acquisition targets. Time Warner has, and may develop, relationships with
businesses that are or may be competitive with the Company. Conflicts may also
arise in the negotiation or enforcement of arrangements entered into by the
Company and Time Warner or entities in which Time Warner has an interest. In
addition, Time Warner has no obligation to bring to the Company any investment
or business opportunities of which it becomes aware, even if such
opportunities are within the scope and objectives of the Company.
MSSF, an affiliate of the Placement Agent and the Morgan Stanley Entities,
is the syndication agent and arranger under the Senior Credit Facility. In
connection with such services, MSSF will receive customary fees and be
reimbursed for expenses.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON RESALES
There presently is no active trading market for the Notes and none may
develop. If the Notes are traded after their initial issuance, they may trade
at a discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities, the financial condition and
prospects of the Obligors and the Guarantor and other factors beyond the
control of the Obligors and the Guarantor, including general economic
conditions. Although Morgan Stanley has informed the Company that it currently
intends to make a market in the Notes, Morgan Stanley is not obligated to do
so and any market-making may be discontinued at any time without notice, at
its sole discretion. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Notes. If Morgan Stanley
conducts any market-making activities, it may be required to deliver a
"market-making prospectus" when effecting offers and sales in the Notes
because of the beneficial ownership in the equity of Holdings by the Morgan
Stanley Entities. For so long as a market-making prospectus is required to be
delivered, the ability of Morgan Stanley to make a market in the Notes may, in
part, be dependent on the ability of the Guarantor and the Obligors to
maintain a current market-making prospectus. See "Plan of Distribution."
The Old Notes have not been registered under the Securities Act and were
offered in reliance upon exemptions from registration under the Securities Act
and applicable state securities laws. Therefore, the Old Notes may be
transferred or resold only in a transaction registered under or exempt from
the Securities Act and applicable state securities laws. Pursuant to the
Registration Rights Agreement, the Guarantor and each Obligor have agreed to
file a registration statement relating to the Exchange Offer with the
Commission and to use their best efforts to cause such registration statement
to become effective with respect to the New Notes. If issued, the New Notes
generally will be permitted to be resold or otherwise transferred by each
holder without the requirement of further registration. The New Notes,
however, will also constitute a new issue of securities with no established
trading market. No assurance can be given as to the liquidity of the trading
market for the New Notes or, in the case of non-exchanging holders of Old
Notes, the trading market for the Old Notes following the Exchange Offer.
Holders who do not participate in the Exchange Offer may thereafter hold a
less liquid security. See "Description of Notes--Registration Rights."
ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF THE NOTES
The Old Notes were, and the New Notes will be, issued at a substantial
discount from their principal amount at maturity. Consequently, the purchasers
of the Notes generally will be required to include amounts in gross income for
federal income tax purposes in advance of receipt of the cash payments to
which such income is attributable. See "Material United States Federal Income
Tax Consequences" for a more detailed discussion of the U.S. federal income
tax consequences to the holders of the Notes of the purchase, ownership and
disposition of the Notes.
If a bankruptcy case is commenced by or against the Guarantor or the
Obligors under the U.S. Bankruptcy Code after the issuance of the Notes, the
claim of a holder of Notes with respect to the principal amount thereof may be
limited to an amount equal to the sum of (i) the initial public offering
price, and (ii) that portion of the original issue discount that is not deemed
to constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code.
Any original issue discount that was not amortized as of any such bankruptcy
filing would constitute "unmatured interest."