<PAGE>
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-30773
P R O S P E C T U S
[LOGO]
THE TIMES MIRROR COMPANY
$500,000,000
LIQUID YIELD OPTION(TM) NOTES
DUE 2017
(ZERO COUPON--SUBORDINATED)
---------------
This Prospectus relates to $500,000,000 aggregate principal amount at
maturity of Liquid Yield Option(TM) Notes ("LYONs") of The Times Mirror
Company, a Delaware corporation (the "Company" or "Times Mirror"), that may be
offered and sold from time to time by the several holders thereof ("Selling
Holders"). The LYONs were issued by the Company on April 15, 1997 and on April
28, 1997 pursuant to an Indenture of the same date between the Company and
Citibank, N.A. (the "Trustee"), as trustee (the "Indenture"), at the issue
price of $391.06 per $1,000 principal amount at maturity (the "Issue Price"),
and there will be no periodic payments of interest. The LYONs will mature on
April 15, 2017. The Issue Price of each LYON represents a yield to maturity of
4.75% per annum (computed on a semiannual bond equivalent basis) calculated
from April 15, 1997. The LYONs are subordinated to all existing and future
Senior Indebtedness (as defined herein) of the Company. As of June 30, 1997,
there was approximately $479 million of Senior Indebtedness outstanding. See
"Description of LYONs--Subordination of LYONs." The Company will not receive
any proceeds from sales of the LYONs by the Selling Holders. The Company has
agreed to bear certain expenses in connection with the registration of the
LYONs being offered and sold by the Selling Holders.
Each LYON is convertible at the option of the Holder thereof (the "Holder")
at any time on or prior to maturity, unless previously redeemed or otherwise
purchased, into Series A Common Stock, par value $1.00 per share, of the
Company (the "Series A Common Stock") at a conversion rate of 5.828 shares per
LYON (the "Conversion Rate") or cash equal to the market value of the shares
of Series A Common Stock into which the LYONs are convertible. The Conversion
Rate will not be adjusted for accrued Original Issue Discount, as defined
herein, but is subject to adjustment upon the occurrence of certain events
affecting any series of the common stock, par value $1.00 per share, of the
Company (the "Common Stock"). Upon conversion, the Holder will not receive any
cash payment representing accrued Original Issue Discount; such accrued
Original Issue Discount will be deemed paid by the Series A Common Stock or
cash received on conversion. See "Description of LYONs--Conversion Rights."
The Series A Common Stock is traded on the New York Stock Exchange (the
"NYSE") and the Pacific Stock Exchange under the symbol "TMC." On August 15,
1997, the last reported sale price of the Series A Common Stock on the NYSE
was $50 3/8 per share.
The LYONs will be purchased by the Company, at the option of the Holder, on
April 15, 2002, April 15, 2007 and April 15, 2012 (each, a "Purchase Date")
for a Purchase Price per LYON of $494.52, $625.35 and $790.79 (Issue Price
plus accrued Original Issue Discount to each such date), respectively. The
Company, at its option, may elect to pay the Purchase Price on any Purchase
Date in cash or shares of Series A Common Stock or in any combination thereof.
See "Description of LYONs--Purchase of LYONs at the Option of the Holder." In
addition, as of 35 business days after the occurrence of any Change in Control
(as defined herein) of the Company occurring on or prior to April 15, 2002,
the LYONs will be purchased for cash by the Company, at the option of the
Holder, for a Change in Control Purchase Price equal to the Issue Price plus
accrued Original Issue Discount to the date set for such purchase. In certain
circumstances the Company's ability to pay the Change in Control Purchase
Price may be limited. See "Description of LYONs--Change in Control Permits
Purchase of LYONs at the Option of the Holder."
The LYONs are not redeemable by the Company prior to April 15, 2002. On or
after that date, the LYONs are redeemable for cash at any time at the option
of the Company, in whole or in part, at Redemption Prices equal to the Issue
Price plus accrued Original Issue Discount to the date of redemption. See
"Description of LYONs--Redemption of LYONs at the Option of the Company."
From and after a Tax Event Date (as defined herein), at the option of the
Company, interest in lieu of future Original Issue Discount shall accrue on
each LYON from the Option Exercise Date (as defined herein) at 4.75% per annum
on the Restated Principal Amount (as defined herein) and shall be payable
semiannually on each Interest Payment Date (as defined herein) to holders of
record at the close of business on each Regular Record Date (as defined
herein) immediately preceding such Interest Payment Date. See "Description of
LYONs--Optional Conversion to Semiannual Coupon Note upon Tax Event."
For a discussion of certain United States federal income tax consequences
for Holders of LYONs, see "Certain Federal Income Tax Considerations."
(Continued on the following page)
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE DATE OF THIS PROSPECTUS IS AUGUST 22, 1997
(TM) Trademark of Merrill Lynch & Co., Inc.
<PAGE>
(Continued from previous page)
The LYONs may be offered for sale and sold by the Selling Holders from time
to time in varying amounts at prices and on terms to be determined at the time
of sale. To the extent required, the name(s) of the Selling Holder(s), the
number of LYONs to be sold, the purchase price, the public offering price, if
applicable, the name of any agent or broker-dealer, and any applicable
commissions, discounts or other items constituting compensation thereto with
respect to a particular offering will be set forth in a supplement or
supplements to this Prospectus (each, a "Prospectus Supplement"). See "Plan of
Distribution."
Selling Holders and any broker-dealers or agents that participate with them
in the distribution of any of the LYONs may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and any discount or commission received by them and any profit on the
resale of the LYONs purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY UNDERWRITER OR
ANY OF THEIR RESPECTIVE AFFILIATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES
OFFERED HEREBY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR
SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
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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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and other
information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
and at its regional offices located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Electronic filings
made by the Company through the Commission's Electronic Data Gathering,
Analysis and Retrieval System are publicly available through the Commission's
world wide web site (http://www.sec.gov). Series A Common Stock of the Company
is listed on the New York Stock Exchange (the "NYSE") and the Pacific Stock
Exchange, and reports, proxy and information statements and other information
concerning the Company can be inspected at such exchanges. On April 2, 1997,
the Company redeemed all of its issued and outstanding Conversion Preferred
Stock, Series B, par value $1.00 per share ("Series B Preferred Stock"), and
the Company has requested that the Series B Preferred Stock be delisted from
the NYSE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 1-13492) pursuant to the Exchange Act are incorporated by reference
and shall be deemed a part hereof:
(a) Times Mirror's Annual Report on Form 10-K for the year ended December
31, 1996 (the "1996 10-K");
(b) Times Mirror's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(c) Times Mirror's Current Reports on Form 8-K dated April 17, 1997 and
August 11, 1997; and
(d) The descriptions of the Company's Series A Common Stock set forth
under the caption "Description of Registrant's Securities to be Registered"
in Times Mirror's Registration Statements on Form 8-A dated November 21,
1994 and December 22, 1994, respectively, together with any amendment or
report filed with the Commission for the purpose of updating such
descriptions.
All other reports filed by Times Mirror pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the securities hereby are incorporated
herein by reference and shall be deemed a part hereof when filed. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus or the Registration Statement of which it is a part to the
extent that a statement contained herein, or in any other subsequently filed
document that also is incorporated or deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or the Registration Statement of which it
is a part. Subject to the foregoing, all information appearing in this
Prospectus or the Registration Statement of which it is a part is qualified in
its entirety by the information appearing in the documents incorporated by
reference.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WITH RESPECT TO THE
COMPANY THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO CORPORATE
SECRETARY, THE TIMES MIRROR COMPANY, TIMES MIRROR SQUARE, LOS ANGELES,
CALIFORNIA 90053, TELEPHONE (213) 237-3700.
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THE COMPANY
Times Mirror is engaged principally in the newspaper publishing,
professional information and magazine publishing businesses. Times Mirror
publishes the Los Angeles Times, Newsday, The Baltimore Sun, The Hartford
Courant, The Morning Call, The (Stamford) Advocate, Greenwich Time and several
smaller newspapers. Through its subsidiaries, the Company also provides
professional information to the legal, aviation and health science and
consumer health markets, publishes books, journals and magazines and also
provides training information and services. Times Mirror was incorporated in
the State of Delaware in June 1994 for the purpose of owning and operating
these businesses after a reorganization of Times Mirror's predecessor which
was completed in February 1995. Times Mirror's predecessor was incorporated in
1884 in the State of California and was reincorporated in the State of
Delaware in 1986. All references herein to the Company and Times Mirror shall
include Times Mirror's predecessor, Times Mirror's subsidiaries and Times
Mirror, collectively, unless the context suggests otherwise.
Times Mirror's principal executive offices are located at Times Mirror
Square, Los Angeles, California 90053 and its telephone number is (213) 237-
3700.
USE OF PROCEEDS
The Company will receive no proceeds from any sales of LYONs or shares of
Series A Common Stock made from time to time hereunder. The Company has agreed
to bear certain expenses in connection with the registration of the LYONs
being offered and sold by the Selling Holders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------- SIX MONTHS ENDED
1992 1993 1994 1995 1996 JUNE 30, 1997
---- ---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges........................ (a) 2.0x 3.8x (b) 9.6x 7.7x
</TABLE>
- --------
(a) Earnings were approximately $7 million lower than the amount needed to
cover fixed charges in this year, as earnings in 1992 were impacted by
over $200 million in restructuring charges.
(b) Earnings were approximately $451 million lower than the amount needed to
cover fixed charges in this year, as earnings in 1995 were impacted by
approximately $768 million in restructuring charges.
The ratio of earnings to fixed charges was computed by dividing earnings
(income from continuing operations before income taxes, adjusted for fixed
charges (net of capitalized interest), equity income or loss from
unconsolidated affiliates and amortization of capitalized interest) by fixed
charges for the periods indicated. Fixed charges include interest incurred on
long-term and other debt, capitalized interest, the interest factor deemed to
be included in rental expense, and certain amortization of debt issuance
costs.
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PRICE RANGE OF SERIES A COMMON STOCK AND DIVIDEND POLICY
The Company's Series A Common Stock is traded principally on the NYSE and is
also listed on the Pacific Stock Exchange. The ranges for the closing prices
of the Company's Series A Common Stock and the quarterly cash dividend
declared and paid on all Common Stock in 1995, 1996 and 1997 are listed below.
<TABLE>
<CAPTION>
SERIES A
COMMON STOCK
PRICE CASH DIVIDEND
---------------- --------------
HIGH LOW DECLARED PAID
------- -------- -------- ----
<S> <C> <C> <C> <C>
1995
First Quarter(1)........................... $33 1/2 $17 1/4 $.06 $.27(2)
Second Quarter............................. 24 3/4 17 5/8 .06 .06
Third Quarter.............................. 32 5/8 23 1/4 .06 .06
Fourth Quarter............................. 35 1/4 28 .06 .06
1996
First Quarter.............................. $40 1/8 $30 5/8 $.10 $.06
Second Quarter............................. 46 36 3/4 .10 .10
Third Quarter.............................. 45 1/4 39 1/2 - (3) .10
Fourth Quarter............................. 56 43 1/2 .10 .10
1997
First Quarter.............................. $59 $46 1/2 $.10 $.10
Second Quarter............................. 58 7/8 52 7/8 .15 .15
Third Quarter (through August 15, 1997).... 49 3/8 58 7/16 .15 (4)
</TABLE>
- --------
(1) On February 1, 1995, the Times Mirror common shareholders received
distributions having a value at that date of $10.45 per Times Mirror
common share. The trading prices indicated for the first month of 1995
have not been adjusted to reflect these distributions.
(2) Reflects the higher dividend policy of the Board of Directors in effect
prior to February 1, 1995.
(3) During 1996, the Company began declaring and paying Common Stock dividends
in the same quarter; previously, dividends were declared in the quarter
prior to payment. As a result, in the third quarter of 1996, no dividends
were declared in order to change to the new procedure.
(4) On July 10, 1997, the Board of Directors declared a quarterly cash
dividend of 15 cents per share, payable on September 10, 1997 to
shareholders of record on August 19, 1997.
On October 10, 1994 as part of the settlement of certain shareholders'
litigation, the Company agreed to pay an annual dividend to Series A and
Series C common stockholders of no less than 24 cents per share, beginning in
June 1995 and continuing for a period of three years, subject to the fiduciary
duties of its Board of Directors. Thereafter, the payment of dividends on
Common Stock will depend on future earnings, capital requirements, financial
condition and other factors.
The amounts and dates of quarterly dividends as may be declared by the
Company will necessarily be dependent upon the Company's future earnings, its
financial requirements, applicable laws and governmental regulations, capital
requirements and other factors that the Board of Directors of the Company
deems relevant. The Board of Directors regularly reviews the Company's
dividend policy.
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DESCRIPTION OF LYONS
The LYONs were issued under the Indenture. A copy of the Indenture is filed
as an exhibit to the Registration Statement of which this Prospectus is a part
and is also available for inspection during normal business hours at the
corporate trust office of the Trustee. The following summaries of certain
provisions of the LYONs and the Indenture do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all of
the provisions of the LYONs and the Indenture, including the definitions
therein of certain terms which are not otherwise defined in this Prospectus.
Wherever particular provisions or defined terms of the Indenture (or of the
form of LYON which is a part thereof) are referred to, such provisions or
defined terms are incorporated herein by reference.
GENERAL
The LYONs are unsecured, subordinated obligations of the Company limited to
$500,000,000 aggregate Principal Amount at Maturity and will mature on April
15, 2017. The Principal Amount at Maturity of each LYON is $l,000 (except as
may be adjusted upon conversion of the LYONs to semiannual coupon notes
following a Tax Event) and will be payable at the office of the Paying Agent,
which initially will be the Trustee, or an office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The City of New York.
The LYONs were originally issued at a substantial discount from their
Principal Amount at Maturity. See "Certain Federal Income Tax Considerations--
Original Issue Discount." Except as discussed below under "--Optional
Conversion to Semiannual Coupon Note upon Tax Event," there will be no
periodic payments of interest. The calculation of the accrual of Original
Issue Discount (the difference between the Issue Price and the Principal
Amount at Maturity of a LYON) in the period during which a LYON remains
outstanding will be on a semiannual bond equivalent basis using a 360-day year
composed of twelve 30-day months; such accrual will commence on the issue date
of the LYONs. In the event of the maturity, conversion, purchase by the
Company at the option of a Holder or redemption of a LYON, Original Issue
Discount and interest, if any, will cease to accrue on such LYON, under the
terms and subject to the conditions of the Indenture. The Company may not
reissue a LYON that has matured or been converted, purchased by the Company at
the option of a Holder, redeemed or otherwise cancelled (except for
registration of transfer, exchange or replacement thereof).
Because certain of the operations of the Company are conducted through
subsidiaries, the Company's cash flow and consequent ability to meet its debt
obligations are dependent in part upon the earnings of its subsidiaries and on
dividends and other payments therefrom. Since the LYONs are solely an
obligation of the Company, the Company's subsidiaries are not obligated or
required to pay any amounts due pursuant to the LYONs or to make funds
available therefor in the form of dividends or advances to the Company.
Holders of the LYONs will not have a claim on the assets of these
subsidiaries.
FORM, DENOMINATION AND REGISTRATION
Except as hereinafter described, the LYONs were issued in fully registered
book-entry form, in minimum denominations of $250,000 and multiples of $1,000
in excess thereof, represented by one or more global LYONs without coupons
(each, a "Global LYON") deposited with a custodian for and registered in the
name of a nominee of The Depository Trust Company ("DTC") in New York, New
York. Beneficial interests in any such Global LYON will be shown on, and
transfers thereof will be effected only through, records maintained by DTC and
its direct and indirect participants, and any such interest may not be
exchanged for LYONs in certificated form except in the limited circumstances
described herein. The LYONs offered hereby may be transferred in minimum
denominations of $1,000 and multiples thereof.
No service charge will be made for any registration of transfer or exchange
of LYONs, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
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Ownership of beneficial interests in a Global LYON will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in the
Global LYONs will be shown on, and the transfer of that ownership will be
effected through, records maintained by DTC (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC, or its nominee, is the registered owner or Holder of a
Global LYON, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder of the LYONs represented by such Global LYON for all
purposes under the Indenture and the LYONs. No beneficial owner of an interest
in a Global LYON will be able to transfer that interest except in accordance
with DTC's applicable procedures (in addition to those under the Indenture
referred to herein and, if applicable, those of Euroclear and Cedel). If DTC
or any successor depository notifies the Company that it is unwilling or
unable to continue as depository for a Global LYON or ceases to be a "Clearing
Agency" registered or in good standing under the Exchange Act or other
applicable statute or regulation and a successor depository is not appointed
by the Company within 90 days, or an Event of Default has occurred and is
continuing, owners of beneficial interests in such Global LYON will receive
physical delivery of LYONs in certificated form and will be considered to be
the owners or Holders of such LYONs under the Indenture or the LYONs.
Payments on Global LYONs will be made to DTC or its nominee, as the
registered owner thereof. Neither the Company, the Trustee nor any Paying
Agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global LYONs or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment in
respect of a Global LYON held by it or its nominee, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global LYON as shown on the records
of DTC or its nominee. The Company also expects that payments by participants
to owners of beneficial interests in such Global LYON held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such
payments, however, will be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in same-day funds. The laws of some states,
however, require that certain persons take physical delivery of securities in
definitive form. Transfers between participants in Euroclear and Cedel will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Cedel participants, on the other, will be
effected by DTC in accordance with DTC rules on behalf of Euroclear or Cedel,
as the case may be, by its respective depository; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel, as
the case may be, by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (Brussels time).
Euroclear or Cedel, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depository to
take action to effect final settlement on its behalf by delivering or
receiving interests in the Regulation S Global LYONs in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlements applicable to DTC. Cedel participants and Euroclear participants
may not deliver instructions directly to the depositories for Cedel or
Euroclear.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global LYON from a DTC
participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following
the DTC settlement date and such credit of any transactions in interests in a
Global LYON settled during such processing day will be reported to the
relevant Euroclear or Cedel participant on such day. Cash received in
Euroclear or Cedel as a result of sales of interests in a Global LYON by or
through a Euroclear or Cedel participant to a DTC participant will be
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<PAGE>
received for value on the DTC settlement date but will be available in the
relevant Euroclear or Cedel cash account only as of the business day following
settlement in DTC.
DTC will take any action permitted to be taken by a Holder of LYONs
(including the presentation of LYONs for exchange as described below) only at
the direction of one or more participants to whose account interests in the
Global LYONs are credited and only in respect of such portion of the aggregate
principal amount of the LYONs as to which such participant or participants has
or have given such direction. However, if there is an Event of Default under
the LYONs, DTC will exchange the Global LYONs for LYONs in certificated form,
which it will distribute to its participants.
In case any such LYON shall become mutilated, defaced, destroyed, lost or
stolen, the Company will execute and upon the Company's request the Trustee
will authenticate and deliver a new LYON, of like tenor (including the same
date of issuance) and equal Principal Amount at Maturity, registered in the
same manner, dated the date of its authentication in exchange and substitution
for such LYON (upon surrender and cancellation thereof) or in lieu of and
substitution for such LYON. In case such LYON is destroyed, lost or stolen,
the applicant for a substituted LYON shall furnish to the Company and the
Trustee such security or indemnity as may be required by them to hold each of
them harmless, and, in every case of destruction, loss or theft of such LYON,
the applicant shall also furnish to the Company satisfactory evidence of the
destruction, loss or theft of such LYON and of the ownership thereof. Upon the
issuance of any substituted LYON, the Company may require the payment by the
registered Holder thereof of a sum sufficient to cover fees and expenses
connected therewith.
SUBORDINATION OF LYONS
Indebtedness evidenced by the LYONs is subordinated in right of payment, as
set forth in the Indenture, to the prior payment in full of all existing and
future Senior Indebtedness (as defined below). No payment of the Principal
Amount at Maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Change in Control Purchase Price or interest, if any, with respect to
any LYONs may be made by the Company, nor may the Company pay cash with
respect to the Purchase Price of any LYON (other than for fractional shares)
or acquire any LYONs for cash or property except as set forth in the Indenture
if (i) any payment default on any Senior Indebtedness has occurred and is
continuing beyond any applicable grace period or (ii) any default (other than
a payment default) with respect to Senior Indebtedness occurs and is
continuing that permits the acceleration of the maturity thereof and such
default is either the subject of judicial proceedings or the Company receives
a written notice of such default (a "Senior Indebtedness Default Notice").
Notwithstanding the foregoing, payments with respect to the LYONs may resume
and the Company may acquire LYONs for cash when (a) the default with respect
to the Senior Indebtedness is cured or waived or (b) in the case of a default
described in (ii) above, 179 or more days pass after notice of the default is
received by the Company, provided that the terms of the Indenture otherwise
permit the payment or acquisition of the LYONs at that time. If the Company
receives a Senior Indebtedness Default Notice, then a similar notice received
within nine months thereafter relating to the same default on the same issue
of Senior Indebtedness shall not be effective to prevent the payment or
acquisition of the LYONs as provided above. In addition, no payment may be
made on the LYONs if any LYONs are declared due and payable prior to their
Stated Maturity by reason of the occurrence of an Event of Default (as defined
below) until the earlier of (i) 120 days after the date of such acceleration
or (ii) the payment in full of all Senior Indebtedness, but only if such
payment is then otherwise permitted under the terms of the Indenture. Upon any
payment or distribution of assets of the Company to creditors upon any
dissolution, winding up, liquidation or reorganization of the Company, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other
similar proceedings, the holders of all Senior Indebtedness shall first be
entitled to receive payment in full of all amounts due or to become due
thereon, or payment of such amounts shall have been provided for, before the
holders of the LYONs shall be entitled to receive any payment or distribution
with respect to any LYONs.
By reason of the subordination described herein, in the event of insolvency,
upon any distribution of the assets of the Company, (i) the Holders of the
LYONs are required to pay over their share of such distribution to
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the trustee in bankruptcy, receiver or other person distributing the assets of
the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all holders of Senior
Indebtedness in full and (ii) unsecured creditors of the Company who are not
Holders of LYONs or holders of Senior Indebtedness of the Company may recover
less, ratably, than holders of Senior Indebtedness of the Company and may
recover more, ratably, than the Holders of LYONs.
The term "Senior Indebtedness" of the Company means, without duplication,
the principal, premium (if any) and accrued unpaid interest on all present and
future (i) indebtedness of the Company for borrowed money, (ii) obligations of
the Company evidenced by bonds, debentures, notes or similar instruments,
(iii) indebtedness incurred, assumed or guaranteed by the Company in
connection with the acquisition by it or a subsidiary of any business,
properties or assets (except purchase-money indebtedness classified as
accounts payable under generally accepted accounting principles), (iv)
obligations of the Company as lessee under leases required to be capitalized
on the balance sheet of the lessee under generally accepted accounting
principles, (v) reimbursement obligations of the Company in respect of letters
of credit relating to indebtedness or other obligations of the Company that
qualify as indebtedness or obligations of the kind referred to in clauses (i)
through (iv) above, and (vi) obligations of the Company under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (v) above, in each case unless the
instrument creating or evidencing the indebtedness or obligation or pursuant
to which the same is outstanding provides that such indebtedness or obligation
is not superior in right of payment to the LYONs.
As of June 30, 1997, there was approximately $479 million of Senior
Indebtedness outstanding. There is no restriction under the Indenture on the
creation of additional indebtedness, including Senior Indebtedness (or any
other indebtedness).
The LYONs are effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. Any right of the Company to
participate in any distribution of the assets of any of the Company's
subsidiaries upon the liquidation, reorganization or insolvency of such
subsidiary (and the consequent right of the Holders of the LYONs to
participate in those assets) will be subject to the claims of the creditors
(including trade creditors) of such subsidiary, except to the extent that the
Company itself is a creditor of such subsidiary and is recognized as such, in
which case the claims of the Company would still be subordinate to any
security interest in the assets of such subsidiary and any indebtedness of
such subsidiary senior to that held by the Company. As of June 30, 1997, the
Company's subsidiaries had approximately $758 million of liabilities,
including trade payables and capitalized lease obligations.
CONVERSION RIGHTS
Each LYON is convertible at the option of the Holder at any time before the
close of business on April 15, 2017, provided, however, that if a LYON is
called for redemption, the Holder may convert it at any time before the close
of business on the Redemption Date. On conversion of a LYON, the Company may
elect to deliver shares of Series A Common Stock or an amount of cash
determined as described below. A LYON in respect of which a Holder has
delivered a Purchase Notice or a Change in Control Purchase Notice, as defined
herein, exercising the option of such Holder to require the Company to
purchase such LYON may be converted only if such notice is withdrawn by a
written notice of withdrawal delivered by the Holder to the Paying Agent prior
to the close of business on the Purchase Date or the Change in Control
Purchase Date, as the case may be, in accordance with the terms of the
Indenture. See "--Purchase of LYONs at the Option of the Holder."
The initial Conversion Rate for the LYONs is 5.828 shares of Series A Common
Stock per $1,000 Principal Amount at Maturity, subject to adjustment upon the
occurrence of certain events described below. See "Price Range of Series A
Common Stock and Dividend Policy." A Holder otherwise entitled to a fractional
share of Series A Common Stock will receive cash equal to the market value of
such fractional share based on the closing Sale Price (as defined under "--
Purchase of LYONs at the Option of the Holder") on the Trading Day (as defined
under "--Purchase of LYONs at the Option of the Holder") immediately preceding
the Conversion
9
<PAGE>
Date. A Holder may convert a portion of such Holder's LYONs so long as such
portion is $1,000 Principal Amount at Maturity or an integral multiple
thereof.
To convert a LYON, a Holder must (i) complete and manually sign the
conversion notice on the back of the LYON (or complete and manually sign a
facsimile thereof) and deliver such notice to the Conversion Agent (initially
the Trustee) at the office maintained by the Conversion Agent for such
purpose, (ii) surrender the LYON to the Conversion Agent, (iii) if required,
furnish appropriate endorsements and transfer documents, and (iv) if required,
pay all transfer or similar taxes. Pursuant to the Indenture, the date on
which all of the foregoing requirements have been satisfied is the Conversion
Date.
Upon conversion of a LYON, a Holder will not receive any cash payment
representing accrued Original Issue Discount. The Company's delivery to the
Holder of the fixed number of shares of Series A Common Stock (or cash in the
applicable amount as described below) into which the LYON is convertible
(together with the cash payment in lieu of any fractional shares) will satisfy
the Company's obligation to pay the Principal Amount at Maturity of the LYON,
including the accrued Original Issue Discount attributable to the period from
the Issue Date to the Conversion Date. Thus, the accrued Original Issue
Discount will be deemed to be paid in full rather than cancelled, extinguished
or forfeited. The Conversion Rate will not be adjusted at any time during the
term of the LYONs for accrued Original Issue Discount. A certificate for the
number of full shares of Series A Common Stock into which any LYON is
converted (and cash in lieu of any fractional shares) will be delivered
through the Conversion Agent no later than the seventh business day following
the Conversion Date. For a discussion of the tax treatment of a Holder
receiving Series A Common Stock or cash upon conversion, see "Certain Federal
Income Tax Considerations--Disposition or Conversion."
In lieu of delivering shares of Series A Common Stock upon notice of
conversion of any LYONs, the Company may elect to pay the Holder surrendering
such LYONs an amount in cash per LYON equal to the Sale Price of a share of
Series A Common Stock on the Trading Day immediately prior to the Conversion
Date multiplied by the Conversion Rate in effect on such Trading Day, subject
to adjustment upon the occurrence of certain events described below; provided,
that if such payment of cash is not permitted pursuant to the provisions of
the Indenture or otherwise, the Company shall deliver shares of Series A
Common Stock (and cash in lieu of fractional shares) as set forth below. Upon
conversion of any LYONs, the Company shall inform the Holders through the
Conversion Agent of its election to deliver shares of Series A Common Stock or
to pay cash in lieu of delivery of such shares no later than two business days
following the Conversion Date. If the Company elects to deliver shares of
Series A Common Stock, such shares (and cash in lieu of fractional shares)
will be delivered through the Conversion Agent no later than the seventh
business day following the Conversion Date. If the Company elects to pay cash,
such cash payment will be made to the Holder surrendering such LYONs no later
than the fifth business day following such Conversion Date.
The Company may not pay cash upon conversion of any LYONs (other than cash
in lieu of fractional shares) if there has occurred and is continuing an Event
of Default described under "--Event of Default; Notice and Waiver" below
(other than a default in such payment on such LYONs).
The Conversion Rate will be adjusted for dividends or distributions on
Common Stock payable in Common Stock or other Capital Stock (see "Description
of Capital Stock") of the Company; certain subdivisions, combinations or
reclassifications of Common Stock; distributions to all holders of Common
Stock of certain rights, warrants or options to purchase Common Stock or
securities convertible into Common Stock for a period expiring within 60 days
after the record date for such distribution at a price per share less than the
Sale Price at the time; and distributions to all holders of Common Stock of
assets or debt securities of the Company or rights, warrants or options to
purchase securities of the Company (excluding cash dividends or other cash
distributions from consolidated current net earnings or earned surplus or
dividends payable in Common Stock but including Extraordinary Cash Dividends).
However, no adjustment need be made if Holders may participate in the
transactions otherwise giving rise to an adjustment on a basis and with notice
that the Board of Directors of the Company determines to be fair and
appropriate, or in certain other cases. In cases where the fair market value
of the portion of assets, debt securities or rights, warrants or options to
purchase securities of the Company
10
<PAGE>
applicable to one share of Common Stock distributed to stockholders exceeds
the Average Sale Price per share of Common Stock, or such Average Sale Price
exceeds such fair market value of such portion of assets, debt securities or
rights, warrants or options so distributed by less than $1.00, rather than
being entitled to an adjustment in the Conversion Rate, the Holder of a LYON
upon conversion thereof will be entitled to receive, in addition to the shares
of Common Stock into which such LYON is convertible, the kind and amounts of
assets, debt securities or rights, options or warrants comprising the
distribution that such Holder would have received if such Holder had converted
such LYON immediately prior to the record date for determining the
shareholders entitled to receive the distribution. The Indenture permits the
Company to increase the Conversion Rate from time to time.
If the Company is party to a consolidation, merger or binding share exchange
or a transfer of all or substantially all of its assets which is otherwise
permitted under the terms of the Indenture, the right to convert a LYON into
Series A Common Stock may be changed into a right to convert it into the kind
and amount of securities, cash or other assets which the Holder would have
received if the Holder had converted such Holder's LYONs immediately prior to
the transaction.
In the event of a taxable distribution to holders of Common Stock which
results in an adjustment of the Conversion Rate (or in which Holders otherwise
participate) or in the event the Conversion Rate is increased at the
discretion of the Company, the Holders of the LYONs may, in certain
circumstances, be deemed to have received a distribution subject to United
States federal income tax as a dividend. See "Certain Federal Income Tax
Considerations--Constructive Dividend."
In the event the Company exercises its option to have interest in lieu of
Original Issue Discount accrue on a LYON following a Tax Event, the Holder
will be entitled on conversion to receive only the same number of shares of
Series A Common Stock such Holder would have received if the Company had not
exercised such option. If the Company exercises such option, LYONs surrendered
for conversion during the period from the close of business on any Regular
Record Date (as defined herein) next preceding any Interest Payment Date (as
defined herein) to the opening of business of such Interest Payment Date
(except LYONs to be redeemed on a date within such period) must be accompanied
by payment of an amount equal to the interest thereon that the registered
Holder is to receive. Except where LYONs surrendered for conversion must be
accompanied by payment as described above, no interest on converted LYONs will
be payable by the Company on any Interest Payment Date subsequent to the date
of conversion. See "--Optional Conversion to Semiannual Coupon Note upon Tax
Event."
REDEMPTION OF LYONS AT THE OPTION OF THE COMPANY
No sinking fund is provided for the LYONs. Prior to April 15, 2002, the
LYONs will not be redeemable at the option of the Company. On and after that
date, the Company may redeem the LYONs for cash as a whole at any time, or
from time to time in part, upon not less than 30 days' nor more than 60 days'
notice of redemption given by mail to Holders of LYONs. Any such redemption
must be in multiples of $1,000 Principal Amount at Maturity.
11
<PAGE>
The table below shows Redemption Prices of a LYON per $1,000 Principal
Amount at Maturity on April 15, 2002, at each April 15 thereafter prior to
maturity, and at maturity on April 15, 2017, which prices reflect the accrued
Original Issue Discount calculated to each such date. The Redemption Price of
a LYON redeemed between such dates would include an additional amount
reflecting the additional Original Issue Discount accrued since the next
preceding date in the table to, but excluding, the Redemption Date.
<TABLE>
<CAPTION>
(1) (2)
LYON ACCRUED ORIGINAL (3) REDEMPTION
REDEMPTION DATE ISSUE PRICE ISSUE DISCOUNT AT 4.75% PRICE = (1)+(2)
--------------- ----------- ----------------------- ---------------
<S> <C> <C> <C>
April 15, 2002.......... $391.06 $103.46 $ 494.52
April 15, 2003.......... 391.06 127.23 518.29
April 15, 2004.......... 391.06 152.14 543.20
April 15, 2005.......... 391.06 178.25 569.31
April 15, 2006.......... 391.06 205.61 596.67
April 15, 2007.......... 391.06 234.29 625.35
April 15, 2008.......... 391.06 264.34 655.40
April 15, 2009.......... 391.06 295.85 686.91
April 15, 2010.......... 391.06 328.86 719.92
April 15, 2011.......... 391.06 363.46 754.52
April 15, 2012.......... 391.06 399.73 790.79
April 15, 2013.......... 391.06 437.74 828.80
April 15, 2014.......... 391.06 477.57 868.63
April 15, 2015.......... 391.06 519.32 910.38
April 15, 2016.......... 391.06 563.08 954.14
At Maturity............. 391.06 608.94 1,000.00
</TABLE>
If converted to semiannual coupon notes following the occurrence of a Tax
Event, the LYONs will be redeemable at the Restated Principal Amount plus
accrued and unpaid interest from the date of such conversion to, but
excluding, the Redemption Date; provided, however, that in no event may the
LYONs be redeemed prior to April 15, 2002. See "--Optional Conversion to
Semiannual Coupon Note upon Tax Event."
If fewer than all of the LYONs are to be redeemed, the Trustee shall select
the LYONs to be redeemed in Principal Amounts at Maturity of $1,000 or
integral multiples thereof by lot, pro rata or by another method the Trustee
considers fair and appropriate. If a portion of a Holder's LYONs is selected
for partial redemption and such Holder converts a portion of such LYONs prior
to such redemption, such converted portion shall be deemed, solely for
purposes of determining the aggregate Principal Amount of LYONs to be redeemed
by the Company, to be of the portion selected for redemption.
PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
On April 15, 2002, April 15, 2007 and April 15, 2012 (each, a "Purchase
Date"), the Company will become obligated to purchase, at the option of the
Holder thereof, any outstanding LYON for which a written notice (a "Purchase
Notice") has been delivered by the Holder to the Paying Agent or an office or
agency maintained by the Company for such purpose in the Borough of Manhattan,
The City of New York, at any time from the opening of business on the date
that is 20 business days preceding such Purchase Date until the close of
business on such Purchase Date and for which such Purchase Notice has not been
withdrawn, subject to certain additional conditions set forth in part in the
following paragraphs.
12
<PAGE>
The table below shows the Purchase Prices of a LYON as of the specified
Purchase Dates:
<TABLE>
<CAPTION>
PURCHASE
PURCHASE DATE PRICE
------------- --------
<S> <C>
April 15, 2002................................................... $494.52
April 15, 2007................................................... $625.35
April 15, 2012................................................... $790.79
</TABLE>
If prior to a Purchase Date the LYONs have been converted to semiannual
coupon notes following the occurrence of a Tax Event, the Purchase Price will
be equal to the Restated Principal Amount plus accrued and unpaid interest
from the date of such conversion to, but excluding, the Purchase Date. See "--
Optional Conversion to Semiannual Coupon Note upon Tax Event."
The Company, at its option, may elect to pay such Purchase Price in cash or
shares of Series A Common Stock, or any combination thereof. For a discussion
of the tax treatment of such a transaction, see "Certain Federal Income Tax
Considerations--Disposition or Conversion."
The Company will give notice (the "Company Notice") not less than 20
business days prior to each Purchase Date (the "Company Notice Date") to all
Holders at their addresses shown in the register of the Registrar (and to
beneficial owners as required by applicable law) stating, among other things,
(i) whether the Company will pay the Purchase Price of the LYONs in cash or
shares of Series A Common Stock, or any combination thereof, and (ii) the
procedures that Holders must follow to require the Company to purchase LYONs
from such Holders.
The Purchase Notice given by any Holder requiring the Company to purchase
LYONs shall state (i) the certificate numbers of the LYONs to be delivered by
such Holder for purchase by the Company; (ii) the portion of the Principal
Amount at Maturity of LYONs to be purchased, which portion must be $1,000 or
an integral multiple thereof; (iii) that such LYONs are to be purchased by the
Company pursuant to the applicable provisions of the LYONs; and (iv) if the
Company elects, pursuant to the Company Notice, to pay a specified percentage
of the Purchase Price in shares of Series A Common Stock but such specified
percentage is ultimately to be paid in cash because any of the conditions to
payment of such specified percentage of the Purchase Price in shares of Series
A Common Stock contained in the Indenture is not satisfied prior to the close
of business on the Purchase Date, as described below, that such Holder elects
(a) to withdraw such Purchase Notice as to some or all of the LYONs to which
it relates (stating the principal amount at maturity and certificate numbers
of the LYONs as to which such withdrawal shall relate) or (b) to receive cash
in respect of the Purchase Price of all LYONs subject to such Purchase Notice.
If the Holder fails to indicate such Holder's choice with respect to the
election described in clause (iv) above in the Purchase Notice, such Holder
shall be deemed to have elected to receive cash for the specified percentage
of the Purchase Price that was to have been payable in shares of Series A
Common Stock. See "Certain Federal Income Tax Considerations--Disposition or
Conversion."
Any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent prior to the close of business on the
Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the LYONs as to which the withdrawal
notice relates and the Principal Amount at Maturity, if any, which remains
subject to the Purchase Notice.
If the Company elects to pay the Purchase Price, in whole or in part, in
shares of Series A Common Stock, the number of shares to be delivered in
respect of the specified percentage of the Purchase Price to be paid in Series
A Common Stock shall be equal to the dollar amount of such specified
percentage of the Purchase Price divided by the Market Price (as defined
below) of a share of Series A Common Stock. However, no fractional shares of
Series A Common Stock will be delivered upon any purchase by the Company of
LYONs in payment, in whole or in part, of the Purchase Price. Instead, the
Company will pay cash based on the Market Price for all fractional shares of
Series A Common Stock. Each Holder whose LYONs are purchased at the option of
such Holder as of the Purchase Date shall receive the same percentage of cash
or Series A Common Stock in payment
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<PAGE>
of the Purchase Price for such LYONs, except as described above with regard to
the payment of cash in lieu of fractional shares of Series A Common Stock. See
"Certain Federal Income Tax Considerations--Disposition or Conversion."
The "Market Price" means the average of the Sale Price of the Series A
Common Stock for the five Trading Day period ending on the third Trading Day
prior to the applicable Purchase Date, appropriately adjusted to take into
account the actual occurrence, during the seven Trading Days preceding such
Purchase Date, of certain events that would result in an adjustment of the
Conversion Rate with respect to the Series A Common Stock. The "Sale Price" on
any Trading Day means the closing per share sale price for the Series A Common
Stock (or, if no closing sale price is reported, the average of the bid and
ask prices or, if more than one in either case the average of the average bid
and average ask prices) on such Trading Day as reported in the composite
transactions for the principal United States securities exchange on which the
Series A Common Stock is traded or, if the Series A Common Stock is not listed
on a United States national or regional securities exchange, as reported by
the National Association of Securities Dealers Automated Quotation System. A
"Trading Day" means each day on which the securities exchange or quotation
system which is used to determine the Sale Price is open for trading or
quotation. Because the Market Price of the Series A Common Stock is determined
prior to the Purchase Date, Holders of LYONs bear the market risk with respect
to the value of the Series A Common Stock to be received from the date such
Market Price is determined to the Purchase Date. The Company may pay the
Purchase Price, in whole or in part, in Series A Common Stock only if the
information necessary to calculate the Market Price is reported in The Wall
Street Journal or another daily newspaper of national circulation.
Upon determination of the actual number of shares of Series A Common Stock
issuable in accordance with the foregoing provisions, the Company will publish
such determination in The Wall Street Journal or another daily newspaper of
national circulation.
The Company's right to purchase LYONs, in whole or in part, with shares of
Series A Common Stock is subject to the Company's satisfying various
conditions, including the registration of the Series A Common Stock under the
Securities Act and the Exchange Act, unless there exists an applicable
exemption to registration thereunder. If such conditions are not satisfied
prior to the close of business on the Purchase Date, the Company will pay the
Purchase Price of the LYONs in cash. The Company will comply with the
provisions of Rule 13e-4 and any other tender offer rules under the Exchange
Act which may then be applicable and will file Schedule 13E-4 or any other
schedule required thereunder in connection with any offer by the Company to
purchase LYONs at the option of the Holders thereof on a Purchase Date. The
Company may not change the form of consideration (or components or percentages
of components thereof) to be paid once the Company has given its Company
Notice to Holders of LYONs except as described in the second sentence of this
paragraph.
Payment of the Purchase Price for a LYON for which a Purchase Notice has
been delivered and not withdrawn is conditioned upon delivery of such LYON
(together with necessary endorsements) to the Paying Agent or an office or
agency maintained by the Company for such purpose in the Borough of Manhattan,
The City of New York, at any time (whether prior to, on or after the Purchase
Date) after delivery of such Purchase Notice. Payment of the Purchase Price
for such LYON will be made promptly following the later of the business day
following the Purchase Date and the time of delivery of such LYON. If the
Paying Agent holds, in accordance with the terms of the Indenture, money or
securities sufficient to pay the Purchase Price of such LYON on the business
day following the Purchase Date, then, on and after the Purchase Date, such
LYON will cease to be outstanding and Original Issue Discount on such LYON
will cease to accrue and will be deemed paid, whether or not such LYON is
delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Purchase Price upon delivery of
such LYON).
The Company's ability to purchase LYONs with cash may be limited by the
terms of its then-existing borrowing agreements. No LYONs may be purchased
pursuant to the provisions described above if there has occurred and is
continuing an Event of Default described under "--Event of Default; Notice and
Waiver" below (other than a default in the payment of the Purchase Price with
respect to such LYONs).
14
<PAGE>
CHANGE IN CONTROL PERMITS PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
In the event of any Change in Control (as defined below) of the Company
occurring on or prior to April 15, 2002, each Holder of LYONs will have the
right, at the Holder's option, subject to the terms and conditions of the
Indenture, to require the Company to purchase all or any part (provided that
the Principal Amount at Maturity must be $1,000 or an integral multiple
thereof) of the Holder's LYONs on the date that is 35 business days after the
occurrence of such Change in Control (the "Change in Control Purchase Date")
at a cash price equal to the Issue Price plus accrued Original Issue Discount
to the Change in Control Purchase Date (the "Change in Control Purchase
Price"). If prior to a Change in Control Purchase Date the LYONs have been
converted to semiannual coupon notes following the occurrence of a Tax Event,
the Company will be required to purchase the LYONs at a cash price equal to
the Restated Principal Amount plus accrued and unpaid interest from the date
of such conversion to, but excluding, the Change in Control Purchase Date.
Holders will not have any right to require the Company to purchase LYONs in
the event of any Change in Control of the Company occurring after April 15,
2002.
Within 15 business days after the Change in Control, the Company shall mail
to the Trustee and to each Holder (and to beneficial owners as required by
applicable law) a notice regarding the Change in Control, which notice shall
state, among other things: (i) the date of such Change in Control and,
briefly, the events causing such Change in Control, (ii) the date by which the
Change in Control Purchase Notice (as defined below) must be given, (iii) the
Change in Control Purchase Date, (iv) the Change in Control Purchase Price,
(v) the name and address of the Paying Agent and the Conversion Agent, (vi)
the Conversion Rate and any adjustments thereto, (vii) that LYONs with respect
to which a Change in Control Purchase Notice is given by the Holder may be
converted into shares of Series A Common Stock only if the Change in Control
Purchase Notice has been withdrawn in accordance with the terms of the
Indenture, (viii) the procedures that Holders must follow to exercise these
rights, (ix) the procedures for withdrawing a Change in Control Purchase
Notice, (x) that Holders who want to convert LYONs must satisfy the
requirements set forth in paragraph 9 of the LYONs and (xi) briefly, the
conversion rights of Holders of LYONs. The Company will cause a copy of such
notice to be published in The Wall Street Journal or another daily newspaper
of national circulation.
To exercise the purchase right, the Holder must deliver written notice of
the exercise of such right (a "Change in Control Purchase Notice") to the
Paying Agent or an office or agency maintained by the Company for such purpose
in the Borough of Manhattan, The City of New York, prior to the close of
business on the Change in Control Purchase Date. The Change in Control
Purchase Notice shall state (i) the certificate numbers of the LYONs to be
delivered by the Holder thereof for purchase by the Company; (ii) the portion
of the Principal Amount at Maturity of LYONs to be purchased, which portion
must be $1,000 or an integral multiple thereof; and (iii) that such LYONs are
to be purchased by the Company pursuant to the applicable provisions of the
LYONs.
Any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close
of business on the Change in Control Purchase Date. The notice of withdrawal
shall state the principal amount at maturity and the certificate numbers of
the LYONs as to which the withdrawal notice relates and the Principal Amount
at Maturity, if any, which remains subject to a Change in Control Purchase
Notice.
Payment of the Change in Control Purchase Price for a LYON for which a
Change in Control Purchase Notice has been delivered and not withdrawn is
conditioned upon delivery of such LYON (together with necessary endorsements)
to the Paying Agent or an office or agency maintained by the Company for such
purpose in the Borough of Manhattan, The City of New York, at any time
(whether prior to, on or after the Change in Control Purchase Date) after the
delivery of such Change in Control Purchase Notice. Payment of the Change in
Control Purchase Price for such LYON will be made promptly following the later
of the business day following the Change in Control Purchase Date and the time
of delivery of such LYON. If the Paying Agent holds, in accordance with the
terms of the Indenture, money sufficient to pay the Change in Control Purchase
Price of such LYON on the business day following the Change in Control
Purchase Date, then, on and after the
15
<PAGE>
Change in Control Purchase Date, such LYON will cease to be outstanding and
Original Issue Discount on such LYON will cease to accrue and will be deemed
paid, whether or not such LYON is delivered to the Paying Agent, and all other
rights of the Holder shall terminate (other than the right to receive the
Change in Control Purchase Price upon delivery of such LYON).
Under the Indenture, a "Change in Control" of the Company is deemed to have
occurred at such time as (i) any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) (other than the
Company, any subsidiary of the Company, any employee benefit plan of either
the Company or any Subsidiary of the Company, or the Chandler Trusts (as
defined below) or any of the trustees thereof), files a Schedule 13D or 14D-1
under the Exchange Act (or any successor schedule, form or report) disclosing
that such person has become the beneficial owner of 50% or more of the total
voting power in the aggregate of all classes of Capital Stock then outstanding
of the Company normally entitled to vote in elections of directors, or (ii)
there shall be consummated any consolidation or merger of the Company (a) in
which the Company is not the continuing or surviving corporation (other than
any consolidation or merger effected primarily to change the jurisdiction of
incorporation of the Company) or (b) pursuant to which the Common Stock would
be converted into cash, securities or other property, in each case, other than
a consolidation or merger of the Company in which the holders of Common Stock
immediately prior to the consolidation or merger have, directly or indirectly,
at least a majority of the total voting power in the aggregate of all classes
of capital stock of the continuing or surviving corporation immediately after
the consolidation or merger. The Indenture does not permit the Board of
Directors to waive the Company's obligation to purchase LYONs at the option of
a Holder in the event of a Change in Control of the Company. The term
"Chandler Trusts" shall mean collectively Chandler Trust No. 1, Chandler Trust
No. 2 and Chandis Securities Company, which collectively owned 18,668,546
shares of Series A Common Stock and 20,757,246 shares of Series C Common Stock
at June 30, 1997.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act which may then be
applicable, and will file Schedule 13E-4 or any other schedule required
thereunder in connection with any offer by the Company to purchase LYONs at
the option of the Holders thereof upon a Change in Control. The Change in
Control purchase feature of the LYONs may in certain circumstances make more
difficult or discourage a takeover of the Company and, thus, the removal of
incumbent management. The Change in Control purchase feature, however, is not
the result of management's knowledge of any specific effort to accumulate
shares of Common Stock or to obtain control of the Company by means of a
merger, tender offer, solicitation or otherwise, or part of a plan by
management to adopt a series of anti-takeover provisions. Instead, the Change
in Control purchase feature is a standard term contained in other LYONs
offerings that have been marketed by Merrill Lynch, and the terms of such
feature result from negotiations between the Company and Merrill Lynch.
If a Change in Control were to occur, there can be no assurance that the
Company would have funds sufficient to pay the Change in Control Purchase
Price for all of the LYONs that might be delivered by Holders seeking to
exercise the purchase right, since substantially all of the Senior
Indebtedness of the Company has cross-default provisions that could be
triggered by a default under the change of control provisions in certain
Senior Indebtedness. In such case, the Holders of the LYONs would be
subordinated to the prior claims of the holders of Senior Indebtedness. In
addition, the Company's ability to purchase LYONs with cash may be limited by
the terms of its then-existing borrowing agreements. No LYONs may be purchased
pursuant to the provisions described above if there has occurred and is
continuing an Event of Default described under "--Event of Default; Notice and
Waiver" below (other than a default in the payment of the Change in Control
Purchase Price with respect to such LYONs).
CONSOLIDATION, MERGER AND SALE OR LEASE OF ASSETS
The Company, without consent of any Holders of outstanding LYONs, may
consolidate with or merge into, or transfer or lease its assets substantially
as an entirety to any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof (each a "Person"),
and any Person may consolidate with or merge into, or transfer or lease
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its assets substantially as an entirety to the Company, provided that (i) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires or leases the assets of the
Company substantially as an entirety is a corporation, partnership or trust
organized and existing under the laws of any United States jurisdiction and
expressly assumes the Company's obligations on the LYONs and under the
Indenture, (ii) immediately after giving effect to such transaction no Event
of Default (as defined below), and no event which, after notice or lapse of
time or both, would become an Event of Default, happened and is continuing,
and (iii) certain other conditions described in the Indenture are met.
OPTIONAL CONVERSION TO SEMIANNUAL COUPON NOTE UPON TAX EVENT
From and after the date (the "Tax Event Date") of the occurrence of a Tax
Event (as defined below), the Company shall have the option to elect to have
interest in lieu of future Original Issue Discount accrue at 4.75% per annum
on a principal amount per LYON (the "Restated Principal Amount") equal to the
Issue Price plus Original Issue Discount accrued to the date immediately prior
to the Tax Event Date or the date on which the Company exercises the option
described herein, whichever is later (such date hereinafter referred to as the
"Option Exercise Date"). Such interest shall accrue from the Option Exercise
Date and shall be payable semiannually on April 15 and October 15 of each year
(each an "Interest Payment Date") to holders of record at the close of
business on April 1 or October 1 (each a "Regular Record Date") immediately
preceding such Interest Payment Date. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months and will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the Option Exercise Date.
A "Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after April 9, 1997, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof
or therein or (b) any amendment to, or change in, an interpretation or
application of such laws or regulations by any legislative body, court,
governmental agency or regulatory authority, in each case which amendment or
change is enacted, promulgated, issued or announced or which interpretation is
issued or announced or which action is taken, on or after April 9, 1997, there
is more than an insubstantial risk that interest (including Original Issue
Discount) payable on the LYONs either (i) would not be deductible on a current
accrual basis or (ii) would not be deductible under any other method, in
either case in whole or in part, by the Company (by reason of deferral,
disallowance, or otherwise) for United States federal income tax purposes.
On December 7, 1995, the U.S. Treasury Department proposed a series of tax
law changes that would, among other things, prevent corporations from
deducting interest (including original issue discount) on debt instruments
convertible into equity of the issuer or a related party until the taxable
year in which such interest is paid in cash or other property (other than
obligations or equity of the issuer or a related party or cash or other
property the amount of which is determined by reference to the value of equity
of the issuer or a related party). This proposal, if enacted and made
applicable to the LYONs, would prevent the Company from deducting interest
(including Original Issue Discount) payable on the LYONs on a current accrual
basis for United States federal income tax purposes and could cause some or
all of the interest (including Original Issue Discount) payable on the LYONs
to fail to be deductible by the Company under any other method for United
States federal income tax purposes. The President's 1998 budget proposals,
submitted to Congress on February 6, 1997, modified this potential change in
tax law to apply to debt instruments issued on or after the date of first
committee action. The Company cannot predict whether or not these proposed tax
law changes will ultimately become law. If legislation is enacted limiting, in
whole or in part, the ability of the Company to either (i) deduct the interest
(including Original Issue Discount) payable on the LYONs on a current accrual
basis or (ii) deduct the interest (including Original Issue Discount) payable
on the LYONs under any other method for United States federal income tax
purposes, such enactment would result in a Tax Event and the terms of the
LYONs would be subject to modification at the option of the Company as
described above. The modification of the terms of LYONs by the Company upon a
Tax Event as described above could possibly alter the timing of income
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recognition by holders of the LYONs with respect to the semiannual payments of
interest due on the LYONs after the Option Exercise Date. See "Certain Federal
Income Tax Considerations."
EVENT OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the Holders of not less
than 25% in aggregate Principal Amount at Maturity of the LYONs then
outstanding may declare the Issue Price plus Original Issue Discount accrued
(or if the LYONs have been converted to semiannual coupon notes following a
Tax Event, the Restated Principal Amount, plus accrued and unpaid interest) to
the date of default (in the case of an Event of Default specified in (i) or
(ii) of the following paragraph) or to the date of such declaration (in the
case of an Event of Default specified in (iii) or (iv) of the following
paragraph) on all the LYONs to be immediately due and payable. In the case of
certain events of bankruptcy or insolvency, the Issue Price of the LYONs plus
the Original Issue Discount accrued thereon (or if the LYONs have been
converted to semiannual coupon notes following a Tax Event, the Restated
Principal Amount plus accrued and unpaid interest) to the occurrence of such
event shall automatically become and be immediately due and payable. Upon any
such acceleration, the subordination provisions of the Indenture preclude any
payment being made to Holders of LYONs until the earlier of either of (i) 120
days or more after the date of such acceleration and (ii) the payment in full
of all Senior Indebtedness, but only if such payment is then otherwise
permitted under the terms of the Indenture. See "--Subordination of LYONs"
above. Under certain circumstances, the Holders of a majority in aggregate
Principal Amount at Maturity of the outstanding LYONs may rescind any such
acceleration with respect to the LYONs and its consequences. Interest shall
accrue and be payable on demand upon a default in the payment of Principal
Amount at Maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Purchase Price, Change in Control Purchase Price or shares of Common
Stock (or cash in lieu of fractional shares) to be delivered on conversion of
LYONs, in each case to the extent that the payment of such interest shall be
legally enforceable.
Under the Indenture, Events of Default include: (i) default in payment of
the principal amount at maturity, Issue Price, accrued Original Issue
Discount, interest upon conversion to a semiannual coupon note following a Tax
Event (if such default in payment of interest shall continue for 30 days),
Redemption Price, Purchase Price or Change in Control Purchase Price with
respect to any LYON, when the same becomes due and payable (whether or not
such payment is prohibited by the provisions of the Indenture); (ii) failure
by the Company to deliver shares of Series A Common Stock or cash in lieu
thereof (together with cash in lieu of fractional shares) when such Series A
Common Stock or cash is required to be delivered following conversion of a
LYON and continuance of such default for 10 days; (iii) failure by the Company
to comply with any of its other agreements in the LYONs or the Indenture upon
the receipt by the Company of notice of such default from the Trustee or from
Holders of not less than 25% in aggregate Principal Amount at Maturity of the
LYONs then outstanding and the Company's failure to cure such default within
90 days after receipt by the Company of such notice; or (iv) certain events of
bankruptcy or insolvency.
The Trustee shall, within 90 days after the occurrence of any default, mail
to all Holders of LYONs notice of all defaults of which the Trustee shall be
aware, unless such defaults shall have been cured or waived before the giving
of such notice; provided, that the Trustee may withhold such notice as to any
default other than a payment default, if it determines in good faith that
withholding the notice is in the interests of the Holders.
The Holders of a majority in aggregate Principal Amount at Maturity of the
outstanding LYONs may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other
limitations. The Trustee may refuse to perform any duty or exercise any right
or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives indemnity satisfactory to it against any loss,
liability or expense. No Holder of any LYON will have any right to pursue any
remedy with respect to the Indenture or the LYONs, unless (i) such Holder
shall have previously given the Trustee written notice of a continuing Event
of Default; (ii) the Holders of at least 25% in aggregate Principal Amount at
Maturity of the outstanding LYONs shall have made a written request to the
Trustee to
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pursue such remedy; (iii) such Holder or Holders shall have offered to the
Trustee reasonable security or indemnity against any loss, liability or
expense satisfactory to it; (iv) the Trustee shall have failed to comply with
the request within 60 days after receipt of such notice, request and offer of
security or indemnity; and (v) the Holders of a majority in aggregate
Principal Amount at Maturity of the outstanding LYONs shall not have given the
Trustee a direction inconsistent with such request within 60 days after
receipt of such request.
The right of any Holder: (a) to receive payment of the Principal Amount at
Maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Purchase Price, Change in Control Purchase Price or interest, if any, in
respect of the LYONs held by such Holder on or after the respective due dates
expressed in the LYONs or as of any Redemption Date, (b) to convert such LYONs
or (c) to bring suit for the enforcement of any such payment on or after such
respective dates or the right to convert, shall not be impaired or adversely
affected without such Holder's consent.
The Holders of a majority in aggregate Principal Amount at Maturity of LYONs
at the time outstanding may waive any existing default and its consequences
except (i) any default in any payment on the LYONs, (ii) any default with
respect to the conversion rights of the LYONs, or (iii) any default in respect
of certain covenants or provisions in the Indenture which may not be modified
without the consent of the Holder of each LYON as described in "--
Modification" below. When a default is waived, it is deemed cured and shall
cease to exist, but no such waiver shall extend to any subsequent or other
default or impair any consequent right.
The Company will be required to furnish to the Trustee annually a statement
as to any default by the Company in the performance and observance of its
obligations under the Indenture. In addition, the Company shall file with the
Trustee written notice of the occurrence or any default or Event of Default
within five business days of its becoming aware of such default or Event of
Default.
MODIFICATION
Modification and amendment of the Indenture or the LYONs may be effected by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate Principal Amount at Maturity of the LYONs then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things, (i) reduce the Principal Amount at
Maturity, Issue Price, Purchase Price, Change in Control Purchase Price or
Redemption Price with respect to any LYON, or extend the Stated Maturity of
any LYON or alter the manner or rate of accrual of Original Issue Discount or
interest, or make any LYON payable in money or securities other than that
stated in the LYON; (ii) make any change to the Principal Amount at Maturity
of LYONs whose Holders must consent to an amendment or any waiver under the
Indenture or modify the Indenture provisions relating to such amendments or
waivers; (iii) make any change that adversely affects the right to convert any
LYON or the right to require the Company to purchase a LYON; (iv) modify the
provisions of the Indenture relating to the subordination of the LYONs in a
manner adverse to the Holders of the LYONs; or (v) impair the right to
institute suit for the enforcement of any payment with respect to, or
conversion of, the LYONs. No change that adversely affects the rights of any
holder of Senior Indebtedness of the Company under the subordination
provisions of the Indenture may be made unless requisite consents to such
change are obtained from holders of Senior Indebtedness pursuant to the terms
of the related Senior Indebtedness instrument.
Without the consent of any Holder of LYONs, the Company and the Trustee may
amend the Indenture to (i) cure any ambiguity, defect or inconsistency,
provided, however, that such amendment does not materially adversely affect
the rights of any Holder, (ii) provide for the assumption by a successor to
the Company of the obligations of the Company under the Indenture, (iii)
provide for uncertificated LYONs in addition to certificated LYONs, as long as
such uncertificated LYONs are in registered form for United States federal
income tax purposes, (iv) make any change that does not adversely affect the
rights of any Holder of LYONs, (v) make any change to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, or (vi) add to
the covenants or obligations of the Company under the Indenture for the
protection of the Holders of the LYONs or surrender any right, power or option
conferred by the Indenture on the Company.
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DISCHARGE OF THE INDENTURE
The Company may satisfy and discharge its obligations under the Indenture by
delivering to the Trustee for cancellation all outstanding LYONs or by
depositing with the Trustee, the Paying Agent or the Conversion Agent, if
applicable, after the LYONs have become due and payable, whether at Stated
Maturity, or any Redemption Date, or any Purchase Date, a Change of Control
Purchase Date, or upon conversion or otherwise, cash or Common Stock (as
applicable under the terms of the Indenture) sufficient to pay all of the
outstanding LYONs and paying all other sums payable under the Indenture by the
Company.
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company under
Title 11 of the United States Code, the claim of the Holder of a LYON may be
limited to the Issue Price of the LYON plus that portion of the Original Issue
Discount that is deemed to have accrued from the date of issue to the
commencement of the proceeding.
INFORMATION CONCERNING THE TRUSTEE
Citibank, N.A. is the Trustee, Registrar, Paying Agent and Conversion Agent
under the Indenture. The Trustee also acts as trustee under the indenture in
connection with the Company's 4 1/4% Premium Equity Participating Securities
due March 15, 2001 and the Company's 7 1/4% Debentures due November 15, 2096.
In addition, the Trustee serves as administrative agent under the Revolving
Credit Agreement dated as of September 6, 1995 which the Company has with
several foreign and domestic banks. In the ordinary course of business, the
Company maintains deposits with the Trustee and the Trustee has also from time
to time provided other banking services to the Company.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue: (i) 500,000,000 shares of Series A
Common Stock ("Series A Common Stock"), of which 63,903,643 shares were issued
and outstanding at August 14, 1997; (ii) 100,000,000 shares of Series B Common
Stock, par value $1.00 per share ("Series B Common Stock"), none of which is
outstanding; (iii) 300,000,000 shares of Series C Common Stock, par value
$1.00 per share ("Series C Common Stock"), of which 25,877,991 shares were
issued and outstanding at August 14, 1997; and (iv) 33,000,000 shares of
Preferred Stock, of which (a) 900,000 shares are designated Preferred Stock,
Series A, par value $1.00 per share ("Series A Preferred Stock"), of which
88,519 were issued and outstanding at August 14, 1997, (b) 8,438,822 shares
are designated Series B Preferred Stock, par value $1.00 per share ("Series B
Preferred Stock"), none of which were issued and outstanding at August 14,
1997, (c) 380,972 shares are designated as Preferred Stock, Series C-1, par
value $1.00 per share ("Series C-1 Preferred Stock"), all of which were issued
and outstanding at August 14, 1997, and (d) 245,100 shares are designated as
Preferred Stock, Series C-2, par value $1.00 per share ("Series C-2 Preferred
Stock"), all of which were issued and outstanding at August 14, 1997. The
Series C-1 Preferred Stock and Series C-2 Preferred Stock were first issued by
the Company on August 8, 1997. The outstanding shares at August 14, 1997
exclude 735,049 shares of Series A Preferred Stock and 22,238,931 shares of
Series A Common Stock which are reported as treasury stock for financial
reporting purposes.
COMMON STOCK
General
The following description of the Series A Common Stock, Series B Common
Stock and Series C Common Stock is summarized from, and qualified in its
entirety by reference to, the Amended and Restated Certificate of
Incorporation of the Company (the "Restated Certificate"), filed as an exhibit
to the Registration Statement of which this Prospectus is a part. The Series A
Common Stock is listed on the NYSE and the Pacific Stock Exchange.
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Rights to Designate Series B Common Stock
Pursuant to the Restated Certificate, the Board of Directors of the Company
is entitled to designate certain rights, powers and preferences of a class of
Series B Common Stock in addition to the outstanding Series A Common Stock and
the Series C Common Stock, as discussed below. First, the Board may determine
the exact number of votes per share of Series B Common Stock at not less than
one-tenth ( 1/10) nor more than one (1). Second, the Board may also make other
changes in the rights, powers and preferences of the Series B Common Stock,
provided that in no such case may the rights, powers and preferences of any
such series be greater than those described herein. Subject to the foregoing,
it is anticipated that Series B Common Stock, if authorized by the Board of
Directors, will be identical in all respects to the Series A Common Stock
currently outstanding, except with respect to voting. Specifically, it is
anticipated that each share of Series B Common Stock will be entitled to one-
tenth ( 1/10) of a vote rather than one vote per share.
The description herein of the rights, powers and preferences of the Series B
Common Stock is subject to the discretionary authority of the Board as
described above. The Board presently has no intention of issuing any shares of
Series B Common Stock or of utilizing such authority to vary the terms of the
Series B Common Stock from those described herein unless it determines that
such change is necessary in light of legal developments or in order to comply
with, or establish an exemption from, any applicable law, regulation or rule
of any governmental authority, national securities exchange or national market
system.
Voting
Except as set forth below, all actions submitted to a vote of the Company's
stockholders will be voted on by holders of Series A Common Stock, Series B
Common Stock, Series C Common Stock and Series B Preferred Stock voting
together as a single class. The affirmative vote of the holders of a majority
of the outstanding shares of Series A Common Stock, Series B Common Stock
and/or Series C Common Stock, voting separately as a class, is required (i) to
approve any amendment to the Restated Certificate that would alter or change
the powers, preferences or special rights of such series so as to affect it
adversely and (ii) to approve such other matters as may require class votes
under the General Corporation Law of the State of Delaware. The Series A
Common Stock is entitled to 1 vote per share, and the Series C Common Stock is
entitled to 10 votes per share.
Dividends and Other Distributions (including Distributions upon Liquidation
or Sale of the Company)
Unless otherwise determined by the Board in the resolutions providing for
the issuance of Series B Common Stock, each share of Series A Common Stock,
Series B Common Stock and Series C Common Stock is equal in respect of
dividends and other distributions in cash, stock or property (including
distributions upon liquidation of the Company and consideration to be received
upon a merger or consolidation of the Company or a sale of all or
substantially all of the Company's assets), except that in the case of
dividends or other distributions payable on the Series A Common Stock, Series
B Common Stock or Series C Common Stock in shares of such stock, including
distributions pursuant to stock splits or dividends, only Series A Common
Stock is to be distributed with respect to Series A Common Stock; only Series
B Common Stock is to be distributed with respect to Series B Common Stock; and
only Series C Common Stock is to be distributed with respect to Series C
Common Stock. In no event will either Series A Common Stock, Series B Common
Stock or Series C Common Stock be split, divided or combined unless each other
class is proportionately split, divided or combined.
Termination and Conversion of Series B and/or Series C Common Stock
Either or both the Series B Common Stock and Series C Common Stock will
automatically be converted into Series A Common Stock on a share-for-share
basis (i) at any time the Board and the holders of a majority of the
outstanding shares of the series approve the conversion of all of such series
into Series A Common Stock, (ii) if, as a result of the existence of the
series, the Series A Common Stock becomes excluded from trading on the NYSE,
the American Stock Exchange and all other national securities exchanges and is
also excluded from quotation on NASDAQ or any other national quotation system
then in use, (iii) if the Board, in its sole discretion,
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elects to effect a conversion of such series in connection with its approval
of any sale or lease of all or any substantial part of the Company's assets or
any merger, consolidation, liquidation or dissolution of the Company, or (iv)
if the Board, in its sole discretion, elects to effect a conversion of such
series after a determination that there has been a material adverse change in
the liquidity, marketability or market value of the outstanding Series A
Common Stock, considered in the aggregate (a) due to the exclusion of the
Series A Common Stock from trading on a national securities exchange or the
exclusion of the Series A Common Stock from quotation on NASDAQ, or such other
national quotation system then in use, or (b) due to requirements of federal
or state law, in any such case, as a result of the existence of such series.
To the extent that the Board has discretion, the decision whether or not to
exercise its authority to effect a conversion of Series B Common Stock or
Series C Common Stock would be made in light of all the existing facts and
circumstances affecting the interests of the Company and its stockholders,
including the effect such conversion could have on the Company's vulnerability
to an unsolicited hostile takeover attempt and any of the other factors
referred to herein.
In the event of any such termination of Series B Common Stock or Series C
Common Stock, certificates formerly representing outstanding shares of that
series shall thereafter be deemed to represent a like number of shares of
Series A Common Stock. If both Series B Common Stock and Series C Common Stock
are terminated, all outstanding shares of Series A Common Stock shall again be
denominated Common Stock and all certificates representing outstanding shares
of Series A Common Stock shall thereafter be deemed to represent a like number
of shares of Common Stock.
Preemptive Rights
None of the Series A Common Stock, the Series B Common Stock or the Series C
Common Stock carries any preemptive right enabling a holder to subscribe for
or receive shares of stock of the Company of any class or any other securities
convertible into shares of stock of the Company. The Board will continue to
possess the power to issue shares of authorized but unissued Series A Common
Stock, Series B Common Stock, Series C Common Stock and Preferred Stock
without further stockholder action.
PREFERRED STOCK
The Restated Certificate provides that the Board of Directors is authorized
to provide for the issuance of shares of Preferred Stock, from time to time,
in one or more series and to fix any voting powers, full or limited or none,
and the descriptions, preferences and relative, participating, optional or
other special rights, applicable to the shares to be included in any such
series and any qualifications, limitations or restrictions thereon. On
April 2, 1997, the Company redeemed all of its issued and outstanding Series B
Preferred Stock, and no shares of Series B Preferred Stock are outstanding at
the date hereof.
The following description of the Series A Preferred Stock, Series C-1
Preferred Stock and Series C-2 Preferred Stock is summarized from, and is
qualified in its entirety by reference to, the Restated Certificate, the
Certificate of Designation of the Series A Preferred Stock (the "Series A
Certificate of Designation"), the Certificate of Designation of the Series C-1
Preferred Stock (the "Series C-1 Certificate of Designation") and the
Certificate of Designation of the Series C-2 Preferred Stock ("the Series C-2
Certificate of Designation").
Ranking
The Series A Preferred Stock, Series C-1 Preferred Stock and Series C-2
Preferred Stock rank prior to the Common Stock, and to all other classes and
series of equity securities of the Company hereafter issued, other than any
class or series of equity securities of the Company expressly designated as
being on a parity with (the "Parity Stock") or senior to (the "Senior Stock")
the Series A Preferred Stock, Series C-1 Preferred Stock or Series C-2
Preferred Stock, with respect to dividend rights and rights on liquidation,
winding up or dissolution of the Company. The Common Stock and such other
classes or series of equity securities of the Company not expressly designated
as being on a parity with or senior to the Series A Preferred Stock, Series C-
1 Preferred Stock and Series C-2 Preferred Stock are referred to hereinafter
as "Junior Stock." The rights of holders of
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shares of Series A Preferred Stock, Series C-1 Preferred Stock and Series C-2
Preferred Stock are subordinate to the rights of the Company's general
creditors. The Series A Preferred Stock, Series C-1 Preferred Stock and Series
C-2 Preferred Stock are subject to creation of Senior Stock, Parity Stock and
Junior Stock to the extent not expressly prohibited by the Restated
Certificate and the Series A Certificate of Designation, the Series C-1
Certificate of Designation or the Series C-2 Certificate of Designation.
Dividend Rights
Holders of Series A Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors of the Company out of funds legally
available therefor, cumulative cash dividends at an annual rate of 8%.
Dividends on the Series A Preferred Stock are payable quarterly following each
quarterly dividend period (a "Dividend Period") on March 10, June 10,
September 10 and December 10 of each year. Commencing October 1, 1997, holders
of Series C-1 Preferred Stock and Series C-2 Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors of the Company out
of funds legally available therefor, cumulative cash dividends at an annual
rate of 5.8%, which rate may increase commencing in 2001 to a maximum of 8.4%
(based on the percentage increases, if any, in the dividends paid by the
Company on its Common Stock). The dividends on the Series C-1 Preferred Stock
and Series C-2 Preferred Stock for the initial Dividend Period ending
September 30, 1997 will be $5.1 million. Dividends on the Series C-1 Preferred
Stock and Series C-2 Preferred Stock are payable for each Dividend Period on
March 10, June 10, September 10 and December 10 in each year with respect to
the Dividend Period ending on the last day of such month, commencing
September 10, 1997.
No dividends (other than in Common Stock or other Junior Stock) shall be
declared or paid or set apart for payment on any Parity Stock or Junior Stock
for any Dividend Period unless full dividends on the Series A Preferred Stock,
Series C-1 Preferred Stock and Series C-2 Preferred Stock for the prior
Dividend Period shall have been paid or declared and set aside.
The Company shall not declare or pay any dividend or other distribution
(other than in Common Stock or other Junior Stock) with respect to any Junior
Stock or Parity Stock, including Common Stock, or redeem or set apart funds
for the purchase or redemption of any Junior Stock or Parity Stock through a
sinking fund or otherwise, or purchase any shares of its Common Stock, unless
and until the Company shall have declared and paid (or set apart) full cash
dividends on the Series A Preferred Stock, Series C-1 Preferred Stock and
Series C-2 Preferred Stock for the most recent Dividend Period.
No dividend shall be paid or set aside for holders of the Series A Preferred
Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock for any
Dividend Period unless full dividends have been paid or set aside for the
holders of each class or series of Senior Stock. Therefore, the Company's
ability to pay dividends on the Series A Preferred Stock, Series C-1 Preferred
Stock and Series C-2 Preferred Stock may be subject to prior and superior
rights of holders of another class or series of equity securities of the
Company. The Company does not currently have outstanding any class or series
of Senior Stock.
Liquidation Preference
Holders of shares of Series A Preferred Stock, Series C-1 Preferred Stock
and Series C-2 Preferred Stock then outstanding are entitled to receive a
liquidation preference of $500 per share, plus an amount per share equal to
any dividends accrued but unpaid, without interest, in the event of any
liquidation, dissolution or winding up of the Company whether voluntary or
involuntary, out of or to the extent of the net assets of the Company legally
available for such distribution, before any distributions are made with
respect to any Common Stock or any other Junior Stock. If the net liquidation
proceeds then available for distribution are insufficient to pay the
liquidation preference of the Series A Preferred Stock, Series C-1 Preferred
Stock, Series C-2 Preferred Stock and any Parity Stock in full, such proceeds
will be distributed on a pro rata basis to the Series A Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock and Parity Stock.
Following payment in full of such liquidation preferences, the Series A
Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock
will not share in any additional net liquidation proceeds.
23
<PAGE>
Voting Rights of Preferred Stock
The holders of shares of Series A Preferred Stock, Series C-1 Preferred
Stock and Series C-2 Preferred Stock are not entitled to any voting rights,
except as required by applicable law and as summarized below.
So long as any shares of the Series A Preferred Stock, Series C-1 Preferred
Stock and Series C-2 Preferred Stock are outstanding, Times Mirror will not,
without the consent of the holders of at least two-thirds of the outstanding
shares of the Series A Preferred Stock, Series C-1 Preferred Stock and Series
C-2 Preferred Stock voting separately as a class together with holders of
shares of any Parity Stock upon which like voting rights have been conferred
and are exercisable (the "Voting Parity Stock"), (i) authorize, create or
issue, or increase the authorized or issued amount of, any class or series of
capital stock that would restrict the obligation of Times Mirror to pay
dividends or perform any of its other obligations to the holders of the Series
A Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock;
or (ii) subject to certain exceptions, authorize, enter into or permit to
exist any covenant or agreement that would restrict the obligation of Times
Mirror to pay dividends or perform any of its other obligations to the holders
of the Series A Preferred Stock, Series C-1 Preferred Stock and Series C-2
Preferred Stock. See "--Ranking" and "--Dividends Rights" above.
So long as any shares of the Series A Preferred Stock, Series C-1 Preferred
Stock and Series C-2 Preferred Stock are outstanding, the holders of such
Preferred Stock have the right, voting separately as a class together with
holders of shares of any Voting Parity Stock, to vote on (i) the liquidation
or dissolution of Times Mirror; (ii) any proposal to authorize, create or
issue, or increase the authorized or issued amount of, any class or series of
capital stock ranking pari passu with, or prior to, the shares of the Series A
Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock in
powers, rights or preferences upon the liquidation, dissolution or winding up
of the affairs of Times Mirror or as to dividends; and (iii) any proposal to
amend by merger, amendment or otherwise (or otherwise alter or repeal) the
Certificate of Incorporation if such amendment, alteration or repeal would
increase or decrease the aggregate number of authorized shares of Series A
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock or any
Voting Parity Stock so as to affect them adversely. An amendment that
increases the number of authorized shares of any class or series of Preferred
Stock or authorizes the creation or issuance of other classes or series of
Preferred Stock, in each case ranking junior to the Series A Preferred Stock,
Series C-1 Preferred Stock and Series C-2 Preferred Stock with respect to the
payment of dividends and distribution of assets upon liquidation, dissolution
or winding up shall not be considered to be such an adverse change.
At any time that dividends in an amount equal to dividend payments for six
Dividend Periods have accrued and remain unpaid, holders of Series A Preferred
Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock will have the
right, voting separately as a class, to elect two directors to the Board of
Directors of Times Mirror (in addition to the then authorized number of
directors) at the next annual, or at a special, meeting of stockholders. Upon
payment of all dividend arrearages, holders of Series A Preferred Stock,
Series C-1 Preferred Stock and Series C-2 Preferred Stock will be divested of
such voting rights until any future time when dividends in an amount equal to
dividend payments for six Dividend Periods have accrued and remained unpaid.
The terms of the special directors will thereupon terminate and the authorized
number of directors will be reduced by two.
Optional Conversion
The Series A Preferred Stock, Series C-1 Preferred Stock and Series C-2
Preferred Stock may be converted into Series A Common Stock by Times Mirror or
by the holders thereof after the latest to occur of (i) the date on which the
assets of either Chandler Trust No. 1 or Chandler Trust No. 2 are distributed
to the beneficiaries thereof or (ii) February 1, 2025 (such later date being
the "Redeemability Date") at a conversion price measured by the average market
value of Series A Common Stock during the 20 trading days prior to the notice
of election to convert the Series A Preferred Stock, Series C-1 Preferred
Stock or Series C-2 Preferred Stock, as the case may be. Notwithstanding the
foregoing, the number of shares of Series A Common Stock into which the
Series C-2 Preferred Stock can be converted is limited, as described in the
Series C-2 Preferred Stock Certificate of Designation. It is not possible to
identify the date on which the assets of Chandler Trust No. 1 or Chandler
24
<PAGE>
Trust No. 2 may be distributed to their respective beneficiaries as the assets
of those trusts are to be distributed upon the death of the last of a list of
specified persons. In lieu of such conversion into the Series A Common Stock,
each of Chandler Trust No. 1 and Chandler Trust No. 2 may be entitled to elect
to exchange shares of Series A Preferred Stock for shares of Series A Common
Stock and Series C Common Stock, in the same proportion as its relative
ownership of Series A Common Stock and Series C Common Stock immediately prior
to such redemption; provided, however, that if the total votes represented by
all shares of Common Stock owned by such holder immediately after such
exchange (expressed as a percentage of the total voting power of Times Mirror
outstanding immediately after such exchange) exceed the greater of (i) the
total votes represented by all Common Stock of Times Mirror's predecessor
("Old Times Mirror Common Stock") owned by such holder as of June 5, 1994
(expressed as a percentage of the total voting power of Times Mirror's
predecessor outstanding as of June 5, 1994) and (ii) the total votes
represented by all Common Stock owned by such holder immediately prior to such
exchange (expressed as a percentage of the total voting power of Times Mirror
outstanding immediately prior to such exchange), then, with respect to all
such excess votes, such holder has agreed that, to the extent any of such
excess votes are voted, it will cause such excess votes to be cast on all
matters proportionately on the same basis as the other votes cast at a meeting
of stockholders of Times Mirror.
CERTAIN PROVISIONS IN THE RESTATED CERTIFICATE AND BYLAWS
The Restated Certificate and Bylaws of the Company provide for
indemnification of directors and officers to the fullest extent permitted by
applicable law and contain various anti-takeover provisions intended to
(i) promote stability of the Company's stockholder base and (ii) render more
difficult certain unsolicited or hostile attempts to take over the Company
which could disrupt the Company, divert the attention of the Company's
directors, officers and employees and adversely affect the independence and
integrity of the Company's media operations. A summary of the principal anti-
takeover provisions is set forth below.
Classified Board of Directors, Removal of Directors and Related Matters
Pursuant to the Restated Certificate, the Company's Board of Directors is
divided into three classes, each class to consist as nearly as possible of
one-third of the Directors. The term of office of each class of Directors
expires three years from the year of election. The Restated Certificate also
provides that Directors may be removed only for cause and only by a majority
of the votes entitled to be cast by the holders of all shares of capital stock
entitled to vote generally in the election of Directors (the "Voting
Interests"). Additionally, if the proposal to remove a Director is made by or
on behalf of a Related Person (as defined below), removal will also require
the affirmative vote of a majority of the Voting Interests held by persons
other than such Related Person.
25
<PAGE>
Thus, a third party seeking to gain control of the Board of Directors may be
forced to wait until the expiration of the respective terms of incumbent
Directors, unless there were cause and sufficient voting strength to remove a
particular Director or Directors.
Increased Stockholder Vote Required in Certain Business Combinations
The Restated Certificate requires, subject to certain exceptions summarized
below, that any Business Combination (as defined below), be approved by (i) an
affirmative vote of the holders of not less than 80% of the Voting Interests
(the "80% Voting Requirement") and (ii) the affirmative vote of the holders of
a majority of the Disinterested Shares (as defined below). Business
Combinations include generally the following: (i) mergers or reorganizations
of the Company or its subsidiaries with or into a Related Person (as defined
below) or of a Related Person with or into the Company or a subsidiary; (ii)
reorganizations that would have the effect of increasing the voting power of a
Related Person; (iii) certain acquisitions by the Company or any subsidiary of
the Company of securities issued by or assets of a Related Person; and (iv)
liquidations, sales or transfers to a Related Person of assets of the Company
or one or more of its subsidiaries constituting a substantial part of the
Company.
A Business Combination does not need to satisfy the foregoing approval
requirements if the Business Combination has been approved by a majority of
the Directors who are unaffiliated with the Related Person and who were
members of the Board of Directors before the Company was incorporated in the
State of Delaware, or who became a member of the Board before the Related
Person became a Related Person (the "Continuing Directors"). Business
Combinations in which the stockholders of the Company are to receive cash,
securities or other property in exchange for their shares of capital stock do
not need to satisfy the 80% Voting Requirement if (i) the value of the
consideration meets certain thresholds of fairness, as specified in the
Restated Certificate, and (ii) the Business Combination is approved by the
affirmative vote of the holders of a majority of the Disinterested Shares.
As used in the Restated Certificate, a "Related Person" is a person or
entity, or an affiliate or associate (as defined in Rule 12b-2 under the
Exchange Act) of such person or entity, that beneficially owns, in the
aggregate, five percent or more of the outstanding voting interests of the
Company; provided, however, the term Related Person does not include (i) any
person or entity that beneficially owned five percent or more of the common
stock of the Company on the date upon which the Company was incorporated in
the State of Delaware, or (ii) any employee benefit plan established to
provide benefits for employees of the Company or its subsidiaries, any trust
plan thereto, or any trustee or fiduciary when acting in such capacity with
respect to any such plan or trust. The term "Disinterested Shares" means, as
to any Related Person, shares of the Company's voting stock held by
stockholders other than such Related Person.
Restriction on a Stockholder's Power to Call Stockholders' Meetings and
Elimination of Right to Act Without a Meeting
The Restated Certificate provides that a special meeting of stockholders may
be called only by the Board of Directors. Furthermore, if a proposal requiring
stockholder approval is made by or on behalf of a Related Person or a Director
affiliated with a Related Person, the affirmative vote of a majority of the
Continuing Directors is also required to call a special meeting of
stockholders. The principal effect of this provision is to prevent
stockholders from forcing a special meeting to consider a proposal opposed by
the Board of Directors.
The Restated Certificate provides that any action taken by the stockholders
of the Company must be effected at an annual or special meeting of
stockholders and may not be taken by written consent.
Procedures for Stockholder Nominations and Proposals
The Restated Certificate provides that a stockholder must furnish written
notice to the Secretary of the Company of any nomination or business proposal
to be brought before a stockholders meeting not less than 30
26
<PAGE>
nor more than 60 days prior to the meeting as originally scheduled. In the
event that less than 40 days public notice of a meeting date is given by the
Company, a stockholder must furnish notice of a nomination or business
proposal not later than the close of business on the tenth day following the
mailing or the public disclosure of notice of the meeting date. These
procedures prohibit last-minute attempts by any stockholder to nominate a
Director or present a business proposal at an annual stockholders meeting,
even if such a nomination or proposal might be desired by a majority of the
stockholders.
Relevant Factors to be Considered by the Board of Directors
The Restated Certificate provides that, in evaluating certain proposed
business transactions and the best interests of the Company and its
stockholders, the Board of Directors shall consider all relevant factors,
including but not limited to freedom of the press, the independence and
integrity of the Company's media operations, the social and economic effects
of the transactions on stockholders, employees, customers, suppliers and other
constituents of the Company and its subsidiaries, as well as the effects on
the communities in which they operate.
In providing the Board of Directors with a broader basis for determining the
advisability of a proposed transaction, the Restated Certificate gives the
Board authority to reject, among other transactions, a proposed acquisition of
the Company notwithstanding the fact that the proposal may include favorable
economic benefits for the Company's stockholders.
Amendment of Certain Charter Provisions
The Restated Certificate provides that any alteration, amendment, repeal or
recission (any "Change") of the provisions contained in the Restated
Certificate must be approved by a majority of the Directors then in office and
by the affirmative vote of the holders of a majority of the Voting Interests,
provided, however, that if the proposed Change relates to certain provisions
specified in the Restated Certificate, then any such Change must also be
approved either (a) by a majority of the authorized number of Directors and,
if one or more Related Persons exist, by a majority of the Directors who are
Continuing Directors with respect to all Related Persons, or (b) by the
affirmative vote of the holders of not less than 80% of the Voting Interests
and, if the Change is proposed by or on behalf of a Related Person or a
Director affiliated with a Related Person, by affirmative vote of a majority
of the Voting Interests represented by Disinterested Shares.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of United States federal income tax considerations is
based on current law, regulations and judicial and administrative
interpretations thereof, all of which are subject to change. The discussion
addresses only LYONs held as capital assets by initial Holders who acquired
the LYONs at their issue price and does not deal with special situations, such
as those of insurance companies, tax-exempt organizations, individual
retirement and other tax-deferred accounts, financial institutions, broker-
dealers, foreign corporations and individuals who are not citizens or
residents of the United States.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, CONVERSION OR OTHER DISPOSITION
OF LYONS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL INCOME
TAX CONSEQUENCES AND THE CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
The Company has been advised by its counsel, Gibson, Dunn & Crutcher LLP,
that in such counsel's opinion the LYONs will be treated as indebtedness for
United States federal income tax purposes. Counsel has further advised the
Company that it is counsel's opinion that, while the following does not
purport to discuss all tax matters relating to the LYONs, based upon the LYONs
being treated as indebtedness, the following are the material federal income
tax consequences of the ownership and conversion or disposition of the LYONs,
subject to the qualifications set forth above.
27
<PAGE>
ORIGINAL ISSUE DISCOUNT
The LYONs were issued at a substantial discount from their principal amount
at maturity. For United States federal income tax purposes, the difference
between the issue price (the initial price at which a substantial number of
the LYONs were sold for money) and the stated principal amount at maturity of
each LYON constitutes Original Issue Discount. Holders of the LYONs are
required to include Original Issue Discount in income periodically over the
term of the LYONs before receipt of the cash or other payment attributable to
such income.
A Holder of a LYON must include in gross income for federal income tax
purposes the sum of the daily portions of Original Issue Discount with respect
to the LYON for each day during the taxable year or portion of a taxable year
on which such Holder holds the LYON ("Accrued Original Issue Discount"). The
daily portion is determined by allocating to each day of the accrual period a
pro rata portion of an amount equal to the adjusted issue price of the LYON at
the beginning of the accrual period multiplied by the yield to maturity of the
LYON (determined by compounding at the close of each accrual period and
adjusted for the length of the accrual period). The accrual period of a LYON
may be of any length and may vary in length over the term of the LYON,
provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs at the end of an accrual
period or on the first day of an accrual period. The adjusted issue price of
the LYON at the start of any accrual period is the issue price of the LYON
increased by the Accrued Original Issue Discount for each prior accrual
period. Under these rules, Holders will have to include in gross income
increasingly greater amounts of Original Issue Discount in each successive
accrual period. Any amount included in income as Original Issue Discount will
increase a Holder's tax basis in the LYON.
The Company is required to furnish annually to the Internal Revenue Service
and to certain noncorporate Holders information regarding the amount of the
Original Issue Discount attributable to that year. For this purpose, the
Company will use a six-month accrual period which ends on the day in each
calendar year corresponding to the maturity day of the LYON or the date six
months before such maturity date.
DISPOSITION OR CONVERSION
Except as described below, gain or loss upon a sale or other disposition of
a LYON will generally be capital gain or loss (which will be long term if the
LYON is held for more than one year). Net capital gains of individuals are,
under certain circumstances, taxed at lower rates than items of ordinary
income.
A Holder's conversion of a LYON into Common Stock is generally not a taxable
event (except with respect to cash received in lieu of a fractional share).
The Holder's obligation to include in gross income the daily portions of
Original Issue Discount with respect to a LYON will terminate prospectively on
the date of conversion. The Holder's basis in the Common Stock received on
conversion of a LYON will be the same as the Holder's basis in the LYON at the
time of conversion (exclusive of any tax basis allocable to a fractional
share), and the holding period for the Common Stock received on conversion
will include the holding period of the LYON converted (assuming each is held
as a capital asset), except that the Holder's holding period for Common Stock
allocable to Accrued Original Issue Discount may commence on the day following
the date of conversion. Gain or loss upon a sale or other disposition of the
Common Stock received on conversion of a LYON will be capital gain or loss if
the Common Stock is a capital asset in the hands of the Holder.
If the Holder elects to exercise his option to tender the LYON to the
Company on a Purchase Date and the Company issues Common Stock in satisfaction
of all or part of the Purchase Price, the exchange of the LYON for Common
Stock should qualify as a reorganization or an otherwise nontaxable
transaction for federal income tax purposes. If the Purchase Price is paid
solely in Common Stock, neither gain nor loss would generally be recognized by
the Holder, except as described below with respect to a fractional share. If
the Purchase Price is paid in a combination of shares of Common Stock and cash
(other than cash received in lieu of a fractional share), gain (but not loss)
realized by the Holder would be recognized, but only to the extent such gain
does not exceed such cash. A Holder's tax basis in the Common Stock received
in the exchange will be the same as the
28
<PAGE>
Holder's tax basis in the LYON tendered to the Company in exchange therefor
(exclusive of any tax basis allocable to a fractional share interest as
described below), decreased by the amount of cash (other than cash received in
lieu of a fractional share), if any, received in exchange and increased by the
amount of any gain recognized by the Holder on the exchange (other than gain
with respect to a fractional share). The holding period for Common Stock
received in the exchange will include the holding period for the LYON tendered
to the Company in exchange therefor (assuming each is held as a capital
asset), except that the holding period for Common Stock allocable to Accrued
Original Issue Discount may commence on the day following the Purchase Date.
Under the current advance ruling policy of the Internal Revenue Service,
cash received in lieu of a fractional share of Common Stock upon conversion of
a LYON or upon a tender of a LYON to the Company on a Purchase Date should be
treated as a payment in exchange for such fractional share. Accordingly, if
such Common Stock is a capital asset in the hands of the Holder, the receipt
of cash in lieu of a fractional share of Common Stock should generally result
in capital gain or loss, if any, measured by the difference between the cash
received for the fractional share and the Holder's basis in the fractional
share.
If the Holder elects to exercise his option to tender the LYONs to the
Company on a Purchase Date or a Change in Control Purchase Date or if a Holder
exercises the conversion right and the Company delivers cash in satisfaction
of the purchase price or the conversion right, such an exchange would be a
taxable sale. The Holder would recognize gain or loss upon the sale, measured
by the difference between the amount of cash transferred by the Company to the
Holder and the Holder's basis in the tendered LYON. Gain or loss recognized by
the Holder would be capital gain or loss.
If a Holder sells a LYON in the market, it will be a taxable sale with the
same results as a tender to the Company with a payment in cash.
Gain or loss upon a sale or other disposition of the Common Stock received
upon conversion of a LYON or in satisfaction of the Purchase Price of a LYON
tendered to the Company generally will be capital gain or loss if the Common
Stock is held as a capital asset (which gain or loss will be long-term if the
holding period for such Common Stock is more than one year).
CONSTRUCTIVE DIVIDEND
If at any time the Company makes a distribution of property to its
shareholders that would be taxable to such shareholders as a dividend for
United States federal income tax purposes and, in accordance with the anti-
dilution provisions of the LYONs, the conversion rate of the LYONs is
increased, such increase may be deemed to be the payment of a taxable dividend
to Holders of the LYONs. For example, an increase in the conversion rate in
the event of distributions of evidences of indebtedness or assets of the
Company or an increase in the event of an Extraordinary Cash Dividend will
generally result in deemed dividend treatment to Holders of the LYONs, but
generally an increase in the event of stock dividends or the distribution of
rights to subscribe for Common Stock will not. See "Description of LYONs--
Conversion Rights."
TAX EVENT
On December 7, 1995, the U.S. Treasury Department proposed a series of tax
law changes that would, among other things, prevent corporations from
deducting interest (including original issue discount) on debt instruments
convertible into equity of the issuer or a related party until the taxable
year in which such interest is paid in cash or other property (other than
obligations or equity of the issuer or a related party or cash or other
property the amount of which is determined by reference to the value of equity
of the issuer or related party). This proposal, if enacted and made applicable
to the LYONs, would prevent the Company from deducting interest (including
original issue discount) payable on the LYONs on a current accrual basis for
United States federal income tax purposes and could cause some or all of the
interest (including original issue discount) payable on the LYONs to fail to
be deductible by the Company under any other method for United States federal
29
<PAGE>
income tax purposes. The President's 1998 budget proposals, submitted to
Congress on February 6, 1997, modified this potential change in tax law to
apply to debt instruments issued on or after the date of first committee
action. However, the Taxpayer Relief Act of 1997, which implemented the
President's 1998 budget proposals, did not contain this provision. The Company
cannot predict whether or not this proposed tax law change will ultimately
become law. If legislation is enacted limiting, in whole or in part, the
ability of the Company to either (i) deduct the interest (including original
issue discount) payable on the LYONs on a current accrual basis or (ii) deduct
the interest (including original issue discount) payable on the LYONs under
any other method for United States federal income tax purposes, such enactment
would result in a Tax Event and the terms of the LYONs would be subject to
modification at the option of the Company as described above. The modification
of the terms of LYONs by the Company upon a Tax Event as described above could
possibly alter the timing of income recognition by holders of the LYONs with
respect to the semiannual payments of interest due on the LYONs after the
Option Exercise Date. See "Description of LYONs--Optional Conversion to
Semiannual Coupon Note upon Tax Event."
30
<PAGE>
SELLING HOLDERS
The LYONs were originally issued by the Company and sold by Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), in
a transaction exempt from the registration requirements of the Securities Act,
to persons reasonably believed by Merrill Lynch to be "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) or other
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) or in transactions complying with the
provisions of Regulation S under the Securities Act. The Selling Holders
(which term includes their transferees, pledges, donees or their successors)
may from time to time offer and sell pursuant to this Prospectus any or all of
the LYONs and Series A Common Stock issued upon conversion of the LYONs.
The following table sets forth information furnished by certain Selling
Holders, including, for each such Selling Holder, the Principal Amount at
Maturity of LYONs beneficially owned by such Selling Holder. With respect to
each Selling Holder, the principal amount set forth may have increased or
decreased since the information was furnished, and there may be additional
Selling Holders of which the Company is unaware. Except as otherwise disclosed
herein, to the knowledge of the Company and based on certain representations
made by the Selling Holders, none of the Selling Holders has, or within the
past three years has had, any position, office or other material relationship
with the Company or any of its predecessors or affiliates. Because the Selling
Holders may offer all or some portion of the LYONs or the Series A Common
Stock issuable upon conversion thereof pursuant to this Prospectus, no
estimate can be given as to the amount of the LYONs or the Series A Common
Stock issuable upon conversion thereof that will be held by the Selling
Holders upon termination of any such sales. In addition, the Selling Holders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their LYONs, since the date on which they provided the information
regarding their LYONs, in transactions exempt from the registration
requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
LYONS BENEFICIALLY
OWNED AND THAT MAY
BE OFFERED
SELLING HOLDER HEREBY(1)
-------------- -------------------
<S> <C>
Advent Capital Management 975,000
Advent Capital Management--PICTET & Cie 275,000
Argent Classic Convertible Arbitrage Fund (Bermuda)
L.P. 4,500,000
Argent Classic Convertible Arbitrage Fund L.P. 9,000,000
Bank of America Convertible Securities Fund 410,000
Banque Nationale de Paris 27,500,000
BEA Associates--Executive Life Insurance of NY 2,000,000
BEA Associates--Fairfax County Police Retirement 375,000
BEA Associates--Fairfax County URS Convertible Bonds 900,000
BEA Associates--Halliburton Company Employee Benefit 2,400,000
BEA Associates--Minnesota Mutual Life Insurance
Company (MIMLIC) 3,375,000
BT Securities Corp. 8,500,000
Canadian Imperial Holdings 2,000,000
Chancellor LGT Asset Management--Healthcare
Underwriters Mutual Insurance Company 1,000,000
Chancellor LGT Asset Management--Medical Liability
Mutual Insurance Company 30,000,000
Continental Assurance Company--Separate Account "E" 5,500,000
Continental Casualty Company (CNA) 8,500,000
Credit Suisse First Boston 3,000,000
Empire Blue Cross and Blue Shield 5,000,000
Employee Benefit Convertible Fund 270,000
Highbridge Capital Corporation 24,000,000
Highbridge Capital Corporation c\o Amalgamated
Gadget, L.P. 5,250,000
HSBC James Capel 1,500,000
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
LYONS BENEFICIALLY
OWNED AND THAT MAY
BE OFFERED
SELLING HOLDER HEREBY(1)
-------------- -------------------
<S> <C>
Income Research and Management--Tufts Associated
Health Plan 2,500,000
Income Research and Management--University of
Massachusetts Medical Center 2,500,000
John Hancock Mutual Life Insurance Co. 10,000,000
Lord Abbett & Co.--Bond Debenture Fund 30,000,000
Lord Abbett & Co.--COVA Bond Fund 250,000
Lord Abbett & Co.--ELF Aquitaine Pension 250,000
Lord Abbett & Co.--Fuji US Income Fund 7,500,000
Lord Abbett & Co.--Illinois Annuity and Insurance
Co. 12,000,000
MacKay Shields--Mainstay Convertible Fund 9,000,000
MacKay Shields--Mainstay VP Convertible Fund 1,000,000
Merrill Lynch Pierce Fenner & Smith Inc. (2) 32,500,000
Michigan Mutual Insurance Company 1,350,000
Natwest Securities Corporation 9,500,000
Oppenheimer Bond Fund for Growth 8,000,000
Orrington International Fund 1,000,000
Orrington Investments 3,000,000
Pacific Horizon Capital Income Fund 7,200,000
Pacific Innovation Trust Capital Income Fund 220,000
Phoenix Duff & Phelps--Phoenix Convertible Fund 3,500,000
Phoenix Duff & Phelps--Phoenix Home Life Mutual
Insurance Convertible Fund 750,000
Phoenix Duff & Phelps--Phoenix Income & Growth Fund 7,500,000
Phoenix Duff & Phelps--University of Southern
Florida Convertible Fund 250,000
Q Investments, L.P. c/o Acme Widgit, L.P. 15,750,000
QCI Asset Management--Aram Kevor Kian 40,000
QCI Asset Management--P.W. Minor & Son Employee Ret. 125,000
QCI Asset Management--R.C. Billings Inc. 85,000
Salomon Brothers Inc. 28,000,000
SBC Warburg--Swiss Bank Corporation--London Office 23,000,000
SBC Warburg 19,350,000
Society Asset Management--EB Convertible Securities
Fund 3,150,000
Society Asset Management--Field Foundation of
Illinois 150,000
Society Asset Management--General Electric Mortgage
Insurance 3,000,000
Society Asset Management--Gencorp Foundation Inc.
SAMI 300,000
Society Asset Management--Key Trust Convertible
Securities Fund 3,000,000
Society Asset Management--Michigan Mutual Insurance
Company 2,250,000
Society Asset Management--Potlatch 1,000,000
Society Asset Management--University of South
Florida Foundation 300,000
STI Classic Capital Growth Fund 10,000,000
Toronto Dominion (New York), Inc. 58,200,000
UBS Securities LLC 22,950,000
Van Kampen American Capital Convertible Securities
Fund 1,200,000
Van Kampen American Capital Habor Fund 6,800,000
</TABLE>
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(1) Does not include shares of Series A Common Stock issuable upon conversion
of the LYONs.
(2) Merrill Lynch was the initial purchaser of the LYONs. Merrill Lynch has
provided, and may continue to provide in the future, underwriting,
investment banking and investment advisory services to the Company, and
has received and will receive fees and commissions for such services.
32
<PAGE>
PLAN OF DISTRIBUTION
The LYONs may be offered for sale and sold by the several Selling Holders in
one or more transactions, including block transactions, at a fixed price or
prices (which may be changed), at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at prices
determined on a negotiated or competitive bid basis. LYONs may be sold by a
Selling Holder directly, through agents designated from time to time or to or
through broker-dealers designated from time to time, or by such other means as
may be specified in the applicable Prospectus Supplement.
LYONs may be sold through a broker-dealer acting as agent or broker for the
Selling Holders or to a broker-dealer acting as principal. In the latter case,
the broker-dealer may then resell such LYONs to the public at varying prices
to be determined by such broker-dealer at the time of resale.
The Selling Holders and any agents or broker-dealers that participate with
the Selling Holders in the distribution of any of the LYONs may be deemed to
be "underwriters" within the meaning of the Securities Act, and any discount
or commission received by them and any profit on the resale of the LYONs
purchased by them may be deemed to be underwriting discounts or commissions
under the Securities Act.
To the extent required, the number of LYONs to be sold, certain information
relating to the Selling Holders, the purchase price, the public offering
price, if applicable, the name of any underwriter, agent or broker-dealer, and
any applicable commissions, discounts or other items constituting compensation
to such underwriters, agents or broker-dealers with respect to a particular
offering will be set forth in an accompanying Prospectus Supplement.
CERTAIN LEGAL MATTERS
The validity of the LYONs and of the shares of Series A Common Stock
issuable upon conversion thereof was passed upon for the Company by Gibson,
Dunn & Crutcher LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements of The Times Mirror Company appearing
in the Company's Annual Report (Form 10-K) for the year ended December 31,
1996, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report 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.
33
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH OTHER INFORMA-
TION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY, ANY UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 4
Price Range of Series A Common Stock and Dividend Policy................... 5
Description of LYONs....................................................... 6
Description of Capital Stock............................................... 20
Certain Federal Income Tax Considerations.................................. 27
Selling Holders............................................................ 31
Plan of Distribution....................................................... 33
Certain Legal Matters...................................................... 33
Experts.................................................................... 33
</TABLE>
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[LOGO OF THE TIMES MIRROR COMPANY]
THE TIMES MIRROR COMPANY
$500,000,000
LIQUID YIELD OPTION(TM) NOTES DUE 2017
(ZERO COUPON--SUBORDINATED)
----------------
PROSPECTUS
----------------
AUGUST 22, 1997
(TM)TRADEMARK OF MERRILL LYNCH & CO., INC.
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