<PAGE>
As filed with the Securities and Exchange Commission on July 2, 1998.
Registration No. 333-56327
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
GRANITE BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 4833 13-3458782
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
W. DON CORNWELL
Chief Executive Officer
GRANITE BROADCASTING CORPORATION
767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
(Name, address, including zip code, and telephone number
including area code, of agent for service)
-------------
Copies to:
Russell W. Parks, Jr., Esq.
William A. Bianco, Esq.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
-------------
Approximate date of commencement of proposed sale of securities to the public:
As soon as practicable after this Registration Statement becomes effective.
-------------
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. |_|
-------------
THE 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 THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
OFFER TO EXCHANGE
8 7/8% SENIOR SUBORDINATED NOTES DUE MAY 15, 2008 FOR UP TO $175,000,000 IN
PRINCIPAL AMOUNT OUTSTANDING 8 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE MAY
15, 2008
OF
GRANITE BROADCASTING CORPORATION
-------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON AUGUST 10, 1998, UNLESS EXTENDED
Granite Broadcasting Corporation, a Delaware corporation ("Granite" or
the "Company"), hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying letter of transmittal (the
"Letter of Transmittal," and together with this Prospectus, the "Exchange
Offer"), to exchange $1,000 principal amount of its newly issued 8 7/8% Senior
Subordinated Notes due May 15, 2008 (the "New Notes") for each $1,000
principal amount of the outstanding 8 7/8% Series A Senior Subordinated Notes
due May 15, 2008 (the "Old Notes") of the Company, of which $175,000,000
principal amount is outstanding. The New Notes will be obligations of the
Company issued pursuant to the Indenture under which the Old Notes were
issued (the "Indenture"). The form and terms of the Old Notes are the same as
the form and terms of the New Notes except that (i) the New Notes will have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (as defined herein) of which this
Prospectus is a part, and thus will not bear legends restricting their
transfer pursuant to the Securities Act, (ii) the holders of the New Notes
will not be entitled to certain rights of holders of the Old Notes under the
Registration Rights Agreement (as defined herein) which will terminate upon
the consummation of the Exchange Offer and (iii) for certain contingent
interest rate provisions. See "The Exchange Offer." The New Notes and the Old
Notes are together referred to herein as the "Notes."
Granite will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m. New York City time, on the date the
Exchange Offer expires, which will be August 10, 1998, unless the Exchange
Offer is extended (the "Expiration Date"). The exchange of New Notes for Old
Notes will be made (i) with respect to all Old Notes validly tendered and not
withdrawn on or prior to 5:00 p.m. New York City time, on July 31, 1998 (the
"Early Exchange Date"), within two business days following the Early Exchange
Date, and (ii) with respect to all Old Notes validly tendered and not
withdrawn after the Early Exchange Date and on or prior to the Expiration
Date, within two business days following the Expiration Date. Tenders of Old
Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date, unless previously accepted for exchange. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Company. See "The Exchange Offer." The
Company has agreed to pay the expenses of the Exchange Offer.
Interest on the New Notes will accrue from May 11, 1998 or from the
most recent interest payment date on the Old Notes surrendered in exchange
therefor. Interest on the New Notes is payable semi-annually on May 15 and
November 15 of each year, commencing on November 15, 1998, at a rate of 8 7/8%
per annum. The New Notes will be issued only in registered form in minimum
denominations of $1,000 and integral multiples thereof. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest accrued from May 11, 1998
to the date of issuance of the New Notes.
(Continued on next page)
--------------
See "Risk Factors" beginning on page 13 of this Prospectus for a
discussion of certain risks associated with an investment in the New Notes.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is July 7, 1998
<PAGE>
The New Notes will be redeemable, at the option of the Company, in
whole or in part, on or after May 15, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest to the date of redemption. In
addition, at any time prior to May 15, 2001, the Company may, at its option
and subject to certain requirements, redeem up to an aggregate of 35% of the
aggregate principal amount of Notes with the net proceeds from one or more
sales of Capital Stock at the redemption price set forth herein plus accrued
and unpaid interest to the redemption date, provided that after any such
redemption the aggregate principal amount of the Notes then outstanding is at
least 65% of the aggregate principal amount of the Notes issued. Subject to
certain conditions, upon the occurrence of a Change of Control, the Company
will be required to offer to purchase all of the then outstanding Notes at a
price equal to 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest to the date of purchase.
The New Notes will be general unsecured obligations of the Company and
will be subordinated in right of payment to all existing and future Senior
Debt (as defined) and will rank pari passu with the Company's outstanding
10 3/8% Notes and 9 3/8% Notes (each as defined) (collectively, the "Existing
Notes") and will rank pari passu with or senior to all future Debt of the
Company that expressly provides that it ranks pari passu with or junior to
the Notes, as the case may be. On a pro forma basis, after giving effect to
an acquisition and certain dispositions and the consummation of the offering
of the Old Notes as though such transactions had occurred on March 31, 1998,
there would have been $18.2 million of Senior Debt of the Company outstanding
and $227.1 million of Debt ranking pari passu with the Notes.
Old Notes initially purchased by qualified institutional buyers were
initially represented by a single, global Note in registered form, registered
in the name of a nominee of The Depository Trust Company ("DTC"), as
depository. The New Notes exchanged for Old Notes represented by the global
Note will be represented by one or more global New Notes in registered form,
registered in the name of the nominee of DTC. New Notes in global form will
trade in DTC's Same-Day Funds Settlement System, and secondary market trading
activity in such New Notes will therefore settle in immediately available
funds. See "Description of New Notes -- Form, Denomination and Book -- Entry
Procedures." New Notes issued to non-qualified institutional buyers in
exchange for Old Notes held by such investors will be issued only in
certificated, fully registered, definitive form.
The Old Notes were originally issued and sold on May 11, 1998 in
transactions not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Old Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the requirements of the Securities Act is available. Based
upon interpretations by the staff of the Securities and Exchange Commission
(the "Commission") set forth in no-action letters issued to unrelated third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a "Restricted Holder,"
being (i) a broker-dealer who purchases such Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an affiliate of the Company
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provisions of the Securities
Act, provided that the holder is acquiring the New Notes in the ordinary
course of its business and is not participating, does not intend to
participate and has no arrangement or understanding with any person to
participate in a distribution of the New Notes. Eligible holders wishing to
accept the Exchange Offer must represent to the Company that such conditions
have been met. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal relating the Exchange Offer states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that it will make this Prospectus
available to any broker-dealer for use in connection with any such resale for
a period from the date of this Prospectus until 180 days after the
consummation of the Exchange Offer, or such shorter period as will terminate
when all Old Notes acquired by broker-dealers for their own accounts as a
result of market-making activities or other trading activities have been
exchanged for New Notes and resold by such broker-dealers. See "The Exchange
Offer" and "Plan of Distribution."
<PAGE>
Any Old Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders
of Old Notes will continue to be subject to the existing restrictions on
transfer thereof and the Company will have no further obligation to such
holders to provide for the registration under the Securities Act of the Old
Notes.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Old Notes. If a market for the New Notes
should develop, the New Notes could trade at a discount from their principal
amount. The Company does not intend to list the New Notes on a national
securities exchange or to apply for quotation of the New Notes through the
National Association of Securities Dealers Automated Quotation System. There
can be no assurance that an active public market for the New Notes will
develop.
The Company will not receive any proceeds from this offering, and no
underwriter is being used in connection with the Exchange Offer. See "Use of
Proceeds."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
The reports and other information filed by the Company with the Commission
can be inspected and copied at 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: 7 World Trade Center, Suite 1300, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such information can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a web
site (http://www.sec.gov) that contains reports and other information
regarding the Company. The Company's Common Stock (Nonvoting), par value $.01
per share, and Cumulative Convertible Exchangeable Preferred Stock, par value
$.01 per share, are quoted on the Nasdaq National Market and such reports and
other information can be inspected and copied at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. In
addition, the Company intends to furnish registered holders of the Notes with
annual reports containing consolidated financial statements audited by
independent certified public accountants and with quarterly reports
containing unaudited financial information for each of the first three fiscal
quarters of the Company's fiscal year.
The Company has filed with the Commission a Registration Statement
(which term shall include any amendment, exhibit, schedule and supplement
thereto) on Form S-4 under the Securities Act for the registration of the New
Notes offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and such securities, reference is hereby made to the
Registration Statement, including the exhibits and schedules thereto.
Statements made in this Prospectus concerning the contents of any contract,
agreement or other document referred to herein are not necessarily complete.
With respect to each such contract, agreement or other document filed with
the Commission as an exhibit to the Registration Statement, reference is
hereby made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety
by such reference. The Registration Statement and the exhibits and schedules
thereto filed by the Company with the Commission may be inspected at the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549.
The Company has agreed that, if it is not subject to the informational
requirements of Sections 13 or 15(d) of the Exchange Act at any time while
the Notes constitute "restricted securities" within the meaning of the
Securities Act, it will furnish to holders and beneficial owners of the Notes
and to prospective purchasers designated by such holders the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
until the consummation of the Exchange Offer.
ii
<PAGE>
INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, Quarterly Reports on Form 10-Q and Form 10-Q/A for the
quarterly period ended March 31, 1998, and Current Report on Form 8-K filed
July 1, 1998, all of which have been filed by the Company with the Commission,
are incorporated by reference into this Prospectus. In addition, all
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Exchange Offer shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained herein or in any document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for the purposes of this Prospectus to the
extent that a statement contained herein or in any other 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 of this Prospectus,
except as so modified or superseded.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
WRITTEN OR ORAL REQUEST FROM ELLEN MCCLAIN HAIME, GRANITE BROADCASTING
CORPORATION, 767 THIRD AVENUE, 34TH FLOOR, NEW YORK, NEW YORK 10017, (212)
826-2530. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY JULY 31, 1998.
iii
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION.................................................. ii
INCORPORATION BY REFERENCE............................................. iii
PROSPECTUS SUMMARY..................................................... 1
RISK FACTORS........................................................... 13
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS........................ 17
USE OF PROCEEDS........................................................ 18
THE EXCHANGE OFFER..................................................... 19
CAPITALIZATION......................................................... 25
PRO FORMA CONDENSED FINANCIAL STATEMENTS............................... 26
DESCRIPTION OF NEW NOTES............................................... 33
DESCRIPTION OF CERTAIN INDEBTEDNESS.................................... 52
PLAN OF DISTRIBUTION................................................... 57
EXPERTS ............................................................... 58
LEGAL MATTERS.......................................................... 58
INDEX TO FINANCIAL STATEMENTS.......................................... F-1
</TABLE>
iv
<PAGE>
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in connection with, the more detailed information and financial
statements and notes thereto appearing elsewhere in this Prospectus. See
"Risk Factors" for a discussion of certain factors to be considered in
connection with an investment in the New Notes. Unless the context requires
otherwise, references to the "Company" or "Granite" include Granite
Broadcasting Corporation and its subsidiaries.
The Company
Granite is a group broadcasting company which operates eleven
network-affiliated television stations. The Company has pending the
acquisition of KOFY-TV, the WB affiliated station serving the San
Francisco-Oakland-San Jose, California television market ("KOFY"), for
aggregate consideration to the sellers of $173.8 million (the "KOFY
Acquisition"), and has agreed to sell WWMT-TV, the CBS affiliated station
serving the Grand Rapids-Kalamazoo-Battle Creek, Michigan television market
("WWMT") and WLAJ-TV, the ABC affiliated station serving the Lansing,
Michigan television market ("WLAJ") for $170.0 million in the aggregate. The
Company currently operates WLAJ pursuant to a time brokerage agreement and
has a contract to purchase WLAJ for $19.4 million. The net proceeds from the
sale of WWMT and WLAJ, after payment of the purchase price for WLAJ, will be
used to fund part of the purchase price of KOFY.
The acquisition of KOFY would add to the Granite station group a second
WB affiliate in a top-ten market and would increase the pro forma revenue
contribution from stations affiliated with the fast-growing WB network to
more than 20%. The Company plans to combine the resources of KOFY with those
of KNTV, its San Jose, California station, and utilize KNTV's capabilities to
launch a news franchise for KOFY. With news programming, KOFY should gain
access to the market for news-targeted television advertising in San
Francisco. Upon completion of the KOFY Acquisition and the sale of WWMT and
WLAJ, the Company will own 10 network-affiliated stations, diverse in
geographic locations and network affiliations, reaching communities
representing approximately 7.0% of the total television households in the
United States.
The Company's goal is to identify and acquire properties that
management believes have the potential for substantial long-term appreciation
and to aggressively manage such properties to improve their operating
results. Since its inception, the Company has grown significantly, primarily
as a result of a series of carefully selected acquisitions involving network
affiliated television stations in increasingly larger markets and also as a
result of the implementation of the Company's operating strategies. For the
year ended December 31, 1997 as compared to the year ended December 31, 1996,
Granite's net revenue increased by 19% to $153,512,000, its broadcast cash
flow increased by 22% to $69,783,000 and its EBITDA increased by 20% to
$62,544,000. See "Summary Consolidated Financial Data," and "Pro Forma
Condensed Financial Statements."
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1
<PAGE>
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The following table sets forth general information for each of the
Company's stations:
<TABLE>
<CAPTION>
Year Network Market Station
Station Acquired Affiliation Rank(a) Rank(a)
------- -------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
New Market:
San Francisco-Oakland-San Jose,
California.................... KOFY Pending WB 5 8
Existing Markets:
Detroit, Michigan ............... WDWB 1997 WB 9 6
Grand Rapids - Kalamazoo -
Battle Creek, Michigan......... WWMT 1995(b) CBS 37 1
Buffalo, New York................ WKBW 1995 ABC 40 1
San Jose, California(c) ......... KNTV 1990 ABC 52 4
Fresno - Visalia, California..... KSEE 1993 NBC 55 2
Austin, Texas.................... KEYE 1995 CBS 60 1
Syracuse, New York............... WTVH 1993 CBS 72 2
Fort Wayne, Indiana.............. WPTA 1989 ABC 102 1 (tie)
Lansing, Michigan................ WLAJ Pending(b)(d) ABC 105 3 (tie)
Peoria - Bloomington, Illinois... WEEK 1988 NBC 110 1
Duluth, Minnesota -
Superior, Wisconsin............ KBJR 1988 NBC 134 1 (tie)
</TABLE>
- ----------
(a) "Market rank" refers to the size of the television market or Designated
Market Area ("DMA") as defined by the A.C. Nielsen Company ("Nielsen"),
except for San Jose. KNTV, whose DMA is the Salinas-Monterey television
market, primarily serves San Jose and Santa Clara County (which are part
of the San Francisco-Oakland-San Jose DMA). If Santa Clara County were a
separate DMA, it would rank as the 52nd largest DMA in the United States.
"Station rank" represents the rank of a station in its DMA, based on
sign-on to sign-off station audience share of such station. All market
rank data is derived from the February 1998 Nielsen Station Index, which
includes ratings from the 1998 Winter Olympics. All station rank data is
derived from an average of the Nielsen Station Index for February 1998,
November 1997, May 1997 and February 1997, unless otherwise noted.
(b) The Company has agreed to sell WWMT and WLAJ. See "Recent Developments -
WWMT and WLAJ Sale Agreement."
(c) Station rank data is for the Salinas-Monterey television market and does
not reflect KNTV's audience in the adjacent market of San Jose.
(d) WLAJ is currently being operated by the Company pursuant to a time
brokerage agreement.
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2
<PAGE>
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Recent Developments
KOFY Acquisition Agreement
On October 3, 1997, the Company entered into a definitive agreement
with Pacific FM Incorporated ("Pacific"), a California corporation, James J.
Gabbert and Michael P. Lincoln to acquire 51% of the outstanding stock of
Pacific, the owner of KOFY, the WB affiliated station serving the San
Francisco-Oakland-San Jose, California television market. On June 26, 1998,
the Company entered into definitive agreements with The Michael Lincoln
Charitable Remainder Unitrust and The James J. Gabbert Charitable Remainder
Unitrust to acquire the remaining 49% of the stock of Pacific. The total
purchase price for all the stock of Pacific will be $143.8 million in cash,
subject to certain adjustments. In addition, the Company will pay $30.0
million to the principal shareholders of Pacific for a covenant not to
compete in the San Francisco-Oakland-San Jose television market for a period
of five years from the closing of the Company's acquisition. The Company has
an agreement to enter into a new network affiliation agreement with WB at the
closing of the KOFY Acquisition, for a term expiring on December 31, 2007.
The consummation of the KOFY acquisition is contingent on, among other
things, approval by the Federal Communications Commission ("FCC") and other
customary closing conditions. On June 24, 1998, Granite received an initial
order from the FCC granting the transfer of control of Pacific to Granite. In
so doing, the FCC granted a temporary waiver of the FCC's local television
multiple ownership rule permitting Granite's common ownership of both KOFY and
KNTV, the ABC station serving the San Jose, California television market,
provided that Granite files an application with the FCC to bring the Company
into compliance with this FCC rule within nine months of the acquisition of
KOFY. The acquisition of KOFY is expected to be completed early in the third
quarter of 1998.
WWMT and WLAJ Sale Agreement
On February 19, 1998, the Company and certain of the Company's
subsidiaries entered into a definitive agreement with Freedom Communications,
Inc. ("Freedom"), a California corporation, whereby Freedom will acquire the
assets of WWMT and WLAJ for a total purchase price of $170.0 million in cash,
subject to certain adjustments. Granite acquired all of the assets of WWMT in
1995 for $95.0 million and has a contract to acquire all of the assets of
WLAJ for $19.4 million. Granite currently operates WLAJ pursuant to a time
brokerage agreement. It is anticipated that the net proceeds from the sale of
WWMT and WLAJ, after payment of the purchase price for WLAJ, will be used to
fund part of the purchase price for the KOFY Acquisition.
The consummation of the sale of WWMT and WLAJ is contingent on, among
other things, approval by the FCC and satisfaction of other customary closing
conditions. The FCC has granted its consent to the assignment of WWMT from
Granite to Freedom. This order became final on June 30, 1998. Because WWMT
and WLAJ operate in overlapping service areas, Freedom must obtain a waiver
of the FCC's local television multiple ownership rules before the assignment
of WLAJ can be granted. On June 24, 1998, the FCC granted a temporary waiver
of the local television multiple ownership rule and an initial order
approving the sale of WLAJ to Freedom. See "Risk Factors -- No Assurance of
Closing KOFY Acquisition or Disposition of WWMT and WLAJ."
It is contemplated that the sale of WWMT and WLAJ will close early in
the third quarter of 1998.
First Quarter Financial Results
For the three months ended March 31, 1998 as compared to the three
months ended March 31, 1997, Granite's net revenue increased by 14% to
$36,724,000, its broadcast cash flow increased by 15% to $14,409,000 and its
after-tax cash flow increased by 193% to $2,546,000. The increase in net
revenue was primarily due to significant increases in advertising revenue
driven by Olympic spending at the Company's CBS affiliated stations,
substantial advertising revenue growth at WDWB in Detroit, Michigan,
increased political spending in an election year and strong non political
local advertising at virtually all of the Company's stations, as well as the
inclusion of one additional month of operations of WDWB.
----------
The Company's Principal Executive Offices are located at 767 Third
Avenue, 34th Floor, New York, New York 10017, telephone number (212) 826-2530.
- --------------------------------------------------------------------------------
3
<PAGE>
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Summary of Terms of the Exchange Offer
The Exchange Offer relates to the exchange of up to $175,000,000
aggregate principal amount of Old Notes for up to an equal aggregate
principal amount of New Notes. The New Notes will be obligations of the
Company issued pursuant to the Indenture. The form and terms of the New Notes
are identical in all material respects to the form and terms of the Old Notes
except (i) that the New Notes have been registered under the Securities Act,
(ii) that the New Notes are not entitled to certain registration rights which
are applicable to the Old Notes under the Registration Rights Agreement and
(iii) for certain contingent interest rate provisions. The Old Notes and the
New Notes are together referred to herein as the "Notes." See "Description of
New Notes."
<TABLE>
<CAPTION>
<S> <C>
The Exchange Offer.... $1,000 principal amount of New Notes will be issued in
exchange for each $1,000 principal amount of Old Notes
validly tendered pursuant to the Exchange Offer. The
exchange of New Notes for Old Notes will be made (i)
with respect to all Old Notes validly tendered and not
withdrawn on or prior to the Early Exchange Date,
within two business days following the Early Exchange
Date, and (ii) with respect to all Old Notes validly
tendered and not withdrawn on or prior to the
Expiration Date, within two business days following
the Expiration Date. As of the date hereof,
$175,000,000 in aggregate principal amount of Old
Notes are outstanding.
Resale............... Based on interpretations by the staff of the Commission
set forth in no-action letters issued to unrelated third
parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale and resold or otherwise
transferred by holders thereof (other than any
Restricted Holder) without compliance with the
registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders'
business and such holders are not participating, do not
intend to participate and have no arrangement or
understanding with any person to participate, in a
distribution of such New Notes. See "K-III
Communications Corporation," SEC No-Action Letter
(available May 14, 1993); "Morgan Stanley & Co.,
Incorporated," SEC No-Action Letter (available June 5,
1991); and "Exxon Capital Holdings Corporation," SEC
No-Action Letter (available May 13, 1988). Each
broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan
of Distribution."
If any person were to participate in the Exchange Offer
for the purpose of distributing securities in a manner
not permitted by the preceding paragraph, such person
could not rely on the position of the staff of the
Commission and must comply with the Prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction. Therefore each holder of
Old Notes who accepts the Exchange Offer must represent
in the Letter of Transmittal that it meets the
conditions described above. See "The Exchange
Offer--Purpose and Effects of the Exchange Offer."
Early Exchange Date... All Notes validly tendered and not withdrawn on or
prior to 5:00 p.m. New York City time, on July 31, 1998
(the "Early Exchange Date") will be exchanged for New
Notes within two business days following the Early
Exchange Date.
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4
<PAGE>
- --------------------------------------------------------------------------------
Expiration Date....... 5:00 p.m., New York City time, on August 10, 1998 unless
the Exchange Offer is extended, in which case the term
"Expiration Date" means the latest date and time to
which the Exchange Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
Accrued Interest on the
New Notes and the Old
Notes............... Interest will accrue on the New Notes from May 11,
1998 or from the most recent interest payment date on
the Old Notes surrendered in exchange therefor. Holders
of Old Notes whose Old Notes are accepted for exchange
will be deemed to have waived the right to receive any
payment in respect of interest accrued from May 11,
1998 to the date of issuance of the New Notes. See
"The Exchange Offer -- Interest on the New Notes."
Conditions to the
Exchange Offer...... The Company will not be obligated to consummate the
Exchange Offer if the New Notes to be received will
not be tradeable by the holder, other than in the
case of Restricted Holders, without restriction under
the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities
laws of substantially all of the states of the United
States. This condition may be waived by the Company.
See "The Exchange Offer -- Conditions."
No federal or state regulatory requirements must be
complied with or approvals obtained in connection with
the Exchange Offer, other than the registration
provisions of the Securities Act and any applicable
registration or qualification provisions of state
securities laws.
Procedure for Tendering
Old Notes.......... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein, and
mail or otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Old Notes (unless
such tender is being effected pursuant to the
procedures for book-entry transfer described below)
to be exchanged and any other required documentation
to the Exchange Agent (as defined herein) at the
address set forth herein and therein. See "The
Exchange Offer -- Procedure for Tendering."
Special Procedures for
Beneficial Holders.. Any beneficial holder whose Old Notes are registered in
the name of his broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender in
the Exchange Offer should contact such registered
holder promptly and instruct such registered holder to
tender on his behalf. If such beneficial holder wishes
to tender on his own behalf, such beneficial holder
must, prior to completing and executing the Letter of
Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly
completed bond power from the registered holder. The
transfer of record ownership may take considerable
time. See "The Exchange Offer -- Procedure for Tendering."
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5
<PAGE>
- --------------------------------------------------------------------------------
Guaranteed Delivery
Procedures ........... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately available
or who cannot deliver their Old Notes (or who cannot
complete the procedures for book-entry transfer on a
timely basis) and a properly completed Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to
the Early Exchange Date or Expiration Date, as the case
may be, may tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights..... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date, unless previously accepted for
exchange. See "The Exchange Offer -- Withdrawal of
Tenders."
Acceptance of Old
Notes Delivery of
New Notes ......... Subject to certain conditions (as summarized above in
"Conditions to the Exchange Offer" and described more
fully in "The Exchange Offer -- Conditions"), the
Company will accept for exchange any and all Old Notes
which are validly tendered in the Exchange Offer prior
to 5:00 p.m., New York City time, on each of the Early
Exchange Date or the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be delivered
promptly following each of the Early Exchange Date or
the Expiration Date. See "The Exchange Offer -- Terms
of the Exchange Offer."
Consequence of Failure
to Exchange....... Holders of Old Notes who do not exchange their Old
Notes for New Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer
of such Old Notes as set forth on the legend thereon.
In addition, if the Exchange Offer is consummated, the
Company does not intend to file further registration
statements for the sale or other disposition of the
Notes. See "Risk Factors -- No Public Market for the
Notes" and -- Consequences of the Exchange Offer on
Non-Tendering Holders of Old Notes."
Registration Rights
Agreement; Effect on
Holders............. The Old Notes were sold by the Company on May 11, 1998
to Goldman, Sachs & Co., Bear Stearns & Co. Inc. and
Salomon Brothers Inc, as the initial purchasers (the
"Initial Purchasers") pursuant to a Purchase Agreement
dated May 6, 1998 between the Company and the Initial
Purchasers (the "Purchase Agreement"). The Initial
Purchasers subsequently sold the Old Notes to qualified
institutional buyers and non-U.S. persons in reliance
on Rule 144A and Regulation S, respectively, under the
Securities Act. Pursuant to the Purchase Agreement, the
Company and the Initial Purchasers entered into an
Exchange and Registration Rights Agreement dated as
of May 11, 1998 (the "Registration Rights Agreement")
which grants the holders of the Old Notes certain
exchange and registration rights. The Exchange Offer
is being made to satisfy this contractual obligation of
the Company. The holders of New Notes are not entitled
to any exchange or registration rights with respect to
the New Notes. See "The Exchange Offer -- Purpose and
Effects of the Exchange Offer."
6
<PAGE>
Certain Tax
Considerations...... Akin, Gump, Strauss, Hauer & Feld, L.L.P. has opined
that the exchange pursuant to the Exchange Offer should
not be a taxable event for federal income tax purposes.
See "Certain U.S. Federal Income Tax Consequences."
Exchange Agent....... The Bank of New York, the Trustee under the Indenture,
is serving as exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. The address of the
Exchange Agent is: The Bank of New York, 101 Barclay
Street - 7E, New York, New York 10286,
Attention: Enrique Lopez, Reorganization Section.
For information with respect to the Exchange Offer,
call (212) 815-6333.
Use of Proceeds...... The Company will not receive any proceeds from the
exchange of the New Notes for the Old Notes pursuant
to the Exchange Offer. The net proceeds from the sale
of Old Notes of approximately $169,000,000 (after
deducting underwriting discounts and expenses of the
offering) were used to repay all outstanding term
loan and revolving credit borrowings under the Credit
Agreement, to retire certain other outstanding
indebtedness and for additions to working capital.
See "Use of Proceeds."
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7
<PAGE>
- --------------------------------------------------------------------------------
Summary Description of the New Notes
Securities Offered.... $175,000,000 principal amount of 8 7/8% Senior
Subordinated Notes due May 15, 2008 (the "New Notes").
Maturity Date......... May 15, 2008.
Interest Payment
Dates................ May 15 and November 15, commencing November 15, 1998,
and accruing from May 11, 1998.
Optional Redemption... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after
May 15, 2003, at the redemption prices set forth herein,
plus accrued and unpaid interest to the date of
redemption. In addition, prior to May 15, 2001, the
Company may, at its option, use the net proceeds of one
or more sales of Capital Stock to redeem up to 35% of
the aggregate principal amount of the Notes, at 108.875%
of their principal amount, plus accrued and unpaid
interest to the date of redemption; provided that after
any such redemption, the aggregate principal amount of
the Notes outstanding must equal at least 65% of the
aggregate principal amount of Notes issued and that such
redemption occurs within 90 days following the closing
of such sale of Capital Stock.
Change of Control..... In the event of a Change of Control, the Company will,
subject to certain conditions, be required to offer to
purchase all outstanding Notes at a purchase price
equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
There can be no assurance that the Company will have
sufficient funds to purchase all the Notes in the
event of a Change of Control or that the Company would
be able to obtain financing for such purpose on
favorable terms, if at all.
Mandatory Sinking
Fund................. None.
Ranking................ The New Notes will be general unsecured obligations
of the Company and will be subordinated in right of
payment to all existing and future Senior Debt of the
Company. In addition, the Notes will be effectively
subordinated to all existing and future Debt of the
Company's subsidiaries. The Notes will rank pari passu
with the Company's existing 10 3/8% Senior Subordinated
Notes due May 15, 2005 (the "10 3/8% Notes") and 9 3/8%
Senior Subordinated Notes due December 1, 2005 (the
"9 3/8% Notes" and, collectively with the 10 3/8% Notes,
the "Existing Notes") and will rank pari passu with or
senior to any class or series of Debt that expressly
provides that it ranks pari passu with or junior to the
Notes, as the case may be. See "Description of
Notes-Subordination." On a pro forma basis, after
giving effect to the acquisition, certain dispositions
and the consummation of the offering of the Old Notes,
at March 31, 1998, the Company had $18.2 million of
Senior Debt of outstanding and $227.1 million of Debt
ranking pari passu with the Notes. See "Description
of New Notes -- Subordination."
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8
<PAGE>
- --------------------------------------------------------------------------------
Form of New Notes..... New Notes will be represented by one or more Notes in
registered, global form without interest coupons, and
deposited with DTC or a custodian for DTC and
registered in the name of a nominee of DTC, as
depository. The Old Notes, to the extent directed by
holders thereof in their Letters of Transmittal, will
be exchanged through book-entry electronic transfer
for one or more New Notes in registered, global form
without interest coupons representing the New Notes
(collectively, the "New Global Notes") registered in
the name of DTC or its nominee. See "Description of
New Notes -- Form, Denomination and Book-Entry
Procedures."
Certain Covenants..... The Indenture will contain certain covenants that,
among other things, limit the ability of the Company
and its subsidiaries to incur additional Debt, pay
dividends or make certain other restricted payments,
enter into certain transactions with affiliates, or
merge or consolidate with or sell all or substantially
all of their assets to any other person. See
"Description of New Notes."
</TABLE>
Risk Factors
Holders of Old Notes should take into account the specific
considerations set forth under "Risk Factors" as well as the other
information set forth in this Prospectus before tendering Old Notes in
exchange for New Notes.
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9
<PAGE>
- --------------------------------------------------------------------------------
Summary Consolidated Financial Data
The summary historical financial information presented below should be
read in conjunction with the Consolidated Financial Statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference herein. The acquisitions by
the Company of its operating properties during the periods for which the
summary data is presented below materially affect the comparability of such
data from one period to another. The historical Statement of Operations Data
and Selected Balance Sheet Data for the years ended December 31, 1993 through
1997 presented below is derived from audited financial statements. The
historical Statement of Operations Data for the three months ended March 31,
1998 and March 31, 1997 and the historical Selected Balance Sheet Data as of
March 31, 1998 has not been audited, but in the opinion of management,
includes all adjustments necessary for a fair presentation of the information
shown. The summary pro forma financial data presented below is unaudited and
should be read in conjunction with the Pro Forma Condensed Consolidated
Financial Statements and notes thereto contained elsewhere herein.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------- 1997
Pro
1993 1994 1995 1996 1997 Forma(a)
----------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenue ................. $ 37,499 $ 62,856 $ 99,895 $ 129,164 $ 153,512 $ 151,503
Station operating expenses .. 22,790 37,764 55,399 72,089 83,729 87,139
Time brokerage agreement
fees ...................... -- -- -- 150 600 --
Depreciation ................ 2,398 3,420 4,514 6,144 5,718 4,726
Amortization ................ 3,359 3,873 7,592 9,737 13,824 25,102
Corporate expense ........... 1,375 2,162 3,132 4,800 6,639 6,639
Non-cash compensation ....... 123 282 363 496 986 986
--------- --------- --------- --------- --------- ---------
Operating income ............ 7,454 15,355 28,895 35,748 42,016 26,911
Other expenses (income) ..... 479 309 798 1,034 1,167 (185)
Equity in net loss (income)
of investee ............... -- -- (439) 995 1,531 1,531
Interest expense, net ....... 10,977 10,707 27,026 36,765 38,986 39,862
Non-cash interest expense ... 505 842 1,738 2,087 2,182 2,002
--------- --------- --------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary ... (4,507) 3,497 (228) (5,133) (1,850) (16,299)
item
(Provision) benefit for
income tax ................ 472 (450) (555) (761) (1,616) (346)
--------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item ........ (4,035) 3,047 (783) (5,894) (3,466) $ (16,645)
=========
Extraordinary loss on
extinguishment of debt .... (1,007) -- -- (2,891) (5,569)
--------- --------- --------- --------- ---------
Net income (loss) ........... $ (5,042) $ 3,047 $ (783) $ (8,785) $ (9,035)
========= ========= ========= ========= =========
Net loss attributable to
common shareholders ....... $ (5,278) $ (688) $ (4,368) $ (12,310) $ (31,207)
========= ========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
Pro Forma
1997 1998 1998(a)
--------------------------------------
(unaudited)
<S> <C> <C> <C>
Statement of Operations Data:
Net revenue ................. $ 32,298 $ 36,724 $ 35,302
Station operating expenses .. 19,797 22,315 22,608
Time brokerage agreement
fees ........................ 150 150 --
Depreciation ................ 1,375 1,365 1,231
Amortization ................ 3,171 3,584 6,312
Corporate expense ........... 1,474 2,017 2,017
Non-cash compensation ....... 192 332 333
--------- --------- ---------
Operating income ............ 6,139 6,961 2,801
Other expenses (income) ..... 192 241 216
Equity in net loss (income)
of investee ............... 400 487 487
Interest expense, net ....... 9,778 9,209 9,685
Non-cash interest expense ... 576 475 430
--------- --------- ---------
Income (loss) before income
taxes and
extraordinary item ........ (4,807) (3,451) (8,017)
(Provision) benefit for
income tax ................ (150) (496) (155)
--------- --------- ---------
Income (loss) before
extraordinary item ........ (4,957) (3,947) $ (8,172)
=========
Extraordinary loss on
extinguishment of debt .... (321) --
--------- ---------
Net income (loss) ........... $ (5,278) $ (3,947)
========= =========
Net loss attributable to
common shareholders ....... $ (9,474) $ (10,060)
========= =========
</TABLE>
<TABLE>
<CAPTION>
March 31,
December 31, 1998
---------------------------------------------------------- March 31, ------------
1993 1994 1995 1996 1997 1998 Pro Forma(a)
--------- --------- --------- --------- --------- --------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Total assets .................... $ 191,517 $ 189,881 $ 452,221 $ 452,563 $ 633,614 $ 624,442 $ 779,725
Total debt ...................... 99,000 99,250 341,000 351,561 392,779 385,790 419,461
Cumulative exchangeable
preferred stock ............... -- -- -- -- 162,537 167,858 167,858
Convertible preferred stock ..... 49,139 49,171 45,488 45,488 45,163 41,563 41,563
Stockholders' equity (deficit) .. 12,075 11,729 8,868 (3,135) (33,257) (39,257) 14,949
</TABLE>
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10
<PAGE>
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<TABLE>
<CAPTION>
Twelve Months
Years Ended December 31, Ended
---------------------------------------------------- 1997 March 31,
Pro 1998
1993 1994 1995 1996 1997 Forma(a) Pro Forma(a)
--------- --------- --------- --------- -------- ---------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Broadcast cash flow(b)(d) ... $14,709 $25,092 $44,496 $57,075 $69,783 $64,364 $66,388
Broadcast cash flow margin .. 39.2% 39.9% 44.5% 44.2% 45.5% 42.5% 43.0%
EBITDA(c) (d) ............... $13,334 $22,930 $41,364 $52,125 $62,544 $57,725 $59,206
EBITDA margin ............... 35.6% 36.5% 41.4% 40.4% 40.7% 38.1% 38.4%
After-tax cash flow(e) ...... $ 2,809 $11,651 $13,275 $13,951 $22,075 $17,702 $18,571
Cash flows provided by (used
in) operating activities .. $ 3,611 $ 5,808 $ 8,806 $13,291 $10,345
Capital expenditures ........ $ 1,089 $ 2,628 $ 7,682 $ 6,938 $ 5,875 $ 5,875 $ 5,865
Ratio of earnings to fixed
charges(f) ................ -- 1.30x -- -- -- -- --
Ratio of long-term debt
to EBITDA ................. 6.28x 7.27x 7.08x
Ratio of EBITDA to total cash
interest expense .......... 1.60x 1.45x 1.52x
</TABLE>
- ----------
(a) Gives effect to the sale of the Old Notes and application of the
proceeds therefrom, the KOFY Acquisition and the related borrowings
under the Credit Agreement, the disposition of WWMT and WLAJ and the
refinancing of certain debentures with borrowings under the Credit
Agreement, as if all such transactions occurred on January 1, 1997 in
the case of statement of operations data and on March 31, 1998 in the
case of selected balance sheet data. 1997 pro forma statement of
operations data also gives effect to the acquisition of WDWB, which was
acquired as of January 31, 1997, as if such acquisition occurred as of
January 1, 1997. See "Use of Proceeds" and "Pro Forma Condensed
Financial Statements."
(b) "Broadcast cash flow" means operating income plus time brokerage
agreement fees, depreciation and amortization, corporate expense and
non-cash compensation. The Company has included broadcast cash flow
data because such data are commonly used as a measure of performance
for broadcast companies and are also used by investors to measure a
company's ability to service debt. Broadcast cash flow is not, and
should not be used as, an indicator or alternative to operating income,
net income or cash flow as reflected in the Consolidated Financial
Statements, is not a measure of financial performance under generally
accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(c) "EBITDA" means operating income plus depreciation and amortization and
non-cash compensation expense. Operating income is reduced for the
years ended December 31, 1996 and 1997 on a historical basis by the
time brokerage agreement fees associated with the Company's operation
of station WLAJ. Such fees will terminate upon the Company's planned
disposition of WLAJ in the second quarter of 1998. The Company has
included EBITDA data because such data are used by investors to measure
a company's ability to service debt. EBITDA does not purport to
represent cash provided by operating activities as reflected in the
Consolidated Financial Statements, is not a measure of financial
performance under generally accepted accounting principles and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(d) The pro forma financial results exclude the effects of estimated cost
savings resulting from the KOFY Acquisition. The Company expects to
realize approximately $1,100 of annualized net cost savings resulting
from the elimination of duplicative staffing and redundant operating
expenses and new rates associated with revised vendor contracts. On a
pro forma basis, assuming the acquisition and the related cost savings
had been realized on the first day of the periods presented, broadcast
cash flow and EBITDA would have been $65,464 and $58,825, respectively,
for the year ended December 31, 1997 and $67,488 and $60,306,
respectively, for the latest twelve months ended March 31, 1998. There
can be no assurances that the cost savings described above will be
achieved or as to the timing of any realization of benefit.
(e) After-tax cash flow is income (loss) before extraordinary item plus
depreciation, amortization, non-cash compensation, non-cash interest
expense, the non-cash portion of the (provision) benefit for income
taxes and the equity in net loss of investee. After-tax cash flow is
not a measure of financial performance under
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
generally accepted accounting principles and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
(f) For purposes of computing the ratio of earnings to fixed charges,
"fixed charges" consists of gross interest expense, amortization of
deferred financing charges and the interest component of rent expense,
and "earnings" consists of income before income taxes and fixed
charges. Earnings were insufficient to cover fixed charges for the
years ended December 31, 1993, 1995, 1996 and 1997 by $4,507, $228,
$5,133 and $1,850, respectively. Earnings were insufficient to cover
fixed charges for the three month periods ended March 31, 1998 and 1997
by $4,807 and $3,451, respectively. Pro forma earnings would have been
insufficient to cover fixed charges by $16,299 for the year ended
December 31, 1997 and by $8,017 for the three months ended March 31,
1998.
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12
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before making an investment in the New Notes. This Prospectus
contains forward-looking statements which involve risks and uncertainties.
The Company's actual results may differ significantly from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth in the following risk factors and elsewhere in this
Prospectus. See "Disclosure Regarding Forward-Looking Statements."
High Leverage; Limitations on Financial Flexibility; Effect of Non-compliance
with Restrictive Covenants
The Company has incurred significant indebtedness in connection with
the acquisition of its television stations and anticipates incurring
additional indebtedness in connection with future acquisitions, including the
KOFY Acquisition. At March 31, 1998, the Company's long-term indebtedness was
approximately $385,800,000 and its combined long-term indebtedness and
liquidation and redemption obligations on its Cumulative Exchangeable
Preferred Stock was approximately $553,600,000. At that date, after giving
effect to the offering of the Old Notes, the Company would have had
approximately $14.0 million in cash on hand and the ability to borrow only an
additional $2.0 million under the then existing Credit Agreement in compliance
with the financial covenants thereunder. The Company has entered into a
new Credit Agreement that, among other things, increases the amount of
the Company's permitted indebtedness to 7.25 times its EBITDA (as defined
therein) for the most recent four fiscal quarters. As of March 31, 1998, on a
pro forma basis, after giving effect to the sale of the Old Notes and
application of the proceeds therefrom, the KOFY Acquisition and the related
borrowings under the Credit Agreement, the disposition of WWMT and WLAJ and
the refinancing of certain debentures with borrowings under the Credit
Agreement, the Company's long term indebtedness would have increased to
approximately $419,500,000, which would represent a ratio of total
indebtedness to EBITDA, as defined in the new Credit
Agreement, of 7.12. Also on such pro forma basis, the Company's combined
long-term indebtedness and liquidation and redemption obligations on its
Cumulative Exchangeable Preferred Stock would have increased to approximately
$587,300,000 as of March 31, 1998, and broadcast cash flow for the twelve
months ended March 31, 1998 would have decreased to approximately
$66,388,000. The Company's ratio of EBITDA to total cash interest expense for
the twelve months ended March 31, 1998 would have been 1.52 on such pro forma
basis. The Indenture governing the Company's 9 3/8% Notes (the "9 3/8% Note
Indenture"), the Indenture governing the Company's 10 3/8% Notes (the "10 3/8%
Note Indenture," collectively with the 9 3/8% Note Indenture, the "Existing
Indentures"), and the Credit Agreement contain various financial and
operating covenants that, among other things, require the maintenance of
certain financial ratios and restrict the Company's ability to borrow funds
and to utilize funds for various purposes, including acquisitions and
investments in certain subsidiaries. These restrictions, in combination with
the leveraged nature of the Company, could limit the ability of the Company
to respond to market conditions or meet extraordinary capital needs, or could
adversely affect the Company's ability to finance its future operations or
capital needs, or engage in other business activities which could be in the
interest of the Company.
A substantial portion of the Company's cash flow from operations is
required for debt service. The Company's ability to service its debt,
including the Notes, Existing Notes and borrowings under the Credit Agreement
will depend upon the Company's future operating performance, which is subject
to financial, political, business, regulatory and other factors, many of
which are beyond the Company's control. Since borrowings under the Credit
Agreement bear interest at rates that will fluctuate with certain prevailing
interest rates, increases in such prevailing interest rates likely will
increase the Company's interest payment obligations with respect to
borrowings thereunder and could have an adverse effect on the Company. In
addition, the Company has significant preferred stock dividend requirements,
including cash dividends on its Cumulative Exchangeable Preferred Stock
commencing in 2002.
Additionally, if the Company were to sustain a decline in its operating
results, it could experience difficulty in complying with the covenants that
are contained in the Credit Agreement and any other agreements governing
future indebtedness of the Company. The failure to comply with such covenants
could result in an event of default under these agreements, thereby
permitting acceleration of indebtedness incurred pursuant thereto, as well as
indebtedness under other instruments that contain cross-acceleration or
cross-default provisions, including the Existing Notes and the Notes.
13
<PAGE>
Subordination of Notes; Pledge of Assets to Secure Senior Indebtedness
The Notes are subordinated in right of payment to all existing and future
Senior Debt, including the principal of (and premium, if any) and interest on
and all other amounts due on or payable in connection with Senior Debt,
including borrowings under the Credit Agreement. On a pro forma basis as of
March 31, 1998, after giving effect to the sale of the Old Notes and
application of the proceeds therefrom, the KOFY Acquisition and the related
borrowings under the Credit Agreement, the disposition of WWMT and WLAJ and
the refinancing of certain debentures with borrowings under the Credit
Agreement, there would have been approximately $18,200,000 of Senior Debt
outstanding. The Company has entered into a new Credit Agreement that,
subject to compliance with certain conditions, permits $260,000,000 of
revolving credit borrowings and borrowings of up to an additional
$240,000,000 on an uncommitted basis. The Indenture does not limit the amount
of Senior Debt that the Company may incur provided that the incurrence of
Debt is then permitted under the Indenture. See "Description of Certain
Indebtedness - Credit Agreement." By reason of the subordination of the
Notes, in the event of the insolvency, liquidation, reorganization,
dissolution or other winding-up of the Company or upon a default in payment
with respect to, or the acceleration of, or if a judicial proceeding is
pending with respect to any default under, any Senior Debt, the lenders under
the Credit Agreement and any other creditors who are holders of Senior Debt
must be paid in full before the holders of the Notes may be paid. The
Indenture also does not limit the amount of debt ranking pari passu with the
Notes that the Company may incur provided that the incurrence of debt is then
permitted under the Indenture. The Notes rank pari passu in right of payment
with the Existing Notes. If the Company incurs any additional pari passu
debt, the holders of such debt, along with the holders of the Existing Notes,
would be entitled to share ratably with the holders of the Notes in any
proceeds distributed in connection with any insolvency, liquidation,
reorganization, dissolution or other winding-up of the Company. This may have
the effect of reducing the amount of proceeds paid to the holders of the
Notes. In addition, no payments may be made with respect to the principal of
(premium, if any) or interest on the Notes if a payment default exists with
respect to Senior Debt and, under certain circumstances, no payments may be
made with respect to the principal of (premium, if any) or interest on the
Notes for a period of up to 179 days if a non-payment default exists with
respect to Senior Debt. In addition, the Indenture permits subsidiaries of
the Company to incur debt provided certain conditions are met. Any debt
incurred by a subsidiary of the Company will be structurally senior to the
Notes. See "Description of New Notes."
The Company has granted to the lenders under the Credit Agreement
security interests in substantially all of the present and future assets of
the Company, as well as a pledge of all of the issued and outstanding shares
of capital stock of the Company's current and future subsidiaries. In the
event of a default on secured indebtedness (whether as a result of the
failure to comply with a payment or other covenant, a cross-default or
otherwise), the parties granted such security interests will have a prior
secured claim on the assets of the Company and its subsidiaries. If such
parties should attempt to foreclose on their collateral, the Company's
financial condition and the value of the Notes will be materially adversely
affected. In the event of certain Asset Dispositions (as defined in the
Indenture), the Indenture provides that net proceeds thereof not reinvested
as provided in the Indenture must be applied first to the repayment of Senior
Debt, then to an offer to repurchase the 10 3/8% Notes and then to an offer to
repurchase the 9 3/8% Notes, prior to the making of any offer to repurchase
the Notes. As a result thereof, in the event of one or more such Asset
Dispositions, there may be insufficient proceeds to repurchase the Notes.
Dependence on Subsidiaries
Nine of the Company's ten television stations are currently owned by
wholly-owned subsidiaries of the Company. The FCC has granted its initial
consent to assign the license of the Company's tenth station to a
wholly-owned subsidiary. This order will become final on July 20, 1998.
Future acquisitions will likely be made through present or future
subsidiaries. The Company's cash flow and consequent ability to service its
debt, including the Notes, will be dependent upon the earnings of its
subsidiaries and the distribution of those earnings to the Company, or upon
loans or other payments of funds by those subsidiaries to the Company. The
Company's subsidiaries have no obligation, contingent or otherwise, to make
any funds available to the Company. The Credit Agreement, the Existing
Indentures and the Indenture impose certain limitations on the ability of
subsidiaries of the Company to enter into agreements restricting their
ability to declare dividends or make distributions or advances to the
Company. The claims of holders of the Notes, upon any distribution of assets
of any subsidiary of the Company in the event of the liquidation or
reorganization of such subsidiary, will be subordinate to the prior claims of
present and future creditors of that subsidiary, including holders of
indebtedness and trade creditors thereof.
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Absence of Net Income; Limitations on Future Utilization of Net Operating Losses
for Tax Purposes
The Company reported net losses of $5,042,000, $783,000, $8,785,000 and
$9,035,000 for the years ended December 31, 1993, 1995, 1996 and 1997,
respectively, and $3,947,000 for the three months ended March 31, 1998. The
losses were primarily caused by the substantial interest expense on debt
incurred by the Company to finance the acquisitions of its television
broadcasting stations (and extraordinary losses of $1,007,000, $2,891,000 and
$5,569,000 incurred in 1993, 1996 and 1997, respectively, on extinguishment
of debt) and depreciation and amortization charges. There can be no
assurances that the Company will not report net losses in the future. The
future utilization of a portion of the Company's net operating losses for
federal income tax purposes is subject to an annual limitation. In addition,
the Company expects to record a gain for tax purposes of approximately $70
million in connection with the sale of WWMT and WLAJ, which will utilize
substantially all of the Company's net operating loss carryforwards.
Dependence On Key Personnel
W. Don Cornwell, the Chief Executive Officer and Chairman of the Board
of Directors of the Company, and Stuart J. Beck, the President and Secretary
of the Company, have each entered into employment agreements with the
Company. Each agreement provides for a two-year employment term and will be
automatically renewed for a subsequent two year term except upon advance
notice of non-renewal by either party. The current terms under the agreements
expire on September 19, 1999. The agreements provide that Mr. Cornwell and
Mr. Beck will not engage in any business activities during the term of such
agreements outside the scope of their employment with the Company unless
approved by a majority of the Company's independent directors. The loss of
the services of certain key personnel currently employed by the Company could
have an adverse impact on the Company. There can be no assurance that the
services of such personnel will continue to be made available to the Company.
The Company does not maintain key man life insurance on any of its employees.
Dependence on Continued Network Affiliation
Each of the Company's stations other than WDWB is affiliated with a
network pursuant to an affiliation agreement. KSEE, WEEK and KBJR are
affiliated with NBC; KNTV, WPTA, WKBW and WLAJ are affiliated with ABC; and
KEYE, WTVH and WWMT are affiliated with CBS. The network affiliation
agreements provide for contract terms of ten years (other than the NBC
agreements for which the terms are seven years and the KEYE agreement with
CBS for which the term is five years), the earliest expiration of which is
February 2000. WDWB has an affiliation arrangement with WB, which is
terminable by either party at will. The WB network has proposed a long-term
affiliation agreement for WDWB which the Company is currently considering. In
connection with the KOFY Acquisition, the Company has an agreement to enter
into a new network affiliation agreement with WB at the closing of the KOFY
Acquisition for a term expiring on December 31, 2007. Under each of the
Company's affiliation agreements, the networks may increase or decrease
network compensation and, under certain circumstances, terminate the
agreement upon advance written notice. Under the Company's ownership, none of
its stations has received a termination notice from its respective network.
The non-renewal or termination of one or more of the network affiliation
agreements could have a material adverse effect on the Company's results of
operations. No assurance can be given that the Company's network affiliation
agreements will be renewed or that such agreements will not be terminated.
No Assurance of Closing KOFY Acquisition or Disposition of WWMT and WLAJ
The Company has entered into definitive agreements to acquire KOFY and
to sell WWMT and WLAJ. Consummation of each of the KOFY Acquisition and the
sale of WWMT and WLAJ is contingent on, among other things, FCC approval and
satisfaction of certain other conditions. The Company has received initial
FCC approval for the sale of WWMT and this order became final on June
30, 1998. Because Granite already owns a television station with an
overlapping service area, KNTV, the Company has requested a permanent waiver
of the FCC's local television multiple ownership rule to permit Granite to
own both KNTV and KOFY. A petition to deny or defer was filed against
Granite's application to acquire KOFY by a competing San Francisco television
station operator. Nonetheless, on June 24, 1998, Granite received an initial
order from the FCC granting the transfer of control of Pacific to Granite. In
so doing, the FCC also granted a temporary waiver of its local television
multiple ownership rule to permit Granite's common ownership of both KOFY and
KNTV, provided that Granite files an application
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with the FCC to bring the Company into compliance with this FCC rule within
nine months of the acquisition of KOFY. In addition, because the signals of
WWMT and WLAJ overlap, the purchaser will be required to obtain a waiver of
the FCC's local television multiple ownership rules. The FCC granted a
temporary waiver of the local television multiple ownership rule and an
initial order approving the sale of WLAJ to Freedom on June 24, 1998.
No assurance can be given that the waiver requests described above will
not be challenged by a third party or that the other conditions to the
consummation of the KOFY Acquisition or the disposition of WWMT and WLAJ will
be fulfilled. The sale of WWMT and WLAJ is not a condition to the Company's
obligation to complete the KOFY acquisition. However, because the Company
expects to apply the net proceeds of the disposition of WWMT and WLAJ to fund
a portion of the purchase price for the KOFY Acquisition, there can be no
assurance that the Company will have funds necessary to consummate the KOFY
Acquisition unless it also consummates the disposition of WWMT and WLAJ. In
the event the Company consummates the sale of WWMT and WLAJ but fails to
consummate the KOFY Acquisition or otherwise reinvest the net proceeds of the
sale as permitted by the Indenture, the Company may be required to apply the
net proceeds to make offers to purchase the Existing Notes and to repay any
amounts outstanding under the Credit Agreement prior to making any offer to
purchase the Old Notes. See "Description of New Notes -- Limitation on
Certain Asset Dispositions."
Risk of Change in Government Regulation; Necessity of FCC Licenses
The Company's operations are subject to significant regulation by the
FCC under the Communications Act of 1934, as amended (the "Communications
Act"). The Communications Act prohibits the operation of television
broadcasting stations except pursuant to a license issued by the FCC and
empowers the FCC, among other things, to issue, renew, revoke and modify
broadcasting licenses, adopt regulations to carry out the provisions of the
Communications Act and impose penalties for violation of such regulations.
The Telecommunications Act of 1996, which amends major provisions of the
Communications Act, was enacted on February 8, 1996. The FCC has commenced,
but not yet completed, implementation of the provisions of the
Telecommunications Act of 1996. The FCC is considering and in the future the
U.S. Congress and the FCC may adopt, new laws, regulations and policies
regarding a wide variety of matters which could, directly or indirectly,
materially affect the operation and ownership of the Company's broadcast
properties.
Competition, Changes in the Broadcast Industry and General Economic Conditions
Technological innovation, and the resulting proliferation of
programming alternatives, have fractionalized television viewing audiences
and subjected traditional television broadcast stations to new types of
competition. These changes have had and will continue to have an effect on
the broadcasting industry in general. In addition, the television industry is
affected by prevailing economic conditions. Since the Company relies on sales
of advertising time at its stations for substantially all of its revenues,
the Company's operating results are and will be sensitive to general economic
conditions and regional conditions in each of the local markets in which the
stations operate. The Company cannot predict the future direction of such
conditions.
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Risk of Inability to Finance Change of Control Offer
W. Don Cornwell and Stuart J. Beck, through their ownership of all of
the outstanding shares of the Company's Class A Common Stock, par value $.01
per share (the "Voting Common Stock"), possess 55% and 45%, respectively, of
the voting power in the Company. As long as Messrs. Cornwell and Beck hold
all of the outstanding shares of Voting Common Stock, they will be able to
elect all of the Company's directors and, under most circumstances, amend the
Company's Certificate of Incorporation and effect a merger, sale of assets or
other fundamental corporate transaction without the approval of the other
stockholders of the Company and will be able to defeat any unsolicited
attempt to acquire control of the Company.
In the event of a Change of Control, the Company will be required to
offer to purchase all outstanding Notes at a purchase price equal to 101% of
the principal amount thereof, plus accrued interest to the date of purchase.
The Company will also be required, upon the occurrence of the Change of
Control, to offer to purchase all of the 9 3/8% Notes and the 10 3/8% Notes at
101% of the principal amount thereof, of which $227,134,000 principal amount,
in the aggregate, is expected to be outstanding upon consummation of the
offering. A Change of Control is an event of default under the Credit
Agreement. If a Change of Control were to occur, there can be no assurance
that the Company would have sufficient funds to repay all borrowings under
the Credit Agreement and pay the Change of Control purchase price for all
9 3/8% Notes and 10 3/8% Notes.
No Public Market for the Notes
There has previously been only a limited secondary market and no public
market for the Old Notes, and there can be no assurance as to the liquidity
of any market that may develop for the New Notes, the ability of the holders
of the New Notes to sell their New Notes or the prices at which the holders
of the New Notes would be able to sell their New Notes. In addition, because
the Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered for exchange, the number of New Notes tendered could be quite
small, which could have an adverse effect on the liquidity of the New Notes.
Also, to the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. Therefore, no assurance can be given as to the liquidity of the
trading market for the Notes. The Company does not intend to list the New
Notes on a national securities exchange or to apply for quotation of the New
Notes through the National Associate of Securities Dealers Automated
Quotation System.
Consequences of the Exchange Offer on Non-Tendering Holders of the Old Notes
The Company intends for the Exchange Offer to satisfy its registration
obligations under the Registration Rights Agreement. If the Exchange Offer is
consummated, the Company does not intend to file further registration
statements for the sale or other disposition of Old Notes. Old Notes that are
not exchanged for New Notes will remain restricted securities within the
meaning of Rule 144 of the Securities Act. Consequently, following completion
of the Exchange Offer, holders of Old Notes seeking liquidity in their
investment would have to rely on an exemption to the registration
requirements under applicable securities laws, including the Securities Act,
with respect to any sale or other disposition of the Old Notes.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking" statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act which involve risks and uncertainties, including statements regarding the
Company's expectations, hopes, beliefs, intentions or strategies regarding
the future. All statements other than statements of historical facts included
in this Prospectus, including, without limitation, statements under
"Prospectus Summary," "Risk Factors," "Selected Consolidated Financial Data"
and "Pro Forma Condensed Financial Statements" and elsewhere herein,
regarding planned acquisitions and dispositions, implementing strategies to
capitalize on such acquisitions, anticipated benefits of such acquisitions,
acquisition opportunities and the Company's financial position, business
strategy and other plans and objectives for future operations, may be
considered forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
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USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
In consideration for issuing the New Notes offered hereby, the Company will
receive, in exchange, Old Notes in like principal amount, which will be
canceled and as such will not result in any increase in indebtedness of the
Company.
The net proceeds of the Old Notes, $169,000,000 (after deducting the
underwriting discounts and estimated expenses of the offering), were used to
repay all outstanding borrowings under the Credit Agreement (aggregating
$136,000,000 at March 31, 1998), to retire certain other outstanding
indebtedness and for additions to working capital.
As of May 10, 1998, the day prior to the repayment date, borrowings
under the Credit Agreement bore interest at a weighted average rate of 8.06%
per annum. The Company has since entered into a new Credit Agreement to
permit the Company to maintain a higher ratio of debt to consolidated cash
flow, to extend the final maturity of the Credit Agreement. See "Description
of Certain Debt Instruments --Credit Agreement."
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THE EXCHANGE OFFER
Purpose and Effects of the Exchange Offer
The Old Notes were sold by the Company on May 11, 1998 (the "Closing")
to the Initial Purchasers, pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes to qualified institutional
buyers within the meaning of Rule 144A under the Securities Act and to
non-U.S. persons pursuant to Regulation S under the Securities Act. As a
condition to the Purchase Agreement, the Company and the Initial Purchasers
entered into the Registration Rights Agreement on May 11, 1998. The
Registration Rights Agreement required the Company to file with the
Commission following the Closing, a registration statement relating to an
exchange offer pursuant to which notes which are substantially identical to
the Old Notes would be offered in exchange for the then outstanding Old Notes
tendered at the option of the holders thereof. The form and terms of the New
Notes are identical in all material respects to the form and terms of the Old
Notes except (i) that the New Notes have been registered under the Securities
Act, (ii) that the New Notes are not entitled to certain registration rights
which are applicable to the Old Notes under the Registration Rights
Agreement, and (iii) certain contingent interest rate provisions applicable
to the Old Notes are generally not applicable to the New Notes. In the event
that the applicable interpretations of the staff of the Commission do not
permit the Company to effect the Exchange Offer, the Company agreed to use
its reasonable best efforts to cause to become effective a shelf registration
statement with respect to the resale of the Old Notes and to keep such resale
registration statement effective for a period of up to three years. The
Exchange Offer is being made to satisfy the contractual obligations of the
Company under the Registration Rights Agreement. The holders of any Old Notes
not tendered in the Exchange Offer will not be entitled to require the
Company to file a resale registration statement.
The Company has agreed that if (i) the Company failed to file the
registration statement relating to the Exchange Offer within 75 days
following the Closing, (ii) such registration statement (or, if applicable,
the resale registration statement) had not become effective within 150 days
following the Closing, (iii) the Exchange Offer has not been consummated
within 30 business days after the effective date of the Exchange Offer
registration statement or (iv) certain other specified events occur, then the
per annum interest rate on the Old Notes will increase by 0.5% for the period
from the occurrence of such default until such time as no default is in
effect (at which time the interest rate will be reduced to its initial rate).
If the Company has not consummated the Exchange Offer (or, if applicable, the
resale registration statement has not become effective) within 270 days
following the Closing, then the per annum interest rate on the Old Notes will
increase by an additional 0.5% for so long as the Company has not consummated
the Exchange Offer (or until such resale registration statement becomes
effective).
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to unrelated third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by the
holders thereof (other than a Restricted Holder) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders are not participating, do not intend to
participate and have no arrangement or understanding with any person to
participate in a distribution of such New Notes. See "K-III Communications
Corporation," SEC No-Action Letter (available May 14, 1993); "Morgan Stanley
& Co., Incorporated," SEC No-Action Letter (available June 5, 1991); and
"Exxon Capital Holdings Corporation," SEC No-Action Letter (available May 13,
1988). Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
If any person were to participate in the Exchange Offer for the purpose
of distributing securities in a manner not permitted by the preceding
paragraph, such person could not rely on the position of the staff of the
Commission and must comply with the Prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Therefore,
each holder of Old Notes who accepts the Exchange Offer must represent in the
Letter of Transmittal that it meets the conditions described above.
An exchange offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged New Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to such exchange offer and (ii) the Company having exchanged,
pursuant to such exchange offer, New Notes
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for all Old Notes that have been validly tendered and not withdrawn on the
Expiration Date. In such event, holders of Old Notes seeking liquidity in
their investment would have to rely on exemptions to registration
requirements under applicable securities laws, including the Securities Act.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal, the Company will
accept all Old Notes validly tendered prior to 5:00 p.m., New York City time,
on the Expiration Date. The exchange of New Notes for Old Notes will be made
(i) with respect to all Old Notes validly tendered and not withdrawn on or
prior to the Early Exchange Date, within two business days following the
Early Exchange Date, and (ii) with respect to all Old Notes validly tendered
and not withdrawn after the Early Exchange Date but on or prior to the
Expiration Date, within two business days following the Expiration Date. The
New Notes issued pursuant to the Exchange Offer will be delivered promptly
following the Expiration Date. The Company will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer in denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
In connection with the issuance of the Old Notes, the Company arranged
for the inclusion of the Old Notes initially purchased by qualified
institutional buyers on the Private Offerings, Resales and Trading through
Automated Linkages (PORTAL) market. The Company also arranged for the Old
Notes initially purchased by qualified institutional buyers to be issued and
transferable in book-entry form through the facilities of DTC, acting as
depository, and in DTC's Same-Day Funds Settlement System. The New Notes will
also be issuable and transferable in book-entry form through the DTC in the
Same-Day Funds Settlement System.
As of the date of this Prospectus, $175,000,000 aggregate principal
amount of the Old Notes is outstanding.
This Prospectus, together with the Letter of Transmittal, is being sent
to all registered holders of Old Notes as of June 29, 1998 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Old Notes for the purpose of receiving New Notes from the Company
and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
The registration expenses to be incurred in connection with the
Exchange Offer, including fees and expenses of the Exchange Agent and Trustee
and accounting and legal fees, will be paid by the Company. The Company has
agreed to pay, subject to the instructions in the Letter of Transmittal, all
transfer taxes, if any, relating to the sale or disposition of such holder's
Old Notes pursuant to the Exchange Offer. See "-- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean August 10, 1998, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case
the term "Expiration Date" shall mean the latest date to which the Exchange
Offer is extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to
the record holders of Old Notes an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Old Notes not previously accepted, if any of the conditions
set
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forth herein under "-- Conditions" shall have occurred and shall not have
been waived by the Company, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, and (ii) to amend the terms
of the Exchange Offer in any manner deemed by it to be advantageous to the
holders of the Old Notes. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform
the holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the Exchange Offer, the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement,
other than by making a timely release to a financial news service.
Interest on New Notes
Interest will accrue on the New Notes from May 11, 1998, or from the
most recent interest payment date on the Old Notes surrendered in exchange
therefor, and will be payable semi-annually on May 15 and November 15 of each
year, commencing on November 15, 1998, at the rate of 8 7/8% per annum.
Holders of Old Notes whose Old Notes are accepted for exchange will be deemed
to have waived the right to receive any payment in respect of interest
accrued from May 11, 1998 to the date of issuance of the New Notes.
Procedure for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such tender is being effected pursuant to the procedure for
book-entry transfer described below) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company having an office or correspondent
in the United States or an "eligible guarantor institution" as defined by
Rule 17Ad-15 under the Exchange Act (any of the foregoing hereinafter
referred to as an "Eligible Institution") unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account
of an Eligible Institution.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at
its addresses set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject
to the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its
address set forth herein. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect such
tender for such holders.
The method of delivery of Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and
risk of the holders. Instead of delivery by mail, it is recommended that
holders use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. No Letter of Transmittal or
Old Notes should be sent to the Company.
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Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder or any person whose Old Notes are held of record by DTC who
desires to deliver such Old Notes at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender his Old Notes should contact the registered holder promptly
and instruct such registered holder to tender on his behalf. If such
beneficial holder wishes to tender on his own behalf, such beneficial holder
must, prior to completing and executing the Letter of Transmittal and
delivering his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or obtain a properly
completed bond power from the registered holder. The transfer of record
ownership may take considerable time.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such
person to tender the Old Notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders appears on the
Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by
the Company, evidence satisfactory to the Company of their authority to so
act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not validly tendered or any Old Notes the Company's acceptance
of which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the absolute right to waive any irregularities or
conditions of tender as to particular Old Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in the Letter of Transmittal) will be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of Old Notes nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not validly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent without cost to the tendering holder of such Old Notes
unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
By tendering, each holder will represent to the Company that, among
other things (i) the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of such holder's business, (ii) such
holder is not participating, does not intend to participate and has no
arrangement or understanding with any person to participate, in a
distribution of such New Notes, (iii) such holder is not an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company and (iv) such
holder is not a broker-dealer who acquired Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Early Exchange Date or the Expiration Date, may effect a tender
if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Early Exchange Date or the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder of
the Old Notes, the certificate number or numbers of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
22
<PAGE>
thereby, and guaranteeing that, within three business days after the date of
execution of the Notice of Guaranteed Delivery, the Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing the Old
Notes to be tendered in proper form for transfer and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the date of execution of the Notice of Guaranteed Delivery.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including required
signature guarantees) or be accompanied by documents of transfer sufficient
to permit the Trustee with respect to the Old Notes to register the transfer
of such Old Notes into the name of the Depositor withdrawing the tender and
(iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such withdrawal notices will
be determined by the Company, whose determination shall be final and binding
on all parties. Any Old Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no New Notes will be
issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes which have been tendered but which are not accepted
for exchange will be returned by the Exchange Agent to the holder thereof
without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described
above under "-- Procedure for Tendering" at any time prior to the Expiration
Date.
Conditions
Notwithstanding any other term of the Exchange Offer, the Company will
not be obligated to consummate the Exchange Offer if the New Notes to be
received will not be tradeable by the holder, other than in the case of
Restricted Holders, without restriction under the Securities Act and the
Exchange Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States. Such
condition will be deemed to be satisfied unless a holder provides the Company
with an opinion of counsel reasonably satisfactory to the Company to the
effect that the New Notes received by such holder will not be tradeable
without restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky laws of substantially all of the
states of the United States. The Company may waive this condition.
If the condition described above exists, the Company will be entitled
to refuse to accept any Old Notes and, in the case of such refusal, will
return all tendered Old Notes to exchanging holders of the Old Notes. See
"Description of New Notes -- Registration Covenant; Exchange Offer."
<PAGE>
Exchange Agent
The Bank of New York, the Trustee under the Indenture, has been appointed
as Exchange Agent for the Exchange Offer. Questions and requests for assistance
and requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
23
<PAGE>
By Hand Delivery: The Bank of New York
101 Barclay Street
Corporate Trust Services Window
New York, New York 10286
Attn: Diana Torres,
Reorganization Section
By Registered or
Certified Mail: The Bank of New York
101 Barclay Street - 7E
New York, New York 10286
Attn: Diana Torres,
Reorganization Section
By Overnight Courier: The Bank of New York
101 Barclay Street
Corporate Trust Services Window
New York, New York 10286
Attn: Diana Torres,
Reorganization Section
Facsimile Transmission:
(Eligible Institutions and
Withdrawal Notices Only) (212) 815-6339
Confirm: (212) 815-5789
For Information Call: (212) 815-5789
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation for tenders pursuant to
the Exchange Offer is being made by mail. Additional solicitations may be
made by officers and regular employees of the Company and its affiliates in
person, by telegraph or telephone.
The Company will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services
and will reimburse the Exchange Agent for its reasonable out-of-pocket
expenses in connection therewith.
The registration expenses to be incurred in connection with the
Exchange Offer, including fees and expenses of the Exchange Agent and Trustee
and accounting and legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however,
certificates representing New Notes or Old Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered, or if tendered Old Notes are registered in
the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
Accounting Treatment
No gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. The expenses of the
Exchange Offer will be amortized by the Company over the term of the New
Notes under generally accepted accounting principles.
24
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31,1998 on an actual basis, on an adjusted basis to reflect the sale of
the Old Notes and the application of the net proceeds therefrom, and on a pro
forma basis to reflect the sale of the Old Notes and application of the
proceeds therefrom, the KOFY Acquisition and the related borrowings under the
Credit Agreement, the disposition of WWMT and WLAJ and the refinancing of
certain debentures with borrowings under the Credit Agreement. See "Pro Forma
Condensed Financial Statements."
<TABLE>
<CAPTION>
March 31, 1998
-----------------------------------
Actual As Adjusted Pro Forma
---------- ----------- ---------
(in thousands)
<S> <C> <C> <C>
Long-term debt:
Credit Agreement ........................................................ $ 136,000 $ -- $ 18,150
10 3/8% Senior Subordinated Notes due May 15, 2005 ...................... 173,000 150,039 150,039
9 3/8% Senior Subordinated Notes due December 1, 2005 ................... 76,790 76,790 76,790
Notes offered hereby .................................................... -- 174,482 174,482
--------- --------- ---------
Total Long-term debt ....................................................... 385,790 401,311 419,461
Redeemable Preferred Stock, $.01 par value:
Cumulative Exchangeable Preferred Stock ................................. 167,858 167,858 167,858
Cumulative Convertible Exchangeable Preferred Stock ..................... 41,563 41,563 41,563
Stockholders' (Deficit):
Common Stock: $.01 par value, 41,000,000 shares
authorized consisting of 1,000,000 shares of Voting Common Stock and
40,000,000 shares of Common Stock (Nonvoting); 178,500 shares of Voting
Common Stock and 9,538,052 shares of Common
Stock (Nonvoting) issued and outstanding .............................. 97 97 97
Additional paid-in capital .............................................. 22,668 22,668 22,668
Accumulated deficit(1) .................................................. (58,359) (62,566) (4,153)
Less: Unearned Compensation ............................................ (2,729) (2,729) (2,729)
Treasury stock ................................................... (47) (47) (47)
Note Receivable from Officer ..................................... (887) (887) (887)
--------- --------- ---------
Total Stockholders' equity (deficit) .............................. (39,257) (43,464) 14,949
--------- --------- ---------
Total capitalization .................................................... $ 555,954 $ 567,268 $ 643,831
========= ========= =========
</TABLE>
- ----------
(1) In connection with the repayment of borrowings under the Credit Agreement
and the repurchase of 10 3/8% Notes with the proceeds of the offering of
the Old Notes, the Company will record an extraordinary loss related to
the write-off of approximately $2,887 of deferred financing costs and
$1,320 associated with the premium on the repurchase of $22,961 principal
amount of 10 3/8% Notes. Such amounts are reflected in the As Adjusted
and Pro Forma columns and will be recorded in the second quarter of 1998.
25
<PAGE>
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The pro forma condensed consolidated financial statements presented
below are based on the historical financial statements of the Company. The
pro forma condensed consolidated statements of operations for the year ended
December 31, 1997 and for the three months ended March 31, 1998 give effect
to (i) the acquisition of WDWB, which was acquired on January 31, 1997, (ii)
the sale of the Old Notes and the application of the proceeds therefrom,
(iii) the KOFY Acquisition and the related borrowings under the Credit
Agreement, (iv) the disposition of WWMT and WLAJ and (v) the refinancing of
certain outstanding debentures with borrowings under the Credit Agreement, as
if all such transactions occurred at January 1, 1997. The pro forma condensed
consolidated balance sheet as of March 31, 1998 gives effect to (i) the sale
of the Old Notes and application of the proceeds therefrom, (ii) the KOFY
Acquisition and the related borrowings under the Credit Agreement and (iii)
the disposition of WWMT and WLAJ, as if all such transactions occurred on
March 31, 1998.
The pro forma condensed consolidated financial statements give effect
to the acquisitions of WDWB and KOFY under the purchase method of accounting
and are based upon the assumptions and adjustments (including the preliminary
allocation of the purchase price for the KOFY Acquisition) described in the
accompanying notes. These pro forma condensed consolidated financial
statements should be read in conjunction with the Company's Consolidated
Financial Statements incorporated by reference herein and the Financial
Statements of KOFY appearing elsewhere in this Offering Circular. The pro
forma information is not necessarily indicative of the results that would
have been reported had such events actually occurred on the dates specified,
nor is it indicative of the Company's future results.
26
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Granite Add:
Broadcasting WDWB Pro forma
Corporation One month Adjustments
Year ended ended for WDWB
December 31, January 31, and
1997 1997 the offering As adjusted
---------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Net revenue ...................... $ 153,512 $ 901 22(a) $ 154,435
Station operating expenses ....... 83,729 618 (57)(b) 84,290
Time brokerage agreement fees .... 600 600
Depreciation expense ............. 5,718 6 14(c) 5,738
Amortization expense ............. 13,824 367(d) 14,191
Corporate expense ................ 6,639 6,639
Non-cash compensation ............ 986 986
--------- --------- ---------
Operating income (loss) .......... 42,016 277 41,991
Equity in net loss of Investee ... 1,531 1,531
Interest expense (income), net ... 38,986 289(e) 39,275
Non-cash interest expense ........ 2,182 (180)(f) 2,002
Other expense (income) ........... 1,167 (17) 1,150
--------- --------- ---------
Income (loss) before income taxes
and extraordinary item ......... (1,850) 294 (1,967)
(Provision) benefit for income tax (1,616) (19) (1,635)
--------- --------- ---------
Income (loss) before
extraordinary item(1) .......... $ (3,466) $ 275 $ (3,602)
========= ========= =========
<CAPTION>
Less:
Combined
Add: WWMT and
KOFY-TV WLAJ
Year ended Year Ended
December 31, December 31, Pro forma
1997 1997 Adjustments Pro forma
---------- ------------- ------------ ---------
<S> <C> <C> <C>
Net revenue ...................... $ 20,406 $ 23,338 $ 151,503
Station operating expenses ....... 19,419 13,507 (3,063)(g) 87,139
Time brokerage agreement fees .... 600
Depreciation expense ............. 273 1,123 (162)(h) 4,726
Amortization expense ............. 360 2,229 12,780 (i) 25,102
Corporate expense ................ 6,639
Non-cash compensation ............ 986
--------- --------- --------
Operating income (loss) .......... 354 5,879 26,911
Equity in net loss of Investee ... 1,531
Interest expense (income), net ... 1,223 865 229 (j) 39,862
Non-cash interest expense ........ 2,002
Other expense (income) ........... (1,230) 105 (185)
--------- --------- --------
Income (loss) before income taxes
and extraordinary item ......... 361 4,909 (16,299)
(Provision) benefit for income tax 588 -- 701(r) (346)
--------- --------- --------
Income (loss) before
extraordinary item(1) .......... $ 949 $ 4,909 $(16,645)
========= ========= ========
</TABLE>
- ----------
(1) Does not reflect an anticipated pre-tax gain for financial reporting
purposes of approximately $49 million from the disposition of WWMT and
WLAJ.
27
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1998
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Less:
Granite Combined WWMT
Broadcasting Add: and
Corporation KOFY-TV WLAJ
Three Months Pro forma Three Months Three Months
Ended Adjustments Ended Ended
March 31, for the As March 31, March 31, Pro forma
1998 offering adjusted 1998 1998 Adjustments Pro forma
------------ ----------- -------- ------------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue ..................... $ 36,724 $36,724 $4,734 $6,156 $35,302
Station operating expenses ...... 22,315 22,315 4,177 3,550 (334)(g) 22,608
Time brokerage agreement fees ... 150 150 150 0
Depreciation expense ............ 1,365 1,365 90 162 (62)(h) 1,231
Amortization expense ............ 3,584 3,584 90 557 3,195(i) 6,312
Corporate expense ............... 2,017 2,017 2,017
Non-cash compensation ........... 333 333 333
-------- ------- ------ ------ -------
Operating income (loss) ......... 6,960 6,960 377 1,737 2,801
Equity in net loss of investee .. 487 487 487
Interest expense (income), net .. 9,209 307(e) 9,516 257 194 106(j) 9,685
Non-cash interest expense ....... 475 (45)(f) 430 430
Other expense (income) .......... 242 242 26 216
-------- ------- ------ ------ -------
Income (loss) before income taxes
and extraordinary item ........ (3,453) (3,715) 120 1,517 (8,017)
Provision for income tax ........ (496) (496) (87) 0 428(r) (155)
-------- ------- ------ ------ -------
Income (loss) before
extraordinary item(1) ......... $ (3,949) $(4,211) $ 33 $1,517 $(8,172)
======== ======= ====== ====== =======
</TABLE>
- ----------
(1) Does not reflect an anticipated pre-tax gain for financial reporting
purposes of approximately $49 million from the disposition of WWMT and
WLAJ.
28
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1998
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Less:
Granite Pro forma Combined
Broadcasting Adjustments Add: WWMT and
Corporation for the As KOFY-TV WLAJ Pro forma
March 31, 1998 offering adjusted March 31, 1998 March 31, 1998 Adjustments Pro forma
-------------- -------- -------- -------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash ............................ $ 3,945 10,046(k) $ 13,991 $ $ (12,500)(o) $ 1,491
Accounts receivable, net ........ 28,833 28,833 28,833
Film contract rights and
other assets ................... 21,742 21,742 2,199 1,708 (393)(n) 16,840
(5,000)(n)
-------- -------- ------- -------- --------
Total current assets ........... 54,520 64,566 2,199 1,708 47,164
Property and equipment, net ..... 35,507 35,507 1,106 6,907 29,706
Other noncurrent assets ......... 16,149 5,482(l) 18,744 2,817 515 (1,668)(n) 19,378
(2,887)(l)
Intangible assets ............... 518,266 518,266 82,912 248,123(n) 683,477
-------- -------- ------- -------- --------
Total assets .................. $624,442 $637,083 $ 6,122 $ 92,042 $779,725
======== ======== ======= ======== ========
Liabilities
Accounts payable ................ $ 3,319 $ 3,319 $ 596 $ 223 $ 3,692
Accrued liabilities ............. 17,609 17,609 1,874 475 2,000(o) 23,408
2,400(r)
Film contract rights and other
current liabilities ............ 11,096 11,096 2,372 1,130 12,338
-------- -------- ------- -------- --------
Total current liabilities ..... 32,024 32,024 4,842 1,828 39,438
Long-term debt .................. 385,790 15,521(m) 401,311 18,150(p) 419,461
Other noncurrent liabilities .... 5,964 1,327(k) 7,291 6,115 427 (780)(n) 20,199
8,000(o)
Deferred income taxes ........... 30,500 30,500 45,757(n) 76,257
Redeemable Preferred Stock ...... 209,421 209,421 209,421
Stockholders' equity (deficit)
Common stock .................... 97 97 97
Additional paid in capital ...... 22,668 22,668 22,668
Accumulated deficit ............. (58,359) (2,887)(l) (62,566) (11,504) 49,309(q) (4,153)
(1,320)(l) (2,400)(r)
Less: Unearned compensation ..... (2,729) (2,729) (2,729)
Note receivable from officer ... (887) (887) (887)
Treasury stock ................. (47) (47) (47)
-------- -------- ------- -------- --------
Total stockholders' equity
(deficit) ...................... (39,257) (43,464) (11,504) 14,949
Net assets to be acquired
and disposed ................... (4,835) 101,291 106,126(q) --
-------- -------- ------- -------- --------
Total liabilities and
stockholders' equity (deficit) .. $624,442 $637,083 $ 6,122 $ 92,042 $779,725
======== ======== ======= ======== ========
</TABLE>
29
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Adjustments reflected in the pro forma financial statements are explained
as follows:
(a) To adjust net revenue to reflect reduced national representative
commissions at WDWB.
(b) To adjust station operating expenses at WDWB as follows:
To reduce amortization of film contract rights to reflect
the net assets acquired based on the allocation of the
purchase price $35,000
To eliminate a management fee paid to a related party of WDWB 22,000
-------
$57,000
=======
(c) To record additional depreciation expense at WDWB based on the allocation
of the purchase price.
(d) To record amortization of the excess cost of the purchase price over the
net assets acquired.
(e) To adjust interest expense as follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1997 March 31, 1998
------------- --------------
<S> <C> <C>
To record interest expense on the Old Notes
at the effective rate(1) $ 15,451,000 $ 3,863,000
To reflect savings resulting from the
redemption of the Company's 12.75%
Subordinated Debentures in September 1997
which was replaced with bank debt (1,900,000) --
To eliminate interest expense on $22,961,000
principal amount of the Company's 10 3/8% Notes (2,382,000) (596,000)
To eliminate interest expense on
Credit Agreement (10,880,000) (2,960,000)
------------ -----------
$ 289,000 $ 307,000
============ ===========
</TABLE>
---------
(1) In anticipation of the offering of the Old Notes, the Company
entered into an interest rate forward contract with one of the
Initial Purchasers. The Company received $1,327,000 on the
settlement of the forward contract. This amount will be recorded as
a noncurrent liability and will be recognized as a reduction to
interest expense over the term of the Notes.
(f) To record amortization of deferred financing costs associated with the
sale of the Old Notes net of reduced amortization from the write-off of
deferred financing costs associated with the Credit Agreement and the
write-off of a pro rata portion of deferred financing costs associated
with the repurchase of $22,961,000 principal amount of 10 3/8% Notes.
30
<PAGE>
(g) To adjust station operating expenses at KOFY as follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1997 March 31, 1998
------------- --------------
<S> <C> <C>
To eliminate the cost of contracts and other
operating assets excluded from the purchase
of KOFY under the terms of the purchase and
sale agreement $1,053,000 $ 21,000
To reduce amortization of film contract rights
to reflect the net assets acquired based on a
preliminary allocation of the purchase price 1,300,000 325,000
To eliminate legal expenses in connection with
the sale of radio stations owned by the owner
of KOFY 355,000 --
To reduce salary expense and related benefit
costs associated with the controlling
shareholder of Pacific 179,000 45,000
To adjust sales expense to reflect reduced
national representative commissions 176,000 (57,000)
---------- --------
$3,063,000 $334,000
========== ========
</TABLE>
The Company expects to realize approximately $1,100,000 of annualized net
cost savings at KOFY resulting from the elimination of duplicative staffing and
redundant operating expenses and new rates associated with revised vendor
contracts, which cost savings have not been reflected in the adjustments. Had
such adjustments been made, EBITDA on a pro forma basis would have been
approximately $58,825,000 for the year ended December 31, 1997 and $11,777,000
for the three months ended March 31, 1998. While management believes that such
cost savings are achievable, the Company's ability to fully achieve such costs
savings is subject to numerous factors, some of which may be beyond the
Company's control.
(h) To reduce depreciation expense to reflect the net assets of KOFY acquired
based on a preliminary allocation of the purchase price.
(i) To reflect increased amortization expense as follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1997 March 31, 1998
----------- --------------
<S> <C> <C>
(i) Amortization of the excess cost of the purchase
price over the net assets acquired $13,140,000 $3,285,000
(ii) Elimination of historical amortization expense
in the financial statements of KOFY (360,000) (90,000)
----------- ----------
$12,780,000 $3,195,000
=========== ==========
</TABLE>
(j) To record interest expense on additional borrowings under the Credit
Agreement at an assumed rate of 8% and to eliminate historical interest
expense in the financial statements of KOFY.
(k) To record the excess proceeds from the sale of the Old Notes and proceeds
from the settlement of the interest rate forward contract.
31
<PAGE>
(l) To reflect the incurrence of deferred financing costs associated with the
issuance of the Old Notes and to write-off deferred financing costs
associated with the existing Credit Agreement and a pro rata portion of
deferred financing costs associated with the Company's 10 3/8% Notes.
In connection with the repayment of the Credit Agreement, the Company
will record an extraordinary loss of approximately $2,364,000,
reflecting a write-off of deferred financing fees. In connection with
the repurchase of the 10 3/8% Notes, the Company will record an
extraordinary loss of $1,843,000, consisting of the premium paid on the
repurchase of the 10 3/8% Notes of $1,320,000 and a write-off of a pro
rata portion of the related deferred financing fees of approximately
$523,000.
(m) To adjust long-term debt as follows:
(i) Issuance of the Old Notes, net of discount $ 174,482,000
(ii) Repurchase of 10 3/8% Notes (22,961,000)
(iii) Repayment of outstanding bank debt (136,000,000)
-------------
$ 15,521,000
=============
(n) To record the preliminary allocation of the purchase price of KOFY as
follows:
<TABLE>
<CAPTION>
Historical Carrying Estimated
Value as reported Market Value
KOFY-TV of Assets Pro forma
Caption March 31, 1998 Purchased Adjustment
-------------- --------- ----------
<S> <C> <C> <C>
Film contract rights and other assets $ 2,199,000 $ 1,806,000 $ (393,000)
Property and equipment 1,106,000 1,106,000 --
Film contract rights and other
noncurrent assets 2,817,000 1,149,000 (1,668,000)
Intangible assets -- 248,123,000 248,123,000
Accounts payable (596,000) (596,000) --
Accrued liabilities (1,874,000) (1,874,000) --
Film contract rights and other current
liabilities (2,372,000) (2,372,000) --
Deferred tax liability -- (45,757,000) (45,757,000)
Other noncurrent liabilities (6,115,000) (5,335,000) 780,000
----------- ------------ ------------
Net assets $(4,835,000) $196,250,000 $201,085,000
=========== ============ ============
</TABLE>
In addition, the Company made a $5,000,000 deposit on the KOFY Acquisition
which has been reclassed from current assets to intangible assets.
(o) The WB network agreed to enter into a ten-year affiliation agreement with
Pacific and the Company instead of another television station in the San
Francisco market in return for total consideration of $22,500,000. At the
closing the Company, will pay $12,500,000 to the WB Network and the
remaining $10,000,000 is to be paid in equal installments over a 5 year
period. The Company will amortize the total consideration paid over ten
years. Of the $10,000,000, $2,000,000 has been reflected as a current
liability and the remaining $8,000,000 has been reflected as noncurrent.
(p) To record additional borrowings under the Credit Agreement.
(q) To eliminate the historical carrying value of the net assets acquired and
disposed and to record the gain on the assets disposed.
(r) To recognize taxes on the sale of WWMT and WLAJ and to adjust the tax
provision to reflect the KOFY Acquisition.
32
<PAGE>
DESCRIPTION OF NEW NOTES
General
The Old Notes were issued, and the New Notes will be issued, under an
Indenture dated as of May 11, 1998 (the "Indenture"), between the Company and
The Bank of New York, as Trustee (the "Trustee"). The New Notes will be issued
solely in exchange for an equal principal amount of the outstanding Old Notes
pursuant to the Exchange Offer. The terms of the New Notes will be identical in
all material respects to the form and terms of the Old Notes except that: (i)
the New Notes will have been registered under the Securities Act (and will
generally be freely transferable by a holder thereof who is not a Restricted
Holder); and (ii) the registration rights and contingent interest rate
provisions applicable to the Old Notes are generally not applicable to the New
Notes. References in this Section to the "Notes" will be references to the Old
Notes and/or the New Notes, depending upon which are outstanding. The definition
of certain terms used in the following summary are set forth below under "--
Certain Definitions."
The Indenture is by its terms subject to and governed by the Trust
Indenture Act of 1939, as amended. The statements under this caption relating to
the Notes and the Indenture are summaries and do not purport to be complete, and
where reference is made to particular provisions of the Indenture, such
provisions, including the definition of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. All material provisions of the Notes and the
Indenture, however, are set forth herein. Unless otherwise indicated, references
under this caption to sections, "ss." or articles are references to sections and
articles of the Indenture. The Indenture is filed as an Exhibit to the
Registration Statement of which this Prospectus is a part and a copy may be
obtained from the Company as set forth under "Available Information."
The Notes are general unsecured senior subordinated obligations of the
Company limited to $200.0 million in aggregate principal amount. The Notes and
the New Notes will be considered collectively to be a single class for all
purposes under the Indenture, including, without limitation, waivers,
amendments, redemptions and Offers to Purchase. Additional Notes may be issued
from time to time under the Indenture, subject to the limitations set forth
under "--Covenants - Limitation on Debt."
The Notes will mature on May 15, 2008. Interest on the Notes will accrue
at the rate of 8 7/8% per annum from May 11, 1998 or from the most recent
interest payment date to which interest has been paid, and will be payable
semi-annually on May 15 and November 15 of each year, commencing on November 15,
1998, to the person in whose name the Note (or any Predecessor Note) is
registered at the close of business on May 1 or November 1 next preceding such
interest payment date. (ss.ss. 301 and 308) Interest on the Notes will be
computed on the basis of a 360-day year of twelve 30-day months. (ss. 311) At
the option of the Company, principal of and premium, if any, and interest on the
Notes may be paid at the corporate trust office of the Trustee or by check
mailed to the registered address of such holders. (ss.ss. 301, 306 and 1002)
The New Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof. (ss. 302) No
service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. The Notes will not
have the benefit of a sinking fund. (ss. 306)
Initially, the Trustee will act as Paying Agent and Registrar. The New
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar. (ss. 306)
Form, Denomination and Book-Entry Procedures
The Old Notes were initially sold to qualified institutional buyers in
reliance on Rule 144A under the Securities Act ("Rule 144A Notes"). Old Notes
also were offered and sold in offshore transactions in reliance on Regulation
S ("Regulation S Notes"). Rule 144A Notes and Regulation S Notes were each
initially represented by one or more Notes in registered, global form without
interest coupons (the "Old Global Notes"). The Old Global Notes were
deposited upon issuance with the Trustee as custodian for The Depository
Trust Company ("DTC"), in New York, New York, and registered in the name of a
nominee of DTC, in each case for credit to an account of a direct or indirect
participant as described below. Regulation S Notes were deposited upon
issuance with the Trustee as custodian for DTC, and registered in the name of
a nominee of DTC, in each case for credit to the accounts of Euroclear System
("Euroclear") and Cedel Bank, S.A. ("CEDEL").
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The New Notes will be represented by one or more new notes in registered,
global form without interest coupons (collectively, the "New Global Notes") and
deposited with the Trustee as custodian and registered in the name of a nominee
of DTC. The Old Global Notes, to the extent directed by holders thereof in their
Letters of Transmittal, will be exchanged through book-entry electronic transfer
for one or more New Global Notes for credit to an account of a direct or
indirect participant as described below. No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
New Notes issued to non-qualified institutional buyers in exchange for Old
Notes held by such investors, if any, will be issued only in certificated, fully
registered, definitive form. The New Global Note will, upon request, be
exchangeable for other New Notes in definitive, fully registered form without
coupons in denominations of $1,000 and integral multiples thereof, but only in
accordance with DTC's customary procedures. The New Global Note will also be
exchangeable in certain other limited circumstances. See "--Exchange of
Book-Entry Notes for Certificated Notes." The Company, the Trustee and any other
agent thereof will be entitled to treat DTC's nominee as the sole owner and
holder of the unexchanged portion of the New Global Note for all purposes.
Depositary Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised the Company that pursuant to procedures established
by it, (i) upon deposit of the New Global Note, DTC will credit the accounts of
Participants designated by the Participants with portions of the principal
amount of the Old Global Notes and (ii) ownership of such interests in the New
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the New Global Note). Investors in
the New Global Note may hold their interests therein directly through DTC, if
they are Participants in such system, or indirectly through organizations
(including Euroclear and CEDEL) which are Participants in such system. All
interests in the New Global Note, including those held through Euroclear or
CEDEL, may be subject to the procedures and requirements of DTC. Those interests
held through Euroclear or CEDEL may also be subject to the procedures and
requirements of such system.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in the Old Global Notes or the New
Global Note to such persons may be limited to that extent. Because DTC can
act only on behalf of the Participants, which in turn act on behalf of the
Indirect Participants and certain banks, the ability of a person having
beneficial interests in the New Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Notes, see "--Exchange of
Book-Entry Notes for Certificated Notes."
Except as described below, owners of interests in the New Global Note will
not have New Notes registered in their names, will not receive physical delivery
of New Notes in certificated form and will not be considered the registered
owners or holders thereof under the Indenture for any purpose.
Payments in respect of the principal of (and premium, if any) and interest
on the New Global Note registered in the name of DTC or its nominee will be
payable by the Trustee to DTC or its nominee in its capacity as the registered
holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the New Notes, including the
New Global Note, are registered as the owners thereof for
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the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company, the Trustee or any agent of
the Company or the Trustee has or will have any responsibility or liability
for (i) any aspect or accuracy of DTC's records or any Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the New Global Note, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership interests
in the New Global Note, or (ii) any other matter relating to the actions and
practices of DTC or any of the Participants or the Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the New Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Notes will be governed by standing
instructions and customary practices and will not be the responsibility of DTC,
the Trustee or the Company. Neither the Company nor the Trustee will be liable
for any delay by DTC or any of the Participants in identifying the beneficial
owners of the New Notes, and the Company and the Trustee may conclusively rely
on and will be protected in relying on instructions from DTC or its nominee as
the registered owner of the New Global Note for all purposes.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Old Global Notes or the New Global Note
are credited and only in respect of such portion of the aggregate principal
amount of the Notes as to which such Participant or Participants has or have
given such direction. However, if any of the events described under "--Exchange
of Book Entry Notes for Certificated Notes" occurs, DTC reserves the right to
exchange the New Global Note for New Notes in certificate form and to distribute
such New Notes to its Participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Old Global Notes and the New Global
Note among accountholders in DTC and accountholders of Euroclear and CEDEL, they
are under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. None of the Company or the
Trustee nor any agent of the Company or the Trustee will have any responsibility
for the performance by DTC, Euroclear or CEDEL or their respective participants,
indirect participants or accountholders of their respective obligations under
the rules and procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
The New Global Note is exchangeable for definitive New Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depository for the New Global Note and the Company
thereupon fails to appoint a successor depository or (y) has ceased to be a
clearing agency registered under the Exchange Act, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the New Notes in certificated form or (iii) there shall have occurred and be
continuing a Default or an Event of Default with respect to the New Notes. In
all cases, certificated New Notes delivered in exchange for the New Global Note
or beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depository (in
accordance with its customary procedures). In addition, subject to certain
restrictions on the transferability of the New Notes, New Notes in definitive
form will be issued upon the resale, pledge or other transfer of any New Notes
or interest therein to any person or entity that is not a qualified
institutional buyer or that does not participate in DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Optional Redemption
The Notes will be redeemable, at the option of the Company, in whole or in
part, at any time on or after May 15, 2003 and prior to maturity, upon not less
than 30 nor more than 60 days' notice mailed to each Holder of Notes to be
redeemed at the address appearing in the Note Register, in amounts of $1,000 or
an integral multiple of $1,000, at the following Redemption Prices (expressed as
percentages of principal amount) plus accrued interest to but excluding the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the
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twelve-month period beginning May 15 of each of the years indicated below,
plus in each case, accrued interest thereon to, but excluding, the date of
redemption.
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003................................................................ 104.437%
2004................................................................ 102.958%
2005................................................................ 101.479%
2006 and thereafter................................................. 100.000%
</TABLE>
The Notes will be redeemable in the event that on or before May 15, 2001
the Company receives net proceeds from the sale of its Capital Stock (other than
Disqualified Stock) in one or more offerings, in which case the Company may, at
its option and from time to time, use all or a portion of any such net proceeds
to redeem Notes in a principal amount of at least $5,000,000 and up to an
aggregate amount equal to 35% of the principal amount of the Notes issued,
provided, however, that Notes in an amount equal to at least 65% of the
principal amount of the Notes issued remain outstanding after each such
redemption. Any such redemption must occur on a Redemption Date within 75 days
of any such sale and upon not less than 30 nor more than 60 days' notice mailed
to each Holder of Notes to be redeemed at such Holder's address appearing in the
Note Register, in amounts of $1,000 or an integral multiple of $1,000, at a
redemption price of 108.875% of the principal amount of the Notes plus accrued
interest to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
In the case of any redemption by the Company, the Notes will be redeemed
pro rata if less than all the Notes are to be redeemed. (ss.ss. 203, 1101, 1104,
1105 and 1107)
Subordination
The Notes will, to the extent set forth in the Indenture, be subordinate
in right of payment to the prior payment of all Senior Debt. Upon any payment or
distribution of assets of the Company to creditors upon any receivership,
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of Senior Debt will first be entitled to
receive payment in full in cash or cash equivalents of principal of (premium, if
any) and interest on, such Senior Debt before the Holders of Notes are entitled
to receive any payment of principal of (premium, if any) or interest on, or any
obligation to purchase, the Notes. In the event that notwithstanding the
foregoing, the Trustee or the Holder of any Note receives any payment or
distribution of assets of the Company of any kind or character (including any
such payment or distribution which may be payable or deliverable by the reason
of the payment of any other indebtedness of the Company being subordinated to
the payment of the Notes), before all the Senior Debt is so paid in full, then
such payment or distribution will be required to be paid over or delivered
forthwith to the trustee in bankruptcy or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay the Senior Debt in
full in cash or cash equivalents. However, notwithstanding the foregoing,
Holders of the Notes may receive shares of stock of the Company or securities of
the Company which are subordinate in right of payment to all Senior Debt to
substantially the same extent as the Notes are so subordinated ("subordinated
consideration"). (ss.ss. 1201 and 1202)
The Company may not make any payments on account of the Notes or on
account of the purchase or redemption or other acquisition of Notes (except for
subordinated consideration) if there shall have occurred and be continuing a
default in the payment of principal of (premium, if any) or interest on the
Senior Debt (a "Senior Payment Default"). If there shall have occurred and be
continuing any default (other than a Senior Payment Default) with respect to any
Senior Debt permitting the holders thereof (or a trustee on behalf thereof) then
to accelerate the maturity thereof (a "Senior Nonmonetary Default"), and the
Company and the Trustee have received written notice thereof from the Agent Bank
under the Credit Agreement (or any successor credit facility) or any other
holder of Senior Debt designated by the Company, then the Company may not make
any payments on account of the Notes or on account of the purchase or redemption
or other acquisition of Notes (except for subordinated consideration) for a
period (a "blockage period") commencing on the date the Company and the Trustee
receive such written notice and ending on the earlier of (x) 179 days after such
date and (y) the date, if any, on which the Senior Debt to which such Senior
Nonmonetary Default relates is discharged or such Senior Nonmonetary Default is
waived or otherwise cured. In any event, not more than one blockage period may
be commenced during any period of 360 consecutive days and there shall be a
period of at least 181 consecutive days in each 360-day period
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when no blockage period is in effect. No Senior Nonmonetary Default with
respect to Senior Debt that existed or was continuing on the date of the
commencement of any blockage period with respect to the Senior Debt
initiating such blockage period will be, or can be, made the basis for the
commencement of a second blockage period, unless such default has been cured
or waived for a period of not less than 90 consecutive days. In the event
that, notwithstanding the foregoing, the Company makes any payment to the
Trustee or the Holder of any Notes prohibited by the subordination
provisions, then such payment will be required to be paid over and delivered
forthwith to the holders of the Senior Debt remaining unpaid, to the extent
necessary to pay in full all the Senior Debt. (Article Twelve)
By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Debt or of the Notes may recover less,
ratably, than holders of Senior Debt and may recover more, ratably, than the
Holders of the Notes.
"Senior Debt" means (a) the principal of (premium, if any) and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement, indemnities
and fees relating to, Debt outstanding pursuant to the Credit Agreement, (b)
payment obligations of the Company under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements entered
into to hedge Debt Incurred under the Credit Agreement or any renewal,
refunding, refinancing or extension thereof, (c) all other Debt for money
borrowed of the Company referred to in the definition of Debt other than
Clause (vi), and (d) all renewals, extensions, modifications, refinancings,
refundings and amendments of any Debt referred to in Clause (a), (b) or (c)
above, unless but only to the extent, in the case of any particular Debt
referred to in Clause (a), (b) or (c) above, (A) such Debt is owed to a
Subsidiary, (B) the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Debt is not
superior in right of payment to the Notes, (C) such Debt is Incurred in
violation of the Indenture, or (D) such Debt is subordinate in right of
payment in respect to any other Debt of the Company. (ss. 101)
The subordination provisions described above will cease to be applicable
to the Notes upon any defeasance or covenant defeasance of the Notes as
described under "--Defeasance." (Article Thirteen)
If the Company fails to make any payment on the Notes, when due or within
any applicable grace period, whether or not on account of payment blockage
provisions, such failure would constitute an Event of Default under the
Indenture and would enable the holders of the Notes to accelerate the maturity
thereof. See "--Events of Default."
Covenants
The Indenture contains, among others, the following covenants:
Limitation on Debt
The Company may not, and may not permit any Subsidiary to, Incur any Debt
unless the ratio of (a) the aggregate principal amount of Debt of the Company
and its Subsidiaries outstanding as of the most recent available balance sheet,
after giving pro forma effect to the Incurrence of such Debt and any other Debt
Incurred since such balance sheet date and the receipt and application of the
proceeds thereof, to (b) Pro Forma Consolidated Cash Flow for the preceding four
full fiscal quarters, determined on a pro forma basis as if such Debt and any
other Debt Incurred since such balance sheet date had been Incurred and the
proceeds therefrom had been applied at the beginning of such four fiscal
quarters, would be less than 7.0 to 1.
Notwithstanding the foregoing paragraph, the Company or any Subsidiary may
Incur the following without regard to the foregoing limitation: (i) Debt under
the Credit Agreement not to exceed $150,000,000 aggregate principal amount at
any one time outstanding, and any renewal, extension, refinancing or refunding
thereof in an amount which, together with any amount remaining outstanding or
available under the Credit Agreement, does not exceed $150,000,000; (ii) Debt
evidenced by the 10 3/8% Notes, the 9 3/8% Notes and the Notes; (iii) Debt owed
by the Company to any Wholly Owned Subsidiary of the Company or Debt owed by a
Subsidiary of the Company to the Company or a Wholly Owned Subsidiary of the
Company; provided, however, that upon either (1) the transfer or other
disposition by such Wholly Owned Subsidiary or the Company of any Debt so
permitted to a Person other than the Company or another Wholly Owned Subsidiary
of the Company or (2) the issuance (other than directors'
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qualifying shares), sale, 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 Clause (iii) shall no longer be applicable to such
Debt and such Debt shall be deemed to have been incurred at the time of such
transfer or other disposition; (iv) Debt Incurred or Incurrable in respect of
letters of credit, bankers' acceptances or similar facilities not to exceed
$2,000,000 at any one time outstanding; (v) Capital Lease Obligations whose
Attributable Value will not exceed $5,000,000 at any one time outstanding;
(vi) Debt arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument drawn against insufficient funds in
the ordinary course of business, provided that such Debt is extinguished
within two Business Days of its Incurrence; (vii) Debt Incurred by a Person
prior to the time (A) such Person became a Subsidiary of the Company, (B)
such Person merges into or consolidates with a Subsidiary of the Company, (C)
another Subsidiary of the Company merges into or consolidates with such
Person (in each case in a transaction in which such Person becomes a
Subsidiary of the Company) or (D) such Person sells any of its property
consisting of operating assets to a Subsidiary of the Company subject to such
Debt (whether such Debt is recourse or non-recourse to such Subsidiary),
provided that in any such case such Debt was not Incurred in anticipation of
such transaction; (viii) Debt evidenced (A) by the 7.75% Exchange Debentures
if the 7.75% Exchange Debentures are issued in exchange for Convertible
Preferred Stock or (B) by the 12 3/4% Exchangeable Debentures if the 12 3/4%
Exchangeable Debentures are issued in exchange for 12 3/4% Cumulative
Exchangeable Preferred Stock; (ix) renewals, refundings, refinancings or
extensions (collectively, "refinancings") of the Credit Agreement, the 10
3/8% Notes, the 9 3/8% Notes, the 7.75% Exchange Debentures, the 12 3/4%
Exchangeable Debentures, the Notes or any other outstanding Debt that is
Incurred in compliance with the provisions of the Indenture (other than Debt
referred to in Clauses (i) through (vi) above), in an aggregate principal
amount not to exceed the principal amount of the Debt so refinanced plus the
amount of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated repurchase,
plus the amount of expenses of the Company Incurred in connection with such
refinancing, provided that, (A) to the extent such refinancing Debt is not
Senior Debt, such refinancing Debt does not have an Average Life less than
the Average Life of the Debt being refinanced and (B) if such Debt is
subordinated in right of payment to the Notes such refinancing Debt is
subordinated in right of payment to the Notes at least to the extent that the
Debt to be refinanced is subordinated to the Notes; and (x) Debt not
otherwise permitted to be Incurred pursuant to Clauses (i) through (ix)
above, which, together with any other outstanding Debt Incurred pursuant to
this Clause (x), has an aggregate principal amount not in excess of
$15,000,000 at any one time outstanding. (ss. 1008)
Other than the limitations on incurrence of indebtedness contained in this
covenant, there are no provisions in the Indenture that would protect the
holders of the Notes in the event of a highly leveraged transaction.
Limitation on Certain Debt
The Company may not Incur or permit to exist any Debt that is by its terms
both (i) subordinate in right of payment to any Senior Debt and (ii) senior in
right of payment to the Notes, in each case other than by reason of its
maturity. The Company may not Incur or permit to exist any Debt that is by its
terms subordinate in right of payment to the Notes unless such Debt constitutes
Subordinated Debt. (ss. 1009)
Limitation on Restricted Payments
The Company (i) may not, directly or indirectly, declare or pay any
dividend, or make any distribution in respect of its Capital Stock or to the
holders thereof (including pursuant to a merger or consolidation of the Company,
but excluding (a) any dividends or distributions payable solely in shares of its
Capital Stock (other than Disqualified Stock) or in options, warrants or other
rights to acquire its Capital Stock (other than Disqualified Stock) and (b)
dividends in accordance with the terms of the Convertible Preferred Stock or 12
3/4% Cumulative Exchangeable Preferred Stock, (ii) may not, and may not permit
any Subsidiary of the Company to, directly or indirectly, purchase, redeem or
otherwise acquire or retire for value (a) any Capital Stock of the Company or
(b) any options, warrants, or rights to purchase or acquire shares of Capital
Stock of the Company (in the case of either (a) or (b) other than in exchange
for the Company's Capital Stock (other than Disqualified Stock) or options,
warrants or other rights to purchase the Company's Capital Stock (other than
Disqualified Stock)), (iii) may not make, or permit any Subsidiary of the
Company to make, any loan, advance, capital contribution to or Investment in, or
payment on a Guarantee of any obligation of, any Affiliate, other than the
Company or a Wholly Owned Subsidiary of the Company, (iv) may not, and may not
permit any Subsidiary of the Company to, redeem, defease, repurchase, retire or
otherwise acquire or retire for value prior to any scheduled maturity, repayment
or sinking fund
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payment, Debt of the Company which is subordinated in right of payment to the
Notes (other than in exchange for the Company's Capital Stock (other than
Disqualified Stock) or options, warrants or other rights to purchase the
Company's Capital Stock (other than Disqualified Stock)) and (v) may not make
any Investment in any Subsidiary that is subject to an encumbrance or
restriction described under "--Limitations Concerning Distributions By and
Transfers to Subsidiaries" below or any Investments in any Unrestricted
Subsidiary (each of Clauses (i) through (v) being a "Restricted Payment"), if
at the time thereof: (1) an Event of Default, or an event that with the lapse
of time or the giving of notice, or both, would constitute an Event of
Default, shall have occurred and is continuing, or (2) upon giving effect to
such Restricted Payment, the aggregate of all Restricted Payments from March
31, 1995 exceeds the sum of: (a) the remainder of (x) 100% of the cumulative
Consolidated Cash Flow (or, in the case Consolidated Cash Flow shall be
negative, less 100% of such deficit) from March 31, 1995 through the last day
of the last full fiscal quarter immediately preceding such Restricted Payment
minus (y) the product of 1.4 times the cumulative Consolidated Interest
Expense from March 31, 1995 through the last day of the last full fiscal
quarter immediately preceding such Restricted Payment; plus (b) 100% of the
aggregate net proceeds received by the Company, including the fair market
value of property other than cash (as determined in good faith by the Board
of Directors and evidenced by a Board Resolution filed with the Trustee),
since March 31, 1995 from the issuance (other than to a Subsidiary) of
Capital Stock (other than Disqualified Stock) of the Company and options,
warrants or other rights to purchase or acquire Capital Stock of the Company
(other than Disqualified Stock) and the principal amount of Debt of the
Company that has been converted into Capital Stock of the Company (other than
Disqualified Stock and other than by a Subsidiary) since March 31, 1995; plus
(c) an amount equal to the net reduction in Investments made by the Company
and its Subsidiaries subsequent to the date of original issue of the Notes
pursuant to Clauses (iii) and (v) above in any Affiliate or Unrestricted
Subsidiary or Subsidiary subject to an encumbrance or restriction upon the
disposition, liquidation or repayment (including by way of dividends)
thereof, from redesignations of Unrestricted Subsidiaries as Subsidiaries or
from the removal of such encumbrance or restriction, but only to the extent
such amounts are not included in Consolidated Net Income and not to exceed in
the case of any Person the amount of Investments previously made by the
Company and its Subsidiaries in such Persons; plus (d) $15,000,000.
Notwithstanding the foregoing, so long as no Event of Default, or event
that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or
would result therefrom, the Company and any Subsidiary of the Company may (i)
pay any dividend within 60 days after declaration thereof if at the
declaration date such payment would have complied with the foregoing
provision; (ii) make any payment in redemption of Capital Stock of the
Company or options to purchase such Capital Stock granted to officers or
employees of the Company pursuant to the Company's Stock Option Plan (or any
successor plan) in connection with the severance or termination of officers
or employees (other than W. Don Cornwell and Stuart J. Beck) not to exceed
$1,000,000 in the aggregate at any one time outstanding; (iii) make
Investments, not to exceed $10,000,000 in the aggregate at any one time
outstanding, in (A) any Subsidiary which is subject to any encumbrance or
restriction described under "--Limitations Concerning Distributions By and
Transfers to Subsidiaries" or (B) any Unrestricted Subsidiary; (iv) exchange
its Convertible Preferred Stock or 12 3/4% Cumulative Exchangeable Preferred
Stock, in accordance with their respective terms, for the 7.75% Exchange
Debentures or the 12 3/4% Exchangeable Debentures, as the case may be, and
make payments of principal (premium, if any) and interest thereon in
accordance with the 7.75% Exchange Debenture Indenture or the 12 3/4%
Exchangeable Debenture Indenture, as the case may be; (v) refinance any Debt
otherwise permitted to be refinanced by Clause (ix) of the second paragraph
under "--Limitation on Debt" above or solely in exchange for or out of the
proceeds of the substantially concurrent sale (other than from or to a
Subsidiary) of shares of Capital Stock of the Company (other than
Disqualified Stock); (vi) purchase, redeem, acquire or retire any shares of
Capital Stock of the Company solely in exchange for or out of the proceeds of
the substantially concurrent sale (other than from or to a Subsidiary) of
shares of Capital Stock (other than Disqualified Stock) of the Company; (vii)
purchase or redeem any Debt from Net Available Proceeds to the extent
permitted or required under "--Limitation on Certain Asset Dispositions"; and
(viii) make Permitted Television Investments in an aggregate amount at any
one time outstanding not to exceed $25,000,000. Any payment or Investment
made pursuant to Clauses (i), (ii) or (iii) of this paragraph shall be a
Restricted Payment for purposes of calculating aggregate Restricted Payments
under the first paragraph of "--Limitation on Restricted Payments." (ss. 1010)
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Limitations Concerning Distributions By and Transfers to Subsidiaries
The Company may not, and may not permit any Subsidiary of the Company to,
suffer to exist any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company (i) to pay, directly or indirectly, dividends or make
any other distributions in respect of its Capital Stock or pay any Debt or other
obligation owed to the Company or any other Subsidiary of the Company; (ii) to
make loans or advances to the Company or any Subsidiary of the Company; or (iii)
to transfer any of its property or assets to the Company. Notwithstanding the
foregoing limitation, the Company may permit a Subsidiary to suffer to exist any
such encumbrance or restriction (A) included in any instrument governing Debt
Incurred by such Subsidiary pursuant to the first paragraph of "--Limitation on
Debt" for the purpose of financing all or part of the purchase price or cost of
construction or improvements of property, provided, however, that the principal
amount of the Debt so Incurred does not exceed the purchase price or cost of
construction or improvements of such property; (B) included in the Credit
Agreement; (C) imposed by virtue of applicable corporate law or regulation and
relating solely to the payment of dividends or distributions to shareholders;
(D) pursuant to an agreement relating to any Debt Incurred by a Person prior to
the date on which such Person became a Subsidiary of the Company and outstanding
on such date and not Incurred in anticipation of becoming a Subsidiary; (E) with
respect to restrictions of the nature described in Clause (iii) above, included
in a contract entered into in the ordinary course of business and consistent
with past practices that contains provisions restricting the assignment of such
contract; (F) pursuant to an agreement effecting a renewal, refunding or
extension of Debt Incurred pursuant to an agreement referred to in Clause (A),
(B) or (D) above; provided, however, that the provisions contained in such
renewal, refunding or extension agreement relating to such encumbrance or
restriction are no more restrictive in any material respect than the provisions
contained in the agreement the subject thereof, as determined in good faith by
the Board of Directors and evidenced by a resolution of the Board of Directors
filed with the Trustee; or (G) included in any instrument governing Capital
Lease Obligations whose Attributable Value will not exceed $5,000,000 in the
aggregate at any one time outstanding or included in any instrument governing a
Sale and Leaseback Transaction whose Attributable Value does not exceed
$2,000,000 and the Attributable Value of all such Sale and Leaseback
Transactions entered into since the date of the Indenture does not exceed
$5,000,000 in the aggregate; provided that in each case, after giving effect to
the Incurrence of such Capital Lease Obligation or Sale and Leaseback and the
receipt and application of the proceeds thereof, the ratio of the aggregate
principal amount of Debt of the Company and its Subsidiaries outstanding as of
the most recent available balance sheet to Pro Forma Consolidated Cash Flow for
the preceding four full fiscal quarters, determined on a pro forma basis as if
such Capital Lease Obligation had been Incurred, or such Sale and Leaseback
Transaction had taken place, and the proceeds therefrom had been applied at the
beginning of such four fiscal quarters, would be less than 7.0 to 1. (ss. 1011)
Limitation on Transactions with Affiliates
The Company may not, and may not permit any Subsidiary of the Company to,
directly or indirectly, enter into any transaction after the date of the
Indenture with any Affiliate (other than the Company or a Wholly Owned
Subsidiary of the Company), unless a majority of the disinterested members of
the Board of Directors determines in its reasonable good faith judgment
evidenced by a Board Resolution filed with the Trustee that: (1) the terms of
such transaction are in the best interests of the Company or such Subsidiary;
and (2) such transaction is on terms no less favorable to the Company or such
Subsidiary than those that could be obtained in a comparable arm's-length
transaction with an entity that is not an Affiliate. Notwithstanding the
foregoing, the Company shall not be required to file any Board Resolution
referred to in the preceding sentence with respect to matters solely concerning
the compensation of employees. (ss. 1012)
Limitation on Certain Asset Dispositions
The Company may not, and may not permit any Subsidiary to, make an Asset
Disposition in one or more transactions in any fiscal year unless: (i) the
consideration for such disposition will be at least equal to the fair market
value thereof as determined by the Board of Directors; (ii) at least 85% of the
consideration for such disposition consists of cash or readily marketable cash
equivalents or the assumption of Debt of the Company or a Subsidiary or other
obligations relating to such assets and a release from all liability on the Debt
or other obligations assumed; and (iii) all Net Available Proceeds of such
disposition and from the sale of any marketable cash equivalents received
thereby, less any amounts invested as described in the second sentence of the
following paragraph, are applied (A) first, within 120 days of such disposition,
to the reduction of any obligations then outstanding under the Credit Agreement
(or any successor credit facility) to the extent the terms of such Credit
Agreement (or successor credit facility) require such application or prohibit
prepayment of the Notes; (B) second,
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within 120 days of such disposition, to the repayment of any other Senior
Debt to the extent the terms of such Senior Debt require such application or
prohibit prepayment of the Notes; (C) third, to the extent of any remaining
Net Available Proceeds and so long as any 10 3/8% Notes are outstanding, to
make an offer to purchase the 10 3/8% Notes in accordance with the
requirements of the 10 3/8% Note Indenture; (D) fourth, to the extent of any
remaining Net Available Proceeds and so long as any 9 3/8% Notes are
outstanding, to make an offer to purchase the 9 3/8% Notes in accordance with
the requirements of the 9 3/8% Notes Indenture; (E) fifth, to the extent more
than $5,000,000 of Net Available Proceeds are not required to be applied to
the repayments as specified in Clauses (A), (B), (C) and (D), to purchases of
Outstanding Notes pursuant to an Offer to Purchase commenced within 120 days
of such disposition, at a purchase price equal to 100% of their principal
amount plus accrued interest to the date of purchase; (F) sixth, to the
extent of any remaining Net Available Proceeds following the completion of
the Offer to Purchase Notes required by Clause (E), to the repayment of other
Debt of the Company or Debt of a Subsidiary of the Company, to the extent
permitted under the terms thereof; and (G) seventh, to the extent of any
remaining Net Available Proceeds, to any other use as determined by the
Company which is not otherwise prohibited by the Indenture.
Notwithstanding Clause (ii) above, all or a portion of the consideration
for any such disposition may consist of all or substantially all of the assets
or a majority of the Voting Stock of an existing television or radio
broadcasting or cable television business or franchise (whether existing as a
separate entity, subsidiary, division, unit or otherwise) if after giving effect
to any such disposition and related acquisition of assets, (x) the ratio of the
aggregate principal amount of Debt of the Company and its Subsidiaries
outstanding as of the most recent available balance sheet to Pro Forma
Consolidated Cash Flow for the preceding four fiscal quarters, determined on a
pro forma basis as if such transaction had taken place and the proceeds
therefrom had been applied at the beginning of such four fiscal quarters, would
be less than 7.0 to 1; (y) no Event of Default or event that, with the passing
of time or the giving of notice, or both, will constitute an Event of Default
shall have occurred or be continuing; and (z) the Net Available Proceeds, if
any, are invested in accordance with the next sentence of this paragraph.
Notwithstanding Clause (iii) above, the Company shall not be required to
repurchase or redeem any Debt to the extent that the Net Available Proceeds from
any Asset Disposition are invested within 120 days of such disposition in
television or radio broadcasting or cable television assets or franchises or the
Company shall have entered into a definitive agreement to acquire such assets
subject only to customary conditions, including, without limitation, the
approval of the Federal Communications Commission (but excluding any conditions
with respect to the financing of such acquisition or due diligence) and such
acquisition shall have been consummated within 240 days of such disposition.
Notwithstanding the foregoing two sentences, the Company shall not be entitled
to take as consideration for an Asset Disposition, or invest Net Available
Proceeds in lieu of repurchasing or redeeming Debt in, any television or radio
broadcasting or cable television assets, business or franchise unless the
majority of the assets (including intangibles) so acquired or the majority of
the assets (including intangibles) of such business or franchise so acquired are
related to television or radio broadcasting. The Company will not be entitled to
any credit against its obligation to purchase Outstanding Notes pursuant to this
covenant for Notes previously acquired by reason of a redemption, tender offer
or other repurchase. (ss. 1013)
Limitation on Liens Securing Company Subordinated Debt
The Company may not, and may not permit any Subsidiary of the Company to,
Incur or suffer to exist any Lien on or with respect to any property or assets
now owned or hereafter acquired to secure any Debt of the Company that is
expressly by its terms subordinate or junior in right of payment (other than by
reason of maturity) to any other Debt of the Company without making, or causing
such Subsidiary to make, effective provision for securing the Notes (x) equally
and ratably with such Debt as to such property or assets for so long as such
Debt will be so secured or (y) in the event such Debt is subordinate in right of
payment (other than by reason of maturity) to the Notes, prior to such Debt as
to such property or assets for so long as such Debt will be so secured. (ss.
1015)
Limitation on Guarantees of Company Subordinated Debt
The Company may not permit any Subsidiary, directly or indirectly, to
assume, Guarantee or in any other manner become liable with respect to any Debt
of the Company that is expressly by its terms subordinate or junior in right of
payment (other than by reason of maturity) to any other Debt of the Company.
(ss. 1016)
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Limitation on Issuances and Sale of Capital Stock of Wholly Owned Subsidiaries
The Company (i) may not, and may not permit any Wholly Owned Subsidiary
to, transfer, convey, sell or otherwise dispose of any Capital Stock of such or
any other Wholly Owned Subsidiary to any Person (other than the Company or a
Wholly Owned Subsidiary) unless such transfer, conveyance, sale or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and the
Net Available Proceeds from such transfer, conveyance, sale or other disposition
are applied in accordance with "--Limitation on Certain Asset Dispositions"
(including the provisions thereof relating to the application of the Net
Available Proceeds therefrom) and (ii) may not permit any Wholly Owned
Subsidiary to issue shares of its Capital Stock (other than directors'
qualifying shares), or securities convertible into, or warrants, rights or
options to subscribe for or purchase shares of, its Capital Stock to any Person
other than to the Company or a Wholly Owned Subsidiary unless in the case of
either Clause (i) or (ii) above (A) after giving effect to any such sale,
disposition or issuance, the ratio of the aggregate principal amount of Debt of
the Company and its Subsidiaries outstanding as of the most recent available
balance sheet to Pro Forma Consolidated Cash Flow for the preceding four fiscal
quarters, determined on a pro forma basis as if such sale, disposition or
issuance had taken place and the Net Available Proceeds therefrom had been
applied at the beginning of such four fiscal quarters, would be less than 7.0 to
1; (B) immediately after giving effect to such sale, disposition or issuance
(including any acquisition of assets with Net Available Proceeds) no Event of
Default or event that, with the passing of time or the giving of notice, or
both, would constitute an Event of Default shall have occurred or be continuing;
(C) the assets acquired pursuant to such sale, disposition or issuance, are
either (x) at least 85% cash or readily marketable cash equivalents and the Net
Available Proceeds from such sale, disposition or issuance are applied in
accordance with "--Limitation on Certain Asset Dispositions" above (including
the provisions thereof relating to the application of Net Available Proceeds
therefrom) or (y) all or substantially all of the assets or a majority of the
Voting Stock of an existing television or radio broadcasting or cable television
business or franchise (whether existing as a separate entity, subsidiary,
division, unit or otherwise) (subject to the restrictions described in the
penultimate sentence of the second paragraph under "--Limitation on Certain
Asset Dispositions") above; (D) after giving effect to any such sale,
disposition or issuance, such Wholly Owned Subsidiary shall be a Subsidiary of
the Company; and (E) the consideration for such sale, disposition or issuance of
Capital Stock will be at least equal to the fair market value thereof as
determined by the Board of Directors. (ss. 1014)
Provision of Financial Information
So long as any of the Notes are Outstanding, the Company will file with
the Commission the annual reports, quarterly reports and other documents that
the Company would have been required to file with the Commission pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Company were subject to
such Sections, and the Company will provide to all Holders and file with the
Trustee copies of such reports and documents. (ss. 1018)
Mergers, Consolidations and Certain Sales of Assets
The Company (i) may not consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company or any
Subsidiary of the Company (in a transaction in which such Subsidiary remains a
Subsidiary of the Company); and (ii) may not, directly or indirectly, transfer,
sell, convey, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety; unless: (1) immediately before and after
giving effect to such transaction and treating any Debt that becomes an
obligation of the Company or a Subsidiary of the Company, as a result of such
transaction, as having been Incurred by the Company or such Subsidiary at the
time of the transaction, no Event of Default or event that, with the passing of
time or the giving of notice, or both, would become an Event of Default, shall
have occurred and be continuing; (2) in a transaction in which the Company does
not survive or in which the Company sells, leases or otherwise disposes of all
or substantially all of its assets, the successor entity to the Company is
organized under the laws of the United States or any State thereof or the
District of Columbia and will expressly assume, by a supplemental indenture
executed and delivered to the Trustee in form satisfactory to the Trustee, all
of the Company's obligations under the Indenture; (3) immediately after giving
effect to such transaction, the Company or the successor entity to the Company
would have a ratio of aggregate principal amount of Debt of the Company and its
Subsidiaries outstanding as of the most recent available balance sheet to Pro
Forma Consolidated Cash Flow for the preceding four full fiscal quarters,
determined on a pro forma basis as if such transaction had taken place and the
proceeds therefrom had been applied at the beginning of such four fiscal
quarters, of less than 7.0 to 1; (4) if, as a result of any such transaction,
property or assets of the Company would become subject to a Lien prohibited by
the provisions of the Indenture described under "--Limitation on Liens Securing
Company Subordinated Debt" above,
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the Company or the successor entity to the Company shall have secured the
Notes as required by such covenant; and (5) certain other conditions are met.
Upon any such sale of all or substantially all of the assets of the Company
to another Person or any merger or consolidation where the Company is not the
surviving entity, such Person or survivor shall become the obligor in respect
of the Notes and the Company will be relieved of all further obligations and
covenants, including the "--Limitation on Certain Asset Dispositions" above,
under the Indenture and the Notes. (ss. 801)
Change of Control
Within 30 days following the date of the consummation of a transaction
that will result in a Change of Control, the Company will commence an Offer to
Purchase all Outstanding Notes, subject to the consummation of the Change of
Control, at a purchase price equal to 101% of their aggregate principal amount
plus accrued interest to the date of purchase. Prior to the commencement of the
Offer, and in any event prior to 30 days following the date of the consummation
of a transaction that will result in a Change of Control, the Company will (a)
to the extent then required to be repaid, pay in full all outstanding Senior
Debt or (b) obtain the requisite consents then required under agreements
governing such debt. A Change of Control will be deemed to have occurred at such
time as any Person or any Persons (other than one or more Permitted Holders)
acting together that would constitute a "group" (a "Group") for purposes of
Section 13(d) of the Exchange Act becomes the beneficial owner of 50% or more of
the total voting power of all classes of Voting Stock of the Company or at such
time as such Person or Group succeeds in having a sufficient number of its
nominees elected to the Board of Directors of the Company such that such
nominees, when added to any existing directors remaining on the Board of
Directors of the Company after such election who are Affiliates of such Group,
will constitute a majority of the Board of Directors of the Company. "Permitted
Holder" means (i) W. Don Cornwell and Stuart J. Beck, (ii) the members of the
immediate family of either of the persons referred to in Clause (i) above, (iii)
any trust created for the benefit of the persons described in Clause (i) or (ii)
above or any of their estates or (iv) any corporation that is controlled by any
person described in Clause (i), (ii) or (iii) above. (ss. 1017)
Upon the occurrence of a Change of Control, the Company will also be
required to offer to purchase all the Existing Notes at 101% of the principal
amount thereof plus accrued and unpaid interest thereon to the date of purchase,
of which $249.8 million principal amount was outstanding at March 31, 1998. Also
a change of Control is an Event of Default under the Credit Agreement. If a
Change of Control were to occur, there can be no assurance that the Company
would have sufficient funds to pay all borrowings under the Credit Agreement and
pay the Change of Control purchase price for all Existing Notes. The Notes will
be subordinated in right of payment to the prior full payment of all Senior
Indebtedness, including Senior Debt outstanding under the Credit Agreement.
Events of Default
The following will be Events of Default under the Indenture: (a) failure
to pay any interest on any Note when due, continued for 30 days; (b) failure to
pay principal of (or premium, if any, on) any Note when due; (c) failure to
purchase Notes required to be purchased pursuant to an Offer to Purchase as
described under the "--Limitation on Certain Asset Dispositions" and the "Change
of Control" covenants in accordance with the terms of such Offer to Purchase;
(d) failure to perform or comply with the provisions described in Clause (a) or
(b) under "Change of Control"; (e) failure to perform or comply with the
provisions described under "Mergers, Consolidations and Certain Sales of
Assets"; (f) failure to perform any other covenant or warranty of the Company in
the Indenture, continued for 60 days after written notice as provided in the
Indenture; (g) failure to pay, at final maturity, in excess of $5,000,000
principal amount of any indebtedness of the Company or any Subsidiary of the
Company, or acceleration of any indebtedness of the Company or any Subsidiary of
the Company in an aggregate principal amount in excess of $5,000,000; (h) the
rendering of a final judgment or judgments (not subject to appeal) against the
Company or any of its Subsidiaries in an aggregate principal amount in excess of
$3,000,000 which remains unstayed, in effect and unpaid for a period of 60
consecutive days thereafter; and (i) certain events in bankruptcy, insolvency or
reorganization affecting the Company or any Subsidiary of the Company. (ss. 501)
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (ss. 603) Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Notes will have the
right to direct the time, method and
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place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. (ss. 512)
If an Event of Default shall occur and be continuing, either the Trustee
or the Holders of at least 25% in aggregate principal amount of the Outstanding
Notes may accelerate the maturity of all Notes; provided, however, that after
such acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of Outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal, have been cured
or waived as provided in the Indenture. (ss. 502) For information as to waiver
of defaults, see "--Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the Holders of at least 25% in aggregate principal amount of
the Outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days. (ss.
507) However, such limitations do not apply to a suit instituted by a Holder of
a Note for enforcement of payment of the principal of (and premium, if any) or,
interest on such Note on or after the respective due dates expressed in such
Note. (ss. 508)
The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. (ss. 1019)
Defeasance
The Indenture will provide that, at the option of the Company, (A) if
applicable, the Company will be discharged from any and all obligations in
respect of the Outstanding Notes or (B) if applicable, the Company may omit to
comply with certain restrictive covenants, and that such omission shall not be
deemed to be an Event of Default under the Indenture and the Notes, and that the
Notes shall no longer be subject to the subordination provisions in either case
(A) or (B) upon irrevocable deposit with the Trustee, in trust, of money and/or
U.S. government obligations which will provide money in an amount sufficient in
the opinion of a nationally recognized accounting firm to pay the principal of
and premium, if any, and each installment of interest, if any, on the
Outstanding Notes. With respect to Clause (B), the obligations under the
Indenture other than with respect to such covenants and the Events of Default
other than the Event of Default relating to such covenants above shall remain in
full force and effect. Such trust may only be established if, among other things
(i) with respect to Clause (A), the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a change
in law, which in the Opinion of Counsel provides that Holders of the Notes will
not recognize gain or loss for Federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to Federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred; or, with
respect to Clause (B), the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Holders of the Notes will not recognize gain or
loss for Federal income tax purposes as a result of such deposit and defeasance
and will be subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred; (ii) no Event of Default or event that, with the passing of
time or the giving of notice, or both, shall constitute an Event of Default
shall have occurred or be continuing; (iii) the Company has delivered to the
Trustee an Opinion of Counsel to the effect that such deposit shall not cause
the Trustee or the trust so created to be subject to the Investment Company Act
of 1940; and (iv) certain other customary conditions precedent. (Article
Thirteen)
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of (or the premium), or interest on, any Note, (c) change the
place or currency of payment of principal of (or premium), or interest on, any
Note, (d) impair the right to institute suit for the enforcement of any payment
on or with respect to any Note, (e) reduce the above-stated percentage of
Outstanding Notes necessary to
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modify or amend the Indenture, (f) reduce the percentage of aggregate
principal amount of Outstanding Notes necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults, (g)
modify any provisions of the Indenture relating to the modification and
amendment of the Indenture or the waiver of past defaults or covenants,
except as otherwise specified, or (h) modify any Offer to Purchase for the
Notes required under the "--Limitation on Certain Asset Dispositions" and the
"Change of Control" covenant thereof. (ss. 902)
The Holders of a majority in aggregate principal amount of the
Outstanding Notes may waive compliance by the Company with certain
restrictive provisions of the Indenture. (ss. 1020) The Holders of a majority
in aggregate principal amount of the Outstanding Notes may waive any past
default under the Indenture, except a default in the payment of principal,
premium, if any, or interest or a default arising from failure to purchase
any Note tendered required to be purchased pursuant to an Offer to Purchase.
(ss. 513)
The Trustee
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs. (ss.ss. 601
and 603)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with the Company or any Affiliate, provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign. (ss. 608)
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. (ss. 101)
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries (including
a consolidation or merger of any such Subsidiaries with or into another Person
in a transaction in which such Subsidiary ceases to be a Subsidiary, but
excluding a disposition by a Subsidiary of such Person to such Person or a
Wholly Owned Subsidiary of such Person or by such Person to a Wholly Owned
Subsidiary of such Person) of (i) shares of Capital Stock (other than directors'
qualifying shares) or other ownership interests of a Subsidiary of such Person,
(ii) substantially all of the assets of such Person or any of its Subsidiaries
representing a division or line of business or (iii) other assets or rights of
such Person or any of its Subsidiaries outside of the ordinary course of
business. Asset Disposition shall not include a Sale and Leaseback Transaction
to the extent that the Attributable Value of such Sale and Leaseback Transaction
does not exceed $2,000,000 and the aggregate Attributable Value of all such Sale
and Leaseback Transactions entered into since the date of the Indenture does not
exceed $5,000,000.
"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 generally accepted accounting
principles, 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
generally accepted accounting principles. The net amount of rent
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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 generally accepted accounting
principles.
"Average Life" means, as of the date of determination, with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of the
numbers of years from the date of determination to the dates of each successive
scheduled principal payments of such Debt, multiplied by the amount of such
principal payments by (ii) the sum of all such principal payments.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The Borough of Manhattan,
The City of New York, New York are authorized or obligated by law or executive
order to close.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow" of any Person means for any period the
Consolidated Net Income for such period increased by the sum of (i) Consolidated
Interest Expense of such Person and its Consolidated Subsidiaries for such
period, plus (ii) Consolidated Income Tax Expense of such Person and its
Consolidated Subsidiaries for such period, plus (iii) the consolidated
depreciation and amortization expense included in the income statement of such
Person and its Consolidated Subsidiaries for such period, plus (iv) other
non-cash charges of such Person and its Consolidated Subsidiaries deducted in
determining Consolidated Net Income (other than amortization of film and program
assets) for such period, minus (v) non-cash items of such Person and its
Consolidated Subsidiaries added in determining Consolidated Net Income for such
period; provided, however, Consolidated Cash Flow shall not include Consolidated
Net Income and the items specified in Clauses (i) through (iv) above to the
extent attributable to a Consolidated Subsidiary of such Person that is subject
to restrictions preventing the payment of dividends and the making of
distributions (by loans, advances, intercompany transfers or otherwise) to such
Person, but shall include such payments and distributions as could be made in
accordance with such restrictions.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Consolidated
Subsidiaries for such period.
"Consolidated Interest Expense" for any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication
(or, to the extent not so included, with the addition of), (i) the portion of
any rental obligation in respect of any Capital Lease Obligation allocable to
interest expense in accordance with generally accepted accounting principles,
(ii) the amortization of Debt discounts, (iii) any payments or fees with
respect to letters of credit, bankers acceptances or similar facilities, (iv)
fees with respect to interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements or Foreign Currency hedge,
exchange or similar agreements other than fees or charges related to the
acquisition or termination thereof which are not allocable to interest
expense in accordance with generally accepted accounting principles, (v)
Preferred Stock dividends declared and payable in cash and (vi) accrued
Disqualified Stock dividends, whether or not declared or paid.
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"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (i) the
net income (or loss) of any Person acquired by such Person or a Subsidiary of
such Person in a pooling-of interests transaction for any period prior to the
date of such transaction, (ii) the net income (or loss) of any Person that is
not a Consolidated Subsidiary of such Person, (iii) gains or losses on Asset
Dispositions by such Person or its Consolidated Subsidiaries and (iv) all
extraordinary gains and extraordinary losses; and provided, further, that there
shall be added thereto, to the extent not otherwise included in Consolidated Net
Income, the amount of any dividends or other distributions actually paid to such
Person during such period by a Person that is not a Consolidated Subsidiary of
such Person.
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as Consolidated Persons in such Person's financial
statements in accordance with generally accepted accounting principles,
provided, however, Consolidated Subsidiaries shall not include any Unrestricted
Subsidiary created in accordance with the definition of Unrestricted Subsidiary.
"Credit Agreement" means the Third Amended and Restated Credit Agreement,
dated as of September 4, 1996, by and among the Company, the lenders listed
therein, Bankers Trust Company, as Agent, and The Bank of New York, First Union
National Bank of North Carolina, Goldman Sachs Credit Partners L.P. and Union
Bank of California, N.A., as Co-Agents, as it may be amended, restated, modified
or replaced from time to time.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (iv) every obligation of such Person issued or assumed
as the deferred purchase price of property or services (but excluding trade
accounts payable, film contract rights or accrued liabilities arising in the
ordinary course of business), (v) every Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Disqualified Stock of
such Person at the time of determination, and (vii) every obligation of the type
referred to in Clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed
or is responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise.
"Disqualified Stock" means any Capital Stock of the Company or any
Subsidiary which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including upon the
occurrence of an event), matures or is required to be redeemed (pursuant to a
sinking fund obligation or otherwise) or is redeemable at the option of the
holder thereof, in whole or in part (other than a redemption which is
conditioned upon a change of control of the Company), on or prior to the final
scheduled maturity of the Notes.
"generally accepted accounting principles" means, with respect to any
computation, such accounting principles as are generally accepted in the United
States as consistently applied by the Company at the date of such computation.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation,
any obligation of such Person, (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Debt, (ii) to purchase property, securities or services for the purpose of
assuring the holder of such Debt of the payment of such Debt, or (iii) to
maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Debt (and "Guaranteed," "Guaranteeing" and "Guarantor"
shall have meanings correlative to the foregoing); provided, however, that
the Guarantee by any Person shall not include endorsements by such Person for
collection or deposit, in either case, in the ordinary course of business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and
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"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that
results in an obligation of such Person that exists at such time becoming
Debt shall not be deemed an Incurrence of such Debt.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property to others or payments for property or services for the account
or use of others, or otherwise) to, or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Debt issued by, any
other Person including any payment on a Guarantee of any obligation of such
other Person.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Local Marketing Agreement" means any agreement pursuant to which the
Company or any of its Subsidiaries agrees to provide television management
services, television broadcasting or assets related to the provision of
television broadcasting in exchange for cash payments and/or the right to charge
others for the provision of advertising or other services or products.
"Net Available Proceeds" from any Asset Disposition or issuance of
Capital Stock by any Person means cash or readily marketable cash equivalents
received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration
received in the form of assumption by the acquiree of Debt or other
obligations relating to such properties or assets or received in any other
noncash form) therefrom by such Person, net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses Incurred and
all federal, state, provincial, foreign and local taxes required to be
accrued as a liability as a consequence of such Asset Disposition or
issuance, (ii) all payments made by such Person or its Subsidiaries on any
Debt which is secured by such assets in accordance with the terms of any Lien
upon or with respect to such assets or which must by the terms of such Lien,
or in order to obtain a necessary consent to such Asset Disposition or
issuance or by applicable law be repaid out of the proceeds from such Asset
Disposition or issuance, (iii) all distributions and other payments made to
minority interest holders in Subsidiaries of such Person or joint ventures as
a result of such Asset Disposition, and (iv) reserves established in
accordance with generally accepted accounting principles against any
liabilities associated with such assets and retained by such Person or any
Subsidiary thereof, as the case may be, after such Asset Disposition,
including, without limitation, liabilities under any indemnification
obligations and severance and other employee termination costs associated
with such Asset Disposition, in each case as determined by the Board of
Directors, in its reasonable good faith judgment evidenced by a resolution of
the Board of Directors filed with the Trustee; provided, however, that any
reduction in such reserve following the consummation of such Asset
Disposition will be treated for all purposes of the Indenture and the Notes
as a new Asset Disposition at the time of such reduction with Net Available
Proceeds equal to the amount of such reduction.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the Note Register on the date of the Offer, offering to purchase
up to the principal amount of Notes specified in such Offer at the purchase
price specified in such Offer. Unless otherwise required by applicable law,
the Offer shall specify an expiration date (the "Expiration Date") of the
Offer to Purchase which shall be, subject to any contrary requirements of
applicable law, not less than 30 days or more than 60 days after the date of
such Offer and a settlement date (the "Purchase Date") for the purchase of
Notes within five Business Days after the Expiration Date. The Company shall
notify the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain information concerning the
business of the Company and its Subsidiaries which the Company in good faith
believes will enable such Holders to make an informed decision with respect
to the Offer to Purchase (which at a minimum will include (i) the most recent
annual and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to the "Provision of
Financial Information" covenant described above (which requirements may be
satisfied by delivery of such documents together with the Offer), (ii) a
description of material developments in the
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Company's business subsequent to the date of the latest of such financial
statements referred to in Clause (i) (including a description of the events
requiring the Company to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Company to make the Offer to Purchase, and (iv) any
other information required by applicable law to be included therein). The Offer
shall contain all instructions and materials necessary to enable such Holder to
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Notes offered
to be purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such has been determined pursuant to the
Section hereof requiring the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000 aggregate
principal amount of Notes accepted for payment (as specified pursuant to the
Indenture);
(5) that the Holder may tender all or any portion of the Notes registered
in the name of such Holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased
by the Company pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the purchase price will become due and
payable upon each Note accepted for payment pursuant to the Offer to Purchase
and that interest thereon shall cease to accrue on and after the Purchase Date;
(9) that each Holder electing to tender a Note pursuant to the Offer to
Purchase will be required to surrender such Note at the place or places
specified in the Offer prior to the close of business on the Expiration Date
(such Note being, if the Company or the Trustee so requires, duly endorsed by,
or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of Notes
tendered if the Company (or its Paying Agent) receives, not later than the close
of business on the Expiration Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder tendered, the certificate number of the Note the Holder tendered and
a statement that such Holder is withdrawing all or a portion of his tender;
(11) that (i) if Notes in an aggregate principal amount less than or equal
to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase all such Notes and (ii) if Notes in an
aggregate principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes
having an aggregate principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only Notes in
denominations of $1,000 or integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Note is purchased only in part,
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the Notes so
tendered.
In the event that the Company is required to make an Offer to Purchase,
the Company intends to comply with any applicable securities laws and
regulations, including any applicable requirements of Rule 14e-1 under the
Exchange Act.
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"Permitted Television Investment" means an Investment in any Person which
is a Restricted Payment within the meaning of either Clause (iii) or (v) of the
definition of Restricted Payment (i) with which the Company has entered into a
Local Marketing Agreement or (ii) (a) for the purpose of facilitating the
delivery by the Company or any of its Subsidiaries of advanced television
service, including high definition television, or interactive television or (b)
to otherwise permit the Company or any of its Subsidiaries to exploit any other
emerging technologies relating to television broadcasting. For purposes of
calculating the aggregate amount of outstanding Permitted Television
Investments, any Investment (a) in a Person which, subsequent to such
Investment, becomes a Wholly Owned Subsidiary of the Company, or (b) that
otherwise, due to a change in the status of such person, would not, if then
made, be deemed a Restricted Payment, shall no longer be deemed outstanding as
of the date such Person becomes a Wholly Owned Subsidiary or otherwise changes
its status, as the case may be.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Pro Forma Consolidated Cash Flow" of any Person means for any period
the Consolidated Cash Flow for such period; provided, that, in the event such
Person or its Subsidiaries has made Asset Dispositions or acquisitions of
assets, properties or franchises not in the ordinary course of business
(including acquisitions of other Persons by merger, consolidation or purchase
of Capital Stock) or has permitted an encumbrance or restriction pursuant to
the provisions described under "--Limitation Concerning Distributions By and
Transfers to Subsidiaries" during or after such period, such computation
shall be made on a pro forma basis (whether the acquisition is treated as a
purchase or a pooling under generally accepted accounting principles) as if
the Asset Dispositions or acquisitions or restriction or encumbrance had
taken place on the first day of such period. If, during or after the period
for which such calculation is made, the Person or any of its Subsidiaries has
acquired or disposed of a television or radio broadcasting or cable
television franchise that does not constitute an existing business (whether
existing as a separate entity, subsidiary, division, unit or otherwise), the
pro forma effect of such acquisition or disposition shall be deemed to be the
Consolidated Cash Flow attributable to such franchise (or a reasonable
estimate thereof) for the period for which such calculation is made prior to
such acquisition or disposition, provided that such estimated Consolidated
Cash Flow shall be determined on the basis of comparable franchises,
evidenced in a Board Resolution and reported on by a nationally recognized
accounting firm.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Ratings Group
or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
180 days from the date of acquisition thereof and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Ratings Group or at least
P-1 from Moody's Investors Service, Inc.; and (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
unimpaired capital and surplus of not less than $100,000,000.
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than 270 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Subordinated Debt" means Debt of the Company as to which the payment of
principal of (and premium, if any) and interest and other payment obligations in
respect of such Debt shall be subordinate to the prior payment in
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full of the Notes to at least the following extent: (i) no payments of
principal of (or premium, if any) or interest on or otherwise due in respect
of such Debt may be permitted for so long as any default in the payment of
principal (or premium, if any) or interest on the Notes exists; and (ii) in
the event that any other default that with the passing of time or the giving
of notice, or both, would constitute an event of default exists with respect
to the Notes, upon notice by 25% or more in principal amount of the Notes to
the Trustee, the Trustee shall have the right to give notice to the Company
and the holders of such Debt (or trustees or agents therefor) of a payment
blockage, and thereafter no payments of principal of (or premium, if any) or
interest on or otherwise due in respect of such Debt may be made for a period
of 179 days from the date of such notice. Notwithstanding the foregoing, the
7.75% Exchange Debentures and the 12 3/4% Exchange Debentures shall
constitute Subordinated Debt unless and until the terms thereof shall be
amended or modified after the date of the Indenture.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person, or by such Person
and one or more other Subsidiaries thereof or (ii) any other Person (other
than a corporation) in which such Person, or one or more other Subsidiaries
of such Person or such Person and one or more other Subsidiaries thereof,
directly or indirectly, has at least a majority ownership and power to direct
the policies, management and affairs thereof. Subsidiary shall not include an
Unrestricted Subsidiary created in accordance with the definition of
Unrestricted Subsidiary.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such by
the Board of Directors as set forth below where (a) neither the Company nor any
of its other Subsidiaries (other than another Unrestricted Subsidiary) (i)
provides credit support for, or Guarantee of, any Debt of such Subsidiary
(including any undertaking, agreement or instrument evidencing such Debt) or
(ii) is directly or indirectly liable for any Debt of such Subsidiary, and (b)
no default with respect to any Debt of such Subsidiary (including any right
which the holders thereof may have to take enforcement action against such
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Debt of the Company and its other Subsidiaries (other than another
Unrestricted Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity, (2) any Subsidiary of the Company (other than a Subsidiary existing as
of the date of the Indenture or successor to any such Subsidiary) which at the
time of determination shall be an Unrestricted Subsidiary (as designated by the
Board of Directors, as provided below) and (3) any Subsidiary of an Unrestricted
Subsidiary where Clauses (a) and (b) are true with respect to such Subsidiary.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary, provided, that either (x) the Subsidiary to be so designated has
total assets of $1,000 or less or (y) immediately after giving effect to such
designation, the ratio of the aggregate principal amount of Debt of the Company
and its Subsidiaries outstanding as of the most recent available balance sheet
to Pro Forma Consolidated Cash Flow for the preceding four full fiscal quarters,
determined on a pro forma basis as if such Subsidiary had been an Unrestricted
Subsidiary at the beginning of such four fiscal quarters, would be less than 7.0
to 1. The Board of Directors may designate any Unrestricted Subsidiary to be a
Subsidiary, provided that, immediately after giving effect to such designation,
the ratio of the aggregate principal amount of Debt of the Company and its
Subsidiaries outstanding as of the most recent available balance sheet to Pro
Forma Consolidated Cash Flow for the preceding four full fiscal quarters,
determined on a pro forma basis as if such Unrestricted Subsidiary had been a
Subsidiary at the beginning of such four fiscal quarters, would be less than 7.0
to 1. Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Set forth below is a summary of certain debt instruments to which the
Company is a party. The summary does not purport to be complete, and where
reference is made to particular provisions of a debt instrument, such
provisions, including the definition of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. Copies of such agreements have been filed by the
Company with the Commission.
Credit Agreement
On June 10, 1998, the Company entered into a new Credit Agreement (the
"Credit Agreement") to provide for a senior secured revolving credit facility
of $260,000,000 (the "Revolving Loans"), none of which is committed, and
borrowings of up to an additional $240,000,000 on an uncommitted basis (the
"Additional Loans"), in each instance, the proceeds of which may be used for
(i) working capital and other general corporate purposes, (ii) the repurchase
of senior subordinated notes (iii) the redemption or repurchase of the
Company's outstanding common and preferred stock, (iv) certain investments
and (v) acquisitions. The Company contemplates financing the acquisition of
KOFY with the net proceeds of the sale of WWMT and WLAJ, after payment of the
purchase price of WLAJ, and borrowings under the Credit Agreement.
Borrowings under the Credit Agreement are (i) secured by a lien on
substantially all of the current and future assets of the Company, other than
broadcast licenses (except to the extent permitted by law) and (ii) guaranteed
by all present and future subsidiaries of the Company, which guarantees are
secured by the pledge of all issued and outstanding shares of capital stock of,
and liens on substantially all of the current and future assets of, the
Company's current and future subsidiaries. The Credit Agreement contains a
negative pledge covenant with respect to the Company's broadcast licenses.
Outstanding principal balances under the Credit Agreement bear interest
at floating rates equal to the LIBOR Rate plus marginal rates between 0.875%
and 2.500% or the agent bank's prime rate plus marginal rates between 0% and
1.250%. The marginal rates are subject to adjustment under the Credit
Agreement, based upon changes in the Company's ratio of total funded debt to
broadcast cash flow after corporate overhead. The principal amount of the
Revolving Loans is payable quarterly, and the Revolving Loan commitments are
subject to reduction in installments, on March 31, June 30, September 30 and
December 31 of each year, commencing December 31, 2000, through December 31,
2005 when the final payment is due on the Revolving Loans. The principal
amounts of any Additional Loans are payable quarterly, and the Additional
Loan commitments are subject to reduction, in installments, on March 31, June
30, September 30 and December 31 of each year, commencing September 30, 2002
through December 31, 2005 when the final payment is due on the Additional
Loans. The Credit Agreement contains representations and warranties, funding
and yield protection provisions, borrowing conditions precedent, financial
and other covenants and restrictions, events of default and other provisions
customary for bank credit agreements of this type. The Credit Agreement
requires that not less than 50% of the Company's aggregate debt have fixed
interest rates.
Covenants and provisions contained in the Credit Agreement restrict (with
certain exceptions), among other things, the Company's and its subsidiaries'
ability: (i) to incur additional indebtedness, (ii) to create or incur liens,
(iii) to create or become or remain liable with respect to certain contingent
liabilities, (iv) to make certain payments with respect to capital stock and
subordinated indebtedness; provided that (a) the Company may pay cash dividends
on the Convertible Preferred Stock if no default exists or would be caused by
such payment and (b) the Company may repurchase the Existing Notes described in
this section if no default exists or would be caused by such repurchase, (v) to
engage in mergers, acquisitions, divestitures, sales and leasebacks or changes
of business, (vi) to engage in asset sales that exceed, in the
aggregate during a 12-month period, 15% of consolidated broadcast cash flow for
such 12-month period or if such asset sales would account for greater than 25%
of consolidated broadcast cash flow for the period from the date of entering
into the Credit Agreement to such date of determination, (vii) to become liable
under any capital lease, if the total rental payments for all capital leases for
any period of 12 consecutive months would be in excess of $4,500,000, (viii) to
sell with recourse or discount any of its notes or accounts receivable, (ix) to
dispose of any shares of capital stock of a subsidiary, (x) to engage in certain
transactions with affiliates and holders of equity interests, (xi) to amend,
modify or terminate certain material agreements, (xii) to invest in, or make
loans or advances to, other persons or entities in excess of $10,000,000 or
(xiii) to enter into agreements prohibiting the creation of liens or restricting
the ability of a subsidiary to pay money
52
<PAGE>
or distribute assets to the Company. The Credit Agreement also requires the
Company to maintain specified financial ratios.
Events of Default under the Credit Agreement include, among other things:
(i) any failure of the Company to pay principal thereunder when due, or to pay
interest or any other amount due within three days after the date due; (ii)
default or breach on any indebtedness in an individual principal amount of
$1,000,000 or more on any items of indebtedness with an aggregate principal
amount of $2,000,000 or more; (iii) breach by the Company of certain covenants
contained therein; (iv) material inaccuracy of any representation or warranty
given by the Company therein; (v) the continuance of a default by the Company in
the performance of or the compliance with other covenants and agreements for 30
days after the occurrence thereof; (vi) certain changes of control and acts of
bankruptcy, insolvency or dissolution; (vii) certain judgments, writs or
warrants of attachment of similar process remaining undischarged, unvacated,
unbonded, or unstayed for a period of 60 days; (viii) the occurrence of certain
reportable events under ERISA; (ix) certain changes in the executive officers of
the Company; and (x) any FCC License of the Company or its subsidiaries being
terminated, denied renewal or modified in any material adverse respect.
10 3/8% Senior Subordinated Notes
In May 1995, the Company completed an offering of $175,000,000 aggregate
principal amount of its 10 3/8% Senior Subordinated Notes due May 15, 2005, of
which $173,000,000 principal amount was outstanding at March 31, 1998. The
Company repurchased approximately $23,000,000 of the 10 3/8% Notes with the
proceeds of the offering of the Old Notes.
Interest on the 10 3/8% Notes is payable in cash semi-annually on May 15
and November 15 of each year. The 10 3/8% Notes do not have the benefit of any
sinking fund obligations, and are not convertible or exchangeable into any other
security.
The 10 3/8% Notes are subordinated in right of payment to the indebtedness
under the Credit Agreement and to any other existing or future Senior Debt (as
defined in the 10 3/8% Note Indenture, which definition is substantially
identical to that contained in the Indenture), rank pari passu with the 9 3/8%
Notes, will rank pari passu with the Notes and will rank pari passu with or
senior to any class or series of Debt that expressly provides that it ranks pari
passu with or junior to the Notes, as the case may be.
The 10 3/8% Notes are redeemable on or after May 15, 2000, at the option
of the Company, in whole or in part from time to time, at 105.188% of principal
amount thereof, plus accrued interest, reducing to 100% of the principal amount
thereof, plus accrued interest, on or after May 15, 2002.
The Company is required to offer to purchase all outstanding 10 3/8% Notes
at 101% of their principal amount, plus accrued interest, in the event of a
Change of Control (as defined in the 10 3/8% Note Indenture, which definition is
substantially identical to that contained in the Indenture).
The Company is required to make an offer to purchase the 10 3/8% Notes
at 100% of their principal amount if the Company makes an Asset Disposition
(as defined in the 10 3/8% Note Indenture) and the sale proceeds are not
reinvested. The offer to purchase is limited to the net proceeds from such
Asset Disposition and is subject to: (i) the prior claims of holders of
Senior Debt and (ii) there being net proceeds in excess of $5,000,000 that
are not required to be applied to Senior Debt.
The 10 3/8% Note Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur debt, pay
cash dividends on or repurchase capital stock, enter into agreements prohibiting
the creation of liens or restricting the ability of a subsidiary to pay money or
transfer assets to the Company, enter into certain transactions with their
affiliates, dispose of certain assets and engage in mergers and consolidations.
Events of Default under the 10 3/8% Note Indenture include: (i) failure to
pay principal of or premium, if any, on the 10 3/8% Notes when due at maturity,
upon redemption or otherwise, including failure by the Company to purchase the
10 3/8% Notes upon a Change of Control or in connection with an Asset
Disposition (whether or not such payment shall be prohibited
53
<PAGE>
by the subordination provisions of the 10 3/8% Note Indenture); (ii) failure
to pay any interest on any 10 3/8% Notes when due, continued for 30 days
(whether or not such payment shall be prohibited by the subordination
provisions of the 10 3/8% Note Indenture); (iii) failure to perform any other
covenant or agreement of the Company in the 10 3/8% Notes or the 10 3/8% Note
Indenture, continued for 60 days after written notice as provided in the 10
3/8% Note Indenture; (iv) failure to pay at final maturity in excess of
$4,000,000 principal amount of any indebtedness of the Company or any
subsidiary of the Company, or acceleration of any indebtedness of the Company
or any subsidiary of the Company in an aggregate principal amount in excess
of $4,000,000; and (v) certain events of bankruptcy, insolvency or
reorganization of the Company or any subsidiary.
9 3/8% Senior Subordinated Notes
In February 1996, the Company completed an offering of $110,000,000
aggregate principal amount of its 9 3/8% Senior Subordinated Notes due December
1, 2005, of which $77,095,000 principal amount was outstanding at March 31,
1998.
Interest on the 9 3/8% Notes is payable in cash semi-annually on June 1
and December 1 of each year. The 9 3/8% Notes do not have the benefit of any
sinking fund obligations, and are not convertible or exchangeable into any other
security.
The 9 3/8% Notes are subordinated in right of payment to the indebtedness
under the Credit Agreement and to any other existing or future Senior Debt (as
defined in the 9 3/8% Note Indenture, which definition is substantially
identical to that contained in the Indenture), rank pari passu with the 10 3/8%
Notes, will rank pari passu with the Notes and will rank pari passu or senior to
any class or series of Debt that expressly provides that it ranks pari passu
with or junior to the Notes, as the case may be.
The 9 3/8% Notes are redeemable on or after December 1, 2000, at the
option of the Company, in whole or in part from time to time, at 104.687% of
principal amount thereof, plus accrued interest, reducing to 100% of the
principal amount thereof, plus accrued interest, on or after December 1, 2002.
The Company is required to offer to purchase all outstanding 9 3/8% Notes
at 101% of their principal amount, plus accrued interest, in the event of a
Change of Control (as defined in the 9 3/8% Note Indenture, which definition is
substantially identical to that contained in the Indenture).
The Company is required to make an offer to purchase the 9 3/8% Notes at
100% of their principal amount if the Company makes an Asset Disposition (as
defined in the 9 3/8% Note Indenture) and the sale proceeds are not reinvested.
The offer to purchase is limited to the net proceeds from such Asset Disposition
and is subject to: (i) the prior claims of holders of Senior Debt, (ii) a
requirement to make a similar offer to purchase the 10 3/8% Notes prior to any
offer to purchase the 9 3/8% Notes and (iii) there being net proceeds in excess
of $5,000,000 that are not required to be applied to Senior Debt or to the
purchase of the 10 3/8% Notes.
The 9 3/8% Notes are redeemable before December 1, 2000 only in the event
that on or before February 22, 1999 the Company receives proceeds from any sale
of its Capital Stock other than Disqualified Stock (each as defined in the 9
3/8% Note Indenture) in one or more offerings, in which case the Company may, at
its option, use all or a portion of any such proceeds within 75 days of receipt
to redeem 9 3/8% Notes in a principal amount of at least $5,000,000 and up to an
aggregate of 33% of the original principal amount of the 9 3/8% Notes at a
redemption price of 109.375% of the principal amount thereof plus accrued
interest to the date of redemption; provided, however, that at least 67% of the
original principal amount of the 9 3/8% Notes remains outstanding.
The 9 3/8% Note Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur debt, pay
cash dividends on or repurchase capital stock, enter into agreements prohibiting
the creation of liens or restricting the ability of a subsidiary to pay money or
transfer assets to the Company, enter into certain transactions with their
affiliates, dispose of certain assets and engage in mergers and consolidations.
Events of Default under the 9 3/8% Note Indenture include: (i) failure to
pay principal of or premium, if any, on the 9 3/8% Notes when due at maturity,
upon redemption or otherwise, including failure by the Company to purchase the 9
3/8% Notes upon a Change of Control or in connection with an Asset Disposition
(whether or not such payment shall be prohibited by the subordination provisions
of the 9 3/8% Note Indenture); (ii) failure to pay any interest on any 9 3/8%
Notes when due, continued for 30 days (whether or not such payment shall be
prohibited by the subordination provisions of the 9 3/8% Note Indenture); (iii)
failure to perform any other covenant or agreement
54
<PAGE>
of the Company in the 9 3/8% Notes or the 9 3/8% Note Indenture, continued
for 30 days after written notice as provided in the 9 3/8% Note Indenture;
(iv) failure to pay at final maturity in excess of $4,000,000 principal
amount of any indebtedness of the Company or any subsidiary of the Company,
or acceleration of any indebtedness of the Company or any subsidiary of the
Company in an aggregate principal amount in excess of $4,000,000; and (v)
certain events of bankruptcy, insolvency or reorganization of the Company or
any subsidiary.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
Subject to the qualifications set forth below, in the opinion of Akin,
Gump, Strauss, Hauer & Feld, L.L.P., tax counsel to the Company, the following
accurately sets forth the anticipated material U.S. federal income tax
consequences applicable to the exchange of Old Notes for New Notes and the
ownership and disposition of the New Notes by holders who acquire the New Notes
pursuant to the Exchange Offer. It is limited solely to U.S. federal income tax
matters and is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations (including proposed regulations), administrative
rulings and pronouncements of the Internal Revenue Service ("IRS"), and judicial
decisions, all as of the date hereof and all of which are subject to change at
any time, possibly with retroactive effect.
The following is limited to holders who hold the Notes as "capital
assets" for U.S. federal income tax purposes and does not cover all aspects of
federal income taxation that may be relevant to, or the actual tax effect that
any of the matters described herein will have on, particular holders. The
following does not address U.S. federal income tax consequences that may be
applicable to particular categories of shareholders, including insurance
companies, tax-exempt persons, financial institutions, dealers in securities,
persons with significant holdings of Company stock, and non-United States
persons, including foreign corporations and nonresident alien individuals. The
following does not address any tax considerations under the laws of any state,
locality, or foreign country.
The Company has not sought, nor does it intend to seek, a ruling from
the IRS as to any of the matters covered by this discussion, and there can be no
assurance that the IRS will not successfully challenge the conclusions reached
in this discussion. BECAUSE THE U.S. FEDERAL INCOME TAX CONSEQUENCES DISCUSSED
BELOW DEPEND UPON EACH HOLDER'S PARTICULAR TAX STATUS, AND DEPEND FURTHER UPON
U.S. FEDERAL INCOME TAX LAWS, REGULATIONS, RULINGS AND DECISIONS WHICH ARE
SUBJECT TO CHANGE (WHICH CHANGES MAY BE RETROACTIVE IN EFFECT), HOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES OF THE
EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE OWNERSHIP AND DISPOSITION OF THE NEW
NOTES.
Exchange
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other tax event for federal income tax
purposes because the New Notes should not be considered to differ materially in
kind or extent from the Old Notes. A holder should have the same adjusted tax
basis and holding period in the New Notes as it had in the Old Notes immediately
before the exchange.
Interest
A holder of New Notes will be required to report interest income for
federal income tax purposes for any interest earned on the Notes in accordance
with such holder's method of tax accounting.
Original Issue Discount
The Old Notes do not have original issue discount ("OID") for federal
income tax purposes. Accordingly, the New Notes also will not have OID since the
New Notes should be treated as a continuation of the Old Notes for federal
income tax purposes.
Market Discount
Under the market discount rules of the Code, an exchanging holder
(other than a holder who made the election described below) who purchased an Old
Note with "market discount" (generally defined as the amount by which the stated
redemption price of the Old Note on the holder's date of purchase exceeded the
holder's purchase price) will be
55
<PAGE>
required to treat any gain recognized on the redemption, sale or other
disposition of the New Note received in the exchange as ordinary income to
the extent of the market discount that accrued during the holder's holding
period for such New Note (which period will include such holder's holding
period for the Old Note). In addition, a holder of a Note acquired at market
discount may be required to defer the deduction of all or a portion of the
interest expense on any indebtedness incurred or continued to purchase or
carry such Note. A holder who has elected under applicable Code provisions to
include market discount in income annually as such discount accrues will not
be required to treat any gain recognized as ordinary income (or defer
interest deductions) under the market discount rules described above. Holders
should consult their tax advisors as to the portion of any gain that would be
taxable as ordinary income under these provisions.
Amortizable Bond Premium
In general, if a holder's initial tax basis in the Old Notes at
acquisition exceeded the amount payable at maturity, the excess will be treated
as "amortizable bond premium" (including after the exchange of such Old Notes
for New Notes). In such case, the holder may elect under section 171 of the Code
to amortize the bond premium annually under a constant yield method. The
holder's adjusted tax basis in the Note is decreased by the amount of the
allowable amortization. Because the Notes have early call provisions, holders
must take such call provisions into account to determine the amount of
amortizable bond premium. Amortizable bond premium is treated as an offset to
interest received on the obligation rather than as an interest deduction, except
as may be provided in Treasury regulations. An election to amortize bond premium
would apply to amortizable bond premium on all taxable bonds held on or acquired
after the beginning of the holder's taxable year for which the election is made,
and may be revoked only with the consent of the IRS. Holders who acquire their
Notes with amortizable bond premium should consult their own tax advisors.
Sale, Exchange, Redemption or Other Disposition of Notes
On sale, exchange, redemption or other disposition of the Notes, and
except to the extent that the cash received is attributable to accrued interest
(which generally represents ordinary interest income) or market discount (the
tax consequences of which are described above), a holder generally will
recognize capital gain or loss measured by the difference between the amount
realized and such holder's adjusted tax basis in the Notes redeemed.
Backup Withholding
Federal income tax backup withholding at a rate of 31 percent on
dividends, interest payments, and proceeds from a sale, exchange, or redemption
of New Notes will apply unless the holder (i) is a corporation or comes within
certain other exempt categories (and, when required, demonstrates this fact) or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. The amount of any backup
withholding from a payment to a holder will be allowed as a credit against the
holder's federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the IRS. A holder of
Notes who does not provide the Company with his correct taxpayer identification
number may be subject to penalties imposed by the IRS. The Company will report
to the holders of the Notes and the IRS the amount of any "reportable payments"
and any amount withheld with respect to the Notes during the calendar year.
56
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale for a period until 180 days after the Exchange Offer
Registration Statement has been declared effective, or such shorter period as
will terminate when all Old Notes acquired by broker-dealers for their own
accounts as a result of market-making activities or other trading activities
have been exchanged for New Notes and resold by such broker-dealers.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period until 180 days after the Exchange Offer Registration
Statement has been declared effective, or such shorter period as will terminate
when all Old Notes acquired by broker-dealers for their own accounts as a result
of market-making activities or other trading activities have been exchanged for
New Notes and resold by such broker-dealers, the Company will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. The Company has agreed to pay all expenses incident to the Exchange
Offer, other than commissions or concessions of any brokers or dealers and the
fees of any counsel or other advisors or experts retained by the holders of the
Notes, except as expressly set forth in the Registration Rights Agreement and
will indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
57
<PAGE>
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report (Form 10-K) for each of the three years in the period
ended December 31, 1997, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of KOFY-TV (a Division of Pacific FM
Incorporated) at June 30, 1997 and 1996, and for each of the two years in the
period ended June 30, 1997, appearing in this Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by Akin,
Gump, Strauss, Hauer & Feld, L.L.P., counsel to the Company. Vernon E. Jordan,
Jr., a partner in Akin, Gump, Strauss, Hauer & Feld, L.L.P. holds, beneficially
and of record, 8,264 shares of the Company's Common Stock (Nonvoting).
58
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Reference
---------
<S> <C>
KOFY-TV (A Division of Pacific FM, Incorporated)
Report of Independent Auditors..................................... F-2
Balance Sheets as of June 30, 1997
and 1996 and March 31, 1998 (unaudited).......................... F-3
Statements of Operations for the Years
Ended June 30, 1997 and 1996 and
Nine Months Ended March 31, 1998
and 1997 (unaudited)............................................. F-4
Statements of Cash Flows for the Years Ended
June 30, 1997 and 1996 and Nine Months
Ended March 31, 1998 and 1997 (unaudited)........................ F-5
Notes to Financial Statements...................................... F-6
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors
Pacific FM, Incorporated
We have audited the accompanying balance sheets of KOFY-TV, a Division of
Pacific FM, Incorporated as of June 30, 1997 and 1996, and the related
statements of operations and accumulated deficit and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KOFY-TV at June 30, 1997 and
1996, and the results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
December 19, 1997
New York, New York
F-2
<PAGE>
KOFY-TV
(A Division of Pacific FM, Incorporated)
Balance Sheets
<TABLE>
<CAPTION>
March 31,
June 30, 1998
1997 1996 (unaudited)
---------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash $ 17,575 $ 33,667 $ 267,000
Accounts receivable, net of allowance for doubtful accounts
($150,800 in 1997 and $150,000 in 1996) 4,248,264 3,416,250 3,762,000
Due from affiliates 10,895,401 11,154,416 --
Programming rights, including $1,911,243 and $500,725 of barter in
1997 and 1996, respectively 2,825,746 1,654,576 914,000
Deferred income taxes 318,054 257,041 318,000
Prepaid expenses and other current assets 162,845 279,003 966,000
---------------------------------------------
Total current assets 18,467,885 16,794,953 6,227,000
Property and equipment, net 1,323,116 1,483,660 1,106,000
Programming rights, less current portion 839,070 1,170,111 2,731,000
Goodwill, net of accumulated amortization of $5,479,902
in 1997 and $5,155,902 in 1996 4,179,891 4,503,891 3,937,000
Other assets 363,371 448,512 86,000
---------------------------------------------
Total assets $ 25,173,333 $ 24,401,127 $ 14,087,000
---------------------------------------------
---------------------------------------------
Liabilities and shareholders' equity (deficit)
Current liabilities:
Accounts payable $ 726,782 $ 1,434,964 $ 596,000
Accrued expenses 1,156,426 736,075 869,000
Deferred barter income 1,005,302 726,285 1,005,000
Income taxes payable 1,015,731 847,839 1,772,000
Obligations for program rights, including $1,911,243 and
$500,725 of barter in 1997 and 1996, respectively 15,340,602 8,246,966 2,372,000
Due to affiliates -- -- 1,015,000
Current portion of long-term debt 1,224,642 1,056,385 1,195,000
---------------------------------------------
Total current liabilities 20,469,485 13,048,514 8,824,000
Obligations for program rights 1,692,956 7,354,934 6,115,000
Long-term debt 9,699,730 10,240,644 6,796,000
Shareholders' equity (deficit):
Common stock, $10 par value: 12,000 shares authorized
1,530 shares issued and outstanding 15,300 15,300 15,000
Capital in excess of par value 112,546 112,546 113,000
Accumulated deficit (6,816,684) (6,370,811) (7,776,000)
---------------------------------------------
Total shareholders' deficit (6,688,838) (6,242,965) (7,648,000)
---------------------------------------------
Total liabilities and shareholders' deficit $ 25,173,333 $ 24,401,127 $ 14,087,000
---------------------------------------------
---------------------------------------------
</TABLE>
See accompanying notes
F-3
<PAGE>
KOFY-TV
(A Division of Pacific FM, Incorporated)
Statements of Operation and Accumulated Deficit
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
Years ended June 30, (unaudited)
1997 1996 1998 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 17,749,319 $ 18,094,242 $ 13,304,000 $ 11,521,000
Barter revenue 2,791,983 3,274,429 2,094,000 2,456,000
---------------------------------------------------------------
Total revenue 20,541,302 21,368,671 15,398,000 13,977,000
Station operating expense 18,884,079 17,689,185 13,612,000 12,530,000
Amortization-goodwill and other 465,041 451,654 270,000 270,000
Depreciation 269,347 277,462 270,000 270,000
---------------------------------------------------------------
Total operating expenses 19,618,467 18,418,301 14,152,000 13,070,000
Operating income 922,835 2,950,370 1,246,000 907,000
Other income (expense):
Net interest expense (1,353,643) (1,239,283) (879,000) (1,008,000)
Other income (expense) 237,885 56,442 1,230,000 --
---------------------------------------------------------------
(1,115,758) (1,182,841) 351,000 (1,008,000)
---------------------------------------------------------------
Income (loss) before income taxes (192,923) 1,767,529 1,597,000 (101,000)
Income tax expense 252,950 664,570 756,000 77,000
---------------------------------------------------------------
Net income (loss) (445,873) 1,102,959 841,000 (178,000)
Accumulated deficit, beginning of period (6,370,811) (7,473,770) (6,817,000) (7,474,000)
Purchase of equity interest -- -- (1,800,000) --
---------------------------------------------------------------
Accumulated deficit, end of period $ (6,816,684) $ (6,370,811) $ (7,776,000) $ (7,652,000)
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
KOFY-TV
(A Division of Pacific FM, Incorporated)
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended March 31,
Year ended June 30, (unaudited)
1997 1996 1998 1997
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (445,873) $ 1,102,959 $ 841,000 $ (178,000)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 734,388 729,116 540,000 540,000
Provision for doubtful accounts 800 -- -- --
Deferred income taxes (61,014) (257,041) -- --
(Increase) decrease in assets:
Programming rights and obligations 591,529 (1,789,887) (8,527,000) (176,000)
Accounts receivable (832,814) (92,206) 486,000 (91,000)
Prepaid expense and other assets 116,158 (82,518) (526,000) (388,000)
Increase (decrease) in liabilities:
Accounts payable (708,181) 475,829 (131,000) 484,000
Accrued liabilities 420,350 178,507 (287,000) (404,000)
Income taxes payable 167,892 763,610 757,000 603,000
Deferred barter income 279,017 63,731 84,000 --
----------------------------------------------------------------
Net cash provided by (used in) operating activities 262,252 1,092,100 (6,763,000) 390,000
Cash flows from investing activities
Purchase of investment -- (22,500) -- --
Purchase of fixed assets (144,802) (53,525) (81,000) (4,000)
Disposal of assets 36,000 225,329 -- --
----------------------------------------------------------------
Net cash provided by (used in) investing activities (108,802) 149,304 (81,000) (4,000)
Cash flows from financing activities
Decrease (increase) in notes receivable due from
related parties 259,015 (2,949,840) 11,826,000 (31,000)
Proceeds from note payable due bank 267,000 3,300,000 -- --
Repayment of note payable due bank (639,657) (1,511,481) (2,933,000) (275,000)
Payment for equity interest -- -- (1,800,000) --
Deferred financing costs (55,900) (98,000) -- --
----------------------------------------------------------------
Net cash provided by (used in) financing activities (169,542) (1,259,321) 7,093,000 (306,000)
----------------------------------------------------------------
Net increase (decrease) in cash (16,092) (17,917) 249,000 80,000
Cash at beginning of year 33,667 51,584 18,000 34,000
----------------------------------------------------------------
Cash at end of year $ 17,575 $ 33,667 $ 267,000 $ 114,000
----------------------------------------------------------------
----------------------------------------------------------------
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest $ 1,365,451 $ 1,244,820 $ 880,000 $ 1,010,000
----------------------------------------------------------------
----------------------------------------------------------------
Taxes $ 21,392 $ 196,476 -- --
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
KOFY-TV
(A Division of Pacific FM, Incorporated)
Notes to Financial Statements
June 30, 1997
1. Summary of Significant Accounting Policies
a. Nature of Business
KOFY-TV (the "Company") is a division of Pacific FM, Incorporated
("Pacific FM"). The Company was acquired in 1980 through a tax free
exchange involving three stations owned and operated by Pacific FM.
Pacific FM also owns and operates two radio stations, KOFY-AM and KDIA-FM,
through its radio division ("Radio Division"), and an airplane through its
wholly-owned subsidiary Next Century Aviation, Inc. ("Air Subsidiary").
The Company broadcasts commercial television programming in the
metropolitan San Francisco television market on UHF station 20. Commercial
time is sold and credit is granted to customers who are predominately
advertising agencies. Collateral is not required for credit granted.
Consequently, the Company's ability to collect amounts due from customers
is affected by economic fluctuations in the advertising industry and the
metropolitan San Francisco television market. However, credit risk with
respect to uncollected receivables is limited due to the large number of
customers comprising the customer base and their dispersion across
different industries and geographical locations.
In October 1997, the stockholders of Pacific FM agreed in principle to
sell 51% of Pacific FM's outstanding common stock to Granite Broadcasting
Corporation ("Granite"). At the closing of the sale, it is contemplated
that Granite will acquire the remaining 49% of Pacific FM. The total price
of all the stock of Pacific FM is $143,750,000 in cash. In addition,
Granite will pay $30,000,000 to the principal shareholders of Pacific FM
for a covenant not to compete in the San Francisco television market for a
period of five years from the closing. Consummation of the sale is
contingent on, among other things, FCC approval and satisfaction of
certain other conditions. Prior to the closing of the sale, Pacific FM
will sell or otherwise dispose of its Radio Division and Air Subsidiary as
Granite's purchase of the outstanding stock of Pacific FM is based solely
on the results of the Company. Thus, the accompanying financial statements
do not include the accounts of the Radio Division and the Air Subsidiary.
b. Program Rights
Program rights represent the cost of broadcast license agreements for
television programming. In accordance with the provisions of Financial
Accounting Standards Board Statement No. 63, "Financial Reporting by
Broadcasters," the Company records assets and liabilities for broadcast
license agreements at the gross amount of the rights acquired and
obligations incurred under these license agreements when the license
period has begun, the cost of the program is known and the program has
been accepted and is available for its first telecast.
Barter programming transactions are accounted for at the fair market value
of programming received. Accordingly, the fair value of the programming
received is capitalized and amortized to expense as used. The related
liability for these barter programming transactions is also recorded at
the fair value of the programming received and is amortized to income as
commercial time is aired.
Amortization of program rights is computed for financial statement
purposes using a sliding-scale method based upon the total available runs
for a program and the number of times shown. The sliding-scale method
results in a higher amortization expense for the first time a program is
broadcast and a smaller amortization expense for each successive broadcast
of the same title. Management estimates that amounts included in current
assets will be charged to operations in the next fiscal year. Program
rights are valued at the lower of unamortized cost or net realizable
value.
F-6
<PAGE>
1. Summary of Significant Accounting Policies (continued)
c. Revenue Recognition
Revenue from the sale of advertising is recognized at the time the
advertisements are aired.
d. Property and Equipment
Property and equipment are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives as follows:
<TABLE>
<S> <C>
Leasehold improvements 5 to 30 years
Equipment 3 to 7 years
Transportation 3 to 7 years
Furniture and fixtures 3 to 7 years
</TABLE>
e. Goodwill
The Company was acquired in 1980 in a business combination accounted for
using the purchase method. Goodwill of $9,659,793 represents the excess of
the purchase price over the fair value of the net assets acquired.
Goodwill is being amortized on a straight-line method over 30 years.
Accumulated amortization for the years ended June 30, 1997 and 1996 was
$5,479,902 and $5,155,902 respectively.
f. Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense
for the years ended June 30, 1997 and 1996 was $172,502 and $226,320,
respectively.
g. Income Taxes
The Company is included in the consolidated federal income tax return of
Pacific FM. For financial reporting purposes, the Company has provided for
federal income taxes as if it filed a separate income tax return. Deferred
income taxes reflect 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.
The provision for income taxes for the years ended June 30, consists of
the following:
<TABLE>
<CAPTION>
1997 1996
------------------------------
<S> <C> <C>
Current taxes
Federal $ 244,289 $ 708,073
State 69,674 213,538
------------------------------
Total current taxes 313,963 921,611
------------------------------
Deferred taxes (61,013) (257,041)
------------------------------
Provision for income taxes $ 252,950 $ 664,570
------------------------------
------------------------------
</TABLE>
F-7
<PAGE>
1. Summary of Significant Accounting Policies (continued)
The significant components of the Company's deferred tax assets at June 30
are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------
<S> <C> <C>
Property, plant and equipment basis differences $ 862 $(16,266)
Allowance for bad debts 60,320 60,000
Other 256,872 213,307
-------------------
Deferred taxes $318,054 $257,041
-------------------
-------------------
</TABLE>
The income tax provisions differ from the amount computed by applying the
U.S. statutory rate due to the following:
<TABLE>
<CAPTION>
For the Year Ended June 30,
--------------------------
1997 1996
--------------------------
<S> <C> <C>
Provision at federal statutory rate 34% 34%
State taxes, net of federal benefit 20 8
Goodwill 57 6
Decrease in valuation allowance -- (11)
Other 20 1
--------------------------
Total 131% 38%
--------------------------
--------------------------
</TABLE>
The Company has not reflected a tax benefit associated with net operating
loss carryforwards recorded at Pacific FM.
h. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. Radio Time Brokerage Agreement
The Company operates KAZA-AM, the Radio Fiesta Corporation ("broker") affiliate
serving San Jose, California, pursuant to a five-year time brokerage agreement
that commenced on August 1, 1995. The terms of the agreement require the Company
to pay a monthly fee and to reimburse the broker for operating expenses. The
Company is also required to pay additional payments if certain gross revenue
figures are attained. In exchange for such payments, the broker makes available
substantially all of its air time for broadcast or programming produced by the
Company. Time Brokerage fees for the years ended June 30, 1997 and 1996, were
$147,500 and $110,000 respectively.
3. Property and Equipment
The major classifications of property and equipment at June 30 are as follows:
<TABLE>
<CAPTION>
1997 1996
-----------------------
<S> <C> <C>
Transportation $ 349,958 $ 275,284
Leasehold improvements 415,234 415,234
Equipment 4,033,684 4,003,045
Furniture and fixtures 136,318 132,828
-----------------------
4,935,194 4,826,391
Less accumulated depreciation 3,612,078 3,342,731
-----------------------
Net property and equipment $1,323,116 $1,483,660
-----------------------
-----------------------
</TABLE>
F-8
<PAGE>
4. Assets Held Under Capital Leases
The Company's net assets recorded under capital leases by major class at June 30
are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------
<S> <C> <C>
Equipment $192,736 $192,736
Less accumulated depreciation 192,736 192,736
----------------------
Assets held under capital leases, net $ -- $ --
----------------------
----------------------
</TABLE>
At June 30, 1997, the Company had no capitalized lease obligations.
5. Long-Term Debt
<TABLE>
<CAPTION>
June 30,
------------------------
1997 1996
------------------------
<S> <C> <C>
Note payable in 48 monthly installments, including
a balloon payment of $6,617,810 due August 1, 2000
bearing interest at the Citibank N.A. base rate
plus 2.5% (11% at June 30, 1997) ("Finova Loan") $10,281,808 $10,514,806
Other long-term debt, due in monthly installments
ranging from $6,278--$15,000. The notes bear
interest rates ranging from 10%--12.25% 642,564 782,223
------------------------
Total long-term debt 10,924,372 11,297,029
Less current portion 1,224,642 1,056,385
------------------------
Long-term debt, less current portion $ 9,699,730 $10,240,644
------------------------
------------------------
</TABLE>
Principal maturities of long-term debt are as follows:
Year ending June 30:
1999 $1,351,426
2000 1,431,463
2001 6,774,977
2002 36,183
Thereafter 105,681
----------
Total $9,699,730
----------
----------
F-9
<PAGE>
6. Obligations for Program Rights
The approximate obligations for recorded cash program rights for the years
subsequent to June 30, 1997, are as follows:
<TABLE>
<S> <C>
1998 $10,918,989
1999 2,984,822
2000 2,479,404
2001 632,309
2002 18,034
-----------
$17,033,558
-----------
-----------
</TABLE>
7. Commitments and Contingencies
a. Broadcasting Agreements
At June 30, 1997, the Company is committed to acquire additional broadcast
programming rights which have not been recorded on its balance sheet at a
total cost of approximately $5,106,749.
b. Lease Agreements
The Company is committed under (noncancelable) long-term operating lease
for facilities rent of its offices and television transmitter sites. The
leases require payments of various expenses incidental to the use of the
properties and consumer price index escalation clauses. Rent expense
during the years ended June 30, 1997 and 1996 was $367,687 and $406,193,
respectively.
The future operating lease commitments for the next five years are
estimated as follows:
<TABLE>
<S> <C>
1998 $ 379,826
1999 379,826
2000 373,776
2001 373,776
2002 373,776
Thereafter 649,536
-----------
$2,530,516
-----------
-----------
</TABLE>
8. Related Party Transactions
The Company has receivables from related entities KOFY-AM, KDIA-AM and Next
Century Air of $7,328,151, $3,156,738 and $410,512 in 1997, and $7,778,006,
$3,295,631 and $80,779 in 1996, respectively.
During the years ended June 30, 1997 and 1996, the Company paid salary and rent
expenses on behalf of KDIA-AM and KOFY-AM totaling $276,000 and $271,800
respectively, which were charged to intercompany receivables.
The Company leases a transmitter site from a related party, a holding company
whose stock is owned by Pacific FM. The Company is responsible for the
maintenance of the property but is entitled to any income derived from the
property. These costs are reflected above in the operating lease commitments.
The Company leases certain space for the parking of company vehicles on a
month-to-month basis from a partnership, whose partners are stockholders or
officers of Pacific FM. The lease expense for the years ended 1997 and 1996 was
$5,664.
F-10
<PAGE>
9. Retirement Plan
Pacific FM has an employee 401(k) retirement plan (the "Plan") covering all
eligible employees. The contributions to the Plan are based upon elective salary
deferrals by Plan participants. An officer of the Company is the trustee of the
Plan. The Company did not make any contributions to the Plan during the years
ended June 30, 1997 and 1996.
10. Network Affiliation
In February 1994, the Company entered into a television affiliation agreement
with Warner Brothers ("WB") Communications for carriage of WB television
programming commencing January 11, 1995, and terminating on January 11, 1998. WB
has the option at its sole discretion to terminate or extend the agreement for
additional successive years in two year increments for an unlimited period of
time. Generally, WB Communications is obligated to pay the costs of providing
the Company's network programming, and the Company has agreed to pay varying
amounts of compensation and airtime to WB Communications based on the station's
television market ratings of the broadcasting programs. Revenue, at various
rates, is derived from the sale to advertisers of time in network programs for
commercial announcements and is dependent on the quantitative and qualitative
audience that the Company can deliver to prospective advertisers with WB network
programs. The Company paid network affiliation fees of $748,500 and $468,272 for
the years ended June 30, 1997 and 1996 respectively.
11. Financial Instruments
The Company maintains its cash balances in one financial institution located in
the metropolitan San Francisco area. The balances are insured by the Federal
Deposit Insurance Corporation up to $100,000.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of customers comprising the Company's customer
base and their dispersion across different industries and geographical
locations.
12. Subsequent Events
a. Option Purchase
On July 8, 1997, the Company paid $10,000 for an option to purchase
participation rights previously granted to a former shareholder. The
rights, the term of which is the life of the Company's majority
shareholder plus 21 years, entitled the former shareholder to 10% of the
proceeds on any sale of the Company's outstanding shares, or a 10%
interest in property acquired in any exchange of the Company's shares.
On September 17, 1997 the company exercised its option to purchase the
rights for $200,000 and a $1,800,000 interest bearing note due on January
2, 1998.
b. Third Amendment to Finova Loan
In exchange for Finova to modify certain loan covenants, the Company
entered into a third amendment to the amended and restated loan in October
1997. The Company incurred an additional loan fee of $200,000 to be paid
at the earlier of either prepayment of the loan balance or the loan
maturity date. The third amendment is for a term of 46 months, and is
collateralized by the Company's assets and the personal guarantee of the
principal stockholder.
c. Restructured Syndicator Debts
The Company negotiated with four distributors to revise the restructured
payment terms. In October 1997, the four distributors agreed to allow
varying amount of discounts on license fees due to them, resulting in a
gain of approximately $1,200,000 on the debt forgiveness.
d. Radio Time Brokerage Agreement
The Company has terminated its time brokerage agreement with Radio Fiesta
Corporation, licensor of KAZA-AM radio. Arbitration is scheduled for May
1998 to determine the amount of liquidating damages, if any.
F-11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article Eighth of the Company's Third Amended and Restated Certificate
of Incorporation, as amended (the "Certificate of Incorporation") (incorporated
by reference as Exhibit 3.1 to this Registration Statement), eliminates the
liability of the Company's directors to the Company or its stockholders, except
for liabilities related to breach of duty of loyalty, actions not in good faith
and certain other liabilities.
Section 145 of the DGCL provides, in substance, that Delaware corporations
shall have the power, under specified circumstances, to indemnify their
directors, officers, employees and agents in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any such action,
suit or proceeding. The DGCL also provides that Delaware corporations may
purchase insurance on behalf of any such director, officer, employee or agent.
Article Eighth of the Certificate of Incorporation provides that the
Company shall indemnify any current or former director or officer to the fullest
extent permitted by the DGCL. Article Eighth further contemplates that the
indemnification provisions permitted thereunder are not exclusive of any other
rights to which such directors and officers are otherwise entitled by means of
Bylaw provisions, contracts, agreements, or otherwise. Article VIII of the
Company's Bylaws provides that the Company shall indemnify to the fullest extent
permitted by DGCL its current and former directors and officers and persons
serving as directors and officers of any corporation at the request of the
Company. The Company also maintains officers' and directors' liability insurance
which insures against liabilities that officers and directors of the Company may
incur in such capacities.
Reference is made to the Granite Broadcasting Corporation Stock Option
Plan (incorporated by reference as Exhibit 10.1 to this Registration Statement),
which provides that the Company shall indemnify and hold harmless each member of
the Stock Option Committee of the Plan against certain liabilities arising by
reason of such person's membership on such committee and the board of directors
of the Company, except liabilities arising from such person's gross negligence
or willful misconduct.
Reference is made to the Exchange and Registration Rights Agreement filed
as Exhibit 99.3 to this Registration Statement which provides for
indemnification for the officers and directors of the Company signing a Resale
Registration Statement and certain control persons of the Company against
certain liabilities, including those arising under the Securities Act in certain
circumstances by selling Holders.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
The following instruments and documents are included as Exhibits to this
Registration Statement.
<TABLE>
<CAPTION>
<S> <C>
1.a/ Purchase Agreement, dated May 6, 1998, between the Company and
the Purchasers named therein.
4.49a/ Indenture dated as of May 11, 1998, between the Company and
The Bank of New York, as Trustee, relating to the Company's
8 7/8% Senior Subordinated Notes due May 15, 1998 (including
form of note).
5.a/ Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
concerning the legality of the securities being registered.
8.1* Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
concerning certain tax matters.
10.15a/ Granite Broadcasting Corporation Management Stock Plan, as
amended through April 28, 1998.
II-1
<PAGE>
10.31a/ Non-Employee Directors' Stock Plan of Granite Broadcasting
Corporation, as amended through April 28, 1998.
12.* Statement of Computation of Financial Ratios.
23.1* Consent of Independent Auditors (Ernst & Young LLP).
23.2a/ Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in Exhibit 5).
24.a/ Power of Attorney for the Company (included on signature
pages hereto).
25.a/ Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939, as amended, of the Bank of
New York, as Trustee for the Notes.
99.1* Letter of Transmittal (to be filed by amendment).
99.2* Notice of Guaranteed Delivery (to be filed by amendment).
99.3a/ Exchange and Registration Rights Agreement dated as of
May 11, 1998, between the Company and the Initial Purchasers.
</TABLE>
- -------------
a/ Incorporated by reference to the similarly numbered exhibits to the
Company's Registration Statement on Form S-4 (Registration No. 333-56327)
filed on June 8, 1998.
* Filed herewith.
Item 22. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL, the Certificate of Incorporation and Bylaws,
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 such Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than 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 such Securities Act 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
items 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-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 2nd day of July, 1998.
GRANITE BROADCASTING CORPORATION
By: /s/ W. DON CORNWELL
-------------------------------------
W. Don Cornwell
Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ W. DON CORNWELL Chief Executive Officer (Principal July 2, 1998
- ---------------------- Executive Officer) and Chairman of
W. Don Cornwell the Board of Directors
STUART J. BECK*
- ---------------------- President and Secretary (Principal
Stuart J. Beck Financial Officer) and Director July 2, 1998
LAWRENCE I. WILLS*
- ---------------------- Vice President - Finance and Controller
Lawrence I. Wills (Principal Accounting Officer) July 2, 1998
ROBERT E. SELWYN, JR.*
- ----------------------
Robert E. Selwyn, Jr. Chief Operating Officer and Director July 2, 1998
MARTIN F. BECK*
- ---------------------- Director July 2, 1998
Martin F. Beck
JAMES L. GREENWALD*
- ---------------------- Director July 2, 1998
James L. Greenwald
VICKEE JORDAN ADAMS*
- ---------------------- Director July 2, 1998
Vickee Jordan Adams
EDWARD DUGGER III*
- ---------------------- Director July 2, 1998
Edward Dugger III
CHARLES J. HAMILTON, JR.*
- ---------------------------- Director July 2, 1998
Charles J. Hamilton, Jr.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
MIKAEL SALOVAARA*
- ---------------------- Director July 2, 1998
Mikael Salovaara
THOMAS R. SETTLE*
- ---------------------- Director July 2, 1998
Thomas R. Settle
*By: /s/ W. DON CORNWELL
-------------------
W. Don Cornwell
Attorney-in-Fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
1.a/ Purchase Agreement, dated May 6, 1998,
between the Company and the Purchasers named
therein.
4.49a/ Indenture dated as of May 11, 1998, between
the Company and The Bank of New York, as
Trustee, relating to the Company's 87/8%
Senior Subordinated Notes due May 15, 1998
(including form of note).
5.a/ Legal Opinion of Akin, Gump, Strauss, Hauer &
Feld, L.L.P. concerning the legality of the
securities being registered.
8.1* Legal Opinion of Akin, Gump, Stauss, Hauer &
Feld, L.L.P. concerning certain tax matters.
10.15a/ Granite Broadcasting Corporation Management
Stock Plan, as amended through April 28, 1998.
10.31a/ Non-Employee Directors' Stock Plan of Granite
Broadcasting Corporation, as amended through
April 28, 1998.
12.* Statement of Computation of Financial Ratios.
23.1* Consent of Independent Auditors (Ernst &
Young LLP).
23.2a/ Consent of Akin, Gump, Strauss, Hauer & Feld,
L.L.P. (included in Exhibit 5).
24.a/ Power of Attorney for the Company (included
on signature pages hereto).
25.a/ Form T-1 Statement of Eligibility and
Qualification under the Trust Indenture Act
of 1939, as amended, of the Bank of New York,
as Trustee for the Notes.
99.1* Letter of Transmittal (to be filed by
amendment).
99.2* Notice of Guaranteed Delivery (to be filed by
amendment).
99.3a/ Exchange and Registration Rights Agreement
dated as of May 11, 1998, between the Company
and the Initial Purchasers.
- -------------
a/ Incorporated by reference to the similarly numbered exhibits to the
Company's Registration Statement on Form S-4 (Registration No. 333-56327)
filed on June 8, 1998.
* Filed herewith.
</TABLE>
<PAGE>
Exhibit 8.1
[Letterhead AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.]
July 2, 1998
Granite Broadcasting Corporation
767 Third Avenue
34th Floor
New York, New York 10017
Dear Sirs:
You have requested our opinion regarding certain tax issues in connection
with the Offer to Exchange (the "Exchange Offer") all outstanding 8 7/8% Series
A Senior Subordinated Notes due May 15, 2008 (the "Old Notes") of Granite
Broadcasting Corporation (the "Company"), which have not been registered under
the Securities Act of 1933 (the "Act"), for 8 7/8% Senior Subordinated Notes of
the Company due May 15, 2008 (the "New Notes"), which will be registered under
the Act (the "New Notes"), all as set forth in the Company's Registration
Statement on Form S-4, File No. 333-56327, as amended.
Our opinion is premised upon the accuracy of all factual statements made in
the Exchange Offer and the underlying documents cited therein, and upon the
completion of the transaction in the manner contemplated in the Exchange Offer.
In addition, our opinion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury regulations (including proposed regulations)
promulgated thereunder, administrative rulings and pronouncements of the
Internal Revenue Service (the "IRS"), and judicial decisions, all as of the date
hereof and all of which are subject to change at any time, possibly with
retroactive effect. Any change in the facts or law upon which we rely could
change our conclusions and render our opinion inapplicable.
Based upon the facts and law described above, and subject to the
qualifications set forth in the "Certain U.S. Federal Income Tax Consequences"
section of the Exchange Offer, it is our opinion that the "Certain U.S. Federal
Income Tax Consequences" section of the Exchange Offer accurately sets forth the
anticipated material federal income tax consequences applicable to the exchange
of Old Notes for New Notes and the ownership and disposition of the New Notes by
persons who acquire the New Notes pursuant to the Exchange Offer. This
<PAGE>
Granite Broadcasting Corporation
July 2, 1998
Page 2
opinion represents our best legal judgment but has no binding effect on the IRS.
Accordingly, there can be no assurance that the IRS will not successfully
challenge our opinion.
We consent to your referring to this opinion letter in the Exchange Offer.
In giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended. We do not consent to any reference to this opinion letter in any
other document. We express no opinion with respect to the merits of an
investment in the Company or participation in the Exchange Offer.
Very truly yours,
/s/AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE>
Exhibit 12
GRANITE BROADCASTING CORPORATION
COMPUTATION OF BROADCAST CASH FLOW MARGIN
(in thousands except percentage)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------------------------------------- 12 Months Ended
Pro Forma March 31, 1998
1993 1994 1995 1996 1997 1997 Pro Forma
------------ ---------- ---------- ---------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $37,499 $62,856 $99,895 $129,164 $153,512 $151,503 $154,383
------------ ---------- ---------- ---------- -------- ---------- ---------------
------------ ---------- ---------- ---------- -------- ---------- ---------------
Operating Income $7,454 $15,355 $28,895 $35,748 $42,016 $26,911 $29,819
Add: Depreciation 2,398 3,420 4,514 6,144 5,718 4,726 4,801
Amortization 3,359 3,873 7,592 9,737 13,824 25,102 23,461
Corporate expense 1,375 2,162 3,132 4,800 6,639 6,639 7,182
Time brokerage agreement fees - - - 150 600 - -
Non-cash compensation expense 123 2 82 363 496 986 986 1,125
------------ ---------- ---------- ---------- -------- ---------- ---------------
Broadcast cash flow $14,709 $25,092 $44,496 $57,075 $69,783 $64,364 $66,388
------------ ---------- ---------- ---------- -------- ---------- ---------------
Broadcast cash flow margin 39.2% 39.9% 44.5% 44.2% 45.5% 42.5% 43.0%
------------ ---------- ---------- ---------- -------- ---------- ---------------
------------ ---------- ---------- ---------- -------- ---------- ---------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
GRANITE BROADCASTING CORPORATION
COMPUTATION OF EBITDA MARGIN
(in thousands except percentage)
Years ended December 31,
--------------------------------------------------------------------- 12 Months Ended
Pro Forma March 31, 1998
1993 1994 1995 1996 1997 1997 Pro Forma
---------- --------- --------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue $37,499 $62,856 $99,895 $129,164 $153,512 $151,503 $154,383
---------- --------- --------- ---------- ---------- ---------- ---------------
---------- --------- --------- ---------- ---------- ---------- ---------------
Operating Income $7,454 $15,355 $28,895 $35,748 $42,016 $26,911 $29,819
Add: Depreciation 2,398 3,420 4,514 6,144 5,718 4,726 4,801
Amorization 3,359 3,873 7,592 9,737 13,824 25,102 23,461
Non-cash compensation expense 123 282 363 496 986 986 1,125
---------- --------- --------- ---------- ---------- ---------- ---------------
EBITDA 13,334 22,930 41,364 52,125 62,544 57,725 59,206
---------- --------- --------- ---------- ---------- ---------- ---------------
EBITDA margin 35.6% 36.5% 41.4% 40.4% 40.7% 38.1% 38.4%
---------- --------- --------- ---------- ---------- ---------- ---------------
---------- --------- --------- ---------- ---------- ---------- ---------------
</TABLE>
<PAGE>
Exhibit 12
GRANITE BROADCASTING CORPORATION
COMPUTATION OF EBITDA TO TOTAL CASH INTEREST EXPENSE
(in thousands except percentage)
<TABLE>
<CAPTION>
Year Ended 12 Months Ended
December 31, Pro Forma March 31, 1998
1997 1997 Pro Forma
------------ --------- ---------------
<S> <C> <C> <C>
Operating income $42,016 $26,911 $29,819
Add: Depreciation 5,718 4,726 4,801
Amortization 13,824 25,102 23,461
Non-cash compensation expense 986 986 1,125
------------ --------- ---------------
EBITDA 62,544 57,725 59,206
Total cash interest expense 38,986 39,862 39,027
------------ --------- ---------------
Ratio of EBITDA to
total cash interest expense 1.60 x 1.45 x 1.52 x
------------ --------- --------------
------------ --------- --------------
</TABLE>
<PAGE>
EXHIBIT 12
GRANITE BROADCASTING CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands except percentage)
<TABLE>
<CAPTION>
Years ended December 31, 12 Months Ended
--------------------------------------------------------- Pro Forma March 31, 1998
1993 1994 1995 1996 1997 1997 Pro Forma
------------ ---------- ---------- ---------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest expense $10,977 $10,707 $27,026 $36,765 $38,986 $ 39,862 $ 39,027
Amortization of deferred
financing costs 505 842 1,738 2,087 2,182 2,002 2,651
Interest component of rental expense 38 35 35 35 35 35 35
------------ ---------- ---------- ---------- -------- ---------- ---------------
Total fixed charges $11,520 $11,584 $28,799 $38,887 $41,203 $ 41,899 $ 41,713
------------ ---------- ---------- ---------- -------- ---------- ---------------
------------ ---------- ---------- ---------- -------- ---------- ---------------
Earnings:
Income (loss) before income taxes and
extraordinary item (4,507) 3,497 (228) (5,133) (1,850) (16,299) (14,636)
Fixed charges 11,520 11,584 28,799 38,887 41,203 41,899 41,713
------------ ---------- ---------- ---------- -------- ---------- ---------------
Adjusted earnings $ 7,013 $15,081 $28,571 $33,754 $39,353 $25,600 $ 27,077
------------ ---------- ---------- ---------- -------- ---------- ---------------
------------ ---------- ---------- ---------- -------- ---------- ---------------
Ratio of earnings to fixed charges (a) - 1.30 x - - - - -
</TABLE>
(a) Earnings were insufficient to cover fixed charges for the years ended
December 31, 1993, 1995, 1996 and 1997 by $4,507, $228, $5,133 and $1,850,
respectively. Pro forma earnings would have been insufficient to cover fixed
charges by $16,299 for the year ended December 31, 1997 and by $14,636 for
the twelve months ended March 31, 1998.
<PAGE>
EXHIBIT 12
GRANITE BROADCASTING CORPORATION
COMPUTATION OF RATIO OF LONG TERM DEBT TO EBITDA
(in thousands except percentage)
<TABLE>
<CAPTION>
12 Months Ended
Pro Forma March 31, 1998
1997 1997 Pro Forma
---------- ----------- ---------------
<S> <C> <C> <C>
Operating Income $ 42,016 $ 26,911 $ 29,819
Add: Depreciation 5,718 4,726 4,801
Amortization 13,824 25,102 23,461
Non-cash compensation expense 986 986 1,125
---------- ----------- ---------------
EBITDA 62,544 57,725 59,206
Total long-term debt 329,779 419,461 419,461
---------- ----------- ---------------
Ratio of long-term debt to EBITDA 6.28 x 7.27 x 7.08 x
---------- ----------- ---------------
---------- ----------- ---------------
</TABLE>
<PAGE>
EXHIBIT 12
GRANITE BROADCASTING CORPORATION
COMPUTATION OF AFTER-TAX CASH FLOW
(in thousands)
<TABLE>
<CAPTION>
12 Months Ended
Pro Forma March 31, 1998
1993 1994 1995 1996 1997 1997 Pro Forma
------------ ---------- ---------- ---------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before extraordinary items ($4,035) $ 3,047 ($783) ($5,894) ($3,466) ($16,645) ($16,598)
Add: Depreciation 2,398 3,420 4,514 6,144 5,718 4,726 4,801
Amortization 3,359 3,873 7,592 9,737 13,824 25,102 23,461
Non-cash interest expense 505 842 1,738 2,087 2,182 2,002 2,651
Non-cash portion of (provision)
benefit for income taxes 459 187 290 386 1,300 -- 1,513
Equity in net (income) loss of invested -- -- (439) 995 1,531 1,531 1,618
Non-cash compensation expenses 123 282 363 496 986 986 1,125
------------ ---------- ---------- ---------- -------- ---------- ---------------
After-tax cash flow $2,809 $11,651 $13,275 $13,951 $22,075 $17,702 $18,571
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" Amendment
No. 1 to Registration Statement Form S-4 No. 333-56327 and related Prospectus
pertaining to the exchange offering of $175,000,000 principal amount of 8 7/8%
Senior Subordinated Notes Due May 15, 2008 of Granite Broadcasting Corporation
and the incorporation by reference of our report dated February 6, 1998, with
respect to the consolidated financial statements and schedule of Granite
Broadcasting Corporation for each of the three years in the period ended
December 31, 1997; and the inclusion of our report dated December 19, 1997,
with respect to the financial statements of KOFY-TV (A Division of Pacific FM,
Incorporated) for each of the two years in the period ended June 30, 1997.
New York, New York
July 1, 1998
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
Offer For All Outstanding 8 7/8% Series A Senior Subordinated Notes Due 2008
of
GRANITE BROADCASTING CORPORATION
in Exchange for 8 7/8 % Senior Subordinated Notes Due 2008
Which Have Been Registered Under The Securities Act of 1933
Pursuant to the Prospectus dated July 7, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON AUGUST 10, 1998, (AS SUCH DATE AND TIME MAY BE EXTENDED BY THE COMPANY
IN ITS SOLE DISCRETION, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent For The Exchange Offer Is
The Bank of New York:
<TABLE>
<CAPTION>
By Registered or Certified Mail Facsimile Transmissions: By Hand Or Overnight Delivery
(Eligible Institutions Only)
<S> <C> <C>
The Bank of New York The Bank of New York
101 Barclay Street, 7E (212) 815-6339 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attn: Diana Torres Confirm By Telephone: Ground Level
Reorganization Section
---------------- (212) 815-5789 New York, New York 10286
Attn: Diana Torres
Reorganization Section
For Information Call: ----------------
(212) 815-5789
</TABLE>
Delivery of this letter of transmittal to an address other than as set
forth above or transmission of this letter of transmittal via facsimile to a
number other than as set forth above does not constitute a valid delivery.
The undersigned hereby acknowledges receipt of the Prospectus dated July
7, 1998 (the "Prospectus") of Granite Broadcasting Corporation, a Delaware
corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its newly issued 8 7/8 %
Senior Subordinated Notes Due 2008, which have been registered under the
Securities Act of 1933, as amended (the "Securities Act") (the "New Notes")
for each $1,000 in principal amount of its outstanding 8 7/8 % Series A
Senior
<PAGE>
Subordinated Notes Due 2008 (the "Old Notes"). The New Notes and the Old Notes
are collectively referred to as the "Notes." Capitalized terms used and not
defined herein have the meanings ascribed to them in the Prospectus.
This Letter of Transmittal is to be completed by holders of Old Notes
either if Old Notes are to be forwarded herewith or if tenders of Old Notes are
to be made by book-entry transfer to an account maintained by The Bank of New
York (the "Exchange Agent") at The Depository Trust Company (the "Book-Entry
Transfer Facility" or "DTC") pursuant to the procedures set forth in "The
Exchange Offer--Procedure for Tendering" in the Prospectus.
Holders of Old Notes whose certificate or certificates (the "Certificates")
for such Old Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date or who cannot complete the procedures for book-entry
transfer on a timely basis, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING THE BOXES
The undersigned has completed the box below and signed this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ----------------- ------------------------ -------------------------
DESCRIPTION OF OLD NOTES TENDERED 1 2 3
- ----------------------------------------------------------- ----------------- ------------------------ -------------------------
Name(s) and Address(es) of Registered Holder(s), exactly Certificate Aggregate Principal Principal Amount of
as name(s) appear(s) on Old Notes Number(s)* Amount of Old Old Notes
Certificate(s): Notes Tendered**
(Please fill in, if blank)
<S> <C> <C> <C>
- ----------------------------------------------------------- ----------------- ------------------------ -------------------------
- ----------------------------------------------------------- ----------------- ------------------------ -------------------------
- ----------------------------------------------------------- ----------------- ------------------------ -------------------------
- ----------------------------------------------------------- ----------------- ------------------------ -------------------------
Total
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
holders.
** Unless otherwise indicated in the column, a holder will be deemed to
have tendered all Old Notes represented by the aggregate principal
amount of Old Notes indicated in Column 2. See Instruction 4.
- -------------------------------------------------------------------------------
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
|_| CHECK HERE IF OLD NOTES TENDERED ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
--------------------------------------------------
Account Number
-----------------------------------------------------------------
Transaction Code Number
--------------------------------------------------------
|_| CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF OLD NOTES TENDERED ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name of Registered Holder(s)
---------------------------------------------------
Window Ticket Number (if any)
-----------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------
Name of Institution which Guaranteed Delivery
----------------------------------
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution
--------------------------------------------------
Account Number
-----------------------------------------------------------------
Transaction Code Number
--------------------------------------------------------
|_| CHECK HERE IF OLD NOTES TENDERED BY BOOK-ENTRY TRANSFER AND NOT
ACCEPTED FOR EXCHANGE OR OTHERWISE NOT EXCHANGED ARE TO BE RETURNED BY
CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER SET FORTH
ABOVE.
|_| CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes described
in the box above (the "Tendered Notes") pursuant to the terms and conditions
described in the Prospectus and this Letter of Transmittal. The undersigned is
the registered owner of all the Tendered Notes and the undersigned represents
that it has received from each beneficial owner of the Tendered Notes
("Beneficial Owners") such information as the undersigned deems necessary, in
his or her sole discretion, to make such representations and take such actions
as are described in the Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the Tendered Notes, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company, all right, title and interest
in, to and under the Tendered Notes.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Tendered Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Tendered Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions, " please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedure for Tendering" in
the Prospectus and in the instructions attached hereto will, upon the Company's
acceptance for exchange of such Old Notes tendered, constitute a binding
agreement between the undersigned and the Company upon the terms and subject to
the conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, the Company may not be
required to accept for exchange any of the Old Notes tendered hereby. All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of the undersigned and any Beneficial Owner(s), and every obligation
of the undersigned or any Beneficial Owners hereunder shall be binding upon
their heirs, representatives, successors, and assigns of the undersigned and
such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Tendered
Notes and that, when the same are accepted for exchange, the company will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances, and that the Old Notes tendered
hereby are not subject to any adverse claims or proxies. The undersigned will,
upon request, execute and deliver any additional documents deemed by the Company
or the Exchange Agent to be necessary or desirable to complete the exchange,
assignment and transfer of the Tendered Notes, and the undersigned will comply
with its obligations under the registration rights agreement. The undersigned
has read and agrees to all of the terms of the Exchange Offer.
If any Old Notes tendered are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted in a principal amount not
tendered or accepted for exchange, Certificates for such
4
<PAGE>
nonexchanged or nontendered Old Notes will be returned (or, in the case of Old
Notes tendered by book-entry transfer, such Old Notes will be credited to an
account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
By tendering Old Notes and executing this Letter of Transmittal, the
undersigned hereby represents and warrants that (i) the New Notes to be received
by the undersigned and any Beneficial Owner(s) in connection with the Exchange
Offer are being acquired by the undersigned and any Beneficial Owner(s) in the
ordinary course of business of the undersigned and any Beneficial Owner(s), (ii)
the undersigned and each Beneficial Owner are not participating, do not intend
to participate, and have no arrangement or understanding with any person to
participate in a distribution of the New Notes to be received in the Exchange
Offer, and (iii) if the undersigned is not a broker-dealer, the undersigned is
not engaged in, and does not intend to engage in, a distribution of such New
Notes, and (iv) if the undersigned is a broker-dealer, it has not entered into
any arrangement or understanding with the Company or an affiliate of the Company
to distribute the New Notes.
The undersigned acknowledges and agrees that any person, including any
Beneficial Owner(s), participating in the Exchange Offer for the purpose of
distributing the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act, in connection with a secondary
resale transaction of the New Notes acquired by such person and cannot rely on
the position of the Staff of the Securities and Exchange Commission (the
Commission) set forth in the no-action letters that are discussed in the section
of the Prospectus entitled "The Exchange Offer--Purpose and Effects of the
Exchange Offer." The undersigned understands that any such secondary resale
transaction should be covered by an effective registration statement containing
the selling securityholder information required by Item 507 of Regulation S-K of
the Commission.
If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired by the undersigned as a
result of market-making or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes; however, by so acknowledging and
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The New Notes will bear interest at a rate per annum of 8 7/8 % from May
11, 1998, the date of issuance of the Old Notes, payable semi-annually in
arrears on May 15 and November 15 of each year commencing on November 15,
1998. Holders of Old Notes whose Old Notes are accepted for exchange will be
deemed to have waived the right to receive any payment in respect of interest
on such Old Notes accrued from May 11, 1998 until the date of the issuance of
the New Notes.
5
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 19)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED
IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
face of the Certificate(s) for the Old Notes hereby tendered or in whose name
Old Notes are registered on the books of the Company, or by any person(s)
authorized to become the registered holder(s) by endorsements and documents
transmitted herewith (including such opinions of counsel, certifications and
other information as may be required by the Company for the Old Notes to comply
with the restrictions on transfer applicable to the Old Notes). If signature is
by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S)
Date:________, 1998
Name(s)
------------------------------------------------------------------------
------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
----------------------------------------------------------
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-------------------------------------------------
- -------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
6
<PAGE>
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
- -------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
Date:__________, 1998
Name of Firm
-------------------------------------------------------------------
Capacity (full title)
----------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-------------------------------------------------
7
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes or Old Notes not tendered are to be issued
in the name of someone other than the registered holder of the Old Notes whose
name(s) appear(s) above.
Issue
|_| Old Notes not tendered to:
|_| New Notes to:
Name(s)
----------------------------------------------------------------
Address
----------------------------------------------------------------
----------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and
Telephone Number
-------------------------------------------------------
- -------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
8
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be sent to
someone other than the registered holder of the Old Notes whose name(s)
appear(s) above, or such registered holder(s) at an address other than that
shown above.
Mail
|_| Old Notes not tendered to:
|_| New Notes to:
Name(s)
----------------------------------------------------------------
Address
----------------------------------------------------------------
----------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and
Telephone Number
-------------------------------------------------------
-----------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
9
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed if either (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer-- Procedure for Tendering" in the Prospectus. Certificates, or timely
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at its address set forth herein on or prior to
the Expiration Date. Old Notes may be tendered in whole or in part.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on a timely basis, may tender their Old Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. Pursuant to such procedures: (i) such
tender must be made by or through an Eligible Institution (as defined below);
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, must be received by the
Exchange Agent on or prior to the Expiration Date; and (iii) the Certificates
(or a book-entry confirmation (as defined in the Prospectus)) representing all
tendered Old Notes, in proper form for transfer, together with a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within three
business days after the date of execution of such Notice of Guaranteed Delivery,
all as provided in "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or overnight
courier or transmitted by facsimile or mail to the Exchange Agent, and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice. For Old Notes to be properly tendered pursuant to the guaranteed
delivery procedure, the Exchange Agent must receive a Notice of Guaranteed
Delivery on or prior to the Expiration Date. As used herein and in the
Prospectus, "Eligible Institution" means a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
10
<PAGE>
RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC whose
name is registered on the books of the Company as the owner of the Old Notes) of
Old Notes tendered herewith, unless such holder(s) has completed either the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
aggregate principal amount of Old Notes and any other required information
should be listed on a separate signed schedule which is attached to this Letter
of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Old Notes which are to be tendered in the box entitled "Principal
Amount of Old Notes Tendered." In such case, new Certificate(s) for the
remainder of the Old Notes that were evidenced by your old Certificate(s) will
only be sent to the holder of the Old Notes, promptly after the Expiration Date.
All Old Notes represented by Certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, a written or facsimile transmission of such
notice of withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth above or in the Prospectus on or prior to the Expiration
Date. Any such notice of withdrawal must specify the name of the person who
tendered the Old Notes to be withdrawn, the aggregate principal amount of Old
Notes to be withdrawn, and (if Certificates for Old Notes have been tendered)
the name of the registered holder of the Old Notes as set forth on the face of
the Certificate for the Old Notes, if different from that of the person who
tendered such Old Notes. If Certificates for the Old Notes have been
11
<PAGE>
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Notes, the tendering holder
must submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in the Prospectus
under "The Exchange Offer--Procedure for Tendering," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be effective
if delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described in the Prospectus
under "The Exchange Offer--Procedure for Tendering."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in their sole discretion, of each such person's
authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or
separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly
12
<PAGE>
as the name or names of the registered owner(s) appear(s) on the face of the
Certificates, and also must be accompanied by such opinions of counsel,
certifications and other information as the Company may require in accordance
with the restrictions on transfer applicable to the Old Notes. Signatures on
such Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by either of them
not to be in proper form or the acceptance of which, or exchange for which, may,
in the view of counsel to the Company, be unlawful. The Company also reserves
the absolute right, subject to applicable law, to waive any of the conditions of
the Exchange Offer set forth in the Prospectus under "The Exchange
Offer--Conditions" or any conditions or irregularity in any tender of Old Notes
of any particular holder whether or not similar conditions or irregularities are
waived in the case of other holders. The Company's interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) will be final and binding. No tender of Old Notes will
be deemed to have been validly made until all irregularities with respect to
such tender have been cured or waived. The Company, any affiliates or assigns of
the Company, the Exchange Agent, or any other person shall not be under any duty
to give notification of any irregularities in tenders or incur any liability for
failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the holder or other payee to a $50 penalty. In addition, payments to
such holders or other payees with respect to Old Notes exchanged pursuant to the
Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and
13
<PAGE>
the Certificate of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent. The Exchange Agent
will retain such amounts withheld during the 60 day period following the date of
the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN
within 60 days after the date of the Substitute Form W-9, the amounts retained
during the 60 day period will be remitted to the holder and no further amounts
shall be retained or withheld from payments made to the holder thereafter. If,
however, the holder has not provided the Exchange Agent with its TIN within such
60 day period, amounts withheld will be remitted to the IRS as backup
withholding. In addition, 31% of all payments made thereafter will be withheld
and remitted to the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
14
<PAGE>
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
15
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF)
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(See Instruction 9)
PAYER'S NAME: THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
- ---------------------- ------------------------------------------------------ ------------------------------------------
SUBSTITUTE PART 1-PLEASE PROVIDE YOUR TIN ON THE LINE AT RIGHT TIN: _________________________
Form W-9 AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number or
Employer Identification Number
Department Of The
Treasury Internal
Revenue Service
------------------------------------------------------ ------------------------------------------
-------------------------------------------------------------------------------------------------
PART 2 - TIN Applied for |_|
-------------------------------------------------------------------------------------------------
Payor's Request CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
for Taxpayer
Identification (1) the number shown on this form is my correct taxpayer identification number (or I am
Number ("TIN") and waiting for a number to be issued to me),
Certification
(2) I am not subject to backup withholding either
because (i) I am exempt from backup withholding,
(ii) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (iii) the
IRS has notified me that I am no longer subject
to backup withholding, and
(3) any other information provided on this form is true and correct.
Signature Date , 1998
---------------------------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
You must cross out item (iii) in Part (2) above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
16
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments made to
me on account of the New Notes shall be retained until I provide a
taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such
retained amounts shall be remitted to the Internal Revenue Service as
backup withholding and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the Internal Revenue Service
until I provide a taxpayer identification number.
Signature Date , 1998
----------------------------------- ------------
---------------------------------------------
Name (Please Print)
17
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
GRANITE BROADCASTING CORPORATION
8 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used by a holder of the 8 7/8% Series A Senior Subordinated Notes
due 2008 (the "Old Notes") of Granite Broadcasting Corporation who wishes to
tender Old Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in The "Exchange Offer--Guaranteed Delivery Procedures" of
the Prospectus dated July 7, 1998 (as the same may be amended or supplemented
from time to time, the "Prospectus") and in Instruction 1 to the Letter of
Transmittal. In addition, in order to utilize the guaranteed delivery procedure
to tender Old Notes pursuant to the Exchange Offer, a completed, signed and
dated Letter of Transmittal relating to the Old Notes (or facsimile thereof)
must also be received by the Exchange Agent prior to 5:00 p.m. New York City
time, on the Expiration Date. Capitalized terms not defined herein have the
meanings assigned to them in the Prospectus or the Letter of Transmittal.
The Exchange Agent For The Exchange Offer Is:
The Bank Of New York
<TABLE>
<CAPTION>
By Registered or Certified Mail Facsimile Transmissions: By Hand Or Overnight Delivery
(Eligible Institutions Only)
<S> <C> <C>
The Bank of New York (212) 815-6339 The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 Confirm By Telephone: Corporate Trust Services Window
Attn.: Diana Torres (212) 815-5789 Ground Level
Reorganization Section
---------------- New York, New York 10286
For Information Call: Attn.: Diana Torres
Reorganization Section
(212) 815-5789 ----------------
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of this Notice of Guaranteed Delivery via
facsimile to a number other than as set forth above will not constitute a valid
delivery.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Granite Broadcasting Corporation, upon
the terms and subject to the conditions set forth in the Prospectus and the
related Letter of Transmittal (which together constitute the "Exchange Offer"),
receipt of which is hereby acknowledged, the principal amount of Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedure for Tendering" and
in Instruction 1 of the Letter of Transmittal.
Aggregate Principal Name(s) of Registered Holder(s):
Amount Tendered: $
-------------------------- --------------------------------
Certificate No(s)
(if known):
---------------------------------
(Total Principal Amount Represented by
Old Notes Certificate(s))
$
-------------------------------------
[] The Depositary Trust Company ("DTC")
(Check if Old Notes will be tendered by book-entry transfer and provide the
following information):
DTC Account Number:
-------------------------
Date:
----------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X
------------------------ -------------------------
X
------------------------ -------------------------
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:
------------------
<PAGE>
Please print name(s) and address(es)
Name(s): -----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Capacity: -----------------------------------------------------------------
Address(es): -----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
3
<PAGE>
- -------------------------------------------------------------------------------
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, hereby guarantees deposit with the
Exchange Agent, at one of its addresses set forth above, either the Old
Notes tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Old Notes to the Exchange Agent's account at
DTC, pursuant to the procedures for book-entry transfer set forth in the
Prospectus, in either case together with one or more properly completed and
duly executed Letter(s) of Transmittal (or facsimile thereof) and any other
required documents within three business days after the date of execution
of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within
the time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
--------------------------------- ---------------------------
Name of Firm Authorized Signature
--------------------------------- ---------------------------
Address Title
--------------------------------- ---------------------------
Zip Code (Please Type or Print)
Area Code and Telephone No.______ Dated:_____________________
- -------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
4
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and risk of the holder, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases
sufficient time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedure, see Instruction 1 of the Letter of
Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed, this Notice of Guaranteed Delivery
must be accompanied by appropriate bond powers, signed as the name of the
registered holder(s) appears on the Old Notes.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
5
