<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
--------------
For the fiscal year ended December 31, 1996 Commission file number 0-19728
GRANITE BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3458782
(State of Incorporation) (I.R.S. Employer
Identification No.)
767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock (Nonvoting), $.01 par value per share
Cumulative Convertible Exchangeable Preferred Stock, $.01 par value per share
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in any definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. / /
As of March 10, 1997, 8,582,091 shares of Granite Broadcasting
Corporation Common Stock (Nonvoting) and 1,819,500 shares of Granite
Broadcasting Corporation Cumulative Convertible Exchangeable Preferred Stock
were outstanding. The aggregate market value (based upon the last reported
sale price on the Nasdaq National Market on March 10, 1997) of the shares of
Common Stock (Nonvoting) held by non-affiliates was approximately
$82,148,005. The aggregate market value (based upon the last reported sale
price on the Nasdaq National Market on March 10, 1997) of shares of
Cumulative Convertible Exchangeable Preferred Stock held by non-affiliates
was approximately $97,337,287. (For purposes of calculating the preceding
amounts only, all directors and executive officers of the registrant are
assumed to be affiliates.) As of March 10, 1997, 178,500 shares of Granite
Broadcasting Corporation Class A Voting Common Stock were outstanding, all of
which were held by affiliates.
-----------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Item 14 of Part IV are incorporated by reference to: Granite
Broadcasting Corporation's Registration Statement No. 33-43770, filed on
November 5, 1991; Granite Broadcasting Corporation's Registration Statement
No. 33-52988, filed on October 6, 1992; Granite Broadcasting Corporation's
Current Report on Form 8-K, filed on June 25, 1993; Granite Broadcasting
Corporation's Quarterly Report on Form 10-Q for the quarter ended September
30, 1993, filed on November 15, 1993; Amendment No. 2 to Granite Broadcasting
Corporation's Registration Statement No. 33-71172, filed on December 16,
1993; Granite Broadcasting Corporation's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994, filed on November 14, 1994; Granite
Broadcasting Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994, filed on March 29, 1995; Granite Broadcasting
Corporation's Current Report on Form 8-K, filed on May 19, 1995; Granite
Broadcasting Corporation's Current Report on Form 8-K, filed on July 14,
1995; Granite Broadcasting Corporation's Registration Statement No. 33-94862,
filed on July 21, 1995; Amendment No. 2 to Granite Broadcasting Corporation's
Registration Statement No. 33-94862, filed on October 6, 1995; Granite
Broadcasting Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995, filed on March 28, 1996; Granite Broadcasting
Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, filed on August 13, 1996; Granite Broadcasting Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, filed on
November 14, 1996; and Granite Broadcasting Corporation's Current Report on
Form 8-K, filed on December 17, 1996.
<PAGE>
PART I
Item 1. Business
Granite Broadcasting Corporation ("Granite" or the "Company"), a Delaware
corporation, is a group broadcasting company founded in 1988 to acquire and
manage network-affiliated television stations and other media and
communications-related properties. The Company's goal is to identify and
acquire properties that management believes have the potential for
substantial long-term appreciation and to aggressively manage such properties
to improve their operating results. The Company currently owns and operates
ten network-affiliated television stations: KNTV(TV), the ABC affiliate
serving San Jose, California and the Salinas-Monterey, California television
market ("KNTV"); WTVH-TV, the CBS affiliate serving Syracuse, New York
("WTVH"); KSEE-TV, the NBC affiliate serving Fresno-Visalia, California
("KSEE"); WPTA-TV, the ABC affiliate serving Fort Wayne, Indiana ("WPTA");
WEEK-TV, the NBC affiliate serving Peoria-Bloomington, Illinois ("WEEK-TV");
KBJR-TV, the NBC affiliate serving Duluth, Minnesota and Superior, Wisconsin
("KBJR"); KEYE-TV, the CBS affiliate serving Austin, Texas ("KEYE"); WWMT-TV,
the CBS affiliate serving Grand Rapids-Kalamazoo-Battle Creek, Michigan
("WWMT"); WKBW-TV, the ABC affiliate serving Buffalo, New York ("WKBW"); and
WXON-TV, the WB affiliate serving Detroit, Michigan ("WXON"). KBJR and WEEK
were acquired in separate transactions in October 1988, WPTA was acquired in
December 1989, KNTV was acquired in February 1990, WTVH and KSEE were
acquired in December 1993, KEYE was acquired in February 1995, WWMT and WKBW
were acquired in separate transactions in June 1995 and WXON was acquired in
January 1997. WLAJ-TV, the ABC affiliate serving Lansing, Michigan ("WLAJ")
is currently being operated by the Company pursuant to a time brokerage
agreement that was entered into in October 1996. The Company owns each of
KNTV, WTVH, KSEE, WPTA, KBJR, KEYE, WWMT, WKBW and WXON through separate
wholly owned subsidiaries (collectively, the "Subsidiaries"; references
herein to the "Company" or to "Granite" include Granite Broadcasting
Corporation and its subsidiaries). The Company's long-term objective is to
acquire additional television stations and to pursue acquisitions of other
media and communications-related properties in the future.
Recent Developments
Acquisitions
On January 31, 1997, the Company acquired substantially all the assets
used in the operation of WXON, the WB affiliate serving Detroit, Michigan
(the "WXON Acquisition"), for approximately $175,000,000 in cash and the
assumption of certain liabilities. On January 8, 1997, the Company completed
the acquisition of WIVR-FM in Eureka, Illinois for $1,000,000 in cash. The
Company also changed the station's call letters to WEEK-FM. The radio
station will be run in combination with Granite-owned WEEK-TV, the leading
television station in the Peoria- Bloomington, Illinois television market.
Time Brokerage Agreement and Acquisition Agreement
In October 1996, the Company entered into agreements (the "WLAJ
Agreements") with the owner of WLAJ, the ABC affiliate serving Lansing,
Michigan, including a time brokerage agreement pursuant to which the Company
operates WLAJ. The Company has an agreement to acquire substantially all the
assets used in the operation of WLAJ for approximately $19.4 million in cash
(subject to certain adjustments) and the assumption of certain liabilities.
<PAGE>
Other Developments
In April 1996, the Company joined Datacast LLC, a company formed to
establish and operate a national data center and network for the broadcast of
digital data through television station broadcast signals. The other equity
investors in Datacast LLC include Chris-Craft Industries, Inc., Lin
Television Corporation and Schurz Communications Inc. The Company has
committed to invest up to $2,500,000 in Datacast LLC, of which $1,750,000 has
been invested to date.
In June 1996, the Company began an alliance with Yahoo! Inc. which is
intended to extend the news franchise of each Granite station by providing
additional information about local and national news stories on Granite
Station web sites at www.granitetv.com. Both companies are working together
to develop local Yahoo! directories in all markets for which Granite stations
will serve as local advertising representative. The Company believes the
alliance with Yahoo! will enhance its efforts to develop the Internet into a
complementary advertising medium and additional revenue source.
In September 1996, the Company named Robert E. Selwyn, Jr. to the
newly-created position of Chief Operating Officer. Mr. Selwyn has over 20
years of experience in television broadcasting. Most recently, he was
Chairman and Chief Executive Officer of the New World Television Station
Group, where he had oversight responsibility for stations in a wide variety
of markets including Dallas, Detroit, Atlanta, Cleveland, San Diego and
Milwaukee.
-2-
<PAGE>
Company and Industry Overview
The following table sets forth general information for each of the
Company's television stations:
<TABLE>
<CAPTION>
Other
Commercial
Market Date of Channel/ Network Market Stations Date of
Station Area Acquisition Frequency Affiliation Rank(1) in DMA FCC License
- - ------- ------ ----------- --------- ----------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
WXON-TV Detroit, MI 01/31/97 20/UHF WB 9 5 10/01/97
WWMT-TV Grand Rapids -
Kalamazoo -
Battle Creek, MI 06/01/95 3/VHF CBS 37 6 10/01/97
WKBW-TV Buffalo, NY 06/29/95 7/VHF ABC 39 4 06/01/99
KNTV(TV) San Jose,
Salinas -
Monterey, CA 02/05/90 11/VHF ABC 52 5(2) 12/01/98
KSEE-TV Fresno-
Visalia, CA 12/23/93 24/UHF NBC 55 9(3) 12/01/98
KEYE-TV Austin, TX 02/01/95 42/UHF CBS 63 6 08/01/98
WTVH-TV Syracuse, NY 12/23/93 5/VHF CBS 68 4 06/01/99
WPTA-TV Fort Wayne, IN 12/11/89 21/UHF ABC 103 4 08/01/97
WLAJ-TV Lansing, MI Pending(4) 53/UHF ABC 106 3 10/01/97
WEEK-TV Peoria -
Bloomington, IL 10/31/88 25/UHF NBC 110 3 12/01/97
KBJR-TV Duluth, MN -
Superior, WI 10/31/88 6/VHF NBC 134 2 12/01/97
</TABLE>
- - ----------------
1 "Market rank" refers to the size of the television market or Designated
Market Area ("DMA") as defined by the A.C. Nielsen Company ("Nielsen"),
except for San Jose. KNTV, whose DMA is the Salinas-Monterey television
market, primarily serves San Jose and Santa Clara County (which are part of
the San Francisco-Oakland-San Jose DMA). If Santa Clara County were a
separate DMA, it would rank as the 52nd largest DMA in the United States.
All market rank data is derived from an average of the Nielsen Station
Index for November 1996, May 1996, February 1996 and November 1995, unless
otherwise noted.
2 Includes KSMS, Salinas-Monterey and KCU, Salinas, both of which broadcast
entirely in Spanish.
3 Includes KFTV Hanford-Fresno and KMSG, Sanger-Fresno, both of which
broadcast entirely in Spanish.
4 WLAJ is currently being operated by the Company pursuant to a time
brokerage agreement. The Company intends to acquire WLAJ. Before the
Company acquires WLAJ, the station's licensed facilities will be modified
to eliminate certain signal coverage overlap with WWMT so that the Company
can obtain an FCC waiver of the restriction on the number of television
stations that may be under common ownership within the same geographic
market. Although there can be no assurance that the waiver will be
obtained, the Company believes that it will be able to obtain such a
waiver.
-3-
<PAGE>
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 and the
license to operate a broadcast station is granted by the FCC. Television
stations can be distinguished by the frequency on which they broadcast.
Television stations which broadcast over the very high frequency ("VHF") band
of the spectrum generally have some competitive advantage over television
stations that broadcast over the ultra-high frequency ("UHF") band of the
spectrum because the former usually have better signal coverage and operate
at a lower transmission cost. In television markets in which all local
stations are UHF stations, such as Fort Wayne, Indiana, Peoria-Bloomington,
Illinois and Fresno-Visalia, California, no competitive disadvantage exists.
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 program's popularity among the viewers an
advertiser wishes to attract, the number of advertisers competing for the
available time, the size and demographic make-up of the market served by the
station, and the availability of alternative advertising media in the market
area. 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 valuation of broadcast properties.
The Company's Stations
Set forth below are the principal types of television gross revenues
(before agency and representative commissions) received by the Company's
television stations for the periods indicated and the percentage contribution
of each to the gross television revenues of the television stations owned by
the Company.
GROSS REVENUES, BY CATEGORY,
FOR THE COMPANY'S STATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
----------------- ---------------- ---------------- ----------------- -----------------
Amount % Amount % Amount % Amount % Amount %
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Local/Regional(1). . $23,088 53.5% $25,416 56.3% $38,802 50.9% $60,969 51.0% $73,491 47.5%
National(2) . . 15,367 35.6 16,290 36.1 28,548 37.5 48,995 41.0 61,945 40.0
Network Compensation(3) . 1,427 3.3 1,286 2.8 2,244 2.9 4,154 3.5 7,289 4.7
Political(4). . 1,246 2.9 133 0.3 4,060 5.3 1,498 1.3 7,265 4.7
Other Revenue(5) . . 2,023 4.7 2,041 4.5 2,559 3.4 3,849 3.2 4,851 3.1
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total. . $43,151 100.0% $45,166 100.0% $76,213 100.0% $119,465 100.0% $154,841 100.0%
------- ----- ------- ----- ------- ----- -------- ----- -------- -----
------- ----- ------- ----- ------- ----- -------- ----- -------- -----
</TABLE>
- - ------------------------
1 Represents sale of advertising time to local and regional advertisers or
agencies representing such advertisers and other local sources.
2 Represents sale of advertising time to agencies representing national
advertisers.
3 Represents payment by networks for broadcasting network programming.
4 Represents sale of advertising time to political advertisers.
5 Represents miscellaneous revenue, including payment for production of
commercials.
Automobile advertising constitutes the Company's single largest source of
gross revenues, accounting for approximately 20% of the Company's total gross
revenues in 1996. Gross revenues from restaurants and entertainment-related
businesses accounted for approximately 12% of the Company's total gross
revenues in 1996. Each other category of advertising revenue represents less
than 5% of the Company's total gross revenues.
-4-
<PAGE>
The following is a description of each of the Company's television
stations:
WXON: Detroit, Michigan
WXON began operating in 1962 and began operating as a WB affiliate in
1995.
Detroit is the 9th largest DMA in the United States with a total of
1,770,000 television households and a population of 4,730,000 according to
Nielsen. Detroit's economy is based on manufacturing, retail and health
services. The largest employers are General Motors, Ford Motor Company,
Chrysler, Detroit Medical Center, Henry Ford Health System and Blue Cross
Blue Shield of Michigan. The median household income in the DMA is $51,392
according to estimates provided in the BIA Investing in Television 1996
Report (the "BIA Report").
WWMT: Grand Rapids - Kalamazoo - Battle Creek, Michigan
WWMT began operations in 1950 and is affiliated with CBS.
The Grand Rapids - Kalamazoo - Battle Creek economy is centered around
manufacturing, health services, education and financial services. The median
household income in the DMA was $44,818, according to estimates provided in
the BIA Report. Leading employers in the area include Pharmacia-UpJohn,
Bronson Medical Center, Borgess Medical Center, Butterworth Hospital, St.
Mary's Health Services, Steel Case, Inc., Amway Corporation, Meijer, Inc.,
James River Corporation, General Motors Corporation and The Kellogg Company.
WKBW: Buffalo, New York
WKBW began operations in 1958 and is affiliated with ABC.
The Buffalo economy is centered around manufacturing, government, health
services and financial services. The median household income in the DMA was
$39,726, according to estimates provided in the BIA Report. Leading
employers in the area include General Motors, Ford Motor Company, American
Axle and Manufacturing, M&T Bank, Fleet Bank, Roswell Park Cancer Institute,
Buffalo General Hospital, NYNEX, Tops Markets and DuPont.
KNTV: San Jose, California
KNTV began operations in 1955 and is affiliated with ABC.
KNTV is the only network-affiliated station and only VHF station licensed
to serve San Jose, California, the largest city in Northern California and
the eleventh largest city in the United States. Its VHF signal is broadcast
on Channel 11 and covers all of Santa Clara County, which includes an area
that has come to be known as "Silicon Valley." Although the Nielsen rating
service designates KNTV as the ABC affiliate for the Salinas-Monterey market
(which is southwest of and adjacent to San Jose), according to the February
1996 Nielsen Monterey/Salinas Viewers In Profile Report more than 62% of the
station's audience resides in the San Francisco-Oakland-San Jose television
market (the fifth largest DMA in the country). The Company believes that
substantially all of such audience resides in Santa Clara County. If Santa
Clara County were a separate DMA with its 522,980 television households, it
would rank as the 52nd largest DMA in the United States.
Santa Clara County has a diverse and affluent economy. The average
effective buying income by household was $57,028, according to the 1995
Demographics USA Report. The area is home to over 2,800 technological
companies as well as numerous institutions and companies of national
reputation. Prominent corporations located in Santa Clara County include
Hewlett-Packard, Lockheed/Martin, IBM, Apple, Intel, Sun Microsystems,
Amdahl, Tandem Computers, National Semiconductor, Syntex, Conner Peripherals,
Varian Associates and Chips & Technologies.
-5-
<PAGE>
Santa Clara County is also the home of several universities including
Stanford University, San Jose State University and Santa Clara University
with enrollments aggregating approximately 51,000 students.
KSEE: Fresno-Visalia, California
KSEE began operations in 1953 and is affiliated with NBC.
Fresno and the San Joaquin Valley is one of the most productive
agricultural areas in the world with over 6,000 square miles planted with
more than 250 different crops. Although farming continues to be the single
most important part of the Fresno area economy, the area now attracts a
variety of service-based industries and manufacturing and industrial
operations. No single employer or industry dominates the local economy. The
median income by household in the DMA was $38,732, according to estimates
provided in the BIA Report. The Fresno-Visalia DMA is also the home of
several universities, including Fresno State University, with enrollment
estimated at 40,000.
KEYE: Austin, Texas
KEYE began operations in 1983. The station, formerly a Fox affiliate,
became a CBS affiliate on July 2, 1995.
The Austin economy benefits from having large private sector employers
such as IBM, Motorola, HEB Stores, Advanced Micro Devices, Abbott
Laboratories, Texas Instruments, Dell Computers, 3M Corporation, Applied
Materials and SEMATECH. Approximately 825 high tech firms employ nearly
85,000 people in the area. This fact, plus the terrain of the region's Hill
Country, has resulted in the Austin area being nicknamed "Silicon Hills."
Since Austin, the nation's 27th largest city, is the state capital, as well
as home to the University of Texas, it also provides a substantial amount of
public sector employment opportunities. The median income per household in
the DMA was $45,741, according to estimates provided in the BIA Report. In
addition to the University of Texas, Southwestern University, Saint Edwards
University and Southwest Texas University are located in the DMA. Total
university enrollment in the DMA is approximately 100,000 students.
WTVH: Syracuse, New York
WTVH began operations in 1948 and is affiliated with CBS.
The Syracuse economy is centered on manufacturing, education and
government. The median income by household in the DMA was $43,036, according
to estimates provided in the BIA Report. Prominent corporations located in
the area include Carrier Corporation, New Venture Gear, Bristol-Myers Squibb,
Crouse-Hinds, Nestle Foods and Lockheed/Martin. The Syracuse DMA is also the
home of several universities, including Syracuse University, Cornell
University and Colgate University, with enrollments aggregating over 50,000
students.
WPTA: Fort Wayne, Indiana
WPTA began operations in 1957 and is affiliated with ABC.
The Fort Wayne economy is centered on manufacturing, government,
insurance, financial services and education. The median income by household
in the DMA was $42,368, according to estimates provided in the BIA Report.
Prominent corporations located in the area include Magnavox, Lincoln National
Life Insurance, General Electric, General Motors, North American Van Lines,
GTE, Dana, Phelps Dodge, ITT, and Tokheim. Fort Wayne is also the home of
several universities, including the joint campus of Indiana University and
Purdue University at Fort Wayne, with enrollments aggregating over 11,000
students.
-6-
<PAGE>
WLAJ: Lansing, Michigan
WLAJ began operations in 1990 and is an ABC affiliate.
Lansing is the 106th largest DMA in the United States with a total of
229,000 television households and a population of 639,000. Lansing is the
state capital and its economy is centered around government employment,
education and manufacturing. The largest employers are General Motors, the
State of Michigan, Michigan State University, Meijer Inc., Michigan Capital
Healthcare, Sparrow Hospital and Lansing Community College. The median
household income in the DMA is $46,143 according to estimates provided in the
BIA Report.
WEEK-TV and WEEK-FM: Peoria-Bloomington, Illinois
WEEK began operations in 1953 and is affiliated with NBC. WEEK-FM,
acquired in January 1997, will be run in combination with WEEK-TV.
The Peoria economy is centered on agriculture and heavy equipment
manufacturing but has achieved diversification with the growth of
service-based industries such as conventions, healthcare and higher
technology manufacturing. Prominent corporations located in Peoria include
Caterpillar, Bemis, Central Illinois Light Company, Commonwealth Edison
Company, Komatsu-Dresser Industries, IBM, Trans-Technology Electronics and
Keystone Steel & Wire. In addition, the United States Department of
Agriculture's second largest research facility is located in Peoria, and the
area has become a major regional healthcare center. The economy of
Bloomington, on the other hand, is focused on insurance, education,
agriculture and manufacturing. Prominent corporations located in Bloomington
include State Farm Insurance Company, Country Companies Insurance Company and
Diamond-Star Motors Corporation (a subsidiary of Mitsubishi). The median
income by household in the DMA was $44,705, according to estimates provided
in the BIA Report. The Peoria-Bloomington area is also the home of numerous
institutions of higher education including Bradley University, Illinois
Central College, Illinois Wesleyan University, Illinois State University,
Eureka College and the University of Illinois College of Medicine, with
enrollments aggregating over 38,000 students.
KBJR: Duluth, Minnesota and Superior, Wisconsin
KBJR began operations in 1954 and is affiliated with NBC.
The area's primary industries include mining, fishing, food products,
paper, medical, shipping, tourism and timber. The median income by household
in the DMA was $34,860, according to estimates provided in the BIA Report.
Duluth is one of the major ports in the United States out of which iron ore,
coal, limestone, cement, grain, paper and chemicals are shipped. Northwest
Airlines has completed construction of two airplane maintenance facilities in
the Duluth area that management estimates added approximately 1,000 jobs to
the Duluth area's economy. Prominent corporations located in the area
include Minnesota Power, U.S. West, Mesabi & Iron Range Railway Co., Walmart,
Jeno Paulucci International, Lake Superior Industries, Potlatch Corporation,
Boise Cascade, Burlington Northern Railway, Target (Dayton-Hudson
Corporation), ConAgra, International Multifoods, Peavey, Cargill, U.S. Steel,
Cleveland-Cliffs Corporation, NorWest Bank, Shopko, Cub Foods and Advanstar.
The Duluth-Superior area is also the home of numerous educational
institutions such as the University of Minnesota-Duluth, the University of
Wisconsin-Superior and the College of St. Scholastica, with enrollments
aggregating over 12,000 students.
Network Affiliation
Whether or not a station is affiliated with one of the four major
networks, NBC, ABC, CBS or Fox (collectively, the "Networks"), has a
significant impact on the composition of the station's revenues, expenses and
operations. A typical Network affiliate receives the significant portion of
its programming each day from the Network. This programming, along with cash
payments, is provided to the affiliate by the Network in exchange
-7-
<PAGE>
for a substantial majority of the advertising inventory during Network
programs. The Network then sells this advertising time and retains the
revenues so generated.
In contrast, a fully independent station purchases or produces all of the
programming which it broadcasts, resulting in generally higher programming
costs, although the independent station is, in theory, able to retain its
entire inventory of advertising and all of the revenue obtained therefrom.
However, barter and cash-plus-barter arrangements are becoming increasingly
popular. Under such arrangements, a national program distributor typically
retains up to 50% of the available advertising time for programming it
supplies, in exchange for reduced fees for such programming.
Each of the Company's stations other than WXON is affiliated with a
Network pursuant to an affiliation agreement. KSEE, WEEK and KBJR are
affiliated with NBC; KNTV, WPTA, WKBW and WLAJ are affiliated with ABC; and
KEYE, WTVH and WWMT are affiliated with CBS. The Network affiliation
agreements provide for contract terms of ten years (other than the NBC
agreements for which the terms are seven years). WXON has an affiliation
arrangement with the WB Network, which is terminable by either party at will.
Under each of the Company's affiliation agreements, the Networks may
increase or decrease network compensation and, under certain circumstances,
terminate the agreement upon advance written notice. Under the Company's
ownership, none of its stations has received a termination notice from its
respective Network.
In substance, each affiliation agreement provides the stations 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 broadcast. In addition, for
every 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 8-11 p.m. and Sunday 7-11 p.m. Eastern Time)
generates the highest hourly rates. Rates are subject to increase or decrease
by the Network during the term of each affiliation agreement, with provisions
for advance notice to and right of termination by the station in the event of
a reduction in rates.
Competition
The financial success of the Company's television and radio stations is
dependent on audience ratings and revenues from advertisers within each
station's geographic market. The Company's stations compete for revenues
with other television stations in their respective markets, as well as with
other advertising media, such as newspapers, radio, magazines, outdoor
advertising, transit advertising, yellow page directories, direct mail and
local cable systems. Some competitors are part of larger companies with
substantially greater financial resources than the Company.
Competition in the broadcasting industry occurs primarily in individual
markets. Generally, a television broadcasting station in one market does not
compete with stations in other market areas. The Company's television
stations are located in highly competitive markets.
In addition to management experience, factors that are material to a
television station's competitive position include signal coverage, local
program acceptance, Network affiliation, audience characteristics, assigned
frequency and strength of local competition. The broadcasting industry is
continuously faced with technological change and innovation, the possible
rise in popularity of competing entertainment and communications media,
changes in labor conditions and governmental restrictions or actions of
federal regulatory bodies, including the FCC and the Federal Trade
Commission, any of which could possibly have a material adverse effect on the
Company's operations and results.
Conventional commercial television broadcasters also face competition
from other programming, entertainment and video distribution systems, the
most common of which is cable television. These other
-8-
<PAGE>
programming, entertainment and video distribution systems can increase
competition for a broadcasting station by bringing into its market distant
broadcasting signals not otherwise available to the station's audience and
also by serving as distribution systems for non-broadcast programming.
Programming is now being distributed to cable television systems by both
terrestrial microwave systems and by satellite. Other sources of competition
include home entertainment systems (including video cassette recorders and
playback systems, video discs and television game devices), multi-point
distribution systems, multichannel multi-point distribution systems, video
programming services available through the Internet and other video delivery
systems. The Company's television stations also face competition from direct
broadcast satellite services which transmit programming directly to homes
equipped with special receiving antennas and competition from video signals
delivered over telephone lines. Satellites may be used not only to
distribute non-broadcast programming and distant broadcasting signals but
also to deliver certain local broadcast programming which otherwise may be
available to a station's audience.
The broadcasting industry is continuously faced with technological change
and innovation, which could possibly have a material adverse effect on the
Company's operations and results. Commercial television broadcasting may
face future competition from interactive video and data services that provide
two-way interaction with commercial video programming, along with information
and data services that may be delivered by commercial television stations,
cable television, direct broadcast satellites, multi-point distribution
systems, multichannel multi-point distribution systems or other video
delivery systems. In addition, recent actions by the FCC, Congress and the
courts all presage significant future involvement in the provision of video
services by telephone companies. The Telecommunications Act of 1996 lifts
the prohibition on the provision of cable television services by telephone
companies in their own telephone areas subject to regulatory safeguards and
permits telephone companies to own cable systems under certain circumstances.
It is not possible to predict the impact on the Company's television
stations of any future relaxation or elimination of the existing limitations
on the ownership of cable systems by telephone companies. The elimination or
further relaxation of the restriction, however, could increase the
competition the Company's television stations face from other distributors of
video programming.
FCC Licenses
Television broadcasting is subject to the jurisdiction of the FCC under
the Communications Act. The Communications Act prohibits the operation of
television broadcasting stations except under a license issued by the FCC and
empowers the FCC, among other things, to issue, revoke and modify
broadcasting licenses, determine the locations of stations, regulate the
equipment used by stations, adopt regulations to carry out the provisions of
the Communications Act and impose penalties for violation of such
regulations. The Telecommunications Act of 1996, which amends major
provisions of the Communications Act, was enacted on February 8, 1996. The
FCC has commenced, but not yet completed, implementation of the provisions of
the Telecommunications Act of 1996.
The Communications Act prohibits the assignment of a license or the
transfer of control of a licensee without prior approval of the FCC. In
addition, foreign governments, representatives of foreign governments,
non-citizens, representatives of non-citizens, and corporations or
partnerships organized under the laws of a foreign nation are barred from
holding broadcast licenses. Non-citizens, however, may own up to 20% of the
capital stock of a licensee and up to 25% of the capital stock of a United
States corporation that, in turn, owns a controlling interest in a licensee.
A broadcast license may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation of which more
than one-fourth of the capital stock is owned or voted by non-citizens or
their representatives, by foreign governments or their representatives, or by
non-U.S. corporations, if the FCC finds that the public interest will be
served by the refusal or revocation of such license. Under the
Telecommunications Act of 1996, non-citizens may serve as officers and
directors of a broadcast licensee and any corporation controlling, directly
or indirectly, such licensee. The Company, which is the licensee of one of
the existing stations, is restricted by the Communications Act from having
more than one-fifth of its capital stock owned by non-citizens, foreign
governments or foreign corporations, but not from having an officer or
director who is a non-citizen.
-9-
<PAGE>
Television broadcasting licenses are generally granted and renewed for a
period of five years, but 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 Telecommunications Act of 1996 extends the license
period for television stations to eight years. At the time application is
made for renewal of a television license, parties in interest as well as
members of the public may apprise the FCC of the service the station has
provided during the preceding license term and urge the grant or denial of
the application. Under the Telecommunications Act of 1996 as implemented in
the FCC's rules, a competing application for authority to operate a station
and replace the incumbent licensee may not be filed against a renewal
application and considered by the FCC in deciding whether to grant a renewal
application. The statute modified the license renewal process to provide for
the grant of a renewal application upon a finding by the FCC that the
licensee (1) has served the public interest, convenience, and necessity; (2)
has committed no serious violations of the Communications Act or the FCC's
rules; and (3) has committed no other violations of the Communications Act or
the FCC's rules which would constitute a pattern of abuse. If the FCC cannot
make such a finding, it may deny a renewal application, and only then may the
FCC accept other applications to operate the station of the former licensee.
In the vast majority of cases, broadcast licenses are renewed by the FCC even
when petitions to deny are filed against broadcast license renewal
applications. All of the Company's existing licenses that have come up for
renewal have been renewed and are in effect. Such licenses are subject to
renewal at various times during 1997, 1998 and 1999. Although there can be no
assurance that the Company's licenses will be renewed, the Company is not
aware of any facts or circumstances that would prevent the Company from
having its licenses renewed.
FCC regulations govern the multiple ownership of broadcast stations and
other media on a national and local level. The Telecommunications Act of
1996 directs the FCC to eliminate or modify certain rules regarding the
multiple ownership of broadcast stations and other media on a national and
local level. Pursuant to this directive, the FCC has revised its rules to
eliminate the limit on the number of television stations that an individual
or entity may own or control nationally, provided that the audience reach of
all television stations owned does not exceed 35% of all U.S. households.
The FCC also has initiated a rulemaking proceeding, in accordance with the
Telecommunications Act of 1996, to determine whether to retain, eliminate, or
modify its limitations on the number of television stations (currently one in
most instances) that an individual or entity may own within the same
geographic market.
Pursuant to the Telecommunications Act of 1996, the FCC has eliminated
the limit on the number of radio broadcast stations that an individual or
entity may own or control nationally. The FCC also has relaxed its local
radio multiple ownership rules governing the common ownership of radio
broadcast stations in the same geographic market. In accordance with the
Telecommunications Act of 1996, the FCC's rules permit the common ownership
of up to eight commercial radio stations, not more than five of which are in
the same service (i.e., AM or FM), in markets with 45 or more commercial
radio stations. In markets with 30 to 44 commercial radio stations, an
individual or entity may own up to seven commercial radio stations, not more
than four of which are in the same service. In markets with 15 to 29
commercial radio stations, an individual or entity may own up to six
commercial radio stations, not more than four of which are in the same
service. In markets with 14 or fewer commercial radio stations, an
individual or entity may own up to five commercial radio stations, not more
than three of which are in the same service, provided that the commonly owned
stations represent no more than 50% of the stations in the market.
The Telecommunications Act of 1996 does not eliminate the FCC's rules
restricting the common ownership of a radio station and a television station
in the same geographic market ("one-to-a-market rule") and the common
ownership of a daily newspaper and a broadcast station located in the same
geographic market. The statute, however, does relax the FCC's one-to-a-market
rule by authorizing the FCC to extend its waiver policy to stations located
in the 50 largest television markets. As directed by the Telecommunications
Act of 1996, the FCC has eliminated its prior restriction on the common
ownership of a cable system and a television network. Although the statute
lifts the prior statutory restriction on the common ownership of a cable
television system and a television station located in the same geographic
market, the FCC is not statutorily required to eliminate its regulatory
restriction on such common ownership. The FCC has initiated a proceeding to
solicit comments on retaining,
-10-
<PAGE>
modifying, or eliminating this regulatory restriction. The
Telecommunications Act of 1996 authorizes the FCC to permit the common
ownership of multiple television networks under certain circumstances.
Furthermore, in accordance with the statute, the FCC has initiated a review
of all of its ownership rules to determine whether they continue to serve the
public interest.
Ownership of television licensees generally is attributed to officers,
directors and shareholders who own 5% or more of the outstanding voting stock
of a licensee, except that certain institutional investors who exert no
control or influence over a licensee may own up to 10% of such outstanding
voting stock before attribution results. Under FCC regulations, debt
instruments, non-voting stock and certain limited partnership interests
(provided the licensee certifies that the limited partners are not
"materially involved" in the media-related activities of the partnership) and
voting stock held by minority shareholders where there is a single majority
shareholder generally will not result in attribution. Under the FCC's
multiple and cross-ownership rules, which have been or will be revised in
accordance with the Telecommunications Act of 1996, an officer or director of
the Company or a holder of the Company's voting common stock who has an
attributable interest in other broadcast stations, a cable television system
or a daily newspaper may violate the FCC regulations depending on the number
and location of the other broadcasting stations, cable television systems or
daily newspapers attributable to such person. In addition, the FCC's
cross-interest policy, which precludes an individual or entity from having an
attributable interest in one media property and a "meaningful" (but not
attributable) interest in another media property in the same area, may be
invoked in certain circumstances to reach interests not expressly covered by
the multiple ownership rules. None of the Company's officers, directors or
holders of voting common stock have attributable or non-attributable
interests in broadcasting stations, cable television systems or daily
newspapers that violate the FCC's multiple and cross-ownership rules or the
cross-interest policy.
Irrespective of the FCC rules, the Justice Department and the Federal
Trade Commission (together the "Antitrust Agencies") have the authority to
determine that a particular transaction presents antitrust concerns. The
Antitrust Agencies have recently increased their scrutiny of the television
and radio industries, and have indicated their intention to review matters
related to the concentration of ownership within markets (including local
marketing agreements ("LMAs")) even when the ownership or LMA in question is
permitted under the regulations of the FCC. There can be no assurance that
future policy and rulemaking activities of the Antitrust Agencies will not
impact the Company's operations.
The Telecommunications Act of 1996 authorizes the FCC to issue additional
licenses for advanced television ("ATV") services only to Existing
Broadcasters (as defined herein). ATV is a technology that will improve the
technical quality of television service. The Telecommunications Act of 1996
directs the FCC to adopt rules to permit Existing Broadcasters to use their
ATV channels for various purposes, including foreign language, niche, or
other specialized programming. The statute also authorizes the FCC to
collect fees from Existing Broadcasters who use their ATV channels to provide
services for which payment is received. Prior to the enactment of the
Telecommunications Act of 1996, members of Congress sought assurance from the
FCC that it would not implement any plan to award spectrum for ATV service
until additional legislation is enacted to resolve spectrum issues such as
whether broadcasters would be required to pay for ATV licenses. In response
to this request, the FCC stated that it would not award licenses or
construction permits for ATV service until such additional legislation is
enacted to address ATV spectrum issues. Such legislation, if adopted, may
require existing television broadcasters to pay for ATV licenses.
The Cable Television Consumer Protection and Competition Act
The Cable Television Consumer Protection and Competition Act of 1992 (the
"Cable Act") and the FCC's implementing regulations give television stations
the right to control the use of their signals on cable television systems.
Under the Cable Act, at three year intervals beginning in June 1993, each
television station is required to elect whether it wants to avail itself of
must-carry rights or, alternatively, to grant retransmission consent. If a
television station elects to exercise its authority to grant retransmission
consent, cable systems are required to obtain the consent of that television
station for the use of its signal and could be required to pay the television
station
-11-
<PAGE>
for such use. The Cable Act further requires mandatory cable carriage of all
qualified local television stations electing their must-carry rights or not
exercising their retransmission rights. Under the FCC's rules, television
stations were required to make their election between must-carry and
retransmission consent status by October 1, 1996, for the period from January
1, 1997 through December 31, 1999. Television stations that failed to make
an election by the specified deadline were deemed to have elected must-carry
status for the relevant three year period. Each of the Company's stations
has either elected its must-carry rights or entered into retransmission
consent agreements with substantially all cable systems in its DMA. KNTV has
elected to exercise its must-carry rights in both the Salinas-Monterey DMA
and Santa Clara County. The Company's other stations have elected to require
retransmission consent in substantially all cases. Approximately 60% of the
households in the geographic areas with respect to which the Company's
stations have elected to exercise their retransmission rights subscribe to
cable television.
In April 1993 the U.S. District Court for the District of Columbia upheld
the constitutionality of the must-carry provisions of the Cable Act.
However, on June 27, 1994, the U.S. Supreme Court vacated the lower court's
judgment and remanded the case to the District Court for further proceedings.
Although the Supreme Court found the must-carry rules to be content-neutral,
it also found that genuine issues of material fact still remained that must
be resolved on a more detailed evidentiary record. On remand, on December
13, 1995, the District Court upheld the constitutionality of the must-carry
rules. An appeal of the District Court's decision is pending before the
Supreme Court. In the meantime, however, the FCC's must-carry regulations
implementing the Cable Act remain in effect. The Company cannot predict the
outcome of such challenges. If the Supreme Court finds the must-carry rules
to be unconstitutional, some cable systems may delete carriage of signals of
some of the Company's stations and it is likely that either Congress or the
FCC will attempt to enact new must-carry requirements intended to withstand
constitutional scrutiny.
Proposed Legislation and Regulations
The FCC currently has under consideration and the Congress and the FCC
may in the future consider and adopt new or modify existing laws, regulations
and policies regarding a wide variety of matters that could, directly or
indirectly, affect the operation, ownership, and profitability of the
Company's broadcast properties, result in the loss of audience share and
advertising revenues for the Company's stations, and affect the ability of
the Company to acquire additional stations or finance such acquisitions.
Such matters include: (i) spectrum use or other fees on FCC licensees; (ii)
the FCC's equal employment opportunity rules and other matters relating to
minority and female involvement in the broadcasting industry; (iii) rules
relating to political broadcasting; (iv) technical and frequency allocation
matters; (v) changes in the FCC's cross-interest, multiple ownership and
cross-ownership rules and policies; (vi) changes to broadcast technical
requirements; (vii) limiting the tax deductibility of advertising expenses by
advertisers; and (viii) changes to the standards governing the evaluation and
regulation of television programming directed towards children, and violent
and indecent programming. The Company cannot predict whether such changes
will be adopted or, if adopted, the effect that such changes would have on
the business of the Company.
As an example of the above proposed changes, the FCC has initiated
rulemaking proceedings to solicit comments on its multiple ownership,
attribution and minority ownership rules. More particularly, the FCC has
initiated proceedings requesting comment on: (i) narrowing the geographic
area where common ownership restrictions would be triggered by limiting it to
overlapping "Grade A" contours rather than "Grade B" contours and by
permitting (or granting waivers or exceptions for) certain UHF or UHF/VHF
station combinations; (ii) relaxing the rules prohibiting cross-ownership of
radio and television stations in the same market to allow certain
combinations where there remain alternative outlets and suppliers to ensure
diversity; (iii) treating television LMAs the same as radio LMAs, which would
currently preclude certain television LMAs where the programmer owns or has
an attributable interest in another television station in the same market;
(iv) establishing a grandfathering policy for certain television LMAs in the
event the FCC decides to treat interests in such LMAs as attributable; and
(v) treating a company's interest in a joint sales agreement for a television
station as an attributable interest for purposes of the FCC's ownership
rules. The FCC also has a rulemaking proceeding pending where it seeks
comment on whether it should relax attribution and other rules to facilitate
greater minority and female ownership. This
-12-
<PAGE>
proceeding currently is being held in abeyance due to uncertainty created by
a 1995 Supreme Court decision which narrowed the legal basis for affirmative
action programs. The Company cannot predict the outcome of the FCC's
rulemaking proceedings or how FCC changes in its multiple and cross-ownership
rules, made in accordance with the Telecommunications Act of 1996, will
affect the Company's business.
The FCC also has initiated a notice of inquiry proceeding seeking
comment on whether the public interest would be served by establishing limits
on the amount of commercial matter broadcast by television stations. No
prediction can be made at this time as to whether the FCC will impose any
limits on commercials at the conclusion of its deliberation. The imposition
of limits on the commercial matter broadcast by television stations may have
an adverse effect on the Company's revenues.
The FCC has begun adopting rules and proposing others to implement
advanced television service ("ATV") which includes high definition television
systems. ATV is a technology that will improve television audio and video
quality. The FCC has "set aside" channels within the existing television
system for ATV and has limited initial ATV eligibility to existing television
stations and certain applicants for new television stations ("Existing
Broadcasters"). The FCC has determined that ATV will be a digital system
which is incompatible with current television transmitters and receivers.
The rules for phasing in ATV service permit each television station to
provide conventional television service on its regular channel until some
point after ATV service has commenced. The FCC is seeking comments on a
timetable for requiring broadcasters to convert to ATV. Broadcasters will
have to convert to ATV by the conversion deadline and surrender then one
channel back to the FCC. The FCC issued for public comment a proposed ATV
Table of Allotments intended to provide an ATV channel for each Existing
Broadcaster, in a manner that attempts to replicate each station's existing
coverage area while taking into account interference to existing television
stations and between ATV stations. On December 26, 1996, the FCC adopted a
standard for the transmission of digital television in the United States,
which is consistent with a consensus agreement voluntarily developed by a
broad cross-section of parties, including the broadcasting, equipment
manufacturing and computer industries. Implementation of ATV service will
impose substantial additional costs on television stations to provide the new
service, due to increased equipment costs. It is also possible that advances
in technology may permit Existing Broadcasters to enhance the picture quality
of existing systems without the need to implement ATV service. Although the
Company believes the FCC will authorize ATV service, the Company cannot
predict when such authorization might be given or the effect such
authorization might have on the Company's business or capital expenditure
requirements.
Seasonality
The Company's operating revenues are generally lower in the first
calendar quarter and generally higher in the fourth calendar quarter than in
the other two quarters, due in part to increases in retail advertising in the
fall months in preparation for the holiday season, and in election years due
to increased political advertising.
Employees
The Company and its subsidiaries currently employ approximately 1,170
persons, of whom approximately 277 are represented by two unions (including
11 bargaining units) pursuant to contracts expiring in 1997, 1998, 1999 and
2000 at the Company's stations. The Company believes its relations with its
employees are good.
-13-
<PAGE>
Item 2. Properties
The Company's principal executive offices are located in New York, New
York. The lease agreement, for approximately 6,800 square feet of office space
in New York, expires January 31, 2011.
The types of properties required to support each of the Company's 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 so as to provide
maximum market coverage.
-14-
<PAGE>
The following table contains certain information describing the general
character of the Company's properties:
Metropolitan Owned or Expiration
Station Area and Use Leased Approximate Size of Lease
- - ------- ------------ -------- ---------------- ----------
KNTV San Jose, California
Office and Studio Owned 26,469 sq. feet --
Tower Site Leased 2,080 sq. feet 9/30/97
Low Power Transmission Site Leased 100 sq. feet 1/1/2001(1)
WTVH Syracuse, New York
Office and Studio Owned 41,500 sq. feet --
Onondaga, New York
Tower Site Owned 2,300 sq. feet --
KSEE Fresno, California
Office and Studio Owned 32,000 sq. feet --
Bear Mountain, Fresno
County, California
Tower Site Leased 9,300 sq. feet 3/22/2034
WPTA Fort Wayne, Indiana
Office, Studio and
Tower Site Owned 18,240 sq. feet --
WEEK Peoria, Illinois
Office, Studio and
Tower Site Owned 20,000 sq. feet --
Bloomington, Illinois
Studio and Sales Office Leased 617 sq. feet 12/31/97
KBJR Duluth, Minnesota,
Superior, Wisconsin
Office and Studio Owned 15,749 sq. feet --
Tower Site Owned 3,125 sq. feet --
KEYE Austin, Texas
Office and Studio Owned 14,000 sq. feet --
Tower Site Leased 1,600 sq. feet 5/1/98
WWMT Kalamazoo, Michigan
Office and Studio Owned 45,000 sq. feet --
Gun Lake, Michigan
Tower Site Owned 3,580 sq. feet --
WKBW Buffalo, New York
Office and Studio Owned 32,000 sq. feet --
Colden, New York
Tower Site Owned 3,406 sq. feet --
WXON Southfield, Michigan
Office Leased 8,850 sq. feet 5/31/99
Southfield, Michigan
Studio and Tower Site Leased(2) 30,000 sq. feet 9/30/06
- - ---------
1 Assuming exercise of all of the Company's renewal options under such lease.
2 The Company owns a 3,400 square foot building on the property.
-15-
<PAGE>
Item 3. Legal Proceedings
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
-16-
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock (Nonvoting) is traded over-the-counter on the
Nasdaq National Market under the symbol GBTVK. As of March 10, 1997, the
approximate number of record holders of Common Stock (Nonvoting) was 126.
The range of high and low prices for the Common Stock (Nonvoting) for each
full quarterly period during 1995 and 1996 is set forth in Note 13 to the
Consolidated Financial Statements in Item 8 hereof. At March 10, 1997, the
closing price of the Common Stock (Nonvoting) was $10.50 per share.
The Company's publicly traded Cumulative Convertible Exchangeable Preferred
Stock, par value $.01 per share (the "Cumulative Convertible Exchangeable
Preferred Stock") is traded over-the-counter on the Nasdaq National Market under
the symbol GBTVP. The range of high and low prices for each full quarterly
period during 1995 and 1996, is set forth in Note 13 to the Consolidated
Financial Statements in Item 8 hereof. As of March 10, 1997, the closing price
for the Cumulative Convertible Exchangeable Preferred Stock was $54.75 per
share.
There is no established public trading market for the Company's Class A
Voting Common Stock, par value $.01 per share (the "Voting Common Stock;" the
Voting Common Stock and the Common Stock (Nonvoting) are referred to herein
collectively as the "Common Stock"). As of March 10, 1997, the number of record
holders of Voting Common Stock was 2.
The Company has declared and paid quarterly cash dividends at a quarterly
rate of $.4844 per share on the Cumulative Convertible Exchangeable Preferred
Stock each quarter since its issuance and anticipates continuing to pay such
dividends. The Company has, however, never declared or paid a cash dividend on
its Common Stock and does not anticipate paying a dividend on its Common Stock
in the foreseeable future. The payment of cash dividends on Common Stock is
subject to certain limitations under the Indentures governing the Company's
12.75% Senior Subordinated Debentures due September 1, 2002, 10 3/8% Senior
Subordinated Notes due May 15, 2005 and 9 3/8% Senior Subordinated Notes due
December 1, 2005, respectively, and is restricted under the Company's credit
agreement (the "credit agreement"). The Company is also prohibited from paying
dividends on any Common Stock: (i) until all accrued but unpaid dividends on the
Cumulative Convertible Exchangeable Preferred Stock and the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), are paid in full. All outstanding shares of Series A Preferred Stock
were converted into Common Stock (Nonvoting) in August 1995. Accrued dividends
on the Series A Preferred Stock, which totaled $262,844 at December 31, 1996,
are payable on the later of December 31, 1999 or the date on which such
dividends may be paid under the Company's existing debt instruments. If unpaid,
dividends on outstanding shares of Cumulative Convertible Exchangeable Preferred
Stock will accrue at an annual rate of $1.9375 per share.
-17-
<PAGE>
Item 6. Selected Financial Data
The information set forth below should be read in conjunction with the
consolidated financial statements and notes thereto included at Item 8 herein.
The selected consolidated financial data for the years ended December 31, 1992,
1993, 1994, 1995 and 1996 are derived from the Company's audited Consolidated
Financial Statements.
The acquisitions by the Company of its operating properties during the
periods reflected in the following selected financial data materially affect
the comparability of such data from one period to another.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data: (Dollars in thousands except per share data)
Net revenue $ 35,957 $ 37,499 $ 62,856 $ 99,895 $129,164
Station operating expenses 21,638 22,790 37,764 55,399 72,089
Depreciation 2,279 2,398 3,420 4,514 6,144
Amortization 3,983 3,865 4,715 9,330 11,824
Corporate expense 1,192 1,374 2,162 3,132 4,800
Non-cash compensation - 123 282 363 496
-------- -------- -------- -------- --------
Operating income 6,865 6,949 14,513 27,157 33,811
Other expenses 487 479 309 798 1,034
Equity in net loss (income)
of investee - - - (439) 995
Interest expense, net 11,675 10,977 10,707 27,026 36,915
-------- -------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary item (5,297) (4,507) 3,497 (228) (5,133)
(Provision) benefit for
income tax 471 472 (450) (555) (761)
-------- -------- -------- -------- --------
Income (loss) before
extraordinary item (4,826) (4,035) 3,047 (783) (5,894)
Extraordinary loss on
extinguishment of debt (5,709) (1,007) - - (2,891)
-------- -------- -------- -------- --------
Net income (loss) $(10,535) $ (5,042) $ 3,047 $ (783) $ (8,785)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net loss attributable to
common shareholders $(10,628) $ (5,278) $ (688) $ (4,333) $(12,310)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Loss before extraordinary
item per common share $ (1.22) $ (0.98) $ (0.15) $ (0.73) $ (1.09)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net loss per common share $ (2.63) $ (1.21) $ (0.15) $ (0.73) $ (1.43)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average common
shares outstanding 4,041 4,365 4,498 5,920 8,612
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet
Data:
Total assets $140,948 $191,517 $189,881 $452,221 $452,563
Total debt 101,611 99,000 99,250 341,000 351,561
Redeemable preferred
stock 1,574 49,139 49,171 45,488 45,488
Stockholders' (deficit)
equity 17,211 12,075 11,729 8,868 (3,135)
</TABLE>
-18-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
The consolidated financial statements of the Company reflect significant
increases between the years ended December 31, 1994, 1995 and 1996 in
substantially all line items. The principal reasons for such increases are the
acquisition of KEYE on February 1, 1995, the acquisition of WWMT on June 1, 1995
and the acquisition of WKBW on June 29, 1995 and the improvements in the
Company's operations.
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 years
ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating income $14,513,000 $27,157,000 $33,811,000
Add:
Depreciation and amortization 8,135,000 13,843,000 17,968,000
Corporate expense 2,162,000 3,132,000 4,800,000
Non-cash compensation 282,000 363,000 496,000
----------- ----------- -----------
Broadcast cash flow $25,092,000 $44,495,000 $57,075,000
----------- ----------- -----------
----------- ----------- -----------
</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 from operations 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.
The Company has elected as provided under Statement of Financial Accounting
Standards No. 123 (Accounting for Stock-Based Compensation) to continue to
account for stock-based employee compensation under Accounting Principles Board
Opinion No. 25.
Years ended December 31, 1996 and 1995
Net revenue for the year ended December 31, 1996 totaled $129,164,000, an
increase of $29,269,000, or 29.3% compared to net revenue of $99,895,000 for the
year ended December 31, 1995. Of this increase, $21,262,000 resulted from the
inclusion of one additional month of operations of KEYE, five additional months
of operations of WWMT and six additional months of operations of WKBW in 1996.
The remaining increase was primarily a result of increased local and national
advertising, political spending and increased network compensation.
-19-
<PAGE>
Station operating expenses for the year ended December 31, 1996 totaled
$72,089,000, an increase of $16,690,000, or 30.1% compared to station operating
expenses of $55,399,000 in the prior year. Of this increase, $10,648,000 was
due to the inclusion of one additional month of operating expenses of KEYE, five
additional months of operating expenses of WWMT and six additional months of
operating expenses of WKBW. The remaining increase was primarily due to higher
programming expenses and increased news expenses associated with the launch of a
news operation at KEYE.
Broadcast cash flow totaled $57,075,000 during the year ended December 31,
1996 compared to $44,495,000 during 1995, an increase of $12,580,000, or 28.3%.
Of the increase, $10,614,000 was due to the inclusion of one additional month of
operations of KEYE, five additional months of operations of WWMT and six
additional months of operations of WKBW.
Depreciation and amortization increased by $4,125,000, or 29.8% during the
year ended December 31, 1996 compared to 1995 primarily due to the inclusion of
one additional month of operations of KEYE, five additional months of operations
of WWMT and six additional months of operations of WKBW. Corporate expense
increased $1,668,000, or 53.3% during the year ended December 31, 1996 compared
to 1995, 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 $133,000 during the year ended
December 31, 1996 compared to 1995 due to the granting of additional awards
payable in Common Stock (Nonvoting) to certain executive employees under the
Company's Management Stock Plan.
As a result of the factors discussed above, operating income increased
$6,654,000 or 24.5% during the year ended December 31, 1996 compared to 1995.
The equity in net loss of investee of $995,000 for the year ended December
31, 1996 resulted from the Company recognizing its pro rata share of the losses
of Datacast LLC accounted for under the equity method of accounting. The equity
in net income of investee of $439,000 for the year ended December 31, 1995
resulted from the Company recognizing its pro rata share of the earnings of
Queen City III Limited Partnership, the ultimate parent of WKBW, under the
equity method of accounting. On June 29, 1995, the Company acquired the
remaining interest in Queen City III Limited Partnership.
Net interest expense totaled $36,915,000 during the year ended December 31,
1996, an increase of $9,889,000, or 36.6% compared to net interest expense of
$27,026,000 during the year ended December 31, 1995, primarily due to higher
levels of outstanding indebtedness as a result of the acquisitions of WWMT and
WKBW in June of 1995.
During 1996, the Company incurred an extraordinary loss of $2,891,000 on
the early extinguishment of debt. See "--Liquidity and Capital Resources."
Net loss totaled $8,785,000 during the year ended December 31, 1996
compared to net loss of $783,000 during 1995, an increase of $8,002,000. This
change was primarily due to the changes in the line items discussed above.
Years ended December 31, 1995 and 1994
Net revenue for the year ended December 31, 1995 totaled $99,895,000, an
increase of $37,039,000, or 58.9% compared to net revenue of $62,856,000 for the
year ended December 31, 1994. Of this increase, $36,324,000 was due to the
inclusion of eleven months of operations of KEYE, seven months of operations of
WWMT and six months of operations of WKBW. The remaining increase of $715,000
resulted from a strong advertising environment in the first six months of the
year and increased network compensation, offset, in part, by lower political
advertising in a non-election year. Net revenue at the Company's nine stations
(including revenue
-20-
<PAGE>
derived by KEYE, WWMT and WKBW prior to their acquisition by the Company)
increased $2,316,000, or 2.0% during the year ended December 31, 1995 as
compared to the same period in 1994.
Station operating expenses for the year ended December 31, 1995 totaled
$55,399,000, an increase of $17,635,000, or 46.7% compared to station operating
expenses of $37,764,000 for the same period a year earlier. Of this increase,
$16,589,000 was due to the inclusion of eleven months of operations of KEYE,
seven months of operations of WWMT and six months of operations of WKBW. The
remaining increase of $1,046,000 was primarily due to increased news and sales
development costs. Station operating expenses at the Company's nine stations
(including station operating expenses of KEYE, WWMT and WKBW prior to their
acquisition by the Company) decreased $1,779,000, or 2.7% during the year ended
December 31, 1995 as compared to the same period in 1994.
Broadcast cash flow totaled $44,495,000 during the year ended December 31,
1995 compared to $25,092,000 during the same period a year earlier, an increase
of $19,403,000, or 77.3%. Of this increase, $19,735,000 was due to the
inclusion of eleven months of operations of KEYE, seven months of operations of
WWMT and six months of operations of WKBW, which was offset, in part, by a
decrease in broadcast cash flow from the Company's initial six stations (the
"Initial Six Stations"). Broadcast cash flow at the Company's nine stations
(including broadcast cash flow of KEYE, WWMT and WKBW prior to their acquisition
by the Company) increased $537,000, or 1.0% during the year ended December 31,
1995 as compared to the same period in 1994.
Depreciation and amortization increased by $5,708,000, or 70.2% during the
year ended December 31, 1995 compared to the same period a year earlier
primarily due to the inclusion of eleven months of operations of KEYE, seven
months of operations of WWMT and six months of operations of WKBW. Corporate
expense increased $970,000, or 44.9% during the year ended December 31, 1995
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 $81,000 during the year ended December 31, 1995 compared to the same
period a year earlier due to the granting of additional awards payable in Common
Stock (Nonvoting) to certain executive employees under the Company's Management
Stock Plan.
As a result of the factors discussed above, operating income increased
$12,644,000 or 87.1% during the year ended December 31, 1995 compared to the
same period a year earlier.
Net interest expense totaled $27,026,000 during the year ended December 31,
1995, an increase of $16,319,000, or 152.4% compared to net interest expense of
$10,707,000 during the same period a year earlier, primarily due to higher
levels of outstanding indebtedness as a result of the acquisitions of KEYE, WWMT
and WKBW.
Other expenses increased by $490,000 during the year ended December 31,
1995 compared to the same period a year earlier primarily due to the incurrence
of a charge to terminate and change certain service contracts.
Net loss totaled $783,000 during the year ended December 31, 1995 compared
to net income of $3,047,000 during the same period a year earlier, a decrease of
$3,830,000. This change is primarily due to the changes in the line items
discussed above.
Liquidity and Capital Resources
On February 22, 1996, the Company completed an offering of $110,000,000
principal amount of its 9 3/8% Senior Subordinated Notes due December 2005 (the
"9 3/8% Notes"). Proceeds from the sale of the 9 3/8% Notes were used to repay
all outstanding term loan and revolving credit borrowings under the Company's
then existing bank credit agreement and for general working capital purposes.
In connection with the repayment of the term loan (which is not subject to being
reborrowed), 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. During the second quarter, the Company
-21-
<PAGE>
purchased $2,000,000 face amount of its 10 3/8% Senior Subordinated Notes due
May 2005 and $13,500,000 face amount of its 9 3/8% Notes at a discount. As a
result of these transactions, the Company recognized a net extraordinary loss
for the year ended December 31, 1996 of $2,891,000.
In September 1996, the Company amended and restated its existing credit
agreement to increase the total amount of committed revolving credit borrowings
available thereunder from $60,000,000 to $200,000,000 and to permit 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 February 28, 1997, subject to compliance with financial
covenants, the Company had $149,000,000 of the revolving credit facility
borrowings available under the credit agreement available for acquisitions and
working capital purposes.
In October 1996, the Company entered into agreements with the owner of
WLAJ, the ABC affiliate serving Lansing, Michigan, including a time brokerage
agreement pursuant to which the Company operates WLAJ and an agreement to
acquire substantially all the assets used in the operation of WLAJ for
approximately $19.4 million in cash and the assumption of certain liabilities.
The Company anticipates financing the acquisition of WLAJ with borrowings under
the credit agreement. 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.
On January 31, 1997, the Company acquired substantially all of the assets
of WXON, the WB affiliate serving Detroit, Michigan for $175,000,000 and the
assumption of certain liabilities. The Company financed the WXON Acquisition
using the proceeds from the sale of its 12 3/4% Cumulative Exchangeable
Preferred Stock (See Note 8 to the Company's Consolidated Financial
Statements) and borrowings of approximately $27,500,000 under the credit
agreement.
Cash flows provided by operating activities were $13,291,000 during the
year ended December 31, 1996 compared to $8,806,000 during the year ended
December 31, 1995 and $5,808,000 during the year ended December 31, 1994. The
increases from year to year resulted primarily from higher broadcast cash flow
offset, in part, by higher cash interest expense.
Cash flows used in investing activities were $14,435,000 during the year
ended December 31, 1996, compared to $236,343,000 during the year ended
December 31, 1995 and $2,628,000 during the year ended December 31, 1994.
Cash flows used in investing activities during the year ended December 31,
1996 related to capital expenditures, the deposit relating to the WXON
Acquisition and other capitalized acquisition costs and an investment in
Datacast LLC. Cash flows used in investing activities during the year ended
December 31, 1995 related primarily to the acquisitions of KEYE, WWMT and
WKBW while cash flows used in investing activities during the year ended
December 31, 1994 were related entirely to capital expenditures.
Cash flows provided by financing activities were $1,565,000 during the
year ended December 31, 1996 compared to cash flows provided by financing
activities of $225,685,000 during the year ended December 31, 1995 and cash
flows used in financing activities of $2,780,000 in 1994. The decrease from
1995 to 1996 resulted primarily from a decrease in net borrowings offset in
part by a decrease in payments for deferred financing fees. The increase
from 1994 to 1995 resulted primarily from a net increase in bank borrowings
and the proceeds from the sale of the 10 3/8% Notes, partially offset by
higher deferred financing fees and the redemption of the Company's adjustable
rate preferred stock.
The Company may recognize significant taxable income as a result of the
acquisition in 1995 of WKBW. Such taxable income would reduce the Company's
net operating losses for federal income tax purposes. For financial
reporting purposes, in accordance with Statement of Financial Accounting
Standards No. 109, any taxable income arising from the consummation of the
acquisition of WKBW is considered additional purchase price, which will be
amortized in future periods. See Note 10 to the Company's Consolidated
Financial Statements.
-22-
<PAGE>
The Company believes that internally generated funds from operations and
borrowings under the credit agreement's revolving credit facility will be
sufficient to satisfy the Company's cash requirements for its operations for the
next twelve months and for the foreseeable future thereafter. The Company
expects that any additional acquisitions of television stations would be
financed through funds generated from operations, borrowings under the credit
agreement's revolving credit facility and additional debt and equity financings.
-23-
<PAGE>
Item 8. Financial Statements and Supplementary Data
Report of Independent Auditors
The Board of Directors and Stockholders
Granite Broadcasting Corporation
We have audited the accompanying consolidated balance sheets of Granite
Broadcasting Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and the schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Granite
Broadcasting Corporation at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
New York, New York
January 24, 1997
-24-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
1994 1995 1996
------------ ----------- ------------
<S> <C> <C> <C>
Net revenue $ 62,856,425 $99,894,627 $129,164,353
Station operating expenses 37,763,732 55,398,930 72,089,368
Depreciation 3,420,850 4,513,919 6,144,193
Amortization 4,714,721 9,329,444 11,823,775
Corporate expense 2,162,621 3,131,943 4,799,984
Non-cash compensation expense 281,896 363,384 495,819
------------ ----------- ------------
Operating income 14,512,605 27,157,007 33,811,214
Other (income) expenses:
Equity in net (income) loss
of investee - (439,033) 995,019
Interest expense, net 10,707,147 27,026,680 36,915,306
Other 307,929 797,576 1,034,351
------------ ----------- ------------
Income (loss) before income
taxes and extraordinary item 3,497,529 (228,216) (5,133,462)
Provision for income taxes 450,125 554,884 761,000
------------ ----------- ------------
Income (loss) before
extraordinary item 3,047,404 (783,100) (5,894,462)
Extraordinary loss - - (2,891,250)
------------ ----------- ------------
Net income (loss) $ 3,047,404 $ (783,100) $ (8,785,712)
------------ ----------- ------------
------------ ----------- ------------
Net loss attributable to
common shareholders $ (687,730) $(4,333,381) $(12,310,993)
------------ ----------- ------------
------------ ----------- ------------
Per common share:
Loss before extraordinary
item $ (0.15) $ (0.73) $ (1.09)
Extraordinary loss - - (0.34)
------------ ----------- ------------
Net loss $ (0.15) $ (0.73) $ (1.43)
------------ ----------- ------------
------------ ----------- ------------
Weighted average common
shares outstanding 4,497,758 5,920,294 8,611,606
</TABLE>
See accompanying notes.
-25-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 95,123 $ 555,753
Accounts receivable, less allowance for
doubtful accounts ($505,759 in 1995 and
$391,910 in 1996) 26,186,579 27,057,451
Film contract rights 5,813,366 6,276,660
Other current assets 3,854,774 9,784,966
------------ ------------
TOTAL CURRENT ASSETS 35,949,842 43,674,830
PROPERTY AND EQUIPMENT, NET 32,132,126 33,562,019
FILM CONTRACT RIGHTS AND OTHER NONCURRENT ASSETS 3,725,612 4,284,578
DEFERRED FINANCING FEES, less accumulated
amortization ($2,947,833 in 1995 and
$4,049,724 in 1996) 14,849,529 14,181,662
INTANGIBLE ASSETS, NET 365,564,029 356,860,115
------------ ------------
$452,221,138 $452,563,204
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 5,285,619 $ 4,016,964
Accrued interest 5,595,610 6,071,378
Other accrued liabilities. 3,500,066 4,497,534
Film contract rights payable and other
current liabilities 6,946,068 9,578,365
------------ ------------
TOTAL CURRENT LIABILITIES 21,327,363 24,164,241
LONG-TERM DEBT 341,000,000 351,560,900
FILM CONTRACT RIGHTS PAYABLE 3,669,534 3,383,428
DEFERRED TAX LIABILITY AND OTHER
NONCURRENT LIABILITIES 31,869,240 31,102,272
COMMITMENTS
REDEEMABLE PREFERRED STOCK 45,487,500 45,487,500
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock: 41,000,000 shares authorized
consisting of 1,000,000 shares of Class A
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 8,499,716 shares of Common Stock
(Nonvoting) (8,218,240 shares at December 31,
1995) issued and outstanding 83,967 86,782
Additional paid-in capital 46,864,202 45,547,145
Accumulated deficit (36,590,198) (45,375,910)
Less: Unearned compensation (1,490,470) (2,506,279)
Note receivable from officer - (886,875)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 8,867,501 (3,135,137)
------------ ------------
$452,221,138 $452,563,204
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
-26-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Class A Common Series B Series C Additional Note Total
Common Stock Preferred Preferred Paid-in (Accumulated Unearned Receivable Stockholders'
Stock (Nonvoting) Stock Stock Capital Deficit) Compensation From Officer Equity (Deficit)
------- ----------- --------- --------- ----------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993 $1,785 $42,546 $ 5,006 $ 10,181 $51,362,550 $(38,854,502) $ (493,000) $ - $12,074,566
Accretion of and
dividends on
Series A
Redeemable
Preferred Stock (91,895) (91,895)
Conversion of
Redeemable
Preferred
Stock and
Series B and
Series C
Preferred
Stock into
Common Stock
(Nonvoting) 1,080 (373) (102) 59,359 59,964
Dividend on
Cumulative
Convertible
Exchangeable
Preferred Stock
and Adjustable
Rate Preferred
Stock (3,643,239) (3,643,239)
Issuance of 34,000
shares of Common
Stock (Nonvoting) 340 (340) --
Grant of Stock Award
under Management
Stock Plan 1,002,000 (1,002,000)
Stock expense
related to
Management
Stock Plan 281,896 281,896
Net income 3,047,404 3,047,404
------- ----------- -------- -------- ----------- ------------ ----------- --------- -----------
Balance at
December 31,
1994 1,785 43,966 4,633 10,079 48,688,435 (35,807,098) (1,213,104) -- 11,728,696
Accretion of
and dividends
on Series A
Redeemable
Preferred Stock (35,116) (35,116)
Conversion of
Series A
Redeemable
Preferred
Stock and
Series B and
C Preferred
Stock into
Common Stock
(Nonvoting) 36,069 (4,633) (10,079) 1,200,518 1,221,875
Dividend on
Cumulative
Convertible
Exchangeable
Preferred Stock
and Adjustable
Rate Preferred
Stock (3,550,281) (3,550,281)
Exercise of
Stock Options 1,574 31,376 32,950
Issuance of
Common Stock
(Nonvoting) 573 (573) --
Grant of Stock
Award under
Management
Stock Plan 640,750 (640,750) --
Stock expense
related to
Management
Stock Plan (110,907) 363,384 252,477
Net loss (783,100) (783,100)
------- ----------- --------- -------- ----------- ------------ ----------- ----------- -----------
Balance at
December 31,
1995 1,785 82,182 -- -- 46,864,202 (36,590,198) (1,490,470) -- 8,867,501
Dividend on
Cumulative
Convertible
Exchangeable
Preferred Stock (3,525,281) (3,525,281)
Exercise of
Stock Options 2,008 888,805 (886,875) 3,938
Issuance of
Common Stock
(Nonvoting) 807 (807) --
Grant of Stock
Award under
Management
Stock Plan 1,511,628 (1,511,628) --
Stock Expense
Related to
Management
Stock Plan (191,402) 495,819 304,417
Net loss (8,785,712) (8,785,712)
------- ----------- -------- -------- ----------- ------------ ----------- --------- -----------
Balance at
December 31,
1996 $1,785 $84,997 $ -- $ -- $45,547,145 $(45,375,910) $(2,506,279) $(886,875) $(3,135,137)
------- ----------- -------- -------- ----------- ------------ ----------- --------- -----------
------- ----------- -------- -------- ----------- ------------ ----------- --------- -----------
</TABLE>
See accompanying notes.
-27-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------
1994 1995 1996
------------ ------------- -------------
<C> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ 3,047,404 $ (783,100) $ (8,785,712)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Amortization of intangible
assets and deferred financing
fees 4,714,721 9,329,444 11,823,775
Extraordinary loss - - 2,891,250
Depreciation 3,420,850 4,513,919 6,144,193
Non-cash compensation expense 281,896 363,384 495,819
Non-cash deferred income taxes - 1,115,000 975,000
Deferred income taxes - (824,116) (589,000)
Equity in net (income) loss
of investee - (439,033) 995,019
Change in assets and liabilities
net of effects from
acquisitions of stations:
Increase in accounts receivable (1,499,860) (7,528,139) (870,872)
Increase in accrued liabilities 1,496,559 2,307,778 1,473,236
(Decrease) increase in accounts
payable (420,205) 2,689,051 (1,268,655)
Decrease (increase) in film
contract rights and
other noncurrent assets 640,968 (3,448,429) (517,279)
(Decrease) increase in film
contract rights payable
and other liabilities (3,390,646) 3,222,796 1,193,223
Increase in other assets (2,484,068) (1,712,859) (668,776)
------------ ------------- -------------
Net cash provided by operating
activities 5,807,619 8,805,696 13,291,221
------------ ------------- -------------
Cash flows from investing
activities:
Deposit for station
acquisition and other
related costs - - (5,957,000)
Investment in Datacast, LLC - - (1,500,000)
Payment for acquisitions of
stations, net of cash acquired - (228,660,507) -
Capital expenditures (2,627,793) (7,682,188) (6,938,477)
------------ ------------- -------------
Net cash used in investing
activities (2,627,793) (236,342,695) (14,395,477)
------------ ------------- -------------
Cash flows from financing
activities:
Proceeds from bank loan 1,500,000 174,250,000 34,000,000
Retirement of senior
subordinated notes - - (15,500,000)
Proceeds from exercise
of stock options - 32,950 3,938
Repayment of bank borrowings (1,250,000) (107,500,000) (117,500,000)
Redemption of Adjustable Rate
Preferred Stock - (2,000,000) -
Payment of deferred financing
fees (129,771) (10,537,110) (5,363,771)
Proceeds from senior
subordinated notes - 175,000,000 109,450,000
Dividends paid (3,564,120) (3,561,280) (3,525,281)
Other financing activities 663,894 - -
------------ ------------- -------------
Net cash provided by (used in)
financing activities (2,779,997) 225,684,560 1,564,886
------------ ------------- -------------
Net increase (decrease) in cash
and cash equivalents 399,829 (1,852,439) 460,630
Cash and cash equivalents,
beginning of year 1,547,733 1,947,562 95,123
------------ ------------- -------------
Cash and cash equivalents,
end of year $ 1,947,562 $ 95,123 $ 555,753
------------ ------------- -------------
------------ ------------- -------------
Supplemental information:
Cash paid for interest $10,176,398 $ 24,699,248 $ 36,451,009
Cash paid for income taxes 251,512 149,751 112,532
Non-cash investing and
financing activities:
Non-cash capital expenditures 350,409 459,786 635,609
</TABLE>
See accompanying notes.
-28-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Summary of Significant Accounting Policies
Financial statement presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain amounts in the prior years have been
reclassified to conform to the 1996 presentation. The Company accounts for its
investment in Datacast, LLC under the equity method of accounting.
Revenue recognition
The Company recognizes revenue from the sale of advertising at the time the
advertisements are aired.
Intangibles
Intangible assets at December 31 are summarized as follows:
1995 1996
----- -----
Goodwill $ 75,192,619 $ 76,202,853
Network affiliations 247,941,641 247,941,641
Broadcast licenses 67,896,861 67,896,861
------------ ------------
391,031,121 392,041,355
Accumulated amortization (25,467,092) (35,181,240)
------------ ------------
$365,564,029 $356,860,115
------------ ------------
------------ ------------
The intangible assets are characterized as scarce assets with long and
productive lives and are being amortized on a straight line basis over forty
years.
The Company continually reevaluates the propriety of the carrying amount of
intangible assets as well as the related amortization period to determine
whether current events and circumstances warrant adjustments to the carrying
value and/or revised estimates of useful lives. This evaluation is based on the
Company's projections of the undiscounted cash flows over the remaining lives of
the amortization period of the related intangible asset. To the extent such
projections indicate that the undiscounted cash flows are not expected to be
adequate to recover the carrying amounts of intangible assets, such carrying
amounts will be written down to their fair market value. At this time, the
Company believes that no significant impairment of intangible assets has
occurred and that no reduction of the estimated useful lives is warranted.
Deferred financing fees
The Company has incurred certain fees in connection with entering into a
bank credit agreement, the sale of 12.75% Debentures (as defined), the sale
of Cumulative Convertible Exchangeable Preferred Stock (as defined) the sale
of 10 3/8% Notes (as defined) and the sale of 9 3/8% Notes (as defined). The
deferred financing fees related to the bank credit agreement are being
amortized over seven years, ten years for the 12.75% Debentures, the 10 3/8%
Notes and the 9 3/8% Notes and twelve years for the Cumulative Convertible
Exchangeable Preferred Stock.
-29-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1 -- Summary of Significant Accounting Policies -- (Continued)
Property and equipment
Property and equipment are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives ranging from three to 32
years.
Film contract rights
Film contract rights are recorded as assets at gross value when the license
period begins and the films are available for broadcasting, are amortized on an
accelerated basis over the estimated usage of the films, and are classified as
current or noncurrent on that basis. Film contract rights payable are
classified as current or noncurrent in accordance with the payment terms of the
various license agreements. Film contract rights are reflected in the
consolidated balance sheet at the lower of unamortized cost or estimated net
realizable value.
At December 31, 1996, the obligation for programming that had not been
recorded because the program rights were not available for broadcasting
aggregated $16,965,469.
Barter transactions
Revenue from barter transactions is recognized when advertisements are
broadcast and merchandise or services received are charged to expense when
received or used.
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. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include funds invested overnight in Eurodollar
deposits.
Net loss per common share
Net loss per common share for each of the three years in the period ended
December 31, 1996 is calculated by dividing net loss attributable to common
stockholders by the weighted average number of common shares outstanding. The
inclusion of additional shares assuming the exercise of outstanding stock
options and the conversion of convertible preferred stock would have been
antidilutive in all three years.
-30-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2 -- Acquisitions
On February 1, 1995, the Company acquired substantially all of the assets
of KEYE-TV (formerly known as KBVO-TV), the CBS affiliate serving Austin, Texas
from Austin Television for $54,000,000 in cash and the assumption of certain
liabilities of KEYE-TV.
On June 1, 1995, the Company acquired substantially all of the assets and
certain liabilities of WWMT-TV, the CBS affiliate serving Grand Rapids, Michigan
from Busse Broadcasting Corporation for $98,942,000 in cash (including
$3,942,000 of working capital and other adjustments) and the assumption of
certain liabilities of WWMT-TV.
On June 29, 1995, the Company completed its acquisition of WKBW-TV, the ABC
affiliate serving Buffalo, New York. The Company paid approximately $16,000,000
(including certain related expenses) for the equity interests it did not already
own, assumed approximately $59,000,000 of debt and received working capital of
approximately $6,760,000, of which $3,491,000 was cash.
On January 31, 1997 the Company acquired substantially all the assets used
in the operation of WXON-TV, the WB affiliate serving Detroit, Michigan for
$175,000,000 in cash and the assumption of certain liabilities.
The following table summarizes the unaudited consolidated pro forma results
of operations for the years ended December 31, 1995 and 1996 assuming the
acquisition of WXON-TV, KEYE-TV, WWMT-TV and WKBW-TV had occurred as of January
1, 1995:
1995 1996
------ ------
Net revenue $145,532,000 $147,231,000
Station operating expenses 74,398,000 78,577,000
Income (loss) before extraordinary item
in 1996 5,187,000 (1,544,000)
Loss before extraordinary item per
common share $ (2.95) $ (2.81)
Time brokerage agreement
The Company operates WLAJ-TV, the ABC affiliate serving Lansing,
Michigan, pursuant to a time brokerage agreement. The terms of the agreement
require the Company to pay a monthly fee in exchange for the right to provide
station programming and sell related advertising time. The fee is expensed
as incurred. The agreement terminates if the Company exercises its option to
acquire WLAJ-TV. The agreement to acquire substantially all of the assets
used in the operation of WLAJ-TV is for $19,400,000 in cash and the
assumption of certain liabilities. The Company classifies the fee as interest
expense to the extent interest is imputed based on the purchase price of the
station. In connection with this agreement, the Company agreed to provide a
loan guarantee of up to $12,000,000 in favor of the owner of WLAJ-TV. The
guarantee is collateralized by all of the assets of WLAJ-TV.
-31-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3-- Property and Equipment
The major classifications of property and equipment are as follows:
December 31,
-------------
1995 1996
------ -----
Land $ 2,527,708 $ 2,527,708
Buildings and improvements. . 14,729,378 16,607,496
Furniture and fixtures . 4,380,475 5,691,019
Technical equipment and other 27,711,903 31,924,360
------------ ------------
49,349,464 56,750,583
Less: Accumulated depreciation. . 17,217,338 23,188,564
------------ ------------
Net property and equipment. . $ 32,132,126 $ 33,562,019
------------ ------------
------------ ------------
Note 4 -- Other Accrued Liabilities
Other accrued liabilities are summarized below:
December 31,
-------------
1995 1996
------ -----
Compensation and benefits . . $ 2,001,193 $ 2,367,808
Other . . 1,498,873 2,129,726
------------ ------------
Total . . $ 3,500,066 $ 4,497,534
------------ ------------
------------ ------------
Note 5 -- Other Current Assets
Other current assets are summarized below:
December 31,
-------------
1995 1996
----- ------
Barter and other receivables $ 2,542,824 $ 2,400,386
Escrow deposit related to station
acquisition and other related costs -- 5,957,000
Other . . 1,311,950 1,427,580
------------ ------------
Total . . $ 3,854,774 $ 9,784,966
------------ ------------
------------ ------------
-32-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6 -- Long-term Debt
The carrying amounts and fair values of the Company's long-term debt at
December 31, are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1996
----------------- -----------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Senior Bank Debt $106,000,000 $106,000,000 $22,500,000 $22,500,000
9 3/8% Senior Subordinated Notes,
net of unamortized discount - - 96,060,900 94,087,500
10 3/8% Senior Subordinated
Notes 175,000,000 180,278,000 173,000,000 178,622,500
12.75% Senior Subordinated
Notes 60,000,000 65,559,600 60,000,000 65,625,000
--------------- ------------ --------------- -------------
Total $341,000,000 $351,837,600 $351,560,900 $360,835,000
--------------- ------------ --------------- -------------
--------------- ------------ --------------- -------------
</TABLE>
The fair value of the Company's Senior Subordinated Notes is estimated
based on quoted market prices. The carrying amount of the Company's
borrowings under its credit facility approximates fair value.
Senior bank debt
The Company's existing bank credit agreement was amended and restated on
February 1, 1995 (as amended and restated the "Amended and Restated Credit
Agreement") to permit term borrowings of up to $100,000,000 plus a revolving
working capital facility permitting borrowings of up to $15,000,000. The
Amended and Restated Credit Agreement was amended and restated on May 19,
1995 (as amended and restated the "Second Amended and Restated Credit
Agreement") to permit term borrowings of up to $102,000,000 plus a revolving
working capital facility permitting borrowings of up to $60,000,000.
Proceeds from the incremental borrowings under the Second Amended and
Restated Credit Agreement along with the proceeds from the sale of
$175,000,000 principal amount of the Company's 10 3/8% Senior Subordinated
Notes due May 15, 2005 (the "10 3/8% Notes") were used to fund the acquisition
of WWMT-TV and WKBW-TV and to pay fees and expenses incurred in connection
with the offering of the 10 3/8% Notes and the Second Amended and Restated
Credit Agreement.
The Second Amended and Restated Credit Agreement was further amended and
restated on September 4, 1996 (as amended and restated the "Third Amended and
Restated Credit Agreement") to create a reducing revolving credit facility of
up to $200,000,000 and permits borrowings of up to $300,000,000 in the
aggregate. The proceeds from this facility are available for acquisitions and
for general working capital purposes as defined in the agreement.
Outstanding principal balances under the Third Amended and Restated
Credit Agreement bear interest at floating rates equal to LIBOR (the "LIBOR
Rate") plus marginal rates between 1.125% and 2.375% or the prime rate plus
marginal rates between 0.0% and 1.125%. The LIBOR Rate was 5.6875% plus a
marginal rate of 2.375% at December 31, 1996. The LIBOR Rate was 5.75% -
5.938% plus a marginal rate of 2.50% at December 31, 1995. The marginal rate
is subject to change based upon changes in the ratio of outstanding principal
balances to operating cash flow. The principal amount of the revolving loans
are subject to reduction in installments commencing December 31, 1998 through
December 31, 2003, when the final payment is due.
-33-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6 -- Long-term Debt -- (Continued)
The Third Amended and Restated Credit Agreement is secured by
substantially all of the assets of the Company, as well as a pledge of all
issued and outstanding shares of capital stock of the Company's present and
future subsidiaries and guaranteed by all present and future subsidiaries of
the Company. The Third Amended and Restated Credit Agreement requires the
Company to maintain compliance with certain financial ratios. Other
provisions place limitations on the incurrence of additional debt, payments
for capital expenditures, prepayment of subordinated debt, merger or
consolidation with or acquisition of another entity, the declaration or
payment of cash dividends other than on the Cumulative Convertible
Exchangeable Preferred Stock and other transactions by the Company.
Senior Subordinated Debentures
The Company has outstanding $60,000,000 aggregate principal amount of its
12.75% Senior Subordinated Debentures (the "12.75% Debentures") due September
1, 2002.
The 12.75% Debentures are redeemable after September 1, 1997, at the option
of the Company, in whole or in part from time to time, at certain prices
declining annually to 100% of the principal amount on or after September 1,
1999, plus accrued interest. The Company is required to offer to repurchase all
outstanding 12.75% Debentures at 101% of the principal amount plus accrued
interest in the event of a Change of Control (as defined in the Indenture
governing the 12.75% Debentures).
The 12.75% Debentures are subordinated in right of payment to the Third
Amended and Restated Credit Agreement and to future Senior Debt (as defined in
the Indenture governing the 12.75% Debentures) and rank pari passu with all
senior subordinated debt and senior to all subordinated debt of the Company.
The Indenture governing the 12.75% Debentures contains certain covenants that,
among other things, limit the ability of the Company and its subsidiaries to
incur debt, pay cash dividends on or repurchase capital stock, enter into
agreements prohibiting the creation of liens or restricting the ability of a
subsidiary to pay money or transfer assets to the Company, enter into certain
transactions with their affiliates, dispose of certain assets and engage in
mergers and consolidations.
Senior Subordinated Notes
The Company issued $175,000,000 aggregate principal amount of its 10 3/8%
Senior Subordinated Notes (the "10 3/8% Notes") due May 15, 2005. On May 6,
1996, the Company purchased $2,000,000 face amount of its 10 3/8% Notes at a
discount and recognized an extraordinary loss, after the write-off of a
portion of related deferred financing fees, of $44,150.
The 10 3/8% Notes will be redeemable in the event that on or before May
15, 1998 the Company receives net proceeds from the sale of its Capital Stock
(other than Disqualified Stock (each as defined in the Indenture governing
the 10 3/8% Notes)), in which case the Company may, at its option and from
time to time, use all or a portion of any such net proceeds to redeem certain
amounts of the 10 3/8% Notes with certain limitations. In addition, the
10 3/8% Notes are redeemable at any time on or after May 15, 2000, at the
option of the Company, in whole or in part from time to time, at certain
prices declining annually to 100% of the principal amount on or after May 15,
2002, plus accrued interest. The Company is required to offer to purchase all
outstanding 10 3/8% Notes
-34-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6 -- Long-term Debt -- (Continued)
at 101% of the principal amount plus accrued interest in the event of a
Change of Control (as defined in the Indenture governing the 10 3/8% Notes).
The 10 3/8% Notes are subordinated in right of payment to the Third
Amended and Restated Credit Agreement and to future Senior Debt (as defined
in the Indenture governing the 10 3/8% Notes) and rank pari passu with all
senior subordinated debt and senior to all subordinated debt of the Company.
The Indenture governing the 10 3/8% Notes contains certain covenants that,
among other things, limit the ability of the Company and its subsidiaries to
incur debt, pay cash dividends on or repurchase capital stock, enter into
agreements prohibiting the creation of liens or restricting the ability of a
subsidiary to pay money or transfer assets to the Company, enter into certain
transactions with their affiliates, dispose of certain assets and engage in
mergers and consolidations.
On February 22, 1996, the Company completed an offering of $110,000,000
principal amount of its 9 3/8% Senior Subordinated Notes (the "9 3/8% Notes")
due December 1, 2005. Proceeds from the sale of the 9 3/8% Notes were used to
repay all outstanding term loan and revolving credit borrowings under the
Company's then existing bank credit agreement and for general working capital
purposes. In connection with the repayment of the term loan, the Company
incurred an extraordinary loss on the early extinguishment of debt of
$3,510,152 related to the write-off of deferred financing fees.
The 9 3/8% Notes will be redeemable in the event that on or before
February 22, 1999 the Company receives proceeds from any sale of its Capital
Stock (other than Disqualified Stock) in one or more offerings, in which case
the Company may, at its option and from time to time, use all or a portion of
any such net proceeds within 75 days of receipt to redeem certain amounts of
the 9 3/8% Notes with certain limitations. In addition, the 9 3/8% Notes are
redeemable at any time on or after December 1, 2000, at the option of the
Company, in whole or in part, at certain prices declining annually to 100% of
the principal amount on or after December 1, 2002, plus accrued interest.
The Company is required to offer to purchase all outstanding 9 3/8% Notes at
101% of the principal amount plus accrued interest in the event of a Change
of Control (as defined in the Indenture governing the 9 3/8% Notes).
The 9 3/8% Notes are subordinate in right of payment to all existing and
future Senior Debt (as defined in the Indenture) and rank pari passu with all
senior subordinated debt and senior to all subordinated debt. The provisions
of the Indenture contains certain covenants that, among other things, limit
the ability of the Company and its subsidiaries to incur debt, make certain
restricted payments, enter into certain transactions with their affiliates,
dispose of certain assets, incur liens securing subordinated debt of the
Company, engage in mergers and consolidations and restrict the ability of the
subsidiaries of the Company to make distributions and transfers to the
Company.
On June 19, 1996, the Company purchased $13,500,000 face amount of its
9 3/8% Notes at a discount and recognized an extraordinary gain, after the
write-off of a portion of related deferred financing fees, of $663,052.
There are no scheduled principal maturities on all long-term debt for the
five years subsequent to December 31, 1996.
-35-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 7 -- Commitments
Future minimum lease payments under long-term operating leases as of
December 31, 1996 are as follows:
1997 $ 839,000
1998 699,000
1999 598,000
2000 411,000
2001 295,000
2002 and thereafter 2,402,000
----------
$5,244,000
----------
----------
Rent expense, including escalation charges, was $116,000, $559,000 and
$929,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
Note 8 -- Redeemable Preferred Stock
Series A Preferred Stock
The Company authorized 100,000 shares of its Series A Convertible
Preferred Stock ("Series A Stock"), par value $.01 per share, which were
issued at an aggregate price of $1,210,000. All outstanding shares of the
Series A Stock were converted into shares of the Company's Common Stock
(Nonvoting), par value $.01 per share (the "Common Stock (Nonvoting)") in
August 1995. Prior to conversion, dividends accrued on the Series A Stock at
an annual rate of $.40 per share which accumulated, without interest, if
unpaid. Accrued but unpaid dividends on the Series A Stock totaled $262,844
at December 31, 1995 and 1996. Accrued dividends are due and payable on the
later of December 31, 1999 or the date on which such dividends may be paid
under the Company's debt instruments.
Cumulative Convertible Exchangeable Preferred Stock
The Company has authorized 3,000,000 shares of its Cumulative Convertible
Exchangeable Preferred Stock (the "Cumulative Convertible Exchangeable
Preferred Stock"), par value $.01 per share, of which 1,520,000 shares were
issued on December 23, 1993 at a price of $25.00 per share. The Company also
issued on December 23, 1993 300,000 shares of its Cumulative Convertible
Exchangeable Preferred Stock valued at $7,500,000 as consideration for
acquiring certain outstanding securities of Queen City III Limited
Partnership, the ultimate parent of WKBW-TV. Holders of the Cumulative
Convertible Exchangeable Preferred Stock are entitled to receive cash
dividends at an annual rate of $1.9375 per share, payable quarterly on each
March 15, June 15, September 15 and December 15 in each year, when, as and if
declared by the Company's Board of Directors. Dividends on the Cumulative
Convertible Exchangeable Preferred Stock are cumulative and accrue without
interest, if unpaid.
Each share of Cumulative Convertible Exchangeable Preferred Stock is
convertible, at the option of the holder, into shares of Common Stock
(Nonvoting). The Cumulative Convertible Exchangeable Preferred Stock is
convertible into Common Stock (Nonvoting) on a 5 for 1 share basis. The
current conversion price of the Cumulative Convertible Exchangeable Preferred
Stock is $5.00 per share, subject to adjustment upon the occurrence of
certain events. The Cumulative Convertible Exchangeable Preferred Stock is
entitled to a preference of $25.00
-36-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 8 -- Redeemable Preferred Stock -- (Continued)
per share plus accrued and unpaid dividends in the event of liquidation,
dissolution or winding up of the Company ($45,487,500 liquidation value at
December 31, 1996). The Company is required, to the extent permitted by loan
agreements or indentures to which the Company is then a party, the
obligations of which are senior in priority to the Cumulative Convertible
Exchangeable Preferred Stock, to redeem the Cumulative Convertible
Exchangeable Preferred Stock at a price of $25.00 per share plus accrued and
unpaid dividends on December 15, 2005.
The Cumulative Convertible Exchangeable Preferred Stock is exchangeable
in whole, but not in part, at the option of the Company, for the Company's
7.75% Junior Subordinated Convertible Exchange Debentures (the "Exchange
Debentures") on any dividend payment date beginning on December 15, 1995 at
the rate of $25.00 principal amount of Exchange Debentures for each share of
Cumulative Convertible Exchangeable Preferred Stock outstanding at the time
of the exchange. The Company may only effect such exchange if accrued and
unpaid dividends on the Cumulative Convertible Exchangeable Preferred Stock
have been paid in full.
In January 1997, the Company authorized 400,000 shares of its 12-3/4%
Cumulative Exchangeable Preferred Stock (the "New Preferred Stock"), par
value $.01 per share. In connection with the Company's acquisition of
WXON-TV, 150,000 shares of the New Preferred Stock were issued in January
1997 at a price of $1,000 per share. Holders of the New Preferred Stock are
entitled to receive dividends at an annual rate of 12-3/4% per share payable
semi-annually on April 1 and October 1 of each year. The Company may elect
to pay dividends prior to April 1, 2002 in additional shares of New Preferred
Stock. Dividends on the New Preferred Stock are cumulative and accrue
without interest, if unpaid.
The New Preferred Stock is entitled to a preference of $1,000 per share
initially, plus accumulated and unpaid dividends in the event of liquidation
or winding up of the Company. The Company is required, subject to certain
conditions, to redeem all of the New Preferred Stock outstanding on April 1,
2009, at a redemption price equal to 100% of the then effective liquidation
preference thereof, plus, without duplication, accumulated and unpaid
dividends to the date of redemption.
Subject to certain conditions, each share of the New Preferred Stock is
exchangeable, in whole or in part, at the option of the Company, for the
Company's 12-3/4% Exchange Debentures (the "New Exchange Debentures") on any
scheduled dividend payment date at the rate of $1,000 principal amount of New
Exchange Debentures for each share of New Preferred Stock outstanding at the
time of the exchange.
Note 9 -- Stockholders' Equity
Stock option plans
The Company has a stock option plan (the "Stock Option Plan") for
officers, directors and certain key employees. On July 25, 1995, the Stock
Option Plan was amended to increase the shares of Common Stock (Nonvoting)
subject to options available for grant to 2,000,000 from 800,000. Options
may be granted under the Stock Option Plan at an exercise price (for
tax-qualified incentive stock options) of not less than 100% of the fair
market value of the Common Stock (Nonvoting) on the date the option is
granted, or 110% of such fair market value for option recipients who hold 10%
or more of the Company's voting stock. The exercise price for non-
-37-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 9 -- Stockholders' Equity -- (Continued)
qualified stock options may be less than, equal to or greater than the fair
market value of the Common Stock (Nonvoting) on the date the option is
granted. Options are normally exercisable at a rate of 20% per year beginning
on the date of grant (or the next preceding January 1) and expire ten years
after the date of grant, except for incentive stock options granted to
recipients who also own 10% or more of the Company's voting stock. At
December 31, 1994, 1995 and 1996, 204,700, 467,850 and 521,000, respectively,
options were exercisable.
On March 1, 1994, the Company adopted a Director Stock Option Plan (the
"Director Option Plan") providing for the grant, from time to time, of
non-qualified stock options to non-employee directors of the Company to
purchase an aggregate of 300,000 shares of Common Stock (Nonvoting). As of
December 31, 1995 and 1996, options granted under the Director Option Plan
were outstanding for the purchase of 101,700 and 97,200 shares of Common
Stock (Nonvoting), respectively. Under the Director Option Plan as amended
in 1995, at the end of the current triennial option period and each third
anniversary thereafter all directors will automatically receive an option to
purchase 18,000 shares of Common Stock (Nonvoting) ("Automatic Director
Service Awards") as compensation for attendance at each regular quarterly
meeting ("Regular Quarterly Meeting") during the triennial option period
subsequent to the grant in lieu of cash compensation. In addition, under the
Director Option Plan, directors receive options ("Automatic Committee
Awards") for service on certain of the committees of the Board of Directors
(each a "Committee"). Options become exercisable one year (or immediately in
the case of Automatic Director Service Awards, or Automatic Committee Awards
granted after February 27, 1997) from the date of attendance by a director at
a Regular Quarterly Meeting or a Committee meeting, as applicable.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("FAS 123"). Accordingly, no compensation expense has been
recognized for the stock option plans. For purposes of FAS 123 pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period, therefore, the impact on pro forma net loss
in 1995 and 1996 may not be representative of the impact in future years.
The Company's pro forma information for years ended December 31, follows:
1995 1996
-------- ----------
Pro forma net loss $969,498 $9,473,649
Pro forma loss per share:
Primary $(0.76) $(1.51)
Fully diluted $(0.76) $(1.51)
The fair value for each option grant was estimated at the date of grant
using a binomial option pricing model with the following weighted-average
assumptions for the various grants made during 1995 and 1996: risk-free
interest rate of 5.77% and 5.92%; no dividend yield; expected volatility of
25%; and expected lives of two to three years.
The binomial option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility. The Company's employee stock options have characteristics
significantly different from those of traded options and changes in the
subjective input assumptions can materially affect the fair value estimate.
-38-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 9 -- Stockholders' Equity -- (Continued)
<TABLE>
<CAPTION>
1995 1996
------------------------------- ------------------------------
Weighted-Average Weighted-Average
Options Exercise Price Options Exercise Price
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 714,850 $4.05 1,048,950 $5.22
Granted 348,400 7.57 1,029,000 14.19
Exercised (7,400) 4.25 (200,750) 4.44
Forfeited (6,900) 4.87 (4,500) 7.10
--------- ---------
Outstanding at end of year 1,048,950 5.22 1,872,700 10.22
--------- ---------
--------- ---------
Exercisable at end of year 480,350 4.24 573,200 5.27
Weighted-average fair value of
options granted during the year $1.86 $5.23
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged
from $3 to $16.
Management Stock Plan
In April 1993, the Company adopted a Management Stock Plan providing for
the grant from time to time of awards denominated in shares of Common Stock
(Nonvoting) (the "Bonus Shares") to salaried executive employees of the
Company. The Company has set aside a reserve of 750,000 shares of Common
Stock (Nonvoting) for grant under the Management Stock Plan. As of December
31, 1996, a total of 610,875 Bonus Shares have been allocated pursuant to the
Management Stock Plan.
The total number of common shares outstanding at December 31, 1996
assuming conversion of all outstanding convertible preferred stock and
exercise of all outstanding stock options is as follows:
Class A Common Stock 178,500
Common Stock (Nonvoting) 8,499,716
Conversion of Cumulative Convertible
Exchangeable Preferred Stock 9,097,500
Stock option plans. 1,872,700
----------
19,648,416
----------
----------
Note 10 -- Income Taxes
The Company files a consolidated federal income tax return for its
entities with the exception of the subsidiary that holds the investment in
WKBW-TV. For all periods presented, the Company provides for income taxes as
required under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, the
Company records income taxes using a liability approach for financial
accounting and reporting which results in the recognition and measurement of
deferred tax assets based on the likelihood of realization of tax benefits in
future years.
-39-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 10 -- Income Taxes -- (Continued)
The provision for income taxes for the years ended December 31 consists
of the following:
1994 1995 1996
--------- -------- --------
Current taxes:
Federal $ 100,000 $ - $ -
State 416,125 264,000 375,000
--------- -------- --------
516,125 264,000 375,000
Deferred taxes:
Federal (101,000) 154,400 285,700
State 35,000 136,484 100,300
--------- -------- --------
(66,000) 290,884 386,000
--------- -------- --------
Provision for income taxes $ 450,125 $554,884 $761,000
--------- -------- --------
--------- -------- --------
The provision for income taxes for the years ended December 31, 1995 and
1996 is comprised of a non-cash provision for income taxes, relating to
WKBW-TV of $1,100,000 and $975,000, respectively, partially offset by the
deferred tax benefit recorded on companies included in the Granite
Broadcasting Corporation U.S. consolidated income tax return. Also included
are the provisions for state and local taxes.
During 1995, the Company utilized approximately $2,800,000 of net
operating loss carryforwards relating to WKBW-TV to eliminate its income tax
liability. This tax benefit of approximately $1,100,000 reduced goodwill.
The Company has remaining net operating loss carryforwards relating to
WKBW-TV of approximately $19,000,000, which expire no sooner than December
31, 2004. The net operating loss carryforwards are restricted to offsetting
future years' U.S. federal income tax liabilities of that subsidiary. If
realized, the benefit will be used to further reduce goodwill.
The provision for income taxes for the year ended December 31, 1994
includes a provision for federal alternative minimum tax and state and local
taxes.
-40-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 10 -- Income Taxes -- (Continued)
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Components
of the Company's deferred tax asset and liability as of December 31 are as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax liability from excess carrying value
of non-goodwill intangible assets over tax basis $31,245,043 $39,648,565
Deferred tax assets:
Net operating loss carryforward 15,168,786 24,293,786
Other 400,134 304,862
----------- -----------
Total deferred tax assets 15,568,920 24,598,648
Valuation allowance (6,542,673) (7,554,878)
----------- -----------
Net deferred tax assets 9,026,247 17,043,770
----------- -----------
Net deferred tax liability $22,218,796 $22,604,795
----------- -----------
----------- -----------
</TABLE>
The difference between the U.S. federal statutory tax rate and the
Company's effective tax rate for the years ended December 31 is as follows:
1994 1995 1996
------ ------ ------
U.S. statutory rate 35.0% (35.0%) (35.0%)
Nondeductible amortization 7.4 201.4 22.2
State and local taxes 10.0 160.8 9.3
Alternative minimum tax 2.9 - -
Increase (decrease) in valuation allowance (42.4) (84.1) 18.3
----- ----- -----
Effective tax rate 12.9% 243.1% 14.8%
----- ----- -----
----- ----- -----
At December 31, 1996, the Company had a net operating loss carryforward
for federal tax purposes of approximately $49,000,000 which will expire no
sooner than December 31, 2004. The future utilization of the net operating
losses may be subject to limitation under Section 382 of the Internal Revenue
Code. This possible limitation has been reflected in the valuation
allowance. The Company has provided a valuation allowance against a portion
of the net deferred tax asset as the past history of the Company makes
realization of taxable income uncertain. During 1994, 1995 and 1996, the
change in valuation allowance relates to the utilization of or increase in
net operating loss carryforwards.
-41-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 11 -- Defined Contribution Plan
The Company has a trusteed profit sharing and savings plan (the "Plan")
covering substantially all of its employees. Contributions by the Company to
the Plan are based on a percentage of the amount of employee contributions to
the Plan and are made at the discretion of the Board of Directors. Company
contributions, which are funded quarterly, amounted to $237,000, $499,000 and
$642,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
Note 12 -- Related Party
The Company paid a company, as to which a director of Granite was the
Chairman and Chief Executive Officer until August 19, 1994, $518,257 for the
year ended December 31, 1994, relating to services rendered as the exclusive
representative and sales agent for three of the stations' national
broadcasting revenue.
In 1995, the Company lent two of its officers an aggregate of $570,000 to
pay certain personal taxes. The terms of the loans provide for an annual
interest rate of 9% payable semi-annually on December 29 and June 29 of each
year, with all principal and remaining interest due on December 29, 2004.
In 1996, the Company lent one of its officers $886,875 to pay the
exercise price incurred in connection with exercising options and $409,000 to
pay related personal income taxes. The loans are term loans which provide
for an annual interest rate of 8%, payable annually on April 23 and December
31, respectively, of each year, with all principal and remaining interest due
on April 23 and December 31, 2001, respectively. The amount of the loan made
in connection with exercising options is shown in the balance sheet at
December 31, 1996 as a reduction to stockholders' equity.
Note 13 -- Price Range of Common Stock (Nonvoting) and
Cumulative Convertible Exchangeable Preferred Stock (unaudited)
The Company's Common Stock (Nonvoting) is traded in the over-the-counter
market and is quoted on the Nasdaq National Market under the symbol "GBTVK".
The following table sets forth the market price ranges per share of Common
Stock (Nonvoting) during 1995 and 1996, as reported by Nasdaq:
1995 High Low
---- ------ ------
First Quarter $7-3/8 $6-1/8
Second Quarter 8-3/8 6-3/4
Third Quarter 13-1/4 7-1/2
Fourth Quarter 11-3/4 8-5/8
1996
----
First Quarter $12-1/8 $9-1/4
Second Quarter 13-1/2 11-1/4
Third Quarter 15 11-1/2
Fourth Quarter 14 9-7/8
-42-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 13 -- Price Range of Common Stock (Nonvoting) and
Cumulative Convertible Exchangeable Preferred
Stock (unaudited) -- (Continued)
As of March 3, 1997, the closing price per share for the Company's Common
Stock (Nonvoting), as reported by Nasdaq was $9-5/8 per share.
The Cumulative Convertible Exchangeable Preferred Stock is traded
over-the-counter and is quoted on the Nasdaq National Market under the symbol
"GBTVP". The following table sets forth the market price ranges per share of
Cumulative Convertible Exchangeable Preferred Stock during 1995 and 1996, as
reported by Nasdaq:
1995 High Low
---- ------- -------
First Quarter $40-3/8 $34
Second Quarter 45 38-1/4
Third Quarter 67-1/2 43-1/2
Fourth Quarter 58-3/8 48
1996
----
First Quarter $61-7/8 $48-1/8
Second Quarter 68-5/8 60
Third Quarter 75-1/2 60
Fourth Quarter 75-1/2 50
As of March 3, 1997, the closing price for the Company's Cumulative
Convertible Exchangeable Preferred Stock, as reported by Nasdaq, was $50-5/8
per share.
-43-
<PAGE>
SCHEDULE II
GRANITE BROADCASTING CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Acquired Amount charged Balance
Allowance for beginning allowance for to costs Amount at end
Doubtful Accounts of year doubtful accounts and expenses written off(1) of year
----------------- ---------- ----------------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1994 . . . $ 227,365 $ -- $ 347,382 $ 318,920 $ 255,827
For the year ended December 31, 1995 . . . 255,827 229,171 402,619 381,858 505,759
For the year ended December 31, 1996 . . . 505,759 -- 212,665 326,514 391,910
</TABLE>
- - -------------
1 Net of recoveries.
-44-
<PAGE>
Item 9. Changes and Disagreements With Accountants on Accounting
and Financial Disclosure
None.
-45-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth information concerning the executive
officers and directors of the Company as of February 1, 1997:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
W. Don Cornwell(1) . . . . . . . . . . 49 Chairman of the Board, Chief Executive Officer
and Director
Stuart J. Beck(1). . . . . . . . . . . 50 President, Treasurer, Secretary and Director
Robert E. Selwyn, Jr. . . . . . . . . 54 Chief Operating Officer
Lawrence I. Wills. . . . . . . . . . . 36 Vice President-Finance and Controller
Ellen McClain. . . . . . . . . . . . . 32 Vice President-Corporate Development and Treasurer
James L. Greenwald(2). . . . . . . . . 69 Director
Vickee Jordan Adams. . . . . . . . . . 37 Director
Martin F. Beck(2). . . . . . . . . . . 79 Director
Edward Dugger, III(2). . . . . . . . . 47 Director
Thomas R. Settle(1)(3) . . . . . . . . 55 Director
Charles J. Hamilton, Jr.(3). . . . . . 49 Director
Mikael Salovaara . . . . . . . . . . . 43 Director
</TABLE>
- - ------------
(1) Member of the Stock Option Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee and Management Stock Plan Committee.
Mr. Cornwell is a founder of the Company and has been Chairman of the Board
of Directors and Chief Executive Officer of the Company since February 1988.
Mr. Cornwell served as President of the Company, which office then included the
duties of chief executive officer, until September 1991 when he was elected to
the newly-created office of Chief Executive Officer. Prior to founding the
Company, Mr. Cornwell served as a Vice President in the Investment Banking
Division of Goldman, Sachs & Co. ("Goldman Sachs") from May 1976 to July 1988.
In addition, Mr. Cornwell was the Chief Operating Officer of the Corporate
Finance Department of Goldman Sachs from January 1980 to August 1987. Mr.
Cornwell is a director of Melville Corporation, Hershey Trust Company, the
Milton S. Hershey School, Pfizer, Inc., CVS Corporation and Utendahl Capital
Partners. Mr. Cornwell received a Bachelor of Arts degree from Occidental
College in 1969 and a Masters degree in Business Administration from Harvard
Business School in 1971.
Mr. Stuart Beck is a founder of the Company and has been a member of the
Board of Directors and Secretary of the Company since February 1988 and
President of the Company since September 1991. Prior to founding the
Company, Mr. Beck was an attorney in private practice of law in New York, New
York and Washington, DC. Mr. Beck is a member of the Board of American Women
in Radio and Television Society. Mr. Beck received a Bachelor of Arts degree
from Harvard College in 1968 and a Juris Doctor degree from Yale Law School
in 1971. Mr. Beck is the son of Martin F. Beck.
Mr. Selwyn has been Chief Operating Officer of the Company since September
19, 1996. Prior to joining the Company, Mr. Selwyn was employed by New World
Communications, Inc. from May 1993 to June 1996
-46-
<PAGE>
serving as Chairman and Chief Executive Officer of the New World Television
Station Group. Mr. Selwyn received a bachelor of science degree from the
University of Tennessee in 1968. From 1990 until 1993, Mr. Selwyn was the
President of Broadcasting for SCI Television, Inc. Mr. Selwyn was an officer
of SCI Television, Inc. at the time that company filed a petition under
Federal bankruptcy laws.
Mr. Wills has been Vice President-Finance and Controller of the Company
since June 25, 1990. Prior to joining the Company, Mr. Wills was employed by
Ernst & Young LLP from July 1982 to May 1990 in various capacities, the most
recent of which was as audit manager responsible for managing and supervising
audit engagements. Mr. Wills is a director of the Broadcast Cable Financial
Management Association. Mr. Wills received a bachelors degree in Business
Administration from Iona College in 1982.
Ms. McClain has been Vice President - Corporate Development and Treasurer
of the Company since January 1994. Prior to joining Granite, Ms. McClain
attended Harvard Business School, where she received a Masters degree in
Business Administration in June 1993. From 1990 to 1991, Ms. McClain was an
Assistant Vice President with Canadian Imperial Bank of Commerce, where she
served as a lender in the Bank's Media Group and from 1986 to 1990 was employed
by Bank of New England, N.A. in various capacities including a lender in the
Communications Group. Ms. McClain is a director of the National Association
of Black Broadcasters. Ms. McClain received a Bachelor of Arts Degree in
Economics from Brown University in 1986.
Mr. Greenwald has been a member of the Board of Directors of the Company
since December 1988. Mr. Greenwald was the Chairman and Chief Executive
Officer of Katz Communications, Inc. from May 1975 to August 1994 and has been
Chairman Emeritus since August 1994. Mr. Greenwald has served as President of
the Station Representatives Association and the International Radio and
Television Society and Vice President of the Broadcast Pioneers. Mr. Greenwald
received a Bachelor of Arts degree from Columbia University in 1949 and an
Honorary Doctorate Degree in Commercial Science from St. Johns University in
1980.
Ms. Adams has been a member of the Board of Directors of the Company since
August 1988. Ms. Adams has been Vice President, Director of Communications
Training with Ketchum P.R., a New York City-based public relations firm, since
October 1992. From February 1990 to September 1992, Ms. Adams was Vice
President, Manager Communications Training with Burson-Marsteller, a New York
City-based public relations firm. From December 1983 to February 1990, Ms.
Adams served in various capacities in Burson-Marsteller's Communications
Training section. Ms. Adams is an Advisory Council Member of the New York
Zoological Society and a member of the PENN Club Board of Governors. She has
also served on the Board of the NOW Legal Defense and Education Fund since
1988. Ms. Adams received a Bachelor of Arts degree from the University of
Pennsylvania in 1981.
Mr. Martin Beck has been a member of the Board of Directors of the Company
since December 1988. Mr. Beck has served as Chairman of Beck-Ross
Communications, Inc., a New York-based group owner of FM radio stations, from
June 1966 until April 1995, at which time he retired. Mr. Beck has served as
President of the New York State Broadcasters Association, the Long Island
Broadcasters Association and the National Association of Broadcasters Radio
Board. Mr. Beck is a director of Tribune Swab Fox Companies, Inc. Mr. Beck
received a Bachelor of Arts degree from Cornell University in 1938. Mr. Beck
is the father of Stuart J. Beck.
Mr. Dugger has been a member of the Board of Directors of the Company since
December 1988. Mr. Dugger has been President and Chief Executive Officer of
UNC Ventures, Inc., a Boston-based venture capital firm, since January 1978.
Mr. Dugger is a director of the Federal Reserve Bank of Boston, Envirotest
Systems Corporation and U.S. Radio, Inc. Mr. Dugger received a Bachelor of
Arts degree from Harvard College in 1971 and a Masters degree in Public
Administration and Urban Planning from Princeton University in 1973. In 1988,
prior to the investment in the Company by UNC Ventures, Inc. and UNC
Ventures II, L.P. (the "UNC Entities"), an agreement was entered into between
Mr. Cornwell, Mr. Stuart Beck and the UNC Entities pursuant to which
Mr. Dugger was to become a member of the Company's Board of Directors and be
assured of remaining on the Board until the earlier to occur of certain events,
including the effectiveness of a registration statement covering any
-47-
<PAGE>
securities of the Company. This event occurred on January 13, 1992 when the
Company's registration statement for the initial public offering of the Common
Stock (Nonvoting) was declared effective by the Securities and Exchange
Commission.
Mr. Hamilton has been a member of the Board of Directors of the Company
since July 1992. Mr. Hamilton has been a partner in the New York law firm of
Battle Fowler since 1983. Mr. Hamilton received a Bachelor of Arts degree from
Harvard College in 1969 and a Juris Doctor degree from Harvard Law School in
1975. Mr. Hamilton is a trustee of the National Urban League, Inc. and the
Environmental Defense Fund. Mr. Hamilton is a member of the Board of Directors
of the Phoenix House Foundation, Inc. He is a member of the Committee on
Policy for Racial Justice of the Joint Center for Political and Economic
Studies, Inc. in Washington, DC and is Chairman of the Board of Directors of
the Higher Education Extension Service.
Mr. Settle has been a member of the Board of Directors of the Company since
July 1992. Mr. Settle founded and has been the President of The Winchester
Group, Inc., an investment advisory firm, since 1990. Mr. Settle was the chief
investment officer at Bernhard Management Corporation from 1985 to 1989. He
was a Managing Director of Furman Selz Capital Management from 1979 until 1985.
Mr. Settle received a Bachelor of Arts Degree from Muskingum College in 1963
and a Masters degree in Business Administration from Wharton Graduate School in
1965.
Mr. Salovaara has been a member of the Board of Directors since March 1994.
Mr. Salovaara had been a General Partner of Greycliff Partners, an investment
advisory firm, from 1991 until 1994 and a Limited Partner of the Blackstone
Group from 1994 until 1996. Mr. Salovaara worked at Goldman, Sachs & Co. from
1980 to 1991 where he was a General Partner from 1988 to 1991. Mr. Salovaara
is a trustee of Playwrights Horizons in New York City and Wooster College and a
visitor and governor of St. John's College. Mr. Salovaara is a director of
Hadco Corporation and a director of Circuit City Stores, Inc. Mr. Salovaara
received a Bachelor of Arts degree from Dartmouth College in 1974, a Juris
Doctor degree and Masters degree in Business Administration from the University
of Virginia in 1980 and a Masters of Arts degree from Cambridge University in
1986.
All members of the Board of Directors hold office until the next annual
meeting of shareholders of the Company or until their successors are duly
elected and qualified. All officers are elected annually and serve at the
discretion of the Board of Directors.
Members of the Board of Directors were entitled to receive a fee of $2,500
for each Board of Directors meeting attended in person that was held prior to
February 25, 1997. Pursuant to and in accordance with the terms and conditions
of the Company's Director Stock Option Plan (the "Director Option Plan"),
however, once every three years, each director was permitted to elect (a
"Triennial Election") to receive options to purchase shares of the Company's
Common Stock (Nonvoting) ("Options"), in lieu of cash compensation, for
attendance at regularly scheduled quarterly meetings of the Board ("Regular
Quarterly Meetings") during the three years subsequent to the Triennial
Election or until their earlier termination (the "Triennial Option Period").
At the end of the last Triennial Option Period, February 25, 1997, however, all
directors automatically received (and will receive on each third year
anniversary thereafter), an option to purchase 18,000 shares of Common Stock
(Nonvoting) ("Automatic Director Service Awards") as compensation for
attendance at Regular Quarterly Meetings during the Triennial Option Period
subsequent to the grant, in lieu of cash compensation. Directors elected or
appointed during the Triennial Option Period receive Options, in lieu of cash
compensation, for the remaining portion of the Triennial Option Period.
During the Triennial Option Period, Options to purchase shares of Common
Stock (Nonvoting) become exercisable one year (or immediately in the case of
Automatic Director Service Awards) from the date of attendance by a director at
a Regular Quarterly Meeting in the following amounts: (i) 1,500 shares for
attendance in person; or (ii) 500 shares for attendance by telephonic means.
The exercise price of all Options is the fair market value of the Common Stock
(Nonvoting) on the date of grant. The following directors elected to receive
Options, in lieu of cash compensation, for the recently completed, Triennial
Option Period: James L. Greenwald, Vickee Jordan
-48-
<PAGE>
Adams, Martin F. Beck, Thomas R. Settle, Charles J. Hamilton, Jr. and Mikael
Salovaara. See "Executive Compensation -- Director Stock Option Plan."
In addition, under the Director Option Plan, directors receive Options
("Automatic Committee Awards") to purchase shares of Common Stock (Nonvoting)
for service on certain of the committees of the Board of Directors (each a
"Committee"). Automatic Committee Awards to purchase 1,500 shares of Common
Stock (Nonvoting) become exercisable one year (or immediately for Automatic
Committee Awards to be granted after February 27, 1997) from the date of
attendance, in person, at each regularly scheduled Committee meeting.
Directors are separately reimbursed by the Company for their travel
expenses incurred in attending Board or committee meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Each director and officer of the Company who is subject to Section 16 of
the Securities Exchange Act of 1934, as amended, is required to report to the
Securities and Exchange Commission, by a specified date, his or her beneficial
ownership of, or certain transactions in, the Company's securities. Except as
noted below, based solely upon a review of such reports, the Company believes
that all filing requirements under Section 16 were complied with on a timely
basis.
In August 1996, new rules under Section 16, among other things,
necessitated the reporting of settlement of units such as those under the
Company's Management Stock Plan in the next month, rather than on a deferred
basis as previously permitted. In January, 1997 Messrs. Cornwell, Stuart Beck
and Wills and Ms. McClain did not report one such settlement each on a Form 4.
Mr. Dugger III did not report, on a timely basis, five transactions on four
Form 4s, and Mr. Martin Beck did not report, on a timely basis, one transaction
on one Form 4. In addition, Mr. Selwyn did not file a Form 3 on a timely
basis, and did not report, on a timely basis, one and five transactions on a
Form 4 and 5, respectively. All of the reports referred to above have been
filed.
-49-
<PAGE>
Item 11. Executive Compensation
The following table sets forth the cash compensation paid by the Company to
its Chief Executive Officer and each of its most highly compensated executive
officers whose total cash compensation exceeded $100,000 during the fiscal year
ended December 31, 1996, for each of the three years in the period ended
December 31, 1996:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards
------------------------------------ ----------------------
Restricted All Other
Name and Stock Options/ Compensation
Principal Position Year Salary ($) Bonus ($) Awards SARs (#) ($)(1)
- - -------------------- ---- ----------- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Don Cornwell 1996 $483,000 $ - $ - 484,000 $ 4,750
Chief Executive 1995 460,000 46,000 - 165,000 4,620
Officer 1994 270,000 - - - 3,000
Stuart J. Beck 1996 483,000 - - 395,000 4,750
President 1995 460,000 46,000 - 135,000 4,620
1994 267,000 - - - 2,000
Robert E. Selwyn, Jr. 1996 102,083(2) - 373,140(3) 150,000 -
Chief Operating 1995 - - - - -
Officer 1994 - - - - -
Lawrence I. Wills 1996 125,000 - 150,438(4) - 3,125
Vice President - 1995 115,000 28,000 - - 2,875
Finance and 1994 105,000 25,000 70,000(5) - 2,100
Controller
Ellen McClain 1996 125,000 - 155,625(6) - 3,125
Vice President - Corporate 1995 85,000 45,000 41,438(7) - 2,125
Development and Treasurer 1994 68,000 17,000 30,000(8) - -
</TABLE>
- - -----------
(1) Represents matching Company contributions under the Company's Employees'
Profit Sharing and Savings (401(k)) Plan.
(2) Represents salary received from September 19, 1996, Mr. Selwyn's date of
hire. Mr Selwyn's annual salary under his employment contract with the
Company is $350,000.
(3) Represents the market value on the date of award of 30,000 Bonus Shares (as
defined) awarded under the Company's Management Stock Plan on October 22,
1996. 10,000 shares vest on December 31, 1997 and each anniversary thereof
through December 31, 1999. Shares of Common Stock (Nonvoting) subject to
an Award of Bonus Shares are not deemed issued and outstanding until such
Bonus Shares vest, and no shareholder rights, including the right to
receive dividends, if any, will arise with respect thereto until the Bonus
Shares vest.
(4) Represents the market value on the date of award of 14,500 Bonus Shares
awarded under the Company's Management Stock Plan on July 25, 1996. On
December 31, 1996, 1,500 Bonus Shares vested. An additional 1,500 Bonus
Shares will vest on December 31, 1997 and 1998 and 5,000 Bonus Shares will
vest
-50
<PAGE>
on each of December 31, 1999 and 2000. Shares of Common Stock (Nonvoting)
subject to an Award of Bonus Shares are not deemed issued and
outstanding until such Bonus Shares vest, and no shareholder rights,
including the right to receive dividends, if any, will arise with respect
thereto until such Bonus Shares vest.
(5) Represents the market value on the date of award of 17,500 Bonus Shares
awarded under the Company's Management Stock Plan on March 15, 1994. On
each of December 31, 1994, 1995 and 1996, 3,500 Bonus Shares vested. An
additional 3,500 Bonus Shares will vest on December 31, 1997 and December
31, 1998. Shares of Common Stock (Nonvoting) subject to an Award of Bonus
Shares are not deemed issued and outstanding until such Bonus Shares vest,
and no shareholder rights, including the right to receive dividends, if
any, will arise with respect thereto until such Bonus Shares vest.
(6) Represents the market value on the date of award of 15,000 Bonus Shares
awarded under the Company's Management Stock Plan on July 25, 1996. On
December 31, 1996, 2,500 Bonus Shares vested. An additional 2,500 Bonus
Shares will vest on December 31, 1997 and each anniversary thereof through
December 31, 1999 and 5,000 Bonus Shares will vest on December 31, 2000.
Shares of Common Stock (Nonvoting) subject to an Award of Bonus Shares are
not deemed issued and outstanding until such Bonus Shares vest, and no
shareholder rights, including the right to receive dividends, if any, will
arise with respect thereto until such Bonus Shares vest.
(7) Represents the market value on the date of award of 6,500 Bonus Shares
awarded under the Company's Management Stock Plan on July 1, 1995. On each
of December 31, 1995 and 1996, 1,500 Bonus Shares vested. An additional
1,500 Bonus Shares will vest on December 31, 1997 and December 31, 1998 and
2,500 Bonus Shares will vest on December 31, 1999. Shares of Common Stock
(Nonvoting) subject to an Award of Bonus Shares are not deemed issued and
outstanding until such Bonus Shares vest, and no shareholder rights,
including the right to receive dividends, if any, will arise with respect
thereto until such Bonus Shares vest.
(8) Represents the market value on the date of award of 7,500 Bonus Shares
awarded under the Company's Management Stock Plan on March 15, 1994. On
each of December 31, 1994 and 1995, 1,500 Bonus Shares vested. An
additional 1,500 Bonus Shares will vest on December 31, 1996 and each
anniversary thereof through December 31, 1998. Shares of Common Stock
(Nonvoting) subject to an Award of Bonus Shares are not deemed issued and
outstanding until such Bonus Shares vest, and no shareholder rights,
including the right to receive dividends, if any, will arise with respect
thereto until the Bonus Shares vest.
Employment Agreements and Compensation Arrangements
Mr. Cornwell and Mr. Stuart Beck each have an employment agreement with the
Company. The agreements provide for a two year employment term which is
automatically renewed for subsequent two year terms unless advance notice of
nonrenewal is given (the current term under such agreements, which were renewed
in 1995, expires September 19, 1997). The base salary determined by the
Compensation Committee of the Board of Directors was $460,000 for 1995 and
$483,000 for 1996. The agreements stipulate that Mr. Cornwell and Mr. Beck will
devote their full time and efforts to the Company and will not engage in any
business activities outside the scope of their employment with the Company
unless approved by a majority of the Company's independent directors. Under the
agreements, Mr. Cornwell and Mr. Beck are permitted to exchange any or all of
their shares of Voting Common Stock for shares of Common Stock (Nonvoting),
provided that such exchange does not jeopardize the Company's status as a
minority-controlled entity under FCC regulations and that, after such exchange
is effected, there will continue to be shares of voting stock of the Company
outstanding. In addition to the compensation set forth in the employment
agreements, Mr. Cornwell and Mr. Beck are eligible to receive incentive bonus
payments under the Company's incentive bonus plan and stock options under
certain of the Company's stock option plans. See "--Stock Option Plan,"
"--Management Stock Plan" and "--Target Cash Flow Stock Option Plan."
-51-
<PAGE>
In November 1990, the Compensation Committee of the Board of Directors
established each of Mr. Cornwell's and Mr. Stuart Beck's base compensation for
fiscal 1991 at $210,000. In order for the Company to remain in compliance with
one of its covenants under the loan agreement relating to its then existing
bank debt, in 1991 Mr. Cornwell adjusted his base salary down to $20,730. In
1992, the Board of Directors of the Company adopted a resolution providing that
Mr. Cornwell's salary adjustment in 1991 did not vitiate Mr. Cornwell's right
to the remainder of his base compensation in subsequent years. In connection
therewith, Mr. Cornwell received supplemental payments in 1992, 1993 and 1994
totaling $33,000, $72,000 and $3,000, respectively.
Mr. Selwyn has an employment agreement with the Company. The current
employment term expires January 31, 2000, which term may be extended by mutual
written agreement of the parties. The annual base salary determined by the
Compensation Committee of the Board of Directors is $350,000 for 1996 and 1997.
The agreement stipulates that Mr. Selwyn will devote his full time and effort
to the Company and will not engage in any business activities outside of the
scope of his employment with the Company other than permitted thereunder. In
addition to his base salary, Mr. Selwyn is eligible to receive shares of the
Company's Common Stock (Nonvoting) under the Management Stock Plan, has been
granted options to purchase shares of Common Stock (Nonvoting) under the Stock
Option Plan and is eligible to participate in the Company's Employee Stock
Purchase Plan. See"--Employee Stock Purchase Plan," "--Stock Option Plan" and
"--Management Stock Plan."
Under an employment arrangement with the Company, Mr. Wills is eligible to
receive an annual cash bonus based upon the Company's financial performance
during that year, such bonus to be determined by Messrs. Cornwell and Beck.
Mr. Wills's 1996 base salary was fixed at $125,000.
Under an employment arrangement with the Company, Ms. McClain is eligible
to receive an annual cash bonus based upon the Company's financial performance
during that year, such bonus to be determined by Messrs. Cornwell and Beck.
Ms. McClain's 1996 base salary was fixed at $125,000.
401(k) Profit Sharing and Savings Plan
Effective January 1990, the Company adopted the Granite Broadcasting
Corporation Employees' Profit Sharing and Savings (401(k)) Plan for the purpose
of providing retirement benefits for substantially all of its employees.
Contributions to the Plan are made by both the employee and the Company. The
Company matches 50% of that part of an employee's deferred compensation which
does not exceed 5% of such employee's salary. Company-matched contributions
vest at a rate of 20% for each year of an employee's service to the Company.
A contribution to the Plan of $642,000 was charged to expense for 1996.
Employee Stock Purchase Plan
On February 28, 1995, the Company adopted the Granite Broadcasting
Corporation Employee Stock Purchase Plan (the "Stock Purchase Plan") for the
purpose of enabling its employees to acquire ownership of Common Stock
(Nonvoting) at a discount, thereby providing an additional incentive to promote
the growth and profitability of the Company. The Stock Purchase Plan enables
employees of the Company to purchase up to an aggregate of 1,000,000 shares of
Common Stock (Nonvoting) at 85% of the then current market price through
application of regularly made payroll deductions. The Stock Purchase Plan is
administered by a Committee consisting of not less than two directors who are
ineligible to participate in the Stock Purchase Plan. The members of the
Committee are currently Mr. Cornwell and Mr. Stuart J. Beck. At the discretion
of the Committee, purchases under the Stock Purchase Plan may be effected
through issuance of authorized but previously unissued shares, treasury shares
or through open market purchases. The Committee has engaged a brokerage company
to administer the day-to-day functions of the Stock Purchase Plan. Purchases
under the Stock Purchase Plan commenced on June 1, 1995.
Stock Option Plan
-52-
<PAGE>
In April 1990, the Company adopted a Stock Option Plan (the "Stock Option
Plan") providing for the grant, from time to time, of Options to key
employees, officers and directors of the Company or its affiliates
(collectively, the "Participating Persons") to purchase shares of Common
Stock (Nonvoting). On April 25, 1995, 165,000 Options were granted to Mr.
Cornwell and 135,000 Options were granted to Mr. Stuart Beck. On July 25,
1995, the Plan was amended to increase the shares of Common Stock (Nonvoting)
subject to Options available for grant under the Plan to 2,000,000 from
800,000. On April 23, 1996, 166,000 Options were granted to Mr. Cornwell and
135,000 Options were granted to Mr. Stuart Beck. On April 25, 1996, 318,000
Options were granted to Mr. Cornwell and 260,000 Options were granted to Mr.
Stuart Beck. On September 19, 1996, 150,000 Options were granted to Mr.
Selwyn. As of December 31, 1996, Options granted under the Plan were
outstanding for the purchase of 1,775,500 shares of Common Stock (Nonvoting).
The Stock Option Plan provides for the grant of (i) Options intended to
qualify as Incentive Stock Options ("ISOs") as defined in Section 422 of the
Code, to certain key employees of the Company or its affiliates (including
employees who are officers or directors, but excluding directors who are not
employees) who have substantial responsibility in the direction and
management of the Company or an affiliate ("Key Employees") and (ii) Options
which do not qualify as ISOs ("NQSOs") to Key Employees and other officers
and directors of the Company or its affiliates who have substantial
responsibility in the direction and management of the Company or an
affiliate. No Participating Person may be granted ISOs which, when first
exercisable in any calendar year (combined with all incentive stock option
plans of the Company and its affiliates) will permit such person to purchase
stock of the Company having an aggregate fair market value (determined as of
the time the ISO was granted) of more than $100,000.
The Stock Option Plan is administered by a committee consisting of not
less than three members of the Board of Directors appointed by the Board.
Subject to the provisions of the Stock Option Plan, the committee is
empowered to, among other things, grant Options under the Stock Option Plan;
determine which employees may be granted Options under the Stock Option Plan,
the type of Option granted (ISO or NQSO), the number of shares subject to
each Option, the time or times at which Options may be granted and exercised
and the exercise price thereof; construe and interpret the Stock Option Plan;
determine the terms of any option agreement pursuant to which Options are
granted (an "Option Agreement"), and amend any Option Agreement with the
consent of the recipient of Options (the "Optionee"). Notwithstanding the
foregoing, grants under the Stock Option Plan to officers of the Company and
holders of 10% or more of the Voting Common Stock are made by the
disinterested members of the Board of Directors of the Company. The Board of
Directors may amend or terminate the Stock Option Plan at any time, except
that approval of the holders of a majority of the outstanding Voting Common
Stock of the Company is required for amendments which decrease the minimum
option price for ISOs, extend the term of the Stock Option Plan beyond 10
years or the maximum term of the Options granted beyond 10 years, withdraw
the administration of the Stock Option Plan from the committee, change the
class of eligible employees, officers or directors or increase the aggregate
number of shares which may be issued pursuant to the provisions of the Stock
Option Plan. Notwithstanding the foregoing, the Board of Directors may,
without the need for shareholder approval, amend the Stock Option Plan in any
respect to qualify ISOs as Incentive Stock Options under Section 422 of the
Code.
Options granted to each of Mr. Cornwell and Mr. Stuart Beck in 1996 vest
as follows: (i) approximately 6% of the Options granted on April 23, 1996
became exercisable on December 1, 1996 and the remainder become exercisable
in varying percentages on various dates from April 23, 1997 through April 23,
2001; (ii) 50% of the Options granted on April 25, 1996 become exercisable on
October 23, 1997 and the remaining 50% of such Options become exercisable on
April 23, 1998. Approximately 5% of the Options granted to Mr. Selwyn in 1996
became exercisable on December 30, 1996, and the remaining options become
exercisable in varying percentages from December 31, 1997 through January 1,
2000.
The exercise price per share for all ISOs may not be less than 100% of
the fair market value of a share of Common Stock (Nonvoting) on the date on
which the Option is granted (or 110% of the fair market value on the date of
grant of an ISO if the Optionee owns more than 10% of the total combined
voting power of all classes
53
<PAGE>
of voting stock of the Company or any of its affiliates (a "10% Holder")).
The exercise price per share for NQSOs may be less than, equal to or greater
than the fair market value of a share of Common Stock (Nonvoting) on the date
such NQSO is granted. Options are not assignable or transferable other than
by will or the laws of descent and distribution.
Unless sooner terminated by the Board of Directors, the Stock Option Plan
will terminate on April 1, 2000, 10 years after its effective date. Unless
otherwise specifically provided in an Optionee's Option Agreement, each
Option granted under the Stock Option Plan expires no later than 10 years
after the date such Option is granted (5 years for ISO's granted to 10%
Holders). Options may be exercised only during the period that the original
Optionee has a relationship with the Company which confers eligibility to be
granted Options and (i) for a period of 30 days after termination of such
relationship, (ii) for a period of 3 months after retirement by the Optionee
with the consent of the Company, or (iii) for a period of 12 months after the
death or disability of the Optionee.
Management Stock Plan
In April 1993, the Company adopted a Management Stock Plan (the
"Management Stock Plan") providing for the grant from time to time of awards
denominated in shares of Common Stock (Nonvoting) (the "Bonus Shares") to all
salaried executive employees of the Company. The purpose of the Management
Stock Plan is to keep senior executives in the employ of the Company and to
compensate such executives for their contributions to the growth and profits
of the Company and its subsidiaries. The Company has set aside a reserve of
750,000 shares of Common Stock (Nonvoting) for grant under the Management
Stock Plan (which reserve may be adjusted from time to time). All salaried
executive employees (including officers and directors, except for persons
serving as directors only) are eligible to receive a grant under the
Management Stock Plan. The Management Stock Plan is administered by a
committee appointed by the Board of Directors which consists of not less than
two members of the Board of Directors (the "Management Stock Plan
Committee"). Pursuant to Board resolution, the members of the Compensation
Committee constitute the members of the Management Stock Plan Committee. The
Management Stock Plan Committee, from time to time, selects eligible
employees to receive a discretionary bonus of Bonus Shares based upon such
employee's position, responsibilities, contributions and value to the Company
and such other factors as the Management Stock Plan Committee deems
appropriate. The Management Stock Plan Committee has discretion to determine
the date on which the Bonus Shares allocated to an employee will be issued to
such employee. The Management Stock Plan Committee may, in its sole
discretion, determine what part of an award of Bonus Shares is paid in cash
and what part of an award is paid in the form of Common Stock (Nonvoting).
Any cash payment will be made to such employee as of the date the
corresponding Bonus Shares would otherwise be issued to such employee and
shall be in an amount equal to the fair market value of such Bonus Shares on
that date.
As of December 31, 1996, the Company has allocated a total of 610,870
Bonus Shares pursuant to the Management Stock Plan, 310,175 of which had
vested through December 31, 1996. Each allocation provides for the vesting
of a percentage of the award on each December 31 after the date of the
allocation.
Target Cash Flow Option Plan
On October 31, 1988, the Company entered into a Target Cash Flow Option
Plan and Agreement (the "Target Cash Flow Option Plan") with W. Don Cornwell
and Stuart J. Beck (collectively, the "Recipients"). The Target Cash Flow
Option Plan granted to the Recipients non-qualified options ("Options") to
purchase an aggregate of not more than 150,000 shares of Common Stock
(Nonvoting) at an exercise price of $.01 per share. The Options vested and
became exercisable upon certain cash flow targets being met by the Company
during each fiscal year through 1992. Options have vested for the purchase
of 150,000 shares of Common Stock (Nonvoting), and on April 19, 1995, were
exercised as follows: Mr. Cornwell: 82,500; Mr. Beck: 67,500.
Director Stock Option Plan
54
<PAGE>
On March 1, 1994, the Company adopted a Director Stock Option Plan (the
"Director Option Plan") providing for the grant, from time to time, of
Options to non-employee directors of the Company ("Director Participants") to
purchase Common Stock (Nonvoting). The number of shares of Common Stock
(Nonvoting) allocated for grant under the Director Option Plan is 300,000.
As of December 31, 1996, Options granted under the Director Option Plan were
outstanding for the purchase of 97,200 shares of Common Stock (Nonvoting).
The Director Option Plan provides for the grant of NQSOs to Director
Participants. Under the Plan, once every three years, each director was
permitted to make an irrevocable Triennial Election to receive Options, in
lieu of cash compensation, for attendance in person at each Regular Quarterly
Meeting during the Triennial Option Period covered by such election. On
February 25, 1995, the end of the last Triennial Option Period however, all
directors automatically received (and each third year anniversary thereafter
will receive) an option to purchase 18,000 shares of Common Stock (Nonvoting)
as compensation for attendance at Regular Quarterly Meetings during the
Triennial Option Period subsequent to the grant in lieu of cash compensation.
Directors elected or appointed during the course of a Triennial Option
Period receive Options, in lieu of a cash compensation, for the remaining
portion of such Triennial Option Period. In addition, under the Director
Option Plan, directors receive Automatic Committee Awards for each Committee
of the Board of Directors on which they serve.
During the Triennial Option Period, Options to purchase shares of Common
Stock (Nonvoting) become exercisable one year (or immediately in the case of
Automatic Director Service Awards) from the date of attendance by director at
a Regular Quarterly Meeting in the following amounts: (i) 1,500 shares for
attendance in person; or (ii) 500 shares for attendance by telephonic means.
Automatic Awards to purchase 1,500 shares of Common Stock (Nonvoting) become
exercisable one year (or immediately for Automatic Awards granted on or after
February 25, 1997) from the date of attendance in person at each regularly
scheduled Committee meeting. The exercise price per share of all Options is
the fair market value on the date of grant.
The following table sets forth information with respect to Options granted
to the executive officers of the Company during 1996.
<TABLE>
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------------------------------- -------------------------
% of Total
Options/SARs
Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($ Per Share) Date 5% ($) 10% ($)
- - -------------- ----------- ------------- -------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
W. Don Cornwell 122,000 57.3% $11.250 4/25/2005 $2,129,198 $3,236,283
44,000 50.0% 12.375 4/23/2001 694,935 876,923
318,000 55.0% 16.000 10/23/1998 5,748,048 6,456,971
Stuart J. Beck 91,000 42.7% 11.250 4/25/2005 1,588,172 2,413,949
44,000 50.0% 12.375 4/23/2001 694,935 876,923
260,000 45.0% 16.000 10/23/1998 4,699,661 5,279,284
Robert E. Selwyn, Jr. 150,000 100.0% 12.438 9/19/2001 2,381,159 3,004,729
</TABLE>
55
<PAGE>
The following table sets forth, as of December 31, 1996, the number of
options and the value of unexercised options held by the Company's executive
officers who held options as of that date, and the options exercised and the
consideration received therefor by such persons during fiscal 1996.
Aggregated Option/SAR Exercises
In Last Fiscal Year And
FY-End Option/SAR Values
<TABLE>
Number of Value of Unexercised
Unexercised Options in-the-Money Options
at December 31, 1996 at December 31, 1996
------------------------- -------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- - ------------- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
W. Don Cornwell 200,000 $1,363,125 156,300/612,700 $860,688/$652,438
Stuart J. Beck - - 293,800/498,700 1,720,875/533,813
Robert E. Selwyn, Jr. - - 8,000/142,000 -/-
Lawrence I. Wills - - 3,750/- 20,156/-
Ellen McClain - - -/- -/-
</TABLE>
Compensation Committee Interlocks and Insider Participation
During 1996, Thomas R. Settle and Charles J. Hamilton, Jr. served as
members of the Compensation Committee of the Board of Directors of the
Company.
56
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of February 1,
1997, regarding beneficial ownership of the Company's Voting Common Stock by
each shareholder who is known by the Company to own beneficially more than 5%
of the outstanding Voting Common Stock, each director, each executive officer
and all directors and officers as a group, and beneficial ownership of: (i)
the Company's Common Stock (Nonvoting) (assuming conversion of all preferred
stock and exercise of all options for the purchase of Common Stock
(Nonvoting), which conversion or exercise is at the option of the holder
within sixty (60) days); and (ii) the Company's Cumulative Convertible
Exchangeable Preferred Stock, by each director, each executive officer and
all directors and officers as a group. The Company also has 150,000 shares of
its 12 3/4% Cumulative Exchangeable Preferred Stock outstanding, none of
which are owned by any officers or directors of the Company. Except as set
forth in the footnotes to the table, each shareholder listed below has
informed the Company that such shareholder has (i) sole voting and investment
power with respect to such shareholder's shares of stock, except to the
extent that authority is shared by spouses under applicable law and (ii)
record and beneficial ownership with respect to such shareholder's shares of
stock.
<TABLE>
Cumulative Convertible
Exchangeable
Voting Common Stock Common Stock (Nonvoting) Preferred Stock
------------------- ------------------------------------------------ --------------------------
Shares Shares
Beneficially Owned Percent of Shares Beneficially Owned
------------------ Number of Shares Beneficially Owned --------------------------
Number Percent Beneficially Owned Actual(1) Fully Diluted(2) Number Percent
------ ------- ------------------- --------- ---------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
W. Don Cornwell 98,250 55.0% 589,950 (3) 6.7% 3.2% 9,750 *
Stuart J. Beck 80,250 45.0% 495,962 (4) 5.6% 2.7% 10,000 *
Robert E. Selwyn, Jr. 19,047 (5) * * -- *
Lawrence I. Wills 11,035 (6) * * -- *
Ellen McClain 6,087 * * -- *
Martin F. Beck 87,314 (7) 1.0% * 3,950 *
James L. Greenwald 92,927 (8) 1.1% * 1,000 *
Vickee Jordan Adams 6,537(9) * * -- *
Edward Dugger III - * * -- *
Thomas R. Settle 64,312(10) * * 3,000 *
Charles J.
Hamilton, Jr. 9,950(11) * * -- *
Mikael Salovaara 107,150(12) 1.2% * 13,950 *
All directors and
officers as a
group(12) 178,500 100.0% 1,489,571 16.0% 8.1% 41,650 2.3
</TABLE>
- - ------------
* Less than 1%.
(1) Actual percentage figures assume the conversion of such shareholder's
preferred stock into Common Stock (Nonvoting) and the exercise of options
for the purchase of Common Stock (Nonvoting) held by such shareholder,
which conversion or exercise is at the option of the holder within sixty
(60) days.
57
<PAGE>
(2) Fully diluted percentage figures assume conversion of all outstanding
shares of preferred stock into Common Stock (Nonvoting), and exercise of
all options for the purchase of Common Stock (Nonvoting), which are
convertible or exercisable at the option of the holder within sixty (60)
days.
(3) Includes 156,300 shares issuable upon exercise of options granted to
Mr. Cornwell under the Stock Option Plan which are exercisable at the
option of the holder within sixty (60) days, 48,750 shares issuable upon
the conversion of 9,750 shares of Cumulative Convertible Exchangeable
Preferred Stock which are convertible at the option of the holder within
sixty (60) days, and a total of 3,900 shares held by Mr. Cornwell's
immediate family. Mr. Cornwell disclaims beneficial ownership with
respect to such 3,900 shares. The business address of Mr. Cornwell is
Granite Broadcasting Corporation, 767 Third Avenue, 34th Floor, New York,
New York, 10017.
(4) Includes 293,800 shares issuable upon exercise of options granted to
Stuart J. Beck under the Stock Option Plan which are exercisable at the
option of the holder within sixty (60) days, and 50,000 shares issuable
upon the conversion of 10,000 shares of Cumulative Convertible
Exchangeable Preferred Stock which are convertible at the option of the
holder wihin sixty (60) days. The business address of Mr. Stuart Beck is
Granite Broadcasting Corporation, 767 Third Avenue, 34th Floor, New York,
New York, 10017.
(5) Includes 8,000 shares issuable upon exercise of options to Mr. Selwyn
under the Stock Option Plan which are exercisable at the option of the
holder within sixty (60) days.
(6) Includes 3,750 shares issuable upon the exercise of options granted to
Mr. Wills under the Stock Option Plan which are exercisable at the option
of the holder within sixty (60) days.
(7) Includes 19,750 shares issuable upon the conversion of 3,950 shares
(including 450 shares of such stock held by Mr. Beck's wife) of Cumulative
Convertible Exchangeable Preferred Stock which are convertible at the
option of the holder within sixty (60) days, 6,000 shares held by
Mr. Beck's wife, and 9,700 shares issuable upon exercise of options
granted under the Directors' Stock Option Plan which are exercisable at
the option of the holder within sixty (60) days. Mr. Beck disclaims
beneficial ownership with respect to shares held by his spouse.
(8) Includes 5,000 shares issuable upon the conversion of 1,000 shares of
Cumulative Convertible Exchangeable Preferred Stock which are convertible
at the option of the holder within sixty (60) days and 12,400 shares
issuable upon exercise of options granted under the Directors' Stock
Option Plan which are exercisable at the option of the holder within
sixty (60) days.
(9) Includes 4,200 shares issuable upon the exercise of Options granted under
the Directors' Stock Option Plan which are exercisable at the option of
the holder within sixty (60) days.
(10) Includes 15,000 shares issuable upon the conversion of 3,000 shares of
Cumulative Convertible Exchangeable Preferred Stock which are
convertible at the option of the holder within sixty (60) days, 4,500
shares held by Mr. Settle's wife as custodian for his children, and
10,800 shares issuable upon exercise of options granted under the
Directors' Stock Option Plan which are exercisable at the option of
the holder within sixty (60) days. Mr. Settle disclaims beneficial
ownership with respect to the shares held by his spouse as custodian
for his children.
(11) Includes 9,700 shares issuable upon exercise of options granted under
the Directors' Stock Option Plan, which are exercisable at the option
of the holder within sixty (60) days.
(12) Includes: (i) 3,500 shares, and 5,000 shares issuable upon the
conversion of 1,000 shares of Cumulative Convertible Exchangeable
Preferred Stock, which are convertible at the option of the holder
within sixty (60) days, held in Trust for the benefit of one of
Mr. Salovaara's children for which Mr. Salovaara is the
58
<PAGE>
Trustee; (ii) 3,500 shares, and 5,000 shares issuable upon the conversion
of 1,000 shares of Cumulative Convertible Exchangeable Preferred Stock,
which are convertible at the option of the holder within sixty (60)
days, held in Trust for the benefit of one of Mr. Salovaara's children
for which Mr. Salovaara's wife is the Trustee; (iii) 59,750 shares
issuable upon the conversion of 11,950 shares of Cumulative
Convertible Exchangeable Preferred Stock, which are convertible at the
option of the holder within sixty (60) days; (iv) 9,900 shares
issuable upon exercise of options granted under the Directors' Stock
Option Plan which are exercisable at the option of the holder within
sixty (60) days; and (v) 5,000 shares issuable upon conversion of
1,000 shares of Cumulative Convertible Exchangeable Preferred Stock,
which are convertible at the option of the holder, held in Trust for
the benefit of nonaffiliates of Mr. Salovaara, for which Mr. Salovaara
and Mr. Salovaara's wife are among the Trustees and as to which Mr.
Salovaara disclaims beneficial ownership.
Item 13. Certain Relationships and Related Transactions
In 1995, the Company made a loan to Mr. Cornwell, Chief Executive Officer
and Chairman of the Board of Directors, in the amount of $348,660 and a loan
to Mr. Stuart Beck, President and a member of the Board of Directors, in the
amount of $221,200 to pay for certain personal taxes. Both loans are term
loans providing for an annual interest rate of 9%, payable semi-annually on
December 29 and June 29 of each year, with all principal and remaining
interest due on December 29, 2004. As of December 31, 1996, the amount
outstanding on such loans, including accrued interest, to Messrs. Cornwell
and Beck was $380,213 and $241,218, respectively, which amount represented
the largest amount outstanding thereunder up to that date.
In April 1996, the Company made a loan to Mr. Cornwell in the amount of
$886,875 to pay the exercise price incurred in connection with exercising
options. In December 1996, the Company made a loan to Mr. Cornwell in the
amount of $409,000 to pay certain personal taxes in connection with the
exercise of such options. Each loan is a term loan which provides for an
annual interest rate of 8%, payable annually, with all principal and
remaining interest due in 2001. As of December 31, 1996 (i) the amount
outstanding under the April 1996 loan, including accrued interest, was
$934,157, which amount represented the largest amount outstanding thereunder
up to that date; and (ii) the amount outstanding under the December 1996 loan
was $409,000, which amount represented the largest amount outstanding
thereunder up to that date.
59
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a)1 Financial Statements
GRANITE BROADCASTING CORPORATION
Report of Independent Auditors
Consolidated Statements of Operations for the Years
Ended December 31, 1994, 1995 and 1996
Consolidated Balance Sheets as of December 31, 1995 and 1996
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1994, 1995 and 1996
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 1995 and 1996
Notes to Consolidated Financial Statements
(a)2 Financial Statement Schedule
Schedule II -- Granite Broadcasting Corporation:
Valuation and Qualifying Accounts
(a)3 Exhibits
1.1 Purchase Agreement, dated January 27, 1997, among Granite
Broadcasting Corporation and the Purchasers named therein.
3.1(g) Third Amended and Restated Certificate of Incorporation of the
Company, as amended.
3.2(g) Amended and Restated Bylaws of the Company, as amended.
3.3 Certificate of Designations of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
the Company's 12 3/4%, Cumulative Exchangeable Preferred Stock
and Qualifications, Limitations and Restrictions Thereof.
4.27(2) Indenture dated as of September 1, 1992 between Granite
Broadcasting Corporation and The United States Trust Company of
New York, as Trustee, relating to the Company's $60,000,000
Principal Amount 12.75% Senior Subordinated Debentures due
September 1, 2002.
4.28(2) Form of 12.75% Senior Subordinated Debenture due September 1,
2002.
4.30(3) Form of Indenture relating to the Company's Junior Subordinated
Convertible Debentures issuable upon the exchange of the
Company's Cumulative Convertible Exchangeable Preferred Stock.
4.31(3) Form of Junior Subordinated Convertible Debenture.
60
<PAGE>
4.35(i) Third Amended and Restated Credit Agreement, dated as of
September 4, 1996, among Granite Broadcasting Corporation, the
Lenders named therein, Bankers Trust Company, as Agent, and The
Bank of New York, First Union National Bank of North Carolina,
Goldman Sachs Credit Partners L.P. and Union Bank of California,
as Co-Agents.
4.37(4) Indenture, dated as of May 19, 1995, between Granite Broadcasting
Corporation and United States Trust Company of New York for the
Company's $175,000,000 Principal Amount 10 3/8% Senior
Subordinated Notes due May 15, 2005.
4.38(5) Form of 10 3/8% Senior Subordinated Note due May 15, 2005.
4.39(g) Exchange and Registration Rights Agreement, dated as of February
22, 1996, by and between Granite Broadcasting Corporation and
Goldman Sachs & Co., BT Securities Corporation and Lazard Freres
& Co. LLC.
4.41(g) Indenture, dated as of February 22, 1996, between Granite
Broadcasting Corporation and The Bank of New York relating to the
Company's $110,000,000 Principal Amount 9 3/8% Series A Senior
Subordinated Notes due December 1, 2005.
4.42(g) Form of 9 3/8% Series A Senior Subordinated Note due December 1,
2005.
4.43 Exchange and Registration Rights Agreement, dated as of January
31, 1997, by and between Granite Broadcasting Corporation and
Goldman, Sachs & Co., BT Securities Corporation, Lazard Freres &
Co. LLC and Salomon Brothers Inc.
4.44 Indenture, dated as of January 31, 1997, between Granite
Broadcasting Corporation and The Bank of New York for the
Company's 12 3/4% Series A Exchange Debentures and 12 3/4 Exchange
Debentures due April 1, 2009.
4.45 Form of 12 3/4% Exchange Debenture due April 1, 2009 (included in
the Exhibit 4.4 Indenture filed herewith).
10.1(h) Granite Broadcasting Corporation Stock Option Plan, as amended on
July 24, 1996.
10.2(1) Target Cash Flow Option Plan and Agreement dated as of October
31, 1988 among Granite Broadcasting Corporation, W. Don Cornwell
and Stuart J. Beck.
10.9(5) Network Affiliation Agreement (KBJR-TV).
10.10(5) Network Affiliation Agreement (WEEK-TV).
10.11(g) Network Affiliation Agreement (KNTV(TV)).
10.12(g) Network Affiliation Agreement (WPTA-TV).
10.13(1) Employment Agreement dated as of September 20, 1991 between
Granite Broadcasting Corporation and W. Don Cornwell.
10.14(1) Employment Agreement dated as of September 20, 1991 between
Granite Broadcasting Corporation and Stuart J. Beck.
10.15(h) Granite Broadcasting Corporation Management Stock Plan, as
amended July 24, 1996.
61
<PAGE>
10.16(a) Purchase and Sale Agreement between the Company and Meredith
Corporation, dated June 15, 1993.
10.17(b) Letter Agreement between the Company and the Sellers (as defined
therein) to acquire certain securities of Queen City III Limited
Partnership dated as of October 20, 1993.
10.18(3) Letter Agreement, dated December 7, 1993, between Granite and
Meredith Corporation, amending the Purchase and Sale Agreement
dated June 15, 1993.
10.19 Granite Broadcasting Corporation Director Stock Option Plan, as
amended on February 25, 1997.
10.20(4) Network Affiliation Agreement (WTVH-TV).
10.21(5) Network Affiliation Agreement (KSEE-TV).
10.22(c) Purchase and Sale Agreement among Granite Broadcasting
Corporation, Austin Television, a Texas general partnership,
Cannan Communications, Inc. and Beard Management, Inc. dated as
of October 2, 1994.
10.23(d) Purchase and Sale Agreement, dated as of February 20, 1995, among
Granite Broadcasting Corporation, Busse Broadcasting Corporation
and WWMT, Inc.
10.24(4) Network Affiliation Agreement (KEYE-TV).
10.25(d) Granite Broadcasting Corporation Employee Stock Purchase Plan,
dated February 28, 1995.
10.26(4) Network Affiliation Agreement (WWMT).
10.27(e) Purchase Agreement, dated May 15, 1995, among Granite
Broadcasting Corporation, Queen City III Limited Partnership,
Queen City Broadcasting of New York, Inc. and the General
Partners of Queen City III Limited Partnership.
10.28(f) Network Affiliation Agreement (WKBW).
10.29(j) Purchase and Sale Agreement, dated as of December 2, 1996, by and
between Granite Broadcasting Corporation and WXON-TV, Inc.
10.30 Employment Agreement dated as of September 19, 1996 between
Granite Broadcasting Corporation and Robert E. Selwyn, Jr.
11. Statement of Computation of Per Share Earnings.
21. Subsidiaries of the Company.
23. Consent of Independent Auditors (Ernst & Young LLP).
27. Financial Data Schedule.
62
<PAGE>
(1) Incorporated by reference to the similarly numbered exhibits to the
Company's Registration Statement No. 33-43770 filed on November 5, 1991.
(2) Incorporated by reference to the similarly numbered exhibits to the
Company's Registration Statement No. 33-52988 filed on October 6, 1992.
(3) Incorporated by reference to the similarly numbered exhibits to Amendment
No. 2 to Registration Statement No. 33-71172 filed December 16, 1993.
(4) Incorporated by reference to the similarly numbered exhibits to the
Company's Registration Statement No. 33-94862 filed on July 21, 1995.
(5) Incorporated by reference to the similarly numbered exhibits to Amendment
No. 2 to Registration Statement No. 33-94862 filed on October 6, 1995.
(a) Incorporated by reference to Exhibit 10.1 to the Company's Current Report
on Form 8-K, filed on June 25, 1993.
(b) Incorporated by reference to the similarly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1993, Commission File No. 0-19728, filed on November 15, 1993.
(c) Incorporated by reference to the similarly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994, Commission File No. 0-19728, filed on November 14, 1994.
(d) Incorporated by reference to the similarly numbered exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994, filed on March 29, 1995.
(e) Incorporated by reference to Exhibit Number 3 to the Company's Report on
Form 8-K, filed on May 19, 1995.
(f) Incorporated by reference to the similarly numbered exhibit to the
Company's Report on Form 8-K filed on July 14, 1995.
(g) Incorporated by reference to the similarly numbered exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995, filed on March 28, 1996.
(h) Incorporated by reference to the similarly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, as filed on August 13, 1996.
(i) Incorporated by reference to the similarly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, filed on November 14, 1996.
(j) Incorporated by reference to Exhibit Number 1 to the Company's Current
Report on Form 8-K, filed on December 17, 1996.
63
<PAGE>
(b) Reports on Form 8-K.
1. Current Report on Form 8-K filed December 17, 1996, reporting a
definitive agreement entered into by and between Granite
Broadcasting Corporation and WXON-TV, Inc., a Michigan
corporation, whereby Granite Broadcasting Corporation would
acquire WXON-TV, the WB Network affiliated station serving
Detroit, Michigan, for approximately $175 million in cash. No
financial statements were filed at such time.
2. 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.
3. 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.
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York, on the 21st day of March, 1997.
GRANITE BROADCASTING CORPORATION
By: /s/ W. DON CORNWELL
W. Don Cornwell
Chief Executive Officer and Chairman
of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ W. DON CORNWELL Chief Executive Officer March 21, 1997
- - -------------------- (Principal Executive Officer)
(W. Don Cornwell) and Chairman of the
Board of Directors
/s/ STUART J. BECK President, Secretary March 21, 1997
- - ---------------------- (Principal Financial Officer)
(Stuart J. Beck) and Director
/s/ LAWRENCE I. WILLS Vice President-Finance and Controller March 21, 1997
- - ---------------------- (Principal Accounting Officer)
(Lawrence I. Wills)
/s/ MARTIN F. BECK Director March 21, 1997
- - ----------------------
(Martin F. Beck)
/s/ JAMES L. GREENWALD Director March 21, 1997
- - -----------------------
(James L. Greenwald)
/s/ VICKEE JORDAN ADAMS Director March 21, 1997
- - -----------------------
(Vickee Jordan Adams)
/s/ EDWARD DUGGER III Director March 21, 1997
- - -----------------------
(Edward Dugger III)
/s/ THOMAS R. SETTLE Director March 21, 1997
- - -----------------------
Thomas R. Settle
/s/ CHARLES J. HAMILTON,
JR. Director March 21, 1997
- - -----------------------
Charles J. Hamilton, Jr.
/s/ MIKAEL SALOVAARA Director March 21, 1997
- - ------------------------
(Mikael Salovaara)
<PAGE>
Exhibit 1.1
150,000 Shares
Granite Broadcasting Corporation
12 3/4% Cumulative Exchangeable Preferred Stock
Purchase Agreement
January 27, 1997
Goldman, Sachs & Co.,
BT Securities Corporation,
Lazard Freres & Co. LLC,
Salomon Brothers Inc,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Granite Broadcasting Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Purchasers named in Schedule I hereto (the
"Purchasers") 150,000 shares of its 12 3/4% Cumulative Exchangeable Preferred
Stock, initial liquidation preference $1,000 per share (the "Securities",
which term shall, unless the context otherwise requires, include the Exchange
Offer Preferred Stock (as defined in the Exchange and Registration Rights
Agreement to be dated January 31, 1997 (the "Registration Rights
Agreement")). The Securities are exchangeable, in whole or in part on any
dividend payment date, at the option of the Company, for its 12 3/4% Exchange
Debentures due 2009 (the "Exchange Debentures", which term shall, unless the
context otherwise requires, include the Exchange Offer Debentures (as defined
in the Registration Rights Agreement) to be issued under an indenture
substantially in the form thereof to be delivered to the Purchasers prior to
or at the Time of Delivery (as defined below) (the "Indenture").
The Purchasers and their direct and indirect transferees of the
Securities will be entitled to the benefits of the Registration Rights
Agreement, pursuant to which the Company has agreed, among other things, to
file a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") registering the
Securities or the Exchange Debentures under the Securities Act of 1933, as
amended (the "Act").
<PAGE>
1. The Company represents and warrants to, and agrees with, each of the
Purchasers that:
(a) A preliminary offering circular, dated January 22, 1997 (the
"Preliminary Offering Circular"), and an offering circular, dated
January 27, 1997 (the "Offering Circular"), have been prepared in
connection with the offering of the Securities. The Preliminary Offering
Circular and the Offering Circular and any amendments or supplements
thereto and the Exchange Act Reports (as defined below) did not and will
not, as of their respective dates, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Company by a Purchaser through Goldman, Sachs & Co. expressly for use
therein. The Exchange Act Reports, when they were filed with the
Securities and Exchange Commission (the "Commission"), conformed in all
material respects to the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the applicable
rules and regulations of the Commission thereunder. "Exchange Act
Reports" means the Company's most recent Annual Report on Form 10-K and
all subsequent documents filed with the Commission pursuant to Section
13(a), 13(c) or 15(d) of the Exchange Act on or prior to the date of the
Preliminary Offering Circular or the Offering Circular, as the case may
be.
(b) The Company and its subsidiaries, taken as a whole, have not
sustained since the date of the latest unaudited financial statements
included in the Offering Circular any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular; and, since the respective dates as
of which information is given in the Offering Circular, there has not been
any change in the capital stock (other than conversion of preferred stock
into Common Stock (Nonvoting) and the exercise of certain employee stock
options and awards) or any increase in the short-term debt (other than
trade payables), long-term debt (other than an increase of not more than
$500,000 under the Company's revolving credit facility (the "Revolving
Credit Facility") under the Credit Agreement (as such term is defined in
the Offering Circular) or redeemable stock of the Company and its
subsidiaries or any material adverse change, or any development involving
a prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Offering Circular;
(c) The Company and its subsidiaries have good and marketable (or,
with respect to property in the State of Texas, indefeasible) title in
fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering
Circular or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not
2
<PAGE>
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(d) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Offering Circular, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to require such
qualification, except where the failure to be so qualified would not have
a material adverse effect on the Company and its subsidiaries, taken as a
whole, or is subject to no material liability or disability by reason of
the failure to be so qualified in any such jurisdiction;
(e) The Company has an authorized capitalization at December 31, 1996
as set forth in the Offering Circular, and all of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable; and all of the issued
shares of capital stock of each subsidiary of the Company have been duly
and validly authorized and issued, are fully paid and non-assessable and
(except for directors' qualifying shares and except as otherwise set forth
in the Offering Circular) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims;
(f) The Securities have been duly and validly authorized, and, when
the Securities are issued and delivered pursuant to this Agreement and if
applicable the Registration Rights Agreement, such Securities will be duly
and validly issued and fully paid and non-assessable; and the Securities
conform in all material respects to the description thereof contained in
the Offering Circular;
(g) The Exchange Debentures have been duly authorized, and, when
issued and delivered in exchange for the Securities pursuant to the terms
thereof, will have been duly executed, authenticated, issued and delivered
and will constitute valid and legally binding obligations of the Company
entitled to the benefits provided by the Indenture, under which they are
to be issued; the Indenture has been duly authorized and, when executed
and delivered by the Company and the trustee under the Indenture (the
"Trustee"), will constitute a valid and legally binding instrument of the
Company, enforceable against the Company in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles; the Indenture will be in a form
which would meet the requirements for qualification under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"); and the
Exchange Debentures and the Indenture will conform in all material
respects to the descriptions thereof in the Offering Circular and will be
in substantially the form delivered to the Purchasers prior to or at the
Time of Delivery.
(h) The Registration Rights Agreement has been duly authorized, and,
when executed and delivered by the Company, will constitute a valid and
legally binding agreement of the
3
<PAGE>
Company enforceable against the Company in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles; the Registration Rights Agreement
will conform in all material respects to the description thereof in the
Offering Circular; the Exchange Offer Preferred Stock has been duly
authorized and reserved for issuance in exchange for the Securities; and
when delivered in accordance with the terms of the Securities and the
Registration Rights Agreement, the Exchange Offer Preferred Stock will be
validly issued, fully paid and non-assessable and will conform in all
material respects to the description thereof in the Offering Circular;
(i) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulation promulgated thereunder, including, without
limitation, Regulations G, T, U, and X of the Board of Governors of the
Federal Reserve System;
(j) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company
in connection with the offering of the Securities;
(k) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, the
Registration Rights Agreement and this Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
sale/leaseback agreement, loan agreement or other similar financing
agreement or instrument or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties, except, in each case, for such conflicts, breaches, violations
or defaults as would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole; and, assuming the accuracy of the
representations and warranties of the Purchasers in Section 3, no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the issue
and sale of the Securities or the consummation by the Company of the
transactions contemplated by this Agreement, the Indenture or the
Registration Rights Agreement, except such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers, and such consents,
approvals, authorizations, registrations and qualifications as may be
required under the Act, the Trust Indenture Act of 1939 and state or
foreign securities or Blue Sky laws in connection with the exchange offer
or resale registration
4
<PAGE>
statement contemplated in the Offering Circular and described in the
Registration Rights Agreement;
(l) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any obligation, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party or by which
it or any of its properties may be bound, except for such violations or
non-compliances as would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(m) The statements set forth in the Offering Circular under the
captions "Description of the New Preferred Stock" and "Description of the
Exchange Debentures" insofar as they purport to constitute a summary of
the terms of the Securities and the Exchange Debentures, and under the
caption "Registration Covenant; Exchange Offer", insofar as they purport
to describe the provisions of the laws and documents referred to therein
(other than any agreement among Purchasers), are accurate and fair in all
material respects;
(n) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and, other than as set
forth in the Offering Circular and to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(o) The Company and each of its subsidiaries holds all material
licenses, certificates, permits, consents, orders, authorizations and
approvals for the Existing Stations (as defined below) (collectively,
"Licenses") from governmental authorities which are necessary to the
conduct of their businesses in the manner and to the full extent now
operated or proposed to be operated as described in the Offering Circular;
such Licenses are in full force and effect and no proceeding has been
instituted or pending or, to the knowledge of the Company, is contemplated
or threatened which in any manner affects or draws into question the
validity or effectiveness thereof; such Licenses contain no materially
burdensome restrictions not customarily imposed by the Federal
Communications Commission (the "FCC") on television stations of the same
class and type; the operation of the television stations identified,
excluding WXON-TV and WLAJ-TV, in the Offering Circular under the caption
"Business -- Stations Overview" (collectively, the "Existing Stations") in
the manner and to the full extent now operated or proposed to be operated
as described in the Offering Circular is in accordance with the
Communications Act of 1934, as amended (the "Communications Act"), the
Telecommunications Act of 1996, and all orders, rules and regulations of
the FCC, except for such noncompliance as would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole; no
event has occurred which permits (nor has an event occurred which with
notice or lapse of time or both would permit) the revocation or
termination of such Licenses or which might result in any other material
impairment of the
5
<PAGE>
rights of the Company or its subsidiaries therein; the Company and its
subsidiaries are in compliance with all statutes, orders, rules or
regulations of the FCC relating to or affecting the broadcasting
operations of any of the Existing Stations, except for such noncompliance
as would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(p) To the best of the Company's knowledge, neither the Company nor
any of its subsidiaries has infringed any patents, patent rights, trade
names, trademarks or copyrights, which infringement might have a material
adverse effect on the general affairs, management financial position,
stockholders' equity or results of operations or the Company and its
subsidiaries, taken as a whole;
(q) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the
meaning of Rule 144A under the Act) as securities which are listed on a
national securities exchange registered under Section 6 of the Exchange
Act or quoted in a U.S. automated inter-dealer quotation system;
(r) The Company is subject to Section 13 or 15(d) of the Exchange Act;
(s) The Company is not, and after giving effect to the offering and
sale of the Securities, will not be an "investment company", or an entity
"controlled" by an "investment company", as such terms are defined in the
United States Investment Company Act of 1940, as amended (the "Investment
Company Act");
(t) Assuming the accuracy of the representations and warranties of
the Purchasers in Section 3, neither the Company, nor any person acting on
its or their behalf has offered or sold the Securities by means of any
general solicitation or general advertising within the meaning of Rule
502(c) under the Act;
(u) Other than the conversion of preferred stock into Common Stock
(Nonvoting) and the exercise of certain employee stock options and awards,
within the preceding six months, neither the Company nor any other person
acting on behalf of the Company has offered or sold to any person any
Securities, or any securities of the same or a similar class as the
Securities, other than Securities offered or sold to the Purchasers
hereunder. The Company will take reasonable precautions designed to
insure that any offer or sale, direct or indirect, in the United States
or to any U.S. person (as defined in Rule 902 under the Act) of any
Securities or any substantially similar security issued by the Company,
within six months subsequent to the date on which the distribution of the
Securities has been completed (as notified to the Company by Goldman,
Sachs & Co.), is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer and sale of the
Securities in the United States and to U.S. persons contemplated by this
Agreement as transactions exempt from the registration provisions of the
Act;
(v) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes; and
6
<PAGE>
(w) Ernst & Young LLP, who have certified certain financial statements
of the Company and its subsidiaries, are independent public accountants
as required by the Act and the rules and regulations of the Commission
thereunder.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the
Purchasers agrees, severally and not jointly, to purchase from the Company,
at a purchase price of $965.00 per share plus accumulated dividends, if any,
from January 31, 1997, the respective number of Securities set forth opposite
the name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities, the
several Purchasers propose to offer the Securities for sale upon the terms
and conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company that:
(a) It has offered or sold and will offer and sell the Securities
only (i) to persons who it reasonably believes are "qualified
institutional buyers" ("QIBs") within the meaning of Rule 144A under the
Act in transactions meeting the requirements of Rule 144A or (ii) subject
to an initial minimum purchase requirement of $100,000, to a limited
number of institutional investors that it reasonably believes are
"accredited investors" within the meaning of Rule 501(a)(1), (2), (3) or
(7) under the Securities Act ("Institutional Accredited Investors");
(b) It is an Institutional Accredited Investor; and
(c) It has not offered or sold and will not offer or sell the
Securities by any form of general solicitation or general advertising,
including but not limited to the methods described in Rule 502(c) under
the Act.
4. (a) Except as set forth in the next paragraph, the Securities to be
purchased by each Purchaser hereunder will be represented by one definitive
global certificate for the Securities in book-entry form, which will be
deposited by or on behalf of the Company with The Depository Trust Company
("DTC") or its designated custodian. The Company will deliver the Securities
to Goldman, Sachs & Co., for the account of each Purchaser, against payment
by or on behalf of such Purchaser of the purchase price therefor by certified
or official bank check or checks, payable to the order of the Company in, or
by wire transfer to an account specified by the Company of, Federal (same
day) funds, by causing DTC to credit the Securities to the account of
Goldman, Sachs & Co. at DTC. The Company will cause the certificate
representing the Securities to be made available to Goldman, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery (as defined
below) at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be 9:30 a.m.,
New York City time, on January 31, 1997 or such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing. Such time
and date are herein called the "Time of Delivery".
Such Securities, if any, as Goldman, Sachs & Co. may request upon at
least forty-eight hours' prior notice to the Company (such request to include
the authorized denominations and the names in which they are to be
registered), shall be delivered in definitive certificated form, by or on
behalf of the Company to Goldman, Sachs & Co. for the account of certain of
the Purchasers,
7
<PAGE>
against payment by or on behalf of such Purchaser of the purchase price
therefor by certified or official bank check or checks, payable to the order
of the Company in, or by wire transfer to an account specified by the Company
of, Federal (same day) funds. The Company will cause the certificate
representing the Securities to be made available for checking and packaging
at least twenty-four hours prior to the Time of Delivery at the office of
Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004.
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by
the Purchasers pursuant to Section 7(i) hereof, will be delivered at such
time and date at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004 (the "Closing Location"), and the Securities will be
delivered at the Designated Office, all at the Time of Delivery. A meeting
will be held at the Closing Location at 3:00 p.m., New York City time, on the
New York Business Day next preceding the Time of Delivery, at which meeting
the final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you;
to make no amendment or any supplement to the Offering Circular which
shall be disapproved by you promptly after reasonable notice thereof;
and to furnish you with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as you may request
and to comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Securities, provided
that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Purchasers with four copies of the Offering
Circular and each amendment or supplement thereto, signed by an
authorized officer of the Company, and any amendment or supplement
containing amendments to the financial statements covered by such
report, signed by the accountants, and additional copies thereof in
New York City in such quantities as you may reasonably request and, if
at any time prior to the earlier of (i) nine months after the date of
the Offering Circular and (ii) the consummation of the exchange offer
registered with the Commission as contemplated by the Registration
Rights Agreement, any event shall have occurred as a result of which the
Offering Circular as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the
8
<PAGE>
light of the circumstances under which they were made when such
Offering Circular is delivered, not misleading or, if for any other
reason it shall be necessary or desirable during such same period to
amend or supplement the Offering Circular, to notify you and upon your
request to prepare and furnish without charge to each Purchaser and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended Offering Circular or a supplement to
the Offering Circular which will correct such statement or omission or
effect such compliance;
(d) During the period beginning from the date hereof and
continuing until the date six months after the Time of Delivery, not to
offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder, any securities of the Company that are substantially
similar to the Securities;
(e) Not to be or become, at any time prior to the expiration of
three years after the Time of Delivery, an open-end investment company,
unit investment trust, closed-end investment company or face-amount
certificate company that is or is required to be registered under
Section 8 of the Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, for the benefit of holders from time to time
of Securities, to furnish at its expense, upon request, to holders of
Securities and prospective purchasers of securities information (the
"Additional Issuer Information") satisfying the requirements of
subsection (d)(4)(i) of Rule 144A under the Act;
(g) If reasonably requested by you at any time when any of the
Securities are (i) restricted securities, as defined in Rule 144(a)(3)
under the Act or (ii) securities that can only be sold pursuant to
Regulation S under the Act, Rule 144A under the Act or Rule 144 under
the Act or in a transaction exempt from the registration requirements
under the Act pursuant to Section 4 of the Act and not involving a
public offering, to use its reasonable best efforts to cause such
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(h) With respect to the sale of the Securities to the Purchasers,
to file with the Commission, not later than 15 days after the Time of
Delivery, five copies of a notice on Form D under the Act (one of which
will be manually signed by a person duly authorized by the Company); to
otherwise comply with the requirements of Rule 503 under the Act; and to
furnish promptly to you evidence of each such required timely filing
thereunder (including a copy thereof);
(i) During a period of five years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders of the Company, and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or
any securities exchange on which the Securities or any class of
securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as you may
from time to time reasonably request (such financial statements to be on
a consolidated basis to the
9
<PAGE>
extent the accounts of the Company and its subsidiaries are consolidated
in reports furnished to its stockholders generally or to the Commission);
(j) During the period of three years (or such lesser period
required by Rule 144(k) in the event Rule 144(k) under the Act is
amended) after the Time of Delivery, the Company will not, and will not
permit any of its "affiliates" (as defined in Rule 144 under the Act) to,
resell any of the Securities which constitute "restricted securities"
under Rule 144 that have been reacquired by any of them;
(k) The Company will comply with the Registration Rights
Agreement; and
(l) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Offering Circular under the caption "Use of Proceeds".
6. The Company covenants and agrees with the several Purchasers that the
Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the issue of the Securities and all other expenses in
connection with the preparation, printing and filing of the Preliminary
Offering Circular and the Offering Circular and any amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Purchasers and dealers; (ii) the cost of printing or producing any Agreement
among Purchasers, this Agreement, the Indenture, any Blue Sky and Legal
Investment Memoranda, closing documents (including any compilations thereof)
and any other documents in connection with the offering, purchase, sale and
delivery of the Securities, excluding (except as provided in clause (iii))
fees for legal services of counsel for the Purchasers; (iii) all expenses in
connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
fees and disbursements of counsel for the Purchasers in connection with such
qualification and in connection with the Blue Sky and legal investment
surveys; (iv) any fees charged by securities rating services for rating the
Securities; (v) the cost of preparing the Securities; (vi) the fees and
expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities; (vii) any cost incurred in connection with the designation of
the Securities for trading in PORTAL; and (viii) all other costs and expenses
incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood,
however, that, except as provided in this Section, and Sections 8 and 11
hereof, the Purchasers will pay all of their own costs and expenses,
including the fees of their counsel, transfer taxes on resale of any of the
Securities by them, and any advertising expenses connected with any offers
they may make.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and
other statements of the Company herein are, at and as of the Time of
Delivery, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) Sullivan & Cromwell, counsel for the Purchasers, shall have
furnished to you such opinion or opinions, dated the Time of Delivery,
with respect to the matters covered in paragraphs (i), (vii), (viii),
(ix), (xx) and (xxi) of subsection (b) below as well
10
<PAGE>
as such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(b) Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the
Company, shall have furnished to you their written opinion, dated the
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company and each of its subsidiaries is duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with power and
authority (corporate and other) to own its properties and conduct
its business as described in the Offering Circular;
(ii) The Company has an authorized capitalization as set forth
in the Offering Circular, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable;
(iii) The Company and each of its subsidiaries has been duly
qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to
require such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole, or is subject to no material
liability or disability by reason of the failure to be so qualified
in any such jurisdiction (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local counsel
and in respect of matters of fact upon certificates of officers of
the Company, provided that such counsel shall state that they believe
that both you and they are justified in relying upon such opinions
and certificates);
(iv) All of the issued shares of capital stock of each such
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for directors'
qualifying shares and except as otherwise set forth in the Offering
Circular) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company or its subsidiaries, provided
that such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and certificates);
(v) To the best of such counsel's knowledge and other than as
set forth or contemplated in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, would
11
<PAGE>
individually or in the aggregate have a material adverse effect on
the current or future consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries;
and, other than as set forth in the Offering Circular and to the best
of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
(vii) The Securities have been duly and validly authorized and
issued and are fully paid and non-assessable; a sufficient number
of shares of Exchange Offer Preferred Stock have been duly authorized
and reserved for issuance; and the Exchange Offer Preferred Stock,
when issued in accordance with the terms of the Registration Rights
Agreement, will be validly issued and fully paid and non-assessable;
(viii) The Exchange Debentures and the Indenture have been
duly authorized; when the Indenture has been duly executed and
delivered by the Company and the Exchange Offer Debentures have been
duly executed, authenticated, issued and delivered in exchange for
the Securities pursuant to the terms thereof, the Exchange Debentures
and the Indenture will constitute valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(ix) The Registration Rights Agreement has been duly
authorized, executed and delivered, and constitutes a valid and
legally binding obligation of the Company enforceable in accordance
with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(x) The issue and sale of the Securities and the compliance
by the Company with all of the provisions of the Securities, the
Indenture, the Registration Rights Agreement and this Agreement and
the consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, sale/leaseback agreement, loan
agreement or other financing agreement or any other agreement or
instrument that has been or, to the knowledge of such counsel, is
required to be filed by the Company with the Commission, nor will
such actions result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute,
rule or regulation of any governmental agency or body of the United
States or the State of New York or Texas having jurisdiction over the
Company or any of its subsidiaries or any of their properties or any
court order identified by the Company to such counsel as potentially
relevant to such transaction, except,
12
<PAGE>
in each case, for such conflicts, breaches, violations or defaults
as would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(xi) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
of the United States or the State of New York or Texas having
jurisdiction over the Company or any of its subsidiaries or any of
their properties is required for the issue and sale of the Securities
or the consummation by the Company of the transactions contemplated
by this Agreement or the Indenture, except such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Purchasers and
such consents, approvals, authorizations, registrations and
qualifications as may be required under the Act, the Trust Indenture
Act and state or foreign securities or Blue Sky laws in connection
with the exchange offer or resale registration statement contemplated
in the Offering Circular and described in the Registration Rights
Agreement;
(xii) To the knowledge of such counsel after reasonable
investigation, neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in
default in the performance or observance of any obligation, covenant
or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument that has been
or is required to be filed by the Company with the Commission, except
for such violations or non-compliances as would not have a material
adverse effect on the Company and its subsidiaries taken as a whole;
(xiii) The statements set forth in the Offering Circular under
the captions "Business -- Competition", "Business -- FCC Licenses",
"Business -- The Cable Television Consumer Protection and Competition
Act of 1992", "Business -- Proposed Legislation and Regulations" and
the statements set forth in the documents incorporated by reference in
the Offering Circular relating thereto and the statements set forth in
the Offering Circular under the captions "Description of the New
Preferred Stock", "Registration Covenant; Exchange Offer,"
"Description of the Exchange Debentures," "Description of Certain Debt
Instruments", "Description of Preferred Stock" and "Certain U.S.
Federal Income Tax Consequences", insofar as they purport to
constitute a summary of the documents referred to therein or matters
of law, are accurate summaries and fairly and correctly present, in
all material respects, the information called for with respect to
such documents and matters;
(xiv) The Company and its subsidiaries have such Licenses from
the FCC as are necessary for the lawful operation of the Existing
Stations in the manner and to the full extent now operated or
proposed to be operated as described in the Offering Circular; such
Licenses are in full force and effect and, to the best of such
counsel's knowledge, no proceeding has been instituted or is
threatened,
13
<PAGE>
pending or contemplated which in any manner affects or draws into
question the validity or effectiveness thereof; such Licenses contain
no materially burdensome restrictions not customarily imposed by the
FCC on television stations of the same class and type;
(xv) To the best of such counsel's knowledge, the operation of
the Existing Stations in the manner and to the full extent now
operated or proposed to be operated as described in the Offering
Circular is in accordance with the Licenses, the Communications Act,
the Telecommunications Act of 1996 and all orders, rules and
regulations of the FCC, except for such noncompliance as would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole;
(xvi) To the best of such counsel's knowledge, no event has
occurred which permits (nor has an event occurred which with notice
or lapse of time or both would permit) the revocation or termination
of the Licenses from the FCC or which would reasonably be expected to
result in any other material impairment of the rights of the Company
or its subsidiaries to such Licenses, taken as a whole;
(xvii) To the best of such counsel's knowledge, the Company and
its subsidiaries are in compliance with all statutes, orders, rules
or regulations of the FCC relating to or affecting the broadcasting
operations of any of the Existing Stations, except for such
noncompliance as would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(xviii) The Exchange Act Reports (other than the financial
statements and related schedules therein and other financial
information, as to which such counsel need express no opinion), when
they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder;
(xix) Assuming the accuracy of the representations and
warranties of the Purchasers in Section 3, compliance with the resale
limitations contained in the Offering Circular under the caption
"Notice to Investors" and that the Purchasers have not resold the
Securities in any Regulation S transactions, no registration of the
Securities under the Act, and no qualification of an indenture under
the Trust Indenture Act with respect thereto, is required for the
offer, sale and initial resale of the Securities by the Purchasers
in the manner contemplated by this Agreement; and
(xx) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act.
In addition, such counsel shall also state that such
counsel has no reason to believe that (i) the Offering Circular and
any further amendments or
14
<PAGE>
supplements thereto made by the Company prior to the Time of
Delivery (other than the financial statements therein and other
financial information, as to which such counsel need express no
opinion) contained as of its date or contains as of the Time of
Delivery an untrue statement of a material fact or omitted or omits,
as the case may be, to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading and (ii) any of the Exchange Act
Reports (other than the financial statements and related schedules
therein and other financial information, as to which such counsel
need express no opinion), when such documents were filed with the
Commission, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made when such documents were so filed, not misleading.
Akin, Gump, Strauss, Hauer & Feld, L.L.P. may limit their opinion to the laws
of the United States, the District of Columbia, New York, Texas and Virginia
and Delaware corporate law.
(c) On the date of the Offering Circular prior to the execution of
this Agreement and also at the Time of Delivery, Ernst & Young LLP shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect
set forth in Annex I hereto;
(d) (i) The Company and its subsidiaries, taken as a whole, shall
not have sustained since the date of the latest unaudited financial
statements included in the Offering Circular any loss or interference
with its business from fire, explosion, flood or other calamity, whether
or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Circular, and (ii) since the respective dates
as of which information is given in the Offering Circular there shall not
have been any change in the capital stock (other than conversion of
preferred stock into Common Stock (Nonvoting) and the exercise of certain
employee stock options and awards) or any increase in the short-term debt
(other than trade payables) or long-term debt (other than an increase of
not more than $500,000 under the Revolving Credit Facility) of the Company
and its subsidiaries, taken as a whole, or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Offering Circular, the
effect of which, in any such case described in Clause (i) or (ii), is in
your judgment so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities
on the terms and in the manner contemplated in this Agreement and in the
Offering Circular;
(e) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act,
and (ii) no such organization shall have publicly announced
15
<PAGE>
that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities;
(f) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on the Nasdaq
National Market; (ii) a suspension or material limitation in trading in
the Company's securities on the Nasdaq National Market; (iii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, if the effect of any such event specified in
this Clause (iv) in your judgment makes it impracticable or inadvisable to
proceed with the offering or the delivery of the Securities on the terms
and in the manner contemplated in the Offering Circular; or (v) the
occurrence of any material adverse change in the existing, financial,
political or economic conditions in the United States or elsewhere which,
in your judgment, would materially and adversely affect the financial
markets or the markets for the Securities and other equity or debt
securities;
(g) The Securities shall have been designated for trading on PORTAL;
(h) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of Offering Circulars, amendments and
supplements on the New York Business Day next succeeding the date of this
Agreement;
(i) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery certificates of officers of the Company satisfactory
to you as to the accuracy of the representations and warranties of the
Company herein at and as of such Time of Delivery, as to the performance by
the Company of all of its obligations hereunder to be performed at or prior
to such Time of Delivery, as to the matters set forth in subsection (e) of
this Section and as to such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Purchaser
against any losses, claims, damages or liabilities, joint or several, to
which such Purchaser may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Circular
or the Offering Circular or any Exchange Act Report, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and will reimburse each Purchaser for any legal or other expenses
reasonably incurred by such Purchaser in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Offering Circular or the Offering Circular
or any such amendment or supplement in reliance upon and in conformity
16
<PAGE>
with written information furnished to the Company by any Purchaser through
Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact contained
in any Preliminary Offering Circular or the Offering Circular, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Offering Circular or the
Offering Circular or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
Purchaser through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under such subsection. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action
or claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act,
by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a)
or (b) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion
17
<PAGE>
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Purchasers on the other from the offering of the
Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then
each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Purchasers on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Purchasers on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total Purchasers' discounts and
commissions received by the Purchasers, in each case as set forth in the
Offering Circular. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Purchasers on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by
pro rata allocation (even if the Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this subsection (d), no Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at
which the Securities purchased by it and distributed to investors were
offered to investors exceeds the amount of any damages which such Purchaser
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Purchasers' obligations in
this subsection (d) to contribute are several in proportion to their
respective purchase obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Purchaser within the meaning of the Act; and the obligations of
the Purchasers under this Section 8 shall be in addition to any liability
which the respective Purchasers may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company and to
each person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to purchase
the Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein. If within thirty-six hours after
such default by any Purchaser you do not arrange for the purchase of such
Securities, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
18
<PAGE>
that, within the respective prescribed periods, you notify the Company that
you have so arranged for the purchase of such Securities, or the Company
notifies you that it has so arranged for the purchase of such Securities, you
or the Company shall have the right to postpone the Time of Delivery for a
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Offering Circular, or in any other documents
or arrangements, and the Company agrees to prepare promptly any amendments to
the Offering Circular which in your opinion may thereby be made necessary.
The term "Purchaser" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and,
in addition, to require each non-defaulting Purchaser to purchase its pro
rata share (based on the principal amount of Securities which such Purchaser
agreed to purchase hereunder) of the Securities of such defaulting Purchaser
or Purchasers for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of
Securities which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Securities, or if the Company shall not exercise
the right described in subsection (b) above to require non-defaulting
Purchasers to purchase Securities of a defaulting Purchaser or Purchasers,
then this Agreement shall thereupon terminate, without liability on the part
of any non-defaulting Purchaser or the Company, except for the expenses to be
borne by the Company and the Purchasers as provided in Section 6 hereof and
the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Purchasers, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on
behalf of any Purchaser or any controlling person of any Purchaser, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided
herein, the Company will reimburse the Purchasers through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Securities, but the
19
<PAGE>
Company shall then be under no further liability to any Purchaser except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Purchasers, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Purchaser made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex
or facsimile transmission to you as the representatives in care of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004, Attention:
Registration Department; and if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth
in the Offering Circular, Attention: Secretary; provided, however, that any
notice to a Purchaser pursuant to Section 8(c) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Purchaser at its
address set forth in its Purchasers' Questionnaire, or telex constituting
such Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take
effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Purchaser, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser
of any of the Securities from any Purchaser shall be deemed a successor or
assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one
and the same instrument.
20
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Purchasers
and the Company.
Very truly yours,
Granite Broadcasting Corporation
By: /s/ LARRY I. WILLS
--------------------------------
Name: Larry I. Wills
Title: Vice President -- Finance
Accepted as of the date hereof:
Goldman, Sachs & Co.
/s/ GOLDMAN, SACHS & CO.
- - ------------------------------
(Goldman, Sachs & Co.)
BT Securities Corporation
By: /s/ G. PAUL
---------------------------
Name: G. Paul
Title: Managing Director
Lazard Freres & Co. LLC
By: /s/ DONALD A. WAGNER
---------------------------
Name: Donald A. Wagner
Title: Managing Director
Salomon Brothers Inc
By: /s/ TODD E. DUNCAN
----------------------------
Name: Todd E. Duncan
Title: Vice President
21
<PAGE>
SCHEDULE I
Number of
Securities
to be
Purchaser Purchased
Goldman, Sachs & Co.............................................. 67,500
BT Securities Corporation........................................ 30,000
Lazard Freres & Co. LLC.......................................... 30,000
Salomon Brothers Inc............................................. 22,500
-------
Total.............................................. 150,000
22
<PAGE>
ANNEX I
Pursuant to Section 7(c) of the Purchase Agreement, the accountants
shall furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Securities
Exchange Act of 1934 (the "Exchange Act") and the applicable published rules
and regulations thereunder;
(ii) In their opinion, the consolidated financial statements and
financial statement schedules audited by them and included or incorporated by
reference in the Offering Circular comply as to form in all material respects
with the requirements of the Exchange Act and the related published rules and
regulations; and they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
consolidated interim financial statements, selected financial data, pro forma
financial information, financial forecasts and/or condensed financial
statements derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports thereon,
copies of which have been furnished to the Purchasers and are attached hereto;
(iii) They have made a review in accordance with standards established by
the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in or incorporated by
reference in the Offering Circular and included in the Company's quarterly
reports on Form 10-Q as indicated in their reports thereon, copies of which
have been furnished to the Purchasers and are attached hereto; and on the
basis of specified procedures including inquiries of officials of the Company
who have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements referred to
in paragraph (v)(A)(i) below comply as to form in all material respects with
the accounting requirements of the Exchange Act and the related published
rules and regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements do not
comply as to form in all material respects with the accounting requirements
of the Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for
the five most recent fiscal years included or incorporated by reference in
the Offering Circular agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial
statements for such five fiscal years;
(v) On the basis of limited procedures not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial statements of
the Company and its subsidiaries, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the Offering Circular,
inquiries of officials of the
1
<PAGE>
Company and its subsidiaries responsible for financial and accounting matters
and such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included or
incorporated by reference in the Offering Circular do not comply as to form
in all material respects with the accounting requirements of the Exchange Act
and the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated statements
of cash flows included or incorporated by reference in the Offering Circular
for them to be in conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Offering Circular do not agree with the corresponding items
in the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not determined
on a basis substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included or
incorporated by reference in the Offering Circular;
(C) the unaudited financial statements which were not included in the
Offering Circular but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the Offering Circular and
referred to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial statements
included in the Offering Circular;
(D) any unaudited pro forma consolidated condensed financial statements
included in the Offering Circular do not comply as to form in all material
respects with the accounting requirements of the Exchange Act and the
published rules and regulations thereunder or the pro forma adjustments have
not been properly applied to the historical amounts in the compilation of
those statements;
(E) as of a specified date not more than five days prior to the date of
such letter, there have been any changes in the consolidated capital stock
(other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding on
the date of the latest financial statements included or incorporated by
reference in the Offering Circular) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other items
specified by the Purchasers, or any increases in any items specified by the
Purchasers, in each case as compared with amounts shown in the latest balance
sheet included or incorporated by reference in the Offering Circular, except
in each case for changes,
2
<PAGE>
increases or decreases which the Offering Circular discloses have occurred or
may occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Offering Circular to the
specified date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or per share
amounts of consolidated net income or other items specified by the
Purchasers, or any increases in any items specified by the Purchasers, in
each case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the Purchasers,
except in each case for decreases or increases which the Offering Circular
discloses have occurred or may occur or which are described in such letter;
and
(vi) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Offering Circular and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (iv) above, they have carried
out certain specified procedures, not constituting an audit in accordance
with generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Purchasers, which are
derived from the general accounting records of the Company and its
subsidiaries, which appear in the Offering Circular or in documents
incorporated by reference in the Offering Circular, and have compared certain
of such amounts, percentages and financial information with the accounting
records of the Company and its subsidiaries and have found them to be in
agreement.
3
<PAGE>
Exhibit 3.3
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 3/4% CUMULATIVE
EXCHANGEABLE PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
- - -------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation law of the State of Delaware
- - -------------------------------------------------------------------------------
Granite Broadcasting Corporation (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its Third
Amended and Restated Certificate of Incorporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, at a meeting of the Pricing Committee held on
January 27, 1997 duly approved and adopted the following resolution (the
"Certificate of Designations"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors
does hereby create, authorize and provide for the issuance of 12 3/4%
Cumulative Exchangeable Preferred Stock, par value $0.01 per share,
with a stated value of $1,000.00 per share, consisting of 400,000
shares, having the designations, preferences, relative, participating,
optional and other special rights and the qualifications, limitations
and restrictions thereof that are set forth in the Certificate of
Incorporation and in this Certificate of Designations as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "12 3/4% Cumulative Exchangeable Preferred Stock." The number
of shares constituting such series shall be 400,000 and are referred to as the
"Exchangeable Preferred Stock," of which 150,000 shares of Exchangeable
Preferred Stock shall be initially issued, with an additional 100,000 shares
reserved for issuance in accordance with paragraph (c)(i) hereof and with the
remaining shares issuable as otherwise permitted hereunder or under applicable
law. The liquidation preference of the Exchangeable Preferred Stock shall be
$1,000.00 per share.
<PAGE>
(b) Rank. The Exchangeable Preferred Stock shall, with respect to
dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Corporation, rank (i) senior to all classes of Common Stock
of the Corporation and to each other class of Capital Stock of the Corporation
or series of Preferred Stock of the Corporation hereafter established the terms
of which do not expressly provide that it ranks senior to, or on a parity with,
the Exchangeable Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up or dissolution of the Corporation (collectively
referred to, together with all classes of Common Stock of the Corporation, as
"Junior Securities"); (ii) on a parity with the Existing Preferred Stock and any
class of Capital Stock of the Corporation or series of Preferred Stock of the
Corporation hereafter established the terms of which expressly provide that such
class or series will rank on a parity with the Exchangeable Preferred Stock as
to dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Corporation (collectively referred to as "Parity
Securities"); and (iii) junior to each other class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation hereafter
established the terms of which expressly provide that such class or series will
rank senior to the Exchangeable Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up or dissolution of the Corporation
(collectively referred to as "Senior Securities").
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the outstanding
shares of Exchangeable Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, distributions in the form of cash dividends on each share of
Exchangeable Preferred Stock, at a rate per annum equal to 12 3/4% of the
liquidation preference per share of the Exchangeable Preferred Stock, payable
semi-annually. All dividends shall be cumulative, whether or not declared, on a
daily basis from the date of issuance of the Exchangeable Preferred Stock and
shall be payable semi-annually in arrears on each Dividend Payment Date,
commencing April 1, 1997. Dividends declared may be paid, at the Corporation's
option, on any Dividend Payment Date occurring on or prior to April 1, 2002
either in cash or by the issuance of additional shares of Exchangeable Preferred
Stock (and, at the Corporation's option, payment of a whole share (after
rounding up) or cash in lieu of a fractional share) having an aggregate
liquidation preference equal to the amount of such dividends. In the event that
on or prior April 1, 2002, dividends are declared and paid through the issuance
of additional shares of Exchangeable Preferred Stock, as provided in the
previous sentence, such dividends shall be deemed paid in full and shall not
accumulate. Each dividend shall be payable to the Holders of record as they
appear on the stock books of the Corporation on the Dividend Record
2
<PAGE>
Date immediately preceding the related Dividend Payment Date. Dividends
shall cease to accumulate in respect of the Exchangeable Preferred Stock on
the Exchange Date or on the date of their earlier redemption (including a
Special Redemption) unless the Corporation shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures in respect of
the Exchangeable Preferred Stock on such Exchange Date or shall have failed
to pay the relevant redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Exchangeable
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for payment, any dividends on
shares of the Exchangeable Preferred Stock at any time.
(iv) Dividends accruing after April 1, 2002 on the Exchangeable
Preferred Stock for any past Dividend Period and dividends in connection with
any optional redemption pursuant to paragraph (e)(i) may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to Holders of
record on such date, not more than forty-five (45) days prior to the payment
thereof, as may be fixed by the Board of Directors.
(v) Dividends payable on the Exchangeable Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in the period for
which payable.
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the Holders of
shares of Exchangeable Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to the liquidation preference for each
share outstanding, plus, without duplication, an amount in cash equal to
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or
3
<PAGE>
winding-up (including an amount equal to a prorated dividend for the period
from the last Dividend Payment Date to the date fixed for liquidation,
dissolution or winding-up) before any distribution shall be made or any
assets distributed to the holders of any of the Junior Securities including,
without limitation, Common Stock of the Corporation. Except as provided in
the preceding sentence, Holders of Exchangeable Preferred Stock shall not be
entitled to any distribution in the event of any liquidation, dissolution or
winding-up of the affairs of the Corporation. If the assets of the
Corporation are not sufficient to pay in full the liquidation payments
payable to the Holders of outstanding shares of the Exchangeable Preferred
Stock and all Parity Securities, then the holders of all such shares shall
share equally and ratably in such distribution of assets first in proportion
to the full liquidation preference to which each is entitled until such
preferences are paid in full, and then in proportion to their respective
amounts of accumulated but unpaid dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with or
into one or more entities shall be deemed to be a liquidation, dissolution or
winding-up of the affairs of the Corporation.
(e) Redemption.
(i) Optional Redemption.
(A) The Corporation may, at the option of the Board of
Directors, redeem, to the extent of funds legally available therefor, at any
time on or after April 1, 2002, in whole or in part, in the manner provided for
in paragraph (e)(iii) hereof, any or all of the shares of the Exchangeable
Preferred Stock, at the redemption prices (expressed as a percentage of the
liquidation preference) set forth below plus, without duplication, an amount in
cash equal to all accumulated and unpaid dividends per share (including an
amount in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption Date)
(the "Optional Redemption Price") if redeemed during the 12-month period
beginning April 1 of each of the years set forth below:
2002 . . . . . . . . . . . . 106.375%
2003 . . . . . . . . . . . . 104.250%
2004 . . . . . . . . . . . . 102.125%
2005 and thereafter . . . . . 100.000%
; provided that no redemption pursuant to this paragraph (e)(i)(A) shall be
authorized or made unless prior thereto full accumulated and unpaid dividends
are declared and paid in full, or declared and a sum in cash set apart
sufficient for such payment, on the Exchangeable Preferred Stock for all
Dividend Periods terminating on or prior to the Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), on or
prior to April 1, 2000, the Corporation may, at its option, use the Net
Available Proceeds of either or both of one or more Major Asset Dispositions or
sales of Capital Stock to
4
<PAGE>
redeem for cash up to an aggregate of 35% of the shares of Exchangeable
Preferred Stock in the manner provided for in paragraph (e)(iii) hereof, in
part, at a redemption price of 112 3/4% of the liquidation preference
thereof, plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends to the Redemption Date (including, without
limitation, an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date) (the "Net Proceeds Redemption Price"); provided,
however, that after any such redemption, there is at least $75 million in
aggregate liquidation preference of Exchangeable Preferred Stock outstanding.
Any such redemption pursuant to this paragraph (e)(i)(B) must occur on or
prior to ninety (90) days after the receipt by the Corporation of the
proceeds of each Major Asset Disposition or sale of Capital Stock.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A)
or (e)(i)(B) hereof of only a portion of the then outstanding shares of the
Exchangeable Preferred Stock, the Corporation shall effect such redemption on a
pro rata basis according to the number of shares held by each Holder of the
Exchangeable Preferred Stock, except that the Corporation may redeem such shares
held by Holders of fewer than 10 shares (or shares held by Holders who would
hold less than 10 shares as a result of such redemption), as may be determined
by the Corporation.
(D) In addition to paragraph (e)(i)(A) or (B), if, on or before
March 17, 1997, the Board of Directors of the Corporation determines, in its
reasonable judgment, that the acquisition of WXON-TV, Detroit, Michigan, is
unlikely to be consummated, the Corporation may, at the option of the Board of
Directors, on or prior to April 16, 1997, redeem all, but not less than all, of
the Exchangeable Preferred Stock (a "Special Redemption") at a redemption price
equal to 100% of the liquidation preference per share, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends to
the Redemption Date (including an amount in cash equal to a prorated dividend
for the period from the Dividend Payment Date immediately prior to the
Redemption Date (or the Issue Date if the Redemption Date occurs prior to the
first Dividend Payment Date) to the Redemption Date)) (the "Special Redemption
Price").
(ii) Mandatory Redemption. On April 1, 2009, the Corporation shall
redeem, to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Exchangeable
Preferred Stock then outstanding at a redemption price equal to 100% of the
liquidation preference per share, plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including, without
limitation, an amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the
5
<PAGE>
Redemption Date to the Redemption Date) (the "Mandatory Redemption Price").
(iii) Procedures for Redemption.
(A) At least thirty (30) days and not more than sixty (60) days
prior to the date fixed for any redemption (other than a Special Redemption, for
which the notice period shall not be less than thirty (30) days) of the
Exchangeable Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Exchangeable Preferred Stock at
such Holder's address as it appears on the stock books of the Corporation;
provided that no failure to give such notice nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares of
Exchangeable Preferred Stock to be redeemed except as to the Holder or Holders
to whom the Corporation has failed to give said notice or to whom such notice
was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A), (e)(i)(B), (e)(i)(D) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Special Redemption
Price, the Mandatory Redemption Price or the Net Proceeds Redemption Price, as
the case may be;
(3) whether all or less than all the outstanding shares of
the Exchangeable Preferred Stock are to be redeemed and the total number of
shares of the Exchangeable Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price designated, his certificate
or certificates representing the shares of Exchangeable Preferred Stock to be
redeemed; and
(6) that dividends on the shares of the Exchangeable
Preferred Stock to be redeemed shall cease to accumulate on such Redemption Date
unless the Corporation defaults in the payment of the Optional Redemption Price,
the Mandatory Redemption Price, the Special Redemption Price or the Net Proceeds
Redemption Price, as the case may be.
(B) Each Holder of Exchangeable Preferred Stock shall surrender
the certificate or certificates representing such shares of Exchangeable
Preferred Stock to the Corporation, duly endorsed (or otherwise in proper form
for transfer, as determined by the Corporation), in the manner and at the place
designated in the Redemption Notice, and on the Redemption Date the full
Optional
6
<PAGE>
Redemption Price, Mandatory Redemption Price, the Special Redemption Price or
Net Proceeds Redemption Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price, dividends on
the Exchangeable Preferred Stock called for redemption shall cease to accumulate
on the Redemption Date, and all rights of the Holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the Optional Redemption Price, the Mandatory Redemption Price, the
Special Redemption Price or the Net Proceeds Redemption Price, as the case may
be, without interest; provided, however, that if a notice of redemption shall
have been given as provided in paragraph (iii)(A) above and the funds necessary
for redemption (including an amount in respect of all dividends that will accrue
to the Redemption Date) shall have been irrevocably deposited in trust for the
equal and ratable benefit of the Holders of the shares to be redeemed, then, at
the close of business on the day on which such funds are segregated and set
aside, the Holders of the shares to be redeemed shall cease to be stockholders
of the Corporation and shall be entitled only to receive the Optional Redemption
Price, the Mandatory Redemption Price, the Special Redemption Price or the Net
Proceeds Redemption Price, as the case may be, without interest.
(f) Voting Rights.
(i) The Holders of Exchangeable Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraph (ii) and (iii) below,
shall not be entitled or permitted to vote on any matter required or permitted
to be voted upon by the stockholders of the Corporation.
(ii) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not amend its Certificate of Incorporation so
as to: (A) affect materially and adversely the specified rights, preferences,
privileges or voting rights of Holders of shares of Exchangeable Preferred
Stock; or (B) authorize the issuance of additional shares of any class of Senior
Securities (or amend the provisions of any existing class of Capital Stock to
make such class of Capital Stock Senior Securities), without the affirmative
vote or consent of Holders of at least a majority of the issued and outstanding
shares of Exchangeable Preferred Stock, voting or consenting, as the case may
be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
7
<PAGE>
Notwithstanding the previous sentence (1) the creation, authorization or
issuance of any shares of any Junior Securities or Parity Securities or (2)
the increase or decrease in the amount of authorized Capital Stock of any
class constituting Junior Securities or Parity Securities, including
Preferred Stock constituting Junior Securities or Parity Securities, shall
not require the consent of Holders of Exchangeable Preferred Stock and shall
not be deemed to affect adversely the rights, preferences, privileges or
voting rights of Holders of Exchangeable Preferred Stock.
(iii) (A) If (1) after April 1, 2002 dividends on the
Exchangeable Preferred Stock required to be paid in cash are in arrears and
unpaid for three (3) or more semi-annual Dividend Periods (whether or not
consecutive) (a "Dividend Default"); (2) the Corporation fails to redeem all of
the then outstanding shares of Exchangeable Preferred Stock on or before
April 1, 2009; (3) the Corporation fails to make a Change of Control Offer
following a Change of Control if such Change of Control Offer is required by
paragraph (h) hereof and/or fails to purchase shares of Exchangeable Preferred
Stock from Holders who elect to have such shares purchased pursuant to the
Change of Control Offer; (4) the Corporation breaches or violates one of the
provisions set forth in any of paragraphs (l)(i), (l)(iii) or (l)(iv) hereof and
the breach or violation continues for a period of sixty (60) days or more after
the Corporation receives notice thereof specifying the default from the Holders
of at least 25% of the shares of Exchangeable Preferred Stock then outstanding,
or (5) the Corporation fails to pay at the final stated maturity (giving effect
to any extensions thereof) the principal amount of any Debt of the Corporation
or any Subsidiary of the Corporation, or the final stated maturity of any such
Debt is accelerated, if the aggregate principal amount of such Debt, together
with the aggregate principal amount of any other such Debt in default for
failure to pay principal at the final stated maturity (giving effect to any
extensions thereof) or which has been accelerated, aggregates $10,000,000 or
more at any time, in each case, after a 20-day period during which such default
shall not have been cured or such acceleration rescinded, then in the case of
any of clauses (1) - (5) the number of directors constituting the Board of
Directors shall be adjusted by the number, if any, necessary to permit the
Holders of Exchangeable Preferred Stock, voting as one class together with the
holders of shares of any Parity Securities issued after the Issue Date upon
which like voting rights have been conferred and are then exercisable (each such
Parity Securities with such exercisable voting rights and, after the occurrence
of a Voting Rights Triggering Event (as defined below), each share of
Exchangeable Preferred Stock, individually a "Triggered Security" and
collectively the "Triggered Securities"), to elect the lesser of two directors
and that number of directors constituting 25% of the members of the Board of
Directors. Each such event described in clauses (1) - (5) is a "Voting Rights
Triggering Event." Upon
8
<PAGE>
occurrence of such Voting Rights Triggering Event, Holders of a majority of
the issued and outstanding shares of Exchangeable Preferred Stock, voting as
one class together with the holders of any other Triggered Securities, shall
have the right to elect the lesser of two directors or that number of
directors constituting 25% of the members of the Board of Directors at a
meeting therefor called and at every subsequent meeting at which the terms of
office of the directors so elected by the holders of the Triggered Securities
expire (other than as described in subparagraph (f)(iii)(B) below). The
voting rights provided herein shall be the exclusive remedy at law or in
equity of the holders of the Exchangeable Preferred Stock for any Voting
Rights Triggering Event.
(B) The right of the Holders of Exchangeable Preferred Stock, to
elect members of the Board of Directors as set forth in subparagraph (f)(iii)(A)
above shall continue until such time as (x) in the event such right arises due
to a Dividend Default, all accumulated dividends that are required to be paid in
cash and that are in arrears on the Exchangeable Preferred Stock are paid in
full in cash; and (y) in all other cases, the failure, breach or default giving
rise to such Voting Rights Triggering Event is remedied, cured (including, but
not limited to, in the case of clause (5) of subparagraph (f)(iii)(A) above
through the issuance of Refinancing Debt or the waiver of any breach or default
by the holder of such Debt) or waived by the Holders of at least a majority of
the shares of Exchangeable Preferred Stock then outstanding and entitled to vote
thereon, at which time (1) the special right of the Holders of Exchangeable
Preferred Stock so to vote as a class for the election of directors and (2) the
term of office of each of the directors elected by the Holders of the Triggered
Securities shall each terminate and the remaining directors shall constitute the
entire Board of Directors. At any time after voting power to elect directors
shall have become vested and be continuing in the Holders of Exchangeable
Preferred Stock pursuant to this paragraph (f)(iii), or if vacancies shall exist
in the offices of directors elected by the Holders of Exchangeable Preferred
Stock, a proper officer of the Corporation may, and upon the written request of
the holders of record of at least twenty-five percent (25%) of the shares of
Triggered Securities then outstanding addressed to the secretary of the
Corporation shall, call a special meeting of the holders of Triggered
Securities, for the purpose of electing the directors which such Holders are
entitled to elect. If such meeting shall not be called by a proper officer of
the Corporation within twenty (20) days after personal service of said written
request upon the secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail, addressed to the
secretary of the Corporation at its principal executive offices, then the
holders of record of at least twenty-five percent (25%) of the outstanding
shares of Triggered Securities may designate in writing one of their number to
call such meeting at the reasonable
9
<PAGE>
expense of the Corporation, and such meeting may be called by the Person so
designated upon the notice required for the annual meetings of stockholders
of the Corporation and shall be held at the place for holding the annual
meetings of stockholders. Any holder of Triggered Securities so designated
shall have, and the Corporation shall provide, access to the lists of
stockholders to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at
which the Holders of Exchangeable Preferred Stock shall have the right, voting
together as a separate class with the holders of shares of any other Triggered
Securities, to elect directors as aforesaid, the presence in person or by proxy
of the holders of outstanding shares representing at least a majority of the
voting power of the Triggered Securities shall be required to constitute a
quorum of such Triggered Securities.
(D) Any vacancy occurring in the office of a director elected by
the holders of Triggered Securities may be filled by the remaining directors
elected by the holders of Triggered Securities unless and until such vacancy
shall be filled by the holders of Triggered Securities.
(iv) In any case in which the holders of Triggered Securities shall be
entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Exchangeable Preferred Stock entitled to vote with respect to
such matter shall be entitled to one vote for each $1,000 in liquidation
preference of Triggered Securities.
(g) Exchange.
(i) Requirements.
The outstanding shares of Exchangeable Preferred Stock are
exchangeable, in whole or in part, on a pro rata basis, at the option of the
Corporation, at any time on any Dividend Payment Date for the Corporation's
12 3/4% Exchange Debentures due 2009 (the "Exchange Debentures") to be
substantially in the form of Exhibit A to the Indenture, dated as of January 31,
1997, between the Corporation and The Bank of New York, as trustee (the
"Exchange Indenture"), a copy of which is on file with the secretary of the
Corporation; provided, however, that immediately after giving effect to any
partial exchange, there shall be shares of Exchangeable Preferred Stock
outstanding with an aggregate liquidation preference of not less than $75
million and not less than $75 million aggregate principal amount of Exchange
Debentures are then outstanding; and provided, further, that any such exchange
may only be made if on or prior to the date of such exchange (1) the Corporation
has paid (or is deemed to have paid) all accumulated dividends on the
Exchangeable Preferred Stock (including the dividends payable on the date of
exchange) and there
10
<PAGE>
shall be no contractual impediment to such exchange; (2) there shall be funds
legally available sufficient therefor; (3) such exchange would be permitted
under the terms of the Existing Preferred Stock, to the extent then
outstanding, and immediately after giving effect to such exchange, no Default
or Event of Default (each as defined in the Exchange Indenture) would exist
under the Exchange Indenture and no default or event of default would exist
under the Credit Agreement or the Existing Note Indentures and no default or
event of default under any other material instrument governing Debt
outstanding at the time would be caused thereby; (4) that the Exchange
Indenture has been qualified under the Trust Indenture Act of 1939, as
amended, if required at the time of such exchange; and (5) the Corporation
shall have delivered a written opinion to the effect that all conditions to
be satisfied prior to such exchange have been satisfied. The exchange rate
shall be $1.00 principal amount of Exchange Debentures for each $1.00 of
liquidation preference of Exchangeable Preferred Stock, including, to the
extent necessary, Exchange Debentures in principal amounts less than $1,000;
provided that the Corporation shall have the right, at its option, to pay
cash in an amount equal to the principal amount of that portion of any
Exchange Debenture that is not an integral multiple of $1,000 instead of
delivering an Exchange Debenture in a denomination of less than $1,000;
provided further that the Corporation shall also have the right, at its
option, to pay cash in lieu of any Exchange Debenture that is an amount that
is not an integral multiple of $1.00.
(ii) Procedure for Exchange.
(A) At least thirty (30) days and not more than sixty (60) days
prior to the date fixed for exchange, written notice (the "Exchange Notice")
shall be given by first-class mail, postage prepaid, to each Holder of record on
the record date fixed for such exchange of the Exchangeable Preferred Stock at
such Holder's address as the same appears on the stock books of the Corporation;
provided that no failure to give such notice nor any deficiency therein shall
affect the validity of the procedure for the exchange of any shares of
Exchangeable Preferred Stock to be exchanged except as to the Holder or Holders
to whom the Corporation has failed to give said notice or to whom such notice
was defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in
the manner and at the place or places designated, his certificate or
certificates representing the shares of Exchangeable Preferred Stock to be
exchanged;
(3) that dividends on the shares of Exchangeable Preferred
Stock to be exchanged shall cease to accrue on such Exchange Date whether or not
certificates for shares of
11
<PAGE>
Exchangeable Preferred Stock are surrendered for exchange on such Exchange
Date unless the Corporation shall default in the delivery of Exchange
Debentures; and
(4) that interest on the Exchange Debentures shall accrue
from the Exchange Date whether or not certificates for shares of Exchangeable
Preferred Stock are surrendered for exchange on such Exchange Date.
(B) On or before the Exchange Date, each Holder of Exchangeable
Preferred Stock shall surrender the certificate or certificates representing
such shares of Exchangeable Preferred Stock, in the manner and at the place
designated in the Exchange Notice. The Corporation shall cause the Exchange
Debentures to be executed on the Exchange Date and, upon surrender in accordance
with the Exchange Notice of the certificates for any shares of Exchangeable
Preferred Stock so exchanged, duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), such shares shall be exchanged by
the Corporation into Exchange Debentures. In the event that any certificate
surrendered pursuant to this paragraph (g) represents shares in excess of those
being surrendered pursuant to the Exchange Notice, the Corporation shall issue a
new certificate representing the unexchanged portion of shares of Exchangeable
Preferred Stock. The Corporation shall pay interest on the Exchange Debentures
at the rate and on the dates specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (1) the Exchange Indenture shall have
been duly executed and delivered by the Corporation and the trustee thereunder
and (2) all Exchange Debentures necessary for such exchange shall have been duly
executed by the Corporation and delivered to the trustee under the Exchange
Indenture with irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders of Exchangeable
Preferred Stock so exchanged as stockholders of the Corporation shall cease
(except the right to receive Exchange Debentures, an amount in cash equal to the
amount of accrued and unpaid dividends to the Exchange Date and, if the
Corporation so elects, cash in lieu of any Exchange Debenture not an integral
multiple of $1,000 and/or $1.00), and the Person or Persons entitled to receive
the Exchange Debentures issuable upon exchange shall be treated for all purposes
as the registered holder or holders of such Exchange Debentures as of the
Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g): (A) the Corporation shall not be entitled to
exchange the Exchangeable Preferred Stock for Exchange Debentures if such
exchange, or any term or provision of the Exchange Indenture or the Exchange
Debentures, or the performance of the Corporation's obligations under the
Exchange Indenture or the Exchange Debentures, shall violate any applicable
12
<PAGE>
law or if, at the time of such exchange, the Corporation is insolvent or if
it would be rendered insolvent by such exchange; and (B) in the event that
the Exchange Indenture is amended other than as would be (or is) permitted by
Section 901 thereof if any Exchange Debentures were (or are) outstanding, the
Corporation shall not have the right to exchange the Exchangeable Preferred
Stock then outstanding for Exchange Debentures unless prior to such exchange
the Corporation obtains the affirmative vote or consent of holders of at
least a majority in liquidation preference of the Exchangeable Preferred
Stock then outstanding (or, in the case of provisions of the Exchange
Indenture so amended would require the unanimous consent of the holder of
Exchange Debentures, the affirmative vote or consent of all holders of the
Exchangeable Preferred Stock then outstanding).
(h) Change of Control.
(i) Provided that there are no 12.75% Debentures outstanding, upon
the occurrence of a Change of Control, the Corporation shall notify the Holders
of the Exchangeable Preferred Stock in writing of such occurrence and shall make
an offer to purchase (the "Change of Control Offer") all then outstanding shares
of Exchangeable Preferred Stock at a purchase price of 101% of the liquidation
preference thereof plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including, without limitation, an
amount in cash equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Change of Control Payment Date to the
Change of Control Payment Date).
(ii) Within 30 days following the consummation of a transaction
resulting in a Change of Control, the Corporation shall send, by first class
mail, postage prepaid, a notice to each Holder of Exchangeable Preferred Stock
at such Holder's address as it appears on the stock books of the Corporation,
which notice shall govern the terms of the Change of Control Offer. The notice
to the Holders shall contain all instructions and materials necessary to enable
such Holders to tender Exchangeable Preferred Stock pursuant to the Change of
Control Offer. Such notice shall state:
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (h) and that all
Exchangeable Preferred Stock validly tendered and not withdrawn will be accepted
for payment;
(B) the purchase price (including the amount of accumulated and
unpaid dividends, if any) and the purchase date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed, other than
as may be required by law) (the "Change of Control Payment Date");
13
<PAGE>
(C) that any shares of Exchangeable Preferred Stock not tendered
will continue to accumulate dividends;
(D) that, unless the Corporation defaults in making payment
therefor, any share of Exchangeable Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accumulate dividends
after the Change of Control Payment Date;
(E) that Holders electing to have any shares of Exchangeable
Preferred Stock purchased pursuant to a Change of Control Offer will be required
to surrender the certificate or certificates representing such shares properly
endorsed for transfer together with such customary documents as the Corporation
and the transfer agent may reasonably require, in the manner and at the place
specified in the notice prior to the close of business on the Business Day prior
to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if
the Corporation receives, not later than five (5) Business Days prior to the
Change of Control Payment Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Exchangeable
Preferred Stock the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such shares of Exchangeable Preferred
Stock purchased;
(G) that Holders whose shares of Exchangeable Preferred Stock
are purchased only in part will be issued a new certificate representing the
unpurchased shares of Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change
of Control.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Exchangeable Preferred Stock in connection with a Change of
Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A)
accept for payment the shares of Exchangeable Preferred Stock validly tendered
pursuant to the Change of Control Offer, (B) pay to the Holders of shares so
accepted the purchase price therefor in cash and (C) cancel and retire each
surrendered certificate. Unless the Corporation defaults in the payment for the
shares of Exchangeable Preferred Stock tendered pursuant to the Change of
Control Offer, dividends will cease to accumulate with respect to the shares of
Exchangeable Preferred Stock tendered and all rights of Holders of such tendered
shares will terminate, except for the right to receive payment therefor, on the
Change of Control Payment Date.
14
<PAGE>
(v) If the purchase of the Exchangeable Preferred Stock would violate
or constitute a default under the Credit Agreement, any other Senior Debt, the
Existing Note Indentures or the Existing Preferred Stock, then, notwithstanding
anything to the contrary contained above, prior to complying with the foregoing
provisions, but in any event within 30 days following the consummation of a
transaction resulting in a Change of Control, the Corporation shall, to the
extent needed to permit such purchase of the Exchangeable Preferred Stock,
either (A) repay in full all such Debt under the Credit Agreement, such Senior
Debt and the Existing Notes and, in the case of the Credit Agreement or other
Senior Debt, terminate all commitments outstanding thereunder and effect the
termination of any such prohibition under the Existing Preferred Stock or (B)
obtain the requisite consents, if any, under the Credit Agreement, the
instruments governing such Senior Debt, the Existing Note Indentures and the
provisions of the certificate of incorporation governing the Existing Preferred
Stock required to permit the repurchase of Exchangeable Preferred Stock required
by this paragraph (h). Until the requirements of the immediately preceding
sentence are satisfied, the Corporation shall not make, and shall not be
obligated to make, any Change of Control Offer; provided that the Corporation's
failure to comply with the provisions of this paragraph (h)(v) shall constitute
a Voting Rights Triggering Event.
(i) Conversion or Exchange. The Holders of shares of Exchangeable
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Exchangeable Preferred Stock. Shares of Exchangeable
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares as Exchangeable Preferred Stock must be in
compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
15
<PAGE>
(l) Certain Additional Provisions.
(i) Limitation on Debt. The Corporation shall not, and shall not
permit any Subsidiary to, Incur any Debt unless the ratio of (A) the aggregate
principal amount of Debt of the Corporation and its Subsidiaries outstanding as
of the most recent available balance sheet, after giving pro forma effect to the
incurrence of such Debt and any other Debt Incurred since such balance sheet
date and the receipt and application of the proceeds thereof, to (B) Pro Forma
Consolidated Cash Flow for the preceding four full fiscal quarters, determined
on a pro forma basis as if such Debt and any other Debt Incurred since such
balance sheet date had been Incurred and the proceeds therefrom had been applied
at the beginning of such four fiscal quarters, would be less than 6.5 to 1.
Notwithstanding the foregoing, the Corporation or any Subsidiary may Incur
the following without regard to the foregoing limitation:
(A) Debt under the Credit Agreement not to exceed $300,000,000
aggregate principal amount at any one time outstanding, and any renewal,
extension, refinancing or refunding thereof in an amount which, together with
any amount remaining outstanding or available under the Credit Agreement, does
not exceed $300,000,000;
(B) Debt evidenced by the Existing Notes;
(C) Debt owed by the Corporation to any Wholly Owned Subsidiary
of the Corporation or Debt owed by a Subsidiary of the Corporation to the
Corporation or a Wholly Owned Subsidiary of the Corporation; provided, however,
that upon either (1) the transfer or other disposition by such Wholly Owned
Subsidiary or the Corporation of any Debt so permitted to a Person other than
the Corporation or another Wholly Owned Subsidiary of the Corporation or (2) the
issuance (other than directors' qualifying shares), sale, transfer or other
disposition of shares of Capital Stock (including by consolidation or merger) of
such Wholly Owned Subsidiary to a Person other than the Corporation or another
such Wholly Owned Subsidiary, the provisions of this clause (C) shall no longer
be applicable to such Debt and such Debt shall be deemed to have been incurred
at the time of such transfer or other disposition;
(D) Debt Incurred or Incurrable in respect of letters of credit,
bankers' acceptances or similar facilities not to exceed $2,000,000 at any one
time outstanding;
(E) Capital Lease Obligations whose Attributable Value will not
exceed $5,000,000 at any one time outstanding;
16
<PAGE>
(F) Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business, provided that such Debt is
extinguished within two Business Days of its Incurrence;
(G) Debt Incurred by a Person prior to the time (1) such Person
became a Subsidiary of the Corporation, (2) such Person merges into or
consolidates with a Subsidiary of the Corporation, (3) another Subsidiary of the
Corporation merges into or consolidates with such Person (in each case in a
transaction in which such Person becomes a Subsidiary of the Corporation) or
(4) such Person sells any of its property consisting of operating assets to a
Subsidiary of the Corporation subject to such Debt (whether such Debt is
recourse or non-recourse to such Subsidiary), provided that in any such case
such Debt was not Incurred in anticipation of such transaction;
(H) Debt evidenced by the 7.75% Exchange Debentures if the 7.75%
Exchange Debentures are issued in exchange for the Existing Preferred Stock;
(I) Debt evidenced by the Exchange Debentures if the Exchange
Debentures are issued in exchange for the Exchangeable Preferred Stock.
(J) Renewals, refundings, replacements or extensions
(collectively,"refinancings") of the Credit Agreement, the Existing Notes, the
7.75% Exchange Debentures, the Exchange Debentures or any other outstanding Debt
that is Incurred in compliance with the provisions hereof, other than Debt
referred to in clauses (A) through (F) and (I) above, in an aggregate principal
amount not to exceed the principal amount of the Debt so refinanced plus the
amount of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt refinanced or the amount of any premium
reasonably determined by the Corporation as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated repurchase, plus
the amount of expenses of the Corporation Incurred in connection with such
refinancing, provided that, (1) to the extent such Refinancing Debt is not
Senior Debt, such refinancing Debt does not have an Average Life less than the
Average Life of the Debt being refinanced and (2) if such Debt is subordinated
in right of payment to the Exchange Debentures such refinancing Debt is
subordinated in right of payment to the Exchange Debentures at least to the
extent that the Debt to be refinanced is subordinated to the Exchange
Debentures; and
(K) Debt not otherwise permitted to be Incurred pursuant to
clauses (A) - (J) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (K), has an
17
<PAGE>
aggregate principal amount not in excess of $15,000,000 at any one time
outstanding.
(ii) Limitation on Certain Debt. The Corporation shall not Incur or
permit to exist any Debt that is by its terms both (i) subordinate in right of
payment to any Senior Debt and (ii) senior in right of payment to the Exchange
Debentures, if issued, in each case other than by reason of its maturity. The
Corporation shall not Incur or permit to exist any Debt that is by its terms
subordinate in right of payment to the Exchange Debentures unless such Debt
constitutes Subordinated Debt.
(iii) Limitation on Restricted Payments. The Corporation
(A) shall not, directly or indirectly, declare or pay any dividend, or make any
distribution in respect of its Capital Stock or to the holders thereof
(including pursuant to a merger or consolidation of the Corporation, but
excluding (1) any dividends or distributions payable solely in shares of its
Capital Stock (other than Disqualified Stock) or in options, warrants or other
rights to acquire its Capital Stock (other than Disqualified Stock) and
(2) dividends in accordance with the terms of the Existing Preferred Stock or
the Exchangeable Preferred Stock), (B) shall not, and shall not permit any
Subsidiary of the Corporation to, directly or indirectly, purchase, redeem or
otherwise acquire or retire for value (1) any Capital Stock of the Corporation
or (2) any options, warrants, or rights to purchase or acquire shares of Capital
Stock of the Corporation (in the case of either clause (1) or (2) other than in
exchange for the Corporation's Capital Stock (other than Disqualified Stock) or
options, warrants or other rights to purchase the Corporation's Capital Stock
(other than Disqualified Stock)), (C) shall not make, or permit any Subsidiary
of the Corporation to make, any loan, advance, capital contribution to or
Investment in, or payment on a guarantee of any obligation of, any Affiliate,
other than the Corporation or a Wholly Owned Subsidiary of the Corporation,
(D) shall not, and may not permit any Subsidiary of the Corporation to, redeem,
defease, repurchase, retire or otherwise acquire or retire for value prior to
any scheduled maturity, repayment or sinking fund payment, Debt of the
Corporation which is subordinated in right of payment to the Exchangeable
Preferred Stock (other than in exchange for the Corporation's Capital Stock
(other than Disqualified Stock) or options, warrants or other rights to purchase
the Corporation's Capital Stock (other than Disqualified Stock)) and (E) shall
not make any Investment in any Subsidiary which is subject to an encumbrance or
restriction described in paragraph (l)(iv) or any Investments in any
Unrestricted Subsidiary (each of clauses (A) - (E) being a "Restricted
Payment"), if at the time thereof:
(1) a Voting Rights Triggering Event shall have occurred
and is continuing; or
18
<PAGE>
(2) upon giving effect to such Restricted Payment, the
aggregate of all Restricted Payments from December 31, 1996 exceeds the sum of:
(a) the remainder of (x) 100% of the cumulative
Consolidated Cash Flow (or, in the case Consolidated Cash Flow shall be
negative, less 100% of such deficit) from December 31, 1996 through the last day
of the last full fiscal quarter immediately preceding such Restricted Payment
minus (y) the product of 1.4 times the cumulative Consolidated Interest Expense
from December 31, 1996 through the last day of the last full fiscal quarter
immediately preceding such Restricted Payment; plus
(b) 100% of the aggregate net proceeds received by the
Corporation, including the fair market value of property other than cash (as
determined in good faith by the Board of Directors) since December 31, 1996,
from the issuance (other than to a Subsidiary) of Capital Stock (other than
Disqualified Stock) of the Corporation and options, warrants or other rights to
purchase or acquire Capital Stock of the Corporation (other than Disqualified
Stock) and the principal amount of Debt of the Corporation that has been
converted into Capital Stock of the Corporation (other than Disqualified Stock
and other than by a Subsidiary) since December 31, 1996; plus
(c) an amount equal to the net reduction in
Investments made by the Corporation and its Subsidiaries subsequent to the date
of original issue of the Exchangeable Preferred Stock pursuant to clauses
(C) and (E) above in any Affiliate, Unrestricted Subsidiary or Subsidiary
subject to an encumbrance or restriction upon the disposition, liquidation or
repayment (including by way of dividends) thereof, from redesignations of
Unrestricted Subsidiaries as Subsidiaries or from the removal of such
encumbrance or restriction, but only to the extent such amounts are not included
in Consolidated Net Income and not to exceed in the case of any Person the
amount of Investments previously made by the Corporation and its Subsidiaries in
such Persons; plus
(d) $15,000,000.
Notwithstanding the foregoing, so long as no Voting Rights Triggering
Event, or event that with the passing of time or the giving of notice, or both,
would constitute a Voting Rights Triggering Event, shall have occurred and is
continuing or would result therefrom, the Corporation and any Subsidiary of the
Corporation shall (A) pay any dividend within 60 days after declaration thereof
if at the declaration date such payment would have complied with the foregoing
provision; (B) make any payment in redemption of Capital Stock of the
Corporation or options to purchase such Capital Stock granted to officers or
employees of the Corporation pursuant to the Corporation's Stock Option Plan (or
any
19
<PAGE>
successor plan) in connection with the severance or termination of officers
or employees (other than W. Don Cornwell and Stuart J. Beck) not to exceed
$1,000,000 in the aggregate; (C) make Investments, not to exceed $10,000,000
in the aggregate at any one time, in (1) any Subsidiary which is subject to
any encumbrance or restriction described under paragraph (l)(iv) below or (2)
any Unrestricted Subsidiary; (D) exchange the Existing Preferred Stock, in
accordance with its terms, for the 7.75% Exchange Debentures and make
payments of principal (premium, if any), and interest thereon in accordance
with the 7.75% Exchange Debenture Indenture; (E) exchange its Exchangeable
Preferred Stock, in accordance with its terms, for the Exchange Debentures
and make payments of principal (premium, if any), and interest thereon in
accordance with the Exchange Indenture; (F) refinance any Debt otherwise
permitted by clause (I) of the second paragraph under paragraph (l)(i) above
or solely in exchange for or out of the proceeds of the substantially
concurrent sale (other than from or to a Subsidiary) of shares of Capital
Stock of the Corporation, other than Disqualified Stock; (G) purchase,
redeem, acquire or retire any shares of Capital Stock of the Corporation
solely in exchange for or out of the proceeds of the substantially concurrent
sale (other than from or to a Subsidiary) of shares of Capital Stock (other
than Disqualified Stock) of the Corporation; (H) purchase or redeem any Debt
from Net Available Proceeds; and (I) make Permitted Television Investments in
an aggregate amount at any one time outstanding not to exceed $25,000,000.
Any payment or Investment made pursuant to clauses (A), (B) and (C) of this
paragraph shall be a Restricted Payment for purposes of calculating aggregate
Restricted Payments under paragraph (l)(ii), above.
(iv) Limitations Concerning Distributions By and Transfers to
Subsidiaries. The Corporation shall not, and shall not permit any Subsidiary of
the Corporation to, suffer to exist any consensual encumbrance or restriction on
the ability of any Subsidiary of the Corporation (A) to pay, directly or
indirectly, dividends or make any other distributions in respect of its Capital
Stock or pay any Debt or other obligation owed to the Corporation or any other
Subsidiary of the Corporation; (B) to make loans or advances to the Corporation
or any Subsidiary of the Corporation; or (C) to transfer any of its property or
assets to the Corporation. Notwithstanding the foregoing limitation, the
Corporation may permit a Subsidiary to suffer to exist any such encumbrance or
restriction (1) included in any instrument governing Debt Incurred by such
Subsidiary pursuant to paragraph (l)(i) for the purpose of financing all or part
of the purchase price or cost of construction or improvements of property,
provided, that the principal amount of the Debt so Incurred does not exceed the
purchase price or cost of construction or improvements of such property;
(2) included in the Credit Agreement; (3) imposed by virtue of applicable
corporate law or regulation and relating solely to the payment of dividends or
distributions to stockholders; (4) pursuant to an agreement relating to any Debt
20
<PAGE>
Incurred by a Person prior to the date on which such Person became a Subsidiary
of the Corporation and outstanding on such date and not Incurred in anticipation
of becoming a Subsidiary; (5) with respect to restrictions of the nature
described in clause (C) above, included in a contract entered into in the
ordinary course of business and consistent with past practices that contains
provisions restricting the assignment of such contract; (6) pursuant to an
agreement effecting a refinancing of Debt Incurred pursuant to an agreement
referred to in clause (1), (2) or (4) above; provided, however, that the
provisions contained in such refinancing agreement relating to such encumbrance
or restriction are no more restrictive in any material respect than the
provisions contained in the agreement the subject thereof, as determined in good
faith by the Board of Directors and evidenced by a resolution of the Board of
Directors; or (7) included in any instrument governing Capital Lease Obligations
whose Attributable Value will not exceed $5,000,000 in the aggregate at any one
time outstanding or included in any instrument governing a Sale and Leaseback
Transaction whose Attributable Value does not exceed $2,000,000 and the
Attributable Value of all such Sale and Leaseback Transactions entered into
since the date hereof does not exceed $5,000,000 in the aggregate; provided that
in each case, after giving effect to the Incurrence of such Capital Lease
Obligation or Sale and Leaseback Transaction and the receipt and application of
the proceeds thereof, the ratio of the aggregate principal amount of Debt of the
Corporation and its Subsidiaries outstanding as of the most recent available
balance sheet to Pro Forma Consolidated Cash Flow for the preceding four full
fiscal quarters, determined on a pro forma basis as if such Capital Lease
Obligation had been Incurred, or such Sale and Leaseback Transaction had taken
place, and the proceeds therefrom had been applied at the beginning of such four
fiscal quarters, would be less than 6.5 to 1.
(v) Limitation on Transactions with Affiliates. The Corporation
shall not, and shall not permit any Subsidiary of the Corporation to, directly
or indirectly, enter into any transaction after the date hereof with any
Affiliate (other than the Corporation or a Wholly Owned Subsidiary of the
Corporation), unless a majority of the disinterested members of the Board of
Directors determines in its reasonable good faith judgment that:
(A) such transaction is in the best interests of the Corporation
or such Subsidiary; and
(B) such transaction is on terms no less favorable to the
Corporation or such Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate.
(vi) Limitation on Issuances and Sale of Capital Stock of Wholly Owned
Subsidiaries. The Corporation (A) shall not, and shall not permit any Wholly
Owned Subsidiary to, transfer, convey,
21
<PAGE>
sell or otherwise dispose of any Capital Stock of such or any other Wholly
Owned Subsidiary to any Person (other than the Corporation or a Wholly Owned
Subsidiary) and (B) shall not permit any Wholly Owned Subsidiary to issue
shares of its Capital Stock (other than directors' qualifying shares), or
securities convertible into, or warrants, rights or options to subscribe for
or purchase shares of, its Capital Stock to any Person other than to the
Corporation or a Wholly Owned Subsidiary unless in the case of either clause
(A) or (B) above (1) after giving effect to any such sale, disposition or
issuance, the ratio of the aggregate principal amount of Debt of the
Corporation and its Subsidiaries outstanding as of the most recent available
balance sheet to Pro Forma Consolidated Cash Flow for the preceding four
fiscal quarters, determined on a pro forma basis as if such sale, disposition
or issuance had taken place and the Net Available Proceeds therefrom had been
applied at the beginning of such four fiscal quarters, would be less than 6.5
to 1; (2) immediately after giving effect to such sale, disposition or
issuance (including any acquisition of assets with Net Available Proceeds) no
Voting Rights Triggering Event or event that, with the passing of time or the
giving of notice, or both, would constitute a Voting Rights Triggering Event
shall have occurred or be continuing; (3) the assets acquired pursuant to
such sale, disposition or issuance, are either (x) at least 85% cash or
readily marketable cash equivalents or (y) all or substantially all of the
assets or a majority of the Voting Stock of an existing television or radio
broadcasting or cable television business or franchise (whether existing as a
separate entity, subsidiary, division, unit or otherwise); (4) after giving
effect to any such sale, disposition or issuance, such Wholly Owned
Subsidiary shall be a Subsidiary of the Corporation; and (5) the
consideration for such sale, disposition or issuance of Capital Stock will be
at least equal to the fair market value thereof as determined by the Board of
Directors.
(vii) Provision of Financial Information. So long as any of the
Exchangeable Preferred Stock is outstanding, the Corporation shall file with the
Commission the annual reports, quarterly reports and other documents that the
Corporation would have been required to file with the Commission pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Corporation were subject to
such Sections, and the Corporation shall provide to all Holders copies of such
reports and documents.
(viii) Mergers, Consolidations and Certain Sales of Assets. The
Corporation (A) shall not consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Corporation or any
Subsidiary of the Corporation (in a transaction in which such Subsidiary remains
a Subsidiary of the Corporation); and (B) shall not, directly or indirectly,
transfer, sell, convey, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety; unless: (1) immediately before and
after giving effect to
22
<PAGE>
such transaction and treating any Debt that becomes an obligation of the
Corporation or a Subsidiary of the Corporation, as a result of such
transaction, as having been Incurred by the Corporation or such Subsidiary at
the time of the transaction, no Voting Rights Triggering Event or event that,
with the passing of time or the giving of notice, or both, would become a
Voting Rights Triggering Event, shall have occurred and be continuing; (2) in
a transaction in which the Corporation does not survive or in which the
Corporation sells, leases or otherwise disposes of all or substantially all
of its assets, the successor entity to the Corporation is organized under the
laws of the United States or any State thereof or the District of Columbia
and the Exchangeable Preferred Stock shall be converted into or exchanged for
and shall become shares of such successor, transferee or resulting Person,
having in respect of such successor, transferee or resulting Person, the same
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations, and restrictions thereon that the
Exchangeable Preferred Stock had immediately prior to such transaction; and
(3) immediately after giving effect to such transaction, the Corporation or
the successor entity to the Corporation would have a ratio of aggregate
principal amount of Debt of the Corporation and its Subsidiaries outstanding
as of the most recent available balance sheet to Pro Forma Consolidated Cash
Flow for the preceding four full fiscal quarters, determined on a pro forma
basis as if such transaction had taken place and the proceeds therefrom had
been applied at the beginning of such four fiscal quarters, of less than 6.5
to 1. Upon any such sale of all or substantially all of the assets of the
Corporation to another Person or any merger or consolidation where the
Corporation is not the surviving entity, such Person or survivor shall become
the obligor in respect of the Exchangeable Preferred Stock and the
Corporation will be relieved of all further obligations and covenants
hereunder.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Corporation shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Corporation.
(m) Definitions. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"7.75% Exchange Debentures" means the 7.75% Junior Subordinated
Convertible Debentures due 2005 that the Corporation may issue at its election
in exchange for the Existing Preferred
23
<PAGE>
Stock in accordance with the terms of the Existing Preferred Stock as such
terms exist on the Issue Date.
"7.75% Exchange Debenture Indenture" means the Indenture to be
executed in connection with the issuance of the 7.75% Exchange Debentures.
"9 3/8% Note Indenture" means the Indenture dated as of February 22,
1996 between the Corporation and The Bank of New York, as Trustee, as such
Indenture exists on the Issue Date.
"9 3/8% Notes" means the 9 3/8% Senior Subordinated Notes due December
1, 2005 of the Corporation issued pursuant to the 9 3/8% Note Indenture and
outstanding on the Issue Date.
"10 3/8% Note Indenture" means the Indenture dated as of May 19, 1995
between the Corporation and United States Trust Company of New York, as Trustee,
as such Indenture exists on the Issue Date.
"10 3/8% Notes" means the 10 3/8% Senior Subordinated Notes due May 15,
2005 of the Corporation issued pursuant to the 10 3/8% Note Indenture and
outstanding on the Issue Date.
"12.75% Debenture Indenture" means the Indenture dated as of September
1, 1992 between the Corporation and United States Trust Company of New York, as
Trustee, as such Indenture exists on the Issue Date.
"12.75% Debentures" means the 12.75% Senior Subordinated Debentures
due September 1, 2002 of the Corporation issued pursuant to the 12.75% Debenture
Indenture and outstanding on the Issue Date.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Subsidiaries
(including a consolidation or merger of any such Subsidiaries with or into
another Person in a transaction in which such Subsidiary ceases to be a
Subsidiary, but excluding a disposition by a Subsidiary of such Person to such
Person or a Wholly Owned Subsidiary of such Person or by such Person to a Wholly
Owned Subsidiary of such Person) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Subsidiary of
such Person, (ii) substantially all of
24
<PAGE>
the assets of such Person or any of its Subsidiaries representing a division
or line of business or (iii) other assets or rights of such Person or any of
its Subsidiaries outside of the ordinary course of business.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with generally accepted accounting
principles, discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which
is terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated. Attributable Value means, as to a Capital Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount thereof
that would appear on the face of a balance sheet of such Person in accordance
with generally accepted accounting principles.
"Average Life" means, as of the date of determination, with respect to
any Debt, the quotient obtained by dividing (i) the sum of the products of the
numbers of years from the date of determination to the dates of each successive
scheduled principal payment of such Debt, multiplied by the amount of such
principal payments by (ii) the sum of all such principal payments.
"Board of Directors" shall have the meaning ascribed to it in the
introductory paragraph of this Certificate of Designations.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The Borough of
Manhattan, The City of New York, New York are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified
25
<PAGE>
and accounted for as a capital lease or a liability on the face of a balance
sheet of such Person in accordance with generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Certificate of Incorporation" shall have the meaning ascribed to it
in the introductory paragraph of this Certificate of Designations.
A "Change of Control" shall be deemed to have occurred in the event
that, after the Issue Date, either (i) any Person or any Persons (other than one
or more Permitted Holders) acting together which would constitute a "group" (a
"Group") for purposes of Section 13(d) of the Exchange Act, or any successor
provision thereto, together with any Affiliates, shall beneficially own (as
defined in Rule 13d-3 of the Exchange Act or any successor provision thereto) at
least 50% of the aggregate voting power of all classes of Voting Stock of the
Corporation; or (ii) any Person or Group (other than Permitted Holders),
together with any Affiliates, shall succeed in having sufficient of its or their
nominees elected to the Board of Directors such that such nominees, when added
to any existing director remaining on the Board of Directors after such election
who is an Affiliate, shall constitute a majority of the Board of Directors.
"Permitted Holder" means (i) W. Don Cornwell and Stuart J. Beck, (ii) the
members of the immediate family of either of the Persons referred to in clause
(i) of this sentence, (iii) any trust created for the benefit of the Persons
described in clause (i) or (ii) of this sentence or any of their estates or (iv)
any corporation that is controlled by any Person described in clause (i), (ii)
or (iii) of this sentence.
"Change of Control Offer" has the meaning ascribed to it in Section
(h)(i) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h)(ii)(B) hereof.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it, then the body performing such duties
at such time.
26
<PAGE>
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding-up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow" of any Person means for any period the
Consolidated Net Income for such period increased by the sum of (i) Consolidated
Interest Expense of such Person and its Consolidated Subsidiaries for such
period, plus (ii) Consolidated Income Tax Expense of such Person and its
Consolidated Subsidiaries for such period, plus (iii) the consolidated
depreciation and amortization expense included in the income statement of such
Person and its Consolidated Subsidiaries for such period, plus (iv) other
non-cash charges of such Person and its Consolidated Subsidiaries deducted in
determining Consolidated Net Income (other than amortization of film and program
assets) for such period, minus (v) non-cash items of such Person and its
Consolidated Subsidiaries added in determining Consolidated Net Income for such
period; provided, however, Consolidated Cash Flow shall not include Consolidated
Net Income and the items specified in clauses (i) - (iv) above to the extent
attributable to a Consolidated Subsidiary of such Person that is subject to
restrictions preventing the payment of dividends and the making of distributions
(by loans, advances, intercompany transfers or otherwise) to such Person, but
shall include such payments and distributions as could be made in accordance
with such restrictions.
"Consolidated Income Tax Expense" of any Person means for any period
the consolidated provision for income taxes of such Person and its Consolidated
Subsidiaries for such period.
"Consolidated Interest Expense" for any Person means for any period
the consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication (or,
to the extent not so included, with the addition of), (i) the portion of any
rental obligation in respect of any Capital Lease Obligation allocable to
interest expense in accordance with generally accepted accounting principles,
(ii) the amortization of Debt discounts, (iii) any payments or fees with respect
to letters of credit, bankers acceptances or similar facilities, (iv) fees with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements other than fees or charges related to the
acquisition or termination thereof which are not allocable to interest expense
in accordance with generally accepted accounting principles, (v) Preferred Stock
dividends declared and payable in cash and (vi) accrued Disqualified Stock
dividends, whether or not declared or paid.
27
<PAGE>
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (i) the
net income (or loss) of any Person acquired by such Person or a Subsidiary of
such Person in a pooling-of-interests transaction for any period prior to the
date of such transaction, (ii) the net income (or loss) of any Person that is
not a Consolidated Subsidiary of such Person, (iii) gains or losses on Asset
Dispositions by such Person or its Consolidated Subsidiaries and (iv) all
extraordinary gains and extraordinary losses; and provided, further, that there
shall be added thereto, to the extent not otherwise included in Consolidated Net
Income, the amount of any dividends or other distributions actually paid to such
Person during such period by a Person that is not a Consolidated Subsidiary of
such Person.
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as Consolidated Persons in such Person's financial
statements in accordance with generally accepted accounting principles;
provided, however, Consolidated Subsidiaries shall not include any Unrestricted
Subsidiary created in accordance with the definition of Unrestricted Subsidiary.
"Corporation" has the meaning ascribed to it in the introductory
paragraph of this Certificate of Designations.
"Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of September 4, 1996, among the Corporation, the Lenders
listed therein and Bankers Trust Company, as Agent, and The Bank of New York,
First Union National Bank of North Carolina, Goldman Sachs Credit Partners L.P.
and Union Bank of California, N.A., as Co-Agents, as it may be amended, restated
or modified from time to time.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable, film contract rights or accrued
liabilities arising in the ordinary course of business), (v) every Capital Lease
Obligation of such Person, (vi) the maximum fixed redemption or repurchase price
of Disqualified Stock of such Person at the time of determination, and
(vii) every obligation of the type referred to in clauses (i) - (vi) of another
Person and all dividends of another Person the payment of which, in either case,
28
<PAGE>
such Person has guaranteed or is responsible or liable, directly or indirectly,
as obligor, guarantor or otherwise.
"Disqualified Stock" means any Capital Stock of the Corporation or any
Subsidiary which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including upon the
occurrence of an event), matures or is required to be redeemed (pursuant to a
sinking fund obligation or otherwise) or is redeemable at the option of the
holder thereof, in whole or in part (other than a redemption which is
conditioned upon a change of control of the Corporation), on or prior to the
final scheduled maturity of the Exchange Debentures, excluding however, the
Exchangeable Preferred Stock and the Existing Preferred Stock, unless the
issuer's obligation to pay, purchase or redeem such security is expressly
conditioned on its ability to do so in compliance with the provisions of the
covenant described in paragraph (l)(iii) hereof.
"Dividend Default" shall have the meaning ascribed to it in paragraph
(f)(iii) hereof.
"Dividend Payment Date" means April 1 and October 1 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each semi-annual period commencing on a Dividend Payment Date and ending one day
before the next Dividend Payment Date.
"Dividend Record Date" means March 15 and September 15 of each year.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Exchange Date" means the date of issuance of any Exchange Debentures
in accordance with paragraph (g) hereof.
"Exchange Debentures" means the Corporation's 12 3/4% Exchange
Debentures due 2009 that the Corporation may issue at its election in exchange
for the Exchangeable Preferred Stock in accordance with the terms of the
Exchangeable Preferred Stock.
"Exchange Indenture" shall have the meaning ascribed to it in
paragraph (f)(ii)(B) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g)(ii)(A) hereof.
"Exchangeable Preferred Stock" shall have the meaning ascribed to it
in paragraph (a) hereof.
29
<PAGE>
"Existing Note Indentures" refers collectively to the 9 3/8% Note
Indenture, 10 3/8% Note Indenture and 12.75% Debenture Indenture.
"Existing Notes" refers collectively to the 9 3/8% Notes, 10 3/8%
Notes and 12.75% Debentures.
"Existing Preferred Stock" means the "Cumulative Convertible
Exchangeable Preferred Stock" of the Corporation outstanding on the Issue Date.
"generally accepted accounting principles" means, with respect to any
computation, such accounting principles as are generally accepted in the United
States as consistently applied by the Corporation at the date of such
computation.
"Holder" means a holder of shares of Exchangeable Preferred Stock as
reflected in the stock books of the Corporation.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that a
change in generally accepted accounting principles that results in an obligation
of such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on March 31, 1997.
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) to, or purchase or acquisition of
Capital Stock, bonds, notes, debentures or other securities or evidence of Debt
issued by, any other Person including any payment on a guarantee of any
obligation of such other Person.
"Issue Date" means the date of original issuance of the Exchangeable
Preferred Stock.
"Junior Securities" shall have the meaning ascribed to it in paragraph
(b)(i) hereof.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement
30
<PAGE>
(other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever on or with
respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Local Marketing Agreement" means any agreement pursuant to which the
Corporation or any of its Subsidiaries agrees to provide television management
services, television broadcasting or assets related to the provision of
television broadcasting in exchange for cash payments and/or the right to charge
others for the provision of advertising or other services or products.
"Major Asset Disposition" means an Asset Disposition or series of
related Asset Dispositions involving assets with a fair market value in excess
of $2 million.
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(ii) hereof.
"Net Available Proceeds" from any Asset Disposition or issuance of
Capital Stock by any Person means cash or readily marketable cash equivalents
received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration received
in the form of assumption by the acquiree of Debt or other obligations relating
to such properties or assets or received in any other noncash form) therefrom by
such Person, net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses Incurred and all federal, state, provincial, foreign
and local taxes required to be accrued as a liability as a consequence of such
Asset Disposition or issuance, (ii) all payments made by such Person or its
Subsidiaries on any Debt which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by the terms
of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or issuance or by applicable law be repaid out of the proceeds from
such Asset Disposition or issuance, (iii) all distributions and other payments
made to minority interest holders in Subsidiaries of such Person or joint
ventures as a result of such Asset Disposition, and (iv) reserves established in
accordance with generally accepted accounting principles against any liabilities
associated with such assets and retained by such Person or any Subsidiary
thereof, as the case may be, after such Asset Disposition, including, without
limitation, liabilities under any indemnification obligations and severance and
other employee termination costs associated with such Asset Disposition, in each
case as determined by the Board of Directors, in its reasonable good faith
judgment evidenced by a resolution of the Board of Directors; provided, however,
that any reduction in such reserve following the consummation of such Asset
31
<PAGE>
Disposition will be treated for all purposes of the Exchangeable Preferred Stock
as a new Asset Disposition at the time of such reduction with Net Available
Proceeds equal to the amount of such reduction.
"Net Proceeds Redemption Price" shall have the meaning ascribed to it
in paragraph (e)(i)(B) hereof.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other liabilities
payable under the documentation governing, or otherwise relating to, any Debt.
"Optional Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(i)(A) hereof.
"Parity Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Permitted Holder" shall have the meaning ascribed to it within the
definition of Change of Control.
"Permitted Television Investment" means an Investment in any Person
which is a Restricted Payment within the meaning of either clause (iii) or (v)
of the definition of Restricted Payment (i) with which the Corporation has
entered into a Local Marketing Agreement or (ii) (a) for the purpose of
facilitating the delivery by the Corporation or any of its Subsidiaries of
advanced television service, including high definition television, or
interactive television or (b) to otherwise permit the Corporation or any of its
Subsidiaries to exploit any other emerging technologies relating to television
broadcasting. For purposes of calculating the aggregate amount of outstanding
Permitted Television Investments, any Investment (a) in a Person which,
subsequent to such Investment, becomes a Wholly Owned Subsidiary of the
Corporation, or (b) that otherwise, due to a change in the status of such
Person, would not, if then made, be deemed a Restricted Payment, shall no longer
be deemed outstanding as of the date such Person becomes a Wholly Owned
Subsidiary or otherwise changes its status, as the case may be.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding-up
of such Person, to shares of Capital Stock of any other class of such Person.
32
<PAGE>
"Pro Forma Consolidated Cash Flow" of any Person means for any period
the Consolidated Cash Flow for such period; provided, that, in the event such
Person or its Subsidiaries has made Asset Dispositions or acquisitions of
assets, properties or franchises not in the ordinary course of business
(including acquisitions of other Persons by merger, consolidation or purchase of
Capital Stock) or has permitted an encumbrance or restriction pursuant to the
provisions of paragraph (l)(iv) during or after such period, such computation
shall be made on a pro forma basis (whether the acquisition is treated as a
purchase or a pooling under generally accepted accounting principles) as if the
Asset Dispositions or acquisitions or restrictions or encumbrances had taken
place on the first day of such period. If, during or after the period for which
such calculation is made, the Person or any of its Subsidiaries has acquired or
disposed of a television or radio broadcasting or cable television franchise
that does not constitute an existing business (whether existing as a separate
entity, subsidiary, division, unit or otherwise), the pro forma effect of such
acquisition or disposition shall be deemed to be the Consolidated Cash Flow
attributable to such franchise (or a reasonable estimate thereof) for the period
for which such calculation is made prior to such acquisition or disposition,
provided that such estimated Consolidated Cash Flow shall be determined on the
basis of comparable franchises, evidenced by a resolution of the Board of
Directors and reported on by a nationally recognized accounting firm.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Ratings Group
or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
180 days from the date of acquisition thereof and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Ratings Group or at least
P-1 from Moody's Investors Service, Inc.; and (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
unimpaired capital and surplus of not less than $100,000,000.
"Redemption Date," with respect to any shares of Exchangeable
Preferred Stock, means the date on which such shares of Exchangeable Preferred
Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e)(iii)(A) hereof.
33
<PAGE>
"refinancing" shall have the meaning ascribed to it in paragraph
(l)(i)(J) hereof.
"Refinancing Debt" means any refinancing by the Corporation or any
Restricted Subsidiary of the Corporation of Debt incurred in accordance with
paragraph (l)(i) above, in each case that does not (i) result in an increase in
the aggregate principal amount of Debt of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Debt and plus the amount of
reasonable expenses incurred by the Corporation in connection with such
Refinancing) or (2) create Debt with (A) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Debt being
Refinanced or (B) a final maturity earlier than the final maturity of the Debt
being Refinanced; provided that (x) if such Debt being Refinanced is Debt of the
Corporation, then such Refinancing Debt shall be Debt solely of the Corporation
and (y) if such Debt being Refinanced is subordinate or junior to the Exchange
Debentures, then such Refinancing Debt shall be subordinate to the Exchange
Debentures at least to the same extent and in the same manner as the Debt being
Refinanced.
"Restricted Payment" shall have the meaning ascribed to it in
paragraph (l)(iii).
"Sale and Leaseback Transaction" of any Person means an arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any property or asset of such Person
which has been or is being sold or transferred by such Person more than 270 days
after the acquisition thereof or the completion of construction or commencement
of operation thereof to such lender or investor or to any Person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement shall be the
date of the last payment of rent or any other amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
"Senior Debt" means (a) the principal of (premium, if any) and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Corporation whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Corporation for reimbursement, indemnities
and fees relating to, Debt outstanding pursuant to the Credit Agreement, (b)
payment obligations of the Corporation under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements, in each
case entered into to hedge Debt Incurred under the Credit Agreement or any
renewal, refunding, refinancing or extension thereof, (c) all other Debt for
money
34
<PAGE>
borrowed of the Corporation referred to in the definition of Debt other
than clause (vi) and (d) all refinancings and modifications and amendments of
any Debt referred to in clause (a), (b) or (c) above, unless but only to the
extent, in the case of any particular Debt referred to in clause (a), (b) or
(c) above, (A) such Debt is owed to a Subsidiary of the Corporation, (B) the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Debt is not superior in right of
payment to the Exchange Debentures, (C) such Debt is Incurred in violation of
the Exchange Indenture, or (D) such Debt is subordinate in right of payment
in respect to any other Debt of the Corporation.
"Senior Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Special Redemption" shall have the meaning ascribed to it in paragraph
(e)(i)(D) hereof.
"Subordinated Debt" means Debt of the Corporation as to which the
payment of principal of (and premium, if any) and interest and other payment
obligations in respect of such Debt shall be subordinate to the prior payment in
full of the Exchange Debentures to at least the following extent: (i) no
payments of principal of (or premium, if any) or interest on or otherwise due in
respect of such Debt may be permitted for so long as any default in the payment
of principal (or premium, if any) or interest on the Exchange Debentures exists;
and (ii) in the event that any other default that with the passing of time or
the giving of notice, or both, would constitute an event of default exists with
respect to the Exchange Debentures, upon notice by 25% or more in principal
amount of the Exchange Debentures to the Trustee, the Trustee shall have the
right to give notice to the Corporation and the holders of such Debt (or
trustees or agents therefor) of a payment blockage, and thereafter no payments
of principal of (or premium, if any) or interest on or otherwise due in respect
of such Debt may be made for a period of 179 days from the date of such notice.
Notwithstanding the foregoing, the 7.75% Exchange Debentures shall constitute
Subordinated Debt unless and until the terms thereof shall be amended or
modified after the date of the Exchange Indenture.
"Subsidiary" of any Person means (i) a corporation more than 50% of
the outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person, or by such Person
and one or more other Subsidiaries thereof or (ii) any other Person (other than
a corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof. Subsidiary shall not include an Unrestricted
35
<PAGE>
Subsidiary created in accordance with the definition of Unrestricted Subsidiary.
"Triggered Securities" shall have the meaning ascribed to it in paragraph
(f)(iii)(A) hereof.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such
by the Board of Directors as set forth below where (a) neither the Corporation
nor any of its other Subsidiaries (other than another Unrestricted Subsidiary)
(i) provides credit support for, or guarantee of, any Debt of such Subsidiary
(including any undertaking, agreement or instrument evidencing such Debt) or
(ii) is directly or indirectly liable for any Debt of such Subsidiary, and
(b) no default with respect to any Debt of such Subsidiary (including any right
which the holders thereof may have to take enforcement action against such
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Debt of the Corporation and its other Subsidiaries (other than another
Unrestricted Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity, (2) any Subsidiary of the Corporation (other than a Subsidiary
existing as of the Issue Date or successor to any such Subsidiary) which at the
time of determination shall be an Unrestricted Subsidiary (as designated by the
Board of Directors, as provided below) and (3) any Subsidiary of an Unrestricted
Subsidiary where clauses (a) and (b) are true with respect to such Subsidiary.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Corporation which is
not a Subsidiary of the Subsidiary to be so designated or otherwise an
Unrestricted Subsidiary, provided, that either (x) the Subsidiary to be so
designated has total assets of $1,000 or less or (y) immediately after giving
effect to such designation, the ratio of the aggregate principal amount of Debt
of the Corporation and its Subsidiaries outstanding as of the most recent
available balance sheet to Pro Forma Consolidated Cash Flow for the preceding
four full fiscal quarters, determined on a pro forma basis as if such Subsidiary
had been an Unrestricted Subsidiary at the beginning of such four fiscal
quarters, would be less than 6.5 to 1. The Board of Directors may designate any
Unrestricted Subsidiary to be a Subsidiary, provided that, immediately after
giving effect to such designation, the ratio of the aggregate principal amount
of Debt of the Corporation and its Subsidiaries outstanding as of the most
recent available balance sheet to Pro Forma Consolidated Cash Flow for the
preceding four full fiscal quarters, determined on a pro forma basis as if such
Unrestricted Subsidiary had been a Subsidiary at the beginning of such four
fiscal quarters, would be less than 6.5 to 1.
36
<PAGE>
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph (f)(iii)(A) hereof.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Weighted Average Life to Maturity" means, when applied to any Debt at
any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Debt into (b) the total of the product
obtained by multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (ii) the number of years
(calculated to the nearest one-twelfth) which will elapse between such date and
the making of such payment.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
37
<PAGE>
IN WITNESS WHEREOF, said Granite Broadcasting Corporation has caused this
Certificate to be signed by Lawrence I. Wills, its Vice President - Finance and
Controller, this 30th day of January, 1997.
GRANITE BROADCASTING CORPORATION
By: /s/ LAWRENCE I. WILLS
-------------------------------
Name: Lawrence I. Wills
Title: Vice President - Finance
and Controller
38
<PAGE>
Exhibit 4.43
EXECUTION COPY
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of January 31, 1997 by
and between Granite Broadcasting Corporation, a Delaware corporation (the
"Company"), and Goldman, Sachs & Co., BT Securities Corporation, Lazard Freres &
Co. LLC and Salomon Brothers Inc (collectively, the "Purchasers").
This Agreement is entered into in connection with the Purchase Agreement,
dated January 27, 1997, between the Company and the Purchasers (the "Purchase
Agreement"), which provides for the issuance and sale by the Company to the
Purchasers of the Company's 12 3/4% Cumulative Exchangeable Preferred Stock, par
value $0.01 per share (the "Preferred Stock"), which is exchangeable at the
Company's option on the terms set forth in the Certificate of Designations
referred to herein for the Company's 12 3/4% Exchange Debentures due April 1,
2009 (the "Exchange Debentures"), which exchange may occur before or after the
Exchange Offer referred to herein. In order to induce the Purchasers to enter
into the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement for the benefit of the Purchasers and their
direct and indirect transferees and assigns. The execution and delivery of this
Agreement is a condition to the Purchasers' obligation to purchase the Preferred
Stock under the Purchase Agreement.
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
(a) "Certificate of Designations" shall mean the certificate of
designations establishing the terms of the Preferred Stock and the Exchange
Offer Preferred Stock, filed with the Secretary of State of the State of
Delaware on January 31, 1997.
(b) "Closing Date" shall mean the date on which the Preferred Stock is
initially issued.
(c) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular
purpose.
(d) "Effective Time", in the case of an Exchange Offer, shall mean the
date on which the Commission declares the Exchange Offer registration
statement effective or on which such registration statement otherwise
becomes effective and, in the case of a Shelf Registration, shall mean the
date on which the Commission declares the Shelf Registration effective or
on which the Shelf Registration otherwise becomes effective.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
(f) "Exchange Offer" shall have the meaning assigned thereto in
Section 2.
<PAGE>
(g) "Exchange Offer Debentures" shall mean the debt securities of the
Company that are issued pursuant to the Indenture and exchanged for the
Exchange Debentures pursuant to the Exchange Offer.
(h) "Exchange Offer Preferred Stock" shall mean the preferred stock of
the Company that is issued pursuant to the Certificate of Designations and
exchanged for the Preferred Stock pursuant to the Exchange Offer.
(i) "Exchange Offer Registration Statement" means registration
statement filed pursuant to Section 2(a).
(j) "Exchange Securities" shall mean the Exchange Offer Debentures and
the Exchange Offer Preferred Stock, collectively.
(k) The term "holder" shall mean each of the Purchasers for so long as
it owns any Registrable Securities, and such of its respective successors
and assigns who acquire Registrable Securities, directly or indirectly,
from such person or from any successor or assign of such person, in each
case for so long as such person owns any Registrable Securities, and, as
the context requires, the term holder shall also include all Participating
Broker-Dealers making requests pursuant to the second paragraph of Section
2(a).
(l) "Participating Broker-Dealer" shall have the meaning assigned
thereto in Section 2(a).
(m) "Indenture" shall mean the Indenture, dated as of January 31, 1997,
between the Company and The Bank of New York, as Trustee, with respect to
the Exchange Debentures and the Exchange Offer Debentures.
(n) The term "person" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
(o) "Private Exchange Securities" shall mean, collectively, the
Exchange Debentures and the Preferred Stock issued pursuant to Section 2(c).
(p) "Registrable Securities" shall mean the Securities; provided,
however, that such Securities shall cease to be Registrable Securities when
(i) in the circumstances contemplated by Section 2(a), such Securities have
been exchanged for Exchange Securities in an Exchange Offer as contemplated
in Section 2(a); (ii) in the circumstances contemplated by Section 2(b), a
registration statement registering such Securities under the Securities Act
has been declared or becomes effective and such Securities have been sold
or otherwise transferred by the holder thereof pursuant to such effective
registration statement; (iii) such Securities are sold pursuant to Rule 144
(or any successor provision) promulgated under the Securities Act under
circumstances in which any legend borne by such Securities relating to
restrictions on transferability thereof, under the Securities Act or
otherwise, is removed by the Company or pursuant to the Indenture or such
Securities are eligible to be sold pursuant to paragraph (k) of Rule 144;
or (iv) such Securities shall cease to be outstanding.
(q) "Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
2
<PAGE>
(r) "Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405 under the Securities Act, (ii) a
holder who acquires Exchange Securities outside the ordinary course of such
holder's business or (iii) a holder who has arrangements or understandings
with any person to participate in the Exchange Offer for the purpose of
distributing Exchange Securities.
(s) "Securities" shall mean, collectively, the Preferred Stock of the
Company to be issued pursuant to the Certificate of Designations and sold
to the Purchasers, and the Exchange Debentures to be issued in exchange
therefor or pursuant to the Indenture.
(t) "Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
(u) "Shelf Registration" shall have the meaning assigned thereto in
Section 2 hereof.
(v) "Trust Indenture Act" shall mean the Trust Indenture Act of 1939,
or any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to use
its reasonable best efforts to file under the Securities Act, as soon as
practicable, but no later than 75 days after the Closing Date, a registration
statement relating to an offer to exchange (the "Exchange Offer") any and all of
the Securities for a like number or aggregate principal amount of securities of
the Company which are substantially identical to the Securities (and which, in
the case of Exchange Debentures, are entitled to the benefits of the Indenture,
which will have been qualified under the Trust Indenture Act) except that they
have been registered pursuant to an effective registration statement under the
Securities Act (such new securities hereinafter called "Exchange Securities").
The Company agrees to use its reasonable best efforts to cause such registration
statement (the "Exchange Offer Registration Statement") to become effective
under the Securities Act as soon as practicable, but no later than 150 days
after the Closing Date. The Exchange Offer will be registered under the Act on
the appropriate form and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company further agrees to use its
reasonable best efforts to commence and complete the Exchange Offer promptly
after such registration statement has become effective, hold the Exchange Offer
open for at least 30 days and exchange Exchange Securities for all Registrable
Securities that have been tendered and not withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed to have been
completed only if the securities received by holders other than Restricted
Holders in the Exchange Offer for Registrable Securities are, upon receipt,
transferable by each such holder without restriction under the Securities Act
and the Exchange Act and without material restrictions under the blue sky or
securities laws of a substantial majority of the States of the United States of
America. The Exchange Offer shall be deemed to have been completed upon the
earlier to occur of (i) the Company having exchanged the Exchange Securities for
all outstanding Registrable Securities pursuant to the Exchange Offer and (ii)
the Company having exchanged, pursuant to the Exchange Offer, Exchange
Securities for all Registrable Securities that have been properly tendered and
not withdrawn before the expiration of the Exchange Offer, which shall
3
<PAGE>
be on a date that is at least 30 days following the commencement of the
Exchange Offer. Upon the making of an Exchange Offer in accordance with this
paragraph (a), the Company may omit to comply with such of the procedures set
forth in Section 3(c) hereof as may be appropriate under the circumstances
without adversely affecting the interests of the holders of Registrable
Securities under this Exchange and Registration Rights Agreement, taken as a
whole, but the other provisions of this Exchange and Registration Rights
Agreement other than Sections 3(d), 3(e), clause (i) and the last sentence of
Section 4, and Section 7, shall continue to apply mutatis mutandis.
The Company shall include within the prospectus contained in the Exchange
Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Purchasers, that shall contain a summary statement
of the positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities received by such broker-dealer (a "Participating Broker-Dealer") in
the Exchange Offer (other than with respect to any Securities acquired by them
and having, or that are reasonably likely to be determined to have, the status
of an unsold allotment in the initial distribution), and whether such positions
or policies have been publicly disseminated by the staff of the Commission or
such positions or policies represent the prevailing views of the staff of the
Commission. Such "Plan of Distribution" section shall also expressly permit the
use of the prospectus by all persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Securities. With respect to such
registration statement the Company and such holder shall have the benefit of,
and shall provide to the other party, the rights of indemnification and
contribution set forth in Section 6 hereof.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus in order to permit the prospectus to be lawfully delivered by all
persons subject to the prospectus delivery requirements of the Securities Act
for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Securities; provided, however, that
such period shall not exceed 180 days after the Exchange Offer Registration
Statement is declared effective.
(b) If prior to the consummation of the Exchange Offer existing Commission
interpretations are changed such that the securities received by holders other
than Restricted Holders in the Exchange Offer for Registrable Securities are not
or would not be, upon receipt, transferable by each such holder without
restriction under the Securities Act, in lieu of conducting the Exchange Offer
contemplated by Section 2(a) the Company shall file under the Securities Act as
soon as practicable a "shelf" registration statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, all of the Registrable Securities, pursuant to Rule 415 under the Securities
Act and/or any similar rule that may be adopted by the Commission (the "Shelf
Registration"). The Company agrees to use its reasonable best efforts to cause
the Shelf Registration to become or be declared effective no later than 150 days
after the Closing Date and to keep such Shelf Registration continuously
effective for a period ending on the earlier of the third anniversary of the
Effective Time or such time as there are no longer any Registrable Securities
outstanding. The Company further agrees to supplement or make amendments to the
Shelf Registration, as and when required by the rules, regulations or
instructions applicable to
4
<PAGE>
the registration form used by the Company for such Shelf Registration or by
the Securities Act or rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to the holders of the
Registrable Securities copies of any such supplement or amendment prior to
its being used or promptly following its filing with the Commission.
(c) At the written request of any Restricted Holder made not before and
within 75 days after the completion of the Exchange Offer, the Company shall
issue and deliver to such Restricted Holder in exchange for the Securities held
by such Restricted Holder, Securities of a like number or aggregate principal
amount as the Securities surrendered by such Restricted Holder in exchange
therefor (the "Private Exchange Securities"), which Private Exchange Securities
are substantially identical to the Securities except that they bear the same
CUSIP number as the Exchange Securities and are in certificated form, are issued
in the name of such Restricted Holder and bear such legends as are required by
the Certificate of Designations or the Indenture, as the case may be.
(d) In the event that (i) the Company has not filed the registration
statement relating to the Exchange Offer on or before the 75th day after the
Closing Date, or (ii) such registration statement or, in lieu thereof, the Shelf
Registration, has not become effective or been declared effective by the
Commission on or before the 150th day after the Closing Date, or (iii) the
Exchange Offer has not been completed within 30 business days after the initial
effective date of the registration statement (if the Exchange Offer is then
required to be made) or (iv) any registration statement required by Section 2(a)
or 2(b) is filed and declared effective but shall thereafter cease to be
effective (except as specifically permitted herein) without being succeeded
immediately by an additional registration statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), then the per annum interest rate as set forth in the Registrable
Securities shall increase by 0.5% per annum as set forth in the Indenture until
such time as no Registration Default is in effect (after which the interest rate
will be restored to its initial rate). In addition, in the event that the
Exchange Offer has not been completed or, if applicable, the Shelf Registration
has not become effective or been declared effective by the Commission on or
before the 270th day after the Closing Date, then the per annum interest rate as
set forth in the Registrable Securities shall increase by an additional 0.5% per
annum as set forth in the Indenture until such time as the Company completes the
Exchange Offer or, if applicable, the Shelf Registration has become or been
declared effective.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act.
(b) In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
5
<PAGE>
(c) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall use its reasonable best efforts
to effect or cause the Shelf Registration to permit the sale of the Registrable
Securities by the holders thereof in accordance with the intended method or
methods of distribution thereof described in the Shelf Registration. In
connection therewith, the Company shall, as soon as reasonably possible:
(i) prepare and file with the Commission a registration statement with
respect to the Shelf Registration on any form which may be utilized by the
Company and which shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods thereof, as
specified in writing by the holders of the Registrable Securities, and use
its reasonable best efforts to cause such registration statement to become
effective as soon as reasonably possible thereafter;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included
therein as may be necessary to effect and maintain the effectiveness of
such registration statement for the period specified in Section 2(b) hereof
and as may be required by the applicable rules and regulations of the
Commission and the instructions applicable to the form of such registration
statement, and furnish to the holders of the Registrable Securities copies
of any such supplement or amendment prior to its being used and/or filed
with the Commission;
(iii) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the intended methods of
disposition by the holders thereof set forth in such registration
statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which term,
for purposes of this Exchange and Registration Rights Agreement, shall
include a person deemed to be an underwriter within the meaning of
Section 2(11) of the Securities Act) if any, thereof, (C) the sales or
placement agent, if any, therefor, (D) counsel for such underwriters or
agent, and (E) not more than one counsel for all the holders of such
Registrable Securities the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with
the Commission, and each amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such registration
statement, and throughout the period specified in Section 2(b), make
available at reasonable times at the Company's principal place of business
or such other reasonable place for inspection by the parties referred to in
Section 3(c)(iv) who shall certify to the Company that they have a current
intention to sell the Registrable Securities pursuant to the Shelf
Registration such financial and other information and books and records of
the Company, and cause the officers, employees, counsel and independent
certified public accountants of the Company to respond to such inquiries,
as shall be reasonably necessary, in the judgment of the respective counsel
referred to in such Section, to conduct a reasonable investigation within
the meaning of Section 11 of the Securities Act; provided, however, that
each such party shall be required to maintain in confidence and not to
disclose to any other person any information or records reasonably
designated by the Company in writing as being confidential, until such
time as (A) such information becomes a matter of public record (whether by
virtue of its inclusion in
6
<PAGE>
such registration statement or otherwise), or (B) such person shall be
required so to disclose such information pursuant to the subpoena or order
of any court or other governmental agency or body having jurisdiction
over the matter (subject to the requirements of such order, and only
after such person shall have given the Company prompt prior written
notice of such requirement), or (C) such information is required to be set
forth in such registration statement or the prospectus included therein
or in an amendment to such registration statement or an amendment or
supplement to such prospectus in order that such registration statement,
prospectus, amendment or supplement, as the case may be, does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(vi) promptly notify the selling holders of Registrable Securities, the
sales or placement agent, if any, therefor and the managing underwriter or
underwriters, if any, thereof and confirm such advice in writing, (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and, with respect to such registration statement or any post-
effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the Blue Sky or securities commissioner
or regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such registration statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Company contemplated by Section 3(c)(xv) or Section 5 cease to be true
and correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or (F) at any time when a
prospectus is required to be delivered under the Securities Act, that such
registration statement, prospectus, prospectus amendment or supplement or
post-effective amendment, or any document incorporated by reference in any
of the foregoing, contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing;
(vii) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(viii) if requested by any managing underwriter or underwriters, any
placement or sales agent or any holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriter or underwriters, such agent or
such holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including, without limitation,
information with respect to the number or principal amount of Registrable
Securities being sold by such holder or agent or to any underwriters, the
name and description of such holder, agent or underwriter, the offering
price of such Registrable Securities and any discount, commission or other
compensation
7
<PAGE>
payable in respect thereof, the purchase price being paid therefor by
such underwriters and with respect to any other terms of the offering of
the Registrable Securities to be sold by such holder or agent or to such
underwriters; and make all required filings of such prospectus supplement
or post-effective amendment promptly after notification of the matters to
be incorporated in such prospectus supplement or post-effective amendment;
(ix) furnish to each holder of Registrable Securities, each placement
or sales agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(c)(iv) an executed copy of such
registration statement, each such amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by reference
therein) and such number of copies of such registration statement (excluding
exhibits thereto and documents incorporated by reference therein unless
specifically so requested by such holder, agent or underwriter, as the case
may be) and of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents, as such holder, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and disposition of
the Registrable Securities owned by such holder, offered or sold by such
agent or underwritten by such underwriter and to permit such holder, agent
and underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Company hereby consents to the use of such
prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by each such holder and by any such agent
and underwriter, in each case in the form most recently provided to such
party by the Company, in connection with the offering and sale of the
Registrable Securities covered by the prospectus (including such preliminary
and summary prospectus) or any supplement or amendment thereto;
(x) use its reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such registration statement under
such securities laws or blue sky laws of such jurisdictions as any holder
of such Registrable Securities and each placement or sales agent, if any,
therefor and underwriter, if any, thereof shall reasonably request, (B)
keep such registrations or qualifications in effect and comply with such
laws so as to permit the continuance of offers, sales and dealings therein
in such jurisdictions during the period the Shelf Registration is required
to remain effective under Section 2(b) above and for so long as may be
necessary to enable any such holder, agent or underwriter to complete its
distribution of Securities pursuant to such registration statement and (C)
take any and all other actions as may be reasonably necessary or advisable
to enable each such holder, agent, if any, and underwriter, if any, to
consummate the disposition in such jurisdictions of such Registrable
Securities; provided, however, that the Company shall not be required for
any such purpose to (1) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this Section 3(c)(x), (2) consent to general service of
process or taxation in any such jurisdiction or (3) make any changes to the
Company's certificate of incorporation or by-laws or any agreement between
the Company and its stockholders;
(xi) use its reasonable best efforts to obtain the consent or approval
of each governmental agency or authority, whether federal, state or local,
which may be required to effect the Shelf
8
<PAGE>
Registration or the offering or sale in connection therewith or to enable
the selling holder or holders to offer, or to consummate the disposition of,
their Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall be printed, lithographed or engraved, or produced
by any combination of such methods, and which shall not bear any restrictive
legends; and, in the case of an underwritten offering, enable such
Registrable Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two business days
prior to any sale of the Registrable Securities;
(xiii) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the Shelf Registration;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including (without limitation)
customary provisions relating to indemnification and contribution, and take
such other actions in connection therewith as any holders of Registrable
Securities aggregating at least 33-1/3% in number or aggregate principal
amount of the Registrable Securities at the time outstanding shall request
in order to expedite or facilitate the disposition of such Registrable
Securities; provided, that the Company shall not be required to enter into
any such agreement more than once with respect to all of the Registrable
Securities and may delay entering into such agreement until the consummation
of any underwritten public offering which the Company shall have then
engaged;
(xv) whether or not an agreement of the type referred to in Section
3(c)(xiv) hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other entity,
(A) make such representations and warranties to the holders of such
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with an offering of securities pursuant to
any appropriate agreement and/or to a registration statement filed on the
form applicable to the Shelf Registration; (B) obtain an opinion of counsel
to the Company in customary form and covering such matters, of the type
customarily covered by such an opinion, as the managing underwriters, if
any, and as any holders of at least 25% in number or aggregate principal
amount of the Registrable Securities at the time outstanding may reasonably
request, addressed to such holder or holders and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof and dated the
effective date of such registration statement (and if such registration
statement contemplates an underwritten offering of a part or all of the
Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the matters
to be covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries; the
qualification of the Company and its subsidiaries to transact business as
foreign corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 3(c)(xiv) hereof; the
due authorization, execution, authentication and issuance, and the validity
and enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Company; the
9
<PAGE>
absence of a breach by the Company or any of its subsidiaries of, or a
default under, material agreements binding upon the Company or any
subsidiary of the Company; the absence of governmental approvals required
to be obtained in connection with the Shelf Registration, the offering and
sale of the Registrable Securities, this Exchange and Registration Rights
Agreement or any agreement of the type referred to in Section 3(c)(xiv)
hereof, except such approvals as may be required under state securities or
blue sky laws; the compliance as to form of such registration statement and
any documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and of the registration
statement or most recent post-effective amendment thereto, as the case may
be, the absence from such registration statement and the prospectus included
therein, as then amended or supplemented, and from the documents
incorporated by reference therein (in each case other than the financial
statements and other financial information contained therein) of an untrue
statement of a material fact or the omission to state therein a material
fact necessary to make the statements therein not misleading (in the case
of such documents, in the light of the circumstances existing at the time
that such documents were filed with the Commission under the Exchange Act));
(C) obtain a "cold comfort" letter or letters from the independent certified
public accountants of the Company addressed to the selling holders of
Registrable Securities and the placement or sales agent, if any, therefor
and the underwriters, if any, thereof, dated (i) the effective date of such
registration statement and (ii) the effective date of any prospectus
supplement to the prospectus included in such registration statement or
post-effective amendment to such registration statement which includes
unaudited or audited financial statements as of a date or for a period
subsequent to that of the latest such statements included in such prospectus
(and, if such registration statement contemplates an underwritten offering
pursuant to any prospectus supplement to the prospectus included in such
registration statement or post-effective amendment to such registration
statement which includes unaudited or audited financial statements as of a
date or for a period subsequent to that of the latest such statements
included in such prospectus, dated the date of the closing under the
underwriting agreement relating thereto), such letter or letters to be in
customary form and covering such matters of the type customarily covered by
letters of such type; (D) deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by any holders of at
least 25% in number or aggregate principal amount of the Registrable
Securities at the time outstanding and the placement or sales agent, if any,
therefor and the managing underwriters, if any, thereof to evidence the
accuracy of the representations and warranties made pursuant to clause (A)
above or those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company; and (E) undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this Exchange
and Registration Rights Agreement pursuant to Section 9(h) hereof and of
any amendment or waiver effected pursuant thereto, each of which notices
shall contain the text of the amendment or waiver proposed or effected, as
the case may be;
10
<PAGE>
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD") or
any successor thereto, as amended from time to time) thereof, whether as a
holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules and
By-Laws, including, without limitation, by (A) if such Rules or By-Laws,
including Schedule E thereto (or any successor thereto), shall so require,
engaging a "qualified independent underwriter" (as defined in such Schedule
(or any successor thereto)) to participate in the preparation of the
registration statement relating to such Registrable Securities, to exercise
usual standards of due diligence in respect thereto and, if any portion of
the offering contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof, and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice
of the NASD; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as soon as
practicable but in any event not later than eighteen months after the
effective date of such registration statement, an earning statement of the
Company and its subsidiaries complying with Section 11(a) of the Securities
Act (including, at the option of the Company, Rule 158 thereunder).
(d) In the event that the Company would be required, pursuant to Section
3(c)(vi)(F) above, to notify the selling holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters, if
any, thereof, the Company shall without delay prepare and furnish to each such
holder, to each placement or sales agent, if any, and to each underwriter, if
any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
Each holder of Registrable Securities agrees that upon receipt of any notice
from the Company pursuant to Section 3(c)(vi)(F) hereof, such holder shall
forthwith discontinue the disposition of Registrable Securities pursuant to the
registration statement applicable to such Registrable Securities until such
holder shall have received copies of such amended or supplemented prospectus,
and if so directed by the Company, such holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus covering such Registrable Securities
at the time of receipt of such notice.
(e) The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such holder and such holder's intended method of
distribution of such Registrable Securities as the Company may from time to time
reasonably request in writing, but only to the extent that such information is
required in order to comply with the Securities Act. Each such holder agrees to
notify the Company as
11
<PAGE>
promptly as practicable of any inaccuracy or change in information previously
furnished by such holder to the Company or of the occurrence of any event in
either case as a result of which any prospectus relating to such registration
contains or would contain an untrue statement of a material fact regarding
such holder or such holder's intended method of distribution of such
Registrable Securities or omits to state any material fact regarding such
holder or such holder's intended method of distribution of such Registrable
Securities required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
promptly to furnish to the Company any additional information required to
correct and update any previously furnished information or required so that
such prospectus shall not contain, with respect to such holder or the
distribution of such Registrable Securities, an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances then existing.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly upon
request being made therefor all expenses incident to the Company's performance
of or compliance with this Exchange and Registration Rights Agreement,
including, without limitation, (a) all Commission and any NASD registration and
filing fees and expenses, (b) all fees and expenses in connection with the
qualification of the Securities for offering and sale under the State securities
and blue sky laws referred to in Section 3(c)(x) hereof, including reasonable
fees and disbursements of counsel for the placement or sales agent or
underwriters in connection with such qualifications, (c) all expenses relating
to the preparation, printing, distribution and reproduction of each registration
statement required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or supplement to the
foregoing, the certificates representing the Securities and all other documents
relating hereto, (d) messenger and delivery expenses, (e) fees and expenses of
the Trustee under the Indenture and of any escrow agent or custodian, (f)
internal expenses (including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or accounting duties), (g)
fees, disbursements and expenses of counsel and independent certified public
accountants of the Company (including the expenses of any opinions or "cold
comfort" letters required by or incident to such performance and compliance),
(h) fees, disbursements and expenses of any "qualified independent underwriter"
engaged pursuant to Section 3(c)(xvii) hereof, (i) fees, disbursements and
expenses of one counsel for the holders of Registrable Securities retained in
connection with a Shelf Registration, as selected by the holders of at least a
majority in number or aggregate principal amount of the Registrable Securities
being registered, and fees, expenses and disbursements of any other persons,
including special experts, retained by the Company in connection with such
registration (collectively, the "Registration Expenses"). To the extent that any
Registration Expenses are incurred, assumed or paid by any holder of Registrable
Securities or any placement or sales agent therefor or underwriter thereof, the
Company shall reimburse such person for the full amount of the Registration
Expenses so incurred, assumed or paid promptly after receipt of a request
therefor. Notwithstanding the foregoing, the holders of the Registrable
Securities being registered shall pay all agency fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registered Securities and the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other than
the counsel and experts specifically referred to above.
12
<PAGE>
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Purchaser and
each of the holders from time to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c)(ix) hereof and any further
amendments or supplements to any such registration statement or prospectus,
when it becomes effective or is filed with the Commission, as the case may
be, and, in the case of an underwritten offering of Registrable Securities,
at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; and at all times subsequent to the Effective Time when a
prospectus would be required to be delivered under the Securities Act,
other than from (i) such time as a notice has been given to holders of
Registrable Securities pursuant to Section 3(c)(vi)(F) hereof until (ii)
such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(d) hereof, each such registration statement, and each
prospectus (including any summary prospectus) contained therein or
furnished pursuant to Section 3(c)(ix) hereof, as then amended or
supplemented, will conform in all material respects to the requirements of
the Securities Act and the Trust Indenture Act and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and none of such documents will
contain or contained an untrue statement of a material fact or will omit or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any subsidiary of the Company is a
party or by which the Company or any subsidiary of the Company is bound or
to which any of the property or assets of the Company or any subsidiary of
the Company is subject, other than a breach or default which is not of
material significance in respect of the business, property, condition
(financial or otherwise), or results of operations of the Company and its
13
<PAGE>
subsidiaries, taken as a whole, nor will such action result in any
violation of the provisions of the certificate of incorporation, as amended,
or the by-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any subsidiary of the Company or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions
contemplated by this Exchange and Registration Rights Agreement, except the
registration under the Securities Act of the Registrable Securities,
qualification of the Indenture under the Trust Indenture Act and such
consents, approvals, authorizations, registrations or qualifications as may
be required under State securities or blue sky laws in connection with the
offering and distribution of the Registrable Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. Upon the registration of the Registrable
Securities pursuant to Section 2 hereof, and in consideration of the agreements
of the Purchasers contained herein, and as an inducement to the Purchasers to
purchase the Securities, the Company shall, and it hereby agrees to, indemnify
and hold harmless each of the holders of Registrable Securities to be included
in such registration, and each person who participates as a placement or sales
agent or as an underwriter in any offering or sale of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which such holder, agent or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Company to any such holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company shall, and it hereby agrees to, reimburse such
holder, such agent and such underwriter for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable to any such person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by holders of
Registrable Securities expressly for use therein;
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2 hereof and to
entering into any underwriting agreement with respect thereto, that the
Company shall have received an undertaking reasonably satisfactory to it from
the holder of such Registrable Securities and from each underwriter named in
any such underwriting
14
<PAGE>
agreement, severally and not jointly, to (i) indemnify and hold harmless the
Company, and all other holders of Registrable Securities, against any losses,
claims, damages or liabilities to which the Company or such other holders of
Registrable Securities may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such registration statement, or
any preliminary, final or summary prospectus contained therein or furnished by
the Company to any such holder, agent or underwriter, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter expressly for use therein, and (ii) reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such holder shall be required to undertake
liability to any person under this Section 6(b) for any amounts in excess of the
dollar amount of the proceeds to be received by such holder from the sale of
such holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation.
(d) Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue
15
<PAGE>
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this Section 6(d) were
determined by pro rata allocation (even if the holders or any agents or
underwriters or all of them were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
or liabilities (or actions in respect thereof) referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6(d), no
holder shall be required to contribute any amount in excess of the amount by
which the dollar amount of the proceeds received by such holder from the sale
of any Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) exceeds the amount of any damages which such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, and no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The holders' and any
underwriters' obligations in this Section 6(d) to contribute shall be several
in proportion to the number or principal amount of Registrable Securities
registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each officer, director and partner of each holder,
agent and underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any underwriters contemplated by this Section 6 shall be in addition
to any liability which the respective holder or underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company (including any person who, with his consent, is named in
any registration statement as about to become a director of the Company) and to
each person, if any, who controls the Company within the meaning of the
Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be
designated by the holders of at least a majority in number or aggregate
principal amount of the Registrable Securities to be included in such
offering, provided that such designated managing underwriter or underwriters
is or are reasonably acceptable to the Company.
16
<PAGE>
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (1) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including, but not limited to, the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and shall take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar or successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities in connection with that holder's sale pursuant to
Rule 144, the Company shall deliver to such holder a written statement as to
whether it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to Registrable Securities or any other
securities which would be inconsistent with the terms contained in this
Exchange and Registration Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any
such failure, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of any other party under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court
of the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 767 Third Avenue, 34th Floor, New York, New York 10017, Attention: W. Don
Cornwell and if to a holder, to the address of such holder set forth in the
security register or other records of the Company, or to such other address as
any party may have furnished to the others in
17
<PAGE>
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the respective successors and assigns of the
parties hereto. In the event that any transferee of any holder of Registrable
Securities shall acquire Registrable Securities, in any manner, whether by gift,
bequest, purchase, operation of law or otherwise, such transferee shall, without
any further writing or action of any kind, be deemed a party hereto for all
purposes and such Registrable Securities shall be held subject to all of the
terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Registrable Securities such transferee shall be entitled to receive
the benefits of and be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Exchange and Registration Rights
Agreement. If the Company shall so request, any such successor, assign or
transferee shall agree in writing to acquire and hold the Registrable Securities
subject to all of the terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted
for convenience only, do not constitute a part of this Exchange and
Registration Rights Agreement and shall not affect in any way the meaning or
interpretation of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least 66-2/3 percent in number or aggregate principal amount of
the Registrable Securities at the time outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any amendment or waiver effected pursuant to this Section 9(h), whether or not
any notice, writing or marking
18
<PAGE>
indicating such amendment or waiver appears on such Registrable Securities or
is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities at the offices of the Company at the
address thereof set forth in Section 9(c) above or at the office of the Trustee
under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
19
<PAGE>
Agreed to and accepted as of the date referred to above.
GRANITE BROADCASTING
CORPORATION
By: /s/ LAWRENCE I. WILLS
-------------------------------
Name: Lawrence I. Wills
Title: Vice President--Finance
and Controller
GOLDMAN, SACHS & CO.
BT SECURITIES CORPORATION
LAZARD FRERES & CO. LLC
SALOMON BROTHERS INC
By: GOLDMAN, SACHS & CO.
By: /s/ GOLDMAN, SACHS & CO.
-------------------------------
<PAGE>
Exhibit 4.44
EXECUTION COPY
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
GRANITE BROADCASTING CORPORATION
TO
THE BANK OF NEW YORK,
Trustee
-----------------------------------
Indenture
Dated as of January 31, 1997
-----------------------------------
$___________
12 3/4% SERIES A EXCHANGE DEBENTURES
DUE APRIL 1, 2009
12 3/4% EXCHANGE DEBENTURES
DUE APRIL 1, 2009
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
GRANITE BROADCASTING CORPORATION
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
--------------- -------------
Section 310(a)(1) . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . Not
Applicable
(a)(4) . . . . . . . . . . . . . . . Not
Applicable
(b) . . . . . . . . . . . . . . . 608
. . . . . . . . . . . . . . . 610
Section 311(a) . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . 701
702(a)
(b) . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . 703(a)
(a)(4) . . . . . . . . . . . . . . . 703(a)
(b) . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . 704
1017
(b) . . . . . . . . . . . . . . . Not
Applicable
(c)(1) . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . Not
Applicable
(d) . . . . . . . . . . . . . . . Not
Applicable
(e) . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . 101
----------------------
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
-i-
<PAGE>
Trust Indenture Indenture
Act Section Section
--------------- -------------
(a)(1)(A) . . . . . . . . . . . . . . . 502
512
(a)(1)(B) . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . Not
Applicable
(b) . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . 104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . 107
-------------------------
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
Page
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals of the Company. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions of
General Application
SECTION 101. Definitions:
7.75% Exchange Debenture Indenture . . . . . . . . . . 2
7.75% Exchange Debentures. . . . . . . . . . . . . . . 2
7.75% Exchangeable Preferred Stock . . . . . . . . . . 2
9 3/8% Note Indenture . . . . . . . . . . . . . . . . 2
9 3/8% Notes . . . . . . . . . . . . . . . . . . . . . 3
10 3/8% Note Indenture . . . . . . . . . . . . . . . 3
10 3/8% Notes . . . . . . . . . . . . . . . . . . . . 3
12.75% Debenture Indenture . . . . . . . . . . . . . . 3
12.75% Debentures . . . . . . . . . . . . . . . . . . 3
12 3/4% Exchangeable Preferred Stock . . . . . . . . . 3
Act . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Interest . . . . . . . . . . . . . . . . . 3
Affiliate. . . . . . . . . . . . . . . . . . . . . . . 3
Agent Bank . . . . . . . . . . . . . . . . . . . . . . 3
Asset Disposition . . . . . . . . . . . . . . . . . . 4
Attributable Value . . . . . . . . . . . . . . . . . . 4
Average Life . . . . . . . . . . . . . . . . . . . . . 5
Board of Directors . . . . . . . . . . . . . . . . . . 5
Board Resolution . . . . . . . . . . . . . . . . . . . 5
Business Day . . . . . . . . . . . . . . . . . . . . . 5
Capital Lease Obligation . . . . . . . . . . . . . . . 5
Capital Stock . . . . . . . . . . . . . . . . . . . . 5
Change of Control. . . . . . . . . . . . . . . . . . . 5
Commission . . . . . . . . . . . . . . . . . . . . . . 5
Common Stock . . . . . . . . . . . . . . . . . . . . . 6
Company. . . . . . . . . . . . . . . . . . . . . . . . 6
Company Request; Company Order . . . . . . . . . . . . 6
Consolidated Cash Flow . . . . . . . . . . . . . . . 6
Consolidated Income Tax Expense. . . . . . . . . . . . 6
Consolidated Interest Expense. . . . . . . . . . . . . 7
Consolidated Net Income . . . . . . . . . . . . . . . 7
- - ---------------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-iii-
<PAGE>
Page
Consolidated Subsidiaries. . . . . . . . . . . . . . . 7
Corporate Trust Office . . . . . . . . . . . . . . . . 8
corporation. . . . . . . . . . . . . . . . . . . . . . 8
Debt . . . . . . . . . . . . . . . . . . . . . . . . . 8
Defaulted Interest . . . . . . . . . . . . . . . . . . 8
Depositary . . . . . . . . . . . . . . . . . . . . . . 8
Designated Senior Debt . . . . . . . . . . . . . . . 8
Disqualified Stock . . . . . . . . . . . . . . . . . . 8
Event of Default . . . . . . . . . . . . . . . . . . . 8
Exchange Act . . . . . . . . . . . . . . . . . . . . . 8
Exchange Offer . . . . . . . . . . . . . . . . . . . . 8
Exchange Securities. . . . . . . . . . . . . . . . . . 8
Global Security . . . . . . . . . . . . . . . . . . . 9
Guarantee . . . . . . . . . . . . . . . . . . . . . . 9
Holder . . . . . . . . . . . . . . . . . . . . . . . . 9
Incur . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture. . . . . . . . . . . . . . . . . . . . . . . 10
Interest Payment Date. . . . . . . . . . . . . . . . . 10
Investment . . . . . . . . . . . . . . . . . . . . . . 10
Lien . . . . . . . . . . . . . . . . . . . . . . . . . 10
Local Marketing Agreement. . . . . . . . . . . . . . . 10
Major Asset Disposition . . . . . . . . . . . . . . . 11
Maturity . . . . . . . . . . . . . . . . . . . . . . . 11
Net Available Proceeds . . . . . . . . . . . . . . . 11
Offer to Purchase. . . . . . . . . . . . . . . . . . . 11
Officers' Certificate. . . . . . . . . . . . . . . . . 14
Opinion of Counsel . . . . . . . . . . . . . . . . . . 14
Outstanding. . . . . . . . . . . . . . . . . . . . . . 14
Paying Agent . . . . . . . . . . . . . . . . . . . . . 15
Payment Blockage Period . . . . . . . . . . . . . . . 15
Permitted Holder . . . . . . . . . . . . . . . . . . . 16
Permitted Television Investment. . . . . . . . . . . . 16
Person . . . . . . . . . . . . . . . . . . . . . . . . 16
Predecessor Security . . . . . . . . . . . . . . . . . 16
Preferred Stock . . . . . . . . . . . . . . . . . . . 16
Pro Forma Consolidated Cash Flow . . . . . . . . . . . 16
readily marketable cash equivalents. . . . . . . . . . 17
Redemption Date . . . . . . . . . . . . . . . . . . . 17
Redemption Price . . . . . . . . . . . . . . . . . . . 17
Regular Record Date. . . . . . . . . . . . . . . . . . 18
Responsible Officer. . . . . . . . . . . . . . . . . . 18
Rule 144A Securities . . . . . . . . . . . . . . . . . 18
Sale and Leaseback Transaction . . . . . . . . . . . . 18
- - -------------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-iv-
<PAGE>
Page
Second Step-Down Date . . . . . . . . . . . . . . . . 18
Second Step-Up . . . . . . . . . . . . . . . . . . . . 18
Securities . . . . . . . . . . . . . . . . . . . . . . 18
Securities Act . . . . . . . . . . . . . . . . . . . . 18
Securities Payment . . . . . . . . . . . . . . . . . . 18
Security Register; Security Registrar. . . . . . . . . 19
Senior Debt . . . . . . . . . . . . . . . . . . . . . 19
Senior Loan Agreement . . . . . . . . . . . . . . . 19
Senior Nonmonetary Default . . . . . . . . . . . . . . 19
Senior Payment Default . . . . . . . . . . . . . . . 19
Special Record Date. . . . . . . . . . . . . . . . . . 19
Stated Maturity. . . . . . . . . . . . . . . . . . . . 19
Step-Down Date . . . . . . . . . . . . . . . . . . . . 20
Step-Up . . . . . . . . . . . . . . . . . . . . . . . 20
Subordinated Debt. . . . . . . . . . . . . . . . . . . 20
Subsidiary . . . . . . . . . . . . . . . . . . . . . . 20
Trustee. . . . . . . . . . . . . . . . . . . . . . . . 20
Trust Indenture Act. . . . . . . . . . . . . . . . . . 21
Unrestricted Subsidiary. . . . . . . . . . . . . . . . 21
Vice President . . . . . . . . . . . . . . . . . . . . 22
Voting Stock . . . . . . . . . . . . . . . . . . . . . 22
Wholly Owned Subsidiary . . . . . . . . . . . . . . . 22
SECTION 102. Compliance Certificates and
Opinions . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 103. Form of Documents
Delivered to Trustee . . . . . . . . . . . . . . . . 23
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . . . . . 24
SECTION 105. Notices, Etc., to Trustee and Company. . . . . . . . . . 26
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . 27
SECTION 107. The Application of Trust
Indenture Act . . . . . . . . . . . . . . . . . . . . 28
SECTION 108. Effect of Headings and
Table of Contents . . . . . . . . . . . . . . . . . . 28
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . 28
- - ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-v-
<PAGE>
Page
SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . . . 28
SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . 28
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . 29
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . 29
SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . 30
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . 33
SECTION 204. Form of Trustee's
Certificate of Authentication. . . . . . . . . . . . . 38
ARTICLE THREE
The Securities
SECTION 301. Title and Terms. . . . . . . . . . . . . . . . . . . . . 39
SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 303. Execution, Authentication,
Delivery and Dating. . . . . . . . . . . . . . . . . . 40
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . 42
SECTION 305. Registration, Registration of
Transfer and Exchange. . . . . . . . . . . . . . . . . 43
SECTION 306. Mutilated, Destroyed,
Lost and Stolen Securities . . . . . . . . . . . . . . . 45
SECTION 307. Payment of Interest;
- - ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-vi-
<PAGE>
Page
Interest Rights Preserved. . . . . . . . . . . . . . . 46
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . 48
SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . 49
SECTION 311. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and
Discharge of Indenture. . . . . . . . . . . . . . . . 49
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . 50
ARTICLE FIVE
Remedies
SECTION 501. Events of Default. . . . . . . . . . . . . . . . . . . . 50
SECTION 502. Acceleration of Maturity;
Rescission and Annulment . . . . . . . . . . . . . . . 53
SECTION 503. Collection of Indebtedness and
Suits for Enforcement by
Trustee. . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . 56
SECTION 505. Trustee May Enforce Claims
Without Possession of
Securities . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 506. Application of Money Collected . . . . . . . . . . . . . 57
SECTION 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . 57
- - --------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-vii-
<PAGE>
Page
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . 58
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . 58
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . 59
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . 59
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . 59
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . 60
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . 60
SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . 60
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and
Responsibilities . . . . . . . . . . . . . . . . . . . 61
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . 61
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . 61
SECTION 604. Not Responsible for Recitals
or Issuance of Securities. . . . . . . . . . . . . . . 63
SECTION 605. May Hold Securities. . . . . . . . . . . . . . . . . . . 63
SECTION 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . 64
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . 64
SECTION 608. Disqualification; Conflicting
Interests. . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 609. Corporate Trustee Required;
Eligibility. . . . . . . . . . . . . . . . . . . . . . 65
- - -----------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-viii-
<PAGE>
Page
SECTION 610. Resignation and Removal;
Appointment of Successor . . . . . . . . . . . . . . . 66
SECTION 611. Acceptance of Appointment by
Successor. . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business. . . . . . . . . . . . . . . 68
SECTION 613. Preferential Collection of
Claims Against Company . . . . . . . . . . . . . . . . 68
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names
and Addresses of Holders . . . . . . . . . . . . . . . 68
SECTION 702. Preservation of Information;
Communications to Holders. . . . . . . . . . . . . . . 69
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . 69
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . 70
SECTION 705. Officers' Certificate with Respect to
Change in Interest Rates . . . . . . . . . . . . . . . 70
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets. . . . . . . . . . . . . . . . . . . . 70
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . 72
- - --------------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-ix-
<PAGE>
Page
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders . . . . . . . . . . . . . . . . . . 73
SECTION 902. Supplemental Indentures with
Consent of Holders . . . . . . . . . . . . . . . . . . 74
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . 75
SECTION 904. Effect of Supplemental Indentures. . . . . . . . . . . . 75
SECTION 905. Conformity with Trust Indenture Act. . . . . . . . . . . 75
SECTION 906. Reference in Securities to
Supplemental Indentures. . . . . . . . . . . . . . . . 75
SECTION 907. Subordination Impaired . . . . . . . . . . . . . . . . . 76
SECTION 908. Other Amendments to the Indenture. . . . . . . . . . . . 76
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . 76
SECTION 1002. Maintenance of Office or Agency. . . . . . . . . . . . . 76
SECTION 1003. Money for Security Payments to
be Held in Trust . . . . . . . . . . . . . . . . . . . 77
SECTION 1004. Existence. . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 1005. Maintenance of Properties. . . . . . . . . . . . . . . . 79
SECTION 1006. Payment of Taxes and Other Claims. . . . . . . . . . . . 79
SECTION 1007. Maintenance of Insurance . . . . . . . . . . . . . . . . 80
- - -----------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-x-
<PAGE>
Page
SECTION 1008. Limitation on Company Debt. . . . . . . . . . . . . . . . 80
SECTION 1009. Limitation on Certain Debt. . . . . . . . . . . . . . . . 82
SECTION 1010. Limitation on Restricted Payments . . . . . . . . . . . . 83
SECTION 1011. Limitations Concerning Distributions
by and Transfers to Subsidiaries. . . . . . . . . . . . 86
SECTION 1012. Limitation on Transactions with
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 1013. Limitation on Certain Asset
Dispositions. . . . . . . . . . . . . . . . . . . . . . 87
SECTION 1014. Limitation on Issuances and Sales
of Capital Stock of Wholly
Owned Subsidiaries. . . . . . . . . . . . . . . . . . . 91
SECTION 1015. Limitation on Liens Securing
Company Subordinated Debt. . . . . . . . . . . . . . . 92
SECTION 1016. Limitation on Guarantees of
Company Subordinated Debt. . . . . . . . . . . . . . . 92
SECTION 1017. Change of Control . . . . . . . . . . . . . . . . . . . . 92
SECTION 1018. Provision of Financial Information. . . . . . . . . . . . 94
SECTION 1019. Statement by Officers as to Default . . . . . . . . . . . 94
SECTION 1020. Waiver of Certain Covenants . . . . . . . . . . . . . . . 95
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . 95
SECTION 1102. Applicability of Article. . . . . . . . . . . . . . . . 95
SECTION 1103. Election to Redeem; Notice
- - ----------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-xi-
<PAGE>
Page
to Trustee. . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 1104. Securities to Be Redeemed Pro Rata. . . . . . . . . . . . 96
SECTION 1105. Notice of Redemption. . . . . . . . . . . . . . . . . . . 97
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . 98
SECTION 1107. Securities Payable on
Redemption Date . . . . . . . . . . . . . . . . . . . . 98
SECTION 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . 99
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to
Senior Debt . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 1202. Payment Over of Proceeds Upon
Dissolution, Etc. . . . . . . . . . . . . . . . . . . . 99
SECTION 1203. No Payment When Senior Debt
in Default. . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 1204. Payment Permitted If No Default . . . . . . . . . . . . . 102
SECTION 1205. Subrogation to Rights of Holders
of Senior Debt . . . . . . . . . . . . . . . . . . . . 103
SECTION 1206. Provisions Solely to Define Relative
Rights. . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 1207. Trustee to Effectuate Subordination . . . . . . . . . . . 104
SECTION 1208. No Waiver of Subordination Provisions . . . . . . . . . . 104
SECTION 1209. Notice to Trustee . . . . . . . . . . . . . . . . . . . . 104
SECTION 1210. Reliance on Judicial Order or
Certificate of Liquidating Agent. . . . . . . . . . . . 105
- - ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-xii-
<PAGE>
Page
SECTION 1211. Trustee Not Fiduciary for Holders of
Senior Debt. . . . . . . . . . . . . . . . . . . . . . 106
SECTION 1212. Rights of Trustee as Holder of
Senior Debt; Preservation of
Trustee's Rights. . . . . . . . . . . . . . . . . . . . 106
SECTION 1213. Article Applicable to Paying Agents . . . . . . . . . . . 106
SECTION 1214. Defeasance of this Article Twelve . . . . . . . . . . . . 107
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Company's Option to Effect Defeasance
or Covenant Defeasance. . . . . . . . . . . . . . . . . 107
SECTION 1302. Defeasance and Discharge. . . . . . . . . . . . . . . . . 107
SECTION 1303. Covenant Defeasance . . . . . . . . . . . . . . . . . . . 108
SECTION 1304. Conditions to Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . . 108
SECTION 1305. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions. . . . . . . . . . . . . 111
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
SIGNATURES AND SEALS. . . . . . . . . . . . . . . . . . . . . . . . . . 113
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
- - ---------------
Note: This table of contents shall not, for any purpose, be deemed to be
a part of the Indenture.
-xiii-
<PAGE>
INDENTURE, dated as of January 31, 1997 between Granite Broadcasting
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
767 Third Avenue, 28th Floor, New York, New York, and The Bank of New York, a
New York banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of up to
$350,000,000 aggregate principal amount of (A) its 12 3/4% Series A Exchange
Debentures due April 1, 2009 (the "Rule 144A Securities") and (B) its 12 3/4%
Exchange Debentures due April 1, 2009 (the "Exchange Securities" and,
collectively with the Rule 144A Securities, the "Securities") of substantially
the tenor and amount hereinafter set forth, and to provide therefor the Company
has duly authorized the execution and delivery of this Indenture. The Rule 144A
Securities and the Exchange Securities shall rank pari passu.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles (whether or not such is indicated herein) and,
except as otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles
as are generally accepted in the United States as consistently applied
by the Company at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"7.75% Exchange Debenture Indenture" means the Indenture, to be
entered into between the Company and a Trustee to be designated by the Company.
"7.75% Exchange Debentures" means the 7.75% Junior Subordinated
Convertible Debentures due 2005 that the Company may issue pursuant to the 7.75%
Exchange Debenture Indenture at its election in exchange for the 7.75%
Exchangeable Preferred Stock in accordance with the terms of the 7.75%
Exchangeable Preferred Stock as such terms exist on the date of this Indenture.
"7.75% Exchangeable Preferred Stock" means the Company's Cumulative
Convertible Exchangeable Preferred Stock, par value $.01 per share, that is
outstanding on the date of this Indenture.
"9 3/8% Note Indenture" means the Indenture, dated as of February 22,
1996, between the Company and The Bank of New York, as Trustee, as such
Indenture exists on the date of this Indenture.
-2-
<PAGE>
"9 3/8% Notes" means the 9 3/8% Senior Subordinated Notes due December
1, 2005 of the Company issued pursuant to the 9 3/8% Note Indenture and
outstanding on the date of this Indenture.
"10 3/8% Note Indenture" means the Indenture, dated as of May 19,
1995, between the Company and United States Trust Company of New York, as
Trustee, as such Indenture exists on the date of this Indenture.
"10 3/8% Notes" means the 10 3/8% Senior Subordinated Notes due May
15, 2005 of the Company issued pursuant to the 10 3/8% Note Indenture and
outstanding on the date of this Indenture.
"12.75% Debenture Indenture" means the Indenture, dated as of
September 1, 1992, between the Company and United States Trust Company of New
York, as Trustee, as such Indenture exists on the date of this Indenture.
"12.75% Debentures" means the 12.75% Senior Subordinated Debentures
due September 1, 2002 of the Company issued pursuant to the 12.75% Debenture
Indenture and outstanding on the date of this Indenture.
"12 3/4% Exchangeable Preferred Stock" means the Company's 12 3/4%
Cumulative Convertible Exchangeable Preferred Stock, par value $.01 per share,
that is outstanding on the date of this Indenture.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Additional Interest" has the meaning set forth in the form of
Security contained in Section 202. Unless the context otherwise requires,
references herein to "interest" on the Securities shall include Additional
Interest.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Bank" shall mean initially Bankers Trust Company or such
successor bank or financial institution
-3-
<PAGE>
designated as such (or equivalent thereof) under the Senior Loan Agreement (or
any successor credit facility).
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Subsidiaries
(including a consolidation or merger of any such Subsidiaries with or into
another Person in a transaction in which such Subsidiary ceases to be a
Subsidiary, but excluding a disposition by a Subsidiary of such Person to such
Person or a Wholly Owned Subsidiary of such Person or by such Person to a Wholly
Owned Subsidiary of such Person) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Subsidiary of
such Person, (ii) substantially all of the assets of such Person or any of its
Subsidiaries representing a division or line of business or (iii) other assets
or rights of such Person or any of its Subsidiaries outside of the ordinary
course of business. Asset Disposition shall not include a Sale and Leaseback
Transaction to the extent that the Attributable Value of such Sale and Leaseback
Transaction does not exceed $2,000,000 and the aggregate Attributable Value of
all such Sale and Leaseback Transactions entered into since the date of this
instrument and then outstanding does not exceed $5,000,000.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the initial term
thereof as determined in accordance with generally accepted accounting
principles, discounted from the last date of such initial term to the date of
determination at a rate per annum equal to the discount rate which would be
applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which
is terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated. Attributable Value means, as to a Capital Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount thereof
that would appear on the face of a balance sheet of
-4-
<PAGE>
such Person in accordance with generally accepted accounting principles.
"Average Life" means, as of the date of determination, with respect to
any Debt, the quotient obtained by dividing (i) the sum of the products of the
numbers of years from the date of determination to the dates of each successive
scheduled principal payments of such Debt multiplied by the amount of such
principal payments by (ii) the sum of all such principal payments.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York, New York are authorized or obligated by law or
executive order to close.
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with generally accepted
accounting principles. The stated maturity of such obligation shall be the date
of the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Change of Control" has the meaning specified in Section 1017.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
perform-
-5-
<PAGE>
ing the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Cash Flow" of any Person means for any period the
Consolidated Net Income for such period increased by the sum of (i) Consolidated
Interest Expense of such Person and its Consolidated Subsidiaries for such
period, plus (ii) Consolidated Income Tax Expense of such Person and its
Consolidated Subsidiaries for such period, plus (iii) the consolidated
depreciation and amortization expense included in the income statement of such
Person and its Consolidated Subsidiaries for such period, plus (iv) other
non-cash charges deducted from consolidated revenues of such Person and its
Consolidated Subsidiaries (other than amortization of film and program assets)
in determining Consolidated Net Income for such period, minus (v) non-cash items
added to consolidated revenues of such Person and its Consolidated Subsidiaries
in determining Consolidated Net Income for such period; provided, however,
Consolidated Cash Flow shall not include Consolidated Net Income and the items
specified in Clauses (i) through (iv) above to the extent attributable to a
Consolidated Subsidiary of such Person that is subject to restrictions
preventing the payment of dividends and the making of distributions (by loans,
advances, intercompany transfers or otherwise) to such Person, but shall include
such payments and distributions as could be made in accordance with such
restrictions.
"Consolidated Income Tax Expense" of any Person means for any period
the consolidated provision for income
-6-
<PAGE>
taxes of such Person and its Consolidated Subsidiaries for such period.
"Consolidated Interest Expense" for any Person means for any period
the consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication (or,
to the extent not so included, with the addition of), (i) the portion of any
rental obligation in respect of any Capital Lease Obligation allocable to inter-
est expense in accordance with generally accepted accounting principles,
(ii) the amortization of Debt discounts, (iii) any payments or fees with respect
to letters of credit, bankers acceptances or similar facilities, (iv) fees with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements other than fees or charges related to the
acquisition or termination thereof which are not allocable to interest expense
in accordance with generally accepted accounting principles, (v) Preferred Stock
dividends declared and payable in cash and (vi) accrued Disqualified Stock
dividends, whether or not declared or paid.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (i) the
net income (or loss) of any Person acquired by such Person or a Subsidiary of
such Person in a pooling-of-interests transaction for any period prior to the
date of such transaction, (ii) the net income (or loss) of any Person that is
not a Consolidated Subsidiary of such Person, (iii) gains or losses on Asset
Dispositions by such Person or its Consolidated Subsidiaries and (iv) all
extraordinary gains and extraordinary losses; and provided further that there
shall be added thereto, to the extent not otherwise included in Consolidated Net
Income, the amount of any dividends or other distributions actually paid to such
Person during such period by a Person that is not a Consolidated Subsidiary of
such Person.
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as Consolidated Persons in such Person's financial
statements in accordance with generally accepted accounting principles;
provided, however, Consolidated Subsidiaries shall not include any Unrestricted
Subsidiary created in accordance with the definition of Unrestricted Subsidiary.
-7-
<PAGE>
"Corporate Trust Office" means the principal office of the Trustee in
the Borough of Manhattan, The City of New York, New York, at which at any
particular time its corporate trust business shall be administered, which at the
date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York
10286.
"corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar facil
ities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable, film contract rights or accrued liabil
ities arising in the ordinary course of business), (v) every Capital Lease
Obligation of such Person, (vi) the maximum fixed redemption or repurchase price
of Disqualified Stock of such Person at the time of determination, and
(vii) every obligation of the type referred to in Clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in the form of one or more Global Securities, The Depository
Trust Company for so long as it shall be a clearing agency registered under the
Exchange Act, or such successor as the Company shall designate from time to time
in an Officers' Certificate delivered to the Trustee.
"Designated Senior Debt" has the meaning set forth in Section 1203.
"Disqualified Stock" means any Capital Stock of the Company or any
Subsidiary of the Company which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or otherwise
-8-
<PAGE>
(including upon the occurrence of an event), matures or is required to be
redeemed (pursuant to a sinking fund obligation or otherwise) or is redeemable
at the option of the holder thereof, in whole or in part (other than a
redemption which is conditioned upon a change of control of the Company), on or
prior to the final Stated Maturity of the Securities, excluding, however, the
12 3/4% Exchangeable Preferred Stock and the 7.75% Exchangeable Preferred Stock.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Exchange Offer" has the meaning set forth in the form of the Security
contained in Section 202.
"Exchange Securities" means the exchange securities designated as such
in the first paragraph of the RECITALS OF THE COMPANY.
"Global Security" means the security or securities that evidences all
or part of the Securities and bears the legend set forth in Section 202.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Debt of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person, (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purpose of assuring
the holder of such Debt of the payment of such Debt, or (iii) to maintain work
ing capital, equity capital or other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such Debt (and
"Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to
the foregoing); provided, however, that the Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
-9-
<PAGE>
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that a
change in generally accepted accounting principles that results in an obligation
of such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Investment" by any Person means any direct or indirect loan, advance
or other extension of credit or capital contribution to (by means of transfers
of cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidences of Debt issued
by any other Person, including any payment on a Guarantee of any obligation of
such other Person.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Local Marketing Agreement" means any agreement pursuant to which the
Company or any of its Subsidiaries agrees to provide television management
services, television broadcasting or assets related to the provision of televi
sion broadcasting in exchange for cash payments and/or the right to charge
others for the provision of advertising or other services or products.
-10-
<PAGE>
"Major Asset Disposition" means any Asset Disposition or series of
related Asset Dispositions involving assets with a fair market value in excess
of $2,000,000.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of accel
eration, call for redemption or otherwise.
"Net Available Proceeds" from any Asset Disposition or issuance of
Capital Stock by any Person means cash or readily marketable cash equivalents
received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration received
in the form of assumption by the acquiree of Debt or other obligations relating
to such properties or assets or received in any other noncash form) therefrom by
such Person, net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses Incurred and all federal, state, provincial, foreign
and local taxes required to be accrued as a liability as a consequence of such
Asset Disposition or issuance, (ii) all payments made by such Person or its
Subsidiaries on any Debt which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by the terms
of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or issuance or by applicable law be repaid out of the proceeds from
such Asset Disposition or issuance, (iii) all distributions and other payments
made to minority interest holders in Subsidiaries of such Person or joint
ventures as a result of such Asset Disposition, and (iv) reserves established in
accordance with generally accepted accounting principles against any liabilities
associated with such assets and retained by such Person or any Subsidiary
thereof, as the case may be, after such Asset Disposition, including, without
limitation, liabilities under any indemnification obligations and severance and
other employee termination costs associated with such Asset Disposition, in each
case as determined by the Board of Directors, in its reasonable good faith
judgment evidenced by a Board Resolution; provided, however, that any reduction
in such reserve following the consummation of such Asset Disposition will be
treated for all purposes of this Indenture and the Securities as a new Asset
Disposition at the time of such reduction with Net Available Proceeds equal to
the amount of such reduction.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage
-11-
<PAGE>
prepaid, to each Holder at its address appearing in the Security Register on the
date of the Offer, offering to purchase up to the principal amount of Securities
specified in such Offer at the purchase price specified in such Offer. Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Offer Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 30 days or more
than 60 days after the date of such Offer and a settlement date (the "Purchase
Date") for the purchase of Securities within five Business Days after the Offer
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to
Section 1018 of this Indenture (which requirements may be satisfied by delivery
of such documents together with the Offer), (ii) a description of material
developments in the Company's business subsequent to the date of the latest of
such financial statements referred to in clause (i) (including a description of
the events requiring the Company to make the Offer to Purchase), (iii) if
applicable, appropriate pro forma financial information concerning the Offer to
Purchase and the events requiring the Company to make the Offer to Purchase, and
(iv) any other information required by applicable law to be included therein).
The Offer shall contain all instructions and materials necessary to enable such
Holder to tender Securities pursuant to the Offer to Purchase. The Offer shall
also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Offer Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which
-12-
<PAGE>
such has been determined pursuant to the Section hereof requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as
specified pursuant to this Indenture);
(5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(6) the place or places where Securities are to be surrendered
for tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the purchase price will become due
and payable upon each Security accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on
and after the Purchase Date;
(9) that each Holder electing to tender a Security pursuant to
the Offer to Purchase will be required to surrender such Security at
the place or places specified in the Offer prior to the close of
business on the Offer Expiration Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied
by a written instrument of transfer in form reasonably satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion
of Securities tendered if the Company (or its Paying Agent) receives,
not later than the close of business on the Offer Expiration Date, a
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security the Holder tendered, the
certificate number of the Security the Holder tendered and a statement
that such
-13-
<PAGE>
Holder is withdrawing all or a portion of such tender;
(11) that (i) if Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such Securities and (ii) if Securities in an aggregate
principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase Securities having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Securities in denominations of $1,000
or integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Security is purchased
only in part, the Company shall execute, and the Trustee shall authen
ticate and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
applicable securities laws and regulations and the Offer for such Offer to
Purchase.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secre
tary, of the Company, and delivered to the Trustee and containing the statements
provided for in Section 102. One of the officers signing an Officers'
Certificate given pursuant to Section 1019 shall be the principal executive,
financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be counsel for the Company, and who shall be acceptable to the Trustee, and
containing the statements provided for in Section 102.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
-14-
<PAGE>
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that,
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee actually knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Payment Blockage Period" has the meaning specified in Section 1203.
-15-
<PAGE>
"Permitted Holder" has the meaning set forth in Section 1017.
"Permitted Television Investment" means an Investment in any Person
which is a Restricted Payment within the meaning of either Clause (iii) or (v)
of Section 1010 (i) with which the Company has entered into a Local Marketing
Agreement or (ii) (a) for the purpose of facilitating the delivery by the
Company or any of its Subsidiaries of advanced television service, including
high definition television, or interactive television or (b) to otherwise permit
the Company or any of its Subsidiaries to exploit any other emerging
technologies relating to television broadcasting. For purposes of calculating
the aggregate amount of outstanding Permitted Television Investments, any
Investment (a) in a Person which, subsequent to such Investment, becomes a
Wholly Owned Subsidiary of the Company, or (b) that otherwise, due to a change
in the status of such Person, would not, if then made, be deemed a Restricted
Payment, shall no longer be deemed outstanding as of the date such Person
becomes a Wholly Owned Subsidiary or otherwise changes its status, as the case
may be.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Pro Forma Consolidated Cash Flow" of any Person means for any period
the Consolidated Cash Flow for such period; provided that, in the event such
Person or its Subsidiaries has made Asset Dispositions or acquisitions of
assets, properties or franchises not in the ordinary course of business
(including acquisitions of other Persons by
-16-
<PAGE>
merger, consolidation or purchase of Capital Stock) or has permitted an
encumbrance or restriction pursuant to Section 1011 during or after such period,
such computation shall be made on a pro forma basis (whether the acquisition is
treated as a purchase or a pooling under generally accepted accounting
principles) as if the Asset Dispositions or acquisitions or restrictions or
encumbrances had taken place on the first day of such period. If, during or
after the period for which such calculation is made, the Person or any of its
Subsidiaries has acquired or disposed of a television or radio broadcasting or
cable television franchise that does not constitute an existing business
(whether existing as a separate entity, subsidiary, division, unit or other
wise), the pro forma effect of such acquisition or disposition shall be deemed
to be the Consolidated Cash Flow attributable to such franchise (or a reasonable
estimate thereof) for the period for which such calculation is made prior to
such acquisition or disposition; provided that such estimated Consolidated Cash
Flow shall be determined on the basis of comparable franchises, evidenced in a
Board Resolution and reported on by a nationally recognized accounting firm.
"readily marketable cash equivalents" means (i) marketable securities
issued or directly and unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's Ratings Group
or Moody's Investors Service, Inc.; (iii) commercial paper maturing no more than
180 days from the date of acquisition thereof and, at the time of acquisition,
having a rating of at least A-1 from Standard & Poor's Ratings Group or at least
P-1 from Moody's Investors Service, Inc.; and (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
unimpaired capital and surplus of not less than $100,000,000.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
-17-
<PAGE>
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee, means
any vice president, any assistant vice president, any assistant secretary, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer of the Corporate Trust Office of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Rule 144A Securities" means the Rule 144A securities designated as
such in the first paragraph of the RECITALS OF THE COMPANY.
"Sale and Leaseback Transaction" of any Person means an arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any property or asset of such Person
which has been or is being sold or transferred by such Person more than 270 days
after the acquisition thereof or the completion of construction or commencement
of operation thereof to such lender or investor or to any person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement shall be the
date of the last payment of rent or any other amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
"Second Step-Down Date" has the meaning set forth in the form of
Security contained in Section 202.
"Second Step-Up" has the meaning set forth in the form of Security
contained in Section 202.
"Securities" means the Exchange Securities and the Rule 144A
Securities designated as such in the first paragraph of the RECITALS OF THE
COMPANY.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Securities Payment" has the meaning set forth in Section 1202.
18
<PAGE>
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Debt" means (a) the principal of (premium, if any) and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement, indemnities and
fees relating to, Debt outstanding pursuant to the Senior Loan Agreement,
(b) payment obligations of the Company under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements, in each
case entered into to hedge Debt Incurred under the Senior Loan Agreement or any
renewal, refunding, refinancing or extension thereof, (c) all other Debt for
money borrowed of the Company referred to in the definition of Debt other than
Clause (vi) and (d) all renewals, extensions, modifications, refinancings,
refundings and amendments of any Debt referred to in Clause (a), (b) or (c)
above, unless but only to the extent, in the case of any particular Debt
referred to in Clause (a), (b) or (c) above, (A) such Debt is owed to a
Subsidiary of the Company, (B) the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such Debt is
not superior in right of payment to the Securities, (C) such Debt is Incurred in
violation of the Indenture, or (D) such Debt is subordinate in right of payment
in respect to any other Debt of the Company.
"Senior Loan Agreement" means the Second Amended and Restated Credit
Agreement, dated as of May 19, 1995, by and among the Company, the Banks named
therein and Bankers Trust Company, as Agent, as it may be amended, restated or
modified from time to time.
"Senior Nonmonetary Default" has the meaning specified in
Section 1203.
"Senior Payment Default" has the meaning specified in Section 1203.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
19
<PAGE>
"Step-Down Date" has the meaning set forth in the form of the Security
contained in Section 202.
"Step-Up" has the meaning set forth in the form of the Security
contained in Section 202.
"Subordinated Debt" means Debt of the Company as to which the payment
of principal of (and premium, if any) and interest and other payment obligations
in respect of such Debt shall be subordinate to the prior payment in full of the
Securities to at least the following extent: (i) no payments of principal of
(or premium, if any) or interest on or otherwise due in respect of such Debt may
be permitted for so long as any default in the payment of principal (or premium,
if any) or interest on the Securities exists; and (ii) in the event that any
other default that with the passing of time or the giving of notice, or both,
would constitute an event of default exists with respect to the Securities, upon
notice by 25% or more in principal amount of the Securities to the Trustee, the
Trustee shall have the right to give notice to the Company and the holders of
such Debt (or trustees or agents therefor) of a payment blockage, and thereafter
no payments of principal of (or premium, if any) or interest on or otherwise due
in respect of such Debt may be made for a period of 179 days from the date of
such notice. Notwithstanding the foregoing, the 7.75% Exchange Debentures shall
constitute Subordinated Debt unless and until the subordination provisions
thereof are amended or modified after the date of this Indenture.
"Subsidiary" of any Person means (i) a corporation more than 50% of
the outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person, or by such Person
and one or more other Subsidiaries thereof or (ii) any other Person (other than
a corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof. Subsidiary shall not include an Unrestricted
Subsidiary created in accordance with the definition of Unrestricted Subsidiary.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
20
<PAGE>
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means (1) any Subsidiary designated as such
by the Board of Directors as set forth below where (a) neither the Company nor
any of its other Subsidiaries (other than another Unrestricted Subsidiary) (i)
provides credit support for, or Guarantee of, any Debt of such Subsidiary
(including any undertaking, agreement or instrument evidencing such Debt) or
(ii) is directly or indirectly liable for any Debt of such Subsidiary, and (b)
no default with respect to any Debt of such Subsidiary (including any right
which the holders thereof may have to take enforcement action against such
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Debt of the Company and its other Subsidiaries (other than another
Unrestricted Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity, (2) any Subsidiary of the Company (other than a Subsidiary existing as
of the date of this Indenture or successor to any such Subsidiary) which at the
time of determination shall be an Unrestricted Subsidiary (as designated by the
Board of Directors, as provided below) and (3) any Subsidiary of an Unrestricted
Subsidiary where Clauses (a) and (b) are true with respect to such Subsidiary.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary; provided that either (x) the Subsidiary to be so designated has
total assets of $1,000 or less or (y) immediately after giving effect to such
designation, the ratio of the aggregate principal amount of Debt of the Company
and its Subsidiaries outstanding as of the most recent available balance sheet
to Pro Forma Consolidated Cash Flow for the preceding four full fiscal quarters,
determined on a pro forma basis as if such Subsidiary had been an Unrestricted
Subsidiary at the beginning of such four fiscal quarters, would be less than 6.5
to 1. The Board of Directors may designate any Unrestricted Subsidiary to be a
Subsidiary; provided that immediately after giving effect to such designation,
the ratio of the aggregate principal amount of Debt of the Company and its
Subsidiaries outstanding as of the most recent available
21
<PAGE>
balance sheet to Pro Forma Consolidated Cash Flow for the preceding four full
fiscal quarters, determined on a pro forma basis as if such Unrestricted
Subsidiary had been a Subsidiary at the beginning of such four fiscal quarters,
would be less than 6.5 to 1. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Board of Directors giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act and under this Indenture. Each such certificate or opinion shall
be given in the form of an Officers' Certificate, if to be given by an officer
of the Company, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the Trust Indenture Act and any other
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or opinion
has read
22
<PAGE>
such covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate of an officer of the Company may be based, insofar as
it relates to legal matters, upon an opinion of counsel submitted therewith,
unless such officer knows, or in the exercise of reasonable care should know,
that the opinion with respect to the matters upon which his certificate is based
is erroneous. Any opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate of an officer or officers of the Company
submitted therewith stating the information on which counsel is relying, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate with respect to such matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments
23
<PAGE>
under this Indenture, they may, but need not, be consolidated and form one
instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
24
<PAGE>
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities; provided that the Company may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next paragraph. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such matter referred to in the
foregoing sentence, the record date for any such matter shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to take
the relevant action, whether or not such Holders remain Holders after such
record date; provided that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities on such record date. Nothing in this
paragraph shall be construed to prevent the Company from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Trustee in writing and to each Holder of Securities in the manner
set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to join
in such notice, declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such
25
<PAGE>
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities on such record date. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Trustee, at the
Company's expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to the Company in
writing and to each Holder of Securities in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record date may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Securities in the manner set forth in Section
106, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document
26
<PAGE>
provided or permitted by this Indenture to be made upon, given or furnished to,
or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if delivered in writing to the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Trustee Administration,
or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
27
<PAGE>
SECTION 107. The Application of Trust Indenture Act.
The Trust Indenture Act shall apply as a matter of contract to this
Indenture for purposes of interpretation, construction and defining the rights
and obligations hereunder. If any provision hereof limits, qualifies or
conflicts with a provision of the Trust Indenture Act that is required under
such Act to be a part of and govern this Indenture, the latter provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of the Senior Debt (subject to Article Twelve hereof) and
the Holders of Securities, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
28
<PAGE>
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
conflicts of laws principles thereof.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, Purchase
Date or at the Stated Maturity; provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Purchase Date
or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Rule 144A Securities, the Exchange Securities and the Trustee's
certificates of authentication thereof shall be in substantially the forms set
forth in this Article, with such appropriate legends, insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
29
<PAGE>
SECTION 202. Form of Face of Security.
[If a Global Security, then insert -- THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGEABLE IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[If a Global Security to be held by The Depository Trust Company, then
insert -- Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the issuer
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]
[If Rule 144A Securities, then insert -- THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A) BY A HOLDER WHO WAS AN INITIAL INVESTOR IN THE 12 3/4%
CUMULATIVE EXCHANGEABLE PREFERRED STOCK OF THE COMPANY, (1) TO A PERSON WHO THE
TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, OR (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) AND (B) BY OTHER HOLDERS, AS SET FORTH IN (A) ABOVE, OR TO AN
INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501 OF REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) AND, IN EACH CASE (A) AND
(B), IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES AND OTHER JURISDICTIONS. SECURITIES OWNED BY AN INITIAL INVESTOR
THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER OR DID NOT ACQUIRE SUCH SECURITIES
IN AN OFFSHORE TRANSACTION COMPLYING WITH
30
<PAGE>
RULE 904 OF REGULATION S MAY NOT BE HELD IN BOOK-ENTRY FORM AND MAY NOT BE
TRANSFERRED WITHOUT CERTIFICATION THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.]
[If Rule 144A Securities, then insert -- 12 3/4% Series A Exchange
Debentures due April 1, 2009]
[If Exchange Securities, then insert -- 12 3/4% Exchange Debentures
due April 1, 2009]
No. __________ $________
CUSIP No. ________
Granite Broadcasting Corporation, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _________ _________, or registered
assigns, the principal sum of _____________________ Dollars on April 1, 2009,
and to pay interest thereon from January 31, 1997 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on April 1 and October 1 in each year, commencing April 1, 1997,
at the rate of 12 3/4% per annum, until the principal hereof is paid or made
available for payment [If Rule 144A Securities, then insert -- provided,
however, that if (i) the Company has not filed a registration statement (the
"Exchange Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), registering a security substantially identical to this
Security pursuant to an exchange offer (the "Exchange Offer") by April 16, 1997,
or (ii) the Exchange Registration Statement relating to the Exchange Offer (or,
in lieu thereof, a registration statement registering this Security for resale
(a "Resale Registration Statement")) has not become or been declared effective
by June 30, 1997 or (iii) the Exchange Offer has not been consummated within 30
business days after the date on which the Exchange Registration Statement has
become or been declared effective initially or (iv) either the Exchange
Registration Statement or, if applicable, the Resale Registration Statement is
filed and declared effective but shall thereafter cease to be effective (except
as specifically permitted therein) without being succeeded immediately by an
additional registration statement filed and declared effective, in each case (i)
through (iv) upon the terms and conditions set forth in the Exchange and
Registration Rights Agreement dated as of January 31, 1997, by and between the
Company and the Holders from time to time of the Securities (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then the per
annum interest rate borne by the Securities shall increase
31
<PAGE>
(the "Step-Up") by 0.5% per annum until such time (the "Step-Down Date") as no
Registration Default is in effect (after which such interest rate will be
restored to its initial rate) and provided, further, that if either the Exchange
Offer has not been consummated or, if applicable, the Resale Registration
Statement has not become or been declared effective, in each case by October 28,
1997, then the per annum rate of the Securities shall increase (the "Second
Step-Up") by an additional 0.5% per annum until such time (the "Second Step-Down
Date") as the Company consummates the Exchange Offer or, if applicable, the
Resale Registration Statement becomes or has been declared effective (after
which such interest rate will be restored to its initial rate). Interest
accruing as a result of the Step-Up or the Second Step-Up is referred to herein
as "Additional Interest." Accrued Additional Interest shall be paid
semi-annually on the Interest Payment Dates; and the amount of accrued
Additional Interest shall be determined on the basis of the number of days
actually elapsed. Any accrued and unpaid interest (including Additional
Interest) on this Security upon the issuance of an Exchange Security in exchange
for this Security shall cease to be payable to the Holder hereof but such
accrued and unpaid interest (including Additional Interest) shall be payable on
the next Interest Payment Date for such Exchange Security to the Holder thereof
on the related Regular Record Date].
On any Interest Payment Date for this Security on or prior to April 1,
2002, the Company may, in lieu of payment of interest in cash, pay such interest
(i) in additional Securities having a principal amount equal to the cash
interest otherwise payable or (ii) a combination of cash and additional
Securities. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 15 or September 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be
32
<PAGE>
required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, New York, in
additional Securities or such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of cash
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
GRANITE BROADCASTING CORPORATION
By______________________________
Attest:
______________________________
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its [If Rule 144A Securities, then insert -- 12 3/4%
Series A Exchange Debentures due April 1, 2009 (the "Rule 144A Securities")
issued under an Indenture, dated as of January 31, 1997 (herein called the
"Indenture"), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee",
33
<PAGE>
which term includes any successor trustee under the Indenture), together with
the 12 3/4% Exchange Debentures due April 1, 2009 of the Company (the "Exchange
Securities" and, collectively with the Rule 144A Securities, the "Securities")]
[If Exchange Securities, then insert -- 12 3/4% Exchange Debentures due April 1,
2009 (the "Exchange Securities") issued under an Indenture, dated as of January
31, 1997 (herein called the "Indenture"), between the Company and The Bank of
New York, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), together with the 12 3/4% Series A
Exchange Debentures due April 1, 2009 of the Company (the "Rule 144A Securities"
and, collectively with the Exchange Securities, the "Securities"]. The
Securities are limited in aggregate principal amount to $350,000,000. Reference
is hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of the Senior Debt (as defined in the Indenture) and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail in the event that on or before April 1, 2000
the Company receives net proceeds from any Major Asset Disposition or sale of
its Capital Stock (other than Disqualified Stock) in one or more offerings, in
which case the Company may, at its option and from time to time, use all or a
portion of any such net proceeds to redeem Securities in a principal amount of
up to an aggregate of $75,000,000; provided, however, that Securities in an
amount equal to at least $75,000,000 remain outstanding after each such
redemption. Any such redemption must occur on a Redemption Date within 90 days
of any such sale at a Redemption Price of 112.75% of the principal amount of the
Securities plus accrued interest to but excluding the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.
In addition, the Securities are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, at any time on or after April 1,
2002, as a whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning April 1 of each of the years
indicated below:
34
<PAGE>
Redemption
Year Price
- - ---- ----------
2002.......................... 106.375%
2003.......................... 104.250%
2004.......................... 102.125%
2005.......................... 100.000%
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to but
excluding the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.
The Securities do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions, if (i) a
Change of Control (as defined in the Indenture) occurs or (ii) certain Net
Available Proceeds are available to the Company as a result of any Asset
Disposition, the Company shall be required to make an Offer to Purchase for all
or a specified portion of the Securities.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Security in part only, a new Security or Securities of like
tenor for the unredeemed or unpurchased portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee his attorney-in-fact for any and all such purposes.
The Exchange Securities and the Rule 144A Securities shall rank pari passu.
35
<PAGE>
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of
(i) the entire indebtedness of this Security, (ii) certain restrictive covenants
and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein or (iii) the subordination
provisions contained in the Indenture.
Unless the context otherwise requires, the Rule 144A Securities and
the Exchange Securities shall constitute one series for all purposes under the
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the form, coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, New York, duly endorsed by,
36
<PAGE>
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and like tenor and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Exchange Securities are issuable only in registered form without
coupons in denominations of $1.00 and any integral multiple thereof, and the
Rule 144A Securities are issuable only in registered form without coupons in
denominations of $100,000 and any integral multiple of $1.00 in excess thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities are exchangeable for a like tenor and aggregate principal
amount of Securities of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
This Security shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflicts of laws
principles thereof.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months; provided, however, that Additional Interest shall
be computed on the basis of a 365- or 366-day year, as the case may be, and the
number of days actually elapsed.
37
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 1013 or 1017 of the Indenture, check the box:
/ /
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Sections 1013 or 1017 of the Indenture, state the
amount: $___________
Dated:________________ Your Signature:____________________
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:________________________________________
Signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements
of the Security Registrar, which requirements
include membership or participation in the
Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee
program" as may be determined by the Security
Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
SECTION 204. Form of Trustee's Certificate of
Authentication.
Dated:____________________
This is one of the Securities referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee
By ____________________
Authorized Signatory
38
<PAGE>
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $350,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906 or 1108 or in connection with an Offer to Purchase pursuant to
Section 1013 or 1017. The Company may issue Securities or Exchange Securities
from time to time pursuant to an Exchange Offer or otherwise, in each case
pursuant to a Board Resolution, subject to Section 303, included in an Officers'
Certificate delivered to the Trustee, in authorized denominations in exchange
for a like principal amount of Rule 144A Securities. Upon any such exchange the
Rule 144A Securities shall be cancelled in accordance with Section 309 and shall
no longer be deemed Outstanding for any purpose. In no event shall the aggre
gate principal amount of Rule 144A Securities and Exchange Securities
Outstanding exceed $350,000,000.
he Rule 144A Securities shall be known and designated as the "12 3/4%
Series A Exchange Debentures due April 1, 2009" of the Company and the Exchange
Securities shall be known and designated as the "12 3/4% Exchange Debentures due
April 1, 2009" of the Company. The Stated Maturity of the Securities shall be
April 1, 2009. The Securities shall bear interest at the rate of 12 3/4% per
annum (subject, in the case of the Rule 144A Securities, to increase at the rate
of 0.50% or 1.00% per annum, as provided in such Security), from January 31,
1997 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, as the case may be, payable semi-annually on April 1
and October 1 until the principal thereof is paid or made available for payment.
On any Interest Payment Date for any Security on or prior to April 1, 2002, the
Company may, in lieu of payment of interest in cash, pay such interest (i) in
additional Securities having a principal amount equal to the cash interest
otherwise payable or (ii) a combination of cash and additional Securities.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the corporate trust office of the Trustee in the Borough of
Manhattan, The City of New York, New York, maintained for such purpose and at
any other office or agency maintained by the Company for
39
<PAGE>
such purpose; provided, however, that at the option of the Company payment of
cash interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
The Securities shall be subject to repurchase by the Company pursuant
to an Offer to Purchase as provided in Sections 1013 and 1017 of the Indenture.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall not have the benefit of any sinking fund
obligations.
The Securities shall be subordinated in right of payment of Senior
Debt as provided in Article Twelve and the Rule 144A Securities and the Exchange
Securities shall rank pari passu.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article Thirteen.
Unless the context otherwise requires, the Rule 144A Securities and
the Exchange Securities shall constitute one series for all purposes under the
Indenture, including without limitation, amendments, waivers, redemptions and
Offers to Purchase.
SECTION 302. Denominations.
The Rule 144A Securities shall be issuable only in registered form
without coupons and only in denominations of $100,000 and any integral multiple
of $1.00 in excess thereof and the Exchange Securities shall be issuable only in
registered form without coupons and only in denominations of $1.00 and any
integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery
and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
40
<PAGE>
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
At any time and from time to time after the execution and delivery of
this Indenture and after the effectiveness of an Exchange Registration Statement
or a Resale Registration Statement under the Securities Act with respect
thereto, the Company may deliver Exchange Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Exchange Securities and a like principal
amount of Rule 144A Securities for cancellation in accordance with Section 309
of this Indenture, and the Trustee in accordance with the Company Order shall
authenticate and deliver such Securities. In authenticating such Exchange
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(a) if the form of such Exchange Securities has been established by
or pursuant to Board Resolution as permitted by Section 301, that such form
has been established in conformity with the provisions of this Indenture;
(b) if the terms of such Exchange Securities have been established by
or pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture;
(c) that such Exchange Securities have been duly and validly issued
in accordance with the terms of the Indenture, and are entitled to all the
rights and benefits set forth herein;
41
<PAGE>
(d) that all conditions precedent to the authentication and delivery
of such Exchange Securities have been complied with and that such Exchange
Securities, when authenticated and delivered by the Trustee and issued by
the Company in the manner and subject to any conditions specified in such
Opinion of Counsel, will constitute valid and legally binding obligations
of the Company, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting the enforcement of creditors' rights
and to general equity principles; and
(e) that the issuance of the Exchange Securities in exchange for the
Rule 144A Securities has been effected in compliance with the Securities
Act of 1933, as amended.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Exchange Securities if the issue of such Exchange
Securities pursuant to this Indenture will affect the Trustee's own rights,
duties or immunities under the Exchange Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
42
<PAGE>
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like tenor and principal amount of definitive
Securities of authorized denominations. Until so exchanged the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided. Such Security Register shall
distinguish between Rule 144A Securities and Exchange Securities.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like tenor and aggregate
principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like tenor and aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid
43
<PAGE>
obligations of the Company, evidencing the same debt, and (subject to the
provisions in the Rule 144A Securities regarding the payment of Additional
Interest) entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906 or 1108 or in accordance with any
Offer to Purchase pursuant to Section 1013 and 1017 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
All Rule 144A Securities initially issued hereunder shall, upon
issuance, bear the legend specified in Section 202 to be applied to such a
Security and such required legend shall not be removed unless the Company shall
have delivered to the Trustee (and the Securities Registrar, if other than the
Trustee) a Company Order which states that the Security may be issued without
such legend thereon. If such legend required for a Rule 144A Security has been
removed from a Security as provided above, no other Security issued in exchange
for all or any part of such Security shall bear such legend, unless the Company
has reasonable cause to believe that such other Security is a "restricted
security" within the meaning of Rule 144 and instructs the Trustee to cause a
legend to appear thereon.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
44
<PAGE>
(1) Each Global Security authenticated under this Indenture shall
be registered in the name of the Depositary or a nominee thereof and
delivered to the Depositary or a nominee thereof or custodian therefor, and
each such Global Security shall constitute a single Security for all
purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part may be
registered, in the name of any Person other than the Depositary or a nominee
thereof unless (A) Depositary (i) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security or
(ii) has ceased to be a clearing agency registered under the Exchange Act,
(B) there shall have occurred and be continuing an Event of Default with
respect to the Securities evidenced by such Global Security or (C) the
Company executes and delivers to the Trustee a Company Order that such
Global Security shall be so exchangeable and the transfer thereof so
registrable.
(3) Subject to Clause (2) above, any exchange of a Global Security
for other Securities may be made in whole or in part, and all Securities
issued in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary shall direct.
(4) Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 304, 306, 906,
1013, 1017 or 1108 or otherwise, shall be authenticated and delivered in
the form of, and shall be, a Global Security, unless such Security is
registered in the name of a Person other than the Depositary or a nominee
thereof.
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
45
<PAGE>
If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest
Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest. On any
Interest Payment Date for any Security on or prior to April 1, 2002, the Company
may, in lieu of payment of interest in cash, pay such interest (i) in additional
Securities having a principal amount equal to
46
<PAGE>
the cash interest otherwise payable or (ii) a combination of cash and additional
Securities.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Security and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first-class postage prepaid, to each Holder
at his address as it appears in the Security Register, not less than 10
days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor
47
<PAGE>
having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following
Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 307) interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the
Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer, exchange or pursuant to any Offer to Purchase pursuant to Section
1013 or 1017 shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in
-48-
<PAGE>
any manner whatsoever, and all Securities so delivered shall be promptly
cancelled by the Trustee. No Securities shall be authenticated in lieu of or
in exchange for any Securities cancelled as provided in this Section, except
as expressly permitted by this Indenture. All cancelled Securities held by
the Trustee shall be disposed of as directed by a Company Order; provided,
however, that the Trustee may, but shall not be required to, destroy such
cancelled Securities.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months; provided, however, that Additional
Interest on Rule 144A Securities shall be computed on the basis of a 365- or
366-day year, as the case may be, and the number of days actually elapsed.
SECTION 311. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of
a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
-49-
<PAGE>
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such trust,
as provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered
to the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Securities
which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money
shall have been deposited
-50-
<PAGE>
with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the
obligations of the Trustee under Section 402 and the last paragraph of
Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when
it becomes due and payable, and continuance of such default for a period
of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity; or
(3) default in the payment of principal and interest pursuant to an
Offer to Purchase pursuant to Sections 1013 or 1017; or
(4) default in the performance, or breach, of Section 801; or
-51-
<PAGE>
(5) default in the performance, or breach, of clause (i) or (ii) of
Section 1017(d); or
(6) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 10% in principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(7) a default or defaults under any bond(s), debenture(s), note(s)
or other evidence(s) of indebtedness by the Company or any Subsidiary of
the Company or under any mortgage(s), indenture(s) or instrument(s) under
which there may be issued or by which there may be secured or evidenced
any indebtedness of such type by the Company or any such Subsidiary with
a principal amount then outstanding, individually or in the aggregate, in
excess of $4 million, whether such indebtedness now exists or shall
hereafter be created, which default or defaults shall constitute a
failure to pay in excess of $4 million of the principal of such
indebtedness when due at the final maturity thereof (which, for purposes
of the Senior Loan Agreement or any successor credit facility shall not
include any interim amortization payment on any term indebtedness prior
to the final maturity of such term indebtedness), or shall have resulted
in excess of $4 million of indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become due
and payable; or
(8) a final judgment or final judgments for the payment of money
are entered against the Company or any Subsidiary in an aggregate amount
in excess of $1 million by a court or courts of competent jurisdiction,
which judgments remain undischarged or unbonded for a period (during
which execution shall not be effectively stayed) of 60 days after the
right to appeal all such judgments has expired; or
(9) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company or any of its
Subsidiaries in an
-52-
<PAGE>
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company or any of its Subsidiaries a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company or any of its Subsidiaries under any applicable Federal or
State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any of
its Subsidiaries or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the continuance of any
such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
(10) the commencement by the Company or any of its Subsidiaries of
a voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief in respect
of the Company or any of its Subsidiaries in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by
it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any of its Subsidiaries or of
any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due,
or the taking of corporate action by the Company or any of its
Subsidiaries in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(9) or (10)) occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
-53-
<PAGE>
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal and
any accrued interest shall become immediately due and payable. If an Event of
Default specified in Section 501(9) or (10) occurs, the principal of and any
accrued interest on the Securities then Outstanding shall ipso facto become
immediately due and payable without any declaration or other Act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration (including any Securities required to have been
purchased on the Purchase Date pursuant to an Offer to Purchase made
by the Company) and interest thereon at the rate borne by the
Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration
of acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
-54-
<PAGE>
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for
a period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been purchased pursuant to an Offer to Purchase
made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the
extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest,
at the rate provided by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree,
and may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other
obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the
Trustee may in its discretion proceed to protect and enforce its rights and
the rights of the Holders by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
-55-
<PAGE>
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized under the Trust
Indenture Act in order to have claims of the Holders and the Trustee allowed
in any such proceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys, securities or other property payable or
deliverable upon the exchange of the Securities or upon any such claims and
to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due
it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disburse ments and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Securities in respect of which such judgment has been recovered.
-56-
<PAGE>
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money
on account of principal (or premium, if any) or interest, upon presentation
of the Securities and the notation thereon of the payment if only partially
paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the extent provided in Article Twelve, to the holders of
Senior Debt in accordance with Article Twelve; and
THIRD: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered and, if requested, provided
to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
-57-
<PAGE>
(4) the Trustee for 60 days after its receipt of such notice, request
and offer and, if requested, provision of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 508. Unconditional Right of Holders
to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to Sec
tion 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of an Offer to Purchase made by the Company and required
to be accepted as to such Security, on the Purchase Date) and to institute
suit for the enforcement of any such payment, and such rights shall not be
impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
-58-
<PAGE>
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee; provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture or expose the Trustee to personal liability (as
determined in the sole discretion of the Trustee), and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
-59-
<PAGE>
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities by
written notice to the Trustee waive any past default hereunder and its conse
quences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to
have been purchased pursuant to an Offer to Purchase which has been made
by the Company), or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered
or omitted by it as Trustee, a court may require any party litigant in such
suit to file an undertaking to pay the costs of such suit, and may assess
costs, including reasonable counsel fees and expenses, against any such party
litigant, in the manner and to the extent provided in the Trust Indenture
Act; provided that neither this Section nor the Trust Indenture Act shall be
deemed to authorize any court to require such an undertaking or to make such
an assessment in any suit instituted by the Trustee or the Company.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may affect
the covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby
-60-
<PAGE>
expressly waives all benefit or advantage of any such law and covenants that
it will not hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided
by this Indenture and the Trust Indenture Act. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it. Whether or not therein expressly so
provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder
as and to the extent provided by the Trust Indenture Act; provided, however,
that in the case of any default of the character specified in Section 501(5),
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
-61-
<PAGE>
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction reasonably satisfactory to the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either
-62-
<PAGE>
directly or by or through agents or attorneys and the Trustee shall not
be responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in accordance with the
direction of Holders of Outstanding Securities as provided in Sections
502, 512 and 513 hereof;
(i) the Trustee shall not be liable for an error of judgment made
in good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(j) for all purposes under this Indenture, the Trustee shall not be
deemed to have notice of any Event of Default unless a Responsible
Officer of the Trustee has actual knowledge thereof or unless written
notice of any event which is in fact such a default is received by the
Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Securities and this Indenture.
SECTION 604. Not Responsible for Recitals
or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities. The Trustee shall not be accountable
for the use or application by the Company of Securities or the proceeds
thereof.
SECTION 605. May Hold Securities.
The Trustee, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may other wise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar
or such other agent.
-63-
<PAGE>
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee
for, and to hold it harmless against, any and all loss, liability,
damage, claim or expense including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or wilful misconduct
on its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
enforcing this Indenture against the Company (including, without
limitation, this Section 607) and of defending itself against any claim
(whether asserted by any Holder or the Company) or liability in
connection with the exercise or performance of any of its powers or
duties hereunder. The provisions of this Section 607 shall survive any
termination of this Indenture and the resignation or removal of the
Trustee.
As security for the performance of the obligations of the Company
under this Section 607, the Trustee shall have a lien prior to the Securities
upon all property and
-64-
<PAGE>
funds held or collected by the Trustee, except funds held in trust for the
payment of principal of (and premium, if any) or interest on particular
Securities. The Trustee's right to receive payment of any amounts due under
this Section 607 shall not be subordinate to any other liability or
indebtedness of the Company (even though the Securities may be so
subordinated), except that such rights of the Trustee under this Section 607
shall be subordinated in right and time of payment to the payment in full of
all obligations of the Company under the Senior Loan Agreement including,
without limitation, the payment of all principal, interest, fees and expenses
thereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(9) or Section 501(10), the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency
or other similar law.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate
such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $50,000,000 and its
Corporate Trust Office in the Borough of Manhattan, The City of New York, New
York. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of a Federal, State, Territorial or
District of Columbia supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
-65-
<PAGE>
SECTION 610. Resignation and Removal; Appointment
of Successor.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611, at
which time the retiring Trustee shall be fully discharged from its
obligations hereunder. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving
of notice of resignation or removal, the Trustee resigning or being removed
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company.
(c) The Trustee may be removed at any time by Act of the Holders
of a majority in principal amount of the Outstanding Securities, delivered to
the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
-66-
<PAGE>
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so
appointed by the Company or the Holders and accepted appointment in the
manner hereinafter provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee; but,
on request of the Company or the suc cessor Trustee, such retiring Trustee
shall, upon payment of all sums owing to the Trustee under Section 607,
execute and deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
-67-
<PAGE>
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder;
provided that such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Securities
shall have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated with the same effect as if such successor Trustee
had itself authenticated such Securities.
SECTION 613. Preferential Collection
of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee
Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and ad-
-68-
<PAGE>
dresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in
its capacity as Security Registrar.
SECTION 702. Preservation of Information;
Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason
of any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant
to the Trust Indenture Act at the times and in the manner provided pursuant
thereto. If required by Section 313(a) of the Trust Indenture Act, the
Trustee shall, within sixty days after each May 15 following the date of this
Indenture deliver to Holders a brief report, dated as of such May 15, which
complies with the provisions of such Section 313(a).
-69-
<PAGE>
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange
upon which the Securities are listed, with the Commission and with the
Company. The Company will promptly notify the Trustee when the Securities
are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed
with the Commission.
Delivery of such reports, information and documents to the Trustee
shall be for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 705. Officers' Certificate with Respect
to Change in Interest Rates.
Within five days after any Step-Up, a Second Step-Up or Step-Down
Date, the Company shall deliver an Officers' Certificate to the Trustee
stating the new interest rate and the date on which it became effective.
ARTICLE EIGHT
Merger, Consolidation, Etc.
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets.
The Company (i) shall not consolidate with or merge into any other
Person or permit any other Person to consolidate with or merge into the
Company or any Subsidiary of the Company in a transaction in which such
Subsidiary
-70-
<PAGE>
remains a Subsidiary of the Company and (ii) shall not, directly or
indirectly, transfer, convey, sell, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety, unless, in any
such transaction specified in Clause (i) or (ii):
(1) immediately after giving effect to such transaction and
treating any Debt that becomes an obligation of the Company or a
Subsidiary of the Company, as a result of such transaction, as having
been Incurred by the Company or such Subsidiary at the time of the
transaction, no Event of Default, and no event that, with the passing of
time or the giving of notice, or both, would become an Event of Default,
shall have occurred and be continuing;
(2) in case the Company shall consolidate with or merge with or
into another Person or shall directly or indirectly transfer, convey,
sell, lease or otherwise dispose of all or substantially all of its
properties or assets as an entirety, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by transfer, con veyance, sale, lease or otherwise the assets
of the Company substantially as an entirety (for purposes of this
Section 801, a "Successor Company") shall be a corporation, partnership,
or trust and shall be organized and validly existing under the laws of
the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee in form satisfactory to
the Trustee, the due and punctual payment of the principal of (and
premium, if any) and interest on all the Securities and the performance
of every covenant of this Indenture on the part of the Company to be
performed or observed;
(3) immediately after giving effect to such transaction, the
Company or, if applicable, the Successor to the Company would have a
ratio of aggregate principal amount of Debt of the Company and its
Subsidiaries outstanding as of the most recent available balance sheet
to Pro Forma Consolidated Cash Flow for the preceding four fiscal
quarters, determined on a pro forma basis as if such transaction had
taken place and the proceeds therefrom had been applied at the beginning
of such four fiscal quarters, of less than 6.5 to 1;
(4) if, as a result of any such transaction, property and assets
of the Company or any Subsidiary of
-71-
<PAGE>
the Company would become subject to a Lien which would not be permitted
by Section 1015, the Company or, if applicable, the Successor Company,
as the case may be, shall take such steps as shall be necessary
effectively to secure the Securities equally and ratably with (or prior
to) Debt secured by such Lien; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each in form and substance
satisfactory to the Trustee stating that such consolidation, merger,
conveyance, transfer, lease or acquisition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, complies with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with, and, with respect to such Officers'
Certificate, setting forth the manner of determination of the Pro Forma
Consolidated Cash Flow in accordance with Clause (3) of Section 801, of
the Company or, if applicable, of the Successor Company as required
pursuant to the foregoing.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company with or into, any other Person or any conveyance, transfer or lease
of the properties and assets of the Company substantially as an entirety in
accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had been named as
the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under
this Indenture and the Securities.
-72-
<PAGE>
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures
Without Consent of Holders.
At any time after any Securities have been issued under this
Indenture, without the consent of any Holders, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time,
may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Securities pursuant to the requirements of
Section 1015 or otherwise; or
(4) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to comply with any
requirement of the Commission in order to effect qualification of this
Indenture under the Trust Indenture Act in connection with the issuance
of Exchange Securities or thereafter to maintain the qualification of
this Indenture under the Trust Indenture Act; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions
of this Indenture; provided that such action pursuant to this Clause (5)
shall not adversely affect the interests of the Holders in any material
respect.
-73-
<PAGE>
SECTION 902. Supplemental Indentures
with Consent of Holders.
At any time after any Securities have been issued under this
Indenture, with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supple mental hereto for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable thereon,
or change the place of payment where, or the coin or currency in which,
any Security or any premium or interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date) or, in the case of an Offer to Purchase
which has been made, on or after the applicable Purchase Date, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1020, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, or
(4) modify any of the provisions of this Indenture relating to the
subordination of the Securities in a manner adverse to the Holders, or
-74-
<PAGE>
(5) following the making of an Offer with respect to an Offer to
Purchase pursuant to Sections 1013 or 1017, modify the provisions of
this Indenture with respect to such Offer to Purchase in a manner
adverse to such Holder.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities
to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
-75-
<PAGE>
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
SECTION 907. Subordination Impaired.
No such supplemental indenture shall directly or indirectly modify
the provisions of Article Twelve in any manner which might terminate or
impair the rights of the Senior Debt pursuant to such subordination
provisions.
SECTION 908. Other Amendments to the Indenture.
At any time prior to the issuance of any Securities under this
Indenture, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indenture supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the
rights of the Holders under this Indenture.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms
of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of
New York, New York, an office or agency where Securities may be presented or
sur rendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the location,
and any
-76-
<PAGE>
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of
the Trustee, and the Company hereby appoints the Trustee as its agent to
receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York, New York) where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, New York for such purposes. The
Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 1003. Money for Security
Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (and premium, if any) or
interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee in writing of its action or failure so to act.
As provided in Section 504, upon any bankruptcy or reorganization proceeding
relative to the Company, the Trustee shall serve as the Paying Agent for the
Securities.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest
on any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee in writing of its action or failure
so to act. As provided in Section 504, upon any bankruptcy or reorganization
proceeding relative to the Company, the Trustee shall serve as the Paying
Agent for the Securities.
-77-
<PAGE>
The Company will cause each Paying Agent other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on
Securities in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities) in the
making of any payment of principal (and premium, if any)
or interest;
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying
Agent; and
(4) acknowledge, accept and agree to comply in all
respects with the provisions of this Indenture relating to
the duties, rights and obligations of such Paying Agent.
The Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay, to the
Trustee all sums held in trust by the Company or such Paying Agent, such sums
to be held by the Trustee upon the same trusts as those upon which such sums
were held by the Company or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of the principal
of (and premium, if any) or interest on any Security and remaining unclaimed
for two years after such principal (and premium, if any) or interest has
become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof,
-78-
<PAGE>
shall thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Existence.
Subject to Article Eight, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises;
provided, however, that the Company shall not be required to preserve any
such right or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all properties used or useful
in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, as determined in the good faith
judgment of the Board of Directors evidenced by a Board Resolution, desirable
in the conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent,
-79-
<PAGE>
(1) all taxes, assessments and governmental charges levied or imposed upon the
Company or any of its Subsidiaries or upon the income, profits or property of
the Company or any of its Subsidiaries, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any of its Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or dis
charged any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings.
SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries
to, keep at all times all of their properties which are of an insurable
nature insured against loss or damage with insurers believed by the Company
to be responsible to the extent that property of similar character is usually
so insured by corporations similarly situated and owning like properties in
accordance with good business practice.
SECTION 1008. Limitation on Company Debt.
The Company shall not, and shall not permit any
Subsidiary of the Company to, Incur any Debt unless the ratio of (a) the
aggregate principal amount of Debt of the Company and its Subsidiaries
outstanding as of the most recent available balance sheet, after giving pro
forma effect to the Incurrence of such Debt and any other Debt Incurred since
such balance sheet date and the receipt and application of the proceeds
thereof, to (b) Pro Forma Consolidated Cash Flow for the preceding four full
fiscal quarters, determined on a pro forma basis as if such Debt and any
other Debt Incurred since such balance sheet date had been Incurred and the
proceeds therefrom had been applied at the beginning of such four fiscal
quarters, would be less than 6.5 to 1.
Notwithstanding the foregoing paragraph, the Company
or any Subsidiary may Incur the following without regard to the foregoing
limitation:
(i) Debt under the Senior Loan Agreement not to
exceed $300 million aggregate principal amount at any one
time outstanding, and any renewal, extension, refinancing
or refunding thereof in an amount which, together with
any amount remaining outstanding or
-80-
<PAGE>
available under the Senior Loan Agreement, does not exceed
$300 million;
(ii) Debt evidenced by the 12.75% Debentures, the
10 3/8% Notes and the 9 3/8% Notes, as well as the
Securities if the Securities are issued in exchange for
the 12 3/4% Exchangeable Preferred Stock;
(iii) Debt owed by the Company to any Wholly Owned
Subsidiary of the Company or Debt owed by a Subsidiary of
the Company to the Company or a Wholly Owned Subsidiary of
the Company; provided, however, that for purposes of this
Section 1008, upon either (x) the transfer or other
disposition by such Wholly Owned Subsidiary or the Company
of any Debt so permitted to a Person other than the Company
or another Wholly Owned Subsidiary of the Company or (y)
the issuance (other than directors' qualifying shares),
sale, transfer or other disposition of shares of Capital
Stock (including by consolidation or merger) of such Wholly
Owned Subsidiary to a Person other than the Company or
another such Wholly Owned Subsidiary, the provisions of
this Clause (iii) shall no longer be applicable to such
Debt and such Debt shall be deemed to have been Incurred at
the time of such transfer or other disposition;
(iv) Debt Incurred or Incurrable in respect of letters
of credit, bankers' acceptances or similar facilities not
to exceed $2 million at any one time outstanding;
(v) Capital Lease Obligations whose Attributable
Value will not exceed $5 million at any one time
outstanding;
(vi) Debt arising from the honoring by a bank or other
financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary
course of business; provided that such Debt is extinguished
within two Business Days of its Incurrence;
(vii) Debt Incurred by a Person prior to the time (A)
such Person became a Subsidiary of the Company, (B) such
Person merges into or consolidates with a Subsidiary of
the Company, (C) another Subsidiary of the Company merges
into or consolidates with such Person (in each case in a
transaction in which such Person becomes a Subsidiary of
the Company) or (D) such Person sells any of its property
consisting of operating
-81-
<PAGE>
assets to a Subsidiary of the Company subject to such Debt
(whether such Debt is recourse or non-recourse to such
Subsidiary); provided that in any such case such Debt was
not Incurred in anticipation of such transaction;
(viii) Debt evidenced by the 7.75% Exchange Debentures
if the 7.75% Exchange Debentures are issued in exchange for
the 7.75% Exchangeable Preferred Stock;
(ix) renewals, refundings, replacement or extensions
(collectively, "refinancings") of the Senior Loan
Agreement, the 12.75% Debentures, the 10 3/8% Notes, the
9 3/8% Notes, the 7.75% Exchange Debentures, the Securities
or any other outstanding Debt that was Incurred in
compliance with this Indenture (other than Debt referred to
in Clauses (i) through (vi) above) in an aggregate
principal amount not to exceed the principal amount of the
Debt so refinanced plus the amount of any premium required
to be paid in connection with such refinancing pursuant to
the terms of the Debt refinanced or the amount of any
premium reasonably determined by the Company as necessary
to accomplish such refinancing by means of a tender offer
or privately negotiated repurchase, plus the amount of
expenses of the Company Incurred in connection with such
refinancing; provided that (A) unless such refinancing Debt
is Senior Debt, such refinancing Debt does not have an
Average Life less than the Average Life of the Debt being
refinanced and (B) if such Debt is subordinated in right of
payment to the Securities such refinancing Debt is
subordinated in right of payment to the Securities at least
to the extent that the Debt to be refinanced is
subordinated to the Securities; and
(x) Debt not otherwise permitted to be Incurred
pursuant to Clauses (i) through (ix) above, which, together
with any other outstanding Debt Incurred pursuant to this
Clause (x), has an aggregate principal amount not in excess
of $15 million at any one time outstanding.
SECTION 1009. Limitation on Certain Debt.
The Company shall not Incur or permit to exist any
Debt that is by its terms both (i) subordinate in right of payment to any
Senior Debt and (ii) senior in right of payment to the Securities, in each
case other than by reason of its maturity. The Company shall not Incur or
permit to
-82-
<PAGE>
exist any Debt that is by its terms subordinate in right of payment to the
Securities unless such Debt constitutes Subordinated Debt.
SECTION 1010. Limitation on Restricted Payments.
The Company (i) shall not, directly or indirectly,
declare or pay any dividend or make any distribution in respect of any class
of its Capital Stock or to the holders thereof (including pursuant to a
merger or consolidation of the Company, but excluding (a) any dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Disqualified Stock) and (b) dividends in accordance
with the terms of the 7.75% Exchangeable Preferred Stock or the 12 3/4%
Exchangeable Preferred Stock, as such terms exist on the date of this
Indenture), (ii) shall not, and shall not permit any Subsidiary of the
Company, directly or indirectly, to purchase, redeem or otherwise acquire or
retire for value (a) any Capital Stock of the Company or (b) any options,
warrants or rights to purchase or acquire shares of Capital Stock of the
Company (in the case of either (a) or (b) other than in exchange for the
Company's Capital Stock (other than Disqualified Stock) or options, warrants
or other rights to purchase the Company's Capital Stock (other than
Disqualified Stock)), (iii) shall not make, or permit any Subsidiary of the
Company to make, any loan, advance, capital contribution to or Investment in,
or payment on a Guarantee of any obligation of, any Affiliate, other than the
Company or a Wholly Owned Subsidiary, (iv) shall not, and shall not permit
any Subsidiary of the Company to, redeem, defease, repurchase, retire or
otherwise acquire or retire for value prior to any scheduled maturity,
repayment or sinking fund payment, Debt of the Company which is subordinated
in right of payment to the Securities (other than in exchange for the
Company's Capital Stock (other than Disqualified Stock) or options, warrants
or other rights to purchase the Company's Capital Stock (other than
Disqualified Stock)), and (v) may not make any Investment in any Subsidiary
that is subject to an encumbrance or restriction prohibited under Section
1011 or any Investments in any Unrestricted Subsidiary (the transactions
described in Clauses (i) through (v) being referred to herein as "Restricted
Payments"), if at the time thereof:
(1) an Event of Default, or an event that with the
lapse of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is
continuing, or
-83-
<PAGE>
(2) upon giving effect to such Restricted Payment,
the aggregate of all Restricted Payments from December 31,
1996 exceeds the sum of:
(a) the remainder of (x) 100% of cumulative
Consolidated Cash Flow (or, in the case
Consolidated Cash Flow shall be negative, less
100% of such deficit) from December 31, 1996
through the last day of the last full fiscal
quarter immediately preceding such Restricted
Payment minus (y) the product of 1.4 times the
cumulative Consolidated Interest Expense from
December 31, 1996 through the last day of the
last full fiscal quarter immediately preceding
such Restricted Payment; plus
(b) 100% of the aggregate net proceeds received by
the Company since December 31, 1996, including
the fair value of property other than cash (as
determined in good faith by the Board of
Directors and evidenced by a Board Resolution),
from the issuance (other than to a Subsidiary of
the Company) of Capital Stock of the Company
(other than Disqualified Stock) and options,
warrants, or other rights to purchase or acquire
Capital Stock of the Company (other than
Disqualified Stock and other than by a
Subsidiary) and the principal amount of Debt of
the Company that has been converted into Capital
Stock of the Company (other than Disqualified
Stock and other than by a Subsidiary) since
December 31, 1996; plus
(c) an amount equal to the net reduction in
Investments made by the Company and its
Subsidiaries subsequent to the date of original
issue of the Securities pursuant to Clauses (iii)
and (v) above in any Affiliate or Unrestricted
Subsidiary or a Subsidiary of the Company that is
subject to an encumbrance or restriction
prohibited under Section 1011 upon the
disposition, liquidation, or repayment (including
by way of dividends) thereof, from redesignations
of Unrestricted Subsidiaries as Subsidiaries or
from the removal of such encumbrance or
restriction, but only to the extent such amounts
are not included in Consolidated Net Income and
not to exceed in the case of any Person the
amount of
-84-
<PAGE>
Investments previously made by the Company and
its Subsidiaries in such Person; plus
(d) $15 million.
Notwithstanding the foregoing, so long as no Event
of Default, or event that with the passing of time or the giving of notice,
or both, would constitute an Event of Default, shall have occurred and is
continuing or would result therefrom, the Company and any Subsidiary of the
Company may (i) pay any dividend within 60 days after declaration thereof if
at the declaration date such payment would have complied with the foregoing
provision; (ii) make any payment in redemption of Capital Stock of the
Company or options to purchase such Capital Stock granted to officers or
employees of the Company pursuant to the Company's Stock Option Plan (or any
successor plan) in connection with the severance or termination of officers
or employees (other than W. Don Cornwell and Stuart J. Beck) not to exceed $1
million in the aggregate; (iii) make Investments not to exceed $10 million in
the aggregate at any one time outstanding, in (A) any Subsidiary which is
subject to any encumbrance or restriction prohibited under Section 1011 or
(B) any Unrestricted Subsidiary; (iv) exchange 7.75% Exchangeable Preferred
Stock in accordance with its terms (as such terms exist on the date of this
Indenture) for the 7.75% Exchange Debentures and exchange 12 3/4%
Exchangeable Preferred Stock in accordance with its terms (as such terms
exist on the date of this Indenture) for the Securities and make payments of
principal (premium, if any) and interest thereon in accordance with the 7.75%
Exchange Debenture Indenture or this Indenture, as the case may be; (v)
refinance any Debt otherwise permitted to be refinanced by Clause (ix) of the
second paragraph of Section 1008 or solely in exchange for or out of the
proceeds of the substantially concurrent sale (other than from or to a
Subsidiary of the Company) of shares of Capital Stock of the Company (other
than Disqualified Stock) (vi) purchase, redeem, acquire or retire any shares
of Capital Stock of the Company solely in exchange for or out of the proceeds
of the substantially concurrent sale (other than from or to a Subsidiary of
the Company) of shares of Capital Stock (other than Disqualified Stock) of
the Company; (vii) purchase or redeem any Debt from Net Available Proceeds to
the extent permitted or required under Section 1013; and (viii) make
Permitted Television Investments in an aggregate amount at any one time
outstanding not to exceed $25 million. Any payment or Investment made
pursuant to Clause (i), (ii) or (iii) of this paragraph shall be a Restricted
Payment for purposes of calculating aggregate Restricted Payments under the
first paragraph of this Section 1010.
-85-
<PAGE>
SECTION 1011. Limitations Concerning Distributions
by and Transfers to Subsidiaries.
The Company shall not, and shall not permit any
Subsidiary of the Company to, suffer to exist any consensual encumbrance or
restriction on the ability of any Subsidiary of the Company: (i) to pay,
directly or indirectly, dividends or make any other distributions in respect
of its Capital Stock or pay any Debt or other obligation owed to the Company
or any other Subsidiary of the Company; (ii) to make loans or advances to the
Company or any Subsidiary of the Company; or (iii) to transfer any of its
property or assets to the Company. Notwithstanding the foregoing limitation,
the Company may permit a Subsidiary to suffer to exist any such encumbrance
or restriction (A) included in any instrument governing Debt Incurred by such
Subsidiary pursuant to the first paragraph of Section 1008 of the Indenture
for the purpose of financing all or part of the purchase price or cost of
construction or improvements of property; provided, however, that the
principal amount of the Debt so Incurred does not exceed the purchase price
or cost of construction or improvements of such property; (B) included in the
Senior Loan Agreement; (C) imposed by virtue of applicable corporate law or
regulation and relating solely to the payment of dividends or distributions
to shareholders; (D) pursuant to an agreement relating to any Debt Incurred
by a Person prior to the date on which such Person became a Subsidiary of the
Company and outstanding on such date and not Incurred in anticipation of
becoming a Subsidiary; (E) with respect to restrictions of the nature
described in Clause (iii) above, included in a contract entered into in the
ordinary course of business and consistent with past practices that contains
provisions restricting the assignment of such contract; (F) pursuant to an
agreement effecting a refinancing of Debt Incurred pursuant to an agreement
referred to in Clause (A), (B) or (D) above; provided, however, that the
provi sions contained in such refinancing agreement relating to such
encumbrance or restriction are no more restrictive in any material respect
than the provisions contained in the agreement the subject thereof, as
determined in good faith by the Board of Directors and evidenced by a Board
Resolution, or (G) included in any instrument governing Capital Lease
Obligations whose Attributable Value will not exceed $5 million in the
aggregate at any one time outstanding or included in any instrument governing
a Sale and Leaseback Transaction whose Attributable Value does not exceed $2
million and the Attributable Value of all such Sale and Leaseback
Transactions entered into since the date of this Indenture does not exceed $5
million in the aggregate;
-86-
<PAGE>
provided that in each case, after giving effect to the Incurrence of such
Capital Lease Obligation or Sale and Leaseback Transaction and the receipt and
application of the proceeds thereof, the ratio of the aggregate principal amount
of Debt of the Company and its Subsidiaries outstanding as of the most recent
available balance sheet to Pro Forma Consolidated Cash Flow for the preceding
four full fiscal quarters, determined on a pro forma basis as if such Capital
Lease Obligation had been Incurred, or such Sale and Leaseback Transaction had
taken place, and the proceeds therefrom had been applied at the beginning of
such four fiscal quarters, would be less than 6.5 to 1.
SECTION 1012. Limitation on Transactions with
Affiliates.
The Company shall not, and shall not permit any
Subsidiary of the Company to, directly or indirectly, enter into any
transaction after the date of this Indenture (including, without limitation,
the purchase, sale, lease or exchange of property, the rendering of any
service or the making of any loan or advance, but excluding transactions
between the Company and Wholly Owned Subsid iaries), with any Affiliate,
unless a majority of the disinterested members of the Board of Directors
determines in its reasonable good faith judgment and which determination
shall be evidenced by a Board Resolution that:
(1) the terms of such transaction are in the best
interests of the Company or such Subsidiary; and
(2) such transaction is on terms no less favorable to
the Company or such Subsidiary than those that could be
obtained in a comparable arm's-length transaction with an
entity that is not an Affiliate.
Notwithstanding the foregoing, the Company shall not
be required to file any Board Resolution referred to in the preceding
paragraph with respect to matters solely concerning the compensation of
employees.
SECTION 1013. Limitation on Certain Asset Dispositions.
(a) The Company shall not, and shall not permit any
Subsidiary to, make an Asset Disposition in one or more transactions in any
fiscal year unless (i) the Company (or the Subsidiary, as the case may be)
receives consideration at the time of such sale or other disposition at least
equal to the fair market value for the assets sold or otherwise
-87-
<PAGE>
disposed of (which shall be as determined in good faith by the Board of
Directors, evidenced by a Board Resolution), (ii) at least 85% of the
considera tion for such disposition shall consist of cash or readily
marketable cash equivalents or the assumption of Debt of the Company or a
Subsidiary or other obligations relating to such assets and a release from
all liability on the Debt or other obligations assumed, and (iii) all Net
Available Proceeds of such disposition and from the sale of any marketable
cash equivalents received thereby, less any amounts invested as described in
the second sentence of the following paragraph, are applied (A) first, within
120 days of such disposition, to the reduction of any obligations then
outstanding under the Senior Loan Agreement (or any successor credit
facility) to the extent the terms of such Senior Loan Agreement (or
successor credit facility) require such application or prohibit prepayment
of the Securities; (B) second, within 120 days of such disposition, to the
repayment of any other Senior Debt to the extent the terms of such Senior
Debt require such application or prohibit prepayment of the Securities; (C)
third, to the extent of any remaining Net Available Proceeds and so long as
any 12.75% Debentures are outstanding, to make an offer to purchase the
12.75% Debentures in accordance with the requirements of the 12.75% Debenture
Indenture; (D) fourth, to the extent of any remaining Net Available Proceeds
and so long as any 10 3/8% Notes are outstanding, to make an offer to
purchase the 10 3/8% Notes in accordance with the requirements of the 10 3/8%
Note Indenture; (E) fifth, to the extent of any remaining Net Available
Proceeds and so long as any 9 3/8% Notes are outstanding, to make an offer to
purchase the 9 3/8% Notes in accordance with the requirements of the 9 3/8%
Note Indenture; (F) sixth, to the extent more than $5,000,000 of Net
Available Proceeds are not required to be applied to the repayments as
specified in Clauses (A), (B), (C), (D) and (E), to purchases of Outstanding
Securities pursuant to an Offer to Purchase at a purchase price equal to 100%
of their principal amount plus accrued interest to the date of purchase; (G)
seventh, to the extent of any remaining Net Available Proceeds following the
completion of the Offer to Purchase Securities required by Clause (F), to the
repayment of other Debt of the Company or Debt of a Subsidiary of the
Company, to the extent permitted under the terms thereof; and (H) eighth, to
the extent of any remaining Net Available Proceeds, to any other use as
determined by the Company which is not otherwise prohibited by this Indenture.
Notwithstanding Clause (ii) above, all or a portion
of the consideration for any such disposition may consist of all or
substantially all of the assets or a majority of the Voting Stock of an
existing television or
-88-
<PAGE>
radio broadcasting or cable television business or franchise (whether
existing as a separate entity, subsidiary, division, unit or otherwise) if
after giving effect to any such disposition and related acquisition of
assets, (x) the ratio of the aggregate principal amount of Debt of the
Company and its Subsidiaries outstanding as of the most recent available
balance sheet to Pro Forma Consolidated Cash Flow for the preceding four
fiscal quarters, determined on a pro forma basis as if such transaction had
taken place and the proceeds therefrom had been applied at the beginning of
such four fiscal quarters, would be less than 6.5 to 1; (y) no Event of
Default or event that, with the passing of time or the giving of notice, or
both, will constitute an Event of Default shall have occurred or be
continuing; and (z) the Net Available Proceeds, if any, are invested in
accordance with the next sentence of this paragraph. Notwithstanding Clause
(iii) above, the Company shall not be required to repurchase or redeem any
Debt to the extent that the Net Available Proceeds from any Asset Disposition
are invested within 120 days of such disposition in television or radio
broadcasting or cable television assets or franchises or the Company shall
have entered into a definitive agreement to acquire such assets subject only
to customary conditions, including, without limitation, the approval of the
Federal Communications Commission (but excluding any conditions with respect
to the financing of such acquisition or due diligence) and such acquisition
shall have been consummated within 240 days of such disposition.
Notwithstanding the foregoing two sentences, the Company shall not be
entitled to take as consideration for an Asset Disposition, or invest Net
Available Proceeds in lieu of repurchasing or redeeming Debt in, any
television or radio broadcasting or cable television assets, business or
franchise unless the majority of the assets (including intangibles) so
acquired or the majority of the assets (including intangibles) of the
business or franchise so acquired are related to television or radio
broadcasting.
(b) The Company will mail the Offer for an Offer to
Purchase required pursuant to Section 1013(a) not more than 120 days after
consummation of the disposition referred to in Section 1013(a), unless the
Company shall have entered into a definitive agreement to acquire such assets
as described above, in which case the Company will mail the Offer for the
Offer to Purchase not later than the earlier of (A) 240 days after such
disposition and (B) 30 days after the termination of any such definitive
acquisition agreement. The aggregate principal amount of the Securities to
be offered to be purchased pursuant to the Offer to Purchase shall equal the
Net Available Proceeds available therefor pursuant to Clause (iii)(D) of
Section 1013(a) (rounded down
-89-
<PAGE>
to the next lowest integral multiple of $1,000). Each Holder shall be
entitled to tender all or any portion of the Securities owned by such Holder
pursuant to the Offer to Purchase, subject to the requirement that any
portion of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount.
The Company shall not be entitled to any credit
against its obligations under this Section 1013 for the principal amount of
any Securities acquired or redeemed by the Company otherwise than pursuant to
the Offer to Purchase pursuant to this Section 1013.
(c) Not later than the date of the Offer with
respect to an Offer to Purchase pursuant to this Section 1013, the Company
shall deliver to the Trustee an Officers' Certificate as to (i) the Purchase
Amount, (ii) the allocation of the Net Available Proceeds from the Asset
Disposition pursuant to which such Offer is being made, including, if amounts
are invested in assets related to the business, the actual assets acquired
and (iii) the compliance of such allocation with the provisions of Section
1013(a).
The Company and the Trustee shall perform their
respective obligations specified in the Offer for the Offer to Purchase. On
or prior to the Purchase Date, the Company shall (i) accept for payment (on a
pro rata basis, if neces sary) Securities or portions thereof tendered
pursuant to the Offer, (ii) deposit with the paying agent (or, if the Company
is acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) money sufficient to pay the purchase price of all Securities or
portions thereof so accepted and (iii) deliver or cause to be delivered to
the Trustee all Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof accepted for payment by the
Company. The Paying Agent (or the Company, if so acting) shall promptly mail
or deliver to Holders of Securities so accepted payment in an amount equal to
the purchase price, and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Security of like tenor equal in principal
amount to any unpurchased portion of the Security surrendered. Any Security
not accepted for payment shall be promptly mailed or delivered by the Company
to the Holder thereof.
(d) Notwithstanding the foregoing, this Section
1013 shall not apply to any Asset Disposition which constitutes a transfer,
conveyance, sale, lease or other disposition of all or substantially all of
the Company's
-90-
<PAGE>
properties or assets within the meaning of Section 801 hereof.
SECTION 1014. Limitation on Issuances and Sales of
Capital Stock of Wholly Owned Subsidiaries.
The Company (i) shall not and shall not permit any
Wholly Owned Subsidiary to transfer, convey, sell or otherwise dispose of
Capital Stock of such or any other Wholly Owned Subsidiary to any Person
(other than the Company or a Wholly Owned Subsidiary) unless such transfer,
conveyance, sale or other disposition is of all the Capital Stock of such
Wholly Owned Subsidiary and the Net Available Proceeds from such transfer,
conveyance, sale or other disposition are applied in accordance with Section
1013 and (ii) will not permit any Wholly Owned Subsidiary to issue shares of
Capital Stock (other than directors' qualifying shares), or securities
convertible into, or warrants, rights or options to subscribe for or purchase
shares of, its Capital Stock to any Person other than to the Company or a
Wholly Owned Subsidiary unless in the case of either Clause (i) or (ii) above
(A) after giving effect to any such sale, disposition or issuance, the ratio
of the aggregate principal amount of Debt of the Company and its Subsidiaries
outstanding as of the most recent available balance sheet to Pro Forma
Consolidated Cash Flow for the preceding four fiscal quarters, determined on
a pro forma basis as if such sale, disposition or issuance had taken place
and the Net Available Proceeds therefrom had been applied at the beginning of
such four fiscal quarters, would be less than 6.5 to 1; (B) immediately after
giving effect to such sale, disposition or issuance (including any
acquisition of assets with Net Available Proceeds) no Event of Default or
event that with the passing of time or the giving of notice, or both, will
constitute an Event of Default shall have occurred or be continuing; (C) the
assets acquired pursuant to such sale, disposition or issuance, are either
(x) at least 85% cash or readily marketable cash equivalents and the Net
Available Proceeds from such sale, disposition or issuance are applied in
accordance with Section 1013 (including the provisions thereof relating to
the application of Net Available Proceeds therefrom) or (y) all or
substantially all of the assets or a majority of the Voting Stock of an
existing television or radio broadcasting or cable television business or
franchise (whether existing as a separate entity, subsidiary, division, unit
or otherwise) (subject to the restrictions described in the last sentence of
the second paragraph of Section 1013(a)); (D) after giving effect to any such
sale, disposition or issuance, such Wholly Owned Subsidiary shall be a
Subsidiary of the Company and (E) the
-91-
<PAGE>
Company (or the Subsidiary, as the case may be) receives consideration at the
time of the issuance, sale or disposition of the Capital Stock at least equal
to the fair value for the Capital Stock issued or sold (which shall be
determined in good faith by the Board of Directors, evidenced by a Board
Resolution).
SECTION 1015. Limitation on Liens Securing Company
Subordinated Debt.
The Company may not, and may not permit any
Subsidiary of the Company to, Incur or suffer to exist any Lien on or with
respect to any property or assets now owned or hereafter acquired to secure
any Debt of the Company that is expressly by its terms subordinate or junior
in right of payment (other than by reason of maturity) to any other Debt of
the Company without making, or causing such Subsidiary to make, effective
provision for securing the Securities (x) equally and ratably with such Debt
as to such property or assets for so long as such Debt will be so secured or
(y) in the event such Debt is subordinate in right of payment (other than by
reason of maturity) to the Securities, prior to such Debt as to such property
or assets for so long as such Debt will be so secured.
SECTION 1016. Limitation on Guarantees of Company
Subordinated Debt.
The Company may not permit any Subsidiary, directly
or indirectly, to assume, Guarantee or in any other manner become liable with
respect to any Debt of the Company that is expressly by its terms subordinate
or junior in right of payment (other than by reason of maturity) to any other
Debt of the Company.
SECTION 1017. Change of Control.
(a) Upon the occurrence of a Change of Control (as
defined below), each Holder of a Security shall have the right to have such
Security repurchased by the Company on the terms and conditions precedent set
forth in this Sec tion 1017 and this Indenture. The Company shall, within 30
days following the date of the consummation of a transaction resulting in a
Change of Control, mail an Offer with respect to an Offer to Purchase all
Outstanding Securities at a purchase price equal to 101% of their aggregate
principal amount plus accrued interest to the Purchase Date; provided,
however, that installments of interest whose Stated Maturity
-92-
<PAGE>
is on or prior to the Purchase Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and
the provisions of Section 307. Each Holder shall be entitled to tender all
or any portion of the Securities owned by such Holder pursuant to the Offer
to Purchase, subject to the requirement that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal amount.
(b) The Company and Trustee shall perform their
respective obligations specified in the Offer for the Offer to Purchase.
Prior to the Purchase Date, the Company shall (i) accept for payment
Securities or portions thereof tendered pursuant to the Offer, (ii) deposit
with the Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) money sufficient to
pay the purchase price of all Securities or portions thereof so accepted and
(iii) deliver or cause to be delivered to the Trustee all Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security or Securities
equal in principal amount to any unpurchased portion of the Security
surrendered as requested by the Holder. Any Security not accepted for
payment shall be promptly mailed or delivered by the Company to the Holder
thereof.
(c) A "Change of Control" shall be deemed to have
occurred in the event that, after the date of this Indenture, either (A) any
Person or any Persons (other than one or more Permitted Holders) acting
together which would constitute a "group" (a "Group") for purposes of Section
13(d) of the Exchange Act, or any successor provision thereto, together with
any Affiliates, shall beneficially own (as defined in Rule 13d-3 of the
Exchange Act or any successor provision thereto) at least 50% of the
aggregate voting power of all classes of Voting Stock of the Company; or (B)
any Person or Group (other than Permitted Holders), together with any
Affiliates, shall succeed in having sufficient of its or their nominees
elected to the Board of Directors of the Company such that such nominees,
when added to any existing director remaining on the Board of Directors of
the Company after such election who is an Affiliate, shall constitute a
majority of the Board of Directors of the Company. "Permitted Holder" means
(i) W. Don Cornwell and Stuart J. Beck, (ii) the members of the immediate
family of
-93-
<PAGE>
either of the persons referred to in Clause (i) above, (iii) any trust
created for the benefit of the persons described in Clause (i) or (ii) above
or any of their estates or (iv) any corporation that is controlled by any
person described in Clause (i), (ii) or (iii) above.
(d) Prior to the time required for the mailing of
an Offer with respect to an Offer to Purchase pursuant to paragraph (a), the
Company will (i) to the extent then required to be repaid, pay in full all
outstanding Senior Debt so as to permit the making of the Offer to Purchase
or (ii) obtain the requisite consents then required under the agreements
governing any Senior Debt. The failure by the Company to satisfy either
clause (i) or clause (ii) above shall not relieve the Company of its
obligation to make an Offer to Purchase required by paragraph (a) of this
Section 1017 in accordance with such paragraph.
SECTION 1018. Provision of Financial Information.
So long as any of the Securities are Outstanding,
and in addition to and without limitation of the Company's obligations
pursuant to Section 704, whether or not the Company is subject to Section
13(a) or 15(d) of the Exchange Act, the Company shall file with the
Commission the annual reports, quarterly reports and other documents that the
Company would have been required to file with the Commission pursuant to such
Sections 13(a) and 15(d) of the Exchange Act if the Company were so subject,
such documents to be filed with the Commis sion on or prior to the respective
dates (the "Required Filing Dates") by which the Company would have been
required so to file such documents if the Company were so subject; provided
that the Commission permits such filing. The Company shall also in any event
(x) within 15 days of each Required Filing Date (i) transmit by mail to all
Holders, as their names and addresses appear in the Security Register,
without cost to such Holders and (ii) file with the Trustee copies of the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to Section 13(a) and
15(d) of the Exchange Act if the Company were subject to such Sections and
(y) if filing such documents by the Company with the Commission is not per
mitted under the Exchange Act, promptly upon written request supply copies of
such documents to any prospective Holder.
SECTION 1019. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within
120 days after the end of each fiscal year of the
-94-
<PAGE>
Company ending after the date hereof, an Officers' Certificate, stating
whether or not to the best knowledge of the signers thereof the Company is in
default in the performance and observance of any of the terms, provisions and
conditions of Sections 1004 to 1018, inclusive, and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
(b) The Company shall deliver to the Trustee, as
soon as possible and in any event within 10 days after the Company becomes
aware of the occurrence of an Event of Default or an event which, with notice
or the lapse of time or both, would constitute an Event of Default, an
Officers' Certificate setting forth the details of such Event of Default or
default and the action which the Company proposes to take with respect
thereto.
SECTION 1020. Waiver of Certain Covenants.
The Company may omit in any particular instance to
comply with any covenant or condition set forth in Sections 1004 to 1017,
inclusive, if before or after the time for such compliance the Holders of at
least a majority in principal amount of the Outstanding Securities shall, by
Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such
waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of
any such covenant or condition shall remain in full force and effect.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
(a) The Securities may be redeemed at the election
of the Company from time to time in the event that on or before April 1, 2002
the Company receives net proceeds from any Major Asset Disposition or sale of
its Capital Stock (other than Disqualified Stock) in one or more offerings,
in which case the Company may, at its option and from time to time, use all
or a portion of any such net proceeds to redeem Securities in a principal
amount of up to aggregate amount of $75,000,000; provided, however, that
-95-
<PAGE>
Securities in an amount equal to at least $75,000,000 remain outstanding
after each such redemption. Any such redemption must occur on a Redemption
Date within 90 days of any such sale at a Redemption Price of 112.75% of the
principal amount of the Securities plus accrued interest to but excluding the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that
is on or prior to the Redemption Date).
(b) In addition, the Securities may be redeemed at
the election of the Company, as a whole or from time to time in part, at any
time on or after April 1, 2002, at the Redemption Prices specified in the
form of Security hereinbefore set forth, together with accrued interest to
the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the
Company, as permitted or required by any provision of this Indenture, shall
be made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities
pursuant to Section 1101 shall be evidenced by a Board Resolution. In case
of any redemption at the election of the Company of the Securities, the
Company shall, at least 45 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee in writing of such Redemption Date and of the principal
amount of Securities to be redeemed.
SECTION 1104. Securities to Be Redeemed Pro Rata.
If less than all the Securities are to be redeemed
in any redemption, the Securities to be redeemed shall be selected from the
Outstanding Securities not previously called for redemption, not more than 60
days prior to the Redemption Date by the Trustee pro rata, by lot or by such
other method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $1,000 or any
integral multiple thereof) of the principal amount of Securities of a
denomination larger than $1,000.
-96-
<PAGE>
The Trustee shall promptly notify the Company and
each Security Registrar in writing of the Securities selected for redemption
and, in the case of any Securities selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount of such
Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class
mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to
the Redemption Date, to each Holder of Securities to be redeemed, at his
address appearing in the Security Register.
All notices of redemption shall identify the
Securities to be redeemed (including CUSIP numbers) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) whether the redemption is being made pursuant to
Section 1101(a) or (b) and, if being made pursuant to
either Section 1101(a), a brief statement setting forth the
Company's right to effect such redemption and the Company's
basis therefor,
(4) if less than all the Outstanding Securities are
to be redeemed, the identification (and, in the case of
partial redemption of any Securities, the principal
amounts) of the particular Securities to be redeemed,
(5) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security to be
redeemed and that interest thereon will cease to accrue on
and after said date,
(6) the place or places where such Securities are to
be surrendered for payment of the Redemption Price, and
-97-
<PAGE>
(7) that in the case that a Security is only redeemed
in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities in an
aggregate amount equal to the unredeemed portion of the
Security.
Notice of redemption of Securities to be redeemed at
the election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the
Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting
as its own Paying Agent, segregate and hold in trust as provided in Section
1003) an amount of money sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid,
the Securities so to be redeemed shall, on the Redemption Date, become due
and payable at the Redemption Price therein specified, and from and after
such date (unless the Company shall default in the payment of the Redemption
Price and accrued interest) such Securities shall cease to bear interest.
Upon surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided, however,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of
Section 307.
If any Security called for redemption shall not be
so paid upon surrender thereof for redemption, the principal (and premium, if
any) shall, until paid, bear interest from the Redemption Date at the rate
provided by the Security.
-98-
<PAGE>
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part
shall be surrendered at an office or agency of the Company designated for
that purpose pursuant to Section 1002 (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of like tenor,
of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of
a Security, by his acceptance thereof, likewise covenants and agrees, that,
to the extent and in the manner hereinafter set forth in this Article, the
indebtedness repre sented by the Securities and the payment of the principal
of (and premium, if any) and interest on each and all of the Securities are
hereby expressly made subordinate and subject in right of payment to the
prior payment in full of all Senior Debt.
SECTION 1202. Payment Over of Proceeds Upon
Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company
or to its creditors, as such, or to its assets, or (b) any liquidation,
dissolution or other winding up of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshalling of assets
and liabilities of the Company, then and in any such event specified in (a),
(b) or (c) above (each such event, if any, herein sometimes referred to as a
"Proceeding") the holders of Senior Debt
-99-
<PAGE>
shall be entitled to receive payment in full of all amounts due or to become
due on or in respect of all Senior Debt, or provision shall be made for such
payment in cash or cash equivalents or otherwise in a manner satisfactory to
the holders of Senior Debt, before the Holders of the Securities are entitled
to receive any payment or distribution of any kind or character, whether in
cash, property or securities (including any payment or distribution which may
be payable or deliverable by reason of the payment of any other Debt of the
Company subordinated to the payment of the Securities, such payment or
distribution being hereinafter referred to as a "Junior Subordinated
Payment"), on account of principal of (or premium, if any) or interest on the
Securities or on account of purchase or other acquisition of Securities by
the Company or any Subsidiary (all such payments, distributions, purchases
and acquisitions herein referred to individually and collectively, as a
"Securities Payment"), and to that end the holders of Senior Debt shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or
securities which may be payable or deliverable in respect of the Securities
in any such Proceeding.
In the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any Security shall
have received any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, then and in such
event such payment or distribution shall be paid over or delivered forthwith
to the trustee in bank ruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of assets of
the Company for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all Senior Debt in full in cash or
cash equivalents, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt unless the Trustee shall
have knowledge, as provided in Section 1209, that the Senior Debt has been
paid in full or payment provided for in cash or cash equivalents or otherwise
in a manner satisfactory to the holder of Senior Debt.
For purposes of this Article only, the words "cash,
property or securities" shall not be deemed to include a payment or
distribution of stock or securities of the Company provided for by a plan of
reorganization or read justment or of any other corporation provided for by
such plan of reorganization or readjustment which stock or securities are
subordinated in right of payment to all then outstanding Senior Debt to
substantially the same extent as the Securities are so subordinated as
provided in this
-100-
<PAGE>
Article (any such stock or securities hereinafter called "Subordinated
Consideration"). The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and conditions
set forth in Article Eight shall not be deemed a Proceeding for the purposes
of this Section if the Person formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer such
properties and assets substantially as an entirety, as the case may be,
shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
SECTION 1203. No Payment When Senior Debt in
Default.
In the event that any Senior Payment Default (as
defined below) shall have occurred and be continuing, then no Securities
Payment (other than in Subordinated Consideration) shall be made unless and
until such Senior Payment Default shall have been cured or waived or shall
have ceased to exist or all amounts then due and payable in respect of Senior
Debt shall have been paid in full, or provision shall have been made for such
payment in cash or cash equivalents or otherwise in a manner satisfactory to
the holders of Senior Debt. "Senior Payment Default" means any default in the
payment of principal of (or premium, if any) or interest with respect to the
Senior Debt when due, whether at the Stated Maturity of any such payment or
by declaration of acceleration, call for redemption or otherwise.
In the event that any Senior Nonmonetary Default (as
defined below) shall have occurred and be continuing, then, upon the receipt
by the Company and the Trustee of written notice of such Senior Nonmonetary
Default from the Agent Bank for the Senior Loan Agreement (or any successor
credit facility) or such other holder of Senior Debt as the Company shall
have designated in an Officers' Certificate delivered to the Trustee (the
"Designated Senior Debt"), no Securities Payment (other than in Subordinated
Consideration) shall be made during the period (the "Payment Blockage
Period") commencing on the date of such receipt of such written notice and
ending on the earlier of (i) the date on which such Senior Nonmonetary
Default shall have been cured or waived or shall have ceased to exist and any
acceleration of Senior Debt shall have been rescinded or annulled or the
Senior Debt to which such Senior Nonmonetary
-101-
<PAGE>
Default relates shall have been discharged or (ii) the 179th day after the
date of such receipt of such written notice; provided, however, that no more
than one Payment Blockage Period may be commenced with respect to the
Securities during any 360-day period and there shall be a period of at least
181 consecutive days in each such 360-day period when no Payment Blockage
Period is in effect. For all purposes of this paragraph, no Senior
Nonmonetary Default that existed or was continuing on the date of
commencement of any Payment Blockage Period shall be, or be made, the basis
for the commencement of a subsequent Payment Blockage Period by holders of
Senior Debt or their representatives unless such Senior Nonmonetary Default
shall have been cured or waived for a period of not less than 90 consecutive
days. "Senior Nonmonetary Default" means the occurrence or existence of any
event, circumstance, condition or state of facts that, by the terms of any
instrument pursuant to which any Senior Debt is outstanding, permits one or
more holders of such Senior Debt (or a trustee or agent on behalf of the
holders thereof) then to declare such Senior Debt due and payable prior to
the date on which it would otherwise become due and payable, other than a
Senior Payment Default.
In the event that, notwithstanding the foregoing,
the Company shall make any payment to the Trustee or any Holder prohibited by
the foregoing provi sions of this Section, and if such fact shall, at or
prior to the time of such payment, have been made known to the Trustee as
provided in Section 1209 or, as the case may be, such Holder, then and in
such event such payment shall be paid over and delivered forthwith to the
Company.
The provisions of this Section shall not apply to
any payment with respect to which Section 1202 would be applicable.
SECTION 1204. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in
this Indenture or in any of the Securities shall prevent (a) the Company, at
any time except during the pendency of any Proceeding referred to in Section
1202 or under the conditions described in Section 1203, from making
Securities Payments, or (b) the application by the Trustee of any money
deposited with it hereunder to Securities Payments or the retention of such
payment by the Holders, if, at the time of such application by the Trustee,
it did not have knowledge that such payment would have been prohibited by the
provisions of this Article.
-102-
<PAGE>
SECTION 1205. Subrogation to Rights of Holders
of Senior Debt.
Subject to the payment in full of all amounts due or
to become due on or in respect of Senior Debt, or provision being made for
such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, the Holders of the Securities
shall be subrogated to the rights of the holders of such Senior Debt to
receive payments and distributions of cash, property and securities
applicable to the Senior Debt until the principal of (and premium, if any)
and interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior Debt
of any cash, property or securities to which the Holders of the Securities or
the Trustee would be entitled except for the provisions of this Article, and
no payments over pursuant to the provisions of this Article to the holders of
Senior Debt by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Debt and the Holders of
the Securities, be deemed to be a payment or distribution by the Company to
or on account of the Senior Debt.
SECTION 1206. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended
solely for the purpose of defining the relative rights of the Holders on the
one hand and the holders of Senior Debt on the other hand. Nothing contained
in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its creditors other
than holders of Senior Debt and the Holders of the Securities, the obligation
of the Company, which is absolute and unconditional (and which, subject to
the rights under this Article of the holders of Senior Debt, is intended to
rank equally with all other general obligations of the Company) to pay to the
Holders of the Securities the principal of (and premium, if any) and interest
on the Securities as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other
than the holders of Senior Debt; or (c) prevent the Trustee or the Holder of
any Security from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture, subject to the rights, if any, under
this Article of the holders of Senior Debt to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
-103-
<PAGE>
SECTION 1207. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee his attorney-in-fact for any and all such
purposes.
SECTION 1208. No Waiver of Subordination Provisions.
No right of any present or future holder of any
Senior Debt to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regard less of any knowledge thereof any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Debt may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders
of the Securities, without incurring responsibility to the Holders of the
Securities and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities to
the holders of Senior Debt, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or
renew or alter, Senior Debt, or otherwise amend or supplement in any manner
Senior Debt or any instrument evidencing the same or any agreement under
which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior Debt;
(iii) release any Person liable in any manner for the collection of Senior
Debt; and (iv) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 1209. Notice to Trustee.
The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the making of
any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article or any other provision of this
Indenture,
-104-
<PAGE>
the Trustee shall not be charged with knowledge of the existence of any
facts which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Debt or from
any trustee therefor; and, prior to the receipt of any such written notice,
the Trustee, subject to the provisions of Section 601, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if a
Responsible Officer of the Trustee shall not have received, at least three
Business Days prior to the date upon which by the terms hereof any such money
may become payable for any purpose, the notice with respect to such money
provided for in this Section 1209, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purpose for which such money
was received and shall not be affected by any notice to the contrary which
may be received by it within three Business Days prior to such date.
Subject to the provisions of Section 601, the
Trustee shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Debt (or a trustee
therefor); provided, however, that failure to give such notice to the Company
shall not affect in any way the ability of the Trustee to rely on such
notice. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held
by such Person, the extent to which such Person is entitled to participate in
such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.
SECTION 1210. Reliance on Judicial Order or Certificate
of Liquidating Agent.
Upon any payment or distribution of assets of the
Company referred to in this Article, the Trustee, subject to the provisions
of Section 601, and the Holders of the Securities shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in
which such
-105-
<PAGE>
Proceeding, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent
or other Person making such payment or distribution, delivered to the Trustee
or to the Holders of Securities, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Senior Debt and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article.
SECTION 1211. Trustee Not Fiduciary for Holders of
Senior Debt.
With respect to the holders of Senior Debt, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of Senior Debt, shall be
read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt and shall not
be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders of Securities or to the Company or to any other
Person cash, property or securities to which any holders of Senior Debt shall
be entitled by virtue of this Article or otherwise.
SECTION 1212. Rights of Trustee as Holder of Senior
Debt; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article with respect to any
Senior Debt which may at any time be held by it, to the same extent as any
other holder of Senior Debt, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.
SECTION 1213. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the
Trustee shall have been appointed by the Company and be then acting
hereunder, the term "Trustee" as used in this Article shall in such case
(unless the context otherwise requires) be construed as extending to and
including such
-106-
<PAGE>
Paying Agent within its meaning as fully for all intents and purposes as if
such Paying Agent were named in this Article in addition to or in place of
the Trustee; provided, however, that Section 1212 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
SECTION 1214. Defeasance of this Article Twelve.
The subordination of the Securities provided by this
Article Twelve is expressly made subject to the provisions for defeasance or
covenant defeasance in Article Thirteen hereof and, anything herein to the
contrary notwithstanding, upon the effectiveness of any such defeasance or
covenant defeasance, the Securities then outstanding shall thereupon cease to
be subordinated pursuant to this Article Twelve.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may at its option by Board Resolution,
at any time (subject to 10-day prior written notification to the Trustee),
elect to have either Section 1302 or Section 1303 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this
Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise of the option provided
in Section 1301 applicable to this Section, the Company shall be deemed to
have been discharged from its obligations with respect to the Outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that
the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Securities and to have satisfied
all its other obligations under such Securities and this Indenture insofar as
such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until
-107-
<PAGE>
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Securities to receive, solely from the trust fund described in
Section 1304 and as more fully set forth in such Section, payments in respect
of the principal of (and premium, if any) and interest on such Securities
when such payments are due, (B) the Company's obligations with respect to
such Securities under Sections 304, 305, 306, 1002 and 1003, (C) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (D) this
Article Thirteen. Subject to compliance with this Article Thirteen, the
Company may exercise its option under this Section 1302 notwithstanding the
prior exercise of its option under Section 1303.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise of the option provided
in Section 1301 applicable to this Section (i) the Company shall be released
from its obligations under Sections 1005 through 1018, inclusive, and Clauses
(3) and (4) of Section 801, (ii) the occurrence of an event specified in
Sections 501(3), 501(4) (with respect to Clauses (3) and (4) of Section 801
and Sections 1005 through 1018, inclusive), 501(5) and 501(6) shall not be
deemed to be an Event of Default and (iii) the provisions of Article Twelve
shall cease to be effective, on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance"). For this purpose,
such covenant defeasance means that the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such Section or Article, whether directly or indirectly by
reason of any reference elsewhere herein to any such Section or Article or by
reason of any reference in any such Section or Article to any other provision
herein or in any other document, but the remainder of this Indenture and such
Securities shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or
Covenant Defeasance.
The following shall be the conditions to application
of either Section 1302 or Section 1303 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 609 who shall agree
to comply with the provisions of this Article Thirteen
applicable to it) as trust funds in
-108-
<PAGE>
trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will
provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized
accounting firm expressed in a written certification
thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of,
premium, if any, and each installment of interest on the
Securities on the Stated Maturity of such principal or
installment of interest on the day on which such payments
are due and payable in accordance with the terms of this
Indenture and of such Securities. For this purpose, "U.S.
Government Obligations" means securities that are (x)
direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or
(y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act)
as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by
such custodian for the account of the holder of such
depository receipt; provided that (except as required by
law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository
receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(2) No Event of Default or event which with notice or
lapse of time or both would become an Event of Default
shall have occurred and be continuing on the date of such
deposit or, insofar as subsections 501(8) and (9) are
concerned, at any time during the period ending on the 91st
day after the date of such deposit
-109-
<PAGE>
(it being understood that this condition shall not be
deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest as defined
in Section 608 and for purposes of the Trust Indenture Act
with respect to any securities of the Company.
(4) Such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default
under, this Indenture or any other agreement or instrument
to which the Company is a party or by which it is bound.
(5) The Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating
to either the defeasance under Section 1302 or the covenant
defeasance under Section 1303 (as the case may be) have
been complied with.
(6) In the case of an election under Section 1302,
the Company shall have delivered to the Trustee an Opinion
of Counsel stating that (x) the Company has received from,
or there has been published by, the Internal Revenue
Service a ruling, or (y) since the date of this Indenture
there has been a change in the applicable Federal income
tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the
Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred.
(7) In the case of an election under Section 1303,
the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Holders of the
Outstanding Securities will not recognize income, gain or
loss for Federal income tax purposes as a result of such
deposit and covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
covenant defeasance had not occurred.
-110-
<PAGE>
(8) The Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit and
defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment
company as defined in the Investment Company Act of 1940,
as amended, or such trust shall be qualified under such act
or exempt from regulation thereunder.
(9) At the time of such deposit: (A) no default in
the payment of all or a portion of principal of (or
premium, if any) or interest on any Senior Debt shall have
occurred and be continuing, and no event of default with
respect to any Senior Debt shall have occurred and be
continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the
date on which it would otherwise have become due and
payable and (B) no other event of default with respect to
any Senior Debt shall have occurred and be continuing
permitting (after notice or the lapse of time, or both)
the holders of such Senior Debt (or a trustee on behalf of
the holders thereof) to declare such Senior Debt due and
payable prior to the date on which it would otherwise have
become due and payable, or, in the case of either Clause
(A) or Clause (B) above, each such default or event of
default shall have been cured or waived or shall have
ceased to exist.
SECTION 1305. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of
Section 1003, all money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying
trustee--collectively, for purposes of this Section 1305, the "Trustee")
pursuant to Section 1304 in respect of the Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities, of all sums due and
to become due thereon in respect of principal (and premium, if any) and
interest, but such money need not be segregated from other funds except to
the extent required by law.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
-111-
<PAGE>
against the U.S. Government Obligations deposited pursuant to Section 1304 or
the principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of
the Out standing Securities.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Sec tion 1304 which, in the opinion of a nationally recognized
accounting firm expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to
be deposited to effect an equivalent defeasance or covenant defeasance.
---------------
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
-112-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, and their respective corporate seals to
be hereunto affixed and attested, all as of the day and year first above
written.
GRANITE BROADCASTING CORPORATION
By /s/ LAWRENCE I. WILLS
-----------------------------------
Name: Lawrence I. Wills
Title: Vice President -- Finance
and Controller
[SEAL]
Attest:
/s/ JENNIFER A. CONWAY
- - ---------------------------
THE BANK OF NEW YORK, as Trustee
By /s/ STEPHEN J. GIURLANDO
-----------------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
[SEAL]
Attest:
/s/
- - ---------------------------
<PAGE>
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the 31st day of January, 1997, before me
personally came Larry I. Wills, to me known, who, being by me duly
--------------
sworn, did depose and say that he is the
Vice President--Finance and Controller of Granite
- - -------------------------------------
Broadcasting Corporation, one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
/s/ THERESA M. CEGLECKI
----------------------------
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the 31st day of January, 1997, before me
personally came Stephen J. Giurlando, to me known, who, being by me
--------------------
duly sworn, did depose and say that he is a
Assistant Vice President of The Bank of New
- - ------------------------
York, one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by
authority of the By-Laws of said corporation; and that he signed his name
thereto by like authority.
/s/ WILLIAM J. CASSELS
----------------------------
<PAGE>
Exhibit 10.19
GRANITE BROADCASTING CORPORATION
DIRECTORS' STOCK OPTION PLAN
As amended through February 25, 1997
ARTICLE I
GENERAL
1.01. Purpose. The purpose of the Granite Broadcasting Corporation
Directors' Stock Option Plan (the "Plan") is to promote the overall financial
objectives of Granite Broadcasting Corporation (the "Company") and its
stockholders by aligning the interests of the Company's stockholders and its
Non-Employee Directors (as defined in Article IV) through the grant of options
to acquire shares of the Company's Common Stock (Nonvoting), par value $.01 per
share, and any other stock or security resulting from the adjustment thereof or
substitution therefor pursuant to Section 8.02 ("Common Stock (Nonvoting)").
The Plan is also intended to attract and retain well-qualified persons for
service as Non-Employee Directors. The Plan is designed to comply with the
provisions of Rule 16b-3 ("Rule 16b-3") promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
1.02. Options. For the purposes of the Plan, the right to acquire a
specified number of shares of Common Stock (Nonvoting) at a stated price in
accordance with the terms of this Plan and an Option Agreement (as defined in
Section 6.02) shall be referred to as an "Option." Options granted under the
Plan will not qualify as "Incentive Stock Options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
1.03. Effective Date of Plan. This Plan shall become effective on March 1,
1994 (the "Effective Date"); provided, however, that the approval by a majority
(or such other proportion as may be required by state law or the Certificate of
Incorporation of the Company) of the outstanding shares of Voting Common Stock,
par value $.01 per share, of the Company (the "Voting Common Stock"), voted
either in person or by proxy, at a duly held stockholders meeting or by written
consent is obtained within twelve (12) months of such adoption.
ARTICLE II
ADMINISTRATION OF THE PLAN
The Plan shall be implemented and administered by the Board. Subject to
the terms and conditions of the Plan, the Board shall have the power to construe
the provisions of the Plan, to determine all questions arising thereunder, and
to adopt and
<PAGE>
amend such rules and regulations for administering the Plan as the
Board deems desirable. In construing, amending and administering the Plan, the
Board shall have full and final discretion in all of its actions under the Plan
only to the extent consistent with Rule 16b-3(c)(2)(ii) promulgated under the
Exchange Act. All expenses of administering the Plan shall be borne by the
Company.
ARTICLE III
STOCK SUBJECT TO THE PLAN
3.01. Number of Shares. The stock subject to the Options granted under this
Plan shall be the Common Stock (Nonvoting). Under the Plan, Options may be
granted to purchase up to 300,000 shares of Common Stock (Nonvoting), subject to
adjustment as provided in Section 8.02. The shares of Common Stock (Nonvoting)
to be issued upon the exercise of Options may be authorized but unissued shares,
or shares issued and reacquired by the Company.
3.02. Release of Shares. If any Option granted hereunder shall be
cancelled, expire or terminate for any reason without having been exercised in
full, the shares of Common Stock (Nonvoting) subject to such Option shall
thereafter again be available to be granted under the Plan.
3.03. Stockholder Rights. No person shall have any rights of a stockholder
of the Company with respect to shares of Common Stock (Nonvoting) subject to an
Option until, after proper exercise of the Option, such shares have been
recorded on the Company's official stockholder records as having been issued or
transferred to the party exercising the Option. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
shares are recorded as issued or transferred (to the party exercising the
Option) in the Company's official stockholder records, except as provided in
Section 8.02. The Company shall cause its transfer agent to record the shares
as issued or transferred.
3.04. Stock Valuation. If and when the value or closing price of Common
Stock (Nonvoting) shall be required to be determined, it shall be 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 (which value or closing price shall be
referred to herein as the "Fair Market Value per share," or for a group of
shares, as the total "Fair Market Value").
<PAGE>
ARTICLE IV
ELIGIBILITY
Each member of the Board who is not an employee, either full-time or
part-time, of the Company (each a "Non-Employee Director") shall be eligible to
receive Options to purchase shares of Common Stock (Nonvoting) in accordance
with Article V. A person to whom an Option hereunder is granted shall be
referred to hereinafter as an "Optionee" and such term shall include any person
who is appointed as a guardian of the Optionee's estate, any legal
representative of the Optionee's estate and any person to whom the Option is
transferred pursuant to the applicable laws of descent and distribution.
ARTICLE V
GRANT OF OPTIONS
5.01. Director Service Awards.
(a) During the five (5) day period commencing on the Effective Date, each
Director shall have the right to make an irrevocable three-year election to
receive Options as compensation payable to such Director for attendance at
regular quarterly meetings ("Regular Board Meetings") of the Board (an "Option
Election"). Each Director making an Option Election shall receive an Option to
purchase 10,800 shares of Common Stock (Nonvoting) ("1994 Awards") in lieu of
the cash compensation that he would otherwise receive for attending Regular
Board Meetings during the period from and including the Effective Date until the
earlier to occur of: (i) termination of such Director's membership on the Board
("Completion of Service"); or (ii) the day immediately preceding the next
Triennial Period Commencement Date (as defined below) (the "Triennial Period
Completion Date"). Each Director who received 1994 Awards shall be granted an
Option, dated July 25, 1995, to purchase 3,600 shares of Common Stock
(Nonvoting) ("1995 Awards"), which number of shares equals 600 multiplied by the
number of Regular Board Meetings from July 24, 1995 until the next occurring
Triennial Period Completion Date, as compensation for attendance at Regular
Board Meetings during the period from and including the Date of Grant of the
Option until the earlier to occur of: (i) his or her Completion of Service; or
(ii) the next occurring Triennial Completion Date. On February 25, 1997 and
each third year anniversary thereof (each of such dates and the Effective Date,
a "Triennial Period Commencement Date"), each Director then in office shall be
granted an Option to purchase 18,000 shares of Common Stock (Nonvoting), which
Option shall serve as the Director's Compensation for attendance at Regular
Board Meetings during the period from and including the Date of Grant of the
Option until the earlier to occur of: (i) his or her Completion of Service; or
(ii) the next occurring Triennial Completion Date.
<PAGE>
Any compensation for attendance at any other meetings of the Board shall be
only in cash.
(b) Each person who first becomes a Director after the Effective Date
(other than on a Triennial Period Commencement Date) shall be granted, on the
date such Director is first elected a Director of the Company, an Option to
purchase a number of shares equal to: 1,500 multiplied by the number of Regular
Board Meetings scheduled from the date of his or her commencement of service as
a Director until the next occurring Triennial Period Completion Date, which
Option shall serve as the Director's compensation for attendance at Regular
Board Meetings during the period from and including his or her election as a
Director until the earlier to occur of: (i) his or her Completion of Service; or
(ii) the next occurring Triennial Period Completion Date.
5.02. Committee Service Awards.
(a) On the Effective Date and on the first anniversary of the Effective
Date, each Director shall be granted an Option to purchase 400 shares of Common
Stock (Nonvoting) (an "Annual Committee Award") as compensation for service on
each committee of the Board on which he or she serves, if any.
(b) On July 25, 1995, each Director who is then a member of the Company's
Audit Committee or Compensation Committee (each such Committee and only such
Committees being a "Board Committee") shall be granted an Option to purchase
6,000 shares of Common Stock (Nonvoting) (a "1995 Committee Award") for service
on each Board Committee on which he or she is a member. On each Triennial
Period Commencement Date (other than the Effective Date), each Director who is
then a member of a Board Committee shall be granted an Option to purchase 9,000
shares of Common Stock (Nonvoting) for service on each Board Committee on which
he or she is a member. Each person who becomes a member of a specific Board
Committee for the first time after July 25, 1995 (other than on a Triennial
Period Commencement Date), shall be granted an Option to purchase a number of
shares of Common Stock (Nonvoting) equal to 9,000 minus 1,500 multiplied by the
number of complete 180 day periods from the Triennial Period Commencement Date
immediately preceding the Date of Grant of such Option until the Date of Grant.
All Options granted pursuant to this Section 5.02(b) shall serve as compensation
to Board Committee members for attendance at Regularly Scheduled Committee
Meetings of the Board Committee for which the Option was granted occurring from
the Date of Grant of such Options until the earlier to occur of: (i) termination
of such Director's membership on the Board Committee; or (ii) the next occurring
Triennial Completion Date. For purposes of this Plan, Regularly Scheduled
Committee Meetings shall mean up to two meetings per calendar year of a Board
Committee occurring on, or within 30 days' prior to, a Regular Board Meeting.
<PAGE>
ARTICLE VI
TERMS AND CONDITIONS OF OPTIONS
6.01. Exercise Price. The price per share of each share of Common Stock
(Nonvoting) purchased upon the exercise of an Option shall be the Fair Market
Value per share of the Common Stock (Nonvoting) on the date the Option is
granted (the "Date of Grant").
6.02. Option Agreement. Each Option granted under this Plan shall be
evidenced by an option agreement (an "Option Agreement"), which shall embody the
terms and conditions of such Option and which shall be subject to the express
terms and conditions set forth in the Plan.
6.03. Term of Option; Exercisability.
(a) With respect to all awards granted on or prior to the initial
Triennial Period Completion Date (other than Annual Committee Awards), subject
to the provisions of Articles VII and IX and Section 8.02, on the first
anniversary of the date of attendance, in person, at each Regular Board Meeting
or Regularly Scheduled Committee Meeting, as applicable, held prior to the
Triennial Period Completion Date for the period covered by such award, Options
to purchase 1,500 (900 shares with respect to the 1994 Grants and 600 shares
with respect to the 1995 Grants) shares of Common Stock (Nonvoting) shall become
fully exercisable. All Annual Committee Service Awards shall become fully
exercisable on the first anniversary of the Date of Grant thereof.
(b) With respect to all awards granted on or after the second Triennial
Period Commencement Date, subject to the provisions of Article VII and IX and
Section 8.02, Options to purchase 1,500 shares of Common Stock (Nonvoting) shall
become fully exercisable on the date of attendance, in person, at each Regular
Board Meeting or Regularly Scheduled Committee Meeting, as applicable, held
prior to the Triennial Completion Date for the period covered by the award.
(c) In addition, subject to the provisions of Articles VII and IX and
Section 8.02, Options granted pursuant to Section 5.01 (other than 1995 Awards)
to purchase 500 shares of Common Stock (Nonvoting) shall become fully
exercisable on the date of attendance (or the first anniversary of the date of
attendance with respect to 1994 Awards) by telephonic means at a Regular Board
Meeting of duration longer than 30 minutes held prior to the Triennial
Completion Date for the period covered by the Options.
(d) Notwithstanding anything to the contrary contained in this Section
6.03, no Options shall become exercisable prior to the amendment of the
Company's Certificate of Incorporation to
<PAGE>
increase the authorized number of shares of Common Stock (Nonvoting) to at
least 30,000,000 shares. Once exercisable, all Options, unless earlier
terminated pursuant to the provisions of the Plan, shall remain exercisable
until ten (10) years from the Date of Grant (the "Option Period"). An
exercisable Option, or portion thereof, may be exercised in whole or in part
only with respect to whole shares of Common Stock (Nonvoting).
(e) All Options (whenever granted, that could become exercisable as a
result of attendance at a future Regular Board Meeting or Regularly Scheduled
Committee Meeting or that, upon the passage of time following attendance at a
prior Regular Board Meeting or Regularly Scheduled Committee Meeting, would
become exercisable) shall become immediately exercisable upon: (i) the death or
disability (as defined in Section 22(e)(3) of the Code) 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."
6.04. Method of Exercise. An Option may be exercised: (i) by giving written
notice to the Company's Secretary at the Company's main office, 767 Third
Avenue, New York, New York 10019 (or any office which is the successor main
office or which is otherwise designated as the office to which such notice is to
be given), specifying the number of whole shares to be purchased and accompanied
by payment therefor in full in a method provided in Section 6.05 below; and (ii)
by executing such documents as the Company may reasonably request to satisfy the
Optionee's obligations under the Plan and the Option Agreement. No shares of
Common Stock (Nonvoting) shall be issued until the full purchase price therefor
has been paid and the withholding obligations described in Article XII have been
satisfied. The Company shall 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 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 the law. Pursuant to Article IX, the Company may also
require that, at the time of exercise, each Optionee 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.
6.05. Method of Payment. The purchase price of the shares of Common Stock
(Nonvoting) as to which an Option shall be exercised, shall be paid to the
Company: (i) in cash; (ii) in previously owned whole shares of Common Stock
(Nonvoting)(for which the director has good title free and clear of all liens
and encumbrances) having a Fair Market Value determined as of the date of
exercise; or (iii) a combination of (i) and (ii).
<PAGE>
6.06. Non-assignability. Except to the extent specifically provided in
Section 7.01 below or in a domestic relations order which is determined to be a
qualified domestic relations order described in the Code or in Title I of the
Employee Retirement Income Security Act of 1974, as amended, Options are not
transferable otherwise than by will or the laws of descent and distribution, and
are exercisable during an Optionee's lifetime only by the Optionee (including
the duly appointed guardian of the estate of the Optionee).
ARTICLE VII
TERMINATION
7.01. Disability or Death. If a Non-Employee Director's directorship
terminates by reason of Disability (as defined herein) or death, any Option
granted under the Plan and held by the Non-Employee Director may thereafter be
exercised by such Director (or the duly appointed guardian of the director's
estate or the legal representative of the director's estate or the person to
whom the Option is transferred pursuant to applicable laws of descent and
distribution) at any time prior to the earlier to occur of six (6) months after
the date of such termination of the Non-Employee's Director's directorship and
the expiration of the Option Period, but, subject to Section 6.03(e), only to
the extent of the number of shares for which Options were then exercisable by
him on the date of termination. If a Non-Employee Director dies during the six
(6) month period following termination of such director's directorship by reason
of Disability, any Option held by the Non-Employee Director may thereafter be
exercised by the legal representative of the Director's estate (or the person to
whom the Option is transferred pursuant to applicable laws of descent and
distribution) for a period of six (6) months from the date of death. A
Disability shall mean a permanent physical or mental incapacity which, in the
reasonable determination of the Board, renders the Optionee unable to perform
the duties of a director of the Company.
7.02. Other Termination. If a Non-Employee Director's directorship
terminates for any reason other than Disability or death, any Option held by the
Non-Employee Director (excluding any Option which, as of the date of the
termination of directorship, was not then exercisable) may thereafter be
exercised at any time prior to the first to occur of ninety (90) days after such
date and the expiration of the Option Period.
7.03. Automatic Termination. Any Option or any portion thereof that does
not become exercisable within four (4) years after the Date of Grant thereof
shall automatically terminate on such fourth anniversary of the Date of Grant.
<PAGE>
ARTICLE VIII
PROVISIONS APPLICABLE TO THE PLAN
8.01. Duration of the Plan. The Plan shall continue in effect until it is
terminated by action of the Board, but such termination shall not affect the
terms of any then-outstanding Options.
8.02. Adjustments.
(a) 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 Common Stock (Nonvoting) 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 (b) or (c) of this
Section 8.02, 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
Common Stock (Nonvoting) then subject to outstanding Options.
(b) Adjustment of Options on Recapitalization. The aggregate number of
shares of Common Stock (Nonvoting) 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 (Nonvoting) 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 any other distribution to all holders of Common
Stock (Nonvoting) other than normal cash dividends; provided, however, that any
Options to purchase fractional shares resulting from any such adjustment shall
be eliminated.
(c) Adjustment of Options Upon Reorganization.
(i) 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 surviving
<PAGE>
entity and the shareholders of Common Stock (Nonvoting) 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
(Nonvoting) 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.
(ii) The resulting corporation 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.
8.03. Amendments of the Plan. The Board may amend this Plan as it shall
deem advisable, subject to any requirements of stockholder approval imposed by
applicable law; provided, however, that no amendment shall be made to any of
this Section 8.03, Articles IV or V or Sections 6.01, 6.02, or 6.03 more than
once every six months other than to comply with changes in the Code, the
Employment Retirement Income Securities Act, as amended, or the rules
thereunder, nor may the Plan be otherwise amended in a manner which fails to
comply with Rule 16b-3(c)(2)(ii)(B) promulgated under Section 16 of the Exchange
Act. No amendment may impair the rights of a holder of an outstanding Option
without the consent of such holder.
ARTICLE IX
REQUIREMENTS OF LAW
9.01. The Company shall not be required to sell or issue any shares upon the
exercise of 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 (Nonvoting)
covered by an Option, the Company shall not be required to issue shares upon
exercise of any Option unless: (i) the Company 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) an opinion of counsel to the Company has been received by the Company, in a
form and substance which is deemed acceptable by the Company, to the effect that
a registration
<PAGE>
statement is not required. Any determination in this connection by the
Company 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 that 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 an 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
thereto to comply with any law or regulation of any governmental authority.
ARTICLE X
USE OF PROCEEDS
10.01. The proceeds of the sale of Common Stock (Nonvoting) pursuant to the
exercise of the Options will be used for the Company's general corporate
purposes.
ARTICLE XI
INDEMNIFICATION OF THE
BOARD OF DIRECTORS
11.01. Each member of the Board 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 the Board, whether
or not he continues to be a member of the Board at the time of incurring such
loss, liabilities, costs and expenses. Notwithstanding any of the foregoing, no
member of the Board shall be entitled to such indemnification from the Company
for any loss, liabilities, costs and expenses incurred by him: (i) in respect of
matters as to which he shall be finally adjudged in any such action, suit or
<PAGE>
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duty as a member of the Board; or (ii) 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 such member the Board 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 member of the
Board and shall be in addition to all other rights to which such member of the
Board may be entitled as a matter of law, contract or otherwise.
ARTICLE XII
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.
ARTICLE XIII
GENERAL PROVISIONS
13.01. Effect on Service. Neither the adoption of this Plan, its operation,
nor any documents describing or referring to this Plan (or any part thereof)
shall confer upon any Participant any right to continue service as a member of
the Board.
13.02. Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under this Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created pursuant to this
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
13.03. Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
13.04. Applicable Law. The Plan shall be construed, governed and enforced in
accordance with the laws of the State of Delaware, without regard to choice of
law principles.
<PAGE>
Exhibit 10.30
EMPLOYMENT AGREEMENT
____________________
THIS AGREEMENT, made and entered into this 24th day of January, 1997, to be
effective as of the 19th day of September, 1996, by and between GRANITE
BROADCASTING CORPORATION, a Delaware corporation (the "Company"), and ROBERT E.
SELWYN, JR. ("Employee").
WHEREAS, the Company desires to employ and secure for itself the
experience, abilities and services of Employee;
WHEREAS, in consideration of the employment to be provided hereby, Employee
desires to serve as an employee of the Company; and
WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions for the employment relationship of Employee with the
Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Employee agree as follows:
1. Employment Terms and Duties.
1.1 Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
set forth in this Agreement.
1.2 Term. Subject to the provisions of Section 6 hereof, the term of
the Employee's employment under this Agreement will commence as of September 19,
1996 (the "Effective Date") and end on January 31, 2000 (the "Initial Term").
The Initial Term may be extended by mutual written agreement of the parties (the
Initial
<PAGE>
Term and any extensions thereto shall be referred to as the "Term").
1.3 Title and Duties. Employee shall be employed as Chief Operating
Officer - Station Group of the Company. As an officer of the Company, Employee
shall render executive, policy and other management services to the Company of
the type customarily performed by persons serving in a similar executive
capacity. Employee will be responsible for the full day to day operations of
the Company's Station Group through the Station Managers. Employee shall also
have such powers and duties as the Chief Executive Officer, President and Board
of Directors of the Company (the "Board of Directors") may from time to time
assign and designate. Except as expressly permitted by the Company in
accordance with Section 1.4 hereof, Employee agrees to use his skills and
abilities to further the interests of the Company and to devote his full time,
attention, energies and efforts to rendering services on behalf of the Company
and its subsidiaries in accordance with the terms hereof.
1.4 Employee's Permitted Arrangement. The Company acknowledges that
it has received full disclosure by Employee with respect to Employee's
consulting arrangement under that certain New World Television Incorporated
Employment Agreement With Robert E. Selwyn, Jr. dated as of January 30, 1996
(the "New World Agreement"). Notwithstanding anything in this Agreement to the
contrary, the Company consents to Employee's ongoing advisory and consulting
duties under the New World Agreement in accordance with
2
<PAGE>
the terms thereof. Employee agrees to notify the Company promptly upon
Employee's receipt of any request of Employee to perform services under the
New World Agreement. The Company further acknowledges that Employee is bound
by certain confidentiality and non-competition provisions contained under
Section 5 of the New World Agreement. The Company covenants and agrees to
indemnify Employee against any and all claims, costs, charges, expenses,
losses and liabilities incurred or sustained by Employee in connection with
any action, suit or proceeding to which Employee may be made a party as a
result of an alleged breach by Employee of said confidentiality and/or
non-competition provisions arising out of or in connection wit Employee's
employment by the Company.
2. Compensation. Except as otherwise agreed to by Employee in writing,
Employee's compensation for the services performed under this Agreement shall be
as follows:
2.1 Base Salary. The Employee will be paid an annual salary of not
less than Three Hundred Fifty Thousand Dollars ($350,000), subject to upward
adjustment as provided below (the "Base Salary"), which will be payable in equal
periodic installments according to the Company's customary payroll practices.
The Base Salary will be reviewed by the Chief Executive Officer not less than
annually, and may be adjusted upward in the discretion of the Board of
Directors.
2.2 Additional Compensation.
2.2.1 Cash Bonus. In addition to the Base Salary provided in
Section 2.1 of this Agreement, Employee shall, with
3
<PAGE>
respect to each calendar year or part thereof during the Term, be eligible to
earn an annual cash bonus (the "Incentive Compensation"). The determination
of whether to grant the cash bonus and the amount of such cash bonus shall be
made by the Chief Executive Officer and shall be subject to approval by the
Compensation Committee of the Board of Directors (the "Compensation
Committee"). Employee's right to Incentive Compensation for a particular
period shall not accrue until said determination is made by the Chief
Executive Officer and approved by the Compensation Committee.
2.2.2 Equity Compensation.
(a) Management Stock Plan Grants. Employee shall be
granted 30,000 Bonus Shares under the Company's Management Stock Plan, with
10,000 shares of Common Stock (Nonvoting) of the Company, par value $0.01 per
share (the "Common Stock (Nonvoting)") to be issued to Employee, subject to the
terms and conditions of such Plan, on each of December 31, 1997, 1998 and 1999.
(b) Stock Options. Employee has been granted options to
purchase 150,000 shares of Common Stock (Nonvoting) of the Company, which
options are governed by the terms and conditions of that certain Stock Option
Agreements between Employee and the Company.
(c) Employee Stock Purchase Plan Eligibility. Employee
shall, during the Term, be eligible to participate in the Company's Employee
Stock Purchase Plan.
4
<PAGE>
3. Additional Benefits.
3.1 Medical and Health Coverage; Disability Insurance. Employee
shall be eligible to participate in all major medical, hospitalization, and
disability and life insurance plans that may be in effect from time to time for
management-level employees of the Company to the extent that Employee is
eligible under the terms of those plans.
3.2 401(k) Plan. Employee shall be eligible to participate in the
Company's existing 401(k) Plan and any deferred compensation plan adopted by the
Company for its executives.
3.3 Health Club and Additional Benefits. Company shall pay or
reimburse Employee for Employee's membership fees at Employee's health club for
the membership level Employee has in effect on the Effective Date. Employee
shall receive such fringe benefits as are made available to other
management-level employees of the Company and such other benefits as the Chief
Executive Officer of the Company may from time to time, in his sole discretion,
make available to Employee.
4. Facilities and Expenses.
4.1 Location of Employment. Employee shall be permitted to work out
of an office to be provided by the Company in a location mutually acceptable to
Employee and the Company in the metropolitan Atlanta, Georgia area (the "Georgia
Office"), with the exception of travel necessitated by Employee's duties
hereunder.
4.2 Facilities. The Company will furnish the Employee office space,
equipment, supplies, and such other facilities and
5
<PAGE>
personnel as the Company deems necessary or appropriate for the performance
of the Employee's duties under this Agreement; provided, however, that except
as stated in the next sentence, any support staff and other personnel to
assist Employee in the duties of his employment shall be based in the Company
executive offices in New York City. The Company shall provide Employee with
an administrative assistant in the Georgia Office.
4.3 Reimbursement for Reasonable Business Expenses. The Company
shall reimburse Employee for reasonable expenses incurred by him in connection
with the performance of his duties pursuant to this Agreement and attributable
to the business of the Company, including, but not limited to, reasonable client
development/ entertainment expenses, reasonable travel expenses, reasonable
expenses in connection with professional conventions or similar professional
functions and other reasonable business expenses. Employee shall submit
appropriate documentation for all business expenses for which he requests
reimbursement.
4.4 Automobile Allowance. The Company will provide the Employee with
an automobile allowance of up to $800 per month for Employee's primary vehicle
(the "Covered Automobile"). The Employee will own the Covered Automobile and
maintain and insure it at his own expense, for his use in connection with his
employment under this Agreement. The Employee will, at his own expense,
maintain liability insurance on the Covered Automobile, including excess
liability (umbrella) insurance coverage in an amount not less than $1 million
per occurrence, with underlying insurance
6
<PAGE>
coverage as required by such excess liability insurance policy, and the
Employee will furnish proof of such insurance to the Company if requested by
the Company. The Employee shall file appropriate documentation with respect
to expenses incurred and to be reimbursed with respect to the Covered
Automobile in accordance with the Company's policies.
5. Vacations and Holidays. The Employee will be entitled to four (4)
weeks' paid vacation each calendar year (and prorated accordingly for partial
calendar years during the term hereof) in accordance with the vacation policies
of the Company in effect for its executive officers from time to time. Vacation
must be taken by the Employee at such time or times as approved by the Chief
Executive Officer. The Employee will also be entitled to the paid holidays and
other paid leave set forth in the Company's policies. Vacation days and
holidays during any calendar year that are not used by the Employee during such
calendar year may not be used in any subsequent calendar year; provided,
however, that Employee may receive payment for unused vacation days as part of
his termination pay in accordance with Section 6.5.5 hereof.
6. Termination.
6.1 Events of Termination. The Employee's Base Salary and Incentive
Compensation, and any and all other rights of the Employee under this Agreement
or otherwise as an employee of the Company will terminate (except as to accrued
but unpaid Base Salary and Incentive Compensation and otherwise provided in this
Section 6):
7
<PAGE>
6.1.1 upon the death of the Employee;
6.1.2 upon the disability of the Employee (as defined in
Section 6.2) upon fifteen (15) days' written notice from either party to the
other;
6.1.3 for cause (as defined in Section 6.3), immediately upon
notice from the Company to the Employee, or at such later time as such notice
may specify; or
6.1.4 for good reason (as defined in Section 6.4) upon not
less than thirty (30) days' prior notice from the Employee to the Company or
without cause upon not less than thirty (30) days' prior notice from the Company
to the Employee.
6.2 Definition of Disability. For purposes of Section 6.1, the
Employee will be deemed to have a "disability" if, for physical or mental
reasons, the Employee is unable to substantially perform the Employee's material
duties under this Agreement for ninety (90) consecutive days, or one hundred
twenty (120) days during any twelve (12) month period.
6.3 Definition of "Cause". For purposes of Section 6.1, "cause"
means: (a) the Employee's breach of a material provision of this Agreement or
failure to substantially perform the material duties associated with Employee's
position and failure to cure such breach or failure within thirty (30) days
after receipt of written notice of same; (b) the Employee's failure to cure a
violation of any written Company policy within thirty (30) days after receipt of
written notice of such violation; (c) the appropriation (or attempted
appropriation) of a material business opportunity of the
8
<PAGE>
Company, including attempting to secure or securing any personal profit in
connection with any transaction entered into on behalf of the Company; (d)
the intentional misappropriation (or attempted misappropriation) of any of
the Company's funds or property; or (e) the conviction of, the indictment for
(or its procedural equivalent), or the entering of a guilty plea or plea of
no contest with respect to, a felony.
6.4 Definition of "For Good Reason". For purposes of Section 6.1,
the phrase "for good reason" means any of the following: (a) the Company's
material breach of this Agreement; (b) the assignment of the Employee without
his consent to or any other action by the Company that results in a position,
responsibilities, or duties of a materially lesser status or degree of
responsibility than his position, responsibilities, or duties on the Effective
Date; or (c) the requirement by the Company that the Employee be based anywhere
other than Atlanta, Georgia, without the Employee's consent.
6.5 Termination Pay. Effective upon the termination of Employee's
employment under this Agreement, the Company will be obligated to pay the
Employee (or, in the event of his death, his designated beneficiary as defined
below) all accrued but unpaid Base Salary and Incentive Compensation and only
such additional compensation as is provided in this Section 6.5, and such
compensation shall be in lieu of all other amounts and in settlement and
complete release (a "Release") of all claims the Employee may have against the
Company other than a claim that the
9
<PAGE>
Company did not have "cause" to terminate or that Employee does not have a
"disability"; provided, however, that no such payment under this Section 6.5
shall be payable until receipt by the Company of a written Release from
Employee or his designated beneficiary of all claims against the Company and
its affiliates other than (i) any claim for breach of this Section 6.5, (ii)
vested benefits under the Company's benefit and stock option plans, and (iii)
a claim that the Company did not have "cause" to terminate this Agreement in
accordance with Sections 6.1.3 and 6.3, or that Employee does not have a
"disability" as defined in Section 6.2. For purposes of this Section 6.5,
the Employee's designated beneficiary will be such individual beneficiary or
trust, located at such address, as the Employee may designate by notice to
the Company from time to time or, if the Employee fails to give notice to the
Company of such a beneficiary, the Company's estate.
6.5.1 Termination by the Employee for Good Reason or by the
Company Other Than for Cause. If the Employee terminates his employment under
this Agreement for good reason or the Company terminates his employment under
this Agreement other than for cause, the Company will continue to pay the
Employee at the times and in the manner so paid prior to termination of
employment: (a) the Employee's Base Salary for the remainder, if any, of the
calendar month in which such termination is effective and for the balance of the
Term, and (b) that portion of the Employee's Incentive Compensation, if any, for
the calendar year during which the termination is effective, prorated through
the date of
10
<PAGE>
termination. Notwithstanding the preceding sentence: (a) if the Employee
obtains other employment while Base Salary payments are still due to Employee
hereunder, he shall promptly give notice thereof to the Company, and the Base
Salary payments under this Agreement for any period after the Employee
obtains other employment will be reduced by the amount of the cash
compensation received and to be received by the Employee from the Employee's
other employment for services performed during such period; and (b) if
Employee's employment with the Company is terminated either by the Company or
Employee following a good faith determination by the Company that Employee
must relocate his office to New York City or any location other than the
metropolitan Atlanta, Georgia area, and Employee is unwilling to do so, the
Base Salary payments provided for in the previous sentence shall terminate
twelve (12) full calendar months after the date of such termination.
6.5.2 Termination by the Company for Cause. If the Company
terminates Employee's employment under this Agreement for cause, the Employee
will be entitled to receive only his accrued but unpaid his Base Salary and
Incentive Compensation.
6.5.3 Termination Upon Disability. If Employee's employment
is terminated under this Agreement by either party as a result of the Employee's
disability, as determined under Section 6.2, the Company will pay the Employee
at the times and in the manner so paid prior to termination of employment: (a)
his Base Salary through the remainder of the calendar month during which such
termination is effective and for twelve (12) consecutive
11
<PAGE>
months thereafter and (b) that portion of the Employee's Incentive
Compensation, if any, for the calendar year during which the termination is
effective, prorated through the date of termination.
6.5.4 Termination Upon Death. If Employee's employment is
terminated under this Agreement because of the Employee's death, the Employee
will be entitled to receive his Base Salary through the end of the calendar
month in which his death occurs, and that part of the Employee's Incentive
Compensation, if any, for the calendar year during which his death occurs,
prorated through the end of the calendar month during which his death occurs.
6.5.5 Benefits. The Employee's accrual of, or participation
in plans providing for, Benefits will cease at the effective date of the
termination of his employment under this Agreement, and the Employee will be
entitled to accrued Benefits pursuant to such plans only as provided in such
plans. Subject to Section 5 hereof, the Employee will receive, as part of his
termination pay pursuant to this Section 6, any payment or other compensation
for any vacation, holiday, sick leave, or other leave unused on the date the
termination of employment under this Agreement to the extent not inconsistent
with Company policy at such time.
6.6 Favorable Statements. The Company and Employee covenant and
agree that from and after the Effective Date (including after termination of
Employee's employment under this Agreement for any reason) neither shall make
any public statements
12
<PAGE>
or issue other responses, whether with respect to the media generally,
inquiries from potential future employers of Employee after termination of
Employee's employment, or otherwise, which statements or responses are
critical of or reflect negatively upon the Company or Employee.
7. Protection of Confidential Information; Non-Competition.
7.1 Confidentiality. Employee shall not, at any time during the Term
or thereafter, whether or not in the employ of the Company, its affiliates or
their successors, communicate or divulge to, or use for the benefit of, any
person, firm, corporation or association, any of the trade secrets, confidential
business information or data used by the Company, its affiliates and/or any
related corporation in its business and communicated to or acquired by Employee
while in the employment of the Company or its affiliates; provided that this
Section shall not be violated by the communication or use by Employee of
information which has become publicly known by means other than by breach by
Employee of his obligations under this Section 7.1. Employee agrees that any
and all files, working papers, tapes, documents, memoranda or other materials
used or prepared by him in the course of his employment shall be and remain the
sole property of the Company.
7.2 Non-Competition.
7.2.1 Acknowledgements by the Employee. The Employee
acknowledges that: (a) the services to be performed by him under this Agreement
are of a special, unique, unusual, extraordinary and intellectual character; (b)
the Company competes
13
<PAGE>
with other businesses that are or could be located in any part of the United
States; and (c) the provisions of this Section 7.2.1 are reasonable and
necessary to protect the Company's business.
7.2.2 Covenants of the Employee. In consideration of the
acknowledgements by the Employee, and in consideration of the compensation and
benefits to be paid or provided to the Employee by the Company, the Employee
covenants that he will comply with the non-compete and non-solicitation
provisions of Exhibit A hereto.
7.2.3 Severability. Without limitation to Section 8.4
hereof, if any covenant in this Section 7.2 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time and geographic area, and such lesser
scope, time or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the Employee.
7.2.4 Notice. The Employee will, while the covenant under
this Section 7.2 is in effect, give notice to the Company, promptly after
accepting any other employment, of the identity of the Employee's employer.
Subject to Section 6.6 hereof, the Company may notify such employer that the
Employee is bound by this Agreement and, at the Company's election, furnish such
employer with a copy of this Agreement or relevant portions thereof.
14
<PAGE>
8. Indemnification. The Company covenants and agrees to indemnify
Employee to the maximum extent permitted by applicable law against any and all
claims, costs, charges, expenses, losses and liabilities incurred or sustained
by Employee in connection with any action, suit or proceeding to which Employee
may be made a party solely by reason of Employee being or having been an
officer, director or employee of the Company or any subsidiary or affiliate of
the Company.
9. Miscellaneous.
9.1 Entire Agreement. This Agreement contains the entire agreement
between the Company and Employee concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Company and Employee with
respect thereto.
9.2 Waiver. The failure of any party to insist, in any one or more
instances, upon performance of the terms or conditions of this Agreement shall
not in any way be construed as a waiver or a relinquishment of any right granted
hereunder or of the future performance of any such term, covenant or condition.
Any waivers hereunder must be in writing signed by the party agreeing to such
waiver.
9.3 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile (with
15
<PAGE>
written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as
a party may designate by notice to the other parties):
if to Employee: Robert E. Selwyn
8180 Landing South
Atlanta, Georgia 30350
Telephone: (770) 518-6153
Telecopy: (770) 518-6137
with a copy to
(which shall not
constitute notice): Lawrence H. Freiman, Esq.
Altman, Kritzer & Levick, P.C.
6400 Powers Ferry Road, N.W.
Powers Ferry Landing
Suite 224
Atlanta, Georgia 30339
Telephone: (770) 955-3555
Telecopy: (770) 955-0038
if to the Company: Granite Broadcasting Corporation
767 Third Avenue
34th Floor
New York, New York 10017
Attention: W. Don Cornwell
Telephone: (212) 826-2530
Telecopy: (212) 826-2858
9.4 Severability. In the event that any provision of this Agreement
shall be held to be invalid or unenforceable for any reason whatsoever, it is
agreed such invalidity or unenforceability shall not affect any other provision
of this Agreement and the remaining covenants, restrictions and provisions
hereof shall remain in full force and effect and any court of competent
16
<PAGE>
jurisdiction may so modify the objectionable provision as to make it valid,
reasonable and enforceable.
9.5 Amendment. This Agreement may be amended only by an agreement in
writing signed by the parties hereto.
9.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
entered into and to be performed therein, without regard to New York's conflicts
of law rules.
9.7 Benefit. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against the Company, its successors
and assigns, and Employee, his heirs, beneficiaries and legal representatives.
It is agreed, however, that the rights and obligations of either party hereto,
may not be delegated or assigned except as specifically set forth in this
Agreement.
9.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute the same agreement.
9.9 Authority. The Company hereby represents and warrants that the
execution, delivery and performance by the Company of this Agreement have been
duly authorized by all necessary corporate actions (including, but not limited
to, the approval of the Board of Directors of the Company).
9.10 Injunctive Relief and Additional Remedy. The Employee
acknowledges that the injury that would be suffered by the Company as a result
of a breach of the provisions of this Agreement
17
<PAGE>
(including any provision of Sections 7) would be irreparable and that an
award of monetary damages to the Company for such a breach would be an
inadequate remedy. Consequently, the Company will have the right, in
addition to any other rights it may have, to obtain injunctive relief to
restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement, and the Company will not be obligated to
post bond or other security in seeking such relief.
9.11 Survival. The provisions of Sections 1.4, 6.5, 6.6, 7 and 8
shall survive the termination of this Agreement.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or cause this
Agreement to be executed as of the date first above written.
GRANITE BROADCASTING CORPORATION
By: /s/ W. DON CORNWELL
-----------------------------
Name: W. Don Cornwell,
Title: Chairman and Chief
Executive Officer
/s/ ROBERT E. SELWYN, JR.
-------------------------------
Robert E. Selwyn, Jr.
19
<PAGE>
EXHIBIT A
1. Non-Competition. After termination of Employee's employment under this
Agreement, Employee may accept employment with or other engagement by unrelated
third parties, subject to the following limitations on Competing Positions (as
hereinafter defined):
(i) During the first ninety (90) days after termination of employment,
Employee shall not be permitted to take any Competing Position:
(ii) During the second ninety (90) days after termination of employment,
Employee shall not be permitted to accept any Competing Positions which,
directly or indirectly, (a) involve Employee acting as a group head of an
organization that owns or operates television properties which distribute
over-the-air or via cable or satellite television programming for home viewing
in twenty-five percent (25%) or more of the markets ("DMAs," as defined by A.C.
Nielsen) then served by television stations owned or operated by the Company or
its affiliates, or (b) involve Employee becoming the general manager of a
television station in any of the DMAs then served by television stations owned
or operated by the Company or its Affiliates (a "competing station");
(iii) Following the first one hundred eighty (180) days after
termination of employment and until the first anniversary thereof, Employee
shall not be permitted to take any Competing Position as a general manager of a
competing station; and
(iv) On and after the anniversary of the termination of employment,
Employee will not be subject to limitations on Competing Positions.
For purposes of the foregoing, "Competing Position" means a position
associated with or involving, directly or indirectly, a Competitive Activity.
For purposes of this Agreement, a "Competitive Activity" means being associated
(as an employee, officer, director, consultant, investor, partner, owner or
proprietor, or in any similar role or capacity) with an entity where such
association as a part thereof could involve directly or indirectly, giving
information, advice, consultation, management, or direction (collectively,
"Direction") to or using Direction on behalf of (or, regardless of any such
association, actually engaging, directly or indirectly, in giving Direction to
or using Direction on behalf of) an over-the-air broadcasting entity or facility
which is not then owned or managed by the Company and which itself is
broadcasting in any DMA that is served over the air by an television station
that is so owned or managed (including through a "local management agreement" or
otherwise) by the company at the time of such activity. Notwithstanding the
foregoing, Employee may retain any investments made before the termination of
A-1
<PAGE>
his employment under this Agreement and may make investments after termination
of his employment under this Agreement in not more than five percent (5%) of the
equity of any entity engaged in a Competitive Activity, if such equity is listed
on a national securities exchange or regularly traded in the over-the-counter
market.
2. Non-Solicitation of Employees. Prior to the Second anniversary of
termination of employment with the Company, Employee shall not, directly or
indirectly, (x) induce or encourage any employee of the Company or any
subsidiary or affiliate of the Company to leave employment with the Company or
such subsidiary or affiliate, or (y) employ, hire or establish a business with,
or cause or encourage any third parson to employ, hire, or establish a business
with, any person who was, within the period of one year preceding such action by
Employee, employed by the Company or any subsidiary or affiliate of the Company;
provided, however, that the restrictions contained in this sentence shall not
apply to employees of the Company, its subsidiaries or affiliates whose gross
compensation from such employment on an annualized basis is (or was as of the
last day of employment) less than fifty thousand dollars ($50,000).
A-2
<PAGE>
Exhibit 11
GRANITE BROADCASTING CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------
1994 1995 1996
---------- --------- ---------
<S> <C> <C> <C>
Primary:
Weighted average shares outstanding 4,497,758 5,920,294 8,611,606
---------- --------- ---------
---------- --------- ---------
Income (loss) before extraordinary
items $3,047,404 $ (783,100) $ (5,894,462)
Extraordinary loss -- -- (2,891,250)
---------- ---------- -----------
Net income (loss) $3,047,404 $ (783,100) $ (8,785,712)
---------- --------- ----------
---------- --------- ----------
Net loss attributable to
common shareholders $ (687,730) $(4,333,381) $(12,310,993)
---------- ---------- ------------
---------- ---------- ------------
Per common share:
Loss before extraordinary items $ (0.15) $ (0.73) $ (1.09)
Extraordinary loss -- -- (0.34)
---------- ---------- ------------
---------- ---------- ------------
Net loss $ (0.15) $ (0.73) $ (1.43)
---------- ---------- ------------
---------- ---------- ------------
Fully Diluted:
Weighted average shares outstanding 4,497,758 5,920,294 8,611,606
---------- ---------- ------------
---------- ---------- ------------
Income (loss) before extraordinary
items $3,047,404 $ (783,100) $ (5,894,462)
Extraordinary loss -- -- (2,891,250)
---------- ---------- ------------
Net income (loss) $3,047,404 $ (783,100) $ (8,785,712)
---------- ---------- ------------
---------- ---------- ------------
Net loss attributable to
common shareholders $ (687,730) $(4,333,381) $(12,310,993)
---------- ---------- ------------
---------- ---------- ------------
Per common share:
Loss before extraordinary items $ (0.15) $ (0.73) $ (1.09)
Extraordinary loss -- -- (0.34)
---------- ---------- ------------
Net loss $ (0.15) $ (0.73) $ (1.43)
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
<PAGE>
GRANITE BROADCASTING CORPORATION
SUBSIDIARIES
Granite Response Television
San Joaquin Communications, Inc.
RJR Communications, Inc.
WPTA-TV, Inc.
KNTV, Inc.
WTVH, Inc.
WTVH License, Inc.
KSEE License, Inc.
KBJR License, Inc.
KNTV License, Inc.
WPTA-TV License, Inc.
KBVO, Inc.
KBVO License, Inc.
WWMT-TV, Inc.
WWMT-TV License, Inc.
WKBW-TV, Inc.
WKBW-TV License, Inc.
Queen City Broadcasting of New York, Inc.
Queen City Broadcasting, Inc.
Queen City III Limited Partnership
WXON License Inc.
WXON, Inc.
WEEK, Inc.
WEEK License, Inc.
WLAJ, Inc.
WLAJ License, Inc.
<PAGE>
Consent Of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-91056) pertaining to the Employee Stock Purchase Plans of
Granite Broadcasting Corporation and to the incorporation therein of our
report dated January 24, 1997, with respect to the consolidated financial
statements and the financial statement schedule of Granite Broadcasting
Corporation included in its Form 10-K for the year ended December 31, 1996,
filed with the Securities and Exchange Commission.
Ernst & Young LLP
New York, New York
March 20, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRANITE
BROADCASTING CORPORATION'S 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 555,753
<SECURITIES> 0
<RECEIVABLES> 27,057,451
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,674,830
<PP&E> 33,562,019
<DEPRECIATION> 0
<TOTAL-ASSETS> 452,563,204
<CURRENT-LIABILITIES> 24,164,241
<BONDS> 351,560,900
45,487,500
0
<COMMON> 86,782
<OTHER-SE> (3,221,919)
<TOTAL-LIABILITY-AND-EQUITY> 452,563,204
<SALES> 129,164,353
<TOTAL-REVENUES> 129,164,353
<CGS> 72,089,368
<TOTAL-COSTS> 95,353,139
<OTHER-EXPENSES> 2,029,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,114,336
<INCOME-PRETAX> (5,133,462)
<INCOME-TAX> 761,000
<INCOME-CONTINUING> (5,894,462)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,891,250)
<CHANGES> 0
<NET-INCOME> (8,785,712)
<EPS-PRIMARY> (1.43)
<EPS-DILUTED> (1.43)
</TABLE>
