Company. The Company shall file with the Trustee
and shall provide, or at the Company's expense cause the Trustee to provide, to
all of the Holders, within 15 days after the Company files them with the
Commission, copies of its annual reports, quarterly reports and other
information, documents and reports ("reports") which the Company is required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act or
pursuant to the provisions of the Trust Indenture Act. In the event the Company
is not required to file any such reports with the Commission, the Company shall
file with the Trustee and shall provide, or at the Company's expense cause the
Trustee to provide, to the Holders within 15 days after the time such reports
would have been
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required to be filed with the Commission, a report containing the information
which the Company would have been required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act or pursuant to Section 314 of the
Trust Indenture Act if the Company were subject to the reporting requirements of
such Sections. The Company and any other obligor on the Notes shall also comply
with the other provisions of Section 314 of the Trust Indenture Act.
SECTION 704 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 704. Reports by the Company and the Parent Guarantor. The Company
shall file with the Trustee and shall provide, or at the Company's expense cause
the Trustee to provide, to all of the Holders, within 15 days after the Company
files them with the Commission, copies of its annual reports, quarterly reports
and other information, documents and reports ("reports") which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or pursuant to the provisions of the Trust Indenture Act. The
Company shall file with the Trustee and shall provide, or at the Company's
expense cause the Trustee to provide, to all of the Holders, within 15 days
after the Parent Guarantor files them with the Commission, copies of reports
which the Parent Guarantor is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. The Company and any other obligor on
the Notes shall also comply with the other provisions of Section 314 of the
Trust Indenture Act.
ARTICLE 8 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 801. Company May Consolidate, etc., Only on Certain Terms. (a) The
Company shall not, and shall not permit any Subsidiary to, enter into any
transaction or series of transactions, consolidate or merge with or into any
other entity (other than the merger of a Wholly Owned Subsidiary of the Company
with another Wholly Owned Subsidiary of the Company or the merger of a Wholly
Owned Subsidiary into the Company), or sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets
(determined on a consolidated basis for the Company and its Subsidiaries taken
as a whole), unless:
(1) either (a) the Company shall be the continuing corporation or (b)
the entity (if other than the Company) formed by such consolidation or into
which the Company is merged or the entity that acquires, by sale,
assignment, conveyance, transfer, lease or disposition, all or substantially
all of the properties and assets of the Company as an entirety shall be a
corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia, and shall expressly
assume by a supplemental indenture, the due and punctual payment of the
principal of and premium, if any, and interest on all the Notes and all
other obligations of the Company pursuant to the Indenture;
(2) immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation,
any debt incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Event of Default
(and no event that, after notice or lapse of time, or both, would become an
Event of Default) shall have occurred and be continuing;
(3) immediately after giving effect to any such transaction or series of
transactions on a pro forma basis (including, without limitation, any debt
incurred or anticipated to be incurred in connection with or in respect of
such transactions or series of transactions), the Company or the entity
formed by such merger or consolidation or to whom all or substantially all
of the assets of the Company are transferred (the "Surviving Entity"), as
the case may be, could incur at least $1.00 of additional debt pursuant to
clause (iii) of the definition of Permitted Indebtedness;
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(4) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any debt
incurred or anticipated to be incurred in connection with or in respect of
such transaction or series of transactions), the Company or the Surviving
Entity, as the case may be, shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to
such transaction; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel as specified in Section 801(b) below.
(b) In connection with any consolidation, merger, transfer or lease
contemplated by this Section 801, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, transfer or lease and the supplemental indenture in
respect thereto comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied with.
SECTION 802. Surviving Entity Substituted. Upon any consolidation with or
merger by the Company into any other Person, or any conveyance, lease or
transfer of the Property of the Company substantially as an entirety in
accordance with Section 801, the Surviving Entity formed by such consolidation
or into which the Company is merged or the successor entity to which such
conveyance, lease or transfer is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor had been named as the Company herein, and
thereafter the predecessor entity shall be relieved of all obligations and
covenants under this Indenture and the Notes, except for the obligation to pay
the principal of (and premium, if any) and interest on the Notes.
ARTICLE 8 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 801. Company or Parent Guarantor May Not Consolidate, etc., Except
under Certain Conditions. Each of the Company and the Parent Guarantor covenants
that it will not merge or consolidate with any other corporation or sell,
convey, transfer or otherwise dispose of all or substantially all of its assets
to any corporation, unless (i) either the Company or the Parent Guarantor, as
the case may be, shall be the continuing corporation, or the successor
corporation or other entity (if other than the Company or the Parent Guarantor,
as the case may be) shall, by supplemental indenture satisfactory to the
Trustee, executed and delivered to the Trustee by such corporation, expressly
assume, in the case of the Company, the due and punctual payment of the
principal of and, premium, if any, and interest, if any, on all the Notes, and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Company, and, in the case of
the Parent Guarantor, the due and punctual performance of the Parent Guarantee
and the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Parent Guarantor, and (ii)
the Company, the Parent Guarantor or such successor corporation or other entity,
as the case may be, shall not, immediately after such merger or consolidation,
or such sale, conveyance, transfer or other disposition, be in default in the
performance of any such covenant or condition. In the event of any such sale,
conveyance (other than by way of lease), transfer or other disposition, the
predecessor company may be dissolved, wound up and liquidated at any time
thereafter.
SECTION 802. Successor Corporation to be Substituted. In case of any such
consolidation, merger, sale, conveyance (other than by way of lease), transfer
or other disposition, and upon any such assumption by the successor corporation
or other entity, such successor corporation or other entity shall succeed to and
be substituted for the Company or the Parent Guarantor, as the case may be, with
the same effect as if it had been named herein as the Company or the Parent
Guarantor, as the case may be, and the Company or the Parent Guarantor, as the
case may be, shall be relieved of any further
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obligation under this Indenture and under the Notes and, in the case of the
Parent Guarantor, under the Parent Guarantee. Such successor corporation or
other entity thereupon may cause to be signed, and may issue either in its own
name or in the name of the Company or the Parent Guarantor, as the case may be,
any or all of the Notes or the Parent Guarantee issuable hereunder which
theretofore shall not have been signed by the Company or the Parent Guarantor,
as the case may be, and delivered to the Trustee; and, upon the order of such
successor corporation or other entity, instead of the Company or the Parent
Guarantor, as the case may be, and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Notes which previously shall have been signed and delivered by
the officers of the Company or the Parent Guarantor, as the case may be, to the
Trustee for authentication, and any Notes or the Parent Guarantee, as the case
may be, which such successor corporation or other entity thereafter shall cause
to be signed and delivered to the Trustee for that purpose. All the Notes or the
Parent Guarantee so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Notes or the Parent Guarantee, as the case
may be, theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Notes or the Parent Guarantee, as the case may
be, had been issued at the date of execution of the Supplemental Indenture.
SECTION 803. Documents to be Given Trustee. The Trustee, subject to the
requirements of Section 315 of the Trust Indenture Act and Section 601, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance, transfer or
other disposition, and any such assumption, comply with the provisions of this
Article Eight.
SECTION 901 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 901. Supplemental Indentures Without Consent of Holders. Without
notice to or the consent of the Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by such successor of the covenants of the Company herein and
contained in the Notes;
(2) to add to the covenants of the Company, for the benefit of the
Holders of all of the Notes, or to surrender any right or power herein
conferred upon the Company;
(3) to add any additional Events of Default;
(4) to add or change any of the provisions of this Indenture to the
extent necessary to permit or facilitate the issuance of Notes in bearer
form, registrable as to principal, and with or without interest coupons;
(5) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Note Outstanding created prior to the execution of such
supplemental indenture which is entitled to the benefit of such provision;
(7) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant to
the requirements of Section 611(b);
(8) to secure the Notes;
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(9) to cure any ambiguity or defects or to correct or supplement any
provision herein which may be inconsistent with any other provision herein
or to make any other provisions with respect to matters or questions arising
under this Indenture, provided that such actions shall not adversely affect
the interests of the Holders;
(10) to modify the restrictions on the Notes, and the procedures for,
resales and other transfers of the Notes to reflect any change in applicable
law or regulation (or the interpretation thereof) or to provide alternative
procedures in compliance with applicable law and practices relating to the
resale or other transfer of restricted securities generally; or
(11) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 901 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 901. Supplemental Indentures Without Consent of Holders. Without
notice to or the consent of the Holders, the Company, when authorized by a Board
Resolution, the Parent Guarantor and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company or the
Parent Guarantor, as the case may be, and the assumption by such successor
of the covenants of the Company or the Parent Guarantor, as the case may be,
herein and contained in the Notes or the Parent Guarantee, as the case may
be;
(2) to add to the covenants of the Company or the Parent Guarantor, for
the benefit of the Holders of all of the Notes, or to surrender any right or
power herein conferred upon the Company or the Parent Guarantor;
(3) to add any additional Events of Default;
(4) to add or change any of the provisions of this Indenture to the
extent necessary to permit or facilitate the issuance of Notes in bearer
form, registrable as to principal, and with or without interest coupons;
(5) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(6) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Note Outstanding created prior to the execution of such
supplemental indenture which is entitled to the benefit of such provision;
(7) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant to
the requirements of Section 611(b);
(8) to secure the Notes and/or the Parent Guarantee;
(9) to cure any ambiguity or defects or to correct or supplement any
provision herein which may be inconsistent with any other provision herein
or to make any other provisions with respect to matters or questions arising
under this Indenture, provided that such actions shall not adversely affect
the interests of the Holders;
(10) to modify the restrictions on the Notes and the Parent Guarantee,
and the procedures for, resales and other transfers of the Notes and the
Parent Guarantee to reflect any change in applicable law or regulation (or
the interpretation thereof) or to provide alternative procedures in
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compliance with applicable law and practices relating to the resale or other
transfer of restricted securities generally; or
(11) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 1004 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1004. Corporate Existence. Subject to Article Eight, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with their respective
organizational documents (as the same may be amended from time to time) and its
(and its Subsidiaries') rights (charter and statutory), licenses and franchises;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise if the Board shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 1004 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1004. Corporate Existence. Subject to Article Eight, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, in accordance with its corporate
charter and by-laws (as the same may be amended from time to time) and its
rights (charter and statutory), licenses and franchises; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise if the Board shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole and that the loss thereof is not disadvantageous
in any material respect to the Holders.
SECTION 1005 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1005. Maintenance of Property. The Company shall cause all Property
used or useful in the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of any of such Property
if such discontinuance is, in the judgment of the Board, desirable in the
conduct of the business of the Company and its Subsidiaries and not
disadvantageous in any material respect to the Holders. Notwithstanding anything
to the contrary contained herein, the Company shall not make any payment to a
Subsidiary pursuant to this Section 1005 that would not be permitted under
Section 1008.
SECTION 1005 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1005. [Intentionally Omitted.]
SECTION 1006 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1006. Payment of Taxes and Other Claims. The Company shall, and
shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become
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delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any of its Subsidiaries or upon the income, profits
or Property of the Company or any of its Subsidiaries and (2) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a Lien
upon the Property of the Company or the Property of any of its Subsidiaries;
provided, however, that the Company and its Subsidiaries shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which adequate provision has been
made. Notwithstanding anything to the contrary contained herein, the Company
shall not make any payment to a Subsidiary pursuant to this Section 1006 that
would not be permitted under Section 1008.
SECTION 1006 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1006. [Intentionally Omitted.]
SECTION 1007 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1007. Limitation on Transactions with Affiliates. Subsequent to the
date of this instrument, the Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, conduct any business or enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, transfer, disposition, purchase, exchange or lease
of assets, property or services) with, or for the benefit of, any Affiliate of
the Company unless (1) such transaction or series of transactions is pursuant to
a contractual obligation incurred prior to the Issue Date or (2) such
transaction or series of transactions (A) is on terms that are no less favorable
to the Company or such Subsidiary, as the case may be, than would be available
in a comparable transaction on an arm's length basis with an unrelated third
party, and (B) with respect to a transaction or series of transactions involving
aggregate payments or value in excess of $1,000,000, the Company delivers an
Officers' Certificate to the Trustee certifying that such transaction or series
of transactions complies with clause (A) above and such transaction or series of
transactions was approved by a majority of the independent members of the Board,
provided, however, that this covenant shall not limit, or be applicable to, any
transaction or series of related transactions between the Company and any
Subsidiary or between Subsidiaries and provided further that no member of the
Board of Directors shall lose his or her status as an "independent" member
thereof for purposes of this Section 1007 solely by virtue of his or her
nomination to the Board of Directors pursuant to the Stockholders Agreement by
an interested party unless such member of the Board of Directors is an officer,
director, employee or partner of, or is otherwise affiliated with, such
interested party.
SECTION 1007 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1007. [Intentionally Omitted.]
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SECTION 1008 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1008. Limitation on Restricted Payments. The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, (i) declare
or pay any dividend on, or make any distribution in respect of, or purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the Company
or any Affiliate of the Company, other than the declaration or payment of
dividends from a Subsidiary to the Company or dividends payable solely in the
Capital Stock (other than Redeemable Capital Stock) of the Company or such
Affiliate, as the case may be, (ii) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, scheduled sinking fund payment or other stated
maturity, debt of the Company or any Subsidiary which is subordinated in right
of payment to the Notes whether pursuant to its terms or by operation of law, or
(iii) make any Investment (other than Permitted Investments and Investments in
its Wholly Owned Subsidiaries or by a Wholly Owned Subsidiary of the Company in
one or more Wholly Owned Subsidiaries) in any Person (such payments and
investments described in clauses (i), (ii) and (iii), collectively, "Restricted
Payments") unless at the time of and after giving effect to the proposed
Restricted Payment (the value of any such payment, if other than cash, to be
determined by the Board, whose determination shall be conclusive and evidenced
by a Board Resolution), (a) no Event of Default (and no event that, after notice
or lapse of time, or both, would become an Event of Default) shall have occurred
and be continuing, (b) the Company could incur at least $1.00 of debt under
clause (iii) of the definition of Permitted Indebtedness, and (c) the aggregate
amount of all Restricted Payments declared or made after the Issue Date shall
not exceed the sum of (A) the remainder of (x) 100% of EBITDA of the Company
accrued during the period (treated as one accounting period) beginning on the
last day of the fiscal quarter of the Company immediately preceding the Issue
Date and ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or if such EBITDA shall
be a deficit, less 100% of such deficit), minus (y) the product of 1.7 times the
cumulative Consolidated Interest Expense during such period, plus (B) an amount
equal to the aggregate net cash proceeds received by the Company from the
issuance or sale (other than to an Affiliate of the Company) of its capital
stock (excluding Redeemable Capital Stock, but including capital stock issued
upon conversion of convertible debt and from the exercise of options, warrants
or rights to purchase capital stock (other than Redeemable Capital Stock) of the
Company); provided, however, that the foregoing provisions will not prevent the
payment of any dividend within 60 days after the date of its declaration if at
the date of its declaration such payment would be permitted by such provisions.
"Permitted Investments" means:
(a) Obligations of the U.S. Government or certificates of deposit or
Eurodollar deposits in commercial banks having capital and surplus of no
less than $500,000,000 having a maturity of one year or less;
(b) Commercial paper issued by an issuer rated at least A-1 or the
equivalent thereof by Standard & Poor's Corporation or P-1 or the equivalent
thereof by Moody's Investors Services, Inc.; and
(c) Other Investments that do not exceed $2,000,000 at any time
outstanding.
SECTION 1008 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1008. [Intentionally Omitted.]
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SECTION 1009 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1009. Limitation on Indebtedness. (a) The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, incur any
Indebtedness (including acquired debt) other than Permitted Indebtedness.
"Permitted Indebtedness" means:
(i) Indebtedness outstanding at any time under the Bank Credit Agreement
(or any successor bank credit facility) not to exceed $30,000,000 aggregate
principal amount;
(ii) Indebtedness represented by the Notes;
(iii) Indebtedness incurred if, immediately after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the Debt-to-Cash Flow Ratio would not exceed 6.5 to 1;
(iv) Indebtedness owed by any Wholly Owned Subsidiary to the Company or
owed by the Company to any Wholly Owned Subsidiary of the Company (provided
that such Indebtedness is at all times held by a Person which is a Wholly
Owned Subsidiary of the Company); provided, however, that for purposes of
this Section 1009, upon either (x) the transfer or other disposition by such
Wholly Owned Subsidiary or the Company of any Indebtedness so permitted to a
Person other than the Company or another Wholly Owned Subsidiary of the
Company or (y) the sale, lease, transfer or other disposition of shares of
Capital Stock (including by consolidation or merger) of such Wholly Owned
Subsidiary to a Person other than the Company or another such Wholly Owned
Subsidiary, the provisions of this subsection (iv) shall no longer be
applicable to such Indebtedness and such Indebtedness shall be deemed to
have been Incurred at the time of the transfer or disposition of such
Indebtedness, or the sale, lease, transfer or other disposition of such
Capital Stock;
(v) Purchase Money Indebtedness and Capital Lease Obligations whose
Attributable Value will not exceed $5,000,000 at any one time outstanding;
(vi) Indebtedness arising under Interest Rate Protection Agreements;
(vii) Indebtedness Incurred in connection with a repurchase of the Notes
pursuant to Change of Control, provided that the principal amount of such
Indebtedness does not exceed 101% of the principal amount of the Notes
repurchased, and such Indebtedness (x) has an Average Life to Stated
Maturity equal to or greater than the remaining Average Life to Maturity of
the Notes, and (y) does not mature prior to the stated maturity of the
Notes;
(viii) Any renewals, extensions, substitutions, refinancings or
replacements of any Indebtedness incurred pursuant to preceding clauses (i),
(ii), (iii), and (v), above, and (ix), below, provided that such renewal,
extension, substitution, refunding, refinancing or replacement does not (x)
result in an increase in the aggregate principal amount of the outstanding
Indebtedness represented thereby, (y) reduce the Average Life to Stated
Maturity of such Indebtedness, or (z) reduce the Stated Maturity of such
Indebtedness, and provided, further, that Subordinated Indebtedness must be
-----------------
renewed, extended, substituted, refinanced or replaced with equally
Subordinated Indebtedness; and
(ix) Indebtedness not otherwise permitted to be Incurred pursuant to
subsections (i) through (viii) above, which, together with any other
outstanding Indebtedness Incurred pursuant to this subsection (ix), has an
aggregate principal amount not in excess of $5,000,000 at any one time
outstanding.
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SECTION 1009 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1009. [Intentionally Omitted.]
SECTION 1011 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1011. Limitation Concerning Distributions or Transfers by
Subsidiaries. The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, cause or suffer to exist or
become effective, or enter into any agreement with any person that would cause
to become effective, any consensual encumbrance or restriction of any kind on
the ability of any Subsidiary of the Company to (a) pay dividends, in cash or
otherwise, or make any other distribution on or in respect of its Capital Stock,
(b) pay any debt owed to the Company or any Subsidiary of the Company, (c) make
loans or advances to the Company or any Subsidiary of the Company, or (d)
transfer any of its Property or assets to the Company or any Subsidiary of the
Company, except for encumbrances or restrictions in existence as of the Issue
Date.
SECTION 1011 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1011. [Intentionally Omitted.]
SECTION 1012 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1012. Limitation on Asset Sales. (a) The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, make any
Asset Sale unless (i) the Company or such Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value (evidenced by a resolution of the Board) of the shares or assets
sold or otherwise disposed of, and (ii) at least 75% of such consideration
consists of cash or cash equivalents. Within 270 days after any Asset Sale, the
Company or such Subsidiary, as the case may be, may apply the net cash proceeds
from such Asset Sale (after paying or providing for the payment of taxes payable
on account of such Asset Sale) to (x) an investment in properties and assets (in
the same line of business) that replaces the properties and assets that were the
subject of such Asset Sale or (y) to a permanent reduction in the amount of debt
outstanding under the Bank Credit Agreement. Any such net cash proceeds from any
Asset Sale that are not used as provided in the preceding sentence constitute
"Excess Proceeds."
(b) Within 30 calendar days subsequent to the date when the aggregate amount
of Excess Proceeds exceeds $5,000,000, the Company shall make an offer to
purchase (an "Excess Proceeds Offer"), from all Holders of the Notes, an
aggregate principal amount of Notes equal to the Excess Proceeds, at a price in
cash equal to 100% of the outstanding principal amount thereof plus accrued
interest, if any, to the purchase date (the "Excess Proceeds Price"). The
Company shall mail a notice to each Holder of Notes and to the Trustee stating:
that the aggregate amount of Excess Proceeds exceeds $5,000,000, that an
Excess Proceeds Offer is being made pursuant to this Section 1012 and that
such Excess Proceeds Offer is limited to the aggregate amount of Excess
Proceeds;
the aggregate amount of Excess Proceeds and that all Notes that are
timely tendered will be accepted for payment in multiples of $1,000 by the
Company, pro rata, based on the aggregate amount of Notes tendered up to the
aggregate amount of Excess Proceeds;
the Excess Proceeds Price and the repurchase date, which shall be no
earlier than 30 days nor later than 60 days after the date such notice is
mailed (the "Excess Proceeds Payment Date");
that any Note (or any portion thereof) not tendered will continue to
accrue interest;
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that any Note (or any portion thereof) accepted by the Company for
payment pursuant to the Excess Proceeds Offer will cease to accrue interest
after the Excess Proceeds Payment Date;
that any Holder electing to have a Note (or any portion thereof)
repurchased pursuant to an Excess Proceeds Offer will be required to
surrender the Note, with the form provided with such notice entitled
"Election of Holder Pursuant to Section 1012" (in the form set forth as
Exhibit C hereto) completed, to the Paying Agent at the address specified in
the notice on or prior to the close of business on the Excess Proceeds
Payment Date;
that any Holder will be entitled to withdraw such election if the Paying
Agent receives, not later than the close of business on the third Business
Day preceding the Excess Proceeds Payment Date, a telegram, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes the Holder delivered for repurchase and a statement that
such Holder is withdrawing the Holder's election to have such Notes
repurchased;
that any Holder that elects to have a portion of its Notes repurchased
must specify the principal amount that is being tendered for repurchase,
which principal amount must be in an integral multiple of $1000; and any
other information necessary to enable Holders to tender their Notes (or any
portion thereof) and to have such Notes repurchased pursuant to this Section
1012.
(c) On the Excess Proceeds Payment Date, the Company shall (i) accept for
payment any Note (or portion thereof in $1,000 multiples) tendered pursuant to
the Excess Proceeds Offer, pro rata, based on the aggregate amount of Notes
tendered up to the aggregate amount of Excess Proceeds, (ii) deposit with the
Paying Agent money sufficient to pay the Excess Proceeds Price of any Note so
accepted and (iii) deliver to the Trustee each Note so accepted together with an
Officers' Certificate that states the aggregate principal amount of Notes
tendered to and accepted by the Company. The Paying Agent shall promptly mail to
each Holder of Notes so accepted payment in an amount equal to the Excess
Proceeds Price therefor. The Company shall publicly announce the results of the
Excess Proceeds Offer on or as soon as practicable after the Excess Proceeds
Payment Date. For purposes of this Section 1012, the Trustee shall act as the
Paying Agent.
(d) Notwithstanding the foregoing, if any Note (or any portion thereof)
accepted for payment shall not be so paid pursuant to the provisions of this
Section 1012, then, from the Excess Proceeds Payment Date until the principal of
and interest on such Note (or portion thereof) is paid, interest shall be paid
on the unpaid principal and, to the extent permitted by law, on any accrued but
unpaid interest thereon, in each case at the rate then borne by such Note.
(e) Upon surrender of any Note tendered in part or accepted by the Company
in part, the Company shall execute, and the Trustee shall authenticate and
deliver, a new Note of any authorized denomination, in an aggregate principal
amount equal to the untendered portion of the surrendered Note.
SECTION 1012 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1012. [Intentionally Omitted.]
SECTION 1013 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1013. Limitation on Issuance and Sale of Capital Stock of
Subsidiaries. The Company (i) shall not permit any Subsidiary of the Company to
issue any stock (other than to the Company or a Wholly Owned Subsidiary of the
Company), and (ii) shall not permit any person (other than the Company or a
Wholly Owned Subsidiary of the Company) to own any capital stock of any
Subsidiary of the Company (other than directors' qualifying shares), except for
a sale of 100% of the capital stock
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of a Subsidiary effected in accordance with the "Limitation on Asset Sales"
covenant contained in Section 1012 above.
SECTION 1013 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1013. [Intentionally Omitted.]
SECTION 1014 OF THE INDENTURE AS CURRENTLY IN EFFECT
SECTION 1014. Restriction on Incurrence of Senior Subordinated
Indebtedness. The Company shall not Incur any Indebtedness which ranks senior in
right of payment to the Notes unless such Indebtedness ranks pari passu with
Senior Indebtedness. For purposes of this Section, Senior Indebtedness which is
secured by a mortgage, deed of trust, security interest or other lien and Senior
Indebtedness which is unsecured shall be deemed to rank pari passu.
SECTION 1014 OF THE INDENTURE AS PROPOSED TO BE AMENDED
SECTION 1014. [Intentionally Omitted.]
PROPOSED ARTICLE 13 TO THE INDENTURE
A new Article 13, Parent Guarantee of the Notes, is proposed to be added to
the Indenture. See Appendix II.
CERTAIN DEFINITIONS IN THE INDENTURE AS CURRENTLY IN EFFECT
"Asset Sale" means, with respect to any Person, any direct or indirect sale,
conveyance, transfer, lease or other disposition (including, without limitation,
by means of a Sale and Leaseback Transaction) to any Person other than the
Company or a Subsidiary, in one transaction or a series of related transactions,
of (i) any Capital Stock of any Subsidiary of the Company or (ii) any other
Property or asset of the Company other than sales of Property or assets in the
ordinary course of business and consistent with past practices.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with GAAP, discounted from the last date of
such initial term to the date of determination at a rate per annum equal to the
discount rate which would be applicable to a Capital Lease obligation with like
term in accordance with GAAP. The net amount of rent required to be paid under
any such lease for any such period shall be the aggregate amount of rent payable
by the lessee with respect to such period after excluding amounts required to be
paid on account of insurance, taxes, assessments, utility, operating and labor
costs and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated. Attributable Value means, as to a Capital Lease obligation under
which any Person is at the time liable and at any date as of which the amount
thereof is to be determined, the capitalized amount thereof that would appear on
the face of a balance sheet of such Person in accordance with GAAP.
"Average Life" means, as of any date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products
obtained by multiplying (x) the number of years from such date of determination
to the date of each successive scheduled principal payment
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(including any sinking fund or mandatory redemption payment requirements) of
such debt security by (y) the amount of such principal payment by (ii) the sum
of all such principal payments.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, (A) the sum of (i) the aggregate amount of interest
recognized by such Person and its Subsidiaries in respect of Indebtedness of
such Person and its Subsidiaries (including, without limitation, all interest
capitalized by such Person and its Subsidiaries during such period, any
amortization of debt discount and all commissions, discounts and other fees and
charges owed by such person and its Subsidiaries with respect to letters of
credit and bankers' acceptance financing and the net costs associated with
Interest Rate Protection Agreements of each Person and its Subsidiaries), (ii)
the aggregate amount of the interest component of rentals in respect of Capital
Lease Obligations recognized by such Person and its Subsidiaries, during such
period, (iii) to the extent any debt of any Person is guaranteed by such Person
and its Subsidiaries, the aggregate amount of interest paid or accrued by such
other Person during such period attributable to any such debt, (iv) preferred
stock dividends in respect of preferred stock of Subsidiaries held by Persons
other than such Person or a Wholly Owned Subsidiary thereof, and (v) the
interest portion of any deferred payment obligation, and less (B) to the extent
included in (A) above, amortization or write-off of deferred financing costs of
such Person and its Subsidiaries during such period and any charge related to
any premium or penalty paid in connection with redeeming or retiring any debt
prior to its stated maturity, with the foregoing amounts in the case of both (A)
and (B) above, as determined in accordance with GAAP as they would be applied on
the Issue Date.
"Consolidated Net Income" of any Person means, for any period, the aggregate
net income (or net loss, as the case may be) of such Person and its Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP as
they would be applied on the Issue Date; provided that there shall be excluded
therefrom, without duplication, (i) gains and losses from Asset Sales or
reserves relating thereto, (ii) items (other than the tax benefit of the
utilization of net operating loss carryforwards or alternative minimum tax
credits) classified as extraordinary or non-recurring, (iii) the income or loss
of any Person other than the Person whose Consolidated Net Income is being
determined or any Subsidiary thereof, except such income will be included to the
extent of the amount of cash dividends or other distributions in respect of
Capital Stock thereof actually paid during such period by such Person and
received by any Person whose Consolidated Net Income is being determined or any
Subsidiary thereof out of funds legally available therefor, (iv) the income (or
loss) of any other Person accrued or attributable to any Person prior to the
date it becomes a Subsidiary of such Person or is merged into or consolidated
with such Person or any of its Subsidiaries or such other Person's Property (or
a portion thereof) is acquired by such Person or any of its subsidiaries, (v)
any non-cash charge resulting from the application of Statement of Financial
Accounting Standards No. 106 ("SFAS 106") to the extent exceeding the cash
payments for benefits covered by SFAS 106 for the relevant period, and (vi) the
net income of any Subsidiary of such Person to the extent that the declaration
of dividends or similar distributions by that Subsidiary of that income is not
at the time permitted, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, law,
rule or governmental regulations applicable to that Subsidiary or its
stockholders.
"Consolidated Net Worth" of any Person means, as of any date, the sum of the
Capital Stock and additional paid-in-capital plus retained earnings (or minus
accumulated deficit) of such Person and its Subsidiaries, each as determined on
a consolidated basis in accordance with GAAP, plus amounts attributable to
Redeemable Capital Stock of such Person and its Subsidiaries.
"Debt-to-Cash Flow Ratio" means as of the Transaction Date, the ratio of (i)
the aggregate amount of Indebtedness of the Company and its consolidated
Subsidiaries (based upon the pro forma amount of debt of the Company and its
Subsidiaries expected by the Company to be outstanding on the Transaction Date)
to (ii) the aggregate amount of EBITDA of the Company and its consolidated
Subsidiaries for the four fiscal quarters for which financial information in
respect thereof is available
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immediately prior to the Transaction Date, provided that if the transaction
giving rise to the need to calculate the Debt-to-Cash Flow Ratio would have the
effect of increasing or decreasing EBITDA in the future, EBITDA shall be
calculated on a pro forma basis as if such transaction had occurred on the first
day of the first quarter of the four fiscal quarters referred to in clause (ii)
of this definition, and if, during the same four fiscal quarters, (x) the
Company or any of its Subsidiaries shall have engaged in any Asset Sale, EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if positive),
or increased by an amount equal to the EBITDA (if negative), directly
attributable to the assets which are the subject of such Asset Sale for such
period calculated on a pro forma basis as if such Asset Sale and any related
retirement of debt had occurred on the first day of such period, or (y) the
Company or any of its Subsidiaries shall have acquired any material assets out
of the ordinary course of business, EBITDA shall be calculated on a pro forma
basis as if such asset acquisition and related financing had occurred on the
first day of such period.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Notes and to have satisfied all the obligations under this Indenture with
respect to the Notes (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except (A) the rights of
Holders to receive, from the trust funds described in clause (B)(1) of Section
401, payment of the principal of and the interest on the Notes when such
payments are due, (B) the Company's obligations with respect to the Notes under
Sections 306, 307, 402, 610 and 1002 and (C) the rights, powers, trusts, duties
and immunities of the Trustee hereunder including, without limitation, the
provisions of Section 607.
"EBITDA" means, with respect to any Person for any period, the sum for such
Person for such period of Consolidated Net Income plus, to the extent reflected
in the income statement of such person for such period from which Consolidated
Net Income is determined, without duplication, (i) Consolidated Interest
Expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization
of intangibles expense and (v) any charge related to any premium or penalty paid
in connection with redeeming or retiring any debt prior to its stated maturity.
"Excess Proceeds" has the meaning specified in Section 1012.
"Excess Proceeds Offer" has the meaning specified in Section 1012.
"Exceeds Proceeds Payment Date" has the meaning specified in Section 1012.
"Excess Proceeds Price" has the meaning specified in Section 1012.
"Fair Market Value" means, with respect to the total consideration received
pursuant to any Asset Sale or any non-cash consideration received by or to be
paid to any Person, the fair market value of such consideration as determined in
good faith by the Board as evidenced by a Board Resolution.
"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan or capital contribution to, the purchase of any stock, bonds,
notes, debentures or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or making of any
investment in any Person. Investments shall exclude extensions of trade credit
on commercially reasonable terms in accordance with normal trade practices and
acquisitions of 100% of the Capital Stock or substantially all of the operating
assets of any corporation engaged exclusively in media and communications
businesses, including broadcast television and radio, cable television,
newspapers, publishing, outdoor advertising, cellular telephone systems and
related businesses.
"Permitted Indebtedness" has the meaning assigned thereto in Section 1009.
"Permitted Investments" has the meaning assigned thereto in Section 1008.
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"Purchase Money Indebtedness" means, as to any Person, the Indebtedness of
such Person Incurred and owing to a seller of Property for all or part of the
purchase price thereof.
"Restricted Payments" has the meaning specified in Section 1008.
"Surviving Entity" has the meaning assigned thereto in Section 801.
"Transaction Date" means the date of the transaction giving rise to the need
to calculate the Debt-to-Cash Flow Ratio.
CERTAIN DEFINITIONS IN THE INDENTURE AS PROPOSED TO BE AMENDED
"Discharged" means that each of the Company and the Parent Guarantor shall
be deemed to have paid and discharged the entire indebtedness represented by,
and obligations under, the Notes and the Parent Guarantee and to have satisfied
all the obligations under this Indenture with respect to the Notes and the
Parent Guarantee (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except (A) the rights of Holders to
receive, from the trust funds described in clause (B)(1) of Section 401, payment
of the principal of and the interest on the Notes when such payments are due,
(B) the Company's obligations with respect to the Notes under Sections 306, 307,
402, 610 and 1002 and (C) the rights, powers, trusts, duties and immunities of
the Trustee hereunder including, without limitation, the provisions of Section
607;
CERTAIN DEFINITIONS IN THE INDENTURE TO BE DELETED IN THEIR ENTIRETY
"Asset Sale", "Attributable Value", "Average Life", "Consolidated Interest
Expense", "Consolidated Net Income", "Consolidated Net Worth", "Debt-to-Cash
Flow Ratio", "EBITDA", "Excess Proceeds", "Excess Proceeds Offer", "Excess
Proceeds Payment Date", "Excess Proceeds Price", "Fair Market Value",
"Investment", "Permitted Indebtedness", "Permitted Investments", "Purchase Money
Indebtedness", "Restricted Payment", "Surviving Entity" and "Transaction Date".
NEW DEFINITIONS PROPOSED TO BE ADDED TO THE INDENTURE
"Parent Guarantee" means the Guarantee of the Parent Guarantor of the Notes
pursuant to Article Thirteen, whether or not such Guarantee is endorsed on the
Notes.
"Parent Guarantor" means General Electric Company, a New York corporation as
Guarantor of the Notes pursuant to Article Thirteen, until a successor Person
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Parent Guarantor" shall mean such successor Person.
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APPENDIX II
ARTICLE 13
PARENT GUARANTEE OF NOTES
SECTION 1301. Unconditional Parent Guarantee. For value received, the Parent
Guarantor hereby unconditionally and irrevocably guarantees to each Holder of a
Note authenticated and delivered by the Trustee the payment of the principal of
and, premium, if any, and interest, if any, on such Note as the same shall
become due and payable after any applicable grace period, whether at maturity or
upon redemption, declaration or otherwise. The Parent Guarantor agrees that as
between the Parent Guarantor and the Holders of the Notes or the Trustee, any
payment made on the Notes or to the Trustee by the Company or out of its assets
which, pursuant to Article Twelve, is required to be paid over to the holders of
Senior Indebtedness, shall not constitute a payment on the Notes or to the
Trustee but, instead, shall be treated for all purposes of the Parent Guarantee
as though such payment had not been made by the Company or out of its assets.
Until the holders of the Notes or the Trustee have received, from the Company or
out of its assets, or from the Parent Guarantor, moneys which such Holders or
the Trustee are entitled to retain for their own account, equal in the aggregate
to the unpaid principal amount (including premium, if any) on the Notes plus all
accrued and unpaid interest thereon, the Parent Guarantor will remain liable on
the Parent Guarantee.
The Parent Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, legality or enforceability of such
Note or this Indenture, the absence of any action to enforce the same, the
waiver or consent with respect to any provisions thereof or hereof, the recovery
of any judgment against the Company or any action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. The Parent Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of merger or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest or notice with respect to such Note or the
indebtedness evidenced thereby and all demands whatsoever and covenants that the
Parent Guarantee will not be discharged except by complete performance of the
obligations contained in the Parent Guarantee.
The Parent Guarantor shall be subrogated to all rights of a holder of a Note
against the Company in respect of any amounts paid by the Parent Guarantor
pursuant to the provisions of the Parent Guarantee of this Indenture; provided
that the Parent Guarantor shall not be entitled to enforce or receive any
payment arising out of, or based upon, such right of subrogation until all
amounts due on or to become due on or in respect of all Notes shall have been
paid in full or duly provided for.
Each Parent Guarantee constitutes a guarantee of payment (and not of
collection) and is unsecured and ranks equally and ratably with all other
unsecured and unsubordinated obligations of the Parent Guarantor.
No recourse for the payment of the Parent Guarantee, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Parent Guarantor in this Indenture or
any indenture supplement thereto or in any Parent Guarantee, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Parent Guarantor or of any successor corporation, either directly
or through the Parent Guarantor of any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
of a Parent Guarantee by each Holder of a Note and as part of the consideration
for the issue of such Parent Guarantee, expressly waived and released.
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SECTION 1302. Execution of Parent Guarantee. To evidence its guarantee to
the Holders and the Trustee, the Parent Guarantor hereby agrees to execute a
notation relating to the guarantee on each Note authenticated and made available
for delivery by the Trustee. The Parent Guarantor hereby agrees that its Parent
Guarantee set forth in Section 1301 shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such Parent
Guarantee.
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APPENDIX III
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the fiscal year ended December 31, 1995 Commission File number: 33-9443
OUTLET BROADCASTING, INC.
(Exact name of registrant as specified in its charter)
RHODE ISLAND 05-0194550
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
23 KENNEY DRIVE
CRANSTON, RHODE ISLAND 02920
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 455-9200
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was none.
Documents Incorporated by Reference: None
The number of shares of the registrant's Class A Common Stock, par value
$.01 per share, outstanding as of March 21, 1996, was 1,000,000.
The Exhibit Index for this document appears on page 71 hereof.
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PART I
ITEM 1. BUSINESS.
INTRODUCTION
Outlet Broadcasting, Inc., a Rhode Island corporation ("Outlet
Broadcasting"), is a wholly-owned subsidiary of Outlet Communications, Inc., a
Delaware corporation ("Outlet Communications"). The operations of Outlet
Broadcasting, a television broadcasting company, consist of three owned
television stations and one television station for which Outlet Broadcasting
supplies programming under a time brokerage agreement. The owned stations
include two NBC network-affiliated VHF television stations and one NBC
network-affiliated UHF television station. Outlet Broadcasting has also entered
into an agreement to supply programming under a time brokerage agreement with
the permittee of a station still under construction in New Bedford,
Massachusetts, WLWC(TV) (formerly WFDG(TV)).
The two VHF television stations are WJAR(TV), Providence, Rhode Island,
which serves the Providence-New Bedford market area and WCMH(TV), which is
located in Columbus, Ohio and serves that market. The owned UHF television
station is WNCN(TV), Goldsboro, North Carolina, which has studios and offices
located in Raleigh, North Carolina and broadcasts in the Raleigh-Durham
(Fayetteville, Goldsboro and Rocky Mount), North Carolina market area. Outlet
Broadcasting acquired WNCN(TV) on August 10, 1994.
Since April 18, 1994, Outlet Broadcasting has also provided programming to
UHF television station WWHO(TV), Chillicothe, Ohio, under a time brokerage
agreement with that station's licensee. Outlet Broadcasting serves as a broker
for the sale of that station's advertising time and provides it with certain
programming and operating capabilities. In return, Outlet Broadcasting retains a
substantial percentage of WWHO(TV)'s net operating income to the extent that it
exceeds cumulative net operating losses. This station is an affiliate of The WB
Television Network.
By letters dated March 7, 1996, the licensee of WWHO(TV) and the permittee
of WLWC(TV), which are under common ownership, purported to terminate the two
time brokerage agreements referred to above on the basis of claims that Outlet
had breached the agreements. By letters dated March 11, 1996, Outlet advised the
licensee of WWHO(TV) and the permittee of WLWC(TV) that Outlet had not breached
the agreements, that the termination letters dated March 7 were therefore
ineffective, and that the agreements remain in full force and effect. This
dispute remains unresolved.
Outlet Broadcasting also offers production services to advertisers and
others on an occasional basis. This activity does not generate significant
revenues.
On August 2, 1995 Outlet Communications executed a definitive merger
agreement with the National Broadcasting Company, Inc. ("NBC") and CO
Acquisition Corporation, a subsidiary of NBC, providing for a transaction in
which NBC would acquire Outlet Communications and Outlet Communications'
stockholders would receive $47.25 per common share in cash. The merger agreement
was approved by Outlet Communications' Board of Directors and by the holders of
a majority of Outlet Communications' outstanding common stock. The transaction
closed on February 2, 1996.
TELEVISION
Outlet Broadcasting's television broadcasting revenues are derived from
regional and national spot advertising, from local advertising, and from network
compensation.
Advertising rates charged by a television station are based primarily upon
the population and number of television sets in the area served by the station,
as well as the station's ability to attract audiences as reflected in surveys
made by the A.C. Nielsen Company ("Nielsen") of the number of sets
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tuned to the station at various times. Nielsen measures ratings within specific
geographic markets by dividing the nation into Designated Market Areas ("DMA").
Advertising rates are highest during the most desirable viewing hours, with
corresponding reductions during other hours. The rates for national spot and
local advertising are determined by each station. Katz Communications, Inc. is
Outlet Broadcasting's national sales representative firm. Local advertising time
is sold by each station's own sales force.
Effective September 1, 1994, Outlet Broadcasting and NBC agreed to renew the
NBC network affiliation for Outlet Broadcasting's VHF television stations for a
period of six years. Effective October 2, 1995, Outlet Broadcasting and NBC
agreed to an NBC network affiliation for WNCN(TV) for a period of six years. The
affiliations give Outlet Broadcasting's owned television stations the right to
rebroadcast all programs transmitted by the NBC network. For each hour of
programming that is rebroadcast by the affiliate, the network pays the affiliate
a fee, which varies in amount depending on the time of day during which the
program is broadcast. Although the hourly rates of network compensation are
fixed, the total amount of network compensation received by each affiliated
station is subject to the number of network program hours rebroadcast by that
station.
Network programs are produced either by the networks themselves or by
independent production companies and are primarily transmitted via satellite by
the network to its affiliated stations for rebroadcast. Each of Outlet
Broadcasting's television stations also acquires programs from non-network
sources and produces its own programs for broadcast.
Approximately 62% of the television programming aired on Outlet
Broadcasting's Providence station is provided by NBC and approximately 25% is
provided or licensed by independent third parties. Outlet Broadcasting's
Columbus station receives 56% of its programming from NBC and 30% is provided or
licensed by independent third parties. Outlet Broadcasting's Raleigh station
receives 65% of its programming from NBC and 24% is provided or licensed by
independent third parties. The remaining portion of Outlet Broadcasting's owned
television station programming consists principally of local programs, such as
news, public affairs and children's programs, produced by the individual
television stations.
Another factor affecting television revenues is the increase in straight
barter and cash-plus-barter arrangements. Under such arrangements national
program distributors retain varying amounts of the advertising time that would
otherwise be available for sale by the stations to national or local
advertisers. While these arrangements reduce the cost of new programming because
the value of the advertising time withheld is credited against its cost, they
also result in decreased revenues to stations and introduce new competitors to
the advertising market.
The principal portion of television station programming for WWHO(TV)
consists of syndicated shows, children's programs, movies and news. Outlet
Broadcasting has also entered into an agreement with The WB Television Network
("WB") for WB to provide network programming to WWHO(TV). Commencing in January
1995, WB provided one night of prime time programming for two hours. A second
night of prime-time programming commenced during the third quarter of 1995 along
with selected children's programming. Additional programming will thereafter be
provided in accordance with a schedule of roll-out dates to the extent that WB
makes available such programming for rebroadcast. The initial period of the WB
agreement is for three years and may be extended for additional successive
periods of two years each if agreed upon by the parties.
In order to compensate WB for its programming, Outlet Broadcasting will pay
WB an annual payment based on Outlet Broadcasting's WB affiliated station
television market ratings for prime time broadcast periods of WB programming.
The payments are based on the value and/or profitability added to such station
as a result of its affiliation with WB and to pay to WB 25% of such added value
and/or profitability. No payment was made for 1995 nor was a payment required.
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The following is a description of each of the television stations operated
by Outlet Broadcasting.
WJAR(TV)
WJAR(TV) is a VHF station affiliated with the NBC network. It is located in
Cranston, Rhode Island but is licensed to and serves the capital city of
Providence, Rhode Island and broadcasts over Channel 10 in the Providence-New
Bedford television market. This market is ranked 46th in the nation in terms of
number of television households in its DMA.
WCMH(TV)
WCMH(TV) broadcasts over Channel 4 in Columbus, the capital city of Ohio,
and is a VHF station affiliated with NBC. The Columbus television market is
ranked 34th in the country in its DMA.
WNCN(TV)
WNCN(TV), Goldsboro, North Carolina, is a UHF television station with
studios and offices located in Raleigh, North Carolina. It broadcasts over
Channel 17 in the Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount) North
Carolina television market, which is ranked 30th in the nation in terms of
number of television households in its DMA. Since September 10, 1995, the
station has broadcast programming provided by NBC. Prior to that time, WNCN(TV)
broadcast WB programming.
WWHO(TV)
WWHO(TV) is a UHF television station that became affiliated with The WB
Television Network as of January 11, 1995. It is located in Chillicothe, Ohio
but serves the capital city of Columbus, Ohio and broadcasts over Channel 53 in
the Columbus-Chillicothe television market area.
COMPETITION
Outlet Broadcasting's television stations compete for revenues with other
broadcasting stations in their respective markets, including radio, as well as
with other advertising media, such as newspapers, magazines, outdoor
advertising, transit advertising, direct mail and cable systems.
Competition in the broadcasting industry occurs primarily in individual
markets. Generally, except as set forth below, a television broadcasting station
in one market does not compete with stations in other market areas. Outlet
Broadcasting television stations are located in highly competitive markets.
Factors that are material to competitive positions include authorized power,
assigned frequency, management experience, network affiliation, audience
characteristics and local program acceptance, as well as strength of local
competition. The broadcasting industry is continuously faced with technological
change and innovation, the possible rise of popularity of competing
entertainment and communications media, changes in labor conditions, and
governmental restrictions or actions of federal regulatory bodies, including the
Federal Communications Commission ("FCC") and the Federal Trade Commission
("FTC"). Any of such developments could possibly have a material effect on
Outlet Broadcasting's operations and profits.
Under present FCC regulations, no additional conventional, full power, VHF
or UHF commercial television stations may be constructed or operated in any of
the markets where Outlet Broadcasting's television stations are located except
there is a construction permit for WLWC(TV), Channel 28, New Bedford,
Massachusetts in the Providence market. See "Introduction" above, with respect
to Outlet Broadcasting's time brokerage agreement with the permittee of
WLWC(TV).
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There are sources of video programming other than conventional television
stations, the most common being cable television ("CATV"). These other sources
have increased the competition for broadcasting stations by bringing into their
markets distant broadcasting signals not otherwise available to the stations'
audience and also serving as a distribution system for programs originating on
the cable system. Programming is now being distributed to CATVs by both
terrestrial microwave systems and by satellite. The FCC has also authorized
intermediate carriers to pick up the signals of so-called "superstations" and to
deliver them to CATV systems via satellite, including CATV systems in each of
Outlet Broadcasting's television markets.
The Signal Carriage Provisions of the Cable Television Consumer Protection
and Competition Act of 1992 require CATV system operators to transmit the
broadcast signal of local commercial television stations that request such
carriage. In certain circumstances, the CATV operator is prohibited from
carrying broadcast stations without obtaining the stations' consent. Once every
three years a television broadcaster must choose whether to proceed under its
must carry, but uncompensated, alternative or instead to negotiate a grant of
retransmission consent. Because Outlet Broadcasting's television stations enjoy
significant viewership, the stations are carried by most of the cable television
systems serving their market area. In this regard, the VHF stations have,
primarily, granted retransmission consent to their cable operators and in return
have obtained, in certain instances, the right to produce news programs which
will be carried by available channels on such cable systems. The UHF stations
have generally proceeded with cable system operators under the must carry
alternative.
Other sources of competition include pay cable, multi-point distribution
systems and multichannel multi-point distribution systems, satellite-fed master
antenna systems and home entertainment systems (including television game
devices, video cassette recorder and playback systems, and video discs). Outlet
Broadcasting's television stations also face competition from Direct Broadcast
Satellites ("DBS"), which transmit programming directly to homes equipped with
special receiving antennas or to CATV systems for transmission to their
subscribers. Under the Telecommunications Act of 1996 (the "Telcom Act"), a
local telephone company will be permitted to deliver video programming directly
to consumers, operating as cable system operators, as common carriers, or as
"open video systems", which will have attributes of both cable systems and
common carrier operations. See "Business--Federal Regulation of Broadcasting"
for possible additional competitive impact from proposed technological changes.
STRATEGY
Despite the changing dynamics of the television industry, management
believes that there will continue to be opportunities to generate significant
revenues from mass marketed programming and associated advertising. Management
believes that an increasing number of national "niche" cable channels will
continue to fractionalize video viewing, including the cable networks
themselves, and that these channels may find it difficult to attract enough
viewers to generate significant advertiser support or obtain satisfactory
programming on a cost-effective basis. However, management believes that Outlet
Broadcasting's blend of strong local news programming, combined with national
network programming and selective use of syndicated programming at its owned
television stations, will continue to attract large viewing audiences and
advertiser support. Additionally, management believes that the syndicated
programs, movies and children's programs offered by WWHO(TV) provide an
attractive alternative to the more traditional news and network-provided
programming.
Successful programming of broadcast television requires constant refinement,
on the basis of cost effectiveness, of the match between available programming
and the changing tastes of the local viewing audience. In conjunction with its
strategy to reduce overall costs and increase profitability, Outlet Broadcasting
has directed the programming focus at its owned television stations towards
building on local news leadership and selectively reducing purchases of
syndicated programs. At WWHO(TV), Outlet Broadcasting has engaged in a network
affiliation while simultaneously developing local news
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programming and improving its offerings of syndicated and children's programs.
Outlet Broadcasting intends to continuously refine its programming mix in order
to attract and hold the audiences desired by advertisers and to increase
profitability. Outlet Broadcasting's strategy has the following elements:
Build on Local News Leadership. Local news programming is commercially
valuable because of its high viewership level, the attractiveness to
advertisers of the demographic characteristics of the typical news audience
(allowing stations to charge higher rates for advertising time) and the
enhanced ratings of other programming in time periods following the news. In
addition, strong local news product helps differentiate local broadcast
stations from cable system competitors, which generally do not provide this
service. The cost of producing local news programming is generally lower
than other sources of non-network programming, and the amount of local news
programming can be increased for very modest incremental increases in cost.
Moreover, such programming can be increased or decreased on very short
notice, providing Outlet Broadcasting with greater programming flexibility.
Outlet Broadcasting has focused on maintaining and building each owned
station's local news franchise as the foundation of its strategy to maintain
and build audience loyalty and increase revenues and profitability.
According to the November 1995 Nielsen report, WJAR(TV) remained as the
leading news station in its market while WCMH (TV)'s weekday news programs
generally captured the second largest share of the Columbus audience in
their time periods. WNCN(TV) is now broadcasting news shows at 5:30 to 7:00
AM and at 6:00, 7:00 and 11:00 PM while WWHO(TV) has instituted a one-half
hour 10:00 p.m. news program.
Optimize Selection of Syndicated Programming. At its owned television
stations, Outlet Broadcasting has operated to reduce its dependence on, and
financial commitment to, syndicated programming. Within this framework,
Outlet Broadcasting has balanced the cost of available syndicated programs
with their potential to increase advertising revenue, while giving due
consideration to the risk of reduced popularity during the term of the
program contract. Outlet Broadcasting is now selectively buying only those
programs which are available on a cost-effective basis and for contractual
periods which permit financial and programming flexibility. Selected
programs must also complement a station's overall and/or competitive
programming strategies.
However, WWHO(TV) is more dependent on syndicated programs for its
overall programming needs. At this station, Outlet Broadcasting has sought
to upgrade the quality of syndicated programs, on a cost-effective basis, in
order to provide a more attractive product to viewers.
Strengthen Advertiser Relationships. Advertising by political candidates
injects significant revenues in relatively short time periods, but disrupts
traditional commercial advertising. In conjunction with a policy decision
not to accept advertising by political candidates during local news
programs, Outlet Broadcasting effectively limited the amount of such
advertising its stations will carry, thereby minimizing the disruption to
commercial advertisers. Outlet Broadcasting also maintains up-to-date
production facilities and audience research capabilities that it makes
available for the benefit of its advertisers. In addition, Outlet
Broadcasting's sales staff is committed to serve and support its advertising
customers. Management believes, therefore, that Outlet Broadcasting's
relationships with its customer base is facilitated and strengthened through
its policy decisions, physical capabilities and sales support activities.
Control Costs. Management believes that controlling costs is essential
to achieving and maintaining the profitability of its broadcast television
stations. Therefore, Outlet Broadcasting implemented a program to control
costs which, beginning in 1992, led to substantially improved operating
results. The cost control measures included reducing financial commitments
to costly, long-term syndicated program contracts, increasing the amount of
local news programming, reducing staff and corporate overhead and relocating
WJAR(TV) and corporate headquarters to a more efficient facility. Through
its ongoing strategic planning and annual budget processes, Outlet
Broadcasting intends to continue to identify and implement cost saving
opportunities.
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SEASONALITY
Outlet Broadcasting's operating revenues are generally highest in the second
and fourth quarters of each year, due in part to increases in beverage
advertising in the spring and retail advertising in the period leading up to and
including the holiday season. Revenues may also be affected by special events
carried by NBC, such as the Olympic Games or the Super Bowl. In addition,
advertising revenues are generally higher during political election years due to
campaign spending by political candidates.
OTHER ACTIVITIES
In addition to its broadcasting properties, Outlet Broadcasting has
interests in certain television production activities. These activities now only
include the offering by each of Outlet Broadcasting's television stations of
production services to advertisers and others. It is not anticipated that any of
such activities will generate significant revenues.
FEDERAL REGULATION OF BROADCASTING
Television broadcasting is subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"). The
Communications Act prohibits television broadcasting except in accordance with a
license issued by the FCC and limits the percentage of alien ownership of
broadcast stations. The Communications Act also empowers the FCC, among other
things, to issue, revoke or modify broadcasting licenses, to determine the
location of stations, to regulate the equipment used by stations, to adopt such
regulations as may be necessary to carry out the provisions of the
Communications Act, and to impose penalties for violation of such regulations.
The assignment of a broadcast license or the transfer of control of a
corporation holding a license cannot be effected without the prior approval of
the FCC.
Effective with the Telcom Act, the terms of television licenses will, upon
their next renewals, be extended from five years to eight years. Licenses are
renewable for additional terms upon application to the FCC, which will approve
the renewal without a hearing if there are no petitions to deny by third parties
conflicting with the renewal applications (which could require a hearing), or
adverse findings as to the licensee's qualifications. In recent years, there
have been a number of challenges and competing applications to broadcast license
renewal applications although, under the Telcom Act, comparative renewal
proceedings are eliminated by requiring the FCC to decide whether a station's
license should be renewed before accepting competing applications. In the vast
majority of cases, television licenses are renewed by the FCC.
Outlet Broadcasting's station licenses have the following expiration dates,
until renewed:
WJAR(TV)................................................. April 1, 1999
WCMH(TV)................................................. October 1, 1997
WNCN(TV)................................................. February 1, 1997
WWHO(TV)................................................. October 1, 1997
The FCC rules now permit cognizable ownership by one entity of an unlimited
number of television stations, nationally, except for an ownership limit based
on audience reach. Under the audience-reach limitation, an entity may acquire
cognizable ownership interests in television stations only if the aggregate
number of television households reached by the television stations does not
exceed 35% of the national television household audience as determined by market
households. The percentage of the national television household audience reached
by the television stations owned by Outlet Broadcasting will be aggregated with
the percentage of the national audience reached by television stations in which
NBC and General Electric Company have an attributable interest. The percentage
of national television households reached by all such stations is significantly
below the 35% limitation.
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There is no overall limitation on the number of radio stations a single
entity may own. There are certain limitations, however, based on market size and
the number of commercial radio stations in each market.
Present FCC rules prohibit ownership of two television stations with
overlapping Grade B signal contours. Currently, FCC rules generally prohibit the
common ownership of a television station and either an AM or an FM radio station
with overlapping areas of local service. Ownership of a newspaper, CATV system,
and a television station in the same market is also prohibited. These rules
apply only to those who seek new authorizations or FCC approval of transfers of
existing combinations. All of the FCC's local ownership limitations that apply
to television (except the newspaper/TV limitation) are under reexamination in an
FCC rulemaking proceeding that is not expected to be concluded prior to the
fourth quarter of 1996.
The FCC requires the attribution of the licenses held by a broadcasting
company to its officers, directors, and holders of specified levels of its
voting securities. There would be a violation of FCC regulations if an officer,
director, or corporate stockholder of a broadcasting company held an
attributable interest in more than the permitted number of stations or in
stations that serve the same area.
Effective January 1, 1992, the FCC implemented commercial time limitations
in children's programming, pursuant to legislation adopted by Congress in 1990.
Commercial matter in programs designed for viewing by children 12 years of age
and under is limited to 12 minutes per hour on weekdays and 10.5 minutes per
hour on weekends. In addition, all television stations have been required since
October 1, 1991 to broadcast some television programming specifically designed
to meet the educational and informational needs of children 16 years of age and
under.
New methods of digital television transmission will in the future make it
technically feasible for television stations to transmit "high definition
television" having greatly improved picture resolution, color rendition and
sound, and wider screen picture. Alternatively, digital transmission will permit
stations to transmit multiple standard definition television channels and other
non-broadcast materials in the same amount of frequency space currently used to
transmit one current television signal. Digital broadcasting will ultimately
also permit consumers to utilize a single reception device for television,
computer data, materials offered via the Internet, and any other form of digital
information. Because existing television sets cannot receive a digital signal,
however, it will be necessary to transition to a new digital system by
broadcasting digital signals on a second set of television channels for a period
of years, while existing stations continue to broadcast their present analogue
signals on their present channels. After the transition is complete, the
government intends to reclaim one set of channels.
Under the Telcom Act, the FCC would be permitted to allocate frequency space
for the transition to digital television. If the FCC does make such an
allocation, the Telcom Act provides that the eligibility to receive the
additional transition frequencies will be limited to existing television
licensees; that special fees would be assesssed such licensees with respect to
any non-broadcast uses of the frequencies; and that, under a schedule to be
determined by the FCC (and which continues to be a subject of debate within the
government), each broadcaster would eventually be required to give back to the
government one of its two frequencies. Notwithstanding these provisions of the
Telcom Act, various members of Congress continue to advocate a present auction
of the transition frequencies, and the FCC has agreed to make no allocation of
transition channels until Congress has had a further opportunity to review the
matter.
Broadcasters who obtain a second channel for the transition to digital
transmission will be required to make significant capital investments in order
to build and operate a second station in each market. Should broadcasters fail
to make this additional investment, they would in the long term be likely to
suffer competitive adverse effects because cable television, direct broadcast
satellites and distributors of recorded video materials are likely to deliver
digital signals and programs to consumers. Broadcasters would also suffer
adverse effects were the government to determine that the digital transition
channels
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must be made available for present auction, or if the time period permitted for
the digital transition process is unduly short.
The foregoing is only a brief summary of certain provisions of the
Communications Act and the regulations of the FCC. Reference is made to the
Communications Act, the Telcom Act, FCC regulations and the public notices
promulgated by the FCC for further information. Outlet Broadcasting is unable to
predict what impact, if any, changes in these laws would have.
MUSIC LICENSING
In July 1995 Outlet Broadcasting was advised that a committee representing
the television industry reached agreement with ASCAP music licensing
organization on the final terms of music license fees payable by television
stations. Pursuant to the agreement, industry-wide blanket license fees were
established for the initial license period October 1, 1995 to March 31, 1997
which fees would be allocated to each station according to the formula used to
allocate additional fees payable to ASCAP during 1995. Industry-wide blanket
fees were set at annual levels of $88.4 million--pro-rated for the fourth
quarter of 1995, $91.8 million for 1996, and $91.8 million pro-rated for the
first quarter of 1997. Effective with the 1995 fourth quarter, the new agreement
resulted in increased music license fees payable by the Outlet Broadcasting
television stations totalling approximately $88,000 per year.
The agreement with ASCAP also provided for a one year extension of the
license period to March 31, 1998. The industry-wide blanket license fee
applicable to the extension has not yet been determined but will be subject to
allocation pursuant to existing methodology. Either ASCAP or the television
industry may opt out of the final twelve months of this agreement, effective
April 1, 1997, and elect to begin negotiations on new license terms. If either
party chooses this option and the negotiations fail to produce an agreement, the
unresolved negotiations will be referred automatically to the ASCAP rate court.
BMI music licensing organization currently receives approximately 70% of
what ASCAP receives. However, BMI is continuing to advocate that it should be
paid on parity with ASCAP. As a result, BMI and the committee representing the
television industry are continuing to negotiate fee determinations. The final
fee determinations, as noted above, could have an effect on Outlet
Broadcasting's continuing costs of music licensing for its television
properties.
EMPLOYEE RELATIONS
Outlet Communications and Outlet Broadcasting have approximately 439
full-time employees. Approximately 181 of such employees are represented by
labor unions under collective bargaining agreements. These agreements expire on
various dates through November 1997. Outlet Broadcasting contributes to and
maintains employee benefit and retirement plans for its employees.
ITEM 2. PROPERTIES
Outlet Broadcasting's and Outlet Communications' corporate headquarters as
well as the studio facility for WJAR(TV) are located at 23 Kenney Drive,
Cranston, Rhode Island 02920.
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The following table sets forth certain information concerning Outlet
Broadcasting's principal facilities.
APPROXIMATE
OWNED OR SQUARE
LOCATION: LEASED FOOTAGE
- - ---------------------------------------------------- -------- -----------
Corporate Headquarters/WJAR(TV) Studio Facilities
Cranston, Rhode Island............................ Owned 42,000
WCMH(TV) Studio Facilities Columbus, Ohio........... Owned 54,000
WNCN(TV) Studio Facilities Raleigh, North Carolina.. Leased 23,200
WWHO(TV) Studio Facilities Chillicothe, Ohio........ (A) 1,162
- - ------------
(A) Leased by licensee
The tower site for WJAR(TV) is owned. The tower sites for WCMH(TV) and
WNCN(TV) are leased. The tower site for WWHO(TV) is leased by that station's
licensee.
ITEM 3. LEGAL PROCEEDINGS.
Outlet Broadcasting is not a party, and none of its assets is subject, to
any pending legal proceedings, other than ordinary routine litigation incidental
to Outlet Broadcasting's businesses and against which it is adequately insured,
or which are not material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Outlet Broadcasting's authorized capital stock consists of 3,000,000 shares
of Class A Common Stock, par value $.01 per share, 1,000,000 shares of
non-voting Class B Stock, par value $.01 per share, and 1,000,000 shares of
Preferred Stock, with no par value. Of such shares, 1,000,000 shares of Class A
Common Stock and no shares of Class B Common Stock or Preferred Stock are issued
and outstanding. All of Outlet Broadcasting's issued and outstanding shares are
owned by Outlet Communications. Accordingly, there is no established public
trading market for Outlet Broadcasting's common stock.
Outlet Broadcasting has no present intention to pay dividends on its common
stock. Among other things, the future payment of dividends will depend on Outlet
Broadcasting's earnings and financial condition, capital requirements, and
general economic conditions. In addition, Outlet Broadcasting's ability to pay
dividends is restricted by the terms of its debt agreements.
ITEM 6. SELECTED FINANCIAL INFORMATION.
The comparability of net income (loss) in the following table of Selected
Financial Information is affected by the cumulative effect of a change in method
of accounting for income taxes in the amount of $4,434,000, and an extraordinary
loss for debt extinguishment of $1,826,000, both of which occurred in 1993.
Also, net income in 1995 includes an extraordinary loss for merger expenses
totalling $4,733,000
Outlet Broadcasting has not paid cash dividends on its capital stock during
any of the periods presented below.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net revenue............................ $ 66,210 $ 59,442 $ 46,952 $ 45,153 $ 39,434
Operating income....................... 19,767 20,175 12,428 10,297 2,232
Income (loss) before non-recurring
items and income taxes............... 11,772 11,229 2,342 (2,825) (12,343)
Net income (loss)...................... 3,439 10,569 4,634 (1,552) (9,265)
Income (loss) per share................ $ 3.44 $ 10.57 $ 4.63 $ (1.55) $ (9.27)
Total assets........................... $129,545 $129,928 $117,611 $126,646 $143,029
Long-term debt excluding current
maturities........................... 70,000 75,000 79,500 87,447 95,961
Other long-term liabilities............ 12,926 15,098 13,392 18,085 18,933
Stockholder's equity................... 22,421 16,404 5,785 1,113 2,665
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Outlet Broadcasting's operations consist of three owned television stations
and one television station operated under a time brokerage agreement. The owned
stations include two NBC network-affiliated VHF television stations and one NBC
network-affiliated UHF television station. The two VHF television stations are
WJAR-TV, which serves the Providence, Rhode Island-New Bedford, Massachusetts
area and WCMH-TV, which serves the Columbus, Ohio area. The UHF television
station, acquired by Outlet Broadcasting on August 10, 1994, is WNCN-TV which
serves the Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount), North
Carolina market area.
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Outlet Broadcasting also operates UHF television station WWHO-TV,
Chillicothe, Ohio, under a time brokerage agreement with that station's
licensee. Outlet Broadcasting serves as a broker for the sale of WWHO-TV's
advertising time and provides it with certain programming and operating
capabilities. In return, Outlet Broadcasting retains a substantial percentage of
the station's net operating income to the extent that it exceeds cumulative net
operating losses. Operations under the time brokerage agreement became effective
April 18, 1994. WWHO-TV is affiliated with The WB Television Network.
Outlet Broadcasting has also entered into an agreement to supply programming
under a time brokerage agreement with the permittee of a station still under
construction in New Bedford, Massachusetts, WLWC-TV (formerly WFDG-TV). On March
7, 1996, the licensee of WWHO-TV and the permittee of WLWC-TV, which are both
under common ownership, notified Outlet Broadcasting that they were terminating
the local marketing agreements. Outlet Broadcasting believes and has notified
the licensee/permittee that they have no right to terminate, that the notice was
ineffective and that the agreement remain in full force and effect.
On August 2, 1995 Outlet Communications executed a definitive merger
agreement with the National Broadcasting Company, Inc. ("NBC") and CO
Acquisition Corporation, a subsidiary of NBC, providing for a transaction in
which the NBC subsidiary would be merged into Outlet Communications and Outlet
Communications stockholders would receive $47.25 per common share in cash. The
merger agreement was approved by Outlet Communications' Board of Directors and
by the holders of a majority of Outlet Communication's outstanding common stock.
The transaction closed on February 2, 1996.
The following table summarizes Outlet Broadcasting's operating results for
the last three years and shows rates of change applicable thereto. The table
also shows the amounts of revenue obtained from both non-political and political
revenue sources.
<TABLE>
<CAPTION>
1995 % CHANGE 1994 % CHANGE 1993
------- -------- ------- -------- -------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
Net revenue:
Non-political............................ $65,645 17.9% $55,696 19.2% $46,735
Political................................ 565 (b) 3,746 (b) 217
------- -------- ------- -------- -------
Total revenue.............................. 66,210 11.4% 59,442 26.6% 46,952
Operating expenses......................... 46,443 18.3% 39,267 13.7% 34,524
------- -------- ------- -------- -------
Operating income........................... $19,767 (2.0)% $20,175 62.3% $12,428
------- -------- ------- -------- -------
------- -------- ------- -------- -------
Net cash provided by operations (a)........ $ 7,944 (59.2)% $19,466 402.7% $ 3,872
------- -------- ------- -------- -------
------- -------- ------- -------- -------
Operating cash flow (a).................... $25,634 .3% $25,555 47.9% $17,276
------- -------- ------- -------- -------
------- -------- ------- -------- -------
<FN>
- - ------------
(a) "Net cash provided by operations" means all cash flows (including working capital
changes) other than cash flow associated with investing or financing activities and
"Operating cash flow" means operating income plus depreciation and amortization of
intangibles.
(b) Not shown, since most political advertising occurs in alternate years.
</TABLE>
REVENUES
In 1995, total net revenue of $66,210,000 increased by $6,768,000 or 11.4%
compared with $59,442,000 in 1994. Outlet Broadcasting's two VHF television
stations had a combined revenue increase of 3.1% with both of the stations
contributing to such increase. Outlet Broadcasting's two UHF stations provided a
1995 revenue increase amounting to 8.3% of the prior year's revenue total.
However,
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<PAGE>
because these stations were added to Outlet Broadcasting's operations during
1994, their revenue comparison reflects operations for all of 1995 versus only
part of the prior year.
Non-political revenue in 1995 totalled $65,645,000. This was an increase of
$9,949,000 or 17.9% compared with $55,696,000 in 1994. The increase in
non-political revenue at the VHF stations was 9.2%. Favorable market conditions
and attractive programming enabled those stations to maintain advantageous
audience levels during 1995. This allowed for selected improvements in
advertising rates. The VHF stations increased their national spot and local time
sales over the prior year by 9.2% and 5.4%, respectively. Also, an increase in
network compensation of approximately $1,465,000, or 51.9%, resulted from the
VHF stations' renewed affiliation with the NBC network, as of September 1, 1994,
on more favorable terms.
Political revenue in 1995 totalled $565,000. Since 1995 was not a major
election year, advertiser spending for political campaigns was not significant.
In the 1994 election year, political revenue totalled $3,746,000 and comprised
6.3% of total revenue.
For the fourth consecutive year, WCMH-TV established a record high in
station revenue. The station increased its non-political local and national spot
revenue for the year by approximately 4.2%. The increased revenue reflected an
estimated 7% growth in the Columbus advertising market.
WJAR-TV increased its non-political local and national spot revenue for the
year by approximately 17.1%. The increased revenue reflected an estimated 2%
growth in the Providence advertising market. Thus, WJAR-TV was able to increase
its market share from that of 1994.
WNCN-TV significantly improved its revenue growth, and programming, by
introducing a local news show during 1995 and by becoming an affiliate of the
NBC network. During the year, the Raleigh-Durham, North Carolina television
market advanced from 32nd position to be the 30th ranked television market in
the country.
Since becoming part of Outlet Broadcasting's operations, in 1994, both
WNCN-TV and WWHO-TV have made continued progress. By improving their
organizational structure, programming and signal delivery, the stations have
become more productive; have been able to increase advertising rates; and have
generally enhanced their overall operating and revenue performance.
In 1994, total net revenue of $59,442,000 increased by $12,490,000 or 26.6%
compared with $46,952,000 in 1993. Of the 1994 revenue total, non-political
revenue amounted to $55,696,000. This was an increase of $8,961,000 or 19.2%
compared with $46,735,000 in the prior year. Revenue contributed by stations
WWHO-TV and WNCN-TV amounted to less than 4% of the prior year's revenue total.
The increase in non-political revenue was primarily attributable to overall
improvement in economic conditions, a strong demand for advertising time and
favorable viewership of Outlet Broadcasting's VHF television stations, all of
which allowed advertising rates to continue to trend higher. There were
increases in both national spot and local time sales. Improved terms in Outlet
Broadcasting's renewed affiliation with the NBC network resulted in an increase
of more than 16% in network compensation.
Advertiser spending for political campaigns was significant in the 1994
election year and political revenue totalled $3,746,000. Since 1993 was not a
major election year, political revenue amounted to a minimal $217,000.
Both of Outlet Broadcasting's VHF television stations increased their total
revenue during 1994. WCMH-TV increased its non-political local and national spot
revenue by approximately 11.4%. Political advertising provided an additional
4.6% increase in the station's revenues. The increased revenue reflected an
estimated 15% growth in the Columbus advertising market.
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<PAGE>
WJAR-TV increased its non-political local and national spot revenue in 1994
by approximately 20.6%. Political advertising provided a further increase of
12.4% to the station's total revenue. The increased revenue reflected an
estimated 17% growth in the Providence advertising market. Thus, WJAR-TV was
able to increase its market share from that of 1993.
OPERATING EXPENSES
Operating expenses in 1995 totalled $46,443,000. This was an increase of
$7,176,000 or 18.3% compared with $39,267,000 in 1994. The increase was
attributable to inclusion of operating expenses for WNCN-TV and WWHO-TV for a
full year in 1995. Excluding the effect of those added stations, there was a
moderate 1% decrease in total operating expenses. In 1994, total operating
expenses of $39,267,000 increased by $4,743,000 or 13.7% compared with
$34,524,000 in 1993. Most of this increase also resulted from the addition of
the two UHF stations during the year. As a percentage of revenue, total expenses
increased to 70.1% in 1995 after having decreased to 66.1% in 1994 from 73.5% in
1993.
Technical, programming and news expenses in 1995 of $23,784,000 increased by
$3,671,000 or 18.3% compared with $20,113,000 in 1994. All of the increase was
accounted for by the effect of added stations. In 1994, technical, programming
and news expenses increased by $2,078,000 or 11.5% from $18,035,000 in the prior
year. Virtually all of this increase also resulted from the added stations.
Programming expense at Outlet Broadcasting's VHF television stations
decreased by approximately 7.4% and 2% in 1995 and 1994, respectively.
Programming expenses include departmental operating costs as well as charges for
amortization of film contract rights. Outlet Broadcasting has strategically
reduced its annual cost for film contract amortization by selectively replacing
more costly programs with local programming, particularly news, or by otherwise
replacing costly programs with more popular and/or cost-effective programs.
During 1995, 1994 and 1993, Outlet Broadcasting recorded lump-sum charges of
$1,453,000, $598,000 and $358,000, respectively, representing valuation
write-downs of certain film contracts. The 1995 charge primarily includes
write-downs of "Empty Nest" at the VHF television stations and, at the UHF
stations, a film contract valuation adjustment for "Full House". The 1994 and
1993 write-downs primarily apply to film contract valuations for "Who's the
Boss."
Outlet Broadcasting believes that increasing its commitment to local
programs, while at the same time reducing its reliance on, and the term of,
purchased programming, will help increase its market share and improve
programming as well as provide cost flexibility. As a result, Outlet
Broadcasting has undertaken to expand its production of local news programs.
Total news department expenses at the VHF stations increased by approximately 2%
in 1995 after having increased by approximately 6% in 1994. In addition, a news
program instituted at WNCN-TV in September 1995 resulted in a significant
increase in that station's news costs.
Selling, general and administrative expenses of $16,792,000 in 1995
increased by $3,018,000 or 21.9% compared with $13,774,000 in 1994.
Approximately 90% of the total increase resulted from inclusion of television
stations WNCN-TV and WWHO-TV for a full year in 1995. The balance of the
increase reflected increased promotion costs at WJAR-TV along with higher sales
commissions and incentive awards payable because of Outlet Broadcasting's
improved operating performance. In 1994, selling, general and administrative
expenses of $13,774,000 increased by $2,133,000 or 18.3% compared with
$11,641,000 in the prior year. The higher amount for 1994 also reflected the
costs of two added television stations as well as increased incentive payments.
Depreciation expense increased in 1995 because of Outlet Broadcasting's
prior year investments in WWHO-TV and WNCN-TV. Amortization of intangible assets
decreased as certain programming and
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<PAGE>
advertising contracts acquired with the new television stations became fully
amortized. In 1994, depreciation expense and amortization of intangibles both
increased due to addition of the new stations.
Outlet Broadcasting's operating income of $19,767,000 for 1995 decreased by
$408,000 or 2% when compared with operating income of $20,175,000 in 1994. The
current year's reduction in operating income reflects revenue growth of 11.4%
reduced by a 18.3% increase in total expenses. In 1994, operating income of
$20,175,000 increased by $7,747,000 or 62.3% when compared with operating income
of $12,428,000 in 1993. The 1994 improvement reflected a 26.6% increase in
revenue reduced by a 13.7% increase in total expenses.
As a percentage of revenue, operating income for 1995 declined to 29.9% from
33.9% in 1994, although up from 26.5% in 1993. The 1995 decrease in operating
income percent was primarily attributable to operating losses sustained by the
two UHF television stations. These stations remain categorized as start-up
operations, although Outlet Broadcasting has made significant improvements to
their overall development.
INTEREST EXPENSE
The following table summarizes interest expense for the last three years.
1995 % CHANGE 1994 % CHANGE 1993
------ -------- ------ -------- -------
DOLLARS IN THOUSANDS
Interest expense:
Loan and notes payable. $8,505 .4% $8,467 14.5% $ 7,392
Note to shareholder.... -0- -- -0- -- 4,016
------ --- ------ -------- -------
Total.................. $8,505 .4% $8,467 (25.8%) $11,408(a)
------ --- ------ -------- -------
------ --- ------ -------- -------
- - ------------
(a) Net of capitalized interest of $225,000.
Interest expense increased by $38,000 in 1995, when compared with 1994,
because of the effect of higher market interest rates on Outlet Broadcasting's
senior loan with a bank. Interest expense decreased in 1994 versus 1993 due to
reductions made in outstanding debt and also due to a 1993 refinancing of total
debt with borrowings having a reduced rate of interest.
In 1993, interest expense for loan and notes payable included an amount
applicable to 13 1/4% Senior Subordinated Notes (the "Senior Notes") which were
repaid during the year. Interest expense on the note to shareholder represents
the annual accretion on the Junior Subordinated Note (the "Junior Note") payable
to The Mutual Benefit Life Insurance Company which was also repaid in 1993.
Details of the 1993 refinancing are provided in the discussion on net cash used
by financing activities.
Cash interest payments for 1995, 1994 and 1993 were $8,108,000, $8,096,000
and $13,071,000 (net of capitalized interest of $225,000), respectively. The
amounts paid in 1995 and 1994 include interest of $1,583,000 and $1,571,000,
respectively, on Outlet Broadcasting's senior bank loan and interest of
$6,525,000 in each year on the outstanding 10 7/8% Senior Subordinated Notes.
The amount paid in 1993 includes interest of $6,769,000 on loan and notes
payable (primarily the Senior Notes), along with interest of $6,527,000 (two
semi-annual installments of $3,125,000 each plus accrued interest through date
of redemption) on the Junior Note. An accretion of debt discount of $649,000 in
1993 represents interest accrued on the Junior Note in excess of the $6,250,000
payment, pursuant to the Junior Note's effective interest rate of 17.2%.
15
AIII-15
<PAGE>
OTHER INCOME (EXPENSE) ITEMS
Interest income increased in 1995 due to higher average cash balances
maintained during the year and because of improved returns on invested funds.
Interest income declined in 1994 as a result of lower cash balances and/or lower
market interest rates. Other income increased in 1995 because of the reversal of
accruals for music license fees and other items that were no longer required. A
gain on the sale of marketable securities provided a further increase to other
income. In 1994, other income principally represents tower rental income and
other sundry items. In 1993, other income principally represents an accrual that
was reversed upon settlement of a music licensing dispute.
Other expense in 1995 and 1994 includes miscellaneous charges associated
with the UHF stations along with approximately $456,000 and $260,000,
respectively, as the cost of employee stock options. In 1993, other expense
included a write-down of $117,000 pertaining to an unsuccessful attempt to
license a black and white television series.
The 1995, 1994 and 1993 income tax expenses of $3,600,000, $660,000 and
$316,000, respectively, represent the applicable current year's provision for
taxes. The provisions for 1995 and 1994 were reduced as the result of
adjustments of prior year net operating losses. See Note 5 to the Consolidated
Financial Statements.
In 1995, an extraordinary loss of $4,733,000 or ($4.73) per share, net of
taxes, represents costs incurred in connection with Outlet Communications'
pending merger with NBC that was consummated on February 2, 1996. In 1993, an
extraordinary loss of $1,826,000 or ($1.83) per share, net of taxes, represented
one-time debt extinguishment costs resulting from a debt refinancing. See Notes
6 and 8 to the Consolidated Financial Statements.
Effective January 1, 1993, Outlet Broadcasting adopted Financial Accounting
Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes", which
requires a change to the liability method of accounting for deferred income
taxes. Adoption of Statement 109 resulted in a cumulative effect of change in
accounting principle, in the amount of $4,434,000 or $4.43 per share,
representing the recognition of previously unrecognized tax benefits.
Outlet Broadcasting also adopted, as of January 1, 1993, FASB Statement No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
See Note 10 to the Consolidated Financial Statements. The effect of adoption of
Statement 106 was not material.
In 1995, Outlet Broadcasting had income before extraordinary loss of
$8,172,000 or $8.17 per share. This compares with 1994 net income of $10,569,000
or $10.57 per share. After the extraordinary loss, net income for 1995 amounted
to $3,439,000 or $3.44 per share. In 1993, Outlet Broadcasting's income before
extraordinary loss and cumulative effect of change in accounting principle was
$2,026,000 or $2.03 per share. After giving effect to the extraordinary loss and
change in accounting principle, net income for 1993 amounted to $4,634,000 or
$4.63 per share.
LIQUIDITY AND CAPITAL RESOURCES
In 1995, net cash provided by operations totalled $7,944,000. This was a
decrease of $11,522,000 or 59.2% when compared with net cash provided by
operations of $19,466,000 in 1994. The decrease included the effect of a bonus
of $5.5 million paid to an officer of Outlet Broadcasting in December 1995,
pursuant to the terms of an agreement with the officer. The payment was recorded
as an extraordinary loss. The decrease in net cash provided by operations also
included other merger related expenses reported as an extraordinary loss. See
Note 8 to the Consolidated Financial Statements.
The 1995 decrease in net cash provided by operations further reflected an
amount of $5 million received in 1994 from NBC upon renewal of Outlet
Broadcasting's affiliation with that network. This was a one-time payment not
repeated in 1995. The amount has been reported as deferred revenue and is
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<PAGE>
being amortized into revenue over the six year duration of the affiliation. The
amount of deferred revenue to be amortized over the ensuing period of twelve
months is included in current liabilities.
In 1994, net cash provided by operations of $19,466,000 increased by
$15,594,000 or 402.7% compared with $3,872,000 in 1993. The improvement included
the one-time payment received from NBC as described above and also reflected
Outlet Broadcasting's trend of improved operating results.
The effect of non-cash operating expenses on Outlet Broadcasting's 1995
operating results contributed to a moderate increase in operating cash flow.
Operating cash flow in 1995 of $25,634,000 increased by $79,000 or .3% compared
with $25,555,000 in 1994. In 1993, operating cash flow amounted to $17,276,000.
Outlet Broadcasting's increased investment in film contract rights during
the years 1995, 1994 and 1993 amounted to $5,672,000, $4,149,000 and $4,672,000,
respectively. The increases for 1995 and 1994 were partially attributable to
film contract rights acquired for WNCN-TV and WWHO-TV, the television stations
that were added during 1994.
The amounts invested in film contract rights have enabled Outlet
Broadcasting to maintain attractive programs on a cost-effective basis. The
result has been successful in that audience levels have been retained, while
investments in film contract rights have been reasonable and manageable. In
addition, the increased number of viewing hours committed to news shows has
reduced the need for film acquisitions.
Although Outlet Broadcasting is strategically committed to a reduced
investment in film contract rights, it has been selective in this process. At
December 31, 1995 Outlet Broadcasting had commitments to acquire approximately
$10,641,000 of film contract rights compared to commitments of $10,992,000 at
December 31, 1994. The total amounts are substantially effected by an extended
commitment to the Oprah Winfrey Show, to the year 2000, by WJAR-TV. Management
believes that the total benefits to be derived from this program will provide a
sound economic return to the broadcast station.
The net decreases in film contracts payable of $372,000, $1,773,000 and
$409,000 in 1995, 1994 and 1993, respectively, reflect payments of film contract
obligations in accordance with the contracted terms and in the normal course of
business. Amortization of film contract rights reflect the normal write-off of
film contract values over the period of their use. The reported amounts for the
years 1993 through 1995 also include the previously described lump-sum charges
for valuation write-downs of certain film contracts.
The increase in accounts receivable of $2,933,000 in 1995 primarily results
from the year's increased volume of business and the effect of two television
stations added in 1994. The 1995 increase in accrued expenses primarily reflects
accrued costs related to the pending merger of Outlet Communications with NBC
and a stockholders' equity pension adjustment resulting from the requirement to
recognize an additional minimum pension liability.
In 1995, net cash used by investing activities amounted to $10,863,000. This
included capital expenditures totalling $10,307,000 of which approximately
two-thirds was spent in behalf of WNCN-TV. During the year, WNCN-TV moved its
broadcast studio and offices to a newly leased facility in Raleigh, North
Carolina. This required capital outlays for new equipment, fixtures and studio
and office renovations. Outlet Broadcasting's television stations currently
operate from modern studio facilities and it is not expected that significant
amounts of capital will be required to be invested each year.
Investing activities also include payments made, in the amount of $556,000,
pursuant to a time brokerage agreement entered into with the licensee of a
television station to be constructed and operated in New Bedford, Massachusetts.
Subject to final regulatory approvals, it is expected that the New
17
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<PAGE>
Bedford station will be operational in the second half of 1996. It is also
anticipated that any further funds required in this venture will be available
from internal operations.
In 1994, net cash used by investing activities totalled $9,932,000. This
included capital expenditures of $3,385,000, for all four television stations,
and an investment of $1,055,000 pursuant to a time brokerage agreement entered
into with the licensee of WWHO-TV. In addition, Outlet Broadcasting purchased
the assets and broadcast license of WNCN-TV for an aggregate price of
$5,478,000, including acquisition costs of approximately $105,000.
In 1993, net cash used by investing activities of $5,907,000 represented
capital expenditures for, primarily, completion of renovations and improvements
to Outlet Broadcasting's new corporate headquarters and WJAR-TV broadcast
facility in Cranston, Rhode Island. This amount also included costs for
equipping such facility with studio and technical equipment.
Net cash used by financing activities in 1995 amounted to $4,032,000. This
included a total of $4,500,000 in quarterly installments paid to Outlet
Broadcasting's senior bank lender on a term loan. In 1994, net cash used by
investing activities of $3,450,000 included total payments to the senior bank
lender of $3,500,000.
In 1995, 1994 and 1993, Outlet Broadcasting recorded capital contributions
of $1,084,000, $50,000 and $38,000, respectively, from the exercise of Outlet
Communications stock options. The amount for 1995 was reduced by an accrual for
stock option expense in the amount of $616,000. Also in 1995, Outlet
Broadcasting received a tax benefit of $1,989,000 from an employee's premature
disposition of Outlet Communications common stock acquired under a stock option,
which amount was recorded as a non-cash contribution of capital.
In 1993, net cash used by financing activities amounted to $10,416,000.
During the year, Outlet Broadcasting undertook a refinancing of its total debt
and thereby obtained benefits from lower interest rates and extended maturities
on its subordinated borrowings along with improved financial flexibility.
Pursuant to the refinancing, on June 28, 1993 Outlet Broadcasting entered into a
Credit and Guaranty Agreement with a bank (the "Senior Loan") under which the
bank agreed to provide a secured senior credit facility consisting of a term
loan in the principal amount of $25,000,000 and revolving loans in the maximum
principal amount outstanding of $5,000,000.
On July 15, 1993 Outlet Broadcasting completed a public offering of 10 7/8%
Senior Subordinated Notes due 2003 (the "Senior Subordinated Notes"), in the
principal amount of $60,000,000. Proceeds of the public offering were used to
prepay the principal balance of the Junior Note due 1997 at its carrying value
of $43,946,000 plus accrued interest.
Also, on August 17, 1993 Outlet Broadcasting redeemed in full its Senior
Notes due 1997 in the principal amount of $44,150,000, at 105% of par plus
accrued interest. The premium payment on the redemption totalled $2,207,000.
Funds for the redemption included a balance remaining from the above public
offering along with available cash and funds provided by the Senior Loan in the
amount of $28,000,000. The interest rates applicable to the public offering and
the Senior Loan were less than the interest rates on the Senior Notes and the
Junior Note. The reduced interest rates contributed to subsequent reductions in
annual interest expense.
Costs incurred in connection with the debt refinancing, $3,151,000, were
capitalized to other assets. On a pretax basis, debt extinguishment costs,
comprised of the premium on debt refinancing-- $2,207,000, unamortized note
costs of the redeemed debt--$555,000, and other--$4,000, were reported as an
extraordinary loss.
During 1993, Outlet Broadcasting repaid $5,000,000, net, against its Senior
Loan including term loan installments of $2,000,000. Overall, there was a net
decrease in long-term debt in 1993 of $4,447,000.
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<PAGE>
On February 2, 1996, upon Outlet Communications' merger with NBC, the
outstanding Senior Loan was repaid in full from funds provided by NBC and the
Credit and Guaranty Agreement dated June 28, 1993 was terminated. As a result,
Outlet Broadcasting's revolving credit facility was also terminated.
On March 2, 1996, Outlet Broadcasting commenced an offer to repurchase its
outstanding Senior Subordinated Notes in whole, or in part in multiples of
$1,000, in cash in an amount equal to 101% of the aggregate principal amount
plus interest accrued to the change of control payment date specified in such
offer, April 1, 1996. The funds will be provided by NBC.
At December 31, 1995 Outlet Broadcasting had an excess of current
liabilities over current assets, in the amount of $2,434,000. This was a
reduction of $5,009,000 compared with an excess of current assets over current
liabilities of $2,575,000 at December 31, 1994. The decrease in net working
capital primarily resulted from the bonus paid to an officer.
In 1995, operating cash flow totalled $25,634,000 and the ratio of such
amount to interest expense of $8,505,000 was 3.0 to 1. In 1994, the ratio of
operating cash flow of $25,555,000 to interest expense of $8,467,000 was also
3.0 to 1, although in 1993 such ratio was 1.5 to 1.
Outlet Broadcasting's cash position decreased by $6,951,000 during 1995.
This reflected funds provided by operations of $7,944,000 reduced by aggregate
funds of $14,895,000 used in investing and financing activities. The funds were
primarily used for capital expenditures and debt reduction. In 1994, improved
results of operations provided a net increase of $6,084,000 in Outlet
Broadcasting's cash position and also contributed to that year's overall
increase in net working capital. It is expected that 1996 operations, along with
current cash on hand, will provide sufficient funds to meet all cash
requirements for that year, including debt service.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA,
The Financial Statements of Outlet Broadcasting appear on Pages F-1 through
F-24 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
19
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following named individuals were the executive officers and directors of
Outlet Broadcasting through February 2, 1996, the date of Outlet Communications'
merger with NBC:
YEARS WITH
POSITION WITH OUTLET
NAME AGE OUTLET BROADCASTING BROADCASTING
- - ------------------------ --- -------------------------------- ------------
James G. Babb........... 64 Chairman of the Board, President (3)
and Chief Executive Officer
Felix W. Oziemblewski... 61 Vice President and Chief 27
Financial Officer
Joanne E. Schenck....... 38 Secretary 21
Linda Sullivan.......... 42 Vice President--General Manager 11
WJAR-TV
Douglas E. Gealy........ 35 Vice President--General Manager (3)
WCMH-TV
Adam G. Polacek......... 53 Vice President--General Manager (1)
WNCN-TV
Letitia Baldrige........ 70 Director (5)
Julius Koppelman........ 79 Director (5)
Frank E. Walsh, Jr...... 55 Director (5)
Frank E. Richardson..... 56 Director (5)
Robert C. Butler........ 65 Director (4)
Leonard Lieberman....... 67 Director (4)
James K. Makrianes...... 71 Director (4)
Stephen J. Carlotti..... 53 Director (3)
Frederick R. Griffiths.. 75 Director (2)
Solomon M. Yas.......... 54 Director (2)
- - ------------
(1) Since 1994.
(2) Since 1992.
(3) Since 1991.
(4) Since 1988.
(5) Since 1986.
Set forth below is certain information with respect to the executive
officers and directors of Outlet Broadcasting through February 2, 1996:
JAMES G. BABB
Mr. Babb was elected Chairman, President and Chief Executive Officer of
Outlet Broadcasting as of May 1, 1991. Before joining Outlet Broadcasting, from
November 1988 to January 1991, Mr. Babb was President of Jefferson-Pilot
Communications Company, an owner-operator of radio and television broadcasting
stations and broadcasting-related businesses. Prior thereto, he served as
Executive Vice President and Chief Operating Officer of that company.
FELIX W. OZIEMBLEWSKI
Mr. Oziemblewski has been with Outlet Broadcasting since 1968, has served as
its Vice President and Chief Financial Officer since 1984 and has served Outlet
Communications in those capacities since its formation in 1986. Prior to joining
Outlet Broadcasting, Mr. Oziemblewski, a certified public
20
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<PAGE>
accountant, was employed by Ernst & Young LLP. He has been active in several
professional organizations.
JOANNE E. SCHENCK
Ms. Schenck has been with Outlet Broadcasting since 1974 and has served as
its Personnel Administrator since 1985. She was appointed Secretary in January
1992.
DOUGLAS E. GEALY
Mr. Gealy was appointed Vice President-General Manager of WCMH-TV in July
1991 and also made General Manager of WWHO-TV in April 1994. Prior to joining
Outlet Broadcasting, from 1989 to 1991, Mr. Gealy was President and General
Manager of WHOI-TV, Peoria, Illinois. Prior thereto, he was associated with
WKEF-TV Dayton, Ohio for five years where he became General Sales Manager.
LINDA SULLIVAN
Ms. Sullivan has been with Outlet Broadcasting since 1985. She was appointed
Vice President-General Manager of WJAR-TV in February 1991. From 1985 to 1986
she was the National Sales Manager for WJAR-TV and from 1986 until February 1991
she served that station as its General Sales Manager.
ADAM G. POLACEK
Mr. Polacek was appointed Vice President-General Manager of WNCN-TV in
August 1994. Prior to joining Outlet Broadcasting, from 1991 to 1994, Mr.
Polacek was Vice President and General Manager of WLFL-TV, Raleigh, North
Carolina. Prior thereto, he was President and Chief Operating Officer of
Heritage Broadcast Group, Inc. for approximately five years.
LETITIA BALDRIGE
Since 1964, Ms. Baldrige has been the owner of Letitia Baldrige Enterprises,
Inc., a management training and public relations consulting firm. She is an
author, lecturer, and columnist. Ms. Baldrige is also a director of Hartmarx
Corporation, Federal Home Loan Bank of Atlanta and a member of the board of
numerous non-profit organizations.
ROBERT C. BUTLER
Mr. Butler was Senior Vice President and Chief Financial Officer of
International Paper Company, a forest products company, from 1988 to September
1995. Mr. Butler was a Group Executive Vice President of the National
Broadcasting Company ("NBC") from 1984 to 1988. From 1979 to 1984 he served as
Executive Vice President-Finance of NBC.
STEPHEN J. CARLOTTI
Mr. Carlotti is Managing Partner of Hinckley, Allen & Snyder, a Providence,
Rhode Island law firm, and has been a partner in that firm since January 1992
and from May 1970 to July 1989. He was Senior Executive Vice President, Chief
Operating Officer and General Counsel of The Mutual Benefit Life Insurance
Company ("Mutual Benefit") from August 1989 to August 1991 and a consultant to
Mutual Benefit from September 1991 to December 1991.
21
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<PAGE>
FREDERICK R. GRIFFITHS
Mr. Griffiths is a retired former Vice President-Corporate Affairs of Outlet
Broadcasting for the period from 1976 to 1987. He previously served in various
administrative and creative capacities during a thirty year affiliation with
Outlet Broadcasting.
JULIUS KOPPELMAN
Mr. Koppelman has been Chairman of the Board of Harding Service Corporation
("Harding Service"), a management consulting firm, since 1985 and was previously
Chairman of the Board of Harding Resources, Inc. ("Harding"), its predecessor.
From 1982 to 1985, he was President of Harding. For more than five years prior
to September 1981, when he retired, he was Executive Vice President and a
director of RCA Corporation, a communications and electronics company. Mr.
Koppelman is also a director of other companies, including Dyersburg Fabrics,
Inc. and Princess House, Inc.
LEONARD LIEBERMAN
Mr. Lieberman was elected a director of Outlet Broadcasting in 1988. Mr.
Lieberman was elected on January 4, 1991 to serve as Chairman, President and
Chief Executive Officer of Outlet Broadcasting until he was succeeded by Mr.
Babb. Mr. Lieberman was President and Chief Executive Officer of Supermarkets
General Corporation from 1983 to 1987 and was Chairman of that company from 1986
to 1987. He is also a director of other corporations, including Celestial
Seasonings, Inc., Republic New York Corporation, Sonic Corp., The William Carter
Company and La Petite Academy, Inc.
JAMES K. MAKRIANES
Mr. Makrianes is a Director of Webb, Johnson Associates, an executive search
firm, since March 1995. He was formerly a Partner of Ward Howell International,
an executive search firm, from February 1989 to February 1995. Mr. Makrianes was
President of Haley Associates, an executive recruitment firm, from 1981 to 1987,
and was Chairman of the Board of that firm from 1987 to 1988.
FRANK E. RICHARDSON
Mr. Richardson is President and a Director of Wesray Capital Corporation
("Wesray"), a private investment banking firm of which he has been an officer
for over five years. He is a director of several other corporations, including
Alex. Brown & Sons, Dyersburg Fabrics, Inc., New River Industries, Inc. and
Sonic Corp.
FRANK E. WALSH, JR.
Mr. Walsh has been Chairman of Wesray since August 1989. Mr. Walsh was Vice
Chairman of Wesray from 1986 to 1989 and Executive Vice President of Wesray from
1984 to 1986. He has been a director of Wesray since 1984. Mr. Walsh is also a
director of other companies, including Tyco Laboratories, Inc.
SOLOMON M. YAS
Mr. Yas is a consultant in the field of Human Resources. He is a former Vice
President-Human Resources of Outlet Broadcasting, having served from 1985 until
retirement as of June 1, 1991. From 1964 to 1973, he was Director of Personnel
for ARA Services, Inc.
Effective with the February 2, 1996 merger of Outlet Communications with
NBC, the above named executive officers and directors of Outlet Broadcasting
were removed from office, except for Ms.
22
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<PAGE>
Sullivan and Messrs. Gealy and Polacek (who retained their position), and Ms.
Schenck (who was elected an Assistant Secretary), and replaced with the
following listed executive officers and directors:
POSITION WITH YEARS WITH
NAME AGE OUTLET BROADCASTING OUTLET BROADCASTING
- - --------------------- --- ----------------------------- -------------------
John Rohrbeck........ 55 President (a)
Robert Finnerty...... 52 Vice President (a)
Warren Jenson........ 39 Vice President & Treasurer and (a)
Director
Richard Cotton....... 51 Secretary and Director (a)
Robert C. Wright..... 52 Director (a)
Edward L. Scanlon.... 61 Director (a)
- - ------------
(a) Since February 2, 1996
Set forth below is certain information with respect to the newly elected
executive officers and directors of Outlet Broadcasting:
JOHN ROHRBECK
Mr. Rohrbeck was named President, NBC Television Stations in December 1991.
From August 1984 until December 1991, Mr. Rohrbeck was President and General
Manager of KNBC-TV in Los Angeles.
ROBERT FINNERTY
Mr. Finnerty has been Vice President, Finance and Operations of NBC since
December 1987.
WARREN JENSON
Mr. Jenson was named Senior Vice President, Chief Financial Officer of NBC
in July 1992. Prior to joining NBC, Mr. Jenson spent four years at General
Electric, first as Staff Executive and Manager of Mergers and Acquisitions, and
then as Director of GE Investor Relations.
ROBERT C. WRIGHT
Mr. Wright has been President and Chief Executive Officer of NBC since
September 1986, when he joined that company.
EDWARD L. SCANLON
Mr. Scanlon has been Executive Vice President, Employee Relations at NBC
since 1987.
RICHARD COTTON
Mr. Cotton has been Executive Vice President and General Counsel of NBC
since October 1989.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information with respect to
compensation paid to the Chief Executive Officer and the most highly compensated
executive officers as to whom the total annual salary and bonus earned exceeded
$100,000 for the fiscal year ended December 31, 1995.
23
AIII-23
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
SHARES
ANNUAL COMPENSATION OTHER RESTRICTED UNDERLYING ALL
PRINCIPAL -------------------------- ANNUAL STOCK OPTIONS OTHER
NAME POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) GRANTED COMPENSATION(4)
- - ------------------------ ------------------ ---- -------- ---------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James G. Babb........... Chairman, 1995 $377,769 $5,750,000 $37,623 $ 0 0 $ 4,500
President and 1994 331,154 225,000 22,819 0 90,000 1,848
Chief Executive 1993 294,615 200,000 23,014 0 0 0
Officer
Felix W. Oziemblewski... Vice 1995 138,192 60,000 4,533 0 0 4,500
President-Chief 1994 127,819 55,000 5,542 0 8,000 1,200
Financial Officer 1993 121,554 60,000 8,781 0 0 0
and Treasurer
Douglas E. Gealy........ Vice 1995 170,481 65,000 4,915 0 0 4,500
President-General 1994 146,538 60,000 4,660 0 12,000 1,558
Manager 1993 133,077 65,000 5,101 0 0 0
WCMH-TV
Linda W. Sullivan....... Vice 1995 146,385 60,000 4,347 0 0 4,500
President-General 1994 124,808 50,000 4,386 0 12,000 1,200
Manager WJAR-TV 1993 111,539 57,500 5,138 0 0 0
Adam G. Polacek......... Vice 1995 147,349 35,000 0 0 0 1,925
President-General 1994 49,053 10,000 0 0 15,000 0
Manager 1993 N/A N/A N/A N/A N/A N/A
WNCN-TV(5)
<FN>
- - ------------
(1) Amounts represent incentive compensation awards except that in 1995, the
amount for Mr. Babb also includes an accelerated bonus of $5,500,000 made
pursuant to an agreement between Outlet Communications, Inc and Mr. Baab.
Also, the amounts for 1993 include one-time bonuses of $25,000 for Mr. Babb
and $15,000 each for Mr. Oziemblewski, Mr. Gealy and Ms. Sullivan, paid upon
completion of a successful debt refinancing.
(2) Amounts listed represent gross-up payments for tax liabilities. Excludes
perquisites and other benefits, unless the aggregate amount of these items
exceeds the lesser of either $50,000 or 10 percent of the total annual
salary and bonus reported for the named executive officer.
(3) As of December 31, 1995, total restricted stock awards of 71,500 shares had
been made pursuant to Outlet Communications' 1992 Stock Incentive Plan. The
value of the restricted stock awards shown in the table, if any, is based on
the market value of the shares on the date of grant of the award, less the
purchase price ($1.00 per share). The shares subject to such awards vest in
three equal annual installments commencing in August 1993. As of December
31, 1995, Mr. Babb had purchased 30,000 shares, Mr. Oziemblewski and Mr.
Gealy had each purchased 6,666 shares and Ms. Sullivan had purchased 3,333
shares in accordance with the terms of the original grant. Mr. Polacek has
not received any restricted stock awards. As of December 31, 1995, the
market value of outstanding restricted stock awards held by Mr. Babb, Mr.
Oziemblewski, Mr. Gealy and Ms. Sullivan, less the purchase price ($1.00 per
share), was $-0-, $154,198, $154,198 and $308,349 for unpurchased shares,
respectively. No restricted stock awards were made in 1995.
(4) Amounts represent Outlet Broadcasting's contribution to the Outlet
Broadcasting, Inc. 401(k) and Profit Sharing Plan.
(5) Mr. Polacek joined Outlet Broadcasting in August 1994.
</TABLE>
STOCK OPTIONS
Options reflected in the Summary Compensation Table were granted under the
Outlet Communications 1992 Stock Incentive Plan (the "Plan") as approved by
stockholders on June 25, 1992, amended April 27, 1993 and May 2, 1995. The Plan
authorizes grants of either non-qualified or incentive stock options, or awards
of restricted shares, to key employees. The aggregate number of shares of Common
Stock available for awards under the Plan is 600,000 shares. The purpose of the
Plan is to encourage stock ownership by executives and thereby increase the
executives' personal interest in Outlet Broadcasting's continued success and
progress. The Plan is administered by the Compensation Committee of the Board of
Directors, which determines the terms of options granted, the exercise price and
exercisability thereof. The Plan was terminated in connection with the NBC
merger and all options
24
AIII-24
<PAGE>
were accelerated and cancelled upon payment of the difference between $47.25 and
the exercise price of each such option.
There were no options granted in the last fiscal year to the executive
officers named in the Summary Compensation Table.
The following table summarizes options exercised during 1995 and shows
fiscal year-end option values for the executive officers named in the Summary
Compensation Table.
<TABLE>
FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
SHARES YEAR-END OPTIONS AT YEAR-END(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------- -------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James G. Babb.................. 120,000 $4,882,500 0 0 $ 0 $ 0
Felix W. Oziemblewski.......... 0 0 12,667 5,333 524,010 167,990
Douglas E. Gealy............... 0 0 14,000 8,000 566,000 252,000
Linda W. Sullivan.............. 0 0 10,667 8,000 419,348 252,000
Adam G. Polacek................ 0 0 5,000 10,000 198,125 396,250
<FN>
- - ------------
(1) Value is based on average of the bid and ask prices on the date of exercise
less the exercise price.
(2) Value is based on the last sales price per share ($47.25) on December 29,
1995, as reported on the NASDAQ National Market System, less the applicable
option price.
</TABLE>
RETIREMENT PLANS
Outlet Broadcasting maintains a non-contributory qualified retirement plan
(the "Retirement Plan") for the benefit of its employees, including the
individuals named in the Summary Compensation Table. As of August 31, 1994 (the
"Curtailment Date"), Outlet Broadcasting curtailed the Retirement Plan and
suspended the accrual of further benefits for all employees. The following table
shows the estimated annual benefits payable upon retirement to persons in
specified salary and bonus levels and years of credited service.
<TABLE>
<CAPTION>
COMPENSATION YEARS OF SERVICE
- - ------------ -------------------------------------------------------
15 20 25 30 35
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $28,125 $37,500 $46,875 $56,250 $65,625
150,000 33,750 45,000 56,250 67,500 78,750
175,000 39,375 52,500 65,625 78,750 91,875
200,000 45,000 60,000 75,000 90,000 105,000
225,000 50,625 67,500 84,375 101,250 118,125
250,000 56,250 75,000 93,750 112,500 120,000*
300,000 67,500 90,000 112,500 120,000* 120,000*
400,000 90,000 120,000 120,000* 120,000* 120,000*
450,000 101,250 120,000* 120,000* 120,000* 120,000*
500,000 112,500 120,000* 120,000* 120,000* 120,000*
600,000 120,000* 120,000* 120,000* 120,000* 120,000*
<FN>
- - ------------
* Maximum annual benefit permitted under Section 415 of the Internal Revenue
Code.
</TABLE>
Note--The estimated annual benefits shown in the above table may be further
limited due to the provisions of section 401(a)(17) of the Internal Revenue
Code.
25
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<PAGE>
The amounts payable shown in the preceding table are based on the following
assumptions: (i) the individual shall have retired at the normal retirement age
of 65, (ii) "compensation" is the average of the covered compensation paid to
such individual during the three calendar years in which salary is the highest,
(iii) covered compensation is salary and bonuses paid to Retirement Plan
participants through the Curtailment Date (which amounts are included in the
Salary and Bonus columns of the Summary Compensation Table), and (iv) benefits
are paid in the form of a straight-life annuity.
In addition to the Retirement Plan, the individuals named in the Summary
Compensation Table also participate in a non-qualified supplemental retirement
plan (the "Supplemental Plan") which provides a supplemental benefit based on a
percentage of final average compensation and years of service, less benefits
paid under the Retirement Plan and Social Security benefits. The following table
shows the estimated annual benefits payable under the Supplemental Plan to
persons in the specified salary and bonus levels and years of credited service.
<TABLE>
<CAPTION>
COMPENSATION YEARS OF SERVICE
- - ------------ ------------------------------------------------------------
15 20 25 30 35
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $ 21,875 $ 25,000 $ 15,625 $ 6,250 $ 0
150,000 26,250 30,000 18,750 7,500 0
175,000 30,625 35,000 21,875 8,750 0
200,000 35,000 40,000 25,000 10,000 0
225,000 39,375 45,000 28,125 11,250 0
250,000 43,750 50,000 31,250 12,500 5,000
300,000 52,500 60,000 37,500 30,000 30,000
400,000 70,000 80,000 80,000 80,000 80,000
450,000 78,750 105,000 105,000 105,000 105,000
500,000 87,500 130,000 130,000 130,000 130,000
600,000 120,000 180,000 180,000 180,000 180,000
</TABLE>
The amounts payable shown in the above table are based on the following
assumptions: (i) the individual shall have retired at the normal age of 65, (ii)
"compensation" is the average salary paid to such individual during the three
calendar years in which salary is the highest in the five years prior to
retirement, plus the average Executive Incentive Compensation award for the
highest three years during the ten years prior to retirement, (iii) benefits are
paid in the form of a straight-line annuity, (iv) estimated annual payments are
after deduction for Retirement Plan benefits, but before any deduction for
Social Security benefits. Covered compensation under the Supplemental Plan is
also included in the Salary and Bonus columns of the Summary Compensation Table.
As of December 31, 1995, for purposes of computing benefits under the
Retirement Plan and the Supplemental Plan, Mr. Babb has 3.4 years of service,
Mr. Oziemblewski has 25.9 years, Ms. Sullivan has 9.4 years, Mr. Gealy has 3.2
years and Mr. Polacek has -0- years.
On September 1, 1994 Outlet Broadcasting adopted the Outlet Broadcasting,
Inc. 401(k) and Profit Sharing Plan (the "401(k) Plan"). This plan is a
qualified 401(k) deferred compensation plan whose purpose is to enable eligible
employees to save for retirement. Eligible employees are those employees who are
not covered by a collective bargaining agreement, unless the agreement allows
for participation in the 401(k) Plan, and who have completed one year of service
and have attained age 21.
Eligible employees may contribute up to the lesser of 15% of taxable
compensation in each calendar year, excluding the taxable value of stock
options, fringe benefits or moving and other expense reimbursements, or $9,240.
All employee contributions are allocated to the employee's individual account
and, at the employee's election, are invested in money market, fixed income or
equity funds. Outlet Broadcasting will make matching contributions in an amount
equal to 25% of the employee contributions but subject to a maximum employee
contribution of 6% of eligible compensation. Outlet
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<PAGE>
Broadcasting's matching contributions vest with the employee at the rate of 20%
for each year of service. Outlet Broadcasting may also make annual discretionary
profit sharing contributions in an amount to be determined by the Board of
Directors at the end of each calendar year. The maximum contributions allowed
are limited by regulations promulgated under the Internal Revenue Code.
EMPLOYMENT CONTRACTS
Mr. James G. Babb entered into an employment agreement as Chairman,
President and Chief Executive Officer, effective January 1, 1993, for a term of
five years, as amended. The agreement provides for a base salary of $385,000, as
adjusted. The agreement also provides that Mr. Babb will be a participant in the
Executive Incentive Compensation Plan and that he will be eligible to receive
awards of stock options under Outlet Communications' stock option plans.
Mr. Babb was further eligible to receive additional compensation in the
event of a merger or sale of assets pursuant to which Outlet Communications'
stockholders receive value in excess of $9 per share. Such provision specifies
that Mr. Babb is to receive on the closing date of such merger or sale an amount
in cash equal to 2% of the aggregate amount by which the per share cash price
paid in a merger or sale exceeds $9.00 per share, up to $12.00 per share, and 3%
of the aggregate amount by which the per share cash price paid exceeds $12.00
per share. Based on the total number of shares of Outlet Communications Common
Stock outstanding at the time of merger with NBC, Mr. Babb would have been
entitled to receive at closing a total of approximately $7,514,868 under this
provision. On December 14, 1995, the Board of Directors, with the approval of
NBC, authorized the unconditional acceleration of all of Mr. Babb's stock
options and the unconditional payment to him of $5,500,000. Such payment of
$5,500,000 was made prior to December 31, 1995, was not conditioned upon the
closing of the merger, and reduced the amount to which he would have been
entitled in the event of the merger as described above.
In the event of termination without cause, Outlet Broadcasting will pay Mr.
Babb his compensation for twelve months or the remaining portion of his
employment period, whichever is greater. On February 2, 1996, upon the
consummation of the merger of Outlet Communications with NBC, Mr. Babb's
employment contract was terminated and Mr. Babb received compensation in the
amount of $1,110,230 for the remaining portion of his employment period.
Mr. Douglas E. Gealy entered into an employment agreement as Vice
President-General Manager of WCMH-TV in May 1993 which remains in effect until
April 30, 1996. The contract provides for a base salary of $175,000 per annum,
as adjusted, and also provides that the employee will be a participant in the
Executive Incentive Compensation Plan. Ms. Sullivan entered into an employment
agreement as Vice President-General Manager of WJAR-TV, effective January 1,
1995, which remains in effect until December 31, 1996. The agreement provides
for a base salary of $150,000 and also provides that the employee will be a
participant in the Executive Incentive Compensation Plan. The employment
contract of Mr. Oziemblewski with Outlet Broadcasting expired as of March 31,
1992. The contract provides, however, that if employment is terminated other
than for cause, death or disability within a five-year period following the term
of the contract, Outlet Broadcasting will pay a minimum of one year base salary
as severance payment. At December 31, 1995 this amounted to $140,000. In the
event of a merger of Outlet Communications or Outlet Broadcasting, or
acquisition of 50% of their voting securities, or any other change in control,
the contracts are deemed to have been assigned to the successor entity.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Koppelman served as Chairman and Messrs. Butler, Richardson and Walsh
and Ms. Baldrige served as members of the Compensation Committee of the Board.
No member of the Compensation Committee is a current or former officer or
employee of Outlet Broadcasting or any of its subsidiaries.
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<PAGE>
All members of the Compensation Committee except Ms. Baldrige were designated by
Wesray pursuant to the Stockholders' Agreement described below under "Certain
Relationships and Related Transactions-Stockholders' Agreement."
Messrs. Richardson and Walsh are stockholders and Messrs. Koppelman,
Richardson and Walsh are directors of Harding Service, which provided management
consulting services to Outlet Broadcasting pursuant to an agreement entered into
in July 1986. Under the agreement, Harding Service agreed to provide Outlet
Broadcasting with general management, corporate finance, marketing and business
investment advice until July 1996. Such advice included reviewing capital and
operating budgets, capital appropriations, executive compensation and employee
incentive programs, business strategies, budgeting and forecasting, and general
corporate planning and financial oversight. Harding Service provides management
consulting services to several other entities affiliated with Wesray. In
consideration of the consulting services, Outlet Broadcasting agreed to pay
consulting services fees equal to 0.333% of annual gross revenues to Harding
Service, which fees totalled $264,095 in 1995. This agreement was entered into
when Outlet Communications was privately held and may not be on terms as
favorable to Outlet Broadcasting as could have been obtained from an
unaffiliated party. As a condition of the closing of the merger of Outlet
Communications with NBC, the agreement with Harding Service was cancelled as of
February 2, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
All of the issued and outstanding shares of capital stock of Outlet
Broadcasting are owned by Outlet Communications.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Stockholders' Agreement Outlet Communications, Outlet Broadcasting, and each
of Outlet Communications' original stockholders (including MBL Life Assurance
Corp., successor to Mutual Benefit) and certain of their successors and assigns
were parties to a stockholders' agreement (the "Stockholders' Agreement"). The
Stockholders' Agreement required that the stockholders party to the
Stockholders' Agreement vote their shares to fix the number of directors of
Outlet Communications at 14 and elect as directors five persons designated by
certain management stockholders (the "Management Stockholders") and nine persons
designated by the stockholders affiliated with Wesray (the "Wesray
Stockholders"). The following persons were parties to the Stockholders'
Agreement: Hugh J. Byrnes, Richard D. Ferrier, Maria E. Ferrier, The Hartington
Trust, Keith Hightower, John D. Howard, Julius Koppelman, Frank H. Pearl and
selected trust, Frank E. Richardson, E. Burke Ross, Jr., William E. Simon,
Manfred L. Steyn, Henrik N. Vanderlip, The OCI Trust, (Wesray Stockholders),
Reginald Butts, Steve J. Caminis, Charles G. Conklin, Estate of David E.
Henderson and related trusts, Frederick R. Griffiths, Thomas J. Mosher, Felix W.
Oziemblewski, Gerald T. Plemmons, Josephine Renola, Garland R. Robinson, John D.
Sawhill, Gerald Scher, Mara L. Snodgrass, Solomon M. Yas, Joseph A. Young
(Management Stockholders) and MBL Life Assurance Corp. MBL Life Assurance Corp.
is the transferee of certain assets formerly held by Mutual Benefit, including
the holdings of Mutual Benefit in Outlet Communications' Common Stock. Mutual
Benefit was placed in rehabilitation by the New Jersey Commissioner of Insurance
on July 16, 1991.
The Stockholders' Agreement also provided that each stockholder and MBL Life
Assurance Corp. may not agree to sell any securities to a buyer who would as a
result of such purchase own more than 50% of the outstanding Common Stock of
Outlet Communications unless prior to such sale the buyer agreed to be bound by
the Stockholders' Agreement and afford each stockholder the opportunity to sell
a pro rata portion of his shares on the same terms and conditions.
The Stockholders' Agreement provided that it would terminate on the earlier
of (i) December 9, 1996; (ii) the date that the Wesray Stockholders, Management
Stockholders and MBL Life Assurance
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<PAGE>
Corp. own an aggregate of less than 50% of Outlet Communications issued and
outstanding Common Stock; and (iii) the date of an event of bankruptcy or
insolvency of Outlet Communications or Outlet Broadcasting or foreclosure or
similar actions or proceedings by the senior bank lender. Upon consummation of
the merger of Outlet Communications with NBC, on February 2, 1996, the
Stockholders' Agreement was terminated.
Management Consulting Agreement In July 1986, Outlet Broadcasting entered
into an agreement for management consulting services with Harding Service, of
which Mr. Richardson and Mr. Walsh are stockholders and Messrs. Koppelman,
Richardson and Walsh are directors. For a description of the agreement with
Harding Service, see "Compensation Committee Interlocks and Insider
Participation."
Transactions with the Law Firm of Hinckley, Allen & Snyder The law firm of
Hinckley, Allen & Snyder of which Mr. Stephen J. Carlotti, a former director of
Outlet Broadcasting, is Managing Partner, provided legal services to Outlet
Broadcasting during fiscal year 1995.
FUTURE TRANSACTIONS WITH AFFILIATES
It is the policy of Outlet Broadcasting with respect to future transactions
with persons or entities affiliated with officers, directors, employees, or
stockholders of Outlet Broadcasting which relate to the operation of the
business of Outlet Broadcasting, that any such transactions shall be on terms no
less favorable to Outlet Broadcasting than could have reasonably been obtained
in arms-length transactions with independent third parties.
29
AIII-29
<PAGE>
PART IV
ITEM 14. EXHIBIT, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a). (1) Financial Statements and Schedules
The following Consolidated Financial Statements of Outlet Broadcasting,
Inc., appear on pages F-1 through F-23 hereof.
Consolidated Balance Sheets as of December 31, 1995, and 1994.
Consolidated Statements of Income for the years ended December 31, 1995,
1994 and 1993.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993.
Notes to Consolidated Financial Statements--December 31, 1995.
(2) The following Financial Statement Schedules of Outlet Broadcasting,
Inc. are included herein.
For the years ended December 31, 1995, 1994 and 1993:
PAGE HEREIN SCHEDULE
- - ------------ -----------------------------------------------------------------
S-1 Schedule II--Valuation and Qualifying Accounts
All supporting schedules other than the above have been omitted because they
are not required or the information to be set forth therein is included in the
financial statements or in the notes thereto.
(b). Reports on Form 8-K.
A report on Form 8-K dated February 2, 1996 was filed regarding (i) change
in control of Outlet Broadcasting upon the merger of Outlet Communications into
a subsidiary of NBC on February 2, 1996, (ii) the termination of Outlet
Broadcasting's Credit and Guaranty Agreement with a bank upon full payment of
Outlet Broadcasting's obligations and liabilities to such bank by NBC and
General Electric Company and (iii) Outlet Broadcasting's intent to offer to
repurchase its outstanding 10 7/8% Senior Subordinated Notes at 101% of
principal amount plus accrued interest.
(c). Exhibits (an exhibit index immediately preceding the exhibits indicates
the page number where each exhibit can be found).
Outlet Broadcasting will furnish, upon request, any exhibit listed herein
upon the payment of a fee not to exceed reasonable expenses incurred by Outlet
Broadcasting in furnishing such exhibit.
3. (a) Certificate of Incorporation*, as amended, December 17, 1987;**
and September 19, 1989;***
(b) Amended and Restated By-Laws, dated February 2,1996;************
4. Indenture, dated as of July 8, 1993 between Outlet Broadcasting, Inc.
and Bankers Trust Company, as Trustee, governing Outlet Broadcasting,
Inc. 10 7/8% Senior Subordinated Notes Due 2003;***
30
AIII-30
<PAGE>
10. Material contracts:
(a) Agreement for Management Consulting Services, dated July 31,
1986, by and between Harding Service Corporation and Outlet
Communications, Inc.;*(1)
(b)(i) Stockholders' Agreement, dated December 10, 1986, by and among
Outlet Communications, Inc.; Outlet Broadcasting, Inc. and the
persons named therein (the Stockholders' Agreement);***
(b)(ii) Amendment No. 1, dated as of December 1, 1987, to the
Stockholders' Agreement;***
(b)(iii) Agreement dated July 26, 1988, by and among Outlet
Communications, Inc.; Outlet Broadcasting, Inc. and the persons
named therein amending the Stockholders' Agreement;***
(c) Credit and Guaranty Agreement dated as of June 28, 1993 among
Outlet Broadcasting, Inc. and Outlet Communications, Inc. and
Fleet National Bank;***
(d) Supplemental Retirement Plan;***(1)
(e) 1992 Stock Incentive Plan, as amended and restated;*** as
amended May 2, 1995***********(1)
(f)(i) Employment Agreement, dated April 1, 1989, among Felix W.
Oziemblewski and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.;****(1)
(f)(ii) Employment Agreement, dated January 1, 1995, among Linda
Sullivan and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.;********(1)
(f)(iii) Employment Agreement, dated May 1, 1993 among Douglas E. Gealy
and Outlet Broadcasting, Inc. and Outlet Communications,
Inc.***(1)
(f)(iv) Employment Agreement, dated January 1, 1993, between James G.
Babb and Outlet Communications, Inc.;****** as amended December
17, 1993;*******(1)
(f)(v) Employment Agreement, dated January 1, 1995, among Adam G.
Polacek and Outlet Broadcasting, Inc. and Outlet Communications,
Inc.;********(1)
(f)(vi) Employment Agreement, dated January 1, 1995 among Steven
Soldinger and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.********(1)
(f)(vii) Agreement dated December 27, 1995 between Outlet
Communications, Inc. and James G. Babb************(1)
(g) Lease Agreement dated as of September 27, 1982 between WBNS-TV
and Outlet Broadcasting, Inc. regarding tower facility of
WCMH;***
(h) Station Affiliation Agreement, dated as of September 1, 1994,
between WB Communications and Outlet Broadcasting;********
(i) Time Brokerage Agreement dated as of March 18, 1994 among Outlet
Broadcasting, Inc. and Fant Broadcasting Company of Ohio, Inc.
and Outlet Communications, Inc.********
(j) Press Release, dated March 21, 1995, announcing the retention of
a financial advisor to explore strategic alternatives.********
(k) Merger Agreement dated as of June 30, 1995, among Renaissance
Communications, Corp., Renaissance Communications Acquisition
Corp., and Outlet Communications, Inc.*********
(l) Merger Agreement dated as of August 2, 1995, among National
Broadcasting Company, Inc., CO Acquisition Corporation and
Outlet Communications, Inc.**********
(m) Time Brokerage Agreement dated as of December 14, 1994, among
Outlet Broadcasting, Inc. and BAF Enterprises, Inc. and Fant
Broadcasting Company of Ohio, Inc.************
22. Subsidiaries of the Registrant:
Outlet Productions, Inc.; Biltout, Inc.; and WATL-TV Pro
Wrestling, Inc.
31
AIII-31
<PAGE>
- - ------------
* Incorporated by reference from the Registration Statement on
Form S-1, Registration No. 33-9442, declared effective by the
Securities and Exchange Commission on January 21, 1987.
** Incorporated by reference from Current Report on Form 10-K for
the year ended December 31, 1987.
*** Incorporated by reference from Outlet Broadcasting, Inc.
Registration Statement on Form S-1, Registration No. 33-62292,
declared effective by the Securities and Exchange Commission on
July 8, 1993.
**** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1989.
***** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1990.
****** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1992.
******* Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1993.
******** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1994.
********* Incorporated by reference from Current Report on Form 8-K
dated June 30, 1995.
********** Incorporated by reference from Current Report on Form 8-K
dated August 2, 1995.
*********** Incorporated by reference from the Definitive 14A Proxy
Statement filed by Outlet Communications, Inc. on March 30,
1995.
************ Filed herewith.
(1) Management contract or compensatory plan or arrangement.
32
AIII-32
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the registrant has duly caused this amendment to Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.
OUTLET BROADCASTING, INC.
Dated: April 1, 1996
By: /s/ ROBERT FINNERTY
..................................
Name: Robert Finnerty
Title: Vice President
33
AIII-33
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
OUTLET BROADCASTING, INC.
We have audited the accompanying consolidated balance sheets of Outlet
Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholder's equity, and cash flows
for each of the three years in the period ended December 31, 1995. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and the schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Outlet Broadcasting, Inc. and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Notes 5 and 10 to the financial statements, in 1993 the
Company changed its method of accounting for income taxes and postretirement
benefits other than pensions.
ERNST & YOUNG LLP
Providence, Rhode Island
February 19, 1996
F-1
AIII-34
<PAGE>
OUTLET BROADCASTING, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
----------------------------
1995 1994
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents..................... $ 889,000 $ 7,840,000
Trade accounts receivable, less allowance
for doubtful accounts of $450,000 in 1995
and $321,000 in 1994........................ 16,573,000 13,640,000
Film contract rights.......................... 3,148,000 3,350,000
Other current assets.......................... 1,154,000 1,171,000
------------ ------------
Total Current Assets............................ 21,764,764 26,001,000
Other Assets
Film contract rights.......................... 346,000 1,012,000
Deferred financing costs and other............ 3,480,000 3,399,000
------------ ------------
3,826,000 4,411,000
Property and Equipment
Land.......................................... 1,899,000 1,899,000
Buildings..................................... 11,633,000 10,967,000
Fixtures and equipment........................ 45,672,000 36,766,000
------------ ------------
59,204,000 49,632,000
Less accumulated depreciation................. 29,728,000 27,115,000
------------ ------------
29,476,000 22,517,000
Intangible Assets............................... 74,479,000 76,999,000
------------ ------------
$129,545,000 $129,928,000
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Trade accounts payable........................ $ 1,492,000 $ 801,000
Accrued expenses.............................. 11,522,000 10,394,000
Film contracts payable........................ 3,814,000 4,174,000
Deferred revenue.............................. 833,000 833,000
Federal and state income taxes................ 1,537,000 2,724,000
Current portion of long-term debt............. 5,000,000 4,500,000
------------ ------------
Total Current Liabilities....................... 24,198,000 23,426,000
Long-Term Debt
Loan payable.................................. 10,000,000 15,000,000
Notes payable................................. 60,000,000 60,000,000
------------ ------------
70,000,000 75,000,000
Other Liabilities
Film contracts payable........................ 1,007,000 1,019,000
Unfunded pensions............................. 2,242,000 2,355,000
Deferred revenue.............................. 3,056,000 3,889,000
Deferred income taxes......................... 3,564,000 4,403,000
Other......................................... 3,057,000 3,432,000
------------ ------------
12,926,000 15,098,000
Stockholder's Equity
Capital stock................................. 10,000 10,000
Capital surplus............................... 35,605,000 32,532,000
Accumulated deficit........................... (12,699,000) (16,138,000)
Pension liability adjustment.................. (495,000) --
------------ ------------
22,421,000 16,404,000
------------ ------------
$129,545,000 $129,928,000
------------ ------------
------------ ------------
See accompanying notes.
F-2
AIII-35
<PAGE>
OUTLET BROADCASTING, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
<S> <C> <C> <C>
1995 1994 1993
----------- ----------- -----------
Net revenue......................................... $66,210,000 $59,442,000 $46,952,000
Operating expenses:
Technical, programming and news................... 23,784,000 20,113,000 18,035,000
Selling, general and administrative............... 16,792,000 13,774,000 11,641,000
Depreciation...................................... 3,347,000 2,775,000 2,488,000
Amortization of intangibles....................... 2,520,000 2,605,000 2,360,000
----------- ----------- -----------
46,443,000 39,267,000 34,524,000
----------- ----------- -----------
Operating income.................................... 19,767,000 20,175,000 12,428,000
Interest expense:
Loan and notes payable............................ (8,505,000) (8,467,000) (7,392,000)
Note payable to shareholder....................... (4,016,000)
Other income (expense):
Interest income................................. 382,000 141,000 239,000
Other income.................................... 1,246,000 276,000 1,694,000
Other expense................................... (1,118,000) (896,000) (611,000)
----------- ----------- -----------
Total interest and other income (expense)........... (7,995,000) (8,946,000) (10,086,000)
Income before income taxes, extraordinary loss and
cumulative effect of change in accounting
principle......................................... 11,772,000 11,229,000 2,342,000
Income taxes........................................ 3,600,000 660,000 316,000
----------- ----------- -----------
Income before extraordinary loss and cumulative
effect of change in accounting principle.......... 8,172,000 10,569,000 2,026,000
Extraordinary loss, net............................. (4,733,000) (1,826,000)
Cumulative effect of change in method of accounting
for income taxes.................................. 4,434,000
----------- ----------- -----------
Net income.......................................... $ 3,439,000 $10,569,000 $ 4,634,000
----------- ----------- -----------
----------- ----------- -----------
Income per share:
Before extraordinary loss and cumulative effect of
change in accounting principle.................. $ 8.17 $ 10.57 $ 2.03
Extraordinary loss, net........................... (4.73) (1.83)
Cumulative effect of change in method of
accounting for income taxes..................... 4.43
----------- ----------- -----------
Net income per share................................ $ 3.44 $ 10.57 $ 4.63
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes.
F-3
AIII-36
<PAGE>
OUTLET BROADCASTING, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
CLASS A COMMON
STOCK
-------------------
<S> <C> <C> <C> <C> <C> <C>
PENSION
NUMBER OF PAR CAPITAL ACCUMULATED LIABILITY
SHARES VALUE SURPLUS DEFICIT ADJUSTMENT TOTAL
--------- ------- ----------- ------------ ---------- -----------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1992......................... 1,000,000 $10,000 $32,444,000 $(31,341,000) $ 1,113,000
Contribution of capital...... 38,000 38,000
Net income................... 4,634,000 4,634,000
--------- ------- ----------- ------------ ---------- -----------
Balances at December 31,
1993......................... 1,000,000 10,000 32,482,000 (26,707,000) 5,785,000
Contribution of capital...... 50,000 50,000
Net income................... 10,569,000 10,569,000
--------- ------- ----------- ------------ ---------- -----------
Balances at December 31,
1994......................... 1,000,000 10,000 32,532,000 (16,138,000) 16,404,000
Contribution of capital...... 3,073,000 3,073,000
Net income................... 3,439,000 3,439,000
Pension liability
adjustment................... $ (495,000) (495,000)
--------- ------- ----------- ------------ ---------- -----------
Balances at December 31,
1995......................... 1,000,000 $10,000 $35,605,000 $(12,699,000) $ (495,000) $22,421,000
--------- ------- ----------- ------------ ---------- -----------
--------- ------- ----------- ------------ ---------- -----------
</TABLE>
See accompanying notes.
F-4
AIII-37
<PAGE>
OUTLET BROADCASTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
<S> <C> <C> <C>
1995 1994 1993
----------- ----------- -----------
Operations:
Net income.......................................... $ 3,439,000 $10,569,000 $ 4,634,000
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization................... 5,867,000 5,380,000 4,848,000
Amortization of other assets.................... 365,000 365,000 272,000
Accretion of debt discount...................... 649,000
Change in accounting principle.................. (4,434,000)
Extraordinary loss--net......................... 1,826,000
Increase (decrease) in deferred taxes........... 1,150,000 (151,000) 1,186,000
Increase in accounts receivable................. (2,933,000) (2,800,000) (1,010,000)
Amortization of film contract rights and
valuation adjustments......................... 6,540,000 5,662,000 5,633,000
Increase in prepaid film contract rights........ (5,672,000) (4,149,000) (4,672,000)
(Increase) decrease in other current assets..... 17,000 (369,000) 395,000
Increase (decrease) in accounts payable and
accrued expenses.............................. 2,435,000 2,148,000 (3,575,000)
Decrease in film contracts payable.............. (372,000) (1,773,000) (409,000)
(Decrease) increase in deferred revenue (833,000) 4,722,000
(Decrease) increase in income taxes payable..... (1,187,000) 524,000 (984,000)
Other........................................... (872,000) (662,000) (487,000)
----------- ----------- -----------
Net Cash Provided by Operations..................... 7,944,000 19,466,000 3,872,000
</TABLE>
<TABLE>
<S> <C> <C> <C>
Investing:
Capital expenditures--net of disposals............ (10,307,000) (3,385,000) (5,907,000)
Investment in time brokerage agreements........... (556,000) (1,055,000)
Acquisition of broadcast station.................. (5,478,000)
Other............................................. (14,000)
------------ ----------- ------------
Net Cash Used by Investing........................ (10,863,000) (9,932,000) (5,907,000)
Financing:
Issuance of notes payable......................... 60,000,000
Proceeds from issuance of term loan............... 25,000,000
Payment of loan payable........................... (4,500,000) (3,500,000) (2,000,000)
Payment of long-term debt......................... (44,150,000)
Redemption of note payable to shareholder......... (43,946,000)
Contribution of capital........................... 468,000 50,000 38,000
Debt refinancing costs............................ (3,151,000)
Premium on debt refinancing....................... (2,207,000)
------------ ----------- ------------
Net Cash Used by Financing........................ (4,032,000) (3,450,000) (10,416,000)
------------ ----------- ------------
Net (decrease) increase in cash and cash
equivalents..................................... (6,951,000) 6,084,000 (12,451,000)
Cash and cash equivalents at beginning of year.... 7,840,000 1,756,000 14,207,000
------------ ----------- ------------
Cash and Cash Equivalents at End of Year.......... $ 889,000 $ 7,840,000 $ 1,756,000
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
See accompanying notes.
F-5
AIII-38
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. BASIS OF PRESENTATION
Outlet Broadcasting, Inc. (the Company) is a wholly-owned subsidiary of
Outlet Communications, Inc. (the Parent Company). The consolidated financial
statements include the accounts of Outlet Broadcasting, Inc. and its
wholly-owned subsidiaries. All material intercompany accounts are eliminated.
The Company's operations consist of three owned television stations and one
television station operated under a time brokerage agreement. The owned stations
include two NBC network-affiliated VHF television stations and one NBC
network-affiliated UHF television station. The two VHF television stations are
WJAR, which serves the Providence, Rhode Island-New Bedford, Massachusetts area
and WCMH, which serves the Columbus, Ohio area. The UHF television station is
WNCN, which services the Raleigh-Durham (Fayetteville, Goldsboro and Rocky
Mount), North Carolina market area. The Company also operates UHF television
station WWHO, Chillicothe, Ohio, under a time brokerage agreement with that
station's licensee.
2. MERGER WITH NATIONAL BROADCASTING COMPANY, INC.
On August 2, 1995, the Parent Company executed a definitive merger agreement
with the National Broadcasting Company, Inc. ("NBC") providing for a transaction
in which NBC would acquire the Parent Company and the Parent Company's
stockholders would receive $47.25 per common share in cash. The merger agreement
was approved by the Parent Company's Board of Directors and by the holders of a
majority of the Parent Company's outstanding common stock. The transaction
closed on February 2, 1996. (See Note 9)
3. SIGNIFICANT ACCOUNTING POLICIES
REVENUES
Broadcasting stations derive revenue from the sale of program time and spot
announcements to local, regional and national advertisers, and from compensation
received from carrying network programs and commercials. Advertising revenue and
network compensation are recognized in the period during which the program time
and spot announcements are broadcast. Revenue is also derived from the
production of film and taping of advertising materials. Production revenue is
recognized in the period when the service is provided.
Deferred revenue represents a one-time payment received upon renewal of the
Company's affiliation with NBC and is being amortized into revenue over the term
of the affiliation. The amount of deferred revenue to be amortized over the
ensuing period of twelve months is included in current liabilities.
FILM CONTRACT RIGHTS
Film contract rights are recorded when the license period begins and the
program is available for showing. The costs of film contract rights are
amortized on accelerated methods over the contract period or as the program is
used, whichever provides the greater amortization on an accumulated basis. The
costs of programs expected to be used within one year are classified as a
current asset. Payments for film contracts are made pursuant to contractual
terms over periods that are generally shorter than the lives of the rights.
F-6
AIII-39
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is calculated on the
straight-line basis over the estimated useful lives of the property and
equipment varying from 3 to 40 years.
INTANGIBLE ASSETS
Intangible assets primarily include network affiliation agreements, station
licenses and goodwill, and are being amortized using the straight-line method up
to 40 years.
INCOME PER SHARE
Income per share is computed by dividing net income by the weighted average
number of shares of common stock--1,000,000 shares.
CASH EQUIVALENTS
Cash equivalents include highly liquid investments with a maturity of three
months or less when purchased.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expense was
$1,447,000, $1,139,000, and $775,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
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 amounts could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company operates television stations which serve the following markets:
Columbus and Chillicothe, Ohio; Providence, Rhode Island--New Bedford,
Massachusetts and Raleigh--Durham (Fayetteville, Goldsboro and Rocky Mount),
North Carolina. The Company grants credit to customers, substantially all of
whom are either local advertisers within these markets or national advertising
agencies.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has estimated that the impact of adopting recently issued
accounting standards with delayed effective dates on the Company's financial
statements will not be material.
4. ACQUISITION AND TIME BROKERAGE AGREEMENTS
In March 1994, the Company entered into a time brokerage agreement ("TBA")
with the licensee of UHF television station WWHO, Chillicothe, Ohio. Under the
agreement, the Company will serve as a broker for the sale of WWHO's advertising
time and provide it with certain programming and operating capabilities. The
Company's obligations commenced April 18, 1994 and, since that date, results of
operations for WWHO are included with those of the Company. The Company made an
F-7
AIII-40
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. ACQUISITION AND TIME BROKERAGE AGREEMENTS--(CONTINUED)
initial investment in the TBA of $1,055,000 which included an option, valued at
$475,000, to purchase the station. The total investment is being amortized over
the initial ten-year term of the TBA. In addition, the Company agreed to
reimburse the licensee for certain annual operating expenses and debt service
which totaled $603,000 and $392,000 during 1995 and 1994, respectively. The
Company has also agreed to pay the licensee specified percentages of net
operating income (as defined in the TBA) after the Company recovers its
aggregate investment, excluding the option. There were no such payments required
in 1995 and 1994. The TBA will automatically renew for two additional periods of
five years unless canceled by the Company.
In December 1994, the Company entered into a TBA with the licensee of UHF
television station WLWC (formerly WFDG), New Bedford, Massachusetts; the terms
of which are similar to the TBA described above. This station has not yet
commenced operations. Under the TBA, the Company is required to spend up to $4
million for construction of improvements to the station of which $1,151,000 has
been expended as of December 31, 1995. The Company is also required to make an
initial investment in the TBA of $1,172,500, which includes an option, valued at
$512,500, to purchase the station. As of December 31, 1995, the Company has made
the payment associated with the purchase option.
On August 10, 1994, the Company purchased the assets and broadcast license
of television station WNCN for an aggregate price of $5,478,000. WNCN is
licensed to Goldsboro, NC, and broadcasts in the Raleigh--Durham (Fayetteville,
Goldsboro and Rocky Mount), North Carolina market area. Funds for the
acquisition were provided by the Company's internal operations. The transaction
was accounted for using the purchase method of accounting. Results of operations
for WNCN are included with those of the Company subsequent to the date of
acquisition. Pro forma net revenue, net income and net income per share would
not have been significantly different from the actual historical results.
F-8
AIII-41
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The components of income tax expense (benefit) for the years ended December
31 are as follows:
1995 1994 1993
------- ----- ------
(DOLLARS IN THOUSANDS)
Current:
Federal......................................... $ 255 $ 531 $ (870)
State........................................... 450 280
------- ----- ------
705 811 (870)
Deferred:
Federal......................................... 2,790 (70) 1,265
State........................................... 105 (81) (79)
------- ----- ------
2,895 (151) 1,186
------- ----- ------
3,600 660 316
Extraordinary items:
Federal......................................... (1,870) (940)
State........................................... (250)
------- ----- ------
(2,120) 0 (940)
------- ----- ------
$ 1,480 $ 660 $ (624)
------- ----- ------
------- ----- ------
Income taxes paid................................. $ 1,186 $ 287 $ 114
------- ----- ------
------- ----- ------
Income tax expense (benefit) computed using the federal statutory rate is
reconciled to the reported income tax provisions before extraordinary credits as
follows:
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ------
(DOLLARS IN THOUSANDS)
Statutory tax expense............................. $4,002 $3,930 $ 796
State income taxes (net of federal income tax
benefit)........................................ 748 129 (52)
Amortization of intangible assets................. 500 529 500
Adjust prior year tax estimate.................... 1,435 311 (1,040)
Change in valuation reserve....................... (3,148) (4,256) 93
Alternative minimum tax........................... 115
Other............................................. 63 17 (96)
------ ------ ------
$3,600 $ 660 $ 316
The Company's income tax liability for both federal and state purposes in
1995 was reduced by the tax benefit derived from the exercise of incentive stock
options and subsequent sale of the related common stock and the exercise of
non-qualified stock options, all related to the Parent Company. The benefit
totaled approximately $1,989,000 for the year ended December 31, 1995 and was
credited to capital surplus.
In 1995, the Company's net operating loss carryover was increased by
$3,470,000 to reflect additional amortization expense related to debt financing
fees incurred in 1986 and 1987; thereby increasing the deferred tax asset and
the related valuation reserve by $1,220,000.
F-9
AIII-42
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES--(CONTINUED)
Pursuant to tax regulations released in 1994, the Company allocated to
equity certain proceeds received from a prior year's issuance of debt and
related common stock purchase warrants, thereby increasing the Company's net
operating loss carryover by $13,301,000 and increasing the deferred tax asset
and the related valuation reserve by $4,745,000.
Effective January 1, 1993, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes" and
adjusted previously recorded deferred taxes. The Company has reflected the
effect of adopting Statement 109 as a change in accounting principle at the
beginning of 1993. The cumulative effect of the change increased net income for
the year ended December 31, 1993 by $4,434,000 or $4.43 per share.
Deferred income taxes represent the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, at currently enacted
rates. Significant components of the Company's deferred tax liabilities and
assets as of December 31, 1995 and 1994, are as follows:
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
Deferred tax liabilities:
Amortization of network affiliation agreements and FCC
licenses............................................ $11,700 $12,058
Amortization of film contracts........................ 890 1,173
Depreciation.......................................... 2,748 1,400
Other................................................. 1,789 7
------- -------
Total deferred tax liabilities........................ 17,127 14,638
Deferred tax assets:
Net operating loss carryover.......................... 10,832 9,244
Accrued expenses not currently deductible for tax
purposes............................................ 1,106 768
Unfunded pensions..................................... 2,161 2,282
Deferred revenue...................................... 1,672 2,030
Other................................................. 1,741 1,788
------- -------
Total deferred tax assets............................... 17,512 16,112
Valuation reserve for deferred tax assets............... (3,949) (5,877)
------- -------
Net deferred tax assets................................. 13,563 10,235
------- -------
Net deferred tax liability.............................. $ 3,564 $ 4,403
------- -------
------- -------
The Company has tax loss carryforwards in the amount of $28,336,000 which
expire as follows:
YEAR
- - -----------------------------------------------------------------
2005............................................................. $ 5,787
2006............................................................. 14,072
2007............................................................. 5,310
2008............................................................. 2,430
2010............................................................. 737
-------
$28,336
-------
-------
F-10
AIII-43
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31
------------------
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
Senior loan payable to bank, principal and interest
payable in quarterly installments to September 30,
1998, interest is based on LIBOR plus 2.5% (8 3/8% at
December 31, 1995) secured by substantially all of the
assets of the Company................................. $15,000 $19,500
10 7/8% Senior Subordinated Notes, due July 15, 2003,
interest payable semiannually on January 15 and July
15...................................................... 60,000 60,000
------- -------
75,000 79,500
Less current portion 5,000 4,500
------- -------
$70,000 $75,000
------- -------
------- -------
On June 28, 1993, the Company entered into a Credit and Guaranty Agreement
(the Agreement) with a bank under which the bank agreed to provide a secured
senior credit facility consisting of a term loan in the principal amount of
$25,000,000 and revolving loans in the maximum principal amount outstanding of
$5,000,000. The term loan is payable in quarterly installments through September
30, 1998. Amounts outstanding on the revolving loan would be payable in three
fluctuating quarterly installments no later than June 30, 1999. The Agreement
provides for payment of a commitment fee equal to 1/2% of the unused portion of
the revolving loan. The Agreement also provides for principal payments based on
the immediately preceding fiscal year's excess cash flow, as defined in the
Agreement, commencing July 1, 1995; however, the principal payment due July 1,
1995 was waived. On February 2, 1996, in connection with the closing of the
Parent Company's merger with NBC, all of the obligations under the Agreement
were paid in full and the Agreement was terminated. Annual maturities of
long-term debt during each of the next five years would have been as follows
(dollars in thousands): 1996-$5,000; 1997-$5,500; 1998-$4,500; 1999 and
2000-none.
On July 15, 1993, in a public offering, the Company issued 10 7/8% Senior
Subordinated Notes due 2003 in the principal amount of $60,000,000. The
estimated fair value of fixed rate debt, $60,600,000 at December 31, 1995, was
determined using an offering price for repurchase of the debt.
The loan and notes payable contain certain covenants that, among other
things, limit the ability of the Company to incur debt, pay cash dividends on or
repurchase capital stock (as defined in the Agreement), enter into certain
transactions with affiliates, acquire and/or dispose of certain assets and
engage in mergers and consolidations. The obligations were entered into in order
for the Company to undertake a refinancing of its outstanding long-term debt,
which was completed during 1993. As a result of the refinancing, the Company
incurred one-time debt extinguishment costs in the amount of $1,826,000, net of
income taxes, reported as an extraordinary loss during the year ended December
31, 1993.
During 1993, the Company repaid in full its Junior Subordinated Note payable
to The Mutual Benefit Life Insurance Company. Interest on the note was payable
semiannually based on the note's principal amount of $50,000,000, with payments
commencing on February 1, 1992, and continuing until maturity on February 1,
1997, at 12.5% per annum. The note was recorded at a discounted value
F-11
AIII-44
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT--(CONTINUED)
at an effective interest rate of 17.2%, which was being amortized over the term
of the note. The Mutual Benefit Life Insurance Company was a shareholder of the
Parent Company through February 2, 1996.
Cash payments for interest during the years ended December 31, 1995, 1994
and 1993 were $8,108,000, $8,096,000, and $13,071,000, respectively.
7. LEASE OBLIGATIONS AND COMMITMENTS
The Company has several operating leases involving equipment. As of December
31, 1995, the future minimum payments under noncancelable operating leases with
initial or remaining terms of one year or more were as follows:
(DOLLARS
(IN THOUSANDS)
--------------
1996........................................................... $ 463
1997........................................................... 339
1998........................................................... 335
1999........................................................... 311
2000........................................................... 262
Thereafter..................................................... 643
-------
$2,353
-------
-------
Rent expense for all operating leases was approximately $703,000, $604,000,
and $692,000, for the years ended December 31, 1995, 1994 and 1993,
respectively.
The Company has commitments to acquire approximately $10,641,000 of film
contract rights at December 31, 1995. The Company has also agreed to reimburse
the licensee of television station WWHO for certain annual operating and debt
service expenses over the duration of the TBA. The reimbursement for 1996 is
estimated at $611,000 and, in subsequent years, may approximate that amount.
At December 31, 1995, the Company remains contingently liable on
approximately $11,380,000 of store leases expiring on various dates through
2007, applicable to a retail division, which was sold as of the fiscal year
ended January 31, 1983. Substantially all of the leases have been assumed by
others, and management believes that future payments, if any, would not be
material to the Company's financial statements. In connection with the sale of
television stations to third parties, the Company also remains contingently
liable on approximately $4,044,000 of building and tower leases related to radio
and television stations sold in March 1990.
8. EXTRAORDINARY LOSSES
The extraordinary loss in 1995 represents costs incurred by the Company in
connection with the Parent Company's merger with NBC, including a $5,500,000
payment to the Chairman of the Board. Other costs, directly related to the
change in the control of the Parent Company, will be recognized as of the
closing date of the Parent Company's merger with NBC.
The extraordinary loss in 1993 represents debt extinguishment costs as
described in Note 6.
F-12
AIII-45
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. COMMISSIONS
Net revenue for the years ended December 31, 1995, 1994, and 1993 are net of
agency and national representative commissions of approximately $13,018,000,
$11,547,000, and $9,140,000, respectively.
10. EMPLOYEE BENEFIT PLANS
The Company has both qualified and nonqualified noncontributory pension
plans covering all employees age 21 or over with one year of service, excluding
certain collective bargaining groups and certain employees who did not qualify
for participation in the pension plan which was suspended in 1994 (see below).
Pension costs are actuarially computed. The Company's policy is to fund amounts
as are necessary on an actuarial basis to provide for benefits in accordance
with the requirements of ERISA.
Benefits are based on (i) the three consecutive years in which compensation
affords the highest average, and (ii) total years of service. The Company
suspended a non-union qualified pension plan as of September 1, 1994. The
Company's actuary determined the curtailment loss associated with the suspended
benefits to be $220,000.
Net pension costs for the indicated years ended December 31 consist of:
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
Service costs--benefits earned during the
period....................................... $ 28 $ 215 $ 305
Interest cost on projected benefit
obligations.................................. 1,552 1,583 1,613
Actual return on assets........................ (1,266) (1,341) (1,311)
Net amortization and other..................... (22) 108 73
------- ------- -------
$ 292 $ 565 $ 680
------- ------- -------
------- ------- -------
Assumptions used in accounting for the pension plans are as follows at
December 31:
1995 1994 1993
-------- --------- ---------
Discount rate.............................. 7%--7.25% 7.5% 7.5%
Average rate of increase in compensation
levels................................... 6% 6% 6%
Expected long-term rate of return on assets 5.5%--9% 5.5%--8.5% 5.5%-8.5%
F-13
AIII-46
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The following table sets forth the funded status of the plans measured as of
December 31:
1995 1994
-------- --------
(DOLLARS IN
THOUSANDS)
Vested benefit obligations............................ $(20,883) $(20,051)
-------- --------
-------- --------
Accumulated benefit obligations....................... $(21,580) $(20,281)
-------- --------
-------- --------
1995 1994
-------- --------
(DOLLARS IN
THOUSANDS)
Projected benefit obligations......................... $(21,580) $(20,281)
Plan assets at fair value, primarily cash equivalents
and listed stocks and bonds......................... 16,844 15,326
-------- --------
Projected benefit obligation in excess of plan
assets................................................ (4,736) (4,955)
Unrecognized net actuarial gain....................... (804) (876)
Unrecognized prior service cost....................... 141 159
Unrecognized net transition obligation................ 939 1,313
Adjustment for minimum liability...................... (638) (774)
-------- --------
Accrued pension liability............................. $ (5,098) $ (5,133)
-------- --------
-------- --------
On September 1, 1994, the Company established the Outlet Broadcasting Inc.
401(k) and Profit Sharing Plan (the Plan), which qualifies under Section 401(k)
of the Internal Revenue Code, for the benefit of substantially all employees not
covered by a collective bargaining agreement unless the agreement allows for
participation in the Plan. The Plan allows the employees to contribute up to 15%
of their regular earnings. The Company contributes, for the personal account of
each employee, 25% of the first 6%. Plan expense in 1995 and 1994 was
approximately $213,000 and $67,000, respectively. In addition, the Company may
make discretionary profit sharing contributions annually.
The Company provides postretirement medical reimbursement benefits to
elected corporate officers who have met certain service requirements. Most of
the eligible participants are currently retired. As of January 1, 1993, the
Company adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" which requires the
cost of providing postretirement medical reimbursement benefits to be accrued
over the eligible employees' service period. As permitted by the new standard,
the Company elected to recognize its accumulated postretirement benefit
obligation at January 1, 1993, on a delayed basis. Postretirement benefit costs
are estimated by management.
F-14
AIII-47
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The following table provides information on the status of the medical
reimbursement benefit plan as of December 31:
1995 1994
----- -----
(DOLLARS IN
THOUSANDS)
Accumulated postretirement benefit obligation:
Retirees............................................. $(603) $(682)
Fully eligible plan participants..................... (76) (71)
Other active plan participants....................... (38) (28)
----- -----
Total.................................................. (717) (781)
Unrecognized transition obligation..................... 493 522
----- -----
Accrued postretirement benefit cost.................... $(224) $(259)
----- -----
----- -----
Net periodic postretirement benefit cost for the indicated years ended
December 31, consists of the following:
1995 1994
---- ----
(DOLLARS IN
THOUSANDS)
Service cost--benefits attributed to service during the
period.................................................. $10 $10
Interest cost on accumulated postretirement benefit
obligation.............................................. 58 60
Amortization of unrecognized transition obligation........ 29 29
---- ----
Net periodic postretirement benefit cost.................. $97 $99
---- ----
---- ----
The Company's policy is to fund postretirement benefits as claims are paid.
The accumulated postretirement benefit obligation was determined using a
discount rate of 8% and a health care cost trend rate of 6%, declining to 5% in
the year 2000 and thereafter. The effect of a 1% annual increase in these
assumed cost trend rates would increase the accumulated postretirement benefit
obligation by approximately $83,000; the annual costs would not be materially
affected.
11. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
Network affiliation agreements.......................... $34,917 $34,917
Station licenses and goodwill........................... 62,231 62,231
------- -------
97,148 97,148
------- -------
Less accumulated amortization........................... 22,669 20,149
------- -------
$74,479 $76,999
------- -------
------- -------
F-15
AIII-48
<PAGE>
OUTLET BROADCASTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
Accrued interest........................................ $ 3,046 $ 3,043
Accrued pensions........................................ 2,856 2,778
Accrued property taxes.................................. 472 471
Accrued salaries, wages and benefits.................... 2,062 2,120
Accrued license fees, commissions and promotion costs... 569 668
Accrued liabilities for claims and contingencies........ 503 596
Accrued merger costs.................................... 838
Other................................................... 1,176 718
------- -------
$11,522 $10,394
------- -------
------- -------
13. CAPITALIZATION
The capitalization of the Company at December 31, 1995 and 1994 was as
follows:
ISSUED AND
DESCRIPTION OUTSTANDING
- - ----------------------------------------------------------------- -----------
Preferred stock, no par value--authorized 1,000,000 shares....... --
Class A common stock, $.01 par value--authorized 3,000,000 shares 1,000,000
Class B common stock, $.01 par value--authorized 1,000,000 shares --
14. LITIGATION
During 1995, the Parent Company entered into, and subsequently terminated, a
merger agreement with a third party. In connection with the termination of this
merger agreement, the Parent Company was obligated to pay a fee of $6.5 million.
NBC paid this fee on behalf of the Parent Company.
During 1993, a representative body of the television broadcast industry
reached an agreement with the American Society of Composers, Authors and
Publishers (ASCAP) as to the total industry's obligation for the payment of
music performance rights fees to that organization. The agreement provided that
each television station's performance rights fees payable to ASCAP would
generally approximate what the stations had paid to date. Accordingly, the
Company reversed an accrued liability of $2,100,000 which provided for the
Company's potential additional exposure in this matter.
The Company is also subject to litigation arising from its normal business
operations. Any liability which may result therefrom, to the extent not provided
by insurance or accruals, would not have a material effect on the Company's
financial position.
15. FOURTH QUARTER ADJUSTMENTS (UNAUDITED)
During the fourth quarter of 1995, the Company recognized an extraordinary
item relating to its merger with NBC (Note 8), lump sum charges of $1,453,000
representing valuation write downs of certain film contracts, reversal of
accruals for music license fees and other items no longer required aggregating
approximately $800,000 and a change in the estimated effective tax rate.
F-16
AIII-49
<PAGE>
SCHEDULE II
OUTLET BROADCASTING, INC.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED AT END
OF PERIOD TO EXPENSE DEDUCTIONS OF PERIOD
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for doubtful accounts................... $300 $275 $275 $ 300
----- ----- ----- ---------
----- ----- ----- ---------
Year ended December 31, 1994
Allowance for doubtful accounts................... $300 $154 $133 $ 321
----- ----- ----- ---------
----- ----- ----- ---------
Year ended December 31, 1995
Allowance for doubtful accounts................... $321 $438 $309 $ 450
----- ----- ----- ---------
----- ----- ----- ---------
</TABLE>
S-1
AIII-50
<PAGE>
EXHIBIT INDEX
PAGE
----
3. (a) Certificate of Incorporation*, as amended December 17,
1987;** and September 19, 1989***
(b) Amended and Restated By-Laws, dated February 2,
1996;************ 75
4. Indenture, dated as of July 8, 1993 between Outlet
Broadcasting, Inc. and Bankers Trust Company, as Trustee,
governing Outlet Broadcasting, Inc. 10 7/8% Senior
Subordinated Notes Due 2003;***
10. Material contracts:
(a) Agreement for Management Consulting Services, dated July
31, 1986, by and between Harding Service Corporation and
Outlet Communications, Inc.;*(1)
(b)(i) Stockholders' Agreement, dated December 10, 1986, by and
among Outlet Communications, Inc.; Outlet Broadcasting,
Inc. and the persons named therein (the Stockholders'
Agreement);***
(b)(ii) Amendment No. 1, dated as of December 1, 1987, to the
Stockholders' Agreement;***
(b)(iii) Agreement dated July 26, 1988, by and among Outlet
Communications, Inc.; Outlet Broadcasting, Inc. and the
persons named therein amending the Stockholders'
Agreement;***
(c) Credit and Guaranty Agreement dated as of June 28, 1993
among Outlet Broadcasting, Inc. and Outlet Communications,
Inc. and Fleet National Bank;***
(d) Supplemental Retirement Plan;***(1)
(e) 1992 Stock Incentive Plan, as amended and restated;*** as
amended May 2, 1995***********(1)
(f)(i) Employment Agreement, dated April 1, 1989, among Felix W.
Oziemblewski and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.;****(1)
(f)(ii) Employment Agreement, dated January 1, 1995, among Linda
Sullivan and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.;********(1)
(f)(iii) Employment Agreement, dated May 1, 1993 among Douglas E.
Gealy and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.***(1)
(f)(iv) Employment Agreement, dated January 1, 1993, between James
G. Babb and Outlet Communications, Inc.;****** as amended
December 17, 1993;*******(1)
(f)(v) Employment Agreement, dated January 1, 1995, among Adam G.
Polacek and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.;********(1)
(f)(vi) Employment Agreement, dated January 1, 1995 among Steven
Soldinger and Outlet Broadcasting, Inc. and Outlet
Communications, Inc.********(1)
(f)(vii) Agreement dated December 27, 1995 between Outlet
Communications, Inc. and James G. Babb************(1) 90
(g) Lease Agreement dated as of September 27, 1982 between
WBNS-TV and Outlet Broadcasting, Inc. regarding tower
facility of WCMH;***
(h) Station Affiliation Agreement, dated as of September 1,
1994, between WB Communications and Outlet
Broadcasting;********
(i) Time Brokerage Agreement dated as of March 18, 1994 among
Outlet Broadcasting, Inc. and Fant Broadcasting Company of
Ohio, Inc. and Outlet Communications, Inc.********
(j) Press Release, dated March 21, 1995, announcing the
retention of a financial advisor to explore strategic
alternatives.********
(k) Merger Agreement dated as of June 30, 1995, among
Renaissance Communications, Corp., Renaissance
Communications Acquisition Corp., and Outlet
Communications, Inc.*********
(l) Merger Agreement dated as of August 2, 1995, among
National Broadcasting Company, Inc., CO Acquisition
Corporation and Outlet Communications, Inc.**********
(m) Time Brokerage Agreement dated as of December 14, 1994,
among Outlet Broadcasting, Inc. and BAF Enterprises, Inc.
and Fant Broadcasting Company of Ohio, Inc.************ 95
AIII-51
<PAGE>
PAGE
----
22. Subsidiaries of the Registrant:
Outlet Productions, Inc.; Biltout, Inc.; and WATL-TV Pro Wrestling,
Inc.
- - ------------
* Incorporated by reference from the Registration Statement on
Form S-1, Registration No. 33-9442, declared effective by the
Securities and Exchange Commission on January 21, 1987.
** Incorporated by reference from Current Report on Form 10-K for
the year ended December 31, 1987.
*** Incorporated by reference from Outlet Broadcasting, Inc.
Registration Statement on Form S-1, Registration No. 33-62292,
declared effective by the Securities and Exchange Commission on
July 8, 1993.
**** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1989.
***** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1990.
****** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1992.
******* Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1993.
******** Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1994.
********* Incorporated by reference from Current Report on Form 8-K
dated June 30, 1995.
********** Incorporated by reference from Current Report on Form 8-K
dated August 2, 1995.
*********** Incorporated by reference from the Definitive 14A Proxy
Statement filed by Outlet Communications, Inc. on March 30,
1995.
************ Filed herewith.
(1) Management contract or compensatory plan or arrangement.
AIII-52
<PAGE>
OUTLET BROADCASTING, INC.
SOLICITATION OF CONSENTS
TO AMENDMENT OF THE INDENTURE GOVERNING ITS 10 7/8%
SENIOR SUBORDINATED NOTES DUE 2003
-------------------
GENERAL ELECTRIC COMPANY
PROSPECTUS
-------------------
Questions concerning the terms of the Solicitation should be directed to
Outlet at the telephone number set forth below. Deliveries of Consents should be
made to Outlet at the address or facsimile number set forth below (facsimiles
should be confirmed by physical delivery). Requests for additional copies of
this Consent Solicitation Statement/Prospectus or the Consent should be directed
to Outlet at the telephone number and address set forth below.
-------------------
OUTLET BROADCASTING, INC.
c/o National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, NY 10112
Attention: Robert Finnerty
Call Collect: (212) 664-4411
Facsimile: (212) 664-5233
-------------------
TABLE OF CONTENTS
PAGE
-----
Available Information............. i
Incorporation of Certain Documents
by Reference...................... i
Summary........................... 1
Introduction...................... 7
The Companies..................... 7
The Proposed Amendment............ 8
Description of The Guarantee...... 17
Selected Consolidated Financial
Information....................... 18
PAGE
-----
Ratio of Earnings to Fixed
Charges........................... 19
Capitalization.................... 20
The Solicitation.................. 21
Certain Federal Income Tax
Consequences...................... 25
Legal Opinion..................... 28
Experts........................... 28
Appendix I........................ AI-1
Appendix II....................... AII-1
Appendix III...................... AIII-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XI of GE's By-Laws, as amended, provides as
follows:
20. The Company shall, to the fullest extent permitted by
applicable law as the same exists or may hereafter be in effect, indemnify
any person who is or was or has agreed to become a director or officer of
the Company and who is or was made or threatened to be made a party to or
is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company to procure a judgment
in its favor and an action by or in the right of any other corporation of
any type or kind, domestic or foreign, or any partnership, joint venture,
trust, employee benefit plan or other enterprise, which such person is
serving, has served or has agreed to serve in any capacity at the request
of the Company, by reason of the fact that he or she is or was or has
agreed to become a director or officer of the Company, or is or was serving
or has agreed to serve such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid or to be paid in settlement, taxes or
penalties, and costs, charges and expenses, including attorney's fees
incurred in connection with such action or proceeding or any appeal
therein; provided, however, that no indemnification shall be provided to
any such person if a judgment or other final adjudication adverse to the
director or officer establishes that (i) his or her acts were committed in
bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii)
he or she personally gained in fact a financial profit or other advantage
to which he or she was not legally entitled. The benefits of this
Paragraph A shall extend to the heirs and legal representative of any
person entitled to indemnification under this paragraph.
21. The Company may, to the extent authorized from time to time by
the Board of Directors, or by a committee comprised of members of the Board
or members of management as the Board may designate for such purpose,
provide indemnification to employees or agents of the Company who are not
officers or directors of the Company with such scope and effect as
determined by the Board, or such committee.
22. The Company may indemnify any person to whom the Company is
permitted by applicable law to provide indemnification or the advancement
of expenses, whether pursuant to rights granted pursuant to, or provided
by, the New York Business Corporation Law or other rights created by (i) a
resolution of shareholders, (ii) a resolution of directors, or (iii) an
agreement providing for such indemnification, it being expressly intended
that these By-laws authorize the creation of other rights in any such
manner. The right to be indemnified and to the reimbursement or
advancement of expenses incurred in defending a proceeding in advance of
its final disposition authorized by this Paragraph C shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, By-laws, agreement,
vote of shareholders or disinterested directors or otherwise.
23. The right to indemnification conferred by Paragraph A shall,
and any indemnification extended under Paragraph B or Paragraph C may, be
retroactive to events occurring prior to the adoption of this Article XI,
to the fullest extent permitted by applicable law.
24. This Article XI may be amended, modified or repealed either by
action of the Board of Directors of the Company or by the vote of the
shareholders.
A director or officer of a corporation organized under
the New York Business Corporation Law is entitled, under specified
circumstances, to indemnification by the corporation against reasonable
expenses, including attorney's fees, incurred by him in connection with the
defense of a civil or criminal proceeding to which he has been made, or has
been threatened to be made, a party by reason of the fact that he was such
director or officer. In certain circumstances, indemnity is provided
against judgments, fines and amounts paid in settlement. Specific court
approval is required in some cases. The foregoing statement is subject to the
detailed provisions of Sections 715, 717 and 721-726 of the New York Business
Corporation Law.
II-1
<PAGE>
The directors and officers of GE are insured under
officers and directors' liability insurance policies purchased by GE and,
in at least one instance, by an individual director on behalf of herself.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
2.1 Merger Agreement, dated as of August 2, 1995,
among National Broadcasting Company, Inc., CO
Acquisition Corporation and Outlet Communications,
Inc. (Incorporated by reference to Outlet's
Current Report on Form 8-K dated August 2, 1995).
4.1 Indenture dated as of July 8, 1993 between Outlet
and Bankers Trust Company, as Trustee.
(Incorporated by reference to Outlet's
Registration Statement on Form S-1 (File No. 33-
62292)).
**4.2 Form of Supplemental Indenture dated as of
__________, 1996 among Outlet, General Electric
Company, as Guarantor, and Bankers Trust Company,
as Trustee.
*5 Opinion of Robert E. Healing, Esq. regarding the
legality of the Guarantees of the 10-7/8% Senior
Notes due 2003, as amended, of Outlet.
**12 Statement Regarding Computation of Ratio of
Earnings to Fixed Charges.
**23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Ernst & Young LLP
23.3 Consent of Robert E. Healing, Esq. (included in
Exhibit 5).
**24 Power of Attorney.
**25 Statement of Eligibility of Trustee on Form T-1.
**99 Form of Consent
___________________________________
* Filed with this Amendment No. 1.
** Previously filed.
(b) Financial Statement Schedules
Not Applicable
(c) Reports, Opinions or Appraisals
Not Applicable
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any
facts or events arising after the effective date of this Registration
Statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and
(iii) To include any material
information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if this Registration Statement is on Form S-4 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
The Registrant hereby undertakes that every prospectus
(i) that is filed pursuant to the paragraph immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(3) of the
Securities Act, and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was not
the subject of and included in the registration statement when it became
effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Fairfield, State of
Connecticut, on April 19, 1996.
GENERAL ELECTRIC COMPANY
By: /s/ Philip D. Ameen
----------------------------
Philip D. Ameen
Vice President and Comptroller
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
* Chairman of the Board
- - ---------------------------- (Principal Executive
John F. Welch, Jr. Officer and Director) April 19, 1996
* Senior Vice President-
- - ---------------------------- Finance (Principal
Dennis D. Dammerman Financial Officer and Director) April 19, 1996
/s/ Philip D. Ameen Vice President and Comptroller
- - ---------------------------- (Principal Accounting Officer) April 19, 1996
* Director April 19, 1996
- - ----------------------------
D. Wayne Calloway
* Director April 19, 1996
- - ----------------------------
Silas S. Cathcart
* Director April 19, 1996
- - ----------------------------
Paolo Fresco
II-5
<PAGE>
Signature Title Date
- - --------- ----- ----
* Director April 19, 1996
- - ----------------------------
Claudio X. Gonzalez
* Director April 19, 1996
- - ----------------------------
Robert E. Mercer
* Director April 19, 1996
- - ----------------------------
Gertrude G. Michelson
* Director April 19, 1996
- - ----------------------------
John D. Opie
* Director April 19, 1996
- - ----------------------------
Barbara S. Prieskel
* Director April 19, 1996
- - ----------------------------
Andrew C. Sigler
* Director April 19, 1996
- - ----------------------------
Douglas A. Warner III
* By: /s/ Philip D. Ameen
------------------------
Philip D. Ameen
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
Sequentially
Number Description of Exhibit Numbered Page
- - ------ ---------------------- -------------
2.1 Merger Agreement, dated as of August 2, 1995,
among National Broadcasting Company, Inc.,
CO Acquisition Corporation and Outlet
Communications, Inc. (Incorporated by reference
to Outlet's Current Report on Form 8-K dated
August 2, 1995).
4.1 Indenture dated as of July 8, 1993 between
Outlet and Bankers Trust Company, as Trustee.
(Incorporated by reference to Outlet's Registration
Statement on Form S-1 (File No. 33-62292)).
4.2 Form of Supplemental Indenture dated as
of ___________, 1996 among Outlet,
General Electric Company, as Guarantor,
and Bankers Trust Company, as Trustee.
5 Opinion of Robert E. Healing, Esq. regarding
the legality of the Guarantees of the 10-7/8%
Senior Notes due 2003, as amended, of Outlet.
12 Statement Regarding Computation of Ratio
of Earnings to Fixed Charges.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Robert E. Healing, Esq.
(included in Exhibit 5).
24 Power of Attorney.
25 Statement of Eligibility of Trustee
on Form T-1.
99 Form of Consent
II-7
Exhibit 5
April 19, 1996
General Electric Company
3135 Easton Turnpike
Fairfield, Connecticut 06431-0001
Re: General Electric Company -
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4, as
amended (the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), with
respect to the solicitation (the "Solicitation") by Outlet Broadcasting, Inc.
("Outlet") of consents of registered holders of Outlet's 10-7/8% Senior
Subordinated Notes due 2003 (the "Notes") to an amendment (the "Proposed
Amendment") to the indenture (the "Indenture") dated as of July 8, 1993
between Outlet and Bankers Trust Company (the "Trustee"), pursuant to which
the Notes were issued, and the preparation and execution of a supplemental
indenture (the "Supplemental Indenture") effecting the Proposed Amendment
and a guarantee (the "Guarantee") by General Electric Company ("GE") of the
Notes as amended by the Proposed Amendment (the "Amended Notes"). As
Corporate Counsel of General Electric Company, I have examined, or caused
to be examined, such corporate records, certificates and other documents and
questions of law as I deem necessary or appropriate to this opinion. In such
examination, I have assumed the genuineness of all signatures, the authenticity
of all documents submitted to me as originals, the comformity to original
documents of documents submitted to me as certified or photostatic copies and
the authenticity of the originals of such latter documents.
Based on the foregoing, I am of the opinion that:
(a) GE has been duly incorporated and is validly existing in good standing
under the laws of the State of New York; and
(b) When the Registration Statement has become effective, the Requisite
Consents (as defined in the Registration Statement) have been delivered
and the Supplemental Indenture has been duly executed by Outlet, GE
<PAGE>
and the Trustee, the Guarantee will constitute a legally binding obligation
of GE (subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights and remedies generally in effect from time to
time and to general principles of equity as they relate to enforcement and
remedies) regardless of whether enforcement is sought in a proceeding
at law or in equity.
The opinions herein are limited in all respects to the laws of the State of
New York and the federal laws of the United States, and no opinion is being
rendered herein with respect to the effect, if any, which the laws of any other
jurisdiction may have on the matters covered by this opinion. In addition, I
express no opinion with respect to the securities or blue sky laws of the State
of New York.
I hereby consent to the filing of this opinion as Exhibit 5 to said
Registration Statement and to the use of my name under the caption, "Legal
Opinion" in the Prospectus contained therein.
Very truly yours,
-------------------
Robert E. Healing
Corporate Counsel
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 19, 1996, with respect to the financial
statements and schedule of Outlet Broadcasting, Inc. included in the
Registration Statement (Form S-4 NO. 33-01947) and related Prospectus of
General Electric Company for the solicitation of consents to amendment of the
indenture governing Outlet Broadcasting, Inc.'s 10 7/8% Senior Subordinated
Notes due 2003.
ERNST & YOUNG LLP
Providence, Rhode Island
April 16, 1996
