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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. #)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
YOUNG BROADCASTING INC.
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(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
YOUNG BROADCASTING INC.
____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1998
____________________
The Annual Meeting of Stockholders of Young Broadcasting Inc. (the
"Company") will be held at the offices of WRIC-TV, 301 Arboretum Place,
Richmond, Virginia at 10:00 a.m. on Tuesday, May 5, 1998, for the following
purposes:
1. To elect nine directors of the Company to serve for a term of one year.
2. To ratify and approve the selection of independent auditors of the
Company to serve until the next annual meeting of stockholders.
3. To approve an amendment to the Company's Certificate of
Incorporation which would lower from 10% to 5% the required minimum
percentage of the Company's outstanding Common Stock to be held by the
Management Group (as defined) for continued designation of the Company's
Class B Common Stock.
4. To approve the issuance of shares of the Company's Class B Common Stock
in exchange for presently outstanding shares of the Company's Class A
Common Stock held by certain members of the Management Group.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of shares of the Company's Class A Common Stock and
Class B Common Stock at the close of business on April 3, 1998 are entitled to
notice of, and to vote at, the meeting and any adjournment thereof.
By Order of the Board of Directors,
JAMES A. MORGAN
Secretary
April 13, 1998
ALL PERSONS TO WHOM THE ACCOMPANYING PROXY IS ADDRESSED ARE REQUESTED TO DATE,
EXECUTE AND RETURN IT PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
<PAGE>
YOUNG BROADCASTING INC.
____________________
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 5, 1998
____________________
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Young Broadcasting Inc. (the "Company") of proxies and
voting instructions in the accompanying form for use at the Annual Meeting of
Stockholders to be held at the offices of WRIC-TV, 301 Arboretum Place,
Richmond, Virginia at 10:00 a.m. on Tuesday, May 5, 1998, and at all
adjournments thereof. The shares represented by proxies solicited by the Board
of Directors of the Company will be voted in accordance with the directions
given therein. If no direction is indicated, the proxy will be voted in favor
of the proposals set forth in the notice attached to this proxy statement. Any
stockholder may revoke his proxy at any time prior to the voting thereof by
giving notice in writing to the Secretary of the Company, by granting a proxy
bearing a later date or by voting in person at the meeting.
Holders of record of shares of the Company's Class A Common Stock, $.001
par value ("Class A Common Stock"), and Class B Common Stock, $.001 par value
("Class B Common Stock"), at the close of business on April 3, 1998 are entitled
to vote at the meeting. As of such record date, there were 12,440,595 shares of
Class A Common Stock and 1,891,890 shares of Class B Common Stock outstanding.
The presence, in person or by proxy, of stockholders entitled to cast at
least a majority of the votes entitled to be cast by all stockholders will
constitute a quorum for the transaction of business at the meeting. Holders of
shares of Class A Common Stock and Class B Common Stock will vote as a single
class on all matters submitted to a vote of the stockholders. Each share of
Class A Common Stock will be entitled to one vote and each share of Class B
Common Stock will be entitled to ten votes.
Directors will be elected by a plurality of the votes cast at the meeting.
Approval of each other matter will require the affirmative vote of a majority of
the votes cast thereon. On all matters to come before the meeting, abstentions
and non-votes will not be considered as votes cast, and will be considered only
for purposes of determining whether a quorum is present at the meeting. Adam
Young and Vincent Young together beneficially possess approximately 60% of the
aggregate votes that may be cast at the meeting. See "Security Ownership of
Certain Beneficial Owners and Management." Accordingly, the affirmative vote of
Adam Young and Vincent Young alone is sufficient to adopt each of the proposals
to be submitted to the stockholders at the meeting. Adam Young and Vincent
Young have advised the Company that they will vote all of their shares in favor
of the proposals set forth in the notice attached to this proxy statement.
The cost of soliciting these proxies will be borne by the Company. Proxies
may be solicited by directors, officers or employees of the Company in person or
by telephone.
The principal executive offices of the Company are at 599 Lexington Avenue,
New York, New York 10022. This proxy statement and the form of proxy are being
mailed to stockholders on or about April 13, 1998.
ELECTION OF DIRECTORS
It is proposed to elect nine directors of the Company to hold office for terms
of one year and until their successors shall be elected and shall qualify. At
the meeting, the persons named in the enclosed form of proxy will vote the
shares covered thereby for the election of the nominees named below to the Board
of Directors of the Company unless instructed to the contrary. The nominees
other than James A. Morgan, Robert L. Winikoff and David C. Lee are currently
directors of the Company.
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<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NAME OF NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- -------------------------------- --- ----- ---------------------------------------
<S> <C> <C> <C>
Current Directors:
Vincent J. Young 50 1986 Chairman of the Company since its inception in 1986,
member of the Compensation and Audit Committees of the
Company, and director and Chairman of each of the
Company's corporate subsidiaries. Mr. Young has served
from 1980 and continues to serve as Chairman of Adam
Young Inc., a national television representation firm,
which merged with and into a subsidiary of the Company in
March 1998. Vincent Young is the son of Adam Young.
Adam Young 84 1986 Treasurer of the Company since its inception, and
director and Treasurer of each of the Company's corporate
subsidiaries. Mr. Young is also President and Treasurer
of Adam Young Inc., which he founded in 1944.
Ronald J. Kwasnick 51 1994 President of the Company since its inception, and
President of each of the Company's corporate
subsidiaries.
Bernard F. Curry 79 1994 Chairman of the Audit Committee of the Company. Mr. Curry
served from 1982 as a director and from December 1992 as
the Chairman of the Audit Committee of Morgan Trust
Company of Florida, N.A. until it was merged into J.P.
Morgan Florida, FSB in January 1994. He has served the
surviving bank, which is an indirect wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated, in the same
capacities since August 1991.
Alfred J. Hickey, Jr. 61 1994 Member of the Compensation and Stock Option Committees of
the Company. Mr. Hickey is currently a private investor.
He was Vice-President--Institutional Sales of Legg Mason,
a brokerage firm, from May 1990 to May 1991. Mr. Hickey
was a private investor from May 1991 to June 1993, when
he became the Vice President--International Sales of
Southeast Research Partners, a brokerage firm, in which
capacity he served until October 1994.
Leif Lomo 68 1994 Member of the Audit, Compensation and Stock Option
Committees of the Company. From 1987 to 1994, Mr. Lomo
served as Chairman of A.B. Chance Industries, Inc., a
manufacturer of electricity-related equipment. Prior to
its acquisition by Hubbell Incorporated in April 1994, Mr.
Lomo also acted as President and Chief Executive Officer
of A.B. Chance. From January 1995 to June 1996, Mr. Lomo
served as the President of Marley Pump, a division of
United Dominion Company, which is principally engaged in
the manufacture and marketing of submersible pumps for
small water well applications and the distribution of
gasoline. Mr. Lomo is currently a private investor.
</TABLE>
2
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<TABLE>
<CAPTION>
<S> <C> <C>
New Directors:
James A. Morgan 49 Executive Vice President of the Company since March 1993,
and Executive Vice President of each of the Company's
corporate subsidiaries. From 1984 until joining the
Company, he was a director and Senior Investment Officer
at J.P. Morgan Capital Corporation involved in investing
the firm's own capital in various leveraged and early
growth stage companies.
Robert L. Winikoff 51 Partner of the New York City law firm of Cooperman Levitt
Winikoff Lester & Newman, P.C. for more than the past five
years, which has served as the Company's general outside
counsel since 1987.
David C. Lee 32 From March 1988 to October 1994 and from April 1996 to the
present, Mr. Lee has served in various capacities at
Lazard Freres & Co. LLP., a leading investment banking
firm which has provided services to the Company from time
to time. Mr. Lee was appointed a Managing Director of
Lazard in January 1998. From November 1994 to March 1996,
Mr. Lee was a Managing Director of Toronto Dominion Bank,
U.S.A. Division, where he headed the mergers and
acquisitions group.
</TABLE>
A vacancy was created on the Board of Directors as a result of the
resignation on January 31, 1998 of Michael S. Willner, a director since 1994.
Mr. Willner is the President and Chief Operating Officer of Insight
Communications Company, L.P., an operator of cable television systems. Mr.
Willner was required to resign as a director of the Company by such date in
order to satisfy the multiple ownership restrictions of the Federal
Communications Commission ("FCC") relating to certain of such cable television
systems and certain of the Company's broadcast television stations. In
addition, the Board of Directors has increased the number of directors from
seven to nine, creating two additional vacancies. The Board of Directors has
nominated the individuals listed above as "New Directors" to fill such
vacancies, each of such individuals having consented to serve as such. The
Board of Directors has nominated for re-election each of the six incumbent
directors listed above as "Current Directors."
The Board of Directors of the Company has an Audit Committee, a Compensation
Committee and a Stock Option Committee. The Board of Directors has no
nominating committee; nominees for election as directors of the Company are
selected by the Board of Directors. During 1997, there were three meetings of
the Audit Committee, three meetings of the Compensation Committee and one
meeting of the Stock Option Committee. All of the respective Committee members
attended each of the Committee meetings.
The Audit Committee consists of three directors, two of whom are required by
the Company's By-Laws to be independent directors. The current members of the
Audit Committee are Bernard Curry, Leif Lomo and Vincent Young. Its functions
are to (i) recommend the appointment of independent accountants, (ii) review the
arrangements for and scope of the audit by independent accountants, (iii) review
the independence of the independent accountants, (iv) consider the adequacy of
the system of internal accounting controls and review any proposed corrective
actions, (v) review and monitor the Company's policies regarding business ethics
and conflicts of interest, (vi) discuss with management and the independent
accountants the Company's draft annual financial statements and key accounting
and reporting matters, and (vii) review the activities and recommendations of
the Company's accounting department.
The Compensation Committee consists of three directors, two of whom are
required by the Company's By-Laws to be independent directors. The current
members of the Compensation Committee are Leif Lomo, Alfred Hickey and Vincent
Young. The Compensation Committee has authority to review and make
recommendations to the Board of Directors with respect to the compensation of
executive officers of the Company. See "Executive Compensation-Report of the
Compensation Committee."
The Stock Option Committee consists of two directors, each of which is a
"disinterested" director. The current members of the Stock Option Committee are
Leif Lomo and Alfred Hickey. The Stock Option Committee administers the Young
Broadcasting Inc. 1995 Stock Option Plan (the "Plan") and determines, among
other things, the time or times at which
3
<PAGE>
options will be granted, the recipients of grants, whether a grant will consist
of incentive stock options, nonqualified stock options and stock appreciation
rights (in tandem with an option or free-standing) or a combination thereof, the
option periods, whether an option is exercisable for Class A Common Stock or
Class B Common Stock, the limitations on option exercise and the number of
shares to be subject to such options, taking into account the nature and value
of services rendered and contributions made to the success of the Company. The
Stock Option Committee also has authority to interpret the Plan and, subject to
certain limitations, to amend provisions of the Plan as it deems advisable.
During 1997, the Board of Directors of the Company held eight meetings. All
of the directors attended at least 75% of the aggregate number of meetings of
the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
HEREIN.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 3, 1998
regarding the beneficial ownership of the Company's Common Stock by (i) each
executive officer and director and nominee of the Company, (ii) each stockholder
known by the Company to beneficially own 5% or more of such Common Stock, (iii)
all directors and executive officers as a group. Except as otherwise indicated,
the address of each beneficial holder of 5% or more of such Common Stock is the
same as the Company.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK PERCENT OF
- -------------------------------------- ------------------------- VOTE AS A
BENEFICIAL OWNER NUMBER % NUMBER % SINGLE CLASS(1)
- -------------------------------------- ------------------------- ---------- ------------------- ----- ---------------
<S> <C> <C> <C> <C> <C>
Vincent J. Young 146,616(2)(3) 1.2 1,119,036(4)(5)(6) 50.3 32.7
Adam Young 252,843(7) 3.1 881,291(8)(9) 46.6 28.9
Ronald J. Kwasnick 533(3) * 132,057(5)(10) 6.8 4.1
James A. Morgan 833(3)(11) * 222,258(5)(6)(12) 10.8 6.7
Deborah A. McDermott 1,333(3) * 45,773(5)(13) 2.4 1.5
Margaret Young 129,003 1.0 338,250(9) 17.9 11.2
Baron Capital Group, Inc. 1,415,600 11.4 -- -- 4.5
and Affiliates(14)
767 Fifth Avenue
New York, NY 10153
The Capital Group of Companies, 746,000 6.0 -- -- 2.4
Inc. and Affiliates(15)
333 South Hope Street
Los Angeles, CA 90071
The Equitable Companies Incorporated 740,000 5.9 -- -- 2.4
and Affiliates (16)
1290 Avenue of the Americas
New York, NY 10104
Mellon Bank Corporation 881,300 7.1 -- -- 2.8
and Affiliates(17)
One Mellon Bank Center
Pittsburgh, PA 15258
Neuberger & Berman, LLC 690,100 5.6 -- -- 2.2
and Affiliates(18)
605 Third Avenue
New York, NY 10158
Bernard F. Curry(19) 7,200 * -- -- *
Alfred J. Hickey, Jr.(19) 6,200 * -- -- *
Leif Lomo(19) 7,200 * -- -- *
Robert L. Winikoff(20) 43,000 * -- -- *
David C. Lee
All directors and 578,973 4.7 2,400,415 97.3 66.2
executive officers,
as a group
</TABLE>
(footnotes begin on following page)
5
<PAGE>
- --------------------------------------
* Less than 1%.
(1) Holders of Class A Common Stock are entitled to one vote per share, and
holders of Class B Common Stock are entitled to ten votes per share except
for votes relating to certain significant transactions. Holders of both
classes of Common Stock will vote together as a single class on all matters
presented for a vote, except as otherwise required by law.
(2) Includes 2,812 shares held by his wife.
(3) Includes 533 shares held through the 401(k) Plan.
(4) Includes 92,347 shares held pursuant to an agreement dated as of July 1,
1991 which established a voting trust for the benefit of family members of
management, for which Vincent Young and Richard Young act as trustees.
During the term of the voting trust, which expires July 1, 2001, the
trustees have the sole right to vote the shares subject to the trust. If
the trustees cannot agree as to how the shares shall be voted, each trustee
will vote 50% of the shares. Also includes 332,023 shares issuable upon the
exercise of options granted pursuant to the Young Broadcasting Inc. 1995
Stock Option Plan (the "Plan"). Also includes 13,417 shares held pursuant
to an agreement dated as of October 1, 1996 which established a voting
trust for the benefit of family members of management, for which Vincent
Young acts as trustee. During the term of the voting trust, which expires
October 1, 2006, the trustee has the right to vote the shares subject to
the trust.
(5) Does not include those shares issuable upon the exercise of options granted
pursuant to the Plan which are not exercisable within 60 days.
(6) Includes 1,900 shares held for the benefit of his minor children.
(7) Includes 129,003 shares held by his wife.
(8) Includes 38,250 shares held by his wife. Also includes 1,186 shares
issuable upon the exercise of options granted pursuant to the Plan.
(9) Includes 300,000 shares held by Spray-V Limited Partnership for which
Margaret Young, the wife of Adam Young, serves as President of its general
partner and has the authority to vote such shares. The share information
for Ms. Young does not include shares held by Adam Young for which Ms.
Young disclaims beneficial ownership.
(10) Includes 43,662 shares issuable upon the exercise of options granted
pursuant to the Plan.
(11) Includes 300 shares held by a family trust.
(12) Includes 167,588 shares issuable upon the exercise of options granted
pursuant to the Plan.
(13) Includes 31,218 shares issuable upon the exercise of options granted
pursuant to the Plan.
(14) Represents shares beneficially owned by BAMCO, Inc. (1,224,000) and Baron
Capital Management, Inc. (191,600), subsidiaries of Baron Capital Group,
Inc. ("BCG"), including 1,077,000 shares held by Baron Asset Fund, an
investment advisory client of BAMCO, Inc., as reported in a Schedule 13G
filed in November 1997. Such report also includes an individual reporting
person who controls BCG. All of such persons disclaim beneficial ownership
of such shares pursuant to Rule 13d-4 under the Securities Exchange Act of
1934, as amended.
(15) Represents shares beneficially owned by a group of investment management
companies for which The Capital Group of Companies, Inc. is the parent
holding company and may be deemed to beneficially own such shares, as
reported in a Schedule 13G filed in February 1998.
(16) Represents shares beneficially owned by The Equitable Life Assurance
Society of the United States (145,000) and Alliance Capital Management
L.P., subsidiaries of The Equitable Companies Incorporated, as well as by
certain parent holding companies, as reported in a Schedule 13G filed in
February 1998. Such report also includes individual reporting persons who
control Franklin.
(17) Represents shares beneficially owned by Mellon Bank Corporation and certain
of its direct and indirect subsidiaries acting in various fiduciary
capacities, as reported in a Schedule 13G filed in February 1998.
(18) Represents shares beneficially owned by Neuberger & Berman, LLC and
Neuberger & Berman Management Incorporated, as reported in a Schedule 13G
filed in February 1998.
(19) Includes 6,200 shares issuable upon the exercise of stock options, 5,200 of
which were granted pursuant to the Plan.
(20) Includes 22,000 shares held by a limited liability company for which he
serves as manager.
6
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Company's Compensation Committee (the "Committee"), which is composed of
two independent directors (Alfred J. Hickey, Jr. and Leif Lomo) and one inside
director (Vincent Young), is responsible for reporting to the Board concerning
the compensation policies followed by the Committee in recommending to the Board
compensation for executive officers.
The Committee utilizes a program designed to attract, motivate and retain
highly skilled and effective executives who can achieve long-term success in an
increasingly competitive business environment and whose services the Company
needs to maximize its return to stockholders. The program is premised on the
belief that an executive's compensation should reflect his individual
performance and the overall performance of the Company, with an appropriate
balance maintained among the weightings of these potentially disparate
performance levels. The program requires flexibility in order to ensure that
the Company can continue to attract and retain executives with unique and
special skills critical to the Company's success. Flexibility is also necessary
to permit adjustments in compensation in light of changes in business and
economic conditions. The compensation of each executive officer is reviewed
annually by the Committee.
In 1997, the Committee was assisted in its review and assessment of its
executive pay program by executive compensation consultants retained by
the Committee to serve as outside experts in the discharge of its
responsibilities. The purpose of the review was to determine whether the
program is market competitive, internally equitable and provides the appropriate
balance between fixed and performance-variable pay to ensure that the program
appropriately reflects the risks and challenges facing the Company's executive
team. The consultants reviewed with the Committee survey data regarding
compensation practices and payments by comparable organizations and the
relationships between measures of company size and performance and corresponding
executive pay levels. The comparison group selected jointly by the Company and
the consultant was comprised of broadcasting industry peer companies. Such
comparative companies are not necessarily the same companies included in the
indicies used in the performance graph that follows, as the Company's
competitors for executive talent are not limited to such companies.
Based on the consultant's recommendations, the Committee determined to set
executive compensation levels at or above competitive median market levels to
provide compensation opportunities comparable to those paid by broadcast media
companies that compete for executives with comparable talents. Specifically,
total cash compensation opportunities (salary plus annual bonus) was targeted at
the 75th percentile of competitive market levels, as warranted by annual
performance. The consultants determined that total cash compensation levels for
executives were at or near median (i.e., 50th percentile) competitive rates and
significantly below competitive 75th percentile target levels.
The consultants recommended that the Committee manage executive compensation
within the framework of a total annual compensation structure to allow for
flexibility in the mix of pay elements and competitive levels while fixing
target pay at desired levels. Target total compensation levels for 1997,
including target annual and long-term incentive opportunities, were developed
for each executive position using a pay mix recommended by the consultants. To
create a more balanced overall pay structure, a pay mix was developed for each
executive with the executive's year-end cash bonus and long-term incentive
compensation tied to a fixed percentage of base salary. The consultants
recommended target compensation levels based on the Company's compensation
philosophy and competitive pay positioning versus the broadcast media peer
group. In February 1997, the Board, based upon the Committee's recommendations
established base salary levels.
In February 1997, the Committee established a year-end cash bonus plan
providing for bonus awards to executive officers at the discretion of the Board
if the Company substantially achieved its objectives in 1997. Included among
the objectives were (i) the continuing evaluation and pursuit of attractive
acquisition opportunities, (ii) achieving the financial goals set forth in
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<PAGE>
the 1997 budget approved by the Board, (iii) increasing financial community and
investor awareness concerning the Company's securities and (iv) developing new
areas of business. In recognition of the successful achievement of such
objectives and other major accomplishments during 1997, the Committee
recommended and the Board approved the year-end cash bonuses to the Company's
executive officers as indicated in the Summary Compensation Table. The Company's
executive officers attended numerous conferences and met with many potential
investors, and the Company's coverage in the investment banking community has
significantly expanded. Furthermore, the Company has surpassed its projected
1997 estimates for new business sales. Other accomplishments included (a) the
modification of its senior credit facility to provide for more favorable
interest rates and covenant flexibility, including a $285 million line of credit
for future acquisitions, and (b) the successful completion in June 1997 of a
$200 million offering of 8-3/4% Senior Subordinated Notes. The Committee
determined, based on the recommendation of the consultants discussed above, to
increase annual bonus opportunities to provide a meaningful incentive that
brings total cash compensation opportunities to competitive opportunities to
75th percentile rates of pay. Accordingly, the year-end cash bonus plan
established by the Board in February 1997 was modified to increase the targeted
bonus for each of the executives to bring them in line with this objective.
These increases are reflected in the Summary Compensation Table.
The Committee in February 1997 also established an incentive cash
compensation plan for executive officers that created the potential for
significant incentive bonuses if Company achieved certain cash flow levels in
1997. The television broadcasting industry generally recognizes operating cash
flow or "OCF" (operating income before income taxes and interest expenses, plus
depreciation and amortization and non-cash compensation, less payments for
program license liabilities) as a means of valuing companies. Accordingly, the
Committee believed it to be in the best interests of the stockholders to
establish an incentive for executive officers to achieve the highest possible
OCF. If the Company met or exceeded its OCF targets for 1997, a bonus pool was
to be created based upon a predetermined rising scale percentage of the excess
OCF. The allocation of the bonus pool among the executive officers was to be
determined at the discretion of the Board. Based upon the consultant's
recommendation, the Committee has determined to modify this plan so that total
annual compensation opportunities for each executive position are set
approximately halfway between the median and the competitive 75th percentile
levels. To accomplish this, the consultants recommended that the plan be more
formally structured and contain a smaller discretionary element, while retaining
the approach that the performance focus remain tied to OCF growth and
improvement based upon specifically budgeted OCF targets. Accordingly, to
achieve the targeted total annual compensation levels for 1997, the consultants
recommended that stock options under the Company's 1995 Stock Option Plan be
granted as long-term incentive compensation to the Company's executive officers,
with each executive officer receiving options having a value based upon a
percentage of base salary, as discussed above. The value placed upon the options
was determined in accordance with a Black-Scholes American option valuation
formula.
As one of the Company's largest stockholders, Vincent Young's financial
well-being is directly tied to the overall performance of the Company as
reflected in the price per share of common stock. For his services as the
Company's chief executive officer, Vincent Young's compensation is and will
continue to be determined in accordance with compensation policies outlined
herein.
The Committee's annual performance evaluation of each executive officer is
subjective, will rely heavily on the performance evaluation presented to the
Committee by the Company's Chairman, and will not typically be based upon an
exact formula for determining the relative importance of each of the factors
considered, nor will there be a precise measure of how each of the individual
factors relates to the Committee's recommendation with respect to each executive
officer's ultimate annual compensation.
Section 162(m) of the Internal Revenue Code limits deductions for certain
executive compensation in excess of $1 million. Certain types of compensation in
excess of $1 million are deductible only if (i) performance goals are specified
in detail by a compensation committee comprised solely of two or more outside
directors, (ii) payments are approved by a majority vote of the stockholders
prior to payment of such compensation, (iii) the material terms of the
compensation are disclosed to the stockholders, and (iv) the compensation
committee certifies that the performance goals were in fact satisfied. During
1996, the Committee considered the compensation arrangements of the Company's
executive officers in light of the requirements of Section 162(m).
While the Committee will continue to give due consideration to the
deductibility of compensation payments on future compensation arrangements with
the Company's executive officers, the Committee will make its compensation
decisions based upon an overall determination of what it believes to be in the
best interests of the Company and its stockholders, and deductibility will be
only one among a number of factors used by the Committee in making its
compensation decisions. Accordingly, the Company may enter into compensation
arrangements in the future under which payments are not deductible under Section
162(m).
Compensation Committee of the Board of Directors
Michael S. Willner, Chairman
Alfred J. Hickey, Jr.
Vincent J. Young
8
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PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Class A Common Stock with
the cumulative total return of the Nasdaq Stock Market Index and the cumulative
total return of the Nasdaq Telecommunications Stock Market Index (an index
containing performance data of radio, telephone, telegraph, television and cable
television companies) from November 7, 1994, the effective date of the Company's
initial public offering, through December 31, 1997. The performance graph
assumes that an investment of $100 was made in the Class A Common Stock and in
each Index on November 7, 1994, and that all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON NOVEMBER 7, 1994
------------------------------------------
[Graph]
<TABLE>
<CAPTION>
11/7/94 12/31/94 12/31/95 12/31/96 12/31/97
-------- --------- --------- --------- ---------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Young Broadcasting Inc. $ 100 $ 93 $ 149 $ 154 $ 204
- ---------------------------------------------------------------------------------
Nasdaq Stock Market Index 100 98 139 171 209
- ---------------------------------------------------------------------------------
Nasdaq Telecommunications 100 93 122 125 184
Stock Market Index
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</TABLE>
The Company believes that the foregoing information provided has only limited
relevance to an understanding of the Company's compensation policies during the
indicated periods and does not reflect all matters appropriately considered in
developing its compensation strategy. In addition, the stock price performance
shown on the graph is not necessarily indicative of future price performance.
9
<PAGE>
The following table summarizes the compensation for services rendered to the
Company paid in 1995, 1996 and 1997 to the Chief Executive Officer and the
Company's other executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------- -----------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)(2)
- ---------------------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Young 1997 $862,500 797,057 275,276 96,435 4,750
Chairman (CEO) 1996 750,000 290,000 278,044 202,740 4,500
1995 650,000 164,486 23,801 266,250 4,500
Adam Young 1997 265,000 122,446 -- 1,004 --
Treasurer 1996 230,000 67,500 -- -- --
1995 200,000 35,000 -- -- --
Ronald J. Kwasnick 1997 442,750 286,409 58,092 21,575 2,400
President 1996 385,000 135,000 58,797 16,242 4,500
1995 335,000 76,512 5,034 32,000 4,500
James A. Morgan 1997 370,875 239,914 54,675 15,835 4,750
Executive Vice 1996 322,500 106,000 54,971 13,992 4,500
President 1995 280,000 60,577 4,704 157,125 4,500
Deborah A. McDermott 1997 316,250 175,352 30,056 4,608 4,750
Executive Vice 1996 248,333 90,000 30,294 13,992 4,500
President-Operations
</TABLE>
______________________
(1) Reflects the forgiveness of loans which were made to employees in 1994 and
1995 for the purpose of satisfying their federal income tax withholding
requirements related to non-cash compensation paid in the form of shares of
Common Stock. See "Certain Transactions."
(2) Reflects employer contributions to the Company's 401(k) Plan on behalf of
the named executive officers. For 1995, 1996 and 1997, such contributions
were made in the form of shares of Class A Common Stock valued at fair
market value on the date of issuance.
10
<PAGE>
The following table sets forth information concerning individual grants of
stock options made during 1997 to the named executive officers in the Summary
Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE
SECURITIES TOTAL OPTIONS EXERCISE AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF BASE OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM (3)
NAMES GRANTED(1) FISCAL YEAR PER SHARE(2) DATE 5%($) 10%($)
- --------------------------- ------------- ----------- ------------ --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Young 96,435 38.69% $36.25 11/03/2007 2,198,470 5,571,355
13,790 5.53 39.88(4) 11/03/2002 345,814 876,361
Adam Young 11,855 4.76 36.25 11/03/2007 270,264 684,901
Ronald J. Kwasnick 33,365 14.19 36.25 11/03/2007 806,231 2,043,148
James A. Morgan 29,625 11.89 36.25 11/03/2007 675,374 1,711,530
Deborah A. McDermott 11,177 6.89 36.25 11/03/2007 391,591 992,370
</TABLE>
______________________
(1) Options may be exercised immediately with respect to 10% of the total option
shares indicated for each of the named executive officers. The following
fixed percentages of such option shares will become exercisable on November
3, 1998 and on each of the three anniversaries of such date, in cumulative
fashion: 15%, 20%, 25% and 30%, respectively.
(2) The exercise price was established at the market price on the date of grant,
November 3, 1997.
(3) The assumed annual rates of appreciation of 5% and 10% would result in the
price of the Company's Class A Common Stock increasing to $59.05 and $94.02,
respectively. For the period from November 7, 1994, the effective date of
the Company's initial public offering, through December 31, 1997, the
cumulative total return of the Company's Class A Common Stock has increased
104%. (4) The exercise price was established at 110% of the market price on
the date of grant, as this option is an "incentive" stock option and Mr.
Young possesses more than 10% of the total voting power of the Company's
Common Stock.
11
<PAGE>
The following table sets forth information at fiscal year-end 1997 concerning
stock options held by the named executive officers in the Summary Compensation
Table. No options held by such individuals were exercised during 1997.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR AT FISCAL YEAR-END
- --------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Vincent J. Young 332,023 263,452 5,474,914 1,496,925
- ---------------------------------------------------------------------------------
Adam Young 1,186 10,669 2,965 26,673
- ---------------------------------------------------------------------------------
Ronald J. Kwasnick 43,662 56,203 681,843 245,570
- ---------------------------------------------------------------------------------
James A. Morgan 167,588 49,162 3,052,783 246,655
- ---------------------------------------------------------------------------------
Deborah A. McDermott 31,248 37,959 482,295 218,648
- ---------------------------------------------------------------------------------
</TABLE>
Those directors who are not also employees of the Company receive as an
annual retainer five year options, having a fair market value exercise price, to
purchase 2,800 shares of Class A Common Stock, and also receive reimbursement of
out-of-pocket expenses incurred for each Board or committee meeting attended.
Nonemployee directors also receive, upon becoming a director, a five-year option
to purchase up to 1,000 shares of Class A Common Stock at an exercise price
equal to 120% of the quoted price on the date of grant. No other directors are
compensated for services as a director.
EMPLOYMENT AGREEMENT
The Company has an employment agreement with James A. Morgan, Executive Vice
President of the Company. The term of Mr. Morgan's employment agreement expires
90 days after the date on which the Company gives notice of termination. Under
the agreement, Mr. Morgan's base salary is $225,000. However, such amount may
be increased at the discretion of the Board of Directors, which has approved an
increase in Mr. Morgan's base salary to 370,875 effective as of January 1, 1998.
The agreement provides for the payment of his base salary for twelve months
after termination other than by reason of disability, death or breach of the
agreement.
401(K) PLAN
The Company maintains a retirement plan (the "401(k) Plan") established in
conformity with Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"), covering all of the eligible employees of the Company and, until
its merger with and into the Company in March 1998, Adam Young Inc. Pursuant to
the 401(k) Plan, employees may elect to defer up to 15% of their current pre-tax
compensation and have the amount of such deferral contributed to the 401(k)
Plan. The maximum elective deferral contribution was $9,500 in 1997, subject to
adjustment for cost-of-living in subsequent years. Certain highly compensated
employees may be subject to a lesser limit on their maximum elective deferral
contribution. The 401(k) Plan permits, but does not require, matching
contributions and non-matching (profit sharing) contributions to be made by the
Company up to a maximum dollar amount or maximum percentage of participant
contributions, as determined annually by the Company. Effective January 1,
1997, the 401(k) Plan was amended to offer a match to employee contributions
equal to .5% for each 1% of compensation an employee contributes, up to a
maximum 3% Company contribution. Such contributions will be made in the form of
Class A Common Stock to be contributed by the Company to the 401(k) after each
calendar quarter with respect to such quarter based upon the closing price as of
the last day of such quarter. The Company contributed an aggregate of 30,817
shares of Class A Common Stock to the 401(k) Plan in 1997 in respect of matching
grants. The 401(k) applies a seven-year vesting schedule to all shares
contributed based upon the number of years employed by the Company. The 401(k)
Plan is qualified under Section 401 of the code so that contributions by
employees and employer, if any, to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made.
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Currently, the members of the compensation committee are Alfred J. Hickey,
Jr., Leif Lomo and Vincent J. Young, the Company's Chairman.
1995 STOCK OPTION PLAN
On February 6, 1995, the Company adopted the Young Broadcasting Inc. 1995
Stock Option Plan (the "Plan"). The purpose of the Plan is to promote the
interests of the Company and its stockholders by strengthening the Company's
ability to attract and retain competent employees, to make service on the Board
of Directors of the Company more attractive to present and prospective non-
employee directors and to provide a means to encourage stock ownership and
proprietary interest in the Company by officers, non-employee directors and
valued employees and other individuals upon whose judgment, initiative and
efforts the financial growth of the Company largely depend.
The Plan may be administered by either the entire Board of Directors of the
Company or a committee consisting of two or more members of the Board of
Directors, each of whom is a "disinterested person." The Plan is currently, and
has been since its adoption in February 1995, administered by a Stock Option
Committee of the Board of Directors presently consisting of two "disinterested"
directors, Leif Lomo and Alfred J. Hickey. To qualify as a disinterested
director, a director may not be eligible for grants under the Plan, but may
receive options in respect of annual non-employee director retainer fees.
Incentive stock options ("ISOs") may be granted only to officers and key
employees of the Company and its subsidiaries. Nonqualified stock options and
stock appreciation rights ("SARs") may be granted to such officers and employees
as well as to agents and directors of and consultants to the Company, whether or
not otherwise employees of the Company. In determining the eligibility of an
individual for grants under the Plan, as well as in determining the number of
shares to be optioned to any individual, the Stock Option Committee takes into
account the recommendations of the Company's Chairman, Vincent Young, the
position and responsibilities of the individual being considered, the nature and
value to the Company or its subsidiaries of his or her service or
accomplishments, his or her present or potential contribution to the success of
the Company or its subsidiaries, the number and terms of options and SARs
already held by an individual and such other factors as the Stock Option
Committee may deem relevant. In making recommendations to the Stock Option
Committee, the Chairman focuses upon individuals who would be motivated by a
direct economic stake in the equity of the Company. Such individuals are
primarily in the executive management group and in the individual station
management groups, and are evaluated by the Chairman at each grant date based
upon the factors discussed above.
Options may provide for their exercise into shares of any class of the
Company's Common Stock, Class A, Class B or Class C. Each such class of Common
Stock has substantially identical rights, except with respect to voting. The
Class A Common Stock entitles its holders to one vote per share on all matters
submitted to a vote of the holders of Common Stock. The Class B Common Stock
entitles its holders to ten votes per share, except in connection with certain
significant transactions. Holders of Class C Common Stock, none of which is
presently outstanding, would not be entitled to vote, except as required by law.
All classes of Common Stock entitled to vote on any matter vote together as a
single class, except as otherwise required by law. Shares of Class B Common
Stock may only be held, directly or indirectly, by members of management and
certain family members of management. Accordingly, options exercisable for
shares of Class B Common Stock may only be granted to individuals within such
group.
The plan provides for the granting of ISOs to purchase the Company's Common
Stock at not less than the fair market value on the date of the option grant and
the granting of nonqualified options and SARs with any exercise price. SARs
granted in tandem with an option have the same exercise price as the related
option. The total number of shares with respect to which options and SARs may
be granted under the Plan is currently 1,500,000. As of April 3, 1998, options
for an aggregate of 1,493,572 shares have been granted to various individuals,
including Vincent Young, Adam Young, Ronald Kwasnick, James Morgan and Deborah
McDermott. The Plan contains certain limitations applicable only to ISOs
granted thereunder. To the extent that the aggregate fair market value, as of
the date of grant, of the shares to which ISOs become exercisable for the first
time by an optionee during the calendar year exceeds $100,000, the option will
be treated as a nonqualified option. In addition, if an optionee owns more than
10% of the total voting power of all classes of the Company's stock at the time
the individual is granted an ISO, the option price per share cannot be less than
110% of the fair market value per share and the term of the
13
<PAGE>
ISO cannot exceed five years. No option or SAR may be granted under the Plan
after February 5, 2005, and no option or SAR may be outstanding for more than
ten years after its grant.
Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash, check or, under certain
circumstances, in shares of any class of the Company's Common Stock, or any
combination thereof. SARs, which give the holder the privilege of surrendering
such rights for the appreciation in the Common Stock between the time of the
grant and the surrender, may be settled, in the discretion of the Board or
committee, as the case may be, in cash, Common Stock, or in any combination
thereof. The exercise of an SAR granted in tandem with an option cancels the
option to which it relates with respect to the same number of shares as to which
the SAR was exercised. The exercise of an option cancels any related SAR with
respect to the same number of shares as to which the option was exercised.
Generally, options and SARs may be exercised while the recipient is performing
services for the Company and within three months after termination of such
services.
The Plan may be terminated at any time by the Board of Directors, which may
also amend the Plan, except that without stockholder approval, it may not
increase the number of shares subject to the Plan or change the class of persons
eligible to receive options under the Plan.
CERTAIN TRANSACTIONS
On February 5, 1998, the Company entered into an Agreement and Plan of Merger
with Adam Young Inc. ("AYI"), a national representation firm which procures
national advertising on behalf of television stations in the United States, and
a newly formed wholly-owned subsidiary of the Company pursuant to which AYI was
merged with and into such subsidiary. The Company issued 476,307 shares of its
Class A Common Stock, with an approximate value of $19.3 million, to Vincent
Young, the Company's Chairman, and Adam Young, the Company's Treasurer, and his
wife in exchange for all of the outstanding stock of AYI. AYI has entered into
sales representative agreements with each of the Company's twelve television
stations. AYI received commissions of approximately $5.3 million in the
aggregate from the Company's stations in 1997. In addition, at December 31,
1997, the Company's stations had accrued commissions payable to AYI of
approximately $494,000. AYI procured approximately $83.0 million of total
advertising time for the Company's stations in 1997.
Until the merger, the Company had a sublease (the "Sublease") with AYI for
the use by AYI of approximately 9,500 square feet of office space together with
furnishings and equipment at the Company's principal executive offices. The
Company received a total of $619,000 in rental and other payments from AYI in
1997 pursuant to the Sublease.
The Company made loans in 1994 to certain executive officers and other
employees of the Company to satisfy their federal income tax withholding
requirements related to non-cash compensation paid in the form of shares of
Common Stock. The Company made additional loans to such employees in 1995 to
satisfy their remaining tax obligations related to such non-cash compensation.
The shares were issued to such employees in August and November 1994 pursuant to
the Company's terminated Incentive Stock Grant Program (the "Program") and in
March 1994 as part of compensation under employment arrangements. The aggregate
outstanding principal amount of such loans at April 3, 1998 was $1,035,000
including $584,000 to Vincent Young, Chairman and a director of the Company;
$123,000 to Ronald J. Kwasnick, President and a director of the Company;
$116,000 to James A Morgan, Executive Vice President and nominee for director of
the Company; and $64,000 to Deborah McDermott, Executive Vice President-
Operations of the Company. The loans bear interest at the rate of 7.21% per
annum and are payable in five equal annual installments of principal and accrued
interest. On November 8, 1995, the Board of Directors of the Company adopted a
loan forgiveness policy in order to afford employees who received grants under
the Program with the benefits intended by the Program without imposing upon them
the adverse tax consequences incident thereto. Under the forgiveness policy, all
employees of the Company with such loans outstanding who were employed in good
standing as of November 15, 1995 could elect to defer for one year the first
installment of principal and related accrued interest. For all of such electing
employees, one-twelfth of such deferred installment was forgiven as of the end
of each full month of employment in good standing during the twelve-month period
ended November 15, 1996. This policy provides for employee elections similarly
to defer the remaining installments as they become due with similar monthly
vesting for forgiveness based upon continued employment in good standing.
14
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, with the concurrence of the Audit Committee, has
selected Ernst & Young LLP as its independent auditors for 1998. Although
stockholder ratification of the Board of Directors' action in this respect is
not required, the Board of Directors considers it desirable for stockholders to
pass upon such appointment. If the stockholders do not ratify the appointment
of Ernst & Young LLP, the engagement of independent auditors will be reevaluated
by the Board of Directors.
A representative of Ernst & Young LLP is expected to attend the meeting and
will be available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP.
15
<PAGE>
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO LOWER REQUIRED MINIMUM
PERCENTAGE OF COMMON STOCK OWNERSHIP BY MANAGEMENT GROUP
The Company has three classes of Common Stock, designated as Class A ("Class
A Shares"), Class B ("Class B Shares") and Class C ("Class C Shares"). Each
class of Common Stock has substantially identical rights, except with respect to
voting. Holders of Class A Shares are entitled to one vote per share on all
matters submitted to a vote of the holders of Common Stock. Holders of Class B
Shares are entitled to ten votes per share, except in connection with certain
significant transactions. Holders of Class C Shares, none of which is presently
outstanding, would not be entitled to vote, except in connection with any change
to the Company's Certificate of Incorporation (the "Certificate") which would
adversely affect their rights as holders of such class of Common Stock. All
classes of Common Stock entitled to vote on any matter vote together as a single
class except as otherwise required by law.
All of the Company's outstanding Class B Shares are held by Company
management and by or in trust for family members of management. The Certificate
provides for a defined "Management Group" which includes such members of
management and also includes a defined group of relatives of Vincent Young and
Adam Young, the Chairman and Treasurer, respectively, of the Company, as well as
entities controlled by Messrs. Young and such relatives. In the event any Class
B Shares are transferred outside of the Management Group, such shares will
automatically be converted into Class A Shares. In addition, if the total number
of shares of Common Stock held by members of the Management Group falls to below
10% of the total number of shares of Common Stock outstanding, all of the
outstanding Class B Shares automatically will be reclassified as Class A Shares.
The dual class voting structure of the Company's Common Stock was created as
part of a recapitalization implemented by the Company in November 1994 in
connection with the Company's initial public offering (the "IPO"). This
structure was recommended by the lead underwriter of the IPO, and approved by
the Company's directors and stockholders, recognizing that the success of the
Company had and would continue to depend upon the existing owners and
management. The lead underwriter sought to ensure that the management skills
and decision making process that were responsible for the Company's prior
successes would continue after the IPO. The structure was also recommended to
address FCC change of control issues that commonly arise in broadcast television
companies which generally are governed by voting control.
Concurrently with the completion of the IPO, the Company entered into its
senior credit facility with a group of lending institutions which required and
continues to require that a specific group of holders, similar to those
comprising the Management Group, retain voting control of the Company. The
failure to retain such control is an event of default under the senior credit
facility and could result in an acceleration of the amounts outstanding
thereunder. In addition, the Company's indentures relating to each of its four
outstanding series of senior subordinated notes have change in control
provisions with a defined group of holders similar to those comprising the
Management Group which, if triggered, would require the Company to redeem the
notes.
At the time of the IPO, the Management Group held a total of 2,039,120 shares
of Common Stock, representing 18.8% of the total number of shares of Common
Stock outstanding and 80.9 % of the total voting power of the Common Stock. As
of April 3, 1998, the record date for the Annual Meeting, the Management Group
held a total of 2,428,863 shares of Common Stock, representing 16.9% of the
total number of shares of Common Stock outstanding and 62.1% of the total voting
power of the Common Stock.
The Board of Directors believes that ownership and control of the Company by
the Management Group, particularly Vincent Young and Adam Young, has been and
will continue to be an essential element in its growth and success. In the past
ten years, under the leadership of Vincent and Adam Young, the Company has grown
from an owner and operator of two television stations to twelve television
stations. Excluding network-owned stations, home shopping stations and foreign
language stations, the Company is presently the sixth-largest television group
based upon coverage, with its stations reaching approximately 9.25% of the
television households in the United States. The Company is presently the
seventh largest ABC network affiliate group in terms of householdlevision
broadcasting industry. The investment community recognizes that the success of
the Company is attributable to the s reached and owns more ABC stations than any
single operator other than ABC. The success of the Company's strategies is
evidenced by this rapid growth and its stations' broadcast cash flow margins,
which are among the highest in the teYoung family and current management. The
Board of Directors believes that a risk to current control by current owners and
management would be viewed negatively by the investment community and would
adversely
16
<PAGE>
impact on the value of the Company. Thus, maintaining the current voting rights
of the Class A and Class B Shares will provide continuity and stability to an
experienced management team.
The Company's success to date is attributable, in part, to its well-developed
acquisition strategy. The Company's ability to manage costs effectively while
enhancing the quality provided to station viewers gives the Company an important
advantage in acquiring and operating new stations. In assessing acquisitions,
the Company targets stations for which it has identified line item expense
reductions that can be implemented upon acquisition. The Company also develops
specific proposals for revenue enhancement utilizing management's significant
experience in local and national advertising. The Board of Directors believes
that a reduction of the 10% ownership requirement is necessary to provide the
Company with greater flexibility to issue additional shares of Common Stock or
securities convertible into Common Stock without triggering the automatic
reclassification of the Class B Shares, as described above. The reduction of
such ownership requirement to 5% would enable the Company to issue additional
shares in connection with possible future transactions, such as financings,
corporate mergers, acquisitions and other uses not presently determinable and as
may be deemed to be feasible and in the best interests of the Company. The
Company does not presently have any definitive agreements or understandings with
respect to any such transaction.
The lead underwriter of the IPO recommended the 10% minimum ownership
requirement to ensure that the Management Group maintain a meaningful economic
interest in the Company. The number of shares of Common Stock held by the
Management Group upon completion of the IPO on November 7, 1994 represented a
$38.7 million economic interest, based upon the IPO share price of $19. The
number of shares held by the Management Group as of April 3, 1998, the record
date for the Annual Meeting, represented a $119.9 million economic interest,
based upon the closing sale price of the Class A Shares on such date of $49-3/8.
Accordingly, while the Management Group's percentage ownership of the Common
Stock as decreased during such period from 18.8 % to 16.9% as a result of the
Company's expansion which included the issuance of additional shares, the
Management Group's economic interest in the Company has significantly increased.
Accordingly, the Board of Directors recognizes that the recommended lower
minimum ownership requirement would continue to represent a truly meaningful
economic interest in the Company.
A reduction in the ownership requirement to 5% will enable the Management
Group to maintain its control over the Company for a longer period of time if
the Company issues additional shares of Common Stock in the future. In
addition, the Company would be able to have twice as many issued shares of
Common Stock as it would, if the reduction were not implemented, before the
Management Group would lose control over the Company, assuming that members of
the Management Group do not acquire any of those additional shares. Giving
effect to the exchange set forth in the Proposal on the following page, Vincent
and Adam Young together would beneficially own Class B Shares representing
approximately 72.9% of the total voting power of the Company's Common Stock and,
as a result, they alone maintain control over the election of a majority of the
Company's directors and, thus, over the operations and business of the Company
as a whole. In addition, such stockholders have the ability to prevent specific
types of material transactions, certain of which could make the Company a less
attractive target for a takeover than it otherwise might be.
DESCRIPTION OF PROPOSED AMENDMENT
The Board of Directors proposes and recommends that the stockholders approve
an amendment of the Certificate to reduce the number of shares of Common Stock
required to be held by members of the Management Group from 10% to 5% of the
total shares of Common Stock of the Company outstanding. Accordingly, giving
effect to such amendment, if the total number of shares of Common Stock held by
members of the Management Group were to fall to below 5% of the total number of
shares of Common Stock outstanding, all of the outstanding Class B Shares would
automatically be reclassified as Class A Shares.
EFFECTIVENESS OF AMENDMENT
If approved by the stockholders, the amendment will become effective upon the
filing of a Certificate of Amendment to the Certificate, setting forth the
proposed amendment, with the Secretary of State of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
AMENDMENT TO THE CERTIFICATE.
17
<PAGE>
PROPOSAL TO ISSUE CLASS B SHARES IN EXCHANGE
FOR CERTAIN OUTSTANDING CLASS A SHARES
On February 5, 1998, the Company entered into an Agreement and Plan of Merger
pursuant to which Adam Young Inc. ("AYI"), a national television representation
firm with sales representative agreements with each of the Company's twelve
television stations, was merged (the "Merger") with and into a wholly-owned
subsidiary of the Company. As part of the Merger, the shareholders of AYI,
comprised of Vincent Young, the Company's Chairman, Adam Young, the Company
Treasurer, and his wife, received and aggregate of 476,306 Class A Shares. Such
shareholders also received an additional 50,450 Class A Shares in consideration
for the equal number of Class B Shares held by AYI at the time of the Merger.
See "Certain Transactions."
In connection with the Merger, the Company's independent directors, serving
as a special committee of the Board for the purpose of passing upon the Merger,
received an opinion from Bear, Stearns & Co. Inc. ("Bear Stearns") that the
Merger was fair, from a financial point of view, to the public stockholders of
the Company. Bear Stearns recommended to the special committee that the Company
issue only Class A Shares in the Merger, just as it would in a similar
transaction with unaffiliated third parties. Accordingly, 476,306 Class A
Shares, with an approximate value of $19.3 million, were issued as consideration
for the business of AYI. In addition, the consideration for the 50,450 Class B
Shares held by AYI at the time of the Merger were issued by the Company, on a
share-for-share basis, in the form of Class A Shares.
The Board of Directors believes that it is in the best interest of the
Company that members of the Management Group hold super-voting Class B Shares
for the reasons stated above in the preceding Proposal. All of the shares of
Common Stock held by the Management Group at the time of the IPO were
reclassified as Class B Shares. For the same reasons, all of the options that
have been granted to date to members of the Management Group under the Company's
Stock Option Plan are exercisable for Class B Shares.
Bear Stearns has advised the Board of Directors that its recommendation to
issue only Class A Shares in the Merger specifically related to the structure of
the Merger transaction and the desirability to the Company and its stockholders
of qualifying the Merger as a transaction effected on the same basis as an arms-
length transaction with unaffiliated third parties. In addition, Bear Stearns
has advised the Board of Directors that they may evaluate this proposal
separately from the Merger based upon an assessment of the merits of such
proposal. Accordingly, for the reasons stated above, the Board of Directors
proposes and recommends that the Company issue 526,756 Class B Shares to Vincent
Young and Adam Young and his wife in exchange for the 526,756 Class A Shares
issued to them in connection with the Merger.
In accordance with the corporate governance rules of the National Association
of Securities Dealers, Inc. relating to issuers listed on the Nasdaq National
Market, such as the Company, stockholder approval is required for non-public
issuances of shares of common stock resulting in an increase in voting power in
excess of a specified percentage of the then outstanding voting power. For this
reason, the Company's stockholders are being requested to approve the issuance
of the Class B Shares in connection with the exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSED
EXCHANGE.
18
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own beneficially more than 10% of the
Company's Common Stock to file reports of ownership and changes in ownership of
such Common Stock with the Securities and Exchange Commission, and to file
copies of such reports with the Company. Based solely upon a review of the
copies of such reports filed with the Company, the Company believes that during
1997 such reporting persons complied with the filing requirements of said
Section 16(a).
ANNUAL REPORT
The Company's 1997 Annual Report is being mailed to stockholders together
with this proxy statement. No part of such Annual Report shall be regarded as
proxy-soliciting material or as a communication by means of which any
solicitation is being or is to be made. THE COMPANY WILL PROVIDE WITHOUT CHARGE
TO EACH OF ITS STOCKHOLDERS, UPON THE WRITTEN REQUEST OF ANY SUCH STOCKHOLDERS,
A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997,
EXCLUSIVE OF EXHIBITS. WRITTEN REQUESTS FOR SUCH FORM 10-K SHOULD BE SENT TO
JAMES A. MORGAN, SECRETARY, YOUNG BROADCASTING INC., 599 LEXINGTON AVENUE, NEW
YORK, NEW YORK 10022.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
meeting. However, if other matters should come before the meeting, it is the
intention of each person named in the proxy to vote such proxy in accordance
with his judgment on such matters.
1999 STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. In order for stockholder proposals for the 1999 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's proxy statement, they
must be received by the Secretary of the Company at the Company's principal
executive offices not later than December 14, 1998.
By Order of the Board of Directors,
JAMES A. MORGAN
Secretary
April 13, 1998
19
<PAGE>
YOUNG BROADCASTING INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Vincent J. Young and James A. Morgan as
proxies, each with the power of substitution, and hereby authorizes them to vote
all shares of Class A and Class B Common Stock of the undersigned at the 1998
Annual Meeting of the Company, to be held at WRIC-TV, 301 Arboretum Place,
Richmond, Virginia, at 10:00 a.m. on Tuesday, May 5, 1998, and at any
adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" THE PROPOSALS SET FORTH
ON THE REVERSE SIDE.
-----------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------------
X PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
- ---------------------------------------------------------------------------------------------------------------------
1. Election of Directors. FOR AGAINST ABSTAIN
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nominees: Vincent J. Young, Adam Young, Ronald J. 2. Selection of Independent ---- ---- ----
Kwasnick, Bernard F. Curry, Alfred J. Hickey, Jr., Leif Auditors.
Lomo, James A. Morgan, Robert L. Winikoff, David C. Lee ---- ---- ----
---- ---- 3. Approval of amendment to ---- ---- ----
FOR WITHHELD the Company's Certificate
ALL FROM ALL of Incorporation to lower ---- ---- ----
NOMINEES NOMINEES from 10% to 5% the required
---- ---- minimum percentage of
Common Stock that can be
held by the Management
Group without the automatic
reclassification of Class B
Common Stock to Class A
Common Stock.
4. Approval of issuance of ---- ---- ----
shares of Class B Common
Stock in exchange for ---- ---- ----
presently outstanding
shares of Class A Common
Stock held by certain
members of the Management
Group.
Please sign exactly as name appears hereon. Joint
---- owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian. Please give full title as such.
---- --------------------------------------
For all nominees except as noted above
Signature: Date: Signature: Date:
---------------------- --------------------------- ---------------------------- ---------------------
</TABLE>
