<PAGE>
As filed with the Securities and Exchange Commission on March 23, 2000
Registration No. 333-31156
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
YOUNG BROADCASTING INC.
(Exact name of registrant as specified in its charter)
----------------
Delaware 4833 13-3339681
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
599 Lexington Avenue
New York, New York 10022
(212) 754-7070
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------
VINCENT J. YOUNG, CHAIRMAN
Young Broadcasting Inc.
599 Lexington Avenue
New York, New York 10022
(212) 754-7070
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
ROBERT L. WINIKOFF, W. RONALD INGRAM, ESQ. PETER F. KERMAN, ESQ.
ESQ. The Chronicle Publishing Company KIMBERLY L. WILKINSON
IRA I. ROXLAND, ESQ. 901 Mission Street ESQ.
Cooperman Levitt San Francisco, California Latham & Watkins
Winikoff 94103 505 Montgomery Street
Lester & Newman, P.C. (415) 777-7179 Suite 1900
800 Third Avenue Fax: (415) 495-5057 San Francisco,
New York, New York California 94111
10022 (415) 391-0600
(212) 688-7000 Fax: (415) 395-8095
Fax: (212) 755-2839
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
YOUNG BROADCASTING INC. THE CHRONICLE PUBLISHING COMPANY
Joint Proxy Statement/Prospectus
Merger Proposed--Your Vote Is Very Important
This joint proxy statement/prospectus is being furnished in connection with
(i) the special meeting in lieu of the 2000 annual meeting of stockholders of
Young Broadcasting Inc. to be held on April 27, 2000 and (ii) the special
meeting of stockholders of The Chronicle Publishing Company to be held on April
27, 2000.
The boards of directors of Young and Chronicle Publishing have unanimously
approved a merger agreement, which provides for the merger of Chronicle
Publishing with and into a wholly-owned subsidiary of Young.
If the merger is completed:
. Each share of Chronicle Publishing's common stock will be exchanged for
$171.96 in cash (subject to adjustment) and not less than 0.84177 nor more
than 1.02878 shares of Young's Class A common stock (subject to adjustment).
The exact number of shares of Young's Class A common stock to be issued in
the merger will be determined by an exchange ratio which will be calculated
by means of a formula linked to the average of the closing sale price of
Young's Class A common stock, as reported on The Nasdaq Stock Market, for
the 20 consecutive trading days ending three trading days prior to the
closing date of the merger. The per share cash consideration described above
is subject to reduction based upon certain expenses incurred by Chronicle
Publishing. The allocation (but not the combined aggregate) of the per share
cash consideration and the per share stock consideration described above is
also subject to adjustment in the event that Young raises proceeds through
the sale of equity prior to the effective time of the merger, in which event
the per share cash consideration will be increased and the per share stock
consideration will be reduced.
. Young stockholders will continue to own their existing shares.
The shares of Young's Class A common stock to be issued to holders of
Chronicle Publishing's common stock will, depending on the exchange ratio,
represent between approximately 19.1% and 22.4% of Young's outstanding voting
stock after the merger. Assuming an exchange ratio of 1.02878 for the merger,
approximately 3,888,788 shares of Young's Class A common stock will be issued
in the merger, representing approximately 22.4% of Young's outstanding voting
stock after the merger.
Young's Class A common stock is quoted on The Nasdaq Stock Market under the
symbol "YBTVA." On March 22, 2000, the last reported sale price of Young's
Class A common stock was $21.1875 per share. There is no established public
trading market for Chronicle Publishing's common stock.
The merger cannot be completed unless Young's stockholders, in accordance
with the rules of The Nasdaq Stock Market, approve the issuance of Young's
Class A common stock, and Chronicle Publishing's stockholders approve the
merger. We have scheduled special meetings for Chronicle Publishing's
stockholders to vote on the merger and for Young's stockholders to vote on the
issuance of Young's Class A common stock and on certain other proposals,
including the election of directors. The exact exchange ratio in the merger
will not be determined by the date of the special meetings. Whether or not you
plan to attend a special meeting, please take the time to vote by completing
and mailing the enclosed proxy card to us. Your vote is very important. The
dates, times and places of the meetings are as follows:
For Young stockholders: For Chronicle Publishing stockholders:
April 27, 2000 April 27, 2000
10 a.m., local time
9 a.m., local time
901 Mission Street
Mark Hopkins Inter-Continental Hotel San Francisco, California
Number One Nob Hill
San Francisco, California
<PAGE>
As of March 20, 2000, the record date for the Young special meeting, Adam
Young and Vincent Young together beneficially possessed approximately 57% of
the aggregate votes that may be cast at the Young special meeting. Accordingly,
the affirmative vote of Adam Young and Vincent Young alone is sufficient to
adopt each of the proposals to be submitted to Young's stockholders at the
Young special meeting. Pursuant to stockholder support agreements entered into
with Chronicle Publishing, certain stockholders of Young (including Adam Young
and Vincent Young) who, as of the record date, control approximately 51% of the
votes entitled to be cast at the Young special meeting, have agreed to vote all
of their shares in favor of the issuance of shares of Young's common stock in
the merger. In addition, Adam Young and Vincent Young have advised Young that
they will vote all of their shares in favor of all of the other proposals to be
submitted to Young's stockholders at the Young special meeting.
Pursuant to stockholder support agreements entered into with Young, certain
stockholders of Chronicle Publishing who, as of the record date, control 62.7%
of the votes entitled to be cast at the Chronicle Publishing special meeting,
have agreed to vote all of their shares in favor of the proposal to approve the
merger agreement at the Chronicle Publishing special meeting.
This document is a proxy statement for both Young and Chronicle Publishing
to use in soliciting proxies for our special meetings of stockholders. This
document is also a prospectus of Young relating to the issuance of up to
3,888,788 shares of Young's Class A common stock in connection with the merger.
This document provides you with detailed information about the proposed
merger. We encourage you to read this entire document carefully. In particular,
please see the section entitled "Risk Factors" on page 16 of this document for
a discussion of risks associated with the merger.
/s/ Vincent J. Young
Vincent J. Young /s/ John B. Sias
Chairman John B. Sias
Young Broadcasting Inc. President and Chief Executive
Officer
The Chronicle Publishing Company
Neither the United States Securities and Exchange Commission nor any state
securities commission has approved or disapproved the shares of Young's Class A
common stock to be issued under this joint proxy statement/prospectus or
determined if this joint proxy statement/prospectus is accurate or adequate.
Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated March 24, 2000 and is
expected to be first mailed to stockholders on or about March 27, 2000.
<PAGE>
YOUNG BROADCASTING INC.
599 Lexington Avenue
New York, New York 10022
----------------
NOTICE OF SPECIAL MEETING IN LIEU OF
2000 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 27, 2000
----------------
To the Stockholders of Young Broadcasting Inc.:
A special meeting in lieu of the 2000 annual meeting of stockholders of
Young Broadcasting Inc. will be held at the Mark Hopkins Inter-Continental
Hotel, Number One Nob Hill, San Francisco, California, on Thursday, April 27,
2000 at 9 a.m., local time, for the following purposes:
(1) To consider and vote upon a proposal to authorize the issuance of up to
3,888,788 shares of Young's Class A common stock in connection with the
merger of The Chronicle Publishing Company with and into a newly formed
subsidiary of Young.
(2) To approve an amendment to Young's certificate of incorporation which
would eliminate the required minimum percentage ownership of Young's
Class B common stock by the Young management group.
(3) To approve an amendment to Young's 1995 Stock Option Plan to increase
the total number of shares with respect to which options and stock
appreciation rights may be granted thereunder.
(4) To elect nine directors of Young to serve for a term of one year.
(5) To ratify and approve the selection of independent auditors of Young to
serve until the next annual meeting of stockholders.
(6) To transact such other business as may properly come before the Young
special meeting or any adjournment or postponement of the Young special
meeting.
Young's board of directors has unanimously approved a merger agreement with
Chronicle Publishing and recommends that you vote FOR approval of the issuance
of Young's Class A common stock in connection with the merger contemplated
thereby. Young's board of directors has also unanimously approved the amendment
to Young's certificate of incorporation and 1995 Stock Option Plan and
recommends that you vote FOR these amendments. Young's board of directors also
recommends that you vote FOR the election of the nominees to serve as directors
of Young. We have described the proposals in more detail in the accompanying
joint proxy statement/prospectus, which you should read in its entirety before
voting. A copy of the merger agreement with Chronicle Publishing is attached as
annex A to the accompanying joint proxy statement/prospectus.
The close of business on March 20, 2000 has been fixed by Young's board of
directors as the record date for the determination of stockholders entitled to
notice of and to vote at the Young special meeting or any adjournment or
postponement thereof. Only holders of record of Young's Class A common stock
and Class B common stock at the close of business on the record date may vote
at the Young special meeting.
The approval of the issuance of Young's Class A common stock in connection
with the proposed merger and the approval of the amendment to Young's
certificate of incorporation will each require the affirmative vote of the
holders of a majority of the voting power of the shares of Young's Class A
common stock and Class B common outstanding on the record date, voting together
as a single class. The approval of the amendment to Young's 1995 Stock Option
Plan will require the affirmative vote of the holders of a majority of the
voting power of the shares of Young's Class A common stock and Class B common,
voting together as a single class, that are present in person or by proxy at
the Young special meeting. The election of the director
<PAGE>
nominees will require the affirmative vote of the holders of a plurality of the
voting power of the shares of Young's Class A common stock and Class B common
stock, voting together as a single class, that are present in person or by
proxy at the Young special meeting.
All stockholders of Young are cordially invited to attend the Young special
meeting in person. However, to ensure your representation at the Young special
meeting, you are urged to complete, sign and return the enclosed proxy card as
promptly as possible in the enclosed postage-prepaid envelope. You may revoke
your proxy in the manner described in the accompanying joint proxy
statement/prospectus at any time before it is voted at the Young special
meeting. Executed proxies with no instructions indicated thereon will be voted
"FOR" the issuance of Young's Class A common stock in connection with the
merger, "FOR" each of the nominees for director and FOR each of the other
matters to be considered at the Young special meeting. If you fail to return a
properly executed proxy card or to vote in person at the Young special meeting,
the effect will be a vote against the issuance of Young's Class A common stock
in connection with the merger and against each of the director nominees and
against each of the other matters to be considered and voted upon at the Young
special meeting.
/s/ James A. Morgan
New York, New York James A. Morgan
Secretary
March 24, 2000
The board of directors of Young recommends that stockholders vote "FOR" the
issuance of Young's Class A common stock in connection with the merger, "FOR"
the amendment to Young's certificate of incorporation, "FOR" the amendment to
Young's 1995 Stock Option Plan and FOR the election of each of the director
nominees.
Your vote is important. Whether or not you plan to attend the special
meeting, please complete, sign and return the enclosed proxy card as promptly
as possible in the enclosed postage-prepaid envelope.
<PAGE>
THE CHRONICLE PUBLISHING COMPANY
901 Mission Street
San Francisco, California 94103
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On April 27, 2000
----------------
To the Stockholders of
The Chronicle Publishing Company:
A special meeting of stockholders of The Chronicle Publishing Company will
be held on Thursday, April 27, 2000, at 10 a.m., local time, at 901 Mission
Street, San Francisco, California for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of November 15, 1999, by and between
Chronicle Publishing and Young Broadcasting Inc. pursuant to which:
(a) Chronicle Publishing will be merged with and into a subsidiary of
Young, with the Young subsidiary being the surviving corporation;
and
(b) each issued and outstanding share of common stock of Chronicle
Publishing will be converted into and represent the right to
receive $171.96 in cash (subject to adjustment) and a number of
shares of Young's Class A common stock (subject to adjustment)
determined by dividing 45.65741 by the average closing sale price
of Young's Class A common stock, as reported on the Nasdaq National
Stock Market, for the 20 consecutive trading days ending three
trading days prior to the closing date of the merger ("Young's
average stock price"); provided that if Young's average stock price
is less than $44.38, then the exchange ratio will be 1.02878, and
if Young's average stock price is greater than $54.24, then the
exchange ratio will be 0.84177. The per share cash consideration
described above is subject to reduction based upon certain expenses
incurred by Chronicle Publishing. The allocation (but not the
combined aggregate) of the per share cash consideration and the per
share stock consideration described above is also subject to
adjustment in the event that Young raises proceeds through the sale
of equity prior to the effective time of the merger, in which event
the per share cash consideration will be increased and the per
share stock consideration will be reduced.
(2) To transact such other business as may properly come before the
Chronicle Publishing special meeting or any adjournment or postponement
of the Chronicle Publishing special meeting.
Chronicle Publishing's board of directors has unanimously approved the
merger agreement with Young and recommends that you vote FOR approval and
adoption of the merger agreement. We have described the proposal in more detail
in the accompanying joint proxy statement/prospectus, which you should read in
its entirety before voting. A copy of the merger agreement with Young is
attached as annex A to the accompanying joint proxy statement/prospectus.
The close of business on March 20, 2000 has been fixed by Chronicle
Publishing's board of directors as the record date for the determination of
stockholders entitled to notice of and to vote at the Chronicle Publishing
special meeting or any adjournment or postponement thereof. Only holders of
record of Chronicle Publishing's common stock at the close of business on the
record date may vote at the Chronicle Publishing special meeting.
Any record holder of Chronicle Publishing's common stock who, before the
taking of the vote on the approval and adoption of the merger agreement,
delivers to Chronicle Publishing a written demand stating that he, she or it
intends to demand appraisal of his, her or its shares if the merger is
consummated and whose
<PAGE>
shares are not voted in favor of approval and adoption of the merger agreement,
may be entitled to such appraisal of his, her or its shares pursuant to
sections 92A.300 to 92A.500, inclusive, of the Nevada Revised Statutes, a copy
of which is included as annex D to the attached joint proxy
statement/prospectus. The subsidiary of Young, as the surviving corporation in
the merger, and any such stockholder shall have the rights and duties and shall
follow the procedures set forth in Sections 92A.380 and 92A.390 of the Nevada
Revised Statutes. For a description of the procedures to be followed in
asserting appraisal rights in connection with the proposed merger, see "The
Merger--Appraisal Rights" in the accompanying joint proxy statement/prospectus.
The approval and adoption of the merger agreement will require the
affirmative vote of the holders of a majority of the shares of Chronicle
Publishing's common stock outstanding on the record date.
All stockholders of Chronicle Publishing are cordially invited to attend the
Chronicle Publishing special meeting in person. However, to ensure your
representation at the Chronicle Publishing special meeting, you are urged to
complete, sign and return the enclosed proxy card as promptly as possible in
the enclosed postage-prepaid envelope. You may revoke your proxy in the manner
described in the accompanying joint proxy statement/ prospectus at any time
before it is voted at the Chronicle Publishing special meeting. Executed
proxies with no instructions indicated thereon will be voted "FOR" approval and
adoption of the merger agreement. If you fail to return a properly executed
proxy card or to vote in person at the Chronicle Publishing special meeting,
the effect will be a vote against the merger agreement.
San Francisco, California
/s/W. Ronald Ingram
March 24, 2000 W. Ronald Ingram
Secretary
The board of directors of Chronicle Publishing recommends that stockholders
vote "FOR" approval and adoption of the merger agreement.
Your vote is important. Whether or not you plan to attend the meeting,
please complete, sign and return the enclosed proxy card as promptly as
possible in the enclosed postage-prepaid envelope. PLEASE DO NOT SEND YOUR
STOCK CERTIFICATES WITH YOUR PROXY CARD AT THIS TIME. DO NOT SEND YOUR STOCK
CERTIFICATES UNTIL YOU RECEIVE A LETTER OF TRANSMITTAL INSTRUCTING YOU WHERE TO
SEND THEM.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 4
RISK FACTORS.............................................................. 16
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS................ 23
THE YOUNG SPECIAL MEETING................................................. 24
Date, Time and Place.................................................... 24
Purpose................................................................. 24
Young Board of Directors' Recommendation................................ 24
Record Date, Outstanding Shares and Voting Rights....................... 24
Vote Required; Quorum................................................... 25
Voting of Proxies....................................................... 26
Revocation of Proxies................................................... 26
Solicitation of Proxies; Expenses....................................... 26
THE CHRONICLE PUBLISHING SPECIAL MEETING.................................. 27
Date, Time and Place.................................................... 27
Purpose................................................................. 27
Chronicle Publishing Board of Directors' Recommendation................. 27
Record Date, Outstanding Shares and Voting Rights....................... 27
Vote Required; Quorum................................................... 27
Voting of Proxies....................................................... 28
Revocation of Proxies................................................... 28
Solicitation of Proxies; Expenses....................................... 28
THE MERGER................................................................ 29
Background of the Merger................................................ 29
Recommendation of Young Board; Young's Reasons for the Merger........... 31
Recommendation of the Chronicle Publishing Board; Chronicle Publishing's
Reasons for the Merger................................................. 32
Opinion of Young's Financial Advisor.................................... 34
Opinion of Chronicle Publishing's Financial Advisor..................... 38
Interests of Executive Officers and Directors of Chronicle Publishing in
the Merger............................................................. 42
Accounting Treatment of the Merger...................................... 43
Regulatory Approvals.................................................... 43
Material United States Federal Income Tax Consequences.................. 44
Resales of Young's Class A Common Stock Issued in Connection with the
Merger; Affiliate Agreements........................................... 45
Merger Financing........................................................ 46
Appraisal Rights........................................................ 46
THE MERGER AGREEMENT...................................................... 49
The Merger.............................................................. 49
Conversion of Securities................................................ 49
Exchange of Stock Certificates.......................................... 51
Appraisal Rights........................................................ 52
Representations and Warranties.......................................... 52
Certain Covenants....................................................... 54
Election of Young to Separately Purchase Broadcast Licenses............. 58
Sale of Other Businesses; Conversion to Asset Purchase Agreement........ 58
</TABLE>
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Validity of Subchapter S Election Condition Precedent; Conversion to
Asset Purchase Agreement or Payment of Termination Fee................. 59
Registration of Shares of Young's Class A Common Stock.................. 59
Conditions to Obligations to Effect the Merger.......................... 60
Termination............................................................. 61
Expenses................................................................ 62
Amendment and Waiver.................................................... 62
Survival of Representations and Warranties.............................. 62
Escrow Fund............................................................. 62
Stockholder Support Agreements.......................................... 66
Registration Rights Agreement........................................... 67
PROPOSAL TO AMEND YOUNG'S CERTIFICATE OF INCORPORATION TO ELIMINATE THE
REQUIRED MINIMUM PERCENTAGE OF YOUNG'S CLASS A COMMON STOCK OWNERSHIP BY
YOUNG'S MANAGEMENT GROUP................................................. 68
PROPOSAL TO ELECT DIRECTORS............................................... 70
APPROVAL OF AMENDMENT INCREASING SHARES UNDERLYING FUTURE GRANTS PURSUANT
TO YOUNG'S 1995 STOCK OPTION PLAN........................................ 72
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS....................... 73
PRICE RANGES OF SECURITIES................................................ 74
YOUNG UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS................... 75
YOUNG SELECTED FINANCIAL DATA............................................. 79
YOUNG'S MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 81
Introduction............................................................ 81
Results of Operations................................................... 82
Liquidity and Capital Resources......................................... 84
Quantitative and Qualitative Disclosure About Market Risk............... 86
Impact of Year 2000..................................................... 87
Income Taxes............................................................ 87
KRON-TV and BAYTV SELECTED FINANCIAL DATA................................. 88
KRON-TV AND BAYTV MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................... 89
Introduction............................................................ 89
KRON-TV................................................................. 89
BayTV................................................................... 89
Results of Operations................................................... 90
Liquidity and Capital Resources......................................... 92
Impact of Year 2000..................................................... 92
THE TELEVISION BROADCASTING INDUSTRY...................................... 93
YOUNG'S BUSINESS.......................................................... 95
General................................................................. 95
Operating Strategy...................................................... 95
Acquisition Strategy.................................................... 97
The Stations............................................................ 97
Network Affiliation Agreements.......................................... 104
Competition............................................................. 105
Employees............................................................... 107
Properties.............................................................. 107
</TABLE>
ii
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CHRONICLE PUBLISHING'S BUSINESS............................................ 110
General.................................................................. 110
KRON-TV.................................................................. 110
BayTV.................................................................... 112
Employees................................................................ 113
Properties............................................................... 113
FEDERAL REGULATION OF TELEVISION BROADCASTING.............................. 114
Existing Regulation...................................................... 114
License Renewals......................................................... 114
Multiple Ownership Restrictions.......................................... 114
Local Radio Ownership.................................................... 115
Local Television Ownership............................................... 115
National Television Ownership Cap........................................ 115
Radio-Television Cross Ownership......................................... 115
Attribution of Ownership................................................. 116
Alien Ownership Restrictions............................................. 116
Proposed Legislation and Regulation...................................... 116
The 1992 Cable Act....................................................... 116
Digital Television Service............................................... 117
Non-FCC Regulation....................................................... 118
YOUNG'S DIRECTORS AND EXECUTIVE OFFICERS................................... 119
EXECUTIVE COMPENSATION..................................................... 121
Report of the Compensation Committee..................................... 121
Performance Graph........................................................ 123
Summary Compensation Table............................................... 124
Fiscal Year-End Option Values............................................ 124
Directors Compensation................................................... 125
Employment Agreements.................................................... 125
401(k) Plan.............................................................. 125
Compensation Committee Interlocks and Insider Participation.............. 126
CERTAIN TRANSACTIONS....................................................... 126
YOUNG'S PRINCIPAL STOCKHOLDERS............................................. 127
DESCRIPTION OF YOUNG'S CAPITAL STOCK....................................... 129
Common Stock............................................................. 129
Preferred Stock.......................................................... 130
Foreign Ownership........................................................ 130
Transfer Agent And Registrar............................................. 130
CHRONICLE PUBLISHING'S PRINCIPAL STOCKHOLDERS.............................. 131
DESCRIPTION OF CHRONICLE PUBLISHING'S CAPITAL STOCK........................ 133
COMPARISON OF STOCKHOLDER RIGHTS UNDER DELAWARE AND NEVADA LAW............. 134
Size and Classification of the Board of Directors........................ 134
Duties of Directors...................................................... 134
Removal of Directors..................................................... 134
Newly Created Directorships and Vacancies................................ 134
Limitation on Directors' Liability....................................... 135
Indemnification of Directors and Officers................................ 135
Loans to Directors....................................................... 136
Dividends................................................................ 136
Action by Stockholders through Written Consent........................... 136
</TABLE>
iii
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Special Meetings of Stockholders....................................... 136
Cumulative Voting...................................................... 136
Necessary Vote to Effect Merger (Not Involving Interested
Stockholder).......................................................... 136
Business Combinations Involving Interested Stockholders................ 137
Appraisal Rights; Dissenters' Rights................................... 137
Redeemable Shares...................................................... 137
Preemptive Rights...................................................... 137
Amendment of Articles of Incorporation and Bylaws...................... 137
Inspection of Books and Records........................................ 138
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934..... 139
STOCKHOLDER PROPOSALS FOR YOUNG'S 2001 ANNUAL MEETING.................... 139
LEGAL MATTERS............................................................ 139
EXPERTS.................................................................. 139
WHERE YOU CAN FIND MORE INFORMATION...................................... 139
INDEX TO FINANCIAL STATEMENTS ........................................... F-1
ANNEXES.................................................................. A-1
A. AGREEMENT AND PLAN OF MERGER
B. OPINION OF LAZARD FRERES & CO. LLC
C. OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
D. QUALIFICATIONS OF AND PROCEDURES FOR DISSENTING STOCKHOLDERS --NEVADA
REVISED STATUTES SEC. 92A
</TABLE>
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q:Why are the two companies proposing to merge?
A. Young believes that the merger, which will enable it to acquire KRON-TV, the
top rated television station in San Francisco, and a majority ownership
interest in BayTV, its companion cable television channel, will give its
advertisers access to the fifth largest broadcast market in the United
States, where the effective buying income per household is the second
highest in the nation. Taking into account Young's ownership of KCAL-TV, the
largest independent television station in Los Angeles, the merger will
enhance Young's presence in California. Further, the merger is consistent
with Young's acquisition strategy of targeting stations for which it has
identified significant potential expense reductions that can be implemented
upon acquisition, with the goal of improving the target station's broadcast
cash flow.
Chronicle Publishing believes that the merger is consistent with its
decision, made in June 1999, to dispose of all of its businesses in a
complete liquidation of the company, and that after evaluating alternative
acquisition proposals, the merger consideration represents the highest
offer that Chronicle Publishing's stockholders are likely to receive from
the sale of KRON-TV and BayTV.
Q:When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. We
expect to complete the merger by April 28, 2000. If necessary or desirable,
Young and Chronicle Publishing may agree to a later date.
Q:What do I need to do now?
A: We urge you to read this joint proxy statement/prospectus carefully,
including its annexes, and to consider how the merger affects you as a
stockholder. You also may want to review the documents referenced under
"Where You Can Find More Information" on page 139.
Q:How do I vote?
A: You should simply indicate on your proxy card how you want to vote, and sign
and mail your proxy card in the enclosed return envelope as soon as possible
so that your shares may be represented at your respective special meeting.
If you sign and send in your proxy and do not indicate how you want to vote,
your proxy will be counted as a vote for the merger agreement, if you are a
Chronicle Publishing stockholder, or for the issuance of shares of Young's
Class A common stock in connection with the merger, if you are a Young
stockholder, except if your Young shares are held in a brokerage account. If
you fail to return your proxy card or to vote in person at your respective
special meeting, the effect will be a vote against the merger agreement, if
you are a Chronicle Publishing stockholder, or against the issuance of
shares of Young's Class A common stock in connection with the merger, if you
are a Young stockholder.
Q:If my shares are held in a brokerage account, will my broker vote my shares
for me?
A: If you are a Young stockholder, your broker will not vote your Young shares
for you unless you provide instructions on how to vote. It is important
therefore that you follow the directions provided by your broker regarding
how to instruct your broker to vote your Young shares.
Q:May I change my vote after I have mailed my signed proxy card?
A: Yes. You may change your vote at any time before your proxy is voted at your
respective special meeting. You may do this in one of three ways. First, you
may send a written notice stating that you would like to revoke your proxy.
Second, you may complete and submit a new proxy card. If you choose either
of these two methods, you must submit your notice of revocation or your new
proxy card to Young at the address on page 26 if you are a Young
stockholder, or to Chronicle Publishing at the address on page 28 if you
1
<PAGE>
are a Chronicle Publishing stockholder. Third, if you are a Young
stockholder, you may attend your respective special meeting and vote in
person. Simply attending your respective special meeting, without voting in
person, will not revoke your proxy. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to change
your vote or to vote at your respective special meeting.
Q:Should I send in my stock certificates now?
A: No. If you are a Chronicle Publishing stockholder, you will receive written
instructions for exchanging your stock certificates for the consideration to
be paid in connection with the merger. Young stockholders will not exchange
their stock certificates.
Q:What effect will the merger have on my Chronicle Publishing shares?
A: Subject to adjustment, each share of Chronicle Publishing's common stock
will be exchanged for $171.96 in cash and not less than 0.84177 nor more
than 1.02878 shares of Young's Class A common stock. Subject to the
preceding limits, the exact number of shares of Young's Class A common stock
to be issued in the merger will be determined by dividing 45.65741 by the
average of the closing sale price of Young's Class A common stock, as
reported on The Nasdaq Stock Market, for the 20 consecutive trading days
ending three trading days prior to preceding the closing date of the merger.
The per share cash consideration described above is subject to reduction
based upon certain expenses incurred by Chronicle Publishing. The allocation
(but not the combined aggregate) of the per share cash consideration and the
per share stock consideration described above is also subject to adjustment
in the event that Young raises proceeds through the sale of equity prior to
the effective time of the merger, in which event the per share cash
consideration will be increased and the per share stock consideration will
be reduced.
For example, if the average of the closing sale price of Young's Class A
common stock is $48.00, Chronicle Publishing stockholders will receive
approximately 0.95 shares of Young's Class A common stock for each share of
Chronicle Publishing stock.
Q:How will Chronicle Publishing stockholders know what the actual exchange
ratio is?
A: We will issue a press release prior to the closing of the merger that will
disclose the exchange ratio. The exchange ratio is the fraction of a share
of Young's Class A common stock that you will receive in the merger for each
share of Chronicle Publishing common stock that you own.
Q: What are the U.S. federal income tax consequences of the merger to Chronicle
Publishing stockholders?
A: If you are a Chronicle Publishing stockholder, you will recognize gain or
loss as a result of the exchange of Chronicle Publishing's common stock for
cash and shares of Young's Class A common stock in connection with the
merger. For a more detailed discussion, you should read "Material United
States Federal Income Tax Consequences" at page 44.
Q:Can I sell my Young Class A common stock received in the merger immediately?
A: Yes, except for those Chronicle Publishing stockholders who may be
considered affiliates of Chronicle Publishing. Affiliates are stockholders
who control, are controlled by, or are under common control with, Chronicle
Publishing. Young has agreed to register for resale the shares of Young's
Class A common stock acquired in the merger by any affiliates of Chronicle
Publishing in order to enable those affiliates of Chronicle Publishing to
freely sell or otherwise transfer their shares of Young's Class A common
stock within a short time following completion of the merger. If you believe
that you may be an affiliate of Chronicle Publishing, you should consult
with your counsel regarding any restrictions you may have with respect to
your resale of the shares of Young's Class A common stock you receive in the
merger.
2
<PAGE>
Q:Who Can Help Answer My Questions?
A: If you are a Young stockholder and would like additional copies of the joint
proxy statement/prospectus or if you have questions about the merger,
including how to complete and return your proxy card, you should contact:
Young Broadcasting Inc.
599 Lexington Avenue
New York, New York 10022
Attention: James Morgan
Phone Number: (212) 754-7070
If you are a Chronicle Publishing stockholder and would like additional
copies of the joint proxy statement/prospectus or if you have questions
about the merger, including how to complete and return your proxy card, you
should contact:
The Chronicle Publishing Company
901 Mission Street
San Francisco, California 94103
Attention: W. Ronald Ingram
Phone Number: (415) 777-7179
3
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See "Where You Can Find More Information" on page
141. We have included page references parenthetically to direct you to a more
complete description of the topics in this summary.
The Companies (Pages 95 and 111)
Young Broadcasting Inc.
599 Lexington Avenue
New York, New York 10022
(212) 754-7070
Young owns and operates eleven television stations in geographically diverse
markets and a national television sales representation firm, Adam Young Inc.
Six of the stations are affiliated with American Broadcasting Companies, Inc.
("ABC"), three are affiliated with CBS Inc., one is affiliated with National
Broadcasting Company, Inc. ("NBC"), and one is an independent station. Each of
Young's stations is owned and operated by a direct or indirect subsidiary.
Young is presently the eighth largest ABC network affiliate group in terms of
households reached. Young's sole independent television station, KCAL, Los
Angeles, California, is the only independent VHF television station operating
in the Los Angeles market, which is ranked as the second-largest television
market in terms of population and the largest in terms of estimated television
revenue.
The Chronicle Publishing Company
901 Mission Street
San Francisco, California 94103
(415) 777-7179
Chronicle Publishing currently owns and operates KRON-TV, a television
station which is currently affiliated with NBC, and a 51% interest in BayTV, a
24-hour local news and information channel, both in the San Francisco Bay Area;
WOWT(TV), a television station in Omaha, Nebraska; KAKE-TV, KUPK-TV and
KLBY(TV), television stations in Kansas; and the San Francisco Chronicle, a
daily newspaper in San Francisco. On February 14, 2000, NBC announced that it
had entered into an affiliation agreement with Granite Broadcasting Corporation
and that the NBC affiliation agreement with KRON-TV would not be renewed after
its expiration on December 31, 2001. Until early 2000, Chronicle Publishing
also owned and operated the Worcester Telegram & Gazette, a daily newspaper in
Worcester, Massachusetts; The Pantagraph, a daily newspaper in central
Illinois; MBI Publishing Company, a book and calendar publishing company in
Wisconsin; and Chronicle Books, a specialty book publishing business in San
Francisco. In June 1999, Chronicle Publishing's board determined to commence
the sale of all of Chronicle Publishing's assets. From August 1999 through
November 1999, Chronicle Publishing entered into definitive agreements with
various buyers for the sale of each of its businesses, including WOWT(TV),
KAKE-TV, KUPK-TV, KLBY(TV) and the San Francisco Chronicle, which have not yet
been sold. It is currently expected that at the time of the closing of the
merger of Chronicle Publishing with Young, KRON-TV and BayTV will be the only
remaining businesses owned by Chronicle Publishing.
The Merger (Pages 29 and 49)
The merger agreement is attached to this joint proxy statement/prospectus as
annex A. We encourage you to read the merger agreement as it is the legal
document that governs the merger.
4
<PAGE>
What Holders of Chronicle Publishing's Common Stock Will Receive in the
Merger (Page 49)
Upon consummation of the merger, holders of Chronicle Publishing's common
stock will receive $171.96 in cash (subject to adjustment) and not less than
0.84177 nor more than 1.02878 shares of Young's Class A common stock (subject
to adjustment) in exchange for each share of Chronicle Publishing's common
stock. The exact number of shares of Young's Class A common stock issuable in
exchange for each outstanding share of Chronicle Publishing's common stock will
be calculated by a formula linked to the average closing sale price of Young's
Class A common stock, as reported on The Nasdaq Stock Market, for the 20
consecutive trading days ending three trading days prior to the closing date of
the merger.
The per share cash consideration described above is subject to reduction
based upon certain expenses incurred by Chronicle Publishing. The allocation
(but not the combined aggregate) of the per share cash consideration and the
per share stock consideration described above is also subject to adjustment in
the event that Young raises cash through the sale of equity prior to the
effective time of the merger, in which event the per share cash consideration
will be increased and the per share stock consideration will be reduced.
For example:
. if the average closing sale price of Young's Class A common stock is
greater than $54.24, you will receive 0.84177 shares of Young's Class A
common stock for each share of Chronicle Publishing's common stock you
hold;
. if the average closing sale price of Young's Class A common stock is less
than $44.38, you will receive 1.02878 shares of Young's Class A common
stock for each share of Chronicle Publishing's common stock you hold; and
. if the average closing sale price of Young's Class A common stock is
between $44.38 and $54.24, you will receive between 0.84177 and 1.02878
shares of Young's Class A common stock for each share of Chronicle
Publishing's common stock you hold. If the average closing price of
Young's Class A common stock is within the foregoing range, the exact
number of shares of Young's Class A common stock that you receive will be
determined by dividing 45.65741 by the average closing sale price of
Young's Class A common stock, as reported on the Nasdaq National Market
System, for the 20 consecutive trading days ending three trading days
prior to the closing date of the merger.
Under this formula:
If the merger had taken place on March 23, 2000, which is the last trading
day prior to the date of this joint proxy statement/prospectus, the exchange
ratio would have been 1.02878. This example is provided to you for explanatory
purposes as the actual calculation cannot be provided in advance of your vote.
The table below indicates the corresponding exchange ratio at various
assumed average closing sale prices of Young's Class A common stock:
<TABLE>
<CAPTION>
Average Closing Sale
Price of Young's
Class A Common Stock Exchange Ratio
-------------------- --------------
<S> <C> <C>
$20.00 1.02878
$30.00 1.02878
$40.00 1.02878
$44.38 1.02878
$50.00 0.91315
$54.24 0.84177
$60.00 0.84177
</TABLE>
5
<PAGE>
If you are a Chronicle Publishing stockholder, all of your shares of
Chronicle Publishing's common stock will be aggregated for purposes of
calculating the number of shares of Young's Class A common stock to be issued
in exchange therefor in connection with the merger. You will not receive
fractional shares of Young's Class A common stock. Instead, you will be paid
cash in lieu of fractional shares.
Potential Adjustment to Cash and Stock Consideration
The per share cash consideration described above is subject to reduction
based upon certain expenses incurred by Chronicle Publishing. The allocation
(but not the combined aggregate) of the per share cash consideration and the
per share stock consideration described above is also subject to adjustment in
the event that Young raises proceeds through the sale of equity prior to the
effective time of the merger, in which event the per share cash consideration
will be increased and the per share stock consideration will be reduced.
Votes Required (Pages 25 and 27)
To approve the issuance of Young's Class A common stock in connection with
the merger, the holders of a majority of the voting power of the outstanding
shares of Young's Class A common stock and Class B common stock, voting
together as one class, must vote in favor of the issuance of Young's Class A
common stock in connection with the merger.
To approve the amendment to Young's certificate of incorporation which would
eliminate the required minimum percentage of Young's outstanding common stock
to be held by the Young management group, the holders of a majority of the
voting power of the outstanding shares of Young's Class A common stock and
Class B common stock, voting together as one class, must vote in favor of the
amendment.
To approve the amendment to Young's 1995 Stock Option Plan, the holders of a
majority of the voting power of the shares of Young's Class A common stock and
Class B common stock, voting together as one class and voting in person or by
proxy at the Young special meeting, must vote in favor of the amendment.
Election of directors of Young requires the affirmative vote of the holders
of a plurality of the voting power of the shares of Young's Class A common
stock and Class B common stock, voting together as one class, that are present
in person or by proxy at the Young special meeting.
To approve the merger agreement, the holders of a majority of the
outstanding shares of Chronicle Publishing's common stock must vote in favor of
approving the merger agreement.
Young's Class A common stock represents approximately 32.8%, and Young's
Class B common stock represents approximately 67.2%, respectively, of the
voting power of Young's outstanding capital stock. As of March 20, 2000, the
record date for the Young special meeting, Adam Young and Vincent Young
together beneficially possessed approximately 57% of the aggregate votes that
may be cast at the Young special meeting. Accordingly, the affirmative vote of
Adam Young and Vincent Young alone is sufficient to adopt each of the proposals
to be submitted to Young's stockholders at the Young special meeting. Pursuant
to stockholder support agreements entered into with Chronicle Publishing,
certain stockholders of Young (including Adam Young and Vincent Young) who, as
of the record date, control approximately 51% of the votes entitled to be cast
at the Young special meeting, have agreed to vote all of their shares in favor
of the issuance of shares of Young's common stock in the merger. For a
description of these stockholder support agreements, see page 66. In addition,
Adam Young and Vincent Young have advised Young that they will vote all of
their shares in favor of all of the other proposals to be submitted to Young's
stockholders at the Young special meeting.
6
<PAGE>
Certain holders of Chronicle Publishing's common stock, who collectively
beneficially own approximately 62.7% of the outstanding shares of Chronicle
Publishing's common stock as of March 20, 2000, have already agreed under
stockholder support agreements to vote to approve the merger agreement. Young
has agreed to register for resale under the Securities Act of 1933 those shares
of Young's Class A common stock to be issued in connection with the merger to
some of the stockholders of Chronicle Publishing who are parties to the
stockholder support agreements. For a description of these stockholder support
agreements, see page 66.
The directors and executive officers of Chronicle Publishing, as a group,
beneficially own approximately 11.8% of the outstanding shares of Chronicle
Publishing's common stock. Chronicle Publishing currently expects that all of
these holders will vote in favor of the merger agreement. The directors and
executive officers of Young and their affiliates, as a group, beneficially own
approximately 66% of the voting power of Young's outstanding capital stock.
Young currently expects that all of these holders will vote in favor of the
issuance of Young's Class A common stock in connection with the merger.
Our Recommendations to Stockholders (Pages 24 and 27)
To Young's Stockholders:
The Young board of directors voted unanimously to approve the merger
agreement and the transactions contemplated thereby, including the issuance of
Young's Class A common stock in connection with the merger. The Young board
believes that the merger is in your best interests and recommends that you vote
FOR the proposal to approve the issuance of Young's Class A common stock in
connection with the merger.
The Young board voted unanimously to approve the amendment to Young's
certificate of incorporation and to approve the amendment to Young's 1995 Stock
Option Plan. The Young board believes that these amendments are in your best
interests and recommends that you vote FOR the proposal to amend Young's
certificate of incorporation and FOR the proposal to amend Young's 1995 Stock
Option Plan.
The Young board also recommends that you vote FOR the election of the
nominees to serve as directors of Young.
To Chronicle Publishing's Stockholders:
The Chronicle Publishing board of directors voted unanimously to approve the
merger agreement and the transactions contemplated thereby. The Chronicle
Publishing board believes that the merger is in your best interests and
recommends that you vote FOR the proposal to approve the merger agreement.
Ownership of Young Following the Merger
Based on the number of shares of Young's common stock outstanding on March
20, 2000:
. assuming an exchange ratio of 0.84177, Chronicle Publishing's
stockholders will receive approximately 3,181,890 shares of Young's Class
A common stock in the merger, which will constitute approximately 8.5% of
the voting power of Young's outstanding capital stock following the
merger.
. assuming an exchange ratio of 1.02878, Chronicle Publishing's
stockholders will receive approximately 3,888,788 shares of Young's Class
A common stock in the merger, which will constitute approximately 10.2%
of the voting power of Young's outstanding capital stock following the
merger.
The foregoing assumes that Young does not raise additional cash proceeds prior
to the merger through the sale of equity (which would increase the per share
cash consideration and decrease the per share stock consideration in the
merger).
7
<PAGE>
Conditions to the Merger (Page 60)
The completion of the merger depends upon the satisfaction of a number of
conditions, including, among other things:
. the approval by the stockholders of Young of the issuance of Young's
Class A common stock in connection with the merger;
. the approval of the merger agreement by the stockholders of Chronicle
Publishing;
. the expiration or termination of all waiting periods applicable to the
merger under the Hart-Scott-Rodino Antitrust Improvement Act of 1976;
. the consent of the FCC to the transfer of broadcasting licenses from
Chronicle Publishing to Young and the entry of a final order with respect
to such consent;
. the sale by Chronicle Publishing of all of its businesses other than
KRON-TV and BayTV; and
. the absence of any law or injunction issued by a court making the merger
illegal or otherwise prohibiting us from closing the merger.
Further, the obligation of Chronicle Publishing to complete the merger is
also conditioned on, among other things:
. the representations and warranties of Young in the merger agreement being
true and correct in all material respects as of the closing of the
merger, except for those representations and warranties that address
matters only as of a particular date, which must be true and correct only
as of such particular date;
. the performance and compliance by Young, in all material respects, of and
with all of Young's obligations under the merger agreement which are to
be performed or complied with prior to the closing of the merger; and
. the absence of any event or occurrence which has had or would reasonably
be expected to have a material adverse effect on the business, results of
operations or condition of Young.
Further, the obligation of Young to complete the merger is also conditioned
on, among other things:
. the representations and warranties of Chronicle Publishing in the merger
agreement being true and correct as of the closing of the merger, except
for those representations and warranties that address matters only as of
a particular date, which must be true and correct only as of such
particular date;
. the performance or compliance by Chronicle Publishing of and with all of
Chronicle Publishing's obligations under the merger agreement which are
to be performed or complied with prior to the closing of the merger,
except where the failure to be so true and correct, and the failure to so
perform and comply, would not result in certain damages to Young which in
the aggregate exceed $10 million, and except for changes specifically
permitted or required by the merger agreement;
. the absence of any event or occurrence which has had or would reasonably
be expected to have a material adverse effect on the business, results of
operations or condition of Chronicle Publishing;
. the continued effectiveness of Chronicle Publishing's election to be
taxed under Subchapter S of the Internal Revenue Code; and
. the holders of no more than 5% of Chronicle Publishing's outstanding
common stock having exercised and not withdrawn any appraisal rights
under the Nevada General Corporation Law.
8
<PAGE>
Conversion of Merger to Asset Purchase (Page 58)
The merger agreement contemplates that, prior to the closing of the merger,
Chronicle Publishing will have effected the sale of its businesses other than
KRON-TV and Bay-TV, and distributed the net proceeds of such sales, and certain
other assets specified in the merger agreement, to the stockholders of
Chronicle Publishing.
If all conditions precedent to the merger have been satisfied but for the
sale of Chronicle Publishing's other businesses, Chronicle Publishing, by
written notice to Young, may elect to have the terms and conditions of the
merger agreement superceded and replaced by an asset purchase agreement
containing terms which are substantially similar to the merger agreement. The
terms of the asset purchase agreement would provide that Chronicle Publishing
would sell, and a subsidiary of Young ("merger sub") would purchase, the assets
of Chronicle Publishing used in the business of KRON-TV and Bay-TV, and assume
specified liabilities of Chronicle Publishing relating thereto, for the same
cash and stock consideration contemplated by the merger agreement.
Young also will have the option to elect to have the terms and conditions of
the merger agreement superceded and replaced by an asset purchase agreement
containing terms which are substantially similar to the merger agreement if all
conditions precedent to the merger, other than the sale of Chronicle
Publishing's businesses other than KRON-TV and Bay TV, have been satisfied and
either:
. after April 30, 2000, Chronicle Publishing does not have a reasonable
expectation that it will complete the sale of its other businesses prior
to August 31, 2000; or
. the merger has not been completed by June 30, 2000 (or, if applicable, by
the later date for giving of notice of termination established pursuant
to the merger agreement). Either Chronicle Publishing or Young may elect
to extend the date on which notice of termination may be given from June
30, 2000 to August 31, 2000 if the consent of the FCC approving the
transfer of broadcast licenses has not become a final order by June 30,
2000 or if the registration statement of which this joint proxy
statement/prospectus forms a part is not effective by June 30, 2000,
provided that neither Chronicle Publishing nor Young may so extend the
applicable termination date if either of the foregoing conditions has
failed to be satisfied due to a breach of the merger agreement by
Chronicle Publishing or Young, as the case may be. Chronicle Publishing
may also elect to extend the applicable termination date to August 31,
2000 if Chronicle Publishing's sale of its assets other than KRON-TV and
BayTV has not taken place by June 30, 2000 and Chronicle Publishing has a
reasonable expectation that it will effect those sales by August 30,
2000. In the latter circumstance, Chronicle Publishing must pay to Young
a fee of $6,666.00 for each day that the termination date is extended
past June 30, 2000.
In the event all of the conditions precedent to the respective obligations
of Young and Chronicle Publishing to effect the merger have been satisfied,
other than the condition to the obligations of Young that Chronicle
Publishing's Subchapter S election remain in effect, then Young may elect to
have the terms and conditions of the merger agreement superceded and replaced
by an asset purchase agreement containing substantially similar terms.
Chronicle Publishing may negate Young's election to convert the merger
agreement to an asset purchase agreement based upon the termination of
Chronicle Publishing's Subchapter S election if Chronicle Publishing pays Young
$25 million in cash within five business days of its receipt of written notice
of Young's election to convert the transaction to an asset purchase. In the
event of such payment, both the merger agreement and the asset purchase
agreement will be terminated.
In the event either Young or Chronicle Publishing elects to exercise its
option to supercede and replace the merger agreement with an asset purchase
agreement containing substantially similar terms, as described above, the
merger agreement will be deemed terminated and replaced by the asset purchase
agreement. Young and
9
<PAGE>
Chronicle Publishing have each agreed to use their commercially reasonable
efforts to close the asset purchase within ten days of written notice to
convert the transaction to an asset purchase, or as soon as possible
thereafter.
Opinions of Financial Advisors (Pages 34 and 38)
In deciding to approve the merger agreement, our boards of directors
received opinions from our respective financial advisors as to the fairness of
the merger consideration from a financial point of view. Young received an
opinion from its financial advisor, Lazard Freres & Co. LLC, and Chronicle
Publishing received an opinion from its financial advisor, Donaldson, Lufkin &
Jenrette Securities Corporation. The full text of these opinions are attached
as annexes B and C to this joint proxy statement/prospectus and should be read
carefully in their entirety. The opinions of Lazard and Donaldson, Lufkin &
Jenrette are directed to the board of directors of Young and Chronicle
Publishing, respectively, and do not constitute a recommendation to any
stockholder with respect to matters relating to the merger.
Merger Financing
At or prior to the time of the merger, Young expects to enter into a revised
$800 million senior credit facility, a portion of which will be used to finance
the cash component of the merger consideration and to pay the fees and expenses
associated with the merger. The revised senior credit facility will also be
used to provide liquidity for strategic acquisitions and working capital
requirements following the effective time of the merger.
In addition, if Young raises cash proceeds prior to the closing of the
merger through the sale of equity, Young will be required to reduce the
aggregate stock consideration payable in connection with the merger and
increase the cash consideration payable in connection with the merger by:
. 20% of the aggregate net proceeds raised by Young through such equity
sales, up to $100 million;
. 40% of the aggregate net proceeds raised by Young through such equity
sales in excess of $100 million and up to $200 million; and
. 100% of the aggregate net proceeds raised by Young through such equity
sales in excess of $200 million.
Accounting Treatment (Page 43)
Young expects to account for the merger as a "purchase" under generally
accepted accounting principles.
Material Federal Income Tax Consequences (Page 44)
Chronicle Publishing stockholders
The merger will be a taxable transaction for Chronicle Publishing and its
stockholders. Chronicle Publishing stockholders will recognize gain or loss as
a result of the merger. See "Material United States Federal Income Tax
Consequences" at page 44 for a more detailed discussion of the material federal
income tax consequences of the merger to the Chronicle Publishing stockholders.
Young stockholders
There will be no United States federal income tax consequences to the
holders of Young common stock as a result of the merger.
10
<PAGE>
Tax matters are very complicated, and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your tax
advisor for a full understanding of the tax consequences of the merger to you.
Certain Regulatory Matters (Page 43)
To complete the merger, we must make filings and receive authorizations from
various federal and state governmental agencies in the United States. These
filings relate to the transfer of control of the KRON-TV license, antitrust
matters and other regulations.
It is possible that some of these governmental authorities may impose
conditions for granting approval. We cannot predict whether we will obtain all
the required regulatory approvals within the time frame contemplated by the
merger agreement or without burdensome conditions.
Appraisal Rights (Page 46)
Under the Nevada Revised Statutes, the holders of Chronicle Publishing's
common stock have the right to seek an appraisal of, and to be paid the fair
value of, their shares. Section 92A.300 through 92A.500 of the Nevada Revised
Statutes, which governs the rights of stockholders who wish to seek appraisal
of their shares, is summarized in this joint proxy statement/prospectus under
the heading "The Merger--Appraisal Rights" on pages 46 through 48, and is
attached to this joint proxy statement/prospectus as annex D.
11
<PAGE>
Summary Historical and Pro Forma Financial Data
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. This information is only a summary and you
should read it in conjunction with the historical and unaudited pro forma
combined financial statements and related notes that are included in this joint
proxy statement/prospectus.
Summary Historical Financial Data of Young
<TABLE>
<CAPTION>
Pro Forma
Year Ended December 31, (unaudited)
---------------------------------------------------------------- -----------
1995 1996 1997 1998 1999 1999
----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues(1)......... $ 122,530 $ 154,343 $ 263,535 $ 277,052 $ 280,659 $ 410,809
Operating expenses,
including selling,
general and
administrative
expenses............... 51,614 64,689 106,708 116,712 114,974 174,928
Amortization of program
license rights......... 6,418 11,034 38,279 33,014 47,690 60,484
Depreciation and
amortization........... 24,572 30,946 46,941 49,472 47,983 78,618
Corporate overhead...... 3,348 4,344 7,150 7,860 8,227 8,227
Non-cash compensation
paid in Common
stock(2)............... 1,167 848 967 1,146 19,102 19,102
Merger related costs.... -- -- -- 1,444 -- --
----------- ----------- ----------- ----------- ----------- -----------
Operating income........ 35,411 42,482 63,490 67,404 42,683 69,450
----------- ----------- ----------- ----------- ----------- -----------
Interest expense........ (32,644) (42,838) (64,103) (62,617) (62,981) (122,301)
Minority interest in
loss of BayTV.......... -- -- -- -- -- 450
Other (expenses) income,
net.................... (233) 1,261 (493) (788) (1,244) (1,870)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) before
extraordinary item..... 2,534 905 (1,106) 3,999 (21,542) (54,271)
----------- ----------- ----------- ----------- ----------- -----------
Extraordinary loss on
extinguishment of
debt................... (9,125) -- (9,243) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net (loss) income....... $ (6,591) $ 905 $ (10,349) $ 3,999 $ (21,542) $ (54,271)
=========== =========== =========== =========== =========== ===========
Basic net income (loss)
per common share before
extraordinary item..... $ 0.23 $ 0.08 $ (0.08) $ 0.28 $ (1.59) $ (3.11)
Basic net income (loss)
per common share....... $ (0.61) $ 0.08 $ (0.74) $ 0.28 $ (1.59) $ (3.11)
Basic shares used in
earnings per share
calculation............ 10,838,972 11,379,298 13,989,969 14,147,522 13,588,108 17,476,896
Other Financial Data:
Cash flow provided by
operating activities... $ 22,231 $ 24,707 $ 41,025 $ 54,292 $ 36,398 --
Cash flow used in
investing activities... (5,800) (496,841) (11,757) (34,154) (7,887) --
Cash flow (used in)
provided by financing
activities............. (19,310) 475,713 (34,621) (21,127) (26,222) --
Payments for program
license liabilities 6,747 10,385 38,610 33,337 46,678 59,726
Broadcast cash flow(3).. 64,169 79,269 118,217 127,003 119,007 176,155
Broadcast cash flow
margin................. 52.4 % 51.4% 44.9% 45.8% 42.4% 42.9%
Adjusted broadcast cash
flow(4)................ -- -- -- -- -- 192,941
Operating cash flow(5).. 60,821 74,925 111,067 119,143 110,780 167,928
Adjusted operating cash
flow(6)................ -- -- -- -- -- 183,941
Capital expenditures.... $ 4,484 $ 4,992 $ 9,034 $ 7,524 $ 9,360 $ 15,121
Balance Sheet Data (as
of end of period):
Total assets............ $ 296,098 $ 893,151 $ 845,966 $ 825,668 $ 818,670 $ 1,618,973
Long-term debt
(including current
portion)............... 297,993 678,927 657,672 658,224 650,510 1,332,010
Stockholders' (deficit)
equity................. $ (25,544) $ 80,504 $ 59,846 $ 46,865 $ 30,659 $ 130,795
</TABLE>
- --------
(1) Net revenues are total revenues net of agency and national representation
commissions.
(2) Represents non-cash charges for the issuance to key employees of shares of
Class A common stock and in 1995 of shares of Class A common stock and
below-market options to purchase shares of Class A common stock. In 1999,
approximately $18.3 million relates to the extension of the expiration date
of stock options granted in 1994 and 1995.
12
<PAGE>
(3) "Broadcast cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), non-cash compensation, merger
related costs and corporate overhead, less payments for program license
liabilities. Other television broadcasting companies may measure broadcast
cash flow in a different manner. Young has included broadcast cash flow
data because such data are commonly used as a measure of performance for
broadcast companies and are also used by investors to measure a company's
ability to service debt. Broadcast cash flow is not, and should not be used
as, an indicator or alternative to operating income, net income or cash
flow as reflected in the Young consolidated financial statements, is not
intended to represent funds available for debt service, dividends,
reimbursement or other discretionary uses, is not a measure of financial
performance under generally accepted accounting principles and should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
(4) Represents pro forma broadcast cash flow after adjustments for net
annualized expense reductions for labor, benefits, programming, national
representation fees, advertising and promotion and other operating costs.
The following table sets forth a reconciliation of pro forma broadcast cash
flow to adjusted broadcast cash flow:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1999
----------------------
(dollars in thousands)
<S> <C>
Broadcast cash flow (pro forma).................... $176,155
Labor & Benefits................................. 7,352
Programming costs................................ 3,989
National representation fees..................... 1,968
Advertising & Promotion.......................... 1,951
Other operating costs............................ 1,526
--------
Adjusted broadcast cash flow....................... $192,941
========
</TABLE>
(5) "Operating cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), non-cash compensation and merger
related costs less payments for program license liabilities. Other
television broadcasting companies may measure operating cash flow in a
different manner. Young has included operating cash flow data because such
data are used by investors to measure a company's ability to service debt
and are used in calculating the amount of additional indebtedness that
Young may incur in the future under the Young indentures. Operating cash
flow does not purport to represent cash provided by operating activities as
reflected in the Young consolidated financial statements, is not a measure
of financial performance under generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(6) Represents pro forma operating cash flow after adjustments for net
annualized expense reductions for labor, benefits, programming, national
representation fees, advertising and promotion and other operating costs.
13
<PAGE>
The following table sets forth a reconciliation of pro forma operating cash
flow to adjusted operating cash flow:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1999
----------------------
(dollars in thousands)
<S> <C>
Operating cash flow (pro forma).................... $167,928
Labor & Benefits................................. 7,352
Programming costs................................ 3,989
National representation fees..................... 1,968
Advertising & Promotion.......................... 1,951
Other operating costs............................ 753
--------
Adjusted operating cash flow....................... $183,941
========
</TABLE>
14
<PAGE>
Summary Historical Financial Data of KRON-TV and BayTV
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1995 1996 1997 1998 1999
----------- ---------- --------- --------- ---------
(unaudited) (unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues (1)........ $ 104,557 $ 116,637 $ 117,013 $ 125,301 $ 130,150
Operating expenses,
including selling,
general and
administrative
expenses............... 47,555 51,588 53,030 57,971 59,953
Amortization of program
license rights......... 12,375 12,806 13,121 13,866 12,794
Depreciation and
amortization........... 2,698 2,861 3,521 4,325 5,004
--------- --------- --------- --------- ---------
Operating income........ 41,929 49,382 47,341 49,139 52,399
Interest expense........ -- -- -- -- --
Minority interest....... -- 614 550 873 450
Other (expenses) income,
net.................... (538) (668) (504) (565) (626)
--------- --------- --------- --------- ---------
Net income.............. $ 41,391 $ 49,328 $ 47,387 $ 49,447 $ 52,223
========= ========= ========= ========= =========
Other Financial Data:
Cash flow provided by
operating activities $ 42,151 $ 53,743 $ 46,155 $ 55,428 $ 50,623
Payments for program
license liabilities.... $ 11,979 $ 12,997 $ 13,646 $ 13,123 $ 13,048
Broadcast cash flow
(2).................... $ 45,023 $ 52,052 $ 50,337 $ 54,207 $ 57,149
Broadcast cash flow
margin................. 43.1% 44.6% 43.0% 43.3% 43.9%
Operating cash flow
(3).................... $ 45,023 $ 52,052 $ 50,337 $ 54,207 $ 57,149
Capital expenditures.... $ 2,987 $ 2,742 $ 5,580 $ 9,654 $ 5,244
Balance Sheet Data (as
of end of period):
Total assets............ $ 44,234 $ 42,998 $ 59,175 $ 64,444 $ 64,145
Long-term debt
(including current
portion)............... -- -- -- -- --
Divisional equity....... $ 31,931 $ 29,947 $ 36,095 $ 39,627 $ 45,478
</TABLE>
- --------
(1) Net revenues are total revenues net of agency and national representation
commissions.
(2) "Broadcast cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), less payments for program license
liabilities. Other television broadcasting companies may measure broadcast
cash flow in a different manner. KRON-TV and BayTV have included broadcast
cash flow data because such data are commonly used as a measure of
performance for broadcast companies and are also used by investors to
measure a company's ability to service debt. Broadcast cash flow is not,
and should not be used as, an indicator or alternative to operating income,
net income or cash flow as reflected in the KRON-TV and BayTV combined
financial statements, is not intended to represent funds available for debt
service, dividends, reimbursement or other discretionary uses, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
(3) "Operating cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), less payments for program license
liabilities. Other television broadcasting companies may measure operating
cash flow in a different manner. KRON-TV and BayTV have included operating
cash flow data because such data are used by investors to measure a
company's ability to service debt. Operating cash flow does not purport to
represent cash provided by operating activities as reflected in the KRON-TV
and BayTV combined financial statements, is not a measure of financial
performance under generally accepted accounting principles and should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
15
<PAGE>
RISK FACTORS
In addition to general investment risks and the other information contained
in this joint proxy statement/prospectus, you should carefully consider the
following factors in deciding whether to vote in favor of approval of the
merger agreement.
Risks Related to the Merger
The aggregate value of Young's Class A common stock that Chronicle Publishing's
stockholders will receive in the merger may vary depending upon the market
price of Young's Class A common stock.
We designed the exchange ratio so that Chronicle Publishing's stockholders
will receive Young's Class A common stock worth an aggregate of $172,585,000 in
the merger, so long as the average closing sale price of Young's Class A common
stock for the 20 consecutive trading days ending three trading days prior to
the closing date of the merger is no less than $44.38 and no more than $54.24
per share. However, if the average closing sale price of Young's Class A common
stock for these 20 consecutive trading days is above $54.24, the exchange ratio
will be fixed at 0.84177 and the aggregate value of Young's Class A common
stock received in the merger will be greater than $172,585,000. Conversely, if
the average closing price of Young's Class A common stock for these 20
consecutive trading days is below $44.38, the exchange ratio will be fixed at
1.02878 and the aggregate value of Young's Class A common stock received in the
merger will be less than $172,585,000. Under the merger agreement, any increase
or decrease in the average closing sale price of Young's Class A common stock
either before or after the exchange ratio is determined will not give either
company the right to terminate or renegotiate the merger agreement or to
resolicit proxies.
The price of Young's common stock may change based upon changes in the
business, operations and prospects of Young, general market and economic
conditions, regulatory considerations, market assessments of the likelihood
that the merger will be completed and other factors. We urge you to obtain
current market quotations for Young's Class A common stock.
Chronicle Publishing's stockholders will not know the aggregate value of the
Young's Class A common stock to be received in connection with the merger at
the time they vote on the merger agreement.
Under the merger agreement, the exchange ratio will not be determined until
three trading days prior to the closing of the merger. As a result, you will
not know the exact exchange ratio at the time you vote on the proposal to
approve the merger agreement. Even after the exchange ratio is determined, you
will not know the exact aggregate value of Young's Class A common stock that
Chronicle Publishing's stockholders will receive when the merger is completed
because the price of Young's Class A common stock at the time of the merger is
likely to be different from the average closing sale price of Young's Class A
common stock for the 20 consecutive trading days ending three trading days
prior to the closing date of the merger. As a result, the actual aggregate
value of Young's Class A common stock received by Chronicle Publishing's
stockholders when the merger is completed may be greater than or less than
$172,585,000, even if the average closing sale price of Young's Class A common
stock for the 20 consecutive trading days ending three trading days prior to
the closing of the merger is between $44.38 and $54.24.
Young may not realize the expected benefits from the merger, such as cost
savings, operating efficiencies, revenue and cash flow enhancements and other
synergies, due to difficulties that may arise in Young's integration of
Chronicle Publishing.
Integrating the operations and personnel of Young and Chronicle Publishing
will be a complex process, and Young cannot assure you that the integration
will be completed rapidly or will result in the realization of the anticipated
benefits of the merger. The diversion of the attention of Young's management
and any difficulties encountered in the process of combining Young and
Chronicle Publishing could cause the disruption
16
<PAGE>
of, or a loss of momentum in, the activities of Young's business. Further, the
process of combining Young and Chronicle Publishing could negatively affect
employee morale and the ability of Young to retain some of the key employees of
Chronicle Publishing after the merger. Any inability to successfully integrate
the operations and personnel of Young and Chronicle Publishing, or any
significant delay in achieving integration, could have a material adverse
effect on the business, financial condition and operating results of Young
after the merger.
As a result of the merger the combined company will incur transaction costs
that may exceed our estimates and significant consolidation and integration
expenses that we cannot accurately estimate at this time, either of which may
negatively affect Young's financial condition and operating results.
Young estimates that, as a result of the merger, it will incur transaction
costs of approximately $31.5 million, including investment banking, legal and
accounting fees. In addition, Young expects that it will incur significant
consolidation and integration expenses which it cannot accurately estimate at
this time. Young expects that the combined company will charge the majority of
such costs and expenses to operations in fiscal 2000. The amount of the
transaction costs is a preliminary estimate and is subject to change. Actual
transaction costs may substantially exceed Young's estimates and, when combined
with the expenses incurred in connection with the consolidation and integration
of Young and Chronicle Publishing, may have an adverse effect on Young's
financial condition and operating results.
The merger may not occur if Chronicle Publishing's Subchapter S status is
terminated.
In the event that all of the conditions precedent to the respective
obligations of Young and Chronicle Publishing to effect the merger have been
satisfied, but Chronicle Publishing's Subchapter S status under the Internal
Revenue Code has been terminated, Young may elect to have the merger agreement
superceded and replaced by an asset purchase agreement containing terms
substantially similar to those of the merger agreement. However, if Young
elects to convert the merger into an asset purchase in accordance with the
foregoing, Chronicle Publishing may elect to terminate its agreement with Young
in its entirety by paying Young $25 million in cash. Accordingly, if Chronicle
Publishing's Subchapter S status is terminated for any reason, whether by
actions of Chronicle Publishing or its stockholders, the merger or other sale
of Chronicle Publishing's KRON-TV and BayTV assets may not occur, and Chronicle
Publishing may be obligated to pay to Young $25 million in cash. Moreover, in
the event that the merger is terminated due to the loss of Chronicle
Publishing's Subchapter S status, Chronicle Publishing may have difficulty
locating or negotiating acceptable terms with another potential buyer of
Chronicle Publishing or its KRON-TV and BayTV businesses.
Merger sub could potentially have material tax liabilities if Chronicle
Publishing is not a qualified Subchapter S corporation.
In the event that, following the merger, the Subchapter S status of
Chronicle Publishing for periods prior to the closing date of the merger is
challenged by a taxing authority and it is determined that Chronicle Publishing
was not a qualified Subchapter S corporation during such prior periods, merger
sub will have a material presently indeterminate liability for income taxes,
including interest and potential penalties. Although Young would be entitled
under the merger agreement to make an indemnification claim for such liability,
such claim would have to be asserted within one year following the closing date
of the merger. Further, any claim of Young would have to be made against, and
would be limited to, the amount then contained in the indemnification escrow
fund described below, which amount may be insufficient to satisfy the entire
amount of all tax liabilities that could arise if Chronicle Publishing were
determined not to have been a Subchapter S corporation at or prior to the
merger.
Sales of substantial amounts of Young common stock may negatively affect share
price.
Following the completing of the merger, Chronicle Publishing's stockholders
will own a significant percentage of the outstanding common stock of Young.
Except for certain stockholders who may be considered
17
<PAGE>
affiliates of Chronicle Publishing, the former stockholders of Chronicle
Publishing will be free to sell their shares of Young's Class A common stock
acquired in the merger immediately following completion of the merger. In
addition, Young has agreed to file a post-effective amendment to the
registration statement of which this joint proxy statement/ prospectus forms a
part, in order to enable any affiliates of Chronicle Publishing to freely sell
or otherwise transfer their shares of Young's Class A common stock promptly
following completion of the merger. Sales of substantial amounts of shares of
Young's Class A common stock at one time or over the course of a short period
of time, or the perception that such sales could occur, could adversely affect
prevailing market prices of Young's Class A common stock.
Risks Related to Young's Business and Stock Price
Young expects to incur significant additional indebtedness, which could impair
Young's ability to operate its business and pursue its business strategy.
Young expects to issue subordinated debt securities and sell equity
securities to finance the cash consideration to be paid to the holders of
Chronicle Publishing common stock in the merger, to pay the fees and expenses
incurred in connection with the merger and the merger financings and to provide
for working capital requirements and financing of strategic acquisitions.
Although the definitive terms of the debt instruments and equity securities, if
any, to be issued in connection with the financing of the merger have not been
finalized as of the date of this joint proxy statement/prospectus, Young
expects that such terms will include significant operating and financial
restrictions, such as limits on Young's ability to incur indebtedness, create
liens, sell assets, engage in mergers or consolidations, make investments and
pay dividends. Upon consummation of the merger, Young expects that it will have
substantial consolidated indebtedness. As of December 31, 1999, after giving
pro forma effect to the merger and the merger financings and the application of
the net proceeds therefrom, Young would have had $1.3 billion of consolidated
indebtedness. In addition, Young expects to incur additional indebtedness in
connection with our post-merger strategy of pursuing strategic acquisitions and
expanding through internal growth. Any such indebtedness may have significant
adverse consequences for Young, including the following:
. Young's ability to obtain additional financing for acquisitions, working
capital, capital expenditures or other purposes may be impaired or any
such financing may not be on terms favorable to Young;
. interest expense may reduce the funds that would otherwise be available
to Young for its operations and future business opportunities;
. a substantial decrease in net operating cash flows or an increase in
expenses could make it difficult for Young to meet its debt service
requirements or force it to modify its operations;
. substantial leverage may place Young at a competitive disadvantage and
may make it more vulnerable to a downturn in its business or the economy
generally;
. certain of Young's indebtedness will be at variable rates of interest,
which would cause it to be vulnerable to increases in interest rates;
and
. certain of Young's indebtedness will be secured by substantially all of
its assets, reducing its ability to obtain additional financing.
In addition, Young's substantial indebtedness may have a negative effect on
its net income. For the year ended December 31, 1999, Young's net loss, on a
pro forma basis as adjusted to give effect to the merger and the merger
financings, but excluding non-recurring items directly attributable to the
merger, would have been $54.3 million compared to the historical loss for such
period of $21.5 million. Pro forma net interest expense would have been $122.3
million for the year ended December 31, 1999, as compared to $63.0 million for
the same year on a historical basis.
18
<PAGE>
The terms of Young's indebtedness may restrict its business operations and its
ability to pursue its business strategies.
At the effective time of the merger, Young expects to enter into a revised
$800 million senior credit facility with its current lenders. Young expects its
revised credit facility agreement to include certain covenants that, among
other things, restrict:
. the making of investments, loans and advances and the paying of
dividends and other restricted payments;
. the incurrence of additional indebtedness;
. the granting of liens, other than certain permitted liens;
. mergers, consolidations, and sales of all or a substantial part of
Young's business or property;
. the sale of assets; and
. the making of capital expenditures.
Young also will be required to maintain certain financial ratios, including
interest coverage and leverage ratios. All of these restrictive covenants may
restrict Young's ability to expand or to pursue its business strategies.
Young's ability to comply with these and other provisions of its revised credit
facility agreement may be affected by changes in economic or business
conditions, results of operations or other events beyond Young's control. The
breach of any of these covenants could result in a default under its revised
credit facility agreement, in which case, depending on the actions taken by the
lenders thereunder or their successors or assignees, such lenders could elect
to declare all amounts borrowed under the revised credit facility, together
with accrued interest, to be due and payable, and Young could be prohibited
from making payments with respect to other indebtedness until the default is
cured or all indebtedness under the revised credit facility is paid or
satisfied in full. If Young were unable to repay such borrowings, such lenders
could proceed against their collateral. If the indebtedness under the revised
credit facility were to be accelerated, there can be no assurance that Young's
assets would be sufficient to repay in full such indebtedness and its other
indebtedness.
After the merger is completed, Young's expected principal sources of
liquidity are cash flow from operations and borrowings under its revised credit
facility. Young anticipates that its principal uses of liquidity under its
revised credit facility will be to finance working capital, meet debt service
requirements and finance strategic acquisitions. However, Young may be required
to attempt to obtain other debt and/or equity financing to finance any
significant acquisitions in the future.
Young may experience disruptions in its business if it acquires and integrates
new television stations.
As part of its business strategy, Young will continue to evaluate
opportunities to acquire new television stations. There can be no assurance
that Young will find attractive acquisition candidates or effectively manage
the integration of acquired stations into its existing business. If the
expected operating efficiencies from acquisitions do not materialize, if Young
fails to integrate new stations or recently acquired stations into its existing
business, or if the costs of such integration exceed expectations, Young's
operating results and financial condition could be adversely affected due to
disruptions in its business. If Young makes acquisitions in the future, it may
need to incur more debt, issue more equity securities (which could dilute the
position of current stockholders) and it may incur contingent liabilities and
amortization expenses related to goodwill and other intangible assets. Any of
these occurrences could adversely affect Young's operating results and
financial condition.
Young is dependent on its personnel, and the departure of one or more of its
key personnel could impair its ability to effectively operate its business or
pursue its business strategies.
Young's success is substantially dependent upon the retention of, and the
continued performance by, its senior management. The loss of the services of
Vincent J. Young, Chairman, Ronald J. Kwasnick, President,
19
<PAGE>
James A. Morgan, Executive Vice President, or Deborah A. McDermott, Executive
Vice President--Operations, could have an adverse impact on Young.
Young is dependent on networks for its programming, and the loss of one or more
of its network affiliations would disrupt its business and could have a
material adverse effect on its financial condition and results of operations by
reducing station revenue at the affected station(s).
Six of Young's eleven stations are affiliated with the ABC television
network, three are affiliated with the CBS television network, one is
affiliated with the NBC television network, and one station is independent. The
television viewership levels for stations other than KCAL (Los Angeles,
California), Young's only independent television station, are materially
dependent upon programming provided by these major networks and are
particularly dependent upon programming provided by the ABC network. Each of
Young's stations other than KCAL is a party to an affiliation agreement with
one of the networks giving the station the right to rebroadcast programs
transmitted by the network. The networks pay each affiliated station a fee for
each hour of network programming broadcast by the stations in exchange for the
networks' right to sell the majority of the commercial announcement time during
such programming.
As an independent station, KCAL purchases all of its programming, resulting
in proportionally higher programming costs for the station. Young may be
exposed in the future to volatile or increased programming costs which may
adversely affect Young's operating results. Further, programs are usually
purchased for broadcasting for two to three year periods, making it difficult
to accurately predict how a program will perform. In some instances, programs
must be replaced before their cost has been fully amortized, resulting in
write-offs that increase station operating costs.
KRON-TV is currently affiliated with the NBC television network. In its
negotiations with Chronicle Publishing, Young operated under the assumption
that this affiliation would not necessarily be extended past December 31, 2001,
the date on which the current affiliation agreement expires. On February 14,
2000, NBC announced that it had entered into an affiliation agreement with
Granite Broadcasting Corporation and that the NBC affiliation agreement with
KRON-TV would not be renewed after its expiration on December 31, 2001. As a
result, Young expects that KRON-TV will become an independent station and, in
such case, it is likely that KRON-TV will experience increased programming
costs, which may adversely affect Young's operating results in the event that
the merger is completed.
Young's business has been and continues to be subject to extensive governmental
legislation and regulation, which may restrict Young's ability to pursue its
business strategy and/or increase Young's operating expenses.
Young's television operations are subject to significant regulation by the
Federal Communications Commission under the Communications Act of 1934, as
amended. A television station may not operate without the authorization of the
FCC. Approval of the FCC is required for the issuance, renewal and transfer of
station operating licenses. In particular, Young's business will be dependent
upon its continuing to hold television broadcasting licenses from the FCC. FCC
licenses generally have a term of eight years. While in the vast majority of
cases such licenses are renewed by the FCC, there can be no assurance that
Young's licenses will be renewed at their expiration dates or, if renewed, that
the renewal terms will be for the maximum permitted period. The non-renewal or
revocation of one or more of our primary FCC licenses could have a material
adverse effect on Young's operations.
Congress and the FCC currently have under consideration and may in the
future adopt new laws, regulations and policies regarding a wide variety of
matters which could, directly or indirectly, affect the operation and ownership
of Young's broadcast properties. Young is unable to predict the impact that any
such laws or regulations may have on its operations.
20
<PAGE>
Young operates in a very competitive business environment.
Young faces competition from:
. cable television;
. new networks;
. alternative methods of receiving and distributing television signals and
satellite delivered programs, including direct broadcast satellite
television systems;
. multipoint multichannel distributions systems, master antenna television
systems and satellite master antenna television systems; and
. other sources of news, information and entertainment such as off-air
television broadcast programming, streaming video broad over the
Internet, newspapers, movie theaters, live sporting events and home
video products, including videotape cassette recorders and digital video
disc players.
In addition to competing with other media outlets for audience share, Young
also competes for advertising revenues, which comprise the primary source of
revenues for its operating subsidiaries. Young's stations compete for such
advertising revenues with other television stations in their respective
markets, as well as with other advertising media, such as newspapers, radio
stations, the Internet, magazines, outdoor advertising, transit advertising,
yellow page directories, direct mail and local cable systems.
Young's television stations are located in highly competitive markets.
Accordingly, Young's results of operations will be dependent upon the ability
of each station to compete successfully in its market, and there can be no
assurance that any one of Young's stations will be able to maintain or increase
its current audience share or revenue share. To the extent that certain of
Young's competitors have or may, in the future, obtain greater resources than
us, Young's ability to compete successfully in its broadcasting markets may be
impeded.
Young's business may be adversely affected by national and local economic
conditions which adversely affect advertising.
The television industry is cyclical in nature. Because Young relies upon
sales of advertising time at its stations for substantially all of its
revenues, Young's operating results are particularly susceptible to being
affected by prevailing economic conditions at both the national and regional
levels. KCAL individually represents a significant portion of Young's revenues;
its operating results, therefore, are particularly susceptible to economic
conditions in the Los Angeles market. Young's revenues could be adversely
affected by a future national recessionary environment and, due to the
substantial portion of revenues derived from local advertisers, its operating
results in individual markets could be adversely affected by local or regional
economic downturns.
Management, as major stockholders, possesses unequal voting rights and control.
Young's common stock has been divided into three classes with different
voting rights which allow for the maintenance of control by management. Each
share of Class A common stock is entitled to one vote, each share of Class B
common stock is entitled to ten votes except for certain significant
transactions for which such shares are entitled to one vote per share, and
shares of Class C common stock are not entitled to vote except in connection
with any change to Young's certificate of incorporation which would adversely
affect the rights of holders of such common stock. At March 20, 2000, there
were no shares of Class C common stock outstanding.
As of March 20, 2000, Adam Young and Vincent Young together beneficially
owned shares of Class A common stock and Class B common stock representing
approximately 57% of the total voting power of Young's common stock prior to
the merger with Chronicle Publishing and together such persons will
beneficially own approximately 51% of the total voting power of Young's common
stock immediately
21
<PAGE>
following the merger. As a result, following the merger, Adam Young and Vincent
Young will maintain control over the election of a majority of Young's
directors and, thus, over Young's operations and business. In addition, such
stockholders have the ability to prevent certain types of material
transactions, including a change of control of Young.
The disproportionate voting rights of the Class A common stock relative to
the Class B common stock may make Young a less attractive target for a takeover
than it otherwise might be, or render more difficult or discourage a merger
proposal or a tender offer.
22
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS
Young and Chronicle Publishing believe this document contains "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are subject to risks and uncertainties and
are based on the beliefs and assumptions of management of Young and Chronicle
Publishing, based on information currently available to each company's
management. When we use words such as "believes," "expects," "anticipates,"
"intends," "plans," "estimates," "should," "likely" or similar expressions, we
are making forward-looking statements. Forward-looking statements include the
information concerning possible or assumed future results of operations of
Young and KRON-TV and BayTV set forth under "Summary," "Summary Historical and
Unaudited Pro Forma Combined Financial Data," "Risk Factors," "The Merger--
Background of the Merger," "--Recommendation of the Young Board; Reasons for
the Merger," "--Recommendation of the Chronicle Publishing Board; Reasons for
the Merger," "--Opinion of Young's Financial Advisor," "--Opinion of Chronicle
Publishing's Financial Advisor," "Young Unaudited Pro Forma Condensed Combined
Financial Statements; " Young Management's Discussion and Analysis of Financial
Condition and Results of Operations," "KRON-TV and BayTV Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Young's Business" and "Chronicle Publishing's Business."
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of Young or Chronicle Publishing may differ materially from those expressed in
the forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. Stockholders
are cautioned not to put undue reliance on any forward-looking statements. For
those statements, we claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
1995.
For a discussion of some of the factors that may cause actual results to
differ materially from those suggested by the forward-looking statements,
please read carefully the information under "Risk Factors" beginning on page
16. In addition to the Risk Factors and other important factors discussed
elsewhere in this joint proxy statement/prospectus, you should understand that
the following important factors could affect the future results of Young after
the merger and could cause results to differ materially from those suggested by
the forward-looking statements:
. increased competitive pressures, which may affect Young's revenues and
cash flows ability to maintain its market share and pricing goals;
. changes in economic conditions which may affect Young's operating and
programming costs;
. changes in United States and global financial and equity markets,
including significant interest rate fluctuations, which may increase the
cost of external financing for Young's operations;
. changes in laws or regulations, third party relations and approvals,
decisions of courts, regulators and governmental bodies which may
adversely affect Young's business or ability to compete; and
. other risks and uncertainties as may be detailed from time to time in
Young's public announcements and SEC filings.
This list of factors that may affect future performance and the accuracy of
forward-looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
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THE YOUNG SPECIAL MEETING
Date, Time and Place
The special meeting in lieu of the 2000 annual meeting of Young's
stockholders will be held at 9 a.m., local time, on April 27, 2000, at the Mark
Hopkins Inter-Continental Hotel, Number One Nob Hill, San Francisco,
California. This joint proxy statement/prospectus is being furnished in
connection with the solicitation by the board of directors of Young of proxies
to be used at the Young special meeting and at any and all adjournments or
postponements of the Young special meeting.
Purpose
Under prevailing Delaware law, Young's acquisition by merger of Chronicle
Publishing would not require Young stockholder approval. However, the corporate
governance rules of The Nasdaq Stock Market, upon which Young's Class A common
stock is listed, require stockholder approval of the issuance of common stock
in those instances where such common stock, upon issuance, would have voting
power equal to or in excess of 20% of the voting power outstanding before such
issuance, or the number of shares of common stock to be issued would be equal
to or in excess of 20% of the number of shares of common stock outstanding
before such issuance. Pursuant to the terms of the merger agreement, the
stockholders of Chronicle Publishing collectively will acquire upon completion
of the merger an aggregate of up to 3,888,788 shares of Young's Class A common
stock, representing approximately 28.8% of the number of shares of Young's
common stock outstanding immediately prior to the merger, based on the number
of shares of Young's common stock outstanding on March 20, 2000. Therefore, The
Nasdaq Stock Market requires Young to obtain stockholder approval of the
issuance of its Class A common stock in connection with the merger.
Other purposes of the Young special meeting are (i) to consider and vote
upon proposals to amend Young's certificate of incorporation to eliminate any
required minimum percentage ownership of Young's outstanding Class B common
stock by Young's management group to maintain the enhanced voting power of the
Class B common stock, (ii) to amend Young's 1995 Stock Option Plan to increase
the number of shares underlying options and stock appreciation rights which may
be granted thereunder, and (iii) to elect nine directors of Young to serve for
a term of one year. Young's stockholders may also be asked to transact other
business that may properly come before the Young special meeting or any
adjournment or postponement of the Young special meeting.
Young Board of Directors' Recommendation
The Young board of directors voted unanimously to approve the merger
agreement and the transactions contemplated thereby, including the issuance of
Young's Class A common stock in connection with the merger. The Young board
believes that the merger is in the best interests of its stockholders and
recommends that its stockholders vote FOR the proposal to approve the issuance
of Young's Class A common stock in connection with the merger.
The Young board voted unanimously to approve the amendment to Young's
certificate of incorporation and to approve the amendment to Young's 1995 Stock
Option Plan. The Young board believes that these amendments are in the best
interests of its stockholders and recommends that its stockholders vote FOR the
proposal to amend Young's certificate of incorporation and FOR the proposal to
amend Young's 1995 Stock Option Plan.
The Young board also recommends that you vote FOR the election of the
nominees to serve as directors of Young.
Record Date, Outstanding Shares and Voting Rights
The Young board has fixed March 20, 2000 as the record date for the Young
special meeting. Only holders of record of shares of Young's Class A common
stock and Class B common stock on the record date
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are entitled to notice of and to vote at the Young special meeting. As of the
record date, there were outstanding shares of Young's Class A common stock
held by approximately 38 holders of record and shares of Young's Class B
common stock held by approximately 38 holders of record. 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 Young stockholders. At the Young special
meeting, each share of Young's Class A common stock will be entitled to one
vote and each share of Young's Class B common stock will be entitled to ten
votes, or approximately 34,138,069 votes in the aggregate. Accordingly, an
aggregate of 34,138,069 votes may be cast at the Young special meeting by
holders of Young's Class A common stock and Young's Class B common stock.
Vote Required; Quorum
The approval of the issuance of Young's Class A common stock in connection
with the merger will require the affirmative vote of the holders of a majority
of the voting power of the shares of Young's Class A common stock and Class B
common stock outstanding on the record date, voting together as one class.
The approval of the amendment to Young's certificate of incorporation will
require the affirmative vote of the holders of a majority of the voting power
of the shares of Young's Class A common stock and Class B common stock
outstanding on the record date, voting together as one class.
The approval of the amendment to Young's 1995 Stock Option Plan will require
the affirmative vote of the holders of a majority of the voting power of the
shares of Young's Class A common stock and Class B common stock, voting
together as one class, present in person or by proxy at the Young special
meeting.
Election of directors of Young requires the affirmative vote of the holders
of a plurality of the voting power of the shares of Young's Class A common
stock and Class B common stock, voting together as one class, that are present
in person or by proxy at the Young special meeting.
The representation, in person or by properly executed proxy, of the holders
of a majority of the voting power of the shares of stock entitled to vote at
the Young special meeting is necessary to constitute a quorum at the Young
special meeting. Shares of Young's Class A common stock and Class B common
stock represented in person or by proxy will be counted for the purposes of
determining whether a quorum is present at the Young special meeting. Shares
that abstain from voting on the proposal to approve the issuance of Young's
Class A common stock in connection with the merger will be treated as shares
that are present and entitled to vote at the Young special meeting for purposes
of determining whether a quorum exists, but abstentions will have the same
effect as votes against approval of the issuance of Young's Class A common
stock and the proposed amendment to Young's certificate of incorporation. If a
broker or nominee holding shares of record for a customer indicates that it
does not have discretionary authority to vote as to a particular matter, those
shares, which are referred to as broker non-votes, will be treated as present
and entitled to vote at the Young special meeting for purposes of determining
whether a quorum exists. Brokers or nominees holding shares of record for
customers will not be entitled to vote on the proposals submitted to the Young
stockholders unless they receive voting instructions from their customers.
Accordingly, broker non-votes will not be voted in favor of the proposals
meaning that such shares will have the same effect as shares voted against
approval of the proposals.
Young's Class A common stock represents approximately 32.8%, and Young's
Class B common stock represents approximately 67.2%, respectively, of the
voting power of Young's outstanding capital stock. As of the record date, Adam
Young and Vincent Young together beneficially possessed approximately 57% of
the aggregate votes that may be cast at the Young special meeting. Accordingly,
the affirmative vote of Adam Young and Vincent Young alone is sufficient to
adopt each of the proposals to be submitted to Young's stockholders at the
Young special meeting. Pursuant to stockholder support agreements entered into
with Chronicle Publishing, certain stockholders of Young (including Adam Young
and Vincent Young) who, as of the record date, control approximately 51% of the
votes entitled to be cast at the Young special meeting, have agreed to vote all
of their shares in favor of the issuance of shares of Young's common stock in
the merger.
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For a description of these stockholder support agreements, see page 66. In
addition, Adam Young and Vincent Young have advised Young that they will vote
all of their shares in favor of all of the other proposals to be submitted to
Young's stockholders at the Young special meeting.
As of the record date, Young's directors and executive officers and their
affiliates beneficially owned approximately 64% of the votes represented by the
outstanding shares of Young's Class A common stock and Class B common stock.
Young's directors and executive officers have expressed their intent to vote
their shares in favor of approval of the proposals being submitted to the Young
stockholders.
Voting of Proxies
All shares of Young's Class A common stock and Class B common stock that are
entitled to vote and are represented at the Young special meeting by properly
executed proxies received prior to or at such meeting, and not revoked, will be
voted at such meeting in accordance with the instructions indicated on such
proxies. If no instructions are indicated, such proxies, other than broker non-
votes, will be voted for approval of the proposals set forth in the notice
attached to this proxy statement.
The Young board does not know of any matters other than those described in
the notice of the Young special meeting that are to come before such meeting.
If any other matters are properly presented at the Young special meeting for
consideration, including, among other things, consideration of a motion to
adjourn or postpone such meeting to another time and/or place for the purposes
of soliciting additional proxies or allowing additional time for the
satisfaction of conditions to the merger, the persons named in the enclosed
form of proxy and acting thereunder generally will have discretion to vote on
such matters in accordance with their best judgment.
Revocation of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by:
. filing with Young's Secretary, at or before the taking of the vote at the
Young special meeting, a written notice of revocation bearing a later
date than the proxy;
. duly executing a later dated proxy relating to the same shares and
delivering it to Young's Secretary before the taking of the vote at the
Young special meeting; or
. attending the Young special meeting and voting in person, although
attendance at the Young special meeting will not in and of itself
constitute a revocation of a proxy.
Any written notice of revocation or subsequent proxy should be sent to Young
Broadcasting Inc., 599 Lexington Avenue, New York, New York 10022, Attention:
Secretary, or hand delivered to the Secretary of Young at or before the taking
of the vote at the Young special meeting. Stockholders that have instructed a
broker to vote their shares must follow directions received from such broker in
order to change their vote or to vote at the Young special meeting.
Solicitation of Proxies; Expenses
All expenses of Young's solicitation of proxies, including the cost of
preparing and mailing this joint proxy statement/prospectus to Young's
stockholders, will be borne by Young. In addition to solicitation by use of the
mails, proxies may be solicited from Young's stockholders by directors,
officers and employees of Young in person or by telephone, facsimile or other
means of communication. Such directors, officers and employees will not be
additionally compensated for their proxy solicitation efforts, but shall be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. Arrangements will also be made with brokerage houses, custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of shares held of record by such brokerage houses,
custodians, nominees and fiduciaries, and Young will reimburse such brokerage
houses, custodians, nominees and fiduciaries for their reasonable expenses
incurred in forwarding such materials.
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THE CHRONICLE PUBLISHING SPECIAL MEETING
Date, Time and Place
The special meeting of Chronicle Publishing's stockholders will be held at
10 a.m., local time, on April 27, 2000, at 901 Mission Street, San Francisco,
California. This joint proxy statement/prospectus is being furnished in
connection with the solicitation by the board of directors of Chronicle
Publishing of proxies to be used at the Chronicle Publishing special meeting
and at any and all adjournments and postponements of the Chronicle Publishing
special meeting.
Purpose
The purpose of the Chronicle Publishing special meeting is to consider and
vote on the proposal to approve the merger agreement under which Chronicle
Publishing would be merged with and into a subsidiary of Young, with the Young
subsidiary continuing as the surviving corporation. Chronicle Publishing's
stockholders may also be asked to transact other business that may properly
come before the Chronicle Publishing special meeting or any adjournment or
postponement of the Chronicle Publishing special meeting.
Chronicle Publishing Board of Directors' Recommendation
After careful consideration, the Chronicle Publishing board has unanimously
approved the merger agreement and recommends a vote FOR approval of the merger
agreement.
Record Date, Outstanding Shares and Voting Rights
The Chronicle Publishing board has fixed March 20, 2000 as the record date
for the Chronicle Publishing special meeting. Only holders of record of shares
of Chronicle Publishing's common stock on the record date are entitled to
notice of and to vote at the Chronicle Publishing special meeting. As of the
record date, there were 3,780,000 outstanding shares of Chronicle Publishing
common stock held by 60 holders of record. At the Chronicle Publishing special
meeting, each share of Chronicle Publishing common stock will be entitled to
one vote.
Vote Required; Quorum
The approval of the merger agreement will require the affirmative vote of
the holders of a majority of the shares of Chronicle Publishing's common stock
issued and outstanding on the record date. Shares represented at the Chronicle
Publishing special meeting that abstain from voting on the proposal to approve
the merger agreement will be treated as having been voted against approval of
the merger agreement.
The representation, in person or by properly executed proxy, of the holders
of a majority of the issued and outstanding shares of Chronicle Publishing
common stock entitled to vote at the Chronicle Publishing special meeting is
necessary to constitute a quorum at the Chronicle Publishing special meeting.
All shares of Chronicle Publishing's common stock represented in person or by
proxy will be counted as present for the purposes of determining whether a
quorum exists at the Chronicle Publishing special meeting.
As of the record date, Chronicle Publishing's directors and executive
officers collectively beneficially owned 11.8% of the outstanding shares of
Chronicle Publishing's common stock. Pursuant to stockholder support agreements
entered into with Young, certain stockholders of Chronicle Publishing who, as
of the record date, control 62.7% of the votes entitled to be cast at the
Chronicle Publishing special meeting, have agreed to vote all of their shares
in favor of the proposal to approve the merger agreement at the Chronicle
Publishing special meeting. Chronicle Publishing's directors have expressed
their intent to vote their shares in favor of approval of the merger agreement.
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Voting of Proxies
All shares of Chronicle Publishing's common stock that are represented at
the Chronicle Publishing special meeting by properly executed proxies received
prior to or at such meeting, and that have not been revoked, will be voted at
such meeting in accordance with the instructions indicated on such proxies. If
no instructions are indicated, such proxies will be voted for approval of the
merger agreement.
The Chronicle Publishing board is presently unaware of any matter other than
the approval of the merger agreement that will be addressed at its special
meeting. If any other matters are properly presented at the Chronicle
Publishing special meeting for consideration, including, among other things,
consideration of a motion to adjourn or postpone such meeting to another time
and/or place for the purposes of soliciting additional proxies or allowing
additional time for the satisfaction of conditions to the merger, the holders
of proxies will have discretion to vote on such matters in accordance with
their best judgment unless otherwise directed by the proxy.
Revocation of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by:
. filing with Chronicle Publishing' Secretary at or before the taking of
the vote at the Chronicle Publishing special meeting, a written notice of
revocation bearing a later date than the proxy;
. duly executing a later dated proxy relating to the same shares and
delivering it to Chronicle Publishing's Secretary before the taking of
the vote at the Chronicle Publishing special meeting; or
. expiration of 6 months from the date of its creation, unless the
stockholder specifies in it a length of time for which it is to continue
in force. Such extension of time may not exceed 7 years from the date of
the proxy's creation.
Any written notice of revocation or subsequent proxy should be sent to The
Chronicle Publishing Company, 901 Mission Street, San Francisco, California
94103, Attention: Secretary, or hand delivered to Chronicle Publishing's
Secretary at or before the taking of the vote at the Chronicle Publishing
special meeting.
Solicitation of Proxies; Expenses
Chronicle Publishing will bear all expenses of Chronicle Publishing's
solicitation of proxies, including the cost of mailing this joint proxy
statement/prospectus to Chronicle Publishing's stockholders. Pursuant to the
merger agreement, Young will bear all costs of preparing this joint proxy
statement/prospectus. In addition to solicitation by use of the mails,
directors, officers and employees of Chronicle Publishing may solicit proxies
from Chronicle Publishing's stockholders in person or by telephone, facsimile
or other means of communication. Such directors, officers and employees will be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation but will not be additionally compensated for their proxy
solicitation efforts.
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THE MERGER
Background of the Merger
In February 1999, the Chronicle Publishing board of directors engaged
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to evaluate
financial alternatives to maximize stockholder value and to provide a valuation
analysis of Chronicle Publishing. In presenting its findings to the board, DLJ
recommended the sale of Chronicle Publishing to maximize stockholder value.
In May 1999, the Chronicle Publishing board authorized management to engage
DLJ to evaluate and make recommendations regarding a sale of all of the assets
of Chronicle Publishing, in one or a series of transactions. In June 1999, the
board authorized DLJ to proceed with further exploration of the sale of all the
assets of Chronicle Publishing.
From time to time, Young and its financial advisor, Lazard Freres & Co. LLC
("Lazard"), have discussed potential strategic alternatives, including
potential acquisitions by Young that would, among other objectives, increase
its reach, enhance its ability to economically acquire syndicated programming,
offer opportunities to improve operations and expand its presence in growing
markets. After the announcement by Chronicle Publishing of its intention to
sell its assets, Young asked Lazard to advise it regarding its potential
interest in one or more of the assets of Chronicle Publishing.
During June and July 1999, DLJ identified parties that might be interested
in engaging in a transaction with Chronicle Publishing for the acquisition of
KRON-TV and its partnership interest in BayTV. During that time, more than 30
parties entered into confidentiality agreements with Chronicle Publishing
regarding information about KRON-TV and BayTV to be provided to them by
Chronicle Publishing and/or DLJ. During this time, Lazard indicated on Young's
behalf its interest in potentially acquiring KRON-TV, and Young executed a
confidentiality agreement on July 12, 1999. Confidential information memoranda
were distributed to all parties who entered into confidentiality agreements.
Interested parties were requested to provide preliminary valuation
indications with respect to the acquisition of KRON-TV and the partnership
interest in BayTV by mid-August. Through DLJ, Chronicle Publishing received
preliminary valuation indications from several interested parties, including
Young.
From mid-August through the end of September, each of the interested parties
conducted due diligence regarding Chronicle Publishing, attended management
presentations and made site visits to Chronicle Publishing's facilities in San
Francisco. In conjunction with the due diligence sessions, Chronicle Publishing
distributed supplemental due diligence materials to each of the interested
parties.
In addition to conducting due diligence during this period, Young developed
an independent set of financial projections concerning the operation of KRON-
TV. In developing these projections, Young took into account the possibility
that KRON-TV's affiliation with NBC would not be extended past December 31,
2001 and that, thereafter, KRON-TV may be operated as an independent station.
On September 28, 1999, NBC sent a letter to Chronicle Publishing indicating the
terms on which it would be willing to renew its affiliation agreement with
KRON-TV upon its expiration on January 1, 2002. In this letter, NBC also
indicated that in its view any such renewal would need to be negotiated and
agreed to prior to the signing of a definitive agreement between Chronicle
Publishing and KRON-TV's acquiror.
A draft merger agreement was distributed to all interested parties on
October 19, 1999. DLJ requested that final proposals from all interested
parties be received by November 4, 1999, with such proposals to include a
formal bid letter and a marked version of the proposed merger agreement
indicating the terms on which each interested party would be willing to
complete a merger with Chronicle Publishing.
Prior to the bid deadline, Young submitted a proposal to acquire Chronicle
Publishing in a merger for $600 million in cash and 3.4 million shares of
Young's Class A common stock. Young's pre-emptive bid was
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predicated on a desire to gain a period of exclusivity during which it could
negotiate a definitive agreement. Following discussions between DLJ and Lazard
regarding the structure of the bid, Young revised its proposal to provide for
$650 million in cash and 3.2 million shares of Young's Class A common stock. On
November 2, 1999, DLJ, Chronicle Publishing's legal advisors and the
stockholder board members participated in a conference call during which DLJ
summarized the proposal from Young and its conversations with other Interested
Parties. The board members asked questions about the Young proposal and
discussed the alternatives available to them.
On November 3, 1999, DLJ informed Lazard of Chronicle Publishing's
unwillingness to negotiate exclusively with Young based on the terms offered.
After consulting with its financial and legal advisors, Young instructed Lazard
to inform DLJ that Young was willing to increase its bid for Chronicle
Publishing in a merger transaction to $650 million cash and 3.5 million shares
of Young's Class A common stock, contingent on Chronicle Publishing's
willingness to delay the deadline for final proposals. On November 3, 1999, DLJ
postponed the deadline for final proposals to November 12, 1999.
On November 4, 1999, DLJ met with representatives of Chronicle Publishing's
stockholders, senior management and Chronicle Publishing's legal advisors to
discuss the Young proposal and DLJ's conversations with other Interested
Parties. Representatives of Chronicle Publishing's stockholders authorized
Chronicle Publishing's legal and financial advisors to engage in further
negotiations with Young, and specifically directed DLJ to seek a "collar" on
the number of shares to be issued by Young in order to minimize the effect of
any decrease in the trading price of Young's Class A common stock. On November
4 and 5, 1999, Chronicle Publishing's and Young's financial advisors had
numerous discussions regarding the economic terms of the transaction, including
(i) the portion of the total consideration that would be represented by Young's
Class A common stock, (ii) the desire of Chronicle Publishing's stockholders to
utilize a collar to limit the impact of any volatility in the trading price of
Young's Class A common stock, (iii) the structural provisions designed to
guarantee a closing of the transaction in the event the sale of other Chronicle
Publishing assets failed to occur prior to the scheduled closing of the
proposed merger and (iv) the alternatives to enhance the liquidity of Young's
Class A common stock during the period following the merger. On November 5,
1999, DLJ and Chronicle Publishing's legal advisors met with representatives of
Chronicle Publishing's stockholders and senior management to convey the results
of those discussions. At that meeting the stockholder representatives
authorized DLJ and its legal advisors to commence negotiation of a definitive
agreement.
Beginning on November 9, 1999, the legal and financial advisors and
management of both Chronicle Publishing and Young commenced negotiation of a
definitive merger agreement, based on the proposed merger agreement that was
distributed to interested parties on October 19, 1999 and a revised version
submitted by Young on November 5, 1999. On November 10, 1999, DLJ, Chronicle
Publishing's legal advisors and certain of the stockholder board members met to
discuss the status of negotiations. On November 11, 1999, DLJ met with Young
and Lazard on behalf of Chronicle Publishing to perform due diligence on Young
as it pertained to Young's ability to complete the transaction as negotiated.
The Board of Directors of Young met on November 15, 1999 to discuss the
proposed terms for the acquisition of Chronicle Publishing and the terms of the
final merger agreement. At the meeting, Lazard presented its oral opinion,
subsequently confirmed in writing, that the merger consideration to be paid in
connection with the merger was fair to Young from a financial point of view.
Young's legal advisors described the final terms of the merger agreement. After
questions by Young's board to its management and its financial and legal
advisors and after further discussions, the board determined that the proposal
to acquire Chronicle Publishing was in the best interest of Young and its
stockholders. The board then unanimously voted to approve the merger agreement
and the transactions contemplated thereby and to authorize Young's management
and its advisors to conclude the negotiation of the merger agreement.
Chronicle Publishing's board met on November 15, 1999 to discuss the Young
proposal and the terms of the merger agreement that had been negotiated. At the
meeting, DLJ presented its oral opinion (subsequently confirmed in writing)
that the consideration to be received by Chronicle Publishing's stockholders in
the
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proposed transaction between Young and Chronicle Publishing was fair from a
financial point of view. Chronicle Publishing's legal advisors described to the
board the terms of the merger agreement. After questions by the board and its
financial and legal advisors and further discussions, the board determined that
the Young proposal as set forth in the merger agreement was advisable and in
the best interest of Chronicle Publishing and its stockholders. The members of
the board who were present at the meeting then voted unanimously to approve the
merger agreement and the transactions contemplated thereby and to authorize
management and Chronicle Publishing's legal advisors to conclude the drafting
and negotiation of the merger agreement.
On November 16, 1999, Young issued a press release announcing the materials
aspects of the proposed merger between Young or a subsidiary of Young, and
Chronicle Publishing.
Recommendation of Young Board; Young's Reasons for the Merger
The Young board believes that the terms of the merger are fair to and in the
best interests of Young and its stockholders. Accordingly, the Young board has
unanimously approved the merger agreement and the transactions contemplated
thereby, including the issuance of Young's Class A common stock in connection
with the merger, and recommends approval of the issuance of Young's Class A
common stock in connection with the merger by the stockholders of Young.
In reaching its conclusion to approve the merger agreement, the Young board
considered the following positive factors:
. KRON-TV is the top-rated station in San Francisco, the nation's fifth
largest market;
. The effective buying income per household in San Francisco is the second
highest in the United States;
. Young's management has a track record of improving the operations of
previously acquired television stations;
. KRON-TV ranks number one in the designated market area in both sign-on to
sign-off and weekly ratings;
. KRON-TV produces five hours a day of local news that is consistently
ranked number one in its time slot;
. By combining KRON-TV with KCAL-TV, Young's Los Angeles television
station, Young would have a significant presence in California;
. BayTV complements KRON-TV's core operations;
. BayTV reaches 93% of the homes in the San Francisco designated market
area; and
. BayTV is the Bay area's only 24 hour source for local news and
information.
The Young board reviewed the principal terms and conditions of the merger
agreement, including the representations, warranties and covenants and the
conditions to each party's obligation to complete the merger. The Young board
considered favorably that the terms of the merger agreement are reasonable and
protective of Young's interests. In particular, the Young board considered
favorably that:
. Chronicle Publishing's ability to solicit, facilitate, discuss or enter
into an alternative transaction is restricted; and
. if the merger agreement is terminated by the parties because Chronicle
Publishing fails to qualify for taxation as a subchapter S corporation,
Young may elect to purchase the KRON-TV and Bay TV assets, and upon such
election Chronicle Publishing may elect to pay Young a fee of $25.0
million to terminate the sale.
The Young board reviewed pro forma financial data for Young and Chronicle
Publishing after giving effect to the merger. The Young board considered
favorably the expectation that Young might be able to realize
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synergies after acquiring Chronicle Publishing. The cost savings were
preliminarily estimated by Young's management to be approximately $14.4
million. Young's management believed that these cost savings could result from
post-merger staff reductions at KRON-TV and BayTV, as well as from the
possibility of revenue enhancements utilizing Young management's significant
experience in local and national advertising.
The Young board considered the ability of Young and Chronicle Publishing to
complete the merger, including their ability to obtain necessary regulatory
approvals and their obligations to attempt to obtain those approvals, and
determined that there was a strong likelihood that such approvals would be
obtained.
The Young board received reports from management as to the results of the
due diligence investigation of Chronicle Publishing and determined that these
reports did not contain issues that would preclude its approval of the merger.
The Young board considered favorably the opinion of its financial advisor,
Lazard, dated November 15, 1999, including the related financial analyses,
that, based upon the assumptions and other matters stated therein, the
consideration to be paid in connection with the merger was fair from a
financial point of view to Young. The Young board viewed the opinion and
analyses of an independent, nationally recognized financial advisor such as
Lazard to be important factors in reaching a determination that the merger
transaction should be approved.
The Young board also considered the following risks and additional factors
relating to the merger:
. Chronicle Publishing has traditionally paid above-market rates for
programming and, despite KRON-TV's lead in ratings, KRON-TV is only third
in share of local advertising;
. Young may not be able to successfully integrate the operations of the two
companies and therefore the anticipated benefits of the merger, including
cost savings and operating synergies, may not be fully realized, or that
integration difficulties may cause the disruption of, or a loss of
momentum in, the activities of Young's business;
. The risk that the merger would not be completed, considering the limited
circumstances under which Chronicle Publishing could terminate the merger
agreement and Chronicle Publishing's obligation, under certain
circumstances, to pay a $25.0 million termination fee to Young;
. The potential loss of the NBC affiliation and its impact on the financial
results and operations of KRON-TV;
. The announcement of the merger and the efforts necessary to complete the
merger could result in a disruption in the operations of Young by, among
other things, diverting management and other resources of Young from its
day to day business; and
. Young is likely to incur substantial indebtedness, as well as transaction
costs of approximately $38 million (including investment banking, legal
and accounting fees), in connection with the merger.
The foregoing discussion of the information and factors considered by the
Young board is not intended to be exhaustive but is believed to include all
material factors considered by the Young board. In view of the wide variety of
information and factors considered, the Young board did not find it practical
to, and did not, assign any relative or specific weights to the foregoing
factors, and individual directors may have given differing weights to different
factors. The Young board did not attempt to analyze the fairness of the
exchange ratio and the cash consideration in isolation from the considerations
as to the businesses of Young and Chronicle Publishing, the strategic merits of
the merger or the other considerations referred to above.
Recommendation of the Chronicle Publishing Board; Chronicle Publishing's
Reasons for the Merger
At a meeting held prior to the execution of the merger agreement, Chronicle
Publishing's board determined that the merger agreement and the merger are fair
to, and in the best interests of, Chronicle
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Publishing and its stockholders. Accordingly, the Chronicle Publishing board
unanimously approved the merger agreement and the merger. The Chronicle
Publishing board based its determination on the following factors:
. information provided by DLJ regarding current industry, economic and
market conditions, including the trend toward consolidation in the
television broadcasting industry and recent market prices for television
broadcasting properties in major television markets throughout the United
States;
. DLJ's opinion presented to the Chronicle Publishing board to the effect
that, based upon and subject to assumptions, limitations and
qualifications set forth in its opinion, the consideration to be received
by Chronicle Publishing stockholders in the merger is fair to Chronicle
Publishing from a financial point of view, and the financial presentation
made by DLJ to the Chronicle Publishing board in connection with the
delivery of its opinion;
. the financial condition, results of operations, cash flow, business and
general prospects of KRON-TV and BayTV, both on a historical and
prospective basis;
. the strategic alternatives available to Chronicle Publishing following
the disposition of its other businesses, including the possibility of
continuing to operate KRON-TV and BayTV as independent businesses, as
well as the risks and uncertainties of those alternatives;
. the current business environment for television broadcasting affiliates
of NBC-TV and other national television networks;
. the increasingly competitive nature of the television broadcasting
industry resulting from new market competitors such as cable television
operators, satellite television operators and the internet;
. the terms and conditions of the merger agreement, including the amount of
consideration payable in the merger;
. the fact that the number of shares of Young stock to be issued in the
merger fluctuates within a range with the average closing price of
Young's stock;
. the fact that the merger is conditioned upon obtaining the approval of
the holders of a majority of Chronicle Publishing's outstanding common
stock;
. the indemnification obligations and exposure of Chronicle Publishing's
stockholders following the completion of the merger;
. the fact that DLJ, on behalf of Chronicle Publishing, contacted and
engaged in discussions with numerous potential acquirors of KRON-TV and
BayTV and the Young proposal represented the most attractive offer the
Chronicle Publishing stockholders received;
. the ability of Young and Chronicle Publishing to complete the merger,
including their ability to obtain necessary regulatory approvals, and
their respective obligations to attempt to obtain those regulatory
approvals on a timely basis;
. information regarding Young, including Young's financial condition,
results of operations, business and general prospects, Young's market
capitalization, the historical market prices and trading information with
respect to Young's Class A common stock, the liquidity of Young's Class A
common stock in the public markets, and prospective market conditions for
Young' s Class A common stock; and
. the potential effects of Young's acquisition of KRON-TV and BayTV on
Chronicle Publishing's employees and the San Francisco community in
general.
The foregoing list of factors is not intended to be exhaustive, but is
believed to include all material factors considered by the Chronicle Publishing
board in its assessment of the merger agreement and the merger. The Chronicle
Publishing board did not assign relative weights to the foregoing factors or
determine that any one factor was more important than any others, but made its
determination based upon the totality of the information presented and
available to it.
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<PAGE>
Opinion of Young's Financial Advisor
On November 15, 1999, Lazard delivered its oral opinion to the Young board,
which opinion was subsequently confirmed in writing, to the effect that, as of
November 15, 1999, based upon and subject to the various considerations set
forth in the opinion, the consideration to be paid in connection with the
merger was fair to Young from a financial point of view.
A copy of the full text of the opinion of Lazard dated November 15, 1999,
which sets forth the assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached hereto as
annex B. This summary discussion of such opinion of Lazard is qualified in its
entirety by reference to the full text of such opinion. The engagement of
Lazard and its opinion are for the benefit of the Young board, and its opinion
was rendered to the Young board in connection with its consideration of the
merger. Lazard's opinion is directed only to the fairness of the merger
consideration from a financial point of view to Young and does not address any
other aspects of the merger. The opinion is not intended to, and does not
constitute, a recommendation to any holder of Young's common stock as to how
such holder should vote with respect to the proposal to issue shares of Young's
Class A common stock to facilitate the closing of the merger. Holders of
Young's common stock are urged to read the opinion of Lazard in its entirety.
In connection with its written opinion dated November 15, 1999 to the Young
board, Lazard:
. reviewed the financial terms and conditions of the draft agreement dated
November 12, 1999;
. analyzed certain historical business and financial information relating
to Young and Chronicle Publishing;
. reviewed various financial forecasts and other data relating to Young
provided to Lazard by Young and financial forecasts relating to Chronicle
Publishing through 2000 provided to Lazard by Chronicle Publishing (which
forecasts, in each case, were limited up to the year 2000, Young and
Chronicle Publishing having informed Lazard that no other meaningful
longer term forecasts were provided to them) and financial forecasts
relating to Chronicle Publishing from 2000 to 2004 provided to Lazard by
Young;
. held discussions with members of senior management of Young and Chronicle
Publishing with respect to the businesses and prospects of Young and
Chronicle Publishing and the strategic objectives of each, and possible
benefits that might be realized following the merger;
. reviewed public information with respect to certain other companies in
lines of business Lazard believed to be generally comparable to the
business of Young and Chronicle Publishing;
. reviewed the financial terms of certain business combinations involving
companies in lines of business Lazard believed to be generally comparable
to those of Young and Chronicle Publishing;
. reviewed the historical stock prices and trading volumes of Young's
common stock; and
. conducted such other financial studies, analyses and investigations as
Lazard deemed appropriate.
Lazard also took into account the possibility that KRON-TV's affiliation
with NBC would not be extended past December 31, 2001 and that, thereafter,
KRON-TV may be operated as an independent station.
Lazard relied upon the accuracy and completeness of the foregoing
information and did not assume any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Young or Chronicle Publishing, or
concerning the solvency of or issues relating to solvency concerning Young or
Chronicle Publishing. With respect to financial forecasts, Lazard assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Young and Chronicle Publishing as
to the future financial performance of Young and Chronicle Publishing,
respectively. Lazard assumed no responsibility for and expressed no view as to
such forecasts or the assumptions on which they were based.
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<PAGE>
The written opinion of Lazard was necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made available
to it as of, November 15, 1999. In rendering its opinion, Lazard did not
address the relative merits of the merger or Young's underlying decision to
effect the merger.
In rendering its opinion, Lazard assumed that the merger would be
consummated on the terms described in the merger agreement, without any waiver
of any material term or condition by Young and that obtaining the necessary
regulatory approvals, if any, for the merger would not have an adverse effect
on Young or Chronicle Publishing and that the projected synergies of the merger
are realized substantially in accordance with such projections. Lazard also
assumed that the definitive merger agreement would not differ in any material
respects from the draft furnished to it.
The following is a summary of the material financial and comparative
analyses performed by Lazard in connection with providing its oral opinion to
the Young board and reviewing it with the Young board at its meeting on
November 15, 1999.
Comparable Publicly Traded Companies Analysis.
Lazard compared the enterprise value implied by the merger consideration
expressed as a multiple of estimated revenues, cash flows and operating profits
to the trading multiples of public companies in lines of business believed to
be generally comparable to those of Young. Such companies (collectively, the
"Selected Comparable Broadcasting Companies") included:
. A.H. Belo Corporation
. Granite Broadcasting Corporation
. Hearst-Argyle Television, Inc.
. Lee Enterprises Inc.
. Paxson Communications Corporation and
. Sinclair Broadcasting Group, Inc.
The analysis indicated that the enterprise value, limited to the
broadcasting assets only, of the Selected Comparable Broadcasting Companies as
a multiple of 1999 estimated revenues ranged from 3.56x to 13.54x, as a
multiple of 2000 estimated revenues ranged from 2.93x to 11.89x, as a multiple
of 1999 estimated broadcast cash flow ("BCF") ranged from 8.9x to 33.6x, as a
multiple of 2000 estimated BCF ranged from 6.8x to 27.2x, as a multiple of 1999
estimated earnings before interest, taxes, depreciation and amortization
("EBITDA") ranged from 9.5x to 37.3x, as a multiple of 2000 estimated EBITDA
ranged from 8.3x to 30.1x, and the equity value of the Selected Comparable
Broadcasting Companies as a multiple of 1999 estimated after tax cash flow
("ATCF") ranged from 7.2x to 55.3x and as a multiple of 2000 estimated ATCF
ranged from 6.4x to 45.6x.
Based upon the projections provided by the management of Young on a pro
forma basis which have been derived from projections received from Chronicle
Publishing, the merger consideration indicated that the asset value of KRON-TV
as a multiple of pro forma 1999 estimated revenues was 6.64x, as a multiple of
pro forma 2000 estimated revenues was 5.85x, as a multiple of pro forma 1999
estimated EBITDA was 11.6x and as a multiple of pro forma 2000 estimated EBITDA
was 9.6x. Excluding $7.9 million and $7.3 million in network compensation from
NBC in 1999 and 2000, respectively, the asset value of KRON-TV as a multiple of
pro forma 1999 estimated revenues was 7.09x, as a multiple of pro forma 2000
estimated revenues was 6.17x, as a multiple of pro forma 1999 estimated EDITDA
was 13.0x and as a multiple of pro forma 2000 estimated EBITDA was 10.5x.
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<PAGE>
Selected Precedent Transactions Analysis.
Lazard reviewed selected publicly available financial, operating and stock
market information of 22 merger transactions in the broadcasting industry since
1997 (the "Selected Broadcasting Transactions").
The Selected Broadcasting Transactions consisted of (acquirer/target):
. CBS Corporation/Gaylord Entertainment Co.
. CBS Corporation/Granite Broadcasting Corporation
. Hearst-Argyle Television, Inc./Pulitzer Publishing Company
. Raycom Ltd./Malrite Communications Group, Inc.
. Hearst-Argyle Television, Inc./Kelly Broadcasting Co.
. Meredith Corporation/Kelly Broadcasting Co.
. Emmis Broadcasting Corporation/SF Broadcasting, Inc.
. Sinclair Broadcasting Group, Inc./River City License Partnership
. Fisher Companies Inc./Retlaw Broadcasting LLC
. Sinclair Broadcasting Group, Inc./Guy Gannett Communications
. Freedom Communications Inc./Granite Broadcasting Corporation
. The Ackerley Group, Inc./Sinclair Broadcasting Group, Inc.
. Hicks, Muse, Tate & Furst Incorporated/LIN Television Corporation
. Sinclair Broadcasting Group, Inc./Sullivan Broadcast Holdings, Inc.
. Apollo Management L.P./Telemundo Group, Inc.
. The Hearst Corporation/Argyle Television, Inc.
. Meredith Corp./First Media Group, Inc.
. Sinclair Broadcast Group, Inc./Heritage Media Corp.
. Paxson Communications Corporation/WBIS-TV
. Sinclair Broadcast Group, Inc./Max Media Properties, LLC
. News Corporation/Heritage Media Corp.
. A.H. Belo Corporation/The E. W. Scripps Howard Company
Based upon such information for the Selected Broadcasting Transactions, the
transaction value as a multiple of the last fiscal year plus one year operating
cash flow ("LFY+1 OCF") ranged from 9.8x to 29.9x. Based upon financial
information provided by the management of Young, the merger consideration as a
multiple of LFY+1 OCF was 11.6x.
Discounted Cash Flow Analysis.
Based upon forecasts provided by the management of Young which reflected the
consummation of the merger, derived from projections provided by the management
of Chronicle Publishing up to the year 2000, Lazard estimated the net present
value of the future free cash flows of the assets to be acquired in the merger.
In performing its calculations, Lazard excluded the theoretical value of
approximately $110 million (based on pro forma projections from the management
of Young) to Young of a step-up in tax basis to be realized in
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<PAGE>
connection with the transaction. Lazard used discount rates ranging from 8.0%
to 11.0% and terminal multiples of estimated EBITDA in year 2004 ranging from
9.0x to 12.0x. Including the network compensation from NBC estimated to be $7.3
million in 2000 and $7.8 million thereafter, this analysis indicated a net
present equity value reference range of approximately $815 million to $915
million. Excluding the network compensation, this analysis indicated a net
present equity value reference range of approximately $750 million to $840
million.
Hypothetical Pro Forma Trading Analysis.
Based upon forecasts provided by the management of Young, which reflected
the consummation of the merger, derived from projections provided by the
management of Chronicle Publishing up to the year 2000, Lazard estimated the
hypothetical pro forma trading price of Young's common stock after giving
effect to the merger. The hypothetical trading price was mathematically derived
based on assumptions regarding the price paid for Chronicle Publishing, the pro
forma financial results of Young and Young's current trading multiples. The
hypothetical share price calculation does not take into account qualitative
factors such as market conditions, potential investor reaction to the
transaction or any other factors not mentioned above. Based on applying Young's
current multiples to the pro forma financial model provided by Young, including
network compensation from NBC, Lazard calculated a hypothetical pro forma share
price of $55.30, an 11.6% premium over $49.56, the closing price on the day
prior to the calculation. Furthermore, Lazard performed a sensitivity analysis
that derived a range of hypothetical pro forma share prices based on a range of
pro forma financial results and a range of pro forma trading multiples. This
sensitivity analysis showed that Young's hypothetical pro forma share price to
be in a range from $37.96 to $61.85. Lazard also calculated the hypothetical
pro forma share price using Young's financial model but excluding network
compensation from NBC. Based on applying Young's current multiples to the pro
forma financial model provided by Young, excluding network compensation from
NBC, Lazard calculated a hypothetical pro forma share price of $49.85, a 0.6%
premium over $49.56, the closing price on the day prior to the calculation.
Furthermore, Lazard performed a sensitivity analysis that derived a range of
hypothetical pro forma share prices based on a range of pro forma financial
results and a range of pro forma trading multiples. This sensitivity analysis
showed that Young's hypothetical pro forma share price to be in a range from
$33.89 to $56.97.
The summary set forth above does not purport to be a complete description of
the analyses performed by Lazard, although it is a summary of the material
financial and comparative analyses performed by Lazard in arriving at its
opinion. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or the summary set forth above without considering the
analyses as a whole, could create an incomplete or misleading view of the
process underlying the opinion of Lazard. No company or transaction used in the
above analyses as a comparison is identical to Young, or Chronicle Publishing
or the transactions contemplated by the merger agreement. In arriving at its
opinion, Lazard considered the results of all such analyses and did not assign
relative weights to any of the analyses. The analyses were prepared solely for
the purpose of Lazard providing its opinion to the Young board in connection
with its consideration of the merger and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold, which may be significantly more or less favorable than as set forth in
these analyses. Lazard made, and was provided estimates and forecasts by the
managements of Young and Chronicle Publishing based upon numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Young, Chronicle
Publishing and Lazard. Similarly, any estimate of values or forecast of future
results contained in the analyses is not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses.
In performing its analyses, Lazard made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters. Because such analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Young, Chronicle Publishing, Lazard, or any
other person assumes responsibility if future results or actual values are
materially different from those forecasts or estimates contained in the
analyses.
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<PAGE>
The opinion and presentation of Lazard to the Young board was only one of
many factors taken into consideration by the Young board in making its
determination to approve the merger agreement. In addition, the terms of the
merger agreement were determined through arm's-length negotiations between
Young and Chronicle Publishing, and were approved by the Young board.
Lazard is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts, and valuations for estate, corporate and other purposes. Lazard was
selected to act as investment banker to the Young board because of its
expertise and its reputation in investment banking and mergers and
acquisitions.
In connection with Lazard's services as investment banker to Young,
including its delivery of the opinion summarized above, Young has agreed to pay
Lazard a fee of approximately $5 million, a substantial portion of which is
contingent upon the completion of the merger. Lazard has in the past provided
financial advisory services to Young for which it received usual and customary
compensation. Young also has agreed to reimburse Lazard for its reasonable out-
of-pocket expenses (including reasonable fees and expenses of its legal
counsel) and will indemnify Lazard and certain related parties against certain
liabilities that may arise out of the rendering of the opinion.
In the ordinary course of its business, Lazard and its affiliates may
actively trade in the securities of Young for its own account and for the
account of its customers and, accordingly, may at any time hold a long or short
position.
Opinion of Chronicle Publishing's Financial Advisor
Introduction
Chronicle Publishing asked Donaldson, Lufkin & Jenrette Securities
Corporation (DLJ), in its role as financial advisor to Chronicle Publishing, to
render an opinion to the Chronicle Publishing board as to the fairness to
Chronicle Publishing, from a financial point of view, of the consideration to
be received by the stockholders in the merger.
On November 15, 1999, DLJ delivered to the Chronicle Publishing board a
written opinion to the effect that, as of such date, and based upon and subject
to the assumptions, limitations and qualifications in the opinion, the
consideration to be received by the holders of Chronicle Publishing's common
stock was fair to Chronicle Publishing from a financial point of view. A copy
of the November 15, 1999 DLJ opinion is attached to this proxy
statement/prospectus as annex C. You should read this opinion for the
procedures followed, the matters considered and the limits of the review made
by DLJ. The opinion is based on economic, market, regulatory, financial and
other conditions as existed on November 15, 1999. Although later events may
affect its opinion, DLJ does not have any obligation to update or reaffirm its
opinion.
DLJ prepared its opinion for the Chronicle Publishing board. The opinion
addresses only the fairness from a financial point of view of the consideration
to be received by the holders of common stock in the merger. The opinion is not
a recommendation to any Chronicle Publishing stockholder as to how you should
vote on the merger. DLJ has expressed no opinion as to:
. the prices at which Young common stock would actually trade in the
future;
. the merits of the merger relative to other business strategies considered
by the Chronicle Publishing board;
. the decision of the Chronicle Publishing board to proceed with the
merger.
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Information Reviewed and Assumptions Made
In arriving at its November 15, 1999 opinion, DLJ:
. reviewed a draft of the merger agreement;
. reviewed financial and other information that was publicly available or
furnished to DLJ by Chronicle Publishing, including information provided
during discussions with its management;
. reviewed certain financial projections of Chronicle Publishing prepared
by its management;
. compared various financial and securities data of Chronicle Publishing
and Young with other companies whose securities are traded in public
markets; and
. reviewed the historical stock prices and trading volumes of Young's
common stock, reviewed prices and premiums paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as it deemed appropriate for purposes of rendering its
opinion.
For its opinion, DLJ relied upon and assumed the accuracy and completeness
of all of the financial and other information that was available or provided to
it from public sources, that was provided to it by Chronicle Publishing or its
representatives, or that was otherwise reviewed by DLJ and assumed that
Chronicle Publishing was not aware of any information prepared by it or its
advisors that might have been material to DLJ's opinion had it been made
available to DLJ. DLJ also relied on representations that all financial
projections were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Chronicle Publishing as
to the future operating and financial performance of Chronicle Publishing. DLJ
assumed that these projections will be realized in all material respects in the
amounts and at the times contemplated thereby. DLJ also assumed that the merger
will be consummated only upon satisfaction of all conditions set forth in the
merger agreement, including consummation of the asset sales contemplated by the
asset sale agreements. DLJ did not make any independent evaluation of the
assets or liabilities of Chronicle Publishing or an independent verification of
the information reviewed by DLJ. DLJ relied as to all legal matters on advice
of counsel to Chronicle Publishing.
Financial Analyses
The following is a summary of the financial analyses made by DLJ in
connection with its opinion and its presentation to the Chronicle Publishing
board on November 15, 1999. The summary of the financial analyses includes
information presented in tabular format. In order to understand fully the
financial analyses used by DLJ, these tables must be read together with the
text of each summary. The tables alone do not summarize completely the
financial analyses.
Chronicle Publishing's assets consist of KRON-TV and its 51% interest in
BayTV. DLJ focused its analysis primarily on KRON-TV and examined comparable
television broadcasting transactions and public companies. There were no
relevant comparable transactions or comparable public companies for BayTV.
Purchase Price. Young proposed a purchase price of $650 million cash plus
$172,585,000 million stock consideration comprised of approximately 3.7 million
shares of Young's Class A common stock at $47.01 per share as of November 12,
1999 for a total purchase price of approximately $823 million. Because Young's
Class A common stock has limited liquidity, DLJ applied a discount of 12.5% to
the stock consideration implying an adjusted purchase price of approximately
$801 million.
Comparable Transactions Analysis. DLJ reviewed certain publicly available
information regarding 50 acquisitions in the television broadcasting industry
completed from February 1996 to present. DLJ selected these transactions
because they involved network affiliated stations in large television revenue
markets. For each of the selected acquisitions DLJ calculated, to the extent
information was publicly available, the transaction value as a multiple of
projected cash flow or forward EBITDA. Based on its professional judgment and
expertise, DLJ also calculated the implied adjusted purchase price for
Chronicle Publishing as a multiple of
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(1) 1999 estimated EBITDA and (2) 2000 projected EBITDA. Estimates of future
financial performance were provided to DLJ by Chronicle Publishing's
management. EBITDA is defined as earnings before interest, taxes, depreciation
and amortization.
Historically, KRON-TV received cash payments from the National Broadcasting
Company, Inc. ("NBC") as part of KRON-TV's affiliate agreement. The Company's
projections for EBITDA include payments from NBC of $7.9 million in 1999 and
$7.3 million in 2000. DLJ analyzed Chronicle Publishing's purchase price
multiples relative to the comparable transactions both including and excluding
payments from NBC due to industry trends for reductions in such payments and
NBC's indication that payments to KRON-TV could be eliminated after the
expiration of the current agreement on December 31, 2001. These analyses showed
the following:
Precedent Transaction Multiples
<TABLE>
<CAPTION>
Forward
EBITDA
-------
<S> <C>
Median............................... 13.1x
High................................. 24.0
Low.................................. 9.5
</TABLE>
Implied KRON-TV/BayTV Transaction Multiples
<TABLE>
<CAPTION>
EBITDA
------------
1999E 2000P
----- -----
<S> <C> <C>
With NBC payments............... 14.0x 12.6x
Without NBC payments............ 16.3 14.3
</TABLE>
The implied multiples for Chronicle Publishing are substantial premiums to
the median transaction value to forward EBITDA multiple of 13.1x.
Based on these analyses, and using comparable data for KRON-TV, DLJ derived
an implied enterprise value range of Chronicle Publishing of $680 million to
$915 million which compares favorably with the purchase price of $823 million
and the adjusted purchase price of $801 million (with a 12.5% liquidity
discount).
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow (DCF)
analysis of KRON-TV and BayTV combined using projections and assumptions
provided by the management of Chronicle Publishing. The projections were
adjusted by eliminating payments from NBC in 2002 and beyond due to trends in
the television broadcasting industry for a reduction in such payments and NBC's
indications that it would eliminate these payments upon the expiration of the
current agreement on December 31, 2001. The following assumptions were used in
calculating DCF values:
. DCF projection period from January 1, 2000 through December 31, 2004;
. Discount rate of 7% to 9%, reflecting KRON-TV's weighted average cost of
capital; and
. Terminal value based on EBITDA multiples of 8.8x to 13.4x.
The DCF analysis shows a range of total enterprise value for Chronicle
Publishing of:
<TABLE>
<CAPTION>
Low Average High
-------------- -------------- ----------------
<S> <C> <C> <C>
Total enterprise value... $523.3 million $718.8 million $1,173.6 million
</TABLE>
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This range of total enterprise values compares favorably with the purchase
price of $823 million and adjusted purchase price of $801 million.
KRON-TV Comparable Public Companies Analysis. DLJ focused its comparable
public company analysis on television broadcasters. DLJ performed a comparable
public analysis in which it compared certain publicly available historical
financial and operating data, estimates of future financial performance and
market statistics (calculated based upon closing stock prices on November 12,
1999) of publicly traded television broadcasting companies that DLJ deemed to
be reasonably similar to KRON-TV. The comparable public companies comprised
A.H. Belo, Granite Broadcasting, Hearst-Argyle Television, Sinclair Broadcast
Group and Young Broadcasting. Historical financial information used in
connection with this analysis was as of the date of the most recent financial
statements publicly available for each company. Projected information for Young
was derived from Lazard equity research dated November 4, 1999. All other
projected financial information was derived from publicly available research
For each of the comparable public companies, DLJ calculated multiples of (1)
enterprise value to projected calendar year 1999 EBITDA and (2) enterprise
value to projected calendar year 2000 EBITDA. Enterprise value is defined as
the sum of the market value of equity securities (stock price as of November
12, 1999) less cash, plus any outstanding debt and preferred stock. DLJ also
calculated the implied adjusted purchase price multiples for the merger
transaction to calendar year 1999 and calendar year 2000 EBITDA. These analyses
show:
<TABLE>
<CAPTION>
Enterprise
Value/EBITDA
---------------
CY 1999 CY 2000
------- -------
<S> <C> <C>
High...................................................... 16.7 14.3
Low....................................................... 9.0 7.9
Median.................................................... 9.8x 9.2x
Implied purchase price multiples for KRON-TV/BayTV........ 14.0x 12.6x
</TABLE>
The implied purchase price multiples for KRON-TV and BayTV include network
compensation of $7.9 million and $7.3 million for 1999 and 2000, respectively.
The implied purchase price multiples are a substantial premiums to the median
enterprise value to EBITDA multiples for calendar year 1999 and calendar year
2000 of the comparable public companies. Based on these analyses, and using
comparable data for KRON-TV, DLJ derived an implied valuation range of KRON-TV
of $550 million to $775 million, or a range of approximately 9.5x to 13.5x
calendar year 1999 EBITDA. No company utilized in the comparable public
companies analysis was identical to KRON-TV. Accordingly, an analysis of the
results of such a comparison is not purely mathematical; rather, it involves
complex considerations and judgments, based on the financial advisors'
professional experience, concerning differences in historical and projected
financial and operating characteristics of the comparable companies and other
factors that could affect the public trading value of the comparable companies
or company to which they are being compared.
This summary is not a complete description of DLJ's analyses. Instead, it
summarizes the material elements of the presentation made by DLJ to the
Chronicle Publishing board on November 15, 1999. The preparation of DLJ's
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances. Therefore, DLJ's opinion is not readily susceptible
to summary description.
Each of DLJ's analyses was carried out in order to provide a different
perspective on the transaction and add to the total mix of information
available. DLJ did not form a conclusion as to whether any individual analysis,
considered by itself, supported or failed to support an opinion as to fairness
from a financial point of view. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses taken as a whole. DLJ
did not place particular reliance or weight on any individual analysis, but
instead concluded that its analyses, taken as a whole,
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<PAGE>
supported its determination. For this reason, DLJ believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the evaluation process underlying its
opinion. The analyses performed by DLJ are not necessarily indicative of
actual, past or future results or values, which may be significantly more or
less favorable than suggested by these analyses.
Engagement Letter
Chronicle Publishing engaged DLJ to act as its exclusive financial advisor
in connection with the merger and the divestiture of its other assets. Under
the engagement letter, Chronicle Publishing paid DLJ a retainer fee of $500,000
on the signing of the letter and agreed to pay DLJ an additional $250,000 for
each three month period thereafter until their engagement is complete. In
addition to the retainer fee, Chronicle Publishing agreed to pay DLJ a
transaction fee based upon the aggregate value of the consideration received by
Chronicle Publishing or its stockholders in connection with the merger and the
sale by Chronicle Publishing of its other businesses. The transaction fee is
(x) 0.40% of the first $2,000,000,000 of aggregate consideration received by
Chronicle Publishing or its stockholders, plus (y) 0.50% of the aggregate
consideration received by Chronicle Publishing or its stockholders above
$2,000,000,000 and less than $2,200,000,000, plus (z) 1.0% of the aggregate
consideration Chronicle Publishing or its stockholders above $2,200,000,000,
but less (a) a previously paid retainer fee of $150,000, (b) the $500,000
retainer fee paid on the signing of the letter, (c) all of the $250,000
quarterly payments, and (d) all amounts paid to DLJ in exchange for its opinion
as described below. In consideration for the opinion delivered by DLJ in
connection with the merger, Chronicle Publishing also agreed to pay DLJ an
additional fee equal to the lesser of (i) $200,000, and (ii) 20% of the
expected transaction fee described above. Based upon the agreed upon and
expected aggregate value of the consideration to be received by Chronicle
Publishing in connection with the merger and Chronicle Publishing's sale of its
other businesses, Chronicle Publishing expects to pay DLJ additional fees
totaling approximately $7,000,000, less retainers, quarterly payments and
opinion fees.
In addition, Chronicle Publishing also agreed to reimburse DLJ for out-of-
pocket expenses. Chronicle Publishing also agreed to indemnify DLJ and related
persons against various liabilities in connection with its engagement,
including liabilities under federal securities laws. The SEC has taken the
position that indemnification under the federal securities laws may not be
enforceable if it is found to be against public policy.
Other Relationships
DLJ has performed investment banking and other services for Chronicle
Publishing in the past. DLJ may also provide investment banking services for
Chronicle Publishing or Young in the future.
The Chronicle Publishing board selected DLJ to act as its financial advisor
for the merger because DLJ is an internationally recognized investment banking
firm with substantial expertise in the television broadcasting industry and in
mergers and acquisitions. DLJ, as part of its investment banking services, is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed
and unlisted securities, private placements and valuations for corporate and
other purposes.
Interests of Executive Officers of Chronicle Publishing in the Merger
You should be aware of the interests that certain executive officers of
Chronicle Publishing have in the merger. On July 8, 1999, Martin A. Jaffe, a
Vice President and Chief Financial Officer of Chronicle Publishing, W. Ronald
Ingram, a Vice President, Secretary and General Counsel of Chronicle
Publishing, Catherine E. McHugh, Treasurer and Controller of Chronicle
Publishing, and Peggy Restivo, Assistant Treasurer of Chronicle Publishing,
entered into Retention Bonus Agreements with Chronicle Publishing. These
agreements
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provide that in return for their continued employment until June 30, 2000 or
the date on which Chronicle Publishing elects to terminate their employment,
Chronicle Publishing will pay each of these officers a retention bonus equal to
two times the sum of (i) their respective base salaries and (ii) the higher of
their respective 1998 or 1999 annual bonus. Chronicle Publishing has the option
to extend the June 30, 2000 date to December 31, 2000, in which event it will
pay an additional bonus (an extension bonus) on June 30, 2000 equal to 50% of
the sum of (i) each officer's base annual salary as of June 30, 2000 and (ii)
the full amount of the higher of each officer's 1998 or 1999 annual bonus.
Accounting Treatment of the Merger
Young expects that the merger will be treated as a "purchase" under
generally accepted accounting principles.
Regulatory Approvals
HSR Act
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the regulations thereunder, Young and Chronicle Publishing may not merge
unless Notification and Report Forms have been filed with the Antitrust
Division of the United States Department of Justice and the United States
Federal Trade Commission, and waiting period requirements have expired or are
otherwise earlier terminated by the Antitrust Division and the FTC. On January
28, 2000, Young and Chronicle Publishing submitted the required filings to the
Antitrust Division and the FTC. Early termination of the waiting period with
respect to the merger was requested of the FTC and the Antitrust Division. The
applicable waiting period expired on February 27, 2000.
Notwithstanding the expiration of the waiting period, at any time before or
after the completion of the merger, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the consummation of the merger
or seeking the divestiture of substantial assets of Young or Chronicle
Publishing. We expect that the merger will not violate the antitrust laws.
There can be no assurance, however, that a challenge to the merger on antitrust
grounds by the Antitrust Division, the FTC, states attorneys general and, under
some circumstances, private parties, will not be made, or, if such a challenge
is made, what the result will be.
FCC Approval
The ownership of Young's television stations and certain of its television
broadcasting operations are subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"), which was
substantially amended by the Telecommunications Act of 1996 (the "1996 Act").
The Communications Act prohibits the operation of television and radio
broadcasting stations except under a license issued by the FCC and empowers the
FCC, among other matters, to issue, renew, revoke and modify broadcast
licenses, to determine the location of stations, to establish areas to be
served and to regulate certain aspects of broadcast programming. The
Communications Act also prohibits the assignment of a broadcast license or the
transfer of control of a license without the prior approval of the FCC.
Consequently, an application for consent to assign control of KRON-TV's
licenses was filed with the FCC on November 22, 1999. It is a condition
precedent to the consummation of the merger that FCC consent to such transfer
of ownership be obtained. On February 29, 2000, the FCC granted its consent to
the assignment of the KRON-TV licenses from Chronicle Publishing to Young. A
public notice confirming that action was released by the FCC on March 14, 2000.
The Communications Act provides that a license may be granted to any
applicant if the public interest, convenience and necessity will be served
thereby, subject to certain limitations. Under regulations promulgated by the
FCC pursuant to the 1996 Act, television broadcast licenses are issued
initially for terms of eight years.
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Upon application, and in the absence of an objection to the renewal
application, or an adverse finding as to the licensee's qualifications,
broadcast licenses usually are renewed without a hearing by the FCC for
additional terms of up to eight years. Under FCC rules, an existing license
automatically continues in effect once a timely renewal application has been
filed until a final FCC decision is issued.
Material United States Federal Income Tax Consequences
Chronicle Publishing Stockholders
The following describes the material United States federal income tax
consequences of the merger to Chronicle Publishing stockholders that are
individuals, trusts and estates. The discussion contained in this summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations promulgated thereunder, administrative pronouncements and judicial
decisions, all as in effect as of the date hereof and all of which are subject
to change, possibly with retroactive effect. This summary applies only to
Chronicle Publishing stockholders that hold their Chronicle Publishing stock as
a capital asset within the meaning of Section 1221 of the Code. This summary
does not address all of the federal income tax consequences that may be
relevant to certain Chronicle Publishing stockholders in light of their
particular circumstances, including Chronicle Publishing stockholders subject
to the alternative minimum tax, or the federal income tax consequences to any
Chronicle Publishing stockholders that exercise dissenters' rights. This
summary does not address any state, local or foreign tax consequences of the
merger.
The Merger. For United States federal income tax purposes, the merger will
be treated as (i) a sale by Chronicle Publishing of all its assets to Young in
exchange for the merger consideration, i.e., the cash, the right to receive all
or part of the amount deposited in the escrow account, the Young common stock
to be delivered to the Chronicle Publishing stockholders and the assumption by
Young of certain Chronicle Publishing liabilities, followed by (ii) a
liquidating distribution by Chronicle Publishing of the cash, the rights with
respect to the escrow account and the Young common stock.
Deemed Sale by Chronicle Publishing. Chronicle Publishing will recognize
gain or loss on the deemed sale of each of its assets equal to the difference
between (i) the fair market value of the portion of the merger consideration
allocated to such asset and (ii) Chronicle Publishing's adjusted tax basis in
such asset. Such gain or loss should generally be long-term capital gain or
loss, except with regard to certain ordinary income producing assets and to the
extent of depreciation recapture with respect to the sale of some of Chronicle
Publishing's assets, which will also produce ordinary income. Chronicle
Publishing will not itself be taxable on such income, gain or loss, but
Chronicle Publishing stockholders will recognize and be taxed on their
respective shares of such income, gain or loss. A Chronicle Publishing
stockholder's adjusted tax basis in his Chronicle Publishing stock immediately
prior to the receipt of the merger consideration will be increased at that time
to reflect Chronicle Publishing's items of income and gain and decreased to
reflect Chronicle Publishing's items of loss, deduction, and nondeductible
noncapitalizable expense, including such items of income, gain and loss as are
recognized by Chronicle Publishing on the deemed sale of its assets to Young,
except to the extent that such items were previously taken into account in
computing the stockholder's adjusted tax basis. A Chronicle Publishing
stockholder's adjusted tax basis in his Chronicle Publishing stock will also be
decreased to reflect prior distributions of cash or other property to such
stockholder to the extent not previously taken into account in computing the
stockholder's adjusted tax basis.
Deemed Liquidating Distribution. A Chronicle Publishing stockholder will
recognize capital gain or loss in addition to the amounts of income, gain or
loss recognized by Chronicle Publishing and taxable to that stockholder, as
described in the preceding paragraph, to the extent of the difference, if any,
between (i) the sum of the amount of cash and the fair market value of the
rights with respect to the escrow account and the Young common stock issued to
such stockholder in the merger and (ii) such stockholder's adjusted tax basis
in his Chronicle Publishing stock (which is cancelled pursuant to the merger).
The gain or loss will be long-term capital gain or loss if the Chronicle
Publishing stockholder's holding period in the Chronicle Publishing stock
cancelled pursuant to the merger exceeds one year on the date of the merger.
Gain or loss must be determined
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separately for each block of Chronicle Publishing stock (i.e., Chronicle
Publishing stock acquired with the same tax basis in a single transaction)
which is cancelled pursuant to the merger. In this connection, certain
limitations apply to the deductibility of capital losses for United States
federal income tax purposes.
Legislation has been introduced in the United States Senate and passed in
the United States House of Representatives that would permit S corporations
that use the accrual method of accounting, such as Chronicle Publishing, to use
the "installment method" to report gain recognized on an installment sale. If
this legislation is enacted and the merger is completed on or before December
13, 2000, Chronicle Publishing may be able, by treating the escrow agreement as
creating an installment sale, to report the sale of a portion of its assets
(with a value approximately equal to the initial amount deposited in the escrow
account) as qualifying under the installment method. In that event, the portion
of the capital gain to be recognized by the Chronicle Publishing stockholders
attributable to that portion of the merger consideration deposited in the
escrow account would be deferred until the amounts deposited in escrow were
actually distributable to the Chronicle Publishing stockholders, and certain
Chronicle Publishing stockholders may be required to pay an interest charge
with regard to the amount of tax deferred.
The Escrow Account. The parties have agreed that all of the income earned
with respect to the cash deposited in escrow will be for the benefit of the
Chronicle Publishing stockholders, other than the income earned on the amount
of an indemnification payment made to Young from the date of Young's submission
of the claim through the date of its payment. Accordingly, unless the
legislation referred to in the preceding paragraph is enacted in a form
applicable to Chronicle Publishing and the merger, it is expected that income
earned in the escrow account, whether or not currently distributed, will be
taxable to the Chronicle Publishing stockholders as such income is earned.
Further, upon a distribution from the escrow account to or for the benefit of
Chronicle Publishing stockholders, such stockholders should not be subject to
United States federal income tax except to the extent the amount distributed
exceeds the amount previously reported by such stockholders with regard to the
escrow account upon the merger, increased by any income earned in the escrow
account which was previously taxed to such stockholders. If amounts are
distributed from the escrow account to Young, Chronicle Publishing stockholders
may recognize (i) a capital loss to the extent that those amounts reduce the
amount of cash deposited in the escrow account at the time of the merger that
is distributable to Chronicle Publishing stockholders below the amount reported
by such stockholders with respect to the escrow account upon the merger, and
(ii) an ordinary loss or deduction to the extent those amounts constitute
distributions of income earned in the escrow account and previously taxed to
Chronicle Publishing stockholders.
A Chronicle Publishing stockholder will also be entitled to deduct certain
expenses of maintaining the escrow account to the extent that his share of such
expenses, together with certain of the stockholder's other expenses, exceeds 2%
of the stockholder's adjusted gross income. In addition, an individual with an
adjusted gross income in excess of a specified amount is subject to other
restrictions with respect to the deduction of such expenses.
Each Chronicle Publishing stockholder is urged to consult his own tax
advisor regarding the particular United States federal, state, local and
foreign income tax consequences of the merger to such stockholder.
Young Stockholders
There will be no United States federal income tax consequences to the
holders of Young common stock as a result of the consummation of the merger.
Resales of Young's Class A Common Stock Issued in Connection with the Merger;
Affiliate Agreements
Young's Class A common stock issued in connection with the merger will be
freely transferable, except that shares of Young's Class A common stock
received by persons who are deemed to be "affiliates," as such term is defined
by Rule 144 under the Securities Act of 1933, of Chronicle Publishing at the
effective time of
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the merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 under the Securities Act of 1933 or as otherwise
permitted under the Securities Act of 1933. Chronicle Publishing has agreed
that it will use its reasonable best efforts to cause each person who may be
deemed an affiliate to execute a written affiliate agreement providing, among
other things, that such person will not offer, sell, transfer or otherwise
dispose of any of the shares of Young's Class A common stock obtained as a
result of the merger except in compliance with the Securities Act of 1933 and
the rules and regulations of the SEC thereunder. Young has also agreed to file
a post-effective amendment to a registration statement to permit stockholders
of Chronicle Publishing, who cannot freely transfer their shares of Young's
Class A common stock, to freely transfer their shares.
The merger agreement includes undertakings of Young to promptly prepare and
file with the SEC, and of Chronicle Publishing to cooperate in the preparation
of, a registration statement of which this joint proxy statement/prospectus is
a part covering the shares of Young's Class A common stock issuable upon
effectiveness of the merger. Young and Chronicle Publishing have each
undertaken to use all reasonable efforts to have the registration statement
declared effective as promptly as practicable and to remain effective until
after the merger has been completed. Young has also agreed to file a post-
effective amendment to the registration statement to permit certain
stockholders of Chronicle Publishing, who cannot freely transfer their shares
of Young's Class A common stock received in connection with the merger in the
absence of such post-effective amendment, to freely transfer their shares.
Merger Financing
At or prior to the time of the merger, Young expects to enter into a revised
$800 million senior credit facility, a portion of which will be used to finance
the cash component of the merger consideration and to pay the fees and expenses
associated with the merger. The revised senior credit facility will also be
used to provide liquidity for strategic acquisitions and working capital
requirements following the effective time of the merger.
In addition, if Young raises cash proceeds prior to the closing of the
merger through the sale of equity, Young will be required to reduce the
aggregate stock consideration payable in connection with the merger and
increase the cash consideration payable in connection with the merger by:
. 20% of the aggregate net proceeds raised by Young through such equity
sales, up to $100 million;
. 40% of the aggregate net proceeds raised by Young through such equity
sales in excess of $100 million and up to $200 million; and
. 100% of the aggregate net proceeds raised by Young through such equity
sales in excess of $200 million.
Appraisal Rights
Holders of Chronicle Publishing common stock are entitled to exercise
dissenters' rights under Chapter 92A, Sections 92A.300 through 92A.500 of the
Nevada Revised Statutes. A stockholder of Chronicle Publishing will be entitled
to relief as a dissenting stockholder if and only if he or she complies
strictly with all of the procedural and other requirements of Sections 92A.300
through 92A.500 of the Nevada Revised Statutes. A copy of Sections 92A.300
through 92A.500 is attached hereto as annex D. The following summary does not
purport to be a complete statement of the method of compliance with Sections
92A.300 through 92A.500. The following summary is qualified in its entirety by
reference to the copy of Sections 92A.300 through 92A.500 attached hereto as
annex D.
Right to dissent
Stockholders of a Nevada corporation have the right to dissent from certain
corporate actions in certain circumstances. According to Nevada Revised
Statutes Sec. 92A.380.1(a)(1), these circumstances include consummation of a
merger requiring approval of the corporation's stockholders. Stockholders who
are entitled to dissent are also entitled to demand payment in the amount of
the fair value of their shares.
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Requirements
According to Nevada Revised Statutes sec. 92A.420.1, stockholders of
Chronicle Publishing who wish to assert dissenters' rights:
. must deliver written notice of their intent to demand payment for their
Chronicle Publishing common stock if the merger is completed to Chronicle
Publishing BEFORE the vote is taken at the special meeting; and
. must not vote their shares in favor of approval of the merger agreement.
Stockholders failing to satisfy these requirements will not be entitled to
dissenters' rights under Chapter 92A of the Nevada Revised Statutes.
Thereafter, the "Subject Corporation", as defined below, will send a written
dissenters' notice to all Chronicle Publishing stockholders who satisfied these
two requirements (written notice of intent to demand payment and not voting in
favor of the merger). The written dissenters' notice is required to be sent
within 10 days after we complete the merger. According to Nevada law, Chronicle
Publishing is deemed to be the "Subject Corporation" before the merger occurs,
but Young will be the "Subject Corporation" after the merger occurs. The
dissenters' notice must include:
. a statement of where dissenting stockholders should send their demand for
payment and where and when certificates for Chronicle Publishing common
stock are to be deposited;
. a statement informing the stockholders of Chronicle Publishing's common
stock to what extent the transfer of such shares will be restricted after
the demand for payment is received;
. a form demanding payment requiring stockholders asserting dissenters'
rights to certify that they acquired beneficial ownership of the shares
before the date when the terms of the merger were announced to the news
media or the stockholders;
. a date by which the Subject Corporation must receive the demand for
payment, which may not be fewer than 30 or more than 60 days after the
date of the dissenters' notice was delivered; and
. a copy of sec. 92A.300 through sec. 92A.500 of the Nevada Revised
Statutes.
Chronicle Publishing stockholders wishing to exercise dissenters' rights
must thereafter:
. demand payment;
. certify whether they acquired beneficial ownership of Chronicle
Publishing common stock before November 16, 1999; and
. deposit their certificates in accordance with the terms of the
dissenters' notice.
Nevada law further provides that Chronicle Publishing stockholders who fail
to demand payment or deposit their certificates where required by the dates set
forth in the dissenters' notice will not be entitled to demand payment or
receive the fair market value for their shares of Chronicle Publishing's common
stock as provided under Nevada law. Instead, such stockholders will receive the
same merger consideration as the stockholders of Chronicle Publishing who do
not exercise dissenters' rights.
Payment for Dissenting Shares
Young will be required under Nevada law to pay each dissenter who made a
valid demand the amount Young estimates to be the fair value of the dissenter's
shares of Chronicle Publishing common stock, plus
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accrued interest. Young must make such payment within 30 days after Young
receives the dissenter's demand for payment. The payment must be accompanied
by:
. a copy of Young's financial statements for the year ended December 31,
1999, as well as Young's most current interim financial statements;
. a statement of Young's estimate of the fair value of the dissenter's
shares of Chronicle Publishing common stock;
. an explanation of how interest was calculated;
. a statement of the dissenter's rights to demand payment under Nevada law
of the dissenter's estimate of the value of the Chronicle Publishing
common stock (discussed below); and
. a copy of sec. 92A.300 through sec. 92A.500 of the Nevada Revised
Statutes.
Young may withhold payment from dissenters who became the beneficial owners
of shares of Chronicle Publishing common stock on or after the November 16,
1999. If payment is withheld in this fashion by Young, it must estimate the
fair value of the dissenter's shares of Chronicle Publishing common stock (plus
accrued interest) and offer to pay this amount to each dissenter in full
satisfaction of his demand. Young is required to send this offer to all such
dissenters with a statement of Young's estimate of the fair value of the shares
of Chronicle Publishing's common stock, an explanation of how interest was
calculated and a statement of the dissenters' rights to demand payment under
Nevada law.
Nevada law provides that a dissenter who believes that the amount paid or
offered is less than the full value of his or her shares of Chronicle
Publishing's common stock, or that the interest due is incorrectly calculated,
may, within 30 days after Young made or offered payment for the shares, either
(i) notify Young in writing of his or her own estimate of the fair value of the
shares of Chronicle Publishing's common stock and the amount of interest due
and demand payment of difference between this estimate and any payments made,
or (ii) reject the offer for payment made by Young and demand payment of the
fair value of his or her shares and interest due.
If a demand for payment remains unsettled, Young must commence a court
proceeding within 60 days after receiving a demand, petitioning the court to
determine the fair value of the shares of Chronicle Publishing's common stock
and accrued interest. All dissenters whose demands remain unsettled would be
made a party to such proceeding, which would be conducted in the district court
of Washau County, Nevada. If Young fails to commence such a proceeding, it
would be required by Nevada law to pay the amount demanded to each dissenter
whose demand remains unsettled. Dissenters would be entitled to a judgment:
. for the amount determined by the district court to represent the fair
value of their shares, plus accrued interest, less any amount paid
pursuant to sec. 92A.460 of the Nevada Revised Statutes; or
. for the amount determined by the district court to represent the fair
value of shares acquired on or after November 16, 1999, plus accrued
interest pursuant to sec. 92A.470 of the Nevada Revised Statutes.
The district court will assess the costs of the proceedings against Young,
unless the court finds that all or some of the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment. The district court may
also assess against Young or the dissenters the fees and expenses of counsel
and experts for the respective parties, in the amount the court finds
equitable.
THE REQUIRED APPRAISAL RIGHTS' PROCEDURES MUST BE FOLLOWED EXACTLY OR ANY
APPRAISAL RIGHTS MAY BE LOST.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as annex A and is incorporated by
reference in this joint proxy statement/prospectus. The summary is qualified in
its entirety by reference to the merger agreement. We urge all stockholders of
Young and Chronicle Publishing to read the merger agreement in its entirety for
a more complete description of the terms and conditions of the merger.
The Merger
The merger agreement provides that Chronicle Publishing will be merged with
and into Young's newly formed Delaware subsidiary, Young Broadcasting San
Francisco, Inc. ("merger sub"). At the effective time of the merger, the
separate corporate existence of Chronicle Publishing will cease and merger sub
will continue as the surviving corporation in accordance with the General
Corporation Laws of the States of Delaware and Nevada. At the effective time of
the merger, all the property, rights, privileges, powers and franchises of
Chronicle Publishing before the merger will vest in merger sub, and all
liabilities and duties of Chronicle Publishing before the merger will become
the liabilities and duties of merger sub. The merger will become effective and
the effective time of the merger will occur after all conditions in the merger
agreement are satisfied, including receipt of stockholder and FCC approvals,
and after merger sub and Chronicle Publishing file a certificate of merger with
the Secretary of State of the State of Delaware and articles of merger with the
Secretary of State of the State of Nevada.
The merger agreement provides that the closing of the merger will take place
and the merger will become effective on the later to occur of April 28, 2000 or
ten calendar days after satisfaction and fulfillment of the conditions to
closing specified in the merger agreement. Assuming that no stockholders of
Chronicle Publishing exercise statutory rights of dissent, and that no portion
of the escrow fund is applied to indemnification claims, the total merger
consideration to be received by stockholders of Chronicle Publishing will be
comprised of approximately $650 million in cash (subject to adjustment) and
$172,585,000 in Young's Class A common stock, subject to adjustment based upon
the market price of Young's Class A common stock, as more fully described
below.
Notwithstanding the foregoing, Young may elect to reduce the aggregate stock
consideration payable in connection with the merger by increasing the aggregate
cash consideration payable in connection with the merger by a corresponding
amount. In addition, if Young raises cash proceeds prior the closing of the
merger through the sale of equity, Young will be required to reduce the
aggregate stock consideration payable in connection with the merger and
increase the cash consideration payable in connection with the merger by:
. 20% of the aggregate net proceeds raised by Young through such equity
sales, up to $100 million;
. 40% of the aggregate net proceeds raised by Young through such equity
sales in excess of $100 million and up to $200 million; and
. 100% of the aggregate net proceeds raised by Young through such equity
sales in excess of $200 million.
In addition to the foregoing, the aggregate cash consideration payable to
Chronicle Publishing's stockholders in connection with the merger will be
reduced by the amount of unpaid expenses incurred by Chronicle Publishing.
Conversion of Securities
Treatment of Chronicle Publishing Common Stock and Determination of Exchange
Ratio
At the effective time of the merger, each issued and outstanding share of
Chronicle Publishing common stock, other than shares held by stockholders
exercising appraisal rights, will be cancelled and converted into
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the right to receive, upon surrender of the stock certificate representing such
shares and subject to the escrow agreement described below, the total of (a)
approximately $171.96 in cash, before deduction of the escrow deposit and (b)
the number of shares of Young's common stock equal to the exchange ratio, as
described below, in each case subject to adjustment, as described above. The
exchange ratio will be calculated as follows:
. in the event that the average closing sale price of Young's Class A
common stock, as reported on the Nasdaq Stock Market, for the 20
consecutive trading days ending three trading days prior to the closing
date of the merger (the "Young average stock price") is equal to or
greater than $44.38 and less than or equal to $54.24, the exchange ratio
will be equal to the number obtained by dividing (x) an amount equal to
the (A) the aggregate stock consideration payable in connection with the
merger, divided by (B) 3,780,000, by (y) the Young average stock price;
. in the event that the Young average stock price is less than $44.38, the
exchange ratio will be equal to the number obtained by dividing (x) an
amount equal to (A) the aggregate stock consideration payable in
connection with the merger, divided by (B) 3,780,000, by (y) $44.38. and
. in the event that the Young average stock price is greater than $54.24,
the exchange ratio will be equal to the number obtained by dividing (x)
an amount equal to (A) the aggregate stock consideration payable in
connection with the merger, divided by (B) 3,780,000, by (y) $54.24.
Illustration of Exchange Ratio at Various Young average stock prices
The following table indicates at various Young average stock prices:
. the corresponding exchange ratio;
. the aggregate value of the shares of Young's Class A common stock
issuable in connection with the merger based on the Young average stock
price (which will not necessarily be the aggregate market value of such
shares on the closing day); and
. the percentage of outstanding shares of Young's common stock that will be
held by current Chronicle Publishing stockholders upon completion of the
merger.
The percentages in the following table were calculated based on 11,136,966
shares of Young's Class A common stock, 2,352,251 shares of Young's Class B
common stock and 3,780,000 shares of Chronicle Publishing's common stock.
<TABLE>
<CAPTION>
Percentage of
Young's
common stock
Young Aggregate to be held by
Average Value Chronicle
Stock Exchange of Young's Publishing
Price Ratio Common Stock Stockholders(a)
------- -------- ------------ ---------------
<S> <C> <C> <C>
$20.00 1.02878 $ 77,775,760 22.4%
$30.00 1.02878 $116,663,640 22.4%
$40.00 1.02878 $155,551,540 22.4%
$44.38 1.02878 $172,585,000 22.4%
$50.00 0.91315 $172,585,000 20.7%
$54.24 0.84177 $172,585,000 19.1%
$60.00 0.84177 $190,913,440 19.1%
</TABLE>
- --------
(a) The figures shown above include shares of Young Class B common stock which
have ten votes per share, assume that the number of shares of Young's Class
A common stock to be issued will not be reduced by the payment of
additional cash consideration and assume that no Chronicle Publishing
stockholders will exercise statutory rights of dissent.
The per share cash consideration described above is subject to reduction
based upon certain expenses incurred by Chronicle Publishing. The allocation
(but not the combined aggregate) of the per share cash consideration and the
per share stock consideration described above is also subject to adjustment in
the event
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that Young raises proceeds through the sale of equity prior to the effective
time of the merger, in which event the per share cash consideration will be
increased and the per share stock consideration will be reduced.
Exchange of Stock Certificates
Fractional Shares
No fractional shares of Young's Class A common stock will be issued in the
merger. Each holder of Chronicle Publishing's common stock who would otherwise
have been entitled to receive, as part of the merger consideration, a fraction
of a share of Young's Class A common stock will receive instead an amount of
cash equal to the product of such fraction multiplied by the Young average
stock price used to calculate the exchange ratio.
Surrender of Shares of Chronicle Publishing's Common Stock; Stock Transfer
Books
Young and Chronicle Publishing will designate an exchange agent to
administer the exchange of certificates representing Chronicle Publishing's
common stock for the cash consideration (less the escrowed portion described
below), certificates representing Young's Class A common stock and cash in lieu
of fractional shares payable in connection with the merger. Prior to the
closing of the merger, the exchange agent will mail to each record holder of
certificates representing shares of Chronicle Publishing common stock, a letter
of transmittal and instructions for surrendering the certificates for exchange
and payment. Each of Chronicle Publishing's stockholders will also be asked to
sign a certificate certifying that such stockholder has not transferred his or
her shares in violation of subchapter S of the Internal Revenue Code. Holders
of certificates who surrender their certificates to the exchange agent together
with a duly completed and validly executed letter of transmittal, will receive
the cash consideration (less the escrowed portion described below),
certificates representing the number of whole shares of Young's Class A common
stock and cash in lieu of any fractional shares of Young's Class A common stock
payable in connection with the merger, together with any dividends or
distributions to which they are entitled. The surrendered certificates will be
canceled.
Holders of Chronicle Publishing's common stock should not send in their
certificates until they receive a transmittal letter from the exchange agent.
Failure to Exchange
No Chronicle Publishing stockholder will receive any cash consideration or
stock consideration from the exchange agent until such stockholder surrenders
his, her or its Chronicle Publishing stock certificates (or a lost certificate
affidavit and a bond, if requested by Young, as more fully described below),
and a duly completed and validly executed letter of transmittal, to the
exchange agent. One hundred eighty days after the effective time of the merger,
Young can require the exchange agent to deliver to Young all unclaimed cash,
including the cash consideration, and shares of Young's Class A common stock.
Thereafter, Chronicle Publishing stockholders must look only to Young for
payment of the consideration payable in exchange for their Chronicle Publishing
shares in connection with the merger.
No Liability
None of Young, merger sub, Chronicle Publishing, the exchange agent or the
escrow agent will be liable to any holder of a Chronicle Publishing share
certificate for the cash consideration, the shares of Young's Class A common
stock and any cash payable in lieu of any fractional shares delivered to a
public official under any applicable abandoned property, escheat or similar
law.
No Further Registration of Transfer of Chronicle Publishing Common Stock
From and after the effective time of the merger, there will be no further
registration of transfers of shares of Chronicle Publishing common stock on
Chronicle Publishing's stock transfer books.
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Dividends and Distributions
No dividends or other distributions declared or made after the effective
time of the merger on shares of Young's Class A common stock will be paid to
the holder of any unsurrendered certificate for the shares of Young's Class A
common stock that the holder is entitled to receive, and no cash payment in
lieu of fractional shares will be paid to any such holder, until the holder
surrenders such certificate as provided above. Upon surrender of the
certificate, Young will pay to the holder, without interest, any dividends or
distributions with respect to such shares of Young's Class A common stock that
have become payable between the effective time of the merger and the time of
such surrender.
Lost Certificates
A Chronicle Publishing stockholder must provide an appropriate affidavit to
the exchange agent if any certificate is lost, stolen or destroyed, in order to
receive the cash and stock consideration payable in exchange for such
certificate in connection with the merger. Young may require the owner of the
shares of Chronicle Publishing's common stock represented by such lost, stolen
or destroyed certificate to deliver a bond as indemnity against any claim that
may be made against Young or the exchange agent with respect to such
certificate.
Withholding Rights
Either Young or the exchange agent is entitled to deduct and withhold from
the consideration payable to any holder of Chronicle Publishing share
certificates the amounts Young or the exchange agent is required to deduct and
withhold from such consideration under the Internal Revenue Code or any
provision of state, local or foreign tax law. Any amounts withheld will be
treated as having been paid to the holder of the shares of Chronicle Publishing
common stock.
Appraisal Rights
Shares of Chronicle Publishing common stock held by stockholders who do not
consent to the merger agreement and who demand and perfect appraisal rights
under Nevada law will not be converted into the right to receive any cash
consideration or stock consideration otherwise payable by Young in connection
with the merger. Any such stockholder may have such shares appraised in
accordance with applicable Nevada law, as more fully described in this joint
proxy statement/prospectus under "The Merger Appraisal Rights." However, in the
event that any such stockholder should withdraw or fail to perfect his, her or
its appraisal rights in accordance with applicable Nevada law, the shares of
Chronicle Publishing common stock held by such stockholder shall automatically
convert into the right to receive the cash consideration and stock
consideration payable by Young in connection with the merger.
Representations and Warranties
Representations and Warranties of Chronicle Publishing
Chronicle Publishing has made representations and warranties to Young in the
merger agreement relating to, among other things:
. the organization, valid existence, good standing and qualification to
transact business of Chronicle Publishing;
. the authorization, execution, delivery and enforceability of the merger
agreement;
. the absence of any conflict with Chronicle Publishing's Articles of
Incorporation, Bylaws, any contract relating to KRON-TV or BayTV to which
Chronicle Publishing is a party, or any laws or governmental orders
applicable to Chronicle Publishing or any assets of KRON-TV or BayTV, in
any case as a result of entering into the merger agreement and effecting
the merger;
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. the absence of any governmental consents, other than as disclosed,
required in order to enable Chronicle Publishing to effect the merger;
. the capital structure of Chronicle Publishing;
. subsidiaries and other equity investments of Chronicle Publishing;
. the accuracy of certain Chronicle Publishing, KRON-TV and BayTV financial
statements and certain other financial information;
. the absence of undisclosed liabilities and any changes occurring since
September 30, 1999 that had, or would reasonably be expected to have, a
material adverse effect on Chronicle Publishing;
. all tangible property owned by Chronicle Publishing (including real
property and personal property), and Chronicle Publishing's valid
ownership of such property;
. all intellectual property and other proprietary rights owned by Chronicle
Publishing, and Chronicle Publishing valid ownership and use of such
property;
. all material contracts and agreements relating to KRON-TV or BayTV to
which Chronicle Publishing is a party, and the validity and
enforceability of all such contracts and agreements;
. Chronicle Publishing's ownership of all licenses and permits which are
necessary to operate KRON-TV and BayTV;
. all employees of KRON-TV and BayTV;
. all employee benefit plans which cover or provide benefits to employees
of KRON-TV or BayTV, certain matters relating to the administration of
such employee benefit plans, and certain matters relating to the legal
compliance or status of such employee benefit plans;
. Chronicle Publishing's valid ownership of all assets necessary to operate
KRON-TV and BayTV, and the sufficiency of such assets to operate KRON-TV
and BayTV;
. the absence of pending or threatened litigation or governmental
investigations involving Chronicle Publishing;
. Chronicle Publishing's compliance with laws;
. Chronicle Publishing's tax status;
. Chronicle Publishing's compliance with environmental laws and Chronicle
Publishing's hazardous material activities;
. transactions between Chronicle Publishing and its officers, directors,
stockholders, employees and other affiliates;
. all insurance policies of Chronicle Publishing's, and the status of all
such insurance policies;
. the absence of any brokers or other parties entitled to a fee or other
commission from Chronicle Publishing in connection with the merger, other
than DLJ;
. Chronicle Publishing's fee licenses, and the effectiveness thereof;
. the accuracy and completeness of all information provided by Chronicle
Publishing for inclusion in this joint proxy statement/prospectus;
. Chronicle Publishing's year 2000 readiness; and
. the accuracy of Chronicle Publishing's books and records.
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Representations and Warranties of Young
Young has made representations and warranties to Chronicle Publishing in the
merger agreement relating to, among other things:
. the organization, valid existence, good standing and qualification to
transact business of Young and merger sub;
. the authorization, execution, delivery and enforceability of the merger
agreement;
. the absence of any conflict with the charter documents and bylaws of
Young and merger sub, any material contract or agreement to which either
Young or merger sub is a party, or any laws applicable to Young or merger
sub, in any case as a result of entering into the merger agreement and
effecting the merger;
. the absence of any governmental consents, other than as disclosed,
required in order to enable Young and merger sub to effect the merger;
. the capital structure of Young and merger sub;
. the accuracy and completeness of all information contained in all reports
filed by Young with the Securities and Exchange Commission;
. the accuracy of all financial statements included in the reports filed by
Young with the Securities and Exchange Commission;
. the absence of undisclosed liabilities and changes occurring since
September 30, 1999 that had, or would reasonably be expected to have, a
material adverse effect on Young;
. the absence of pending or threatened litigation or governmental
investigations involving Young;
. Young's compliance with laws;
. Young's valid ownership or possession of all licenses necessary to
conduct its business;
. the absence of any brokers or other parties entitled to a fee or other
commission from Young in connection with the merger, other than Lazard;
. the qualifications of Young and merger sub under the Communications Act
to enter into the merger agreement and effect the merger;
. the accuracy and completeness of all information provided by Young for
inclusion in this joint proxy statement/prospectus;
. the stockholder vote required by Young to approve the issuance of shares
of Young's Class A common stock in connection with the merger.
Certain Covenants
Conduct of Business by Chronicle Publishing Prior to the Merger
Chronicle Publishing has agreed that, until the earlier of the termination
of the merger agreement or the effective time of the merger, Chronicle
Publishing will:
. conduct the operations of KRON-TV and Bay-TV in the ordinary course and
consistent with past practices;
. use commercially reasonable efforts to preserve intact the goodwill of
KRON-TV and BayTV and the current relationships of Chronicle Publishing
with its officers, employees, customers, suppliers, and others with
significant and recurring business dealings with KRON-TV or BayTV;
. use commercially reasonable efforts to maintain all insurance policies
and all licenses of KRON-TV and BayTV that are necessary to operate KRON-
TV and BayTV in the manner conducted by Chronicle Publishing as of the
date of the merger agreement;
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. maintain the books of account and records of KRON-TV and BayTV in the
usual, regular and ordinary manner and consistent with past practices;
. maintain accounts receivable and accounts payable related to KRON-TV and
BayTV at levels consistent with past practices; and
. take, or cause to be taken, all commercially reasonable actions within
its powers to cause to be satisfied, at or prior to the effective time of
the merger, all conditions to the obligations of Young and merger sub to
consummate the merger.
During the same period, Chronicle Publishing has agreed that it will not
(whether or not any such actions relate to KRON-TV and BayTV, but excepting any
actions which relate to its business other than KRON-TV or BayTV):
. redeem or repurchase any outstanding shares of its common stock;
. split, combine, reclassify or recapitalize any class of its common stock;
. authorize for issuance, issue, sell, pledge, deliver or commit to issue,
sell, pledge or deliver any common stock (including any options to
acquire any of its common stock) or any securities convertible into or
exchangeable for any class of its common stock;
. amend its Articles of Incorporation or Bylaws;
. other than in the ordinary course of business, enter into any real
property leases,
. other than in the ordinary course of business and consistent with past
practices, sell, abandon or make any other disposition of any of its
assets, other than the assets of its businesses other than KRON-TV and
BayTV and certain other excluded assets;
. grant or incur any lien or encumbrance (other than certain permitted
encumbrances) on any of its assets, other than the assets of its
businesses other than KRON-TV and BayTV;
. other than in the ordinary course of business or pursuant to its
agreements providing for the sale of its businesses other than KRON-TV
and BayTV, incur or assume any liability that will continue to exist at
the effective time of the merger;
. make any acquisition of any capital stock or all or substantially all of
the assets, properties or businesses of any other entity or organization;
or
. make any material amendments to the agreements providing for the sale of
its businesses other than KRON-TV and BayTV.
In addition, during the same period, Chronicle Publishing has agreed that it
will not (only to the extent such actions relate to KRON-TV or BayTV):
. change or agree to rearrange in any material respect the character of
KRON-TV or BayTV;
. except with respect to any amendment to the pension plan of Chronicle
Publishing which would not increase the contribution obligation of
Chronicle Publishing thereunder, adopt, enter into or amend any
arrangement which is or would be a benefit plan applicable to KRON-TV or
BayTV employees unless otherwise required by applicable law or the merger
agreement or make any change in any actuarial methods or assumptions used
in funding any benefit plan applicable to KRON-TV or BayTV employees or
in the assumptions or factors used in determining benefit equivalencies
thereunder, provided that the foregoing will not prevent Chronicle
Publishing from amending its pension plan to provide for lump sum
distributions thereunder;
. knowingly waive any right of material value;
. make any material write-down of inventory or material write-off as
uncollectible of accounts receivable;
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. increase any wage, salary, bonus or other direct or indirect compensation
payable or to become payable to any of the employees of KRON-TV or BayTV,
or make any accrual for or commitment or agreement to make or pay the
same, other than increases in wages, salary, bonuses or other direct or
indirect compensation made in the ordinary course of business consistent
with past practice, and those required by any existing contract or law;
. make any payment or commitment to pay any severance or termination pay to
any employee of KRON-TV or BayTV or any independent contractor,
consultant, agent or other representative of KRON-TV or BayTV, other than
payments or commitments to pay such employees in the ordinary course of
business consistent with past practice;
. enter into any commitments to make capital expenditures payable after the
effective time of the merger in an aggregate amount exceeding $1,000,000;
or
. knowingly take or cause to be taken, or fail to take or cause to be
taken, any action that would cause the conditions to the obligations of
Chronicle Publishing, Young or merger sub to effect the merger to fail to
be satisfied.
Notwithstanding the foregoing or any other provisions of the merger
agreement, however, Chronicle Publishing may distribute certain excluded assets
to its stockholders and perform its obligations under its other agreements
providing for the sale of its businesses other than KRON-TV and BayTV, and
distribute the proceeds from any such sale, transfer or other disposition to
its stockholders or to any entity designated by them.
Chronicle Publishing has also agreed not to take any action, and to use its
reasonable efforts not to permit any action to be taken, which would cause
Chronicle Publishing to lose its tax status as an S corporation for federal or
state income tax purposes.
Subject to the terms of a confidentiality agreement, Chronicle Publishing
has agreed, until the earlier of the termination of the merger agreement or the
effective time of the merger, that it will afford to Young and its agents and
representatives reasonable access to employees and assets of the business and
all relevant books, records and documents of or relating to the business,
Chronicle Publishing and the election to be subject to Subchapter S of the
Internal Revenue Code. Chronicle Publishing has also agreed to afford to Young
and its agents and representatives reasonable access to Chronicle Publishing's
accountants, auditors and suppliers for reasonable consultation or verification
of information.
Conduct of Business by Young Prior to the Merger
Young has agreed that until the earlier of the termination of the merger
agreement or the effective time of the merger, Young will not:
. declare, set aside or pay any dividends on or make any distributions in
respect of, its stock, other than dividends of shares of common stock and
regular quarterly cash dividends consistent with past practices;
. amend its charter or organizational documents;
. adopt a plan of liquidation or resolutions providing for or authorizing a
plan of liquidation;
. take any action that could reasonably be expected to delay the merger;
. take, offer to take or agree to take any actions described above, or any
other actions which could result in any of the conditions specified in
the merger agreement to the obligations of Young and merger sub to fail
to be satisfied; or
. knowingly take or cause to be taken, or fail to take or cause to be
taken, any action that would cause the conditions to the obligations of
Chronicle Publishing, Young or merger sub to effect the merger to fail to
be satisfied.
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In addition, during the same period, Young has agreed that it will take, or
cause to be taken, all commercially reasonable actions within its powers to
cause to be satisfied, at or prior to the effective time of the merger, all
conditions to the obligations of Chronicle Publishing to consummate the merger.
Governmental and Third Party Approvals; Defense of Litigation
Young and Chronicle Publishing have agreed to use their commercially
reasonable best efforts to take all appropriate action to consummate the
merger, including preparing and filing all necessary documentation to obtain
all approvals and authorizations of all third parties and governmental entities
which are necessary or advisable to consummate the merger (including all
filings required by regulations of the FCC and under the HSR Act or any
applicable anti-trust law or regulation) defend any litigation or
administrative proceeding adversely affecting the merger.
Director and Officer Insurance
Prior to the effective time of the merger, Chronicle Publishing will
purchase a prepaid policy of directors' and officers' liability insurance
insuring its officers and directors covered by its existing directors' and
officers' liability insurance policy for an aggregate period of no less than
six years with respect to claims arising from facts or events that occurred on
or before the effective time of the merger, including with respect to the
transactions contemplated by the merger agreement.
Employee Benefits
Chronicle Publishing has agreed that, prior to the effective time of the
merger, it will terminate the employment of all of its employees other than
employees who are parties to an employment agreement with Chronicle Publishing,
who are covered by a collective bargaining agreement with Chronicle Publishing,
or who Young identifies in a written statement. Following the merger, Young
must cause merger sub to employ the employees whose employment was not
terminated by Chronicle Publishing. Young has agreed that any retained
employees who are not covered by a collective bargaining agreement will be
employed at a salary and on terms and conditions (excluding employee benefits)
that are at least as favorable in the aggregate as those provided by Chronicle
Publishing prior to the merger. Young has also agreed that all retained
employees (whether or not covered by a collective bargaining agreement) will
receive the same type and level of employee benefits as provided by Chronicle
Publishing prior to the merger for at least 18 months following the merger.
Young may change the type and level of benefits provided to any retained
employees following this 18-month period. Notwithstanding the foregoing or any
other provision of the merger agreement, all retained employees who are covered
by a collective bargaining agreement to which Chronicle Publishing is a party
will continue to receive benefits in accordance with the terms of such
agreement.
Income Tax Matters; Retention, Delivery and Access to Chronicle Publishing
Books and Records
Chronicle Publishing and Young have agreed that the stockholders of
Chronicle Publishing will be entitled to control (with certain limitations) all
income tax returns for Chronicle Publishing for all periods ending on or prior
to the effective time of the merger. In addition, the stockholders of Chronicle
Publishing will have control (with certain limitations) over any audits or
other investigations relating to Chronicle publishing's income tax returns for
the same periods. Notwithstanding the foregoing and any other provisions of the
merger agreement, Young will have certain oversight and participation rights in
respect of the income tax returns of Chronicle Publishing for any periods
ending prior to the effective time of the merger that may affect Young.
From and after the effective time of the merger, Young has agreed to
preserve all books and records of Chronicle Publishing or, instead, to transfer
such books and records to a representative of the Chronicle Publishing
stockholders. Whether or not such books and records are transferred to the
Chronicle Publishing stockholders, Young has agreed to deliver to Chronicle
Publishing's stockholders a sufficient amount of
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financial information regarding Chronicle Publishing to enable the Chronicle
Publishing stockholders to prepare Chronicle Publishing's income tax returns
(for income attributable to Chronicle Publishing) for all periods prior to the
effective time of the merger. Moreover, following the merger, Young has agreed
to afford all Chronicle Publishing stockholders with reasonable access to the
employees, books and records of Chronicle Publishing in order to enable such
stockholders, among other things, to prepare Chronicle Publishing's income tax
returns (for income attributable to Chronicle Publishing) for all periods prior
to the effective time of the merger.
Election of Young to Separately Purchase Broadcast Licenses
Young may elect, by notice delivered to Chronicle Publishing no less than
thirty days in advance of the effective date of the merger, to demand that
Chronicle Publishing sell and assign to a subsidiary designated by Young all
broadcast station licenses used in the operation of KRON-TV and BayTV for $195
million in cash. In such case, the total cash portion of the merger
consideration will be reduced by $195 million.
Sale of Other Businesses; Conversion to Asset Purchase Agreement
The merger agreement contemplates that, prior to the effective time of the
merger, Chronicle Publishing will effect the sale or other disposition of its
businesses other than KRON-TV and Bay-TV, and distribute the net proceeds of
such dispositions, and certain other assets specified in the merger agreement,
to the stockholders of Chronicle Publishing.
Chronicle Publishing's closing of the sale of its businesses other than
KRON-TV or BayTV is a condition precedent to the respective obligations of each
of Young and Chronicle Publishing to effect the merger. If all conditions
precedent to the merger have been satisfied but for the sale of Chronicle
Publishing's other businesses, Chronicle Publishing, by notice to Young, may
elect to have the terms and conditions of the merger agreement superceded and
replaced by an asset purchase agreement containing, other than as described
below, terms and conditions which are substantially similar to the merger
agreement.
Young will also have the option to elect to have the terms and conditions of
the merger agreement superceded by an asset purchase agreement, if all
conditions precedent to the merger, other than the sale of the other
businesses, have been satisfied and either:
. after April 30, 2000, Chronicle Publishing does not have a reasonable
expectation that it will complete the sale of its businesses other than
KRON-TV and BayTV prior to August 31, 2000; or
. the merger has not been effected by June 30, 2000 (or, if applicable, by
the later date for giving of notice of termination established pursuant
to the merger agreement). Either Chronicle Publishing or Young may elect
to extend the date on which notice of termination may be given from June
30, 2000 to August 31, 2000 if the consent of the FCC approving the
transfer of broadcast licenses has not become a final order by June 30,
2000 or if the registration statement of which this joint proxy
statement/prospectus forms a part is not effective by June 30, 2000,
provided that neither Chronicle Publishing nor Young may so extend the
applicable termination date if either of the foregoing conditions has
failed to be satisfied due to a breach of the merger agreement by
Chronicle Publishing or Young, as the case may be. Chronicle Publishing
may also elect to extend the applicable termination date to August 31,
2000 if Chronicle Publishing's sale of its assets other than KRON-TV and
BayTV has not taken place by June 30, 2000 and Chronicle Publishing has a
reasonable expectation that it will effect those sales by August 30,
2000. In the latter circumstance, Chronicle Publishing must pay to Young
a fee of $6,666.00 for each day that the termination date is extended
past June 30, 2000.
Under the terms of the asset purchase agreement, Chronicle Publishing will
sell, and merger sub will purchase, the assets of Chronicle Publishing used in
the business of KRON-TV and Bay-TV and assume specified liabilities of
Chronicle Publishing relating thereto for the same consideration contemplated
by the merger agreement. The asset purchase agreement would provide that the
representations and warranties, and
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restrictions on Chronicle Publishing's conduct of business pending the closing,
set forth in the asset purchase agreement would only relate to the businesses
being purchased by Young. The closing documents will be typical of an asset
transaction, and Young will assume all tax liabilities (other than income tax
liabilities) relating primarily to KRON-TV and BayTV. The escrow amount would
be $30 million, with $15 million (less claims made or any amount paid out of
the escrow account) being released to Chronicle Publishing six months after the
closing and the remaining amounts (less claims then pending against the escrow)
being released one year after the closing.
In the event either Young or Chronicle Publishing elects to exercise its
option to supercede and replace the merger agreement with an asset purchase
agreement containing terms as described above, the merger agreement will be
deemed terminated, and Young and Chronicle Publishing have agreed to use their
commercially reasonable efforts to effect a closing of the asset purchase
transaction within ten days of written notice, or as soon as possible
thereafter.
Validity of Subchapter S Election Condition Precedent; Conversion to Asset
Purchase Agreement or Payment of Termination Fee
Chronicle Publishing has filed a valid election to be treated as an S
corporation for United States federal income tax purposes. As an S corporation,
Chronicle Publishing is generally not subject to United States federal income
tax. The continuing validity of Chronicle Publishing's election is a condition
precedent to the obligation of Young to consummate the merger.
Chronicle Publishing's election to be treated as an S corporation will be
terminated if, among other things, (a) any Chronicle Publishing stockholder is
not a permitted S corporation stockholder or (b) the number of Chronicle
Publishing's stockholders, as determined under special rules applicable to S
corporations, exceeds 75. No agreement or other arrangement currently exists
that would, by contract, prevent either of these conditions from being
satisfied, although some of Chronicle Publishing's stockholders have entered
into such an agreement.
In the event all of the conditions precedent to the respective obligations
of Young and Chronicle Publishing to effect the merger have been satisfied,
other than the condition to the obligation of Young that the Chronicle
Publishing's Subchapter S election be in effect, then Young, by notice to
Chronicle Publishing, may elect to have the terms and conditions of the merger
agreement superceded and replaced by an asset purchase agreement. In such
event, the merger agreement shall be deemed terminated and replaced by an asset
purchase agreement containing terms as described above, and Young and Chronicle
Publishing have agreed to use their commercially reasonable efforts to effect a
closing of the transaction within ten days of such written notice, or as soon
as possible thereafter.
Notwithstanding the foregoing, Chronicle Publishing may negate Young's
election to convert the merger agreement to an asset purchase agreement if
Chronicle Publishing pays Young $25 million in cash within five business days
of its receipt of written notice of election from Young. In the event of such
payment, both the merger agreement and the asset purchase agreement will be
terminated. Chronicle Publishing believes that termination fees are not an
unusual feature of transactions such as the merger. The amount of the
termination fee was determined by arm's length negotiation between Young and
Chronicle Publishing. In determining the fairness of the merger to the
stockholders of Chronicle Publishing, the Chronicle Publishing board took into
account the relatively small amount of the termination fee in relation to the
size of the transaction and the limited circumstances in which it might be
paid.
Registration of Shares of Young's Class A common stock
The merger agreement includes undertakings of Young to promptly prepare and
file with the SEC, and of Chronicle Publishing to cooperate in the preparation
of, a registration statement of which this joint proxy statement/prospectus is
a part covering the shares of Young's Class A common stock issuable upon
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effectiveness of the merger. Young and Chronicle Publishing have each
undertaken to use all reasonable efforts to have the registration statement
declared effective as promptly as practicable and to remain effective until
after the merger has been completed. Young has also agreed to file a post-
effective amendment to the registration statement to permit stockholders of
Chronicle Publishing who cannot freely transfer their shares of Young's Class A
common stock received in connection with the merger in the absence of such
post-effective amendment, to freely transfer their shares.
Conditions to Obligations to Effect the Merger
The respective obligations of Young and Chronicle Publishing to effect the
merger are subject to the satisfaction of several conditions, including among
other things, the following:
. the stockholders of Chronicle Publishing shall have approved and adopted
the merger agreement;
. the stockholders of Young shall have approved the issuance of the shares
of Young's Class A common stock to be issued upon effectiveness of the
merger;
. no order, executive order, stay, decree, judgment or injunction or
statute, rule or regulation shall be in effect that prohibits the
consummation of the merger;
. any waiting period applicable to the merger under the HSR Act shall have
terminated or expired;
. the FCC shall have consented to the transfer of broadcasting licenses
from Chronicle Publishing to merger sub and the consent shall have become
a final order;
. the registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part shall have become effective and not be the
subject of any stop order, and any material blue sky laws will have been
complied with; and
. Chronicle Publishing shall have closed the sales of its assets other than
KRON-TV and BayTV, and not be in possession of certain excluded assets.
Except as may be waived in writing by Chronicle Publishing, the obligation
of Chronicle Publishing to effect the merger is also subject to the
satisfaction of the following additional conditions, among other things:
. the representations and warranties of Young in the merger agreement shall
be true and correct in all material respects as of the date of the
merger, except for those representations and warranties that address
matters only as of a particular date, which shall remain true and correct
as of such particular date;
. Young shall have delivered registration rights agreements affording to
the stockholders of Chronicle Publishing certain registration rights with
respect to the shares of Young's common stock issued to them in the
merger;
. Young shall have performed and complied in all material respects, with
all obligations required to be performed or complied with by it under the
merger agreement at or prior to the effective time of the merger;
. no event shall have occurred which had or would reasonably be expected to
have a material adverse effect on the business, results of operations or
condition of Young; and
. Young shall have delivered registration rights agreements affording
Chronicle Publishing stockholders certain registration rights with
respect to the shares of Young's Class A common stock issued to them in
the merger.
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Except as may be waived in writing by Young, the obligation of Young to
effect the merger is also subject to the satisfaction of the following
additional conditions, among other things:
. the representations and warranties of Chronicle Publishing in the merger
agreement shall be true and correct as of the date of the merger, except
for those representations and warranties which address matters only as of
a particular date, which shall remain true and correct as of such
particular date, and Chronicle Publishing shall have performed and
complied with all obligations required to be performed and complied with
by it under the merger agreement at or prior to the effective time of the
merger, except where the failure to be so true and correct, and the
failure to so perform and comply, would not result in damages in the
aggregate in excess of $10 million, and except for changes specifically
permitted or required by the merger agreement;
. no event shall have occurred which had or would reasonably be expected to
have a material adverse effect on the business, results of operations or
condition of Chronicle Publishing,
. the election of Chronicle Publishing to be taxed under Subchapter S of
the Internal Revenue Code shall continue to be valid and in effect;
. the shares of Young's Class A common stock to be issued in connection
with the merger shall have been approved for listing on The Nasdaq
National Market System;
. the holders of no more than 5% of the outstanding shares of Chronicle
Publishing's common stock shall have validly exercised and not withdrawn
any appraisal rights under Nevada law.
Termination
The merger agreement provides that prior to the consummation of the merger,
the merger agreement may be terminated:
. by mutual written consent of Young and Chronicle Publishing;
. by either Young or Chronicle Publishing if:
. any court or other governmental entity has issued an order, decree or
ruling which cannot be appealed and which makes the merger illegal or
prohibits the consummation of the merger, provided that neither
Chronicle Publishing nor Young may avail itself of this termination
right unless such party has used its commercially reasonable best
efforts to oppose any such governmental order, decree or ruling;
. if the consent of the FCC to the transfer of broadcast licenses from
Chronicle Publishing to merger sub does not become a final order by
June 30, 1999 (or any extension of that date, as described below),
provided that neither Chronicle Publishing nor Young may avail itself
of this termination right if such party is then in material default
under the merger agreement or such party has caused or taken actions
that materially contributed to this result;
. if the FCC elects to hold a hearing on the transfer of broadcast
licenses from Chronicle Publishing to merger sub, provided that neither
Chronicle Publishing nor Young may avail itself of this termination
right if such party is then in material default under the merger
agreement or such party has caused or taken actions that materially
contributed to the decision to hold a hearing; or
. the merger is not consummated by June 30, 1999, or a later date as
described below, so long as the terminating party did not prevent
consummation of the merger by failing to fulfill any of its obligations
under the merger agreement.
Either Chronicle Publishing or Young may elect to extend the date on which
notice of termination may be given from June 30, 2000 to August 31, 2000 if the
consent of the FCC approving the transfer of broadcast licenses has not become
a final order by June 30, 2000 or if the registration statement of which this
joint proxy statement/prospectus forms a part is not effective by June 30,
2000, provided that neither Chronicle Publishing nor Young may not so extend
the applicable termination date if either of the foregoing conditions has
failed to
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be satisfied due to a breach of the merger agreement by Chronicle Publishing
or Young, as the case may be. Chronicle Publishing may also elect to extend
the applicable termination date to August 31, 2000 if Chronicle Publishing's
sale of its assets other than KRON-TV and BayTV has not taken place by June
30, 2000 and Chronicle Publishing has a reasonable expectation that it will
effect those sales by August 30, 2000. In such circumstances, Chronicle
Publishing must pay to Young a fee of $6,666.00 for each day that the
termination date is extended past June 30, 2000.
There are no termination fees payable if the merger agreement is terminated
for any of the reasons specified above.
Expenses
Other than the costs of preparing and filing the registration statement of
which this joint proxy statement/prospectus is a part, which shall be paid by
Young, Young and Chronicle Publishing will bear their own expenses in
connection with the merger agreement and the merger.
Amendment and Waiver
Young and Chronicle Publishing may amend the merger agreement at any time,
but, after approval of the merger agreement by the Chronicle Publishing
stockholders, no amendment may be made that by law requires further approval
by the stockholders of Chronicle Publishing without such further approval.
At any time prior to the agreed upon time for the closing of the merger,
Young and Chronicle Publishing may:
. extend the time for the performance of any of the obligations or other
acts required by the merger agreement;
. waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered in connection with the
merger agreement; and
. waive compliance with any of the agreements or conditions contained in
the merger agreement.
Amendments and waivers must be in writing and signed by the party granting
the extension or waiver.
Survival of Representations and Warranties
Except as set forth in the following sentence, the representations and
warranties of Chronicle Publishing, Young and merger sub contained in the
merger agreement will not survive the merger. The representations and
warranties of Chronicle Publishing regarding undisclosed liabilities,
ownership of tangible personal property, employee benefit plans, litigation,
tax matters and environmental matters will survive the merger for a period of
one year. Claims for indemnification by Young or merger sub on account of a
breach of representations and warranties by Chronicle Publishing must be
brought within the one year period. None of the covenants or agreements of the
parties set forth in the merger agreement will survive the merger, except to
the extent such covenants and agreements, by their terms, contemplate
performance after the merger.
Escrow Fund
In accordance with the terms of the merger agreement, Young and Chronicle
Publishing will designate an escrow agent to serve as escrow agent pursuant to
an escrow agreement to be delivered prior to the effective time of the merger.
A representative of the stockholders of Chronicle Publishing immediately prior
to the merger will also be a party to the escrow agreement. At the closing of
the merger, Young will deduct $50 million in cash from the cash consideration
otherwise payable by Young to the Chronicle Publishing stockholders in
connection with the merger, and deposit such amount with the escrow agent. The
$50 million escrow deposit will be held by the escrow agent under the terms of
the escrow agreement for the benefit and on
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behalf of the holders of Chronicle Publishing common stock outstanding
immediately prior to the merger, other than those stockholders who elect to
exercise statutory rights of dissent, and as the sole source of payment for the
indemnification obligations described below.
Indemnification from Escrow Fund
Young and merger sub may seek indemnification from, and shall have the right
to be indemnified out of, the escrow fund for (a) any and all direct damages,
loss, liability and expense (including, without limitation, reasonable expenses
for investigation and reasonable attorney's fees but excluding punitive and
similar non-compensatory damages, which, excluding punitive and similar non-
compensatory damages, are collectively referred to as "damages") incurred or
sustained by any of them arising out of any breach of any representation and
warranty of Chronicle Publishing surviving the merger and (b) any and all
damages incurred or sustained by Young and merger sub arising out of any claims
with respect to indemnified liabilities, as described below.
Indemnified liabilities include any liability of Chronicle Publishing
existing on, or arising after but primarily relating to periods prior to the
effective time of the merger which are not related primarily to KRON-TV and
BayTV, including liabilities for taxes incurred prior to the effective time and
claims for indemnification against Chronicle Publishing pursuant to the
agreements providing for the sale of Chronicle Publishing's businesses other
than KRON-TV and BayTV, regardless of when such claim is asserted.
Indemnified liabilities also include any damages incurred by merger sub, as
the corporation surviving the merger, as a result of, or incident to, any
matter pertaining to any benefit plan that has been or will be assumed pursuant
to the agreements providing for the sale of Chronicle Publishing's businesses
other than KRON-TV and BayTV. Claims for indemnification on account of
indemnified liabilities may be brought only within the three year period
following the effective time of the merger.
Indemnified liabilities do not include:
. any liabilities incurred in connection with or relating to shares of
Chronicle Publishing common stock held by stockholders who exercised
statutory rights of appraisal;
. liabilities (exclusive of liabilities for taxes incurred prior to the
effective time of the merger and claims for indemnification pursuant to
the other agreements providing for the sale of Chronicle Publishing's
businesses other than KRON-TV and BayTV) of merger sub to stockholders of
Chronicle Publishing immediately prior to the merger arising out of the
merger agreement;
. liabilities included in corporate expenses of Chronicle Publishing for
which there was an adjustment to the total cash consideration payable by
Young in connection with the merger; and
. liabilities arising out of any (A) increase in the aggregate present
value of the accrued benefits or (B) decreases in the fair market value
of the assets of, the pension plan of Chronicle Publishing, in either
case, during the period commencing on the effective date of the merger.
Claims Procedure
To assert a claim for indemnification pursuant to the escrow fund, Young
must notify the Chronicle Publishing stockholder representative within a
commercially reasonable time after becoming aware of the basis for a claim, and
within the applicable one or three year period during which a claim for
indemnification may be asserted.
In the event of a claim by any third party, including a governmental
authority, the Chronicle Publishing stockholder representative has the right to
undertake the settlement or defense of any such claim with counsel of his
choice reasonably acceptable to Young. If the Chronicle Publishing stockholder
representative does not undertake the defense of any such third party claim
within a reasonable time after notice from Young, Young, upon further notice to
the Chronicle Publishing stockholder representative, has the right to undertake
the
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settlement or defense of any such claim with counsel of its choice. If there is
a reasonable probability that a third party claim may materially and adversely
affect Young, Young, at its own expense, has the right to participate in the
defense or settlement of the claim. Without Young's consent, which may not be
unreasonably withheld or delayed, the Chronicle Publishing stockholder
representative may not settle any third party claims which are other than for
money damages only and does not include the giving by the claimant to Young of
a release from all liability in respect of third claims. Young, at its sole
cost and expense, may consult with the Chronicle Publishing stockholder
representative and his counsel regarding any third party claim being defended
by the Chronicle Publishing stockholder representative, and there shall be
cooperation among Young, the Chronicle Publishing stockholder representative
and their counsel with respect to the third party claim.
Each of the Chronicle Publishing stockholder representative and Young, as to
the third party claims they have undertaken the defense of, will have an
obligation to keep the other informed of the status of the defense of such
third party claim and furnish the other with all documents and information
reasonably requested in connection therewith. The stockholder representative,
at his sole cost and expense, will have the right to consult with Young and its
counsel regarding any third party claim being defended by Young, and there
shall be cooperation among the Chronicle Publishing stockholder representative,
Young and their respective counsel with respect to the third party claim. Young
shall not pay, settle, adjust or compromise any indemnified liability or third
party claim without the prior written consent of the Chronicle Publishing
stockholder representative, which consent shall not be unreasonably withheld or
delayed.
Dollar Limitation on Indemnification; Other Indemnification Matters
Claims for indemnification for damages arising out of a breach of any
representation and warranty in the merger agreement will be recoverable only in
the event the accumulated amount of damages with respect to such claims exceeds
$10 million in the aggregate (and shall be recoverable only for amounts in
excess of the $10 million limitation). Claims for indemnification on account of
any indemnified liability will be recoverable from the first dollar of the
claim asserted and on a dollar-for-dollar basis.
The amount of any damages, or claim for damages, will be:
. reduced by any amounts recovered by Young or merger sub under insurance
policies or other arrangements for which other persons are responsible
for such damages or claims, net of costs of collection;
. increased to take account of any tax cost incurred by Young or merger sub
by reason of the receipt of any indemnity payment; and
. reduced to take account of any tax benefit realized by Young or merger
sub by reason of the incurrence or payment of such damage.
Young and merger sub will not be entitled to indemnification for damages
incurred or sustained by them arising out of a breach of any representation and
warranty covering environmental matters to the extent the damages arise from or
are due to any use of any real property in any manner other than the use of any
such real property on the effective date of the merger, or unless the response
activities, as defined in the following sentence, are required by any
environmental law. Response activities includes the performance of any
investigation, clean-up, removal, containment or other remediation or response
actions required under any applicable environmental laws.
Any claims for indemnification on account of damages for response activities
shall be limited to damages incurred to meet the least stringent standards or
requirements that Young or merger sub is required to meet under the applicable
environmental laws and to use the affected real property to conduct the
business. If any claim involves a response activity for which a third party has
or reasonably may be expected to have liability under any environmental law,
Young or merger sub may not waive or compromise any claims for contribution or
indemnity against any such third party. To the extent Young or merger sub is
indemnified from the escrow
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fund for damages resulting from a response activity for which a third party has
or may reasonably be expected to have liability under any environmental law,
Young or merger sub, as applicable, shall assign to the Chronicle Publishing
stockholder representative any claim for contribution or indemnity against such
third party in respect to such damage. Young or merger sub, without incurring
out-of-pocket expenditures, must cooperate with the Chronicle Publishing
stockholder representative in respect to any claim for contribution or
indemnity that the Chronicle Publishing stockholder representative may bring
against any third party related to environmental matters.
The amount of any claim from the escrow fund for indemnification on account
of any breach of any representation and warranty covering environmental matters
shall be reduced by amounts recovered by Young or merger sub from any third
party.
Any payment made to Young or merger sub from the escrow fund shall be
treated by the parties to the merger agreement as a purchase price adjustment
for tax purposes.
The indemnification provisions described above are the sole and exclusive
remedy of Young or merger sub with respect to any and all claims and actions,
suits or proceedings relating to the subject matter of the merger agreement and
the transactions contemplated by the merger agreement. The merger agreement
sets forth an express waiver by Young and merger sub of any and all other
claims, rights and causes of action which any of them or their affiliates may
now or hereafter have relating to the subject matter of the merger agreement.
Young, merger sub and the stockholder representative must cooperate with
each other in respect to resolving any claim. Young and merger sub must use
their reasonable efforts not to take any actions with the intention of
provoking a governmental authority to make a claim that it would not otherwise
have made.
Release of Escrow Fund
The escrow agreement will provide that, on the first anniversary of the
effective time of the merger, the escrow agent will release from escrow and pay
to the Chronicle Publishing stockholder representative, or as designated in
writing by the Chronicle Publishing stockholder representative, a sum equal to
one-half of the initial escrow deposit plus income and interest (net of taxes
paid thereon) accrued with respect thereto, less the amount, as of such date,
of (a) all claims for indemnification made by Young (on behalf of itself and
merger sub), whether or not disbursed from the escrow fund, exclusive of claims
disputed by the Chronicle Publishing stockholder representative and (b) all
disputed claims and interest and income (net of taxes paid thereon) accrued on
such amount from the date of the escrow agent's receipt of Young's notice of
claim in respect of such disputed claims.
The escrow agreement will further provide that, on the third anniversary of
the effective time of the merger, the escrow agent will release from escrow and
deliver to the Chronicle Publishing stockholder representative, or as
designated in writing by the Chronicle Publishing stockholder representative,
the initial escrow deposit, inclusive of interest and income thereon, less the
sum, as of such date, of (a) amounts released or disbursed on the first
anniversary of the effective time of the merger or as to which a claim had been
made by the first anniversary of the effective time and later released or
disbursed , (b) all claims for indemnification by Young that have not become
disbursed claims and (c) all claims of Young disputed by the Chronicle
Publishing stockholder representative and interest and income, net of taxes
paid thereon, accrued on such amount from the date of the escrow agent's
receipt of Young's claim in respect of such disputed claim. The amount referred
to in clause (c) above is herein referred to as the retained amount.
Upon resolution of all claims for indemnification by Young, including claims
disputed by the stockholder representative, any retained amounts not paid to
Young shall be paid to the Chronicle Publishing stockholder representative or
as designated in writing by the Chronicle Publishing stockholder
representation.
Young and the stockholders of Chronicle Publishing immediately prior to the
effective time of the merger will each pay one-half of the escrow agent's
compensation for its services, and reimburse one-half of all expenses,
including fees and disbursements of counsel, incurred by the escrow agent.
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Amounts payable to the escrow agent by the stockholders of Chronicle
Publishing immediately prior to the effective time of the merger will be paid
solely out of the initial escrow deposit plus interest and income earned
thereon.
The Chronicle Publishing stockholder representative will also be entitled to
reimbursement of expenses incurred in connection with his or her defense of
third party claims from the funds held by the escrow agent. Such reimbursement
shall not be permitted if the sum of:
. the reimbursable expenses;
. the amounts paid to the escrow agent as compensation for services and as
reimbursement of expenses from the escrow fund for the account of the
stockholders of Chronicle Publishing immediately prior to the merger; and
. any indemnification payments made to the escrow agent pursuant to the
provisions of the escrow agreement indemnifying the escrow agent for
losses, liabilities and expenses incurred by the escrow agent in acting
under the escrow agreement from the escrow fund for the account of the
Chronicle Publishing stockholders, exceeds the aggregate amount of income
and interest, net of taxes and net of interest payments on claims by
Young, accrued on the initial escrow deposit through the time of such
reimbursement.
Stockholder Support Agreements
As an inducement and condition to the willingness of Young to enter into the
merger agreement, stockholders who collectively held of record, at the record
date 62.7% of the issued and outstanding common stock of Chronicle Publishing
entered into stockholder support agreements for the benefit of Young.
In each Chronicle Publishing stockholder support agreement, each stockholder
has agreed:
. to vote all of such stockholder's shares of Chronicle Publishing common
stock in favor of approval of the merger agreement and the other
transactions contemplated by the merger agreement; and
. that he, she or it will not, without the prior written consent of Young,
directly or indirectly, during the term of the agreement, sell, assign,
transfer, encumber or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale,
assignment, transfer, encumbrance or other disposition of any shares of
Chronicle Publishing common stock held of record by such stockholder
except for a sale or other transfer to a person or entity who agrees to
be bound by all of the provisions of the shareholder support agreement.
As an inducement and condition to the willingness of Chronicle Publishing to
enter into the merger agreement, stockholders who collectively held of record
at the record date approximately 51% of the combined voting power of the
outstanding Class A common stock and Class B common stock of Young entered into
stockholder support agreements for the benefit of Chronicle Publishing.
In each Young stockholder support agreement, each stockholder has agreed:
. to vote all of such stockholder's shares of Young's Class A common stock
and Class B common stock in favor of the issuance of shares of Young's
Class A common stock and in favor of the merger and the other
transactions contemplated by the merger agreement; and
. that he or she will not, without the prior written consent of Chronicle
Publishing, directly or indirectly, during the term of the agreement,
sell, assign, transfer, or otherwise dispose of, or enter into any
contract, option or other arrangement with respect to the sale,
assignment, transfer, or other disposition of any shares, except (i) for
a sale or other transfer to a person or entity who agrees to be bound by
all of the provision of the shareholder support agreement of Young's
Class A common stock and Class B common stock held of record by such
stockholder or (ii) when, after giving effect to any such
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disposition, such stockholder and Adam Young beneficially own shares of
Class A common stock and Class B common stock of Young representing a
majority of the voting power of the outstanding capital stock of Young.
The stockholder support agreements will terminate upon the effectiveness of
the merger or the earlier termination of the merger agreement.
Registration Rights Agreement
The merger agreement contemplates that Young and a representative of the
stockholders of Chronicle Publishing immediately prior to the effectiveness of
the merger will enter into a registration rights agreement affording to those
stockholders additional registration rights with respect to the shares of
Young's Class A common stock received in connection with the merger.
This agreement will afford to the former Chronicle Publishing stockholders
the right, on three separate occasions, to require Young to use its best
efforts to effect a registration under the Securities Act of 1933 of the
shares of Young's Class A common stock received by such stockholders in the
merger. Other than for the first registration effected pursuant to this
provision, Young will not be obligated to file a registration statement within
six (6) months after the effective date of any other registration statement of
Young. In addition, Young may delay such registration for 90 days if it in
good faith determines that the requested registration would adversely affect a
planned registration or other significant corporate activity.
The agreement will also afford to the former Chronicle Publishing
stockholders the right to include their shares of Young's Class A common stock
in other registration statements filed by Young under the Securities Act of
1933, subject to customary limitations.
The registration rights agreement includes customary provisions as to the
procedures to be followed by Young in connection with any registration
statement subject to the agreement, and contains customary indemnification
undertakings by Young and by the stockholders in connection with registration
statements subject to the agreement.
The expenses of preparing registration statements subject to the agreement
(other than underwriting discounts, selling commissions and any transfer
taxes) shall be borne by Young. Young shall also be responsible for the fees
and expenses of one counsel selected by the former stockholders of Chronicle
Publishing, not to exceed $15,000 in any one registration statement. In the
event Young files a registration statement at the request of the Chronicle
Publishing stockholders which is withdrawn at the request of such holders, the
holders shall pay the expenses of preparing and filing such registration
statement.
The registration rights agreement also provides that, so long as the former
holders of Chronicle Publishing common stock own at least 10% of the
outstanding shares of Young's Class A common stock, they shall have the right
to designate one non-voting observer to attend and participate in (but not to
vote at) all meetings of the Young board.
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PROPOSAL TO AMEND YOUNG'S CERTIFICATE OF INCORPORATION
TO ELIMINATE THE REQUIRED MINIMUM OWNERSHIP PERCENTAGE
OF YOUNG'S CLASS A COMMON STOCK BY YOUNG'S MANAGEMENT GROUP
Young has three classes of common stock, designated as Class A, Class B and
Class C. Each class of common stock has substantially identical rights, except
with respect to voting. Holders of Class A common stock are entitled to one
vote per share on all matters submitted to a vote of the holders of common
stock. Holders of Class B common stock are entitled 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 in connection with any change to Young's certificate of
incorporation that 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 shares of Young's Class B common stock which are issued and outstanding
are held by Young's management and by or in trust for family members of
management. Young's certificate of incorporation 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 Young, as well as entities controlled by Messrs.
Young and such relatives. In the event any Class B common stock is transferred
outside of the management group, such common stock will automatically be
converted into Class A common stock. In addition, if the total number of shares
of common stock held by members of the management group falls to below 5% of
the total number of shares of common stock outstanding, all of the outstanding
Class B common stock automatically will be reclassified as Class A common
stock.
The dual class voting structure of Young's common stock was created as part
of a recapitalization implemented by Young in November 1994 in connection with
Young's initial public offering. This structure was recommended by the lead
underwriter of Young's initial public offering, and approved by Young's
directors and stockholders, recognizing that the success of Young 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 Young's prior successes would continue after
Young's initial public offering and to ensure that such persons would maintain
a meaningful economic interest in Young. 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. At the
time of Young's initial public offering, the minimum percentage of common stock
ownership by the management group necessary to maintain the Class B common
stock classification was 10%. This minimum percentage was reduced to 5% by
stockholder approval at Young's 1998 annual meeting.
Concurrently with the completion of Young's initial public offering, Young
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
Young. 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, Young'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 Young to redeem the notes.
At the time of Young's initial public offering, 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 March 20, 2000, the record date for the Young
special meeting, the management group held a total of 2,382,447 shares of
common stock, representing approximately 17.6% of the total number of shares of
common stock outstanding and approximately 68.4% of the total voting power of
the common stock.
The Young board believes that ownership and control of Young 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, Young has grown from an
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owner and operator of two television stations to twelve television stations.
Excluding network-owned stations, home shopping stations and foreign language
stations, Young is presently the 9th-largest television group based upon
coverage, with its stations reaching approximately 11.3% of the television
households in the United States. Young is presently the eighth largest ABC
network affiliate group in terms of households reached and owns more ABC
stations than any single operator other than ABC. The success of Young's
strategies is evidenced by this rapid growth and its stations' broadcast cash
flow margins, which are among the highest in the television broadcasting
industry. The investment community recognizes that the success of Young is
attributable to the Young family and current management. The Young board
believes that a risk to current control by current owners and management would
be viewed negatively by the investment community and would adversely impact on
the value of Young. Thus, maintaining the current voting rights of the Class A
and Class B common stock will provide continuity and stability to an
experienced management team.
Young's success to date is attributable, in part, to its well-developed
acquisition strategy. Young's ability to manage costs effectively while
enhancing the quality provided to station viewers gives Young an important
advantage in acquiring and operating new stations. In assessing acquisitions,
Young targets stations for which it has identified line item expense reductions
that can be implemented upon acquisition. Young also develops specific
proposals for revenue enhancement utilizing management's significant experience
in local and national advertising. The Young board believes that the
elimination of the 5% ownership requirement is necessary to provide Young 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 common stock, as described above. The elimination of such
ownership requirement would enable Young 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 Young. Young does not
presently have any definitive agreements or understandings with respect to any
such transaction except as described in this joint proxy statement/prospectus.
The elimination of the ownership requirement will enable the management
group to maintain its control over Young if Young issues additional shares of
common stock in the future. Giving effect to the acquisition of Chronicle
Publishing, Vincent and Adam Young together would beneficially own Class B
common stock representing approximately 51% of the total voting power of
Young's common stock and, as a result, they alone would maintain control over
the election of a majority of Young's directors and, thus, over the operations
and business of Young as a whole. In addition, such stockholders have the
ability to prevent specific types of material transactions, certain of which
could make Young a less attractive target for a takeover than it otherwise
might be.
The Young board proposes and recommends that the stockholders approve an
amendment of Young's certificate of incorporation to eliminate any minimum
number of shares of Class B common stock required to be held by members of the
management group. Accordingly, giving effect to such amendment, if the total
number of shares of Class B 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, the outstanding Class B common stock would not automatically be
reclassified as Class A common stock.
If approved by the stockholders, the amendment will become effective upon
the filing of a certificate of amendment to Young's certificate of
incorporation, setting forth the proposed amendment, with the Secretary of
State of the State of Delaware.
The Young board of directors recommends that Young's stockholders vote FOR
approval of this proposed amendment to Young's certificate of incorporation.
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PROPOSAL TO ELECT DIRECTORS
It is proposed to elect nine directors of Young to hold office for terms of
one year and until their successors shall be elected and shall qualify. At the
Young special meeting, the persons named in the enclosed form of Young proxy
will vote the shares covered thereby for the election of the nominees named
below to the board of directors of Young unless instructed to the contrary.
Each nominee is currently a director of Young.
<TABLE>
<CAPTION>
Director Principal occupation and business
Name of Nominee Age Since experience during the past five years
--------------- --- -------- -------------------------------------
<C> <C> <C> <S>
Vincent J. Young........ 52 1986 Chairman of Young since its inception in
1986, member of the Compensation and
Audit Committees of Young, and director
and Chairman of each of Young'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.............. 86 1986 Treasurer of Young since its inception,
and director and and Treasurer of each
of Young's corporate subsidiaries. Mr.
Young is also President and Treasurer of
Adam Young Inc., which he founded in
1944.
Ronald J. Kwasnick...... 52 1998 President of Young since its inception,
and President of each of Young's
corporate subsidiaries other than Adam
Young Inc., for which he serves as
Executive Vice President.
James A. Morgan......... 51 1998 Executive Vice President of Young since
March 1993, and Executive Vice President
of each of Young's corporate
subsidiaries. From 1984 until joining
Young, 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.
Bernard F. Curry........ 81 1994 Chairman of the Audit Committee of
Young. 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 (now J.P. Morgan, 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. .. 63 1994 Chairman of the Compensation and Stock
Option Committee of Young. 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.
David C. Lee............ 34 1998 Member of the Compensation and Stock
Option Committee of Young. Mr. Lee has
been a managing director of Sandler
Capital Management, a private investment
and money management firm specializing
in media, communications, and technology
since January 1999. Prior thereto, he
was a Managing Director of Lazard Freres
& Co. LLC, a leading investment banking
firm where he served in various
capacities from March 1988 to October
1994 and from April 1996 to December
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>
70
<PAGE>
<TABLE>
<CAPTION>
Director Principal occupation and business
Name of Nominee Age Since experience during the past five years
--------------- --- -------- -------------------------------------
<C> <C> <C> <S>
Leif Lomo........... 70 1994 Member of the Compensation and Stock Option
Committees of Young. 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.
Robert L. Winikoff.. 53 1998 Member of the Audit Committee of Young.
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 Young's general outside
counsel since 1987.
</TABLE>
The Young board has an Audit Committee, a Compensation Committee and a Stock
Option Committee. The Audit Committee consists of three directors, two of whom
are required by Young's By-Laws to be independent directors. The current
members of the Audit Committee are Bernard Curry, Robert Winikoff and Vincent
Young. Its functions are to
. recommend the appointment of independent accountants;
. review the arrangements for and scope of the audit by independent
accountants;
. review the independence of the independent accountants;
. consider the adequacy of the system of internal accounting controls and
review any proposed corrective actions;
. review and monitor Young's policies regarding business ethics and
conflicts of interest;
. discuss with management and the independent accountants Young's draft
annual financial statements and key accounting and reporting matters; and
. review the activities and recommendations of Young's accounting
department.
The Compensation Committee consists of four directors, two of whom are
required by Young's By-Laws to be independent directors. The current members of
the Compensation Committee are Leif Lomo, Alfred Hickey, David Lee and Vincent
Young. The Compensation Committee has authority to review and make
recommendations to the Young board with respect to the compensation of
executive officers of Young.
The Stock Option Committee consists of three directors, each of whom is a
"non-employee" director (as described hereinafter under "Approval of Amendment
Increasing Shares Underlying Future Grants Pursuant to Young's 1995 Stock
Option Plan"). The current members of the Stock Option Committee are Leif Lomo,
Alfred Hickey and David Lee. 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 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 Young. 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 1999, the Board of Directors of Young held six meetings.
The Board of Directors recommends a vote FOR the election of the nominees to
serve as directors.
71
<PAGE>
APPROVAL OF AMENDMENT INCREASING SHARES UNDERLYING
FUTURE GRANTS PURSUANT TO YOUNG'S 1995 STOCK OPTION PLAN
The Young board has adopted, subject to stockholder approval, an amendment
to the Young Broadcasting Inc. 1995 stock option plan increasing the total
number of shares with respect to which options and stock appreciation rights
("SARs") may be granted under the 1995 stock option plan from 2,300,000 to
3,300,000. The purpose of the 1995 stock option plan is to promote the
interests of Young and its stockholders by strengthening Young's ability to
attract and retain competent employees, to make service on the Young board more
attractive to present and prospective non-employee directors and to provide a
means to encourage stock ownership and proprietary interest in Young by
officers, non-employee directors and valued employees and other individuals
upon whose judgment, initiative and efforts the financial growth of Young
largely depend.
The 1995 stock option plan may be administered by either the entire Young
board or a committee consisting of two or more members of the Young board, each
of whom is a "non-employee director." The 1995 stock option plan is currently,
and has been since its adoption in February 1995, administered by a stock
option committee of the Young board consisting of two "non-employee directors."
The current members of the stock option committee are Leif Lomo and Alfred
Hickey. To qualify as a non-employee director, a director may not be eligible
for grants under the 1995 stock option 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 Young and its subsidiaries. Nonqualified stock options and SARs
may be granted to such officers and employees as well as to agents and
directors of and consultants to Young, whether or not otherwise employees of
Young. In determining the eligibility of an individual for grants under the
1995 stock option 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 Young's Chairman, Vincent Young, the position and
responsibilities of the individual being considered, the nature and value to
Young or its subsidiaries of his or her service or accomplishments, his or her
present or potential contribution to the success of Young 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
Young. 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 Young's
common stock, Class A, Class B or Class C. As discussed elsewhere in this joint
proxy statement/prospectus, each such class of common stock has substantially
identical rights, except with respect to voting. 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 1995 stock option plan provides for the granting of ISOs to purchase
Young'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 1995 stock option 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 Young'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 ISO cannot exceed five years. No option or SAR may be
granted under the 1995 stock option plan after February 5, 2005, and no option
or SAR may be outstanding for more than ten years after its grant.
72
<PAGE>
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 Young'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 Young and within three months after termination of
such services.
The 1995 stock option plan may be terminated at any time by the Young
board, which may also amend the 1995 stock option plan, except that without
stockholder approval, it may not increase the number of shares subject to the
1995 stock option plan or change the class of persons eligible to receive
options under the 1995 stock option plan.
Giving effect to approval of this proposal and the increase in the number
of shares available for grants under the 1995 stock option plan, there would
be 1,441,647 additional shares available for future grants under the 1995
stock option plan. No determinations have been made regarding the persons to
whom grants will be made in the future under the 1995 stock option plan or the
terms of such grants.
The Young board of directors recommends that Young's stockholders vote FOR
approval of the amendment to the 1995 stock option plan.
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 2000. 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 Young
special 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.
73
<PAGE>
PRICE RANGES OF SECURITIES
Young
Young's Class A common stock is traded on The Nasdaq National Market
("Nasdaq") under the symbol YBTVA. The following table sets forth the range of
the high and low closing sales prices of the class A common stock for the
periods indicated as reported by Nasdaq:
<TABLE>
<CAPTION>
Quarters Ended High Low
-------------- ------ ------
<S> <C> <C>
March 31, 1998............................................ $55.63 $39.00
June 30, 1998............................................. 65.00 46.50
September 30, 1998........................................ 69.00 33.38
December 31, 1998......................................... 43.13 22.63
March 31, 1999............................................ $45.63 $39.50
June 30, 1999............................................. 44.38 37.75
September 30, 1999........................................ 65.00 40.00
December 31, 1999......................................... 52.06 38.63
March 31, 2000 (through March 22, 2000)................... $50.00 $20.75
</TABLE>
On November 15, 1999, which was the last trading day prior to the public
announcement of the execution of the merger agreement, the last reported
closing price of Young class A common stock was $51.78. On that date, there
were 59 recordholders of Young common stock, although Young believes that there
are other persons who are beneficial owners of Young common stock held in
street name.
Chronicle Publishing
There is not presently, nor has there been in the past, any trading market
for Chronicle Publishing's common stock.
On March 20, 2000, there were 60 recordholders of Chronicle Publishing
common stock.
74
<PAGE>
YOUNG UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Unaudited Pro Forma Combined Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
--------------------------------------------------------
Young KRON and BAY-TV
Broadcasting Acquisition Adjustments Pro forma
------------ --------------- ----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Operating Data:
Gross revenue......... $ 327,192 $154,418 $ -- $ 481,610
Less commissions...... 46,533 24,268 70,801
----------- -------- -------- -----------
Net revenues............ 280,659 130,150 410,809
----------- -------- -------- -----------
Operating expenses...... 64,843 41,204 106,047
Amortization of program
rights................. 47,690 12,794 60,484
Selling, general and
administrative
expenses............... 50,131 18,749 68,880
Depreciation and
amortization........... 47,983 5,004 25,632 (1) 78,619
Corporate overhead...... 8,227 -- -- 8,227
Non-cash compensation
paid in Common Stock... 19,102 -- -- 19,102
----------- -------- -------- -----------
Total operating
expenses............... 237,976 77,751 25,632 341,359
----------- -------- -------- -----------
Operating income........ 42,683 52,399 (25,632) 69,450
----------- -------- -------- -----------
Interest expense...... (62,981) -- (59,320)(2) (122,301)
Minority interest in
loss of BayTV........ -- 450 -- 450
Other (expenses)...... (1,244) (626) (1,870)
----------- -------- -------- -----------
(Loss) income before
provision for income
taxes.................. (21,542) 52,223 (84,952) (54,271)
Provision (benefit) for
income taxes........... -- -- -- --
----------- -------- -------- -----------
Net income (loss)....... $ (21,542) $ 52,223 $(84,952) $ (54,271)
=========== ======== ======== ===========
Basic loss per common
share.................. $ (1.59) $ (3.11)
=========== ===========
Basic shares used in EPS
calculation............ 13,588,108 17,476,896
=========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Statement of Operations.
75
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
(1) Reflects the amortization of intangible assets associated with the KRON and
BayTV merger over a 40 year period and increased annual depreciation
resulting from the newly acquired property and equipment depreciated over
new estimated useful lives. In addition, reflects the amortization expense
of the new debt financing costs related to the New Senior Credit Facility.
(2) Reflects the drawdown of approximately $688.0 million from the New Senior
Credit Facility at the assumed rate of 8.5% and the increased rate of the
New Facility.
76
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
KRON TV-
Young BayTV
Broadcasting Combined Adjustments(1) Pro Forma
------------ -------- -------------- ----------
(dollars in thousands)
ASSETS
- ------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents.............. $ 2,952 $ 442 $ (442) $ 2,952
Accounts receivable less
Allowance for doubtful
accounts............... 65,438 32,374 97,812
Program rights, current... 28,269 9,170 37,439
Prepaid expenses and other
Current assets.......... 13,718 1,595 15,313
-------- ------- -------- ----------
Total current assets.. 110,377 43,581 (442) 153,516
Property and equipment, net
of
Accumulated depreciation.. 88,102 19,072 30,928 138,102
Program rights, noncurrent.. 1,171 715 1,886
Other noncurrent assets..... 24,706 777 25,483
Intangible assets, net of
Accumulated amortization.. 584,102 674,172 1,258,274
Deferred financing costs,
net of
Accumulated amortization.. 10,212 31,500 (2) 41,712
-------- ------- -------- ----------
Total assets.......... $818,670 $64,145 $736,158 $1,618,973
======== ======= ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------
Current liabilities:
Bank overdraft............ $ 1,084 $ 1,084
Accounts payable.......... $ 20,545 1,718 22,263
Accrued expenses.......... 6,845 6,398 13,243
Accrued interest.......... 12,682 12,682
Program license
liabilities, current..... 24,441 8,437 32,878
Capital lease obligations,
current.................. 924 924
-------- ------- -------- ----------
Total current
liabilities.......... 65,437 17,637 -- 83,074
Program license liabilities,
Noncurrent................. 1,538 110 1,648
Long-term debt, noncurrent.. 79,000 681,500(2) 760,500
11 3/4% Senior Subordinated
Notes due 2004............. 120,000 120,000
10 1/8% Senior Subordinated
Notes due 2005............. 120,000 120,000
9% Senior Subordinated Notes
due 2006................... 125,000 125,000
8 3/4% Senior Subordinated
Notes due 2007............. 200,000 200,000
Deferred tax liabilities.... 71,450 71,450
Capital lease obligations,
noncurrent................. 5,586 5,586
-------- ------- -------- ----------
Total liabilities..... 788,011 17,747 681,500 1,487,258
-------- ------- -------- ----------
Minority interest........... 920 920
Stockholders' equity:
Common stock.............. 13 4 (3) 17
Divisional equity......... 45,478 (45,478) --
Additional paid-in
capital.................. 210,860 100,132 (3) 310,992
Accumulated deficit....... (180,214) (180,214)
-------- ------- -------- ----------
Total stockholders equity... 30,659 45,478 54,658 130,795
-------- ------- -------- ----------
Total liabilities and
stockholders' equity....... $818,670 $64,145 $736,158 $1,618,973
======== ======= ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Operations.
77
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
For the Year Ended December 31, 1999
(1) To record the purchase of KRON and BayTV, Young has preliminarily allocated
the purchase price to the tangible assets and liabilities based upon
estimates of fair market value at December 31, 1999. The KRON Acquisition
consideration is $650 million in cash plus 3.9 million shares of Young's
Class A common stock, (valued at $100.1 million based on Young's closing
stock price of $25.75 on February 18, 2000, exclusive of financing costs).
The excess of the purchase price over amounts allocated to the tangible
assets and liabilities will be amortized on a straight-line basis over
periods ranging from 2 to 40 years. Final allocations are not expected to
be materially different from the preliminary allocations discussed above.
(2) To record the borrowing under the New Senior Credit Facility and the
deferred financing costs.
(3) To record approximately 3.9 million shares related to the KRON Acquisition.
78
<PAGE>
YOUNG SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data of Young
for the five years ended December 31, 1999, which have been derived from
Young's audited consolidated financial statements.
The information in the following table should be read in conjunction with
"Young's Management Discussion and Analysis and Results of Operations" and the
Consolidated Financial Statements and the notes thereto included elsewhere in
this prospectus. Young has not paid dividends on its capital stock during any
of the periods presented below.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
(dollars in thousands, except share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues(1)......... $ 122,530 $ 154,343 $ 263,535 $ 277,052 $ 280,659
Operating expenses,
including selling,
general and
administrative
expenses............... 51,614 64,689 106,708 116,712 114,974
Amortization of program
license rights......... 6,418 11,034 38,279 33,014 47,690
Depreciation and
amortization........... 24,572 30,946 46,941 49,472 47,983
Corporate overhead...... 3,348 4,344 7,150 7,860 8,227
Non-cash compensation
paid in common
stock(2)............... 1,167 848 967 1,146 19,102
Merger related costs.... -- -- -- 1,444 --
----------- ----------- ----------- ----------- -----------
Operating income........ 35,411 42,482 63,490 67,404 42,683
Interest expense........ 32,644 42,838 64,103 62,617 62,981
Other expenses (income),
net.................... 233 (1,261) 493 788 1,244
----------- ----------- ----------- ----------- -----------
Net income (loss) before
extraordinary item..... 2,534 905 (1,106) 3,999 (21,542)
Extraordinary loss on
extinguishment of
debt................... (9,125) -- (9,243) -- --
----------- ----------- ----------- ----------- -----------
Net (loss) income....... $ (6,591) $ 905 $ (10,349) $ 3,999 $ (21,542)
=========== =========== =========== =========== ===========
Basic net income (loss)
per common share before
extraordinary item..... $ 0.23 $ 0.08 $ (0.08) $ 0.28 $ (1.59)
Basic net (loss) income
per common share....... (0.61) 0.08 (0.74) 0.28 $ (1.59)
Basic shares used in
earnings per share
calculation............ 10,838,972 11,379,298 13,989,969 14,147,522 13,588,108
Other Financial Data:
Cash flow provided by
operating activities... $ 22,231 $ 24,707 $ 41,025 $ 54,292 $ 36,398
Cash flow used in
investing activities... (5,800) (496,841) (11,757) (34,154) (7,887)
Cash flow (used in)
provided by financing
activities............. (19,310) 475,713 (34,621) (21,127) (26,222)
Payments for program
license liabilities.... 6,747 10,385 38,610 33,337 46,678
Broadcast cash flow(3).. 64,169 79,269 118,217 127,003 119,007
Broadcast cash flow
margin................. 52.4 % 51.4 % 44.9 % 45.8 % 42.4 %
Operating cash flow(4).. 60,821 74,926 111,067 119,143 110,780
Capital expenditures.... $ 4,484 $ 4,992 $ 9,034 $ 7,524 $ 9,360
Balance Sheet Data (as
of end of period):
Total assets............ $ 296,098 $ 893,151 $ 845,966 $ 825,668 $ 818,670
Long-term debt
(including current
portion)............... 297,993 678,927 657,672 658,224 650,510
Stockholders' (deficit)
equity................. $ (25,544) $ 80,504 $ 59,846 $ 46,865 $ 30,659
</TABLE>
- --------
(1) Net revenues are total revenues net of agency and national representation
commissions.
(2) Represents non-cash charges for the issuance to key employees of shares of
Class A common stock and in 1995 of shares of Class A common stock and
below-market options to purchase shares of Class A common stock. In 1999,
approximately $18.3 million relates to the extension of the expiration
dates of stock options issued in 1994 and 1995.
(3) "Broadcast cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), non-cash compensation, merger
related costs and corporate overhead, less payments for program license
liabilities. Other television broadcasting companies may measure broadcast
cash flow in a different manner. Young has included broadcast cash flow
data because such data are commonly used as a measure of performance for
broadcast
79
<PAGE>
companies and are also used by investors to measure a company's ability to
service debt. Broadcast cash flow is not, and should not be used as, an
indicator or alternative to operating income, net income or cash flow as
reflected in the Young consolidated financial statements, is not intended
to represent funds available for debt service, dividends, reimbursement or
other discretionary uses, is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(4) "Operating cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), non-cash compensation and merger
related costs, less payments for program license liabilities. Other
television broadcasting companies may measure operating cash flow in a
different manner. Young has included operating cash flow data because such
data are used by investors to measure a company's ability to service debt
and are used in calculating the amount of additional indebtedness that
Young may incur in the future under the Young indentures. Operating cash
flow does not purport to represent cash provided by operating activities
as reflected in the Young consolidated financial statements, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.
80
<PAGE>
YOUNG'S MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The operating revenues of Young's stations are derived primarily from
advertising revenues and, to a much lesser extent, from compensation paid by
the networks to the stations for broadcasting network programming. The
stations' primary operating expenses are for employee compensation, news
gathering, production, programming and promotion costs. A high proportion of
the operating expenses of the stations are fixed.
Advertising is sold for placement within and adjoining a station's network
and locally originated programming. Advertising is sold in time increments and
is priced primarily on the basis of a program's popularity among the specific
audience an advertiser desires to reach, as measured principally by periodic
audience surveys. In addition, advertising rates are affected by the number of
advertisers competing for the available time, the size and demographic makeup
of the market served by the station and the availability of alternative
advertising media in the market area. Rates are highest during the most
desirable viewing hours, with corresponding reductions during other hours. The
ratings of a local station affiliated with a national television network can be
affected by ratings of network programming.
Most advertising contracts are short-term, and generally run only for a few
weeks. Approximately 65% of the 1999 annual gross revenue of Young's stations
was generated from local advertising, which is sold by a station's sales staff
directly to local accounts. The remainder of the advertising revenue primarily
represents national advertising, which is sold by Adam Young Inc. ("AYI"), a
national advertising sales representative which was recently merged with Young.
The stations generally pay commissions to advertising agencies on local,
regional and national advertising; on national advertising, the stations also
pay commissions to AYI. Effective January 1, 1998, the commissions paid to AYI
have been eliminated for consolidation purposes.
The advertising revenues of Young's stations are generally highest in the
second and fourth quarters of each year, due in part to increases in consumer
advertising in the Spring and retail advertising in the period leading up to,
and including, the holiday season. In addition, advertising revenues are
generally higher during even numbered election years due to spending by
political candidates, which spending typically is heaviest during the fourth
quarter.
Young defines "broadcast cash flow" as operating income before income taxes
and interest income and expense, plus depreciation and amortization (including
amortization of program license rights), non-cash compensation, merger related
costs and corporate overhead, less payments for program license liabilities.
Other television broadcasting companies may measure broadcast cash flow in a
different manner. Young has included broadcast cash flow data because such data
are commonly used as a measure of performance for broadcast companies and are
also used by investors to measure a company's ability to service debt.
Broadcast cash flow is not, and should not be used as, an indicator or
alternative to operating income, net income or cash flow as reflected in the
Consolidated Financial Statements, is not intended to represent funds available
for debt service, dividends, reinvestment or other discretionary uses, is not a
measure of financial performance under generally accepted accounting principles
and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
81
<PAGE>
The following table sets forth certain operating data for the years ended
December 31, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Operating income.......................... $ 63,490 $ 67,404 $ 42,683
Add:
Amortization of program license rights.. 38,279 33,014 47,690
Depreciation and amortization........... 46,941 49,472 47,983
Corporate overhead...................... 7,150 7,860 8,227
Merger-related cost..................... -- 1,444 --
Non-cash compensation paid in common
stock.................................. 967 1,146 19,102
Less:
Payments for program license
liabilities............................ (38,610) (33,337) (46,678)
-------- -------- --------
Broadcast cash flow..................... $118,217 $127,003 $119,007
======== ======== ========
</TABLE>
Results of Operations
Set forth below are the principal types of television revenues received by
Young's stations for the periods indicated and the percentage contribution of
each to Young's total revenues, as well as agency and national sales
representative commissions:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1997 1998 1999
--------------- ------------------ ------------------
Amount % Amount % Amount %
-------- ----- -------- ----- -------- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Local................. $197,519 63.7 % $199,177 62.1 % $212,558 65.0 %
National.............. 95,106 30.6 90,281 28.2 93,796 28.7
Network............... 12,600 4.1 12,610 3.9 12,400 3.8
Political............. 1,322 0.4 13,734 4.3 3,411 1.0
Production/other...... 3,725 1.2 4,848 1.5 5,027 1.5
-------- ----- -------- ----- -------- -----
Total............... 310,272 100.0 320,650 100.0 327,192 100.0
Commissions........... (46,737) (15.1) (43,598)(1) (13.6) (46,533)(1) (14.2)
-------- ----- -------- ----- -------- -----
Net revenues.......... $263,535 84.9 % $277,052 86.4 % $280,659 85.8 %
======== ===== ======== ===== ======== =====
</TABLE>
- --------
(1) National sales commissions paid to AYI eliminated for consolidation
purposes were $6.4 million and $4.0 million for the years ended December
31, 1998 and 1999, respectively.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net revenues for the year ended December 31, 1999 were $280.7 million, an
increase of $3.6 million, or 1.3%, compared to $277.1 million for the year
ended December 31, 1998. Improvements in various local market economies and the
national economy led to increases in Young's gross local revenues and gross
national revenues of 6.7% and 3.9%, respectively, in 1999, compared to 1998.
Political revenue for the year ended December 31, 1999 was $3.4 million, a
decrease of $10.3 million from the year ended December 31, 1998. The decrease
was attributable to 1998 being a national election year with many state and
local elections, while 1999 had limited state and local elections.
Operating expenses, including selling, general and administrative expenses
for the year ended December 31, 1999 were $115.0 million, compared to $116.7
million, for the year ended December 31, 1998, a decrease of $1.7 million, or
1.5%. Cost control plans implemented at the stations accounted for most of this
decrease.
82
<PAGE>
Amortization of program license rights for the year ended December 31, 1999
was $47.7 million, compared to $33.0 million for the year ended December 31,
1998, an increase of $14.7 million, or 44.5%. The Los Angeles Lakers and
Clippers, two professional basketball teams, not playing in the fourth quarter
of 1998 because of the National Basketball Association ("NBA") lockout
accounted for approximately $12.3 million of the increase. The remaining
increase was the result of increased costs related to syndicated programming.
Depreciation of property and equipment and amortization of intangibles was
$48.0 million for the year ended December 31, 1999, compared with $49.5 million
for the comparable period in 1998, a decrease of $1.5 million or 3.0%. The
decrease is primarily the result of intangible assets becoming fully amortized
in 1998 and 1999 at stations acquired in 1988 and 1989.
Young made payments for program license liabilities of $46.7 million during
the year ended December 31, 1999, compared to $33.3 million for the year ended
December 31, 1998, an increase of $13.4 million or 40.2%. As stated above, in
the amortization of program license rights, approximately $11.7 million is
attributable to the NBA lockout. The remaining $1.7 million of the increase is
the result of increases in costs for syndicated programming.
Corporate overhead for the year ended December 31, 1999 was $8.2 million,
compared to $7.9 million for the comparable period in 1998, an increase of
$367,000 or 4.7%. This increase was the result of increased personnel and
administrative costs.
Non-cash compensation was $19.1 million for the year ended December 31,
1999, compared to $1.1 million for the year ended December 31, 1998, an
increase of $18.0 million. Young recorded a non-cash compensation charge of
$18.3 million in the third quarter of 1999 for extending the expiration date of
stock options granted in 1994 and 1995.
Interest expense for the year ended December 31, 1999 was $63.0 million,
compared to $62.6 million for the same period in 1998, an increase of $364,000,
or 0.6%. The increase is primarily attributable to higher interest rates.
As a result of the factors discussed above, Young's net loss was $21.5
million for the year ended December 31, 1999, compared with net income of $4.0
million for the same period in 1998, a decrease of $25.5 million.
Broadcast cash flow for the year ended December 31, 1999 was $119.0 million,
compared with $127.0 million for the year ended December 31, 1998, a decrease
of $8.0 million, or 6.3%. Broadcast cash flow margins (broadcast cash flow
divided by net revenues) for the year ended December 31, 1999 decreased to
42.4% from 45.8% for the same period in 1998. The decrease in broadcast cash
flow and broadcast cash flow margins was attributable to the increased
programming costs for the Lakers and Clippers.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
The following historical information includes the results of Adam Young Inc.
("AYI") (merger agreement entered into on February 5, 1998), for all of 1998.
The operating results for 1997 do not include AYI, as the results were not
deemed to be material.
Net revenues for the year ended December 31, 1998 were $277.1 million, an
increase of $13.6 million, or 5.2%, compared to $263.5 million for the year
ended December 31, 1997. Improvement in various local market economies led to
an increase in Young's gross local revenues of 1%, while gross national was
down 5.1% in 1998 compared to 1997. Political revenue for the year ended
December 31, 1998 was $13.7 million, an increase of $12.4 million from the year
ended December 31, 1997. The increase was attributable to 1998 being a national
election year with many state and local elections, while 1997 had only limited
state and local elections.
83
<PAGE>
Operating expenses, including selling, general and administrative expenses
for the year ended December 31, 1998 were $116.7 million, compared to $106.7
million for the year ended December 31, 1997, an increase of $10.0 million, or
9.4%, with AYI accounting for $4.7 million of such increase. Additional news
costs at several stations and higher sales expenses relating to the increased
sales accounted for an additional $3.1 million and $857,000, respectively.
Amortization of program license rights for the year ended December 31, 1998
was $33.0 million, compared to $38.3 million for the year ended December 31,
1997, a decrease of $5.3 million, or 13.8%. The entire decrease is attributable
to the Los Angeles Lakers and Clippers, two professional basketball teams, not
playing games in the fourth quarter of 1998 as a result of the National
Basketball Association ("NBA") lockout.
Depreciation of property and equipment and amortization of intangibles was
$49.5 million for the year ended December 31, 1998, compared with $46.9 million
for the comparable period in 1997, an increase of $2.6 million or 5.5%. The
increase is primarily attributable to larger equipment purchases at the end of
1997 which were depreciated during 1998. AYI accounted for approximately
$131,000 of this increase.
Young made payments for program license liabilities of $33.3 million during
the year ended December 31, 1998, compared to $38.6 million for the year ended
December 31, 1997, a decrease of $5.3 million, or 13.7%. As stated above in the
amortization of program license rights, the entire decrease is attributable to
the NBA lockout.
Corporate overhead for the year ended December 31, 1998 was $7.9 million,
compared to $7.2 million for the comparable period in 1997, an increase of
$710,000 or 9.9%. This increase was the result of increased occupancy and
administrative costs.
Non-cash compensation paid in Class A Common Stock for the year ended
December 31, 1998 was $1.1 million, compared to $1.0 million for the year ended
December 31, 1997.
Interest expense for the year ended December 31, 1998 was $62.6 million,
compared to $64.1 million for the same period in 1997, a decrease of $1.5
million, or 2.3%. The decrease is primarily attributable to lower interest
rates and lower debt levels.
As a result of the factors discussed above, Young's net income was $4.0
million for the year ended December 31, 1998, compared with a net loss of $10.3
million for the same period in 1997, an increase of $14.3 million. The 1997 net
loss included an extraordinary item of $9.2 million.
Broadcast cash flow for the year ended December 31, 1998 was $127.0 million,
compared with $118.2 million for the year ended December 31, 1997, an increase
of $8.8 million, or 7.5%. Broadcast cash flow margins (broadcast cash flow
divided by net revenues) for the year ended December 31, 1998 increased to
45.8% from 44.9% for the same period in 1997. The increase in broadcast cash
flow and broadcast cash flow margins was attributable to the increased local
and political revenues, as well as the elimination of AYI commissions.
Liquidity and Capital Resources
Cash provided by operations for the year ended December 31, 1999 was $36.4
million as compared to cash provided by operations of $54.3 million in 1998.
Changes in Young's net cash flows from operating activities are primarily the
result of increases in accounts receivable and payments on program license
liabilities during the year ended December 31, 1999 as compared to the year
ended December 31, 1998.
Cash used in investing activities for the years ended December 31, 1999 and
1998 was $7.9 million and $34.2 million, respectively. The decrease in 1999 was
primarily attributable to the $30 million initial rights fee payment to the Los
Angeles Lakers in 1998 and the increased spending for capital expenditures of
approximately $1.9 million.
84
<PAGE>
Cash used in financing activities for the years ended December 31, 1999 and
1998 was $26.2 million and $21.1 million, respectively. Financing activities
for the years ended December 31, 1999 and 1998 include principal payments under
the Senior Credit Facility of $12.3 million and $37.8 million, respectively. In
the third quarter of 1998, Young borrowed $30.0 million under the working
capital facility for the Los Angeles Lakers payment. In addition, in 1999 and
1998, Young repurchased 348,400 shares for $14.0 million and 552,800 shares for
$19.5 million, respectively, in Class A common stock. In the third quarter of
1999, Young repurchased $5.0 million of its 10 1/8 % Notes due 2006 at a price
of $103-3/8.
It is anticipated that Young will be able to meet the working capital needs
of the stations, principal and interest payments under the Senior Credit
Facility and Young's senior subordinated notes (the "Senior Subordinated
Notes"), and to a lesser extent, capital expenditures from cash on hand, cash
flows from operations and funds available under the Senior Credit Facility.
On November 25, 1997, the Senior Credit Facility was amended and restated to
provide Young with the ability to borrow up to $300.0 million in the form of
five year revolving credit facility. As of December 31, 1999, there was $79.0
million outstanding under the Senior Credit Facility.
The Senior Credit Facility has a $285.0 million sublimit (the "Sublimit")
for borrowings in connection with the acquisition of additional television
stations (and businesses, if any, incidental thereto) pursuant to transactions
which meet the following criteria: (i) each of the acquired stations will
become a wholly-owned subsidiary of Young and will become a part of the
lenders' security package under the Senior Credit Facility, and (ii) Young can
demonstrate that after giving pro forma effect to each such acquisition (based
upon assumptions, including identified cost savings, that the agents for the
lenders find reasonable), Young will be in compliance with all of the terms and
conditions of the Senior Credit Facility.
Pursuant to the Senior Credit Facility, Young is prohibited from making
investments or advances to third parties exceeding $7.5 million in the
aggregate unless the third party becomes a guarantor of Young's obligations.
However, Young may utilize up to $70.0 million of its borrowing availability
under the Sublimit for the purpose of repurchasing shares of Common Stock and
for paying dividends, subject to the limitations set forth in the Indentures.
In addition, Young may utilize the undrawn amounts under the Sublimit to retire
or prepay subordinated debt, subject to the limitations set forth in the
Indentures. Undrawn amounts under the Senior Credit Facility are available to
Young for working capital requirements and general corporate purposes.
Interest under the Senior Credit Facility is payable at the LIBOR rate, "CD
Rate" or "Base Rate." In addition to the index rates, Young pays a floating
percentage tied to Young's ratio of total debt to operating cash flow; ranging,
in the case of LIBOR rate loans, from 0.75% based upon a ratio under 4:1 to
2.00% based upon a 6:1 or greater ratio.
Each of the Subsidiaries has guaranteed Young's obligations under the Senior
Credit Facility. The Senior Credit Facility is secured by the pledge of all the
stock of the Subsidiaries and a first priority lien on all of the assets of
Young and its Subsidiaries.
The Senior Credit Facility imposes restrictions on Young's ability to incur
additional indebtedness. Young will be permitted to incur, subject to the terms
of the Indentures and satisfaction of the financial covenants of the Senior
Credit Facility, unsecured subordinated debt, provided that the subordination
and mandatory redemption provisions and the maturity of such indebtedness are
comparable to Young's existing Senior Subordinated Notes and that the net
proceeds in excess of any permitted acquisition are used to repay the
outstanding balance of the Senior Credit Facility by the amount of such excess.
Young is also restricted as to the amount of its capital lease obligations and
guarantees. The Senior Credit Facility also restricts the ability of Young to
amend material terms of the Indentures.
85
<PAGE>
The Senior Credit Facility requires Young to maintain certain financial
ratios. Young is required to maintain a total debt/operating cash flow ratio
ranging from 6.25x to 5.00x depending on senior debt leverages. Young is also
required to maintain a senior debt/operating cash flow ratio ranging from 2.75x
to 2.25x depending on senior debt leverages. Additionally, Young is required to
maintain an operating cash flow/total interest expense ratio ranging from 1.75x
to 2.25x depending on senior debt leverages. Young is also required to maintain
an operating cash flow minus capital expenditures to pro forma debt service
ratio of no less than 1.10x at any time. Such ratios must be maintained as of
the last day of the quarter for each of the periods.
Young is required to apply the proceeds from permitted equity issuances and
certain subordinated debt issuances, to the extent it exceeds the purchase
price for permitted acquisitions or permitted redemptions of Senior
Subordinated Debt, to reduce Young's senior debt levels. The Senior Credit
Facility also contains a number of customary covenants including, among others,
limitations on investments and advances, mergers and sales of assets, liens on
assets, affiliate transactions and changes in business. Young may, subject to
the financial covenants of the Senior Credit Facility, sell assets constituting
less than 15% of its operating cash flow.
Interest on Young's 11 3/4% Senior Subordinated Notes due 2004 (the
"November 1994 Notes") is payable semi-annually on May 15 and November 15;
interest on the June 1995 Notes is payable semi-annually on February 15 and
August 15; interest on the January 1996 Notes is payable semi-annually on
January 15 and July 15; and interest on the June 1997 Notes is payable semi-
annually on June 15 and December 15. The Indentures impose certain limitations
on the ability of Young and certain of its Subsidiaries to, among other things,
pay dividends or make certain other restricted payments, consummate certain
asset sales, enter into certain transactions with affiliates, incur
indebtedness that is subordinate in right of payment to any Senior Debt and
senior in right of payment to the Notes, incur liens, impose restrictions on
the ability of a Subsidiary to pay dividends or make certain payments to Young,
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the assets of Young.
Young regularly enters into program contracts for the right to broadcast
television programs produced by others and program commitments for the right to
broadcast programs in the future. Such programming commitments are generally
made to replace expiring or canceled program rights. Payments under such
contracts are made in cash or the concession of advertising spots to the
program provider to resell, or a combination of both.
On June 16, 1998, Young entered into a new long-term agreement with the Los
Angeles Lakers ("Lakers") with broadcast rights through the 2004/2005 season.
Under the terms of the seven year deal, KCAL-TV, Los Angeles, California, will
broadcast 41 Lakers pre-season and regular season away games annually.
Additionally, KCAL-TV has the broadcast rights to all post-season away games
not subject to NBA/network commitments. KCAL-TV has also obtained the exclusive
sales rights and control over broadcast, production and inventory activities.
Young paid an initial rights fee of $30 million on August 14, 1998 and will pay
an additional $18.0 million per season. In the event that all 41 games are not
made available to KCAL-TV or are canceled, Young will receive a per game
credit.
Young is regularly presented with opportunities to acquire television
stations which it evaluates on the basis of its acquisition strategy. Certain
of these opportunities may result in extensive negotiations with the
prospective seller. Other than the proposed merger and the WKBT-TV sale, Young
does not presently have any agreements to acquire or sell any television
stations. The merger will be accounted for as a purchase. See "Young's
Business--Acquisition Strategy."
Quantitative and Qualitative Disclosure About Market Risk
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
86
<PAGE>
instruments embedded in other contracts, and for hedging activities. Young is
required to adopt the provisions of the standard during the first quarter of
2000. Because Young does not use derivatives, Young does not expect that the
adoption of the new standard will have a material impact on the results of
operations or financial condition.
Impact of Year 2000
State of Readiness
The Company evaluated the impact of the Year 2000 problem on its business
and its ability to deliver its product to its viewers. The Year 2000 problem
was the result of computer programs being written using two digits (rather
than four) to define the applicable year. Various computer programs that had
time-sensitive software may recognize a date using "00" as the Year 1900
rather than the Year 2000, which could have resulted in miscalculations or
system failures.
The evaluation included a review of its Year 2000 preparedness relative to
its products and systems, accounting software and computer hardware. The
Company also evaluated the potential Year 2000 impact as a result of its
reliance on third parties that may have the Year 2000 problem embedded in
software and hardware.
The Company developed a plan to assess and handle the Year 2000 problem.
The plan was as follows:
1. Inventorying and assessing the impact on affected technology and systems;
2. Developing solutions for affected technology and systems;
3. Modifying or replacing affected technology and systems;
4. Testing and verifying solutions; and
5. Developing contingency plans.
Costs
Costs incurred directly related to addressing the Year 2000 problem were
not material. Since the Company did not utilize outside consulting firms and
utilized the employment resources within the Company to address the Year 2000
problem, the Company did not incur material costs in connection with becoming
Year 2000 compliant.
Contingency Plan
The Company developed contingency plans to minimize the effect of any
potential Year 2000 related disruptions. Virtually all of its stations had
plans in effect for natural disasters in the event a station was not able to
broadcast in the usual manner. The Company expanded these plans to include
additional systems, software and equipment deemed to be critical to its
broadcasts and business operations.
Results
The Company was not materially effected by any Year 2000 problems as of
January 31, 2000. None of the Company's computer hardware and software
experienced any material adverse effects, including signal interruption
resulting from the Year 2000 conversion.
Income Taxes
Young and its subsidiaries file a consolidated federal income tax return
and such state or local tax returns as are required. Young has $210.0 million
of net operating loss ("NOL") carryforwards the use of which is limited by
Internal Revenue Code Section 382. See Note 8 to Notes to Young's Consolidated
Financial Statements.
87
<PAGE>
KRON-TV AND BAYTV SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- -------- -------- --------
(unaudited) (unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues(1).......... $104,557 $116,637 $117,013 $125,301 $130,150
Operating expenses,
including selling,
general and
administrative
expenses................ 47,555 51,588 53,030 57,971 59,953
Amortization of program
license rights.......... 12,375 12,806 13,121 13,866 12,794
Depreciation and
amortization............ 2,698 2,861 3,521 4,325 5,004
-------- -------- -------- -------- --------
Operating income......... 41,929 49,382 47,341 49,139 52,399
Interest expense......... -- -- -- -- --
Minority interest........ -- 614 550 873 450
Other (expenses) income,
net..................... (538) (668) (504) (565) (626)
-------- -------- -------- -------- --------
Net income............... $ 41,391 $ 49,328 $ 47,387 $ 49,447 $ 52,223
======== ======== ======== ======== ========
Other Financial Data:
Cash flow provided by
operating activities.... $ 42,151 $ 53,743 $ 46,155 $ 55,428 $ 50,623
Payments for program
license liabilities..... $ 11,979 $ 12,997 $ 13,646 $ 13,123 $ 13,048
Broadcast cash flow(2)... $ 45,023 $ 52,052 $ 50,337 $ 54,207 $ 57,149
Broadcast cash flow
margin.................. 43.1% 44.6% 43.0% 43.3% 43.9%
Operating cash flow(3)... $ 45,023 $ 52,052 $ 50,337 $ 54,207 $ 57,149
Capital expenditures..... $ 2,987 $ 2,742 $ 5,580 $ 9,654 $ 5,244
Balance Sheet Data (as of
end of period):
Total assets............. $ 44,234 $ 42,998 $ 59,175 $ 64,444 $ 64,145
Long-term debt (including
current portion)........ -- -- -- -- --
Divisional equity........ $ 31,931 $ 29,947 $ 36,095 $ 39,627 $ 45,478
</TABLE>
- --------
(1) Net revenues are total revenues net of agency and national representation
commissions.
(2) "Broadcast cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), less payments for program license
liabilities. Other television broadcasting companies may measure broadcast
cash flow in a different manner. KRON-TV and BayTV have included broadcast
cash flow data because such data are commonly used as a measure of
performance for broadcast companies and are also used by investors to
measure a company's ability to service debt. Broadcast cash flow is not,
and should not be used as, an indicator or alternative to operating income,
net income or cash flow as reflected in the KRON-TV and BayTV combined
financial statements, is not intended to represent funds available for debt
service, dividends, reimbursement or other discretionary uses, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
(3) "Operating cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), less payments for program license
liabilities. Other television broadcasting companies may measure operating
cash flow in a different manner. KRON-TV and BayTV have included operating
cash flow data because such data are used by investors to measure a
company's ability to service debt. Operating cash flow does not purport to
represent cash provided by operating activities as reflected in the KRON-TV
and BayTV combined financial statements, is not a measure of financial
performance under generally accepted accounting principles and should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
88
<PAGE>
KRON-TV AND BAYTV MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
In June, 1999, Chronicle Publishing commenced the sale of all of its assets,
including KRON-TV and BayTV. At that time, Chronicle Publishing's businesses
included, among other things, The San Francisco Chronicle, The Pantagraph, The
Worcester Telegram & Gazette, KRON-TV, a 51% interest in BayTV, KAKE-TV, WOWT-
TV, SFGate.com, Chronicle Books and MBI Publishing Company. From August 1999 to
November 1999, Chronicle Publishing entered into definitive agreements with
various buyers for the sale of each of these businesses. It is currently
expected that at the time Chronicle Publishing is sold to Young, KRON-TV and
BayTV will be the only remaining businesses owned by Chronicle Publishing.
KRON-TV
KRON-TV is a VHF television station in the San Francisco Bay Area, the fifth
largest television market in the country based on television households.
Chronicle Publishing has owned and operated KRON-TV, and KRON-TV has been an
NBC affiliate, since it was first granted an FCC license in 1949. KRON-TV
currently has the number one sign-on to sign-off ranking as measured in ratings
and share in the San Francisco Bay Area television market and ranks second in
net television advertising revenues billed.
KRON-TV is the market television news leader as it delivers more hours of
local news weekly to viewers in the San Francisco Bay Area than any other
station in the market. The station has achieved this position by expanding
weekly news coverage and increasing coverage of breaking stories. KRON-TV
started airing thirty second news updates on the hour every hour in 1990,
lengthened its early morning news broadcast by one hour in 1992 and added a
4:00 pm daily newscast in 1996. KRON-TV is the only Bay Area station to offer
local news to its viewers on Saturday and Sunday mornings. KRON-TV also
increased the size of its news reporting staff so that it has more reporters
covering the news 24 hours a day than any of its competitors. KRON- TV
newscasts are time shifted and replayed on BayTV.
The operating revenues of KRON-TV are derived primarily from advertising
revenues and, to a much lesser extent, from compensation paid by the NBC
network to the station for broadcasting network programming. The station's
primary operating expenses are for employee compensation, news gathering,
production, programming and promotion costs. The majority of the operating
expenses of the station are fixed from year to year.
BayTV
As compensation for allowing local cable operators to carry the KRON-TV
broadcast signal on their systems, each cable operator agreed in 1993 to carry
a 24-hour local news and information channel produced and owned by KRON-TV. In
July 1994, the BayTV channel was launched with 850,000 subscribers, and it now
reaches 1.4 million cable homes. BayTV is the San Francisco Bay Area's only 24-
hour local news and information channel carried on local cable systems. The
programming for BayTV centers around features of interest to San Francisco Bay
Area residents such as local high school sports, local college sports,
restaurant reviews, local entertainment schedules, book reviews and long form
coverage of local community events.
BayTV has the most common channel position of any cable channel in the San
Francisco market with 82% of the systems carrying BayTV on Channel 35. BayTV
serves as a promotional platform for KRON-TV's news product since many of KRON-
TV's anchors and reporters appear regularly on BayTV and several of KRON-TV's
main anchors have their own programs on BayTV. Certain KRON-TV news programs
are time shifted on BayTV for viewer convenience and BayTV purchases base
infrastructure services such as equipment maintenance, promotional support,
accounting, office services, human resources and studio operations from KRON-
TV.
89
<PAGE>
The operating revenues of BayTV stations are derived from monthly subscriber
fees from local cable operators and from advertising revenues. In 2000, the
monthly fee is $.26 per subscriber per month. The stations' primary operating
expenses are for employee compensation, news gathering, production, programming
and promotion costs. The majority of the operating expenses of the station are
fixed each year.
In connection with Chronicle Publishing's sale of its cable systems to Tele-
Communications, Inc. ("TCI") in 1996 (now AT&T Broadband and Internet
Services), TCI acquired a 49% minority interest in BayTV, with Chronicle
Publishing retaining a 51% ownership position and management control. BayTV's
affiliation agreement with AT&T Broadband and Internet Services extends through
December 31, 2000.
Results of Operations
The following table sets forth certain combined operating data for KRON-TV
and BayTV for the years ended December 31, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Operating income....................... $ 47,341 $ 49,139 $ 52,399
Add:
Amortization of program license
rights.............................. 13,121 13,866 12,794
Depreciation and amortization........ 3,521 4,325 5,004
Less:
Payments for program license
liabilities......................... (13,646) (13,123) (13,048)
-------- -------- --------
Broadcast cash flow.................... $ 50,337 $ 54,207 $ 57,149
======== ======== ========
Broadcast cash flow margin............. 43.0 % 43.3 % 43.9 %
======== ======== ========
</TABLE>
Set forth below are the principal types of television revenues received by
KRON-TV and BayTV for the periods indicated and the percentage contribution of
each to total gross revenues, as well as agency and national sales
representative commissions paid thereon.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1998 1999
--------------- --------------- ---------------
Amount % Amount % Amount %
-------- ----- -------- ----- -------- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Local.................. $ 65,566 47.4 % $ 65,584 44.3 % $ 67,603 43.8 %
National............... 56,078 40.6 58,619 39.6 69,438 45.0
Network Compensation... 7,577 5.5 7,799 5.3 7,919 5.1
Political.............. 218 0.2 6,092 4.1 560 0.4
Subscription fees...... 3,562 2.6 3,669 2.5 4,074 2.6
Production/other....... 5,075 3.7 6,153 4.2 4,824 3.1
-------- ----- -------- ----- -------- -----
Total................ $138,076 100.0 % $147,916 100.0 % $154,418 100.0 %
Commissions.............. (21,063) (15.3) (22,615) (15.3) (24,268) (15.7)
-------- ----- -------- ----- -------- -----
Net operating revenues... $117,013 84.7 % $125,301 84.7 % $130,150 84.3 %
======== ===== ======== ===== ======== =====
</TABLE>
Year ended December 31, 1999 Compared to Year ended December 31, 1998
Net operating revenues for the year ended December 31, 1999 were $130.2
million, an increase of $4.9 million or 3.9% compared to $125.3 million for the
year ended December 31, 1998. Gross revenues for national advertising grew by
$10.8 million or 18.5% primarily as a result of an increase in television
advertising by internet companies in the third and fourth quarters of 1999.
This advertising category more than
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replaced the $6.1 million of gross revenue generated from political advertising
earned in 1998, a national election year. In 1999, KRON-TV also earned $560,000
of gross revenue from political advertising related to the San Francisco
mayoral election.
Operating expenses, including selling, general and administrative expenses
for the year ended December 31, 1999 were $60.0 million, compared to $58.0
million in 1998, an increase of $2.0 million or 3.4%. This increase was
primarily attributable to annual salary increases for the staff, including $1.6
million in long-term management incentive compensation and the write-off of
production costs related to the cancellation of the Oakland A's baseball
broadcast agreement of $998,000 in 1999.
Amortization of program license rights for the year ended December 31, 1999
was $12.8 million compared to $13.9 million for the year ended December 31,
1998, a decrease of $1.1 million or 7.7%. In 1998, KRON-TV incurred $1.9
million in program license fees related to Oakland A's baseball which was not
renewed in 1999. Part of this savings was offset by increases in costs related
to syndicated programming incurred in 1999.
Depreciation of property and equipment was $5.0 million for the year ended
December 31, 1999 compared to $4.3 million for the comparable period in 1998,
an increase of $679,000 or 15.7%. This increase is attributed to the
acquisition and placing into service of $5.2 million of equipment in 1999 and
$9.6 million of equipment in 1998 related to the installation of high
definition television (HDTV) transmission facilities in 1998 and to convert the
broadcast equipment of KRON-TV and BayTV from an analog to a digital format in
both years.
KRON-TV's payments for program license liabilities were $13.0 million during
the year ended December 31, 1999 compared to $13.1 million in 1998.
Net income for the year ended December 31, 1999 was $52.2 million compared
to $49.4 million for the year ended December 31, 1998, an increase of $2.8
million or 5.7%.
Broadcast cash flow for the year ended December 31, 1999 was $57.1 million,
compared with $54.2 million for the year ended December 31, 1998, an increase
of $2.9 million or 5.4%. Broadcast cash flow margins (broadcast cash flow
divided by net revenues) for the year ended December 31, 1999 increased to
43.9% from 43.3% for the same period in 1998.
Year ended December 31, 1998 Compared to Year ended December 31, 1997
Net operating revenues for the year ended December 31, 1998 were $125.3
million, an increase of $8.3 million or 7.1% compared to $117.0 million for the
year ended December 31, 1997. The increase for the year was primarily
attributable to strong spending on political advertising in the San Francisco
market. Gross revenue for political advertising for the year ended December 31,
1998 was $6.1 million, an increase of $5.9 million over the year ended December
31, 1997. In addition, gross revenue for national advertising increased by $2.5
million or 4.5%.
Operating expenses, including selling, general and administrative expenses
for the year ended December 31, 1998 were $58.0 million, compared to $53.0
million, an increase of $5.0 million or 9.3%. The most significant increase was
the additional $2.1 million or a 35.3% increase in the operating costs of BayTV
for the year due to the introduction in April 1997 of an expanded program
schedule with several new locally produced programs. This increase was also
attributable to annual salary increases and additional newsroom expenses for
the year.
Amortization of program license rights for the year ended December 31, 1998
was $13.9 million compared to $13.1 million for the year ended December 31,
1997, an increase of $745,000 or 5.7%. Syndicated program costs for new
programs and renewed programs increased $2.4 million while the program license
fees on Oakland A's baseball under a new contract decreased $1.6 million in
1998 from 1997.
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Depreciation of property and equipment was $4.3 million for the year ended
December 31, 1998 compared with $3.5 million for the comparable period in 1997,
an increase of $804,000 or 22.8%. This increase in depreciation was primarily
attributable to the acquisition and placing into service of $9.6 million of
equipment in 1998 and $5.6 million of equipment in 1997 for the installation of
high definition television (HDTV) transmission facilities in 1998 and to
convert the broadcast equipment of KRON-TV and BayTV from an analog to a
digital format in both years.
KRON-TV made payments for program license liabilities of $13.1 million
during the year ended December 31, 1998 compared to $13.6 million for the year
ended December 31, 1997, a decrease of $523,000 or 3.8%.
Net income for the year ended December 31, 1998 was $49.4 million compared
to $47.4 million for the year ended December 31, 1997, or an increase of $2.0
million or 4.3%.
Broadcast cash flow for the year ended December 31, 1998 was $54.2 million,
compared with $50.3 million for the year ended December 31, 1997, an increase
of $3.9 million or 7.7%. Broadcast cash flow margins (broadcast cash flow
divided by net revenues) for the year ended December 31, 1998 were 43.3%
compared to 43.0% for the same period in 1997.
Liquidity and Capital Resources
Cash provided from operating activities for the year ended December 31, 1999
was $50.6 million compared to cash provided from operating activities of $55.4
million for the year ended December 31, 1998. The changes in net cash flows
from operating activities are primarily the result of an increase in trade
accounts receivable and a decrease in trade accounts payable during the year
ended December 31, 1999 as compared to the year ended December 31, 1998.
Cash used in investing activities for the years ended December 31, 1999 and
1998, of $5.2 million and $9.7 million, respectively, related exclusively to
the purchase of property and equipment.
The remaining net cash provided from operations, after the purchase of
capital expenditures, was transferred to Chronicle Publishing. Excess net cash
from operations after meeting working capital needs and purchasing capital
expenditures transferred to Chronicle Publishing was $46.4 million for the year
ended December 31, 1999 compared to $45.9 million for the year ended December
31, 1998. There were no outstanding credit facilities related to KRON-TV and
BayTV as of December 31, 1999.
Impact of Year 2000
In late 1999 KRON-TV and BayTV completed their remediation and testing of
systems related to Year 2000 readiness. As a result of those planning and
implementation efforts, KRON-TV and BayTV experienced no significant
disruptions in mission critical information technology and non-information
technology systems and believe those systems successfully responded to the Year
2000 date change. Chronicle Publishing expensed approximately $381,000 during
1999 in connection with remediating its systems. Chronicle Publishing is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
Chronicle Publishing will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
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THE TELEVISION BROADCASTING INDUSTRY
Commercial television broadcasting began in the United States on a regular
basis in the 1940s. Currently there are a limited number of channels available
for broadcasting in any one geographic area. Television stations can be
distinguished by the frequency on which they broadcast. Television stations
broadcast over the very high frequency ("VHF") band (channels 2-13) of the
spectrum generally have some competitive advantage over television stations
which broadcast over the ultra-high frequency ("UHF") band (channels above 13)
of the spectrum because the former usually have better signal coverage and
operate at a lower transmission cost. However, the improvement of UHF
transmitters and receivers, the complete elimination from the marketplace of
VHF-only receivers and the expansion of cable television systems have reduced
the VHF signal advantage. Any disparity between VHF and UHF is likely to
diminish even further in the coming era of digital television.
The Market for Television Programming
Television station revenues are primarily derived from local, regional and
national advertising and, to a lesser extent, from network compensation and
revenues from studio rental and commercial production activities. Advertising
rates are based upon a variety of factors, including a program's popularity
among the viewers an advertiser wishes to attract, the number of advertisers
competing for the available time, the size and demographic makeup of the market
served by the station, and the availability of alternative advertising media in
the market area. Rates are also determined by a station's overall ratings and
share in its market, as well as the station's ratings and share among
particular demographic groups which an advertiser may be targeting. Because
broadcast television stations rely on advertising revenues, declines in
advertising budgets, particularly in recessionary periods, adversely affect the
broadcast industry, and as a result may contribute to a decrease in the
revenues of broadcast television stations.
All television stations in the country are grouped by Nielsen, a national
audience measuring service, into approximately 210 generally recognized
television markets that are ranked in size according to various formulae based
upon actual or potential audience. Each designated market area is determined as
an exclusive geographic area consisting of all counties in which the home-
market commercial stations receive the greatest percentage of total viewing
hours. Nielsen periodically publishes data on estimated audiences for the
television stations in the various television markets throughout the country.
The estimates are expressed in terms of the percentage of the total potential
audience in the market viewing a station (the station's "rating") and of the
percentage of the audience actually watching television (the station's
"share"). Nielsen provides such data on the basis of total television
households and selected demographic groupings in the market. Nielsen uses two
methods of determining a station's ability to attract viewers. In larger
geographic markets, ratings are determined by a combination of meters connected
directly to selected television sets and weekly diaries of television viewing,
while in smaller markets only weekly diaries are completed. The Los Angeles and
Nashville markets are metered.
Whether or not a station is affiliated with one of the three major networks
(NBC, ABC or CBS) has a significant impact on the composition of the station's
revenues, expenses and operations. A typical network affiliate receives the
majority of its programming each day from the network. This programming, along
with cash payments ("network compensation"), is provided to the affiliate by
the network in exchange for a substantial majority of the advertising time
during network programs. The network then sells this advertising time and
retains the revenues. The affiliate retains the revenues from time sold during
breaks in and between network programs and programs the affiliate produces or
purchases from non-network sources. The Fox Broadcasting Company has
established a network of independent stations whose operating characteristics
are similar to the major network affiliate stations although the number of
hours of network programming for Fox affiliates is less than that of the three
major networks. In recent years, Fox has effectively evolved into the fourth
network.
A fully independent station such as KCAL purchases or produces all of the
programming which it broadcasts, resulting in generally higher programming
costs than those of major-network affiliates in the same
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market. However, under increasingly popular barter arrangements, a national
program distributor may receive advertising time in exchange for programming it
supplies, with the station paying a reduced fee or no cash fee at all for such
programming. Because the major networks regularly provide first-run programming
during prime time viewing hours, their affiliates generally (but do not always)
achieve higher audience shares, but have substantially less inventory of
advertising time to sell during those hours than independent stations, since
the major networks use almost all of their affiliates' prime time inventory for
network shows. The independent station is, in theory, able to retain its entire
inventory of advertising and all of the revenue obtained therefrom. The
independent stations' smaller audiences and greater inventory during prime time
hours generally result in lower advertising rates charged and more advertising
time sold during those hours, as compared with major affiliates' larger
audiences and limited inventory, which generally allow the major-network
affiliates to charge higher advertising rates for prime time programming. By
selling more advertising time, the independent station typically achieves a
share of advertising revenues in its market greater than its audience ratings.
Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations, and to a lesser extent, with radio
stations and cable system operators serving the same market. Traditional
network programming, and recently Fox programming, generally achieve higher
audience levels than syndicated programs aired by independent stations.
However, since greater amounts of advertising time are available for sale by
independent stations and Fox affiliates, they typically achieve a share of the
television market advertising revenues greater than their share of the market's
audience. Public broadcasting outlets in most communities compete with
commercial broadcasters for viewers.
Developments in the Television Market
Through the 1970s, network television broadcasting enjoyed virtual dominance
in viewership and television advertising revenue, because network-affiliated
stations competed only with each other in most local markets. Beginning in the
1980s, however, this level of dominance began to change as more local stations
were authorized by the FCC and marketplace choices expanded with the growth of
independent stations and cable television services.
Cable television systems, which grew at a rapid rate beginning in the early
1970s, were initially used to retransmit broadcast television programming to
paying subscribers in areas with poor broadcast signal reception. In the
aggregate, cable-originated programming has emerged as a significant competitor
for viewers of broadcast television programming, although no single cable
programming network regularly attains audience levels amounting to more than
any major broadcast network. With the increase in cable penetration in the
1980s, the advertising share of cable networks has increased. Notwithstanding
such increases in cable viewership and advertising, over-the-air broadcasting
remains the dominant distribution system for mass market television
advertising. Basic cable penetration (the percentage of television households
which are connected to a cable system) in Young's television markets ranges
from 60 % to 74%.
In acquiring programming to supplement network programming, network
affiliates compete with independent stations and Fox affiliates in their
markets. Cable systems generally do not compete with local stations for
programming. Although various national cable networks from time to time have
acquired programs that would have otherwise been offered to local television
stations, such programs would not likely have been acquired by such stations in
any event. In the past, the cost of programming increased dramatically,
primarily because of an increase in the number of new independent stations and
a shortage of desirable programming. Recently, however, program prices have
stabilized as a result of increases in the supply of programming.
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YOUNG'S BUSINESS
All market rank, rank in market, station audience rating and share, and
television household data in this report are from the Nielsen Station Index
Viewers and Profile dated November 1999, as prepared by A.C. Nielsen Company
("Nielsen"). Nielsen data provided herein refers solely to the United States
television markets. As used herein, "Young" means Young Broadcasting Inc. and,
where the context requires, its subsidiaries.
General
Young owns and operates eleven television stations in geographically diverse
markets and a national television sales representation firm, Adam Young Inc.
Six of the stations are affiliated with American Broadcasting Companies, Inc.
("ABC"), three are affiliated with CBS Inc., one is affiliated with National
Broadcasting Company, Inc. ("NBC"), and one is an independent station. Each of
Young's stations is owned and operated by a direct or indirect subsidiary.
Young is presently the eighth largest ABC network affiliate group in terms of
households reached. Young's sole independent television station, KCAL, Los
Angeles, California, is the only independent VHF television station operating
in the Los Angeles market, which is ranked as the second-largest television
market in terms of population and the largest in terms of estimated television
revenue.
Young was founded in 1986 by Vincent Young and his father, Adam Young.
Vincent Young, Young's Chairman, has over 25 years of experience in the
television broadcast industry, and Adam Young has over 50 years of experience
in the industry. Ronald Kwasnick, Young's President, has over 25 years of
experience in the industry.
Operating Strategy
Young continually seeks to increase its revenues and broadcast cash flow (as
defined). Young operating strategy focuses on increasing the cash flow of its
stations through advertising revenue growth and strict control of programming
and operating costs. The components of this strategy include the following:
Targeted Marketing
Young seeks to increase its revenues and broadcast cash flow by expanding
existing relationships with local and national advertisers and attracting new
advertisers through targeted marketing techniques and carefully tailored
programming. Young works closely with advertisers to develop campaigns that
match specifically targeted audience segments with the advertisers' overall
marketing strategies. With this information, Young regularly refines its
programming mix among network, syndicated and locally-produced shows in a
focused effort to attract audiences with demographic characteristics desirable
to advertisers. Young's success in increasing local advertising revenues is
also attributable, in part, to the upgrading of its local sales staff,
performance-based compensation arrangements and the implementation of systems
of performance accountability. Each station also benefits from the ongoing
exchange of ideas and experiences with the other stations.
Young's stations utilize a variety of marketing techniques to increase
advertising revenues, including the following:
. Vendor Marketing. Young's "vendor marketing" program has experienced a
great deal of success in Young markets. Under this program, a station
will contact the vendors of a particular store chain and arrange for the
vendors to purchase advertising for the store chain in exchange for the
store's commitment to purchase additional products from the vendors. The
result is that both the vendors' products and the store chain are
advertised, with the vendors collectively bearing the cost of the
advertisement.
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. Live Remotes. Stations obtain premium advertising dollars by utilizing
live remotes on location at the offices or facilities of an advertiser.
The station will use its own staff and broadcasting equipment and, as a
result, the expense to the station is relatively low. Live advertisements
are broadcast continually over the course of a period of the day and tend
to show immediate results with viewers being attracted to the live
television event taking place within their community.
. Research. Each station designates personnel to research the amount of
advertising dollars expended in other media (such as radio, newspapers
and magazines) by advertisers within its market. The station will then
target individual advertisers seeking the same demographic groups sought
by the station for particular dayparts and will illustrate to the
advertisers the advantages of television advertising over other media
which do not target specific demographic groups.
An important element in determining advertising rates is the station's
rating and share among a particular demographic group which the advertiser may
be targeting. Young believes that its success is attributable to its ability to
reach desirable demographic groups with the programs it broadcasts.
Strong Local Presence
Each station seeks to achieve a distinct local identity principally through
the quality of its local news programming and by targeting specific audience
groups with special programs and marketing events. Each station's local news
franchise is the foundation of Young's strategy to strengthen audience loyalty
and increase revenues and broadcast cash flow for each station. Strong local
news generates high viewership and results in higher ratings both for programs
preceding and following the news.
Strong local news product helps differentiate local broadcast stations from
cable system competitors, which generally do not provide this service. The cost
of producing local news programming generally is lower than other sources of
programming and the amount of local news programming can be increased for very
modest incremental increases in cost. Moreover, such programming can be
increased or decreased on very short notice, providing Young with greater
programming flexibility.
In each of its markets, Young develops additional information-oriented
programming designed to expand Young's hours of commercially valuable local
news and other news programming with relatively small increases in operating
expenses. In addition to local news, each station utilizes special programming
and marketing events, such as prime time programming of local interest or
sponsored community events, to strengthen community relations and increase
advertising revenues. Young places a special emphasis on developing and
training its local sales staff to promote involvement in community affairs and
stimulate the growth of local advertising sales.
Programming
Young continually reviews its existing programming inventory and seeks to
purchase the most profitable and cost-effective syndicated programs available
for each time period. In developing its selection of syndicated programming,
management balances the cost of available syndicated programs, their potential
to increase advertising revenue and the risk of reduced popularity during the
term of the program contract. Young seeks to purchase only those programs with
contractual periods that permit programming flexibility and which complement a
station's overall programming strategy and counter competitive programming.
Programs that can perform successfully in more than one time period are more
attractive due to the long lead time and multi-year commitments inherent in
program purchasing.
Cost Controls
Each station emphasizes strict control of its programming and operating
costs as an essential factor in increasing broadcast cash flow.
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Young relies primarily on its in-house production capabilities and seeks to
minimize its use of outside firms and consultants. Young's size benefits each
station in negotiating favorable terms with programming suppliers and other
vendors. In addition, each station reduces its overhead costs by utilizing the
group benefits provided by Young for all of the stations, such as insurance and
other employee group benefit plans. Through its strategic planning and annual
budget processes, Young continually seeks to identify and implement cost
savings opportunities at each of its stations. Young closely monitors the
expenses incurred by each of the stations and continually reviews the
performance and productivity of station personnel. Young has been successful in
controlling its costs without sacrificing revenues through efficient use of its
available resources.
Acquisition Strategy
Young believes that its ability to manage costs effectively while enhancing
the quality provided to station viewers gives Young an important advantage in
acquiring and operating new stations. In assessing acquisitions, Young targets
stations for which it has identified line item expense reductions that can be
implemented upon acquisition. Young emphasizes strict controls over operating
expenses as it expands a station's revenue base with the goal of improving a
station's broadcast cash flow. Typical cost savings arise from reducing
staffing levels, substituting more cost-effective employee benefit programs,
reducing dependence on outside consultants and research firms and reducing
travel and other non-essential expenses. Young also develops specific proposals
for revenue enhancement utilizing management's significant experience in local
and national advertising.
Young plans to pursue favorable acquisition opportunities as they become
available. Young is regularly presented with opportunities to acquire
television stations which it evaluates on the basis of its acquisition
strategy. Other than its proposed merger with Chronicle and the resultant
acquisition of KRON-TV and BayTV and its recent sale of WKBT-TV, both discussed
elsewhere in this joint proxy statement/prospectus, Young does not presently
have any agreements to acquire or sell any television stations.
The Stations
Young's stations are geographically diverse, which minimizes the impact of
regional economic downturns. One station is located in the west region (KCAL-
Los Angeles, California), five stations are located in the Midwest region
(WBAY-Green Bay, Wisconsin, KWQC-Quad Cities, KELO-Sioux Falls, South Dakota,
WLNS-Lansing, Michigan and WTVO-Rockford, Illinois), four stations are in the
southeast region (WKRN-Nashville, Tennessee, WRIC-Richmond, Virginia, WATE-
Knoxville, Tennessee, and KLFY-Lafayette, Louisiana), and one station is in the
northeast region (WTEN-Albany, New York).
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Six of Young's eleven stations are affiliated with ABC, three are affiliated
with CBS and one is affiliated with NBC. Young believes that this network
diversity reduces the potential impact of a ratings decline experienced by a
particular network. KCAL is the only independent VHF television station
operating in the Los Angeles market. The following table sets forth general
information for each of Young's stations:
<TABLE>
<CAPTION>
Commercial Station
Market Television Network Stations Rank In In-Market Year
Rank(1) Households(2) Channel Affiliation in DMA(3) Market(4) Share(5) Acquired
------- ------------- ------- ----------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
KCAL (Los Angeles, CA).. 2 5,135,140 9 IND 13 7 9 1996
WKRN (Nashville, TN).... 30 811,870 2 ABC 8 3 20 1989
WTEN (Albany, NY)....... 55 507,000 10(6) ABC 6 3 27 1989
WRIC (Richmond, VA)..... 60 474,610 8 ABC 5 3 26 1994
WATE (Knoxville, TN).... 63 451,870 6 ABC 5 2 22 1994
WBAY (Green Bay, WI).... 69 392,300 2 ABC 6 1 33 1994
KWQC (Quad Cities)...... 88 312,300 6 NBC 4 1 41 1996
WLNS (Lansing, MI)...... 106 237,130 6 CBS 4 1 35 1986
KELO (Sioux Falls, SD).. 114 231,900 11(7) CBS 4 1 45 1996
KLFY (Lafayette, LA).... 123 203,100 10 CBS 4 1 53 1988
WTVO (Rockford, IL)..... 135 171,000 17 ABC 5 3 25 1988
</TABLE>
- --------
(1) Refers to the size of the television market or Designated Market Area
("DMA") as used by Nielsen.
(2) Refers to the number of television households in the DMA as estimated by
Nielsen.
(3) Represents the number of television stations ("reportable stations")
designated by Nielsen as "local" to the DMA, excluding public television
stations and stations which do not meet minimum Nielsen reporting standards
(weekly cumulative audience of less than 2.5%) for reporting in the Sunday
through Saturday, 7:00 a.m. to 1:00 a.m. period ("sign-on to sign-off").
Does not include national cable channels. The number of reportable stations
may change for each reporting period. "Weekly cumulative audience" measures
the total number of different households tuned to a station at a particular
time during the week. "Share" references used elsewhere herein measure the
total daily households tuned to a station at a particular time during the
week.
(4) Station's rank relative to other reportable stations, based upon the DMA
rating as reported by Nielsen sign-on to sign-off during November 1999.
(5) Represents an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market ("in-market share"), as measured sign-on
to sign-off.
(6) WTEN has a satellite station, WCDC (Adams, Massachusetts), Channel 19,
operating under a separate license from the FCC.
(7) KELO has three satellite stations, KDLO (Florence, South Dakota), Channel
3, KPLO (Reliance, South Dakota), Channel 6, and KCLO (Rapid City, South
Dakota), Channel 15, each of which operates under a separate license from
the FCC. KCLO operates in a separate DMA from that of KELO and the other
two satellites, wherein it ranks 172.
The following is a description of each of Young's stations:
KCAL, Los Angeles, California
Young acquired KCAL from KCAL Broadcasting, Inc., a subsidiary of the Walt
Disney Company ("Disney") on November 22, 1996. KCAL has the distinction of
being one of the first commercial stations in the country. KCAL's first
broadcast was on December 23, 1931. It is now the only independent VHF station
in the Los Angeles market. Los Angeles is the second largest DMA with an
estimated 5,135,140 television households and the country's largest television
market in terms of estimated advertising dollars spent on the medium. There are
thirteen reportable stations in the DMA. For the November 1999 ratings period,
KCAL was ranked seventh after the local ABC, NBC, CBS, WB, Fox, UPN and
Univision affiliates, with an overall sign-on to sign-off in-market share of
9%.
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KCAL is a prominent news provider in the market, presenting 29.5 hours of
such programming each week and up to 25 special one-half hour reports each
year. In 1995, the station won the prestigious Edward R. Murrow Award as the
"Best Local Newscast in the Country." In 1996, KCAL was honored with nine
Golden Mikes, including Best 30 Minute Newscast and Best Daytime Newscast, ten
Emmys, five Radio Television News Directors awards, ten New York Film Festival
Awards, 17 Associated Press Awards and 31 Los Angeles Press Club Awards. In
1997, KCAL won five Golden Mikes. In 1998, KCAL won 8 Emmys and 4 Golden Mikes.
In 1999 KCAL won two Emmys for live sports coverage and two Golden Mikes for
news coverage. Since 1991, KCAL has been the most honored local station in Los
Angeles for news.
KCAL is also the broadcast station of choice for premier local sports
franchises with over 130 major televised sporting events each year. KCAL has
won numerous Emmy Awards and currently has agreements with the Los Angeles
Lakers (5 years remaining), Anaheim Angels (1 year remaining), Mighty Ducks of
Anaheim (3 years remaining), and Los Angeles Clippers (1 years remaining). The
station also has agreements to broadcast PAC 10 Football, the John Wooden
Classic and Fight Night Boxing events. These contracts enable KCAL to offer
advertisers year-round sports packages aimed at very attractive audience
categories.
As the largest market in the country's largest state, Los Angeles enjoys a
diverse industry makeup ranging from entertainment and manufacturing to
international trade and financial services. In addition to Los Angeles County,
KCAL reaches Orange, Santa Barbara and other counties in Southern California.
Orange County alone has ranked fifth, nationally, in both population and
population growth over the last five years. According to Investing in
Television Market Report 99 (4th Edition), published by BIA Publications, Inc.
(the "BIA Guide"), the average household income in the Los Angeles market in
1997 was $45,789, with an effective buying income projected to grow at an
annual rate of 2.3% through 2002. Historically, there has been a close
correlation between retail sales and expenditures on broadcast television
advertising in a given market. According to the BIA Guide, retail sales growth
for the Los Angeles market is projected to average 1.7% annually through 2002.
WKRN, Nashville, Tennessee
WKRN, acquired by Young from Knight-Ridder Broadcasting, Inc. in June 1989,
began operations in 1953 and is affiliated with ABC. The Nashville market is
the 30th largest DMA, with an estimated 811,870 television households. There
are eight reportable stations in the DMA. For the November 1999 ratings period,
WKRN was rated third after the CBS and NBC affiliates, with an overall sign-on
to sign-off in-market share of 20%. The station's syndicated programs include
Live with Regis and Kathie Lee, Donnie & Marie, Rosie, Friends, Wheel of
Fortune, ER, Jenny Jones and National Enquirer.
The quality of the station's newscasts has been regularly recognized by its
broadcasting peers, highlighted by it winning of the prestigious Peabody Award
for investigative journalism. News 2 received the 1998 Mid-South Regional Emmy
for Overall News Excellence and has been named Outstanding News Operation in
the State of Tennessee by the Associated Press for three of the last four
years.
Nashville is the capital of Tennessee and the center of local, state and
federal government with three of its five largest employers being government
related. Prominent corporations located in the area include Bridgestone-
Firestone, Nissan, Saturn, Columbia/HCA, Shoney's, Service Merchandise, Bell
South and Dell Computer. Nashville is the home of several universities,
including Vanderbilt and Tennessee State. According to the BIA Guide, the
average household income in the Nashville market in 1997 was $42,956, with
effective buying income projected to grow at an annual rate of 6.5% through
2002. Historically, there has been a close correlation between retail sales and
expenditures on broadcast television advertising in a given market. According
to the BIA Guide, retail sales growth for the Nashville market is projected to
average 6.0% annually through 2002.
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WKRN is a prime example of Young's strategy to achieve a strong local
presence and has been recently nominated for Nashville's Corporate Donor of the
Year for its commitment to community activities. Public Service involvement
ranges from raising food for the hungry of Middle Tennessee, The Ronald
McDonald House, to focusing on the issues and concerns of children through its
"Kids to Kids" campaign and "One for the Community" fund raising effort.
ABC affiliates in Bowling Green, Kentucky and Jackson, Tennessee have
overlapping signals with WKRN on the north and west edges of the DMA, resulting
in some loss of viewers in those areas. Young believes this overlap is
responsible for the lower station share compared to the NBC and CBS affiliates.
WTEN, Albany, New York
WTEN, acquired by Young from Knight-Ridder Broadcasting, Inc. in October
1989, began operations in 1953 and is affiliated with ABC. WTEN added a
satellite station, WCDC-TV Channel 19, in Adams, Massachusetts in 1963 to serve
more adequately the eastern edge of the market. WCDC-TV was acquired
concurrently with WTEN. (All references to WTEN include WCDC-TV)
The Albany market (which includes Schenectady and Troy) is the 55th largest
DMA, with an estimated 507,000 television households. There are six reportable
stations in the DMA, three of which broadcast in the VHF spectrum. During the
November 1999 ratings period, WTEN was third in the ratings, with a sign-on to
sign-off in-market share of 27%, compared to 30% for WNYT, the NBC affiliate,
31% for WRGB, the CBS affiliate, 11% for WXXA, the Fox affiliate and 0% for
WYPX, the PAX station and 4% for WEWB, the WB affiliate has signed on as of
September 1999. The station's syndicated programs include Wheel of Fortune,
Jeopardy, Rosie, and Jenny Jones. WTEN has won numerous awards in recent years
for both local news and public affairs programming.
Albany is the capital of New York. The largest employers are the New York
State government, the State University of New York and the General Electric
Company. Other prominent corporations located in the area include Lockheed
Martin, Chubb Corp, State Farm Insurance, Key Corp. and Quad Graphics. These
employers, which are dependent upon a well-educated and skilled labor force to
remain competitive in their industries, are able to draw upon the nation's
largest concentration per capita of professionals with doctoral and post-
doctoral degrees. According to the BIA Guide, the average household income in
the Albany market in 1997 was $40,370, with effective buying income projected
to grow at an annual rate of 1.6% through 2002. Retail sales growth in this
market is also projected by the BIA Guide to average 1.7% annually during the
same period.
The station has focused on its local newscasts, selective syndicated program
acquisitions and client marketing programs to maximize revenues. Selective use
of sales marketing programs has generated over $2 million of new incremental
revenue in 1999.
WTEN's share of market revenue was 24.6% in 1998 which is a 5% increase over
the prior year. The station achieved a market share of 24.7% for the calendar
year 1999.
WRIC, Richmond, Virginia
WRIC, acquired by Young in November 1994 from Nationwide Communications Inc.
("Nationwide"), began operations in 1955 and is affiliated with ABC. The
Richmond market (which also includes Petersburg, Virginia) is the 60th largest
DMA, with an estimated 474,610 television households. There are five reportable
commercial television stations in the DMA, three of which are VHF stations. For
the November 1999 ratings period, WRIC was in third place in the ratings, five
points behind WWBT, the NBC affiliate, and WTVR, the CBS affiliate, with a
sign-on to sign-off in market share of 26% compared to 31% for WWBT. The
station's syndicated programming includes Wheel of Fortune, Jeopardy, Maury
Povich, Rosie and Jerry Springer. WRIC has won numerous awards in recent years
from state journalism organizations for its news operations.
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Richmond is the capital of Virginia and home to numerous colleges and
universities, including the University of Richmond, Virginia Commonwealth
University (VCU) and the Medical College of Virginia. Philip Morris USA is the
largest employer in the market, employing approximately 6,900 area residents.
According to the BIA Guide, the average household income in the Richmond market
in 1997 was $41,951 with effective buying income projected to grow at an annual
rate of 3.6% through 2002. Retail sales growth is also projected by the BIA
Guide to average 4.4% annually during the same period.
WATE, Knoxville, Tennessee
WATE, also acquired by Young in November 1994 from Nationwide, began
operations in 1953 and is also affiliated with ABC. The Knoxville, Tennessee
market is the 63rd largest DMA, with an estimated 451,870 television
households. There are five reportable stations in the DMA, three of which are
VHF stations. During the November 1999 ratings period, WATE ranked second, with
a sign-on to sign-off in-market share of 22%. The station's syndicated
programming includes Home Improvement, People's Court, Judge Judy and Rosie.
WATE has won numerous awards in recent years from state journalism
organizations, including Emmy Awards from the Tennessee Chapter of NATAS. In
1999, WATE also received a national Gabriel Award for a documentary on The
Holocaust.
According to the BIA Guide, the average household income in the Knoxville
market in 1997 was $36,917 with effective buying income projected to grow at an
annual rate of 5.4% through 2002. Retail sales growth is also projected by the
BIA Guide to average 5.5% annually during the same period.
WBAY, Green Bay, Wisconsin
WBAY, the third station acquired by Young in November 1994 from Nationwide,
began operations in 1953 and is also affiliated with ABC. The Green Bay market
(which also includes Appleton, Wisconsin) is the 69th largest DMA, with an
estimated 392,300 television households. There are six reportable stations in
the DMA, four of which are VHF stations. For the November 1999 ratings period,
WBAY was first in the ratings with a sign-on to sign-off in-market share of
33%. The station's syndicated programming includes Home Improvement, Seinfeld,
Friends, Martha Stewart and Dr. Joy Brown. WBAY has won numerous awards in
recent years from state journalism organizations for its news operations.
According to the BIA Guide, the average household income in the Green Bay
market in 1997 was $40,854, with effective buying income projected to grow at
an annual rate of 4.3% through 2002. Retail sales growth is also projected by
the BIA Guide to average 4.7% annually during the same period.
KWQC, Quad Cities
Young acquired KWQC from Broad Street Television, L.P. on April 15, 1996.
The station began operations in 1949 and is affiliated with NBC. The Davenport
market, referred to as the Quad Cities Market, is the 88th largest DMA serving
an estimated 312,300 television households in eastern Iowa and western
Illinois. There are four reportable stations in the DMA, three of which are
VHF. During the November 1999 ratings period, KWQC retained its number one
position in the market with a sign-on to sign-off in-market share of 41%. The
station has retained the number one position for over thirteen years and
continues to expand news programming and increase market share. The station's
syndicated programming includes Oprah, Jeopardy, Wheel of Fortune, Martha
Stewart, Hollywood Squares, Inside Edition and Cheers.
KWQC places a strong emphasis on local news and community related events and
broadcasts. The station annually produces several news specials in addition to
providing 25 hours of local news and information programming per week. KWQC is
involved in a variety of community events including Race For The Cure, Toys For
Tots, Festival of Trees, The Student Hunger Drive, the United Way Drive, Bix 7
Race and Women's Lifestyle Fair.
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John Deere Corporation and Eagle Country Markets are both headquartered in
the Quad Cities. Other major employers include the Rock Island Arsenal, Alcoa,
Trinity Medical Center, Oscar Mayer, J.I. Case and Modern Woodman. Riverboat
gambling has brought three boats to the market that have increased the tourism
business. The market has also experienced an increase in convention business.
According to the BIA Guide, the average household income in the Quad Cities
market in 1997 was $39,962, with effective buying income projected to grow at
an annual rate of 3.2% through 2002. Retail sales growth is also projected by
the BIA Guide to average 3.3% annually during the same period.
WLNS, Lansing, Michigan
WLNS, acquired by Young from Backe Communications, Inc. in September 1986,
began operations in 1950 and is affiliated with CBS. The Lansing market is the
107th largest DMA, with an estimated 237,860 television households. WLNS is one
of only two VHF network affiliates in the DMA. During the November 1999 ratings
period, WLNS was the highest-rated station out of four reportable stations in
its DMA, with a sign-on to sign-off in-market share of 35%. The station's
syndicated programming includes Rosie, Entertainment Tonight, Hollywood
Squares, and Montel Williams.
The station attributes its success to the experience of its local sales
staff, which focuses on developing strong relationships with local advertisers.
The station's revenue market share in 1998 was 40%. The projected market share
in 1999 is 42%. WLNS is also recognized as the dominant news station in the
Lansing market. The station consistently wins by wide margins against
competitors in its noon and 6:00pm newscasts. For the November 1999 ratings
period, WLNS's newscasts finished ahead its closest competitor by 33 share
points at noon and 9 share points at 6:00pm. WLNS launched the market's first
5:30pm newscast in 1989, which has since developed a solid audience share and
has consistently held the greatest share in its time period. In 1997, WLNS
added another half hour of local news at 5:00pm, making WLNS one of the only
stations in the country of its market size to produce a 90 minute news block
each evening from 5:00pm to 6:30pm. The station recognizes local news
programming as the key to its success and produces 18 to 20 special news
programs each year, including live town hall meetings in prime time on
community topics such as youth violence, and political debates in major
election years. The quality of the news broadcast at WLNS has resulted in
numerous state journalism and public service awards.
The economy of Lansing is dominated by three employers, the State of
Michigan, General Motors and Michigan State University, giving Lansing an
advantage over other Michigan cities whose economies rely more heavily on, and
are more prone to the cyclical nature of, the domestic automobile industry.
Lansing is the capital of Michigan and its various government agencies employ
an aggregate of approximately 15,500 people. General Motors has approximately
14,000 employees. Michigan State University has over 12,000 employees with a
student enrollment of over 42,000. Other significant industry sectors in the
area are plastics, non-electrical machinery, fabricated metal products, food
processing and printing. Companies represented in these groups include Owens-
Brockway, John Henry Co. and Dart Container. According to the BIA Guide, the
average household income in the Lansing market in 1997 was $40,704, with
effective buying income projected to grow at an annual rate of 2.7% through
2002. Retail sales growth in this market is also projected by the BIA Guide to
average 4.6% annually during the same period.
KELO, Sioux Falls, South Dakota
On May 31, 1996, Young acquired KELO from a subsidiary of Midcontinent
Media, Inc. The station began operations in 1953 and is affiliated with CBS.
KELO added satellite station KDLO, Channel 3, in Florence, South Dakota in 1955
to serve the northern South Dakota area, and added satellite station KPLO,
Channel 6, in Reliance, South Dakota in 1957 to serve the central South Dakota
area. In 1988, KCLO, Channel 15, then operating as a translator facility, was
added as a satellite station of KELO in Rapid City, South Dakota. KELO-TV fully
serves two DMAs, as Rapid City is a separate contiguous market. (All references
to KELO include KDLO and KPLO. The following information pertains only to the
Sioux Falls DMA.)
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The Sioux Falls market is the 114th largest DMA serving an estimated 231,900
television households encompassing counties in Minnesota, Iowa and Nebraska, as
well as 51 counties within South Dakota. There are four reportable stations in
the DMA, three of which are VHF. During the November 1999 ratings period, KELO
was first in the market with a sign-on to sign-off in-market share of 45%,
significantly ahead of the ABC, NBC and FOX affiliates, who had 30%, 15% and
9%, respectively. KELO-TV's newscast finished each of the competing stations
for every weekday and weekend newscast time period. Recognizing the importance
of local news, the station presents live newscasts seven times daily, with
notable ratings and sales success. The station's revenue market share in 1999
was 48%. The projected market share in 2000 is 49%. The station's syndicated
programming includes Rosie, Entertainment Tonight, and Maury.
The largest employers in the market are Citibank and John Morrell. Sioux
Falls is the largest city in South Dakota, with a population of 120,500.
According to the BIA Guide, the average household income in the Sioux Falls
market in 1997 was $40,237, with effective buying income projected to grow at
an annual rate of 4.6% through 2001. Retail sales growth is also projected by
the BIA Guide to average 5.7% annually during the same period.
KLFY, Lafayette, Louisiana
KLFY, acquired by Young from Texoma Broadcasters, Inc. in May 1988, began
operations in 1955 as the market's first television station and is affiliated
with CBS. KLFY is one of only two network-affiliated VHF stations serving the
Lafayette market. The third commercial station in the market is a Fox affiliate
operating on a UHF channel and a fourth Station, KLAF, is a lower power station
affiliated with the UPN and Warner Brothers Network. The market is dominated by
KLFY and the local ABC affiliate. The signals from the NBC affiliates in Lake
Charles, Baton Rouge and Alexandria, Louisiana are available to households in
the DMA. Since 1994, the NBC affiliate in Lake Charles is selling advertising
in the Lafayette market with minimal success.
The Lafayette market is the 123rd largest DMA, with an estimated 203,100
television households. KLFY ranks first in the November 1999 ratings period
with an overall sign-on to sign-off in-market share of 53%, and has ranked
first in those viewership measurements consistently for prior ratings periods.
KLFY leads its competition in audience share in 27 major Nielsen dayparts. KLFY
is ranked number one during prime-time (7:00 p.m.-10:00 p.m., Monday-Saturday
and 6:00 p.m.-10:00 p.m., Sunday), the most sought after advertiser demographic
time period, with an in-market share of 45%. The station's syndicated programs
include The Maury Povich Show, Home Improvement, Coach, Rosie, Sally Jessy
Raphael, Hercules and Zena.
Historically, KLFY has placed a strong emphasis on local news and community-
related broadcasts. Each weekday begins with a 90-minute live production of
"Passe Partout," a family-oriented program offering early morning news,
weather, sports and interviews on subjects relevant to local residents. For the
November 1999 ratings period, this program received a 6:00-7:00 a.m. in-market
share of 66%. The first 30 minutes of "Passe Partout" are broadcast in French
for the large French-speaking Cajun population in the area; the balance is in
English. KLFY also has won numerous awards in recent years from state
journalism organizations, including the 1995 and 1998 "Station of the Year"
award from the Louisiana Broadcasters Association.
KLFY has made community involvement an important part of its operations. The
12:00 noon news show is called "Meet Your Neighbor" and, in addition to an
emphasis on local news reporting, is a platform for community service segments.
In addition to ongoing commitments to blood drives, food and clothing drives, a
big brother/big sister program and animal adoptions, the station has been the
motivating force behind some unusual projects. "Wednesday's Child" is a
nationally recognized weekly segment featuring a child in need of adoption, and
the effort has had a significant success rate in placing children. The station
has over the past thirteen years raised over two thousand tons of food for the
hungry with its annual "Food for Families" all-day live remote from 17
locations in the DMA. It has an annual "Coats for Kids" campaign to clothe
needy children and has raised over $9.6 million for the Muscular Dystrophy
Association's ("MDA") annual telethon.
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For its efforts, the station has received awards from state and national
service organizations, including the MDA's special recognition award and Media
of the Year awards from the Louisiana Special Olympics and the Black Advisory
Adoption Committee.
According to the BIA Guide, the average household income in the Lafayette
market in 1997 was $33,959, with effective buying income projected to grow at
an annual rate of 4.9% through 2002. Retail sales growth in this market is also
projected by the BIA Guide to average 5.7% annually during the same period.
WTVO, Rockford, Illinois
WTVO, the ABC affiliate in Rockford, Illinois began operations in 1953 under
the ownership of Winnebago Television Corporation. Young purchased Winnebago
Television Corporation in September 1988. WTVO switched its affiliation from
NBC to ABC, effective as of August 14, 1995.
The Rockford market is the 135th largest DMA, with an estimated 171,000
television households. There are five reportable stations in the DMA, of which
one is a VHF station and the others, including WTVO, are UHF stations. In the
November 1999 ratings period, WTVO was number three in the market, with a sign-
on to sign-off in-market share of 25%, compared to 31% and 33% for the CBS and
NBC affiliates, respectively. The station's syndicated programs include Sally
Jessy Raphael, Rosie, Hollywood Squares, Dr. Joy Brown and Extra. The station
produces local interest programs such as Spotlight 17, Friday Football Blitz
and Friday Basketball Blitz.
Each year, the Northern Illinois Council of Advertising recognizes the
production creativity of local advertising agencies and television stations by
awarding "Raddys." Since 1990, WTVO has been the recipient of 18 Raddy awards
which span the categories of broadcast division, original footage, and
promotional (news) campaign.
WTVO's DMA encompasses a five-county area of northern Illinois, northwest of
Chicago. Rockford is the second largest city in Illinois. Over 1,000
manufacturing firms employ a total of over 50,000 persons in the Rockford area,
specializing in machine tool, automotive, aerospace, and consumer product
industries. Prominent manufacturers in the area include Hamilton Corporation,
the area's largest employer, Ingersoll Milling Machine Company and
Daimler/Chrysler Corporation's Neon facility. UPS has constructed a $60.0
million Midwestern freight hub at Rockford, and Motorola has a cellular phone
plant in nearby Harvard, Illinois. WTVO's share of revenue in 1999 is projected
to be 22% versus 1998's 24%. According to the BIA Guide, the average household
income in the Rockford market in 1997 was $42,557, with effective buying income
projected to grow at an annual rate of 3.2% through 2002. Retail sales growth
in this market is also projected by the BIA Guide to average 2.7% annually
during the same period.
Network Affiliation Agreements
Each of Young's network-affiliated stations is affiliated with its network
pursuant to an affiliation agreement (an "Affiliation Agreement"). WKRN, WTEN,
WRIC, WATE, WBAY and WTVO are affiliated with ABC. KELO, WLNS and KLFY are
affiliated with CBS. The Quad Cities Station (KWQC) is affiliated with NBC.
In October 1994, Young and ABC entered into new Affiliation Agreements for
five of Young's ABC-affiliated stations. Effective August 14, 1995, Young
switched the affiliation of its then sole NBC affiliate to ABC. In addition, in
September 1994, Young and CBS entered into new Affiliation Agreements for three
of Young's CBS-affiliated stations. Such Affiliation Agreements with ABC and
CBS provide for contract terms of ten years. The Affiliation Agreement for the
Quad Cities Station provides for a ten-year term, with an expiration date of
November 1, 2004. On April 3, 1996, Young and CBS entered into new affiliation
agreements for KELO and each of its satellite stations which expire on October
2, 2006. Each Affiliation Agreement is automatically renewed for successive
terms subject to either party's right to terminate at the end
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of any term after giving proper notice thereof. Under the Affiliation
Agreements, the networks also possess, under certain circumstances (such as a
transfer of control or adverse changes in signal, operating hours or other mode
of operation), the right to terminate the Affiliation Agreement on prior
written notice ranging between 15 and 45 days depending on the Affiliation
Agreement. In addition, ABC has the right upon 60 days prior notice to
terminate the Affiliation Agreement with respect to an ABC-affiliated station
in a particular market if it acquires a different station within such market.
Each Affiliation Agreement provides the affiliated station with the right to
broadcast all programs transmitted by the network with which it is affiliated.
In exchange, the network has the right to sell a substantial majority of the
advertising time during such broadcasts. In addition, for each hour that the
station elects to broadcast network programming, the network pays the station a
fee, specified in each Affiliation Agreement, which varies with the time of
day. Typically, "prime-time" programming (Monday through Saturday from 8:00
p.m.-11:00 p.m., Eastern time, and Sunday from 7:00 p.m.-11:00 p.m., Eastern
time) generates the highest hourly rates. Management believes that programming
costs are generally lower for network affiliates than for independent
television stations and prime-time network programs generally achieve higher
ratings than non-network programs. Management believes that Young's
relationship with the networks is excellent and that all of its stations are
highly valued affiliates.
As an independent station, KCAL purchases all of its programming, resulting
in proportionally higher programming costs for the station. In this regard,
KCAL retains its entire inventory of advertising and all of the revenue
obtained therefrom. Furthermore, KCAL enters into barter arrangements whereby
program distributors may receive advertising time in exchange for the
programming they provide.
Competition
Competition in the television industry takes place on several levels:
competition for audience, competition for programming (including news) and
competition for advertisers. Additional factors that are material to a
television station's competitive position include signal coverage and assigned
frequency. The broadcasting industry is continually faced with technological
change and innovation, the possible rise in popularity of competing
entertainment and communications media, and governmental restrictions or
actions of federal regulatory bodies, including the FCC and the Federal Trade
Commission, any of which could have a material effect on Young's operations.
Audience
Stations compete for audience on the basis of program popularity, which has
a direct effect on advertising rates. A majority of the daily programming on
Young's stations is supplied by the network with which each station is
affiliated. In those periods, the stations are totally dependent upon the
performance of the network programs in attracting viewers. There can be no
assurance that such programming will achieve or maintain satisfactory
viewership levels in the future. Non-network time periods are programmed by the
station with a combination of self-produced news, public affairs and other
entertainment programming, including news and syndicated programs purchased for
cash, cash and barter, or barter only.
Independent stations, whose number has increased significantly over the past
decade, have also emerged as viable competitors for television viewership
share. Each of Time Warner, Inc. and Paramount Communications, Inc. has
recently launched a new television network and have entered into affiliation
agreements with certain independent commercial television stations. The
programming made available by these new networks is presently limited. Young is
unable to predict the effect, if any, that such networks will have on the
future results of Young's operations.
In addition, the development of methods of television transmission of video
programming other than over-the-air broadcasting, and in particular the growth
of cable television, has significantly altered competition for audience in the
television industry. These other transmission methods can increase competition
for a
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broadcasting station by bringing into its market distant broadcasting signals
not otherwise available to the station's audience and also by serving as a
distribution system for non-broadcast programming originated on the cable
system. Through the 1970s, network television broadcasting enjoyed virtual
dominance in viewership and television advertising revenues because network-
affiliated stations competed only with each other in most local markets.
Although cable television systems were initially used to retransmit broadcast
television programming to paid subscribers in areas with poor broadcast signal
reception, significant increases in cable television penetration occurred
throughout the 1970s and 1980s in areas that did not have signal reception
problems. As the technology of satellite program delivery to cable systems
advanced in the late 1970s, development of programming for cable television
accelerated dramatically, resulting in the emergence of multiple, national-
scale program alternatives and the rapid expansion of cable television and
higher subscriber growth rates. Historically, cable operators have not sought
to compete with broadcast stations for a share of the local news audience.
Recently, however, certain cable operators have elected to compete for such
audiences, and the increased competition could have an adverse effect on
Young's advertising revenues.
Other sources of competition include home entertainment systems (including
video cassette recorder and playback systems, videodisks and television game
devices), "wireless cable" service, satellite master antenna television
systems, low power television stations, television translator stations and,
most recently, direct broadcast satellite video distribution services which
transmit programming directly to homes equipped with special receiving
antennas.
Further advances in technology may increase competition for household
audiences and advertisers. Video compression techniques, now under development
for use with current cable channels or direct broadcast satellites, are
expected to reduce the bandwidth required for television signal transmission.
These compression techniques, as well as other technological developments, are
applicable to all video delivery systems, including over-the-air broadcasting,
and have the potential to provide vastly expanded programming to highly
targeted audiences. Reduction in the cost of creating additional channel
capacity could lower entry barriers for new channels and encourage the
development of increasingly specialized "niche" programming. This ability to
reach very narrowly defined audiences is expected to alter the competitive
dynamics for advertising expenditures. Young is unable to predict the effect
that these or other technological changes will have on the broadcast television
industry or the future results of Young's operations.
Programming
Competition for programming involves negotiating with national program
distributors or syndicators which sell first-run and rerun packages of
programming. The stations compete against in-market broadcast station
competitors for exclusive access to off-network reruns (such as Roseanne) and
first-run product (such as Entertainment Tonight) in their respective markets.
Cable systems generally do not compete with local stations for programming,
although various national cable networks from time to time have acquired
programs that would have otherwise been offered to local television stations.
Competition for exclusive news stories and features is also endemic in the
television industry.
Time Warner, Inc. and Paramount Communications, Inc., each of which has
launched a new television network, also own or control a major production
studio. Outside production studios are the primary source of programming for
the networks. It is uncertain whether in the future such programming, which is
generally subject to short-term agreements between the studios and the
networks, will be moved to the new networks.
Advertising
Advertising rates are based upon the size of the market in which the station
operates, a program's popularity among the viewers that an advertiser wishes to
attract, the number of advertisers competing for the available time, the
demographic makeup of the market served by the station, the availability of
alternative advertising media in the market area, aggressive and knowledgeable
sales forces, and development of projects, features and programs that tie
advertiser messages to programming. In addition to competing with other media
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outlets for audience share, Young's stations also compete for advertising
revenues, which comprise the primary source of revenues for the Subsidiaries.
Young's stations compete for such advertising revenues with other television
stations in their respective markets, as well as with other advertising media,
such as newspapers, radio stations, magazines, outdoor advertising, transit
advertising, yellow page directories, direct mail and local cable systems.
Competition for advertising dollars in the broadcasting industry occurs
primarily within individual markets. Generally, a television broadcasting
station in the market does not compete with stations in other market areas.
Young's television stations are located in highly competitive markets.
Employees
Approximately 200 of Young's employees are represented by collective
localized bargaining agreements at various stations.
Properties
Young's principal executive offices are located at 599 Lexington Avenue, New
York, New York 10022. Young leases approximately 9,546 square feet of space in
New York (the "Master Lease"). The Master Lease expires in the year 2009 with
respect to 7,600 square feet and in 2002 with respect to 1,946 square feet.
The types of properties required to support television stations include
offices, studios, transmitter sites and antenna sites. A station's studios are
generally housed with its offices in downtown or business districts. The
transmitter sites and antenna sites are generally located in elevated areas so
as to provide maximum market coverage. The following table contains certain
information describing the general character of Young's properties.
<TABLE>
<CAPTION>
Metropolitan Area and Use Owned or Leased Approximate Size
---------------------------- ----------------------- --------------------
<S> <C> <C> <C>
KCAL Los Angeles, California
Office and studio Owned 33,000 sq. ft.
Office and studio Leased 16,198 sq. ft.
Transmission tower site Leased 60,000 sq. ft.
WKRN Nashville, Tennessee
Office and studio Owned 43,100 sq. ft.
Land Owned 2.72 acres
Transmission tower site Owned 49.33 acres
WTEN Albany, NY
Office and studio Owned 39,736 sq. ft.
Land Owned 2.56 acres
New Scotland, NY
Transmission tower site
-Land Owned 5.38 acres
-Building Owned 2,800 sq. ft.
Mt. Greylock, Adams, MA
Transmission tower site
-Land Leased 15,000 sq. ft.
-Building Owned 2,275 sq. ft.
WRIC Richmond, VA
Office and studio Owned 34,000 sq. ft.
Land Owned 4 acres
Petersburg, VA
Transmission site Lease of space on tower --
Chesterfield Co., VA(1)
Transmitter building Owned 900 sq. ft.
</TABLE>
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<TABLE>
<CAPTION>
Metropolitan Area and Use Owned or Leased Approximate Size
---------------------------------- ----------------------- --------------------
<S> <C> <C> <C>
WATE Knoxville, TN
Office and studio Owned 34,666 sq. ft.
Land Owned 2.65 acres
Knox County, TN
Transmission tower site Owned 9.57 acres
House Mountain, TN
Prospective tower site Owned 5 acres
WBAY Green Bay, WI
Office and studio Owned 90,000 sq. ft.
Land Owned 1.77 acres
DePere, WI
Transmission tower site Owned 3.54 acres
Appleton, WI
Office Leased 1,506 sq. ft.
KWQC Davenport, Iowa
Office and Studio Owned 59,786 sq. ft.
Land Owned 86,978 sq. ft.
Bettendorf, Iowa
Transmission tower site Owned 37.323 acres
KELO Sioux Falls, South Dakota
Land, office and studio Owned 23,700 sq. ft.
Transmission tower site Owned 58.23 acres
Auxiliary transmission tower site Leased 26.42 acres
Reliance, South Dakota
Transmission tower site Owned 5.83 acres
Rapid City, South Dakota
Office and studio Leased 3,555 sq. ft.
Transmission tower site Owned 1 acre
Murdo, South Dakota
Transmission tower site Leased 1 acre
Philip, South Dakota
Transmission tower site Leased 8.23 acres
Wall, South Dakota
Transmission tower site Leased 4 acres
Beresford, South Dakota
Transmission tower site Leased 2.1 acres
Doppler Radar tower site Leased 0.02 acres
Diamond Lake, South Dakota
Transmission tower site Owned 1 acre
DeSmet, South Dakota
Transmission tower site Owned 0.55 acres
Garden City, South Dakota
Transmission tower site Owned 1 acre
Auxiliary transmission tower site Owned 1 acre
Farmer, South Dakota
Transmission tower site Owned 1 acre
</TABLE>
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<TABLE>
<CAPTION>
Owned
or Approximate
Metropolitan Area and Use Leased Size
--------------------------------- ------ --------------
<S> <C> <C> <C>
Mt. Vernon, South Dakota
Transmission tower site Owned 1 acre
White Lake, South Dakota
Transmission tower site Owned 1 acre
New Underwood, South Dakota
Transmission tower site Leased 200 sq. ft.
Huron, South Dakota
Doppler Radar tower site Leased 480 sq. ft.
WLNS Lansing, Michigan
Office and studio Owned 19,000 sq. ft.
Land Owned 4.75 acres
Meridian,Michigan
Transmission tower site Owned 40 acres
KLFY Lafayette, Louisiana
Office and studio Owned 24,800 sq. ft.
Land Owned 3.17 acres
Maxie, Louisiana
Transmission tower site Leased 8.25 acres
Proposed transmission tower site Owned 142 acres
WTVO Rockford, Illinois
Office and studio Owned 15,200 sq. ft.
Land Owned 14.4 acres
</TABLE>
- --------
(1) Station owns tower structure and related building, with non-exclusive
easement for access to underlying property, which is owned by a third
party.
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CHRONICLE PUBLISHING'S BUSINESS
General
The predecessor to The Chronicle Publishing Company was incorporated in 1906
("Old Chronicle"). The Chronicle Publishing Company, a Nevada corporation, was
incorporated in September 1995. In March 1996, Chronicle Publishing acquired
all the assets and liabilities of Old Chronicle other than those relating to
Old Chronicle's cable television business. The businesses and assets acquired
by Chronicle Publishing from Old Chronicle included three daily newspapers,
three network-affiliated television broadcast stations, two book publishing
operations and a 51% interest in Bay TV.
Chronicle Publishing currently owns and operates KRON-TV, a television
station which is currently affiliated with NBC, and a 51% interest in BayTV, a
24-hour local news and information channel, both in the San Francisco Bay Area,
WOWT(TV), a television station in Omaha, Nebraska, KAKE-TV, KUPK-TV and
KLBY(TV), television stations in Kansas, and the San Francisco Chronicle, a
daily newspaper in San Francisco. Until early 2000, Chronicle Publishing also
owned and operated the Worcester Telegram & Gazette, a daily newspaper in
Worcester, Massachusetts, The Pantagraph, a daily newspaper in central
Illinois, MBI Publishing Company, a book and calendar publishing company in
Wisconsin, and Chronicle Books, a specialty book publishing business in San
Francisco. In June 1999, Chronicle Publishing's board determined to commence
the sale of all of Chronicle Publishing's assets. From August 1999 through
November 1999, Chronicle Publishing entered into definitive agreements with
various buyers for the sale of each of its businesses, including WOWT(TV),
KAKE-TV, KUPK-TV, KLBY(TV) and the San Francisco Chronicle, which have not yet
been sold. It is currently expected that at the time of the closing of the
merger of Chronicle Publishing with Young, KRON-TV and BayTV will be the only
remaining businesses owned by Chronicle Publishing.
KRON-TV
Overview and History
KRON-TV is a VHF television station in the San Francisco Bay Area, the fifth
largest television revenue market in the country, based on television
households. Chronicle Publishing has owned and operated KRON-TV, and KRON-TV
has been an NBC affiliate, since it was first granted a FCC license in 1949. As
an NBC affiliate, KRON-TV is the largest non-network owned NBC station in the
country.
Business Strategy
KRON-TV has three primary strategic goals to develop its broadcast business:
. continue its recent track record as the dominant television news provider
in the market;
. maintain the number one sign-on to sign-off ranking as measured in
ratings and share in the San Francisco Bay Area market; and
. become the number one billing station in the market as measured by net
advertising revenues.
To further these goals, KRON-TV distributes its news content through as many
local outlets as possible to increase the public awareness of KRON-TV's news
programs. By having its news product on a variety of distribution outlets,
KRON-TV seeks to attract viewers to its regular newscasts and thereby increase
its ratings and advertising base. Currently, in addition to its traditional
newscasts, KRON-TV airs news updates on CNN Headline News every half hour and
MSNBC hourly. Time shifted KRON-TV newscasts also air on BayTV, and all KRON-TV
stories can be accessed through the KRON-TV section of the SF Gate website
(www.SFGate.com). This website will be sold with the San Francisco Chronicle
and is not an asset subject to this joint proxy statement/prospectus.
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In the five years from May 1994 to May 1999 the total viewing market shares
of the four major stations in San Francisco: KRON-TV (NBC); KPIX (CBS); KGO
(ABC) and KTVU (FOX) have fallen on a total weekly basis from 53% to 46%. KRON-
TV's rating and market share have remained consistent during that time at a 4
rating and a 13% viewing share.
NBC Affiliation
Throughout most of the 1990s, NBC has been the highest performing network
nationally in terms of delivering 18-49 year old and 25-54 year old adult
demographics in prime time to its affiliates. KRON-TV is the largest non-
network owned NBC station in the country reaching 2.5% of the total television
audience (behind New York, Los Angeles and Chicago, which are all owned and
operated by NBC). NBC's strong program line-up, including the Today Show in the
morning, prime time and the Tonight Show with Jay Leno, provides a strong
foundation for KRON-TV's successful program schedule.
In 1994, KRON-TV renegotiated its affiliation agreement with NBC and secured
a new seven year term with higher network compensation from NBC. The current
agreement expires December 31, 2001.
Local News
KRON-TV's strategy in the 1980s and early 1990s was to become the market
news leader. The station has achieved this goal by expanding weekly news
coverage and increasing coverage of breaking stories. KRON-TV started airing
thirty second news updates on the hour every hour in 1990 and lengthened its
early morning news broadcast by one hour. KRON-TV also added a 4:00 pm daily
newscast, which is the earliest evening newscast in the San Francisco Bay Area.
KRON-TV also increased the size of its news reporting staff so that it has more
reporters covering the news 24 hours a day than its competitors. KRON-TV
newscasts are time shifted and replayed on BayTV.
Syndicated Programming
While KRON-TV does not enjoy the leverage of being a member of a large
station group in acquiring syndicated product, it maintains strong
relationships with most of the major studios and has successfully negotiated
competitive programming contracts with several of them. This has enabled KRON-
TV to secure such hit shows as Entertainment Tonight, Frasier and Judge Judy
under favorable terms through the 2001-2002 season.
Historic Video Archive
KRON-TV has covered the San Francisco Bay Area since 1949 and holds one of
the largest video news archives of local San Francisco Bay Area footage. While
KRON-TV frequently sells archive footage to outside parties who make requests,
it has never sought any on-going commercial application for this archive
outside uses in its own programming.
Advertising
The San Francisco Bay Area, referred to as the San Francisco-Oakland-San
Jose designated market area, is an attractive market for advertisers given its
size, demographics and powerful economy. The San Francisco Bay Area is
comprised of eleven counties that border or lie in close proximity to San
Francisco and includes the major cities of San Francisco, San Jose and Oakland
as well as Silicon Valley. The San Francisco Bay Area has a total population of
approximately 6.4 million with approximately 2.3 million television households,
ranking the San Francisco Bay Area as the fifth largest designated market area
in the United States. The San Francisco Bay Area population is particularly
affluent with a per household annual effective buying income of approximately
$56,000, which ranks second in the nation behind Washington, D.C. The San
Francisco Bay Area economy has experienced significant growth in the past five
years driven by Silicon Valley and the growing importance of technology-based
industries to the regional and national economies.
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In 1998, the top six broadcast stations billed $598 million as compiled by
Ernst & Young. Between 1998 and 2000, the market is projected to increase at a
compound annual growth rate of 5.0% which compares favorably with the other
top-ten designated market areas in the country. The estimated compound annual
growth rates for the Chicago, Boston, Dallas-Fort Worth and Detroit designated
market areas for the same period are estimated to be 2.7%, 4.2%, 3.7% and 2.0%,
respectively. The Atlanta, Washington, D.C., Los Angeles and New York
Designated Market Areas are projected to grow at an estimated compound annual
growth rates of 4.5% over the same period. Only Philadelphia, with a projected
compound annual growth rate of 5.7%, is estimated to grow faster than the San
Francisco-Oakland-San Jose designated market area.
High Definition Television
KRON-TV has invested in the equipment necessary to transmit a high
definition television signal to its viewers from Sutro Tower. The equipment
includes the transmission encoder, HDTV transmitter, transmission line and
antennae necessary to transmit a high definition television signal. This will
allow KRON-TV to transmit and deliver a HDTV signal to its viewers. At this
time very few viewers have television sets that can receive a high definition
signal and the networks are not yet in full high definition production. KRON-TV
has converted its analog NTSC signal and is simulcasting it to viewers with
HDTV and NTSC. The Tonight Show with Jay Leno is currently the only regularly
scheduled television program being produced in HDTV by either NBC or KRON-TV.
Environmental And Regulatory
KRON-TV is subject to various federal, state and local laws and regulations.
Chronicle Publishing believes it is in compliance with all environmental and
regulatory issues applicable to KRON-TV. KRON-TV's license was renewed on
November 30, 1998 for a term expiring December 1, 2006.
Litigation
KRON-TV believes it is in compliance with all applicable federal, state and
local laws and regulations. The Station, from time to time, is involved in
legal matters which arise in the ordinary course of business. At the present
time, it is the opinion of management that the ultimate liability, if any, of
KRON-TV from all such proceedings will not have a material adverse effect upon
the financial position or operating results of KRON-TV.
BayTV
As compensation for allowing local cable operators to carry the KRON-TV
broadcast signal on their system, each cable operator agreed to carry a 24-hour
local news and information channel produced and owned by KRON-TV. In July 1994,
the BayTV channel was launched with 850,000 subscribers, and it now reaches 1.4
million cable homes. BayTV is the San Francisco Bay Area's only 24-hour local
news and information channel offering viewers local news, sports, talk and
other information. The programming for BayTV centers around features of
interest to San Francisco Bay Area residents such as local high school sports,
local college sports, restaurant reviews, local entertainment schedules, book
reviews, long form coverage of local community events and more.
In connection with Chronicle Publishing's sale of its cable systems to Tele-
Communications, Inc. ("TCI") (now AT&T Broadband and Internet Services) in
1996, TCI acquired a 49% minority interest in BayTV, with Chronicle Publishing
retaining a 51% ownership position and management control. BayTV's affiliation
agreement with TCI has been extended through December 31, 2000.
Current Affiliation Agreements
BayTV has affiliation agreements with seven local cable operators each of
which has been extended through December 31, 2000. TCI (now AT&T Broadband and
Internet Services) accounts for 88% of the total subscribers. Under the
agreements BayTV receives:
. Fees: Subscriber fees are $0.26 per subscriber per month for calendar
year 2000.
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. Channel Position: BayTV has the most common channel position of any cable
channel in the San Francisco Bay area market with 82% of the systems
carrying BayTV on Channel 35. As the cable rebuilds are completed in the
next year and TCI adopts a universal channel line-up, this will move
closer to 100%.
. Exclusivity: BayTV was given exclusivity as the only 24-hour local cable
news service to be carried on local cable systems.
. CNN Headline News: KRON-TV was given the exclusive right to program the
local news windows on Headline News at 24 and 54 minutes after the hour.
. Advertising Revenue: BayTV retains all the local inventory on BayTV and
in the Headline News inserts for sales purposes.
Subscribers
BayTV was launched with 850,000 TCI subscribers in July 1994. BayTV is
currently carried in all but 62,000 of the San Francisco Bay Area's 1.5 million
cable homes. The remaining homes are expected to carry Bay-TV by June 2000 as
the final cable rebuilds are completed in Marin County and Healdsburg.
Synergies With KRON-TV
BayTV serves as a promotional platform for KRON-TV's news product since many
of the KRON-TV's anchors and reporters appear regularly on BayTV and several of
KRON-TV's main anchors have their own programs on BayTV. Certain KRON-TV news
programs are time shifted on BayTV for viewer convenience and BayTV purchases
base infrastructure services such as equipment maintenance, promotional
support, accounting, office services, human resources and studio operations
from KRON-TV.
Sales Representation Agreement
In March 1999, BayTV eliminated its in-house sales staff and an agreement
with Bay Cable Advertising to be BayTV's exclusive sales representative. The
sales representation agreement with Bay Cable Advertising expires December 31,
2000. Sales goals are established annually and Bay Cable Advertising guarantees
minimum levels of sales performance. Bay Cable Advertising, owned by TCI Media
Services, a subsidiary of TCI, is one of the largest and most successful cable
interconnect sales organizations in the country.
Employees
Approximately 140 of KRON-TV's employees and 50 of BayTV's employees are
represented by collective bargaining agreements with two different unions, The
International Brotherhood of Electrical Workers and the American Federation of
Television and Radio Artists.
Properties
KRON-TV's principal offices are located at 1001 Van Ness Avenue, San
Francisco, California.
The types of properties required to support television stations include
offices, studios, transmitter sites and antenna sites. A station's studios are
generally housed with its offices in downtown or business districts. The
transmitter sites and antenna sites are generally located in elevated areas so
as to provide maximum market coverage. The following table contains certain
information describing the general character of properties used by KRON-TV and
BayTV:
<TABLE>
<CAPTION>
Metropolitan Area and Use Owned or Leased Approximate Size
------------------------------------------ --------------- ----------------
<S> <C> <C> <C>
KRON-TV San Francisco, California Owned 95,100 sq. ft.
Office and studio Transmission tower site Leased 1,800 sq. ft.
BayTV San Francisco Office and studio Leased 7,900 sq. ft.
</TABLE>
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FEDERAL REGULATION OF TELEVISION BROADCASTING
Existing Regulation
Television broadcasting is subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"), most
recently amended in significant respects by the Telecommunications Act of 1996
(the "1996 Act"). The Communications Act empowers the FCC, among other things:
to determine the frequencies, location and power of broadcast stations; to
issue, modify, renew and revoke station licenses; to approve the assignment or
transfer of control of broadcast licenses; to regulate the equipment used by
stations; to adopt and implement regulations and policies concerning the
ownership and operation of television stations; and to impose penalties for
violations of the Communications Act or FCC regulations. The FCC has also
adopted children's programming regulations for television broadcasters that
effectively require most television broadcasters to air at least three hours
per week of programming designed to meet the educational and informational
needs of children age 16 and younger. Failure to observe these or other rules
and policies can result in the imposition of various sanctions, including
monetary forfeitures or, for particularly egregious violations, the revocation
of a license. Young's business will be dependent upon its continuing ability to
hold television broadcasting licenses from the FCC.
License Renewals
As a result of the 1996 Act, broadcast licenses are now generally granted or
renewed for terms of eight years, though licenses may be renewed for a shorter
period upon a finding by the FCC that the "public interest, convenience and
necessity" would be served thereby. The FCC prohibits the assignment of a
license or the transfer of control of a broadcasting licensee without prior FCC
approval. Young must apply for renewal of each broadcast license. At the time
an application is made for renewal of a license, parties in interest may file
petitions to deny, and such parties, as well as other members of the public,
may comment upon the service the station has provided during the preceding
license term and urge denial of the application. The FCC is required to hold
evidentiary, trial-type hearings on renewal applications if a petition to deny
renewal of such license raises a "substantial and material question of fact" as
to whether the grant of the renewal application would be inconsistent with the
public interest, convenience and necessity. The FCC must grant the renewal
application if after notice and an opportunity for a hearing, it finds that the
incumbent has served the public interest and has not committed any serious
violation of FCC requirements. If the incumbent fails to meet that standard,
and if it does not show other mitigating factors warranting a lesser sanction,
the FCC has the authority to deny the renewal application and consider a
competing application. While broadcast licenses are typically renewed by the
FCC, even when petitions to deny are filed against renewal applications, there
can be no assurance that the licenses for Young's television stations will be
renewed at their expiration dates or, if renewed, that the renewal terms will
be for the maximum eight-year period. The non-renewal or revocation of one or
more of Young's primary FCC licenses could have a material adverse effect on
Young's operations. The main station licenses for Young's television stations
expire on the following dates: WRIC, October 1, 2004; KLFY, June 1, 2005; WKRN,
August 1, 2005, WATE, August 1, 2005; WLNS, October 1, 2005; WBAY, December 1,
2005; WTVO, December 1, 2005; KWQC, February 1, 2006; KCLO, April 1, 2006;
KELO, April 1, 2006; KDLO and KPLO (satellites of KELO), April 1, 2006; KCAL,
December 1, 2006; WTEN, June 1, 2007; and WCDC, WTEN's satellite station, April
1, 2007. KRON-TV's license will expire on December 1, 2006.
Multiple Ownership Restrictions
The Communications Act and FCC rules and regulations also regulate broadcast
ownership. The FCC has promulgated rules that, among other matters, limit the
ability of individuals and entities to own or have an official position or
ownership interest, known as an attributable interest, above a specific level
in broadcast stations as well as other specified mass media entities. As
detailed below, in August 1999, the FCC substantially revised a number of its
multiple ownership and attribution rules. Although these rules became effective
November 16, 1999, they may still be stayed, modified or reconsidered in
subsequent proceedings. In
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three separate orders, the FCC revised its rules regarding restrictions on
television ownership, radio-television cross-ownership, and attribution of
broadcast ownership interests. The three orders resolve several long pending
rulemaking proceedings and respond, in part, to certain directives in the 1996
Act, where Congress liberalized the radio ownership rules and directed the FCC
to consider certain additional deregulatory measures for television. The FCC's
key broadcast ownership rules, inclusive of the recent revisions, are
summarized below:
Local Radio Ownership
With respect to radio licenses, the maximum allowable number of stations
that can be commonly owned in a market varies depending on the number of radio
stations within that market, determined by using an FCC-prescribed method. In
markets with more than 45 stations, one company may own, operate or control up
to eight radio stations, with no more than five in either AM or FM.
Local Television Ownership
The FCC's new TV "duopoly" rule permits parties to own two TV stations
without regard to signal contour overlap provided they are located in separate
markets referred to as designated market areas. In addition, the new rules
permit parties in larger designated market areas to own up to two television
stations in the same designated market area so long as at least eight
independently owned and operating full-power television stations remain in the
market at the time of acquisition and at least one of the two stations is not
among the top four-ranked stations in the market based on audience share.
Furthermore, without regard to numbers of remaining or independently owned TV
stations, the FCC will permit television duopolies within the same designated
market area so long as certain signal contours of the stations involved do not
overlap. Satellite stations that simply rebroadcast the programming of a
"parent" station continue to be exempt from the duopoly rule if located in the
same designated market area as the "parent" station. The duopoly rule also
applies to same-market Local Marketing Agreements ("LMAs") involving more than
15% of the brokered station's program time, although current LMAs will be
exempt from the TV duopoly rule for a limited period of time of either two or
five years, depending on the date of the adoption of the LMA. Further, the FCC
may grant a waiver of the TV duopoly rule if one of the two television stations
is a "failed" or "failing" station, or the proposed transaction would result in
the construction of a new television station.
National Television Ownership Cap
On the national level, the 1996 Act raised the national audience coverage
restriction on television station ownership from 25% to 35% of the national
audience. Accordingly, one party may not have an attributable interest in
television stations which reach more than 35% of all U.S. television
households. Under its recently revised rules, if entities have attributable
interests in two stations in the same market, the FCC will count the audience
reach of that market only once for purposes of applying the national cap.
Radio-Television Cross Ownership
The so-called "one-to-a-market" rule has until recently prohibited common
ownership or control of a radio station, whether AM, FM or both, and a
television station in the same market, subject to waivers in some
circumstances. The FCC's new radio-television cross-ownership rule uses a
graduated test based on the number of independently owned media voices in the
local market. In the largest markets--i.e., markets with at least 20
independently owned media voices--a single entity can own up to one television
station and seven radio stations or, if permissible under the new TV duopoly
rule, two television stations and six radio stations. If the number of
independently owned media voices is less than 20 but at least 10, the number of
radio stations that can be owned by a television licensee in the same market
drops to 4. If the media voices number less than 10, a television licensee can
only own 1 radio station in the same market.
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Attribution of Ownership
Under the FCC's recently revised attribution rules, a direct or indirect
purchaser of various types of securities of Young could violate FCC regulations
or policies if that purchaser owned or acquired an "attributable" interest in
other media properties in the same area as stations owned by Young in a manner
prohibited by the FCC. Under the FCC's revised rules, an "attributable"
interest for purposes of the Commission's broadcast ownership rules generally
includes:
. equity and debt interests, which combined exceed 33% of a licensee's
total assets, if the interest holder supplies more than 15% of total
weekly programming, or is a same-market media entity, whether TV, radio,
cable or daily newspaper;
. 5% or greater voting stock interest. It should be noted that equity
interests up to 49% are non-attributable if the licensee is controlled by
a single majority shareholder and the interest holder is not otherwise
attributable under the foregoing "equity/debt plus" standard;
. 20% or greater voting stock interest, if the holder is a qualified
passive investor;
. any equity interest in a limited liability company or limited
partnership, unless properly "insulated" from management activities; and
. all officers and directors (or general partners) of a licensee and its
direct or indirect parent.
Under the new rules, all non-conforming interests acquired before November
7, 1996 are permanently grandfathered and thus do not constitute attributable
ownership interests. Any nonconforming interests acquired after that date need
to be brought into compliance by August 5, 2000.
Alien Ownership Restrictions
The Communications Act restricts the ability of foreign entities to own or
hold interests in broadcast licensees. Foreign governments, representatives of
foreign governments, non-citizens, representatives of non-citizens and
corporations or partnerships organized under the laws of a foreign nation
(collectively, "aliens") are barred from holding broadcast licenses. Aliens may
directly or indirectly own up to one-fifth of the capital stock of a licensee.
In addition, a broadcast license may not be granted to or held by any
corporation that is controlled, directly or indirectly, by any other
corporation more than one-fourth of whose capital stock is owned or voted by
aliens, if the FCC finds that the public interest will be served by the refusal
or revocation of such license. The FCC has interpreted this provision of the
Communications Act to require an affirmative public interest finding before a
broadcast license may be granted to or held by any such corporation, and the
FCC has made such affirmative findings only in limited circumstances. As a
result of these provisions, Young which serves as a holding company for its
various television station license subsidiaries cannot have more than 25% of
its capital stock owned or voted by aliens.
Proposed Legislation and Regulation
The U.S. Congress and the FCC currently have under consideration, and may in
the future adopt, new laws, regulations and policies regarding a wide variety
of matters which could, directly or indirectly, affect the operation and
ownership of Young's broadcast properties. Young is unable to predict the
outcome of future federal legislation or the impact of any such laws or
regulations on Young's operations.
The 1992 Cable Act
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). Some of its
provisions, such as signal carriage and retransmission consent, have a direct
effect on television broadcasting. Under these provisions, television
broadcasters, on a cable system-by-system basis, must make a choice once every
three years whether to proceed under the "must carry" rules or
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to waive that right to mandatory but uncompensated carriage and, instead, to
negotiate a grant of retransmission consent to permit individual cable systems
to carry their signals in exchange for some form of consideration.
On March 31, 1997, in a 5-4 decision, the U.S. Supreme Court upheld the
constitutionality of the must-carry provisions of the 1992 Cable Act. As a
result, the regulatory scheme promulgated by the FCC to implement the must-
carry provisions of the 1992 Cable Act remains in effect. Whether and to what
extent such must-carry rights will extend to the new digital television signals
(see below) to be broadcast by licensed television stations (including those
owned by Young) over the next several years is still a matter to be determined
in a pending FCC rulemaking proceeding.
The 1992 Cable Act was amended in several important respects by the 1996
Act. Most notably, the 1996 Act repeals the cross-ownership ban between cable
and telephone entities and the FCC's former video dialtone rules (permitting
telephone companies to enter the video distribution services market under
several new regulatory options). The 1996 Act also (a) eliminates the broadcast
network/cable cross-ownership limitation and (b) lifts the statutory ban on
TV/cable cross-ownership within the same market area (without, however,
eliminating the separate FCC regulatory restriction on TV/cable cross-
ownership, which remains in place).
Digital Television Service
The FCC has taken a number of steps to implement digital television
broadcasting service in the Untied States. It has adopted a digital television
table of allotments that provides all authorized television stations with a
second channel on which to broadcast a digital television signal. In doing so,
it has attempted to provide digital television coverage areas that are
comparable to stations' existing service areas. The FCC has also ruled that
television broadcast licensees may use their digital channels for a wide
variety of services such as high-definition television, multiple channels of
standard definition television programming, audio, data, and other types of
communications, subject to the requirement that each broadcaster provide at
least one free video channel equal in quality to the current technical
standard.
Digital television channels will generally be located in the range of
channels from channel 2 through channel 51. The FCC required affiliates of ABC,
CBS, Fox and NBC in the top 10 television markets to begin digital broadcasting
by May 1, 1999. Many stations, including KCAL-TV, Young's independent station
in Los Angeles, California, have begun digital broadcasting. Affiliates of the
four major networks in the top 30 markets were required to begin digital
broadcasting by November 1, 1999, and all other commercial broadcasters,
including all of Young's remaining stations, must do so by May 1, 2002.
The FCC's plan calls for the digital television transition period to end in
the year 2006, at which time the FCC expects that television broadcasters will
cease non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered for other uses. Under the
Balanced Budget Act, however, the FCC is authorized to extend the December 31,
2006 deadline for reclamation of a television station's non-digital channel if,
in any given market one or more television stations affiliated with ABC, CBS,
NBC or Fox is not broadcasting digitally, and the FCC determines that such
stations have "exercised due diligence" in attempting to convert to digital
broadcasting; or less than 85% of the television households in the station's
market subscribe to a multichannel video service that carries at least one
digital channel from each of the local stations in that market, and less than
85% of the television households in the market can receive digital signals off
the air using either a set-top converter box for an analog television set or a
new digital television set.
The FCC is currently considering whether cable television system operators
should be required to carry stations' digital television signals in addition to
the currently required carriage of stations' analog signals. In July 1998, the
FCC issued a Notice of Proposed Rulemaking posing several different options for
the carriage of digital signals and solicited comments from all interested
parties. The FCC has yet to issue a decision on this matter.
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The implementation of digital television will also impose substantial
additional costs on television stations because of the need to replace
equipment and because some stations will need to operate at higher utility
costs and there can be no assurance that television stations will be able to
increase revenue to offset such costs. The FCC is also considering imposing new
public interest requirements on television licensees in exchange for their
receipt of digital television channels. In addition, the Communications Act
allows the FCC to charge a spectrum fee to broadcasters who use the digital
spectrum to offer subscription-based services. The FCC has adopted rules that
require broadcasters to pay a fee of 5% of gross revenues received from
ancillary or supplementary uses of the digital spectrum for which they charge
subscription fees, excluding revenues from the sale of commercial time. Young
is unable to predict what future actions the FCC might take with respect to
digital television, nor can Young predict the effect of the FCC's present
digital television implementation plan or such future actions on its business.
Young will incur significant expense in the conversion to digital television
and is unable to predict the extent or timing of consumer demand for any such
digital television services.
Non-FCC Regulation
Television broadcast stations may be subject to a number of other federal
regulations, as well as numerous state and local laws, that can either directly
or indirectly impact their operations. Included in this category are rules and
regulations of the Federal Aviation Administration affecting tower height,
location and marking, plus federal, state and local environmental and land use
restrictions.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act or of the regulations and policies of the
FCC thereunder. Proposals for additional or revised regulations and
requirements are either pending before or considered by Congress and federal
regulatory agencies from time to time. Also, various of the foregoing matters
are now, or may become, the subject of court litigation, and Young cannot
predict the outcome of any such litigation or the impact on its broadcast
business.
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<PAGE>
YOUNG'S DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the Young directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Vincent J. Young...................... 52 Chairman
Adam Young............................ 86 Treasurer and director
Ronald J. Kwasnick.................... 52 President and director
Executive Vice President and
James A. Morgan....................... 51 director
Executive Vice President-
Deborah A. McDermott.................. 45 Operations
Bernard F. Curry...................... 81 Director
Alfred J. Hickey, Jr.................. 63 Director
David C. Lee.......................... 34 Director
Leif Lomo............................. 70 Director
Robert L. Winikoff.................... 53 Director
</TABLE>
Vincent J. Young has been Chairman of Young since its inception in 1986. Mr.
Young is also a director and Chairman of each of Young'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 Young in March 1998. Vincent Young is the son of
Adam Young.
Adam Young has been Treasurer of Young since its inception. Mr. Young is
also a director and Treasurer of each of Young's corporate subsidiaries. Mr.
Young is also President and Treasurer of Adam Young Inc., which he founded in
1944.
Ronald J. Kwasnick has been President of Young since its inception. Mr.
Kwasnick is also President of each of Young's corporate subsidiaries other than
Adam Young Inc., for which he serves as Executive Vice President.
James A. Morgan has been Executive Vice President of Young since March 1993.
Mr. Morgan is also Executive Vice President of each of Young's corporate
subsidiaries. From 1984 until joining Young, 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.
Deborah A. McDermott became the Executive Vice President-Operations of Young
in May 1996, and has been General Manager of WKRN, Young's ABC network
affiliate serving the Nashville, Tennessee market, since 1990. From 1986 to
1989, when WKRN was acquired by Young, and thereafter through February 1990,
she was Station Manager of that station.
Bernard F. Curry has been a director of Young since 1994. 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 (now J.P. Morgan, 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. has been a director of Young since 1994. 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.
David C. Lee has been a director of Young since 1998. Mr. Lee has been a
managing director of Sandler Capital Management, a private investment and money
management firm specializing in media, communications, and technology since
January 1999. Prior thereto, he was a Managing Director of Lazard
119
<PAGE>
Freres & Co. LLC, leading investment banking firm where he served in various
capacities from March 1988 to October 1994 and from April 1996 to December
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.
Leif Lomo has been a director of Young since 1994. 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.
Robert L. Winikoff has been a director of Young since 1998. Mr. Winikoff has
been a 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
Young's general outside counsel since 1987.
120
<PAGE>
EXECUTIVE COMPENSATION
Report of the Compensation Committee
Young's Compensation Committee (the "Committee"), which is composed of three
independent directors (Alfred Hickey, Leif Lomo and David Lee) 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 Young 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 Young, with an appropriate balance maintained among the
weightings of these potentially disparate performance levels. The program
requires flexibility in order to ensure that Young can continue to attract and
retain executives with unique and special skills critical to Young'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 discharging its responsibilities with respect to its 1999 executive pay
program, the Committee utilized the recommendations made in 1997 by executive
compensation consultants. The consultants made a review and assessment of
Young's executive pay program to determine whether it was market competitive,
internally equitable and provided the appropriate balance between fixed and
performance-variable pay to ensure that the program appropriately reflects the
risks and challenges facing Young'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 by the consultants was comprised of broadcasting industry peer
companies. Such comparative companies are not necessarily the same companies
included in the indices used in the performance graph that follows, as Young's
competitors for executive talent are not limited to such companies.
Based on the consultants' 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, 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 Young's compensation philosophy
and competitive pay positioning versus the broadcast media peer group. In
February 1999, the Board, based upon the Committee's recommendations,
established base salary levels for Vincent Young and the other executive
officers which were 5% higher than the 1998 base salary levels for such
persons.
In February 1999, the Committee established a year-end cash bonus plan
providing for bonus awards to executive officers at the discretion of the Board
if Young substantially achieved its objectives in 1999. Included
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<PAGE>
among the objectives that the Committee established for 1999 were (i) the
continuing evaluation and pursuit of attractive acquisition opportunities, (ii)
achieving the financial goals set forth in the 1999 budget approved by the
Board, (iii) increasing financial community and investor awareness concerning
Young's securities and (iv) developing new areas of business. In recognition of
the successful achievement of such objectives and other major accomplishments
during 1999, the Committee recommended and the Board approved the year-end cash
bonuses to Young's executive officers as indicated in the Summary Compensation
Table. Young's executive officers attended numerous conferences and met with
many potential investors, and Young's coverage in the investment banking
community has significantly expanded. The Committee determined, based on the
recommendation of the consultants as discussed above, to increase annual bonus
opportunities to provide a meaningful incentive that brings total cash
compensation opportunities to competitive 75th percentile rates of pay.
Accordingly, the 1999 targeted bonuses for each of the executives were set in
line with this objective. These increases are reflected in the Summary
Compensation Table.
The Committee in February 1997 also established an annual incentive cash
compensation plan for executive officers that created the potential for
significant incentive bonuses if Young achieved certain cash flow levels. 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. Under the incentive cash compensation plan, if Young met or exceeded its
OCF targets for 1999, 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 consultants' recommendation, 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. Based upon the consultant's recommendation,
stock options under Young's 1995 Stock Option Plan were granted as long-term
incentive compensation to Young'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 Young's largest stockholders, Vincent Young's financial well-being
is directly tied to the overall performance of Young as reflected in the price
per share of common stock. For his services as Young's chief executive officer,
Vincent Young's compensation is and will continue to be determined in
accordance with the compensation policies outlined herein. Based on the
recommendation of the consultants, Young entered into employment agreements
with Vincent Young, Ronald Kwasnick, James Morgan and Deborah McDermott the
terms of which are described under "Employment Agreements."
The Committee's annual performance evaluation of each executive officer is
subjective, will rely heavily on the performance evaluation presented to the
Committee by Young'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
1999, the Committee considered the compensation arrangements of Young's
executive officers in light of the requirements of Section 162(m).
122
<PAGE>
While the Committee will continue to give due consideration to the
deductibility of compensation payments on future compensation arrangements with
Young'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 Young and its stockholders, and deductibility will be only one
among a number of factors used by the Committee in making its compensation
decisions. Accordingly, Young 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
Alfred J. Hickey, Jr., Chairman
Leif Lomo
David C. Lee
Vincent J. Young
Performance Graph
The following line graph compares the yearly percentage change in the
cumulative total stockholder return on Young'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
Young's initial public offering, through December 31, 1999. 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 12/31/98 12/31/99
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Young Broadcasting,
Inc.................... $100 $93 $149 $154 $204 $220 $268
Nasdaq Stock Market
Index.................. 100 99 140 172 211 297 551
Nasdaq
Telecommunications
Stock Market Index..... 100 94 123 126 185 305 618
</TABLE>
Young believes that the foregoing information provided has only limited
relevance to an understanding of Young'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.
123
<PAGE>
The following table summarizes the compensation for services rendered to
Young paid in 1997, 1998 and 1999 to the Chief Executive Officer and Young's
other executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------- ------------
Name and Securities
Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation(1) Options Compensation(2)
--------- ---- --------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Young........ 1999 $ 905,625 $ 760,573 $ 244,724 -- $5,100
Chairman (CEO) 1998 862,500 796,094 259,789 109,595 5,000
1997 862,500 797,057 275,276 96,435 4,750
Adam Young.............. 1999 278,250 116,842 -- -- --
Treasurer 1998 265,000 122,299 -- -- --
1997 265,000 122,446 -- 1,004 --
Ronald J. Kwasnick...... 1999 464,888 273,299 51,646 -- 2,400
President 1998 442,750 286,063 54,826 17,426 2,400
1997 442,750 286,409 58,092 21,575 2,400
James A Morgan.......... 1999 389,419 228,933 48,608 -- 5,100
Executive Vice 1998 370,875 239,625 51,601 13,376 5,000
President 1997 370,875 239,914 54,675 15,835 4,750
Deborah A. McDermott.... 1999 332,063 195,213 26,721 -- 5,100
Executive Vice 1998 316,250 204,331 28,366 2,838 5,000
President--Operations 1997 316,250 175, 352 30,056 4,608 4,750
</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 Young's 401(k) Plan on behalf of the
named executive officers. For 1997, 1998 and 1999 such contributions were
made in the form of shares of Class A common stock valued at fair market
value on the date of issuance.
The following table sets forth information at fiscal year-end 1999
concerning stock options held by the named executive officers in the Summary
Compensation Table. No options held by such individuals were exercised during
1999.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options At Fiscal Year- In-the-Money Options
End At Fiscal Year-End
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Vincent J. Young............ 503,278 222,197 $12,930,273 $4,715,403
Adam Young.................. 8,335 15,520 138,825 314,647
Ronald J. Kwasnick.......... 75,171 62,194 1,845,274 1,328,235
James A Morgan.............. 199,707 50,043 5,750,678 1,078,447
Deborah A. McDermott........ 55,730 33,437 1,359,268 719,093
</TABLE>
124
<PAGE>
Directors' Compensation
Those directors who are not also employees of Young receive an annual
retainer as fixed by the Board, which may be in the form of cash or stock
options, or a combination of both. For the twelve months beginning October 1,
1997, nonemployee directors received an annual retainer in the form of 2,800
shares of Class A common stock. For the twelve months beginning on October 1,
1998, nonemployee directors received an annual retainer in the form of 3,500
shares of Class A common stock. For the twelve months beginning on October 1,
1999, nonemployee directors received an annual retainer in the form of 1,900
shares of Class A common stock. Nonemployee directors 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 Agreements
Young has employment agreements with Vincent Young (Chairman), Ronald
Kwasnick ( President), James Morgan (Executive Vice President and Chief
Financial Officer) and Deborah McDermott (Executive Vice President-Operations).
Each agreement is for an initial term ending on March 31, 2001, with automatic
three-year renewal terms commencing upon the expiration of such term. The
agreements each provide for an initial annual salary for each employee, with
automatic annual increases of 5% (subject to additional increases at the
discretion of the Board) and for participation in the bonus and incentive plans
of Young and for other employee benefits as are generally available to other
senior management employees of Young.
Each agreement provides that either Young or the employee may terminate the
agreement on notice given before the expiration of the initial term or any
renewal term, and upon such termination Young shall pay the employee all
amounts due for the current term plus a payment of one month of the employee's
base salary for each year of service with Young. Upon a change of control of
Young: (a) if Young ceases to use the employee's services, he shall be paid for
the remainder of the term of his current employment agreement plus a bonus
equal to the greater of the amount he would have earned under Young's bonus
plan for the year in which the change of control occurs or the amount earned
under Young's bonus plan during the year preceding the change of control; or
(b) in the event the employee continues to perform services, Young shall pay
his base salary plus an annual bonus equal to the greater of the bonus he would
have earned under Young's bonus plan for the year or the bonus earned under any
new incentive plan adopted by Young; or (c) if Young exercises its right to
terminate the agreement at the end of the then current term, the employee shall
receive severance benefits equal to one month of the employee's then current
annual base salary for each year of service. Upon a change of control, the
employee shall become immediately entitled to exercise any outstanding options
under the Young Broadcasting Inc. 1995 Stock Option Plan. Each agreement
subjects the employee to a non-competition covenant in favor of Young.
401(k) Plan
Young 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 Young. 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 $10,000 in 1998 and 1999,
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 Young up to a maximum dollar amount or maximum percentage of
participant contributions, as determined annually by Young. 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% Young contribution. Such contributions will be made in the form of
Class A common stock to be contributed by Young to the 401(k) after each
calendar quarter with respect to such
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<PAGE>
quarter based upon the closing price as of the last day of such quarter. Young
contributed an aggregate of 25,243 shares of Class A common stock in 1998 and
21,545 shares of Class A common stock in 1999 to the 401(k) Plan 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 Young. 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 Young, if any, will be deductible by Young
when made.
Compensation Committee Interlocks and Insider Participation
Currently, the members of the compensation committee are Alfred Hickey, Leif
Lomo, Davit Lee and Vincent Young, Young's Chairman.
CERTAIN TRANSACTIONS
Young made loans in 1994 to certain executive officers and other employees
of Young to satisfy their federal income tax withholding requirements related
to non-cash compensation paid in the form of shares of common stock. Young 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 Young'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 December 15, 1999 was $375,000 including $204,000 to
Vincent Young, Chairman and a director of Young; $43,000 to Ronald J. Kwasnick,
President and a director of Young; $41,000 to James A Morgan, Executive Vice
President and a director of Young; and $22,000 to Deborah McDermott, Executive
Vice President-Operations of Young. 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 Young board 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 Young 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.
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<PAGE>
YOUNG'S PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of December 31, 1999
regarding the beneficial ownership of Young's common stock by
. each executive officer and director of Young,
. each stockholder known by Young to beneficially own 5% or more of such
common stock, and
. 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 Young. The table includes shares
issuable upon the exercise of options, subject to stockholder approval of the
proposal to amend Young's 1995 stock option plan. See "Approval of Amendment
Increasing Shares Underlying Future Grants Pursuant to Young's 1995 Stock
Option Plan."
<TABLE>
<CAPTION>
Class A Common Class B Common
Stock Stock
---------------------- -------------------------- Percent of
Number of Per Number of Per Vote as a
Beneficial Owner Shares Cent Shares Cent Single Class(1)
- ---------------- --------- ---- --------- ---- ---------------
<S> <C> <C> <C> <C> <C>
Vincent J. Young........ 3,984 (2)(3) * 1,402,544(4)(5)(6)(7) 49.1 35.4
Adam Young.............. -- -- 820,472(5)(7)(8) 34.8 23.6
Ronald J. Kwasnick...... (3) -- 168,438(5)(9) 6.9 4.8
James A. Morgan......... 300 (3)(10) * 253,377(5)(6)(11) 9.9 6.9
Deborah A. McDermott.... 800 (3) * 70,285(5)(12) 2.9 2.0
Capital Group 588,700 5.3 -- -- 2.5
International,
Inc.(13)...............
11100 Santa Monica
Blvd.
Los Angeles, CA 90025
NewSouth Capital 837,175 7.5 -- -- 2.4
Management, Inc.(14)...
1000 Ridegeway Loop
Road
Memphis, TN 38120
T. Rowe Price 967,400 8.6 -- -- 2.8
Associates, Inc.(15)...
100 E. Pratt Street
Baltimore, MD 21202
Neuberger Berman, 1,453,150 13.0 -- -- 4.2
LLC(16)................
605 Third Avenue
New York, NY 10158
Wanger Asset Management, 1,147,100 10.3 -- -- 3.3
L.P.(17)...............
227 West Monroe Street
Chicago, IL 60606
Bernard F. Curry (18)... 12,600 * -- -- *
Alfred J. Hickey, Jr.
(19)................... 11,600 * -- -- *
David C. Lee(19)........ 8,196 * -- -- *
Leif Lomo(18)........... 12,600 * -- -- *
Robert L.
Winikoff(19)(20)....... 53,196 * -- -- *
All directors and
executive
officers as a group.... 103,276 * 2,715,116 84.9 63.1
</TABLE>
- --------
* 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) Does not include shares held through the 401(k) Plan. The 401(k) Plan
offers matching contributions on a quarterly basis in the form of Class A
common stock.
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<PAGE>
(4) Includes 69,572 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 443,012 shares issuable upon the
exercise of options granted pursuant to the Plan and 60,266 shares issuable
upon the exercise of options granted pursuant to the Plan which are held
for the benefit of his minor children. Also includes 10,050 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 2,918 shares held for the benefit of his minor children.
(7) The table does not include 395,000 shares held by Spray-V Limited
Partnership for which Vincent Young, his siblings Richard and Sharon Young,
and his mother Margaret Young, serve as directors and may be deemed to
beneficially own such shares pursuant to Rule 13d-3(a) under the Securities
Exchange Act of 1934, as amended.
(8) Includes 141,438 shares held by his wife. Also includes 8,335 shares
issuable upon the exercise of options granted pursuant to the Plan.
(9) Includes 80,043 shares issuable upon the exercise of options granted
pursuant to the Plan.
(10) Includes 300 shares held by a family trust.
(11) Includes 199,707 shares issuable upon the exercise of options granted
pursuant to the Plan.
(12) Includes 55,730 shares issuable upon the exercise of options granted
pursuant to the Plan.
(13) Represents shares beneficially owned by Capital Group International, Inc.,
on behalf of its clients, as reported in a Schedule 13G filed February
2000.
(14) Represents shares beneficially owned by NewSouth Capital Management, Inc.,
on behalf of its clients, as reported in a Schedule 13G filed in February
2000.
(15) Represents shares beneficially owned by T. Rowe Price Associates, Inc., on
behalf of its clients, as reported in a Schedule 13G filed in February
2000.
(16) Represents shares beneficially owned by Neuberger Berman, LLC, as reported
in a Schedule 13G filed in February 2000. Includes 92,100 shares owned by
principals of Neuberger Berman, LLC, as to which Neuberger Berman, LLC
disclaims beneficial ownership.
(17) Represents shares beneficially owned by Wanger Asset Management, L.P., on
behalf of its clients, and Wanger Asset Management, Ltd., as reported in a
Schedule 13G filed in February 2000.
(18) Includes 11,600 shares issuable upon the exercise of stock options, 10,600
of which were granted pursuant to the Plan.
(19) Includes 7,196 shares issuable upon exercise of options granted pursuant
to the Plan.
(20) Includes 25,000 shares issuable held by a limited liability company for
which he serves as manager.
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DESCRIPTION OF YOUNG'S CAPITAL STOCK
Common Stock
Young has three classes of common stock, designated as Class A, Class B and
Class C, each share having a par value of $.001. Young also has one class of
preferred stock, divided into three series, none of which is currently issued.
Each 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 as
described below. Holders of Class C common stock are not entitled to vote,
except in connection with any change to Young's certificate of incorporation
that would adversely affect their rights as holders of such class of common
stock. Holders of all classes of common stock entitled to vote will vote
together as a single class on all matters presented to the stockholders for
their vote or approval except as otherwise required by the General Corporation
Law of the State of Delaware ("DGCL").
All of Young's outstanding shares of Class B common stock are held by
Young's management and by or in trust for family members of management. Young's
certificate of incorporation 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 Young. The Management Group, by virtue of its ownership of the
Class B common stock, with its super voting rights as described below, retain
control over Young's business and operations. In the event any shares of Class
B common stock are transferred outside of the Management Group, such shares
will automatically be converted into shares of Class A common stock. 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 shares of Class B common stock
automatically will be reclassified as Class A common stock.
Holders of Class C common stock may at any time convert their shares into
the same number of shares of Class A common stock. Holders of Class A common
stock may convert their shares into the same number of shares of Class C common
stock, provided that prior notice of such conversion is given to each holder of
shares of Class C common stock. In addition, Young is required to give notice
to holders of Class C common stock before it acquires any shares of Class A
common stock or takes any other action affecting the voting rights of Class A
common stock. In any merger, consolidation or business combination, the
consideration to be received per share by holders of Class A and Class C common
stock must be identical to that received by holders of Class B common stock,
except that in any such transaction in which shares of common stock are
distributed, such shares may differ as to voting rights to the extent that
voting rights now differ among the classes of common stock.
The holders of Class A common stock and Class B common stock vote as a
single class, with each share of each class entitled to one vote per share,
with respect to any proposed (a) "going private" transaction, (b) sale or other
disposition of all or substantially all of Young's assets, (c) sale or transfer
which would cause a fundamental change in the nature of Young's business and
(d) merger or consolidation of Young in which the holders of Young's common
stock will own less than 50% of the common stock following such transaction. A
"going private" transaction is any "Rule 13e-3 Transaction," as such term is
defined in Rule 13e-3 promulgated under the Securities Exchange Act of 1934,
between Young and (i) Vincent Young or Adam Young, or (ii) any affiliate of
Vincent Young or Adam Young, or (iii) any group of which Vincent Young or Adam
Young or an affiliate of Vincent Young or Adam Young is a member. An
"affiliate" is defined as
. any individual or entity who or that, directly or indirectly, controls,
is controlled by, or is under common control with Vincent Young or Adam
Young;
. any corporation or organization (other than Young or a majority- owned
subsidiary of Young) of which Vincent Young or Adam Young is an officer
or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of voting securities, or in which Vincent Young or Adam
Young has a substantial beneficial interest;
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. a voting trust or similar arrangement pursuant to which Vincent Young or
Adam Young generally controls the vote of the shares of common stock held
by or subject to such trust or arrangement;
. any other trust or estate in which Vincent Young or Adam Young has a
substantial beneficial interest or as to which Vincent Young or Adam
Young serves as trustee or in a similar fiduciary capacity; or
. any relative or spouse of Vincent Young or Adam Young, or any relative of
such spouse, who has the same residence as Vincent Young or Adam Young.
Under DGCL, the holders of each class of common stock are entitled to vote
as a separate class with respect to any amendment to Young's certificate of
incorporation that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or modify or change the powers, preferences or special
rights of the shares of such class so as to affect such class adversely.
Stockholders of Young have no preemptive rights or other rights to subscribe
for additional shares. Subject to the rights of holders of preferred stock, if
any, and the provisions of the Senior Credit Facility and the Indentures, all
holders of common stock, regardless of class, are entitled to share equally on
a share-for-share basis in any assets available for distribution to
stockholders on liquidation, dissolution or winding up of Young. No shares of
any class of common stock have conversion rights or are subject to redemption.
Holders of common stock are entitled to receive such dividends, if any, as
may be declared by the Young board out of funds legally available therefor, but
only if all dividends due on the outstanding preferred stock have been paid.
Under the Senior Credit Facility and the Indentures, Young's ability to declare
dividends will be restricted.
Preferred Stock
The Young board is authorized to provide for the issuance of preferred stock
in one or more series and to fix the designations, preferences, powers and
relative, participating, optional and other rights, qualifications, limitations
and restrictions thereof, including the dividend rate, conversion rights,
voting rights, redemption price and liquidation preference, and to fix the
number of shares to be included in any such series. Any preferred stock so
issued may rank senior to the common stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up, or both. In
addition, any such shares of preferred stock may have class or series voting
rights.
Foreign Ownership
Under Young's certificate of incorporation, Young is not permitted to issue
or transfer on its books any of its capital stock to or for the account of any
alien if after giving effect to such issuance or transfer, the capital stock
held by or for the account of any alien or aliens would exceed, individually or
in the aggregate, 25% of Young's capital stock at any time outstanding. Any
issuance or transfer of capital stock in violation of such prohibition will be
void and of no force and effect. Young's certificate of incorporation also
provides that no alien or aliens shall be entitled to vote or direct or control
the vote of more than 25% of the total voting power of all of the shares of
capital stock of Young outstanding and entitled to vote at any time and from
time-to-time. In addition, Young's certificate of incorporation provides that
no alien shall be qualified to act as an officer of Young and no more than 25%
of the total number of directors of Young at any time may be aliens. Young's
certificate of incorporation further gives the Young board all power necessary
to administer the above provisions. See "Business--Federal Regulation of
Television Broadcasting."
Transfer Agent And Registrar
The Transfer Agent and Registrar for Young's Class A common stock is
American Stock Transfer & Trust Company.
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CHRONICLE PUBLISHING'S PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Chronicle Publishing's common stock as of March 20, 2000 by
(i) each person beneficially holding 5% or more of the Chronicle Publishing's
common stock, (ii) each executive officer of the Chronicle Publishing, (iii)
each of the Chronicle Publishing's directors, and (iv) all of Chronicle
Publishing's executive officers and directors as a group. As of March 20, 2000,
there were 3,780,000 shares of the Chronicle Publishing's common stock
outstanding. Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes all shares of the Chronicle Publishing's common
stock with respect to which a person has voting and/or investment power. In
addition, a person is deemed to beneficially own shares of the Chronicle
Publishing's common stock that are held of record by a trust if such person may
acquire beneficial ownership of such shares by revoking such trust. The address
of each person listed in the table below is c/o The Chronicle Publishing
Company, 901 Mission Street, San Francisco, California 94103.
<TABLE>
<CAPTION>
Number of Shares Percent of Shares
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------
<S> <C> <C>
Nan T. McEvoy. ......................... 655,200 17.3
Peter Folger (as trustee)(1)............ 555,500 14.7
Daniel M. Mosley (as trustee)(2)........ 529,200 14.0
Ferdinand T. Stent and Margaret DeBord
Stent (as trustees)(3)................. 251,000 6.6
Charles C. Thierot(4)................... 168,000 4.4
Peter D. Stent(5)....................... 160,000 4.2
Nion T. McEvoy(6)....................... 75,600 2.0
Helen M. Spalding(7).................... 26,900 *
Patricia Tobin Kubal(8)................. 15,000 *
John Sias(9)............................ 0 *
Marty Jaffe(10)......................... 0 *
W. Ronald Ingram(11).................... 0 *
Catherine E. McHugh(12)................. 0 *
William S. Elkus(13).................... 0 *
David F. Marquardt(14).................. 0 *
Timothy J. Parrott(15).................. 0 *
Richard M. Rosenberg(16)................ 0 *
All executive officers and directors as
a group (13 persons)(17)............... 445,500 11.8
</TABLE>
- --------
* Represents less than one percent.
(1) Consists of (i) 115,500 shares held of record by the Consuelo Tobin Martin
Children's Trust f/b/o Constance M. Goodyear, Candyce Martin, Francis A.
Martin III, Helen M. Spalding and Priscilla M. Tamkin, with respect to
which Mr. Folger is the trustee with sole power to direct the voting of
the shares held thereby, (ii) 40,000 shares held of record by the
Constance Martin Goodyear 1997 Irrevocable Trust, with respect to which
Mr. Folger is the trustee with sole power to direct the voting of the
shares held thereby, (iii) 50,000 shares held of record by the Francis A.
Martin III 1997 Irrevocable Trust, with respect to which Mr. Folger is the
trustee with sole power to direct the voting of the shares held thereby,
(iv) 50,000 shares held of record by the Helen Martin Spalding 1997
Irrevocable Trust, with respect to which Mr. Folger is the trustee with
sole power to direct the voting of the shares held thereby, (v) 105,000
shares held of record by the Richard T. Thieriot Children's Trust dated
November 18, 1997, with respect to which Mr. Folger is the trustee with
sole power to direct the voting of the shares held thereby, (vi) 25,000
shares held of record by the Francis A. Martin III 1998 Irrevocable Trust,
with respect to which Mr. Folger is the trustee with sole power to direct
the voting of the shares held thereby, (vii) 20,000 shares held of record
by the Priscilla Martin Tamkin 1999 Irrevocable Trust, with respect to
which Mr. Folger is the trustee with sole power to direct the voting of
the shares held thereby, (viii) 20,000 shares held of record by the
Candyce Martin 1999 Irrevocable Trust, with respect to which Mr. Folger is
the trustee with sole power to direct the voting of the shares held
thereby, (ix) 130,000
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shares held of record by the Consuelo Tobin Martin 1999 Irrevocable Trust
f/b/o Constance Martin Goodyear, Francis Augustus Martin III, Margaret
Candyce Martin, Helen Martin Spalding and Priscilla Martin Tamkin, with
respect to which Mr. Folger is the trustee with sole power to direct the
voting of the shares held thereby.
(2) Consists of (i) 189,000 shares held of record by a Trust, dated January 1,
1998, with respect to which Mr. Mosley is the trustee with sole power to
direct the voting of the shares held thereby, and (ii) 340,200 shares held
of record by the Nan T. McEvoy 1997 GRAT, with respect to which Mr. Mosley
is the trustee with sole power to direct the voting of the shares held
thereby.
(3) Represent shares held of record by the Ferdinand T. Stent Revocable Trust
and the Peter D. Stent Trust f/b/o Alexa C. Stent and Shane P. Stent, with
respect to which Mr. Stent and Ms. Stent are joint trustees with sole
power to direct the voting of 201,000 shares held thereby. Mr. Stent is
joint trustee, with Alexa C. Stent and Shane P. Stent, respectively, with
power to direct the voting of 50,000 shares held thereby.
(4) Represents shares held of record by the Charles C. Thieriot Revocable
Trust Under Declaration Dated February 27, 1997, with respect to which Mr.
Thieriot is a trustee with sole power to direct the voting of the shares
held thereby. Mr. Thieriot is a director of Chronicle Publishing.
(5) Represents shares held of record by the Peter D. Stent Separate Property
Trust, with respect to which Mr. Stent is the trustee with sole power to
direct the voting of the shares held thereby. Mr. Stent is a director of
Chronicle Publishing.
(6) Represents shares held of record by the Nion T. McEvoy 1998 GRAT, with
respect to which Mr. McEvoy is the trustee with sole power to direct the
voting of the shares held thereby. Mr. McEvoy is a director of Chronicle
Publishing.
(7) Ms. Spalding is a director of Chronicle Publishing.
(8) Represents shares held of record by the Patricia Tobin Kubal Separate
Property Trust, with respect to which Ms. Kubal is the trustee with sole
power to direct the voting of the shares held thereby. Ms. Kubal is a
director of Chronicle Publishing.
(9) Mr. Sias is the President and Chief Executive Officer of Chronicle
Publishing.
(10) Mr. Jaffe is a Vice President and the Chief Financial Officer of Chronicle
Publishing.
(11) Mr. Ingram is a Vice President and the Secretary and General Counsel of
Chronicle Publishing.
(12) Ms. McHugh is the Treasurer and Controller of Chronicle Publishing.
(13) Mr. Elkus is a director of Chronicle Publishing.
(14) Mr. Marquardt is a director of Chronicle Publishing.
(15) Mr. Parrott is a director of Chronicle Publishing.
(16) Mr. Rosenberg is a director of Chronicle Publishing.
(17) Consists of (i) 168,000 shares beneficially owned by Charles C. Thieriot,
a director of Chronicle Publishing, (ii) 160,000 shares beneficially owned
by Peter D. Stent, a director of Chronicle Publishing, (iii) 75,600 shares
beneficially owned by Nion T. McEvoy, a director of Chronicle Publishing,
(iv) 26,900 shares beneficially owned by Helen M. Spalding, a director of
Chronicle Publishing, and (v) 15,000 shares beneficially owned by Patricia
Tobin Kubal, a director of Chronicle Publishing.
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DESCRIPTION OF CHRONICLE PUBLISHING'S CAPITAL STOCK
Chronicle Publishing's articles of incorporation authorize the issuance of
capital stock consisting of 5,040,000 shares of common stock, par value $0.01
per share. As of March 20, 2000, Chronicle Publishing had issued and
outstanding 3,780,000 shares of common stock. No other classes of capital stock
are authorized under Chronicle Publishing's articles of incorporation. All
shares of Chronicle Publishing's common stock are duly authorized, validly
issued, fully paid and non-assessable. As of March 20, 2000, there were 60
holders of Chronicle Publishing's common stock. All of Chronicle Publishing's
common stock is privately held and is not registered or listed on any exchange.
Chronicle Publishing's articles of incorporation provides for two classes of
directors. There are no restrictions on Class A directors. Class B directors
may not be stockholders of the Chronicle Publishing or descendants of Meichel
H. de Young or the spouse thereof. The articles of incorporation require
approval of a majority of outstanding shares of common stock in connection with
(a) the disposition of any of the Chronicle Publishing's property valued over
$100 million if any four directors request approval and (b) the issuance of any
capital stock of the corporation in excess of 3,780,000 shares of common stock.
The Chronicle Publishing's bylaws provide for annual meetings and for
special meetings at the request of one or more stockholders holding in
aggregate at least twenty percent of the shares entitled to vote at the meeting
and at the request of any stockholder for purpose of filling a vacancy in the
Class A directors. Stockholders are given notice of meetings 10 to 60 days in
advance of such meeting. Each stockholder is entitled to one vote for each
share owned of record on all matters voted on by stockholders; provided,
however, that election of directors shall be conducted by cumulative voting if,
before the voting begins, any shareholder entitled to vote gives notice of an
intention to cumulate his or her votes. The vote of a majority of the shares
present and entitled to vote at a meeting where a quorum is present constitutes
an act of the stockholders.
Stockholders are entitled to receive dividends if, as and when declared by
the board of directors of the Chronicle Publishing out of funds legally
available. Chronicle Publishing currently pays a monthly dividend of 57 cents
per share and periodic dividends sufficient to enable its stockholders to pay
estimated taxes required to be paid as a result of their ownership of S
corporation stock. Prior to February 1999, Chronicle Publishing also paid
special quarterly dividends of varying amounts.
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COMPARISON OF STOCKHOLDER RIGHTS
UNDER DELAWARE AND NEVADA LAW
Upon consummation of the merger, holders of Chronicle Publishing's common
stock will become holders of Young's common stock and the rights of former
Chronicle Publishing stockholders will be governed by Young's certificate of
incorporation, Young's By-laws and the Delaware General Corporation Law
("DGCL"). Chronicle Publishing is incorporated in Nevada. The Nevada Revised
Statutes ("NRS") and the DGCL are similar in many respects. The following
summary sets forth certain similarities and differences that should be
considered by stockholders. The following summary is not a complete statement
of the differences between the NRS and the DGCL because the differences between
the two statutes are too numerous to list in their entirety.
Size and Classification of the Board of Directors
Section 141(b) of the DGCL provides that the board of directors shall
consist of one or more members. The number of directors shall be fixed by, or
in the manner provided in, the by-laws, unless the certificate of incorporation
fixes the number of directors, in which case a change in the number of
directors shall be made only by amendment of the certificate. Pursuant to
Section 141(d) of the DGCL, the directors of any Delaware corporation may, by
the certificate of incorporation, by an initial by-law or by a by-law adopted
by a vote of the stockholders, be divided into one, two or three classes.
Section 78.115 of the NRS provides that a corporation must have at least one
director and may provide in its articles of incorporation or its by-laws for a
fixed number of directors or a variable number of directors within a fixed
maximum and minimum and for the manner in which the number of directors may be
increased or decreased. Section 78.330 of the NRS provides that the articles of
incorporation or the by-laws may provide for a classified board of directors,
but at least one-fourth of the directors must be elected annually. Chronicle
Publishing has two classes of directors, Class A and Class B. While there are
no restrictions on Class A directors, Class B directors cannot be stockholders
or a descendant of Meichel H. de Young or the spouse thereof.
Duties of Directors
Section 78.138 of the NRS allows directors and officers of a corporation to
consider a variety of nonstockholder interests in discharging their duties to
the corporation. The DGCL does not have a similar provision.
Removal of Directors
Section 141(k) of the DGCL provides that any director or the entire board of
directors may generally be removed with or without cause by a majority
stockholder vote. However, a director of a corporation with a classified board
of directors may be removed only for cause unless the certificate of
incorporation otherwise provides.
Under Section 78.335 of the NRS, directors may be removed from office by a
two-thirds stockholder vote, or by the vote of a larger percentage of shares as
is provided in the articles of incorporation. However, if the corporation's
articles provide for cumulative voting to elect directors, such directors may
not be removed other than by a vote of a sufficient number of shares to have
prevented their election in the first instance. Chronicle Publishing's articles
include an option for the election of directors by cumulative voting.
Newly Created Directorships and Vacancies
Under Section 223 of the DGCL, unless the certificate of incorporation or
the by-laws of a corporation provide otherwise, a majority vote of the
directors then in office may fill vacancies and newly created directorships,
even if the number of current directors is less than a quorum or only one
director remains. If the
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directors filling an open slot on the board constitute less than a majority of
the whole board (as measured before an increase in the size of the board), the
Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the outstanding voting shares, summarily order an election to fill
the open slots or replace directors chosen by the directors then in office.
Unless otherwise provided in the certificate of incorporation or by-laws, when
one or more directors resign effective at a future date, a majority of
directors then in office, including those who have so resigned, may vote to
fill the vacancy.
Similarly, under Section 78.335 of the NRS, all vacancies, including those
caused by an increase in the number of directors, may be filled by a majority
of the remaining directors, though less than a quorum, unless the articles of
incorporation provide otherwise. If a director gives notice of his or her
resignation to the board of directors, to become effective at a future date,
the board may fill the vacancy to take effect when the resignation becomes
effective, with the director so appointed to hold office during the remainder
of the term of office of the resigning director. Chronicle Publishing's by-laws
provide that Class A directors may only be filled by stockholders; Class B
directors can be filled by stockholders or by a majority of the remaining
directors.
Limitation on Directors' Liability
Section 102(b)(7) of the DGCL allows a corporation, through its certificate
of incorporation, to limit or eliminate the personal liability of directors to
the corporation and its stockholders for monetary damages for breach of
fiduciary duty. However, this provision excludes any limitation on liability
for (i) any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) willful or
negligent violation of the laws governing the payment of dividends or the
purchase or redemption of stock or (iv) any transaction from which the director
derives an improper personal benefit.
Section 78.037 of the NRS allows a corporation, through its articles of
incorporation, to limit or eliminate the personal liability of directors to the
corporation and its stockholders for damages for breach of fiduciary duty.
However, this provision excludes any limitation on liability for (i) acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law or (ii) the payment of distributions in violation of Section 78.300 of the
NRS. Also, unlike the DGCL, the NRS applies to officers as well as directors.
Chronicle Publishing's articles include a provision that limits the personal
liability of its officers and directors to the fullest extent permitted by the
NRS.
Indemnification of Directors and Officers
Section 145 of the DGCL and Section 78.751 of the NRS have nearly identical
provisions regarding indemnification by a corporation of its officers,
directors, employees and agents, except Nevada provides broader indemnification
in connection with stockholder derivative lawsuits.
Delaware and Nevada law differ in their provisions for advancement of
expenses incurred by an officer or director in defending a civil or criminal
action, suit or proceeding. The DGCL provides that expenses incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or an behalf of the director or officer to repay the
amount if it is ultimately determined that he is not entitled to be indemnified
by the corporation. Thus, a corporation has the discretion to decide whether or
not to advance expenses.
Under the Nevada Revised Statutes, the articles of incorporation, by-laws or
an agreement made by the corporation may provide that the corporation must pay
advancements of expenses in advance of the final disposition of the action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined that he
is not entitled to be indemnified by the corporation. Thus, a corporation may
have no discretion to decide whether or not to advance expenses. Chronicle
Publishing's by-laws provide that the corporation must pay advances.
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Loans to Directors
Section 143 of the DGCL allows a corporation to lend money to or guarantee
an obligation of an officer or employee, including one who acts as a director,
if the assistance is reasonably expected to benefit the corporation. Such
assistance may be provided without stockholder approval. The NRS contains no
corresponding provision.
Dividends
Subject to additional restrictions in a corporation's certificate of
incorporation, Section 170 of the DGCL allows the board of directors of a
Delaware corporation to pay dividends out of surplus or, if there is no
surplus, out of its net profits for the fiscal year in which the dividend is
declared or the preceding fiscal year.
Section 78.288 of the NRS allows a board of directors to make distributions
to stockholders, unless otherwise provided in the articles of incorporation.
However, no distribution may be made if it would cause (i) the corporation to
be unable to pay its debts as they become due or (ii) except as otherwise
specifically allowed by the articles of incorporation, the corporation's assets
to be less than the sum of its liabilities plus the amount that would be
needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential stockholders whose rights are
superior to those receiving the distribution.
Action by Stockholders through Written Consent
Under Section 228(a) of the DGCL, unless otherwise provided in a
corporation's certificate of incorporation, any action required to be taken at
an annual or special meeting of the stockholders may be taken by the written
consent of stockholders in lieu of a meeting. The written consent must set
forth the action taken and be signed by the holders of outstanding stock
representing the number of shares necessary to take such action at a meeting at
which all shares entitled to vote were present and voted.
Under Section 78.320 of the NRS, unless otherwise provided in a
corporation's articles of incorporation or by-laws, any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if a written consent thereto is signed by stockholders holding at least
a majority of the voting power, except that if a different proportion of voting
power is required for such an action at a meeting, then that proportion of
written consents is required.
Special Meetings of Stockholders
Under Section 211(d) of the DGCL, special meetings of stockholders may be
called by the board of directors and by such other person or persons as may be
authorized to do so by the corporation's certificate of incorporation or by-
laws. Under Section 78.310 of the NRS, meetings may be held in the manner
provided by the by-laws of the corporation. Chronicle Publishing's bylaws allow
stockholders holding at least 20 percent of the shares entitled to vote to call
a special meeting. In addition, any stockholder may call a special meeting for
purposes of electing a director to fill a vacancy in the Class A directors.
Cumulative Voting
Both Section 214 of the DGCL and Section 78.360 of the NRS allow a
corporation to provide for cumulative voting in the certificate of
incorporation or the articles of incorporation. Chronicle Publishing's by-laws
provide an option to stockholders to use cumulative voting in the election of
directors.
Necessary Vote to Effect Merger (Not Involving Interested Stockholder)
Both the DGCL, under Sections 251(c) and 252(c), and the NRS, under Section
78.453, require a majority vote of the shares entitled to vote in order to
effectuate a merger between two corporations. However,
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under the NRS, the articles of incorporation or the board of directors may
provide for a greater vote under some circumstances. In addition, both the DGCL
and NRS provide that the vote of the stockholders of the surviving corporation
on a plan of merger is not required under certain circumstances.
Business Combinations Involving Interested Stockholders
Both the DGCL and the NRS contain provisions restricting the ability of a
corporation to engage in business combinations with an interested stockholder.
Under the DGCL, except under certain circumstances, a corporation is not
permitted to engage in a business combination with any interested stockholder
for a three-year period following the date such stockholder became an
interested stockholder. The DGCL defines interested stockholder generally as a
person who owns 15% or more of the outstanding shares of such corporation's
voting stock. The NRS defines an interested stockholder, generally, as a person
who owns 10% or more of the outstanding shares of the corporations' voting
stock.
Appraisal Rights; Dissenters' Rights
Both Section 262 of the DGCL and Sections 92A.380 and 92A.390 of the NRS
provide that shareholders have the right, in some circumstances, to dissent
from certain corporate reorganizations and to instead demand payment of the
fair cash value of their shares. Unless a corporation's certificate of
incorporation provides otherwise, dissenters do not have rights of appraisal
with respect to a merger or consolidation by a corporation, the shares of which
are either (i) listed on a national securities exchange, designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., or (ii) held by more than
2,000 shareholders, if the shareholders receive cash (in the case of the NRS),
shares in the surviving corporation, shares of another corporation that are
publicly listed or held by more than 2,000 shareholders, cash in lieu of
fractional shares or any combination of the above. Also, Shareholders of a
corporation surviving a merger do not have appraisal rights if no vote of the
shareholders of the surviving corporation is required to approve the merger.
Redeemable Shares
Section 151(b) of the DGCL provides that the certificate of incorporation or
a resolution of the board of directors may make any class of stock subject to
redemption at the option of the corporation or the stockholders or upon the
happening of a specified event, as long as at the time of redemption one class
of voting stock is not subject to redemption.
Section 78.196 of the NRS provides that the articles of incorporation or a
resolution of the board of directors may authorize one or more classes of stock
that are redeemable or convertible at the option of the corporation, the
stockholders or another person or upon the occurrence of a designated event.
Preemptive Rights
Under Section 102(b)(3) of the DGCL and Section 78.267 of the NRS, absent an
express provision in a corporation's certificate of incorporation or articles
of incorporation, a stockholder does not, by operation of law, possess
preemptive rights to subscribe to an additional issue of stock.
Amendment of Articles of Incorporation and By-laws
Section 242 of the DGCL and Sections 78.385 and 78.390 of the NRS permit a
corporation to amend its certificate or articles of incorporation in any
respect provided the amendment contains only provisions that would be lawful in
an original certificate or articles of incorporation filed at the time of
amendment. To amend a certificate or articles of incorporation, the board must
adopt a resolution presenting the proposed amendment. In addition, a majority
of the shares entitled to vote, as well as a majority of shares by class of
each class entitled to vote, must approve the amendment to make it effective.
When the substantial rights of a class of
137
<PAGE>
shares will be affected by an amendment, the holders of those shares are
entitled to vote as a class even if the shares are non-voting shares. When only
one or more series in a class of shares, and not the entire class, will be
adversely affected by an amendment, only the affected series may vote as a
class. Under Section 242(b)(2) of the DGCL, the right to vote as a class may be
limited in certain circumstances. Any provision in the certificate or articles
of incorporation which requires a greater vote than required by law cannot be
amended or repealed except by such greater vote. Section 242(c) of the DGCL
provides that, in its resolution proposing an amendment, the board may insert a
provision allowing the board to abandon the amendment, without concurrence by
stockholders, after the amendment has received stockholder approval but before
its filing with the Secretary of State.
Section 109 of the DGCL provides that the power to amend the by-laws rests
with the stockholders entitled to vote, although the certificate of
incorporation may give the board of directors power to amend the by-laws. The
fact that the certificate of incorporation confers such power upon the board of
directors neither limits nor divests the stockholders of the power to amend the
by-laws. Section 78.120 of the NRS, on the other hand, provides that, subject
to the by-laws, if any, adopted by the stockholders, the directors may make the
by-laws of the corporation.
Inspection of Books and Records
Section 220 of the DGCL entitles any stockholder of record of a corporation,
in person or by an agent, upon written demand under oath stating the purpose
thereof, to inspect during usual business hours, for any proper purpose, the
corporation's stock ledger, a list of its stockholders and its other books and
records, and to make copies or extracts therefrom. A proper purpose means a
purpose reasonably related to such person's interest as a stockholder.
Section 78.105 of the NRS entitles any person who has been a stockholder of
record of a corporation for at least six months, or any person holding or
representing at least 5% of its outstanding shares, upon at least five days'
written demand, to inspect, in person or by an agent, during usual business
hours, its stock ledger and to make extracts therefrom. However, pursuant to
Section 78.257 of the NRS, only stockholders of record who own or represent at
least 15% of a corporation's shares have the right, upon at least five days'
written demand, to inspect, in person or by an agent, during normal business
hours, the books of account and financial records of the corporation, to make
extracts therefrom and to conduct an audit of such records.
138
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires Young's directors and executive
officers and persons who own beneficially more than 10% of Young'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
Young. Based solely upon a review of the copies of such reports filed with
Young, Young believes that during 1999 such reporting persons complied with the
filing requirements of said Section 16(a).
STOCKHOLDER PROPOSALS FOR YOUNG'S 2001 ANNUAL MEETING
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 Young's 2001 annual meeting
of stockholders to be eligible for inclusion in Young's proxy statement, they
must be received by the Secretary of Young at Young's principal executive
offices not later than January 4, 2001.
LEGAL MATTERS
The validity of the shares of Young's common stock to be issued in
connection with the merger will be passed upon for Young by Cooperman Levitt
Winikoff Lester & Newman, P.C., New York, New York, counsel to Young. Robert L.
Winikoff, a director of Young, is a partner of Cooperman Levitt Winikoff Lester
& Newman, P.C..
EXPERTS
The audited consolidated financial statements of Young Broadcasting Inc. as
of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, and the audited combined financial statements of KRON-
TV, a Division of The Chronicle Publishing Company and BayTV Joint Venture as
of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, included in the joint proxy statement/prospectus of
Young Broadcasting Inc., which is referred to and made a part of the
registration statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports appearing elsewhere herein, and are
included in reliance upon such reports given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Young files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information Young files at the Securities
and Exchange Commission's Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Securities and Exchange Commission's regional
offices located at 7 World Trade Center, Suite 1300, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Young's Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the web site maintained by the Securities and
Exchange Commission at "http://www.sec.gov."
Young has filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act to register Young's Class A
common stock to be issued to Chronicle Publishing's stockholders in the merger.
This joint proxy statement/prospectus is a part of that registration statement
and constitutes a prospectus of Young in addition to being a proxy statement of
Young and Chronicle Publishing for the special meetings. As allowed by
Securities and Exchange Commission rules, this joint proxy statement/prospectus
does not contain all the information you can find in the registration statement
or the exhibits to the registration statement.
139
<PAGE>
The SEC allows us to "incorporate by reference" information into this
document. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
Young incorporates by reference additional documents that it may file with
the SEC between the date of this document and the date of the Young special
meeting. These documents include periodic reports, including Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
The information contained in this document speaks only as of its date unless
the information specifically indicates that another date applies. Young has
supplied all information contained in this joint proxy statement/prospectus
relating to Young, and Chronicle Publishing has supplied all such information
relating to Chronicle Publishing.
140
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
YOUNG BROADCASTING INC.
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3
Consolidated Statements of Operations for Years ended December 31, 1997,
1998 and 1999........................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1997, 1998 and 1999........................................
Consolidated Statements of Cash Flows for the Years ended December 31,
1997, 1998 and 1999..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
KRON-TV AND BayTV
Report of Independent Auditors........................................... F-18
Combined Balance Sheets as of December 31, 1998 and 1999................. F-19
Combined Statements of Income and Divisional Equity for the Years ended
December 31, 1997, 1998 and 1999........................................ F-20
Combined Statements of Cash Flows for the Years ended December 31, 1997,
1998 and 1999........................................................... F-21
Notes to Combined Financial Statements................................... F-22
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Young Broadcasting Inc.
We have audited the accompanying consolidated balance sheets of Young
Broadcasting Inc. and Subsidiaries as of December 31, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Young Broadcasting Inc. and Subsidiaries at December 31, 1998 and 1999, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
February 7, 2000
F-2
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1999
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (Note 2)............. $ 663,298 $ 2,952,144
Trade accounts receivable, less allowance for
doubtful accounts of $2,012,000 in 1998 and
$1,761,000 in 1999............................ 53,835,994 65,062,866
Current portion of loans receivable--officers
(Note 11)..................................... 530,892 375,310
Current portion of program license rights
(Notes 2 and 4)............................... 15,250,015 28,268,497
Prepaid expenses............................... 10,845,065 13,718,474
------------- -------------
Total current assets......................... 81,125,264 110,377,291
Property and equipment, less accumulated
depreciation and amortization of $122,757,235 in
1998 and $144,394,626 in 1999 (Notes 2 and 10).. 96,736,970 88,102,344
Program license rights, excluding current portion
(Notes 2 and 4)................................. 1,987,123 1,171,438
Deposits and other assets........................ 28,005,890 24,706,034
Loans receivable--officers, excluding current
portion (Note 11)............................... 208,041 --
Broadcasting licenses and other intangibles, less
accumulated amortization of $118,631,102 in 1998
and $139,260,326 in 1999 (Note 2)............... 604,576,679 584,101,367
Deferred charges, less accumulated amortization
of $10,508,840 in 1998 and $13,659,344 in 1999
(Note 2)........................................ 13,027,559 10,211,507
------------- -------------
Total assets................................. $ 825,667,526 $ 818,669,981
============= =============
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable......................... $ 14,571,552 $ 20,545,231
Accrued interest (Notes 5 and 6)............... 13,090,459 12,682,009
Accrued expenses............................... 6,857,710 6,844,840
Current installments of program license
liability (Notes 2 and 4)..................... 12,412,040 24,440,679
Current installments of long-term debt (Note
5)............................................ 914,171 --
Current installments of obligations under
capital leases (Note 10)...................... 491,666 923,567
------------- -------------
Total current liabilities.................... 48,337,598 65,436,326
Program license liability, excluding current
installments (Notes 2 and 4).................... 2,196,256 1,538,100
Long-term debt, excluding current installments
(Note 5)........................................ 85,000,000 79,000,000
Senior Subordinated Notes (Note 6)............... 570,000,000 565,000,000
Deferred tax liabilities (Note 8)................ 71,450,273 71,450,273
Obligations under capital leases, excluding
current installments (Note 10).................. 1,818,273 5,586,000
------------- -------------
Total liabilities............................ 778,802,400 788,010,699
------------- -------------
Stockholders' equity (Note 7):
Class A Common Stock, $.001 par value.
Authorized 20,000,000 shares; issued and
outstanding 11,401,823 shares at 1998 and
11,142,472 shares at 1999..................... 11,402 11,143
Class B Common Stock, $.001 par value.
Authorized 20,000,000 shares; issued and
outstanding 2,408,447 shares at 1998 and
2,351,251 shares at 1999...................... 2,408 2,351
Additional paid-in capital..................... 205,523,080 210,859,627
Accumulated deficit............................ (158,671,764) (180,213,839)
------------- -------------
Total stockholders' equity................... 46,865,126 30,659,282
------------- -------------
Total liabilities and stockholders' equity... $ 825,667,526 $ 818,669,981
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net operating revenue................ $263,534,581 $277,051,669 $280,658,940
------------ ------------ ------------
Operating expenses................... 64,700,352 66,482,606 64,843,194
Amortization of program license
rights.............................. 38,279,226 33,013,564 47,689,774
Selling, general and administrative
expenses............................ 42,007,903 50,228,854 50,131,239
Depreciation and amortization........ 46,940,592 49,471,437 47,983,723
Corporate overhead................... 7,150,096 7,860,031 8,226,577
Non-cash compensation (Notes 7 and
9).................................. 967,112 1,146,335 19,101,560
Merger-related costs................. -- 1,444,588 --
------------ ------------ ------------
Operating income................. 63,489,300 67,404,254 42,682,873
------------ ------------ ------------
Interest expense..................... (64,102,237) (62,617,274) (62,980,836)
Other expenses, net.................. (493,331) (787,951) (1,244,112)
------------ ------------ ------------
(64,595,568) (63,405,225) (64,224,948)
------------ ------------ ------------
Income (loss) before extraordinary
item................................ (1,106,268) 3,999,029 (21,542,075)
Extraordinary loss on extinguishment
of debt............................. (9,243,128) -- --
------------ ------------ ------------
Net (loss) income................ $(10,349,396) $ 3,999,029 $(21,542,075)
============ ============ ============
Income (loss) per common share:
Basic:
Income (loss) before extraordinary
item.............................. $ (.08) $ .28 $ (1.59)
Extraordinary loss on
extinguishment of debt............ (.66) -- --
------------ ------------ ------------
Net income (loss) per common
share........................... $ (.74) $ .28 $ (1.59)
------------ ------------ ------------
Weighted average shares.......... 13,989,969 14,147,522 13,588,108
============ ============ ============
Diluted:
Income (loss) before extraordinary
item.............................. $ (.08) $ .27 $ (1.59)
Extraordinary loss on
extinguishment of debt............ (.66) -- --
------------ ------------ ------------
Net income (loss) per common
share........................... $ (.74) $ .27 $ (1.59)
------------ ------------ ------------
Weighted average shares.......... 13,989,969 14,760,454 13,588,108
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Common Stock
--------------- Additional Total
Class Paid-In Accumulated Stockholders'
Class A B Capital Deficit Equity
------- ------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... 12,209 2,022 233,190,382 (152,700,390) 80,504,223
Contribution of shares
into Company's
defined contribution
plan................. 53 -- 1,574,958 -- 1,575,011
Exercise of stock
options.............. 23 -- 454,227 -- 454,250
Repurchase and
retirement of Class A
Common Stock......... (459) -- (12,338,021) -- (12,338,480)
Conversion of Class B
Common Stock to Class
A Common Stock....... 25 (25) -- -- --
Net loss for 1997..... -- -- -- (10,349,396) (10,349,396)
------- ------ ------------ ------------- ------------
Balance at December 31,
1997................... 11,851 1,997 222,881,546 (163,049,786) 59,845,608
Contribution of shares
into Company's
defined contribution
plan................. 22 -- 1,103,172 -- 1,103,194
Exercise of stock
options.............. 16 -- 358,703 -- 358,719
Repurchase and
retirement of Class A
Common Stock......... (552) -- (19,488,610) -- (19,489,162)
Conversion of Class B
Common Stock to Class
A Common Stock....... 65 (65) -- -- --
Issuance of Class A
Common Stock and
repurchase of Class B
Common Stock for the
Adam Young Inc.
merger............... -- 476 668,269 378,993 1,047,738
Net income for 1998... -- -- -- 3,999,029 3,999,029
------- ------ ------------ ------------- ------------
Balance at December 31,
1998................... $11,402 $2,408 $205,523,080 $(158,671,764) $ 46,865,126
Contribution of shares
into Company's
defined contribution
plan................. 21 -- 854,205 -- 854,226
Conversion of Class B
Common Stock to Class
A Common Stock....... 57 (57) -- -- --
Exercise of stock
options.............. 12 -- 223,000 -- 223,012
Repurchase and
retirement of Class A
Common Stock......... (349) -- (14,031,241) -- (14,031,590)
Non-cash
compensation......... -- -- 18,290,583 -- 18,290,583
Net loss for 1999..... -- -- -- (21,542,075) (21,542,075)
------- ------ ------------ ------------- ------------
Balance at December 31,
1999................... $11,143 $2,351 $210,859,627 $(180,213,839) $ 30,659,282
======= ====== ============ ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net (loss) income................... $ (10,349,396) $ 3,999,029 $(21,542,075)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization of
property and equipment........... 19,522,619 23,998,934 23,985,741
Amortization of program license
rights........................... 38,279,226 33,013,564 47,689,774
Amortization of broadcasting
licenses, other intangibles and
deferred charges................. 27,417,973 25,472,503 23,997,982
Non-cash compensation paid in
Common Stock..................... 967,112 1,146,335 19,101,560
Non-cash interest expense on
outstanding indebtedness......... 275,588 189,386 85,829
Loss on disposal of fixed assets.. 467,920 72,977 167,480
Extraordinary loss on
extinguishment of debt........... 9,243,128 -- --
Deferred acquisition and debt
refinancing costs incurred....... (1,760,000) -- --
Payments on programming license
liabilities...................... (38,609,618) (33,336,886) (46,678,348)
Decrease (increase) in trade
accounts receivable.............. 480,554 7,571,176 (10,891,837)
Increase in prepaid expenses...... (143,678) (6,025,061) (3,715,479)
(Decrease) increase in trade
accounts payable................. (5,133,300) (1,468,593) 4,575,414
Increase (decrease) in accrued
expenses......................... 366,933 (341,121) (378,071)
------------- ------------ ------------
Net cash provided by operating
activities..................... 41,025,061 54,292,243 36,397,970
------------- ------------ ------------
Investing activities:
Capital expenditures................ (9,033,690) (7,524,480) (9,359,911)
(Increase) decrease in deposits and
other assets....................... (214,498) (26,362,234) 1,625,139
Increase in broadcast licenses and
other intangibles.................. (2,508,374) (267,186) (152,419)
------------- ------------ ------------
Net cash used in investing
activities..................... (11,756,562) (34,153,900) (7,887,191)
------------- ------------ ------------
Financing activities:
Proceeds from issuance of public
subordinated debt.................. 200,000,000 -- --
Borrowings from working capital
facility........................... -- 36,527,000 6,327,000
Principal payments on long term-
debt............................... (220,740,000) (37,787,000) (12,327,000)
Deferred acquisition and debt
refinancing costs incurred......... (1,206,520) (64,871) (552,705)
Repurchase of Senior Subordinated
Notes.............................. -- -- (5,000,000)
Repurchase of Class A and Class C
Common Stock....................... (12,338,480) (19,489,162) (14,031,590)
Proceeds from exercise of options... 454,249 358,719 223,012
Principal payments under capital
lease obligations.................. (790,064) (672,159) (860,650)
------------- ------------ ------------
Net cash used in financing
activities..................... (34,620,815) (21,127,473) (26,221,933)
------------- ------------ ------------
Net (decrease) increase in cash..... (5,352,316) (989,130) 2,288,846
Cash and cash equivalents at
beginning of year.................. 7,004,744 1,652,428 663,298
------------- ------------ ------------
Cash and cash equivalents at end of
year............................... $ 1,652,428 $ 663,298 $ 2,952,144
============= ============ ============
Supplemental disclosure of cash flow
information........................
Interest paid....................... $ 63,930,212 $ 62,214,784 $ 62,315,437
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Operations of the Company
The business operations of Young Broadcasting Inc. and subsidiaries (the
"Company") consist of eleven network affiliated stations (four with CBS, six
with ABC, and one with NBC), and one independent commercial television
broadcasting station in the states of Michigan, Wisconsin, Louisiana, Illinois,
Tennessee, New York, Virginia, Iowa, South Dakota and California, and a
national television sales representation firm.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the financial statements of
Young Broadcasting Inc., its wholly-owned subsidiaries and three partnerships.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
Concentration of Credit Risk
The Company provides advertising air time to national, regional and local
advertisers within the geographic areas in which the Company operates. Credit
is extended based on an evaluation of the customer's financial condition, and
advance payment is not generally required. Credit losses are provided for in
the consolidated financial statements and have consistently been within
management's expectations.
Use of Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. The principal areas of judgment relate to the allowance for
doubtful accounts and the realizability of program license rights. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Program License Rights
Program license rights are stated at cost, less accumulated amortization.
Program license rights acquired as part of a station acquisition are recorded
at their appraised value. Program rights with lives greater than one year, and
when the Company has the right to multiple showings, are amortized using an
accelerated method. Program rights expected to be amortized in the succeeding
year and amounts payable within one year are classified as current assets and
liabilities, respectively. Program rights with lives of one year or less are
amortized on a straight-line basis.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Equipment under capital leases is stated at the present value of the future
minimum lease payments at the inception of the lease, less accumulated
depreciation. Major renewals and improvements are charged to the property and
equipment accounts. Maintenance and repairs which do not improve or extend the
lives of the respective assets are expensed as incurred.
F-7
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Depreciation and amortization of property and equipment are calculated on
the straight-line basis over the estimated useful lives of the assets.
Equipment held under capital leases is generally amortized on a straight-line
basis over the shorter of the lease term or estimated useful life of the asset.
The estimated useful lives of depreciable assets are as follows:
<TABLE>
<CAPTION>
Estimated
Classification Useful Lives
-------------- ------------
<S> <C>
Land improvements............................................... 5-19 years
Buildings and building improvements............................. 5-40 years
Broadcast equipment............................................. 3-10 years
Office furniture, fixtures and other equipment.................. 5-8 years
Vehicles........................................................ 3-5 years
</TABLE>
Property and equipment at December 31, 1998 and 1999 consist of the
following:
<TABLE>
<CAPTION>
1998 1999
-------- --------
(in thousands)
-----------------
<S> <C> <C>
Land and land improvements................................ $ 8,035 $ 8,280
Buildings and building improvements....................... 37,726 38,099
Broadcast equipment....................................... 158,496 172,826
Office furniture, fixtures and other equipment............ 10,702 8,222
Vehicles.................................................. 4,535 5,070
-------- --------
$219,494 $232,497
======== ========
</TABLE>
Broadcasting Licenses and Other Intangibles
Intangible assets, which include broadcasting licenses, network affiliation
agreements, and other intangibles are carried on the basis of cost, less
accumulated amortization. Cost is based upon appraisals. Intangible assets are
amortized over varying periods, not exceeding 40 years. It is the Company's
policy to account for broadcasting licenses and other intangibles at the lower
of amortized cost or estimated realizable value. As part of an ongoing review
of the valuation and amortization of broadcasting licenses and other
intangibles of the Company and its subsidiaries, management assesses the
carrying value of the broadcasting licenses and other intangibles if facts and
circumstances suggest that there may be impairment. If this review indicates
that the broadcasting licenses and other intangibles will not be recoverable as
determined by a non-discounted cash flow analysis of the operating assets over
the remaining amortization period, the carrying value of the broadcasting
licenses and other intangibles would be reduced to estimated fair value.
Deferred Charges
Deferred charges incurred during 1997 consisted primarily of debt issuance
costs incurred in connection with the Company's 8 3/4% Senior Subordinated
Notes issued on June 23, 1997 (see Note 6), and an amendment to its Senior
Credit Facility (see Note 5). As a result of the amendment, approximately $9.2
million of net deferred charges incurred in 1996 were expensed in 1997 and
included as part of the extraordinary item in the accompanying statements of
operations.
Revenue
The Company's primary source of revenue is the sale of television time to
advertisers. Revenue is recorded when the advertisements are broadcast.
F-8
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Barter Arrangements
The Company, in the ordinary course of business, provides advertising air
time to certain customers in exchange for products or services. Barter
transactions are recorded on the basis of the estimated fair market value of
the products or services received. Revenue is recognized as the related
advertising is broadcast and expenses are recognized when the merchandise or
services are consumed or utilized. Barter revenue transactions related to the
purchase of equipment amounted to approximately $681,000, $203,000 and $228,000
in 1997, 1998 and 1999, respectively, and are depreciated in accordance with
Company policy as stated above. The Company has entered into barter agreements
with program syndicators for television programs with an estimated fair market
value, recorded as assets and liabilities at December 31, 1998 and 1999, of
$2.5 million and $2.7 million, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax
return and separate state tax returns. In addition, partnership returns are
filed for its three general partnerships. Since the partners are all
participants in the consolidation, all partnership income or losses are
ultimately included in the consolidated federal income tax return. The future
utilization of a significant portion of the Company's net operating losses for
federal income tax purposes is subject to an annual limitation (see Note 8).
3. Acquisition and Pending Sale of Stations
On November 16, 1999, the Company entered into an agreement to acquire KRON-
TV ("KRON") and a 51% interest in the San Francisco cable channel BayTV
("BayTV") from the Chronicle Publishing Company ("CPC"). Under the terms of the
agreement, the Company will pay CPC $650 million in cash plus up to
approximately 3.9 million shares of the Company's Class A Common Stock, subject
to adjustment. This acquisition will be accounted for as a purchase and is
expected to close sometime in the second or third quarter of 2000.
On September 30, 1999, the Company entered into an agreement with Television
Wisconsin, Inc. of Madison, Wisconsin, to sell WKBT-TV in LaCrosse, Wisconsin
for approximately $24.5 million. The operating results of WKBT are included in
the Company's consolidated results of operations.
The following unaudited pro forma information gives effect to the
acquisition of KRON and BayTV as if it had been effected on January 1, 1999.
The pro forma information for the year ended December 31, 1999 does not purport
to represent what the Company's results of operation would have been if such
transactions had been effected at such dates and do not purport to project
results of operations of the Company in any future period.
<TABLE>
<CAPTION>
Actual Pro Forma
December 31, 1999 December 31, 1999
----------------- -----------------
(dollars in thousands,
except per share data)
<S> <C> <C>
Net operating revenue....................... $280,659 $410,809
Operating income............................ 42,683 69,450
Net loss.................................... $(21,542) $(54,271)
Basic loss per common share................. $ (1.59) $ (3.11)
</TABLE>
The Company did not include estimated cost savings relating to, among other
things labor, benefits, programming costs, national representation fees,
advertising, promotion and other costs of approximately $16.0 million in the
table above. If such cost savings had been included, the adjusted Pro Forma
Operating income for December 31, 1999 would have been $85.5 million.
4. Program License Rights and Liability
The Company entered into agreements for program license rights which became
available in 1998 and 1999 of approximately $28.9 million and $59.7 million,
respectively.
F-9
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
On June 16, 1998, the Company entered into a new long-term agreement with
the Los Angeles Lakers ("Lakers") with broadcast rights through the 2004/2005
season. Under the terms of the seven year deal, KCAL-TV, Los Angeles,
California, a wholly-owned subsidiary of the Company, will broadcast 41 Lakers
pre-season and regular season away games annually. Additionally, KCAL-TV
obtained the broadcast rights to all post-season away games not subject to
NBA/network commitments. KCAL-TV also obtained the exclusive sales rights and
control over broadcast, production and inventory activities. The Company paid
an initial rights fee of $30 million on August 14, 1998, which was recorded as
a deposit in the accompanying consolidated financial statements. The Company
will pay an additional $18.0 million per season. In the event that all 41 games
are not made available to KCAL-TV or are canceled, the Company will receive a
per game credit.
The unpaid program license liability, which is reflected in the December 31,
1999 balance sheet, is payable during each of the years subsequent to 1999 as
follows: 2000, $24.4 million; 2001, $997,000; $449,000 in 2002; and $91,000 in
2003.
The obligation for programming that has been contracted for, but not
recorded in the accompanying balance sheets because the program rights were not
currently available for airing aggregated approximately $19.8 million at
December 31, 1999.
5. Long-Term Debt
Long-term debt (excluding Senior Subordinated Notes) at December 31, 1998
and 1999 consisted of the following:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
(dollars in thousands)
<S> <C> <C>
Senior Credit Facility................................. $85,000 $79,000
Nationwide Seller Note................................. 914 --
Total long-term debt................................. 85,914 79,000
Less:
Scheduled current maturities......................... 914 --
----------- -----------
Long-term debt excluding all current installments...... $85,000 $79,000
=========== ===========
</TABLE>
At December 31, 1999, the Company had outstanding borrowings of $79.0
million under the Revolver, which approximates its fair value as its interest
rate floats with market conditions. The Company pays an annual commitment fee
of 0.375% of the unused commitment.
The Senior Credit Facility provides, at the option of the Company, that
borrowed funds bear interest based upon the bank's base rate, London Interbank
Offered Rate (LIBOR), the customary "CD Rate" or "Base Rate." In addition to
the index rate, the Company pays a floating percentage on borrowings under the
Revolver tied to the interest rate option and the Company's ratio of total debt
to operating cash flow, ranging from 0.75% based upon a ratio under 4:1 to
2.00% based upon a 6:1 or greater ratio. For the year ended December 31, 1999,
this floating percentage was 1.75%. At December 31, 1999, the effective
interest rate for amounts outstanding under the Senior Credit Facility was
8.07%.
The Senior Credit Facility contains, among other things, limitations on
dividends and investments, and requires the Company to maintain certain
financial ratios. At December 31, 1999, the Company was in compliance with all
such covenants. The Senior Credit Facility is secured by a pledge of all the
stock of the Company's subsidiaries and a first priority lien on substantially
all of the assets of the Company. Each of the Company's subsidiaries guarantee
the obligations under the Senior Credit Facility.
F-10
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Senior Subordinated Notes
Senior Subordinated Notes at December 31, 1998 and 1999 consisted of the
following:
<TABLE>
<CAPTION>
1998 1999
-------- --------
(in thousands)
<S> <C> <C>
11.75% Senior Subordinated Notes.............................. $120,000 $120,000
10.125% Senior Subordinated Notes............................. 125,000 120,000
9% Senior Subordinated Notes.................................. 125,000 125,000
8.75% Senior Subordinated Notes............................... 200,000 200,000
-------- --------
Total Senior Subordinated Notes............................. $570,000 $565,000
======== ========
</TABLE>
On November 14, 1994, the Company issued 11 3/4% Senior Subordinated Notes
due 2004 with an aggregate principal amount of $120.0 million (the "November
1994 Notes"). Interest on the November 1994 Notes is payable semi-annually on
May 15 and November 15. The November 1994 Notes are redeemable, in whole or in
part, at the option of the Company on or after November 15, 1999, at the
redemption prices set forth in the Senior Subordinated Note Indenture
("Indenture") pursuant to which the November 1994 Notes were issued plus
accrued interest to the date of redemption.
On June 12, 1995, the Company issued 10 1/8% Senior Subordinated Notes due
2005 with an aggregate principal amount of $125.0 million (the "June 1995
Notes"). Interest on the June 1995 Notes is payable semi-annually on February
15 and August 15. 1995. The June 1995 Notes are redeemable, in whole or in
part, at the option of the Company on or after February 15, 2000, at the
redemption prices set forth in the Indenture pursuant to which the June 1995
Notes were issued plus accrued interest to the date of redemption. On August
17, 1999, the Company purchased $5 million of outstanding 10 1/8% Senior
Subordinated Notes through JP Morgan Securities at 103 3/8 or $5.2 million.
On January 16, 1996, the Company issued 9% Senior Subordinated Notes due
2006 with an aggregate principal amount of $125.0 million (the "January 1996
Notes"). Interest on the January 1996 Notes is payable semi-annually on January
15 and July 15. The January 1996 Notes are redeemable, in whole or in part, at
the option of the Company on or after January 15, 2001, at the redemption
prices set forth in the Indenture, pursuant to which the January 1996 Notes
were issued, plus accrued interest to the date of redemption.
On June 23, 1997, the Company issued 8 3/4% Senior subordinated Notes due
2007 with an aggregate principal amount of $200.0 million (the "June 1997
Notes"). Interest on the June 1997 Notes is payable semi-annually on June 15th
and December 15th. The June 1997 Notes are redeemable, in whole or in part, at
the option of the Company on or after June 15, 2002, at the redemption prices
set forth in the Indenture, pursuant to which the June 1997 Notes were issued,
plus accrued interest to the date of redemption. In addition, at anytime before
June 15, 2000, the Company, at its option, may redeem up to $67 million of the
June 1997 Notes, with the net proceeds of one or more public equity offerings,
at a redemption price equal to 108 3/4% of the principal amount thereof, plus
accrued interest to the date of redemption.
The Company's November 1994 Notes, June 1995 Notes, January 1996 Notes, and
June 1997 Notes (collectively the "Notes") are general unsecured obligations of
the Company and subordinated in right of payment to all senior debt, including
all indebtedness of the Company under the Senior Credit Facility. The Notes are
guaranteed, jointly and severally, on a senior subordinated unsecured basis by
all of the Company's subsidiaries.
Upon a change of control, each holder of the Notes will have the right to
require the Company to repurchase such holder's Notes at a price equal to 101%
of their principal amount plus accrued interest to the
F-11
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
date of repurchase. In addition, the Company will be obligated to offer to
repurchase Notes at 100% of their principal amount plus accrued interest to the
date of repurchase in the event of certain asset sales.
At December 31, 1999, the November 1994 Notes, June 1995 Notes, January 1996
Notes, and the June 1997 Notes were trading in the public market with ask
prices of 104.4, 102.0, 96.0 and 95.0, respectively.
7. Stockholders' Equity
Common Stock
The Company's stockholders' equity consists of three classes of common stock
designated Class A, Class B and Class C which are substantially identical
except for voting rights. The holders of Class A Common Stock are entitled to
one vote per share. Holders of Class B Common Stock are entitled to ten votes
per share. Holders of Class C Common Stock are not entitled to vote. Holders of
all classes of Common Stock entitled to vote will vote together as a single
class. Holders of Class C Common Stock may at any time convert their shares
into the same number of shares of Class A Common Stock. At December 31, 1999,
there were no holders of Class C Common Stock outstanding.
Ownership of Class B Common Stock is restricted to members of management and
by, or in trust for, family members of management ("Management Group"). In the
event that any shares of Class B Common Stock held by a member of the
Management Group are transferred outside of the Management Group, such shares
will automatically be converted into shares of Class A Common Stock. In
addition, if the total number of shares of Common Stock held by members of the
Management Group falls below 5% of the total number of shares of Common Stock
outstanding, all of the outstanding shares of Class B Common Stock
automatically will be reclassified as Class A Common Stock.
In any merger, consolidation or business combination, the consideration to
be received per share by holders of Class A and Class C Common Stock must be
identical to that received by holders of Class B Common Stock.
The terms of the Senior Credit Facility and the Indentures relating to the
Company's outstanding Senior Subordinated Notes (the "Indentures") restrict the
Company's ability to pay cash dividends on its Common Stock. Under the
Indentures, the Company is not permitted to pay any dividends on its Common
Stock unless at the time of, and immediately after giving effect to the
dividend, no default would result under the Indentures and the Company would
continue to have the ability to incur indebtedness. In addition, under the
Indentures, dividends may not exceed an amount equal to the Company's cash flow
less a multiple of the Company's interest expense, plus the net proceeds of the
sale by the Company of additional capital stock.
The Company regularly contributed Class A Common Stock into its defined
contribution plan (see Note 9) for the years ended 1997, 1998, and 1999.
Stock Option Plans
On May 22, 1995, the Company adopted the Young Broadcasting Inc. 1995 Stock
Option Plan ("1995 Stock Option Plan").
The 1995 Stock Option Plan was adopted to provide incentives for independent
directors, officers and employees. It 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, each of whom is a non-employee director. The Board of
Directors or committee, as the case may be, is to determine, among other
things, the recipients of grants,
F-12
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
whether a grant will consist of incentive stock options ("ISOs"), non-qualified
stock options or stock appreciation rights ("SARs") (in tandem with an option
or free-standing) or a combination thereof, and the number of shares to be
subject to such options. ISOs may be granted only to officers and key employees
of the Company and its subsidiaries. Non-qualified stock options and 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.
The 1995 Stock Option 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 non-qualified 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 1995 Stock Option Plan is currently
2,300,000. As of December 31, 1999, non-qualified and incentive stock options
for an aggregate of 1,858,353 shares at various prices from $19.75 to $61.20
have been granted to various individuals, including various executive officers.
The 1995 Stock Option 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 exceed $100,000, the option will
be treated as a non-qualified 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 ISO
cannot exceed five years. No option or SAR may be granted under the Stock
Option Plan after February 5, 2005, and no option may be outstanding for more
than ten years after its grant.
On August 3, 1999, the Board of Directors extended the expiration date of
596,188 stock options issued in 1994 and 1995 to directors, officers and
employees. The original option agreements were to expire in 1999 and 2000. The
new option agreements are extended by ten years until 2009. As a result of this
modification to these stock option agreements, the Company recorded a non-cash
compensation charge of $18.3 million in the third quarter of 1999.
Those directors who are not also employees of the Company receive an annual
retainer as fixed by the Board of Directors, which may be in the form of cash
or stock options, or a combination of both, and also receive reimbursement of
out-of-pocket expenses incurred for each Board or committee meeting attended.
Non-employee 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.
Under the 1995 Stock Option Plan for the year ended December 31, 1999,
independent directors, officers and employees were not granted options to
purchase the Company's stock at less than the fair market value on the date of
the option grant. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No.123, ("SFAS No. 123")
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for the stock option plans. Had compensation cost for the
Company's stock option plan been determined based on the fair market value at
the grant date for awards in 1997, 1998, and 1999 consistent with the
provisions of SFAS No. 123, the Company's net (loss) income and (loss) income
per share would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ------ --------
(dollars in thousands,
except per share data)
<S> <C> <C> <C>
Net (loss) income--as reported.................. $(10,349) $3,999 $(21,542)
Net (loss) income--pro forma.................... $(12,531) $1,048 $(23,892)
Net (loss) income per basic common share--as
reported....................................... $ (0.74) $ 0.28 $ (1.59)
Net (loss) income per basic common share--pro
forma.......................................... $ (0.90) $ 0.07 $ (1.76)
</TABLE>
F-13
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over
the vesting period, and additional options may be granted in future years. The
fair value for these options was estimated at the date of grant using the
Black-Scholes model with the following assumptions:
<TABLE>
<S> <C>
Expected dividend yield.............................................. 0%
Expected stock price volatility...................................... 25%
Risk-free interest rate:
1997............................................................... 5.80%
1998............................................................... 5.04%
1999............................................................... 6.66%
Expected life of options............................................. 5 years
</TABLE>
The weighted average fair value of options granted during 1997, 1998, and
1999 was $11.58, $14.20 and $17.19 respectively.
Changes during 1997, 1998 and 1999 in stock options are summarized below:
<TABLE>
<CAPTION>
Stock Options Weighted Average
Outstanding Exercise Price
------------- ----------------
<S> <C> <C>
Outstanding at January 1, 1997................... 1,115,788 $24.45
Granted........................................ 246,657 36.16
Granted........................................ 13,790 39.88
Exercised...................................... (23,000) 19.81
--------- ------
Outstanding at December 31, 1997................. 1,353,235 26.83
Granted........................................ 130,792 26.83
Exercised...................................... (16,750) 21.42
Forfeited...................................... (2,907) 33.67
--------- ------
Outstanding at December 31, 1998................. 1,464,370 $28.25
Granted........................................ 405,500 25.18
Exercised...................................... (10,987) 20.29
Forfeited...................................... (530) 41.71
--------- ------
Outstanding at December 31, 1999................. 1,858,353 $27.59
========= ======
</TABLE>
Options for 775,563 shares, 920,755 shares, and 1,200,633 shares were
exercisable at December 31, 1997, 1998, and 1999, respectively.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------- -----------------------
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Exercisable at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Prices 1999 Life Price 1999 Price
- --------------- -------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$19.75-$21.73 589,564 9.5 19.80 589,564 19.80
$24.50-$26.95 395,500 8.8 24.63 98,880 24.70
$28.00-$33.83 513,850 7.0 30.74 358,853 30.77
$34.00-$39.875 237,447 7.7 36.58 113,014 36.59
$43.50-$61.20 121,992 8.3 44.25 40,322 45.76
--------- ---- ----- --------- -----
1,858,353 7.75 27.59 1,200,633 25.92
========= ==== ===== ========= =====
</TABLE>
F-14
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
At December 31, 1999, the Company has reserved 51,392 shares of its Class A
Common Stock and 1,806,961 shares of Class B Common Stock in connection with
stock options.
Stock Repurchases
During April and May of 1997, the Company repurchased 459,000 shares of its
Class A Common Stock in open-market purchases pursuant to a stock repurchase
program for an aggregate price of approximately $12.3 million.
During September and October of 1998, the Company repurchased 552,800 shares
of its Class A Common stock in open-market purchases pursuant to a stock
repurchase program for an aggregate price of approximately $19.5 million.
During February and June 1999, the Company repurchased 348,400 shares of its
Class A Common Stock in open market purchases pursuant to a stock repurchase
program for an aggregate price of approximately $14.0 million.
8. Income Taxes
At December 31, 1999, the Company had net operating loss ("NOL")
carryforwards for tax purposes of approximately $210.0 million expiring at
various dates through 2019. The availability of NOL carryforwards to offset
future income is subject to annual limitations imposed by Internal Revenue Code
Section 382 as a result of successive ownership changes.
These limitations are summarized as follows:
<TABLE>
<CAPTION>
NOL Carryforwards Annual Usage Limitation
----------------- -----------------------
<S> <C>
$129 million $ 8.9 million
54 million $20.9 million
27 million No limit
---------------
$210 million
---------------
---------------
</TABLE>
The amount of NOL carryforwards available to offset income in 1999 is
approximately $73.0 million based upon carryforwards of annual limitations and
NOLs with no limitations. To the extent that an annual NOL limitation is not
used, it carries and accumulates forward to future years.
F-15
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
Deferred Tax Assets:
Stock Option Compensation Accrued................ $ -- $ 7,640,624
Accounts Receivable.............................. 804,800 812,805
Other............................................ 58,392 58,392
Net Operating Loss Carryforwards................. 83,467,477 84,802,263
Less: Valuation Allowance for Deferred Tax
Assets.......................................... (51,249,179) (59,517,704)
------------ ------------
Total Deferred Tax Assets...................... 33,081,490 33,796,380
------------ ------------
Deferred Tax Liabilities:
Fixed Assets..................................... 6,155,957 1,708,512
Intangibles...................................... 98,326,225 103,488,560
Other............................................ 49,581 49,581
------------ ------------
Total Deferred Tax Liabilities................. 104,531,763 105,246,653
------------ ------------
Net Deferred Tax Liability..................... (71,450,273) (71,450,273)
============ ============
</TABLE>
9. Employee Benefit Plans
The Company sponsors defined contribution plans ("Plan") which provide
retirement benefits for all eligible employees. The Plan participants may make
pretax contributions from their salaries up to the maximum allowed by the
Internal Revenue Code.
On January 1, 1997, the Company adopted and established a matching stock
plan ("Matching Plan"). According to the Matching Plan, the Company will
contribute one-half of every dollar a participant contributes, up to the first
3% of the participant's pay.
For the years ended December 31, 1997, 1998 and 1999, the Company paid and
accrued matching contributions (30,817; 25,243 and 21,545 shares of Class A
Common Stock, respectively) equal to 3% of eligible employee compensation,
amounting to $967,000, $1,146,000 and $811,000, respectively. The Company
effected such contributions by issuing shares on a quarterly basis. The fourth
quarter of 1999 was issued on January 10, 2000.
10. Commitments and Contingencies
The Company is obligated under various capital leases for certain broadcast
equipment, office furniture, fixtures and other equipment that expire at
various dates during the next seven years. At December 31, 1998 and 1999, the
net amount of property and equipment recorded under capital leases was $531,000
and $5,691,000, respectively. Amortization of assets held under capital leases
is included with depreciation and amortization of property and equipment.
The Company also has certain non-cancelable operating leases, primarily for
administrative offices, broadcast equipment and vehicles that expire over the
next five years. These leases generally contain renewal options for periods of
up to five years and require the Company to pay all costs such as maintenance
and insurance.
F-16
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) and the present value
of future minimum capital lease payments as of December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
(dollars in thousands)
<S> <C> <C>
Year ending December 31:
2000......................................... $ 924 $ 4,522
2001......................................... 989 4,424
2002......................................... 1,016 3,135
2003......................................... 1,051 2,987
2004......................................... 1,854 2,476
Thereafter................................... 676 3,857
------ -------
Total minimum lease payments............... $6,510 $21,401
====== =======
</TABLE>
11. Related Party Transactions
The aggregate amount of loans outstanding, made to certain executive
officers and other employees of the Company, including accrued interest at
December 31, 1999 was approximately $375,000. The principal amount of the loans
will bear interest, payable annually, at the rate of 7.21%.
On November 8, 1995, the Board of Directors approved a loan forgiveness
program (the "Loan Forgiveness Program") for the payment that was due on
November 15, 1995 and the payments due in subsequent years. Under this program,
participants who choose to participate will have their annual installments
forgiven over the year following the scheduled payment date at the rate of one-
twelfth per month, as long as the employee continues to be employed by the
Company.
12. Quarterly Financial Data (Unaudited)
The following summarizes the Company's results of operations for each
quarter of 1999 and 1998 (in thousands, except per share amounts). The (loss)
income per common share computation for each quarter and the year are separate
calculations. Accordingly, the sum of the quarterly (loss) income per common
share amounts may not equal the (loss) income per common share for the year.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1999
Net revenues........... $ 63,247 $ 73,704 $ 64,190 $ 79,518
Operating income
(loss)................ 8,192 18,512 (5,380) 21,359
Net (loss) income...... (7,743) 2,606 (21,607) 5,202
Net (loss) income per
common share:
Basic................ $ (0.56) $ 0.19 $ (1.60) $ 0.39
Diluted.............. $ (0.56) $ 0.18 $ (1.60) $ 0.39
1998
Net revenues........... $ 64,581 $ 77,246 $ 62,944 $ 72,281
Operating income....... 8,615 23,114 12,822 22,853
Net (loss) income...... (7,335) 7,809 (3,452) 6,977
Net (loss) income per
common share:
Basic................ $ (0.52) $ 0.54 $ (0.24) $ 0.51
Diluted.............. $ (0.52) $ 0.52 $ (0.24) $ 0.49
</TABLE>
Quarterly depreciation and amortization is provided based on estimates.
F-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
The Chronicle Publishing Company
We have audited the accompanying combined balance sheets of KRON-TV, a
Division of The Chronicle Publishing Company, and BayTV Joint Venture
(collectively, the "Company") as of December 31, 1998 and 1999, and the related
combined statements of income, divisional equity and cash flows for each of the
three years in the period ended December 31, 1999. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of KRON-TV, a
Division of The Chronicle Publishing Company, and BayTV Joint Venture as of
December 31, 1998 and 1999, and the combined results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999,
in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
New York, New York
February 4, 2000
F-18
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................ $ 1,434,297 $ 442,035
Trade accounts receivable, less allowance for doubt-
ful accounts of $825,669 in 1998 and $804,534 in
1999................................................ 28,073,358 32,373,572
Current portion of program license rights............ 10,243,825 9,170,437
Other current assets................................. 923,592 1,594,622
----------- -----------
Total current assets............................... 40,675,072 43,580,666
Property and equipment, less accumulated depreciation
and amortization of $32,999,240 in 1998 and
$33,039,584 in 1999................................. 18,316,914 19,072,087
Program license rights, excluding current portion.... 4,717,100 715,194
Other assets........................................... 734,620 777,100
----------- -----------
$64,443,706 $64,145,047
=========== ===========
Liabilities and divisional equity
Current liabilities:
Bank overdraft....................................... $ 1,872,149 $ 1,084,026
Trade accounts payable............................... 3,415,076 1,718,506
Accrued expenses..................................... 4,840,180 6,397,588
Current installment of program license liability..... 10,654,216 8,437,335
----------- -----------
Total current liabilities.......................... 20,781,621 17,637,455
Program license liability............................ 3,223,000 110,000
----------- -----------
Total liabilities.................................. 24,004,621 17,747,455
Commitments and contingencies........................ -- --
Minority interest.................................... 812,258 919,796
Divisional equity.................................... 39,626,827 45,477,796
----------- -----------
Total liabilities and divisional equity............ $64,443,706 $64,145,047
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-19
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
COMBINED STATEMENTS OF INCOME AND DIVISIONAL EQUITY
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net operating revenue............... $117,012,694 $125,301,198 $130,150,396
Operating expenses.................. 37,014,132 40,447,060 41,205,185
Amortization of program license
rights............................. 13,120,938 13,865,780 12,793,694
Selling, general and administrative
expenses........................... 16,015,714 17,524,512 18,748,769
Depreciation and amortization....... 3,520,855 4,324,632 5,003,570
------------ ------------ ------------
Operating income.................. 47,341,055 49,139,214 52,399,178
Other expense, net.................. (503,943) (564,655) (626,162)
Minority interest in net loss of
BayTV.............................. 549,641 872,527 449,998
------------ ------------ ------------
Net income.......................... 47,386,753 49,447,086 52,223,014
Divisional equity, beginning of
year............................... 29,946,553 36,094,833 39,626,827
Transfers of net assets to parent... (41,238,473) (45,915,092) (46,372,045)
------------ ------------ ------------
Divisional equity, end of year...... $ 36,094,833 $ 39,626,827 $ 45,477,796
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-20
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities
Net income.......................... $ 47,386,753 $ 49,447,086 $ 52,223,014
Adjustments to reconcile net income
to net cash used in operating ac-
tivities:
Depreciation of property and
equipment........................ 3,520,855 4,324,632 5,003,570
Amortization of program license
rights........................... 13,120,938 13,865,780 12,793,694
Payments of programming license
liabilities...................... (13,646,447) (13,123,447) (13,048,282)
Minority interest in net loss of
BayTV............................ (549,641) (872,527) (449,998)
Increase in trade accounts receiv-
able............................. (3,811,468) (949,524) (4,300,214)
(Increase) decrease in other cur-
rent assets...................... (935,616) 1,015,305 (671,030)
Increase (decrease) in bank over-
draft............................ 2,204,711 (430,668) (788,123)
(Decrease) increase in trade ac-
counts payable................... (1,582,714) 1,582,962 (1,696,570)
Increase in accrued expenses...... 447,737 568,181 1,557,408
------------ ------------ ------------
Net cash provided by operating ac-
tivities........................... 46,155,108 55,427,780 50,623,469
Investing activities
Capital expenditures................ (5,580,304) (9,654,042) (5,243,686)
------------ ------------ ------------
Net cash used in investing activi-
ties............................... (5,580,304) (9,654,042) (5,243,686)
Financing activities
Transfer of net assets to parent.... (41,238,473) (45,915,092) (46,372,045)
Contributions from minority share-
holder............................. 588,818 1,280,307 --
------------ ------------ ------------
Net cash used in financing activi-
ties............................... (40,649,655) (44,634,785) (46,372,045)
------------ ------------ ------------
Net (decrease) increase in cash and
cash equivalents................... (74,851) 1,138,953 (992,262)
Cash and cash equivalents, beginning
of year............................ 370,195 295,344 1,434,297
------------ ------------ ------------
Cash and cash equivalents, end of
year............................... $ 295,344 $ 1,434,297 $ 442,035
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-21
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1999
1. Description of Business
The accompanying combined financial statements consist of the accounts of
KRON-TV ("KRON"), a division of The Chronicle Publishing Company ("CPC"), and
BayTV Joint Venture ("BayTV"), of which KRON, on behalf of CPC, owns 51%. CPC
is a San Francisco-based corporation with operations in the newspaper and book
publishing and television industries.
KRON is a broadcast television station affiliated with NBC and located in
San Francisco, California. KRON has no separate legal status or existence. Its
assets are legally available for the satisfaction of debts of CPC as well as
those appearing on the accompanying combined financial statements, and its
debts may result in claims against assets not appearing herein. As an NBC
affiliate, KRON broadcasts NBC network programming for a substantial portion of
each day's transmission. The NBC affiliation agreement expires December 31,
2001, and provides annual network compensation to KRON of approximately
$8,000,000. In addition, approximately 50% of KRON's advertising revenue is
sold within the network programming. (See Note 6).
BayTV, a general partnership formed in 1996 between KRON and a predecessor
of AT&T Broadband and Internet Services (the "BayTV partners"), is a San
Francisco Bay Area cable television network carrying local news, information,
sports and talk show programming which is distributed exclusively to cable
television subscribers in the San Francisco Bay Area.
On November 16, 1999, Young Broadcasting, Inc. signed a definitive purchase
agreement to acquire KRON, BayTV and CPC in exchange for approximately
$172,585,000 of its Class A common stock, subject to adjustment, and
$650,000,000 in cash. The transaction reverts to an acquisition of the assets
and an assumption of the liabilities of KRON and BayTV if CPC is unable to
divest itself of all of its other holdings prior to August 31, 2000 or if the
transaction is not closed by June 30, 2000 (subject to extension to August 31,
2000 by mutual agreement). The transaction is expected to close on April 30,
2000 or upon resolution of the CPC divestiture, whichever is later, and is
pending shareholder and FCC approval.
2. Summary of Significant Accounting Policies
Basis of Accounting and Principles of Combination
The accompanying combined financial statements reflect the "carved-out"
assets, liabilities, revenues, expenses and cash flows of KRON and BayTV as if
these entities had been operating as a separate business, distinct from CPC.
All intercompany accounts and transactions have been eliminated in combination.
Certain insurance, benefits and professional service expenses incurred by CPC
have been allocated to KRON and BayTV on various bases which, in the opinion of
management, are reasonable. Such expenses are not necessarily indicative of,
and it is not practicable for management to estimate the level of, expenses
which might have been incurred had KRON and BayTV been operating as a separate
business, apart from CPC.
KRON
Divisional equity includes net intercompany balances that result from
various transactions between KRON and CPC. There are no terms of settlement or
interest charges associated with these balances. The balances are primarily the
result of KRON's participation in CPC's central cash management program,
wherein cash balances are remitted to CPC. In addition, certain corporate
expenses are allocated to KRON as discussed above.
F-22
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1998 and 1999, KRON had a 25% interest in Sutro Tower,
Inc., which was accounted for under the equity method. Sutro Tower, Inc. owns
and operates a community transmission tower located in San Francisco and is
owned in equal shares by each of the four major network affiliated television
stations in San Francisco.
BayTV
The BayTV partners are required to make capital contributions in proportion
to their ownership interests to fund any shortfalls in operating cash flow (as
defined in the BayTV partnership agreement) and the acquisition of property and
equipment. To the extent that the operating cash flow shortfall for any year
exceeds the amount as specified in the partnership agreement, KRON is obligated
to contribute the excess. Neither partner is required to fund any shortfalls in
operating cash flow on or after December 31, 2000 unless the partners agree to
continue funding.
Operating losses are allocated first to KRON in an amount equal to its
excess capital contribution and, thereafter, to each partner in proportion to
their respective ownership interests. Operating profits are allocated first to
KRON to match the accumulated losses allocated to its excess capital
contribution and, thereafter, to each partner in proportion to their respective
ownership interests.
Distributions to the partners are to be made to the extent that the amount
of available cash exceeds BayTV's cash requirements. All distributions are to
be made first to KRON, until the distributions equal the cumulative amount of
the excess capital contribution and, thereafter, to each partner in proportion
to its respective ownership interests. There have been no distributions in the
three years ended December 31, 1999. As of December 31, 1999, KRON has made
excess capital contributions totaling $6,456,619.
Concentration of Credit Risk
Financial instruments that potentially subject KRON and BayTV to significant
concentrations of credit risk consist principally of accounts receivable and
cash and cash equivalents. KRON and BayTV maintain minimal cash and cash
equivalent balances with one financial institution and monitor its financial
condition on a periodic basis.
KRON and BayTV provide advertising air time to national and local
advertisers within the geographic areas in which they operate. Credit is
extended based on an evaluation of the advertiser's financial condition and
advance payment is not generally required. Credit losses are provided for in
the combined financial statements and have consistently been within
management's expectations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. The principal areas of judgment relate to the allowance for
doubtful accounts and the realizability of program license rights. Actual
results may differ from those estimates.
Cash and Cash Equivalents
KRON and BayTV consider all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Such amounts are
stated at cost which approximates market value.
F-23
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Program License Rights
Program license rights consist of rights to broadcast syndicated television
shows and feature films and are stated at cost, less accumulated amortization.
Program license rights and the related liabilities, both typically amortized on
a straight-line basis, are recorded at the contract value when the program is
available for airing, the license period begins and certain other conditions
are met. Program license rights expected to be amortized in the succeeding year
and amounts payable within one year are classified as current assets and
liabilities, respectively.
Property and Equipment
Property and equipment are stated on the basis of cost, less accumulated
depreciation. Major renewals and improvements are charged to the property and
equipment accounts. Maintenance and repairs which do not improve or extend the
lives of the respective assets are expensed as incurred.
Depreciation and amortization of property and equipment are calculated
primarily on a straight-line basis over the estimated useful lives of the
assets. The estimated useful lives of depreciable assets are as follows:
<TABLE>
<S> <C>
Buildings and building improvements............................ 3-40 years
Broadcast equipment............................................ 3-10 years
Office furniture, fixtures and other equipment................. 5 years
Vehicles....................................................... 3-5 years
</TABLE>
Property and equipment at December 31, 1998 and 1999 consisted of the
following:
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
Land........................................ $ 457,923 $ 457,923
Buildings and building improvements......... 9,068,796 10,435,185
Broadcast equipment......................... 34,858,651 34,382,592
Office furniture, fixtures and other
equipment.................................. 2,672,350 4,326,816
Vehicles.................................... 1,762,551 2,412,659
Construction in progress.................... 2,495,883 96,496
------------ ------------
Total cost................................. 51,316,154 52,111,671
Accumulated depreciation.................... (32,999,240) (33,039,584)
------------ ------------
$ 18,316,914 $ 19,072,087
============ ============
</TABLE>
Revenue Recognition
Advertising revenue is recorded when the related advertisement is broadcast
and is net of the standard advertising agency commissions. Management does not
believe that the loss of any single advertiser or advertising agency would have
a materially adverse impact on KRON or BayTV.
KRON also earns revenues under the terms of its network affiliation
agreement with NBC, which are recognized on the straight line basis over the
life of the agreement (see Note 6). BayTV earns monthly subscription revenues
which are recognized as service is provided to subscribers.
F-24
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Barter and Trade Arrangements
KRON and BayTV, in the ordinary course of business, provide advertising air
time to certain suppliers of syndicated programming as full or partial
compensation for programming. Related revenues and expenses are recorded on the
basis of the estimated fair market value of the air time provided and are
recognized as the related program and advertising are broadcast. Such revenues
and expenses totaled $2,118,911, $3,519,101 and $2,373,163 for the years ended
December 31, 1997, 1998 and 1999, respectively.
KRON and BayTV maintain trade agreements with the San Francisco Newspaper
Agency, a related party, which require KRON and BayTV to provide advertising
air time in exchange for newspaper advertising. Related revenues and expenses
are recorded based on agreed-upon values. Revenue is recognized as the related
advertising is broadcast and expenses are recognized when the newspaper
advertising is published. Such revenues and expenses totaled $886,198, $950,000
and $900,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
Income Taxes
No provision has been made for income taxes as CPC has elected subchapter
"S' corporation status for income tax purposes; therefore, its income was
included in the tax returns of its shareholders, and no income tax provision
was recorded for KRON or BayTV.
California franchise tax, calculated as 1.5% of taxable income, is included
in other expense, net in the accompanying combined statements of income.
Advertising
KRON and BayTV expense the cost of advertising as incurred. Advertising
expense for the years ended December 31, 1997, 1998 and 1999 was $2,465,733,
$2,759,328 and $2,856,095, respectively.
Fair Value of Financial Instruments
The carrying amounts reported in the combined balance sheet for cash and
cash equivalents, accounts receivable and accounts payable approximate their
fair values.
3. Program License Rights and Liability
KRON entered into agreements for program license rights which became
available in 1998 and 1999 of $12,811,780 and $7,718,400, respectively.
The obligation for programming that has been contracted for, but not
recorded in the accompanying combined balance sheets because the program rights
were not currently available for airing totaled $37,622,000 as of December 31,
1999. Such rights pertain to numerous programs for broadcast through the 2005-
2006 broadcast season.
4. Employee Benefit Plans
KRON maintains a noncontributory, defined benefit plan covering certain
employees included in a collectively bargained employment agreement. Benefits
are based on compensation and years of service. The funding policy is to
contribute amounts to the plan sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
plus such additional tax deductible amounts as may be advisable under the
circumstances. Plan assets are invested principally in fixed income and equity
funds.
F-25
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The components of net periodic benefit cost for this plan are as follows:
<TABLE>
<CAPTION>
For the years ended December
31,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Service cost................................... $ 204,291 $ 222,965 $ 257,079
Interest cost.................................. 326,936 371,390 396,775
Expected return on plan assets................. (405,810) (504,010) (606,644)
Prior service cost amortization................ 20,710 20,710 20,710
Transition asset recognition................... (23,730) (23,730) (23,730)
--------- --------- ---------
Net periodic benefit cost...................... $ 122,397 $ 87,325 $ 44,190
========= ========= =========
</TABLE>
The change in benefit obligation and plan assets and reconciliation of
funded status are as follows, as of December 31:
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Change in benefit obligation
Projected benefit obligation at beginning of year..... $4,797,354 $ 6,006,021
Service cost.......................................... 222,965 257,079
Interest cost......................................... 371,390 396,775
Actuarial (gain) loss................................. 898,798 (753,948)
Benefits paid......................................... (220,329) (217,883)
Expenses paid......................................... (64,157) (115,329)
---------- -----------
Projected benefit obligation at end of year........... $6,006,021 $ 5,572,715
========== ===========
Change in plan assets
Fair value of plan assets at beginning of year........ $5,913,369 $ 7,244,923
Actual return on plan assets.......................... 1,370,445 1,044,060
Employer contributions................................ 245,595 --
Benefits paid......................................... (220,329) (217,883)
Expenses paid......................................... (64,157) (115,329)
---------- -----------
Fair value of plan assets at end of year.............. $7,244,923 $ 7,955,771
========== ===========
Reconciliation of funded status
Funded status......................................... $1,238,902 $ 2,383,056
Unrecognized net gain................................. (580,151) (1,771,515)
Unrecognized prior service costs...................... 285,716 265,006
Unrecognized net transition asset..................... (179,946) (156,216)
---------- -----------
Prepaid benefit cost.................................. $ 764,521 $ 720,331
========== ===========
Weighted average assumptions
Discount rate......................................... 6.75% 7.75%
Expected long-term rate of return on plan assets...... 8.50% 8.50%
Rate of compensation increase......................... 4.00% 4.00%
</TABLE>
F-26
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
KRON and BayTV also participate in a noncontributory, defined benefit plan,
administered by CPC, for a significant number of their employees not covered by
any collectively bargained employment agreements. The funding policy is to
contribute amounts to the plan sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
plus such additional tax deductible amounts as may be advisable under the
circumstances. Plan assets are invested principally in short-term income and
long-term U.S. government funds.
The following summarizes the portion of net periodic benefit cost
attributable to KRON and BayTV:
<TABLE>
<CAPTION>
For the years ended December
31,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Service cost................................... $ 447,666 $ 524,336 $ 751,633
Interest cost.................................. 586,224 632,675 730,176
Expected return on plan assets................. (680,020) (737,741) (846,651)
Net (gain) loss recognition.................... -- -- 6,237
Prior service cost amortization................ (1,184) (967) (967)
--------- --------- ---------
Net periodic benefit cost...................... $ 352,686 $ 418,303 $ 640,428
========= ========= =========
</TABLE>
F-27
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The following summarizes the portion attributable to KRON and BayTV of the
change in benefit obligation and plan assets and the reconciliation of funded
status, as of December 31:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Change in benefit obligation
Projected benefit obligation at beginning of year.... $ 8,557,450 $10,768,074
Service cost......................................... 524,336 751,633
Interest cost........................................ 632,675 730,176
Actuarial (gain) loss................................ 1,326,180 (1,811,176)
Benefits paid........................................ (227,725) (209,089)
Expenses paid........................................ (44,842) (35,698)
----------- -----------
Projected benefit obligation at end of year.......... $10,768,074 $10,193,920
=========== ===========
Change in plan assets
Fair value of plan assets at beginning of year....... $ 9,834,289 $11,039,663
Actual return on plan assets......................... 1,477,941 (258,871)
Benefits paid........................................ (227,725) (209,089)
Expenses paid........................................ (44,842) (35,698)
----------- -----------
Fair value of plan assets at end of year............. $11,039,663 $10,536,005
=========== ===========
Reconciliation of funded status
Funded status........................................ $ 271,589 $ 342,085
Unrecognized net gain................................ 34,495 (677,396)
Unrecognized prior service costs..................... (6,284) (5,317)
----------- -----------
Prepaid (accrued) benefit cost....................... $ 299,800 $ (340,628)
=========== ===========
Weighted average assumptions
Discount rate........................................ 6.75% 7.75%
Expected long-term rate of return on plan assets..... 8.50% 8.50%
Rate of compensation increase........................ 5.00% 5.00%
</TABLE>
The final allocation of plan assets and obligations has not been made as of
December 31, 1999.
F-28
<PAGE>
KRON-TV, A DIVISION OF THE CHRONICLE PUBLISHING COMPANY
AND
BAYTV JOINT VENTURE
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
KRON and BayTV also participate in a multiemployer, defined contribution
plan for a significant number of their employees covered by a second
collectively bargained employment agreement, which is administered by a third
party. Contributions to this plan are based on various percentages of
compensation. The annual cost of this plan amounted to $379,390, $417,075 and
$464,838 for the years ended December 31, 1997, 1998 and 1999, respectively.
KRON also participates in a Supplemental Executive Retirement Plan for
certain key executives which is administered by CPC. Compensation expense
related to the plan was $188,156, $277,139 and $343,781 for the years ended
December 31, 1997, 1998 and 1999, respectively. The plan was discontinued
effective December 31, 1999, at which time a curtailment loss of $587,823 was
recorded. Total accrued benefits of $1,442,384 were distributed to the
participants in February 2000.
KRON and BayTV participate in a 401(k) plan, which is administered by CPC,
that covers their eligible employees and made contributions totaling $181,701,
$185,673 and $254,070 in the years ended December 31, 1997, 1998 and 1999,
respectively.
As of December 31, 1999, KRON has accrued $2,100,000 under the terms of a
long-term incentive plan offered to three executives, subject to meeting
certain criteria.
As of December 31, 1999, approximately 58% of the employees of KRON and 68%
of the employees of BayTV were employed under collectively bargained employment
agreements.
5. Commitments and Contingencies
KRON and BayTV have certain non-cancelable operating leases, primarily for
bureau and transmitter facilities and equipment that expire over the next five
years. These leases generally contain renewal options for periods of up to five
years and require the lessee to pay all costs such as maintenance and
insurance.
Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1999
are as follows:
<TABLE>
<S> <C>
2000.......................................................... $ 314,954
2001.......................................................... 257,631
2002.......................................................... 148,836
2003.......................................................... 135,751
2004.......................................................... 142,538
Thereafter.................................................... 149,665
----------
Total minimum payments........................................ $1,149,375
==========
</TABLE>
KRON is dependent upon a small number of providers of syndicated program
license rights, principally Paramount Distribution, which as of December 31,
1999 accounted for 86% of KRON's program license rights.
6. Subsequent Events (Unaudited)
In February 2000, NBC announced that it had signed an agreement that will
provide the NBC affiliation in the San Francisco Bay Area to another
broadcaster with a television station in San Jose, California, effective upon
the expiration of KRON's affiliation agreement with NBC on January 1, 2002.
Accordingly, after that date, KRON will no longer be an NBC affiliate and will
no longer receive NBC programming or network compensation (see Note 1).
F-29
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
---------
into as of November 15, 1999, by and between Young Broadcasting Inc., a Delaware
corporation ("Parent") and The Chronicle Publishing Company, a Nevada
------
corporation (the "Company").
-------
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and the Company have
each determined that it is in the best interests of their respective
shareholders to effect a merger of the Company with and into a Delaware
corporation to be formed by Parent as a subsidiary of Parent ("Merger Sub"),
----------
pursuant to which, among other things, all of the issued and outstanding Company
Common Stock (as defined below) will be cancelled and extinguished and converted
into the right to receive the Merger Consideration (as defined herein), and
Merger Sub will survive as a wholly-owned subsidiary of Parent (the "Merger"),
------
all upon the terms and subject to the conditions set forth herein.
WHEREAS, the Board of Directors of the Company and Parent have approved and
adopted this Agreement, the Merger, and the other transactions contemplated
hereby (including the Company Shareholder Support Agreements and the Parent
Shareholder Support Agreements), and each has recommended approval and adoption
of this Agreement and the Merger by their respective shareholders and
stockholders.
WHEREAS, the Company, among other things, owns certain assets which it uses
to conduct the operations of television broadcast station KRON-TV, San
Francisco, California, and cable television station Bay-TV in the San Francisco,
California Bay Area (the "Business").
--------
WHEREAS, the Company has entered into the Other Agreements (as defined
below) pursuant to which the Company will, among other things, sell to certain
third parties substantially all of the assets of the Company owned, used or held
for use by the Company primarily to conduct the operations of the Disposed
Businesses (as defined below), and in connection therewith, such third parties
have agreed to assume the liabilities of the Company relating to operations of
the Disposed Businesses.
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent to enter into this Agreement, certain shareholders of the
Company representing a majority of the voting rights of the outstanding Company
Common Stock have entered into Shareholder Support Agreements (the "Company
-------
Shareholder Support Agreements") with Parent, pursuant to which such
- ------------------------------
shareholders have agreed, among other things, to vote all voting securities of
the Company beneficially owned by them in favor of approval and adoption of this
Agreement and the Merger.
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to the Company to enter into this Agreement, certain stockholders of
Parent representing a majority of the voting power of the outstanding Parent
Common Stock have
<PAGE>
entered into Shareholder Support Agreements (the "Parent Shareholder Support
--------------------------
Agreements") with the Company, pursuant to which such stockholders have agreed,
- -----------
among other things, to vote all voting securities of Parent beneficially owned
by them in favor of approval and adoption of this Agreement and the Merger.
WHEREAS, the Company and Parent desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby, all as more fully set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, promises and agreements hereinafter set forth, the mutual benefits to
be gained by the performance of such covenants, promises and agreements, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged and accepted, the parties hereto hereby agree as follows:
ARTICLE I.DEFINITIONS
I.1 Certain Definitions. For all purposes of and under this Agreement,
-------------------
the following terms shall have the respective meanings set forth below:
-
(a) "Action" means any claim, action, suit or proceeding, arbitral
------
action, governmental investigation or criminal prosecution.
(b) "Affiliate" means any "affiliate" as defined in Rule 144(a)(1)
---------
promulgated under the Securities Act.
(c) "Benefit Plan" means any employment, bonus, incentive
------------
compensation, deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, equity (or equity-based), leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health, medical, accident,
disability, workmen's compensation or other insurance, severance, separation,
termination, change of control or other benefit plan, agreement (including any
collective bargaining agreement), practice, policy or arrangement, whether
written or oral, and whether or not subject to ERISA (including, without
limitation, any "employee benefit plan" within the meaning of Section 3(3) of
ERISA).
(d) "Broadcast Station" means television station KRON-TV, San
-----------------
Francisco, California.
2
<PAGE>
(e) "Business Assets" means the assets of the Company which it
---------------
uses to Conduct the operations of the Business in the manner currently
conducted.
(f) "Business Contracts" means the Contracts to which the Company
------------------
is a party and which relate to the operations of the Business or the Business
Assets.
(g) "Business Day" means any weekday (Monday through Friday) on
------------
which commercial banks in San Francisco, California and New York, New York are
open for business.
(h) "Business Liabilities" means the Liabilities of the Company
--------------------
arising out of or relating solely to the operations of the Business or the
Business Assets.
(i) "Communications Act" means the Communications Act of 1934, as
------------------
amended, any successor statute thereto, and all rules, regulations and written
policies of the FCC promulgated thereunder.
(j) "Company Common Stock" means the Common Stock, par value $0.01
--------------------
per share, of the Company.
(k) "Confidentiality Agreement" means the letter agreement between
-------------------------
the Company and Parent, dated as of July 12, 1999.
(l) "Contract" means any currently enforceable contract, agreement,
--------
indenture, note, bond, instrument, lease, conditional sales contract, mortgage,
license, franchise agreement, concession agreement, security interest, guaranty,
binding commitment or other agreement or arrangement, whether written or oral.
(m) "Corporate Expenses" means the aggregate of (i) all costs and
------------------
expenses incurred by the Company in connection with the preparation, execution
and delivery of this Agreement and the Other Agreements which are unpaid as of
the Effective Time, plus (ii) all Taxes payable and other expenses incurred by
the Company in connection with the consummation of the Merger, the sale of the
Broadcast Station Licenses, and the asset sales contemplated by the Other
Agreements which are unpaid as of the Effective Time, plus (iii) Station
Severance Costs unpaid as of the Effective Time, but not to exceed the amount
which, when added to Station Severance Costs which have been paid as of the
Effective Time, equals $1,000,000, plus (iv) all other severance obligations of
the Company to its officers, directors and employees not primarily employed in
the Business, including retention, severance or bonus arrangements, other than
Station Severance Costs in excess of $1 million, plus (v) all Taxes payable by
the Company upon the
3
<PAGE>
distribution to Current Company Shareholders on account of the distribution of
Excluded Assets, less (x) cash and cash equivalents held by the Surviving
Corporation immediately after the Effective Time, and (y) any Station Severance
Costs paid by the Company in excess of $1,000,000.
(n) "Current Company Shareholders" means the shareholders of the
----------------------------
Company immediately prior to the Effective Time.
(o) "DGCL" means the General Corporation Law of the State of
----
Delaware.
(p) "Disposed Businesses" means the operations and businesses of
-------------------
the Company transferred, or to be transferred, pursuant to the Other Agreements.
(q) "Encumbrance" means any security interest, pledge, option,
-----------
easement, right of entry, restrictive covenant, mortgage, lien, charge, adverse
claim of ownership or use, restriction on transfer (such as a right of first
refusal or other similar right), defect of title, or other encumbrance of any
kind or character.
(r) "Environmental Law" means any Law pertaining to land use, air,
-----------------
soil, surface water, groundwater (including the protection, cleanup, removal,
remediation or damage thereof), use, treatment, storage, disposal, handling,
transportation, emissions, discharges, releases or threatened releases of
Hazardous Materials, public or employee health or safety, Hazardous Materials
Activity, or any other environmental matter, including, without limitation, the
following laws as in effect on the Closing Date: (i) Clean Air Act (42 U.S.C.
(S)7401, et seq.); (ii) Clean Water Act (33 U.S.C. (S)1251, et seq.); (iii)
Resource Conservation and Recovery Act (42 U.S.C. (S)6901, et seq.); (iv)
Comprehensive Environmental Resource Compensation and Liability Act (42 U.S.C.
(S)9601, et seq.); (v) Safe Drinking Water Act (42 U.S.C. (S)300f, et seq.);
(vi) Toxic Substances Control Act (15 U.S.C. (S)2601, et seq.); (vii) Rivers and
Harbors Act (33 U.S.C. (S)401, et seq.); (viii) Endangered Species Act (16
U.S.C. (S)1531, et seq.); (ix) Occupational Safety and Health Act (29 U.S.C.
(S)651, et seq.); and (x) any other Laws relating to Hazardous Materials or
Hazardous Materials Activities.
(s) "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended, any successor statute thereto, and the rules and regulations
promulgated thereunder.
(t) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, any successor statute thereto, and the rules and regulations
promulgated thereunder.
4
<PAGE>
(u) "Excluded Assets" means (i) artwork located at corporate
---------------
headquarters and at the Company's finance department, (ii) artwork and statues
located at KRON-TV, (iii) any De Young family memorabilia, pictures or archives,
(iv) any newspapers or newspaper plates relating to the 1906 earthquake, (v)
that certain parcel of real property located in Butte County, California, (vi) a
secured note from Asphalt Release Corporation in the original principal amount
of $525,000 and the security therefor, (vii) the Company's investment in TCW
Special Placements Fund II, (viii) any marketable securities, limited
partnerships or similar investments owned by the Company and unrelated to the
Business, (ix) the furniture, fixtures and equipment from the Company's
corporate and finance departments designated by the Company ten (10) calendar
days prior to Closing, (x) all cash and cash equivalents, including all proceeds
from the transactions contemplated by the Other Agreements, but excluding cash
and cash equivalents deducted from Corporate Expenses, and (xi) any and all of
the assets covered by any of the Other Agreements.
(v) "FCC" means the United States Federal Communications
---
Commission, and any successor agency thereto.
(w) "Final Order" means an order or action by the FCC that, by
-----------
reason of expiration of time or exhaustion of remedies, is no longer subject to
administrative or judicial reconsideration or review.
(x) "GAAP" means generally accepted accounting principles in the
----
United States.
(y) "Governmental Authority" means any government, any governmental
----------------------
entity, department, commission, board, agency or instrumentality, and any court,
tribunal, arbitrator or panel of arbitrators or judicial body of competent
jurisdiction, in each case whether federal, state, county, provincial, local or
foreign.
(z) "Governmental Order" means any statute, rule, regulation,
------------------
order, arbitration award, judgment, injunction, decree, stipulation or
determination issued, promulgated or entered by or with any Governmental
Authority.
(aa) "Hazardous Material" means any material or substance that is
------------------
prohibited or regulated by any Environmental Law or that has been designated by
any Governmental Authority to be radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment, including, but not limited
to, asbestos, petroleum, radon gas and radioactive matter.
5
<PAGE>
(bb) "Hazardous Materials Activity" means the handling,
----------------------------
transportation, transfer, recycling, storage, use, treatment, manufacture,
investigation, removal, remediation, release, exposure of others to, sale or
other distribution of any Hazardous Material or any product containing a
Hazardous Material.
(cc) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
-------
Act of 1976, as amended, any successor statute thereto, and the rules and
regulations promulgated thereunder.
(dd) "Income Tax" means any federal, state, county, provincial,
----------
local or foreign income, franchise, business profits or other similar Tax, any
estimated Tax related thereto, any interest and penalties (civil or criminal)
thereon or additions thereto.
(ee) "Income Tax Return" means any Tax Return in respect of Income
-----------------
Taxes.
(ff) "Indemnified Liabilities" means any Liability of the Company
-----------------------
existing, or arising after but primarily relating to, periods prior to the
Closing Date not related primarily to the Business (including Liabilities for
Taxes incurred prior to the Effective Time and claims for indemnification
against the Company pursuant to the Other Agreements, regardless of when such
claim for indemnification is asserted), excluding (i) Liabilities incurred in
connection with or related to Dissenting Shares, or (ii) Liabilities (exclusive
of Liabilities for Taxes incurred prior to the Effective Time and claims for
indemnification pursuant to the Other Agreements) of the Surviving Corporation,
to the Current Company Shareholders, arising out of this Agreement and the
transactions contemplated hereby, or (iii) Liabilities included in Corporate
Expenses, and for which there was an adjustment to the Total Cash Consideration,
or (iv) Liabilities arising out of any (A) increase in the aggregate present
value of the accrued benefits (whether vested or unvested) under, or (B)
decrease in the fair market value of the assets of, The Pension Plan of the
Chronicle Publishing Company (or any successor plan thereto), in either case,
during the period commencing on and after the Closing Date. "Indemnified
-----------
Liabilities" shall also include any Damages incurred by the Surviving
- -----------
Corporation as a result of, or incident to, any matter pertaining to any Benefit
Plan that has been or will be assumed pursuant to the Other Agreements.
(gg) "Intellectual Property" means any (i) United States, state or
---------------------
foreign patents, patent applications, patent disclosures and improvements
thereto, (ii) registered United States, state or foreign trademarks, service
marks, trade dress, logos, trade names and corporate names, the goodwill
associated therewith, and the registrations and
6
<PAGE>
applications for registration thereof, and (iii) registered United States, state
or foreign copyrights, and the registrations and applications for registration
thereof.
(hh) "Internal Revenue Code" means the Internal Revenue Code of
---------------------
1986, as amended, any successor statute thereto, and the rules and regulations
promulgated thereunder.
(ii) "IRS" means the United States Internal Revenue Service, and
---
any successor agency thereto.
(jj) "Knowledge of the Company," "known to the Company" and
------------------------ --------------------
phrases of similar import mean, with respect to any matter in question relating
to the Business, if any of John Sias, President and Chief Executive Officer of
the Company, Marty Jaffe, Chief Financial Officer of the Company, Ron Ingram,
General Counsel of the Company, Amy McCombs, President of KRON-TV, Al Holzer,
Vice President and General Manager of KRON-TV, Rich Cerussi, Vice President and
Director of Sales of KRON-TV, Mark Murray, Vice President, Business Affairs of
KRON-TV and Craig Porter, Chief Engineer of KRON-TV, has actual knowledge of
such matter without obligation of inquiry.
(kk) "Knowledge of Parent," "known to Parent" and phrases of
-------------------- ---------------
similar import mean, with respect to any matter in question relating to Parent
or any of its consolidated Subsidiaries (including, without limitation, Merger
Sub), if Vincent J. Young, Ronald J. Kwasnick and James A. Morgan has actual
knowledge of such matter without obligation of inquiry.
(ll) "Law" means any statute, law, ordinance, regulation, rule,
---
code or rule of common law of any federal, state, county, provincial, local or
foreign Governmental Authority.
(mm) "Liability" means any direct or indirect debt, obligation or
---------
liability of any kind or nature, whether accrued or fixed, absolute or
contingent, determined or determinable, matured or unmatured, and whether due or
to become due, asserted or unasserted, or known or unknown.
(nn) "License" means any franchise, approval, permit, order,
-------
authorization, consent, license, registration or filing, certificate, variance
and any other similar right obtained from or filed with any Governmental
Authority.
(oo) "Material Adverse Effect" means any change or effect that is
-----------------------
materially adverse to the assets, liabilities, properties, operations,
7
<PAGE>
business, condition (financial or otherwise), or results of operations of the
Business, except for any such changes or effects resulting directly or
indirectly from (i) the announcement or other disclosure of the transactions
contemplated by this Agreement, (ii) regulatory changes, or (iii) changes in
conditions generally applicable to the television broadcasting industry, or in
general economic conditions in the geographic regions in which the Business is
conducted.
(pp) "Merger Consideration" means (i) the Total Cash Consideration,
--------------------
and (ii) the Total Stock Consideration.
(qq) "NGCL" means the General Corporation Law of the State of
----
Nevada, Chapter 92A of the Nevada Revised Statutes, the Mergers and Share
Exchange Law, and any successor statutes thereto.
(rr) "Other Agreements" means the following agreements, as they
----------------
may be amended from time to time in accordance therewith and in accordance with
this Agreement: (i) the Asset Purchase Agreement dated as of August 6, 1999, by
and between the Company and The Hearst Corporation, (ii) the Asset Purchase
Agreement dated as of October 4, 1999, by and between the Company and Pulitzer
Inc., (iii) the Asset Purchase Agreement dated as of October 11, 1999, by and
between the Company and The New York Times Company, (iv) the Asset Purchase
Agreement dated as of November 12, 1999, by and between the Company and
Chronicle Books LLC, (v) an Asset Purchase Agreement, substantially in the form
previously delivered to Parent, relating to the business and operations of
television stations WOWT (TV), Omaha, Nebraska, KAKE-TV, Wichita, Kansas, KUPK-
TV, Garden City, Kansas, and KLBY (TV), Colby, Kansas, and (vi) the Share
Purchase Agreement dated as of November 5, 1999, by and among the Company, MBI
Acquisition Partners, L.P., a Delaware limited partnership, and MBI Publishing
Company, a Nevada corporation.
(ss) "Parent Average Stock Price" means the average closing sale
--------------------------
price of Parent Class A Common Stock, as reported on the Nasdaq National Market
System, for the twenty (20) consecutive trading days ending three (3) trading
days prior to the Closing Date.
(tt) "Parent Cash Election Amount" means the amount by which Parent
---------------------------
has elected, or is required, pursuant to Section 2.7(c) hereof to increase Total
--------------
Cash Consideration and reduce the Total Stock Consideration Value.
(uu) "Parent Class A Common Stock" means the Class A Common Stock,
---------------------------
par value $0.001 per share, of Parent.
8
<PAGE>
(vv) "Parent Class B Common Stock" means the Class B Common Stock,
---------------------------
par value $0.001 per share, of Parent.
(ww) "Parent Class C Common Stock" means the Class C Common Stock,
---------------------------
par value $0.001 per share, of Parent.
(xx) "Parent Common Stock" means the Common Stock of Parent,
-------------------
including, without limitation, Parent Class A Common Stock, Parent Class B
Common Stock, and Parent Class C Common Stock.
(yy) "Parent Material Adverse Effect" means any change or effect
------------------------------
that (i) is materially adverse to the assets, liabilities, properties,
operations, business, condition (financial or otherwise), or results of
operations of Parent and its subsidiaries, taken as a whole, except for any such
changes or effects resulting directly or indirectly from (A) the announcement or
other disclosure of the transactions contemplated by this Agreement, (B)
regulatory changes, or (C) changes in conditions generally applicable to the
television broadcasting industry, or in general economic conditions in the
geographic regions in which Parent and Merger Sub conduct business, or (ii) is
materially adverse to the ability of each of Parent and Merger Sub to perform
its respective obligations under this Agreement, or to consummate the
transactions contemplated hereby on a timely basis.
(zz) "Per Share Cash Consideration" means an amount equal to the
----------------------------
quotient obtained by dividing (x) the Total Cash Consideration, by (y) the
aggregate number of shares of Company Common Stock outstanding immediately prior
to the Effective Time.
(aaa) "Per Share Escrow Amount" means an amount equal to the
-----------------------
quotient obtained by dividing (x) $50 million, by the (y) aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time.
(bbb) "Permitted Encumbrances" means (i) Encumbrances for inchoate
----------------------
mechanics' and materialmen's liens for construction in progress and workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of business, (ii) Encumbrances for Taxes and other Liabilities not yet due and
payable, and for Taxes and other Liabilities being contested in good faith,
provided that reserves have been established and maintained for such Taxes and
other Liabilities in accordance with GAAP, (iii) Encumbrances in favor of Parent
and Merger Sub arising out of, under or in connection with this Agreement, (iv)
Encumbrances reflected on the Latest Balance Sheet, (v) Encumbrances and
imperfections of title the existence of which would not reasonably be expected
to materially detract from the value of, interfere with, or otherwise affect the
continued
9
<PAGE>
ownership, use and enjoyment of the property subject thereto or affected
thereby, consistent with past practice, and (vi) solely with respect to Owned
Real Property, provided that the following are not violated by existing
improvements in any material respect and do not prohibit or materially restrict
the continued use and operation of such Owned Real Property for the same uses
and operations as currently conducted, or grant any third party any option or
right to acquire or lease a material portion thereof, (A) easements, rights of
way and other similar restrictions which would be shown by a current title
report, (B) conditions that may be shown by a current survey, title report or
physical inspection, and (C) zoning, building and other similar restrictions
imposed by applicable Law.
(ccc) "Person" means any individual, general or limited partnership,
------
firm, corporation, limited liability company, association, trust, unincorporated
organization or other entity.
(ddd) "Program License Agreements" means any Contract granting
--------------------------
rights to programming on any of the Stations.
(eee) "Proprietary Rights" means (i) Intellectual Property, (ii)
------------------
trade secrets and confidential business information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, research and
development information, software, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works (including all work in progress),
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information), (iii)
copies and tangible embodiments thereof (in whatever form or medium) and (iv)
licenses granting any rights with respect to any of the foregoing.
(fff) "SEC" means the United States Securities and Exchange
---
Commission, and any successor agency thereto.
(ggg) "Securities Act" means the Securities Act of 1933, as amended,
--------------
any successor statute thereto, and the rules and regulations promulgated
thereunder.
(hhh) "Stations" means television station KRON-TV, San Francisco,
--------
California and cable television station Bay-TV in the San Francisco, California
Bay Area.
(iii) "Station Severance Cost" shall mean all costs incurred by the
----------------------
Company in connection with the termination of employees of the Stations who are
not identified in the written instrument delivered pursuant to Section 5.11(a)
---------------
hereof.
10
<PAGE>
(jjj) "Subsidiary" means (unless otherwise indicated), with respect
----------
to a Person, any other Person in which such Person has a direct or indirect
equity or other ownership interest in excess of fifty percent (50%).
(kkk) "Tax" means any federal, state, county, provincial, local or
---
foreign income, gross receipts, sales, use, ad valorem, employment, severance,
transfer, gains, profits, excise, franchise, property, capital stock, premium,
minimum and alternative minimum or other taxes, fees, levies, duties,
assessments or charges of any kind or nature whatsoever imposed by any
Governmental Authority (whether payable directly or by withholding), together
with any interest, penalties (civil or criminal), additions to, or additional
amounts imposed by, any Governmental Authority with respect thereto, and any
expenses incurred in connection with the determination, settlement or litigation
of any liability therefor.
(lll) "Tax Return" means a report, return or other information
----------
required to be supplied to a Governmental Authority with respect to any Tax.
(mmm) "Total Cash Consideration" means an amount equal to (x) $650
------------------------
million, plus (y) the Parent Cash Election Amount, less (z) Corporate Expenses.
(nnn) "Total Stock Consideration" means that number of shares of
-------------------------
Parent Class A Common Stock equal to (x) the Exchange Ratio, multiplied by (y)
the aggregate number of shares of Company Common Stock outstanding immediately
prior to the Effective Time.
(ooo) "Total Stock Consideration Value" means an amount equal to (x)
-------------------------------
$172,585,000 million, less (y) the Parent Cash Election Amount.
(ppp) "Trade Agreements" means any Contract for the sale of
----------------
advertising time on the Stations in exchange for goods or services, other than
Program License Agreements.
I.2 Certain Additional Definitions. For all purposes of and under this
Agreement, the following terms shall have the respective meanings ascribed
thereto in the respective sections of this Agreement set forth opposite each
such term below:
- --------------------------------------------------------------------------------
Term Section
- ---- -------
- --------------------------------------------------------------------------------
Affiliate Agreement 5.20
- --------------------------------------------------------------------------------
Agreement Preamble
- --------------------------------------------------------------------------------
Articles of Merger 2.3
- --------------------------------------------------------------------------------
Asset Purchase Agreement 5.21(a)
- --------------------------------------------------------------------------------
Broadcast Station Licenses 3.23
- --------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Term Section
- ---- -------
- ----------------------------------------------------------------------------------------------
<S> <C>
Business Recitals
- ----------------------------------------------------------------------------------------------
Business Benefit Plan(s) 3.14(a)
- ----------------------------------------------------------------------------------------------
Business Employee(s) 3.13
- ----------------------------------------------------------------------------------------------
Business Financial Statements 3.7
- ----------------------------------------------------------------------------------------------
Business Insurance Policies 3.20(a)
- ----------------------------------------------------------------------------------------------
Business License(s) 3.12
- ----------------------------------------------------------------------------------------------
Certificate of Merger 2.3
- ----------------------------------------------------------------------------------------------
Claim 8.3(a)
- ----------------------------------------------------------------------------------------------
Closing 2.2(a)
- ----------------------------------------------------------------------------------------------
Closing Date 2.2(a)
- ----------------------------------------------------------------------------------------------
Company Preamble
- ----------------------------------------------------------------------------------------------
Company Affiliate Letter 5.20
- ----------------------------------------------------------------------------------------------
Company Articles of Incorporation 3.1
- ----------------------------------------------------------------------------------------------
Company Bylaws 3.1
- ----------------------------------------------------------------------------------------------
Company Financial Statements 3.7
- ----------------------------------------------------------------------------------------------
Company Indemnified Party 5.17
- ----------------------------------------------------------------------------------------------
Company Proxy Materials 3.24
- ----------------------------------------------------------------------------------------------
Company Shareholders Meeting 5.4(b)
- ----------------------------------------------------------------------------------------------
Company Shareholder Support Agreements Recitals
- ----------------------------------------------------------------------------------------------
Damages 8.2(a)
- ----------------------------------------------------------------------------------------------
Default 3.3
- ----------------------------------------------------------------------------------------------
Dissenting Shares 2.11(a)
- ----------------------------------------------------------------------------------------------
Effective Time 2.3
- ----------------------------------------------------------------------------------------------
Escrow Amount 2.8(b)
- ----------------------------------------------------------------------------------------------
Escrow Agent 2.8(b)
- ----------------------------------------------------------------------------------------------
Escrow Agreement 2.7(a)
- ----------------------------------------------------------------------------------------------
Escrow Fund 2.8(b)
- ----------------------------------------------------------------------------------------------
Exchange Agent 2.8(a)
- ----------------------------------------------------------------------------------------------
Exchange Fund 2.8(a)
- ----------------------------------------------------------------------------------------------
Exchange Ratio 2.7(d)
- ----------------------------------------------------------------------------------------------
Financial Statements 3.7
- ----------------------------------------------------------------------------------------------
Form S-4 3.24
- ----------------------------------------------------------------------------------------------
Latest Business Balance Sheet Date 3.7
- ----------------------------------------------------------------------------------------------
Latest Business Balance Sheet 3.7
- ----------------------------------------------------------------------------------------------
Latest Business Financial Statements 3.7
- ----------------------------------------------------------------------------------------------
Latest Company Balance Sheet 3.7
- ----------------------------------------------------------------------------------------------
Latest Company Financial Statements 3.7
- ----------------------------------------------------------------------------------------------
Leased Assets 3.9(a)
- ----------------------------------------------------------------------------------------------
Leased Real Property 3.9(a)
- ----------------------------------------------------------------------------------------------
Material Business Contract(s) 3.11(a)
- ----------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Term Section
- ---- -------
- ----------------------------------------------------------------------------------------------
<S> <C>
Merger Recitals
- ----------------------------------------------------------------------------------------------
Merger Sub Recitals
- ----------------------------------------------------------------------------------------------
Non-Union Employees 5.11
- ----------------------------------------------------------------------------------------------
Owned Intellectual Property 3.10(a)
- ----------------------------------------------------------------------------------------------
Owned Real Property 3.9(a)
- ----------------------------------------------------------------------------------------------
Parent Preamble
- ----------------------------------------------------------------------------------------------
Parent Option Plan 4.5(b)
- ----------------------------------------------------------------------------------------------
Parent Proxy Statement 3.24
- ----------------------------------------------------------------------------------------------
Parent SEC Reports 4.6(a)
- ----------------------------------------------------------------------------------------------
Parent Shareholder Support Agreements Recitals
- ----------------------------------------------------------------------------------------------
Parent Stockholders Meeting 5.4(a)
- ----------------------------------------------------------------------------------------------
Prospectus 3.24
- ----------------------------------------------------------------------------------------------
Proceedings 5.13
- ----------------------------------------------------------------------------------------------
Response Activities 8.4(c)
- ----------------------------------------------------------------------------------------------
Retained Employee(s) 5.11
- ----------------------------------------------------------------------------------------------
Rule 145 5.20
- ----------------------------------------------------------------------------------------------
Rule 145 Affiliates 5.3(d)
- ----------------------------------------------------------------------------------------------
S Election 3.18(c)
- ----------------------------------------------------------------------------------------------
Share Certificate(s) 2.8(b)
- ----------------------------------------------------------------------------------------------
Shareholder Fund 2.8(a)
- ----------------------------------------------------------------------------------------------
Shareholder Representative 9.7
- ----------------------------------------------------------------------------------------------
Short Term Agreement 3.11(a)
- ----------------------------------------------------------------------------------------------
Surviving Corporation 2.1
- ----------------------------------------------------------------------------------------------
Termination Date 7.1(b)
- ----------------------------------------------------------------------------------------------
Third Party Claim 8.3(b)
- ----------------------------------------------------------------------------------------------
Transfer Application 5.14
- ----------------------------------------------------------------------------------------------
Year-End Business Financial Statements 3.7
- ----------------------------------------------------------------------------------------------
Year 2000 Complaint 3.25
- ----------------------------------------------------------------------------------------------
Year 2000 problem 3.25
- ----------------------------------------------------------------------------------------------
Year-End Company Financial Statements 3.7
- ----------------------------------------------------------------------------------------------
</TABLE>
ARTICLE II.the merger
---------------------
II.1 Formation of Merger Sub; The Merger. Promptly after the execution
-----------------------------------
hereof, Parent shall cause Merger Sub to be formed and to become a party to this
Agreement. Parent shall, and shall cause Merger Sub to, take all corporate
action necessary to approve and adopt this Agreement, the Merger and the
transactions contemplated hereby. Upon the terms and subject to the conditions
set forth herein and in the applicable provisions of the NGCL and the DGCL, at
the Effective Time, the
13
<PAGE>
Company shall be merged with and into Merger Sub, the separate corporate
existence of the Company shall thereupon cease, and Merger Sub shall continue as
the surviving corporation of the Merger. The surviving corporation of the Merger
shall sometimes be referred to herein as the "Surviving Corporation."
II.2 Closing.
-------
(a) Unless this Agreement is earlier terminated pursuant to Section
7.1 hereof, the consummation of the Merger and the other transactions
contemplated hereby shall take place at a closing (the "Closing") to be held at
-------
10:00 a.m., New York time, on the later to occur of (i) April 28, 2000, and (ii)
the ten (10) calendar days after satisfaction and fulfillment or, if permissible
pursuant to the terms hereof, waiver of the conditions set forth in Article VI
----------
(the "Closing Date"), at the offices of Cooperman Levitt Winikoff Lester &
------------
Newman, P.C., 800 Third Avenue, New York, New York 10022, unless another time,
date or place is mutually agreed upon in writing by Parent and the Company.
(b) At the Closing, (i) the agreements, documents, certificates and
other instruments set forth in this Article II and Article VI hereof shall be
---------- ----------
delivered by each of the parties thereto, (ii) Parent shall deposit with the
Exchange Agent the Merger Consideration required by Section 2.8 hereof to be
-----------
deposited therewith, and (iii) Parent shall deposit with the Escrow Agent the
amounts required by Section 2.8(b) hereof to be deposited therewith.
--------------
II.3 Merger Filings; Effective Time. Upon the terms and subject to the
------------------------------
conditions set forth herein, at the Closing, Parent, Merger Sub and the Company
shall execute and deliver, or cause to be executed and delivered, a Certificate
of Merger in a form mutually agreeable to Parent and the Company (the
"Certificate of Merger") and articles of merger in a form mutually agreeable to
Parent and the Company (the "Articles of Merger"), and, as soon as practicable
------------------
thereafter, Parent, Merger Sub and the Company shall file, or cause to be filed,
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the applicable provisions of the DGCL and the Articles of
Merger with the Secretary of State of the State of Nevada in accordance with the
applicable provisions of the NGCL. The Merger shall become effective (the
"Effective Time") at such time as is designated in the Articles of Merger and
--------------
the Certificate of Merger.
II.4 Effect of the Merger. The Merger shall have the effects set forth in
--------------------
the applicable provisions of the DGCL and the NGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises
14
<PAGE>
of the Company shall vest in the Surviving Corporation, and all Liabilities and
duties of the Company shall become the Liabilities and duties of the Surviving
Corporation.
II.5 Certificate of Incorporation and Bylaws of the Surviving Corporation.
--------------------------------------------------------------------
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall thereupon be
the Certificate of Incorporation of the Surviving Corporation, until thereafter
duly amended in accordance with applicable Law and as provided in such
Certificate of Incorporation.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall thereupon be the Bylaws of the
Surviving Corporation, until thereafter duly amended in accordance with
applicable Law and as provided in the Certificate of Incorporation and such
Bylaws of Merger Sub.
II.6 Directors and Officers of the Surviving Corporation.
---------------------------------------------------
(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation at and after
the Effective Time, each to hold office as a director of the Surviving
Corporation in accordance with applicable provisions of the DGCL until their
respective successors are duly elected or appointed and qualified in accordance
with applicable Law and the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
(b) The officers of Merger Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation at and after the
Effective Time, each to hold office in accordance with the applicable provisions
of the DGCL until their respective successors are duly elected or appointed and
qualified in accordance with applicable Law and the Certificate of Incorporation
and Bylaws of the Surviving Corporation.
II.7 Conversion of Capital Stock. At the Effective Time, by virtue of
---------------------------
the Merger and without any action on the part of Parent, Merger Sub or the
Company, or any holders of the following shares of capital stock:
(a) Conversion of Company Common Stock. Each share of Company Common
----------------------------------
Stock issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares) shall be automatically converted into and represent the right
to receive, upon surrender of the certificate representing such share of Company
Common Stock in accordance with the terms of Section 2.8 hereof and subject to
-----------
the terms of
15
<PAGE>
the Escrow Agreement, in substantially the form attached hereto as Exhibit A
---------
(the "Escrow Agreement"), (i) an amount in cash equal to the Per Share Cash
----------------
Consideration, and (ii) an aggregate number of fully paid and nonassessable
shares of Parent Class A Common Stock equal to the Exchange Ratio; provided,
however, that in any event, if between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Class A Common Stock shall have
been changed, reclassified or converted into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, conversion or exchange of shares, the
Exchange Ratio shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination, conversion
or exchange of shares. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall cease to exist, and each
certificate which immediately prior to the Effective Time represented any such
shares of Company Common Stock (other than any Dissenting Shares) shall cease to
represent any rights with respect thereto, except the right to receive, upon
surrender of such certificate in accordance with the terms and provisions of
Section 2.8 hereof and subject to the terms of the Escrow Agreement, (i) an
- -----------
amount in cash equal to the product obtained by multiplying (x) the number of
shares of Company Common Stock represented by such certificate, by (y) the Per
Share Cash Consideration, (ii) subject to the terms of Section 2.8(i) hereof, an
--------------
aggregate number of fully paid and nonassessable shares of Parent Class A Common
Stock equal to the product obtained by multiplying (x) the number of shares of
Company Common Stock represented by such certificate, by (y) the Exchange Ratio,
(iii) cash in lieu of fractional shares of Parent Class A Common Stock payable
in respect thereto pursuant to Section 2.8(i) hereto, (iv) all dividends and
--------------
distributions declared prior to the Effective Time with respect to the shares of
Company Common Stock represented by such certificate, and (v) any amounts to be
received pursuant to Section 5.15 hereof.
------------
(b) Common Stock of Merger Sub. Each share of Common Stock of Merger
--------------------------
Sub issued and outstanding immediately prior to the Effective Time shall remain
outstanding and thereupon represent one fully paid and nonassessable share of
Common Stock of the Surviving Corporation.
(c) Cash Substitution. Parent may, by written notice to the Company
-----------------
and the Company's shareholders, at least five (5) calendar days prior to
Closing, elect to reduce the Total Stock Consideration Value by increasing the
Total Cash Consideration by an equal amount. For each $1.00 that Total Cash
Consideration is increased, Total Stock Consideration Value shall be reduced by
$1.00. Parent shall be required to use the following amounts of aggregate net
cash proceeds received from the date hereof up to and including the Closing Date
from the sale or other issuance
16
<PAGE>
of capital stock of Parent to increase the Total Cash Consideration and reduce
the Total Stock Consideration Value, but not below zero (0): (i) 20% of such
aggregate net cash proceeds up to $100 million; (ii) 40% of such aggregate net
cash proceeds in excess of $100 million up to $200 million; and (iii) 100% of
aggregate net cash proceeds in excess of $200 million.
(d) Exchange Ratio. For all purposes of and under this Agreement, the
--------------
term "Exchange Ratio" means that number of shares of Parent Class A Common Stock
--------------
(or fraction thereof) calculated in accordance with the following:
(i) in the event that the Parent Average Stock Price is equal
to or greater than $44.38 and less than or equal to $54.24, the Exchange Ratio
shall be equal to the quotient obtained by dividing (x) an amount equal to (A)
the Total Stock Consideration Value, divided by (B) the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time, by (y) the Parent Average Stock Price;
(ii) in the event that the Parent Average Stock Price is less
than $44.38, the Exchange Ratio shall be an amount equal to the quotient
obtained by dividing (x) an amount equal to (A) the Total Stock Consideration
Value, divided by (B) the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time, by (y) $44.38; and
(iii) in the event that the Parent Average Stock Price is
greater than $54.24, the Exchange Ratio shall be an amount equal to the quotient
obtained by dividing (x) an amount equal to (A) the Total Stock Consideration
Value, divided by (B) the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time, by (y) $54.24.
II.8 Exchange of Share Certificates. The procedures for exchanging
------------------------------
certificates which represented shares of the Company Common Stock immediately
prior to the Effective Time for that portion of the Merger Consideration
issuable or payable in exchange therefor are as follows:
(a) Exchange Agent. On or prior to the Closing Date, Parent shall
--------------
deposit with a bank or trust company designated by Parent and the Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
--------------
Stock outstanding immediately prior to the Effective Time (other than Dissenting
Shares), for exchange in accordance with this Section 2.8 by the Exchange Agent,
-----------
(i) cash in the aggregate amount sufficient to pay the Per Share Cash
Consideration, less the Per Share
17
<PAGE>
Escrow Amount, for shares of Company Common Stock converted pursuant to Section
-------
2.7(a) hereof, and (ii) certificates representing the aggregate number of shares
- ------
of Parent Class A Common Stock issuable in exchange for shares of Company Common
Stock converted pursuant to Section 2.7(a) hereof (such cash and stock deposited
--------------
with the Exchange Agent being referred to herein as the "Exchange Fund"). The
-------------
Exchange Agent being maintain an account for the benefit of the holders of
shares of Company Common Stock outstanding immediately prior to the Effective
Time (the "Shareholder Fund") into which amounts may be deposited in accordance
----------------
with Section 2.9(c) and Section 5.15 hereof. The Exchange Agent shall, pursuant
-------------- ------------
to irrevocable instructions (which shall be mutually agreeable to the parties
hereto), (i) disburse the cash amounts required to be delivered from the
Exchange Fund and the Shareholder Fund to holders of shares of Company Common
Stock (with respect to the Exchange Fund, other than Dissenting Shares), and
(ii) deliver certificates representing the shares of Parent Class A Common Stock
required to be delivered from the Exchange Fund to the holders of shares of
Company Common Stock (other than Dissenting Shares).
(b) Escrow Deposit. On or prior to the Closing Date, (i) Parent and
--------------
the Company shall select a mutually satisfactory Escrow Agent under the Escrow
Agreement (the "Escrow Agent"), (ii) Parent and the Shareholder Representative
shall execute the Escrow Agreement, and (iii) Parent shall deposit with the
Escrow Agent, for the benefit and on behalf of the holders of shares of Company
Common Stock outstanding immediately prior to the Effective Time (other than
Dissenting Shares), an amount in cash equal to $50,000,000 (the "Escrow
------
Amount") for disbursement in accordance with the terms of the Escrow Agreement
- ------
(such cash deposit being referred to herein as the "Escrow Fund"). Each holder
-----------
of shares of Company Common Stock outstanding immediately prior to the Effective
Time (other than Dissenting Shares) shall be deemed to have contributed such
holder's pro rata portion of the Escrow Amount to the Escrow Fund, based upon
the number of shares of Company Common Stock held by each such holder
immediately prior to the Effective Time relative to the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time (other than Dissenting Shares).
(c) Exchange Procedures. Parent shall cause the Exchange Agent to
-------------------
deliver to each holder of record of a certificate or certificates representing
outstanding shares of Company Common Stock (each, a "Share Certificate" and,
-----------------
collectively, the "Share Certificates") no later than March 31, 2000 (i) a
------------------
letter of transmittal, which shall specify that delivery shall be effected, and
risk of loss and title to the Share Certificates shall pass, only at or
following the Effective Time and upon delivery of Share Certificates to the
Exchange Agent, and which shall be in such form and
18
<PAGE>
have such other provisions as Parent and the Company may reasonably specify;
provided, however, that the letter of transmittal shall include a certificate to
be executed by each holder of shares of Company Common Stock outstanding
immediately prior to the Effective Time (other than Dissenting Shares) which
shall provide that each such shareholder is a permitted S corporation
shareholder, and (ii) instructions for effecting the surrender of Share
Certificates in exchange for that portion of the Exchange Fund payable or
issuable in exchange for the shares of Company Common Stock formerly represented
thereby. Each holder of a Share Certificate shall be entitled to surrender such
Share Certificate to the Exchange Agent at any time in accordance with the
procedures set forth herein and in the instructions described in the foregoing
sentence. Upon surrender of any such Share Certificate to the Exchange Agent,
together with a letter of transmittal, properly completed and duly executed, the
holder of such Share Certificate shall be entitled to receive promptly in
exchange therefor that portion of the Exchange Fund (payable in immediately
available funds in the case of any cash payments) which such holder has the
right to receive pursuant to Section 2.8(a) hereof (provided, however, that in
--------------
the event that a Share Certificate is delivered, together with a letter of
transmittal, properly completed and duly executed, to the Exchange Agent prior
to or at the Closing, that portion of the Exchange Fund payable or issuable in
exchange therefor pursuant to Section 2.8(a) hereof shall be paid by wire
-------------
transfer of immediately available funds in the case of cash payments promptly
following the Closing, or issued promptly following the Closing), and the Share
Certificate so surrendered shall be canceled immediately thereafter.
(d) Distributions with Respect to Holders of Unsurrendered
------------------------------------------------------
Certificates. No portion of the Exchange Fund shall be paid or issued to the
- ------------
holder of any unsurrendered Share Certificate in respect thereof until the
holder of record of such Share Certificate shall surrender such Share
Certificate to the Exchange Agent in accordance with the terms of this Section
-------
2.8; provided, however, that each holder of a Share Certificate (other than the
- ---
holder of Dissenting Shares) shall be deemed to have contributed such holder's
pro rata portion of the Escrow Amount to the Escrow Fund pursuant to Section
-------
2.8(b) hereof whether or not such holder surrenders such Share Certificate to
- ------
the Exchange Agent in accordance with the terms hereof.
(e) No Further Ownership Rights in Company Common Stock. That portion
---------------------------------------------------
of the Exchange Fund paid or issued upon the surrender for exchange of Share
Certificates in accordance with the terms of this Section 2.8, together with
-----------
that portion of the Escrow Amount deposited into the Escrow Fund in respect of
such Share Certificates and any proceeds from the Shareholder Fund to which the
Current Company Shareholders of the
19
<PAGE>
Company are entitled, shall be deemed to have been paid, issued and deposited in
full satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Share Certificates, other than rights with
respect to dividends or distributions declared prior to the Effective Time with
respect to shares of Company Common Stock theretofore represented by such Share
Certificates.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed for one hundred eighty (180) calendar days following
the Effective Time shall be delivered to the Surviving Corporation upon demand,
and any former shareholders of the Company who have not previously submitted any
Share Certificates to the Exchange Agent in exchange for that portion of the
Exchange Fund payable or issuable in exchange therefor shall thereafter look
only to the Surviving Corporation for payment or issuance of such shareholder's
claim for any portion of the Exchange Fund otherwise payable or issuable in
exchange therefor pursuant this Agreement; provided, however, that
notwithstanding the foregoing, any such former shareholder shall look only to
the Escrow Agent for payment of such shareholder's claim for any portion of the
Escrow Amount deposited in the Escrow Fund on behalf of such former shareholder.
(g) No Liability. None of Parent, Merger Sub, the Company, the
------------
Exchange Agent or the Escrow Agent shall be liable to any holder of shares of
Company Common Stock for any cash, stock or other property delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
(h) Lost Certificates. If any Share Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Share Certificate to be so lost, stolen or destroyed, and, if
required by Parent, the posting by such Person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Share Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Share Certificate that portion of
the Exchange Fund payable or issuable in exchange therefor pursuant to Section
-------
2.8(a) hereof.
- ------
(i) Fractional Shares of Parent Class A Common Stock.
20
<PAGE>
(i) Notwithstanding anything to the contrary set forth in this
Article II or elsewhere in this Agreement, no certificates or scrip or shares
- ----------
of Parent Class A Common Stock representing fractional shares of Parent Class A
Common Stock shall be issued upon the surrender for exchange of Share
Certificates pursuant to this Section 2.8, and such fractional interests shall
-----------
not entitle the owners thereof to vote or to have any rights of a stockholder of
Parent or a holder of shares of Parent Class A Common Stock.
(ii) Notwithstanding anything to the contrary set forth in this
Article II or elsewhere in this Agreement, each holder of shares of Company
- ----------
Common Stock who would otherwise be entitled to receive a fractional share of
Parent Class A Common Stock (after aggregating all shares of Company Common
Stock held by such shareholder) shall be entitled to receive, in lieu thereof,
cash (without interest) in an amount equal to the product of (x) such fraction
of a share of Parent Class A Common Stock, multiplied by (y) the Parent Average
Stock Price.
II.9 Determination of Corporate Expenses. At least five (5) calendar days
-----------------------------------
prior to the Closing, the Company shall deliver to Parent an estimate of
Corporate Expenses. Parent and the Company shall agree upon the amount of
Corporate Expenses prior to the Closing.
II.10 Stock Transfer Books. From and after the Effective Time, the stock
--------------------
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of shares of Company Common Stock on the books and
records of the Company or the Surviving Corporation. If, after the Effective
Time, any Share Certificates are presented to the Exchange Agent or the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
II.11 Dissenting Shares.
-----------------
(a) Notwithstanding any other term or provision of this Agreement to
the contrary, shares of Company Common Stock that are outstanding immediately
prior to the Effective Time which are held by shareholders who (i) have not
consented to the Merger, (ii) have demanded appraisal for such shares in
accordance with the provisions of Section 92A.300 to 92A.500, inclusive, of the
NGCL (if such provisions provide for appraisal rights for such shares) and,
(iii) have not failed to perfect or effectively withdrawn such demand or
otherwise lost their appraisal rights (the "Dissenting Shares"), shall not be
converted into or represent the right to receive any portion of the Total Cash
Consideration pursuant to Section 2.7(a) hereof or any other term or provision
--------------
of this Agreement (other than that portion of the Shareholder Fund to which such
shareholder is entitled, as specified in the instructions to the Exchange
21
<PAGE>
Agent). Such shareholders shall be entitled to have such shares of Company
Common Stock held by them appraised in accordance with the provisions of Section
92A.300 to 92A.500, inclusive, of the NGCL, except that all Dissenting Shares
held by shareholders who have failed to perfect or have effectively withdrawn or
otherwise lost their right to appraisal of such shares under such provisions of
the NGCL shall thereupon be deemed to have been converted into, and to have
become exchangeable for, as of the Effective Time, the right to receive, without
any interest thereon, that portion of the Total Cash Consideration payable and
Total Stock Consideration issuable in exchange therefor pursuant to Section
-------
2.7(a) hereof, upon surrender in accordance with Section 2.8(b) hereof of the
- ------ --------------
Share Certificate(s) that formerly represented such shares of Company Common
Stock.
(b) The Company shall give Parent (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of demands for appraisal, and
any other instruments served pursuant to the NGCL and received by the Company,
and (ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under the NGCL. The Company shall not, except
with the prior written consent of Parent, make any payment with respect to any
demands for appraisal, or offer to settle, or settle, any such demand for
appraisal rights.
II.12 Allocation of Purchase Price. As promptly as practicable following
----------------------------
the execution hereof, the Company and Parent shall enter into good faith
negotiations regarding a mutually agreeable allocation of the sum of (a) the
Total Cash Consideration (including amounts allocated to the sale of the
Broadcast Station Licenses), (b) the Total Stock Consideration Value, and (c)
the Liabilities of the Company assumed by the Surviving Corporation among the
assets of the Company acquired by the Surviving Corporation. In the event that
the parties are unable to agree on an allocation by January 31, 2000, then the
parties agree to be bound by an appraisal of such assets by a mutually
acceptable independent nationally recognized firm of valuation experts. The cost
of such appraisal shall be borne equally by the Company and Parent, shall be
obtained no later than March 31, 2000, and shall be conclusive and binding on
the parties for purposes of this Section 2.12. Notwithstanding anything to the
contrary contained herein, the allocation pursuant to this Section 2.12 shall be
------------
consistent with Section 1060 of the Internal Revenue Code. The Current Company
Shareholders and Parent shall, and Parent shall cause the Surviving Corporation
to, (a) execute and file all Tax Returns and prepare all financial statements,
returns and other instruments in a manner consistent with the allocation
determined pursuant to this Section 2.12, and (b) not take any position before
------------
any Governmental Authority or in any judicial proceeding that is inconsistent
with such allocation. If the
22
<PAGE>
allocation determined pursuant to this Section 2.12 is disputed by any
------------
Governmental Authority, Parent, on behalf of the Surviving Corporation, or the
Shareholder Representative, shall provide notice of such dispute and the
resolution thereof to the other.
II.13 Sale of Broadcast Station Licenses. Notwithstanding anything to the
----------------------------------
contrary in this Agreement, in the event that Parent shall deliver written
notice to the Company, at least thirty days (30) calendar days prior to the
Closing, of Parent's desire to structure the transactions contemplated by this
Agreement in accordance with the terms of this Section 2.13, at the Closing (i)
------------
the Company shall sell, convey, transfer, assign and deliver to a wholly-owned
subsidiary of Parent designated by Parent all of the Broadcast Station Licenses,
(ii) Parent shall pay to the Company an amount in cash equal to $195 million in
exchange for such Broadcast Station Licenses, (iii) the Company shall
distribute, pursuant to Section 5.16 hereof, the $195 million proceeds from the
------------
sale of the Broadcast Station Licenses to the Current Company Shareholders, and
(iv) the Total Cash Consideration will be reduced by $195 million. Except as set
forth in this Section 2.13, all other terms and conditions of this Agreement
------------
shall remain in full force and effect.
ARTICLE III.Representations and Warranties of the COMPANY
The Company hereby represents and warrants to Parent as follows:
III.1 Organization. The Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Nevada, and has all
requisite corporate power and authority to own, operate or lease the assets and
properties now owned, operated or leased by it, and to conduct its operations
(including, without limitation, the operations of the Business) as presently
conducted by the Company. The Company is duly authorized, qualified or licensed
to do business as a foreign corporation, and is in good standing, under the Laws
of each state or other jurisdiction in which the character of its properties
owned, operated or leased, or the nature of its activities, makes such
qualification necessary, except in those states and jurisdictions where the
failure to be so qualified or in good standing would not reasonably be expected
to have a Material Adverse Effect. True and complete copies of the Articles of
Incorporation (the "Company Articles of Incorporation") and Bylaws (the "Company
--------------------------------- -------
Bylaws") of the Company, each as amended and in effect as of the date of this
- ------
Agreement, have been made available to Parent.
III.2 Authority. The Company has all requisite corporate power and
---------
authority to enter into this Agreement to perform its obligations hereunder, and
to consummate the transactions contemplated hereby. The execution and delivery
by the Company of this Agreement, the performance
23
<PAGE>
by the Company of its obligations hereunder, and the consummation by the Company
of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by Parent, this Agreement constitutes a
legally valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by principles of public policy, and subject to (i) the effect of any
applicable Laws of general application relating to bankruptcy, reorganization,
insolvency, moratorium or similar Laws affecting creditors' rights and relief of
debtors generally, and (ii) the effect of rules of law and general principles of
equity, including, without limitation, rules of law and general principles of
equity governing specific performance, injunctive relief and other equitable
remedies (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
III.3 No Violation; Third Party Consents. Assuming that all consents,
----------------------------------
waivers, approvals, orders and authorizations set forth in Schedule 3.4 hereto
have been obtained and all registrations, qualifications, designations,
declarations or filings with any Governmental Authorities set forth in Schedule
--------
3.4 hereto have been made, and except as set forth in Schedule 3.3 hereto, the
- --- ------------
execution and delivery by the Company of this Agreement, the performance by the
Company of its obligations hereunder, and the consummation by the Company of the
transactions contemplated hereby, will not conflict with or violate, constitute
a default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, give rise to any right of termination, amendment,
modification, acceleration or cancellation of any obligation or loss of any
benefit under, result in the creation of any Encumbrance other than a Permitted
Encumbrance on any of the Business Assets pursuant to, or require the Company to
obtain any consent, waiver, approval or action of, make any filing with, or give
any notice to any Person as a result or under (collectively, a "Default"), the
-------
terms and provisions of (i) the Company Articles of Incorporation or the Company
Bylaws, (ii) any Business Contract to which the Company is a party or by which
any of the Business Assets are bound, or (iii) any Law applicable to the Company
or any of the Business Assets, or any Governmental Order issued by a
Governmental Authority by which the Company or any of the Business Assets is in
any way bound or obligated.
III.4 Government Consents. No consent, waiver, approval, order or
-------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is required on the part of the Company
in connection with the execution and delivery by the Company of
24
<PAGE>
this Agreement, the performance by the Company of its obligations hereunder, and
the consummation by the Company of the transactions contemplated hereby, except
as set forth in Schedule 3.4 hereto.
III.5 Company Common Stock.
--------------------
(a The authorized capital stock of the Company consists of 5,040,000
shares of Company Common Stock, of which 3,780,000 shares have been issued and
are outstanding as of the date hereof. All such issued and outstanding shares of
Company Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable and were not issued in violation of any preemptive or
similar rights created by statute, the Company Articles of Incorporation, the
Company Bylaws or any agreement to which the Company is a party or by which it
is bound. Other than the shares of Company Common Stock issued and outstanding
as of the date hereof, there are no other issued or outstanding shares of
capital stock of the Company.
(b As of the date hereof, there are no outstanding options, warrants,
calls, rights of conversion or other rights, agreements, arrangements or
commitments of any kind or character, whether written or oral, relating to the
Company Common Stock to which the Company is a party, or by which it is bound,
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of Company Common Stock. Attached as Schedule
3.5(b) is a list of the Company's shareholders as of the date hereof.
(c Except as set forth in Schedule 3.5(c) hereto, as of the date
hereof, there are (i) no rights, agreements, arrangements or commitments of any
kind or character, whether written or oral, relating to the Company Common Stock
to which the Company is a party, or by which it is bound, obligating the Company
to repurchase, redeem or otherwise acquire any issued and outstanding shares of
Company Common Stock, and (ii) no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar rights with respect to the
Company.
III.6 Subsidiaries and Investments. Except for the Business Assets as set
----------------------------
forth in Schedule 3.6 hereto, which are owned as of the date hereof by the
Company, the Company does not have any Subsidiaries, and does not own any direct
or indirect equity or debt interest in any other Person, including, without
limitation, any interest in a corporation, partnership or joint venture, and is
not obligated or committed to acquire any such interest, in any case which
Subsidiary or interest is a Business Asset.
III.7 Financial Statements. Attached to Schedule 3.7 hereto is a true,
-------------------- ------------
correct and complete copy of the following financial statements
25
<PAGE>
(collectively, the "Financial Statements"): (i) the audited balance sheet of the
--------------------
Company dated as of December 31, 1998, and the related audited statement of
income for the year then ended (the "Year-End Company Financial Statements"),
-------------------------------------
(ii) the unaudited balance sheet ("Latest Company Balance Sheet") of the Company
-----------------------------
dated as of September 30, 1999 (the "Latest Business Balance Sheet Date"), and
----------------------------------
the related unaudited statement of income for the nine (9) month period then
ended (the "Latest Company Financial Statements" and, together with the Year-End
-----------------------------------
Company Financial Statements, the "Company Financial Statements"), (iii) the
----------------------------
unaudited balance sheet of the Business as of December 31, 1998, and the related
unaudited statement of income for the year then ended (the "Year-End Business
-----------------
Financial Statements"), and (iv) the unaudited balance sheet of the Business
- --------------------
dated as of the Latest Balance Sheet Date (the "Latest Business Balance Sheet"),
-----------------------------
and the related unaudited statement of income for the nine (9) month period then
ended (the "Latest Business Financial Statements" and, together with the Year-
------------------------------------
End Business Financial Statements, the "Business Financial Statements"). Except
-----------------------------
as set forth therein, the Company Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated therein and with each other (except that the Latest Company Financial
Statements may not contain all of the notes required by GAAP), and present
fairly, in all material respects, the financial condition of the Company as of
the respective dates thereof and the results of operations of the Company during
the respective periods indicated therein, subject in the case of the Latest
Company Financial Statements to normal recurring year-end adjustments. The
Business Financial Statements have been derived from the books and records of
the Company (which are accurate and complete in all material respects) and the
Company Financial Statements, and fairly present, in all material respects, the
assets and the Liabilities of the Company that primarily relate to, or primarily
arise out of, the Business as of the respective dates thereof, and the results
of operations of the Business for the respective periods then ended.
III.8 No Undisclosed Liabilities; Absence of Certain Changes
------------------------------------------------------
(a The Company has no Business Liabilities of a type required by GAAP
to be reflected on, or reserved against in, a balance sheet of the Company or in
the notes thereto, except (i) the Liabilities reflected on, or reserved against
in, the Latest Business Balance Sheet, (ii) Liabilities incurred in the ordinary
course of business after the Latest Business Balance Sheet Date, (iii)
Liabilities set forth in Schedule 3.8(a) hereto, and (iv) Liabilities arising
---------------
under the Business Contracts.
(b Except as set forth in Schedule 3.8(b) hereto, or as contemplated
---------------
by this Agreement, since the Latest Business Balance Sheet
26
<PAGE>
Date, the Company has conducted the Business in the ordinary course and in a
manner consistent with past practices, and there has not been, occurred or
arisen any event or occurrence which has had, or would reasonably be expected to
have, a Material Adverse Effect to the Business.
III.9 Tangible Property.
-----------------
(a Schedule 3.9(a) hereto contains a true, correct and complete
---------------
list of the following to the extent owned, used or held for use by the Company
primarily to conduct the operations of the Business: (i) each parcel of real
property owned, as of the date hereof, by the Company ("Owned Real Property"),
-------------------
(ii) each parcel of real property leased from or to a third party, as of the
date hereof, by the Company ("Leased Real Property"), and (iii) all fixed assets
--------------------
owned by the Company, as reflected in the Company's schedule of fixed assets
prepared in the ordinary course of business as of the date set forth therein.
Except as set forth in Schedule 3.9(a) hereto, the Company does not own, or have
---------------
a contractual obligation to purchase or otherwise acquire any material interest
in, any parcel of real property which would be used or held for use primarily in
the operation of the Business. All of such tangible assets and properties used
by the Company pursuant to a lease or license shall be referred to herein,
collectively, as "Leased Assets."
-------------
(b The Company has (i) legal, marketable and valid title in fee
simple to all of the Owned Real Property, (ii) valid and subsisting leasehold
interests in and to all of the Leased Real Property, and (iii) legal and valid
title to, or in the case of Leased Assets, valid and subsisting licenses or
leasehold interests in and to, all of the tangible personal property set forth
in Schedule 3.9(a) hereto, in each case free and clear of any Encumbrances other
---------------
than Permitted Encumbrances and those Encumbrances set forth in Schedule 3.9(a)
---------------
hereto.
III.10 Intellectual Property and Proprietary Rights.
--------------------------------------------
(a Schedule 3.10(a) hereto contains a true, correct and complete
----------------
list of all material Intellectual Property owned by the Company as of the date
hereof, to the extent such Intellectual Property is related primarily to the
operations of the Business ("Owned Intellectual Property"). A true and complete
---------------------------
copy of all material documentation relating to each item of Owned Intellectual
Property has been made available to Parent and its agents and representatives.
(b Except as set forth on Schedule 3.10(b), the Company owns or
has a valid right to use all Proprietary Rights used by the Company to conduct
the operations of the Business, as currently conducted by the Company, without
infringing upon the rights of any other Person. To the
27
<PAGE>
knowledge of the Company, no other Person is infringing upon the rights of the
Company in or to any of the Owned Intellectual Property.
III.11 Business Contracts.
------------------
(a Schedule 3.11(a) hereto contains a list of each Business
----------------
Contract to which the Company is a party or by which the Company or any of its
Business Assets is bound, as of the date hereof, which is material to the
Business, (each, a "Material Business Contract" and, collectively, the "Material
-------------------------- --------
Business Contracts"), including, without limitation, the following: (i)
- ------------------
noncompetition or other agreements restricting the ability of the Company to
conduct the operations of the Business in any location; and (ii) agreements
under which the Company is obligated to indemnify, or entitled to
indemnification from, any other Person, other than any agreement that requires
indemnification solely in connection with or as a result of a breach of such
agreement. For purposes of this Agreement, any Short Term Agreement or any
Business Contract to which the Company is a party and which obligates the
Company to pay less than $50,000 in annual payments shall be deemed not to be a
Material Business Contract and any Business Contract (other than a Short Term
Agreement) to which the Company is a party and which obligates the Company to
pay more than $50,000 in annual payments shall be deemed to be a Material
Business Contract. For all purposes of and under this Agreement, the term "Short
-----
Term Agreement" shall mean an agreement entered into in the ordinary course of
- --------------
business that is terminable by the Company upon ninety (90) days or less notice
without penalty.
(b The Company has made available to Parent and its agents and
representatives a copy of each written Material Business Contract. Except as
set forth in Schedule 3.11(b) hereto, (i) each Business Contract is in full
----------------
force and effect and represents a valid, binding and enforceable obligation of
the Company in accordance with the respective terms thereof and, to the
knowledge of the Company, represents a valid, binding and enforceable obligation
of each of the other parties thereto; and (ii) there exists no breach or default
(or event that with notice or the lapse of time, or both, would constitute a
breach or default) on the part of the Company or, to the knowledge of the
Company, on the part of any other party under any Business Contract.
(c The Company has delivered to Parent or its agents and
representatives true and correct copies of the Other Agreements. Each of the
Other Agreements is in full force and effect and represents a valid, binding and
enforceable obligation of the Company in accordance with the respective terms
thereof and, to the knowledge of the Company, represents a valid, binding and
enforceable obligation of each of the other parties
28
<PAGE>
thereto. There exists no breach or default (or event that with notice or the
lapse of time, or both, would constitute a breach or default) on the part of the
Company or, to the knowledge of the Company, on the part of any other party
under the Other Agreements.
III.12 Business Licenses. The Company owns or possesses all right, title
-----------------
and interest in and to all Licenses which are necessary to conduct the Business,
as conducted by the Company as of the date hereof (each, a "Business License"
and, collectively, the "Business Licenses"). No loss or expiration of and
-----------------
Business License is pending or, to the knowledge of the Company, threatened,
other than the expiration of any Business Licenses in accordance with the terms
thereof which may be renewed in the ordinary course of business.
III.13 Business Employees. Schedule 3.13 hereto contains a true, correct
------------------ -------------
and complete list of all employees of the Company who, as of the date of this
Agreement, have employment duties principally related to the Business, including
(and designating as such) any such employee who is an inactive employee on paid
or unpaid leave of absence, and indicating date of employment, current title and
compensation. Each employee set forth in Schedule 3.13 hereto who remains
-------------
employed by the Company immediately prior to the Effective Time (whether
actively or inactively), and each additional employee who is hired to work in
the Business following the date hereof and prior to the Effective Time who
remains employed by the Company immediately prior to the Effective Time (whether
actively or inactively), shall be referred to herein individually as a "Business
--------
Employee" and, collectively, as "Business Employees."
- -------- ------------------
III.14 Employee Benefit Plans.
----------------------
(a Schedule 3.14(a) hereto contains a true, correct and complete
----------------
list of each Benefit Plan which the Company sponsors, maintains, has any
obligation to contribute to, has any Liability under or is otherwise a party to,
as of the date hereof, and which covers or otherwise provides benefits to any
Business Employee or former employee of the Business (or their dependents and
beneficiaries), (each a "Business Benefit Plan" and collectively the "Business
--------------------- --------
Benefit Plans"). A true, correct, and complete copy of the applicable following
- -------------
documents have been made available to Parent and its agents and representatives
with respect to each of the Business Benefit Plans, as applicable: (i) all
current plan documents and related trust documents, and any amendments thereto;
(ii) Forms 5500 (with all Schedules thereto), financial statements, and
actuarial reports for the last three completed plan years; (iii) the most
recently issued IRS determination letter; and (iv) summary plan descriptions.
29
<PAGE>
(b Except as set forth in Schedule 3.14(b) hereto, (i) each of the
----------------
Business Benefit Plans presently complies and has been operated in compliance in
all material respects with its terms and all applicable Laws, including, without
limitation, ERISA and all tax rules for which favorable tax treatment is
intended, and (ii) each of the Business Benefit Plans which is intended to be
tax-qualified under Section 401(a) of the Internal Revenue Code has been
determined by the IRS to be so qualified and, to the knowledge of the Company,
no circumstances have occurred that would adversely affect the tax-qualified
status of any such Business Benefit Plan.
(c Except as set forth in Schedule 3.14(c) hereto, the execution and
----------------
delivery by the Company of this Agreement, the performance by the Company of its
obligations hereunder, and the consummation by the Company of the transactions
contemplated hereby, does not and will not result in the acceleration or
creation of any rights or benefits of any current Business Employee or former
employee of the Business that would not have been required but for the
transactions contemplated by this Agreement.
(d With respect to the Business Benefit Plans, all accrued
contribution obligations of the Company have been fully satisfied or are fully
reflected as payables on the Financial Statements as of the Latest Balance Sheet
Date. As of the latest annual actuarial valuation, the aggregate present value
of all accrued benefits (vested and non-vested), as determined on an ongoing
basis, under each Business Benefit Plan that is a defined benefit plan does not
exceed the aggregate fair market value of the assets of such Business Benefit
Plan. The Company has provided notice to Parent of any material change in the
net fair market value of the assets of such Business Benefit Plans of which the
Company has knowledge for the period between the latest annual asset valuation
for each such plan and the Effective Time. No plan listed on Schedule 3.14(a)
----------------
hereto has incurred an accumulated funding deficiency, as defined in Section 412
of the Internal Revenue Code and Section 302(e)(1) of ERISA.
(e To the knowledge of the Company, the Business Benefit Plans and
the Company have not engaged in any transaction prohibited under the provisions
of Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
no applicable exemption exists. The Company has incurred no liability for
excise tax or penalty due to the Internal Revenue Service or any liability to
the Pension Benefit Guaranty Corporation with respect to any Business Benefit
Plan, and no event has occurred or circumstance exists that could lead to the
imposition of any such tax, penalty or liability with respect to any Business
Benefit Plan.
(f Except as set forth on Schedule 3.14(f) hereto, (i) there has
----------------
been no complete or partial or termination of, or discontinuance of
30
<PAGE>
contribution to, any Business Benefit Plan intended to qualify under Section
401(a) of the Internal Revenue Code without notice to and approval by the
Internal Revenue Service and the Pension Benefit Guaranty Corporation, as
applicable; (ii) no Business Benefit Plan that is subject to the provisions of
Title IV of ERISA has been terminated; (iii) there has been no "reportable
event" (as defined in Section 4043 of ERISA) for which notice has not been
waived with respect to any Business Benefit Plan; (iv) the Company has not
incurred liability under Section 4062 of ERISA; and (v) other than with respect
to benefit accruals in the ordinary course and ordinary uncontested claims for
benefits thereunder, no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not limited to,
any liability to (A) any multiemployer plan for delinquent contributions or
complete or partial withdrawal (as defined in ERISA Sections 4203 and 4205,
respectively), (B) the Pension Benefit Guaranty Corporation under Title IV of
ERISA, (C) the Internal Revenue Service for any excise tax or penalty, or (D)
any entity pursuant to a statutory lien to secure payment of any such liability
with respect to any Business Benefit Plan now or heretofore maintained or
contributed to by the Company or any entity other than the Company that is, or
at any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Internal Revenue Code) that includes the Company.
(g For each year that premiums were required, the Company has paid
all premiums (and penalties for late payment, if applicable) due the Pension
Benefit Guaranty Corporation with respect to each Business Benefit Plan that is
a defined benefit plan.
(h With respect to all Business Benefit Plans, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, Forms 5500
with all applicable schedules, actuarial reports and independent accountant's
opinions) have been timely filed or distributed.
(i No Business Benefit Plan that is intended to be a tax qualified
plan under Section 401(a) of the Internal Revenue Code is the subject of a
filing pending with the Internal Revenue Service Employee Plans Compliance
Resolution System.
(j To the knowledge of the Company, as to the date hereof, no audit
or other examination by the Internal Revenue Service, Pension Benefit Guaranty
Corporation or any other governmental agency of any Form 5500 for any Business
Benefit Plan is presently in progress, nor has the Company been notified in
writing or otherwise of any request for such an audit or other examination.
31
<PAGE>
III.15 Sufficiency of Business Assets. The Company owns or has valid
------------------------------
rights to use all of the Business Assets necessary to conduct the operations of
the Business in a manner consistent withpast practice. The Business Assets are
sufficient to conduct the Business as it is presently conducted. The tangible
personal property set forth in Schedule 3.9(a) hereto and the Leased Assets are
in good condition and repair (ordinarywear and tear excepted) for property of
comparable type, age and usage, except for tangible personal property that is
obsolete and no longer used.
III.16 Litigation; Governmental Orders.
-------------------------------
(a Except as set forth in Schedule 3.16(a) hereto, as of the date
----------------
hereof, there are no pending or, to the knowledge of the Company, threatened
Actions by any Person or Governmental Authority against or relating to the
Company with respect to the Business or, to the knowledge of the Company, any
current or former employees (in their capacity as such) of the Company.
(b The Company is not subject to or bound by any Governmental
Order with respect to the Business.
III.17 Compliance with Laws. Except as set forth in Schedule 3.17 hereto,
-------------------- -------------
to the knowledge of the Company, the Company is in compliance with each Law or
Governmental Order applicable to the Business.
III.18 Tax Matters.
-----------
(a Except as set forth in Schedule 3.18(a) hereto, (i) the Company
------------------------------------------
has prepared and timely filed, and will prepare and timely file, all Tax Returns
required to be filed by or on behalf of the Company with respect to Taxes
concerning or attributable to the Company or its operations for any taxable
period ending on or before the Effective Time, taking into account any extension
of time to file that has been granted to, or obtained by or on behalf of, the
Company, (ii) all Taxes shown to be payable on such Tax Returns have been paid
or will be paid, and (iii) no deficiency for any amount of Taxes has been
proposed, asserted or assessed by a taxing authority against the Company, which
deficiency remains unpaid, except for such deficiencies which (A) are being
contested in good faith or (B) for which adequate reserves have been
established. There are no liens for Taxes on any of the assets of the Company
relating to the Business, other than liens for Taxes not yet due and payable and
those being contested in good faith.
(b Except as set forth in Schedule 3.18(b) hereto, as of the date
----------------
hereof, (i) no waivers of statutes of limitations have been given with respect
to any Tax Returns and reports of the Company, which waivers are
32
<PAGE>
currently in effect, and no request for any such waiver is currently pending,
(ii) no requests for rulings or determination letters or competent authority
relief with respect to the Company is currently pending with any taxing
authority with respect to any Taxes, and (iii) no audit or other examination of
any Tax Return of the Company is presently in progress, nor has the Company been
notified in writing of any request for such an audit or other examination.
(c The Company has filed an election to be taxed under Subchapter
S ("S Election") of the Internal Revenue Code, and, except as set forth on
----------
Schedule 3.18(c) hereto, such election is valid and effective for federal Income
- ----------------
Tax purposes and for state Income Tax purposes for all states in which the
Company files Income Tax Returns for all taxable periods of the Company as to
which the statute of limitations has not expired, including to the current
taxable period and will remain valid and effective for all taxable periods
ending on or before the Effective Time.
III.19 Environmental Matters. (i) No Hazardous Material is present at any
---------------------
of the Owned Real Property or Leased Real Property in violation of any
applicable Environmental Law, (ii) during the course of its operation of the
Business, the Company has not engaged in any Hazardous Materials Activity in
violation of any applicable Environmental Law, and (iii) as of the date hereof,
no Action is pending or, to the knowledge of the Company, has been threatened in
writing against the Company concerning any of the Owned Real Property or Leased
Real Property, or any of the Hazardous Materials Activities of the Company with
respect to its operations of the Business.
III.20 Insurance Matters.
-----------------
(a Schedule 3.20(a) hereto contains a true, correct and complete
----------------
list (specifying the insurer, the policy number or covering note number with
respect to binders and the limits, and the aggregate limit, if any, of the
insurer's liability thereunder) of all policies or binders of fire, liability,
errors and omissions, workers' compensation, vehicular, and other insurance held
by or on behalf of the Company with respect to the Business as of the date
hereof ("Business Insurance Policies").
---------------------------
(b Except as set forth on Schedule 3.20(b) hereto, all of the
----------------
Business Insurance Policies are in full force and effect. The Company is not in
default with respect to any provision contained in any such Business Insurance
Policy, nor has the Company failed to give any notice or present any claim under
any such Business Insurance Policy in due and timely fashion. The Company has
not received any notice of cancellation or non-renewal of any such Business
Insurance Policy. The Company has not received any notice from any of its
insurance carriers that any premiums will be
33
<PAGE>
materially increased in the future or that any insurance coverage under the
Business Insurance Policies will not be available in the future on substantially
the same terms as now in effect.
III.21 Transactions with Affiliates. Except as set forth in Schedule 3.21
---------------------------- -------------
hereto, no shareholder, officer, director or Business employee of the Company or
any of its Affiliates, or any immediate family member of any of the foregoing,
(a) has an outstanding loan to or from the Company, (b) has except as set forth
in Schedule 3.14(a) or Schedule 3.14(b) hereto, any contractual or other claim,
---------------- ----------------
express or implied, of any kind whatsoever against the Company, (c) has any
interest in any of the Business Assets, or (d) is currently engaged in any other
transaction with the Business other than in such person's capacity as an
employee, officer or director of the Company.
III.22 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by the Company directly
with Parent without the intervention of any Person on behalf of the Company in
such manner as to give rise to any claim by any Person against Parent or Merger
Sub for a finder's fee, brokerage commission or similar payment, other than
Donaldson, Lufkin & Jenrette Securities Corporation, whose fees and expenses
shall be borne by the Company.
III.23 FCC Matters. All licenses, permits, permissions and other
-----------
authorizations issued by the FCC for the operation of the Broadcast Station,
including, but not limited to, those listed on Schedule 3.23 hereto, and the
-------------
right to use the Broadcast Station's call letters (the "Broadcast Station
-----------------
Licenses") constitute all of the FCC licenses, permits and other authorizations
- --------
used or necessary to lawfully operate the Broadcast Station in the manner it is
now operated. The Broadcast Station Licenses, including extensions or renewals
thereof, are in full force and effect and are unimpaired by any acts or
omissions of the Company or its shareholders, employees or agents. Without
limiting the generality of the foregoing, the Broadcast Station Licenses are all
valid for the balance of the current license term applicable to television
stations licensed to communities in the state where the Broadcast Station is
located and are subject to no restrictions or conditions outside of the ordinary
course.
III.24 Accuracy of Information Supplied. None of the information supplied
--------------------------------
or to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed by Parent with the SEC to
register the issuance of Parent Class A Common Stock in connection with the
Merger (the "Form S-4") will, at the time the Form S-4 (including any amendments
--------
or supplements thereto) becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein, or necessary to
34
<PAGE>
make the statements therein, in light of the circumstances under which they were
made, not misleading, (ii) the prospectus included in the Form S-4 (such
prospectus, and any amendments or supplements thereto, the "Prospectus") will,
----------
on the date it is first mailed to shareholders of the Company and at the time of
the Company Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (iii) the proxy statement relating to the
Parent Stockholders Meeting included in the Form S-4 (such proxy statement, and
any amendments or supplements thereto, the "Parent Proxy Statement"), on the
----------------------
date it is first mailed to stockholders of Parent and at the time of the Parent
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein, or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and (iv) the proxy materials related to the Company
Shareholders Meeting (such proxy materials or information materials, and any
amendments or supplements thereto, the "Company Proxy Materials") will, on the
-----------------------
date it is first mailed to shareholders of the Company and at the time of the
Company Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein, or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
III.25 Year 2000 Readiness. The Company has made available to Parent and
-------------------
its agents and representatives disclosure regarding the state of readiness,
remediation plans and related expenditures of the Business relating to what is
commonly referred to as the "Year 2000 problem." As of the date thereof, such
disclosure was accurate. As of the date hereof, to the knowledge of the Company,
the management information systems of the Business are Year 2000 Compliant,
except as would not reasonably be expected to result in an expenditure of more
than $50,000 to be Year 2000 Compliant. For the purposes of this Section 4.22,
------------
"Year 2000 Compliant" means the ability to (a) correctly handle date information
before, during and after January 1, 2000, (b) function according to the
documentation before, during and after January 1, 2000 (assuming correct
configuration), (c) respond to two digit date input in a way that resolves the
ambiguity as to century, (d) store and provide output of date information in
ways that are unambiguous as to century and, (e) manage the leap year occurring
in the year 2000 following the quad-centennial rule.
III.26 Books and Records. Except as set forth on Schedule 3.8(a) hereto,
----------------- ---------------
the books and records of the Company relating to the Business fairly reflect the
operations of the Business.
35
<PAGE>
ARTICLE IV. Representations and Warranties of Parent
Parent hereby jointly and severally represents and warrants to the Company
as follows:
IV.1 Organization. (a Parent is a corporation duly organized, validly
------------
existing and in good standing under the laws of its jurisdiction of
incorporation, and Parent has all requisite corporate power and authority to
own, operate or lease the assets and properties now owned, operated or leased by
it, and to conduct its operations as presently conducted by Parent. Parent is
duly authorized, qualified or licensed to do business as a foreign corporation,
and is in good standing, under the Laws of each state or other jurisdiction in
which the character of its properties owned, operated or leased, or the nature
of its activities, makes such qualification necessary, except in those states
and jurisdictions where the failure to be so qualified or in good standing would
not reasonably be expected to have a Parent Material Adverse Effect.
(b Merger Sub will be a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation, and Merger Sub will have all requisite corporate power and
authority to own, operate or lease the assets and properties now owned, operated
or leased by it, and to conduct its operations as will be conducted by Merger
Sub. Merger Sub will be duly authorized, qualified or licensed to do business as
a foreign corporation, and will be in good standing, under the Laws of each
state or other jurisdiction in which the character of its properties owned,
operated or leased, or the nature of its activities, makes such qualification
necessary, except in those states and jurisdictions where the failure to be so
qualified or in good standing would not reasonably be expected to have a Parent
Material Adverse Effect.
IV.2 Authority. Parent has all requisite corporate power and authority to
---------
enter into this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution and delivery by
Parent of this Agreement, the performance by Parent of its obligations
hereunder, and the consummation by Parent of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the part
of Parent. This Agreement has been duly executed and delivered by Parent and,
assuming the due authorization, execution and delivery of this Agreement by the
Company, this Agreement constitutes a legally valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except as such
enforceability
36
<PAGE>
may be limited by principles of public policy, and subject to (i) the effect of
any applicable Laws of general application relating to bankruptcy,
reorganization, insolvency, moratorium or similar Laws affecting creditors'
rights and relief of debtors generally, and (ii) the effect of rules of law and
general principles of equity, including, without limitation, rules of law and
general principles of equity governing specific performance, injunctive relief
and other equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
IV.3 No Violation. Assuming that all consents, waivers, approvals, orders
------------
and authorizations set forth in Schedule 4.4 hereto have been obtained and all
------------
registrations, qualifications, designations, declarations or filings with any
Governmental Authorities set forth in Schedule 4.4 hereto have been made, and
------------
except as set forth in Schedule 4.3 hereto, the execution and delivery by Parent
------------
of this Agreement, the performance by Parent of its obligations hereunder, and
the consummation by Parent and Merger Sub of the transactions contemplated
hereby, will not conflict with or violate in any material respect, constitute a
material default (or event which with the giving of notice or lapse of time, or
both, would become a material default) under, give rise to any right of
termination, amendment, modification, acceleration or cancellation of any
material obligation or loss of any material benefit under, result in the
creation of any Encumbrance other than a Permitted Encumbrance on any of the
assets or properties of Parent or Merger Sub pursuant to, or require Parent or
Merger Sub to obtain any consent, waiver, approval or action of, make any filing
with, or give any notice to any Person as a result or under, the terms or
provisions of (i) the organizational documents of Parent or Merger Sub, (ii) any
material Contract to which Parent or Merger Sub is or will be a party or is or
will be bound, other than any Contract that Parent enters into in order to
obtain any financing it requires to consummate the transactions contemplated
hereby; or (iii) any Law applicable to Parent or Merger Sub, or any Governmental
Order issued by a Governmental Authority by which Parent or Merger Sub is or
will be in any way bound or obligated, except, in the case of clauses (ii) and
(iii) of this Section 4.3, as would not, in any individual case, have a Parent
-----------
Material Adverse Effect.
IV.4 Governmental Consents. No consent, waiver, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is or will be required on the part of
Parent or Merger Sub in connection with the execution and delivery by Parent of
this Agreement, the performance by Parent of its obligations hereunder, and the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
except (i) as set forth in Schedule 4.4 hereto, and (ii) where the failure to
------------
obtain such consent,
37
<PAGE>
waiver, approval, order or authorization, or to make such registration,
qualification, designation, declaration or filing, would not have a Parent
Material Adverse Effect.
IV.5 Parent Capital Stock.
--------------------
(a The authorized capital stock of Parent consists of 60,000,000
shares of Parent Common Stock, consisting of (i) 20,000,000 shares of Parent
Class A Common Stock, of which 11,136,966 shares have been issued and are
outstanding as of the date hereof, (ii) 20,000,000 shares of Class B Common
Stock, of which 2,352,251 shares have been issued and are outstanding as of the
date hereof, and (iii) zero shares of Class C Common Stock, none of which have
been issued or are outstanding as of the date hereof. All such issued and
outstanding shares of Parent Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights created by statute, the Certificate of
Incorporation or Bylaws of Parent, in each case as amended to date, or any
agreement to which Parent is or was a party or by which Parent is or was bound.
Other than the shares of Parent Common Stock issued and outstanding as of the
date hereof, there are no other issued or outstanding shares of capital stock of
Parent.
(b As of the date hereof, an aggregate of 2,300,000 shares of Parent
Class A Common Stock have been reserved for issuance under the 1995 Stock Option
Plan of Parent ("Parent Option Plan"), 1,848,853 shares of which are issuable
------------------
upon the exercise of options outstanding under the Parent Option Plan. All of
the shares of Parent Common Stock issuable upon the exercise of options
outstanding under the Parent Option Plan have been duly authorized and, upon the
exercise of such options in accordance with the terms of the Parent Option Plan
and such option, will be validly issued, fully paid and nonassessable shares of
Parent Common Stock. Except for options to purchase shares of Parent Class A
Common Stock outstanding under the Parent Option Plan and as set forth on
Schedule 4.5(b) hereto, as of the date hereof, there are no outstanding options,
- ---------------
warrants, calls, rights of conversion or other rights, agreements, arrangements
or commitments of any kind or character, whether written or oral, relating to
the Parent Common Stock to which Parent is a party, or by which it is bound,
obligating Parent to issue, deliver or sell, or cause to be issued, delivered or
sold, any shares of Parent Common Stock.
(c Except as set forth in Schedule 4.5(c) hereto, as of the date
---------------
hereof, there are (i) no rights, agreements, arrangements or commitments of any
kind or character, whether written or oral, relating to the Parent Common Stock
to which Parent is a party, or by which it is bound, obligating Parent to
repurchase, redeem or otherwise acquire any issued and
38
<PAGE>
outstanding shares of Parent Common Stock, and (ii) no outstanding or authorized
stock appreciation, phantom stock, profit participation, or other similar rights
with respect to Parent.
IV.6 Parent SEC Reports; Parent Financial Statements.
-----------------------------------------------
(a Parent has delivered to the Company true, correct and complete
copies of (i) each registration statement, proxy or information statement, form,
report and other documents required to be filed by Parent with the SEC since
January 1, 1999 (collectively, the "Parent SEC Reports"), and (ii) each
------------------
amendment or modification to any Parent SEC Report which has been filed by
Parent prior to the date hereof. As of their respective dates, the Parent SEC
Reports (i) complied (except to the extent revised or superseded by a subsequent
filing with the SEC prior to the date hereof), or, with respect to those Parent
SEC Report to be filed after the date hereof and prior to the Closing, will
comply, in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, and (ii) did not (except to the extent
revised or superseded by a subsequent filing with the SEC prior to the date
hereof), or, with respect to those Parent SEC Reports to be filed after the
date hereof and prior to the Closing (except to the extent revised or superseded
by a subsequent filing by the SEC prior to the Closing), will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Parent has
filed all Parent SEC Reports required to be filed by it under the Exchange Act
since January 1, 1999.
(b) Except as set forth therein, each of the consolidated balance
sheets of Parent, and the related consolidated statements of operations,
stockholders' equity and cash flows, included in or incorporated by reference
into the Parent SEC Reports (including the related notes and schedules) (i) was
prepared in accordance with the books and records of Parent, (ii) was prepared
in accordance with GAAP applied on a consistent basis throughout the periods
indicated therein and with each other (except that any unaudited consolidated
financial statements of the Company included in or incorporated by reference
into any of the Parent SEC Reports may not contain all of the footnotes required
by GAAP), and (iii) presents fairly (except to the extent revised or superseded
by financial statements included in a subsequent filing with the SEC prior to
the date hereof), in all material respects, the consolidated financial position
of Parent and its consolidated Subsidiaries as of the respective date thereof,
or the consolidated results of operations, stockholders' equity or cash flows,
as the case may be, of Parent and its consolidated Subsidiaries for the
39
<PAGE>
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end adjustments).
IV.7 No Undisclosed Liabilities. Neither Parent nor any of its
--------------------------
Subsidiaries has any Liabilities of a type required by GAAP to be reflected on,
or reserved against in, a consolidated balance sheet of the Parent and its
Subsidiaries or in the notes thereto, except for (i) Liabilities reflected on,
or reserved against in, the consolidated balance sheet of Parent as of September
30, 1999 included within the Form 10-Q filed by Parent with the SEC on November
10, 1999, (ii) Liabilities incurred in the ordinary course of business since
September 30, 1999, and (iii) Liabilities set forth on Schedule 4.7 hereto.
------------
IV.8 Absence of Certain Changes. Except (i) as set forth in Schedule 4.8
-------------------------- ------------
hereto, (ii) as set forth in the Parent SEC Reports, or (iii) as contemplated by
this Agreement, since September 30, 1999, Parent and its consolidated
Subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practices, and there has not been,
occurred or arisen any event or occurrence which has had, or would reasonably be
expected to have, a Parent Material Adverse Effect.
IV.9 Litigation; Governmental Orders.
-------------------------------
(a) Except as set forth in Schedule 4.9(a) hereto, as of the date
-------------------------------------------
hereof, there are no pending or, to the knowledge of Parent, threatened Actions
by any Person or Governmental Authority against or relating to Parent or any of
its consolidated Subsidiaries or, to the knowledge of Parent, any current or
former employees (in their capacity as such) of Parent or any of its
consolidated Subsidiaries, other than those which would not, in any individual
case, reasonably be expected to have a Parent Material Adverse Effect.
(b) Parent is not subject to or bound by any Governmental Order,
other than those which would not, in any individual case, reasonably be
expected, as of the date hereof, to have a Parent Material Adverse Effect.
IV.10 Compliance with Laws. Except as set forth in Schedule 4.10 hereto,
-------------------- -------------
to the knowledge of Parent, Parent is in compliance with each material Law or
Governmental Order applicable to Parent, other than those which would not, in
any individual case, reasonably be expected to have a Parent Material Adverse
Effect.
IV.11 Business Licenses. Parent and its consolidated Subsidiaries own or
-----------------
possess all right, title and interest in and to all Licenses which are
40
<PAGE>
necessary to conduct their respective operations as conducted by them as of the
date hereof, except for such Licenses which the failure to obtain or possess
would not have a Parent Material Adverse Effect. No loss or expiration of any
such License is pending or, to the knowledge of Parent, threatened, other than
the expiration of any such Licenses in accordance with the terms thereof which
may be renewed in the ordinary course of business.
IV.12 Brokers. All negotiations relative to this Agreement and the
-------------------------------------------------------------
transactions contemplated hereby have been carried out by Parent directly with
- ------------------------------------------------------------------------------
the Company without the intervention of any Person on behalf of Parent in such
- ------------------------------------------------------------------------------
manner as to give rise to any claim by any Person against the Company for a
- ---------------------------------------------------------------------------
finder's fee, brokerage commission or similar payment other than Lazard Freres &
- --------------------------------------------------------------------------------
Co. LLC, whose fees and expenses shall be borne by Parent.
- ---------------------------------------------------------
IV.13 FCC Matters. Parent is legally and financially qualified under the
-------------------------------------------------------------------
Communications Act to enter into this Agreement and to consummate the
- ---------------------------------------------------------------------
transactions contemplated hereby. Merger Sub will be legally and financially
- ----------------------------------------------------------------------------
qualified under the Communications Act to consummate the transactions
- ----------------------------------------------------------------------
contemplated hereby. It is not necessary for Parent or Merger Sub or any
- -------------------------------------------------------------------------
Affiliate of Parent or Merger Sub (or any person in which Parent or Merger Sub
- ------------------------------------------------------------------------------
or any Affiliate of Parent or Merger Sub has an attributable interest under the
- -------------------------------------------------------------------------------
Communications Act) to seek or obtain any waiver from the FCC, dispose of any
- -----------------------------------------------------------------------------
interest in any media or communications property or interest (including, without
- --------------------------------------------------------------------------------
limitation, the Broadcast Station), terminate any venture or arrangement, or
- ----------------------------------------------------------------------------
effectuate any changes or restructuring of their ownership, including, without
- ------------------------------------------------------------------------------
limitation, the withdrawal or removal of officers or directors or the conversion
- --------------------------------------------------------------------------------
or repurchase of equity securities of Parent or Merger Sub or any Affiliate of
- ------------------------------------------------------------------------------
Parent or Merger Sub or owned by Parent or Merger Sub or any Affiliate of Parent
- --------------------------------------------------------------------------------
or Merger Sub (or any person in which Parent or Merger Sub or any Affiliate of
- ------------------------------------------------------------------------------
Parent or Merger Sub has any attributable interest under the Communications
- ---------------------------------------------------------------------------
Act). Parent is and Merger Sub will be able to certify on a FCC Form 314 that it
- --------------------------------------------------------------------------------
is financially qualified.
- ------------------------
IV.14 Accuracy of Information Supplied. None of the information supplied
--------------------------------
or to be supplied by Parent for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 (including any amendments or
supplements thereto) becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein, or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, (ii) the
Prospectus will, on the date it is first mailed to shareholders of the Company
and at the time of the Company
41
<PAGE>
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, (iii) the Parent Proxy Statement will, on the date it is first
mailed to stockholders of Parent and at the time of the Parent Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein, or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (iv) the Company Proxy Materials will, on the date it is first
mailed to shareholders of the Company and at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein, or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Form S-4, the Prospectus and the Parent Proxy
Statement will comply as to form in all material respects with the requirements
of the Securities Act and the Exchange Act.
IV.15 Vote Required. The affirmative approval of a majority of the issued
-------------
and outstanding shares of Parent Common Stock is the only stockholder approval
required to approve the issuance of the Parent Class A Common Stock in
connection with the consummation of the Merger and the other transactions
contemplated hereby.
ARTICLE V.Covenants and Agreements
V.1 Conduct of Business by the Company.
----------------------------------
(a) At all times during the period commencing upon the execution and
delivery hereof by each of the parties hereto and terminating upon the earlier
to occur of the Effective Time or the termination of this Agreement pursuant to
and in accordance with the terms of Section 7.1 hereof, unless Parent shall
-----------
otherwise consent in writing (which consent shall not be unreasonably withheld
or delayed), and except as contemplated hereby or as otherwise set forth in
Schedule 5.1 hereto, the Company shall (i) conduct the operations of the
- ------------
Business in the ordinary course of business and consistent with past practices,
(ii) use commercially reasonable efforts to preserve intact the goodwill of the
Business and the current relationships of the Company with its officers,
employees, customers, suppliers and others with significant and recurring
business dealings with the Business, (iii) use commercially reasonable efforts
to maintain all Business Insurance Policies and all Business Licenses that are
necessary for the Company to carry on the Business in the manner conducted by
the Company as of the date hereof, (iv) maintain the books of account and
records of the Business in the usual, regular and ordinary manner and
42
<PAGE>
consistent with past practices, and (v) maintain accounts receivable and
accounts payable related to the Business at levels consistent with past
practice.
(b) At all times during the period commencing upon the execution and
delivery hereof by each of the parties hereto and terminating upon the earlier
to occur of the Effective Time or the termination of this Agreement pursuant to
and in accordance with the terms of Section 7.1 hereof, unless Parent shall
-----------
otherwise consent in writing (which consent shall not be unreasonably withheld
or delayed), and except as otherwise contemplated hereby or as set forth in
Schedule 5.1 hereto, the Company shall not take, or caused to be taken, any of
- ------------
the following actions (whether such actions relate to the Business, and except
for actions which relate to the Disposed Businesses or the Excluded Assets):
(i) redeem or repurchase any outstanding shares of Company
Common Stock;
(ii) split, combine, reclassify or recapitalize any class of
Company Common Stock;
(iii) authorize for issuance, issue, sell, pledge, deliver or
commit to issue, sell, pledge or deliver any Company Common Stock (including,
without limitation, any options to acquire any Company Common Stock) or any
securities convertible into or exchangeable for any class of Company Common
Stock;
(iv) amend the Company Articles of Incorporation or the Company
Bylaws;
(v) (A) other than in the ordinary course of business, enter
into any real property lease (as lessor or lessee); (B) sell, abandon or make
any other disposition of any of the assets of the Company (other than the assets
of the Disposed Businesses and the Excluded Assets) other than in the ordinary
course of business consistent with past practice; or (C) grant or incur any
Encumbrance on any of the assets of the Company (other than the assets of the
Disposed Businesses and the Excluded Assets) other than Permitted Encumbrances;
(vi) except in the ordinary course of business or pursuant to
the Other Agreements, incur or assume any Liability that will continue to exist
at the Closing;
(vii) make any acquisition of all or any part of the capital
stock or all or substantially all of the assets, properties or businesses of any
other Person; or
43
<PAGE>
(viii) make any material amendments to the Other Agreements.
(c) At all times during the period commencing upon the execution and
delivery hereof by each of the parties hereto and terminating upon the earlier
to occur of the Effective Time or the termination of this Agreement pursuant to
and in accordance with the terms of Section 7.1 hereof, unless Parent shall
-----------
otherwise consent in writing (which consent shall not be unreasonably withheld
or delayed), and except as otherwise contemplated hereby or as set forth in
Schedule 5.1 hereto, the Company shall not take, or cause to be taken, any of
- ------------
the following actions to the extent such actions relate primarily to the
Business:
(i) change or agree to rearrange in any material respect the
character of the Business;
(ii) (A) except with respect to any amendment to The Pension
Plan of the Chronicle Publishing Company which would not increase the
contribution obligation of the Company thereunder, adopt, enter into or amend
any arrangement which is, or would be, a Business Benefit Plan unless otherwise
required by applicable Law or this Agreement, or (B) make any change in any
actuarial methods or assumptions used in funding any Business Benefit Plan or in
the assumptions or factors used in determining benefit equivalencies thereunder;
provided, however, that the parties to this Agreement acknowledge and agree that
nothing herein shall prohibit the Company from amending The Pension Plan of the
Chronicle Publishing Company prior to the Effective Time to provide for lump sum
distributions of benefits thereunder;
(iii) knowingly waive any right of material value;
(iv) make any material write down of inventory or material
write off as uncollectible of accounts receivable;
(v) increase any wage, salary, bonus or other direct or
indirect compensation payable or to become payable to any of the Business
Employees, or make any accrual for or commitment or agreement to make or pay the
same, other than increases in wages, salary, bonuses or other direct or indirect
compensation made in the ordinary course of business consistent with past
practice, and those required by any existing Contract or Law;
(vi) make any payment or commitment to pay any severance or
termination pay to any Business Employee or any independent contractor,
consultant, agent or other representative of the Business,
44
<PAGE>
other than payments or commitments to pay such Business Employees in the
ordinary course of business consistent with past practice;
(vii) enter into any commitments to make capital expenditures
payable after the Effective Time in an aggregate amount exceeding $1,000,000.
(d) Notwithstanding anything to the contrary set forth in this
Section 5.1 or elsewhere in this Agreement, the Company shall be permitted,
- -----------
without obtaining the consent or other approval of Parent, to distribute the
Excluded Assets to the shareholders of the Company as provided in Section 5.15
------------
hereof, and to perform its obligations under, and consummate the transactions
contemplated by this Agreement and the Other Agreements, it being expressly
acknowledged and agreed by each of the parties hereto that the foregoing shall
include the right to distribute the proceeds from any such sale, transfer or
other disposition to the shareholders of the Company or to any entity designated
by them without obtaining the consent or other approval of Parent.
(e) The Company shall not take any action, and will use its
reasonable efforts not to permit any action to be taken, which would cause the
Company to lose its tax status as an S corporation for federal or state Income
Tax purposes.
V.2 Conduct of Business by Parent.
-----------------------------
(a) At all times during the period commencing upon the execution and
delivery hereof by each of the parties hereto and terminating upon the earlier
to occur of the Effective Time or the termination of this Agreement pursuant to
and in accordance with the terms of Section 7.1 hereof, unless the Company shall
-----------
otherwise consent in writing (which consent shall not be unreasonably withheld
or delayed), and except as otherwise contemplated hereby or as set forth in
Schedule 5.2 hereto, Parent shall not take, or caused to be taken, any of the
- ------------
following actions:
(i) declare, set aside or pay any dividend on, or make any other
distributions in respect of, any of capital stock of Parent (other than
dividends of shares of common stock on common stock or regular quarterly cash
dividends consistent with past practices);
(ii) amend the Articles of Incorporation or Bylaws of Parent in a
manner which adversely affects the preferences or relative, participating,
optional or other special rights of shares of Parent Class A Common Stock, or
the qualifications, limitations or restrictions of such rights in respect of
Parent Class A Common Stock;
45
<PAGE>
(iii) adopt a plan of complete liquidation or partial
liquidation with respect to Parent, or resolutions providing for or authorizing
such a plan of complete liquidation or partial liquidation;
(iv) take any action that could reasonably be expected to delay
the Closing; or
(v) take, offer to take, or agree to take, any of the actions
described in clauses (i) through (iv) of this Section 5.2(b), inclusive, or any
--------------
other action which could result in any of the conditions to the obligations of
Parent and Merger Sub set forth in Section 6.1 hereof to fail to be satisfied or
-----------
fulfilled.
V.3 Preparation of Form S-4, Prospectus, Parent Proxy Statement and
---------------------------------------------------------------
Company Proxy Materials.
- -----------------------
(a) Parent shall, at its sole cost and expense, use its commercially
reasonable efforts, in cooperation with the Company, to prepare and file with
the SEC as promptly as practicable following the date hereof (i) the Form S-4 to
register the issuance of Parent Class A Common Stock in connection with the
Merger, (ii) the Prospectus to be included in the Form S-4, and (iii) the Parent
Proxy Statement to be included in the Form S-4. The Form S-4, the Prospectus and
the Parent Proxy Statement shall comply as to form in all material respects with
the applicable provisions of the Securities Act and the Exchange Act. Each of
Parent and the Company shall use all reasonable efforts to have the Form S-4
declared or ordered effective by the SEC as promptly as practicable after filing
with the SEC and to keep the Form S-4 effective as long as is necessary to
consummate the Merger. Parent shall, as promptly as practicable after receipt
thereof, provide copies of any written comments received from the SEC with
respect to the Form S-4, the Prospectus and the Parent Proxy Statement to the
Company and advise the Company of any oral comments with respect to the Form S-
4, the Prospectus and the Parent Proxy Statement received from the SEC. Parent
shall, at its expense, take any action required to be taken under any applicable
state securities laws in connection with the issuance of the shares of Parent
Class A Common Stock in connection with the Merger. Parent shall provide the
Company with a reasonable opportunity to review and comment on any amendment or
supplement to the Form S-4, the Prospectus and the Parent Proxy Statement prior
to filing the same with the SEC, and shall provide the Company with a reasonable
number of copies of all such filings made with the SEC. No amendment or
supplement to the information supplied by the Company for inclusion in the Form
S-4, the Prospectus or the Parent Proxy Statement shall be made without the
approval of the Company, which approval shall not be unreasonably withheld or
delayed.
46
<PAGE>
(b) The Company shall use its commercially reasonable efforts, in
cooperation with Parent, to prepare the Company Proxy Materials as promptly as
practicable following the date hereof.
(c) Parent and the Company shall cooperate with each other (i) to
cause the Parent Proxy Statement to be mailed to the stockholders of Parent, and
to obtain the proxies of the stockholders of Parent approving the issuance of
the shares of Parent Class A Common Stock in connection with the Merger, as
required by the rules and regulations of the Nasdaq Stock Market, as soon as
practicable thereafter, and (ii) to cause the Prospectus and the Company Proxy
Materials to be mailed to the shareholders of the Company, and to obtain the
proxies of the shareholders of the Company approving the Merger and the other
transactions contemplated hereby as soon as practicable thereafter.
(d) Parent agrees to file a post-effective amendment to the Form S-4
as soon as practicable after the Effective Time to register the offer and sale
or other distribution by persons executing an Affiliate Agreement or their
assigns, heirs or legal representatives (the "Rule 145 Affiliates") of all
shares of Parent Class A Common Stock received by them in the Merger. Parent
amendment to therewith become effective and to remain effective and usable for a
period of one (1) year following the Effective Time.
V.4 Parent Stockholders Meeting; Company Shareholders Meeting.
---------------------------------------------------------
(a) Parent (i) shall, as promptly as practicable following the
execution and delivery of this Agreement by each of the parties hereto, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"Parent Stockholders Meeting") for the purpose of obtaining the affirmative
- ----------------------------
approval of the holders of a majority of the outstanding shares of Parent Common
Stock with respect to the issuance of shares of Parent Class A Common Stock in
connection with the Merger, (ii) shall take all lawful action necessary or
advisable to solicit the approval of the stockholders of Parent with respect to
the issuance of shares of Parent Class A Common Stock in connection with the
Merger, and (iii) the Board of Directors of Parent shall recommend approval of
the issuance of shares of Parent Class A Common Stock in connection with the
Merger by the stockholders of Parent.
(b) The Company (i) shall, as promptly as practicable following the
execution and delivery of this Agreement by each of the parties hereto, duly
call, give notice of, convene and hold a meeting of its shareholders (the
"Company Shareholders Meeting") for the purpose of obtaining
- -----------------------------
47
<PAGE>
the affirmative approval of the holders of a majority of the outstanding shares
of Company Common Stock with respect to this Agreement, the Merger and the other
transactions contemplated by this Agreement, (ii) shall take all lawful action
necessary or advisable to solicit the approval of the shareholders of the
Company with respect to the Merger and the other transactions contemplated by
this Agreement, and (iii) the Board of Directors of the Company shall recommend
approval of the Merger and the other transactions contemplated hereby, by the
shareholders of the Company. Notwithstanding the foregoing or anything else in
this Agreement to the contrary, the Company shall have the right to solicit the
written consent of its shareholders to obtain approval for the Merger and the
other transactions contemplated hereby.
V.5 Access and Information. Subject to the terms of the
----------------------
Confidentiality Agreement, at all times during the period commencing upon the
execution and delivery hereof by each of the parties hereto and terminating upon
the earlier to occur of the Effective Time or the termination of this Agreement
pursuant to and in accordance with the terms of Section 7.1 hereof, the Company
-----------
shall permit Parent and its authorized agents and representatives to have
reasonable access, upon reasonable notice and during normal business hours, to
all Business Employees, Business Assets and all relevant books, records and
documents of or relating to the Business, the Company and the S Election for
federal and state tax purposes, and shall furnish to Parent such information and
data, financial records and other documents relating to the Business and the
Company as Parent may reasonably request. The Company shall permit Parent and
its agents and representatives reasonable access to the Company's accountants,
auditors and suppliers for reasonable consultation or verification of any
information obtained by Parent during the course of any investigation conducted
pursuant to this Section 5.5, and shall use all commercially reasonable efforts
-----------
to cause such Persons to cooperate with Parent and its agents and
representatives in such consultations and in verifying such information.
V.6 Further Actions.
---------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement (including, without limitation, the terms of Section 5.6(b) hereof),
--------------
the Company, Parent and Merger Sub shall each use its respective commercially
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, and to assist and cooperate with the other party
or parties hereto in doing, all things necessary, proper or advisable under
applicable Laws to consummate the transactions contemplated hereby, including,
without limitation: (i) obtaining all necessary Licenses, actions or nonactions,
waivers, consents,
48
<PAGE>
approvals, authorizations, qualifications and other orders of any Governmental
Authorities with competent jurisdiction over the transactions contemplated
hereby, (ii) obtaining all necessary consents, approvals or waivers from third
parties, (iii) defending any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including, without limitation, seeking to
have vacated or reversed any stay or temporary restraining order entered by any
Governmental Authority prohibiting or otherwise restraining the consummation of
the transactions contemplated hereby, and (iv) executing and delivering any
additional instruments, certificates and other documents necessary or advisable
to consummate the transactions contemplated hereby and to fully carry out the
purposes of this Agreement.
(b) Without limiting the generality of the foregoing, the Company,
Parent and Merger Sub hereby agree to provide promptly to Governmental
Authorities with regulatory jurisdiction over enforcement of any applicable
antitrust laws all information and documents requested by any such Governmental
Authorities or necessary, proper or advisable to permit consummation of the
transactions contemplated hereby, and to file any Notification and Report Form
and related material required under the HSR Act as soon as practicable after the
date hereof. The Company, Parent and Merger Sub shall each thereafter use its
respective commercially reasonable best efforts to complete as soon as
practicable its substantial compliance with any requests for additional
information or documentary material that may be made under the HSR Act. The
Company, Parent and Merger Sub hereby further agree to use their respective
commercially reasonable best efforts to (i) obtain any governmental clearances
required for consummation of the transactions contemplated hereby, (ii) respond
to any government request for information, (iii) contest and resist any action,
including any legislative, administrative or judicial action, and have vacated,
lifted, reversed or overturned, any Governmental Order (whether temporary,
preliminary or permanent) that restricts, prevents or prohibits the consummation
of the transactions contemplated hereby, including, without limitation, by using
all legal efforts to vigorously pursue all available avenues of administrative
and judicial appeal and all available legislative action, and (iv) in the event
that any permanent or preliminary injunction or other order is entered or
becomes reasonably foreseeable to be entered in any proceeding that would make
consummation of the transactions contemplated hereby in accordance with the
terms of this Agreement unlawful or that would prohibit, prevent, delay or
otherwise restrain the consummation of the transactions contemplated hereby, to
cause the relevant Governmental Authorities to vacate, modify or suspend
49
<PAGE>
such injunction or order so as to permit the consummation of the transactions
contemplated hereby prior to the Termination Date.
V.7 Fulfillment of Conditions by the Company. The Company shall not
----------------------------------------
knowingly take or cause to be taken, or fail to take or cause to be taken, any
action that would cause the conditions to the obligations of the Company or
Parent and Merger Sub to consummate the transactions contemplated hereby to fail
to be satisfied or fulfilled at or prior to the Closing, including, without
limitation, by taking or causing to be taken, or failing to take or cause to be
taken, any action that would cause the representations and warranties made by
the Company in Article III hereof to fail to be true and correct as of the
Closing. The Company shall take, or cause to be taken, all commercially
reasonable actions within its power to cause to be satisfied or fulfilled, at or
prior to the Closing, the conditions precedent to the obligations of Parent and
Merger Sub to consummate the transactions contemplated hereby as set forth in
Section 6.1 hereof.
- -----------
V.8 Fulfillment of Conditions by Parent and Merger Sub. Parent and Merger
--------------------------------------------------
Sub shall not knowingly take or cause to be taken, or fail to take or cause to
be taken, any action that would cause the conditions to the obligations of the
Company or Parent and Merger Sub to consummate the transactions contemplated
hereby to fail to be satisfied or fulfilled at or prior to the Closing,
including, without limitation, by taking or causing to be taken, or failing to
take or cause to be taken, any action that would cause the representations and
warranties made by Parent and Merger Sub in Article IV hereof to fail to be true
and correct as of the Closing. Parent and Merger Sub shall take, or cause to be
taken, all commercially reasonable actions within its respective power to cause
to be satisfied or fulfilled, at or prior to the Closing, the conditions
precedent to the obligations of the Company to consummate the transactions
contemplated hereby as set forth in Section 6.2 hereof.
-----------
V.9 Publicity. The Company, Parent and Merger Sub shall cooperate with
---------
each other in the development and distribution of all news releases and other
public disclosures relating to the transactions contemplated by this Agreement.
Neither the Company nor Parent and Merger Sub shall issue or make, or allow to
have issued or made, any press release or public announcement concerning the
transactions contemplated by this Agreement without the consent of the other
party or parties hereto, except as otherwise required by applicable Law, but in
any event only after giving the other party or parties hereto a reasonable
opportunity to comment on such release or announcement in advance, consistent
with such applicable legal requirements.
50
<PAGE>
V.10 Transaction Costs. Whether or not the transactions contemplated
-----------------
hereby are consummated, Parent shall pay all transaction costs and expenses
(including legal, accounting and other professional fees and expenses and other
fees described in Section 4.5 hereof) that Parent and Merger Sub incur in
-----------
connection with the negotiation, execution and performance of this Agreement and
the consummation of the transactions contemplated hereby. The Company shall pay
all transaction costs and expenses (including legal, accounting and other
professional fees and expenses and other fees described in Section 3.22 hereof)
------------
that it incurs in connection with the negotiation, execution and performance of
this Agreement and the consummation of the transactions contemplated hereby, and
to the extent that such costs and expenses have not been paid as of the
Effective Time, such cost and expenses shall be included in Corporate Expenses
and adjusted for at the Closing.
V.11 Employees and Employee Benefit Matters.
--------------------------------------
(a) At or prior to the Closing (but in no event more than three (3)
calendar days prior to the Closing), the Company shall terminate the employment
of all Business Employees and other employees of the Company who are (i) not a
party to an employment agreement with the Company, (ii) not covered by a
collective bargaining agreement to which the Company is a party, or (iii) not
identified by Parent in a written instrument delivered to the Company at least
forty-five (45) calendar days prior to the Closing (all Business employees not
referred to in the foregoing clauses (i), (ii) and (iii) being referred to
herein, individually, as a "Retained Employee" and, collectively, as the
-----------------
"Retained Employees"). As of the Effective Time, Parent shall, or shall cause
------------------
the Surviving Corporation to, retain the employment of all Retained Employees.
From and after the Effective Time, each Retained Employee whose employment is
not covered by a collective bargaining agreement ("Non-Union Employees") shall
-------------------
be employed by the Surviving Corporation or Parent at a salary and on terms and
conditions (excluding employee benefits) that are at least as favorable in the
aggregate as those provided by the Company (or its Affiliates) immediately
before the execution hereof. As of the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, provide each Retained Employee with the same
type and level of employee benefits previously provided to Business Employees by
the Company by continuing benefits under the Business Benefit Plans (to the
extent such plans are not terminated before the Effective Time) for the period
specified below. Nothing in this Agreement shall be construed to require any
Retained Employee to forfeit any credit for years of service previously earned
with the Company or any Affiliate of the Company for purposes of eligibility or
vesting credit, as applicable, under the Business Benefit Plans. However, no
earlier than eighteen (18) months from the Closing Date, Parent and the
Surviving Corporation shall
51
<PAGE>
have the right and power to amend or terminate any of the Business Benefit
Plans, in order to change the type and level of benefits that Parent or the
Surviving Corporation will provide to the Retained Employees. To the extent that
any Non-Union Employees are permitted to participate in employee benefit plans
or arrangements sponsored or maintained by Parent or Surviving Corporation,
Parent or Surviving Corporation shall provide each such Non-Union Employee (i)
credit for years of service with the Company or any Affiliate of the Company
prior to the Effective Time for the purpose of eligibility and vesting under
Parent's health, vacation and other employee benefit plans (including, without
limitation, any "employee benefit plan," as defined in Section 3(2) of ERISA,
maintained or sponsored by Parent), and (ii) credit for participation in the
Business Benefit Plans prior to the Effective Time for any and all pre-existing
condition limitations and eligibility waiting periods under group health plans
of Parent or Surviving Corporation, and shall cause to be credited to any
deductible out-of-pocket expenses under any health plans of Parent any
deductibles or out-of-pocket expenses incurred by Non-Union Employees and their
beneficiaries and dependents during the portion of the plan year prior to their
participation in the health plans of Parent or Surviving Corporation.
Notwithstanding any other provision of this Agreement, Business Employees who
are covered by a collective bargaining agreement to which the Company is a party
on and after the Effective Time shall receive benefits in accordance with the
terms of such agreement as of the Effective Time.
(b) To the extent such transfers have not occurred prior to the
Effective Time, Parent shall, or shall cause the Surviving Corporation to,
effectuate the transfer of assets and liabilities of the Tax Deferred Investment
Plan of The Chronicle Publishing Company and The Pension Plan of The Chronicle
Publishing Company as provided and in accordance with the terms and conditions
of the Other Agreements.
(c) On or after the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, assume or retain, as applicable, any and all
obligations to provide continuation coverage pursuant to Section 601 of ERISA,
et seq., with respect to current and former employees of the Company and their
qualified beneficiaries for whom a "qualifying event," as defined in Section 603
of ERISA, occurs prior to the Effective Time; provided, however, that neither
Parent nor the Surviving Corporation shall have such obligation to the extent
such obligations have been assumed pursuant to the Other Agreements.
V.12 Retention and Delivery of Company Records. From and after the
-----------------------------------------
Effective Time, Parent shall, or shall cause Merger Sub to, preserve, in
accordance with the normal document retention policy of the Company, all books
and records of the Company; provided, however, that in lieu
52
<PAGE>
thereof, Parent may transfer the books and records of the Company to the
Shareholder Representative. As soon as practicable following the Effective Time,
Parent shall, or shall cause Merger Sub to, deliver to the Current Company
Shareholders of the Company (through the Shareholder Representative) financial
information relating to the Business and the Company in sufficient detail to
enable such shareholders to prepare the Company's Income Tax Returns relating to
all taxable periods ending on or prior to the Effective Time. In addition to the
foregoing, from and after the Effective Time, Parent shall, or shall cause
Merger Sub to, afford to the Current Company Shareholders of the Company, and
their respective counsel, accountants and other authorized agents and
representatives, during normal business hours and upon the execution and
delivery of a confidentiality and non-disclosure agreement in customary form and
substance (which shall include appropriate exceptions for disclosure relating to
Income Tax Returns and other Tax matters), reasonable access to the employees,
books, records and other data of the Company in the possession of Parent or
Merger Sub with respect to all taxable periods ending on or prior to the
Effective Time, and the right to make copies and extracts therefrom, to the
extent that such access may be reasonably required by the requesting party (a)
to facilitate the investigation, litigation and final disposition of any claims
which may have been or may be made against any such party or Person, or such
Person's Affiliates, (b) for the preparation of Income Tax Returns and audits
relating to the Company, and (c) for any other reasonable business purpose.
V.13 Income Tax Returns of the Company for Periods Ending On or Prior to
-------------------------------------------------------------------
the Closing Date. Notwithstanding anything to the contrary contained in this
- ----------------
Agreement, Parent and Merger Sub hereby agree that (a) the Current Company
Shareholders, at their own cost and expense, shall have sole control over and
shall be entitled and authorized to prepare, file, change, and/or amend on
behalf of the Company any and all Income Tax Returns of the Company required to
be filed for all taxable periods ending on or prior to the Effective Time, (b)
the Current Company Shareholders shall have sole control over any audits or
other investigatory proceedings relating to such Income Tax Returns and claims
for refunds of Income Taxes ("Proceedings"), and (c) if Parent or Merger Sub
-----------
receives any written or other notice of a Proceeding, Parent or Merger Sub shall
so notify the Current Company Shareholders (through the Shareholder
Representative) in writing within ten (10) Business Days of receipt of such
notice; provided, however, that the Shareholder Representative shall provide
fifteen (15) days in advance of filing to the Parent for its review copies of
the federal and state Income Tax Returns (including the Income Tax Return for
the year ended December 31, 1999) to be filed by the Company (other than the
related schedules K-1 and any shareholder composite returns) for the taxable
year
53
<PAGE>
ending with the Merger; provided further, however, that Parent shall have the
right, with respect to any Proceeding, to request information from the
Shareholder Representative as to the status and development of any Proceeding,
and shall have the right, at its own cost and expense, to participate in any
Proceeding challenging or in any way affecting the status of the Company as an S
corporation in any period ending on or prior to the Effective Time; and provided
further, however, that the Current Company Shareholders shall consult with
Parent and Merger Sub with respect to any Proceeding that may affect Parent or
Merger Sub or any of their Affiliates for taxable periods ending after the
Closing Date; and provided further, however, that the Current Company
Shareholders shall not enter into any final settlement or closing arrangement
with respect to any such Proceedings that may affect Parent or Merger Sub or any
of their Affiliates without the prior written consent of Parent and Merger Sub,
which consent shall not be unreasonably withheld or delayed. Neither Parent nor
Merger Sub shall, for any taxable period ending on or prior to the Closing Date,
without the prior written consent of all of the Current Company Shareholders,
file, change or amend any Income Tax Return of the Company; provided further,
however, that in the case of a shareholder that is a trust, such consent shall
be given by or on behalf of such trust's beneficiary or beneficiaries. Parent
and Merger Sub shall execute or cause to be executed any powers of attorney or
other documents reasonably necessary to designate representatives of the Current
Company Shareholders to take the actions reserved to the shareholders of the
Company pursuant to this Section 5.13. Neither the Current Company Shareholders,
------------
nor the Shareholder Representative on their behalf, shall take any position
before a Governmental Authority or in any Tax Return or amended Tax Return that
the Company is not an S corporation for federal or state (other than the
District of Columbia) Income Tax purposes for any period ending on or prior to
the Closing Date.
V.14 Application for FCC Consent. Within five (5) calendar days after the
---------------------------
date of this Agreement, the Company and Parent shall join in an application to
be filed with the FCC requesting its written consent to the transfer of control
of the Broadcast Station Licenses from the Company to Merger Sub (the "Transfer
--------
Applications"), and they will diligently take all steps necessary or desirable
- ------------
and proper to expeditiously prosecute the Transfer Application and to obtain the
FCC's determination that grant of the Transfer Application will serve the public
interest, convenience and necessity, including, without limitation, compliance
with the public notice requirements of the Communications Act. The failure by
either party hereto to timely file or diligently prosecute its portion of the
Transfer Application as required by this Section 5.14 shall be deemed a material
------------
breach of this Agreement.
54
<PAGE>
V.15 Transfer of Payments and Proceeds to Shareholders. Notwithstanding
-------------------------------------------------
anything to the contrary set forth in this Agreement, each of the parties hereto
hereby acknowledges and agrees that the Current Company Shareholders of the
Company shall be entitled to control any proceedings relating to, and receive
all payments, proceeds and other benefits that relate to, or arise out of or in
connection with the transactions contemplated by the Other Agreements to which
the Company is a party, it being expressly acknowledged and agreed by each of
the parties hereto that the foregoing shall include, without limitation, the
right to receive (i) all payments and proceeds from any such sale, transfer or
other disposition of the Disposed Businesses, (ii) any post-closing payments or
proceeds resulting from any post-closing adjustment to the closing payments made
under any of the Other Agreements, and (iii) any refunds of Taxes included in
Corporate Expenses or for which the shareholders of the Company have agreed to
indemnify Parent, Merger Sub or the Surviving Corporation pursuant to this
Agreement. If Parent or the Surviving Corporation receives any payments,
proceeds or other benefits referred to in the preceding sentence, Parent or the
Surviving Corporation, as the case may be, shall pay any such amount to the
Exchange Agent for deposit in the Shareholder Fund within five (5) Business Days
of such receipt, for distribution to the Current Company Shareholders in
accordance with the instructions delivered to the Exchange Agent pursuant to
Section 2.8(a) hereof. Each of the parties hereto hereby acknowledges and
- --------------
further agrees that, notwithstanding anything to the contrary set forth in this
Agreement, the Company shall be entitled, without obtaining the consent or other
approval of Parent or Merger Sub, to transfer any and all payments, proceeds and
other benefits that relate to, or arise out of or in connection with, the
transactions contemplated by any of the Other Agreements to the shareholders of
the Company or to an entity designated by them, including, without limitation,
those payments and other proceeds described in the foregoing sentence of this
Section 5.15. Parent and Merger Sub shall execute, or cause to be executed, a
- ------------
of attorney substantially, in customary form and substance, or other documents
as may be reasonably necessary, in order to effectuate the transactions
contemplated by this Section 5.15.
------------
V.16 Distribution of Excluded Assets. Notwithstanding anything to the
-------------------------------
contrary in this Agreement, Parent and Merger Sub acknowledge that the Current
Company Shareholders are entitled to the Excluded Assets. As a result, prior to
the Effective Time, the Company shall do one or more of the following: (a)
distribute the Excluded Assets to the shareholders of the Company or to a
separate entity designated by the shareholders of the Company, (b) sell the
Excluded Assets, or (c) take such other actions with
55
<PAGE>
respect to Excluded Assets as may be necessary, in the Company's sole
discretion, to effect the intent of this Section 5.16.
------------
V.17 Indemnification; Officers' and Directors' Insurance.
----------------------------------------------------
(a) The Company shall obtain a prepaid policy or policies (i.e.,
"tail coverage") which policy or policies shall provide those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy (copies of which have been heretofore delivered by the Company to Parent
or its agents and representatives) for an aggregate period of not less than six
(6) years with respect to claims arising from facts or events that occurred on
or before the Closing Date, including with respect to the transactions
contemplated by this Agreement. Parent shall, and shall cause Surviving
Corporation to, cooperate in keeping such insurance policies valid and in
effect, and shall cooperate with the Company's current and former directors and
officers on pursuing claims and obtaining coverage under such insurance
policies. The Surviving Corporation shall not be responsible for any payments or
be required to incur any expense in connection with this Section 5.17 (a) or
----------------
Section 5.17 (b).
- ----------------
(b) The terms and provisions of this Section 5.17 are intended to be
------------
in addition to the rights otherwise available to the Company Indemnified Parties
by applicable Law, charter, bylaw or agreement, and shall operate for the
benefit of, and shall be enforceable by, the Company Indemnified Parties and
their respective heirs and representatives.
V.18 Treatment for Tax Purposes. For all Income Tax purposes, the Company
--------------------------
and Parent intend, and consistent with such intention shall, and Parent shall
cause the Surviving Corporation to, treat the Merger as a taxable sale by the
Company of all of its assets to Merger Sub in exchange for the Merger
Consideration and the assumption by Merger Sub of all of the Company's
Liabilities, followed by the Company's distribution, in complete liquidation, of
the Merger Consideration to its shareholders.
V.19 Listing of Shares of Parent Common Stock. Parent shall use all
----------------------------------------
commercially reasonable efforts to cause the shares of Parent Class A Common
Stock to be issued in connection with the Merger to be approved for listing,
upon official notice of issuance, on the Nasdaq National Market System, prior to
the Effective Time.
V.20 Affiliate Agreements. On or prior to the date of the Company
--------------------
Shareholders Meeting, the Company shall deliver to Parent a letter (the "Company
-------
Affiliate Letter") identifying all persons who are "affiliates" of the Company
- ----------------
for purposes of Rule 145 promulgated under the Securities Act ("Rule 145"). On
--------
or prior to the Closing Date, the Company will use all commercially reasonable
efforts to cause each person identified as an
56
<PAGE>
"affiliate" in the Company Affiliate Letter to deliver a written affiliate
agreement in form and substance reasonably satisfactory to Parent and the
Company (an "Affiliate Agreement").
-------------------
V.21 Asset Purchase Election.
-----------------------
(a) In the event that (i) all of the conditions to the obligations of
Parent set forth in Section 6.1 hereof, other than the condition to the
-----------
obligations of Parent and Merger Sub set forth in Section 6.1(h), have been
--------------
satisfied or fulfilled, and (ii) all of the conditions to the obligations of the
Company set forth in Section 6.2 hereof, other than the condition set forth in
-----------
Section 6.2(h), have been satisfied or fulfilled, the Company may, in its sole
- --------------
discretion and upon the delivery of written notice thereof to Parent at any time
prior to the Closing under this Agreement, elect to have the terms and
conditions of this Agreement superseded and replaced in their entirety by the
terms and conditions set forth in an Asset Purchase Agreement containing terms
and conditions substantially similar to the terms hereof, except for such
additional or revised terms and conditions as are set forth on Exhibit B
---------
attached hereto ("Asset Purchase Agreement"). Upon receipt of such written
------------------------
notice, without any action by either party hereto, this Agreement shall be
deemed terminated and the Asset Purchase Agreement shall be deemed effective and
the parties hereto shall use their commercially reasonable efforts to effect the
Closing within 10 days of such written notice, or as soon as possible
thereafter.
(b) In the event that (i) all of the conditions to the obligations of
Parent and Merger Sub set forth in Section 6.1 hereof, other than the condition
-----------
to the obligations of Parent set forth in Section 6.1(h), have been satisfied or
--------------
fulfilled, (ii) all of the conditions to the obligations of the Company set
forth in Section 6.2 hereof, other the condition set forth in Section 6.2(h),
----------- --------------
have been satisfied or fulfilled, and (a) the Closing under this Agreement has
not occurred by June 30, 2000 (unless the Termination Date has been extended
beyond June 30, 2000 in accordance with Section 7.1(b), in which case, if the
--------------
Closing has not occurred by such new Termination Date) or (b) after April 30,
2000, if the Company does not have a reasonable expectation that the condition
set forth in Section 6.2(h) could be satisfied on or prior to August 31, 2000,
--------------
as evidenced by a certificate delivered by the Company to Parent, Parent may, in
its sole discretion and upon the delivery of written notice thereof to the
Company at any time prior to the Closing under this Agreement, elect to have the
terms and conditions of this Agreement superseded and replaced in their entirety
by the terms and conditions set forth in the Asset Purchase Agreement. Upon
receipt of such written notice, without any action by either party hereto, this
Agreement shall be deemed terminated and the Asset Purchase Agreement shall be
deemed effective, and the parties thereto shall use their commercially
57
<PAGE>
reasonably efforts to effect the Closing within 10 days of such written notice,
or as soon as possible thereafter.
(c) In the event that (i) all of the conditions to the obligations of
Parent and Merger Sub set forth in Section 6.1 hereof, other than the condition
-----------
set forth in Section 6.1(p), have been satisfied or fulfilled and (ii) all of
--------------
the conditions to the obligations of the Company set forth in Section 6.2 hereof
-----------
have been satisfied or fulfilled, Parent may, in its sole discretion and upon
the delivery of written notice thereof to the Company at any time prior to the
Closing under this Agreement, elect to have the terms and conditions of this
Agreement superseded and replaced in their entirety by the terms and conditions
set forth in the Asset Purchase Agreement. Upon receipt of such written notice,
without any action by either party hereto, this Agreement shall be deemed
terminated and the Asset Purchase Agreement shall be deemed effective; provided,
however, that if the Company pays Parent $25,000,000 in cash within five (5)
business days of receipt of such written notice from Parent, then such election
shall be ineffective and this Agreement and the Asset Purchase Agreement shall
both be terminated and of no further force or effect.
V.22 Reporting Requirements. The Company covenants and agrees that from
----------------------
time to time prior to the Closing Date, upon the request of Parent, and at the
expense of Parent, the Company shall (i) make promptly available to Parent such
financial information with respect to the Station and the Business as Parent may
reasonably request in writing in order to prepare any financial statements and
financial statement schedules relating to the Station and the Business which
Parent may be required to include in any registration statement, report or other
document which it files with the Securities and Exchange Commission or any state
securities commission, in appropriate form as provided by applicable federal or
state securities laws and the rules and regulations promulgated thereunder, and
shall direct its present certified public accountants, Arthur Andersen & Co., to
cooperate with Parent in connection therewith, and (ii) use its commercially
reasonably efforts to obtain promptly for Parent any consent, report, opinion or
letter of accountants required to be filed in connection therewith.
V.23 Indemnified Liabilities Letter. As soon as practicable following the
------------------------------
execution and delivery of this Agreement by each of the parties hereto, the
Company shall prepare and deliver to Parent a list of all Indemnified
Liabilities as of the date hereof known to the Company.
V.24 Tax Matters. The Company undertakes to promptly furnish to Parent
-----------
following the date hereof, Internal Revenue Service Form 2553, Election by a
Small Business Corporation (under Section 1362 of the
58
<PAGE>
Internal Revenue Code), and elections under Section 1361(d)(2) of the Internal
Revenue Code regarding qualified subchapter S trusts. Between the date hereof
and the Closing Date, the Company shall promptly notify Parent of any request by
any shareholder of the Company of a transfer of any of such shareholder's stock
in the Company.
ARTICLE VI.Closing Conditions
-----------------------------
VI.1 Conditions to Obligations of Parent. The obligations of Parent to
consummate the Merger and the other transactions contemplated by this Agreement
are subject to the satisfaction or fulfillment at or prior to the Closing of the
following conditions, any of which may be waived in whole or in part by Parent
in writing:
(a) (i) All representations and warranties of the Company contained
in this Agreement shall be true and correct at and as of the Closing with the
same effect as though such representations and warranties were made at and as of
the Closing (other than any representation or warranty that is expressly made as
of a specified date, which shall be true and correct as of such specified date
only), and (ii) the Company shall have performed and complied in with all the
covenants and agreements required by this Agreement to be performed or complied
with by it at or prior to the Closing, except in the case of clauses (i) and
(ii) of this Section 6.1(a), where the failure to be so true and correct, and
the failure to so perform and comply, would not result in Damages in the
aggregate in excess of $10,000,000, and except for changes specifically
permitted or required by this Agreement.
(b) [Intentionally omitted]
(c) All applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(d) There shall be in effect no Law or injunction issued by a court
of competent jurisdiction making illegal or otherwise prohibiting or restraining
the consummation of the transactions contemplated by this Agreement.
(e) The Company shall have delivered to Parent the following
certificates, instruments at or prior to the Closing:
(i) an officer's certificate customary for a transaction of
this type signed on behalf of the Company by a duly authorized officer thereof;
59
<PAGE>
(ii) a secretary's certificate customary for a transaction of
this type signed on behalf of the Company by the secretary thereof;
(iii) a certificate of the Company certifying as to its non-
foreign status which complies with the requirements of Section 1445 of the
Internal Revenue Code, signed on behalf of the Company by a duly authorized
officer thereof;
(iv) a certificate of good standing issued by the Secretary of
State of the State of Nevada; and
(v) a copy of the Company Articles of Incorporation, certified
by the Secretary of State of the State of Nevada.
(f) Parent shall have a received a legal opinion of Latham & Watkins,
outside counsel for the Company customary for a transaction of this type.
(g) Parent shall have a received a legal opinion of W. Ronald Ingram,
general counsel of the Company customary for a transaction of this type.
(h) The Company shall have closed the sales of the assets of the
Company as contemplated by the Other Agreements and shall not be in possession
of the Excluded Assets.
(i) The FCC shall have granted its consent to the Transfer Application
and such consent shall have become a Final Order.
(j) Parent shall have obtained the affirmative approval of the holders
of that number of outstanding shares of Parent Common Stock required to approve
the issuance of the Parent Class A Common Stock in connection with the Merger,
as required by the rules and regulations of the Nasdaq Stock Market.
(k) The Company shall have obtained the affirmative approval of the
holders of that number of outstanding shares of Company Common Stock required to
approve the Merger and the other transactions contemplated hereby under the NGCL
and the Company Articles of Incorporation.
(l) The holders of no more than five percent (5%) of the outstanding
shares of Company Common Stock shall have demanded appraisal for such shares in
accordance with the applicable provisions of the NGCL.
60
<PAGE>
(m) The shares of Parent Class A Common Stock to be issued in
connection with the Merger shall have been approved for listing, subject to
official notice of issuance, on the Nasdaq National Market System.
(n) The Form S-4 shall have been declared or ordered effective by the
SEC under the Securities Act, and no stop order suspending the effectiveness of
the Form S-4 shall have been issued by the SEC, and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
(o) Since the execution and delivery of this Agreement by each of the
parties hereto, there shall not have been any event or occurrence that has had,
or would reasonably be expected to have, a Material Adverse Effect.
(p) The S Election shall continue to be valid and in effect.
VI.2 Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to consummate the Merger and the other transactions contemplated by this
Agreement are subject to the satisfaction or fulfillment at or prior to the
Closing of the following conditions, any of which may be waived in whole or in
part by the Company in writing:
(a) All representations and warranties of Parent contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing with the same effect as though such representations and warranties were
made at and as of the Closing (other than any representation or warranty that is
expressly made as of a specified date, which shall be true and correct in all
material respects as of such specified date only).
(b) Parent shall have performed and complied in all material respects
with the covenants and agreements required by this Agreement to be performed or
complied with by them at or prior to the Closing.
(c) All applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(d) There shall be in effect no Law or injunction issued by a court
of competent jurisdiction making illegal or otherwise prohibiting or restraining
the consummation of the transactions contemplated by this Agreement.
(e) Parent shall have delivered to the Company the following
certificates, instruments and other documents:
61
<PAGE>
(i) an officer's certificate customary for a transaction of
this type signed on behalf of Parent by a duly authorized officer thereof; and
(ii) a secretary's certificate customary for a transaction of
this type signed on behalf of Parent by the respective secretaries thereof.
(f) Parent shall have a received a legal opinion of Cooperman Levitt
Winikoff Lester & Newman, P.C., outside counsel for the Company, customary for a
transaction of this type.
(g) The FCC shall have granted its consent to the Transfer Application
and such consent shall have become a Final Order.
(h) The Company shall have closed the sale of the assets of the
Company as contemplated by the Other Agreements and shall not be in possession
of the Excluded Assets.
(i) The Company shall have obtained the affirmative approval of the
holders of that number of outstanding shares of Company Common Stock required to
approve the Merger and the other transactions contemplated hereby under the NGCL
and the Company Articles of Incorporation.
(j) Parent shall have obtained the affirmative approval of the
holders of that number of outstanding shares of Parent Common Stock required to
approve the issuance of the Parent Class A Common Stock in connection with the
Merger, as required by the rules and regulations of the Nasdaq Stock Market.
(k) The Form S-4 shall have been declared or ordered effective by the
SEC under the Securities Act, and no stop order suspending the effectiveness of
the Form S-4 shall have been issued by the SEC, and no proceedings for that
purpose shall have been initiated or threatened by the SEC, and none of the
shares of Parent Class A Common Stock to be issued in connection with the Merger
shall be "restricted securities" as defined in Rule 144 promulgated under the
Securities Act.
(l) Since the execution and delivery of this Agreement by each of the
parties hereto, there shall not have been any event or occurrence that has had,
or would reasonably be expected to have, a Parent Material Adverse Effect.
(m) Each shareholder of the Company shall have received a copy of the
Registration Rights Agreement, substantially in the form attached
62
<PAGE>
hereto as Exhibit C, signed on behalf of Parent by a duly authorized officer
---------
thereof.
ARTICLE VII. TERMINATION
VII.1 Termination. This Agreement and the transactions contemplated
-----------
hereby may be terminated and abandoned:
(a) by either the Company, on the one hand, or Parent, on the other
hand, at any time prior to the Closing with the mutual written consent of the
other party or parties hereto;
(b) unless the Closing has not occurred as a result of a breach of
this Agreement by the party or parties seeking such termination, by either the
Company, on the one hand, or Parent, on the other hand, if the Closing has not
occurred on or prior to 5:00 p.m. (California time) on June 30, 2000 (the
"Termination Date"); provided, however, that Parent, in its sole discretion, may
elect to extend the Termination Date until 5:00 p.m. (California time) on August
31, 2000 in the event that the Closing has not occurred prior to June 30, 2000
as a result of the failure of any of the conditions to the obligations of Parent
set forth in Section 6.1(i) or Section 6.1(n) hereof to be satisfied or
-------------- --------------
fulfilled prior to June 30, 2000 (unless either or both of such conditions have
failed to be satisfied or fulfilled as a result of a breach of this Agreement by
Parent); and provided further, however, that that the Company, in its sole
discretion, may elect to extend the Termination Date until 5:00 p.m. (California
time) on August 31, 2000 in the event that the Closing has not occurred prior to
June 30, 2000 as a result of the failure of any of the conditions to the
obligations of the Company set forth in Section 6.2(g), Section 6.2(h) or
-------------- --------------
Section 6.2(k) hereof to be satisfied or fulfilled prior to June 30, 2000
- --------------
(unless any of such conditions has failed to be satisfied or fulfilled as a
result of a breach of this Agreement by the Company); provided, however, that in
the event that the Company elects to extend the Termination Date due to the
failure of the condition to the obligations of the Company set forth in Section
-------
6.2(h) (but only if the Company has a reasonable expectation that the condition
- ------
set forth in Section 6.2(h) could be satisfied on or prior to August 31, 2000)
--------------
to be satisfied or fulfilled, the Company shall pay Parent $6,666.00 for each
day the Termination Date is extended past June 30, 2000;
(c) by either the Company, on the one hand, or Parent, on the other
hand, if any Governmental Authority with jurisdiction over such matters shall
have issued a final and nonappealable Governmental Order permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement; provided, however, that neither the
Company nor Parent may terminate this Agreement pursuant to this Section 7.1(c)
--------------
unless the party or parties seeking to so terminate this Agreement has used all
commercially reasonable best efforts to oppose any such
63
<PAGE>
Governmental Order or to have such Governmental Order vacated or made
inapplicable to the transactions contemplated by this Agreement;
(d) by either the Company, on the one hand, or Parent, on the other
hand, if a Final Order granting the Transfer Application is not secured on or
before the Termination Date (including any extension thereof); provided,
however, that neither the Company, on the one hand, nor Parent, on the other
hand, may terminate this Agreement pursuant to this Section 7.1(d) if such party
--------------
or parties is in material default hereunder, or if a delay in any decision or
determinations by the FCC respecting the Transfer Application has been caused or
materially contributed to by any failure on the part of such party or parties to
furnish, file or make available information within its control or caused by the
willful furnishing by such party or parties of incorrect, inaccurate or
incomplete information to the FCC, or caused by any action taken by such party
or parties for the purposes of delaying any decision or determination respecting
the Transfer Application; or
(e) by either the Company, on one hand, or Parent, on the other
hand, if, for any reason, the Transfer Application is designated for hearing by
the FCC; provided, however, that neither the Company, on the one hand, nor
Parent, on the other hand, may terminate this Agreement pursuant to this Section
-------
7.1(e) if such party or parties is in material default hereunder, or if such
- ------
designation for hearing was caused by or materially contributed to by its
misrepresentations in the Agreement or in the Transfer Application or it is in
willful and knowing violation of the FCC's rules or policies.
VII.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 7.1 hereof, this Agreement shall become null and void and none of the
parties hereto shall have any further liability hereunder except that (i) the
provisions of Section 5.9 and Section 5.10 hereof, and Article IX hereof
----------- ------------ ----------
generally, shall remain in full force and effect, and (ii) each party hereto
shall remain liable to each other party hereto for any breach of its obligations
under this Agreement prior to such termination.
ARTICLE VIII. SURVIVAL; INDEMNIFICATION
VIII.1 Survival. Except as set forth in the following sentence, none of
--------
the representations and warranties of the Company or Parent contained in this
Agreement, or in any certificate, instrument or other document delivered by the
Company, Parent or Merger Sub pursuant to this Agreement or in connection with
the transactions contemplated hereby, shall survive the Closing. The
representations and warranties set forth in Section 3.8(a) (No Undisclosed
Liabilities), Section 3.9 (Tangible Property), Section 3.14 (Employee Benefit
----------- ------------
Plans), Section 3.16(a) (Litigation), Section 3.18 (Tax Matters) and Section
--------------- ------------ -------
3.19 (Environmental Matters) shall survive the Closing until the first
- ----
anniversary of the Closing and claims for
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<PAGE>
indemnification against the Escrow Fund may be brought only within one year
following the Closing in accordance with the procedures specified in this
Article VIII. None of the covenants and agreements of the Company, Parent or
Merger Sub contained in this Agreement, or in any certificate, instrument or
other document delivered by the Company, Parent or Merger Sub pursuant to this
Agreement or in connection with the transactions contemplated hereby, shall
survive the Closing, except to the extent such covenants and agreements by their
terms contemplate performance after the Closing. Except as set forth in this
Article VIII, no claim shall be made or brought by any party hereto after the
- ------------
Closing for the breach of any covenant or agreement contained in this Agreement,
or in any certificate, instrument or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby, except
with respect to those covenants and agreements that by their terms contemplate
performance after the Closing.
VIII.2 Indemnification from Escrow Fund.
--------------------------------
(a) Subject to the conditions and provisions of this Article VIII,
from and after the Closing Date, Parent, Merger Sub and the Surviving
Corporation may seek indemnification from, and shall have the right to be
indemnified out of, the Escrow Fund for (a) any and all direct damages, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit of proceeding), but shall exclude any consequential, punitive,
exemplary or similar non-compensatory damages (such direct damages, losses,
liabilities and expenses, collectively "Damages") incurred or sustained by
-------
Parent, Merger Sub or the Surviving Corporation arising out of any breach of any
representation and warranty set forth in Section 3.8(a) (No Undisclosed
--------------
Liabilities), Section 3.9 (Tangible Property), Section 3.14 (Employee Benefit
----------- ------------
Plans), Section 3.16(a) (Litigation), Section 3.18 (Tax Matters) and Section
--------------- ------------ -------
3.19 (Environmental Matters) hereof, and (b) any and all Damages incurred or
- ----
sustained by Parent, Merger Sub or Surviving Corporation arising out of any
claims with respect to Indemnified Liabilities. Claims for indemnification on
account of Indemnified Liabilities against the Escrow Fund may be brought only
within the three year period following the Closing in accordance with the
procedures specified in this Article VIII.
(b) PARENT, MERGER SUB AND THE SURVIVING CORPORATION SHALL HAVE
INDEMNIFICATION ONLY PURSUANT TO THIS ARTICLE VIII, AND ONLY TO THE EXTENT OF
THE ESCROW AMOUNT CONTAINED IN THE ESCROW FUND, AND NO OFFICER, DIRECTOR,
EMPLOYEE OR SHAREHOLDER OF THE COMPANY SHALL HAVE ANY
65
<PAGE>
LIABILITY TO PARENT, MERGER SUB OR THE SURVIVING CORPORATION FOR INDEMNIFICATION
OR OTHERWISE PURSUANT TO THIS AGREEMENT.
VIII.3 Conditions and Indemnification. The rights of Parent, Merger Sub
------------------------------
and Surviving Corporation to indemnification pursuant to Section 8.2 hereof
shall be subject to the following terms and conditions:
(a) Parent must notify the Shareholder Representative of any claims
for indemnification pursuant to Section 8.2 hereof (a "Claim") within a
----------- -----
commercially reasonable time after Parent, through an executive officer, becomes
aware of the basis for such Claim; provided, however, that the failure to give
such notice shall not affect the rights of Parent, Merger Sub or Surviving
Corporation hereunder except to the extent that the rights of the Current
Company Shareholders shall have been materially prejudiced by reason of such
failure. The notice of a Claim shall set forth the basis of the Claim in
reasonable detail, and Parent shall otherwise make available to the Shareholder
Representative all relevant information which is material to the Claim and which
is in the possession of the indemnified party. In no event can a Claim for
indemnification pursuant to (i) Section 8.2(a) hereof be made on or after the
--------------
first (1/st/) anniversary of the Closing Date, or (ii) Section 8.2(b) hereof be
--------------
made on or after the third (3/rd/) anniversary of the Closing Date. In addition,
claims for indemnification pursuant to Section 8.2(b) hereof can be made only
--------------
after a claim by a third party has been made with respect to an Indemnified Loss
and then only in an amount reasonably related to the claim asserted by such
third party.
(b) If any Claim involves a claim by any third party, including
without limitation a Governmental Authority, including a claim or Action with
respect to an Indemnified Liability (a "Third-Party Claim"), the Shareholder
-----------------
Representative shall have the right to undertake, by counsel or other
representatives of its own choosing, reasonably acceptable to Parent, the
settlement, compromise or defense of any such Third Party Claim. In the event
that the Shareholder Representative shall not elect to undertake such defense,
or, within a reasonable time after notice from Parent of any such Third Party
Claim, shall fail to defend, Parent (upon further written notice to the
Shareholder Representative) shall have the right to undertake the defense,
compromise or settlement of such Third Party Claim, by counsel or other
representatives of its own choosing. Anything in this Section 8.3 to the
-----------
contrary notwithstanding and except as otherwise set forth in Section 5.13
------------
hereof, (i) if there is a reasonable probability that a Third Party Claim may
materially and adversely affect Parent, Parent shall have the right, at its own
cost and expense, to participate in the defense, compromise or settlement of the
Third Party Claim, (ii) the Shareholder Representative shall not, without
Parent's written consent (which consent shall not be unreasonably withheld or
66
<PAGE>
delayed), settle or compromise any Third Party Claim or consent to entry of any
judgment which is other than for money damages only and does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to Parent
of a release from all liability in respect of such Third Party Claim, (iii) in
the event that the Shareholder Representative undertakes defense, settlement or
compromise of any Third Party Claim, Parent, by counsel or other representative
of its own choosing and at its sole cost and expense, shall have the right to
consult with the Shareholder Representative and his counsel or other
representatives concerning such Third Party Claim and Parent and the Shareholder
Representative and their respective counsel or other representatives shall
cooperate with respect to such Third Party Claim, (iv) in the event that the
Shareholder Representative undertakes defense of any such Third Party Claim, the
Shareholder Representative shall have an obligation to keep Parent informed of
the status of the defense of such Third Party Claim and furnish Parent with all
documents, instruments and information that Parent shall reasonably request in
connection therewith, and (v) in the event Parent undertakes the defense,
settlement or compromise of any such Third Party Claim, Parent shall have an
obligation to keep the Shareholder Representative informed of the status of the
defense of such Third Party Claim and furnish the Shareholder Representative
with all documents, instruments and information that the Shareholder
Representative shall reasonably request in connection therewith, and the
Shareholder Representative, by counsel or other representative of his own
choosing and at his sole cost and expense, shall have the right to consult with
Parent and its counsel or other representatives concerning such Third Party
Claim, and Parent and the Shareholder Representative and their respective
counsel or other representatives shall cooperate with respect to such Third
Party Claim, and Parent shall not pay, settle, adjust or compromise any
Indemnified Liability or such Third Party Claim without the prior written
consent of the Shareholder Representative, which consent shall not be
unreasonably withheld or delayed.
VIII.4 Limitations; Certain Other Indemnification Matters.
---------------------------------------------------
(a) Notwithstanding the foregoing, any Claim made pursuant to Section
8.2(a) hereof shall be recoverable only in the event that the accumulated amount
of Damages with respect to Claims made pursuant to Section 8.2(a) hereof exceeds
--------------
$10,000,000 in the aggregate (and shall be recoverable only for amounts in
excess of such amount). Claims made pursuant to Section 8.2(b) shall be
--------------
recoverable from the first dollar of the Claim asserted and on a dollar for
dollar basis.
(b) The amount of any Damage or Claim, including with respect to
Indemnified Liabilities, otherwise recoverable under this Article VIII by
------------
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<PAGE>
Parent, Merger Sub or Surviving Corporation shall be (i) reduced by any amounts
recovered by Parent, Merger Sub, Surviving Corporation or their Subsidiaries
under insurance policies, indemnification agreements or other arrangements
pursuant to which others are responsible for such Damages or Claims (net of any
costs incurred in connection with the collection thereof) (it being understood
that Parent, Merger Sub, Surviving Corporation and their subsidiaries shall use
its commercially reasonable efforts to timely pursue all reasonable remedies
against applicable insurers, indemnitors or other liable parties), and (ii) (A)
increased to take account of any Tax cost incurred by Parent, Merger Sub,
Surviving Corporation or their Subsidiaries by reason of the receipt of any
indemnity payment, and (B) reduced to take account of any Tax benefit realized
by Parent, Merger Sub, Surviving Corporation or their Subsidiaries by reason of
the incurrence or payment of such Damage. In computing the amount of any such
Tax cost or Tax benefit, Parent, Merger Sub, Surviving Corporation or their
Subsidiaries shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt of any
indemnity payment hereunder or the incurrence or payment of any indemnified
Damage or Claim.
(c) Parent, Merger Sub and Surviving Corporation shall not be entitled
to indemnification under Section 8.2 for Damages incurred or sustained by
-----------
Parent, Merger Sub or Surviving Corporation arising out of a breach of any
representation and warranty set forth in Section 3.19 (Environmental Matters)
------------
(A) to the extent that the Damage arises from or is due to any use of the Owned
Real Property or the Leased Real Property for other than the use of such
property on the Closing Date or other use reasonably necessary for the conduct
of the Business, or (B) unless the Response Activities (as defined below) are
required under any Environmental Law. If Parent, Merger Sub or Surviving
Corporation is entitled to indemnification under Section 8.2 from and against
-----------
any Damage in connection with the performance of any investigation, clean-up,
removal, containment, or other remediation or response actions ("Response
--------
Activities"), such Damage shall be limited to Damage incurred to meet the least
- ----------
stringent standards or requirements that the Parent, Merger Sub or Surviving
Corporation is required to meet under the applicable Environmental Law, and to
use the affected Owned Real Property or Leased Real Property to conduct the
Business. If any Claim involves a Response Activity for which a third-party has
or reasonably may be expected to have liability under any Environmental Law,
Parent, Merger Sub or Surviving Corporation, as the case may be, shall not waive
or compromise any claim (under law or equity) for contribution or indemnity
against any such third-party (including any prior owner or operator of the Owned
Real Property or Leased Real Property). To the extent that Parent, Merger Sub
or Surviving Corporation
68
<PAGE>
are indemnified under Section 8.2 for Damages resulting from a Response Activity
-----------
for which a third-party has or reasonably may be expected to have liability
under any Environmental Law, Parent, Merger Sub and Surviving Corporation, as
the case may be, shall assign the Shareholder Representative any claim for
contribution or indemnity against such third-party in respect to such Damage.
Parent, Merger Sub and Surviving Corporation shall cooperate (without incurring
out-of-pocket expenditures) with the Shareholder Representative in respect to
any claim for contribution or indemnity that the Shareholder Representative may
bring against any third-party related to environmental matters. The amount of
any Damage arising out of a breach of any representation and warranty set forth
in Section 3.19 (Environmental Matters) otherwise recoverable under Section 8.2
------------ -----------
shall be reduced by any amounts recovered by Parent, Merger Sub, Surviving
Corporation or their Subsidiaries from any third party.
(d) Any payment made under any indemnity provided for in this Article
-------
VIII shall be treated by the parties to this Agreement as a purchase price
- ----
adjustment for Tax purposes.
(e) Parent's, Merger Sub's, Surviving Corporation's and their
Affiliates' sole and exclusive remedy with respect to any and all claims and
Actions relating to the subject matter of this Agreement and the transactions
contemplated hereby shall be pursuant to the indemnification provisions set
forth in this Article VIII. In furtherance of the foregoing, each of Parent,
------------
Merger Sub and Surviving Corporation, on its own behalf and on behalf of its
Affiliates, hereby waives, to the fullest extent permitted under applicable Law,
and agrees not to assert in any Action or proceeding of any kind, any and all
rights, claims and causes of action it or such Affiliate may now or hereafter
have against the other parties hereto relating to the subject matter of this
Agreement and the transactions contemplated hereby other than claims for
indemnification asserted as permitted by and in accordance with the terms and
provisions set forth in this Article VIII (including any such rights, claims or
------------
causes of action arising under or based upon the common law or other applicable
law).
(f) Parent, Merger Sub and Surviving Corporation shall not be entitled
to indemnification for any Damages or Claims which were included in Corporate
Expenses and resulted in an adjustment of the Total Cash Consideration.
(g) Parent, Merger Sub, Surviving Corporation and the Shareholder
Representative shall cooperate with each other in respect to resolving any
Claim, including by making commercially reasonable efforts to mitigate or
resolve any such Claim. Parent, Merger Sub and the
69
<PAGE>
Surviving Corporation shall use their reasonable efforts not to take any actions
with the intention of provoking a Governmental Authority to make a claim that it
would not otherwise have made.
(h) No Claim shall be made pursuant to Section 8.2(a) hereof with
--------------
respect to any Indemnified Liability.
VIII.5 Recovery for Indemnifiable Losses. The sole source of recovery for
-------------------------------------------------------------------
the indemnification obligations set forth in Section 8.2 hereof shall be the
- --------------------------------------------------------
Escrow Amount as deposited in the Escrow Fund, to be held and disbursed pursuant
to the terms and conditions set forth in the Escrow Agreement. All claims for
indemnification made pursuant to Section 8.2 hereof shall be effected solely by
-----------
recovery against the funds held in the Escrow Fund, if any, at the time of any
such claim for indemnification. The terms and conditions under which Parent and
Merger Sub shall be entitled to recover proceeds from the Escrow Fund are set
forth in the Escrow Agreement.
ARTICLE IX.miscellaneous
IX.1 Notices. All notices that are required or may be given pursuant to
-------------------------------------------------------------------
this Agreement must be in writing and delivered personally, by a recognized
- ---------------------------------------------------------------------------
courier service, by a recognized overnight delivery service, by telecopy or by
- ------------------------------------------------------------------------------
registered or certified mail, postage prepaid, to the parties at the following
- -------------------------------------------------------------------------------
addresses (or to the attention of such other person or such other address as any
- --------------------------------------------------------------------------------
party may provide to the other parties by notice in accordance with this Section
- --------------------------------------------------------------------------------
9.1):
- ----
if to Parent or Merger Sub, to: with copies to:
------------------------------- --------------
Young Broadcasting, Inc. Cooperman Levitt Winikoff
599 Lexington Avenue Lester & Newman, P.C.
New York, New York 10022 800 Third Avenue
Attention: James A. Morgan New York, New York 10022
Executive Vice President Attention: Robert L. Winikoff
70
<PAGE>
if to the Company prior to with copies to:
--------------------------- --------------
the Closing, to:
---------------
The Chronicle Publishing Company Latham & Watkins
901 Mission Street 135 Commonwealth Drive
San Francisco, California 94103 Menlo Park, California 94025
Attention: W. Ronald Ingram Attention: Peter F. Kerman
Kimberly Wilkinson
and, with regard to matters
---------------------------
relating to Taxes, to:
---------------------
Skadden, Arps, Slate, Meagher &
Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Matthew A. Rosen
if regarding the Company or with a copies to:
--------------------------- ----------------
the Shareholder Representative
------------------------------
after the Closing:
-----------------
Latham & Watkins
The address provided from 135 Commonwealth Drive
time to time by the Menlo Park, California 94025
Shareholder Representative Attention: Peter F. Kerman
Kimberly Wilkinson
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<PAGE>
and, with regard to matters
---------------------------
relating to Taxes, to:
---------------------
Skadden, Arps, Slate, Meagher &
Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Matthew A. Rosen
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy (receipt confirmed) or, if mailed, when actually received.
IX.2 Attorneys' Fees and Costs. If attorneys' fees or other costs are
-------------------------
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate relief,
whether by way of prosecution or defense, the prevailing party will be entitled
to recover reasonable attorneys' fees and costs incurred in connection
therewith.
IX.3 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder may be assigned or delegated by the Company, Parent or
Merger Sub without the prior written consent of the other party or parties
hereto and any purported assignment or delegation in violation hereof shall be
null and void; provided, however, that Parent may assign its rights to
indemnification under this Agreement to any insurer referred to in Section
-------
8.4(b) hereof.
- ------
IX.4 Amendments and Waiver. This Agreement may not be modified or amended
---------------------
except in writing signed by the party or parties against whom enforcement is
sought. The terms of this Agreement may be waived only by a written instrument
signed by the party or parties waiving compliance. No waiver of any provision of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise provided. No delay on the part of any party
or parties hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof,
72
<PAGE>
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Unless otherwise provided, the rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies which the parties hereto may otherwise have at law or in equity.
Whenever this Agreement requires or permits consent by or on behalf of a party
or parties hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
-------
9.4.
- ---
IX.5 Entire Agreement. This Agreement, the Confidentiality Agreement and
----------------
the related documents contained as Exhibits and Schedules hereto or expressly
contemplated hereby contain the entire understanding of the parties relating to
the subject matter hereof and supersede all prior written or oral and all
contemporaneous oral agreements and understandings relating to the subject
matter hereof. The Exhibits and Schedules to this Agreement are hereby
incorporated by reference into and made a part of this Agreement for all
purposes.
IX.6 Representations and Warranties Complete. The representations,
---------------------------------------
warranties, covenants and agreements set forth in this Agreement and the
Confidentiality Agreement constitute all the representations, warranties,
covenants and agreements of the parties hereto and their respective
shareholders, directors, officers, employees, affiliates, advisors (including
financial, legal and accounting), agents and representatives and upon which the
parties have relied.
IX.7 Third Party Beneficiaries. Except as set forth below in this Section
------------------------- -------
9.7, this Agreement is made for the sole for the benefit of the parties hereto
- ---
and nothing contained herein, express or implied, is intended to or shall confer
upon any other Person any third party beneficiary right or any other legal or
equitable rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement. Notwithstanding the foregoing or anything to the
contrary contained in this Agreement, the parties hereto acknowledge and agree
that the shareholders of the Company are third party beneficiaries of the
benefits under this Agreement that inure to the Company following the Closing,
and, as a result, a representative of the shareholders, to be designated in
writing by the Company prior to the Closing and after the Closing from time to
time by Current Company Shareholders owning a majority of the Company Common
Stock immediately prior to the Effective Time (the "Shareholder
-----------
Representative"), shall be entitled to enforce any of the shareholders' third
- --------------
party beneficiary rights following the Closing for so long as any such rights
remain in effect pursuant to the terms of this Agreement.
73
<PAGE>
IX.8 Governing Law. This Agreement will be governed by and construed and
-------------
interpreted in accordance with the substantive laws of the State of Delaware,
except for corporate matters relating to the Company which shall be governed by
the laws of the State of Nevada, in each case without giving effect to any
conflicts of law rule or principle that might require the application of the
laws of another jurisdiction.
IX.9 Neutral Construction. The parties to this Agreement agree that this
--------------------
Agreement was negotiated fairly between them at arms' length and that the final
terms of this Agreement are the product of the parties' negotiations. Each party
hereto represents and warrants that it has sought and received legal counsel of
its own choosing with regard to the contents of this Agreement and the rights
and obligations affected hereby. The parties hereto agree that this Agreement
shall be deemed to have been jointly and equally drafted by them, and that the
provisions of this Agreement therefore should not be construed against any of
the parties hereto on the grounds that a party drafted or was more responsible
for drafting the provision(s) hereof.
IX.10 Severability. In the event that any one or more of the provisions
------------
or parts of a provision contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or any other jurisdiction, but this
Agreement shall be reformed and construed in any such jurisdiction as if such
invalid or illegal or unenforceable provision or part of a provision had never
been contained herein and such provision or part shall be reformed so that it
would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction.
IX.11 Headings; Interpretation; Schedules and Exhibits. The descriptive
------------------------------------------------
headings of the several Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement. References to
Sections or Articles, unless otherwise indicated, are references to Sections and
Articles of this Agreement. The word "including" means including without
limitation. Words (including defined terms) in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires. The terms "hereof," "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Schedules
and Exhibits hereto) and not to any particular provision of this Agreement
unless otherwise specified. It is understood and agreed that neither the
specifications of any dollar amount in this Agreement nor the inclusion of any
specific item in the Schedules or Exhibits is intended to imply that such
74
<PAGE>
amounts or higher or lower amounts, or the items so included or other items, are
or are not material, and neither party shall use the fact of setting of such
amounts or the fact of the inclusion of such item in the Schedules or Exhibits
in any dispute or controversy between the parties as to whether any obligation,
item or matter is or is not material for purposes hereof.
IX.12 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
--------------------
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (II) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.12.
------------
IX.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts for the convenience of the parties hereto, each of which shall be
deemed an original and all of which together will constitute one and the same
instrument.
[Remainder of Page Intentionally Left Blank]
75
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the date first above written.
THE CHRONICLE PUBLISHING COMPANY
By:______________________________________
Name:
Title:
YOUNG BROADCASTING INC.
By:______________________________________
Name:
Title:
<PAGE>
ANNEX B
[Letterhead of Lazard Freres & Co. LLC]
November 15, 1999
The Board of Directors
Young Broadcasting Inc.
599 Lexington Avenue
New York, NY 10022
Dear Members of the Board:
We understand that Young Broadcasting Inc., a Delaware corporation (the
"Company"), and The Chronicle Publishing Company, a Nevada corporation
("Chronicle"), propose to enter into an Agreement and Plan of Merger (the
"Agreement"), pursuant to which Chronicle will merge with and into a Delaware
corporation to be formed by the Company as its wholly-owned subsidiary ("Merger
Sub"), with Merger Sub surviving the merger as a wholly-owned subsidiary of the
Company (the "Merger"). Pursuant to the Merger, the shares of the capital stock
of Chronicle, par value $0.01 per share, issued and outstanding as of the date
of the Merger will be converted into the right to receive an aggregate
consideration (the "Consideration") consisting of $650 million in cash and 3.5
million shares of Class A Common Stock of the Company, par value $0.001 per
share (the "Company Common Stock"), subject to adjustment as provided in the
Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, to the Company of the Consideration to be paid in connection with the
Merger. In connection with this opinion, we have, among other things:
(i)Reviewed the financial terms and conditions of a draft Agreement dated
November 12, 1999;
(ii) Analyzed certain historical business and financial information
relating to the Company and Chronicle;
(iii) Reviewed various financial forecasts and other data relating to the
Company provided to us by the Company and financial forecasts
relating to Chronicle through 2000 provided to us by Chronicle (which
forecasts, in each case, were limited up to the year 2000, the
Company and Chronicle having informed us that no other meaningful
longer term forecasts we prepared by them) and financial forecasts
relating to Chronicle from 2000 to 2004 provided to us by the
Company;
(iv) Held discussions with members of senior management of the Company and
Chronicle with respect to the businesses and prospects of the Company
and Chronicle, respectively, the strategic objectives of each, and
possible benefits that might be realized following the Merger;
(v) Reviewed public information with respect to certain other companies in
lines of business we believe to be generally comparable to those of the
Company and Chronicle;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be generally
comparable to those of the Company and Chronicle;
(vii)Reviewed the historical stock prices and trading volumes of the
Company Common Stock;
(viii)Conducted such other financial studies, analyses and investigations
as we deemed appropriate;
We have relied upon the accuracy and completeness of the foregoing
information and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company and Chronicle, or concerning
the solvency of or issues relating to solvency concerning the Company or
Chronicle. With respect to financial forecasts, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and
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judgments of management of the Company and Chronicle as to the future financial
performance of the Company and Chronicle, respectively. We assume no
responsibility for and express no view as to such forecasts or the assumptions
on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. In rendering our opinion, we did not address the relative
merits of the Merger or the Company's underlying decision to effect the Merger.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and that obtaining the necessary
regulatory approvals, if any, for the Merger will not have an adverse effect on
the Company or Chronicle and that the projected synergies of the Merger are
realized substantially in accordance with such projections. We have also
assumed that the definitive Agreement will not differ in any material respect
from the draft thereof furnished to us.
Lazard Freres & Co. LLC is acting as investment banker to the Company in
connection with the Merger and will receive a fee for our services, which is
contingent upon the consummation of the Merger. We have in the past provided
investment banking services to the Company for which we received usual and
customary compensation.
Our engagement and the opinion expressed herein are solely for the benefit
of the Company's Board of Directors and our opinion is rendered to the
Company's Board of Directors in connection with its consideration of the
Merger. This opinion is not intended to and does not constitute a
recommendation to any holder of the Company Common Stock as to whether such
stockholder should vote for the Merger, if such vote is required under the
Company's certificate of incorporation and/or applicable law. We are not
expressing any opinion herein as to the prices at which the Company Common
Stock will trade following the announcement or consummation of the Merger. It
is understood that this letter may not be disclosed or otherwise referred to
without our prior consent, except as may otherwise be required by law or by a
court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
Consideration to be paid in connection with the Merger is fair to the Company
from a financial point of view.
Very truly yours
Lazard Freres & Co. LLC
/s/ Peter R. Ezersky
By: _________________________________
Peter R. Ezersky
Managing Director
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[Letterhead of Donaldson, Lufkin & Jenrette Securities Corporation]
Annex C
November 15, 1999
Board of Directors
The Chronicle Publishing Company
901 Mission Street
San Francisco, CA 94103
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to The Chronicle Publishing Company (the "Company") of the aggregate
consideration to be received by the holders of common stock, par value $0.01
per share ("Company Common Stock") of the Company pursuant to the terms of the
Agreement and Plan of Merger, dated November 15, 1999 (the "Agreement"), by and
between Young Broadcasting Inc. ("Young") and the Company, the Company will be
merged (the "Merger") with and into a to be formed subsidiary of Young.
Pursuant to the Merger, Young will pay to holders of Company Common Stock an
aggregate amount of (i) $650,000,000 million in cash and (ii) a number of
shares Young's Class A Common Stock, par value $0.01 per share ("Young Class A
Common Stock") equal to:
(i) in the event the average closing sale price of Young's Class A Common
Stock for the 20 consecutive trading days ending 3 trading days prior
to consummation of the Merger is equal to or greater than $44.38 and
less than or equal to $54.24, an amount equal to $172,585,000 divided
by such average price;
(ii)in the event such average price is less than $44.38, an amount equal to
3,888,801; and
(iii) in the event such average price is greater than $54.24, an amount
equal to 3,181,877.
In arriving at our opinion, we have reviewed the draft dated November 15,
1999 of the Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company including
information provided during discussions with the management of the Company.
Included in the information provided during discussions with the management of
the Company were certain financial projections of the Company for the period
beginning January 1, 1999 and ending December 31, 2004 prepared by the
management of the Company. In addition, we have compared certain projected
financial data of the Company with certain other companies whose securities are
traded in public markets, reviewed prices paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by the Company or its
respective representatives, or that was otherwise reviewed by us and have
assumed that the Company is not aware of any information prepared by it or its
advisors that might be material to our opinion that has not been made available
to us.
With respect to the financial projections supplied to us, we have relied on
representations that they have been reasonably prepared on the basis reflecting
the best currently available estimates and judgments of the management of the
Company as to the future operating and financial performance of the Company. In
addition, we have assumed that the Merger will be consummated only upon
satisfaction of all the conditions set forth in the Agreement, including
consummation of the asset sales contemplated by the Other Agreements (as
defined in the Agreement). We have not assumed any responsibility for making an
independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
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Our opinion is necessarily based on economic, market, Financial and other
conditions as they exist on, and on the information made available to us as of
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion as to the prices
at which Young Class A Common Stock will actually trade at any time. Our
opinion does not address the relative merits of the Merger and the other
business strategies being considered by the Company's Board of Directors, nor
does it address the Board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholders should vote on the proposed Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the aggregate consideration to be received by the holders
of Company Common Stock is fair to the Company from a financial point of view.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
/s/ Jill Greenthal
By: _________________________________
Jill Greenthal
Managing Director
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ANNEX D
QUALIFICATIONS OF AND PROCEDURES
FOR DISSENTING STOCKHOLDERS
NEVADA REVISED STATUTES SEC. 92A
92A.300 DEFINITIONS. As used in Nevada Revised Statutes ("NRS") 92A.300 to
92A.500, inclusive, unless the context otherwise requires, the words and terms
defined in NRS 92A.305 to 92A.335, inclusive, have the meanings ascribed to
them in those sections.
92A.305 "BENEFICIAL STOCKHOLDER" DEFINED. "Beneficial stockholder" means a
person who is a beneficial owner of shares held in a voting trust or by a
nominee as the stockholder of record.
92A.310 "CORPORATE ACTION" DEFINED. "Corporate action" means the action of a
domestic corporation.
92A.315 "DISSENTER" DEFINED. "Dissenter" means a stockholder who is entitled
to dissent from a domestic corporation's action under NRS 92A.380 and who
exercises that right when and in the manner required by NRS 92A.410 to 92A.480,
inclusive.
92A.320 "FAIR VALUE" DEFINED. "Fair value," with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation of
the corporate action to which he objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable.
92A.325 "STOCKHOLDER" DEFINED. "Stockholder" means a stockholder of record
or a beneficial stockholder of a domestic corporation.
92A.330 "STOCKHOLDER OF RECORD" DEFINED. "Stockholder of record" means the
person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic corporation.
92A.335 "SUBJECT CORPORATION" DEFINED. "Subject corporation" means the
domestic corporation which is the issuer of the shares held by a dissenter
before the corporate action creating the dissenter's rights becomes effective
or the surviving or acquiring entity of that issuer after the corporate action
becomes effective.
92A.340 COMPUTATION OF INTEREST. Interest payable pursuant to NRS 92A.300 to
92A.500, inclusive, must be computed from the effective date of the action
until the date of payment, at the average rate currently paid by the entity on
its principal bank loans, or if it has no bank loans, at a rate that is fair
and equitable under all of the circumstances.
92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP. A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited partnership are
available for any class or group of partnership interests in connection with
any merger or exchange in which the domestic limited partnership is a
constituent entity.
92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED-LIABILITY
COMPANY. The articles of organization or operating agreement of a domestic
limited-liability company or, unless otherwise provided in the articles of
organization or operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of a dissenting
member are available in connection with any merger or exchange in which the
domestic limited-liability company is a constituent entity.
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92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT CORPORATION.
1. Except as otherwise provided in subsection 2, and unless otherwise
provided in the articles or bylaws, any member of any constituent domestic
nonprofit corporation who voted against the merger may, without prior
notice, but within 30 days after the effective date of the merger, resign
from membership and is thereby excused from all contractual obligations to
the constituent or surviving corporations which did not occur before his
resignation and is thereby entitled to those rights, if any, which would
have existed if there had been no merger and the membership had been
terminated or the member had been expelled.
2. Unless otherwise provided in its articles of incorporation or bylaws,
no member of a domestic nonprofit corporation, including, but not limited
to, a cooperative corporation, which supplies services described in chapter
704 of NRS to its members only, and no person who is a member of a domestic
nonprofit corporation as a condition of or by reason of the ownership of an
interest in real property, may resign and dissent pursuant to subsection 1.
92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS AND
TO OBTAIN PAYMENT FOR SHARES.
1. Except as otherwise provided in NRS 92A.370 to 92A.390, a stockholder
is entitled to dissent from, and obtain payment of the fair value of his
shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic
corporation is a party:
(1) If approval by the stockholders is required for the merger by
NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation
and he is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is merged
with its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's
interests will be acquired, if he is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders
to the event that the articles of incorporation, bylaws or a resolution
of the board of directors provides that voting or nonvoting stockholders
are entitled to dissent and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under NRS
92A.300 to 92A.500, inclusive, may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent with
respect to him or the domestic corporation.
92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN CLASSES OR
SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER.
1. There is no right of dissent with respect to a plan of merger or
exchange in favor of stockholders of any class or series which, at the
record date fixed to determine the stockholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or exchange is to
be acted on, were either listed on a national securities exchange, included
in the national market system by the National Association of Securities
Dealers, Inc., or held by at least 2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation issuing the
shares provide otherwise; or
(b) The holders of the class or series are required under the plan of
merger or exchange to accept for the shares anything except:
(1) Cash, owner's interest or owner's interests and cash in lieu
of fractional owner's interests of:
(I) The surviving or acquiring entity; or
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(II) Any other entity which, at the effective date of the
plan of merger or exchange, were either listed on a national
securities exchange, included in the national market system by
the National Association of Securities Dealers, Inc., or held of
record by at least 2,000 holders of owner's interests of record;
or
(2) A combination of cash and owner's interests of the kind
described in sub-subparagraphs (I) and (II) of subparagraph (1) of
paragraph (b).
2. There is no right of dissent for any holders of stock of the
surviving domestic corporation if the plan of merger does not require
action of the stockholders of the surviving domestic corporation under NRS
92A.130.
92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY TO
SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER.
1. A stockholder of record may assert dissenter's rights as to fewer
than all of the shares registered in his name only if he dissents with
respect to all shares beneficially owned by any one person and notifies the
subject corporation in writing of the name and address of each person on
who behalf he asserts dissenter's rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which he
dissents and his other shares were registered in the names of different
stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares
held on his behalf only if:
(a) He submits to the subject corporation the written consent of the
stockholder of record to the dissent not later than the time the
beneficial stockholder asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to direct the vote.
92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT.
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, the notice of the meeting
must state that stockholders are or may be entitled to assert dissenters'
rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a
copy of those sections.
2. If the corporate action creating dissenters' rights is taken by
written consent of the stockholders or without a vote of the stockholders,
the domestic corporation shall notify in writing all stockholders entitled
to assert dissenters' rights that the action was taken and send them the
dissenter's notice described in NRS 92A.430.
92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES.
1. If a proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, a stockholder who wishes to
assert dissenter's right:
(a) Must deliver to the subject corporation, before the vote is
taken, written notice of his intent to demand payment for his shares if
the proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1
is not entitled to payment for his shares under this chapter.
92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT
RIGHTS; CONTENTS.
1. If a proposed corporate action creating dissenters' rights is
authorized at a stockholders' meeting, the subject corporation shall
deliver a written dissenter's notice to all stockholders who satisfied the
requirements to assert those rights.
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2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and
when certificates, if any, for shares must be deposited:
(b) Inform the holders of shares not represented by certificates to
what extent the transfer of the shares will be restricted after the
demand for payment is received;
(c) Supply a form for demanding payment that includes the date of
the first announcement to the news media or to the stockholders of the
terms of the proposed action and requires that the person asserting
dissenter's rights certify whether or not he acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the subject corporation must receive the
demand for payment, which may not be less than 30 nor more than 60 days
after the date the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF RIGHTS
OF STOCKHOLDER.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenter's notice for
this certification; and
(c) Deposit his certificates, if any, in accordance with the terms
of the notice.
2. The stockholder who demands payment and deposits his certificates, if
any, before the proposed corporate action is taken retains all other rights
of a stockholder until those rights are canceled or modified by the taking
of the proposed corporate action.
3. The stockholder who does not demand payment or deposit his
certificates where required, each by the date set forth in the dissenter's
notice, is not entitled to payment for his shares under this chapter.
92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER DEMAND
FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER.
1. The subject corporation may restrict the transfer of shares not
represented by a certificate from the date the demand for their payment is
received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder
until those rights are canceled or modified by the taking of the proposed
corporate action.
92A.450 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.
1. Except as otherwise provided in NRS 92A.470, within 30 days after
receipt of a demand for payment, the subject corporation shall pay each
dissenter who complied with NRS 92A.440 the amount the subject corporation
estimates to be the fair value of his shares, plus accrued interest. The
obligation of the subject corporation under this subsection may be enforced
by the district court.
(a) Of the county where the corporation's registered office is
located; or
(b) At the election of any dissenter residing or having its
registered office in this state, of the county where the dissenter
resides or has its registered office. The court shall dispose of the
compliant promptly.
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2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of payment,
a statement of income for that year, a statement of changes in the
stockholders' equity for that year and the latest available interim
financial statements, if any:
(b) A statement of the subject corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under
NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF DISSENTER'S
NOTICE.
1. A subject corporation may elect to withhold payment from a dissenter
unless he was the beneficial owner of the shares before the date set forth
in the dissenter's notice as the date of the first announcement to the news
media or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment,
after taking the proposed action, it shall estimate the fair value of the
shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
subject corporation shall send with its offer a statement of its estimate
of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment
pursuant to NRS 92A.480.
92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT
CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE.
1. A dissenter may notify the subject corporation in writing of his own
estimate of the fair value of his shares and the amount of interest due,
and demand payment of his estimate, less any payment pursuant to NRS
92A.160, or reject the offer pursuant to NRS 92A.470 and demand payment of
the fair value of his shares and interest due, if he believes that the
amount paid pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is
less than the fair value of his shares or that the interest due is
incorrectly calculated.
2. A dissenter waives his rights to demand payment pursuant to this
section unless he notifies the subject corporation of his demand in writing
within 30 days after the subject corporation made or offered payment for
his shares.
92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT
CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER.
1. If a demand for payment remains unsettled, the subject corporation
shall commence a proceeding within 60 days after receiving the demand and
petition the court to determine the fair value of the shares and accrued
interest. If the subject corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the district
court of the county where its registered office is located. If the subject
corporation is a foreign entity without a resident agent in the state, it
shall commence the proceeding in the county where the registered office of
the domestic corporation merged with or whose shares were acquired by the
foreign entity was located.
3. The subject corporation shall make all dissenters, whether or not
residents of Nevada, whose demands remain unsettled, parties to the
proceeding as in an action against their shares. All parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
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4. The jurisdiction of the court in which the proceeding is commenced
under subsection 2 is plenary and elusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or any amendment thereto. The dissenters are
entitled to the same discovery rights as parties in other civil
proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value
of his shares, plus interest, exceeds the amount paid by the subject
corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the subject corporation elected to withhold payment
pursuant to NRS 92A.470.
92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS AND
FEES.
1. The court in a proceeding to determine fair value shall determine all
of the costs of the proceeding, including the reasonable compensation and
expenses of any appraisers appointed by the court. The court shall assess
the costs against the subject corporation, except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and
experts for the respective parties, in the amounts the court finds
equitable:
(a) Against the subject corporation and in favor of all dissenters
if the court finds the subject corporation did not substantially comply
with the requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor
of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in
good faith with respect to the rights provided by NRS 92A.300 to
92A.500, inclusive.
3. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and
that the fees for those services should not be assessed against the subject
corporation, the court may award to those counsel reasonable fees to be
paid out of the amounts awarded to the dissenters who were benefitted.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may
assess the costs against the subject corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court
finds that such parties did not act in good faith in instituting the
proceeding.
5. This section does not preclude any party in a proceeding commenced
pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P.
68 or NRS 17.115.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 145 also empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of
the capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery or the court in
which such action was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation is empowered to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
Section 10 of Young's Restated Certificate of Incorporation provides as
follows:
The Corporation shall, to the fullest extent permitted by Section 145 of the
General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under such section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-laws, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Article V, Section 5 of Young's Second Amended and Restated By-Laws provides
as follows:
The Corporation shall indemnify to the full extent authorized by law any
person made or threatened to be made a party to an action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer, employee or
agent of the Corporation or is or was serving, at the request of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
II-1
<PAGE>
Item 21. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 15, 1999, among
Young Broadcasting Inc. and The Chronicle Publishing Company
(Incorporated by reference to Annex A to the Joint Proxy
Statement/Prospectus that is a part of this filing)
3.1(a) Restated Certificate of Incorporation of Young (Incorporated by
reference to the Registrant's Registration Statement on Form S-1,
Registration No. 33-83336)
3.1(b) Certificate of Amendment to Restated Certificate of Incorporation of
Young (Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Registration No. 33-94192)
3.1(c) Certificate of Amendment to Restated Certificate of Incorporation of
Young (Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Registration No. 333-31429)
3.2 Second Amended and Restated By-laws of Young (Incorporated by
reference to the Registrant's Registration Statement on Form S-1,
Registration No. 33-83336)
4.1 Specimen Stock Certificate (Incorporated by reference to the
Registrant's Registration Statement on Form S-1, Registration No. 33-
83336)
5.1 Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C. as to the
legality of the securities being registered*
8.1 Opinion and Consent of Skadden Arps Slate Meagher & Flom as to certain
federal income tax consequences described in the Joint Proxy
Statement/Prospectus**
21.1 Subsidiaries of Young*
23.1 Consent of Ernst & Young on behalf of Young and KRON-TV and BayTV**
23.2 Consent of Cooperman Levitt Winikoff Lester & Newman, P.C. (included
in Exhibit 5.1)*
23.3 Consent of Skadden Arps Slate Meagher & Flom (included in Exhibit
8.1)**
23.4 Consent of Lazard Freres & Co. LLC**
23.5 Consent of Donaldson, Lufkin & Jenrette Securities Corporation**
24.1 Powers of Attorney*
99.1 Form of proxy for Special Meeting of Stockholders of Chronicle
Publishing Company**
99.2 Form of proxy for Special Meeting of Stockholders of Young
Broadcasting**
</TABLE>
- --------
* Previously filed
** Filed herewith
All supporting schedules have been omitted because they are not required or the
information required to be set forth therein is included in the financial
statements or the notes thereto included in the Joint Proxy
Statement/Prospectus.
II-2
<PAGE>
Item 22. Undertakings.
(a) Registrant hereby undertakes as follows:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form; and
(2) that every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act"), and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospects pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(d) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
Company being acquired involved therein, that was not the subject of and
included in the Registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 23rd day of March, 2000.
Young Broadcasting Inc.
/s/ Vincent J. Young
By: _________________________________
Vincent J. Young,
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Vincent J. Young Chairman and Director March 23, 2000
______________________________________ (principal executive
Vincent J. Young officer)
* President and Director March 23, 2000
______________________________________
Ronald J. Kwasnick
* Treasurer and Director March 23, 2000
______________________________________
Adam Young
/s/ James A. Morgan Executive Vice President March 23, 2000
______________________________________ (principal financial
James A. Morgan officer and principal
accounting officer)
* Director March 23, 2000
______________________________________
Bernard F. Curry
* Director March 23, 2000
______________________________________
Alfred J. Hickey, Jr.
* Director March 23, 2000
______________________________________
David C. Lee
* Director March 23, 2000
______________________________________
Leif Lomo
* Director March 23, 2000
______________________________________
Robert L. Winikoff
</TABLE>
James A Morgan
*By: _______________________
James A. Morgan, as Attorney-in-
Fact
March 23, 2000
II-4
<PAGE>
Exhibit 8.1
[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]
March 23, 2000
The Chronicle Publishing Company
901 Mission Street
San Francisco, California 94103
Ladies and Gentlemen:
We have acted as tax counsel to The Chronicle Publishing Company, a Nevada
corporation ("CPC"), in connection with the preparation of the Joint Proxy
Statement/Prospectus, which is included in the Registration Statement on Form
S-4 (the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the proposed merger (the "Merger") of CPC with and into a wholly-
owned subsidiary of Young Broadcasting Inc. ("Young"), pursuant to the
Agreement and Plan of Merger by and between Young and CPC, dated November 15,
1999 (the "Merger Agreement"). Capitalized terms used and not defined herein
shall have the meanings ascribed to them in the Merger Agreement.
In rendering our opinion, we have examined and relied upon the accuracy and
completeness of the facts, information, covenants and representations contained
in originals or copies, certified or otherwise identified to our satisfaction,
of the Merger Agreement (including the exhibits and schedules thereto), the
Registration Statement, and such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. Our opinion is
conditioned on, among other things, the initial and continuing accuracy of the
facts, information, covenants and representations set forth in the documents
referred to above and statements and representations made by CPC. For purposes
of rendering our opinion, have assumed that such statements and representations
are true without regard to any qualification as to knowledge or belief.
In our examination we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted as us as certified or photostatic copies and the authenticity of the
originals of such copies. We also have assumed that the transactions related to
the Merger or contemplated by the Merger Agreement will be consummated in
accordance with the Merger Agreement and as described in the Registration
Statement, and that none of the terms and conditions contained therein will
have been waived or modified in any material respect prior to the Effective
Time.
In rendering our opinion, we have considered applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder (the "Regulations"), pertinent judicial authorities,
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant. It should be noted that the Code, Regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some circumstances, with retroactive effect. A change in any of the
authorities upon which our opinion is based could affect our conclusions
herein.
<PAGE>
Based solely upon and subject to the foregoing, and the qualifications,
assumptions and limitations set forth under the caption "Material United
States Federal Income Tax Consequences" in the Joint Proxy
Statement/Prospectus, the discussion set forth under the caption "Material
United States Federal Income Tax Consequences" in the Joint Proxy
Statement/Prospectus, to the extent relating to matters of United States
federal income tax law, represents our opinion as to the material United
States federal income tax consequences of the Merger to holders of CPC common
stock under current law.
Except as set forth above, we express no opinion to any party as to the tax
consequences, whether federal, state, local or foreign, of the Merger or of
any transactions related thereto or contemplated by the Merger Agreement or
the Registration Statement. We disclaim any undertaking to advise you of any
subsequent changes of the facts stated or assumed herein or any subsequent
changes in applicable law. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher &
Flom LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-4 No. 333-31156) and
related Prospectus of Young Broadcasting Inc. for the registration of 3,888,788
shares of its Class A common stock and to the use of our report dated February
7, 2000 with respect to the consolidated financial statements of Young
Broadcasting Inc. as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999, and to the use of our report dated
February 4, 2000 with respect to the combined financial statements of KRON-TV,
a Division of The Chronicle Publishing Company and BayTV Joint Venture as of
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999, included in the Proxy Statement of Young Broadcasting Inc.
that is made a part of the Registration Statement.
/s/ Ernst & Young LLP
New York, New York
March 22, 2000
<PAGE>
Exhibit 23.4
[Letterhead of Lazard Freres & Co. LLC]
The Board of Directors
Young Broadcasting, Inc.
599 Lexington Avenue
New York, NY 10022
Re: Proxy Statement of Young Broadcasting Inc. ("Young")
Filed as Part of the Registration Statement on Form S-4
Dear Members of the Board:
Reference is made to our opinion letter dated November 15, 1999 with respect
to the fairness, from a financial point of view, to Young Broadcasting Inc. of
the consideration to be paid in connection with the Merger as defined in the
first paragraph of such opinion letter pursuant to the Merger Agreement
referred to therein.
The foregoing opinion letter is for the information and assistance of the
Board of Directors of Young in connection with its consideration of the
transactions contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purposes, nor is it to be filed with or
referred to in whole or in part in any registration statement, proxy statement
or any other document, except in accordance with our prior written consent.
In that regard, we hereby consent to the reference to the opinion of our
firm under the captions "Opinion of Young Financial Advisor" and to the
inclusion of the foregoing opinion in the above-referenced Proxy Statement
included in the above-referenced Registration Statement. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1993 or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
LAZARD FRERES & CO. LLC
/s/ Scott Hoffman
By: ____________________________
Scott Hoffman
Managing Director
<PAGE>
Exhibit 23.5
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter, dated November
15, 1999, to the Board of Directors of The Chronicle Publishing Company (the
"Company") as Annex C to the joint Proxy Statement/Prospectus of the Company
relating to the Company's merger with and into Young Broadcasting
San Francisco, Inc. and (ii) all references to DLJ in the sections captioned
"Summary", "Background of the Merger", "Recommendation of The Chronicle
Publishing Board; Chronicle Publishing's Reasons for the Merger", and "Opinion
of Chronicle Publishing's Financial Advisor" of the joint Proxy
Statement/Prospectus of Young Broadcasting Inc. and The Chronicle Publishing
Company which forms a part of this Registration Statement on Form S-4. In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under, and we do not admit that we are
"experts" for purposes of, the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Donaldson, Lufkin &
Jenrette
Securities Corporation
----------------------------
New York, New York
March 21, 2000
<PAGE>
EXHIBIT 99.1
CHRONICLE PUBLISHING COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John B. Sias and W. Ronald Ingram as
proxies, each with the power of substitution, and hereby authorizes them to
vote all shares of common stock of the undersigned at the special meeting of
The Chronicle Publishing Company, to be held at 901 Mission Street, San
Francisco, California, at 10:00 a.m. on Thursday, April 27, 2000 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 PROPOSAL SET FORTH ON THE REVERSE SIDE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
Please mark vote as in this example.
The Board of Directors recommends a vote FOR proposal 1.
<TABLE>
<S> <C> <C> <C>
1. To consider and vote upon a proposal to approve and FOR AGAINST ABSTAIN
adopt the Agreement and Plan of Merger, dated as of
November 15, 1999, by and between The Chronicle Publishing
Company, Inc. and Young Broadcasting Inc.
</TABLE>
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.
Signature: __________Date: Signature: __________Date:
<PAGE>
EXHIBIT 99.2
YOUNG BROADCASTING INC.
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
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
special meeting of Young, to be held at the Mark Hopkins Inter-Continental
Hotel, Number One Nob Hill, San Francisco, California, at 9:00 a.m. on
Thursday, April 27, 2000 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 PROPOSALS SET FORTH ON THE REVERSE SIDE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
Please mark
vote as in
this example
The Board of Directors recommends a vote FOR proposals 1, 2, 3, 4 and 5.
<TABLE>
<S> <C> <C> <C>
1. Proposal to authorize the issuance of Young's FOR AGAINST ABSTAIN
Class A common stock in connection with the
merger of the Chronicle Publishing Company, Inc.
with and into a newly formed subsidiary of
Young.
2. Election of Directors.
Nominees: Vincent J. Young, Adam Young, FOR ALL WITHHELD FROM
Ronald J. Kwasnick, James A. Morgan, Bernard NOMINEES ALL NOMINEES
F. Curry, Alfred J. Hickey, Jr., David C.
Lee, Leif Lomo, Robert L. Winikoff
-----------------------------------
FOR ALL NOMINEES EXCEPT AS
NOTED ABOVE
3. Proposal to approve an amendment to Young's FOR AGAINST ABSTAIN
Certificate of Incorporation which would
eliminate the required minimum percentage of
Young's outstanding common stock to be held by
the Young Management Group (as defined) for
continued designation of Young's Class B common
stock
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
4. Proposal to approve an amendment to Young's 1995 Stock FOR AGAINST ABSTAIN
Option Plan to increase the total number of shares with
respect to which options and stock appreciation rights may
be granted thereunder.
5. Selection of Ernst & Young LLP as Independent Auditors FOR AGAINST ABSTAIN
</TABLE>
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.
Signature: __________Date: Signature: __________Date:
2
