<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number 0-19728
GRANITE BROADCASTING CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 13-3458782
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
767 Third Avenue
34th Floor
New York, New York 10017
Telephone number: (212) 826-2530
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_____ _______
------
(APPLICABLE ONLY TO CORPORATE ISSUERS:)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Voting Common Stock, par value $.01 per share - 178,500 shares
outstanding at March 31, 1997; Common Stock (Nonvoting), par value $.01 per
share - 8,582,091 shares outstanding at March 31, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
GRANITE BROADCASTING CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
------ ------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,379,969 $ 555,753
Accounts receivable, net 27,716,377 27,057,451
Film contract rights 7,411,219 6,276,660
Other assets 4,952,653 9,784,966
------------ ------------
Total current assets 41,460,218 43,674,830
Property and equipment, net 34,644,844 33,562,019
Film contract rights and other noncurrent assets 3,956,218 4,284,578
Deferred financing fees, net 13,239,423 14,181,662
Intangible assets, net 530,850,164 356,860,115
------------ ------------
$624,150,867 $452,563,204
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable $ 3,228,490 $ 4,016,964
Accrued interest 10,545,686 6,071,378
Other accrued liabilities 5,440,423 4,497,534
Film contract rights and other current liabilities 15,448,384 9,578,365
------------ ------------
Total current liabilities 34,662,983 24,164,241
Long-term debt 373,745,995 351,560,900
Film contract rights payable 4,180,786 3,383,428
Deferred tax and other noncurrent liabilities 30,837,953 31,102,272
Commitments
Redeemable preferred stock 193,140,326 45,487,500
Stockholders' deficit:
Common Stock: 41,000,000 shares authorized consisting of
1,000,000 shares of Voting Common Stock, $.01 par value,
and 40,000,000 shares of Common Stock (Nonvoting), $.01
par value; 178,500 shares of Voting Common Stock and
8,582,091 shares of Common Stock (Nonvoting) (8,499,716
shares at December 31,1996) issued and outstanding 87,605 86,782
Additional paid-in capital 41,349,518 45,547,145
Accumulated deficit (50,653,486) (45,375,910)
Less: Unearned compensation (2,313,938) (2,506,279)
Note receivable from officer (886,875) (886,875)
------------ ------------
Total stockholders' deficit (12,417,176) (3,135,137)
------------ ------------
$624,150,867 $452,563,204
============ ============
</TABLE>
See accompanying notes.
-1-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Net revenue $32,297,811 $28,629,635
Station operating expenses 19,796,761 17,517,927
Depreciation expense 1,375,476 1,473,380
Amortization expense 3,746,291 2,951,278
Corporate expense 1,473,754 990,014
Non-cash compensation expense 192,336 114,537
----------- -----------
Operating income 5,713,193 5,582,499
Other expenses:
Equity in net loss of investee 400,000 ---
Interest expense, net 9,928,119 8,849,730
Other 191,696 125,633
----------- -----------
Loss before income taxes and extraordinary item (4,806,622) (3,392,864)
Provision for income taxes 150,150 61,089
----------- -----------
Loss before extraordinary item (4,956,772) (3,453,953)
Extraordinary loss on early extinguishment of debt (320,804) (3,510,152)
----------- -----------
Net loss $(5,277,576) $(6,964,105)
=========== ===========
Net loss attributable to common stockholders $(9,474,380) $(7,845,424)
=========== ===========
Per common share:
Loss before extraordinary item $(1.05) $ (0.51)
Extraordinary loss on early extinguishment of debt (0.04) (0.42)
----------- -----------
Net loss $(1.09) $ (0.93)
=========== ===========
Weighted average common shares outstanding 8,735,879 8,464,012
</TABLE>
See accompanying notes.
-2-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Three Months Ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Class A Common Additional Total
Common Stock Paid-in Accumulated Unearned Note Receivable Stockholders'
Stock (Nonvoting) Capital Deficit Compensation from Officer Deficit
---------- ----------- ----------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $1,785 $84,997 $45,547,145 $(45,375,910) $(2,506,279) $(886,875) $(3,135,137)
Dividend on redeemable
preferred stock (4,121,945) (4,121,945)
Accretion of offering costs
related to Cumulative
Exchangeable Preferred Stock (74,859) (74,859)
Issuance of Common Stock
(Nonvoting) 823 (823) -
Stock expense related to
Management Stock Plan 192,341 192,341
Net loss (5,277,576) (5,277,576)
------- ------- ----------- ------------- ------------ ---------- -------------
Balance at March 31, 1997 $1,785 $85,820 $41,349,518 $(50,653,486) $(2,313,938) $(886,875) $(12,417,176)
======= ======= =========== ============= ============ ========== =============
</TABLE>
See accompanying notes.
-3-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------
1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,277,576) $ (6,964,105)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of intangible assets and deferred financing fees 3,746,291 2,951,278
Depreciation 1,375,476 1,473,380
Non-cash compensation expense 192,336 114,537
Extraordinary loss 320,804 3,510,152
Equity in net loss of investee 400,000 ---
Change in assets and liabilities net of effects from
acquisitions of stations:
(Increase) decrease in accounts receivable (658,886) 3,553,454
Increase in accounts payable and accrued liabilities 4,497,915 1,073,716
Decrease in film contract rights and other noncurrent assets 1,848,637 740,983
Increase in film contract rights payable and other liabilities 3,311,182 734,423
Increase in other assets (1,058,641) (823,238)
------------- -------------
Net cash provided by operating activities 8,697,538 6,364,580
Cash flows from investing activities:
Payment for acquisitions of stations, net of cash acquired (172,713,906) ---
Investment in Datacast (250,000) ---
Capital expenditures (657,289) (1,443,898)
------------- -------------
Net cash used in investing activities (173,621,195) (1,443,898)
Cash flows from financing activities:
Proceeds from bank financing 41,500,000 1,000,000
Proceeds from senior subordinated notes --- 109,450,000
Repayment of bank debt --- (107,000,000)
Retirement of senior subordinated notes (19,405,000) ---
Dividends paid (881,320) (881,319)
Payment of deferred financing fees (208,307) (3,230,056)
Proceeds from issuance of preferred stock 144,742,500 ---
------------- -------------
Net cash provided by (used in) financing activities 165,747,873 (661,375)
------------- -------------
Net increase in cash and cash equivalents 824,216 4,259,307
Cash and cash equivalents, beginning of period 555,753 95,123
------------- -------------
Cash and cash equivalents, end of period $ 1,379,969 $ 4,354,430
============= =============
Supplemental information:
Cash paid for interest $ 5,444,816 $ 5,967,996
Income taxes paid 166,594 12,500
Non-cash capital expenditures 208,307 101,993
Non-cash dividends paid 3,240,625 ---
</TABLE>
See accompanying notes.
-4-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of presentation
- --------------------------------
The accompanying unaudited consolidated financial statements include the
accounts of Granite Broadcasting Corporation and its subsidiaries (the
"Company"), have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Operating
results for the three month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the Company's consolidated financial
statements and notes thereto for the year ended December 31, 1996 which were
included in the Company's Form 10-K dated March 21, 1997. All significant
intercompany accounts and transactions have been eliminated. Data at and for
the year ended December 31, 1996 are derived from the Company's audited
consolidated financial statements.
In the opinion of management, all adjustments of a normal recurring nature which
are necessary for a fair presentation of the results for the interim periods
have been made.
Note 2 - Acquisitions
- ---------------------
On January 31, 1997, the Company acquired substantially all of the assets of
WXON-TV, the WB affiliate serving Detroit, Michigan, for $175,000,000 and the
assumption of certain liabilities. The Company financed the acquisition by
borrowing approximately $27,500,000 under its credit agreement and issuing
150,000 shares of its 12-3/4% Cumulative Exchangeable Preferred Stock, par value
$0.01 per share (the "New Preferred Stock"), at $1,000 per share. Dividends on
the New Preferred Stock are payable semi-annually on April 1 and October 1 and
may be paid, at the Company's option, either in cash or by the issuance of
additional shares of New Preferred Stock.
Note 3 - Long term debt
- -----------------------
In March 1997, the Company purchased $19,405,000 face amount of its 9-3/8%
Senior Subordinated Notes due December 1, 2005 (the "9-3/8% Notes") at a
discount. As a result, the Company recognized an extraordinary loss, after the
write-off of a portion of related deferred financing fees, of $320,804.
Note 4 - Net loss per common share
- -----------------------------------
Net loss per common share for the three months ended March 31, 1997 and 1996 is
calculated by dividing net loss attributable to common stockholders by the
weighted average number of shares of common stock outstanding. The inclusion of
additional shares assuming the exercise of outstanding stock options and the
conversion of certain preferred stock into Common Stock (Nonvoting) would have
been antidilutive for both periods presented.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 "Earnings Per Share" (FAS 128),which establishes new standards for computing
and presenting earnings per share. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. Management does not believe that the implementation of FAS 128 will
have a material impact on the Company's per share amounts.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
- ------------
The consolidated financial statements of the Company reflect increases between
the three month periods ended March 31, 1997 and 1996 in substantially all line
items. The principal reasons for such increases are the acquisition of WXON-TV
on January 31, 1997 and the operation of WLAJ-TV under a time brokerage
agreement which commenced in October 1996. It is anticipated that the
Company's consolidated financial statements for the year ended December 31, 1997
will reflect significant increases in substantially all line items compared to
the prior year due to the acquisition of WXON-TV and the operation of WLAJ-TV.
The Company's revenues are derived principally from local and national
advertising and, to a lesser extent, from network compensation for the broadcast
of programming and revenues from studio rental and commercial production
activities. The primary operating expenses involved in owning and operating
television stations are employee salaries, depreciation and amortization,
programming and advertising and promotion expenses. Numbers referred to in the
following discussion have been rounded to the nearest thousand.
The following table sets forth certain operating data for the three months ended
March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Operating income $ 5,713,000 $ 5,582,000
Add:
Depreciation and amortization 5,122,000 4,425,000
Corporate expense 1,474,000 990,000
Non-cash compensation 192,000 115,000
----------- -----------
Broadcast cash flow $12,501,000 $11,112,000
=========== ===========
</TABLE>
"Broadcast cash flow" means operating income plus depreciation, amortization,
corporate expense and non-cash compensation. The Company has included broadcast
cash flow data because such data are commonly used as a measure of performance
for broadcast companies and are also used by investors to measure a company's
ability to service debt. Broadcast cash flow is not, and should not be used as,
an indicator or alternative to operating income, net income or cash flow as
reflected in the consolidated financial statements, is not a measure of
financial performance under generally accepted accounting principles and should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
Three months ended March 31, 1997 and 1996
- ------------------------------------------
Net revenue for the three months ended March 31, 1997 totaled $32,298,000, an
increase of $3,668,000 or 13 percent compared to $28,630,000 for the three
months ended March 31, 1996. Of this increase, $3,581,000 was due to the
inclusion of two months of operations of WXON-TV and three months of operations
of WLAJ-TV. The remaining increase was primarily due to increased local and
national advertising revenue and incremental revenue from the Company's various
internet ventures, partially offset by lower political advertising revenue in a
non-election year.
-6-
<PAGE>
Station operating expenses totaled $19,797,000, an increase of $2,279,000 or 13
percent compared to $17,518,000 for the three months ended March 31, 1996. Of
this increase, $1,367,000 was due to the inclusion of two months of operations
of WXON-TV and three months of operations of WLAJ-TV. The remaining increase
was primarily due to increased news and administrative expenses, partially
offset by lower promotion expenses.
Depreciation and amortization increased $697,000, or 16% during the three months
ended March 31, 1997 compared to the same period a year earlier primarily due to
the inclusion of two months of operations of WXON-TV. Corporate expense
increased $484,000 or 49% during the three months ended March 31, 1997 compared
to the same period a year earlier, primarily due to higher administrative costs
associated with the expansion of the Company's corporate office to manage its
expanded station group. Non-cash compensation expense increased $77,000 or 67%
during the three months ended March 31, 1997 compared to the same period a year
earlier due to the granting of additional awards payable in Common Stock
(Nonvoting) to certain executive employees of the Company under the Management
Stock Plan.
The equity in net loss of investee of $400,000 for the three months ended March
31, 1997 resulted from the Company recognizing its pro rata share of the net
loss of Datacast, LLC under the equity method of accounting.
Net interest expense was $9,928,000 compared to $8,850,000 a year earlier, an
increase of 12 percent, primarily due to the fact that the Company's 9-3/8%
Notes, which were issued on February 22, 1996, were outstanding for a full
quarter.
Loss before extraordinary item for the three months ended March 31, 1997 totaled
$4,957,000 compared to a loss before extraordinary item of $3,454,000 for the
same period a year earlier, an increase of $1,503,000. The increase was
primarily due to the changes in the line items discussed above.
During the three months ended March 31, 1997, the Company purchased $19,405,000
face amount of its 9-3/8% Notes at a discount and replaced it with borrowings
under its credit agreement which bear interest at a lower rate, thereby reducing
its cost of borrowing. In conjunction with the repurchase of this debt, the
Company recognized an extraordinary loss, after the write-off of a portion of
related deferred financing fees, of $321,000. During the three months ended
March 31, 1996, the Company repaid all then outstanding term loan and revolving
credit borrowings under its then existing bank credit agreement using the
proceeds from the sales of its 9-3/8% Notes. In connection with the repayment
of the term loan, the Company incurred an extraordinary loss on the early
extinguishment of debt of $3,510,000 related to the write-off of deferred
financing fees.
Liquidity and Capital Resources
- -------------------------------
In October 1996, the Company entered into agreements with the owner of WLAJ-TV,
the ABC affiliate serving Lansing, Michigan, including a time brokerage
agreement pursuant to which the Company operates WLAJ-TV and an agreement to
acquire substantially all the assets used in the operation of WLAJ-TV for
approximately $19.4 million in cash and the assumption of certain liabilities.
The Company anticipates financing the acquisition of WLAJ-TV with borrowings
under its credit agreement's revolving working capital facility. In connection
with these agreements, the Company agreed to provide a loan guarantee of up to
$12,000,000 in favor of the owner of WLAJ-TV.
On January 31, 1997, the Company acquired substantially all of the assets of
WXON-TV for $175,000,000 and the assumption of certain liabilities. The Company
financed the acquisition through the sale of 150,000 shares of its New Preferred
Stock at $1,000 per share and borrowings of $27,500,000 under its credit
agreement.
-7-
<PAGE>
The Company's existing credit agreement allows for revolving credit borrowings
of $200,000,000 and permits borrowings of up to $300,000,000 in the aggregate.
The revolving credit facility can be used to fund future acquisitions of
broadcast stations and for general corporate purposes. As of May 10, 1997,
subject to compliance with financial covenants, the Company had $137,000,000 of
the revolving credit facility borrowings available under the credit agreement
available for acquisitions and working capital purposes.
Cash flows provided by operating activities were $8,698,000 during the three
months ended March 31, 1997 compared to cash flows provided by operating
activities of $6,365,000 during the three months ended March 31, 1996, an
increase of $2,333,000 or 37 percent. The increase was primarily due to higher
broadcast cash flow and a decrease in net operating assets offset, in part, by
higher cash interest expense.
Cash flows used in investing activities were $173,621,000 during the three
months ended March 31, 1997 compared to $1,444,000 during the three months ended
March 31, 1996. Cash flows used in investing activities during the three months
ended March 31, 1997 related primarily to the acquisition of WXON-TV while cash
flows used in investing activities during the three months ended March 31, 1996
were related entirely to capital expenditures.
Cash flows provided by financing activities were $165,748,000 during the three
months ended March 31, 1997 compared to cash flows used in financing activities
of $661,000 during the three months ended March 31, 1996. The increase resulted
primarily from the issuance of the 12-3/4% Cumulative Exchangeable Preferred
Stock, an increase in net borrowings and a decrease in payments for deferred
financing fees.
The Company believes that internally generated funds from operations and
borrowings under its credit agreement's revolving working capital facility, if
necessary, will be sufficient to satisfy the Company's cash requirements for its
existing operations for the next twelve months and for the foreseeable future
thereafter.
-8-
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
ITEM 1. Legal Proceedings
-----------------
Not applicable
ITEM 2. Changes in Securities
---------------------
Not applicable
ITEM 3. Defaults upon Senior Securities
-------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
ITEM 5. Other Information
-----------------
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
10.1 Granite Broadcasting Corporation Stock Option Plan, as
amended through April 29, 1997.
10.31 Non-Employee Directors' Stock Plan of Granite Broadcasting
Corporation dated April 29, 1997.
11. Statement of Computation of Per Share Earnings
27. Financial Data Schedule
b. Reports on Form 8-K
-------------------
1. Current Report on Form 8-K filed January 15, 1997, reporting
the announcement by Granite Broadcasting Corporation of its
intention to commence a private offering of securities to
raise funds to consummate the acquisition of WXON-TV. No
financial statements were filed at such time.
2. Current Report on Form 8-K filed February 7, 1997, announcing
the completion of the acquisition by Granite Broadcasting
Corporation of substantially all of the assets used in the
operation of WXON-TV. Pro Forma Condensed Consolidated
Financial Statements (unaudited) were filed on such date.
3. Current Report on Form 8-K/A filed April 14, 1997, amending
that certain Current Report on Form 8-K filed February 7,
1997. Audited financial statements related to WXON-TV were
filed on such date.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed by an officer
and the principal accounting officer on its behalf by the undersigned thereunto
duly authorized.
GRANITE BROADCASTING CORPORATION
Registrant
Date May 12, 1997 /s/ W. DON CORNWELL
------------ -------------------------------------
(W. Don Cornwell)
Chief Executive Officer
Date May 12, 1997 /s/ LAWRENCE I. WILLS
------------ -------------------------------------
(Lawrence I. Wills)
Vice President, Finance and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT 10.1
GRANITE BROADCASTING CORPORATION
STOCK OPTION PLAN
--------------------------------
AS AMENDED THROUGH APRIL 29, 1997
1. PURPOSE. The purpose of this Stock Option Plan (the "Plan"),
-------
adopted by the Board of Directors of Granite Broadcasting Corporation (the
"Company") on April 17, 1990 and amended on May 10, 1990, November 8, 1990,
September 20, 1991, April 27, 1993, July 25, 1995 and July 24, 1996, is to
provide a means by which certain employees and officers of the Company and its
Affiliates (as defined below) may be given an opportunity to purchase non-voting
common stock of the Company. Options that may be granted under this Plan
include (a) Incentive Stock Options as such term is defined in Section 422A of
the Internal Revenue Code of 1986, as amended (hereinafter the "Code"), and (b)
Nonqualified Stock Options, which would not constitute Incentive Stock Options.
The Plan is intended to advance the interests of the Company by encouraging
stock ownership on the part of certain employees and officers, by enabling the
Company (and its Affiliates) to secure and retain the services of highly
qualified persons, and by providing employees and officers with an additional
incentive to advance the success of the Company (and its Affiliates). For
purposes of this Plan, Affiliate shall mean any parent or subsidiary corporation
of the Company. The term "parent corporation" shall mean any corporation (other
than the Company) in an unbroken chain of corporations ending with the Company
if, on the date of grant of the option in question, each of the corporations
other than the Company owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. The term "subsidiary corporation" shall mean any
corporation in an unbroken chain of corporations beginning with the Company if,
on the date of grant of the option in question, each of the corporations other
than the last corporation in the chain owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. Affiliation shall refer to a group of
Affiliates.
2. STOCK SUBJECT TO OPTION. Subject to adjustment as provided in
-----------------------
Sections 4(i) and (j) hereof, options may be granted by the Company from time to
time to purchase up to an aggregate of 3,000,000 shares of the Company's
authorized but unissued Class B Nonvoting Common Stock, par value $0.01 per
share (the "Common Stock"). Shares that by reason of the expiration of an
option or otherwise are no longer subject to purchase pursuant to an option
granted under the Plan may be again available for issuance pursuant to options
under the Plan.
<PAGE>
3. PARTICIPANTS. Persons eligible to be granted Incentive Stock
------------
Options or Nonqualified Stock Options under the Plan shall be limited to key
employees of the Company (or its Affiliates) (including employees who are also
officers or directors, but not including directors who are not also employees)
who have substantial responsibility in the direction and management of the
Company or an Affiliate, as indicated by the action of the Stock Option
Committee or the Compensation Committee (as such terms are defined in Section 5)
in granting an option to such employee.
4. TERMS AND CONDITIONS OF OPTIONS. The Stock Option Committee may
-------------------------------
grant options from time to time pursuant to the Plan. Such options shall be
evidenced by written stock option agreements signed by the Optionee and by the
President of the Company or by any member of the Stock Option Committee (the
"Stock Option Agreements"). The Stock Option Agreements shall be subject to the
terms and conditions of the Plan, shall specify whether the options are
Incentive Stock Options or Nonqualified Stock Options and shall contain such
other provisions as the Stock Option Committee in its discretion shall deem
appropriate. Shares of Common Stock that may be purchased under an option
granted pursuant to this Plan shall sometimes hereinafter be referred to as
"Option Shares," and an employee of the Company to whom options are granted
shall sometimes hereinafter be referred to as an "Optionee."
(a) OPTION PRICE. The option price for each Incentive Stock Option
------------
share shall not be less than the fair market value of a share of the Common
Stock on the date the option is granted. The option price for each
Nonqualified Stock Option share shall be specified by the Stock Option
Committee at the time such option is granted, and may be less than, equal
to or greater than the fair market value of the shares of Common Stock on
the date such option is granted. The option price may include amounts that
are required to be paid by the Optionee, as a down payment of the option
price, prior to his or her exercise of the option. In its sole discretion,
the Stock Option Committee may provide that the price at which shares may
be so purchased shall be more than such fair market value on the date of
grant. However, notwithstanding the foregoing, the option price for
Incentive Stock Options granted to any employee owning stock (including any
attribution of stock ownership under Section 425(d) of the Code) possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or any of its Affiliates on the date such option is granted
(hereinafter a "10% Shareholder"), shall be at least 110% of the fair
market value of the Common Stock on the date the option is granted. The
Stock Option Committee shall, in good faith, determine the fair market
value of the Common Stock on the date the option is granted, and the fair
market value may be more or less than the book value of the Common Stock.
-2-
<PAGE>
(b) TERM OF OPTION. Unless otherwise specifically provided in an
--------------
Optionee's Stock Option Agreement, each option granted under this Plan
shall expire no later than ten years after the date the option is granted
except under the circumstances described in Sections 4(g), 4(j)(2), 4(j)(3)
and 4(k), options may expire and terminate at an earlier date than provided
in this paragraph. If an Incentive Stock Option is granted to an employee
who is a 10% Shareholder, then, for purposes of such Incentive Stock Option
the word "five" shall be substituted for the word "ten" in the immediately
preceding sentence. The term of Nonqualified Stock Options granted
hereunder shall be determined by the Stock Option Committee in its
discretion.
(c) EXERCISE OF OPTION. Except as otherwise specifically provided in
------------------
this Plan, each option will be exercisable according to the provisions of
an Optionee's Stock Option Agreement. All options (whenever granted) of an
Optionee shall become immediately exercisable upon the (i) death or
disability (as defined in Section 4(g)(2) below) of such Optionee; and (ii)
the occurrence of a "Change of Control"; for purposes hereof, a "Change of
Control" shall occur on the date on which W. Don Cornwell no longer owns,
beneficially, in excess of 50% of the issued and outstanding Class A Common
Stock of the Company.
(d) MANNER OF EXERCISE. Shares of Common Stock purchased upon
------------------
exercise of options shall at the time of purchase be paid for in full. To
the extent that an option is exercisable, options may be exercised from
time to time by written notice to the Company stating the full number of
shares with respect to which the option is being exercised, accompanied by
full payment (or the balance due) of the exercise price, for the shares
being purchased, by certified or official bank check or the equivalent
thereof acceptable to the Company. When and if shares of the Company's
Common Stock are traded on either the New York or American Stock Exchanges
or in the NASDAQ/National Market System, the payment of the exercise price
may be in the form of Common Stock, the value of which shall be deemed to
be the closing price on the last trading date prior to date on which the
shares are tendered for payment of the exercise price. The notice required
by this paragraph shall be delivered in person to the President of the
Company, or shall be sent by registered or certified mail, return receipt
requested, to the President of the Company, in which case delivery shall be
deemed made on the date such notice is deposited in the mail. The Company
shall, without charge of any transfer or issue tax to the Optionee (or
other person entitled to exercise the option), deliver to the Optionee (or
to such other person) at the principal office of the Company, or such other
place as shall be mutually agreed upon, a certificate or certificates for
the shares
-3-
<PAGE>
being purchased; provided, however, that the time of delivery may be
-------- -------
postponed by the Company for such period as may be required for it with
reasonable diligence to comply with any requirements of law. Pursuant to
Section 6 hereof, the Company may require that, at the time of exercise,
each Optionee: (i) deliver an investment representation in form acceptable
to the Company and its counsel that the shares are being acquired for
investment and not with a view to their distribution, and (ii) enter into
any applicable stockholders' agreement with the Company and other
stockholders of the Company, as deemed necessary by the Stock Option
Committee.
(e) LIMITATION ON AMOUNT. No employee shall be granted Incentive
--------------------
Stock Options which, when first exercisable during any calendar year
(combined with all other incentive stock option plans of the Company and
its Affiliates), will permit such employee to purchase stock that has an
aggregate fair market value (determined as of the time the option is
granted) of more than $100,000.
(f) NON-ASSIGNABILITY OF OPTION RIGHTS. Options under the Plan will
----------------------------------
not be transferable by an Optionee except by will or the laws of descent
and distribution. During the lifetime of the Optionee, the Option is
exercisable only by the Optionee or, in the event of the Optionee's
incapacity, by his duly authorized legal representative. Notwithstanding
the foregoing, the Committee may, in its discretion, authorize all or a
portion of the Option (other than Incentive Stock Options) granted to a
Optionee to be on terms which permit transfer by such Optionee to (i) the
spouse, children or grandchildren of such Optionee ("Immediate Family
Members"), (ii) a trust or trusts for exclusive benefit of such Immediate
Family Members, or (iii) a partnership or limited liability company in
which such Immediate Family Members are the only partners or members, as
applicable; provided, that (x) there may be no consideration for any such
-------- ----
transfer, (y) the Option agreement pursuant to which such Options are
granted must be approved by the Committee and must expressly provide for
transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred Options shall be prohibited except
those occurring by laws of descent and distribution. Following transfer,
any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer; provided, that
-------- ----
for purposes of the Plan, the term Optionee shall be deemed to refer to the
transferee; provided, however, that, the Option shall continue to be
-------- ------- ----
exercisable and shall terminate in accordance with its terms as if the
transferor (Non-Employee Director) remained the holder of the Option.
Options under the Plan may not be pledged, mortgaged, hypothecated or
otherwise encumbered, and shall not be subject to the claims of creditors.
-4-
<PAGE>
(g) TERMINATION OF EMPLOYMENT.
-------------------------
(1) In the event that Optionee's employment by the Company and
its Affiliates shall terminate for any reason, with or without cause, and
the provisions of Sections 4(g)(2), 4(g)(3), 4(j) and 4(k) do not apply,
(i) the option for those shares for which such option was exercisable
pursuant to this plan immediately prior to such termination of employment
shall terminate thirty (30) days following such termination of employment,
unless specifically provided otherwise in such Optionee's Stock Option
Agreement, and (ii) the option for those shares for which the option was
not exercisable immediately prior to such termination of employment shall
terminate on the date of termination of employment. In the event that an
option terminates pursuant to the preceding sentence, any amounts paid as a
down payment on the exercise of such option (as provided in Section 4(a))
shall be returned to the Optionee with respect to shares for which the
option was not exercisable on the date of termination of employment and
shall not be returned to the Optionee with respect to shares for which the
option was exercisable on the date of termination. For purposes of this
Section, whether an authorized leave of absence or absence on military or
government service shall constitute severance of the employment
relationship between the Company (or an Affiliate) and the Optionee shall
be determined by the Stock Option Committee in its sole discretion at the
time thereof.
(2) In the event that Optionee shall die while in the employment
of the Company (or an Affiliate) or if Optionee's employment by the Company
(or an Affiliate) is terminated because Optionee has become disabled within
the meaning of Section 22(e)(3) of the Code, the Optionee, his personal
representative, estate or beneficiary shall have the right at any time
within twelve months after such date of death or termination due to
disability to exercise such Optionee's options. Notwithstanding the
foregoing, the provisions of this Section 4(g)(2) shall be subject to the
provisions of Sections 4(b), 4(j)(3) and 4(k), which may terminate the
option earlier.
(3) In the event that any termination of employment by an
Optionee is due to retirement with the consent of his employer, the
Optionee shall have the right to exercise his option at any time within
three months after such retirement to the extent the option was exercisable
immediately prior to retirement. Notwithstanding the foregoing, the
provisions of this Section 4(g)(3) shall be subject to the provisions of
Sections 4(b), 4(j)(3) and 4(k), which may terminate the option earlier.
-5-
<PAGE>
(h) CHANGES TO CAPITAL STRUCTURE; NEED FOR ADJUSTMENT. The existence
-------------------------------------------------
of outstanding options shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Stock or the rights thereof, or
the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
Except as otherwise expressly provided in Sections 4(i) and 4(j), the
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect or necessitate any adjustment to the number, class or price of
shares of stock then subject to outstanding options.
(i) ADJUSTMENT OF OPTIONS ON RECAPITALIZATION. The aggregate number
-----------------------------------------
of shares of Common Stock for which options may be granted to persons
participating under the Plan, the number of shares covered by each
outstanding option, and the exercise price per share for each such option
shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock of the Company resulting from the
subdivision or consolidation of shares, or the payment of a stock dividend
after the effective date of this Plan, or other increase (excluding any
increase due to conversion of any other outstanding securities of the
Company) or decrease in such shares effected without receipt of
consideration by the Company, such that each Optionee remains entitled upon
exercise of his option(s) to the same total number and class of shares as
he would have received for the same aggregate consideration had he
exercised his options in full immediately prior to the event requiring the
adjustment; provided, however, that any options to purchase fractional
-------- -------
shares resulting from any such adjustment shall be eliminated; and
provided, further, that any such adjustment shall be made in a manner so as
-------- -------
not to constitute a "modification" as defined in Section 425(h)(3) of the
Code.
(j) ADJUSTMENT OF OPTIONS UPON REORGANIZATION.
-----------------------------------------
(1) If the Company shall at any time merge or consolidate with or
into another corporation and (A) the Company is not the surviving entity,
or (B) the Company is the
-6-
<PAGE>
surviving entity and the shareholders of Company Common Stock are required
to exchange their shares for property and/or securities, the holder of each
option will thereafter receive, upon the exercise thereof, the securities
and/or property to which a holder of the number of shares of Common Stock
then deliverable upon the exercise of such option would have been entitled
upon such merger or consolidation, and the Company shall take such steps in
connection with such merger or consolidation as may be necessary to assure
that the provisions of this Plan shall thereafter be applicable, as nearly
as reasonably may be, in relation to any securities or property thereafter
deliverable upon the exercise of such option; provided, however, that,
-------- ------- ----
except as provided in the following sentence, no option exercise date shall
be accelerated in contemplation of such action. In the event of an
Optionee's termination of employment without cause within twelve (12)
months after the date of a merger or consolidation described in this
paragraph, the Optionee shall have the right to exercise all his then
outstanding options, whether or not then otherwise exercisable, within the
thirty (30) day period following his termination of employment. For
purposes of this paragraph, termination without cause shall mean (a)
termination other than for (i) the Optionee's material failure to observe
or perform any of the requirements of his position with the Company, or it
Affiliate (or successor by merger or consolidation), or (ii) the Optionee's
grossly negligent or willful and continued misconduct or action on the part
of the Optionee that is damaging or detrimental to the operations of the
Company or its Affiliate (or successor by merger or consolidation), or (b)
resignation by the Optionee within thirty (30) days after a material
diminution in duties or compensation of the Optionee. A sale of all or
substantially all of the assets of the Company for a consideration (apart
from the assumption of obligations) consisting primarily of securities
shall be deemed a merger or consolidation for the foregoing purposes.
Notwithstanding the foregoing, the provisions of this Section 4(j)(1) shall
be subject to Section 4(b).
(2) The resulting Affiliation following any reorganization may at
any time, in its sole discretion, tender substitute options as it may deem
appropriate. However, in no event may the substitute options entitle an
Optionee under the Plan to any fewer shares (or at any greater aggregate
price) or any less other property than the Optionee would be entitled to
under the immediately preceding paragraph upon an exercise of the options
held prior to the substitution of the new option. Any substitution made
under this Section 4(j)(2) shall be made in a manner so as not to
constitute a "modification" as defined in Section 425(h)(3) of the Code.
-7-
<PAGE>
(3) With respect to options to acquire stock of an Affiliate of
Optionee's then present employer, if Optionee's then present employer
ceases to be affiliated with the other member(s) of the Affiliation, then
the Affiliation shall give the Optionee written notice of such fact within
thirty (30) days after the date on which Optionee's employer ceases to be
an Affiliate and the option shall expire and terminate thirty (30) days
after the receipt of such notice by Optionee. Notwithstanding the
foregoing, the provisions of this Section 4(j)(3) shall be subject to
Section 4(b) and shall be subject to Section 4(k) if the Optionee receives
notice under Section 4(k) at a time earlier than the notice provided for
herein.
(k) DISSOLUTION OF ISSUER OF OPTION STOCK. In the event of the
-------------------------------------
proposed dissolution or liquidation of the Company, the options granted
hereunder shall terminate as of a date to be fixed by the Stock Option
Committee; provided, that, not less than thirty (30) days' prior written
-------- ----
notice of the date so fixed shall be given to the Optionee, and the
Optionee shall have the right, during the period of thirty (30) days
preceding such termination, to exercise his option. Notwithstanding the
foregoing, the provisions of this Section shall be subject to Section 4(b)
and shall be subject to Section 4(j)(3) if the Optionee receives notice
under Section 4(j)(3) at a time earlier than the notice provided for
herein.
(l) SUBSTITUTION OPTIONS. Options may be granted under this Plan from
--------------------
time to time in substitution for stock options held by employees of other
corporations who become employees of the Company or an Affiliate as a
result of a merger or consolidation of the employing corporation with the
Company or an Affiliate, or the acquisition by the Company or an Affiliate
of the assets of the employing corporation, or the acquisition by the
Company or an Affiliate of at least 50% of the issued and outstanding stock
of the employing corporation as the result of which it becomes an Affiliate
of the Company. The terms and conditions of the substitute options so
granted may vary from the terms and conditions set forth in this Plan to
such extent as the Stock Option Committee at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted, but with respect to
stock options which are Incentive Stock Options, no such variation shall be
such as to affect the status of any such substitute option as an "incentive
stock option" under Section 422A of the Code.
(m) RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
-----------------------
shareholder with respect to any shares of Common Stock of the Company held
under option until the date of exercise of the option with respect to such
shares. Except as provided in Section 4(h), no adjustment shall be made
for
-8-
<PAGE>
dividends or other rights for which the record date is prior to the date of
exercise.
(n) TIME OF GRANTING OPTIONS. The grant of an option shall occur only
------------------------
when a written option agreement shall have been duly executed and delivered
by or on behalf of the Company and the employee to whom such option shall
be granted.
(o) STOCK LEGEND. Certificates evidencing shares of the Company's
------------
Common Stock purchased upon the exercise of Incentive Stock Options issued
under the Plan shall be endorsed with a legend in substantially the
following form:
The shares evidenced by this certificate may not be sold or
transferred prior to _______________, 19___, in the absence of a
written statement from Granite Broadcasting Corporation (the
"Company") to the effect that the Company is aware of the fact of such
sale or transfer.
The blank contained in such legend shall be filled in with the date that is
the later of: (1) one year and one day after the date of exercise of such
Incentive Stock Option or (2) two years and one day after the date of grant
of such Incentive Stock Option. Upon delivery to the Company, at its
principal executive office, of a written statement to the effect that such
shares have been sold or transferred prior to such date, the Company does
hereby agree to promptly deliver to the transfer agent for such shares a
written statement to the effect that the Company is aware of the fact of
such sale or transfer. The Company may also require the inclusion of any
additional legend which may be necessary or appropriate.
5. ADMINISTRATION.
--------------
(a) Subject to Section 5(f) hereof, the Plan shall be administered by
a Stock Option Committee (the "Stock Option Committee") consisting of not
less than three (3) members of the Board of Directors, to be appointed by
the Board of Directors of the Company. The Board of Directors may, from
time to time, remove members from or add members to the Stock Option
Committee. Vacancies in the Stock Option Committee, however caused, shall
be filled by the Board of Directors. The Stock Option Committee shall
select one of its members as chairman who shall preside at all of its
meetings, and shall designate a secretary (who may or may not be a Stock
Option Committee Member) to keep the minutes of the proceedings and all
records, documents, and data pertaining to the administration of the Plan.
The Stock Option Committee shall hold meetings at such times and places as
it may determine. Subject to the provisions of the Plan and to policies
-9-
<PAGE>
determined by the Board of Directors, the Stock Option Committee may make
such rules and regulations for the conduct of its business as it shall deem
advisable. A majority of the Stock Option Committee shall constitute a
quorum. All actions of the Stock Option Committee shall be taken by a
majority of the members present at such meeting. Any action may be taken
by a written instrument signed by a majority of the members, and action so
taken shall be fully as effective as if it had been taken by a vote of the
majority of the members at a meeting duly called and held. The Stock
Option Committee and Compensation Committee (as defined below) members
shall be eligible to be granted options; provided, that, a Stock Option
-------- ----
Committee member shall abstain from voting with respect to the grant of any
option to such Stock Option Committee member.
(b) Subject to the express terms and conditions of the Plan, including
Section 5(f) hereof, the Stock Option Committee shall have full power to
grant options under the Plan, to construe or interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it and to
make all other determinations necessary or advisable for its
administration. Any such determinations by a majority of the whole Stock
Option Committee shall be final and binding.
(c) Subject to the provisions of Sections 3, 4 and 5(f) hereof, the
Stock Option Committee may, from time to time, determine which employees of
the Company or its Affiliates shall be granted options under the Plan, the
type of option granted, the number of option shares subject to each option,
the time or times at which options shall be granted and be exercisable, the
exercise price thereof, and the timing of payment of the exercise price,
and the Stock Option Committee may grant such options under the Plan.
(d) The Stock Option Committee or the Compensation Committee, as the
case may be, shall report to the Board of Directors the names of employees
granted options, the number of option shares subject to, and the terms and
conditions of, each option.
(e) No member of the Board of Directors, the Stock Option Committee or
the Compensation Committee shall be liable for any action, determination or
omission of any other member of the Stock Option Committee or for any
action, determination, or omission on his own part, including but not
limited to the exercise of any power or discretion given to him under the
Plan, except those resulting from his gross negligence or willful
misconduct. For this purpose, no action taken in good faith shall
constitute gross negligence or willful misconduct.
-10-
<PAGE>
(f) Notwithstanding anything herein to the contrary, with respect to
any participants in the Plan who, by virtue of such person's relationship
to the Company, are subject to Section 16(a) and 16(b) of the Securities
Exchange Act of 1934, as amended, in lieu of the Stock Option Committee,
the Compensation Committee of the Board of Directors (the "Compensation
Committee") shall govern all decisions as to such person's rights to
participate, the number of and terms of options granted to them, and all
respects of the administration of the Plan with respect to them and shall
have and exercise all such authority with respect to such persons as is
otherwise granted to the Stock Option Committee hereunder.
6. REQUIREMENTS OF LAW. The Company shall not be required to sell or
-------------------
issue any shares under any option if the issuance of such shares shall
constitute a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority whether it be Federal
or State. Unless a registration statement is in effect under the Securities Act
of 1933, as amended (the "Act") with respect to the shares of Common Stock
covered by an option, the Company shall not be required to issue shares upon
exercise of any option (i) unless the Stock Option Committee has received
evidence satisfactory to it to the effect that the holder of such option is
acquiring such shares for investment and not with a view to the distribution
thereof or (ii) unless an opinion of counsel to the Company has been received by
the Company, in a form and substance which is deemed acceptable by the Stock
Option Committee, to the effect that a registration statement is not required.
Any determination in this connection by the Stock Option Committee shall be
final, binding and conclusive. In the event the shares issuable on exercise of
an option are not registered under the Act, the Company may imprint the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any State and may not be sold or transferred except pursuant to an
effective registration statement or upon receipt by the Corporation of any
opinion of counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that registration is not required for such
sale or transfer."
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act and, in the event any shares are
so registered, the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any affirmative action
in order to cause the exercise of an option or the issuance of shares pursuant
-11-
<PAGE>
thereto to comply with any law or regulation of any governmental authority.
7. INTENTION OF PLAN. Incentive Stock Options granted pursuant to this
-----------------
Plan are intended to qualify as Incentive Stock Options within the meaning of
Section 422A of the Code, and the terms of this Plan and options granted
hereunder shall be so construed; provided, however, that nothing in this Plan
-------- ------- ----
shall be interpreted as a representation, guarantee or other undertaking on the
part of the Company that any options granted pursuant to this Plan are, or will
be, determined to be incentive stock options, within the meaning of the Code.
8. USE OF PROCEEDS. The proceeds from the sale of Common Stock pursuant
---------------
to the exercise of options, including any down payments provided in Section
4(a), will be used for the Company's general corporate purposes.
9. INDEMNIFICATION. Each member of the Stock Option Committee, the
---------------
Compensation Committee and the Board of Directors shall be indemnified and held
harmless by the Company for all loss, liabilities, costs and expenses (including
the amount of judgments and the amount of approved settlements made with a view
to the curtailment of costs of litigation, other than amounts paid to the
Company itself) reasonably incurred by him in connection with or arising out of
any action, suit, or proceeding regarding administration of the Plan in which he
may be involved by reason of his being or having been a member of such committee
or the Board of Directors, whether or not he continues to be a member of such
committee or the Board of Directors at the time of incurring such loss,
liabilities, costs and expenses. Notwithstanding any of the foregoing, no
member of such committee or the Board of Directors shall be entitled to such
indemnification from the Company for any loss, liabilities, costs and expenses
incurred by him (a) in respect of matters as to which he shall be finally
adjudged in any such action, suit or proceeding to have been guilty of gross
negligence or willful misconduct in the performance of his duty as a member of
such committee or the Board of Directors, or (b) in respect of any matter in
which any settlement is effected, to an amount in excess of the amount approved
by the Company on the advice of its legal counsel. Moreover, no right of
indemnification under the provisions set forth herein shall be available to or
enforceable against the Company by any member of such committee and the Board of
Directors unless, within sixty (60) days after institution of any such action,
suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend the same at its own expense. The foregoing
right of indemnification shall inure to the benefit of the heirs, executors or
administrators of each such member of such committee and the Board of Directors
and shall be in addition to all other rights to which the member of such
committee and the Board of Directors may be entitled as a matter of law,
contract or otherwise.
-12-
<PAGE>
10. WITHHOLDING. The Company's obligation to deliver shares upon the
-----------
exercise of any option hereunder shall be subject to applicable federal, state
and local tax withholding requirements.
11. NO OBLIGATION OF EMPLOYMENT. Nothing in this Plan or contained in an
---------------------------
option granted hereunder or in any Stock Option Agreement shall govern the
employment rights and duties between the Optionee and the Company or Affiliate.
Neither this Plan, nor any grant or exercise pursuant thereto, shall constitute
an employment agreement among such parties. The granting of any option
hereunder shall not impose upon the Company or an Affiliate any obligation to
employ or continue to employ any Optionee. The right of the Company to
terminate the employment of any officer or other employee shall not be
diminished or affected by reason of a grant or the existence of an option
hereunder.
12. EFFECTIVE DATE AND TERMINATION.
------------------------------
(a) The effective date of the Plan is April 1, 1990; provided, that,
-------- ----
within one year of that date, the Plan shall have been approved by a
majority of the holders of the outstanding voting stock of the Company.
(b) The Plan shall terminate ten years after the effective date of the
Plan and no options shall be granted pursuant to the Plan thereafter. The
Board of Directors may terminate the Plan at any time prior to ten years
after the effective date of the Plan. Termination of the Plan shall not
alter or impair, without the consent of the Optionee, any of the rights or
obligations and any option theretofore granted under the Plan.
13. AMENDMENTS. The Board of Directors of the Company may, from time to
----------
time, alter, amend, suspend, or discontinue the Plan, or alter or amend any and
all option agreements granted thereunder; provided, however, that no such action
-------- ------- ----
of the Board of Directors, without the approval of a majority of the holders of
shares of the Company then entitled to vote, may alter the provisions of the
Plan so as to:
(a) Decrease the minimum option price for Incentive Stock Options;
(b) Extend the term of the Plan beyond ten years or the maximum term
of the options granted beyond ten years;
(c) Withdraw the administration of the Plan from the Stock Option
Committee;
(d) Change the class of eligible employees, officers and directors; or
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<PAGE>
(e) Increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan;
Notwithstanding the foregoing, (i) the Board of Directors may amend the
Plan in any respect in order to qualify the Incentive Stock Options granted
pursuant hereto as Incentive Stock Options as defined in Section 422A of the
Code, (ii) no amendment may be made to an outstanding option agreement to the
detriment of the Optionee without the Optionee's consent, and (iii) no amendment
may be made to this Plan (or any option granted hereunder without the consent of
the Optionee) which would constitute a modification of any Incentive Stock
Option outstanding under Section 425(h) of the Code or which would adversely
affect an outstanding Incentive Stock Option's status as an Incentive Stock
Option under Section 422A of the Code.
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<PAGE>
EXHIBIT 10.31
NON EMPLOYEE DIRECTORS STOCK PLAN OF
GRANITE BROADCASTING CORPORATION
APRIL 29, 1997
1. PURPOSE. The purpose of this Non-Employee Directors' Stock Plan (the
-------
"Plan") of Granite Broadcasting Corporation (the "Company"), is to advance the
interests of the Company and its stockholders by providing a means to attract
and retain highly qualified persons to serve as non-employee directors of the
Company and to enable such persons to acquire or increase a proprietary interest
in the Company, thereby promoting a closer identity of interests between such
persons and the Company's stockholders.
2. DEFINITIONS. In addition to terms defined elsewhere in the Plan, the
-----------
following are defined terms under the Plan:
(a) "Code" means the Internal Revenue Code of 1986, as amended from
----
time to time. References to any provision of the Code shall be deemed to
include regulations thereunder and successor provisions and regulations thereto.
(b) "Disability" means a permanent physical or mental incapacity
----------
which, in the reasonable determination of the Board, renders the Participant
unable to perform his duties as a director of the Company.
(c) "Fair Market Value" of a Share on a given date shall mean the
-----------------
closing price reported on the Nasdaq National Market or the principal securities
exchange on which the Common Stock (Nonvoting) may then be traded, as the case
may be, or, if there is no such sale on the relevant date, then on the last
previous day on which a sale was reported.
(d) "Participant" means a person who, as a non-employee director of
-----------
the Company, has been granted Shares under the Plan.
(e) "Share" means a share of Common Stock (Nonvoting), $.01 par value,
-----
of the Company and such other securities as may be substituted for such Share or
such other securities pursuant to Section 8.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
-------------------------------
Section 8, as of any date, the total number of Shares issuable under the Plan
shall be 100,000. Such Shares may be authorized but unissued Shares, treasury
Shares, or Shares acquired in the market for the account of the Participant.
<PAGE>
4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the
--------------------------
Board of Directors of the Company (the "Board").
5. ELIGIBILITY. Only directors of the Company who are not employees of
-----------
the Company or any subsidiary of the Company shall participate in the Plan.
6. GRANT OF SHARES. On April 29, 1997 and on the date of the second
---------------
quarterly meeting of the Board of each calendar year during the term of the
Plan, each Participant shall receive a number of Shares equal to $20,000 divided
by the Fair Market Value per Share on the date of grant.
7. DEFERRAL OF SHARES. Each director of the Company may elect to defer
------------------
the payment of Shares by submitting an election form to the Board, in accordance
with this Section 7.
(a) ELECTIONS. Each director who elects to defer the payment of
---------
Shares for a given calendar year must file an irrevocable written election with
the Secretary of the Company no later than December 31 of the year preceding
such calendar year; provided, that, any newly elected or appointed director may
-------- ----
file an election for any year not later than 30 days after the date such person
first became a director, and a director may file an election for the year in
which the Plan became effective not later than 30 days after the date of
effectiveness of the Plan. An election by a director shall be deemed to be
continuing and therefore applicable to subsequent Plan years unless the director
revokes or changes such election by filing a new election form by the due date
for such form specified in this Section 7(a). The election must specify the
following:
(i) A percentage or number of Shares to be deferred under the
Plan; and
(ii) The date on which the commencement of payments of Shares should
begin, which date shall not be later than 10 years from the date the Shares
originally were payable;
provided, however, that, notwithstanding an election pursuant to this Section
- -------- ------- ----
7(a), all Shares of a Participant for which payment has not otherwise occurred,
shall be paid upon death, Disability or termination of directorship of the
Participant.
(b) DEFERRAL OF SHARES. The Company will establish a deferral account
------------------
for each Participant who elects to defer Shares under this Section 7. At any
date Shares are payable to a Participant who has elected to defer Shares, the
Company will credit such Participant's deferral account with a the number of
Shares so deferred.
-2-
<PAGE>
(c) CREDITING OF DIVIDEND EQUIVALENTS. Whenever dividends are paid or
---------------------------------
distributions made with respect to Shares, a Participant to whom Shares are then
credited in a deferral account shall be entitled, on the dividend payment date,
as dividend equivalents, to an amount equal in value to the amount of the
dividend paid or property distributed on a single Share multiplied by the number
of Shares credited to his or her deferral account as of the record date for such
dividend or distribution. Such dividend equivalents shall be credited to the
Participant's deferral account by payment to such account of a number of Shares
determined by dividing the aggregate value of such dividend equivalents by the
Fair Market Value of a Share at the payment date of the dividend or
distribution.
(d) SETTLEMENT OF DEFERRED SHARES. The Company will settle the
-----------------------------
Participant's deferral account by delivering to the Participant (or his or her
beneficiary) a number of Shares equal to the number of whole Shares then
credited to his or her deferral account (or a specified portion in the event of
any partial settlement), together with cash in lieu of any fractional Share
remaining at a time that less than one whole Share is credited to such deferral
account. Such settlement shall be made at the time or times specified in the
Participant's election filed in accordance with Section 7(a); provided, however,
-------- -------
that a Participant may further defer settlement of Shares if counsel to the
Company determines that such further deferral likely would be effective under
applicable federal income tax laws and regulations.
(e) NONFORFEITABILITY. The interest of each Participant in any Shares
-----------------
(and any deferral account relating thereto) at all times will be nonforfeitable.
8. ADJUSTMENT PROVISIONS. In the event any dividend or other
---------------------
distribution (whether in the form of cash, Shares or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, exchange of Shares or other
securities of the Company, extraordinary dividend (whether in the form of cash,
Shares, or other property), liquidation, dissolution, or other similar corporate
transaction or event affects the Shares such that an adjustment is appropriate
in order to prevent dilution or enlargement of each Participant's rights under
the Plan, then an adjustment shall be made, in a manner that is proportionate to
the change to the Shares and otherwise equitable, in (i) the number and kind of
Shares remaining reserved and available for issuance under Section 3, and (ii)
the number and kind of Shares to be issued upon settlement of deferred Shares
under Section 7. In addition, the Board is authorized to make such adjustments
in recognition of unusual or non-recurring events (including, without
limitation, events described in the preceding sentence) affecting the Company or
any subsidiary or the financial statements of the Company or any subsidiary, or
in response to changes in applicable laws,
-3-
<PAGE>
regulations or accounting principles. The foregoing notwithstanding, no
adjustment may be made hereunder except as will be necessary to maintain the
proportionate interest of the Participant under the Plan and to preserve,
without exceeding, the value of outstanding deferred Shares.
9. CHANGES TO THE PLAN. The Board may amend, alter, suspend,
-------------------
discontinue, or terminate the Plan or authority to grant Shares under the Plan
without the consent of stockholders or Participants, except that any amendment
or alteration will be subject to the approval of the Company's stockholders at
or before the next annual meeting of stockholders for which the record date is
after the date of such Board action if such stockholder approval is required by
any federal or state law or regulation or the rules of any stock exchange or
automated quotation system as then in effect, and the Board may otherwise
determine to submit other such amendments or alterations to stockholders for
approval; provided, however, that, without the consent of an affected
-------- ------- ----
Participant, no such action may materially impair the rights of such Participant
with respect to any previously granted Shares.
10. GENERAL PROVISIONS.
------------------
(a) AGREEMENTS. Any right or obligation under the Plan may be
----------
evidenced by agreements or other documents executed by the Company and the
Participant incorporating the terms and conditions set forth in the Plan,
together with such other terms and conditions not inconsistent with the Plan, as
the Board may from time to time approve.
(b) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company will not be
------------------------------------
obligated to issue or deliver Shares in a transaction subject to the
registration requirements of the Securities Act of 1933, as amended, or any
other federal or state securities law, any requirement under any listing
agreement between the Company and any stock exchange or automated quotation
system, or any other law, regulation, or contractual obligation of the Company,
until the Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full. Certificates
representing Shares issued under the Plan will be subject to such stop-transfer
orders and other restrictions as may be applicable under such laws, regulations,
and other obligations of the Company, including any requirement that a legend or
legends be placed thereon.
(c) LIMITATIONS ON TRANSFERABILITY. Deferred Shares under the Plan
------------------------------
will not be transferable by a Participant except by will or the laws of descent
and distribution or to a beneficiary in the event of the Participant's death.
Deferred Shares may not be pledged, mortgaged, hypothecated or otherwise
encumbered, and shall not be subject to the claims of creditors.
-4-
<PAGE>
(d) NO RIGHT TO CONTINUE AS A DIRECTOR. Nothing contained in the Plan
----------------------------------
or any agreement hereunder will confer upon any Participant any right to
continue to serve as a director of the Company.
(e) NO STOCKHOLDER RIGHTS CONFERRED. Nothing contained in the Plan or
-------------------------------
any agreement hereunder will confer upon any Participant (or any person or
entity claiming rights by or through a Participant) any rights of a stockholder
of the Company unless and until Shares are in fact issued to such Participant
(or person).
(f) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
--------------------------
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other compensatory arrangements for directors as it may deem
desirable.
(g) GOVERNING LAW. The validity, construction, and effect of the Plan
-------------
and any agreement hereunder will be determined in accordance with the laws of
the State of New York, without giving effect to principles of conflicts of laws,
and applicable federal law.
11. STOCKHOLDER APPROVAL, EFFECTIVE DATE, AND PLAN TERMINATION. The Plan
----------------------------------------------------------
will be effective as of the date of its adoption by the Board, subject to
stockholder approval if necessary or appropriate, and, unless earlier terminated
by action of the Board, shall terminate at such time as no Shares remain
available for issuance under the Plan and the Company and Participants have no
further rights or obligations under the Plan.
-5-
<PAGE>
EXHIBIT 11
GRANITE BROADCASTING CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1997 1996
-------------- --------------
(Unaudited)
<S> <C> <C>
Primary:
Average shares of common stock
outstanding 8,735,879 8,464,012
=========== ===========
Loss before extraordinary item $(4,956,772) $(3,453,953)
Extraordinary loss on early
extinguishment of debt (320,804) (3,510,152)
----------- -----------
Net loss $(5,277,576) $(6,964,105)
=========== ===========
Net loss attributable to common stockholders $(9,474,380) $(7,845,424)
=========== ===========
Per common share:
Loss before extraordinary item $ (1.05) $ (0.51)
Extraordinary loss on early
extinguishment of debt (0.04) (0.42)
----------- -----------
Net loss $ (1.09) $ (0.93)
=========== ===========
Fully Diluted:
Average shares of common stock
outstanding 8,735,879 8,464,012
=========== ===========
Loss before extraordinary item $(4,956,772) $(3,453,953)
Extraordinary loss on early
extinguishment of debt (320,804) (3,510,152)
----------- -----------
Net loss $(5,277,576) $(6,964,105)
=========== ===========
Net loss attributable to common stockholders $(9,474,380) $(7,845,424)
=========== ===========
Per common share:
Loss before extraordinary item $ (1.05) $ (0.51)
Extraordinary loss on early
extinguishment of debt (0.04) (0.42)
----------- -----------
Net loss $ (1.09) $ (0.93)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRANITE
BROADCASTING CORPORATION'S 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,379,969
<SECURITIES> 0
<RECEIVABLES> 27,716,377
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,460,218
<PP&E> 34,644,844
<DEPRECIATION> 0
<TOTAL-ASSETS> 624,150,867
<CURRENT-LIABILITIES> 34,662,983
<BONDS> 373,745,995
193,140,326
0
<COMMON> 87,605
<OTHER-SE> 12,504,781
<TOTAL-LIABILITY-AND-EQUITY> 624,150,867
<SALES> 32,297,811
<TOTAL-REVENUES> 32,297,811
<CGS> 0
<TOTAL-COSTS> 26,584,618
<OTHER-EXPENSES> 537,106
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,982,709
<INCOME-PRETAX> (4,806,622)
<INCOME-TAX> 150,150
<INCOME-CONTINUING> (4,956,772)
<DISCONTINUED> 0
<EXTRAORDINARY> (320,804)
<CHANGES> 0
<NET-INCOME> (5,277,576)
<EPS-PRIMARY> (1.09)
<EPS-DILUTED> (1.09)
</TABLE>
