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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 1999 Commission file number 0-19728
GRANITE BROADCASTING CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3458782
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(State of Incorporation) (I.R.S. Employer
Identification No.)
767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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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
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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
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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 1, 2000, 18,168,071 shares of Granite Broadcasting
Corporation Common Stock (Nonvoting) were outstanding. The aggregate market
value (based upon the last reported sale price on the Nasdaq National Market on
March 1, 2000) of the shares of Common Stock (Nonvoting) held by non-affiliates
was approximately $138,424,317. (For purposes of calculating the preceding
amounts only, all directors and executive officers of the registrant are assumed
to be affiliates.) As of March 1, 2000, 178,500 shares of Granite Broadcasting
Corporation Class A Voting Common Stock were outstanding, all of which were held
by affiliates.
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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 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 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
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 Annual Report on Form 10-K
for the year ended December 31, 1996, filed on March 21, 1997; Granite
Broadcasting Corporation's Current Report on Form 8-K, filed on October 17,
1997; Granite Broadcasting Corporation's Current Report on Form 8-K, filed on
March 2, 1998; Granite Broadcasting Corporation's Registration Statement No.
333-56327, filed on June 8, 1998; Granite Broadcasting Corporation's Current
Report on Form 8-K, filed on July 1, 1998; Granite Broadcasting Corporation's
Current Report on Form 8-K, filed on August 13, 1998; Granite Broadcasting
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, filed on March 31, 1999; Granite Broadcasting Corporation's Current Report
on Form 8-K, filed on May 11, 1999; and Granite Broadcasting Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, filed on
November 15, 1999.
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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 nine
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"); WKBW-TV,
the ABC affiliate serving Buffalo, New York ("WKBW"); WDWB-TV, the WB Network
affiliate serving Detroit, Michigan ("WDWB") and KBWB-TV, the WB Network
affiliate serving San Francisco-Oakland-San Jose, California ("KBWB"). 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, WKBW was acquired in June 1995, WDWB was acquired in
January 1997 and KBWB was acquired in July 1998. The Company owns each of its
television stations 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.
The Company is also committed to growing its Internet properties with the goal
of becoming the number one local web destination in each of its markets. The
Company's internet strategy is to provide compelling local news, weather, sports
and entertainment information on each of its websites, leveraging its newsroom
assets and the power of television to drive viewers to the Web. The Company
plans to maintain its position as one of the most progressive broadcast groups
in the area of new media by continuing to not only explore Internet
opportunities, but to pursue broadband business applications that utilize
digital terrestrial spectrum for the delivery of digital content and services.
RECENT DEVELOPMENTS
KNTV AFFILIATION CHANGE AND NBC ALLIANCE
In September 1999, the Company and the American Broadcasting Companies,
Inc. ("ABC") agreed to terminate the ABC affiliation of KNTV, the ABC affiliate
serving the San Jose-Salinas-Monterey, California Designated Market Area
("DMA"), effective July 1, 2000. The Company received $14,000,000 in cash on
September 1, 1999 in accordance with the agreement.
On February 14, 2000, the Company announced the formation of a
strategic alliance (the "Strategic Alliance") with the National Broadcasting
Company, Inc. ("NBC"). Pursuant to the Strategic Alliance, KNTV is to become the
NBC affiliate in the San Francisco-Oakland-San Jose California DMA for a
ten-year term commencing on January 1, 2002 (the "San Francisco Affiliation").
The Company intends to file a petition with the Federal Communications
Commission (the "FCC") to change KNTV's market designation from San Jose,
California to San Francisco-Oakland-San Jose, California. In connection with the
affiliation switch to NBC, the Company intends to expand KNTV's coverage to
include a greater percentage of the San Francisco-Oakland-San Jose DMA. The
Company has received permission from the FCC to increase KNTV's signal coverage,
and anticipates consummating such increase in May 2000. The Company is also
seeking to reach all cable homes in the San Francisco-Oakland-San Jose DMA
through expanded cable coverage.
In addition, NBC is to extend the term of the Company's NBC affiliation
agreements with KSEE, WEEK and KBJR until December 31, 2011. As part of such
extension, NBC's affiliation payment obligations to Granite for such stations
will terminate as of December 31, 2001.
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The Strategic Alliance further contemplates co-operative efforts
between the Company and NBC with respect to digital spectrum and the operation
of a cable news service in the San Francisco bay area, and provides for the
Company to participate in NBC group programming purchases and preferred
relationship technology and equipment deals to the extent such arrangements are
commercially and legally feasible. In addition, the Company anticipates entering
into joint sales agreements with the local Paxon Communications stations in both
the San Francisco-Oakland-San Jose, California and Fresno, California markets.
In consideration for the San Francisco Affiliation, the Company will
pay NBC $362,000,000 in nine annual installments, with the initial payment in
the amount of $61,000,000 being due January 1, 2002. In addition, Granite is
to grant NBC a warrant to acquire 2.5 million shares of the Company's Common
Stock (Nonvoting), par value $0.01 per share (the "Common Stock
(Nonvoting)"), at an exercise price of $12.50 per share (the "A Warrant") and
a warrant to purchase 2.0 million shares of Common Stock (Nonvoting) at an
exercise price of $15.00 per share (the "B Warrant"). The A Warrant vests in
full on December 31, 2000. The B Warrant vests in full on January 1, 2002, if
the San Francisco Affiliation is in effect on that date. Each warrant, once
vested, remains exercisable until December 31, 2011 and may be exercised for
cash or surrender of a portion of a then exercisable warrant. The aggregate
number of shares issuable upon exercise of the warrants (assuming they are
exercised for cash) would represent approximately 20.0% of the Common Stock
(Nonvoting) as of December 31, 1999 after giving effect to their issuance.
Granite has also agreed to pay $7,430,000 during 2001 in promotion expenses
in connection with KNTV's affiliation switch to NBC.
Other terms of the Strategic Alliance include a right of first refusal
in favor of NBC on the sale of KNTV, and an NBC right to purchase KNTV upon an
uncured event of default by Granite, at a value to be determined by an
independent appraiser. In addition, NBC will have the right to terminate the San
Francisco Affiliation if it elects to acquire an attributable interest in
another station in the San Francisco-Oakland-San Jose DMA. NBC can also
terminate the Strategic Alliance if the definitive affiliation and warrant
agreements are not executed by May 1, 2000.
WEEK-FM AND KEYE DISPOSITION
On July 30, 1999, the Company completed the disposition of WEEK-FM to
the Cromwell Group, Inc. of Illinois for $1,150,000 in cash. On August 31, 1999,
the Company completed the disposition of KEYE-TV, the CBS affiliate serving
Austin, Texas, to CBS Corporation for $160,000,000 in cash. A portion of the
proceeds from the sale of these stations was used to repay outstanding
indebtedness under the Company's bank credit agreement (the "Credit Agreement")
and to repurchase subordinated debt of the Company.
WNGS ACQUISITION
On November 16, 1999, the Company entered into a definitive agreement
to acquire WNGS-TV, the UPN affiliate serving Buffalo, New York, from Caroline
K. Powley for $23,000,000 in cash. Closing of the acquisition is subject to
certain closing conditions, including approval by the FCC. Two informal
objections have been filed against the application to assign WNGS-TV's FCC
Licenses from Ms. Powley to Granite. Both objections relate to FCC matters
asserted against Caroline K. Powley unrelated to her ownership of WNGS. Both
Caroline K. Powley and the Company have filed oppositions to these two informal
objections. The informal objections and the associated oppositions are still
pending before the FCC. The Company expects to complete the acquisition in the
fourth quarter of 2000.
FT. WAYNE - WB CABLE ALLIANCE
The Company has formed an alliance with the WB Television Network (the
"WB Network") for the cable distribution of WB Network programming in Fort
Wayne, Indiana. The cablecasting of this WB Network programming began on October
7, 1999 on the Comcast cable system, which serves approximately 32% of the Fort
Wayne area.
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CONVERSION OF PREFERRED STOCK
On August 16, 1999 the Company announced it would redeem all
outstanding shares of its Cumulative Convertible Exchangeable Preferred Stock on
September 15, 1999 (the "Redemption Date") at a redemption price of $25.97 per
share, plus accrued but unpaid dividends. Holders of the Cumulative Convertible
Exchangeable Preferred Stock had the option to accept the Redemption Price or
convert each preferred share into five shares of Common Stock (Nonvoting) at any
time on or before September 10, 1999. All shares of the Cumulative Convertible
Exchangeable Preferred Stock were converted into Common Stock (Nonvoting) prior
September 10, 1999.
OTHER DEVELOPMENTS
On August 5, 1999, the FCC revised its ownership rules to permit the
joint ownership of two television stations in a single market under various
circumstances. As a result of the FCC decision, the Company became one of the
first broadcasters to permanently own and operate two stations serving a top ten
market. The Company has owned and operated KNTV since 1990. The Company
completed the acquisition of KBWB on July 21, 1998. The FCC has consented to
Granite's permanent joint ownership of these two stations.
COMPANY AND INDUSTRY OVERVIEW
The following table sets forth general information for each of the
Company's television stations:
<TABLE>
<CAPTION>
OTHER
COMMERCIAL EXPIRATION
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>
KBWB-TV San Francisco-
Oakland -
San Jose, CA 07/20/98 20/UHF WB 5 14(2) 12/01/06
WDWB-TV Detroit, MI 01/31/97 20/UHF WB 9 9(6) 10/01/05
WKBW-TV Buffalo, NY 06/29/95 7/VHF ABC 44 5 06/01/07
KNTV(TV) San Jose,
Salinas -
Monterey, CA 02/05/90 11/VHF ABC(5) 49 5(3) 12/01/06
KSEE-TV Fresno-
Visalia, CA 12/23/93 24/UHF NBC 54 10(4) 12/01/06
WTVH-TV Syracuse, NY 12/23/93 5/VHF CBS 76 4 06/01/07
WPTA-TV Fort Wayne, IN 12/11/89 21/UHF ABC 103 3 08/01/05
WEEK-TV Peoria -
Bloomington,
IL 10/31/88 25/UHF NBC 110 4 12/01/05
KBJR-TV Duluth, MN -
Superior, WI 10/31/88 6/VHF NBC 133 2 12/01/05
</TABLE>
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(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 49th largest
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DMA in the United States. All market rank data is derived from the
Nielsen Station Index for September 1999.
(2) Includes KDTV, San Francisco and KSTS, San Jose, both of which
broadcast entirely in Spanish.
(3) Includes KSMS, Salinas-Monterey and KCU, Salinas, both of which
broadcast entirely in Spanish.
(4) Includes KFTV Hanford-Fresno and KMSG, Sanger-Fresno, both of which
broadcast entirely in Spanish.
(5) KNTV will be an ABC affiliate through June 30, 2000. The Company has
entered into a Strategic Alliance with NBC pursuant to which KNTV will
be affiliated with NBC commencing on January 1, 2002. The Company
intends to file a petition with the FCC to change KNTV's market
designation from San Jose, California to San Francisco-Oakland-San
Jose, California. See "Recent Developments--KNTV Affiliation Change and
NBC Alliance."
(6) Includes CBET Windsor, Canada.
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,
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1995 1996 1997 1998 1999
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AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Local/Regional(1)........ $60,969 51.0% $73,491 47.5% $87,412 48.3% $89,144 46.0% $89,626 49.2%
National(2).............. 48,995 41.0 61,945 40.0 78,833 43.5 76,446 39.4 79,780 43.7
Network Compensation(3).. 4,154 3.5 7,289 4.7 7,859 4.3 6,715 3.5 5,074 2.8
Political(4)............. 1,498 1.3 7,265 4.7 1,036 0.6 15,752 8.1 2,601 1.4
Other Revenue(5)......... 3,849 3.2 4,851 3.1 5,943 3.3 5,877 3.0 5,249 2.9
------- ------ -------- ------ ------- ------ -------- ----- -------- -----
Total.................... $119,465 100.0% $154,841 100.0% $181,083 100.0% $193,934 100.0% $182,330 100.0%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</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.
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<PAGE>
(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 34% of the Company's total gross
revenues in 1999. Gross revenues from restaurants and entertainment-related
businesses accounted for approximately 24% of the Company's total gross revenues
in 1999. Each other category of advertising revenue represents less than 8% of
the Company's total gross revenues.
The following is a description of each of the Company's television
stations:
KBWB: SAN FRANCISCO-OAKLAND-SAN JOSE, CALIFORNIA
KBWB began operations in 1968 and commenced operating as a WB Network
affiliate in 1995.
The San Francisco-Oakland-San Jose economy is centered around apparel,
banking and finance, biosciences, engineering and architecture, film and TV
production, health care, high technology, manufacturing, multimedia,
telecommunications, tourism and wineries. The average household income in the
DMA was $55,565, according to estimates provided in the BIA Investing in
Television 1999 Market Report (the "BIA Report"). Leading employers in the area
include Safeway Supermarkets, Hewlett-Packard, Seagate Technology, The Gap,
Intel, Chevron, Oracle, Kaiser-Permanente and Levi-Strauss. The San
Francisco-Oakland-San Jose DMA is also the home of several universities,
including the University of California Berkeley, San Francisco State University,
San Jose State University, Stanford University, California State
University-Hayward, Santa Clara University and the University of San Francisco,
with enrollment estimated at 122,000.
WDWB: DETROIT, MICHIGAN
WDWB began operating in 1962 and commenced operating as a WB Network
affiliate in 1995.
Detroit is the 9th largest DMA in the United States with a total of
1,855,500 television households and a population of 4,988,000 according to
Nielsen. Detroit's economy is based on manufacturing, retail and health
services. The largest employers are General Motors, Ford Motor Company,
Daimler-Chrysler, Detroit Medical Center, Henry Ford Health System and Blue
Cross Blue Shield of Michigan. The average household income in the DMA is
$46,547 according to estimates provided in the BIA Report.
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 average household income in the DMA
was $36,848, 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 will be affiliated with ABC through
June 30, 2000. On January 1, 2002, KNTV will become an NBC affiliate. See
"Recent Developments - KNTV Affiliation Change and NBC Alliance."
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
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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 November 1999 Nielsen Monterey/Salinas Viewers In
Profile Report more than 72% of the station's audience resides in Santa Clara
County. If Santa Clara County were a separate DMA with its estimated 577,250
television households, it would rank as the 49th largest DMA in the United
States.
Santa Clara County has a diverse and affluent economy. The average
effective buying income by household was $57,890, according to the 1999
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. 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.
The Company has entered the Strategic Alliance with NBC, which among
other matters, provides for KNTV to become the NBC affiliate in the San
Francisco-Oakland-San Jose DMA beginning on January 1, 2002. The Company intends
to file a petition with the FCC to change KNTV's market designation from San
Jose, California to San Francisco-Oakland-San Jose, California. See "Recent
Developments-KNTV Affiliation Change and NBC Alliance." In connection with the
affiliation switch to NBC, the Company intends to expand KNTV's coverage to
include a greater percentage of the San Francisco-Oakland-San Jose DMA. The
Company has received permission from the FCC to increase KNTV's signal strength,
and anticipates consummating such increase in May 2000. The Company expects that
such increase will enable KNTV's over-the-air signal to reach 92% of the
households in the San Francisco-Oakland-San Jose DMA. The Company also
anticipates being on substantially all cable systems in the San
Francisco-Oakland-San Jose DMA by January 1, 2002.
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 average income by
household in the DMA was $34,709, 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.
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 average income by household in the DMA was $37,667, 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 average income by household in
the DMA was $42,846, according to estimates provided in the BIA Report.
Prominent corporations located in the area include Magnavox, Lincoln National
Life Insurance, General
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<PAGE>
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.
WEEK: PEORIA-BLOOMINGTON, ILLINOIS
WEEK began operations in 1953 and is affiliated with NBC.
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
average income by household in the DMA was $44,470, 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 average income by household in
the DMA was $33,026, 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. Prominent
corporations located in the area include Northwest Airlines, 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 major networks,
NBC, ABC, CBS, Fox (the "Traditional Networks") or the WB Network or United
Paramount Networks ("UPN" and collectively with the WB Network and the
Traditional Networks, the "Networks"), has a significant impact on the
composition of the station's revenues, expenses and operations. A typical
Traditional Network affiliate receives the significant portion of its
programming each day from the Network. Historically, this programming, along
with cash payments, is provided to the affiliate by the Traditional Network in
exchange for a substantial majority of the advertising inventory during Network
programs. The Traditional Network then sells this advertising time and retains
the revenues so generated. A typical WB Network or UPN affiliate receives prime
time programming from the Network pursuant to arrangements agreed upon by the
affiliate and the Network.
In contrast, a fully independent station purchases or produces all of
the programming that 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
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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 is affiliated with a Network pursuant to
an affiliation agreement. KSEE, WEEK and KBJR are affiliated with NBC; KNTV will
be affiliated with ABC until June 30, 2000 and will become affiliated with NBC
on January 1, 2002 (see "Recent Developments--KNTV Affiliation Change and NBC
Alliance"); WPTA and WKBW are affiliated with ABC; WTVH is affiliated with CBS;
and KBWB and WDWB are affiliated with the WB Network.
In substance, each Traditional Network affiliation agreement provides
the Company's station with the right to broadcast all programs transmitted by
the Network with which it is affiliated. In exchange, the Network has the right
to sell a substantial majority of the advertising time during such broadcast. In
addition, historically, for every hour that the station elects to broadcast
Traditional Network programming, the Network has paid the station a fee (the
"Network Compensation Fee"), specified in each affiliation agreement, which
varies with the time of day. Typically, "prime-time" programming (Monday through
Saturday 8 - 11p.m. and Sunday 7 - 11p.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.
As part of the Strategic Alliance with NBC, in exchange for the San Francisco
Affiliation and extending the terms of the NBC affiliation agreements for KSEE,
WEEK and KBJR, Granite is to pay NBC $362 million in nine installments
commencing on January 1, 2002 and Network Compensation Fees payable to KSEE,
WEEK and KBJR, will terminate as of December 31, 2001.
Under each WB Network affiliation agreement, the Company's stations
receive "prime-time" programming from the WB Network. KBWB and WDWB pay an
affiliation fee for the programming it receives pursuant to its affiliation
agreement.
The Network affiliation agreements provide for contract terms ranging
from seven to eleven years. Under each of the Company's affiliation agreements,
the Networks may, 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.
COMPETITION
The financial success of the Company's television stations are
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, the Internet, 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
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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), the Internet, 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 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 not 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. Video compression techniques, now in use
with direct broadcast satellites and in development for cable, are expected to
permit greater numbers of channels to be carried within existing bandwidth.
These compression techniques, as well as other technological developments, are
applicable to all video delivery systems, including over-the-air broadcasting
and other non-broadcast commercial applications, and have the potential to
provide vastly expanded programming to highly targeted audiences. Reduction in
the cost of creating additional channel capacity could lower entry barriers for
new channels and encourage the development of increasingly specialized niche
programming. This ability to reach very narrowly defined audiences may alter the
competitive dynamics for advertising expenditures. The Company is unable to
predict the effect that technological changes will have on the Company.
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 of 1934, as amended (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
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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 is restricted by the Communications Act from having
more than one-fourth 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.
Television broadcasting licenses generally are granted and renewed for
a period of eight 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. 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 are in effect and are subject to renewal at various times
during 2005, 2006 and 2007. 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. For purposes of this
calculation, stations in the UHF band, which covers channels 14 - 69, are
attributed with only 50% of the households attributed to stations in the VHF
band, which covers channels 2 - 13. Under its recently revised ownership rules,
if an entity has attributable interests in two television stations in the same
market, the FCC will count the audience reach of that market only once for
purposes of applying the national ownership cap.
During 1999, the FCC relaxed its "television duopoly" rule, which
previously barred any entity from having an attributable interest in two
television stations with overlapping service areas. The FCC's new television
duopoly rule permits a party to have attributable interests in two television
stations without regard to signal contour overlap provided the stations are
licensed to separate DMAs, as determined by Nielsen. In addition, the new rule
permits parties to own up to two television stations in the same DMA as long as
at least eight independently owned and operating full-power television stations
remain in the market at the time of acquisition, and at least one of the two
stations is not among the top four ranked stations in the DMA based on specified
audience share measures. The FCC also may grant a waiver of the television
duopoly rule if one of the two television stations is a "failed" or "failing"
station, if the proposed transaction would result in the construction of an
unbuilt television station or if extraordinary public interest factors are
present. With the changes in the FCC's rule on television duopolies, the
Company's common ownership of KNTV and KBWB is fully consistent with the
Commission's rules. The Company also is seeking to establish a second television
duopoly in the Buffalo, New York DMA. The Company currently owns WKBW, Buffalo,
New York and has filed an assignment application requesting FCC consent to
acquire WNGS, which also is located in the Buffalo DMA. See "Recent
Developments--WNGS Acquisition." The Company believes that this joint ownership
is fully consistent with the FCC's new television duopoly rule.
The FCC also relaxed its "one-to-a-market" rule in 1999, which
restricts the common ownership of television and radio stations in the same
market. One entity may now own up to two television stations and six radio
stations in the same market provided that: (1) 20 independent voices (including
certain newspapers and a single cable system) will remain in the relevant market
following consummation of the proposed transaction, and
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(2) the proposed combination is consistent with the television duopoly and local
radio ownership rules. If fewer than 20 but more than 9 independent voices will
remain in a market following a proposed transaction, and the proposed
combination is otherwise consistent with the FCC's rules, a single entity may
have attributable interests in up to two television stations and four radio
stations. If neither of these various "independent voices" tests are met, a
party generally may have an attributable interest in no more than one television
station and one radio station in a market. The FCC's rules restrict the holder
of an attributable interest in a television station from also having an
attributable interest in a daily newspaper or cable television system serving a
community located within the coverage area of that television station.
The FCC also recently eliminated its "cross-interest" policy, which had
prohibited common ownership of an attributable interest in one media outlet and
a "meaningful", non-attributable interest in another media outlet serving
essentially the same market.
Although the FCC's recent revisions to its broadcast ownership rules
became effective on November 16, 1999, several petitions have been filed at the
FCC seeking reconsideration of the new rules. The Company cannot predict the
outcome of these reconsideration requests.
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, 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.
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 20% 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. However, under the FCC's new "equity-debt plus" rule, a party will
be deemed to be attributable if it owns equity (including all stockholdings,
whether voting, non-voting, common or preferred) and debt interests, in the
aggregate, exceeding 33% of the total asset value (including debt and equity) of
the licensee and it either provides 15% of the station's weekly programming or
owns an attributable interest in another broadcast station, cable system or
daily newspaper in the market. The "equity-debt plus" attributable rule will
apply even if there is a single majority shareholder. Under the FCC's multiple
and cross-ownership rules, which have been revised in accordance with the
Telecommunications Act of 1996, an officer or director of the Company, a party
attributable under the "equity-debt plus" rule 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. 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.
In addition, for purposes of its national and local multiple ownership
rules, the FCC recently revised its rules to attribute local marketing
agreements ("LMAs") that involve more than 15% of the brokered station's weekly
program time. Thus, if an entity owns one television station in a market and has
a qualifying LMA with another station in the same market, this arrangement must
comply with all of the FCC's ownership rules including the television duopoly
rule. LMA arrangements entered into prior to November 5, 1996 are grandfathered
until 2004. LMAs entered into on or after November 5, 1996 have until
approximately August 2001 to come into compliance with this requirement.
Petitions for reconsideration of this FCC rule change are pending. The Company
cannot predict the outcome of these reconsideration requests.
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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 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 digital television ("DTV") services only to Existing
Broadcasters (as defined herein). DTV 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 DTV
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 DTV channels to provide services for
which payment is received. See "Digital Television Service."
In accordance with requirements of the Telecommunications Act of 1996,
the FCC has approved a voluntary rating system proposed by the broadcast
industry to identify video programming that contains sexual, violent or such
other material about which parents should be informed prior to viewing by
children. The rating system also indicates the appropriateness of the
programming for children according to age and/or maturity. The rating system
applies to all television programming except news, sports and unedited movies
rated by the Motion Picture Association of America.
In connection with this programming rating system, the FCC also has
established technical requirements of equipping new television receivers with a
device, termed a "V-chip," which will permit parents to block programming with a
common rating designation from their television sets. All new television
receiver models with picture screens 13 inches or greater are required to be
equipped with this "V-chip."
Pursuant to the Balanced Budget Act of 1997, the FCC has adopted
competitive bidding procedures to select among mutually exclusive applications
for licenses for new commercial broadcast stations and major modifications to
existing broadcast facilities.
THE CABLE TELEVISION CONSUMER PROTECTION AND COMPETITION
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 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, 1999, for the period from January 1,
2000 through December 31, 2002. Television stations that fail to make an
election by the specified deadline are deemed to have elected must-carry status
for the relevant three year period. For the three year period beginning January
1, 2000, each of the Company's stations has either elected its must-carry
rights, entered into retransmission consent agreements, or obtained an extension
to permit the Company to continue negotiating a retransmission consent agreement
with substantially all cable systems in its DMA. The FCC currently is conducting
a rulemaking proceeding to determine the scope of the cable systems' carriage
obligations with respect to digital broadcast signals during and following the
transition from analog to DTV service.
DIGITAL TELEVISION
The FCC has adopted rules authorizing DTV service and intends to adopt
other rules to implement the new service. In 1996, the FCC adopted a
transmission standard for DTV which is consistent with a consensus agreement
voluntarily developed by a broad cross-section of parties, including the
broadcasting, equipment manufacturing and computer industries. This digital
standard should improve the quality of both the audio and
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video signals of television stations. The FCC has "set aside" channels within
the existing television spectrum for DTV and limited initial DTV eligibility to
existing television stations and certain applicants for new television stations
("Existing Broadcasters"). The FCC has adopted a DTV table of allotments as well
as service and licensing rules to implement the service. The DTV allotment table
provides a channel for DTV operations for each Existing Broadcaster and is
intended to enable Existing Broadcasters to replicate their existing service
areas. The affiliates of CBS, NBC, ABC and Fox in the ten largest U.S.
television markets were required to initiate commercial DTV service with a
digital signal by May 1, 1999. Affiliates of these networks located in the 11th
through the 30th largest U.S. television markets were required to begin DTV
operation by November 1, 1999. All other commercial stations are required to
begin DTV broadcasts by May 1, 2002. All of the company-owned stations must meet
the May 1, 2002 construction deadline. By 2006, broadcasters will have to
convert to DTV service, terminate their existing analog service and surrender
their present analog channel to the FCC. The FCC has begun issuing construction
permits for DTV operations to broadcast licensees. All of the Company's
stations, have filed applications requesting FCC authorization to begin
construction of DTV facilities. Each station also has requested FCC consent to
maximize its digital facilities and technical operations. Stations KBWB and KNTV
have authorization to construct their digital facilities, and KNTV already has
commenced its digital operations.
Due to additional equipment requirements, implementation of DTV service
will impose substantial additional costs on television stations. 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 DTV
service in a high definition format. The Company will incur significant expense
for DTV conversion and is unable to predict the extent or timing of consumer
demand for any such digital television services.
The FCC has adopted rules that will require the Company to pay a fee of
5% of the gross revenues received from any ancillary or supplemental uses of the
DTV spectrum for which the Company charges subscription fees or other specified
compensation. No fees will be due for commercial advertising revenues received
from free over-the-air broadcasting services. The FCC also has initiated a
rulemaking proceeding to examine: (1) whether, and to what extent, cable "must
carry" obligations should be applied to DTV signals; and (2) various DTV tower
siting issues. The Commission has initiated a notice of inquiry to examine
whether additional public interest obligations should be imposed on DTV
licensees. The FCC also has initiated a rulemaking proceeding to examine a
number of issues that have arisen as television stations convert from analog to
digital operations, including tower siting, signal replication and several other
matters.
SATELLITE HOME VIEWER IMPROVEMENT ACT
The Satellite Home Viewer Improvement Act ("SHVIA") enables satellite
carriers to provide more television programming to subscribers. Specifically,
SHVIA: (1) provides a statutory copyright license to enable satellite carriers
to retransmit a local television broadcast station into the station's local
market (i.e., provide "local-into-local" service); (2) permits the continued
importation of distant network signals (i.e., network signals that originate
outside of a satellite subscriber's local television market or designated market
areas ("DMA") for certain existing subscribers; (3) provides broadcast stations
with retransmission consent rights in their local markets; and (4) mandates
carriage of broadcast signals in their local markets after a phase-in period.
"Local markets" are defined to include both a station's DMA and its county of
license.
SHVIA requires that, with several exceptions, satellite carriers may
not retransmit the signal of a television broadcast station without the express
authority of the originating station. Such express authorization is not needed,
however, when satellite carriers retransmit a station's signal into its local
market (i.e., provide local-into-local transmissions) prior to May 28, 2000.
This retransmission can occur without the station's consent. Beginning May 29,
2000, however, a satellite carrier must obtain a station's consent before
retransmitting its signal within the local market. Additional exceptions to the
retransmission consent requirement exist for noncommercial stations, certain
superstations and broadcast stations that have asserted their must-carry rights.
In addition, SHVIA permits satellite carriers to provide distant or
nationally broadcast programming to subscribers in "unserved" households (i.e.,
households are unserved by a particular network if they do not receive a signal
of at least Grade B intensity from a station affiliated with that network) until
December 31, 2004.
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However, satellite television providers can retransmit the distant signals of no
more than two stations per day for each television network.
SHVIA provides for mandatory carriage of television broadcast stations
by satellite carriers, effective January 1, 2002, under certain circumstances.
Effective January 1, 2002, a satellite carrier that retransmits one local
television broadcast station into its local market under a retransmission
consent agreement must carry all television broadcast stations in that same
market upon request. Satellite carriers are not required, however, to carry the
signal of a station that substantially duplicates the programming of another
station in the market, and are not required to carry more than one affiliate of
the same network in a given market unless the television stations are located in
different states.
In addition, SHVIA requires the FCC to commence a rulemaking proceeding
that extends the network nonduplication, syndicated exclusivity and sports
blackout rules to the satellite retransmission of nationally distributed
superstations. The FCC already has initiated several rulemaking proceedings, as
required by SHVIA, to implement certain aspects of this Act. Pursuant to SHVIA,
satellite carriers are beginning to offer local broadcast signals to subscribers
in some of the nation's largest television markets. To date, however, these
carriers have concentrated on retransmitting local broadcast programming offered
by Fox, ABC, NBC and CBS affiliates. Satellite carriers have not yet begun to
retransmit the signals of stations that are either affiliated with the WB or
other networks outside the top four, or located in smaller television markets.
Beginning May 29, 2000, satellite carriers that seek to retransmit the broadcast
signals of the Company's stations into the stations' respective local markets
will be required to negotiate the terms of this retransmission with the Company.
In addition, after January 1, 2002, the Company's stations, especially those
located in the larger television markets, may be permitted to invoke must carry
rights to require satellite distribution of their signals into local markets. At
this point, however, the Company cannot predict when, or how extensively,
satellite carriers will seek to retransmit the signals of the Company's
stations, or those of the stations' competitors, into local markets.
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) matters relating to
minority and female involvement in the broadcasting industry; (iii) rules
relating to political broadcasting and advertising; (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) changes to the standards governing the evaluation and
regulation of television programming directed towards children, and violent and
indecent programming; (viii) restrictions on the advertisement of certain
alcoholic products; (ix) an examination of whether the cable must-carry
requirement mandates carriage of both analog and digital television signals; (x)
an examination of legislation and FCC rules governing the ability of viewers to
receive local and distant television network programming directly via satellite;
and (xi) an examination of issues that have arisen during the transition from
analog to digital television service. 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 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
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 Telecommunications Act of 1996 requires the FCC to review
the broadcast ownership rules every two years and to repeal or modify any rules
that are determined to no longer be in the public interest.
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
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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.
On November 29, 1999, Congress enacted the Community Broadcasters
Protection Act, which created a new "Class A" status for low power television
stations. Under this new statute, certain LPTV stations which previously had
secondary status to full power television stations, are eligible for "Class A"
status and are entitled to protection from future displacement by full-power
television stations under certain circumstances. The FCC has initiated
rulemaking proceedings to adopt rules governing the extent of interference
protection that must be afforded to Class A stations and the eligibility
criteria for these stations. Since Class A stations are required to provide
interference protection to full-power television stations, these new facilities
are not expected to adversely affect the operations of the Company's television
stations.
Legislation also has been introduced in the U.S. Congress to provide a
tax deferral on gains made from the sale of telecommunications businesses in
specific circumstances. This tax deferral is designed to promote greater
diversity in the ownership of telecommunications businesses. The Company, at the
present time, cannot predict how this legislation will affect its operations, if
adopted.
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 940
persons, of whom approximately 279 are represented by three unions pursuant to
contracts expiring in 2000, 2001 and 2002 (and one of which has expired but
which the Company is currently renegotiating) at the Company's stations. The
Company believes its relations with its employees are good.
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ITEM 2. PROPERTIES
The Company's principal executive offices are located in New York, New
York. The lease agreement, for approximately 9,500 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.
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<PAGE>
The following table contains certain information describing the general
character of the Company's properties:
<TABLE>
<CAPTION>
METROPOLITAN OWNED OR EXPIRATION
STATION AREA AND USE LEASED APPROXIMATE SIZE OF LEASE
<S> <C> <C> <C> <C>
KNTV SAN JOSE, CALIFORNIA
Office and Studio Owned 26,469 sq. feet -
Tower Site Leased 2,080 sq. feet 9/30/02
Low Power Transmission Site Leased 100 sq. feet 1/1/01(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 3/22/51
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 (2)
KBJR DULUTH, MINNESOTA, SUPERIOR, WISCONSIN
Office and Studio Owned 20,000 sq. feet -
Tower Site Owned 3,300 sq. feet -
KBWB SAN FRANCISCO, CALIFORNIA
Office and Studio Leased 25,777 sq. feet 8/31/02
Tower Site Leased 2,750 sq. feet 2/28/05
WKBW BUFFALO, NEW YORK
Office and Studio Owned 32,000 sq. feet -
COLDEN, NEW YORK
Tower Site Owned 3,406 sq. feet -
WDWB SOUTHFIELD, MICHIGAN
Office Leased 8,850 sq. feet 12/31/00
SOUTHFIELD, MICHIGAN
Studio and Tower Site Leased(3) 30,000 sq. feet 9/30/06
</TABLE>
(1) Assuming exercise of all of the Company's renewal options under
such lease.
(2) This lease is in effect on a month-to-month basis.
(3) The Company owns a 3,400 square foot building on the property.
-17-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On each of January 8, 1999 and February 23, 1999, the holders of all of
the Company's Voting Common Stock adopted resolutions by written consent in lieu
of a special meeting amending the Granite Broadcasting Corporation Stock Option
Plan (a copy of the Stock Option Plan is filed as exhibit 10.1 hereto).
On April 27, 1999, the holders of all of the Company's Voting Common
Stock adopted resolutions by written consent in lieu of an annual meeting
appointing Ernst & Young LLP as independent auditors of the Company and electing
W. Don Cornwell, Stuart J. Beck, James L. Greenwald, Martin F. Beck, Edward
Dugger, III, Thomas R. Settle, Charles J. Hamilton, Jr., Robert E. Selwyn, Jr.,
Jon E. Barfield and M. Frederick Brown as directors of the Company.
On July 27, 1999, the holders of all of the Company's Voting Common
Stock adopted resolutions by written consent in lieu of a special meeting
amending the Granite Broadcasting Corporation Directors' Stock Option Plan (a
copy of the Directors' Stock Option Plan is filed as exhibit 10.19 hereto).
-18-
<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 1, 2000, the
approximate number of record holders of Common Stock (Nonvoting) was 145.
The range of high and low prices for the Common Stock (Nonvoting) for
each full quarterly period during 1998 and 1999 is set forth in Note 15 to the
Consolidated Financial Statements in Item 8 hereof. At March 1, 2000, the
closing price of the Common Stock (Nonvoting) was $8.125 per share.
The Company's publicly traded Cumulative Convertible Exchangeable
Preferred Stock, par value $.01 per share (the "Cumulative Convertible
Exchangeable Preferred Stock") was traded on the OTC Bulletin Board under the
symbol GBTVP. The range of high and low prices for each full quarterly period
that the Cumulative Convertible Exchangeable Preferred Stock traded during 1998
and 1999 is set forth in Note 15 to the Consolidated Financial Statements in
Item 8 hereof. As of September 10, 1999, all outstanding shares of the
Cumulative Convertible Exchangeable Preferred Stock were converted into Common
Stock (Nonvoting).
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 1, 2000, the number of record
holders of Voting Common Stock was 2.
The Company had 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. The Company has 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 10-3/8% Senior Subordinated Notes due May 15, 2005,
9-3/8% Senior Subordinated Notes due December 1, 2005 and the 8-7/8% Senior
Subordinated Notes due May 15, 2008, respectively, and is restricted under the
Company's Credit Agreement. The Company is also prohibited from paying dividends
on any Common Stock until all accrued but unpaid dividends on 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, 1999, are payable on the date on which such dividends may be paid
under the Company's existing debt instruments.
-19-
<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, 1995,
1996, 1997, 1998 and 1999 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,
1995 1996 1997 1998 1999
-------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: (Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Net revenue................................... $ 99,895 $ 129,164 $ 153,512 $ 161,104 $149,847
Station operating expenses.................... 55,399 72,089 83,729 89,812 92,874
Time brokerage agreement fees................. - 150 600 428 -
Depreciation.................................. 4,514 6,144 5,718 5,388 5,455
Amortization.................................. 7,592 9,737 13,824 18,493 26,667
Corporate expense............................. 3,132 4,800 6,639 8,179 8,862
Non-cash compensation......................... 363 496 986 977 935
-------- -------- -------- -------- --------
Operating income.............................. 28,895 35,748 42,016 37,827 15,054
Equity in net loss (income) of investee....... (439) 995 1,531 973 254
Interest expense, net......................... 27,026 36,765 38,986 38,896 36,352
Non-cash interest expense..................... 1,738 2,087 2,182 2,095 3,115
Gain on sale of assets........................ - - - (57,776) (101,292)
Gain from insurance claim..................... - - - (2,159) (4,079)
Other expenses................................ 798 1,034 1,167 1,381 1,616
-------- -------- -------- -------- --------
Income (loss) before income taxes and (228) (5,133) (1,850) 54,417 79,088
extraordinary item............................
Provision for income tax...................... (555) (761) (1,616) (10,250) (31,574)
-------- -------- -------- -------- --------
Income (loss) before extraordinary item....... (783) (5,894) (3,466) 44,167 47,514
Extraordinary loss net of tax benefit in 1998
and 1999 of $950,000 and $256,655, respectively - (2,891) (5,569) (1,761) (385)
-------- -------- -------- -------- --------
Net income (loss) ............................ $ (783) $ (8,785) $ (9,035) $ 42,406 $ 47,129
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income (loss) attributable to common $(4,368) $ (12,310) $ (31,207) $ 16,896 $ 19,912
shareholders..................................
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
PER COMMON SHARE:
Basic income (loss) before extraordinary item $ (0.74) $ (1.09) $ (2.93) $ 1.80 $ 1.46
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Basic net income (loss).................... $ (0.74) $ (1.43) $ (3.57) $ 1.63 $ 1.43
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average common shares outstanding. 5,920 8,612 8,765 10,358 13,969
Net income (loss) attributable to common
shareholders - assuming dilution............ $(4,368) $ (12,310) $ (31,207) $ 19,776 $ 21,588
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
PER COMMON SHARE:
Diluted income (loss) before extraordinary $ (0.74) $ (1.09) $ (2.93) $ 1.27 $ 1.16
item.......................................
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Diluted net income (loss) ................. $ (0.74) $ (1.43) $ (3.57) $ 1.17 $ 1.14
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average common share outstanding -
Assuming dilution........................ 5,920 8,612 8,765 16,967 19,012
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
SELECTED BALANCE SHEET DATA: 1995 1996 1997 1998 1999
-------- ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Total assets.................................. $ 452,221 $ 452,563 $633,614 $781,974 $730,591
Total debt.................................... 341,000 351,561 392,779 426,399 303,874
</TABLE>
-20-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Redeemable preferred stock.................... 45,488 45,488 207,700 216,351 210,709
Stockholders' equity (deficit) ............... 8,868 (3,135) (33,257) (1,470) 50,084
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain sections of this Form 10-K, including "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contain various "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, which represent the
Company's expectations or beliefs concerning future events. The "forward-looking
statements" include, without limitation, the renewal of the Company's FCC
licenses and the Company's ability to meet its future liquidity needs. The
Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those in the
"forward-looking statements". Such factors include, without limitation, general
economic conditions, competition in the markets in which the Company's stations
are located, technological change and innovation in the broadcasting industry
and proposed legislation.
INTRODUCTION
Comparisons of the Company's consolidated financial statements between
the years ended December 31, 1999 and 1998 have been affected by the acquisition
of KBWB, which occurred on July 20, 1998, the sale of WWMT, which occurred on
July 15, 1998, the sale of WLAJ, which occurred on August 17, 1998, the sale of
WEEK-FM, which occurred on July 30, 1999 and the sale of KEYE, which occurred on
August 31, 1999. The comparisons between the years ended December 31, 1998 and
1997 have been affected by the acquisition of KBWB, the acquisition of WDWB,
which occurred on January 31, 1997, and the sales of WWMT and WLAJ.
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. Amounts 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, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Operating income........................ $ 42,016,000 $ 37,827,000 $ 15,054,000
Time brokerage agreement fees........... 600,000 428,000 -
Depreciation and amortization........... 19,542,000 23,881,000 32,122,000
Corporate expense....................... 6,639,000 8,179,000 8,862,000
Non-cash compensation................... 986,000 978,000 935,000
Program amortization.................... 9,384,000 11,149,000 15,245,000
Program payments........................ (10,706,000) (11,747,000) (15,429,000)
-------------- ------------ -----------
Broadcast cash flow..................... $ 68,461,000 $ 70,695,000 $ 56,789,000
============= =========== ===========
</TABLE>
"Broadcast cash flow" means operating income plus time brokerage
agreement fees, depreciation, amortization, corporate expense, non-cash
compensation and program amortization, less program payments. 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 loss
or cash flow as reflected in the consolidated financial statements, is not a
measure of financial performance under generally accepted
-21-
<PAGE>
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.
YEARS ENDED DECEMBER 31, 1999 AND 1998
Net revenue for the year ended December 31, 1999 totaled $149,847,000;
a decrease of $11,257,000 or 7% as compared to $161,104,000 for the year ended
December 31, 1998. The decrease was primarily due to the loss of political
advertising in a non-election year as well as the loss of Olympic-related
advertising revenue at the Company's CBS affiliated stations. The decrease was
also due to the loss of revenue from the disposition of WWMT and WLAJ in the
third quarter of 1998 and the disposition of KEYE in August of 1999, offset, in
part, by the added revenues from the acquisition of KBWB in the third quarter of
1998 and strong revenue growth at the Company's WB affiliates.
Station operating expenses for the year ended December 31, 1999 totaled
$92,874,000; an increase of $3,062,000 or 3% as compared to $89,812,000 for the
year ended December 31, 1998. The increase was primarily due to increases in
programming and promotion expense at the Company's WB affiliates and in news
expense at the Company's San Francisco duopoly. These increases were offset, in
part, by an overall reduction in expenses resulting from the acquisition and
dispositions.
Amortization increased $8,173,000 or 44% for the twelve months ended
December 31, 1999 as compared to the prior year primarily due to additional
intangible amortization expense associated with the acquisition of KBWB.
Corporate expense increased $682,000, or 8% during the year ended December 31,
1998 compared to the same period a year earlier, primarily due to the expansion
of the Company's Internet business.
The equity in net loss of investee of $254,000 and $973,000 for the
years ended December 31, 1999 and 1998, respectively, resulted from the Company
recognizing its pro rata share of the losses of Datacast, LLC under the equity
method of accounting. The Company has written off its entire investment and no
other charges will be incurred.
Net interest expense decreased $2,543,000 or 7% primarily due to lower
levels of outstanding indebtedness. The Company used the net proceeds from the
sale of KEYE to repay a total of $129,000,000 of debt.
Non-cash interest expense increased $1,020,000 or 49% due to the
amortization of imputed interest on the Company's obligations to the WB Network.
The net gain on asset dispositions of $101,292,000 for the year ended
December 31, 1999 resulted primarily from the sale of KEYE in August 1999. The
net gain on asset dispositions of $57,776,000 for the year ended December 31,
1998 resulted primarily from the sale of WWMT in August 1998.
The gain on insurance settlement resulted from insurance proceeds the
Company received in excess of the net book value of assets that were destroyed
in a fire and, separately, in an ice storm, at KBJR. The Company anticipates
that it will recognize additional gains in 2000 as further insurance proceeds
are received upon replacement of the destroyed assets.
The Company reported income before taxes and extraordinary item of
$79,088,000 for the year ended December 31, 1999. The Company has partially
offset this income with its remaining available net operating loss
carryforwards. The provision for income taxes for the year consists of
$25,508,000 of current federal and state taxes and $5,809,000 of deferred taxes.
During 1999, the Company repurchased $59,255,000 principal amount of
its subordinated notes at various repurchase prices. In connection with the
repurchases, the Company incurred an extraordinary loss after the write-off of
related deferred financing fees, net of tax, of $385,000.
-22-
<PAGE>
YEARS ENDED DECEMBER 31, 1998 AND 1997
Net revenue for the year ended December 31, 1998 totaled $161,104,000,
an increase of $7,592,000, or 5% compared to net revenue of $153,512,000 for the
year ended December 31, 1997. Of this increase, $1,193,000 was due to the
inclusion of one additional month of operations of WDWB. The remaining increase
was primarily due to increases in local and national advertising revenue driven
largely by first quarter Olympic spending at the Company's CBS affiliated
stations, heavy political spending and the impact of the acquisition of KBWB,
offset, in part, by the dispositions of WWMT and WLAJ.
Station operating expenses for the year ended December 31, 1998 totaled
$89,812,000, an increase of $6,083,000 or 7% compared to $83,729,000 for the
same period a year earlier. Of this increase, $733,000 was due to the inclusion
of one additional month of operations of WDWB. The remaining increase was
primarily due to increased news, programming, promotion and sales expenses and
the inclusion of operating expenses of KBWB, offset, in part by, the
dispositions of WWMT and WLAJ.
Depreciation and amortization increased $4,339,000 or 22% for the year
ended December 31, 1998 as compared to the prior year primarily due to the
acquisition of KBWB and the inclusion of one additional month of operations of
WDWB, offset, in part, by the disposition of WWMT and WLAJ. Corporate expense
increased $1,540,000, or 23% during the year ended December 31, 1998 compared to
the same period a year earlier, primarily due to higher administrative costs
associated with the expansion of the Company's corporate office.
The equity in net loss of investee of $973,000 and $1,532,000 for the
years ended December 31, 1998 and 1997, respectively, resulted from the Company
recognizing its pro rata share of the losses of Datacast, LLC under the equity
method of accounting.
Net interest expense remained flat for the year ended December 31, 1998
compared to the prior year despite higher levels of outstanding indebtedness as
a result of the Company's strategic plan to reduce its cost of borrowing. During
the first quarter of 1997, the Company repurchased $19,405,000 principal amount
of its 9-3/8% Senior Subordinated Notes due December 1, 2005 (the "9-3/8%
Notes") at a discount. In September 1997, the Company redeemed the entire
outstanding amount of its $60,000,000 principal amount 12.75% Senior
Subordinated Debentures, due September 1, 2002 (the "12.75% Debentures") at a
redemption price of 106.375%. This debt was replaced with credit agreement
borrowings with a lower rate of interest. During the second quarter of 1998, the
Company completed an offering of $175,000,000 of its 8-7/8% Senior Subordinated
Debentures, due May 15, 2008 (the "8-7/8% Notes"). The proceeds of the offering
were used to repay all of the Company's then outstanding borrowings under its
then existing bank credit agreement and to repurchase $22,960,000 principal
amount of its 10-3/8% Senior Subordinated Notes, due May 15, 2005 (the "10-3/8%
Notes") at a repurchase price of 105.75%. During the third quarter of 1998, the
Company used lower rate Credit Agreement borrowings to repurchase an additional
$9,500,000 principal amount of the 10-3/8% Notes at a repurchase price of
101.50%. During the fourth quarter of 1999, the Company used lower rate bank
borrowings to repurchase an additional $46,100,000 principal amount of its
subordinated debt at discounts ranging from 89% to 95%.
The gain on insurance settlement resulted from insurance proceeds
received in excess of the net book value of assets that were destroyed in a fire
at KBJR.
Other expenses increased $214,000 or 18% during the year ended December
31, 1998 as compared to the same period a year earlier primarily due to costs
incurred in connection with the relocation of several employees in 1998.
In connection with the sale of WWMT and WLAJ, the Company recognized a
pre-tax gain for financial statement purposes of $57,776,000 during the third
quarter of 1998. The Company had sufficient net operating loss carryforwards to
offset regular federal taxes on the gain. However, the tax provision for 1998
includes a cash tax of approximately $1,689,000 consisting of federal
alternative minimum taxes and state income taxes.
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<PAGE>
In connection with the repurchases of subordinated debt throughout the
year, the Company incurred an extraordinary loss, net of taxes, during the year
ended December 31, 1998 of $1,761,000 relating to premiums paid and the
write-off of deferred financing costs, offset, in part, by the repurchases made
at a discount in the fourth quarter. In connection with the redemption of the
12.75% Debentures and the repurchase of $19,405,000 principal amount of its
9-3/8% Notes, the Company recognized an extraordinary loss during the year ended
December 31, 1997 of $5,569,000 related to net premiums paid and the write-off
of the related deferred financing fees.
LIQUIDITY AND CAPITAL RESOURCES
On July 30, 1999 the Company completed the disposition of WEEK-FM to
the Cromwell Group, Inc. of Chicago for $1,150,000 in cash. On August 31, 1999
the Company completed the disposition of KEYE to CBS Corporation for
$160,000,000 in cash. A portion of the proceeds from the sale of these stations
was used to repay outstanding indebtedness under the Company's Credit Agreement
and to repurchase subordinated debt of the Company. The Company recognized a
pre-tax gain for financial statement reporting purposes on the sale of these
stations of $103,470,000. The Company utilized its remaining net operating loss
carryforwards to partially reduce income for tax purposes. The 1999 tax
provision includes approximately $25,508,000 of current federal and state income
taxes, which were paid in December 1999.
In July 1999, the Company and ABC agreed to terminate the ABC
affiliation of KNTV, effective July 1, 2000. The Company received $14,000,000 in
cash on September 1, 1999 in accordance with the agreement. On February 14,
2000, the Company announced the formation of the Strategic Alliance with NBC.
Pursuant to the Strategic Alliance, KNTV is to become the NBC affiliate in the
San Francisco-Oakland-San Jose California market for a ten-year term commencing
on January 1, 2002. In addition, NBC is to extend the term of the Company's NBC
affiliation agreements with KSEE, WEEK and KBJR until December 31, 2011. As part
of such extension, NBC's affiliation payment obligations to Granite for such
stations will terminate as of December 31, 2001.
In consideration for the San Francisco Affiliation, the Company will
pay NBC $362,000,000 in nine annual installments, with the initial payment in
the amount of $61,000,000 being due January 1, 2002. Granite has also agreed to
pay $2,430,000 during 2001 in promotion expenses in connection with KNTV's
affiliation switch to NBC. See "Recent Developments KNTV Affiliation Change and
NBC Alliance."
On November 16, 1999, the Company entered into a definitive agreement
to acquire WNGS-TV, the UPN affiliate serving Buffalo, New York, from Caroline
K. Powley for $23,000,000 in cash. In connection therewith, the Company made a
$2,000,000 deposit which is refundable, under certain circumstances, if the
acquisition is not completed. The acquisition is subject to satisfaction of
certain conditions, including approval by the FCC. The Company expects to
complete the acquisition in the fourth quarter of 2000.
On June 10, 1998, the Company amended and restated its bank credit
agreement (as amended and restated, the "Credit Agreement") which, among other
things, allows for revolving credit borrowings of $260,000,000 and permits
borrowings of up to an additional $240,000,000 on an uncommitted basis. The
Credit Agreement can be used to fund future acquisitions of broadcast stations
and for general working capital purposes. As of March 23, 1999, February 16,
2000 and March 17, 2000, the Company amended the Credit Agreement to revise the
maximum consolidated total debt to consolidated cash flow ratio covenant
contained therein. As of March 17, 2000, the Company had $11,663,000 of
borrowings outstanding under the Credit Agreement and the ability to borrow in
compliance with the financial covenants thereunder an additional $40,763,000 for
acquisitions and working capital purposes. The Company expects to enter into a
replacement credit agreement (the "New Credit Agreement") during the year 2000
to enable the Company to meet its long-term borrowing needs.
During 1999, the Company repurchased $59,255,000 of its subordinated
debentures at various prices.
Net cash used in operating activities was $26,801,000 during the year
ended December 31, 1999 compared to net cash provided by operating activities of
$19,027,000 and $10,345,000 during the years ended
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<PAGE>
December 31, 1998 and 1997, respectively. The change from 1998 to 1999 was
primarily a result of an increase in cash paid for taxes, a decrease in
broadcast cash flow and an increase in net operating assets in 1999. The
increase in net cash provided by operating activities from 1997 to 1998 was
primarily due to a less significant increase in net operating assets, an
increase in broadcast cash flow and a decrease in cash paid for interest in
1998.
Net cash provided by investing activities was $156,471,000 during the
year ended December 31, 1999 compared to net cash used in investing activities
of $43,825,000 and $186,499,000 during the years ended December 31, 1998 and
1997, respectively. Cash provided by investing activities during 1999 resulted
primarily from the sale of KEYE. Cash used in investing activities during 1998
resulted primarily from the purchase of KBWB as well as payments made in
connection with securing the WB Network affiliation agreement at that station,
offset, in part, by proceeds from the sale of WWMT in 1998. Cash used in
investing activities during 1997 resulted primarily from the purchase of WDWB
and the deposit made in advance of the purchase of KBWB.
Net cash used in financing activities was $124,978,000 during the year
ended December 31, 1999 compared to net cash provided by financing activities of
$23,390,000 and $177,769,000 during the years ended December 31, 1998 and 1997,
respectively. The change from 1998 to 1999 resulted primarily from the issuance
of the 8-7/8% Notes during 1998, offset, in part, by a decrease in repurchases
of subordinated debt and a reduction in payment of deferred financing fees in
1999. The decrease in net cash provided by financing activities from 1997 to
1998 resulted primarily from a net decrease in bank borrowings, an increase in
payments for deferred financing fees and the issuance of the 12-3/4% Cumulative
Exchangeable Preferred Stock during 1997, offset in part by the issuance of the
8-7/8% Notes in 1998.
The Company anticipates that future requirements for capital
expenditures will include those incurred during the ordinary course of business,
which include costs associated with the implementation of digital television
technology. The Company believes that internally generated funds from operations
and borrowings under the Credit Agreement and the New Credit Agreement will be
sufficient to satisfy the Company's cash requirements for its existing
operations for the next twelve months and for the foreseeable future thereafter.
The Company expects that any future acquisitions of television stations would be
financed through funds generated from operations and additional debt and equity
financings.
YEAR 2000
In prior years, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
The Company expensed approximately $1,490,000 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's earnings are affected by changes in short-term
interest rates as a result of its Credit Agreement. Under its Credit
Agreement, the Company pays interest at floating rates based on Eurodollar.
The Company has not entered into any agreements to hedge such risk. Assuming
the balance under the Credit Agreement as of December 31, 1999 remains
outstanding in 2000, a 2% increase in Eurodollar would increase interest
expense by $340,000. This analysis does not consider the effects of the
reduced level of overall economic activity that could exist in such an
environment. Further, in the event of an increase in interest rates,
management could potentially take actions to mitigate its exposure to the
change.
-25-
<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, 1999 and 1998 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, 1999. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a) of the Granite Broadcasting Corporation Form 10K for the fiscal year
ended December 31, 1999. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Granite
Broadcasting Corporation at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. 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
February 18, 2000
-26-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net revenue............................................... $153,511,540 $161,104,371 $149,846,955
Station operating expenses................................ 83,728,786 89,811,723 92,874,454
Time brokerage agreement fees............................. 600,000 427,810 -
Depreciation.............................................. 5,717,989 5,387,800 5,454,819
Amortization.............................................. 13,824,248 18,493,235 26,666,719
Corporate expense......................................... 6,639,159 8,179,232 8,861,640
Non-cash compensation expense............................. 985,634 977,502 935,142
------------ ------------ -------------
Operating income........................................ 42,015,724 37,827,069 15,054,181
Other (income) expenses:
Equity in net loss of investee.......................... 1,531,542 973,439 253,603
Interest expense, net................................... 38,985,979 38,895,358 36,351,950
Non-cash interest expense............................... 2,181,686 2,095,115 3,114,890
Gain on sale of assets.................................. - (57,775,928) (101,291,854)
Gain from insurance claim............................... - (2,158,961) (4,079,207)
Other................................................... 1,167,144 1,381,443 1,616,072
------------ ------------ -------------
Income (loss) before income taxes and
extraordinary item.................................... (1,850,627) 54,416,603 79,088,727
Provision for income taxes.............................. 1,616,212 10,250,000 31,574,238
------------ ------------ -------------
Income (loss) before extraordinary item................... (3,466,839) 44,166,603 47,514,489
Extraordinary loss, net of tax benefit in 1998 and 1999
of $950,000 and $256,655, respectively.................. (5,569,119) (1,761,002) (384,983)
------------ ------------ -------------
Net income (loss)..................................... $ (9,035,958) $ 42,405,601 $ 47,129,506
------------ ------------ -------------
------------ ------------ -------------
Net income (loss) attributable to common shareholders..... $(31,207,468) $16,895,727 $19,912,091
------------ ------------ -------------
------------ ------------ -------------
Per common share:
Basic income (loss) before extraordinary item....... $ (2.93) $ 1.80 $ 1.46
Basic extraordinary loss............................ (0.64) (0.17) (0.03)
------------ ------------ -------------
Basic net income (loss)........................... $ (3.57) $ 1.63 $ 1.43
------------ ------------ -------------
------------ ------------ -------------
Weighted average common shares outstanding................ 8,764,705 10,358,371 13,968,611
Net income (loss) attributable to common shareholders -
assuming dilution......................................... $(31,207,468) $ 19,775,599 $ 21,588,040
Per common share:
Diluted income (loss) before extraordinary item..... $ (2.93) $ 1.27 $ 1.16
Diluted extraordinary loss........................... (0.64) (0.10) (0.02)
------------ ------------ -------------
Diluted net income (loss) ........................... $ (3.57) $ 1.17 $ 1.14
------------ ------------ -------------
------------ ------------ -------------
Weighted average common shares outstanding -
assuming dilution....................................... 8,764,705 16,966,501 19,011,795
</TABLE>
See accompanying notes.
-27-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
ASSETS 1998 1999
- ------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................ $ 762,392 $ 5,453,542
Accounts receivable, less allowance for doubtful accounts
($424,290 in 1998 and $430,360 in 1999) ............................... 32,830,227 33,017,344
Film contract rights..................................................... 9,671,443 17,510,909
Other current assets..................................................... 9,627,807 10,399,749
---------- -----------
TOTAL CURRENT ASSETS............................................. 52,891,869 66,381,544
PROPERTY AND EQUIPMENT, NET................................................ 33,040,152 39,176,169
FILM CONTRACT RIGHTS....................................................... 4,497,956 11,125,490
OTHER NONCURRENT ASSETS 2,788,083 3,142,422
DEFERRED FINANCING FEES, less accumulated amortization
($3,636,134 in 1998 and $5,011,922 in 1999) ............................. 11,086,733 8,209,537
INTANGIBLE ASSETS, NET..................................................... 677,669,324 602,555,693
----------- -----------
$781,974,117 $730,590,855
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable......................................................... $ 4,031,837 $ 3,120,875
Accrued interest......................................................... 5,107,551 3,487,384
Other accrued liabilities................................................ 9,908,091 7,779,475
Film contract rights payable............................................. 13,648,629 22,049,869
Other current liabilities................................................ 5,763,882 6,473,693
------------ ------------
TOTAL CURRENT LIABILITIES 38,459,990 42,911,296
LONG-TERM DEBT............................................................. 426,399,159 303,874,304
FILM CONTRACT RIGHTS PAYABLE............................................... 5,920,122 18,000,393
DEFERRED TAX LIABILITY..................................................... 78,308,597 84,117,915
OTHER NONCURRENT LIABILITIES............................................... 18,005,696 20,894,010
COMMITMENTS
REDEEMABLE PREFERRED STOCK, net of offering costs.......................... 216,350,713 210,708,780
STOCKHOLDERS' (DEFICIT) EQUITY:
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 Class A Common Stock and 17,964,081 shares of Common Stock
(Nonvoting) (11,608,032 shares at December 31, 1998) issued and
outstanding.........................................................
117,865 181,425
Additional paid-in capital............................................... 14,233,125 17,909,802
Retained (deficit) earnings.............................................. (12,006,267) 35,123,239
Less:
Unearned compensation.................................................. (2,881,008) (1,946,434)
Treasury stock (5,000 shares in 1998
and 30,000 shares in 1999), at cost................................ (47,000) (297,000)
Note receivable from officer........................................... (886,875) (886,875)
----------- -----------
TOTAL STOCKHOLDER'S (DEFICIT) EQUITY................................... (1,470,160) 50,084,157
----------- -----------
$781,974,117 $730,590,855
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
-28-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
CLASS A COMMON ADDITIONAL (ACCUMULATED
COMMON STOCK STOCK (NONVOTING) PAID-IN CAPITAL DEFICIT)
------------ ----------------- --------------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $1,785 $84,997 $45,547,145 $(45,375,910)
Dividends on redeemable preferred stock (21,729,672)
Accretion of offering costs related to
Cumulative Exchangeable Preferred Stock (441,838)
Exercise of stock options 124 58,164
Conversion of redeemable preferred stock
into Common Stock (Nonvoting) 650 324,350
Issuance of Common Stock (Nonvoting) 990 (990)
Repurchase of redeemable preferred stock
Grant of stock award under stock plans 1,008,587
Stock expense related to stock plans (236,034)
Net loss (9,035,958)
----------- ------------ --------------- ----------
Balance at December 31, 1997 1,785 86,761 24,529,712 (54,411,868)
Dividends on redeemable preferred stock (25,009,726)
Accretion of offering costs related to
Cumulative Exchangeable Preferred Stock (500,148)
Exercise of stock options 201 159,455
Conversion of redeemable preferred stock
into Common Stock (Nonvoting) 27,958 13,951,142
Issuance of Common Stock (Nonvoting) 1,160 (1,160)
Grant of stock award under stock plans 1,329,278
Stock expense related to stock plans (225,428)
Net income 42,405,601
----------- ------------ --------------- ----------
Balance at December 31, 1998 1,785 116,080 14,233,125 (12,006,267)
Dividends on redeemable preferred stock (26,717,267)
Accretion of offering costs related to
Cumulative Exchangeable Preferred Stock (500,148)
Exercise of stock options 260 97,930
Conversion of convertible preferred stock
into Common Stock (Nonvoting) 62,367 31,121,033
Issuance of Common Stock (Nonvoting) 933 (933)
Repurchase of 25,000 shares of Common Stock
(Nonvoting)
Grant of stock award under stock plans 568
Stock expense related to stock plans (324,506)
Net income 47,129,506
----------- ------------ --------------- ----------
Balance at December 31, 1999 $ 1,785 $179,640 $17,909,802 $35,123,239
======== ======== ============ ===========
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
NOTE TOTAL
UNEARNED RECEIVABLE TREASURY STOCKHOLDERS'
COMPENSATION FROM OFFICER STOCK EQUITY (DEFICIT)
------------ ------------ -------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1996 $(2,506,279) $(886,875) -- $(3,135,137)
Dividends on redeemable preferred stock (21,729,672)
Accretion of offering costs related to
Cumulative Exchangeable Preferred Stock (441,838)
Exercise of stock options 58,288
Conversion of redeemable preferred stock
into Common Stock (Nonvoting) 325,000
Issuance of Common Stock (Nonvoting) --
Repurchase of redeemable preferred stock (47,000) (47,000)
Grant of stock award under stock plans (1,008,587) --
Stock expense related to stock plans 985,634 749,600
Net loss (9,035,958)
------------- ------------- ---------- -----------
Balance at December 31, 1997 (2,529,232) (886,875) (47,000) (33,256,717)
Dividends on redeemable preferred stock (25,009,726)
Accretion of offering costs related to
Cumulative Exchangeable Preferred Stock (500,148)
Exercise of stock options 159,656
Conversion of redeemable preferred stock
into Common Stock (Nonvoting) 13,979,100
Issuance of Common Stock (Nonvoting) --
Grant of stock award under stock plans (1,329,278) --
Stock expense related to stock plans 977,502 752,074
Net income 42,405,601
------------- ------------- ---------- - ----------
Balance at December 31, 1998 (2,881,008) (886,875) (47,000) (1,470,160)
Dividends on redeemable preferred stock (26,717,267)
Accretion of offering costs related to
Cumulative Exchangeable Preferred Stock (500,148)
Exercise of stock options 98,190
Conversion of convertible preferred stock
into Common Stock (Nonvoting) 31,183,400
Issuance of Common Stock (Nonvoting) --
Repurchase of 25,000 shares of Common Stock
(Nonvoting) (250,000) (250,000)
Grant of stock award under stock plans (568) --
Stock expense related to stock plans 935,142 610,636
Net income 47,129,506
------------- ------------- ---------- ----------
Balance at December 31, 1999 $(1,946,434) $ (886,875) $(297,000) $50,084,157
=========== ========== ========= ===========
</TABLE>
-29-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................... $(9,035,958) $ 42,405,601 $ 47,129,506
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Extraordinary loss................................................. 5,569,119 2,711,002 641,638
Amortization of intangible assets.................................. 13,824,248 18,493,235 26,666,719
Depreciation....................................................... 5,717,989 5,387,800 5,454,819
Non-cash compensation expense...................................... 985,634 977,502 935,142
Non-cash interest expense.......................................... 2,181,686 2,095,115 3,114,890
Deferred income taxes.............................................. 1,194,212 7,610,728 5,809,000
Equity in net loss of investee..................................... 1,531,542 973,439 253,603
Gain on sale of assets............................................. -- (57,775,928) (101,291,854)
Gain from insurance settlement..................................... -- (2,158,961) (4,079,207)
Change in assets and liabilities net of effects from
acquisitions of stations:
(Increase) decrease in accounts receivable......................... (8,251,013) 2,478,237 (187,117)
(Decrease) increase in accrued liabilities......................... (629,972) 3,607,363 (3,748,783)
(Decrease) increase in accounts payable............................ (131,725) 146,598 (910,962)
Increase in film contract rights and other assets.................. (6,697,410) (4,176,217) (24,185,421)
Increase (decrease) in film contract rights payable
and other liabilities............................................. 4,086,757 (3,748,846) 17,596.607
------------- ------------- ------------
Net cash provided by (used in) operating activities................... 10,345,109 19,026,668 (26,801,420)
------------- ------------- ------------
Cash flows from investing activities:
Deposit for station acquisition and other related costs............. (5,960,000) -- (2,123,116)
Proceeds from sale of assets, net................................... -- 149,990,381 171,308,975
WB affiliation payment.............................................. -- (14,846,638) (4,874,778)
Insurance proceeds received......................................... -- 1,743,544 8,622,081
Investment in Datacast, LLC......................................... (1,500,000) (500,000) (133,603)
Payment for acquisitions of assets, net of cash acquired............ (173,164,089) (170,869,424)
Capital expenditures................................................ (5,874,633) (9,343,021) (16,078,762)
------------- ------------- ------------
Net cash provided by (used in) investing activities............... (186,498,722) (43,825,158) 156,720,797
------------- ------------- ------------
Cash flows from financing activities:
Proceeds from bank loan............................................. 138,500,000 100,000,000 72,500,000
Retirement of senior subordinated notes............................. (82,897,588) (78,560,000) (59,255,000)
Repayment of bank borrowings........................................ (18,000,000) (162,500,000) (136,000,000)
Payment of deferred financing fees.................................. (210,873) (7,195,821) (503,965)
Proceeds from senior subordinated notes............................. -- 174,482,000
Proceeds from Preferred Stock Offering, net......................... 143,889,789 -- --
Dividends paid...................................................... (3,523,828) (2,926,217) (1,776,629)
Purchase of Common Stock (Nonvoting) for treasury................... (47,000) -- (250,000)
Other financing activities, net..................................... 58,287 89,993 57,367
------------- ------------- ------------
Net cash provided by (used in) financing activities............... 177,768,787 23,389,955 (125,228,227)
------------- ------------- ------------
Net (decrease) increase in cash and cash equivalents.................. 1,615,174 (1,408,535) 4,691,150
Cash and cash equivalents, beginning of year.......................... 555,753 2,170,927 762,392
------------- ------------- ------------
Cash and cash equivalents, end of year................................ $2,170,927 $ 762,392 $ 5,453,542
------------- ------------- ------------
------------- ------------- ------------
Supplemental information:
Cash paid for interest.............................................. $40,711,506 $38,688,348 $39,031,115
Cash paid for income taxes.......................................... 193,000 195,000 26,800,664
Non-cash investing and financing activities:
Non-cash capital expenditures..................................... 668,747 581,692 600,875
Stock dividend.................................................... 13,009,715 21,446,256 24,267,776
</TABLE>
See accompanying notes.
-30-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 prior years have been
reclassified to conform to the 1999 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:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Goodwill............................................. $216,788,583 $222,114,559
Covenant not to compete.............................. 30,000,000 30,000,000
Network affiliations................................. 187,731,900 130,979,900
Broadcast licenses................................... 302,638,089 297,336,089
----------- -----------
737,158,572 680,430,548
Accumulated amortization............................. (59,489,248) (77,874,855)
---------- ----------
Net intangible assets................................ $677,669,324 $602,555,693
============ ============
</TABLE>
The intangible assets are characterized as scarce assets with long and
productive lives and are being amortized on a straight line basis over periods
ranging from seven to forty years, with the exception of the covenant not to
compete, which is being amortized over 5 years.
In July 1999 the Company and the American Broadcasting Companies, Inc.
("ABC") agreed to terminate the ABC affiliation of KNTV, the ABC affiliate
serving San Jose-Salinas-Monterey, California, effective July 2000. The Company
received $14,000,000 in cash on September 1, 1999 in accordance with the
agreement. The Company recognized a loss for financial statement purposes on the
sale of the affiliation of $2,178,000.
During 1999, the Company reclassified certain of its intangible
assets based on appraised values. As both of these intangible assets are
being amortized over a 40-year life, other than the impact on the loss on the
sale of the ABC affiliation, the reclassification had no impact on the
results of operations for the year ended December 31, 1999.
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
-31-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
10-3/8% Notes (as defined), the sale of 9-3/8% Notes (as defined) and the sale
of 8-7/8% Notes (as defined). The deferred financing fees related to the bank
credit agreement are being amortized over seven years, and the deferred
financing fees related to the 10-3/8% Notes, the 9-3/8% Notes and the 8-7/8%
Notes are being amortized over ten years. Amortization of deferred financing
fees is classified as non-cash interest expense on the consolidated statement of
operations.
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, 1999, the obligation for programming that had not been
recorded because the program rights were not available for broadcasting
aggregated $64,237,000.
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. The net effect of barter transactions on the Company's
results of operations is not material.
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.
-32-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NET LOSS PER COMMON SHARE
The per share calculations shown on the face of the income statement
are computed in accordance with Statement of Financial Accounting Standards No.
128, "Earnings Per Share." The following table sets forth the computation of
basic and diluted earnings per share:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net income (loss) before extraordinary item.......... $ (3,466,839) $ 44,166,603 $ 47,514,489
Extraordinary loss on early extinguishment
of debt, net of tax benefit in 1998 and 1999
of $950,000 and $256,655, respectively............. (5,569,119) (1,761,002) (384,983)
---------- ------------ -------------
Net income (loss) ................................... (9,035,958) 42,405,601 47,129,506
LESS:
Preferred stock dividends:
Convertible preferred............................. 3,523,989 2,879,872 1,675,949
Exchangeable preferred............................ 18,205,683 22,129,854 25,041,318
Accretion on exchangeable preferred.................. 441,838 500,148 500,148
------------- ------------- -------------
Net income (loss) attributable to common shareholders (31,207,468) 16,895,727 19,912,091
Effect of dilutive securities:
PLUS:
Convertible preferred stock dividends.............. (a) 2,879,872 1,675,949
------------- -------------
Net income (loss) attributable to common
Shareholders - assuming dilution................... $(31,207,468) $19,775,599 $21,588,040
============ =========== ===========
Weighted average common shares outstanding for
basic net income (loss) per share.................. 8,764,705 10,358,371 13,968,611
ADD:
Effect of dilutive securities:
Preferred stock conversions....................... 6,236,680 4,151,240
Stock options..................................... 371,450 891,944
----------- -------------
Total potential dilutive common shares.......... (a) 6,608,130 5,043,184
Adjusted weighted average common
shares outstanding - assuming dilution............. 8,764,705 16,966,501 19,011,795
========= ========== ==========
Per Common Share:
Basic income (loss) before extraordinary item..... $ (2.93) $ 1.80 $ 1.46
Basic extraordinary loss.......................... (0.64) (0.17) (0.03)
------------ ------------ ------------
Basic net income (loss) per share................. $ (3.57) $ 1.63 $ 1.43
============ =========== ============
Diluted income (loss) before extraordinary item... $ (2.93) $ 1.27 $ 1.16
Diluted extraordinary loss........................ (0.64) (0.10) (0.02)
------------ ------------ ------------
Diluted net income (loss) per share............... $ (3.57) $ 1.17 $ 1.14
============== ============== ============
</TABLE>
(a) No adjustments were made to the dilutive per share calculation
for the year ended December 31, 1997 as doing so would have been
antidilutive.
-33-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
On July 15, 1998, the Company completed the disposition of WWMT-TV, the
CBS affiliate serving Grand Rapids-Kalamazoo-Battle Creek, Michigan, to Freedom
Communications, Inc. ("Freedom") for $150,540,000 in cash. On August 17, 1998,
the Company exercised its option to purchase WLAJ-TV, the ABC affiliate serving
Lansing, Michigan, for $19,500,000 in cash and simultaneously sold the station
to Freedom for $18,950,000 in cash. In connection with the sale of WWMT and
WLAJ, the Company recognized a net pre-tax gain for financial statement purposes
of $57,776,000.
On July 20, 1998, the Company completed the acquisition of KBWB-TV
(formerly KOFY-TV), the WB affiliate serving San Francisco-Oakland-San Jose
California, by acquiring the stock of Pacific FM Incorporated ("Pacific"), the
owner of KBWB-TV for $143,150,000 in cash and the assumption of certain
liabilities. In addition, the Company paid $30,000,000 to the principal
shareholders of Pacific for a covenant not to compete in the San
Francisco-Oakland-San Jose television market for a period of five years from the
closing. In connection with the purchase of KBWB-TV, the WB Network agreed to
enter into a ten-year affiliation agreement with the Company instead of with
another television station in the San Francisco market in return for total
consideration of $31,572,000. The Company paid $14,847,000 to the WB Network
after the closing of the acquisition and will pay the remaining $16,725,000 over
a five year period. The remaining payment is shown at its net present value on
the Company's balance sheet using an effective interest rate of 7.75%. The
acquisition has been accounted for under the purchase method of accounting and
the results of operations are included in the Company's consolidated statements
of operations from the date of acquisition.
The following comprises the allocation of the purchase price:
<TABLE>
<S> <C>
Total Purchase Price $205,322,000
Net liabilities acquired, principally film contract rights,
deferred tax liability and property and equipment 61,369,000
Broadcast license (118,902,000)
Covenant not to compete (30,000,000)
Network affiliation agreement (28,666,000)
-----------
Goodwill $89,123,000
-----------
-----------
</TABLE>
On July 30, 1999, the Company completed the disposition of WEEK-FM to
the Cromwell Group, Inc. of Illinois for $1,150,000 in cash. On August 31, 1999,
the Company completed the disposition of KEYE-TV, the CBS affiliate serving
Austin, Texas to CBS Corporation ("CBS") for $160,000,000 in cash. A portion of
the proceeds from the sale of these stations was used to repay outstanding
indebtedness under the Company's bank credit agreement (the "Credit Agreement").
The Company recognized a pre-tax gain for financial statement purposes on the
sale of these stations of $103,470,000.
On November 16, 1999, the Company entered into a definitive agreement
to acquire WNGS-TV, the UPN affiliate serving Buffalo, New York, from Caroline
K. Powley for $23,000,000 in cash. Closing of the acquisition is subject to
certain closing conditions, including approval by the Federal Communications
Commission (the "FCC"). The Company expects to complete the acquisition in the
fourth quarter of 2000.
-34-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the unaudited consolidated pro forma
results of operations for the years ended December 31, 1997, 1998 and 1999
assuming the acquisition of KBWB-TV and the disposition of WWMT-TV and WLAJ-TV
had occurred as of January 1, 1997 and the disposition of KEYE and WEEK-FM had
occurred as of January 1, 1998:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Net revenue $147,580,000 $140,876,000 $139,400,000
Station operating expenses 84,925,000 79,711,000 87,212,000
Loss before extraordinary item (19,368,000) (10,139,000) (51,741,000)
Per common share:
Basic and diluted loss before
extraordinary item $ (5.22) $ (3.44) $ (5.65)
</TABLE>
NOTE 3 -- PROPERTY AND EQUIPMENT
The major classifications of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 1999
-------- --------
<S> <C> <C>
Land.................................... $ 1,853,704 $ 1,750,522
Buildings and improvements.............. 13,576,255 14,075,255
Furniture and fixtures.................. 6,707,887 7,990,633
Technical equipment and other........... 40,128,206 45,350,080
---------- ----------
62,266,052 69,166,490
Less: Accumulated depreciation......... 29,225,900 29,990,321
---------- ----------
Net property and equipment.............. $33,040,152 $39,176,169
=========== ===========
</TABLE>
NOTE 4 -- OTHER ACCRUED LIABILITIES
Other accrued liabilities are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1999
-------- --------
<S> <C> <C>
Compensation and benefits............... $ 2,313,611 $ 2,205,324
Income taxes payable.................... 5,287,748 3,912,027
Other................................... 2,306,732 1,662,124
--------- ---------
Total................................... $ 9,908,091 $7,779,475
=========== ==========
</TABLE>
-35-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- OTHER CURRENT LIABILITIES
Other current liabilities are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1999
-------- --------
<S> <C> <C>
WB affiliation payment, net................. $ 2,909,227 $ 4,101,907
Barter payable.............................. 2,023,280 1,724,025
Other....................................... 831,375 647,761
----------- -----------
Total....................................... $5,763,882 $6,473,693
========== ==========
</TABLE>
NOTE 6-- OTHER CURRENT ASSETS
Other current assets are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1999
-------- --------
<S> <C> <C>
Barter and other receivables................ $ 3,114,266 $ 2,951,963
Escrow deposit related to station
acquisition and other related costs....... -- 2,123,116
Prepaid film contract rights................ 1,589,776 92,496
Insurance settlement receivable............. 2,812,669 2,595,902
Other....................................... 2,111,096 2,636,272
--------- ---------
Total....................................... $9,627,807 $ 10,399,749
========== ===========
</TABLE>
NOTE 7-- LONG-TERM DEBT
The carrying amounts and fair values of the Company's long-term debt
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
------------------------------- --------------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Senior Bank Debt.............. $ 80,500,000 $ 80,500,000 $ 17,000,000 $ 17,000,000
9-3/8% Senior Subordinated
Notes, net of unamortized
discount.................... 58,980,335 58,006,200 38,643,509 38,453,796
10-3/8% Senior Subordinated
Notes....................... 134,420,000 135,764,200 132,420,000 134,856,528
8-7/8% Senior Subordinated
Notes, net of unamortized
discount.................... 152,498,824 145,661,063 115,810,795 111,873,960
----------- ----------- ----------- -----------
Total......................... $426,399,159 $419,931,463 $303,874,304 $302,184,284
============ ============ ============ ============
</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.
-36-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SENIOR BANK DEBT
The Company's existing bank credit agreement was amended and restated
on June 10, 1998 (as amended and restated and as further amended from time to
time, the "Fourth Amended and Restated Credit Agreement" or the "Credit
Agreement") to create a reducing revolving credit facility of up to $260,000,000
and permits additional borrowings of up to $240,000,000. The proceeds from this
facility are available for acquisitions and for general working capital purposes
as defined in the agreement. As of March 23, 1999, February 16, 2000 and March
17, 2000, the Company amended the Credit Agreement to revise the maximum
consolidated total debt to consolidated cash flow ratio covenant contained
therein.
The March 17, 2000 amendment also increased the marginal rates above
Eurodollar and the prime rate that outstanding indebtedness bear interest
under the Credit Agreement. Outstanding principal balances under the Fourth
Amended and Restated Credit Agreement bear interest at floating rates equal
to Eurodollar (the "Eurodollar Rate") plus marginal rates between 1.50% and
2.75% or the prime rate plus marginal rates between 0.25% and 1.50%. The
Eurodollar Rate was 5.6875% plus a marginal rate of 2.5% at December 31,
1998. The Eurodollar Rate was 6.25% plus a marginal rate of 2.25% at December
31, 1999. The prime rate was 7.75% plus a marginal rate of 1.25% at December
31, 1998. The prime rate was 8.5% plus a marginal rate of 1.00% at December
31, 1999. 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 is subject to reduction in installments
commencing December 31, 2000 through December 31, 2005, when the agreement
matures.
The Fourth 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 Fourth 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 and
other transactions by the Company.
SENIOR SUBORDINATED NOTES
In May 1995, 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 repurchased $2,000,000 face amount of its 10-3/8%
Notes at a discount. In 1998, the Company repurchased a total of $38,580,000
face amount of its 10-3/8% Notes at various prices. During 1999, the Company
repurchased $2,000,000 face amount of its 10-3/8% Notes at a premium.
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 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 all existing
and 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.
In February 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 at a discount, resulting in net proceeds to the
-37-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company of $109,450,000. In 1996, the Company repurchased $13,500,000 principal
amount of its 9-3/8% Notes at a discount. In 1997, the Company repurchased
$19,405,000 principal amount of its 9-3/8% Notes at a discount. In 1998, the
Company repurchased a total of $17,905,000 principal amount of its 9-3/8% Notes
at a discount. During 1999, the Company repurchased a total of $20,430,000
principal amount of its 9-3/8% Notes at a premium.
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 governing the 9-3/8% Notes)
and rank PARI PASSU with all senior subordinated debt and senior to all
subordinated debt. The provisions of the Indenture governing the 9-3/8% Notes
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.
In May 1998, the Company completed an offering of $175,000,000
principal amount of its 8-7/8% Senior Subordinated Notes, due May 15, 2008 (the
"8-7/8% Notes"), at a discount, resulting in proceeds to the Company of
$174,482,000. The proceeds of this offering were used to repay all of the then
outstanding borrowings under the Company's then existing bank credit agreement
and to repurchase $22,960,000 principal amount of its 10-3/8% Notes at a
premium. In 1998, the Company repurchased a total of $22,075,000 principal
amount of its 8-7/8% Notes at various prices. During 1999, the Company
repurchased a total of $36,825,000 principal amount of its 8-7/8% Notes at
various prices.
The 8-7/8% Notes are redeemable in the event that on or before May 15,
2001 the Company receives net proceeds from the sale of its Capital Stock (other
than Disqualified Stock (each as defined in the Indenture governing the 8-7/8%
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
8-7/8% Notes with certain limitations. In addition, the 8-7/8% Notes are
redeemable at any time on or after May 15, 2003 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 May 15, 2006, plus accrued interest. The Company is required
to offer to purchase all outstanding 8-7/8% Notes at 101% of the principal
amount thereof plus accrued interest in the event of a Change of Control (as
defined in the Indenture governing the 8-7/8% Notes).
The 8-7/8% Notes are subordinate in right of payment to all existing
and future Senior Debt (as defined in the Indenture governing the 8-7/8% Notes)
and rank PARI PASSU with all senior subordinated debt and senior to all
subordinated debt. The provisions of the Indenture governing the 8-7/8% Notes
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.
During 1997, 1998 and 1999, the Company recognized extraordinary losses
of $5,569,119, $2,711,002 and $641,638, respectively, related to the
aforementioned repurchases of subordinated debt, as well as the repayment of all
then outstanding term loan and revolving credit borrowings under the then
existing bank credit agreements in 1998. Such extraordinary losses were the
result of premiums paid and the write-off of related deferred financing fees,
offset, in part, by gains recognized on that subordinated debt repurchased at a
discount.
There are no scheduled principal maturities on all long-term debt for
the five years subsequent to December 31, 1999.
-38-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- COMMITMENTS
Future minimum lease payments under long-term operating leases as of
December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000............................................................. $ 1,488,610
2001............................................................. 1,289,580
2002............................................................. 1,138,723
2003............................................................. 1,027,387
2004 ............................................................ 1,107,464
2005 and thereafter.............................................. 2,600,659
-----------
$ 8,652,423
-----------
-----------
</TABLE>
Rent expense, including escalation charges, was $1,038,000, $1,314,000
and $1,559,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
NOTE 9 -- 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, 1998 and 1999.
Accrued dividends are due and payable on the date on which such dividends may be
paid under the Company's debt instruments.
CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
The Company had 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 then ultimate parent of WKBW. Holders of the Cumulative
Convertible Exchangeable Preferred Stock were 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 were cumulative and accrue without interest, if
unpaid.
In August 1999, the Company called for the redemption of all
outstanding shares of its Cumulative Convertible Exchangeable Preferred Stock.
Holders of Cumulative Convertible Exchangeable Preferred Stock had the option to
accept cash in the amount of $25.97 per share, plus accrued but unpaid
dividends, or convert at any time on or before September 10, 1999 each preferred
share into 5 shares of the Company's Common Stock (Nonvoting). As of September
10, 1999 all of the Company's outstanding Cumulative Convertible Exchangeable
Preferred Stock had been converted into Common Stock (Nonvoting).
12-3/4% CUMULATIVE EXCHANGEABLE PREFERRED STOCK
In January 1997, the Company authorized 400,000 shares of its 12-3/4%
Cumulative Exchangeable Preferred Stock (the "12-3/4% Cumulative Exchangeable
Preferred Stock"), par value $.01 per share. In connection
-39-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with the Company's acquisition of WDWB-TV, 150,000 shares of the 12-3/4%
Cumulative Exchangeable Preferred Stock were issued in January 1997 at a price
of $1,000 per share. Holders of the 12-3/4% Cumulative Exchangeable 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 Fourth Amended
and Restated Credit Agreement allows for the payment of cash dividends on the
12-3/4% Cumulative Exchangeable Preferred Stock provided that the Company is in
compliance with all covenants under the Fourth Amended and Restated Credit
Agreement. The Company may elect to pay dividends prior to April 1, 2002 in
additional shares of 12-3/4% Cumulative Exchangeable Preferred Stock. Dividends
on the 12-3/4% Cumulative Exchangeable Preferred Stock are cumulative and accrue
without interest, if unpaid.
The 12-3/4% Cumulative Exchangeable 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 ($215,376,900
liquidation value at December 31, 1999). The Company is required, subject to
certain conditions, to redeem all of the 12-3/4% Cumulative Exchangeable
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 12-3/4% Cumulative
Exchangeable 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 "12-3/4%
Exchange Debentures") on any scheduled dividend payment date at the rate of
$1,000 principal amount of 12-3/4% Exchange Debentures for each share of 12-3/4%
Cumulative Exchangeable Preferred Stock outstanding at the time of the exchange.
NOTE 10 -- STOCKHOLDERS' EQUITY
STOCK OPTION PLANS
The Company has a stock option plan (the "Stock Option Plan") for
officers and certain key employees. On January 8, 1999, the Stock Option Plan
was amended to increase the shares of Common Stock (Nonvoting) subject to
options available for grant to 4,000,000 from 3,000,000. On February 23, 1999,
the Stock Option Plan was further amended to increase the shares of Common Stock
(Nonvoting) subject to options available for grant from 4,000,000 to 6,000,000.
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 nonqualified 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. At December 31, 1998 and 1999,
options granted under the Stock Option Plan were outstanding for the purchase of
1,803,125 and 4,692,625 shares of Common stock (Nonvoting), respectively.
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
nonqualified stock options to non-employee directors of the Company to purchase
an aggregate of 300,000 shares of Common Stock (Nonvoting). On July 27, 1999,
the Director Option Plan was amended to increase the shares of Common Stock
(Nonvoting) subject to options available for grant from 300,000 to 1,000,000. As
of December 31, 1998 and 1999, options granted under the Director Option Plan
were outstanding for the purchase of 250,100 and 786,685 shares of Common Stock
(Nonvoting), respectively. The options granted under the Director Option Plan
serve as compensation for attendance at regularly scheduled board meetings and
for service on certain committees of the Board of Directors.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123"). Accordingly, no compensation expense has been recognized for the
stock option plans. For purposes of SFAS 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 income
-40-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(loss) in 1997, 1998 and 1999 may not be representative of the impact in future
years. The Company's pro forma information for years ended December 31, follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Pro forma net income (loss)......................... $(10,301,413) $40,900,956 $45,661,497
Pro forma net income (loss) per share:
Basic............................................. $(3.70) $1.49 $1.32
Diluted........................................... $(3.70) $1.08 $1.06
</TABLE>
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 1997, 1998 and 1999: risk-free
interest rate of 5.67% in 1997, 4.65% in 1998 and 5.93% in 1999; no dividend
yield; expected volatility of 38% in 1997 and 1998, and 45% in 1999; and
expected lives of three years in 1997, 1998 and four years in 1999.
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.
<TABLE>
<CAPTION>
1997 1998 1999
------------------------------ ----------------------------- ---------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- ------ -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.... 1,872,700 $10.22 2,336,850 $ 9.98 2,053,225 8.51
Granted............................. 481,000 8.89 317,500 11.28 3,637,385 7.78
Exercised........................... (12,350) 4.72 (20,125) 7.62 (31,800) 4.63
Forfeited........................... (4,500) 9.75 (581,000) 15.97 (179,500) 6.95
--------- --------- ---------
Outstanding at end of year.......... 2,336,850 9.98 2,053,225 8.51 5,479,310 8.10
========= ========= =========
Exercisable at end of year.......... 1,285,250 8.87 1,298,025 7.49 1,779,810 7.90
Weighted-average fair value of
options granted during the year... $2.84 $ 3.36 $ 2.87
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
WEIGHTED-AVERAGE --------------------------------
RANGE OF REMAINING WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/99 EXERCISE PRICE
--------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$3 - $5.25 445,825 4.39 years $3.80 445,825 $3.80
$6.13 - $6.88 1,701,400 9.07 years $6.49 150,400 $6.67
$7 - $9.75 1,395,885 8.16 years $7.86 687,585 $8.06
$10 - $12.44 1,936,200 7.86 years $10.68 496,000 $11.74
</TABLE>
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 1,000,000 shares of Common Stock
(Nonvoting) for grant under the Management Stock Plan. Shares generally vest
over a five-year period. As of December 31, 1999, the Company has allocated a
total of 783,979 Bonus Shares pursuant to the Management Stock Plan, 607,062 of
which had vested through December 31, 1999. For the years ended December 31,
1998 and 1999, 135,000 and 66,600 shares, respectively, were granted pursuant to
the Management Stock Plan. The weighted-average grant-date fair value of those
shares is $11.39 and $7.60, respectively.
-41-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NON-EMPLOYEE DIRECTORS' STOCK PLAN
In April of 1997, the Company adopted a Non-Employee Directors' Stock
Plan (the "Director Stock Plan"), providing an annual grant of the Company's
Common Stock (Nonvoting) to each eligible non-employee director of a number of
shares equal to $20,000 divided by the fair market value of the Common Stock
(Nonvoting) on the date of grant. The Company has set aside a reserve of 100,000
shares of Common Stock (Nonvoting) for grant under the Director Stock Plan.
Shares granted vest immediately. For the years ended December 31, 1998 and 1999,
12,586 and 27,297 shares, respectively, were granted pursuant to the Director
Stock Plan with weighted-average grant date fair values of $11.13 and $6.23,
respectively.
The total number of common shares outstanding at December 31, 1999
assuming the exercise of all outstanding stock options is as follows:
<TABLE>
<S> <C>
Class A Common Stock.............................................. 178,500
Common Stock (Nonvoting).......................................... 17,964,081
Stock option plans................................................ 5,479,310
----------
23,621,891
----------
----------
</TABLE>
NOTE 11 -- INCOME TAXES
The Company files a consolidated federal income tax return for its
entities which, as of January 1, 1999 included the operations of WKBW. For all
periods presented, the Company provides for 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.
The provision for income taxes for the years ended December 31 consists
of the following:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ---------- ----------
<S> <C> <C> <C>
Current taxes:
Federal............................................... $ - $ 958,000 $ 23,397,000
State................................................. 422,000 731,000 2,111,000
------- -------- ---------
422,000 1,689,000 25,508,000
Deferred taxes:
Federal............................................... 844,212 7,469,000 4,876,000
State................................................. 350,000 142,000 933,000
-------- -------- -------
1,194,212 7,611,000 5,809,000
--------- --------- ---------
Provision for income taxes............................... $1,616,212 $9,300,000 $31,317,000
========== ========== ===========
</TABLE>
The provision for income taxes for the years ended December 31, 1997
and 1998 is comprised of a non-cash provision for income taxes relating to the
separate federal return of WKBW of $1,730,561 and $719,215, respectively.
-42-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (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,
-----------------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax liability:
Deferred tax liability from excess carrying value
of non-goodwill intangible assets over tax basis.......... $94,519,337 $88,674,743
Depreciation................................................ 756,021 2,406,638
Other....................................................... 177,265 181,473
---------- ----------
Total deferred tax liability............................... 95,452,623 91,262,854
Deferred tax assets:
Net operating loss carryforward........................... 16,185,619 7,144,939
Alternative minimum tax credit............................ 958,407 -
---------- ----------
Total deferred tax assets................................... 17,144,026 7,144,939
Net deferred tax liability.................................. $78,308,597 $84,117,915
=========== ===========
</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:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
U.S. statutory rate......................................... (35.0%) 35.0% 35.0%
Nondeductible amortization................................. 35.5 1.9 1.8
State and local taxes....................................... 35.1 1.1 2.6
(Decrease) increase in valuation allowance.................. 51.7 (19.2) -
Other (net)................................................. - - .5
--------- --------- ----
Effective tax rate......................................... 87.3% 18.8% 39.9%
==== ==== ====
</TABLE>
At December 31, 1999, the Company had a net operating loss carryforward
for federal tax purposes of approximately $18,000,000 relating to WKBW, which
may be subject to limitation under the Separate Return Limitation Rules of the
Internal Revenue Code. These net operating losses will expire no sooner than
December 31, 2002.
In 1998, the Company released the valuation allowance as it was more
likely than not that deferred tax assets would be realized in the future.
NOTE 12 -- 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 monthly, amounted to $718,000, $792,000 and
$811,390 for the years ended December 31, 1997, 1998 and 1999, respectively.
-43-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- RELATED PARTY
In 1995, the Company loaned 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 annually in April of each year, with all
principal and remaining interest due on December 29, 2004.
In 1996, the Company loaned 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 in April 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 and 1997 as a reduction to
stockholders' equity.
In 1997, the Company loaned one of its officers $441,530 to pay certain
personal taxes. The loan is a term loan which provides for an annual interest
rate of 8%, payable annually on April 16 of each year with all principal and
remaining interest due April 16, 2001.
In 1998, the Company loaned one of its officers $825,000. The loan is a
term loan which provides for an annual interest rate of 7.50%, payable annually
on April 30 of each year with all principal and remaining interest due December
1, 2003.
NOTE 14 - SUBSEQUENT EVENT
On February 14, 2000, the Company announced the formation of a
strategic alliance (the "Strategic Alliance") with the National Broadcasting
Company, Inc. ("NBC"). Pursuant to the Strategic Alliance, KNTV is to become the
NBC affiliate in the San Francisco-Oakland-San Jose California DMA for a
ten-year term commencing on January 1, 2002 (the "San Francisco Affiliation").
In connection with the affiliation switch to NBC, the Company intends to expand
KNTV's coverage to include a greater percentage of the San Francisco-Oakland-San
Jose DMA. The Company has received permission from the FCC to increase KNTV's
signal coverage, and anticipates consummating such increase in May 2000. The
Company is also seeking to reach all cable homes in the San
Francisco-Oakland-San Jose DMA through expanded cable coverage.
In addition, NBC is to extend the term of the Company's NBC affiliation
agreements with KSEE, WEEK and KBJR until December 31, 2011. As part of such
extension, NBC's affiliation payment obligations to Granite for such stations
will terminate as of December 31, 2001.
In consideration for the San Francisco Affiliation, the Company will
pay NBC $362,000,000 in nine annual installments, with the initial payment
in the amount of $61,000,000 being due January 1, 2002. In addition, Granite
is to grant NBC a warrant to acquire 2.5 million shares of the Company's
Common Stock (Nonvoting), par value $0.01 per share (the "Common Stock
(Nonvoting)"), at an exercise price of $12.50 per share (the "A Warrant") and
a warrant to purchase 2.0 million shares of Common Stock (Nonvoting) at an
exercise price of $15.00 per share (The "B Warrant"). The A Warrant vests in
full on December 31, 2000. The B Warrant vests in full on January 1, 2002, if
the San Francisco Affiliation is in effect on that date. Each warrant, once
vested, remains exercisable until December 31, 2011 and may be exercised for
cash or surrender of a portion of a then exercisable Warrant. The aggregate
number of shares issuable upon exercise of the warrants (assuming they are
exercised for cash) would represent approximately 20.0% of the Common Stock
(Nonvoting) as of December 31, 1999 after giving effect to their issuance.
Granite has also agreed to pay $2,430,000 during 2001 in promotion
expenses in connection with KNTV's affiliation switch to NBC.
-44-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- 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 closing market price ranges
per share of Common Stock (Nonvoting) during 1998 and 1999, as reported by
Nasdaq:
<TABLE>
<CAPTION>
1998 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter..................................................... $12-1/4 $8-7/8
Second Quarter.................................................... 12-1/8 10-7/8
Third Quarter..................................................... 13-1/2 5-3/4
Fourth Quarter.................................................... 6-7/8 4
1999
First Quarter..................................................... $ 8-3/4 $6-1/8
Second Quarter.................................................... 8-1/8 6
Third Quarter..................................................... 12-1/8 7-3/8
Fourth Quarter.................................................... 14-3/8 8-15/16
</TABLE>
As of March 1, 2000 the closing price per share for the Company's
Common Stock (Nonvoting), as reported by Nasdaq was $8.125 per share.
The Cumulative Convertible Exchangeable Preferred Stock was traded in
the over-the-counter market and was quoted on the OTC Bulletin Board under the
symbol "GBTVP". The following table sets forth the closing market price ranges
per share of Cumulative Convertible Exchangeable Preferred Stock during 1998 and
1999:
<TABLE>
<CAPTION>
1998 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter..................................................... $62-5/8 $45
Second Quarter.................................................... 59-19/64 54
Third Quarter..................................................... 66-1/2 30
Fourth Quarter.................................................... 34-11/16 20
1999
First Quarter..................................................... $43-1/8 $29-1/4
Second Quarter.................................................... 39-1/2 34
Third Quarter..................................................... 56 37-3/16
</TABLE>
As of September 10, 1999 all of the Company's Cumulative Convertible
Exchangeable Preferred Stock was converted into Common Stock (Nonvoting).
-45-
<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, 1997.... $ 391,910 134 $ 396,829 $ 380,583 $ 408,290
For the year ended December 31, 1998.... 408,290 - 466,945 450,945 424,290
For the year ended December 31, 1999.... 424,290 - 492,648 486,578 430,360
</TABLE>
- --------
(1) Net of recoveries.
-46-
<PAGE>
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
-47-
<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 March 1, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
W. Don Cornwell(1)................................... 52 Chairman of the Board, Chief Executive Officer
and Director
Stuart J. Beck(1).................................... 53 President, Secretary and Director
Robert E. Selwyn, Jr................................. 56 Chief Operating Officer and Director
Lawrence I. Wills.................................... 39 Vice President-Finance and Controller
Ellen McClain........................................ 35 Vice President-Corporate Development and
Treasurer
James L. Greenwald(2)................................ 72 Director
Martin F. Beck....................................... 82 Director
Edward Dugger, III................................... 50 Director
Thomas R. Settle(1)(3)(4)............................ 59 Director
Charles J. Hamilton, Jr.(2)(4)....................... 52 Director
M. Fred Brown(2)...................................... 53 Director
Jon E. Barfield(3)(4)................................. 48 Director
Veronica Pollard(3)(5)................................ 54 Director
</TABLE>
- ------------
(1) Member of the Stock Option Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Management Stock Plan Committee.
(5) Joined the Board on January 1, 2000.
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 Hershey Trust Company, the Milton S. Hershey School,
Pfizer, Inc. and CVS Corporation. 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 The American Women in Radio
and Television Society and of the Board of The Advertising Council. 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.
-48-
<PAGE>
Mr. Selwyn has been Chief Operating Officer of the Company since
September 19, 1996 and a member of the Board of Directors since May 11, 1998.
Prior to joining the Company, Mr. Selwyn was employed by New World
Communications, Inc. from May 1993 to June 1996 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 Junior Achievement of New York,
Inc. 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 as a lender in the
Communications Group. Ms. McClain is a director of the National Association of
Black Owned 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
is a director of Paxson Communications Corp. and Source Media Inc. 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.
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 is a director of
Site Shell Corporation. 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 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,
and its investment management company, UNC Partners, Inc., since June 1990. Mr.
Dugger is a director of the Federal Reserve Bank of Boston and Envirotest
Systems Corp. 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.
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 LLP 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.
-49-
<PAGE>
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. Brown has been a member of the Board of Directors since April 1999.
Mr. Brown founded and has been President of JetAir Capital, Inc., a San
Francisco based company specializing in the trading and leasing of commercial
jet aircraft and high-bypass jet engines and aircraft spare parts acquisition
and sales, since 1993. Prior to founding JetAir, Mr. Brown was Senior Vice
President and Managing Director of Marketing for Blenhiem Aviation from
1989-1993. Mr. Brown is a director of Dominican College and Jazz in the City.
Mr. Brown received a Bachelor of Science degree from Middlebury College in 1969.
He received a Juris Doctor degree and a Masters degree in Business
Administration from the University of California at Berkeley in 1973.
Mr. Barfield has been a member of the Board of Directors since April
1999. Mr. Barfield has been Chairman and Chief Executive Officer of The Bartech
Group, a contract employment and staffing services firm specializing in the
recruitment and placement of engineering, MIS and technical professionals, since
1995. In addition, Mr. Barfield served as President of The Bartech Group from
1981 to 1995. Prior to joining The Bartech Group, Mr. Barfield practiced
corporate and securities law with the Chicago based law firm of Sidley and
Austin from 1977 to 1981. Mr. Barfield is a director of National City
Corporation, Tecumseh Products Company, Blue Cross Blue Shield of Michigan,
Reading is Fundamental, Inc. and the Community Foundation for Southeastern
Michigan. He is also a Charter Trustee of Princeton University and a Trustee of
Henry Ford Museum and Greenfield Village. Mr. Barfield received a Bachelor of
Arts degree from Princeton University in 1974 and received a Juris Doctor degree
from Harvard Law School in 1977.
Ms. Pollard has been a member of the Board of Directors since January
2000. Ms. Pollard has been Vice President-External Affairs for Toyota Motor
North America, Inc. since 1998. Prior to joining Toyota Motor North America,
Inc., Ms. Pollard was Vice President-Corporate Public Relations for ABC, Inc., a
division of The Walt Disney Company from 1994 to 1998. Ms. Pollard is a director
of the National YMCA of the USA and the Museum for African Art. Ms. Pollard
received a Bachelor of Arts degree from Boston University in 1966 and a Masters
degree from Columbia University Teachers College in 1968.
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.
Directors are separately reimbursed by the Company for their travel
expenses incurred in attending Board or committee meetings and receive
securities under each of the Company's Non-Employee Director Stock Plan and
Director Option Plan (each as defined herein and collectively referred to as the
"Director Plans").
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.
For fiscal year 1999, Mr. Brown did not report, on a timely basis, one
transaction on one Form 4, and Mr. Greenwald did not report, on a timely basis
two transactions on one Form 4. Also, Mr. Martin Beck did not report on a timely
basis, one transaction on one Form 4 for fiscal year 1998. All of the reports
referred to above have been filed.
In addition, the following automatic grants of securities to directors
under the Director Plans ("Director Grants") that were exempt from the profit
recovery rules of Section 16(b) under the Securities Exchange Act of
-50-
<PAGE>
1934, as amended, were inadvertently not timely reflected on Form 5. For fiscal
year 1999, Mr. Barfield did not report, on a timely basis, three Director Grants
on Form 5 and Mr. Brown did not report, on a timely basis, one Director Grant on
Form 5. In addition, Messrs. Martin Beck, Hamilton and Settle did not report, on
a timely basis, three Director Grants on Form 5 for fiscal year 1997 and one
Director Grant on Form 5 for each of fiscal year 1998 and 1999, and Messrs.
Dugger and Greenwald did not report, on a timely basis, three Director Grants on
Form 5 for fiscal year 1997, one Director Grant on Form 5 for fiscal year 1998
and three Director Grants on Form 5 for fiscal year 1999. All of the reports
referred to above have been filed.
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 $100,000 for each of
the three years in the period ended December 31, 1999:
Summary Compensation Table
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ----------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND STOCK OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) AWARDS SARS (#) ($)(2)
--------------------- -------- ------------ -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Don Cornwell 1999 $550,000 $585,960 - 1,160,000 $5,000
Chief Executive 1998 550,000 448,300 - 150,000 5,000
Officer 1997 500,000 448,300 - 166,000 4,750
Stuart J. Beck 1999 $550,000 $419,760 - 962,000 $13,800
President 1998 550,000 349,800 - 135,000 5,000
1997 500,000 349,800 - 135,000 4,750
Robert E. Selwyn, Jr. 1999 $371,600 $90,500 - 150,000 $14,600
Chief Operating 1998 362,000 72,000 - - 5,000
Officer 1997 350,000 70,000 - - 4,750
Lawrence I. Wills 1999 $140,500 $85,125 - 50,000 $5,000
Vice President - 1998 136,500 35,000 6,000(3) - 5,000
Finance and Controller 1997 130,000 26,000 - - 3,250
Ellen McClain 1999 $140,500 $85,125 - 50,000 $4,063
Vice President - Corporate 1998 136,500 32,500 6,000(3) - 5,000
Development and 1997 130,000 26,000 - - 3,250
Treasurer
</TABLE>
- ----------
(1) Represents bonuses for services rendered in 1997, 1998 and 1999 that
were paid in the following year.
(2) The amounts shown in this column consist of a matching Company
contribution under the Company's Employees' Profit Sharing and Savings
(401(k)) Plan and, in 1999, an annual perquisite allowance for Messrs.
Beck and Selwyn of $8,800 and $9,600, respectively.
(3) Represents the market value on the date of award of 1,000 Bonus Shares
awarded under the Company's Management Stock Plan on December 31, 1998.
-51-
<PAGE>
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 1999, expires September 19, 2001). The base salary determined by the
Compensation Committee of the Board of Directors was $500,000 for 1997 and
$550,000 for each of 1998 and 1999. 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 the Stock Option Plan. See "--Stock Option Plan" and "--Management
Stock Plan."
Mr. Selwyn has an employment agreement with the Company. The current
employment term was extended to January 31, 2003. The annual base salary
determined by the Compensation Committee of the Board of Directors was $350,000
for 1997, $362,000 for 1998 and $371,600 for 1999. 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' 1999 base salary was fixed at $140,500.
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 1999 base salary was fixed at $140,500.
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 (the "401(k)
Plan") for the purpose of providing retirement benefits for substantially all of
its employees. Contributions to the 401(k) 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. The plan was amended in 1999 to provide that all Company-matched
contributions on behalf of employees of KEYE-TV fully vested upon the sale of
KEYE-TV to CBS.
A contribution to the 401(k) Plan of $811,390 was charged to expense
for 1999.
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
-52-
<PAGE>
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
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). The Stock Option Plan was amended on January 8, 1999 and February
23, 1999 to increase the number of shares of Common Stock (Nonvoting) subject to
options available for grant under the plan to 4,000,000 and 6,000,000,
respectively. As of March 1, 2000, options granted under the Stock Option Plan
were outstanding for the purchase of 4,575,165 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 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. The
members of the Committee are Mr. Cornwell, Mr. Stuart J. Beck and Mr. Settle.
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.
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 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.
-53-
<PAGE>
The Stock Option Committee may provide, at or subsequent to the date of
grant of any Option, that in the event the Optionee pays the exercise price for
the Option by tendering shares of Common Stock (Nonvoting) previously owned by
the Optionee, the Optionee will automatically be granted a "reload option" for
the number of shares of Common Stock (Nonvoting) used to pay the exercise price
plus the number of shares withheld to pay for taxes associated with the Option
exercise (a "Reload Option"). On October 26, 1999, the Board of Directors
granted to each officer of the Company on that date the right to receive a
Reload Option with respect to all NQSO's granted to such officer prior to
October 26, 1999 in the event the officer pays the exercise price for any such
NQSO by tendering shares of Common Stock (Nonvoting). The Reload Option has an
exercise price equal to the fair market value of the Common Stock (Nonvoting) on
the date of grant of the Reload Option and remains exercisable for the remainder
of the term of the NQSO to which it relates.
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 and except in
the case of Reload Options as discussed above, 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. On April 28, 1998, the Company increased the reserve of
shares of Common Stock (Nonvoting) for grant under the Management Stock Plan to
1,000,000 from 750,000. 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 March 1, 2000, the Company has allocated a total of 783,979 Bonus
Shares pursuant to the Management Stock Plan, of which 607,062 had vested
through March 1, 2000. Each allocation provides for the vesting of a percentage
of the award on each December 31 after the date of the allocation.
DIRECTOR STOCK OPTION PLAN
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). On July 27, 1999, the Company increased the number of
shares of Common Stock (Nonvoting) allocated for grant under the Director Option
Plan to 1,000,000 from 300,000. As of March 1, 2000, Options granted under the
Director Option Plan were outstanding for the purchase of 859,860 shares of
Common Stock (Nonvoting).
-54-
<PAGE>
The Director Option Plan provides for the grant of NQSOs to Director
Participants. On February 25, 1997, all non-employee directors automatically
received an option to purchase 18,000 shares of Common Stock (Nonvoting) as
compensation for attendance at regular quarterly meetings during the three year
period beginning on such date in lieu of cash compensation. On April 27, 1999,
the Director Option Plan was amended to provide that all Director Participants
automatically receive on April 27, 1999 (and on each five year anniversary
thereafter) an option to purchase 62,500 shares of Common Stock (Nonvoting) as
compensation for attendance at regular quarterly meetings during the five year
period beginning on February 25, 2000 (or each five year anniversary thereof, as
the case may be) in lieu of cash compensation. Non-employee directors elected or
appointed during the course of a three year or five year option period receive
Options, in lieu of a cash compensation, for the remaining portion of such
option period. In addition, under the Director Option Plan, non-employee
directors receive automatic committee awards for certain committees of the Board
of Directors on which they serve.
Between February 25, 1997 and April 26, 1999, Options to purchase 1,500
shares of Common Stock (Nonvoting) became exercisable on the date of attendance
in person of a Director Participant at each regular quarterly meeting of the
Board of Directors. Options to purchase 500 shares of Common Stock (Nonvoting)
became exercisable if such Director Participant attended the meeting by
telephonic means. Since April 27, 1999, Options to purchase 3,125 shares of
Common Stock (Nonvoting) become exercisable on the date of attendance, in person
or by telephonic means, of a Director Participant at each regular quarterly
meetings of the Board of Directors. Between February 25, 1997 and February 24,
2000, Options to purchase 1,500 shares of Common Stock (Nonvoting) became
exercisable on the date of attendance in person at each regularly scheduled
meeting of the Audit Committee and the Compensation Committee of any Director
Participant who is a member of such committees. Since February 25, 2000, Options
to purchase 625 shares of Common Stock (Nonvoting) (875 in the case of Committee
chairs) become exercisable upon the date of attendance, in person or by
telephonic means, at each regular meeting of the Audit Committee and the
Compensation Committee of any Director Participant who is a member of such
committees. The exercise price per share of all Options is the fair market value
on the date of grant.
The Board of Directors may provide, at or subsequent to the date of
grant of any Option, that in the event the Director Participant pays the
exercise price for the Option by tendering shares of Common Stock (Nonvoting)
previously owned by the Director Participant, the Director Participant will
automatically be granted a "reload option" for the number of shares of Common
Stock (Nonvoting) used to pay the exercise price plus the number of shares
withheld to pay for taxes associated with the Option exercise (a "Reload
Option"). On October 26, 1999, the Board of Directors granted to each Director
Participant on that date the right to receive a Reload Option with respect to
all Options granted prior to October 26, 1999 in the event the director pays the
exercise price for any such Options by tendering shares of Common Stock
(Nonvoting). The Reload Option has an exercise price equal to the fair market
value of the Common Stock (Nonvoting) on the date of grant of the Reload Option
and remains exercisable for the remainder of the term of the Option to which it
relates.
Unless otherwise specifically provided in a Director Participant's
Option Agreement and except in the case of Reload Options as described above,
each Option granted under the Director Option Plan expires no later than 10
years after the date the Option is granted. Options may be exercised only during
the period that the original optionee is a non-employee director and (i) for a
period of 6 months after the death or disability of the Director Participant or
(ii) for a period of 2 years after termination of the Director Participant's
directorship for any other reason.
NON-EMPLOYEE DIRECTORS STOCK PLAN
On April 29, 1997, the Company adopted a Non-Employee Directors Stock
Plan (the "Non-Employee Directors Stock Plan") for the purpose of providing a
means to attract and retain highly qualified persons to serve as non-employee
directors of the Company and to enable such persons to acquire or increase a
proprietary interest in the Company. The Non-Employee Directors Stock Plan
provides that on April 29, 1997 and 1998, and on January 1st of each subsequent
calendar year during the term of the Non-Employee Directors Stock Plan,
non-
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<PAGE>
employee directors of the Company ("Directors Stock Plan Participants")
shall receive a number of shares of Common Stock (Nonvoting) equal to $20,000
divided by the fair market value per share on the date of grant. If a person
first becomes a non-employee director after January 1st of any calendar year,
such person receives a pro rated grant, based on the number of regular board
meetings scheduled from the date of his or her commencement of service as a
director until December 31 of that year. The number of shares of Common Stock
(Nonvoting) available for issuance under the Non-Employee Directors Stock Plan
is 100,000. Each Directors Stock Plan Participant may elect to defer the payment
of shares of Common Stock (Nonvoting) by filing an irrevocable written election
with the Secretary of the Company.
The Non-Employee Directors Stock Plan, unless earlier terminated by
action of the Board of Directors, will terminate at such time as no shares
remain available for issuance under the Non-Employee Directors Stock Plan and
the Company and the Directors Stock Plan Participants have no further rights or
obligations under the Non-Employee Directors Stock Plan.
As of March 1, 2000, 68,433 shares had been granted under the
Non-Employee Directors Stock Plan.
The following table sets forth information with respect to Options
granted to the executive officers of the Company during 1999.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------------------------------------- --------------------------
% OF TOTAL
OPTIONS/SARS
GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($ PER SHARE) DATE 5%($) 10% ($)
- ---------------------- ---------- ---------- ------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
W. Don Cornwell 136,000(1) 4.4% $6.875 1/08/2009 $588,016 $1,490,149
14,000(2) 0.5% 7.560 1/08/2004 29,242 64,616
400,000(3) 13.1% 6.125 2/23/2009 1,540,792 3,904,669
610,000(4) 19.9% 10.000 2/23/2009 3,836,257 9,721,829
Stuart J. Beck 121,000(5) 4.0% 6.875 1/08/2009 523,162 1,325,795
14,000(2) 0.5% 7.560 1/08/2004 29,242 64,616
327,000(6) 10.7% 6.125 2/23/2009 1,259,597 3,192,067
500,000(4) 16.3% 10.000 2/23/2009 3,144,473 7,968,712
Robert E. Selwyn 150,000(7) 4.9% 6.875 1/08/2009 648,548 1,643,547
Lawrence I. Wills 50,000(8) 1.6% 6.875 1/08/2009 216,183 547,849
Ellen McClain 50,000(8) 1.6% 6.875 1/08/2009 216,183 547,849
</TABLE>
- --------
(1) 30,000 Options vest on each of January 8, 2000, 2001, 2002 and 2003 and
16,000 Options vest on January 8, 2004.
(2) Options vest on January 8, 2004.
(3) 160,000 Options vest on February 23, 2000; 120,000 Options vest on
February 23, 2001; 80,000 Options vest on February 23, 2002 and 40,000
Options vest on February 23, 2004.
(4) 50% vest at the time the closing stock price of the Common Stock
(Nonvoting) averages $15.00 or more for ten consecutive business days
and 50% vest when the closing stock price averages $20.00 or more for
ten consecutive business days.
(5) 27,000 Options vest on each January 8, 2000, 2001, 2002 and 2003 and
13,000 on January 8, 2004.
-56-
<PAGE>
(6) 130,800 Options vest on February 23, 2000; 98,100 Options vest on
February 23, 2001; 65,400 Options vest on February 23, 2002 and 32,700
Options vest on February 23, 2004.
(7) 50,000 Options vest on each of December 31, 2000, 2001 and 2002.
(8) 12,500 Options vest on each of December 31, 1999, 2000, 2001 and 2002.
The following table sets forth, as of December 31, 1999, the number of
options and the value of unexercised options held by the Company's executive
officers who held options as of that date, and the options exercised and the
consideration received therefor by such persons during fiscal 1999.
Aggregated Option/SAR Exercises
In Last Fiscal Year And
FY-End Option/SAR Values
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1999 AT DECEMBER 31, 1999 ($)
SHARES ACQUIRED VALUE ---------------------- ------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------ --------------------- ------------ ------------------------- ------------------------
<S> <C> <C> <C> <C>
W. Don Cornwell - - 547,500/1,379,500 $1,522,413/2,292,873
Stuart J. Beck - - 613,500/1,151,000 2,179,125/1,912,723
Robert E. Selwyn, Jr. - - 142,000/158,000 -/487,500
Lawrence I. Wills - - 16,250/37,500 58,906/121,875
Ellen McClain - - 12,500/37,500 40,625/121,875
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Thomas R. Settle, Charles J. Hamilton, Jr. and Jon E.
Barfield served as members of the Compensation Committee of the Board of
Directors of the Company.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 1,
2000, regarding beneficial ownership of (i) 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 (ii) beneficial ownership of the
Company's Common Stock (Nonvoting) (assuming exercise of all options for the
purchase of Common Stock (Nonvoting), which exercise is at the option of the
holder within sixty (60) days), by each director, each executive officer and all
directors and officers as a group. The Company also has 153,241 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>
<CAPTION>
VOTING COMMON STOCK COMMON STOCK (NONVOTING)
-------------------------- ----------------------------
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
-------------------------- ----------------------------
NUMBER PERCENT NUMBER PERCENT (1)
------ ------- ------ -----------
<S> <C> <C> <C> <C>
W. Don Cornwell.................. 98,250 55.0% 1,176,500 (2) 6.2%
Stuart J. Beck................... 80,250 45.0% 1,059,862 (3) 5.6%
Robert E. Selwyn, Jr. ........... 227,342 (4) 1.2%
Lawrence I. Wills................ 34,589 (5) *
Ellen McClain.................... 22,425 (6) *
Martin F. Beck................... 135,808 (7) *
James J. Greenwald............... 145,546 (8) *
Edward Dugger III................ 33,994 (9) *
Thomas R. Settle................. 120,181 (10) *
Charles J. Hamilton, Jr. ........ 66,444 (11) *
M. Fred Brown.................... 23,783 (12) *
Jon E. Barfield.................. 17,083 (13) *
Veronica Pollard................. 6,100 (14) *
All directors and officers
as a group(13) .............. 178,500 100.0% 3,069,657 15.3%
</TABLE>
- -----
* Less than 1%.
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<PAGE>
(1) Percentage figures assume the exercise of options for the purchase of
Common Stock (Nonvoting) held by such shareholder, which exercise is at
the option of the holder within sixty (60) days.
(2) Includes 812,800 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 and a total of 4,900 shares
held by Mr. Cornwell's immediate family. Mr. Cornwell disclaims
beneficial ownership with respect to such 4,900 shares. The business
address of Mr. Cornwell is Granite Broadcasting Corporation, 767 Third
Avenue, 34th Floor, New York, New York, 10017.
(3) Includes 696,940 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 a total of 8,000 shares
held in trust for Mr. Beck's children. Mr. Beck disclaims beneficial
ownership with respect to such 8,000 shares. The business address of
Mr. Stuart Beck is Granite Broadcasting Corporation, 767 Third Avenue,
34th Floor, New York, New York, 10017.
(4) Includes 150,000 shares issuable upon exercise of options granted to
Mr. Selwyn under the Stock Option Plan which are exercisable at the
option of the holder within sixty (60) days.
(5) Includes 16,250 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.
(6) Includes 12,500 shares issuable upon exercise of options granted to Ms.
McClain under the Directors' Stock Option Plan which are exercisable at
the option of the holder within sixty (60) days.
(7) Includes 8,250 shares held by Mr. Beck's wife, 29,264 shares held by
the Martin F. Beck Family Foundation and 31,100 shares issuable upon
exercise of options granted to Mr. Beck 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 and by the Martin F. Beck Family
Foundation.
(8) Includes 55,525 shares issuable upon exercise of options granted to Mr.
Greenwald under the Directors' Stock Option Plan which are exercisable
at the option of the holder within sixty (60) days.
(9) Includes 24,500 shares issuable upon exercise of options granted to Mr.
Dugger under the Directors' Stock Option Plan which are exercisable at
the option of the holder within sixty (60) days.
(10) Includes 3,000 shares held by Mr. Settle's wife as custodian for his
children and 51,235 shares issuable upon exercise of options granted to
Mr. Settle 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 56,700 shares issuable upon exercise of options granted to Mr.
Hamilton under the Directors' Stock Option Plan, which are exercisable
at the option of the holder within sixty (60) days.
(12) Includes 200 shares held by Mr. Brown's children and 14,625 shares
issuable upon exercise of options granted to Mr. Brown under the
Directors' Stock Option Plan which are exercisable at the option of the
holder within sixty (60) days.
(13) Includes 13,125 shares issuable upon exercise of options granted to Mr.
Barfield under the Directors' Stock Option Plan which are exercisable
at the option of the holder within sixty (60) days.
(14) Includes 3,125 shares issuable upon exercise of options granted to Ms.
Pollard under the Directors' Stock Option Plan which are exercisable at
the option of the holder within sixty (60) days.
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<PAGE>
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 annually on April 30
of each year, with all principal and remaining interest due on December 29,
2004. As of March 1, 2000, the amount outstanding on such loans, including
accrued interest, to Messrs. Cornwell and Beck was $387,189 and $245,643,
respectively. During 1999, the largest amount outstanding on such loans,
including accrued interest, to Messrs. Cornwell and Beck was $390,499 and
$247,744, respectively.
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 on
April 23 and December 31, 2001, respectively. In April 1997, the Company made a
loan to Mr. Cornwell in the amount of $441,530 to pay certain personal taxes.
The loan is a term loan which provides for an annual interest rate of 8%,
payable annually, with all principal and remaining interest due on April 16,
2002. In December 1998, the Company made a loan to Mr. Cornwell in the amount of
$825,000. The loan is a term loan which provides for an annual interest rate of
7.50%, payable annually, with all principal and remaining interest due on
December 1, 2003. As of March 1, 2000 (i) the amount outstanding under the April
1996 loan, including accrued interest, was $973,986, (ii) the amount outstanding
under the December 1996 loan, including accrued interest, was $449,173, (iii)
the amount outstanding under the April 1997 loan, including accrued interest,
was $484,898, and (iv) the amount outstanding under the December 1998 loan,
including accrued interest was $900,969. During 1999, the largest amount
outstanding, including accrued interest (i) on the April 1996 loan was $981,475,
(ii) on the December 1996 loan was $452,627, (iii) on the April 1997 loan was
$488,627, and (iv) on the December 1998 loan was $907,500.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT 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, 1997, 1998 and 1999
Consolidated Balance Sheets as of
December 31, 1998 and 1999
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1997, 1998 and 1999
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1998 and 1999
Notes to Consolidated Financial Statements
(a)2 Financial Statement Schedule
Schedule II -- Granite Broadcasting Corporation:
Valuation and Qualifying Accounts
(a)3 Exhibits
<TABLE>
<S> <C>
3.1(e)/ Third Amended and Restated Certificate of Incorporation
of the Company, as amended.
3.2(e)/ Amended and Restated Bylaws of the Company, as amended
as of February 20, 1996.
3.3(h)/ 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.
3.4(t)/ May 11, 1998 Amendment to Amended and Restated Bylaws
of the Company.
4.30(2)/ 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(2)/ Form of Junior Subordinated Convertible Debenture.
4.35(g)/ Fourth Amended and Restated Credit Agreement, dated as
of June 10, 1998, among Granite Broadcasting
Corporation, as Borrower, the Lenders listed therein,
Bankers Trust Company, as Administrative Agent, The
Bank of New York, as Documentation Agent, and Goldman
Sachs Credit Partners L.P., Union Bank of California,
N.A. and ABN AMRO Bank N.V., as Co-Agents.
4.37(3)/ 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(4)/ Form of 10-3/8% Senior Subordinated Note due
May 15, 2005.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
4.41(e)/ 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(e)/ Form of 9-3/8% Series A Senior Subordinated Note due
December 1, 2005.
4.43(h)/ 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(h) 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(h)/ Form of 12 3/4% Exchange Debenture due April 1, 2009
(included in the Indenture filed as Exhibit 4.44).
4.49(p)/ Indenture dated as of May 11, 1998, between the Company
and The Bank of New York, as Trustee, relating to the
Company's 8-7/8% Senior Subordinated Notes due May 15,
2008 (including form of note).
4.50(q)/ Exchange and Registration Rights Agreement dated as
of May 11, 1998, between Granite Broadcasting
Corporation and Goldman, Sachs & Co., Bear Stearns &
Co. Inc. and Salomon Brothers Inc.
10.1 Granite Broadcasting Corporation Stock Option Plan, as
amended through October 26, 1999.
10.9(4)/ Network Affiliation Agreement (KBJR-TV).
10.10(4)/ Network Affiliation Agreement (WEEK-TV).
10.11(e)/ Network Affiliation Agreement (KNTV(TV)).
10.12(e)/ 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(p)/ Granite Broadcasting Corporation Management Stock
Plan, as amended through April 28, 1998.
10.19 Granite Broadcasting Corporation Directors' Stock
Option Plan, as amended on October 26, 1999.
10.20(3)/ Network Affiliation Agreement (WTVH-TV).
10.21(4)/ Network Affiliation Agreement (KSEE-TV).
10.24(3)/ Network Affiliation Agreement (KEYE-TV).
10.25(c)/ Granite Broadcasting Corporation Employee Stock
Purchase Plan, dated February 28, 1995.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
10.28(d)/ Network Affiliation Agreement (WKBW).
10.30(h)/ Employment Agreement dated as of September 19,
1996 between Granite Broadcasting Corporation and
Robert E. Selwyn, Jr.
10.31 Non-Employee Directors Stock Plan of Granite
Broadcasting Corporation, as amended through April
26, 1999.
10.32(i)/ Stock Purchase Agreement, dated as of October 3, 1997,
by and among Granite Broadcasting Corporation, Pacific
FM Incorporated, James J. Gabbert and Michael P.
Lincoln.
10.33(j)/ Purchase and Sale Agreement, dated as of February 18,
1998, among Granite Broadcasting Corporation, Freedom
Communications, Inc., WWMT-TV, Inc., WLAJ, Inc. and
WWMT License, Inc.
10.34(m)/ First Amendment to Purchase and Sale Agreement, dated
as of July 20, 1998 among Granite Broadcasting
Corporation, Pacific FM Incorporated, James J. Gabbert
and Michael P. Lincoln.
10.35(r)/ Purchase and Sale Agreement, dated as of July 15, 1998,
among Granite Broadcasting Corporation, WLAJ, Inc.,
WLAJ License, Inc., WWMT-TV, Inc. and WWMT-TV License,
Inc.
10.36(n)/ Stock Purchase Agreement, dated as of June 26, 1998,
between Granite Broadcasting Corporation and The
Michael Lincoln Charitable Remainder Unitrust.
10.37(o)/ Stock Purchase Agreement, dated as of June 26, 1998,
between Granite Broadcasting Corporation and The James
J. Gabbert Charitable Remainder Unitrust.
10.38(t)/ Extension Letter, dated February 28, 1999 between
Granite Broadcasting Corporation and Robert E. Selwyn,
Jr. extending the term of Mr. Selwyn's Employment
Agreement to January 31, 2003.
10.39(t)/ First Amendment, dated as of March 23, 1999, to the
Fourth Amended and Restated Credit Agreement, dated as
of June 10, 1998, by and among Granite Broadcasting
Corporation, the Lenders listed therein and Bankers
Trust Company, as Administrative Agent.
10.40(s)/ Limited Waiver, dated August 31, 1999, to the Fourth
Amended and Restated Credit Agreement, dated as of June
10, 1998, as amended, by and among Granite Broadcasting
Corporation, the Lenders listed therein, and Bankers
Trust Company, as Administrative Agent, The Bank of New
York, as Documentation Agent, and Goldman Sachs Credit
Partners L.P., Union Bank of California, N.A., and ABN
Amro Bank N.V., as Co-Agents.
10.41(s)/ Amendment, dated July 26, 1999, to the Network
Affiliation Agreement (KNTV(TV)).
10.42(u)/ Purchase and Sale Agreement, dated as of April 28,
1999, among CBS Corporation, Granite Broadcasting
Corporation, KBVO, Inc. and KBVO License, Inc.
10.43 Form of Second Amendment, dated February 16, 2000, to
the Fourth Amended and Restated Credit Agreement, dated
as of June 10, 1998, as amended, by and among Granite
Broadcasting Corporation, the Lenders listed therein,
and Bankers Trust Company, as
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Administrative Agent, The Bank of New York, as
Documentation Agent, and Goldman Sachs Credit Partners
L.P., Union Bank of California, N.A., and ABN Amro Bank
N.V., as Co-Agents.
10.44 Form of Third Amendment, dated March 17, 2000, to the
Fourth Amended and Restated Credit Agreement, dated as
of June 10, 1998, as amended, by and among Granite
Broadcasting Corporation, the Lenders listed therein,
and Bankers Trust Company, as Administrative Agent, The
Bank of New York, as Documentation Agent, and Goldman
Sachs Credit Partners L.P., Union Bank of California,
N.A., and ABN Amro Bank N.V., as Co-Agents.
10.45 Asset Purchase Agreement, dated as of November 12,
1999, between Caroline K. Powley and Granite
Broadcasting Corporation as amended.
21. Subsidiaries of the Company.
23. Consent of Independent Auditors (Ernst & Young LLP).
27. Financial Data Schedule.
</TABLE>
- ----------
<TABLE>
<S> <C>
(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 Amendment No. 2 to Registration Statement
No. 33-71172 filed December 16, 1993.
(3)/ Incorporated by reference to the similarly numbered
exhibits to the Company's Registration Statement No.
33-94862 filed on July 21, 1995.
(4)/ Incorporated by reference to the similarly numbered
exhibits to Amendment No. 2 to Registration Statement
No. 33-94862 filed on October 6, 1995.
(c)/ 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.
(d)/ Incorporated by reference to the similarly numbered
exhibit to the Company's Current Report on Form 8-K
filed on July 14, 1995.
(e)/ 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.
(f)/ 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.
(g)/ Incorporated by reference to the similarly numbered
exhibit to the Company's Current Report on Form 8-K,
filed on July 1, 1998.
(h)/ 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, 1996, filed on March
21, 1997.
</TABLE>
-64-
<PAGE>
<TABLE>
<S> <C>
(i)/ Incorporated by reference to Exhibit Number 1 to the
Company's Current Report on Form 8-K, filed on October
17, 1997.
(j)/ Incorporated by reference to Exhibit Number 1 to the
Company's Current Report on Form 8-K, filed on March 2,
1998.
(m)/ Incorporated by reference to Exhibit Number 2.5 to the
Company's Current Report on Form 8-K, filed on August
13, 1998.
(n)/ Incorporated by reference to Exhibit Number 2.3 to the
Company's Current Report on Form 8-K, filed on July 1,
1998.
(o)/ Incorporated by reference to Exhibit Number 2.4 to the
Company's Current Report on Form 8-K, filed on July 1,
1998.
(p)/ Incorporated by reference to the similarly numbered
exhibit to the Company's Registration Statement No.
333-56327 filed on June 8, 1998.
(q)/ Incorporated by reference to Exhibit Number 99.3 to the
Company's Registration Statement No. 333-56327 filed on
June 8, 1998.
(r)/ Incorporated by reference to Exhibit Number 2.6 to the
Company's Current Report on Form 8-K, filed on August
13, 1998.
(s)/ Incorporated by reference to the similarly numbered
exhibits to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999, filed on
November 15, 1999.
(t)/ Incorporated by reference to the similarly numbered
exhibits to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, filed on
March 31, 1999.
(u)/ Incorporated by reference to Exhibit Number 1 on the
Company's Current Report on Form 8-K, filed on May 11,
1999.
</TABLE>
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<PAGE>
(b) Reports on Form 8-K.
1. Current report on Form 8-K filed May 11,
1999, reporting an agreement in principle
entered into by and among the Company,
certain of the Company's subsidiaries and
CBS Corporation, a Pennsylvania
corporation ("CBS"), whereby CBS would
acquire the assets of KEYE-TV, the CBS
affiliate serving the Austin, Texas
television market, for a total purchase
price of $160 million in cash, subject to
certain adjustments. No financial
statements were filed at such time.
2. Current Report on Form 8-K, filed
September 13, 1999, reporting the sale of
the assets of KEYE-TV, the CBS affiliate
serving the Austin, Texas television
market, to CBS Corporation for a purchase
price of $160 million, subject to certain
adjustments. No financial statements were
filed at such time.
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<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 27th day of March, 2000.
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ W. DON CORNWELL Chief Executive Officer March 27, 2000
- --------------------------------- (Principal Executive Officer) and Chairman
(W. Don Cornwell) of the Board of Directors
/s/ STUART J. BECK President and Secretary March 27, 2000
- --------------------------------- (Principal Financial Officer) and Director
(Stuart J. Beck)
/s/ LAWRENCE I. WILLS Vice President - Finance and March 27, 2000
- --------------------------------- Controller (Principal Accounting Officer)
(Lawrence I. Wills)
/s/ ROBERT E. SELWYN, JR. Chief Operating Officer and Director March 27, 2000
- ---------------------------------
(Robert E. Selwyn, Jr.)
/s/ MARTIN F. BECK Director March 27, 2000
- ---------------------------------
(Martin F. Beck)
/s/ JAMES L. GREENWALD Director March 27, 2000
- ---------------------------------
(James L. Greenwald)
/s/ EDWARD DUGGER III Director March 27, 2000
- ---------------------------------
(Edward Dugger III)
/s/ THOMAS R. SETTLE Director March 27, 2000
- ---------------------------------
(Thomas R. Settle)
/s/ CHARLES J. HAMILTON, JR. Director March 27, 2000
- ---------------------------------
(Charles J. Hamilton, Jr.)
/s/ M. FRED BROWN Director March 27, 2000
- ---------------------------------
(M. Fred Brown)
/s/ JON E. BARFIELD Director March 27, 2000
- ---------------------------------
(Jon E. Barfield)
/s/ VERONICA POLLARD Director March 27, 2000
- ---------------------------------
(Veronica Pollard)
</TABLE>
<PAGE>
Exhibit 10.1
GRANITE BROADCASTING CORPORATION
STOCK OPTION PLAN
AS AMENDED THROUGH OCTOBER 26, 1999
1. PURPOSE. The purpose of this Stock Option Plan (the "Plan"), adopted
by the Board of Directors of Granite Broadcasting Corporation (the "Company") on
April 17, 1990 and amended on May 10, 1990, November 8, 1990, September 20,
1991, April 27, 1993, July 25, 1995, July 24, 1996, April 29, 1997, January 8,
1999, February 23, 1999, July 27, 1999 and October 26, 1999 is to provide a
means by which certain employees and officers of the Company and its Affiliates
(as defined below) may be given an opportunity to purchase non-voting common
stock of the Company. Options that may be granted under this Plan include (a)
Incentive Stock Options as such term is defined in Section 422A of the Internal
Revenue Code of 1986, as amended (hereinafter the "Code"), and (b) Nonqualified
Stock Options, which would not constitute Incentive Stock Options. The Plan is
intended to advance the interests of the Company by encouraging stock ownership
on the part of certain employees and officers, by enabling the Company (and its
Affiliates) to secure and retain the services of highly qualified persons, and
by providing employees and officers with an additional incentive to advance the
success of the Company (and its Affiliates). For purposes of this Plan,
Affiliate shall mean any parent or subsidiary corporation of the Company. The
term "parent corporation" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, on the date of
grant of the option in question, each of the corporations other than the Company
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
The term "subsidiary corporation" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if, on the date of grant of the
option in question, each of the corporations other than the last corporation in
the chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain. Affiliation shall refer to a group of Affiliates.
2. STOCK SUBJECT TO OPTION. Subject to adjustment as provided in
Sections 4(i) and (j) hereof, options may be granted by the Company from time to
time to purchase up to an aggregate of 6,000,000 shares of the Company's
authorized but unissued Class B Nonvoting Common Stock, par value $0.01 per
share (the "Common Stock"). Shares that by reason of the expiration of an option
or otherwise are no longer subject to purchase pursuant to an option granted
under the Plan may be again available for issuance pursuant to options under the
Plan. Shares tendered by an Optionee to pay all or part of the option price of
an option and shares that are withheld to pay taxes associated with the
<PAGE>
exercise of an option may be again available for issuance pursuant to
nonqualified options under the Plan.
3. PARTICIPANTS. Persons eligible to be granted Incentive Stock Options
or Nonqualified Stock Options under the Plan shall be limited to key employees
of the Company (or its Affiliates) (including employees who are also officers or
directors, but not including directors who are not also employees) who have
substantial responsibility in the direction and management of the Company or an
Affiliate, as indicated by the action of the Stock Option Committee or the
Compensation Committee (as such terms are defined in Section 5) in granting an
option to such employee.
4. TERMS AND CONDITIONS OF OPTIONS. The Stock Option Committee may
grant options from time to time pursuant to the Plan. Such options shall be
evidenced by written stock option agreements signed by the Optionee and by the
President of the Company or by any member of the Stock Option Committee (the
"Stock Option Agreements"). The Stock Option Agreements shall be subject to the
terms and conditions of the Plan, shall specify whether the options are
Incentive Stock Options or Nonqualified Stock Options and shall contain such
other provisions as the Stock Option Committee in its discretion shall deem
appropriate. Shares of Common Stock that may be purchased under an option
granted pursuant to this Plan shall sometimes hereinafter be referred to as
"Option Shares," and an employee of the Company to whom options are granted
shall sometimes hereinafter be referred to as an "Optionee."
(A) OPTION PRICE. The option price for each Incentive Stock Option
share shall not be less than the fair market value of a share of the Common
Stock on the date the option is granted. The option price for each
Nonqualified Stock Option share shall be specified by the Stock Option
Committee at the time such option is granted, and may be less than, equal
to or greater than the fair market value of the shares of Common Stock on
the date such option is granted. The option price may include amounts that
are required to be paid by the Optionee, as a down payment of the option
price, prior to his or her exercise of the option. In its sole discretion,
the Stock Option Committee may provide that the price at which shares may
be so purchased shall be more than such fair market value on the date of
grant. However, notwithstanding the foregoing, the option price for
Incentive Stock Options granted to any employee owning stock (including any
attribution of stock ownership under Section 425(d) of the Code) possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or any of its Affiliates on the date such option is granted
(hereinafter a "10% Shareholder"), shall be at least 110% of the fair
market value of the Common Stock on the date the option is granted. The
Stock Option Committee shall, in good faith,
2
<PAGE>
determine the fair market value of the Common Stock on the date the option
is granted, and the fair market value may be more or less than the book
value of the Common Stock.
(B) TERM OF OPTION. Unless otherwise specifically provided in an
Optionee's Stock Option Agreement, each option granted under this Plan
shall expire no later than ten years after the date the option is granted
except under the circumstances described in Sections 4(g), 4(j)(2), 4(j)(3)
and 4(k), options may expire and terminate at an earlier date than provided
in this paragraph. If an Incentive Stock Option is granted to an employee
who is a 10% Shareholder, then, for purposes of such Incentive Stock Option
the word "five" shall be substituted for the word "ten" in the immediately
preceding sentence. The term of Nonqualified Stock Options granted
hereunder shall be determined by the Stock Option Committee in its
discretion.
(C) EXERCISE OF OPTION. Except as otherwise specifically provided in
this Plan, each option will be exercisable according to the provisions of
an Optionee's Stock Option Agreement. All options (whenever granted) of an
Optionee shall become immediately exercisable upon the (i) death or
disability (as defined in Section 4(g)(2) below) of such Optionee; and (ii)
the occurrence of a "Change of Control"; for purposes hereof, a "Change of
Control" shall occur on the date on which W. Don Cornwell no longer owns,
beneficially, in excess of 50% of the issued and outstanding Class A Common
Stock of the Company.
(D) MANNER OF EXERCISE. Shares of Common Stock purchased upon exercise
of options shall at the time of purchase be paid for in full. To the extent
that an option is exercisable, options may be exercised from time to time
by written notice to the Company stating the full number of shares with
respect to which the option is being exercised, accompanied by full payment
(or the balance due) of the exercise price, for the shares being purchased,
by certified or official bank check or the equivalent thereof acceptable to
the Company. When and if shares of the Company's Common Stock are traded on
either the New York or American Stock Exchanges or in the NASDAQ/National
Market System, the payment of the exercise price may be in the form of
Common Stock, the value of which shall be deemed to be the closing price on
the last trading date prior to date on which the shares are tendered for
payment of the exercise price. The notice required by this paragraph shall
be delivered in person to the President of the Company, or shall be sent by
registered or certified mail, return receipt requested, to the President of
the Company, in which case delivery shall be deemed made on the date such
notice is deposited in the mail. The Company shall, without charge of any
transfer or issue tax to the Optionee (or other person entitled to exercise
the option), deliver
3
<PAGE>
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 law. Pursuant to Section 6 hereof, the Company may
require that, at the time of exercise, each Optionee: (i) deliver an
investment representation in form acceptable to the Company and its counsel
that the shares are being acquired for investment and not with a view to
their distribution, and (ii) enter into any applicable stockholders'
agreement with the Company and other stockholders of the Company, as deemed
necessary by the Stock Option Committee.
The Stock Option Committee may provide, at or subsequent to the date
of grant of an option, that in the event an Optionee pays the option price
of such option (in whole or in part) by tendering Common Stock owned by the
Optionee, such Optionee shall automatically be granted a reload option for
the number of shares of Common Stock used to pay the exercise price plus
the number of shares withheld to pay for taxes associated with the exercise
of the option. The reload option shall be subject to the terms and
conditions that the Stock Option Committee will in its discretion provide,
consistent with the terms of the Plan. Unless the Stock Option Committee
explicitly provides otherwise, if a reload option is granted as set forth
above, one or more successive reload options will be automatically granted
to an Optionee who pays all or part of the exercise price of any such
reload option by tendering Common Stock owned by the Optionee.
(E) LIMITATION ON AMOUNT. No employee shall be granted Incentive Stock
Options which, when first exercisable during any calendar year (combined
with all other incentive stock option plans of the Company and its
Affiliates), will permit such employee to purchase stock that has an
aggregate fair market value (determined as of the time the option is
granted) of more than $100,000.
(F) NON-ASSIGNABILITY OF OPTION RIGHTS. Options under the Plan will
not be transferable by an Optionee except by will or the laws of descent
and distribution. During the lifetime of the Optionee, the Option is
exercisable only by the Optionee or, in the event of the Optionee's
incapacity, by his duly authorized legal representative. Notwithstanding
the foregoing, the Committee may, in its discretion, authorize all or a
portion of the Option (other than Incentive Stock Options) granted to a
Optionee to be on terms which permit transfer by such Optionee to (i) the
spouse, children or grandchildren of such Optionee ("Immediate Family
4
<PAGE>
Members"), (ii) a trust or trusts for exclusive benefit of such Immediate
Family Members, or (iii) a partnership or limited liability company in
which such Immediate Family Members are the only partners or members, as
applicable; provided, that (x) there may be no consideration for any such
transfer, (y) the Option agreement pursuant to which such Options are
granted must be approved by the Committee and must expressly provide for
transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred Options shall be prohibited except
those occurring by laws of descent and distribution. Following transfer,
any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer; provided, that
for purposes of the Plan, the term Optionee shall be deemed to refer to the
transferee; provided, however, that, the Option shall continue to be
exercisable and shall terminate in accordance with its terms as if the
transferor (Non-Employee Director) remained the holder of the Option.
Options under the Plan may not be pledged, mortgaged, hypothecated or
otherwise encumbered, and shall not be subject to the claims of creditors.
(G) TERMINATION OF EMPLOYMENT.
(1) In the event that Optionee's employment by the Company and
its Affiliates shall terminate for any reason, with or without cause,
and the provisions of Sections 4(g)(2), 4(g)(3), 4(j) and 4(k) do not
apply, (i) the option for those shares for which such option was
exercisable pursuant to this plan immediately prior to such
termination of employment shall terminate thirty (30) days following
such termination of employment, unless specifically provided otherwise
in such Optionee's Stock Option Agreement, and (ii) the option for
those shares for which the option was not exercisable immediately
prior to such termination of employment shall terminate on the date of
termination of employment. In the event that an option terminates
pursuant to the preceding sentence, any amounts paid as a down payment
on the exercise of such option (as provided in Section 4(a)) shall be
returned to the Optionee with respect to shares for which the option
was not exercisable on the date of termination of employment and shall
not be returned to the Optionee with respect to shares for which the
option was exercisable on the date of termination. For purposes of
this Section, whether an authorized leave of absence or absence on
military or government service shall constitute severance of the
employment relationship between the Company (or an Affiliate) and the
Optionee shall be determined by the Stock Option Committee in its sole
discretion at the time thereof.
5
<PAGE>
(2) In the event that Optionee shall die while in the employment
of the Company (or an Affiliate) or if Optionee's employment by the
Company (or an Affiliate) is terminated because Optionee has become
disabled within the meaning of Section 22(e)(3) of the Code, the
Optionee, his personal representative, estate or beneficiary shall
have the right at any time within twelve months after such date of
death or termination due to disability to exercise such Optionee's
options. Notwithstanding the foregoing, the provisions of this Section
4(g)(2) shall be subject to the provisions of Sections 4(b), 4(j)(3)
and 4(k), which may terminate the option earlier.
(3) In the event that any termination of employment by an
Optionee is due to retirement with the consent of his employer, the
Optionee shall have the right to exercise his option at any time
within three months after such retirement to the extent the option was
exercisable immediately prior to retirement. Notwithstanding the
foregoing, the provisions of this Section 4(g)(3) shall be subject to
the provisions of Sections 4(b), 4(j)(3) and 4(k), which may terminate
the option earlier.
(H) CHANGES TO CAPITAL STRUCTURE; NEED FOR ADJUSTMENT. The existence
of outstanding options shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Stock or the rights thereof, or
the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
Except as otherwise expressly provided in Sections 4(i) and 4(j), the
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect or necessitate any adjustment to the number, class or price of
shares of stock then subject to outstanding options.
(I) ADJUSTMENT OF OPTIONS ON RECAPITALIZATION. The aggregate number of
shares of Common Stock for which options may be granted to persons
participating under the
6
<PAGE>
Plan, the number of shares covered by each outstanding option, and the
exercise price per share for each such option shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
Common Stock of the Company resulting from the subdivision or consolidation
of shares, or the payment of a stock dividend after the effective date of
this Plan, or other increase (excluding any increase due to conversion of
any other outstanding securities of the Company) or decrease in such shares
effected without receipt of consideration by the Company, such that each
Optionee remains entitled upon exercise of his option(s) to the same total
number and class of shares as he would have received for the same aggregate
consideration had he exercised his options in full immediately prior to the
event requiring the adjustment; provided, however, that any options to
purchase fractional shares resulting from any such adjustment shall be
eliminated; and provided, further, that any such adjustment shall be made
in a manner so as not to constitute a "modification" as defined in Section
425(h)(3) of the Code.
(J) ADJUSTMENT OF OPTIONS UPON REORGANIZATION.
(1) If the Company shall at any time merge or consolidate with or
into another corporation and (A) the Company is not the surviving
entity, or (B) the Company is the surviving entity and the
shareholders of Company Common Stock are required to exchange their
shares for property and/or securities, the holder of each option will
thereafter receive, upon the exercise thereof, the securities and/or
property to which a holder of the number of shares of Common Stock
then deliverable upon the exercise of such option would have been
entitled upon such merger or consolidation, and the Company shall take
such steps in connection with such merger or consolidation as may be
necessary to assure that the provisions of this Plan shall thereafter
be applicable, as nearly as reasonably may be, in relation to any
securities or property thereafter deliverable upon the exercise of
such option; provided, however, that, except as provided in the
following sentence, no option exercise date shall be accelerated in
contemplation of such action. In the event of an Optionee's
termination of employment without cause within twelve (12) months
after the date of a merger or consolidation described in this
paragraph, the Optionee shall have the right to exercise all his then
outstanding options, whether or not then otherwise exercisable, within
the thirty (30) day period following his termination of employment.
For purposes of this paragraph, termination without cause shall mean
(a) termination other than for (i) the Optionee's material failure to
7
<PAGE>
observe or perform any of the requirements of his position with the
Company, or it Affiliate (or successor by merger or consolidation), or
(ii) the Optionee's grossly negligent or willful and continued
misconduct or action on the part of the Optionee that is damaging or
detrimental to the operations of the Company or its Affiliate (or
successor by merger or consolidation), or (b) resignation by the
Optionee within thirty (30) days after a material diminution in duties
or compensation of the Optionee. A sale of all or substantially all of
the assets of the Company for a consideration (apart from the
assumption of obligations) consisting primarily of securities shall be
deemed a merger or consolidation for the foregoing purposes.
Notwithstanding the foregoing, the provisions of this Section 4(j)(1)
shall be subject to Section 4(b).
(2) The resulting Affiliation following any reorganization may at
any time, in its sole discretion, tender substitute options as it may
deem appropriate. However, in no event may the substitute options
entitle an Optionee under the Plan to any fewer shares (or at any
greater aggregate price) or any less other property than the Optionee
would be entitled to under the immediately preceding paragraph upon an
exercise of the options held prior to the substitution of the new
option. Any substitution made under this Section 4(j)(2) shall be made
in a manner so as not to constitute a "modification" as defined in
Section 425(h)(3) of the Code.
(3) With respect to options to acquire stock of an Affiliate of
Optionee's then present employer, if Optionee's then present employer
ceases to be affiliated with the other member(s) of the Affiliation,
then the Affiliation shall give the Optionee written notice of such
fact within thirty (30) days after the date on which Optionee's
employer ceases to be an Affiliate and the option shall expire and
terminate thirty (30) days after the receipt of such notice by
Optionee. Notwithstanding the foregoing, the provisions of this
Section 4(j)(3) shall be subject to Section 4(b) and shall be subject
to Section 4(k) if the Optionee receives notice under Section 4(k) at
a time earlier than the notice provided for herein.
(K) DISSOLUTION OF ISSUER OF OPTION STOCK. In the event of the
proposed dissolution or liquidation of the Company, the options granted
hereunder shall terminate as of a date to be fixed by the Stock Option
Committee; provided, that, not less than thirty (30) days' prior written
notice of the date so fixed shall be given to the
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Optionee, and the Optionee shall have the right, during the period of
thirty (30) days preceding such termination, to exercise his option.
Notwithstanding the foregoing, the provisions of this Section shall be
subject to Section 4(b) and shall be subject to Section 4(j)(3) if the
Optionee receives notice under Section 4(j)(3) at a time earlier than the
notice provided for herein.
(L) SUBSTITUTION OPTIONS. Options may be granted under this Plan from
time to time in substitution for stock options held by employees of other
corporations who become employees of the Company or an Affiliate as a
result of a merger or consolidation of the employing corporation with the
Company or an Affiliate, or the acquisition by the Company or an Affiliate
of the assets of the employing corporation, or the acquisition by the
Company or an Affiliate of at least 50% of the issued and outstanding stock
of the employing corporation as the result of which it becomes an Affiliate
of the Company. The terms and conditions of the substitute options so
granted may vary from the terms and conditions set forth in this Plan to
such extent as the Stock Option Committee at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted, but with respect to
stock options which are Incentive Stock Options, no such variation shall be
such as to affect the status of any such substitute option as an "incentive
stock option" under Section 422A of the Code.
(M) RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any shares of Common Stock of the Company held
under option until the date of exercise of the option with respect to such
shares. Except as provided in Section 4(h), no adjustment shall be made for
dividends or other rights for which the record date is prior to the date of
exercise.
(N) TIME OF GRANTING OPTIONS. The grant of an option shall occur only
when a written option agreement shall have been duly executed and delivered
by or on behalf of the Company and the employee to whom such option shall
be granted.
(O) STOCK LEGEND. Certificates evidencing shares of the Company's
Common Stock purchased upon the exercise of Incentive Stock Options issued
under the Plan shall be endorsed with a legend in substantially the
following form:
The shares evidenced by this certificate may not be sold or
transferred prior to , 19 , in the absence of a
written statement from Granite Broadcasting Corporation
(the "Company") to
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the effect that the Company is aware of the fact of such sale or
transfer.
The blank contained in such legend shall be filled in with the date that is the
later of: (1) one year and one day after the date of exercise of such Incentive
Stock Option or (2) two years and one day after the date of grant of such
Incentive Stock Option. Upon delivery to the Company, at its principal executive
office, of a written statement to the effect that such shares have been sold or
transferred prior to such date, the Company does hereby agree to promptly
deliver to the transfer agent for such shares a written statement to the effect
that the Company is aware of the fact of such sale or transfer. The Company may
also require the inclusion of any additional legend which may be necessary or
appropriate.
5. ADMINISTRATION.
(a) Subject to Section 5(f) hereof, the Plan shall be administered by
a Stock Option Committee (the "Stock Option Committee") consisting of not
less than three (3) members of the Board of Directors, to be appointed by
the Board of Directors of the Company. The Board of Directors may, from
time to time, remove members from or add members to the Stock Option
Committee. Vacancies in the Stock Option Committee, however caused, shall
be filled by the Board of Directors. The Stock Option Committee shall
select one of its members as chairman who shall preside at all of its
meetings, and shall designate a secretary (who may or may not be a Stock
Option Committee Member) to keep the minutes of the proceedings and all
records, documents, and data pertaining to the administration of the Plan.
The Stock Option Committee shall hold meetings at such times and places as
it may determine. Subject to the provisions of the Plan and to policies
determined by the Board of Directors, the Stock Option Committee may make
such rules and regulations for the conduct of its business as it shall deem
advisable. A majority of the Stock Option Committee shall constitute a
quorum. All actions of the Stock Option Committee shall be taken by a
majority of the members present at such meeting. Any action may be taken by
a written instrument signed by a majority of the members, and action so
taken shall be fully as effective as if it had been taken by a vote of the
majority of the members at a meeting duly called and held. The Stock Option
Committee and Compensation Committee (as defined below) members shall be
eligible to be granted options; provided, that, a Stock Option Committee
member shall abstain from voting with respect to the grant of any option to
such Stock Option Committee member.
(b) Subject to the express terms and conditions of the Plan, including
Section 5(f) hereof, the Stock Option Committee shall have full power to
grant options under the
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Plan, to construe or interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it and to make all other determinations
necessary or advisable for its administration. Any such determinations by a
majority of the whole Stock Option Committee shall be final and binding.
(c) Subject to the provisions of Sections 3, 4 and 5(f) hereof, the
Stock Option Committee may, from time to time, determine which employees of
the Company or its Affiliates shall be granted options under the Plan, the
type of option granted, the number of option shares subject to each option,
the time or times at which options shall be granted and be exercisable, the
exercise price thereof, and the timing of payment of the exercise price,
and the Stock Option Committee may grant such options under the Plan.
(d) The Stock Option Committee or the Compensation Committee, as the
case may be, shall report to the Board of Directors the names of employees
granted options, the number of option shares subject to, and the terms and
conditions of, each option.
(e) No member of the Board of Directors, the Stock Option Committee or
the Compensation Committee shall be liable for any action, determination or
omission of any other member of the Stock Option Committee or for any
action, determination, or omission on his own part, including but not
limited to the exercise of any power or discretion given to him under the
Plan, except those resulting from his gross negligence or willful
misconduct. For this purpose, no action taken in good faith shall
constitute gross negligence or willful misconduct.
(f) Notwithstanding anything herein to the contrary, with respect to
any participants in the Plan who, by virtue of such person's relationship
to the Company, are subject to Section 16(a) and 16(b) of the Securities
Exchange Act of 1934, as amended, in lieu of the Stock Option Committee,
the Compensation Committee of the Board of Directors (the "Compensation
Committee") shall govern all decisions as to such person's rights to
participate, the number of and terms of options granted to them, and all
respects of the administration of the Plan with respect to them and shall
have and exercise all such authority with respect to such persons as is
otherwise granted to the Stock Option Committee hereunder.
6. REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any shares under any option if the issuance of such shares shall
constitute a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority whether it be Federal
or State. Unless a registration statement is in effect under the
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Securities Act of 1933, as amended (the "Act") with respect to the shares of
Common Stock covered by an option, the Company shall not be required to issue
shares upon exercise of any option (i) unless the Stock Option Committee has
received evidence satisfactory to it to the effect that the holder of such
option is acquiring such shares for investment and not with a view to the
distribution thereof or (ii) unless an opinion of counsel to the Company has
been received by the Company, in a form and substance which is deemed acceptable
by the Stock Option Committee, to the effect that a registration statement is
not required. Any determination in this connection by the Stock Option Committee
shall be final, binding and conclusive. In the event the shares issuable on
exercise of an option are not registered under the Act, the Company may imprint
the following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any State and may not be sold or transferred except pursuant
to an effective registration statement or upon receipt by the
Corporation of any opinion of counsel satisfactory to the Corporation,
in form and substance satisfactory to the Corporation, that
registration is not required for such sale or transfer."
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act and, in the event any shares are
so registered, the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any affirmative action
in order to cause the exercise of an option or the issuance of shares pursuant
thereto to comply with any law or regulation of any governmental authority.
7. INTENTION OF PLAN. Incentive Stock Options granted pursuant to this
Plan are intended to qualify as Incentive Stock Options within the meaning of
Section 422A of the Code, and the terms of this Plan and options granted
hereunder shall be so construed; provided, however, that nothing in this Plan
shall be interpreted as a representation, guarantee or other undertaking on the
part of the Company that any options granted pursuant to this Plan are, or will
be, determined to be incentive stock options, within the meaning of the Code.
8. USE OF PROCEEDS. The proceeds from the sale of Common Stock pursuant
to the exercise of options, including any down payments provided in Section
4(a), will be used for the Company's general corporate purposes.
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9. INDEMNIFICATION. Each member of the Stock Option Committee, the
Compensation Committee and the Board of Directors shall be indemnified and held
harmless by the Company for all loss, liabilities, costs and expenses (including
the amount of judgments and the amount of approved settlements made with a view
to the curtailment of costs of litigation, other than amounts paid to the
Company itself) reasonably incurred by him in connection with or arising out of
any action, suit, or proceeding regarding administration of the Plan in which he
may be involved by reason of his being or having been a member of such committee
or the Board of Directors, whether or not he continues to be a member of such
committee or the Board of Directors at the time of incurring such loss,
liabilities, costs and expenses. Notwithstanding any of the foregoing, no member
of such committee or the Board of Directors shall be entitled to such
indemnification from the Company for any loss, liabilities, costs and expenses
incurred by him (a) in respect of matters as to which he shall be finally
adjudged in any such action, suit or proceeding to have been guilty of gross
negligence or willful misconduct in the performance of his duty as a member of
such committee or the Board of Directors, or (b) in respect of any matter in
which any settlement is effected, to an amount in excess of the amount approved
by the Company on the advice of its legal counsel. Moreover, no right of
indemnification under the provisions set forth herein shall be available to or
enforceable against the Company by any member of such committee and the Board of
Directors unless, within sixty (60) days after institution of any such action,
suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend the same at its own expense. The foregoing
right of indemnification shall inure to the benefit of the heirs, executors or
administrators of each such member of such committee and the Board of Directors
and shall be in addition to all other rights to which the member of such
committee and the Board of Directors may be entitled as a matter of law,
contract or otherwise.
10. WITHHOLDING. The Company's obligation to deliver shares upon the
exercise of any option hereunder shall be subject to applicable federal, state
and local tax withholding requirements.
11. NO OBLIGATION OF EMPLOYMENT. Nothing in this Plan or contained in
an option granted hereunder or in any Stock Option Agreement shall govern the
employment rights and duties between the Optionee and the Company or Affiliate.
Neither this Plan, nor any grant or exercise pursuant thereto, shall constitute
an employment agreement among such parties. The granting of any option hereunder
shall not impose upon the Company or an Affiliate any obligation to employ or
continue to employ any Optionee. The right of the Company to terminate the
employment of any officer or other employee shall not be diminished or affected
by reason of a grant or the existence of an option hereunder.
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12. EFFECTIVE DATE AND TERMINATION.
(a) The effective date of the Plan is April 1, 1990; provided, that,
within one year of that date, the Plan shall have been approved by a
majority of the holders of the outstanding voting stock of the Company.
(b) The Plan shall terminate ten years after the effective date of the
Plan and no options shall be granted pursuant to the Plan thereafter. The
Board of Directors may terminate the Plan at any time prior to ten years
after the effective date of the Plan. Termination of the Plan shall not
alter or impair, without the consent of the Optionee, any of the rights or
obligations and any option theretofore granted under the Plan.
13. AMENDMENTS. The Board of Directors of the Company may, from time to
time, alter, amend, suspend, or discontinue the Plan, or alter or amend any and
all option agreements granted thereunder; provided, however, that no such action
of the Board of Directors, without the approval of a majority of the holders of
shares of the Company then entitled to vote, may alter the provisions of the
Plan so as to:
(a) Decrease the minimum option price for Incentive Stock Options;
(b) Extend the term of the Plan beyond ten years or the maximum term
of the options granted beyond ten years;
(c) Withdraw the administration of the Plan from the Stock Option
Committee;
(d) Change the class of eligible employees, officers and directors; or
(e) Increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan;
Notwithstanding the foregoing, (i) the Board of Directors may amend the
Plan in any respect in order to qualify the Incentive Stock Options granted
pursuant hereto as Incentive Stock Options as defined in Section 422A of the
Code, (ii) no amendment may be made to an outstanding option agreement to the
detriment of the Optionee without the Optionee's consent, and (iii) no amendment
may be made to this Plan (or any option granted hereunder without the consent of
the Optionee) which would constitute a modification of any Incentive Stock
Option outstanding under Section 425(h) of the Code or which would adversely
affect an outstanding Incentive Stock Option's status as an Incentive Stock
Option under Section 422A of the Code.
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Exhibit 10.19
GRANITE BROADCASTING CORPORATION
DIRECTORS' STOCK OPTION PLAN
AS AMENDED THROUGH OCTOBER 26, 1999
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
<PAGE>
adopt and 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 1,000,000 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. Shares tendered by an Optionee to pay
all or part of the option price of an option and shares that are withheld to pay
taxes associated with the exercise of an option may be again available for
issuance pursuant to options 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").
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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 1997
Triennial Period Commencement Date (as defined below) (the "1994 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 1997 Triennial
Period Completion Date (as defined below), 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 1997 Triennial Period Completion Date.
(b) On February 25, 1997 (the "1997 Triennial Period Commencement
Date"), each Director then in office shall be granted an Option to purchase
18,000 shares of Common Stock (Nonvoting) ("1997 Awards"), 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
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Option until the earlier to occur of: (i) his or her Completion of Service; or
(ii) the day immediately preceding the initial Quinquennial Period Commencement
Date (as defined below) (the "1997 Triennial Period Completion Date"). Each
Director who received 1997 Awards shall be granted an Option, dated April 27,
1999, to purchase 4,875 shares of Common Stock (Nonvoting) ("1999 Awards"),
which number of shares equals 1,625 multiplied by the number of Regular Board
Meetings from April 26, 1999 until the 1997 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 1997 Triennial Period Completion Date.
(c) On April 27, 1999 and on each five year anniversary thereof (each
such date a "Quinquennial Period Grant Date"), each Director then in office
shall be granted an Option to purchase 62,500 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
February 25, 2000 (each such date and each five year anniversary thereof, a
"Quinquennial Period Commencement Date") until the earlier to occur of: (i) his
or her Completion of Service; and (ii) the day immediately preceding the next
Quinquennial Period Commencement Date (each such date, a "Quinquennial Period
Completion Date"). Any compensation for attendance at any other meetings of the
Board shall be only in cash.
(d) Each person who first becomes a Director after the Effective Date
(other than on the 1997 Triennial Period Commencement Date or on a Quinquennial
Period Grant 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:
the number of Regular Board Meetings scheduled from the date of his or her
commencement of service as a Director until the earlier of the 1994 Triennial
Period Completion Date, the 1997 Triennial Period Completion Date or the
Quinquennial Period Completion Date for the period covered by the award, as
applicable, multiplied by 1,500, in the case of Regular Board Meetings prior to
April 27, 1999, or 3,125, in the case of Regular Board Meetings on or after
April 27, 1999. All Options granted pursuant to Sections 5.01(b)-(d) 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 1994
Triennial Period Completion Date, the 1997 Triennial Period Completion Date, or
the Quinquennial Period Completion Date for the period covered by the award, as
applicable.
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
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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 the 1997
Triennial Period Commencement 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. On each Quinquennial Period Grant Date, each Director who is then a
member (other than the Chair) of a Board Committee shall be granted an Option to
purchase 12,500 shares of Common Stock (Nonvoting) for service on each Board
Committee on which he or she is a member, and each Director who is then the
Chair of a Board Committee shall be granted an Option to purchase 17,500 shares
of Common Stock (Nonvoting) for service as the Chair of such Board Committee.
(c) Each person who becomes a member of a specific Board Committee for
the first time after July 25, 1995 but prior to February 24, 2000 (other than on
the 1997 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. Each person who becomes a member of a specific Board
Committee for the first time after February 25, 2000 (other than on a
Quinquennial Period Grant Date), shall be granted an Option to purchase a number
of shares of Common Stock (Nonvoting) equal to 12,500 (17,500 in the case of a
Board Committee Chair) minus 625 (875 in the case of a Board Committee Chair)
multiplied by the number of regular quarterly meetings of such Board Committee
("Regular Committee Meetings") from the Quinquennial Period Commencement Date
immediately preceding the Date of Grant of such Option until the Date of Grant.
Notwithstanding the above, each person who becomes a member of a specific Board
Committee for the first time between April 28, 1999 and February 24, 2000 shall
be granted an Option to purchase a number of shares of Common Stock (Nonvoting)
equal to the sum of (i) the number of complete 180 day periods from the Date of
Grant of such Option until February 24, 2000 multiplied by 1,500 and (ii) 12,500
(or 17,500 in the case of Board Committee Chair). After February 25, 2000, each
person who becomes a member of a specific Board Committee for the first time
between a Quinquennial Period Grant Date and the Quinquennial Period
Commencement Date to which such Quinquennial Period Grant Date relates, shall be
granted an Option to purchase a number of shares of Common Stock (Nonvoting)
equal to the sum of (i) the number of Regular
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Committee Meetings between the Date of Grant and the immediately following
Quinquennial Period Commencement Date multiplied by 625 (875 in the case of a
Board Committee Chair) and (ii) 12,500 (or 17,500 in the case of a Board
Committee Chair).
(d) All Options granted pursuant to Sections 5.02(b)-(c) with respect
to periods prior to and including February 24, 2000 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 1994 Triennial
Period Completion Date (in the case of grants on or prior to February 24, 1997)
or the 1997 Triennial Completion Date (in the case of grants on or after
February 25, 1997). 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. All Options
granted pursuant to this Section 5.02(b) with respect to periods beginning on or
after February 25, 2000 shall serve as compensation to Board Committee members
for attendance at Regular 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 Quinquennial Period Completion Date for the five
year period to which the grant relates.
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 1994
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 1994
Triennial Period Completion Date, Options to
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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 1997 Triennial
Period Commencement Date for periods ending on or prior to the 1997 Triennial
Period Completion Date, subject to the provisions of Article VII and IX and
Section 8.02, (i) 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 held prior to April 27, 1999 or each Regularly Scheduled
Committee Meeting, as applicable, held prior to the 1997 Triennial Completion
Date, and (ii) Options to purchase 3,125 shares of Common Stock (Nonvoting)
shall become fully exercisable on the date of attendance, in person, at each
Regular Board Meeting on or after April 27, 1999 and prior to the 1997 Triennial
Period Completion Date.
(c) With respect to all awards granted on or after April 27, 1999 for
periods beginning on or after the initial Quinquennial Period Commencement Date,
subject to the provisions of Article VII and IX and Section 8.02, (i) Options to
purchase 3,125 shares of Common Stock (Nonvoting) shall become fully exercisable
on the date of attendance, in person or by telephonic means, at each Regular
Board Meeting held prior to the Quinquennial Period Completion Date for the
period covered by the award, and (ii) if applicable, Options to purchase 625
(875 in the case of a Board Committee Chair) shares of Common Stock (Nonvoting)
shall become fully exercisable on the date of attendance, in person or by
telephonic means, at each Regular Committee Meeting held prior to the
Quinquennial Period Completion Date for the period covered by the award.
(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 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 Regular Committee
Meeting or that, upon the passage of time following attendance at a prior
Regular Board Meeting or Regular Committee Meeting, would become exercisable)
shall become immediately exercisable upon: (i) the death or disability
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(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).
6.06. RELOAD OPTION. The Board may provide, at or subsequent to the date of
grant of an option, that in the event an Optionee pays the option price of such
option (in whole or in part) by tendering Common Stock owned by the Optionee,
such Optionee shall automatically be granted a reload option for the number of
shares of Common Stock used to pay the exercise price plus the number of shares
withheld to pay for taxes associated with the exercise of the option. The reload
option shall be subject to the terms and conditions that the Board will in its
discretion provide, consistent with the terms of the Plan. Unless the Board
explicitly provides otherwise, if a reload option is granted as set forth above,
one or more successive reload options will be automatically granted to an
Optionee who
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pays all or part of the exercise price of any such reload option by tendering
Common Stock owned by such Optionee.
6.07. NON-ASSIGNABILITY. Options under the Plan will not be transferable by an
Optionee except by will or the laws of descent and distribution. During the
lifetime of the Optionee, the Option is exercisable only by the Optionee or, in
the event of the Optionee's incapacity, by his duly authorized legal
representative. Notwithstanding the foregoing, the Board may, in its discretion,
authorize all or a portion of the Option granted to a Optionee to be on terms
which permit transfer by such Optionee to (i) the spouse, children or
grandchildren of such Optionee ("Immediate Family Members"), (ii) a trust or
trusts for exclusive benefit of such Immediate Family Members, or (iii) a
partnership or limited liability company in which such Immediate Family Members
are the only partners or members, as applicable, provided that (x) there may be
no consideration for any such transfer, (y) the Option agreement pursuant to
which such Options are granted must be approved by the Board and must expressly
provide for transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred Options shall be prohibited except those
occurring by laws of descent and distribution. Following transfer, any such
Options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of the
Plan, the term Optionee shall be deemed to refer to the transferee; provided,
however, that, the Option shall continue to be exercisable and shall terminate
in accordance with its terms as if the transferor (Non-Employee Director)
remained the holder of the Option. Options under the Plan may not be pledged,
mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the
claims of creditors.
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(d), 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
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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 earlier to occur of the second anniversary of
such date of termination of directorship and the expiration of the Option
Period.
7.03. AUTOMATIC TERMINATION. Any Option or any portion thereof that does not
become exercisable within six (6) years after the Date of Grant thereof shall
automatically terminate on such sixth anniversary of the Date of Grant.
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
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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 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 the Plan may not be 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.
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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 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.
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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
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 of 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.
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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.
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Exhibit 10.31
NON-EMPLOYEE DIRECTORS STOCK PLAN OF
GRANITE BROADCASTING CORPORATION
as amended through April 26, 1999
1. PURPOSE. The purpose of this Non-Employee Directors Stock Plan (the
"Plan") of Granite Broadcasting Corporation (the "Company"), is to advance the
interests of the Company and its stockholders by providing a means to attract
and retain highly qualified persons to serve as non-employee directors of the
Company and to enable such persons to acquire or increase a proprietary interest
in the Company, thereby promoting a closer identity of interests between such
persons and the Company's stockholders.
2. DEFINITIONS. In addition to terms defined elsewhere in the Plan, the
following are defined terms under the Plan:
(a) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include regulations thereunder and successor provisions and regulations thereto.
(b) "DISABILITY" means a permanent physical or mental
incapacity which, in the reasonable determination of the Board, renders the
Participant unable to perform his duties as a director of the Company.
(c) "FAIR MARKET VALUE" of a Share on a given date shall mean
the closing price reported on the Nasdaq National Market or the principal
securities exchange on which the Common Stock (Nonvoting) may then be traded, as
the case may be, or, if there is no such sale on the relevant date, then on the
last previous day on which a sale was reported.
(d) "PARTICIPANT" means a person who, as a non-employee
director of the Company, has been granted Shares under the Plan.
(e) "SHARE" means a share of Common Stock (Nonvoting), $.01
par value, of the Company and such other securities as may be substituted for
such Share or such other securities pursuant to Section 8.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided
in Section 8, as of any date, the total number of Shares issuable under the Plan
shall be 100,000. Such Shares may be authorized but unissued Shares, treasury
Shares, or Shares acquired in the market for the account of the Participant.
4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the
Board of Directors of the Company (the "Board").
<PAGE>
5. ELIGIBILITY. Only directors of the Company who are not employees of
the Company or any subsidiary of the Company shall participate in the Plan.
6. GRANT OF SHARES. On April 29, 1997, April 28, 1998, January 1, 1999
and on January 1 of each subsequent calendar year during the term of the Plan,
each Participant shall receive a number of Shares equal to $20,000 divided by
the Fair Market Value per Share on the date of grant.
As of January 1, 1999, if a person first becomes a director of the
Company at any time after January 1 of any calendar year and such person is
eligible to participate in the Plan under Section 5 hereof, such person shall
receive on the date such person is first elected a director of the Company a
number of Shares equal to (x) $5,000 multiplied by the number of regular board
meetings scheduled from the date of his or her commencement of service as a
director until December 31 of such calendar year divided by (y) the Fair Market
Value per Share on the date of grant.
7. DEFERRAL OF SHARES. Each director of the Company may elect to defer
the payment of Shares by submitting an election form to the Board, in accordance
with this Section 7.
(A) ELECTIONS. Each director who elects to defer the payment
of Shares for a given calendar year must file an irrevocable written election
with the Secretary of the Company no later than December 31 of the year
preceding such calendar year; provided, that, any newly elected or appointed
director may file an election for any year not later than 30 days after the date
such person first became a director, and a director may file an election for the
year in which the Plan became effective not later than 30 days after the date of
effectiveness of the Plan. An election by a director shall be deemed to be
continuing and therefore applicable to subsequent Plan years unless the director
revokes or changes such election by filing a new election form by the due date
for such form specified in this Section 7(a). The election must specify the
following:
(i) A percentage or number of Shares to be deferred under
the Plan; and
(ii) The date on which the commencement of payments of
Shares should begin, which date shall not be later than 10 years from the date
the Shares originally were payable;
PROVIDED, HOWEVER, that, notwithstanding an election pursuant to this Section
7(a), all Shares of a Participant for which payment has not otherwise occurred,
shall be paid upon death, Disability or termination of directorship of the
Participant.
(B) DEFERRAL OF SHARES. The Company will establish a deferral
account for each Participant who elects to defer Shares under
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this Section 7. At any date Shares are payable to a Participant who has elected
to defer Shares, the Company will credit such Participant's deferral account
with a number of Shares so deferred.
(C) CREDITING OF DIVIDEND EQUIVALENTS. Whenever dividends are
paid or distributions made with respect to Shares, a Participant to whom Shares
are then credited in a deferral account shall be entitled, on the dividend
payment date, as dividend equivalents, to an amount equal in value to the amount
of the dividend paid or property distributed on a single Share multiplied by the
number of Shares credited to his or her deferral account as of the record date
for such dividend or distribution. Such dividend equivalents shall be credited
to the Participant's deferral account by payment to such account of a number of
Shares determined by dividing the aggregate value of such dividend equivalents
by the Fair Market Value of a Share at the payment date of the dividend or
distribution.
(D) SETTLEMENT OF DEFERRED SHARES. The Company will settle the
Participant's deferral account by delivering to the Participant (or his or her
beneficiary) a number of Shares equal to the number of whole Shares then
credited to his or her deferral account (or a specified portion in the event of
any partial settlement), together with cash in lieu of any fractional Share
remaining at a time that less than one whole Share is credited to such deferral
account. Such settlement shall be made at the time or times specified in the
Participant's election filed in accordance with Section 7(a); provided, however,
that a Participant may further defer settlement of Shares if counsel to the
Company determines that such further deferral likely would be effective under
applicable federal income tax laws and regulations.
(E) NONFORFEITABILITY. The interest of each Participant in any
Shares (and any deferral account relating thereto) at all times will be
nonforfeitable.
8. ADJUSTMENT PROVISIONS. In the event any dividend or other
distribution (whether in the form of cash, Shares or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, exchange of Shares or other
securities of the Company, extraordinary dividend (whether in the form of cash,
Shares, or other property), liquidation, dissolution, or other similar corporate
transaction or event affects the Shares such that an adjustment is appropriate
in order to prevent dilution or enlargement of each Participant's rights under
the Plan, then an adjustment shall be made, in a manner that is proportionate to
the change to the Shares and otherwise equitable, in (i) the number and kind of
Shares remaining reserved and available for issuance under Section 3, and (ii)
the number and kind of Shares to be issued upon settlement of deferred Shares
under Section 7. In addition, the Board is authorized to make such adjustments
in
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recognition of unusual or non-recurring events (including, without limitation,
events described in the preceding sentence) affecting the Company or any
subsidiary or the financial statements of the Company or any subsidiary, or in
response to changes in applicable laws, regulations or accounting principles.
The foregoing notwithstanding, no adjustment may be made hereunder except as
will be necessary to maintain the proportionate interest of the Participant
under the Plan and to preserve, without exceeding, the value of outstanding
deferred Shares.
9. CHANGES TO THE PLAN. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or authority to grant Shares under the Plan
without the consent of stockholders or Participants, except that any amendment
or alteration will be subject to the approval of the Company's stockholders at
or before the next annual meeting of stockholders for which the record date is
after the date of such Board action if such stockholder approval is required by
any federal or state law or regulation or the rules of any stock exchange or
automated quotation system as then in effect, and the Board may otherwise
determine to submit other such amendments or alterations to stockholders for
approval; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights of such Participant
with respect to any previously granted Shares.
10. GENERAL PROVISIONS.
(A) AGREEMENTS. Any right or obligation under the Plan may be
evidenced by agreements or other documents executed by the Company and the
Participant incorporating the terms and conditions set forth in the Plan,
together with such other terms and conditions not inconsistent with the Plan, as
the Board may from time to time approve.
(B) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company will not
be obligated to issue or deliver Shares in a transaction subject to the
registration requirements of the Securities Act of 1933, as amended, or any
other federal or state securities law, any requirement under any listing
agreement between the Company and any stock exchange or automated quotation
system, or any other law, regulation, or contractual obligation of the Company,
until the Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full. Certificates
representing Shares issued under the Plan will be subject to such stop-transfer
orders and other restrictions as may be applicable under such laws, regulations,
and other obligations of the Company, including any requirement that a legend or
legends be placed thereon.
(C) LIMITATIONS ON TRANSFERABILITY. Deferred Shares under the
Plan will not be transferable by a Participant except
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by will or the laws of descent and distribution or to a beneficiary in the event
of the Participant's death. Deferred Shares may not be pledged, mortgaged,
hypothecated or otherwise encumbered, and shall not be subject to the claims of
creditors.
(D) NO RIGHT TO CONTINUE AS A DIRECTOR. Nothing contained in
the Plan or any agreement hereunder will confer upon any Participant any right
to continue to serve as a director of the Company.
(E) NO STOCKHOLDER RIGHTS CONFERRED. Nothing contained in the
Plan or any agreement hereunder will confer upon any Participant (or any person
or entity claiming rights by or through a Participant) any rights of a
stockholder of the Company unless and until Shares are in fact issued to such
Participant (or person).
(F) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements for directors as it may deem
desirable.
(G) GOVERNING LAW. The validity, construction, and effect of
the Plan and any agreement hereunder will be determined in accordance with the
laws of the State of New York, without giving effect to principles of conflicts
of laws, and applicable federal law.
11. STOCKHOLDER APPROVAL, EFFECTIVE DATE, AND PLAN TERMINATION. The
Plan will be effective as of the date of its adoption by the Board, subject to
stockholder approval if necessary or appropriate, and, unless earlier terminated
by action of the Board, shall terminate at such time as no Shares remain
available for issuance under the Plan and the Company and Participants have no
further rights or obligations under the Plan.
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Exhibit 10.43
EXECUTION
GRANITE BROADCASTING CORPORATION
SECOND AMENDMENT TO FOURTH AMENDED
AND RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT AND LIMITED WAIVER TO FOURTH AMENDED AND
RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of February 16, 2000
and entered into by and among GRANITE BROADCASTING CORPORATION, a Delaware
corporation ("COMPANY"), the financial institutions listed on the signature
pages hereof ("LENDERS") and BANKERS TRUST COMPANY ("BANKERS"), as
administrative agent for Lenders ("ADMINISTRATIVE AGENT"), and, for purposes of
Section 5 hereof, the Credit Support Parties (as defined in Section 3 hereof)
listed on the signature pages hereof, and is made with reference to that certain
Fourth Amended and Restated Credit Agreement dated as of June 10, 1998 by and
among Company, Lenders, Administrative Agent, The Bank of New York as
Documentation Agent, and Goldman Sachs Credit Partners L.P., Union Bank of
California, N.A. and ABN-Amro Bank N.V., as Co-Agents, as amended by that
certain First Amendment dated as of March 23, 1999 (as so amended, the "CREDIT
AGREEMENT"). Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company has requested that Requisite Lenders amend
the leverage ratio contained in Section 7.6A of the Credit Agreement for the
fiscal quarter ending December 31, 1999; and
WHEREAS, Agent and Requisite Lenders are willing to make such
amendment, but only on the terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, and in reliance on the
representations and warranties of Company and the Credit Support Parties herein
contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
AMENDMENTS TO SECTION 7.6A: MAXIMUM TOTAL DEBT RATIO
Section 7.6A of the Credit Agreement is hereby amended by
inserting the following proviso at the end thereof:
<PAGE>
"; PROVIDED FURTHER, HOWEVER, that notwithstanding anything in the
foregoing to the contrary, for the fiscal quarter period ending on
December 31, 1999, the ratio of 6.50:1 shall apply."
The parties hereto agree that the amendment to the Credit Agreement set forth in
this Section 1 shall be deemed effective as of December 31, 1999.
SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate of
Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on Company
or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than Liens created under any
of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by
Company of this Amendment and the performance by Company of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by Company and are the legally
valid and binding obligations of Company, enforceable against Company in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
2
<PAGE>
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date hereof to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. After giving effect to the amendment
set forth herein, no event has occurred and is continuing or will result from
the consummation of the transactions contemplated by this Amendment that would
constitute an Event of Default or a Potential Event of Default.
SECTION 3. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Borrower Pledge and Security
Agreement and the Borrower Mortgage, in each case as amended through the date
hereof, pursuant to which Company has created Liens in favor of Agent on certain
Collateral to secure the Obligations. Each of Company's Subsidiaries is a party
to the Subsidiary Guaranty and the Subsidiary Pledge Agreement and each of
Company's Subsidiaries (other than the License Cos and Granite Response
Television Inc.) is a party to one or more Subsidiary Mortgages, in each case as
amended through the date hereof, pursuant to which such Subsidiary has (i)
guarantied the Obligations and (ii) created Liens (subject to Liens permitted by
the Credit Agreement) in favor of Administrative Agent on certain Collateral
(except to the extent prohibited by the FCC or the Communications Act) to secure
the obligations of such Subsidiary under the Subsidiary Guaranty. Company, and
each Subsidiary Guaranty are collectively referred to herein as the "CREDIT
SUPPORT PARTIES", and the Borrower Pledge and Security Agreement, the Borrower
Mortgage, the Subsidiary Guaranty, the Subsidiary Pledge Agreement and the
Subsidiary Mortgages are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral encumbered
thereby will continue to guaranty or secure, as the case may be, to the fullest
extent possible the payment and performance of all "Guarantied Obligations" and
"Secured Obligations," as the case may be (in each case as such terms are
defined in the applicable Credit Support Document), including without limitation
the payment and performance of all such "Guarantied Obligations" or "Secured
Obligations," as the case may be, in respect of the Obligations of Company now
or hereafter existing under or in respect of the Amended Agreement and the Notes
defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
3
<PAGE>
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the date hereof to the same extent as though made on and as of that date,
except to the extent such representations and warranties specifically relate to
an earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
Each Credit Support Party (other than Company) acknowledges
and agrees that (i) notwithstanding the conditions to effectiveness set forth in
this Amendment, such Credit Support Party is not required by the terms of the
Credit Agreement or any other Loan Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to the
Credit Agreement.
SECTION 4. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Amended
Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right,
power or remedy of Administrative Agent or any Lender under, the
Credit Agreement or any of the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in Section 10.2 of the Credit Agreement incurred
by Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT
4
<PAGE>
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by Company, Requisite
Lenders and each of the Credit Support Parties and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY, individually
and as Administrative Agent and
Collateral Agent
By:
-----------------------------------
Name:
Title:
LENDERS:
THE BANK OF NEW YORK,
as Documentation Agent and a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Co-Agent and a Lender
By:
-----------------------------
Name:
-------------------------
Title:
-------------------------
UNION BANK OF CALIFORNIA, N.A.,
as a Co-Agent and a Lender
By:
-----------------------------
Name:
-------------------------
Title:
-------------------------
S-1
<PAGE>
ABN AMRO BANK N.V., NEW YORK BRANCH,
as a Co-Agent and a Lender
By:
-----------------------------
Name:
-------------------------
Title:
-------------------------
NATEXIS BANQUE BFCE,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
CREDIT INDUSTRIEL ET COMMERCIAL
as a Lender
By:
-----------------------------
Name:
-------------------------
Title:
-------------------------
By:
-----------------------------
Name:
-------------------------
Title:
-------------------------
HELLER FINANCIAL, INC.,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
S-2
<PAGE>
PARIBAS,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
THE BANK OF NOVA SCOTIA,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
BANQUE NATIONALE DE PARIS,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
S-3
<PAGE>
MELLON BANK, N.A.,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
BANK OF TOKYO-MITSUBISHI TRUST,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
FINOVA CAPITAL CORPORATION,
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
SOUTHERN PACIFIC BANK,
as a Lender
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
S-4
<PAGE>
COMPANY:
GRANITE BROADCASTING CORPORATION
By:
------------------------------
Lawrence I. Wills
Vice President
SUBSIDIARIES:
GRANITE RESPONSE TELEVISION, INC.
KBVO, INC.
KBVO LICENSE, INC.
KNTV, INC.
KNTV LICENSE, INC.
RJR COMMUNICATIONS, INC.
KBJR LICENSE, INC.
SAN JOAQUIN COMMUNICATIONS CORPORATION
KSEE LICENSE, INC.,
WPTA-TV, INC.
WPTA-TV LICENSE, INC.
WTVH L.L.C.
WTVH LICENSE, INC.
WWMT-TV, INC.
WWMT-TV LICENSE, INC.
WKBW-TV LICENSE, INC.
QUEEN CITY BROADCASTING OF NEW YORK, INC.
WEEK, INC.
WEEK LICENSE, INC.
WXON, INC.
WXON LICENSE, INC.
WLAJ, INC.
WLAJ LICENSE, INC.
WEEK-TV LICENSE, INC.
PACIFIC FM INCORPORATED
KOFY-TV LICENSE, INC.
By:
----------------------------
Lawrence I. Wills
Vice President
S-5
<PAGE>
Exhibit 10.44
EXECUTION
GRANITE BROADCASTING CORPORATION
THIRD AMENDMENT TO FOURTH AMENDED
AND RESTATED CREDIT AGREEMENT
This THIRD AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT
AGREEMENT (this "AMENDMENT") is dated as of March __, 2000 and entered into by
and among GRANITE BROADCASTING CORPORATION, a Delaware corporation ("COMPANY"),
the financial institutions listed on the signature pages hereof ("LENDERS") and
BANKERS TRUST COMPANY ("BANKERS"), as administrative agent for Lenders
("ADMINISTRATIVE AGENT"), and, for purposes of Section 3 hereof, the Credit
Support Parties (as defined in Section 3 hereof) listed on the signature pages
hereof, and is made with reference to that certain Fourth Amended and Restated
Credit Agreement dated as of June 10, 1998 by and among Company, Lenders,
Administrative Agent, The Bank of New York as Documentation Agent, and Goldman
Sachs Credit Partners L.P., Union Bank of California, N.A. and ABN-Amro Bank
N.V., as Co-Agents, as amended by that certain First Amendment dated as of March
23, 1999, and that certain Second Amendment dated as of February 16, 2000 (as so
amended, the "CREDIT AGREEMENT"). Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.
RECITALS
WHEREAS, Company has requested that Requisite Lenders (i)
amend the leverage ratio contained in Section 7.6A of the Credit Agreement for
each of the fiscal quarters in the fiscal year ending December 31, 2000 and (ii)
make certain other amendments as set forth herein; and
WHEREAS, Agent and Requisite Lenders are willing to make such
amendments, but only on the terms and conditions set forth herein:
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, and in reliance on the
representations and warranties of Company and the Credit Support Parties herein
contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1.1: CERTAIN DEFINED TERMS.
(a) The definition of "Applicable Margin" contained in Section 1.1 of
the Credit Agreement is hereby amended and restated in its entirety as follows:
`"APPLICABLE MARGIN" means, for each Loan, a percentage per
annum determined by reference to the Leverage Ratio as set forth below:
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------- --------------------------- --------------------------------
PRICE LEVERAGE RATIO BASE RATE LOANS EURODOLLAR RATE LOANS
----------------------------------------- --------------------------- --------------------------------
<S> <C> <C>
=> 7.0 to 1 1.50% 2.75%
----------------------------------------- --------------------------- --------------------------------
=> 6.5 to 1 and < 7.0 to 1 1.25% 2.50%
----------------------------------------- --------------------------- --------------------------------
=> 6.0 to 1 and < 6.5 to 1 1.00% 2.25%
----------------------------------------- --------------------------- --------------------------------
=> 5.5 to 1 and < 6.0 to 1 0.75% 2.00%
----------------------------------------- --------------------------- --------------------------------
=> 5.0 to 1 and < 5.5 to 1 0.50% 1.75%
----------------------------------------- --------------------------- --------------------------------
< 5.0 to 1 0.25% 1.50%"
----------------------------------------- --------------------------- --------------------------------
</TABLE>
(b) Notwithstanding anything in Section 2.2A of the Credit Agreement to
the contrary, from and after the Third Amendment Effective Date (as defined
below) until the first day following delivery to Administrative Agent of the
first Compliance Certificate delivered to Administrative Agent after the Third
Amendment Effective Date pursuant to Section 6.1 of the Credit Agreement, the
Applicable Margin shall be that determined with reference to the most recent
Compliance Certificate delivered to Administrative Agent by Company on or before
the Third Amendment Effective Date (as defined below) pursuant to Section 6.1 of
the Credit Agreement.
(c) Section 1.1 of the Credit Agreement is hereby further amended by
adding the following definition of "Third Amendment Effective Date" thereto in
alphabetical order:
`"THIRD AMENDMENT EFFECTIVE DATE" has the meaning assigned to
that term in the Third Amendment to Fourth Amended and Restated Credit
Agreement dated as of March __, 2000 by and among Company, Lenders and
Administrative Agent."
1.2 AMENDMENTS TO SECTION 2.3A: COMMITMENT FEES.
Section 2.3A of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"A. COMMITMENT FEES.
(i) Company agrees to pay to Administrative Agent,
for distribution to each Lender in proportion to that Lender's
Pro Rata Share, commitment fees for the period from and
including the Closing Date to and excluding the Revolving Loan
Commitment Termination Date equal to (a) the average of the
daily excess of the Revolving Loan Commitments over the sum of
(x) the aggregate principal amount of Revolving Loans
outstanding PLUS (y) the Letter of Credit Usage, MULTIPLIED BY
(b) 1/4 of 1% per annum, such commitment fees to be calculated
on the basis of a 360-day year and the actual number of days
elapsed and to be payable quarterly in arrears on January 31,
April 30, July 31 and October 31 of each year, commencing on
the first such date to occur after the Closing Date, and on
the Revolving Loan Commitment Termination Date; PROVIDED
HOWEVER that from and after the Third Amendment Effective
Date, such per annum percentage shall be 1/2 of 1% per annum
(PROVIDED FURTHER HOWEVER that such per annum percentage shall
be
2
<PAGE>
decreased to 3/8 of 1% per annum during any period in which
the Pricing Leverage Ratio is less than 5.00:1.00); and
(ii) Company agrees to pay to Administrative Agent,
with respect to the Additional Credit Commitments made under
each Additional Credit Facility Supplement, for distribution
to each Additional Credit Lender in proportion to that
Additional Credit Lender's Pro Rata Share, commitment fees for
the period from and including the applicable Additional Credit
Closing Date to and excluding the Revolving Loan Commitment
Termination Date (a) the average of the daily excess of the
applicable Additional Credit Commitments over the aggregate
principal amount of Additional Credit Loans outstanding
thereunder, MULTIPLIED BY (b) 1/2 of 1% per annum, such
commitment fees to be calculated on the basis of a 360-day
year and the actual number of days elapsed and to be payable
quarterly in arrears on January 31, April 30, July 31 and
October 31 of each year, commencing on the first such date to
occur after the applicable Additional Credit Facility Closing
Date, and on the Revolving Loan Commitment Termination Date
(PROVIDED HOWEVER that such per annum percentage shall be
decreased to 3/8 of 1% per annum during any period in which
the Pricing Leverage Ratio is less than 5.00:1.00)."
1.3 AMENDMENTS TO SECTION 7.6A: MAXIMUM TOTAL DEBT RATIO.
Section 7.6A of the Credit Agreement is hereby amended by
inserting the following proviso at the end thereof:
"; PROVIDED STILL FURTHER, HOWEVER, that notwithstanding
anything in the foregoing to the contrary, for any fiscal
quarter ending during any period set forth below, the
following ratios shall apply:
<TABLE>
<CAPTION>
- ------------------------------------------------ -----------------------------------------------
PERIOD MAXIMUM TOTAL DEBT RATIO
- ------------------------------------------------ -----------------------------------------------
<S> <C>
1/01/2000-3/31/2000 7.25 to 1
- ------------------------------------------------ -----------------------------------------------
4/01/2000-6/30/2000 7.25 to 1
- ------------------------------------------------ -----------------------------------------------
7/01/2000-9/30/2000 6.75 to 1
- ------------------------------------------------ -----------------------------------------------
10/01/2000-12/31/2000 6.50 to 1"
- ------------------------------------------------ -----------------------------------------------
</TABLE>
1.4 AMENDMENTS TO SECTION 7.8: RESTRICTION ON LEASES.
Section 7.8 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"7.8 RESTRICTION ON LEASES.
3
<PAGE>
Company shall not, and shall not permit any of its
Subsidiaries to, become or remain liable in any way, whether
directly or by assignment or as a guarantor or other surety,
for the obligations of the lessee under any Capital Lease
(other than intercompany leases between Company and its
wholly-owned Subsidiaries), unless the aggregate portion of
the obligations with respect to all Capital Leases of Company
and its Subsidiaries at any time in effect that is properly
classified as a liability on a balance sheet in conformity
with GAAP does not exceed $20,000,000."
1.5 AMENDMENTS TO SCHEDULE 5.1: SUBSIDIARIES OF COMPANY.
Schedule 5.1 of the Credit Agreement is hereby amended and
restated in its entirety as set forth on Exhibit A hereto.
SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate of
Incorporation or Bylaws of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other agency of government binding on Company
or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than Liens created under any
of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by
Company of this Amendment and the performance by Company of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
4
<PAGE>
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by Company and are the legally
valid and binding obligations of Company, enforceable against Company in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date hereof to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. After giving effect to the amendment
set forth herein, no event has occurred and is continuing or will result from
the consummation of the transactions contemplated by this Amendment that would
constitute an Event of Default or a Potential Event of Default.
SECTION 3. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Borrower Pledge and Security
Agreement and the Borrower Mortgage, in each case as amended through the date
hereof, pursuant to which Company has created Liens in favor of Agent on certain
Collateral to secure the Obligations. Each of Company's Subsidiaries is a party
to the Subsidiary Guaranty and the Subsidiary Pledge Agreement and each of
Company's Subsidiaries (other than the License Cos. and Granite Response
Television Inc.) is a party to one or more Subsidiary Mortgages, in each case as
amended through the date hereof, pursuant to which such Subsidiary has (i)
guarantied the Obligations and (ii) created Liens (subject to Liens permitted by
the Credit Agreement) in favor of Administrative Agent on certain Collateral
(except to the extent prohibited by the FCC or the Communications Act) to secure
the obligations of such Subsidiary under the Subsidiary Guaranty. Company, and
each Subsidiary Guaranty are collectively referred to herein as the "CREDIT
SUPPORT PARTIES", and the Borrower Pledge and Security Agreement, the Borrower
Mortgage, the Subsidiary Guaranty, the Subsidiary Pledge Agreement and the
Subsidiary Mortgages are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral encumbered
thereby will continue to guaranty or secure, as the case may be, to the fullest
extent possible the payment and performance of all "Guarantied Obligations" and
"Secured Obligations," as the case may be (in each case as such terms are
defined in the applicable Credit Support Document), including without limitation
the payment and performance of all such "Guarantied Obligations" or "Secured
Obligations," as the case may
5
<PAGE>
be, in respect of the Obligations of Company now or hereafter existing under or
in respect of the Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the date hereof to the same extent as though made on and as of that date,
except to the extent such representations and warranties specifically relate to
an earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
Each Credit Support Party (other than Company) acknowledges
and agrees that (i) notwithstanding the conditions to effectiveness set forth in
this Amendment, such Credit Support Party is not required by the terms of the
Credit Agreement or any other Loan Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to the
Credit Agreement.
SECTION 4. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the date hereof, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Amended
Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right,
power or remedy of Administrative Agent or any Lender under, the
Credit Agreement or any of the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in Section 10.2 of the Credit Agreement incurred
by Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
6
<PAGE>
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS; AMENDMENT FEE. This Amendment
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective (the "THIRD AMENDMENT EFFECTIVE DATE") upon (i) the execution of a
counterpart hereof by Company, Requisite Lenders and each of the Credit Support
Parties and receipt by Company and Administrative Agent of written or telephonic
notification of such execution and authorization of delivery thereof and (ii)
the payment by Company to Administrative Agent, for distribution to the Lenders
that have executed this Amendment, of a non-refundable amendment fee in
immediately available funds in an amount equal to 0.125% of each such Lender's
Commitment.
[Remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY, individually
and as Administrative Agent and
Collateral Agent
By:
----------------------------------
Name:
Title:
LENDERS:
THE BANK OF NEW YORK,
as Documentation Agent and a Lender
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Co-Agent and a Lender
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
UNION BANK OF CALIFORNIA, N.A.,
as a Co-Agent and a Lender
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
S-1
<PAGE>
ABN AMRO BANK N.V., NEW YORK BRANCH,
as a Co-Agent and a Lender
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
NATEXIS BANQUE BFCE,
as a Lender
By:
--------------------------------------
Name:
--------------------------------
Title:
-------------------------------
CREDIT INDUSTRIEL ET COMMERCIAL
as a Lender
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
By:
------------------------------------
Name:
--------------------------------
Title:
------------------------------
HELLER FINANCIAL, INC.,
as a Lender
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
S-2
<PAGE>
PARIBAS,
as a Lender
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
THE BANK OF NOVA SCOTIA,
as a Lender
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
BANQUE NATIONALE DE PARIS,
as a Lender
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
S-3
<PAGE>
MELLON BANK, N.A.,
as a Lender
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
BANK OF TOKYO-MITSUBISHI TRUST,
as a Lender
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
FINOVA CAPITAL CORPORATION,
as a Lender
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
SOUTHERN PACIFIC BANK,
as a Lender
By:
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
S-4
<PAGE>
COMPANY:
GRANITE BROADCASTING CORPORATION
By:
------------------------------------
Lawrence I. Wills
Vice President
SUBSIDIARIES:
GRANITE RESPONSE TELEVISION, INC.
KBVO, INC.
KBVO LICENSE, INC.
KNTV, INC.
KNTV LICENSE, INC.
RJR COMMUNICATIONS, INC.
KBJR LICENSE, INC.
SAN JOAQUIN COMMUNICATIONS CORPORATION
KSEE LICENSE, INC.,
WPTA-TV, INC.
WPTA-TV LICENSE, INC.
WTVH L.L.C.
WTVH LICENSE, INC.
WWMT-TV, INC.
WWMT-TV LICENSE, INC.
WKBW-TV LICENSE, INC.
QUEEN CITY BROADCASTING OF NEW YORK, INC.
WEEK, INC.
WEEK LICENSE, INC.
WXON, INC.
WXON LICENSE, INC.
WLAJ, INC.
WLAJ LICENSE, INC.
WEEK-TV LICENSE, INC.
PACIFIC FM INCORPORATED
KOFY-TV LICENSE, INC.
By:
-------------------------------------
Lawrence I. Wills
Vice President
S-5
<PAGE>
EXHIBIT A
TO THIRD AMENDMENT
SCHEDULE 5.1
SUBSIDIARIES OF COMPANY
<PAGE>
EXHIBIT 10.45
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BETWEEN
CAROLINE K. POWLEY
AND
GRANITE BROADCASTING CORPORATION
DATED AS OF
NOVEMBER 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions.....................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Accounting Terms................................................................................1
1.3 Other Definition Provisions.....................................................................1
2. Purchase of Broadcasting Assets; Purchase Price.................................................1
2.1 Purchase of Broadcasting Assets.................................................................1
2.2 Consideration; Accounts Receivable; Allocation of Purchase Price................................2
2.2.1 Purchase Price..................................................................................2
2.2.2 Prorations......................................................................................2
2.2.3 Manner of Determining Prorations................................................................3
2.2.4 Payment of Purchase Price.......................................................................4
2.2.5 Allocation of Purchase Price/Appraisal..........................................................5
2.3 Accounts Receivable.............................................................................6
2.4 Assumption of Obligations.......................................................................6
2.4.1 Limitation on Obligations of Buyer..............................................................6
2.4.2 Assumed Obligations.............................................................................7
2.4.3 Substitution Where Not Transferable.............................................................7
3. FCC and Related Matters.........................................................................8
3.1 Grant of License................................................................................8
3.2 Application and Request.........................................................................8
3.3 Final Order.....................................................................................9
3.4 Local Ownership Rules..........................................................................10
4. Representations and Warranties Relating to WNGS and Seller.....................................10
4.1 Organization and Standing......................................................................10
4.2 Authorization and Binding Obligations..........................................................11
4.3 No Contravention; Consents.....................................................................11
4.3.1 No Contravention...............................................................................11
4.3.2 Consent........................................................................................11
4.4 Year 2000......................................................................................11
4.5 Title to Assets................................................................................12
4.5.1 Real Property..................................................................................12
4.5.2 Personal Property..............................................................................12
4.5.3 Assets Sufficient..............................................................................12
4.5.4 Condemnation...................................................................................12
4.5.5 Permits........................................................................................13
4.5.6 Access.........................................................................................13
4.6 Condition of Assets............................................................................13
4.7 Licenses and Authorizations....................................................................13
4.7.1 Licenses.......................................................................................13
4.7.2 Pending Applications...........................................................................13
4.7.3 Authorizations.................................................................................14
4.8 Contracts......................................................................................14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
4.9 Franchises, Trademarks and Trade Names.........................................................15
4.10 ERISA..........................................................................................15
4.11 Liabilities....................................................................................16
4.12 Litigation; Violations.........................................................................16
4.12.1 Litigation.....................................................................................16
4.12.2 Violations.....................................................................................16
4.13 DTV............................................................................................16
4.14 Reports........................................................................................17
4.15 No Misleading Statements.......................................................................17
4.16 Affiliated and Recent Transactions.............................................................17
4.17 Taxes..........................................................................................17
4.17.1 Filing of Tax Returns..........................................................................17
4.17.2 Payment of Taxes...............................................................................17
4.17.3 Audits.........................................................................................18
4.17.4 Sole Proprietorship............................................................................18
4.18 Environmental Matters..........................................................................18
4.18.1 USTs...........................................................................................18
4.18.2 Studies; Investigations........................................................................18
4.18.3 Relevant Property..............................................................................18
4.19 Labor..........................................................................................19
4.19.1 Labor Problems.................................................................................19
4.19.2 Employees and Compensation.....................................................................19
4.20 Cable Carriage.................................................................................19
4.21 Insurance......................................................................................20
5. Representations and Warranties of Buyer........................................................20
5.1 Organization and Standing......................................................................20
5.2 Authorization and Binding Obligations..........................................................21
5.3 No Contravention...............................................................................21
5.4 Litigation.....................................................................................21
5.5 No Misleading Statements.......................................................................21
6. Conduct Pending Closing........................................................................22
6.1 Seller's Covenants.............................................................................22
6.1.1 Conduct of Business............................................................................22
6.1.2 Assets.........................................................................................22
6.1.3 Employee Compensation and Benefits.............................................................22
6.1.4 Organization, Etc..............................................................................22
6.1.5 Insurance......................................................................................22
6.1.6 Transfer of Broadcasting Assets................................................................23
6.1.7 [RESERVED].....................................................................................23
6.1.8 Litigation.....................................................................................23
6.1.9 Agreements.....................................................................................23
6.1.10 Consents and Approvals.........................................................................23
6.1.11 Licenses.......................................................................................24
6.1.12 Offers to Purchase.............................................................................24
6.1.13 No Breach of Representations and Warranties....................................................24
6.1.14 Employee Notification Requirements.............................................................24
6.1.15 Compliance with Laws...........................................................................24
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.1.16 [RESERVED].....................................................................................24
6.1.17 No Violations..................................................................................24
6.1.18 Access and Information.........................................................................25
6.1.19 Delivery of Supplement.........................................................................25
6.1.20 Film Contracts.................................................................................25
6.1.21 Satisfaction of Funded Debt and Pre-Closing Liabilities;
Removal of Encumbrances........................................................................25
6.2 Buyer's Covenants..............................................................................26
6.2.1 Organization, Etc..............................................................................26
6.2.2 Litigation.....................................................................................26
6.2.3 No Breach of Representations and Warranties....................................................26
6.2.4 No Violations..................................................................................26
6.3 [RESERVED].....................................................................................26
6.4 Due Diligence..................................................................................26
7. Conditions Precedent to the Obligations of the Parties.........................................27
7.1 Conditions Precedent to the Obligation of Buyer................................................27
7.1.1 FCC............................................................................................27
7.1.2 Accuracy of Representations and Warranties.....................................................27
7.1.3 Compliance with Agreement......................................................................27
7.1.4 No Obstructive Proceeding......................................................................27
7.1.5 No Changes.....................................................................................28
7.1.6 Consents.......................................................................................28
7.1.7 Officers' Certificates.........................................................................29
7.1.8 Opinion of Counsel.............................................................................29
7.1.9 Certifications.................................................................................29
7.1.10 HSRA Waiting Period............................................................................29
7.1.11 Copies of Documents............................................................................29
7.1.12 Analog Authorization...........................................................................29
7.1.13 Proceedings....................................................................................29
7.1.14 Delivery of Instruments of Conveyance and Transfer.............................................30
7.1.15 Tower Space Lease..............................................................................30
7.2 Conditions to Obligations of Seller............................................................30
7.2.1 FCC Consent....................................................................................30
7.2.2 Accuracy of Representations and Warranties.....................................................30
7.2.3 Compliance with Agreement......................................................................30
7.2.4 No Obstructive Proceeding......................................................................30
7.2.5 Proceedings....................................................................................31
7.2.6 Opinion of Counsel.............................................................................31
7.2.7 HSRA Waiting Period............................................................................31
7.2.8 Officer's Certificate..........................................................................31
8. Instruments of Conveyance and Transfer.........................................................31
9. [RESERVED].....................................................................................32
10. Employees......................................................................................32
10.1 [RESERVED].....................................................................................32
10.2 Continued Employment; Prorations...............................................................32
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.2.1 Right to Continue Employment...................................................................32
10.2.2 Cooperation....................................................................................32
10.2.3 Accrued Compensation...........................................................................32
10.3 No Liability for Employee Plans................................................................33
11. Risk of Loss; Casualty or Condemnation.........................................................33
11.1 Risk of Loss...................................................................................33
11.2 Casualty.......................................................................................33
11.3 Repair Parameters..............................................................................34
11.4 Failure of Broadcast Transmission..............................................................34
12. Books and Records..............................................................................34
13. Possession and Control of WNGS.................................................................35
14. Brokers........................................................................................35
15. Survival; Indemnification......................................................................35
15.1 Survival.......................................................................................35
15.2 Seller's Indemnification.......................................................................36
15.2.1 Generally......................................................................................36
15.2.2 Limitations....................................................................................36
15.3 Buyer's Indemnification........................................................................37
15.3.1 Generally......................................................................................37
15.3.2 Taxes..........................................................................................37
15.4 Seller's Satisfaction of Retained Liabilities..................................................37
15.5 Limitations....................................................................................37
15.6 Method of Asserting Claim......................................................................37
15.6.1 Third Party Claims.............................................................................37
15.6.2 Indemnification Claims by the Parties..........................................................39
15.7 Indemnitor's Obligations.......................................................................41
15.8 Limitation on Liability........................................................................41
15.9 Termination of Indemnification.................................................................41
16. Hart-Scott-Rodino Filings......................................................................41
17. [RESERVED].....................................................................................41
18. Termination....................................................................................42
18.1 Termination....................................................................................42
18.1.1 Buyer..........................................................................................42
18.1.2 Seller.........................................................................................42
18.1.3 Mutual Consent.................................................................................42
18.1.4 By Seller Upon Breach..........................................................................42
18.1.5 By Buyer Upon Breach...........................................................................42
18.1.6 Seller or Buyer................................................................................42
18.1.7 Other..........................................................................................42
18.2 Effects of Termination.........................................................................42
18.2.1 Survival.......................................................................................42
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
18.2.2 Event of Termination...........................................................................43
18.2.3 Instructions to Escrow Agent...................................................................43
19. Security Deposit...............................................................................43
20. Covenant Against Competition; Confidentiality..................................................43
20.1 Non-Competition................................................................................43
20.2 Seller's Confidentiality.......................................................................44
20.3 Buyer Confidentiality..........................................................................44
21. Miscellaneous..................................................................................45
21.1 Grace Period...................................................................................45
21.1.1 Default Grace Period...........................................................................45
21.1.2 FinalOrder Grace Period........................................................................45
21.2 Costs, Expenses, Etc...........................................................................45
21.3 Further Assurances.............................................................................45
21.4 Notice of Proceedings..........................................................................46
21.5 Bulk Sales Law.................................................................................46
21.6 Notices........................................................................................46
21.7 Headings and Entire Agreement; Amendment.......................................................47
21.8 Waiver.........................................................................................47
21.9 Binding Effect and Assignment..................................................................47
21.10 Counterparts...................................................................................48
21.11 Exhibits, Schedules and Attachments............................................................48
21.12 Rights Cumulative..............................................................................48
21.13 Governing Law..................................................................................48
21.14 Severability...................................................................................48
21.15 Third Party Rights.............................................................................48
21.16 Press Releases.................................................................................48
21.17 Specific Performance...........................................................................49
21.18 Right to Payments..............................................................................49
</TABLE>
(v)
<PAGE>
<TABLE>
<S> <C>
EXHIBITS
Exhibit A - Form of Deposit Escrow Agreement
Exhibit B - Form of Tower Lease
Exhibit C - Form of Proration Statement
Exhibit D - Form of Opinion of Counsel to Seller
Exhibit E - Form of Opinion of Buyer's Counsel
SCHEDULES
Schedule 1-A - Owned and Leased Real Property of WNGS
Schedule 1-B - Owned and Leased Tangible Personal Property of WNGS
Schedule 1-C - Network Affiliation Agreements and Other Contracts of WNGS
Schedule 1-D - Licenses, Permits and Authorizations of WNGS
Schedule 1-E - Franchises, Trademarks, Copyrights, etc. of WNGS
Schedule 1-F - Excluded WNGS Assets; Excluded Contracts
Schedule 4.1 - Broadcasting Assets Not Owned by Sellers
Schedule 4.3.2 - Consents
Schedule 4.5.1 - Real Estate Encumbrances
Schedule 4.5.2 - Personal Property Encumbrances
Schedule 4.5.3 - Sufficiency of Assets
Schedule 4.10 - WNGS Benefit Plans
Schedule 4.11 - Liabilities
Schedule 4.12 - Schedule of Litigation and Claims
Schedule 4.16 - Affiliated Transactions
Schedule 4.17 - Taxes
Schedule 4.18 - Environmental Disclosures
Schedule 4.19 - Employee Matters
Schedule 4.19.2 - Employees and Compensation
Schedule 4.20 - Cable Carriage
Schedule 4.21 - Insurance
Schedule 5.4 - Litigation
Schedule 6.1.21 - Unsatisfied Liabilities
</TABLE>
(i)
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, dated as of November 12, 1999, between GRANITE BROADCASTING
CORPORATION, a Delaware corporation ("Buyer"), and CAROLINE K. POWLEY
("Seller").
WITNESSETH:
WHEREAS, Seller owns and operates, under license from the Federal
Communications Commission (the "FCC"), television station WNGS, Channel 67,
Buffalo, New York and its auxiliary facilities ("WNGS"), including all of the
Broadcasting Assets (as hereinafter defined);
WHEREAS, Buyer desires to purchase all of the Broadcasting Assets from
Seller and to obtain from Seller assignment of all WNGS Licenses (as hereinafter
defined), and Seller desires to sell all of the Broadcasting Assets to Buyer and
to assign to Buyer all WNGS Licenses;
WHEREAS, concurrently with the execution of this Agreement, Buyer is
depositing in escrow a cash security deposit in the amount of $2,000,000 (the
"Deposit"), which escrow shall be governed by the terms and conditions of this
Agreement and the Deposit Escrow Agreement.
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the parties hereto hereby agree as
follows:
1. DEFINITIONS.
1.1. DEFINED TERMS. As used herein, the capitalized terms not otherwise
defined herein have the meanings set forth on APPENDIX A hereto.
1.2. ACCOUNTING TERMS. All terms of an accounting nature not
specifically defined herein shall have the respective meanings given to them
under GAAP.
1.3. OTHER DEFINITION PROVISIONS. The masculine form of words includes
the feminine and the neuter and vice versa, and, unless the context otherwise
requires, the singular form of words includes the plural and vice versa. The
words "herein," "hereof," "hereunder" and other words of similar import when
used in this Agreement refer to this Agreement as a whole, and not to any
particular section or subsection.
2. PURCHASE OF BROADCASTING ASSETS; PURCHASE PRICE.
2.1. PURCHASE OF BROADCASTING ASSETS. Subject to the terms upon
satisfaction of the conditions contained in this Agreement, at the Closing: (i)
Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase from Seller, the
<PAGE>
Broadcasting Assets; (ii) Seller shall assign and deliver to Buyer, and Buyer
shall accept assignment from Seller of, the WNGS Licenses; and (iii) Seller
shall transfer and deliver to Buyer, and Buyer shall assume, the Assumed
Obligations.
2.2. CONSIDERATION; ACCOUNTS RECEIVABLE; ALLOCATION OF PURCHASE PRICE.
2.2.1. PURCHASE PRICE. For and in full consideration of the
assignments, conveyances, and transfers described herein, at the Closing, Buyer
shall: (i) pay to Seller the sum of Twenty Three Million Dollars
($23,000,000.00) (the "Base Purchase Price"), subject to adjustment as provided
in Section 2.2.2 and 2.2.3 (as so adjusted the "Purchase Price"); and (ii)
assume the Assumed Obligations in accordance with Section 2.4 hereof.
2.2.2. PRORATIONS. The Purchase Price shall be increased or
decreased as required to effectuate the proration of expenses relating to the
operation of WNGS. All expenses arising solely from the operations of WNGS and
incurred by WNGS, including business and license fees, utility charges, real and
personal property taxes and assessments levied against the Broadcasting Assets,
property and equipment rentals, applicable copyright or other fees, sales and
service charges, employee compensation (including wages and salaries, accrued
sick leave, severance pay and personal days) and similar prepaid and deferred
items, shall be prorated between Seller and Buyer in accordance with the
principle that Seller shall be responsible for all expenses, costs and
liabilities allocable to the operations of WNGS for the period prior to and
including the Effective Time, and Buyer shall be responsible for all expenses,
costs and obligations allocable to the operations of WNGS for the period after
the Effective Time as determined in accordance with Section 2.2.3 below, subject
to the following:
(a) There shall be no adjustment for, and Seller shall be
solely liable with respect to, Liabilities and obligations under any Contracts
listed on SCHEDULE 1-F or under any WNGS Employee Plans.
(b) Payments due under film or programming license agreements
for the month in which the Closing occurs shall be prorated based on the number
of days in such month on or before the Effective Time and the number of days in
such month after and including the Effective Time.
(c) There shall be no adjustment for any difference between
the value of the goods or services to be received by Seller as of the Effective
Time under trade or barter agreements relating to WNGS and the value of any
advertising time
-2-
<PAGE>
remaining to be run by Seller as of the Effective Time under trade or barter
agreements relating to WNGS ("Trade Agreements"); PROVIDED, HOWEVER, that this
provision shall not apply to barter arrangements that do not arise under
programming Contracts or which pertain to goods or services to be retained by
Seller or her Affiliates after the Effective Date, which shall be prorated.
(d) Seller shall be responsible for (i) any overdue amounts
under film or programming license agreements to the extent relating to periods
prior to the Closing, and (ii) any payments that contractually have been
deferred but for which Seller or WNGS have already received the benefit of the
asset to which they relate prior to Closing.
2.2.3. MANNER OF DETERMINING PRORATIONS. The Purchase Price,
taking into account the adjustments and prorations outlined in Section 2.2.2,
shall be determined in accordance with the following procedures:
(a) PRORATED OBLIGATIONS. Seller shall, no later than five
(5) business days prior to the Closing Date, prepare a document (the "Proration
Statement"), a copy of the form of which is attached as EXHIBIT C, listing by
item, all of the expenses, costs, obligations and other Liabilities of WNGS of
the type identified in Section 2.2.2 that are attributable solely to the
operations of WNGS, either in whole or in part, during the period after the
Effective Time but either payable in advance prior to the Effective Time or in
arrears after the Effective Time ("Prorated Obligations"). For each Prorated
Obligation, there shall be listed (i) the amount of such Prorated Obligation
incurred by WNGS or attributable to operations of WNGS on or prior to the
Effective Time ("Pre-Closing Incurred Obligations") and (ii) the actual amount
paid by Seller with respect to such Prorated Obligation on or prior to the
Effective Time ("Pre-Closing Paid Obligations"). Notwithstanding anything to the
contrary contained herein, Prorated Obligations shall be expressly limited to
those items listed on EXHIBIT C and amounts listed on the Proration Statement,
with any obligations in excess of such amounts being Retained Liabilities.
(b) CLOSING ADJUSTMENT. The Base Purchase Price paid to
Seller shall be adjusted on an estimated basis in accordance with Section
2.2.3(a) at Closing (with a final adjustment to be completed in accordance with
Section 2.2.3(c) below): (i) upward dollar-for-dollar by the amount, if any, by
which Pre-Closing Paid Obligations exceed Pre-
-3-
<PAGE>
Closing Incurred Obligations; or (ii) downward dollar-for-dollar by the amount,
if any, by which, Pre-Closing Incurred Obligations exceed Pre-Closing Paid
Obligations.
(c) POST-CLOSING ADJUSTMENT.
(i) As promptly as possible after the Closing, but in
any event not later than forty-five (45) days after the Closing Date, Buyer
shall deliver to Seller a statement setting forth Buyer's determination of the
Purchase Price and the calculation thereof pursuant to Section 2.2.3(b). Buyer's
statement shall contain all information reasonably necessary to determine the
adjustments to the Purchase Price under Section 2.2.3(b), and such other
information as may be reasonably requested by Seller. If Seller disputes the
amount of the Purchase Price determined by Buyer, Seller shall deliver to Buyer
within thirty (30) days after its receipt of Buyer's statement a statement
setting forth Seller's determination of the amount of the Purchase Price. If
Seller notifies Buyer of its acceptance of Buyer's statement, or if Seller fails
to deliver its statement within the thirty-day period specified in the preceding
sentence, Buyer's determination of the Purchase Price shall be conclusive and
binding on the parties as of the last day of the thirty-day period.
(ii) Buyer and Seller shall use good faith efforts to
resolve any dispute involving the determination of the Purchase Price. If the
parties are unable to resolve the dispute within thirty (30) days following the
delivery of Seller's statement pursuant to Section 2.2.3(c)(i), Buyer and Seller
shall jointly designate an independent public accounting firm of national
stature that has not been employed by any party hereto for the two years
preceding the date of such designation, who shall be knowledgeable and
experienced in the operation of television broadcasting stations, to resolve the
dispute. This accounting firm's resolution of the dispute shall be final and
binding on the parties, and a judgment may be entered thereon in any court of
competent jurisdiction. Any fees of this firm shall be split equally between
Buyer and Seller.
2.2.4. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
as follows:
(a) PAYMENT OF ESTIMATED PURCHASE PRICE AT CLOSING. The Base
Purchase Price, adjusted by the estimated Closing adjustments pursuant to
Section 2.2.3(b), is referred to as the "Estimated Purchase Price," and shall be
paid to Seller by wire transfer,
-4-
<PAGE>
pursuant to wire transfer instructions delivered by Seller to Buyer at least 3
business days prior to the Closing, in immediately available funds, as follows:
(i) FROM BUYER. Buyer shall pay Seller the Estimated
Purchase Price, less the Deposit Amount.
(ii) FROM THE DEPOSIT ESCROW AGENT. The Deposit Escrow
Agent shall pay Seller the Deposit Amount.
(b) PAYMENTS TO REFLECT POST-CLOSING ADJUSTMENTS.
(i) If the Purchase Price as finally determined pursuant
to Section 2.2.3(c) exceeds the Estimated Purchase Price, Buyer shall pay to
Seller, in immediately available funds within five business days after the date
on which the Purchase Price is determined pursuant to Section 2.2.3(c), the
difference between the Purchase Price and the Estimated Purchase Price.
(ii) If the Purchase Price as finally determined
pursuant to Section 2.2.3(c) is less than the Estimated Purchase Price, Seller
shall pay to Buyer, in immediately available funds within five business days
after the date on which the Purchase Price is determined pursuant to Section
2.2.3(c), the difference between the Purchase Price and the Estimated Purchase
Price.
2.2.5. ALLOCATION OF PURCHASE PRICE/APPRAISAL. For the
purpose of determining the value of the Broadcasting Assets for Tax purposes, if
Buyer and Seller cannot reach a mutually acceptable agreement on allocation of
the Purchase Price, Buyer shall have the right to cause an appraisal (the
"Appraisal"), with expenses therefor to be borne by Buyer, of the Broadcasting
Assets, by a nationally known appraisal firm as Buyer and Seller mutually
designate, no later than twenty (20) days prior to the Closing Date. The
Appraisal shall comply in all respects with the applicable requirements of
Section 1060 of the Code and the regulations promulgated thereunder. Buyer and
Seller shall report the allocation of the Purchase Price consistently with the
Appraisal, to the extent permitted by law, on Internal Revenue Service Form
8594, which both parties shall cooperate in preparing and which both parties
will timely file with the Internal Revenue Service. If any taxing authority
makes or proposes an allocation of the Purchase Price which differs materially
from that contained in the Appraisal, Buyer and Seller shall each have the
right, at such party's election and expense, to contest such taxing authority's
determination.
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2.3. ACCOUNTS RECEIVABLE. As of the Closing Date, Seller appoints
Buyer, as Seller's agent without compensation but without Liability except for
willful misconduct, to collect the Accounts Receivable. Buyer shall account to
Seller, and remit to Seller, the amounts collected during the period in respect
of Accounts Receivable as follows: (i) on or before the twentieth (20th) day of
the second complete calendar month after the Closing Date, pay the amounts
collected up to the end of the previous month; and (ii) on or before the
twentieth (20th) day of each succeeding month, remit the amounts collected
during the month previous thereto. With each remittance, Buyer shall furnish a
statement of the amounts collected and the Persons from whom such amounts were
collected. Buyer shall, unless the remittance or an Accounts Receivable debtor
specifies otherwise, apply all amounts it receives from or for the benefit of
any Accounts Receivable debtor first to pay the oldest undisputed Accounts
Receivable of such debtor before applying any of such amounts to pay any
obligation of such debtor to Buyer arising during, or otherwise attributable to,
the period after the Effective Time.
Buyer's agency to collect the Accounts Receivable shall expire as of
midnight on the 120th day following the Closing Date. Within fifteen (15)
business days thereafter, Buyer shall remit to Agent the amounts collected from
the Closing Date until the date thereof that remain in Buyer's possession. Upon
expiration of the agency, Buyer shall turn over to Seller all documents and
records evidencing the Accounts Receivable which were paid to Seller hereunder
and which remain uncollected and Seller shall assume sole responsibility for
collection of any remaining Accounts Receivable. Buyer shall use commercially
reasonable collection efforts to collect the Accounts Receivable consistent with
its practice for collection of Accounts Receivable, but shall not be required to
institute any legal proceedings to collect the Accounts Receivable or to
otherwise incur any cost or obligations in respect thereof other than in the
ordinary course of business. Buyer shall remit all amounts collected during the
period of Buyer's agency to collect the Accounts Receivable to Seller without
any deductions for Taxes, agency, sales or other commissions, or employee
related costs and expenses (collectively, "Receivables Expenses"), and Seller
shall be responsible for, and shall indemnify Buyer against, all such
Receivables Expenses.
2.4. ASSUMPTION OF OBLIGATIONS.
2.4.1. LIMITATION ON OBLIGATIONS OF BUYER. Except for Assumed
Obligations, Buyer expressly does not, and shall not, assume or be deemed to
have assumed,
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under this Agreement or by reason of any transactions contemplated hereunder,
any Liabilities or obligations of WNGS, Seller or any of her Affiliates of any
nature whatsoever (including any Retained Liabilities).
2.4.2. ASSUMED OBLIGATIONS. Subject to the provisions of Section
2.4.3 below, the following obligations shall be the only obligations or other
Liabilities of Seller or WNGS assumed by Buyer at Closing (collectively, the
"Assumed Obligations"): (a) the obligations of Seller arising subsequent to, and
relating solely to, the operations of WNGS after the Effective Time, under, (i)
all Contracts included in the Broadcasting Assets and set forth on SCHEDULE 1-C
in effect as of the date hereof, and (ii) all Contracts, amendments, renewals
and other modifications thereof that are entered into by Seller in connection
with WNGS between the date hereof and the Closing as expressly permitted by and
subject to the terms of this Agreement; (b) any other Prorated Obligations which
accrued prior to the Effective Time to the extent that the Purchase Price has
been reduced therefor in accordance with Section 2.2 hereof; and (c) any other
Prorated Obligations which accrue after the Effective Time. It is understood and
agreed that Assumed Obligations shall not include trade or other accounts
payable (other than barter obligations remaining on Trade Agreements listed on
SCHEDULE 1-A), accrued payroll, employee sales commissions, payroll Taxes, or
unemployment Taxes, that are not Prorated Obligations, any obligations relating
to any funded or other indebtedness or under Employee Plans, collective
bargaining agreements, or any other Retained Liabilities.
2.4.3. SUBSTITUTION WHERE NOT TRANSFERABLE.
(a) If any transfer or assignment by Seller to, or any assumption
by Buyer of, any interest in, or Liability under, any Contract, requires the
consent of a third party, then such assignment or assumption shall be made
subject to such consent being obtained. Subject to subsection (b) below, to the
extent any Contract may not be assigned to Buyer by reason of the absence of any
such consent, Buyer shall not be required to assume any Assumed Obligations
arising under such Contract.
(b) If Seller shall be unable, or prior to the Closing, to obtain
a consent necessary for the assignment of its title to, interest in and rights
under any Contract to be assigned hereunder, then Seller and Buyer will
cooperate to enter into any lawful and reasonable arrangement reasonably
proposed by Buyer designed to provide Buyer with the economic claims, rights and
benefits under any such Contract, including enforcement at the cost
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and for the account of Seller of such rights. To the extent, and only to the
extent, Buyer is able to receive the economic claims, rights and benefits under
any such Contract, Buyer shall be responsible for the Assumed Obligations, if
any, arising under such Contract.
3. FCC AND RELATED MATTERS.
3.1. GRANT OF LICENSE. Seller shall take such action as is
necessary to obtain a grant of the License Application. Seller shall pay all
filing fees in connection with the License Application. Seller covenants to
Buyer that within thirty (30) days from the date hereof, the FCC shall have
granted the Modification Application and issued to Seller a construction permit
to construct the facilities specified in the Modification Application
("Modification Authorization").
3.2. APPLICATION AND REQUEST. On or prior to November 16, 1999, Buyer
and Seller shall file with the FCC complete and accurate applications requesting
the consent of the FCC to the assignment of the WNGS Licenses from Seller to
Buyer or its permitted assignee as contemplated herein (the "FCC Applications").
In addition, Seller shall cooperate with Buyer in the preparation and filing by
Seller of an application to modify the Modification Authorization, to relocate
the transmitter site to a location acceptable to Buyer in Colden, New York, with
technical parameters acceptable to Buyer (including, but not limited to, a
minimum transmitter power output of 5,000 kilowatts, a minimum height of antenna
radiation center above average terrain of 415 meters and transmitting antenna
beam tilt and other technical parameters equivalent to or greater than those
specified in the Modification Application), and further timely amend such
application at Buyer's request if necessary to obtain the Relocation
Authorization (as so amended, the "Relocation Application"). Seller shall also
cooperate with Buyer in the preparation and filing by Seller of an amendment to
the Initial DTV Application, to authorize digital operation of WNGS on channel
46 at a transmitter power output, transmitting antenna height and other
technical parameters equivalent to or greater than those specified in the
Modification Application, and further amend such application at Buyer's request
(as so amended the "DTV Application"). Such DTV Application shall request a
signal contour that enables WNGS to provide a dipole-adjusted DTV signal contour
equal to or greater than the Grade B signal contour proposed in the Modification
Application. The Relocation Application shall be filed within 10 business days
after FCC publication of notice of the grant of the Modification Application and
the DTV Application shall be filed on or prior to November 30, 1999. Buyer
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and Seller shall each pay one half of all FCC filing fees in connection with the
FCC Applications. Buyer shall pay all filing fees and other costs associated
with the Relocation Application and the DTV Application. Buyer and Seller shall,
with respect to the FCC Applications, the DTV Application and the Relocation
Application, diligently take, or cooperate in the taking of, all necessary,
desirable and proper actions, provide any additional information reasonably
required or requested by the FCC, and otherwise use commercially reasonable
efforts to prosecute the FCC Applications, the DTV Application and the
Relocation Application, and to obtain promptly the requested approval by the FCC
of the FCC Applications, the DTV Application and the Relocation Application.
Buyer and Seller shall oppose any petitions to deny or other objections filed
with respect to the FCC Applications, the DTV Application or the Relocation
Application; PROVIDED, HOWEVER, that neither Buyer nor Seller shall have any
obligation to participate in an evidentiary hearing on the FCC Applications, the
DTV Application or the Relocation Application. If either Seller or Buyer is
required by the FCC to participate in an evidentiary hearing on the FCC
Applications, the DTV Application or the Relocation Application or, if the FCC
Applications, the DTV Application or the Relocation Application are denied,
either Seller (only with respect to the FCC Applications) or Buyer, at its
option, by written notice of termination to the other party, may terminate this
Agreement without liability on the part of such party other than liability for
indemnification, if any, pursuant to Section 15 hereof; PROVIDED, HOWEVER, that
the terminating party may not so terminate this Agreement if it or any of its
Affiliates are in material default under any provision of this Agreement. At
Buyer's option, Buyer and Seller shall appeal or otherwise seek review of any
action of the FCC denying the FCC Applications, the DTV Application and the
Relocation Application, by filing an appropriate request for appeal or review
with the FCC or a court of competent jurisdiction, as the case may be. Buyer and
Seller shall use reasonable commercial efforts to obtain all necessary local
zoning and other approvals required to construct and operate the facilities
specified in the Relocation Application and the DTV Application. Notwithstanding
anything to the contrary contained herein, nothing in this Agreement shall
require any party hereto to make any payment to any Person who has filed a
Competing Application or any Affiliate of such Person, regardless of whether
such payment may enhance the chances of the FCC Consent being obtained.
3.3. FINAL ORDER. The consummation of the transactions
contemplated by this Agreement is conditioned upon: (a) the issuance by the FCC
(including, for purposes hereof,
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the FCC staff acting under delegated authority) of an order or other action
approving the (i) FCC Applications (the "FCC Consent"), and (ii) the Relocation
Application (the "Relocation Consent"), and compliance by the parties hereto
with the conditions imposed in said orders (provided that neither Buyer nor
Seller shall be required to accept or comply with any condition which would be
unreasonably burdensome or which would have a material adverse effect upon
WNGS); and (b) the FCC Consent and the Relocation Consent having become a Final
Order; PROVIDED, HOWEVER, that condition (b) may be waived, in whole or in part,
by written notice from Buyer to Seller at any time after an FCC Consent is
obtained from the FCC.
3.4. LOCAL OWNERSHIP RULES. The parties agree that Buyer's
acquisition of WNGS complies with Section 73.3555(b)(2) of the FCC's rules, 47
C.F.R. Section 73.3555(b), which becomes effective on November 16, 1999. The
parties acknowledge that one or more applications to assign FCC construction
permits or licenses for other television stations in the Buffalo Designated
Market Area may be filed with the FCC on November 16, 1999 ("Competing
Applications"). The parties further acknowle that if the FCC decides to process
any of the Competing Applications before the FCC Applications, the FCC may
dismiss, deny or return the FCC Applications or otherwise grant priority to a
Competing Application (each an "FCC Denial"). Notwithstanding any provision in
this Agreement to the contrary, (a) an FCC Denial shall not be deemed to be a
default under this Agreement by either party, and (b) either party shall have a
right to terminate the Agreement upon the occurrence of an FCC Denial.
4. REPRESENTATIONS AND WARRANTIES RELATING TO WNGS AND SELLER. Seller
represents and warrants to Buyer that, as of the date hereof:
4.1. ORGANIZATION AND STANDING. Seller has full power and
authority to own, lease and use the Broadcasting Assets and to conduct the
business and operations of WNGS as now being conducted and proposed to be
conducted under existing agreements and to perform the obligations required to
be performed by her hereunder and to consummate the transactions contemplated
hereby. None of the Broadcasting Assets are held by, and none of the business or
operations of WNGS are or have ever been conducted through, any corporation or
Person other than Seller, except as set forth on SCHEDULE 4.1 hereto (which
Schedule lists the names of any such corporation or Person). Seller shall
acquire title to all of the Broadcasting Assets, including the assets listed on
SCHEDULE 4.1 hereto, prior to Closing.
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4.2. AUTHORIZATION AND BINDING OBLIGATIONS. This Agreement and the
agreements, exhibits and other documents to be executed and delivered by Seller
pursuant hereto or in connection herewith have been duly and validly authorized
and, upon execution thereof, will be duly executed and delivered by Seller, and
constitute valid and binding agreements of Seller enforceable in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws relating to or affecting creditors' rights
generally and the exercise of judicial discretion in accordance with general
equitable principles.
4.3. NO CONTRAVENTION; CONSENTS.
4.3.1. NO CONTRAVENTION. The execution, delivery and
performance of this Agreement and the other documents to be executed in
connection herewith, the consummation of the transactions contemplated hereby
and thereby and the compliance with the provisions hereof and thereof by Seller
do not and will not, after the giving of notice, or the lapse of time, or
otherwise: (a) result in the breach of any of the terms of, constitute a default
under, conflict with, result in, or constitute grounds for, the termination or
alteration of, or result in the acceleration of the performance required by the
terms of, any agreement, arrangement, license, permit or other instrument to
which Seller or WNGS is a party or by which Seller, WNGS or any of their
property is bound or affected, or result in the creation of any Encumbrance upon
any of the assets of Seller or WNGS, including any of the Broadcasting Assets or
the WNGS Licenses; (b) violate, result in the breach of, or conflict with, any
laws, regulations, orders, writs, ordinances, injunctions, decrees, rules, or
judgments applicable to Seller, WNGS or any of their assets, including the
Communications Act.
4.3.2. CONSENT. Except as set forth in SCHEDULE 4.3.2, no
consent, waiver, authorization or approval from, or filing of any notice or
report with, any Governmental Authority or other Person is necessary in
connection with the execution, delivery or performance by Seller of this
Agreement or any of the documents or transactions contemplated hereby (with or
without the giving of notice, the lapse of time or both).
4.4. YEAR 2000. Seller is using all reasonable efforts to assure that
all material computer software used by WNGS in its business as currently
conducted and other applicable material technology used by WNGS in its business
as currently conducted will be able to operate consistently after December 31,
1999 to accurately process, provide and receive date data (including
calculating, comparing and sequencing) from, into and between the Twentieth
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and Twenty-First Centuries, including the years 1999 and 2000 and make leap-year
calculations. Seller believes that it is using all reasonable efforts to assure
that the Year 2000 date change will not adversely affect the systems and
facilities that support the operation of WNGS and its business as currently
conducted, except as could not reasonably be expected to have a Material Adverse
Effect on WNGS.
4.5. TITLE TO ASSETS.
4.5.1. REAL PROPERTY.
(a) Seller has good and marketable fee simple or leasehold
title to all of the real property Used in the operation of WNGS, free and clear
of all Encumbrances, except for and subject only to: (i) liens for real estate
and other taxes not yet due and payable; and (ii) those matters set forth in
SCHEDULE 4.5.1, including the leases listed thereon, none of which is violated
by existing structures or their use and none of which materially impairs or
pursuant to its terms would materially impair the present operations of WNGS or
the present use of such property.
(b) SCHEDULE 1-A sets forth and accurately describes: (i) all
real estate Used in the operation of WNGS; and (ii) the nature of the right,
title or interest Seller has in such real estate. There are no leases,
tenancies, licenses or other rights of occupancy or use for any portion of such
real property or any assignments or sublets thereunder other than as set forth
on SCHEDULE 1-A.
4.5.2. PERSONAL PROPERTY. Seller has good and marketable title to
all tangible personal property included in the Broadcasting Assets, in each case
free and clear of all Encumbrances, except for and subject only to: (a) liens
for taxes not yet due or payable; and (b) the liens set forth in SCHEDULE 4.5.2.
4.5.3. ASSETS SUFFICIENT. Except as set forth on SCHEDULE 4.5.3,
the Broadcasting Assets include all assets that are Used in, and/or necessary to
conduct the business and operations of WNGS as presently conducted.
4.5.4. CONDEMNATION. There is no pending, or to the best of
Seller's knowledge, threatened, condemnation or eminent domain proceeding
affecting any portion of the Tower Property.
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4.5.5. PERMITS. Seller possesses all licenses, permits,
authorizations, approvals, non-residential use permits and all other approvals
necessary for the current use and operation of the Tower.
4.5.6. ACCESS. All means of access to the Tower: (a) are permanent
and no special access or other permits from the applicable Governmental
Authorities are required to operate and maintain such means of access; and (b)
are obtained from public streets, sidewalks, alleys or other public space
without the need for easements, rights-of-way, or licenses, or across lands or
premises not owned by Seller.
4.6. CONDITION OF ASSETS. The Broadcasting Assets and the Tower are in
Seller's possession and in good operating condition and repair, ordinary wear
and tear excepted and are suitable for the uses and purposes for which they are
being used or intended. To the best of Seller's knowledge, the broadcasting
transmission tower(s) used by WNGS (the "Tower") is properly anchored and
secured, is structurally sound and is in conformance in all respects with
generally accepted engineering standards of the television broadcasting industry
applicable to transmission towers and all applicable laws (including zoning,
land use and FAA marking and lighting requirements).
4.7. LICENSES AND AUTHORIZATIONS.
4.7.1. LICENSES. SCHEDULE 1-D hereto contains a true and complete
list of all WNGS Licenses, and all other licenses, permits and authorizations
issued under federal (including the Communications Act), state or local law of
Seller or WNGS. Seller is the authorized and legal holder of all of the
foregoing.
4.7.2. PENDING APPLICATIONS.
(a) Seller has pending before the FCC an application for a
license to cover the construction permit for WNGS's operations (FCC File No.
BLCT-970303KE) (the "License Application"). Seller presently is validly
operating WNGS pursuant to program test authority pending FCC action on the
License Application. The License Application complies in all material respects
with the Communications Act and Seller has no reason to believe, after due
inquiry (including but not limited to consultation with FCC counsel and
engineering consultants) that the License Application will not be granted by the
FCC within sixty (60) days from the date hereof.
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(b) Seller has pending before the FCC an application for a
construction permit to modify the facilities of WNGS filed on April 7, 1998, and
amended on May 8, 1998 and February 18, 1999 (FCC File No. BPCT-980407KF) (the
"Modification Application"). The Modification Application complies in all
material respects with the Communications Act and Seller has no reason to
believe, after due inquiry (including but not limited to consultation with FCC
counsel and engineering consultants) that the Modification Application, the
Relocation Application and the DTV Application will not be granted in the
ordinary course by the FCC.
4.7.3. AUTHORIZATIONS. The WNGS Licenses and all other items
identified in Section 4.7.1 were (and upon the grant of the License Application,
the License issued pursuant thereto shall be) validly issued, are (and upon the
grant of the License Application, the License issued pursuant thereto shall be)
valid and in full force and effect, and have been (and upon the grant of the
License Application, the License issued pursuant thereto shall be) complied with
in all material respects. No FCC investigation, notice of investigation, notice
of apparent liability, order of forfeiture, violation, notice of apparent
violation, order, complaint, action or other proceeding is (and upon the
issuance of the License Application, shall be) pending or, to the knowledge of
Seller, threatened before the FCC or any other Governmental Authority to revoke,
refuse to renew or modify such FCC licenses or other authorizations or which
could in any manner threaten or adversely affect the WNGS Licenses or WNGS's
operations as presently conducted or which otherwise relate to WNGS. No event
has occurred (and upon issuance of the License Application, no event shall have
occurred) that permits, or after notice or lapse of time would permit, the
revocation or termination of the WNGS Licenses or such other authorizations or
the imposition of any restriction thereon of such a nature as may materially
limit the business or operations of WNGS as now conducted. Seller has no reason
to believe that the WNGS Licenses will not be renewed in the ordinary course.
4.8. CONTRACTS. SCHEDULES 1-C, 1-F AND 4.10 hereto, contain a true and
complete list of all contracts, leases, national and local advertising
representation agreements, employment agreements, programming contracts and
other agreements and commitments of every nature as of the date hereof, written
or otherwise, constituting part of the Broadcasting Assets or otherwise relating
to WNGS (collectively the "Contracts"). Neither Seller, WNGS, nor, to the best
of the knowledge of Seller, any other party to the Contracts, is now, or shall
be as
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of the Closing, in material default under any of the Contracts, and no event,
occurrence or condition exists which with the giving of notice, lapse of time,
or both, or the happening of any further event or condition, would become a
material default thereunder. Neither Seller nor WNGS has released or waived (by
action or inaction) any of its material rights under any of the Contracts. All
such Contracts are in full force and effect and valid and binding and
enforceable against the parties thereto in accordance with their terms, except
as such enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws relating to or affecting creditors' rights generally. Neither Seller
nor WNGS has assigned any of its rights under any of the Contracts or is in any
way restricted from enforcing its rights thereunder. True and complete copies of
all Contracts (or accurate descriptions of any verbal Contracts) and all
amendments and modifications thereto have been delivered or made available to
Buyer. Seller has not amended, or otherwise altered the payment terms of or
under, any Contract.
4.9. FRANCHISES, TRADEMARKS AND TRADE NAMES. All franchises,
trademarks, patents, tradenames, intellectual property rights and interests,
service marks, know-how, call letters, telephone numbers, copyrights in literary
property of any kind, jingles and privileges Used in the operations of WNGS are
set forth on SCHEDULE 1-E hereto, are owned by Seller or licensed for her use
and are valid and in full force and effect. To the knowledge of Seller, the
ownership and operation of WNGS and the other assets utilized in connection with
its business and operations, as presently owned and operated, do not infringe
upon or conflict in any respect with any franchise, patent, trademark,
tradename, service mark, brand name, copyright or other intellectual property
rights or interests of any other Person and no other Person is infringing upon
any such rights of Seller or WNGS.
4.10. ERISA. Except as set forth on SCHEDULE 4.10 hereto, neither
Seller nor any entity which is considered one employer with Seller under Section
4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate") contributes or
has ever contributed to, maintains or has ever maintained, or has any liability
(whether contingent or otherwise) with respect to, any plan, program, policy,
payroll practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock
related awards, fringe benefits, change in control, deferred compensation or
other employee benefits of any kind, whether formal or informal, funded or
unfunded, written or oral and whether or not legally binding, including, without
limitation, each "employee benefit plan," within the meaning of
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Section 3(3) of ERISA and each "multiemployer plan" within the meaning of
Sections 3(37) or 4001(a)(3) of ERISA (any such plan or arrangement, an
"Employee Plan"), maintained or contributed to on behalf of, or for the benefit
of, any current or former employee, consultant, service provider or director of
the Seller or any ERISA Affiliate (any such plan or other arrangement, a "WNGS
Benefit Plan"). Each WNGS Benefit Plan has been maintained and is in substantial
compliance with all applicable law, including ERISA, the Code and the New York
Insurance Code.
4.11. LIABILITIES. Except as set forth on SCHEDULE 4.11, there are no
Liabilities or any unrealized or anticipated losses or expenses relating to or
affecting WNGS or any of the Broadcasting Assets.
4.12. LITIGATION; VIOLATIONS.
4.12.1. LITIGATION. Except for administrative rulemaking or other
proceedings of general applicability to the broadcast industry and except as set
forth in SCHEDULE 4.12: (a) there is no civil, criminal or administrative
action, suit, demand, claim, hearing, litigation, action, arbitration,
proceeding or investigation of any nature pending or, to the best of Seller's
knowledge, threatened against or relating to Seller or any of her Affiliates
relating to or affecting WNGS, WNGS, the Broadcasting Assets or the transactions
contemplated hereby or affecting the same; (b) no writ, injunction, judgment,
award, order or decree has been rendered or is pending against or, to the best
of Seller's knowledge, threatened against affecting Seller or any of its
Affiliates relating to or affecting WNGS, WNGS, the Broadcasting Assets or the
transactions contemplated hereby; and (c) to the best of Seller's knowledge,
there is no basis for any of the foregoing set forth in (a) and (b) above.
4.12.2. VIOLATIONS. Neither Seller nor its Affiliates has violated
or is in default under any order, law, rule, regulation, ordinance, policy,
judgment, writ or decree of any court or other Governmental Authority in any
respect which might materially adversely affect the business, operations,
prospects or condition, financial or otherwise, of WNGS, any of the WNGS
Licenses, the Broadcasting Assets or the transactions contemplated hereby.
4.13. DTV. WNGS has been assigned Channel 46 by the FCC for the
provision of digital television service. Such assignment has not been vacated,
reversed, stayed, set aside, annulled or suspended, is not the subject of any
pending timely appeal, request for stay, or petition for rehearing,
reconsideration or review by any Person or by the FCC on its motion,
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and the time for filing any appeal, request, petition, or similar document or
for the reconsideration or review by the FCC on its own motion has expired.
Seller has filed an application with the FCC for a construction permit to
implement WNGS's digital television allotment (the "Initial DTV Application").
4.14. REPORTS. All returns, notices, reports, statements or other
filings currently required to be filed by Seller or any of its Affiliates with
the FCC, and all material returns, notices, reports, statements or other filings
currently required to be filed by Seller or any of its Affiliates (relating to
or affecting WNGS) with any other federal, state, or local Governmental
Authority, have been filed and complied with and shall continue to be filed and
be in compliance on a current basis until the Closing Date. All such reports,
returns and statements are (or will be, in the case of future reports) complete
and correct.
4.15. NO MISLEADING STATEMENTS. No representation or warranty made by
Seller in this Agreement (without reference to any "materiality," qualifying or
limiting language set forth therein), and no statement made in any schedule,
exhibit, certificate or other document furnished pursuant to this Agreement,
contains any untrue statement of a material fact or omits or fails to state any
material fact or information necessary to make such representation or warranty
or any such statement not materially misleading.
4.16. AFFILIATED AND RECENT TRANSACTIONS. Except as described on
SCHEDULE 4.16, neither Seller nor any of its Affiliates is a party to any
transaction relating to or affecting WNGS (each an "Affiliated Transaction").
4.17. TAXES.
4.17.1. FILING OF TAX RETURNS. Seller and her Tax Affiliates have
timely filed with the appropriate taxing authorities all federal, state, local
and foreign returns (including, without limitation, information returns and
other material information) in respect of all Taxes required to be filed through
the date hereof. All such income tax returns were complete and accurate in all
material respects. Except as specified in SCHEDULE 4.17, no returns are subject
to an automatic extension and, in addition, neither Seller nor any of her Tax
Affiliates have requested any extension of time within which to file returns
(including, without limitation, information returns) in respect of any Taxes.
4.17.2. PAYMENT OF TAXES. Seller and her Tax Affiliates have
accurately computed and timely paid all Taxes of any kind that have become due
and payable.
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4.17.3. AUDITS. Except as set forth in SCHEDULE 4.17, no material
deficiencies for Taxes have been claimed, proposed, or assessed by any taxing or
other Governmental Authority against Seller or any of her Tax Affiliates. Except
as set forth in SCHEDULE 4.17, there are no pending or, to the best knowledge of
Seller, threatened audits, investigations or claims for or relating to any
material Liability in respect of Taxes, and there are no matters under
discussion with any Governmental Authorities with respect to Taxes that, in the
reasonable judgment of Seller or her counsel, are likely to result in a material
additional amount of Taxes. Audits of federal, state, and local returns for
Seller and her Tax Affiliates for Taxes by the relevant taxing authorities have
been completed for each period set forth in SCHEDULE 4.17 and, except as set
forth in such schedule, Seller and her Tax Affiliates have not been notified
that any taxing authority intends to audit a return for any other period. Except
as set forth in SCHEDULE 4.17, no extension of a statute of limitations relating
to Taxes is in effect with respect to Seller and her Tax Affiliates. No claim
has ever been made by an authority in a jurisdiction where Seller and her Tax
Affiliates do not file Tax Returns that any of them is or may be subject to
taxation by that jurisdiction.
4.17.4. SOLE PROPRIETORSHIP. Except as set forth on SCHEDULE 4.1
hereto, Seller, at all times, has owned and operated WNGS and the Broadcasting
Assets as a sole proprietorship and has been treated as such for federal income
tax purposes.
4.18. ENVIRONMENTAL MATTERS.
4.18.1. USTS. Except as described on SCHEDULE 4.18, no
underground storage tanks ("USTs"), as defined in RCRA, 42 U.S.C.
Section 6991(1), or applicable state law, exist or, to the best of Seller's
knowledge, has ever existed on, under, in or about any of the Relevant
Property.
4.18.2. STUDIES; INVESTIGATIONS. SCHEDULE 4.18 sets forth
all environmental investigations, studies, audits, tests, reviews or other
analyses conducted by, or which are in the possession of, Seller, or of which
Seller is aware, in relation to any Relevant Property, all of which have been
delivered to Buyer prior to the execution of this Agreement.
4.18.3. RELEVANT PROPERTY. For purposes of this Agreement,
Relevant Property shall mean all real property and equipment owned, leased,
occupied, controlled or used by WNGS and all real property and equipment
formerly owned, occupied or used by WNGS or used by WNGS.
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4.19. LABOR.
4.19.1. LABOR PROBLEMS. Except as set forth on SCHEDULE
4.19, there are no and, during the three year period immediately preceding the
date hereof, there have been no, strikes, work stoppages, grievance proceedings,
labor grievances, labor controversies or union organization efforts or, to the
knowledge of Seller, have any been threatened between WNGS, Seller or any of her
Affiliates (with respect to WNGS) and any of their employees or agents or any
union or collective bargaining unit. Except as set forth on SCHEDULE 4.19.2,
neither Seller nor WNGS is a party to any written or oral agreement, consent
decree or court order, and there is no employment manual, employment handbook or
employment practice or policy governing the employment of any of the employees
of Seller or WNGS under which such employment is not terminable on 30 days' (or
less) notice by Seller without penalty or Liability to WNGS, Seller or Buyer.
4.19.2. EMPLOYEES AND COMPENSATION. SCHEDULE 4.19 contains a
true, correct and complete list of all employees of WNGS and Seller, including
those currently engaged (or at any time during the sixty (60) days prior to the
date hereof engaged) in the business and operations of WNGS (the "WNGS
Employees"), which employees are separately identified on such Schedule, and a
description of all compensation arrangements affecting all of the scheduled
employees.
4.20. CABLE CARRIAGE. SCHEDULE 4.20 sets forth:
(a) a list of all U.S. cable television systems
which carry WNGS's signal (including the channel position), other than those
which have fewer than 300 subscribers;
(b) a list of all Market Cable Systems to which
WNGS has provided a must-carry notice or retransmission consent notice in
accordance with the provisions of the Cable Television Consumer Protection
and Competition Act of 1992, as amended, and the applicable FCC regulations
(collectively, the "Cable Act Requirements") for the three-year period ending
2002, and a list of all Market Cable Systems to which WNGS has not provided
any such must-carry or retransmission consent notice;
(c) a list of all retransmission consent and/or
copyright indemnification agreements entered into by Seller with respect to
WNGS for the three-year period ending 2002;
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(d) a list, to Seller's knowledge, of all Market
Cable Systems to which WNGS has provided a must-carry notice, for the
three-year period ending 2002, which have given notice to Seller or WNGS of
such Market Cable System's intention not to carry WNGS or to delete WNGS from
carriage or to change WNGS's channel position on such cable system, other
than pursuant to any agreement described in clause (c) above;
(e) a list, to Seller's knowledge, of all notices
received during the three-year periods ending 1999 and 2002, respectively,
from any Market Cable System alleging that WNGS does not deliver an adequate
signal level, as defined in 47 C.F.R. Section 76.55(c)(3), to such Market Cable
System's principal headend (other than any such notice as to which such
failure has been remedied or been determined not to exist), and a list of all
further correspondence with or from any such Market Cable System relating to
such notice;
(f) a list, to Seller's knowledge, of all pending
petitions for special relief filed by Seller with the FCC to include any
additional community or area as part of WNGS's television market, as defined
in 47 C.F.R. Section 76.55(e); and
(g) a list of all pending petitions for special
relief filed by, or served upon, Seller with the FCC requesting the deletion
of any community or area from WNGS's television market.
Seller has delivered to Buyer true and correct copies of all material
notices, agreements, correspondence, petitions and other items described in
clauses (c) - (g) of this Section 4.20 that are in Seller's possession.
4.21. INSURANCE. SCHEDULE 4.21 is a true and complete list as of
the date of this Agreement of all insurance policies that insure any part of the
Broadcasting Assets or the business or operation of WNGS. All policies of
insurance listed in SCHEDULE 4.21 are in full force and effect and no notice of
cancellation has been received with respect to any such policy.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to Seller that:
5.1. ORGANIZATION AND STANDING. Buyer: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) has full corporate power and authority to own its properties and
to transact the business in which it is currently engaged and to perform the
obligations required to be performed by it hereunder and to consummate the
transactions contemplated hereby; and (c) is duly qualified to do business and
in
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good standing as a foreign corporation in every jurisdiction in which the nature
of the business to be conducted by it requires such qualification, except where
the failure to so qualify would not materially adversely affect the transactions
contemplated hereby.
5.2. AUTHORIZATION AND BINDING OBLIGATIONS. The execution,
delivery and performance of this Agreement and the agreements, exhibits and
other documents to be executed and delivered by Buyer pursuant hereto have been
duly and validly authorized and, upon execution thereof, will be duly executed
and delivered by Buyer and constitute valid and binding agreements of Buyer
enforceable in accordance with their terms except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or other laws relating to or
affecting creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles.
5.3. NO CONTRAVENTION. The execution, delivery and performance of
this Agreement and the other documents to be executed in connection herewith,
the consummation of the transactions contemplated hereby and thereby in
accordance with the terms and conditions hereof and thereof and the compliance
with the provisions hereof and thereof by Buyer do not and will not, after the
giving of notice, or the lapse of time, or otherwise: (a) conflict with or
violate any provisions of the Certificate of Incorporation or Bylaws of Buyer;
(b) result in the breach of, conflict with, or constitute a default under, the
provisions of any agreement or other instrument to which Buyer is a party or by
which the property of Buyer is bound or affected; or (c) violate or conflict
with any laws, regulations, orders, writs, decrees, injunctions or judgments
applicable to Buyer, including the Communications Act.
5.4. LITIGATION. As of the date hereof, except for administrative
rulemaking or other proceedings of general applicability to the broadcast
industry or as set forth on SCHEDULE 5.4, there is no civil, criminal or
administrative action, suit, demand, claim, litigation, action, proceeding or
investigation of any nature pending or, to the best of Buyer's knowledge,
threatened against or affecting Buyer that would adversely affect its or, if
Buyer assigns its rights hereunder to a permitted assignee, its permitted
assignee's ability to consummate the transactions contemplated in this
Agreement.
5.5. NO MISLEADING STATEMENTS. No representation or warranty made
by Buyer in this Agreement (without reference to any "materiality," qualifying
or limiting language set forth therein), and no statement made in any schedule,
exhibit, certificate or other document
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furnished pursuant to this Agreement, contains any untrue statement of a
material fact or omits or fails to state any material fact or information
necessary to make such representation or warranty or any such statement not
materially misleading.
6. CONDUCT PENDING CLOSING.
6.1. SELLER'S COVENANTS. Seller covenants and agrees that
pending the Closing, except with the prior written consent of Buyer:
6.1.1. CONDUCT OF BUSINESS. Subject to the provisions of
this Agreement, Seller shall conduct its business and operations in the normal
and ordinary course of business in substantially the same manner as heretofore
conducted and shall use all reasonable efforts consistent with normal business
practices to preserve and promote such business and to avoid any act which might
have a Material Adverse Effect.
6.1.2. ASSETS. Consistent with normal business practices,
Seller shall maintain the Broadcasting Assets in the condition specified in
Section 4.6 hereof.
6.1.3. EMPLOYEE COMPENSATION AND BENEFITS. Seller shall not
increase the compensation, expense allowance or other benefits payable or to
become payable to any of the WNGS Employees or pay or arrange to pay any bonus
payment to any such employee; PROVIDED, HOWEVER, that, Seller shall be permitted
to grant bonuses and increases in compensation in the normal and ordinary course
of business consistent with past practices if, in the case of a bonus, such
bonus is paid in full prior to Closing and Buyer shall not have any obligation
with respect thereto after Closing.
6.1.4. ORGANIZATION, ETC. Consistent with normal business
practices, Seller shall use commercially reasonable efforts to: (a) maintain the
present quality of the operations of WNGS; (b) preserve the value of WNGS as a
going concern; (c) keep available to WNGS the services of all current WNGS
Employees and make available for employment by Buyer all current WNGS Employees;
and (d) preserve for WNGS the existing relationships with employees, suppliers,
customers, advertisers and their agencies and others having business with WNGS,
including notifying advertisers of the pending sale of the Broadcasting Assets
and providing Buyer with access to WNGS's advertisers to aid in the transition
of ownership of WNGS.
6.1.5. INSURANCE. Seller shall cause to be maintained in
effect until the Closing adequate property damage, Liability and other insurance
with respect to its assets,
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including the Broadcasting Assets and WNGS, the list of the policies governing
which are set forth on SCHEDULE 4.21.
6.1.6. TRANSFER OF BROADCASTING ASSETS. Seller shall not
sell, assign, lease or otherwise transfer or dispose of any of the Broadcasting
Assets, except where such disposition is in the ordinary course of business and
the assets involved are either: (a) no longer used or useful; or (b) replaced
with a substantially equivalent asset of substantially equivalent kind,
condition and value.
6.1.7. [RESERVED]
6.1.8. LITIGATION. Seller shall notify Buyer: (a) of any
litigation pending or, to its knowledge, threatened against or affecting WNGS or
Seller or which challenges or seeks any damages or other payments in connection
with the transactions contemplated hereby; and (b) of any material damage to or
destruction of the Broadcasting Assets.
6.1.9. AGREEMENTS. Seller and WNGS shall perform all
obligations (including, without limitation, all payment obligations) required to
be performed by them under all Contracts, and shall not amend or terminate any
Contract or series of related Contracts or other obligations (or waive any
material right thereunder) or enter into any new agreements or arrangements or
series of related Contracts involving payments of or other obligations over
$5,000 which might be binding on or affect WNGS or Buyer after Closing. Except
as required by law, Seller shall not enter into any collective bargaining
agreement, network affiliation agreement, employment agreement (other than an
employment agreement terminable at will), agreement restricting the operation of
WNGS or Benefit Plan or any amendment, extension or other modification of any
existing employment agreement or network affiliation agreement.
6.1.10. CONSENTS AND APPROVALS. Seller will, prior to the
Closing Date, use its best efforts to obtain or cause to be obtained: (a)
consents under the Contracts (without any change in the terms and conditions of
any such Contracts that could have an adverse affect on Buyer or the operations
of WNGS) which require the consent of any Person by reason of the transactions
provided for or contemplated in this Agreement; and (b) any other consents,
approvals, waivers, authorizations (without any conditions attached that could
have an adverse affect on Buyer, or the operations of WNGS) and make all
necessary filings identified on
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SCHEDULE 4.3.2 hereof. Each party shall cooperate with the other to obtain any
such consents or approvals.
6.1.11. LICENSES. Except as provided in Section 6.3 hereof,
Seller shall not, by any act or omission to act within its reasonable knowledge
and power, surrender, modify, adversely affect or forfeit any of the WNGS
Licenses or cause the FCC to institute any proceedings for the cancellation,
non-renewal or modification of any of the WNGS Licenses.
6.1.12. OFFERS TO PURCHASE. Neither Seller, nor any of its
officers, directors, employees, agents, representatives or Affiliates shall,
either directly or indirectly, entertain or conduct discussions or negotiations
with any Person with respect to any offer or proposal for the, direct or
indirect, purchase or sale of any portion of the assets or interests of Seller
or WNGS, or with respect to any financing, merger, acquisition, combination,
consolidation or similar transaction involving Seller, WNGS or any significant
assets or business of WNGS, or enter into any agreement or transaction relating
to any of the foregoing.
6.1.13. NO BREACH OF REPRESENTATIONS AND WARRANTIES. Seller
shall not take any action or pursue any other course of conduct, or fail to take
any action, that would cause any of the representations and warranties made by
Seller in this Agreement (or any document delivered in connection herewith) to
be materially untrue, incorrect or inaccurate.
6.1.14. EMPLOYEE NOTIFICATION REQUIREMENTS.
(a) NOTICE. Seller shall provide timely notice to
her employees pursuant to the Worker Adjustment and Retraining Notification
Act, 29 U.S.C.ss.ss.2102-09, if applicable.
(b) AUTHORITY. Seller shall immediately notify the
Buyer of any activity by any labor organization at WNGS or any activity by
any labor organization directed at organizing the employees or any group of
employees of WNGS.
6.1.15. COMPLIANCE WITH LAWS. Seller shall comply with all
laws, rules and regulations applicable or relating to Seller, WNGS and the
business, operations and assets of Seller, including the Broadcasting Assets.
6.1.16. [RESERVED].
6.1.17. NO VIOLATIONS. Seller shall take all reasonable
actions to prevent, and Seller shall not take any action that would cause, a
breach of this Agreement.
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6.1.18. ACCESS AND INFORMATION. Seller shall give Buyer and
its counsel, accountants, engineers, investment bankers, potential lenders and
other authorized representatives reasonable access upon reasonable advance
notice during normal business hours throughout the period prior to the Closing
Date, to all of WNGS's and Seller's books, records (including all employee
files), agreements, reports, and other documents and all of the Broadcasting
Assets and shall furnish Buyer, its counsel, accountants, engineers, investment
bankers, potential lenders and other authorized representatives during such
period with all information concerning the affairs of Seller and WNGS as they
may reasonably request in order to enable Buyer to make such examinations and
investigations thereof as it shall deem necessary, and Seller will make
employees, attorneys, agents and accountants available to discuss with Buyer and
its representatives such aspects of the business and operations of WNGS and
Seller as Buyer may require (it being understood that the foregoing shall
include such access as Buyer may reasonably require to the management of WNGS to
enable Buyer to obtain information about the WNGS Employees that Buyer may elect
to retain in connection with the transactions contemplated hereby).
6.1.19. DELIVERY OF SUPPLEMENT. Seller shall deliver to
Buyer a supplement to the Schedules to this Agreement promptly after she becomes
aware of any event that changes any representation or warranty made by Seller in
this Agreement or any statement made in any of Seller's Schedules or in any
supplement; PROVIDED, HOWEVER, nothing contained in any supplement shall be
deemed to modify, amend or supplement said representations or warranties for
purposes of Section 4 of this Agreement unless Buyer shall have consented
specifically thereto in writing.
6.1.20. FILM CONTRACTS. Subject to the provision of Section
2.2.2(c), Seller shall, at or prior to Closing, satisfy in full any and all
payment and other obligations under: (a) all film and other programming
Contracts that have become or are due and payable at or prior to the Closing
Date without regard to any extension of time for payment therefrom; and (b) any
Contract that is not included in the Broadcasting Assets.
6.1.21. SATISFACTION OF FUNDED DEBT AND PRE-CLOSING
LIABILITIES; REMOVAL OF ENCUMBRANCES.
(a) Except as set forth on SCHEDULE 6.1.21 hereto,
Seller shall, prior to Closing, pay off or otherwise satisfy, fully and
completely, any and all of the
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Liabilities and other obligations arising out of events occurring on or prior to
the Closing relating to or affecting WNGS or the Broadcasting Assets, other than
Assumed Obligations;
(b) Seller shall, prior to Closing, have removed any
and all Encumbrances of any kind and nature from the Broadcasting Assets and the
WNGS Licenses other than Permitted Encumbrances; and
(c) Seller shall, prior to Closing, have terminated
any Affiliated Transaction without any further cost or Liability to Buyer.
6.2. BUYER'S COVENANTS. Buyer covenants and agrees that
prior to Closing:
6.2.1. ORGANIZATION, ETC. Consistent with normal business
practices, Buyer shall use its reasonable best efforts to prevent any change in
its business organization or financial capacity that would materially impair its
ability to consummate the transactions contemplated hereby.
6.2.2. LITIGATION. Buyer shall notify Seller: (a) of any
litigation pending or, to its knowledge, threatened against or affecting Buyer
or which challenges or seeks any damages or other payments in connection with
the transactions contemplated hereby; and (b) any change that would adversely
affect its ability to own the WNGS Licenses.
6.2.3. NO BREACH OF REPRESENTATIONS AND WARRANTIES. Buyer
shall not take any action or pursue any other course of conduct, or fail to
take any action, that would cause any of the representations and warranties
made by the Buyer in this Agreement to be materially untrue, incorrect or
inaccurate.
6.2.4. NO VIOLATIONS. Buyer shall take all reasonable
actions to prevent, and Buyer shall not take any action that would cause, a
breach of this Agreement.
6.3. [RESERVED].
6.4. DUE DILIGENCE. Buyer may terminate this Agreement at
any time prior to January 5, 2000 if Buyer is not satisfied with its due
diligence review of the business, operations and affairs of WNGS.
Notwithstanding and without limiting the foregoing, Buyer may terminate this
Agreement at any time prior to January 15, 2000, if Buyer is not satisfied that
it will obtain necessary authorizations for, or be able to commence in a timely
manner, digital operations of WNGS on channel 46 at a transmitter site and with
transmitter power output, transmitting antenna height and other technical
parameters satisfactory to Buyer.
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7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.
7.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER. The
obligations of the Buyer under this Agreement are subject, at the Buyer's
option, to the satisfaction on or prior to the Closing Date of each of the
following express conditions precedent:
7.1.1. FCC. The conditions specified in Section 3.3
hereof shall have been met and the FCC shall have granted the License
Application (in form reasonably satisfactory to Buyer), which grant shall not
have been vacated, reversed, stayed, enjoined, set aside, annulled or
suspended, shall not be subject to any pending timely appeal, request for
stay, request or petition for rehearing, reconsideration or review by any
Person or by the FCC on its motion and the time for filing any appeal,
request, petition, or similar document or for the reconsideration or review
by the FCC on its own motion shall have expired.
7.1.2. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Seller contained in this Agreement (and in
any document delivered in connection herewith) shall be true and correct in
all respects when made and at and as of the Closing Date as though made at
and as of that time (without regard to any "materiality," "knowledge," or
"awareness" limiting or qualifying language stated therein), except to the
extent the failure to be true and correct, in the aggregate, would not or
could not reasonably be expected to have a Material Adverse Effect, and Buyer
shall have received a certificate, executed by Seller, repeating, as of the
Closing Date, all such representations and warranties.
7.1.3. COMPLIANCE WITH AGREEMENT. Seller shall have
performed and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by her prior to or on the Closing Date.
7.1.4. NO OBSTRUCTIVE PROCEEDING.
(a) NO LITIGATION. No action, suit,
investigation, or proceeding shall have been instituted or be pending against
or affecting any of the parties to this Agreement or any of their Affiliates
before any court or any other Governmental Authority to restrain or prohibit,
or to obtain substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated hereby, which may reasonably be
expected to result in a preliminary or permanent injunction against
consummating the transactions contemplated hereby or, if the transactions
contemplated hereby were consummated, an order to nullify or render
ineffective this Agreement or such transactions, or the recovery against Buyer
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of substantial damages or otherwise have a material adverse effect on Buyer, the
business or operations of WNGS or the Broadcasting Assets;
(b) NO GOVERNMENTAL INTERVENTION. None of the
parties to this Agreement or their Affiliates shall have received written
notice from any Governmental Authority of: (i) its intention to institute any
action or proceeding to restrain or enjoin or nullify or render ineffective
this Agreement or the transactions contemplated hereby if consummated, or
commence any investigation into the consummation of this Agreement or the
transactions contemplated hereby; or (ii the actual commencement of such an
investigation;
(c) NO ORDER. No order, decree or judgment of any
Governmental Authority shall be subsisting against any of the parties which
would render it unlawful or materially restrain or limit Buyer's ability, as
of the Closing Date, to effect the transactions contemplated hereunder in
accordance with the terms hereof or to operate WNGS as presently being
conducted.
7.1.5. NO CHANGES.
(a) At the Closing, WNGS's network affiliation
agreement with UPN shall be in full force and effect, with no amendments
thereto between the date hereof and the Closing.
(b) From the date hereof until the Closing, there
shall have been no adverse change in WNGS's relationship with UPN or any
cable system on which WNGS is broadcast on the date hereof; and
(c) From the date hereof until the Closing,
neither UPN nor any cable system on which WNGS is broadcast on the date
hereof shall have sent any notice of cancellation of, or intention to modify,
its relationship with Seller or WNGS.
7.1.6. CONSENTS. Seller shall have (a) obtained and
delivered to Buyer all consents, approvals, and permits necessary for the
consummation of transactions contemplated hereby, with no adverse condition
attached (including any adverse change in the terms and conditions of any
Contract included in the Assumed Obligations) and no material expense imposed
upon Buyer and (b) made all necessary filings identified on SCHEDULE 4.3.2
hereto. All necessary local zoning and other approvals required to construct
and operate the facilities specified in the Relocation Application shall have
been obtained and such approvals shall not have been vacated, reversed,
stayed, set aside, annulled or suspended, shall not be
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subject to any pending timely appeal, request for stay, or petition for
rehearing, reconsideration or review by any Person or by the local zoning or
other authority on its own motion, and the time for filing any appeal, request,
petition or similar document or for the reconsideration or review by the local
zoning or other authority on its own motion shall have expired.
7.1.7. OFFICERS' CERTIFICATES. Seller shall have
delivered to Buyer a certificate, dated the Closing Date to the effect that
the conditions set forth in Sections 7.1.2, 7.1.3, 7.1.4, 7.1.5, 7.1.6 and
7.1.11 have been satisfied.
7.1.8. OPINION OF COUNSEL. Buyer shall have received the
written opinion of McQuaid, Metzler, Bedford and Van Zandt, L.L.P., counsel
for Seller, dated the Closing Date, substantially in the form attached to
this Agreement as EXHIBIT D.
7.1.9. CERTIFICATIONS. Seller shall have delivered to
Buyer a schedule and certification showing in all material respects: (a) the
fees payable after the Closing Date under all WNGS program license
agreements; (b) all Contracts or amendments, renewals or other modifications
thereof that have been entered into by Seller after the date of this
Agreement with respect to WNGS.
7.1.10. HSRA WAITING PERIOD. The applicable waiting
period(s) under HSRA with respect to the transactions contemplated by this
Agreement shall have expired.
7.1.11. COPIES OF DOCUMENTS. Seller shall have delivered
to Buyer copies of all documents required to be delivered pursuant to the
Agreement, including but not limited to, all Contracts listed in the schedule
delivered pursuant to Section 7.1.9(b) hereof.
7.1.12. ANALOG AUTHORIZATION. The FCC shall have issued a
construction permit to modify WNGS's Modification Authorization to authorize
WNGS's operation at a transmitter site in Colden, New York selected by Seller
with transmitter power output, transmitting antenna height, transmitting
antenna beam tilt and other technical parameters equivalent to or greater
than those specified in the Modification Application ("Relocation
Authorization"). Such Relocation Authorization shall enable WNGS to provide a
Grade A signal contour, Grade B signal contour, and City Grade signal contour
equal to or greater than that proposed in the Modification Application.
7.1.13. PROCEEDINGS. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Buyer and its counsel,
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and Buyer and its counsel shall have received copies of such documents as Buyer
or its counsel, as the case may be, may reasonably request in connection with
said transactions.
7.1.14. DELIVERY OF INSTRUMENTS OF CONVEYANCE AND
TRANSFER. Buyer shall have received the instruments and other documents (in
form and substance reasonably satisfactory to its counsel) required to be
delivered to it pursuant to Section 8 hereof.
7.1.15. TOWER SPACE LEASE. If WNGS is not broadcasting on
a tower in Colden, New York at the time of Closing, the Tower Space Lease
shall be in effect.
7.2. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller at Closing are subject, at Seller's option, to the fulfillment prior
to or at the Closing Date of each of the following conditions:
7.2.1. FCC CONSENT. The FCC Consent shall have been
obtained.
7.2.2. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Buyer or its permitted assignee contained
in this Agreement (and any document delivered in connection herewith) shall
be true and correct in all respects at and as of the Closing Date as though
made at and as of that time (without regard to any "materiality,"
"knowledge," or "awareness" limiting or qualifying language stated therein),
except where the failure to be true and correct, in the aggregate, would not
have a material adverse effect on the ability of Seller to consummate the
transactions contemplated hereby, and Seller shall have received a
certificate, executed on behalf of Buyer or its permitted assignee by an
officer thereof, to that effect.
7.2.3. COMPLIANCE WITH AGREEMENT. Buyer or its permitted
assignee shall have performed and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
7.2.4. NO OBSTRUCTIVE PROCEEDING.
(a) NO LITIGATION. No action, suit,
investigation, or proceeding shall be pending against any of the parties to
this Agreement or any of their Affiliates before any court or any other
Governmental Authority to restrain or prohibit, or to obtain substantial
damages in respect of, this Agreement or the consummation of the transactions
contemplated hereby, which may reasonably be expected to result in a
preliminary or permanent injunction against consummating the transactions
contemplated hereby or, if the transactions
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contemplated hereby were consummated, an order to nullify or render ineffective
this Agreement or such transactions, or the recovery against Seller of
substantial damages or otherwise have a material adverse effect on Seller.
(b) NO GOVERNMENTAL INTERVENTION. None of the
parties to this Agreement or their Affiliates shall have received written
notice from any Governmental Authority of: (i) its intention to institute any
action or proceeding to restrain or enjoin or nullify or render ineffective
this Agreement or the transactions contemplated hereby if consummated, or
commence any investigation into the consummation of this Agreement and the
transactions contemplated hereby; or (ii) the actual commencement of such an
investigation.
(c) NO ORDER. No order, decree or judgment of any
Governmental Authority shall be subsisting against any of the parties which
would render it unlawful or materially restrain or limit Seller's ability, as
of the Closing Date, to effect the transactions contemplated hereunder in
accordance with the terms hereof.
7.2.5. PROCEEDINGS. All proceedings to be taken in
connection with the consummation of the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Seller and her counsel, and Seller and
her counsel shall have received copies of such documents as Seller or her
counsel, as the case may be, may reasonably request in connection with said
transactions.
7.2.6. OPINION OF COUNSEL. Agent shall have received the
written opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for
Buyer, dated the Closing Date, substantially in the form attached hereto as
EXHIBIT E.
7.2.7. HSRA WAITING PERIOD. The applicable waiting
period(s) under HSRA with respect to the transactions contemplated by this
Agreement shall have expired.
7.2.8. OFFICER'S CERTIFICATE. Buyer shall have delivered
to Seller a certificate signed by its Chairman, President or Vice President
and its Secretary or Assistant Secretary dated the Closing Date, to the
effect that the conditions set forth in Sections 7.2.2, 7.2.3 and 7.2.4 have
been satisfied.
8. INSTRUMENTS OF CONVEYANCE AND TRANSFER. Subject to Section 2.4.3 hereof,
at the Closing, to effect the transfers, conveyances and assignments from Seller
to Buyer, Seller shall deliver to Buyer bills of sale, certificates, assignments
and other instruments of transfer assigning, transferring and conveying to Buyer
all of Seller's right, title and interest in, to and
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under all of the property included in the Broadcasting Assets, free and clear of
all Encumbrances of any kind other than Permitted Encumbrances, all in form and
substance reasonably satisfactory to counsel for Buyer, and dated the Closing
Date, including:
(a) ASSIGNMENT OF LEASES. Assignments of all of
Seller's right, title and interest in, to and under the leases and leasehold
interests in property included in the Broadcasting Assets, including all rights
of Seller under the lease agreements referred to in SCHEDULE 1-C hereto;
(b) BILL OF SALE. A bill of sale for all tangible
personal property included in the Broadcasting Assets;
(c) ASSIGNMENTS OF LICENSES. Assignments of the WNGS
Licenses; and
(d) ASSIGNMENTS OF CONTRACTS. Assignments of all of
Seller's right, title and interest in, to and under all contracts and other
intangible assets included in the Broadcasting Assets.
9. [RESERVED].
10. EMPLOYEES.
10.1. [RESERVED].
10.2. CONTINUED EMPLOYMENT; PRORATIONS.
10.2.1. RIGHT TO CONTINUE EMPLOYMENT. On the Closing
Date, Buyer shall have the right but not the obligation to offer employment
to any WNGS Employee ("Buyer's Employees"), with such compensation, benefits
and other terms of employment as Buyer shall determine; PROVIDED, THAT,
nothing herein shall require Buyer to continue the employment of any such
person for any period of time.
10.2.2. COOPERATION. To the extent permitted by law,
Seller shall cooperate with Buyer's attempts to obtain information relating
to the WNGS Employees, including making available to Buyer the employees
personnel files and performance evaluations. Seller will make all reasonable
efforts to assist Buyer in making a smooth transition after Closing.
10.2.3. ACCRUED COMPENSATION. All personal days,
vacation and bonuses of the WNGS Employees that are accrued but unpaid at the
Closing Date shall be paid by Seller.
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10.3. NO LIABILITY FOR EMPLOYEE PLANS. Seller shall be solely
liable and responsible for providing continuation coverage under Code Section
4980B and Part 6 of Title I of ERISA or under the New York Insurance Code
with respect to any qualifying event that occurs on or prior to the Closing
Date, including any continuation coverage requirements that arise as a result
of the failure of Buyer to continue employment or to maintain a Group Health
Plan as defined in section 4980B(g) of the Code or a group policy under the
New York Insurance Code. Any expenses and benefits with respect to medical
claims incurred by any current or former employees of Seller or their covered
dependents on or before the Closing Date shall be the responsibility of
Seller.
11. RISK OF LOSS; CASUALTY OR CONDEMNATION.
11.1. RISK OF LOSS. The risk of any loss, damage or
impairment, confiscation or condemnation of the Broadcasting Assets or any
part thereof from fire or any other casualty or cause shall be borne by
Seller at all times prior to the Closing.
11.2. CASUALTY.
(a) If the Broadcasting Assets are damaged or destroyed
by fire or other casualty or cause between the date hereof and the Closing
Date and the repair cost, individually or in the aggregate (the "Repair
Cost"), will exceed $200,000, Buyer shall have the option either: (i) to
accept the Broadcasting Assets in their damaged or destroyed condition with
(x) Seller and her Affiliates assigning or delivering to Buyer all of their
rights to any insurance proceeds for such damage or destruction and (y) the
Purchase Price being reduced by the difference between the amount, if any,
that the Repair Cost exceeds such insurance proceeds received by Buyer (the
"Insurance Deficiency") up to an amount not to exceed $1,000,000; or (ii)
unless Seller agrees to pay the full amount of such repair cost and such
repairs can be so substantially completed prior to the Closing Date that
broadcast activities can be conducted unabated from and after the Closing, to
cancel this Agreement by giving written notice to Seller not later than
fifteen (15) days after the Repair Cost is determined. Seller shall promptly
notify Buyer in writing of any fire or other casualty occurring with respect
to the Broadcasting Assets. Seller shall provide Buyer and its agents and
contractors with access to any damaged Broadcasting Assets following any fire
or other casualty so that Buyer can obtain an estimate of the Repair Cost
within thirty (30) days after Seller notifies Buyer of the fire or other
casualty.
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(b) If any of the Broadcasting Assets are damaged or
destroyed by fire or other casualty or cause between the date hereof and the
Closing Date and the Repair Cost is equal to or less than $200,000, the Buyer
shall accept the Broadcasting Assets in their damaged or destroyed condition
with Seller and her Affiliates assigning or delivering to Buyer all of their
rights to any insurance proceeds for such damage or destruction and the
Purchase Price being reduced by the amount of the Insurance Deficiency, if
any.
11.3. REPAIR PARAMETERS. If any of the Broadcasting Assets are
damaged or destroyed by fire or other casualty or cause between the date
hereof and the Closing Date and Buyer elects to have Seller repair such
damage, all repairs shall be: (a) completed at least fifteen (15) days prior
to the Closing Date; (b) completed in a good and workmanlike manner, using
materials, labors and finishes resulting in the completed repairs being of
the same or better quality than immediately prior to the damage; and (c)
subject to the reasonable approval of Buyer's engineers or contractors.
11.4. FAILURE OF BROADCAST TRANSMISSION. Notwithstanding any
provision of this Agreement to the contrary and except in connection with
relocation of WNGS's broadcasting transmission tower at Buyer's request, in
the event WNGS's signal ceases to be carried by any U.S. cable television
system which carries WNGS's signal on the date hereof as a result of a
reduction in the power of WNGS's broadcast transmission: (a) for a period of
five consecutive days, Buyer shall have the right, by written notice to
Seller, to terminate this Agreement without further obligation to Seller
hereunder; or (b) on the scheduled Closing Date, the Closing shall not take
place on the scheduled Closing Date and the Buyer shall have the right to
terminate this Agreement, if such failure is not cured within two (2) days.
12. BOOKS AND RECORDS. Buyer shall be entitled to all records,
including but not limited to, books of account, technical information and
engineering data, programming information, employment records, customer lists
and files, advertising records, FCC logs, asset history files and other files
relating to WNGS operations on or prior to the Closing Date as shall be
reasonably necessary to the maintenance of the business affairs of WNGS after
the Closing Date; PROVIDED, HOWEVER, that for a period of six (6) years,
Buyer shall retain and make available for inspection by Seller for any
reasonable purpose all such records, books of account, files, documents and
correspondence, and Buyer shall not dispose of, alter or destroy any such
materials without giving sixty (60) days' prior written notice to Seller and
Seller may, at its
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expense, examine, make copies of, or take possession of such materials. Within
five (5) days after the Closing, Seller shall deliver to Buyer in accordance
with Buyer's instructions all documents relating to WNGS that are in the
possession of Seller or any of her representatives, agents or Affiliates. For a
period of six (6) years after the Closing Date Seller and her Affiliates shall
give Buyer and its counsel and accountants reasonable access, during normal
business hours and in accordance with mutually satisfactory prior arrangements,
to such other records, books of account, files, documents and correspondence
relating to WNGS prior to the Closing Date which Buyer may reasonably deem
necessary to comply with applicable federal or state securities laws in
connection with any financing the Buyer may be effecting.
13. POSSESSION AND CONTROL OF WNGS. Notwithstanding any other provision of
this Agreement, between the date of this Agreement and the Closing Date, Seller
shall retain ultimate control over the management and operations of WNGS.
Neither title to the Broadcasting Assets, nor right to possession at WNGS shall,
directly or indirectly, pass to Buyer until the Closing Date.
14. BROKERS. Seller represents and warrants to Buyer that neither Seller
nor any of her Affiliates has engaged any broker, finder or consultant in
connection with this Agreement or the transactions contemplated herein or any
aspect hereof, other than The Exline Company, the brokerage commission of which
shall be paid by Seller at Closing. Buyer represents and warrants to Seller that
it has not engaged any broker, finder or consultant in connection with this
Agreement. Subject to the previous sentence, each party agrees to indemnify and
hold the other parties harmless from any and all loss, cost, Liability, damage
and expense (including legal and other expenses incident thereto) in respect of
any claim for a broker, finder or consultant's fee or commission or similar
payment by virtue of any alleged agreements, arrangements or understandings with
the indemnifying party or any of its Affiliates. Buyer is not aware that any of
Buyer's officers were contacted by Blackburn & Company, Inc. in connection with
the transactions contemplated by this Agreement.
15. SURVIVAL; INDEMNIFICATION.
15.1. SURVIVAL. The several representations and warranties of
the parties contained in this Agreement (or in any document delivered in
connection herewith) shall be deemed to have been made on the date of this
Agreement and on the Closing Date, shall survive the Closing Date and shall
remain operative and in full force and effect without limitation;
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PROVIDED, HOWEVER, that any claim made with respect to the representations and
warranties of: Seller contained in (a) Sections 4.3 (No Contravention;
Consents), 4.4 (Year 2000), 4.6 (Condition of Assets), 4.8 (Contracts), 4.16
(Affiliated Transactions) and 4.21 (Insurance) must be made within one (1) year
from the Closing Date; (b) Section 4.10 (ERISA), must be made within seven (7)
years from the Closing Date; and (c) Section 4.19 (Labor), must be made within
four (4) years from the Closing Date. The several covenants and agreements of
the parties contained in this Agreement (or in any document delivered in
connection herewith) shall remain operative and in full force and effect without
any time limitation, except as any such covenant or agreement shall be limited
in duration by the express terms hereof.
15.2. SELLER'S INDEMNIFICATION.
15.2.1. GENERALLY. Subject to the limitations contained
in this Section 15, Seller shall indemnify, defend and hold harmless Buyer,
its Affiliates and each of their respective officers, directors, employees,
stockholders, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (the "Buyer Indemnitees") from
and against, and pay or reimburse the Buyer Indemnitees for, any and all
losses, Liabilities, damages, obligations, fines, expenses, claims, demands,
actions, suits, proceedings, judgments or settlements, whether or not
resulting from Third Party Claims, including interest and penalties recovered
by a third party with respect thereto and reasonable out-of-pocket expenses
and reasonable attorneys' and accountants' fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any rights hereunder, suffered or incurred (collectively,
"Damages") by the Buyer Indemnitees, relating to or arising from:
(a) any breach by Seller of any of its
covenants or agreements contained in this Agreement;
(b) any breach or inaccuracy of any
representation or warranty of Seller contained in this Agreement or in any
certificate delivered pursuant hereto (without regard to any materiality,
limitation or qualification language contained therein); or
(c) any of the Retained Liabilities.
15.2.2. LIMITATIONS. Seller shall not have any liability
under Section 15.2.1(b) unless the aggregate of all Damages for which Seller
would, but for this provision, be liable under Section 15.2.1(b) exceed on a
cumulative pre-tax basis an amount equal to $50,000 (the "Indemnity Basket"),
and in such event payments shall be made from dollar one.
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15.3. BUYER'S INDEMNIFICATION.
15.3.1. GENERALLY. Buyer shall indemnify, defend and
hold harmless Seller, her Affiliates and each of their respective officers,
directors, employees, agents and representatives and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Seller
Indemnitees"), from and against, and pay or reimburse the Seller Indemnitees
for, all Damages suffered or incurred by the Seller Indemnitees, relating to
or arising from:
(a) Buyer's breach of any of its covenants or
agreements contained in this Agreement;
(b) any breach of inaccuracy of any
representation or warranty of Buyer contained in this Agreement or in any
certificate delivered pursuant hereto; or
(c) except to the extent of Seller's
indemnification obligation under Section 15.2, any of the Assumed Obligations.
15.3.2. TAXES. All payments made pursuant to Section 15
of this Agreement shall be made free and clear of, and without reduction or
withholding of, any Taxes. If any Taxes are payable in respect of any such
payment, the amount of such payment shall be increased to the extent
necessary to yield (after payment of all Taxes) the same amount that would
have been received if no Taxes were payable in respect of the payment.
15.4. SELLER'S SATISFACTION OF RETAINED LIABILITIES. Seller
agrees to discharge all contingent Retained Liabilities as the same become due
and payable.
15.5. LIMITATIONS. No officer, director, employee, agent or
partner of Buyer, or any Affiliate thereof shall have any personal liability
under this Agreement or any document delivered in connection herewith arising
from or in connection with its execution of any agreement, certificate or other
instrument executed by such officer, director, employee, agent or partner in
connection with the transactions contemplated by this Agreement.
15.6. METHOD OF ASSERTING CLAIM.
15.6.1. THIRD PARTY CLAIMS.
(a) A Person seeking indemnification under this
Section 15 (an "Indemnified Person") shall give written notification to the
Person from whom indemnification is sought (the "Indemnifying Person") of the
commencement of any suit or proceeding relating to a third party (each a
"Third Party Claim"). Such notification shall be given within twenty (20)
business days after receipt by the Indemnified Person of notice of such
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Third Party Claim; PROVIDED, HOWEVER, that no delay or failure on the part of
the Indemnified Person in notifying the Indemnifying Person shall relieve the
Indemnifying Person of any Liability or obligation hereunder except to the
extent of any Damages caused by or arising out of such delay or failure. Such
notice shall be accompanied by copies of any summons, complaint or other
pleading which may have been served on, and any written demand received by, the
Indemnified Person relating to such Third Party Claim.
(b) Within fifteen (15) days after delivery of
such notification, the Indemnifying Person may, upon written notice thereof
to the Indemnified Person, assume control of the defense of such suit, claim
or proceeding (at the expense of the Indemnifying Person) with counsel
reasonably satisfactory to the Indemnified Person. If the Indemnifying Person
does not so assume control of such defense, the Indemnified Person shall
control such defense. The Indemnifying Person shall be liable for the fees
and expenses of counsel employed by the Indemnified Person for any period
during which the Indemnifying Person has not assumed the defense thereof
(other than during any period in which the Indemnified Person shall have
failed to give notice of the Third Party Claim as provided above).
Notwithstanding the foregoing, the Indemnifying Person shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the
reasonable fees and expenses of counsel incurred by the Indemnified Person in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other relief for other than money damages against the
Indemnified Person which the Indemnified Person reasonably determines, after
conferring with its outside counsel, cannot be separated from any related
claim for money damages. If such injunctive relief or other nonmonetary
relief portion of the Third Party Claim can be so separated from that for
money damages, the Indemnifying Person shall be entitled to assume the
defense of the portion relating to money damages. Any party not controlling a
defense (the "Non-controlling Party") of a Third Party Claim may participate
therein at its own expense. The party controlling such defense (the
"Controlling Party") shall keep the Non-controlling Party advised of the
status of such suit or proceeding and the defense thereof and shall consider
in good faith recommendations made by the Non-controlling Party with respect
thereto. The Non-controlling Party shall furnish the Controlling Party with
such information as it may have with respect to such suit or proceeding
(including copies of any summons, complaint or other pleading that may have
been served on such party and any written claim, demand, invoice,
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billing or other document evidencing or asserting the same) and shall otherwise
cooperate with and assist the Controlling Party in the defense of such suit or
proceeding. If the Indemnifying Person chooses to defend or prosecute any Third
Party Claim, the Indemnified Person will agree to any settlement, compromise or
discharge of such Third Party Claim which the Indemnifying Person may recommend
and which by its terms obligates the Indemnifying Person to pay the full amount
of liability in connection with such Third Party Claim; PROVIDED, HOWEVER, that
without the Indemnified Person's consent (which consent shall not be
unreasonably withheld in the case of clause (ii) below), the Indemnifying Person
shall not consent to entry of any judgment or enter into any settlement (i) that
provides for injunctive or other nonmonetary relief adversely affecting the
Indemnified Person or (ii) that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to such Indemnified Person of a
release from all liability with respect to such claim. The Indemnified Person
shall not admit any liability with respect to, or settle, compromise or
discharge, any Third Party Claim (A) for which the Indemnifying Person shall
have assumed the defense or (B) which involves a claim for monetary relief for
which indemnification may be sought hereunder, without the Indemnifying Person's
prior written consent (which consent shall not be unreasonably withheld).
15.6.2. INDEMNIFICATION CLAIMS BY THE PARTIES.
(a) In the event any Indemnified Person should
have a claim against any Indemnifying Person under Section 15.2 or 15.3
hereof that does not involve a Third Party Claim being asserted against or
sought to be collected from such Indemnified Party, an Indemnified Person
shall give written notification (a "Claim Notice") to the Indemnifying Person
which contains (i) a description and the amount (the "Claimed Amount"),
including the basis therefor, of any Damages incurred by the Indemnified
Person, (ii) a statement that the Indemnified Person is entitled to
indemnification under this Section 15 for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment in the
amount of such Damages, subject to the limitations contained in this Section
15; PROVIDED, HOWEVER, that no delay or failure in giving a Claim Notice
shall relieve the Indemnifying Person of any Liability or obligation
hereunder except to the extent of any Damages caused by or arising out of
such delay or failure.
(b) Within fifteen (15) days after delivery of
a Claim Notice, the Indemnifying Person shall deliver to the Indemnified
Person a written response (the
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"Response") in which the Indemnifying Person shall: (i) agree that the
Indemnified Person is entitled to receive all of the Claimed Amount; (ii) agree
that the Indemnified Person is entitled to receive part, but not all, of the
Claimed Amount (the "Agreed Amount"); or (iii) dispute that the Indemnified
Person is entitled to receive any of the Claimed Amount. If the Indemnifying
Person in the Response disputes the payment of all or part of the Claimed
Amount, the Indemnifying Person and the Indemnified Person shall follow the
procedures set forth in Section 15.6.2(c) for the resolution of such dispute (a
"Dispute"). If the Indemnifying Person does not deliver a Response within thirty
(30) days after receipt of a Claim Notice, the claim shall be conclusively
deemed a Liability of the Indemnifying Person under Section 15.2 or 15.3, as the
case may be, and the Indemnifying Person shall pay the Claimed Amount to the
Indemnified Person on demand.
(c) During the 60-day period following the
delivery of a Response that reflects a Dispute, the Indemnifying Person and
the Indemnified Person shall use good faith efforts to resolve the Dispute.
If the Dispute is not resolved within such 60-day period, the Indemnifying
Person and the Indemnified Person shall discuss in good faith the submission
of the Dispute to a mutually acceptable alternative dispute resolution
procedure (which may be non-binding or binding upon the parties, as they
agree in advance) (the "ADR Procedure"). In the event the Indemnifying Person
and the Indemnified Person agree upon an ADR Procedure, such parties shall,
in consultation with the chosen dispute resolution service (the "ADR
Service"), promptly agree upon a format and timetable for the ADR Procedure,
agree upon the rules applicable to the ADR Procedure, and promptly undertake
the ADR Procedure. The provisions of this Section 15.6.2(c) shall not
obligate the Indemnifying Person and the Indemnified Person to pursue an ADR
Procedure or prevent either such party from pursuing the Dispute in a court
of competent jurisdiction; PROVIDED, THAT, if the Indemnifying Person and the
Indemnified Person agree to pursue an ADR Procedure, neither the Indemnifying
Person nor the Indemnified Person may commence litigation or seek other
remedies with respect to the Dispute prior to the completion of such ADR
Procedure. Any ADR Procedure undertaken by the Indemnifying Person and the
Indemnified Person shall be considered a compromise negotiation for purposes
of federal and state rules of evidence, and all statements, offers, opinions
and disclosures (whether written or oral) made in the course of the ADR
Procedure by or on behalf of the Indemnifying Person, the Indemnified Person
or the ADR Service shall be treated as
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confidential and, where appropriate, as privileged work product. Such
statements, offers, opinions and disclosures shall not be discoverable or
admissible for any purposes in any litigation or other proceeding relating to
the Dispute (provided that this sentence shall not be construed to exclude from
discovery or admission any matter that is otherwise discoverable or admissible).
The fees and expenses of any ADR Service used by the Indemnifying Person and the
Indemnified Person shall be shared equally by the Indemnifying Person, on the
one hand, and the Indemnified Person on the other hand.
15.7. INDEMNITOR'S OBLIGATIONS. Except for Third Party Claims
being defended in good faith or any amounts sought in an unresolved Dispute,
the Indemnifying Person shall satisfy its obligations hereunder in cash
within twenty (20) days after the Claim Notice.
15.8. LIMITATION ON LIABILITY. The parties hereto acknowledge
and agree that from and after the Closing the sole and exclusive remedy with
respect to any and all claims relating to the subject matter of this
Agreement (other than any claims relating to a breach of a covenant or
agreement under this Agreement which by its terms contemplates performance
after the Closing) shall be made pursuant to the provisions of this Section
15, except in the case of fraud or intentional breach or misrepresentation.
15.9. TERMINATION OF INDEMNIFICATION. The obligations to
indemnify and hold harmless any party: (a) pursuant to Section 15.2.1(b) or
15.3.1(b) shall terminate when the applicable representation or warranty
terminates pursuant to Section 15.1; PROVIDED, HOWEVER, that such obligations
to indemnify and hold harmless shall not terminate with respect to any item
as to which an Indemnified Person shall have, before the expiration of the
applicable period, previously made a claim by delivering a notice of such
claim pursuant to Section 15.6.1 or 15.6.2 to the Indemnifying Person; and
(b) pursuant to clauses (a) and (c) of Section 15.2.1 or clauses (a) and (c)
of Section 15.3.1 shall not terminate.
16. HART-SCOTT-RODINO FILINGS. Within 30 days' of the execution of this
Agreement, each party shall make or cause to be made any and all filings
which are required under HSRA with respect to the transactions contemplated
by this Agreement, the filing fees for which shall be borne by Buyer, and
shall cooperate in the taking of all steps that are necessary, proper or
desirable to expedite the preparation and filing of such notification and the
furnishing of all information required in connection therewith.
17. [RESERVED].
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18. TERMINATION. This Agreement may be terminated:
18.1. TERMINATION.
18.1.1. BUYER. Subject to Section 21.1, by Buyer if the
Closing shall not have occurred on or prior to November 15, 2000 (other than
as a result of the failure by Buyer to fully comply in all material respects
with its obligations under this Agreement);
18.1.2. SELLER. Subject to Section 21.1, by Seller if
the Closing shall not have occurred on or prior to November 15, 2000 (other
than as a result of the failure by Seller to fully comply in all material
respects with its obligations under this Agreement);
18.1.3. MUTUAL CONSENT. By mutual consent of Buyer and
Seller, which consent may be withheld at the absolute discretion of each such
party;
18.1.4. BY SELLER UPON BREACH. Subject to Section 21.1,
by Seller if: (a) Buyer is in material breach of this Agreement; and (b)
Seller is not then in material breach of this Agreement.
18.1.5. BY BUYER UPON BREACH. Subject to Section 21.1,
by Buyer: if (a) Seller is in material breach of this Agreement; and (b)
Buyer is not then in material breach of this Agreement;
18.1.6. SELLER OR BUYER. Subject to Section 21.1, by
Seller or by Buyer if, at or before the Closing, any condition set forth
herein for the benefit of the party seeking termination, shall not have been
timely met and cannot be met by the non-termination party thereto or their
permitted assigns on or before the Closing Date and has not been waived;
PROVIDED, HOWEVER, that neither party, shall be entitled to terminate this
Agreement pursuant to the foregoing provision if the failure of any condition
set forth herein is caused, in whole or in part, by such parties, material
breach of any covenant or agreement hereunder; or
18.1.7. OTHER. As otherwise provided herein.
18.2. EFFECTS OF TERMINATION.
18.2.1. SURVIVAL. If this Agreement is validly
terminated pursuant to Section 18.1 this Agreement will forthwith become null
and void and of no further force or effect, except for the provisions of (a)
Section 21.2 hereof with respect to expenses (b) Section 20 hereof with
respect to confidentiality, (c) Section 14 with respect to brokers' fees and
(d) this Section 18.2.1 and (e) Section 15 with respect to indemnification.
Nothing in this Section 18.2.1 shall be deemed to release any party from any
liability for any breach by such party of the terms
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and provisions of this Agreement or to impair the right of any party to compel
specific performance by any other party of its obligations under this Agreement.
18.2.2. EVENT OF TERMINATION.
(a) Notwithstanding anything to the contrary
contained in the Agreement, in the event this Agreement is validly terminated
by Seller pursuant to Section 18.1.4 hereof, then Buyer shall pay to Seller,
within five (5) days of such termination, as liquidated damages, the Deposit
Amount (the "Liquidated Damages"), and upon receipt of such payment, neither
Seller nor any of her Affiliates, shall have any further recourse against the
Buyer, its agents or any of their Affiliates under this Agreement or
otherwise. The Seller hereby acknowledges that damages Seller would sustain
in the event of any breach of this Agreement by Buyer are difficult or
impossible to ascertain. Accordingly, the parties hereto have agreed that
Seller sole remedy for any violation by Buyer under this Agreement or
otherwise shall be as set forth in this Section 18.2.2 and shall be limited
to the Deposit Amount; and
(b) The Buyer shall be entitled to receive the
Deposit Amount in the event this Agreement is validly terminated other than
pursuant to Section 18.1.4, within five (5) days for the date of termination.
18.2.3. INSTRUCTIONS TO ESCROW AGENT. The parties agree
that upon termination of this Agreement, they will, within two business days
of any such termination, instruct the Deposit Escrow Agent to disburse the
Deposit Amount in a manner consistent with Section 18.2.2 above.
19. SECURITY DEPOSIT. Concurrently with the execution of this Agreement,
Buyer has deposited in escrow a cash security deposit of $2,000,000 to secure
Buyer's obligations under this Agreement, which deposit shall be governed by the
terms and conditions of the Deposit Escrow Agreement.
20. COVENANT AGAINST COMPETITION; CONFIDENTIALITY.
20.1. NON-COMPETITION. Seller hereby agrees that for a period
of three (3) years from and after the Closing, she shall not, directly or
indirectly, including through any of her Affiliates, in any manner (a) engage
in the television station business ("Prohibited Business") within the
Buffalo, New York Designated Market Area as measured by Nielsen Media
Research Company, except on behalf of Buyer, (b) induce or attempt to induce
any Buyer Employee to leave the employ of WNGS or (c) hire any Buyer Employee.
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In the event that any provision of this Section 20 is deemed to be
unenforceable, the remainder of this Section 20 shall not be affected thereby
and each provision hereof shall be valid and enforced to the fullest extent
permitted by law.
20.2. SELLER'S CONFIDENTIALITY. Seller shall and shall cause
her respective Affiliates to, at all times from the date hereof until three (3)
years after the Closing Date, maintain confidential and not use for any purpose
other than the operation of WNGS, any information relating to WNGS (other than
information in the public domain not as the result of a breach of this
Agreement), its business and operations except: (a) for disclosure to authorized
representatives of Buyer; (b) as necessary to the performance of this Agreement;
(c) as authorized in writing by the Buyer; or (d) to the extent that disclosure
is required by law or the order of any Governmental Authority under color of
law; PROVIDED, THAT, prior to disclosing any information pursuant to this clause
(d), the disclosing Person shall have given prior written notice thereof to
Buyer and provided Buyer with the opportunity to contest such disclosure at
Buyer's expense.
20.3. BUYER CONFIDENTIALITY. At all times from the date hereof
until three (3) years after the Closing Date in the case of information with
respect to Seller and at all times from the date hereof until the earlier of
three (3) years from the date hereof and Closing in the case of information with
respect to WNGS, Buyer shall keep and cause its Affiliates and agents
(collectively, "Buyer's Representatives") to keep all information with respect
to Seller and/or WNGS obtained in connection with the negotiation and
performance of this Agreement (other than information in the public domain not
as the result of a breach of this Agreement) as confidential and shall not
disclose, and shall cause Buyer's Representatives not to disclose, such
information to any third party (other than Buyer's financing sources or
potential financing sources or as may be required in connection with any
financing) without Seller's express prior written consent, except: (i) for
disclosure to authorized representatives of Seller; (ii) as necessary to the
performance of this Agreement; (iii) as authorized in writing by Seller; or (iv)
to the extent that disclosure is required by law or the order of any
Governmental Authority under color of law; PROVIDED, THAT, prior to disclosing
any information pursuant to this clause (iv), the disclosing Person shall have
given prior written notice thereof to Seller and provided Seller with the
opportunity to contest such disclosure at Seller's expense. If the transactions
contemplated by this Agreement are not consummated, Buyer will return to Seller
all confidential information
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obtained from Seller by Buyer or Buyer's Representatives. Buyer shall advise any
third party to whom disclosure of confidential information is made hereunder of
the confidential nature of such information and shall request that the
confidentiality of such information be preserved.
21. MISCELLANEOUS.
21.1. GRACE PERIOD.
21.1.1. DEFAULT GRACE PERIOD. Notwithstanding any
other provision of this Agreement, if a default by any party hereto can be cured
or a condition satisfied within fifteen (15) business days after the time
initially fixed for Closing as set forth herein, then the Closing Date shall be
extended for the period (not to exceed fifteen (15) business days) required for
such party to make such cure or satisfaction; PROVIDED, THAT, such default does
not, and would not reasonably be expected to, have a material adverse effect on
WNGS, the Broadcasting Assets or Buyer. If such cure or satisfaction cannot be,
or is not, completed within fifteen (15) business days after such initial time,
then the rights of the parties shall be governed by the applicable provisions of
this Agreement.
21.1.2. FINAL ORDER GRACE PERIOD. Notwithstanding
anything to the contrary contained herein, in the event that the FCC Consent
shall have been obtained but the FCC Consent shall not have become a Final Order
on or prior to November 15, 2000, then such date shall be extended by forty-five
(45) days.
21.2. COSTS, EXPENSES, ETC. Except as provided elsewhere
herein, each of the parties hereto shall bear all costs and expenses incurred by
it in connection with this Agreement and in the preparation for and consummation
of the transactions provided for herein. The payment of all sales, use, transfer
or similar Taxes, documentation stamps, or other similar charges imposed by any
and all Governmental Authorities with respect to the transfer of title to the
Broadcasting Assets shall be borne by Seller or Buyer, in accordance with local
custom. Any income or gain Taxes shall be borne by Seller. All recording costs
and fees incurred in connection with clearing and removing any liens and
Encumbrances including costs incurred so as to permit Seller to convey good and
marketable title to the Broadcasting Assets free and clear of all Encumbrances,
shall be the responsibility of Seller.
21.3. FURTHER ASSURANCES. Each party shall, from time to time,
upon the request of another party, execute, acknowledge and deliver to the other
party such other
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documents or instruments, and take any and all actions as are reasonably
necessary for the implementation and consummation of the transactions
contemplated by this Agreement.
21.4. NOTICE OF PROCEEDINGS. Each party will promptly and in
any case within five (5) business days notify the other parties in writing upon
becoming aware of any labor organization drive or any order or decree or any
complaint praying for an order or decree restraining or enjoining the
consummation of this Agreement or the transactions contemplated hereunder, or
upon receiving any notice from any Governmental Authority of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Agreement or such transactions, or to nullify
or render ineffective this Agreement or such transactions if consummated.
21.5. BULK SALES LAW. Buyer waives compliance by Seller with
the provisions of bulk sales and similar laws applicable to this transaction, if
any; PROVIDED, HOWEVER, that any loss, liability, obligation or cost suffered by
Buyer as a result of the failure by Seller to comply therewith shall be borne by
Seller and that Seller shall indemnify Buyer and hold Buyer harmless therefrom.
21.6. NOTICES. Any notice, request, demand or consent required
or permitted to be given under this Agreement shall be in writing (including
telexes, telecopies, facsimile transmissions and similar writings) and shall be
effective when transmitted and confirmation of receipt is obtained for telexes,
telecopies, facsimile transmissions and similar writings; when delivered
personally; one day after sent by recognized overnight courier; and five days
after sent by mail, first class, postage prepaid, registered mail, return
receipt requested; in each case to the following address or telephone number, as
applicable:
If to Seller to: Caroline K. Powley
9279 Dutch Hill Valley Road
West Valley, New York
Attention: Caroline K. Powley
Telephone: (716) 942-3000
Telecopier: (716) 942-3010
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with copies to: McQuaid, Metzler, Bedford & Van Zandt, L.L.P.
221 Main Street
16th Floor
San Francisco, California 94105-1936
Attention: Roger J. Metzler
Telephone: (415) 905-0200
Telecopier: (415) 905-0202
If to Buyer: Granite Broadcasting Corporation
767 Third Avenue
34th Floor
New York, New York 10017
Attention: W. Don Cornwell, Chairman
and Chief Executive Officer
Telephone: (212) 826-2530
Telecopier: (212) 826-2858
with copies to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr.
Telephone: (202) 887-4000
Telecopier: (202) 887-4288
or at such other address as either party shall specify by notice to the other.
21.7. HEADINGS AND ENTIRE AGREEMENT; AMENDMENT. The section
and subsection headings do not constitute any part of this Agreement and are
inserted herein for convenience of reference only. This Agreement embodies the
entire agreement between the parties with respect to the subject matter hereof.
This Agreement may not be amended, modified or changed orally, and no provision
hereof may be waived, except only in writing signed by the party against whom
enforcement of any amendment, modification, change, waiver, extension or
discharge is sought.
21.8. WAIVER. No waiver of a breach of, or default under, any
provision of this Agreement shall be deemed a waiver of such provision or of any
subsequent breach or default of the same or similar nature or of any other
provision or condition of this Agreement.
21.9. BINDING EFFECT AND ASSIGNMENT. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
successors and permitted assigns. Neither this Agreement nor any obligation
hereunder shall be assignable except with the
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prior written consent of the other party which may be withheld for any reason;
PROVIDED, HOWEVER, that Buyer may assign this Agreement, in whole or in part, to
any direct or indirect wholly owned subsidiary of Buyer provided such assignment
shall not relieve Buyer of its obligations under this Agreement and such
assignment application does not cause a material delay in obtaining the FCC
Consent.
21.10. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but which taken
together shall constitute one agreement.
21.11. EXHIBITS, SCHEDULES AND ATTACHMENTS. The Exhibits,
Schedules and attachments attached to this Agreement are incorporated herein and
shall be considered a part of this Agreement for the purposes stated herein,
except that in the event of any conflict between any of the provisions of such
exhibits and the provisions of this Agreement, the provisions in this Agreement
shall control.
21.12. RIGHTS CUMULATIVE. Except as set forth herein, all
rights, powers and remedies herein given to the parties hereto are cumulative
and not alternative, and are in addition to all statutes or rules of law.
21.13. GOVERNING LAW. This Agreement, and the rights and
obligations of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed therein.
21.14. SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance, is held invalid, such
invalidity shall not affect any other provision which can be given effect
without the invalid provision or application, and to this end the provisions
hereof shall be severable.
21.15. THIRD PARTY RIGHTS. Except as expressly provided in
Section 15 hereof with respect to Buyer Indemnitees and Seller Indemnitees,
nothing in this Agreement (including the Schedules, Exhibits and other
attachments hereto, or any ancillary agreement, instrument or document
contemplated hereby or relating hereto) shall be deemed to create any right with
respect to any Person or property not a party to this Agreement.
21.16. PRESS RELEASES. Except as otherwise required by law,
Buyer and Seller shall: (a) prior to the issuance of any press release relating
to the transactions contemplated by this Agreement, submit to and consult with
the other party with respect to such press release; and (b) use its best efforts
to characterize the other party, in any other public statements made by the
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party making such statement about the other party, on substantially the same
basis as in any press release made by the party making such statement. No
Affiliate of any party shall be permitted to issue a press release relating to
the transactions contemplated hereby.
21.17. SPECIFIC PERFORMANCE. Each party acknowledges that,
notwithstanding any other provision of this Agreement, the damages that Buyer
would sustain in the event of any violation of the provisions of this Agreement
are difficult or impossible to ascertain and that the remedy of indemnity
payments pursuant to Section 15 and other remedies at law would be inadequate.
Accordingly, the parties hereby agree that Buyer shall be entitled, in addition
to any other remedy or damages available to it in the event of any such
violation, to equitable relief, including specific performance and injunctive
relief with respect to any breach or attempted breach.
21.18. RIGHT TO PAYMENTS. If any party (the "Initial
Recipient") hereto receives any payments that another party (the "Proper
Recipient") is entitled to hereunder, the Initial Recipient shall promptly
notify the Proper Recipient of receipt of, and within ten (10) business days
transfer to the Proper Recipient, such payments.
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IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed and delivered in its name and on its behalf, all as of the date and
year first above written.
GRANITE BROADCASTING CORPORATION
By: /s/ W. DON CORNWELL
------------------------------------
W. Don Cornwell, Chairman and
Chief Executive Officer
/s/ CAROLINE K. POWLEY
------------------------------------
Caroline K. Powley
THE UNDERSIGNED, being the spouse of Caroline K. Powley, does hereby
consent to each and all of the transactions contemplated in this Agreement and
guarantees each of Seller's obligations hereunder.
/s/ WILLIAM. M. SMITH
-------------------------------------
William M. Smith
<PAGE>
APPENDIX A
"ACCOUNTS RECEIVABLE" means billed trade accounts receivable of Seller
as of the Effective Time for services rendered or products delivered or used on
or prior to that time for the benefit of WNGS and listed on a Schedule to be
delivered by Seller to Buyer within two (2) business days after the Closing
Date.
"ADR PROCEDURE" has the meaning set forth in Section 15.6.2 hereof.
"ADR SERVICE" has the meaning set forth in Section 15.6.2 hereof.
"AFFILIATE" (and, with a correlative meaning, "Affiliated") shall mean,
with respect to any Person, any other Person that directly, or through one or
more intermediaries, controls or is controlled by or is under common control
with such first Person, and, if such Person is an individual, any member of the
family (including any parent, sibling, spouse or child) of such individual and
any trust whose principal beneficiary is such individual or one or more members
of such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with," shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise)).
"AFFILIATED TRANSACTION" has the meaning set forth in Section 4.16
hereof.
"AGREED AMOUNT" has the meaning set forth in Section 15.6.2 hereof.
"AGREEMENT" means this Asset Purchase Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"APPRAISAL" has the meaning set forth in Section 2.2.5 hereof.
"ASSUMED OBLIGATIONS" has the meaning set forth in Section 2.4.2
hereof.
"BASE PURCHASE PRICE" has the meaning set forth in Section 2.2.1
hereof.
"BROADCASTING ASSETS" means all real, personal and mixed assets, both
tangible and intangible (including the business of WNGS as a "going concern"),
of every kind, nature and description whether or not carried or reflected on the
books of WNGS, Used in connection with the business and operations of WNGS,
other than the Excluded Assets (as hereinafter defined), which are expressly
excluded from the definition of Broadcasting Assets, and except as otherwise
provided in this Agreement, Broadcasting Assets shall include all such assets
existing
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on the date of this Agreement and all such assets acquired between the date
hereof and the Closing Date, including, without limitation:
(a) all real property, leasehold interests, estates and improvements of
every kind and description (other than Excluded Assets), together with all
buildings, structures and improvements of every nature located thereon, Used in
connection with the business and operations of WNGS;
(b) all broadcasting and other equipment, office furniture and other
tangible personal property of every kind and description Used in connection with
the business and operations of WNGS on the date hereof, including without
limitation the assets set forth in SCHEDULE 1-B hereto;
(c) all Contracts (as herein defined), other than Excluded Assets, on
the date hereof, including without limitation those contracts, agreements and
commitments set forth on SCHEDULE 1-C (NETWORK AFFILIATION AGREEMENTS AND OTHER
CONTRACTS OF WNGS) hereto;
(d) (i) all WNGS Licenses and (ii) any other permits, certificates,
consents, approvals, licenses and authorizations issued or granted by any
Governmental Authority or any other Person Used in connection with the business
or operations of WNGS as of the date hereof and any applications therefor, as
set forth in SCHEDULE 1-D hereto;
(e) all files, lists, tapes and books and records, including all FCC
logs, of or relating to WNGS;
(f) all franchises, trademarks, patents, tradenames, service marks,
promotional materials, slogans, intellectual property rights and interests, call
letters, copyrights in literary property of any kind, know-how, jingles and
privileges, if any, Used in connection with the business and operations of WNGS
as of the date hereof;
(g) all rights and claims relating to any other Broadcasting Asset,
including all guarantees, warranties, indemnities and similar rights in respect
of any other Broadcasting Asset; and
(h) all of the prepaid expenses useful to Buyer in the operation of
WNGS after the Effective Time.
"BUYER" has the meaning set forth in the recitals hereto.
"BUYER'S EMPLOYEES" has the meaning set forth in Section 10.2.1 hereof.
"BUYER'S INDEMNITEES has the meaning set forth in Section 15.2.1
hereof.
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"BUYER'S REPRESENTATIVES" has the meaning set forth in Section 20.3
hereof.
"CABLE ACT REQUIREMENTS" has the meaning set forth in Section 4.20(b)
hereof.
"CLAIMED AMOUNT" has the meaning set forth in section 15.6.2 hereof.
"CLAIM NOTICE" has the meaning set forth in Section 15.6.2 hereof.
"CLOSING" means the consummation of the purchase, assignment and sale
of the Broadcasting Assets as contemplated hereby.
"CLOSING DATE" means a time and business date to be selected by Buyer,
which date shall occur between: (i) two business days after the date on which
the conditions specified in Section 7 hereof (excluding conditions that by their
terms cannot be satisfied until Closing) shall have been met or waived by the
beneficiary thereof; and (ii) subject to the provisions of Section 21.1 hereof,
November 15, 2000, unless Buyer and Seller mutually agree to a different time
and date.
"CLOSING PLACE" means the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Suite 400, Washington, D.C. 20036 or
such other place as the Buyer and Seller may agree.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
Treasury regulations promulgated thereunder, as in effect from time to time.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended,
The Telecommunications Act of 1996 and the Children's Television Act, and the
rules, regulations and policies promulgated thereunder, as in effect from time
to time.
"COMPETING APPLICATIONS" has the meaning set forth in Section 3.4
hereof.
"CONTRACTS" has the meaning set forth in Section 4.8 hereof.
"CONTROLLING PARTY" has the meaning set forth in Section 15.6.1 hereof.
"DAMAGES" has the meaning set forth in Section 15.2.1 hereof.
"DEPOSIT" has the meaning set forth in the recitals hereto.
"DEPOSIT AMOUNT" means the amount of the Deposit plus accrued interest
thereon minus the fees and expenses of the Deposit Escrow Agent, if any.
"DEPOSIT ESCROW AGENT" means the Escrow Agent (as defined in the
Deposit Escrow Agreement).
"DEPOSIT ESCROW AGREEMENT" means the Deposit Escrow Agreement in the
form attached hereto as EXHIBIT A.
"DISPUTE" has the meaning set forth in Section 15.6.2 hereof.
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"DTV APPLICATION" has the meaning set forth in Section 3.2 hereof.
"DTV AUTHORIZATION" has the meaning set forth in Section 6.3(b) hereof.
"EFFECTIVE TIME" means 11:59 p.m. on the Closing Date.
"EMPLOYEE PLAN" has the meaning set forth in Section 4.10 hereof.
"ENCUMBRANCES" means all mortgages, security interests, pledges,
claims, liens, charges, covenants, easements, rights of way, restrictions,
encroachments, leases, occupancies, tenancies, options, preemptive purchase or
other rights or any other encumbrances whatsoever.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder, as in effect from time to
time.
"ERISA AFFILIATE" has the meaning set forth in Section 4.10 hereof.
"ESTIMATED PURCHASE PRICE" has the meaning set forth in Section 2.2.4
hereof.
"EXCLUDED ASSETS" means: (a) Accounts Receivable; (b) cash on hand and
in bank accounts that relate exclusively to the operation of WNGS prior to the
Closing Date; and (c) any Contract, WNGS Benefit Plan, agreement or asset listed
on SCHEDULES 1-F OR 4.10 hereto.
"FCC" has the meaning set forth in the recitals hereto.
"FCC APPLICATIONS" has the meaning set forth in Section 3.2 hereof.
"FCC CONSENT" has the meaning set forth in Section 3.3 hereof.
"FCC DENIAL" has the meaning set forth in Section 3.4 hereof.
"FINAL ORDER" means an order of the FCC granting its consent to the
applications referred to in Section 3.2 below, which order has become final. For
purposes of this Agreement, "final" shall mean action by the FCC: (a) which has
not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended;
(b) with respect to which no timely appeal, request for stay, request or
petition for rehearing, reconsideration or review by any Person or Governmental
Authority or by the FCC on its motion, is pending; and (c) as to which the time
for filing any such appeal, request, petition, or similar document or for the
reconsideration or review by the FCC on its own motion, has expired.
"GAAP" means generally accepted accounting principles in effect in the
United States of America at the time of determination, and which are
consistently applied.
"GOVERNMENTAL AUTHORITY" means any court or federal, state, municipal
or other governmental or quasi-governmental authority, department, commission,
board, agency or instrumentality, foreign or domestic, or any employee or agent
thereof.
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"HSRA" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the regulations thereunder, as in effect from time to time.
"INDEMNIFIED PERSON" has the meaning set forth in Section 15.6.1
hereof.
"INDEMNIFYING PERSON" has the meaning set forth in Section 15.6.1
hereof.
"INDEMNITY BASKET" has the meaning set forth in Section 15.2.2 hereof.
"INITIAL DTV APPLICATION" has the meaning set forth in Section 4.13
hereof.
"INITIAL RECIPIENT" has the meaning set forth in Section 21.18 hereof.
"INSURANCE DEFICIENCY" has the meaning set forth in Section 11.2
hereof.
"LIABILITIES" means all obligations, indebtedness, commitments, and
other items constituting "liabilities" under GAAP, whether direct or indirect,
absolute, accrued, contingent, or otherwise, or due or to become due, asserted
or unasserted, matured or unmatured.
"LICENSE APPLICATION" has the meaning set forth in Section 4.7.2(a)
hereof.
"LIQUIDATED DAMAGES" has the meaning set forth in Section 18.2.2(a).
"MARKET CABLE SYSTEM" means any U.S. cable television system within
WNGS's market, as defined in 47 C.F.R. Section 76.55(e).
"MATERIAL ADVERSE EFFECT" means any material and adverse effect upon
the business, assets, prospects, liabilities, financial condition, rights or
results of operations of WNGS or the Broadcasting Assets, or upon the ability of
Seller to perform in any material respect its respective obligations under this
Agreement.
"MODIFICATION APPLICATION" has the meaning set forth in Section
4.7.2(b) hereof.
"MODIFICATION AUTHORIZATION" has the meaning set forth in Section 3.1
hereof.
"NON-CONTROLLING PARTY" has the meaning set forth in Section 15.6.1
hereof.
"PERMITTED ENCUMBRANCES" means (a) Encumbrances expressly identified as
Permitted Encumbrances on SCHEDULE 4.5.1 and (b) Encumbrances expressly
identified as Permitted Encumbrances on SCHEDULE 4.5.2 hereto.
"PERSON" shall mean any natural person, corporation, partnership,
limited liability company, firm, joint venture, joint-stock company, trust,
association, unincorporated entity of any kind, trust, governmental or
regulatory body or other entity.
"PRE-CLOSING INCURRED OBLIGATIONS" has the meaning set forth in Section
2.2.3(a) hereof.
"PRE-CLOSING PAID OBLIGATIONS" has the meaning set forth in Section
2.2.3(a) hereof.
"PROHIBITED BUSINESS" has the meaning set forth in Section 20.1 hereof.
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"PROPER RECIPIENT" has the meaning set forth in Section 21.18 hereof.
"PRORATED OBLIGATIONS" has the meaning set forth in Section 2.2.3(a)
hereof.
"PRORATION STATEMENT" has the meaning set forth in Section 2.2.3(a)
hereof.
"PURCHASE PRICE" has the meaning set forth in Section 2.2.1 hereof.
"RCRA" means the Resource Conservation and Recovery Act, as amended,
42 U.S.C. Sections 6901 - 6992K, and the regulations thereunder, as in effect
from time to time.
"RECEIVABLE EXPENSE" has the meaning set forth in Section 2.3 hereof.
"RELEVANT PROPERTY" has the meaning set forth in Section 4.18.3 hereof.
"RELOCATION APPLICATION" has the meaning set forth in Section 3.2
hereof.
"RELOCATION AUTHORIZATION" has the meaning set forth in Section 7.1.12
hereof.
"RELOCATION CONSENT" has the meaning set forth in Section 3.3 hereof.
"REPAIR COST" has the meaning set forth in Section 11.2 hereof.
"RESPONSE" has the meaning set forth in Section 15.6.2 hereof.
"RETAINED LIABILITIES" means all Liabilities, commitments or other
obligations of WNGS, Seller or any of her Affiliates of any kind and nature,
whether direct or indirect, absolute, accrued, contingent or otherwise, or due
or to become due, asserted or unasserted, matured or unmatured, other than
Assumed Obligations, including (a) any severance pay arising in connection with
Seller's or any of her Affiliates' employment or termination of any current or
former employee of WNGS, Seller or any of her Affiliates; (b) any claim made
pursuant to the Worker Adjustment and Retraining and Notification Act arising in
connection with Seller's or any of her Affiliates' employment or termination of
any current of former employees of WNGS, Seller or any of her Affiliates; (c)
claims or Liabilities arising by reason of or relating to any failure of Seller
or her Affiliates to comply with Code Section 4980B or Part 6 of Title I of
ERISA or the New York Insurance Code or any other similar statute; and (d) any
Receivable Expenses.
"SELLER" has the meaning set forth in the recitals hereto.
"SELLER INDEMNITEES" has the meaning set forth in Section 15.3.1
hereof.
"STUDY" has the meaning set forth in Section 17.1 hereof.
"TAX" or "TAXES" means all federal, state, local, foreign and other
taxes, including but not limited to capital gains, income, estimated income,
franchise, gross receipts, employment, license, payroll, excise, stamp, social
security, Medicare, unemployment, real property, personal
A-6
<PAGE>
property, sales, use, transfer and withholding taxes, including interest,
penalties and additions in connection therewith, whether disputed or not.
"TAX AFFILIATE" means, with respect to any individual, such
individual's spouse and any Person that is controlled by or under common control
with such individual or such individual's spouse. As used in this definition,
"controlled by" and "under common control with" have the meanings given such
terms in the definition of "Affiliate" herein.
"THIRD PARTY CLAIM" has the meaning set forth in Section 15.6.1 hereof.
"TOWER" has the meaning set forth in Section 4.6 hereof.
"TOWER SPACE LEASE" means the lease governing the lease of space on the
Tower by Buyer after the Closing, substantially in the form of EXHIBIT B hereto.
"TOWER PROPERTY" means the Tower and the real property on which the
Tower is located.
"TRADE AGREEMENTS" has the meaning set forth in Section 2.2.2 hereof.
"UPN" means The United Paramount Network.
"USED" means (i) owned, (ii) leased, (iii) held and used or (iv) held
and useful to, in each case, by Seller or one of her Affiliates.
"USTS" has the meaning set forth in Section 4.18.1 hereof.
"WNGS" has the meaning set forth in the recitals hereto.
"WNGS BENEFIT PLANS" has the meaning set forth in Section 4.10 hereof.
"WNGS EMPLOYEES" has the meaning set forth in Section 4.19.2 hereof.
"WNGS LICENSES" means all licenses, permits and authorizations issued
or granted by the FCC for the ownership and operation of WNGS and all
applications therefor, all of which are listed in SCHEDULE 1-D hereto, together
with any renewals, extensions or modifications thereof and additions thereto and
any licenses, permits or authorizations issued or granted pursuant to any such
applications between the date hereof and the Closing Date.
A-7
<PAGE>
SIDE AGREEMENT
Reference is made to Section 6.4 of the Asset Purchase Agreement
between Caroline K. Powley and Granite Broadcasting Corporation, dated as of
November 12, 1999 (the "Purchase Agreement"). Capitalized terms used herein and
not otherwise defined are as defined in the Purchase Agreement.
Buyer and Seller hereby agree to extend the period to allow Buyer to
complete its due diligence review of the business, operations and affairs of
WNGS by extending Buyer's due diligence termination right date in the first
sentence of Section 6.4 from January 5, 2000 to January 15, 2000.
Dated: January 5, 2000
GRANITE BROADCASTING CORPORATION
By: /s/ LAWRENCE I. WILLS
-----------------------------------------
Name: Lawrence I. Wills
Title: Vice President - Finance and Controller
/s/ Caroline K. Powley
----------------------------------------------
Caroline K. Powley
<PAGE>
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
Reference is made to Section 6.4 of the Asset Purchase Agreement
between Caroline K. Powley and Granite Broadcasting Corporation, dated as of
November 12, 1999 (the "Purchase Agreement"). Capitalized terms used herein and
not otherwise defined are as defined in the Purchase Agreement.
The second sentence of Section 6.4 is hereby amended and restated as
follows:
"Notwithstanding and without limiting the foregoing, Buyer may
terminate this Agreement at any time prior to February 7, 2000, if
Buyer is not satisfied that it will obtain necessary authorizations
for, or be able to commence in a timely manner, digital operations
of WNGS on channel 46 at a transmitter site and with transmitter
power output, transmitting antenna height and other technical
parameters satisfactory to Buyer."
Dated: January 14, 2000
GRANITE BROADCASTING CORPORATION
By:/s/ W. DON CORNWELL
------------------------------------
Name: W. Don Cornwell
---------------------------------
Title: Chief Executive Officer
--------------------------------
/s/ CAROLINE K. POWLEY
--------------------------------------
Caroline K. Powley
<PAGE>
AMENDMENT NO. 2 TO PURCHASE AGREEMENT
Reference is made to Section 6.4 of the Asset Purchase Agreement
between Caroline K. Powley and Granite Broadcasting Corporation, dated as of
November 12, 1999, and as amended by Amendment No. 1 dated as of January 14,
2000 (the "Purchase Agreement"). Capitalized terms used herein and not otherwise
defined are as defined in the Purchase Agreement.
The second sentence of Section 6.4 is hereby amended and restated as
follows:
"Notwithstanding and without limiting the foregoing, Buyer may
terminate this Agreement at any time prior to February 21, 2000, if
Buyer is not satisfied that it will obtain necessary authorizations
for, or be able to commence in a timely manner, digital operations
of WNGS on channel 46 at a transmitter site and with transmitter
power output, transmitting antenna height and other technical
parameters satisfactory to Buyer."
This Amendment No. 2 may be executed in counterparts, each of which
shall be deemed an original, but which taken together shall constitute one
agreement.
Dated: February 4, 2000
GRANITE BROADCASTING CORPORATION
By:/s/ LAWRENCE I. WILLS
-------------------------------------
Name: Lawrence I. Wills
------------------------------------
Title: Vice President - Finance
and Controller
/s/ CAROLINE K. POWLEY
------------------------------------
Caroline K. Powley
<PAGE>
AMENDMENT NO. 3 TO PURCHASE AGREEMENT
Reference is made to Section 6.4 of the Asset Purchase Agreement
between Caroline K. Powley and Granite Broadcasting Corporation, dated as of
November 12, 1999, as amended by Amendment No. 1 dated as of January 14, 2000
and as amended by Amendment No. 2 dated as of February 4, 2000 (the "Purchase
Agreement"). Capitalized terms used herein and not otherwise defined are as
defined in the Purchase Agreement.
The second sentence of Section 6.4 is hereby amended and restated as
follows:
"Notwithstanding and without limiting the foregoing, Buyer may
terminate this Agreement at any time prior to March 20, 2000, if
Buyer is not satisfied that it will obtain necessary authorizations
for, or be able to commence in a timely manner, digital operations
of WNGS on channel 46 at a transmitter site and with transmitter
power output, transmitting antenna height and other technical
parameters satisfactory to Buyer."
This Amendment No. 3 may be executed in counterparts, each of which
shall be deemed an original, but which taken together shall constitute one
agreement.
Dated: February 18, 2000
GRANITE BROADCASTING CORPORATION
By:/s/ LAWRENCE I. WILLS
----------------------------------
Name: Lawrence I. Wills
---------------------------------
Title: Vice President - Finance
and Controller
/s/ CAROLINE K. POWLEY
------------------------------------
Caroline K. Powley
<PAGE>
AMENDMENT NO. 4 TO PURCHASE AGREEMENT
Reference is made to Section 6.4 of the Asset Purchase Agreement
between Caroline K. Powley and Granite Broadcasting Corporation, dated as of
November 12, 1999, as amended by Amendment No. 1 dated as of January 14, 2000,
by Amendment No. 2 dated as of February 4, 2000, and by Amendment No. 3 dated as
of February 18, 2000 (the "Purchase Agreement"). Capitalized terms used herein
and not otherwise defined are as defined in the Purchase Agreement.
The second sentence of Section 6.4 is hereby amended and restated as
follows:
"Notwithstanding and without limiting the foregoing, Buyer may
terminate this Agreement at any time prior to April 17, 2000, if
Buyer is not satisfied that it will obtain necessary authorizations
for, or be able to commence in a timely manner, digital operations
of WNGS on channel 46 at a transmitter site and with transmitter
power output, transmitting antenna height and other technical
parameters satisfactory to Buyer."
This Amendment No. 4 may be executed in counterparts, each of which
shall be deemed an original, but which taken together shall constitute one
agreement.
Dated: March 16, 2000
GRANITE BROADCASTING CORPORATION
By:/s/ LAWRENCE I. WILLS
-----------------------------------
Name: Lawrence I. Wills
-----------------------------------
Title: Vice President - Finance
and Controller
/s/ CAROLINE K. POWLEY
------------------------------------
Caroline K. Powley
<PAGE>
Exhibit 21
GRANITE SUBSIDIARIES JURISDICTION OF
ORGANIZATION
Granite Response Television, Inc. Delaware
San Joaquin Communications Corporation California
RJR Communications, Inc. Minnesota
WPTA-TV, Inc. Delaware
KNTV, Inc. Virginia
WTVH, LLC Delaware
WTVH License, Inc. Delaware
KSEE License, Inc. Delaware
KBJR License, Inc. Delaware
KNTV License, Inc. Delaware
WPTA-TV License, Inc. Delaware
KBVO, Inc. Delaware
WLAJ, Inc. Delaware
KBVO License, Inc. Delaware
WWMT-TV, Inc. Delaware
WWMT-TV License, Inc. Delaware
WKBW-TV License, Inc. Delaware
Queen City Broadcasting of New York, Inc. New York
WXON License, Inc. Delaware
WXON, Inc. Delaware
WEEK, Inc. Delaware
WEEK License, Inc. Delaware
WEEK-TV License, Inc. Delaware
WLAJ License, Inc. Delaware
KOFY-TV License, Inc. Delaware
Pacific FM Incorporated California
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8, No. 333-46629) pertaining to the Employee Stock Plans,
collectively, of Granite Broadcasting Corporation, of our report dated
February 18, 2000, with respect to the consolidated financial statements and
schedule of Granite Broadcasting Corporation included in the Annual Report
(Form 10-K) for the year ended December 31, 1999.
Ernst & Young LLP
New York, New York
March 29, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRANITE
BROADCASTING CORPORATION'S 1999 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,453,542
<SECURITIES> 0
<RECEIVABLES> 33,017,344
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,381,544
<PP&E> 39,176,169
<DEPRECIATION> 0
<TOTAL-ASSETS> 730,590,855
<CURRENT-LIABILITIES> 42,911,296
<BONDS> 303,874,304
210,708,780
0
<COMMON> 181,425
<OTHER-SE> 49,902,732
<TOTAL-LIABILITY-AND-EQUITY> 730,590,855
<SALES> 0
<TOTAL-REVENUES> 149,846,955
<CGS> 0
<TOTAL-COSTS> 134,792,774
<OTHER-EXPENSES> (101,651,532)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,616,986
<INCOME-PRETAX> 79,088,727
<INCOME-TAX> 31,574,238
<INCOME-CONTINUING> 47,514,489
<DISCONTINUED> 0
<EXTRAORDINARY> 384,983
<CHANGES> 0
<NET-INCOME> 47,129,506
<EPS-BASIC> 1.43
<EPS-DILUTED> 1.14
</TABLE>
