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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-K
____________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER: 0-25042
YOUNG BROADCASTING INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3339681
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
599 Lexington Avenue 10022
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 754-7070
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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:
CLASS A COMMON STOCK, $.001 PAR VALUE
(Title of class)
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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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the voting stock of registrant held by non-
affiliates of the registrant as of February 27, 1998 was approximately
$641,154,954.
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Number of shares of Common Stock outstanding as of February 27, 1998:
12,410,595 shares of Class A Common Stock and 1,916,890 shares of Class B Common
Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
LOCATION IN FORM 10-K
DOCUMENT IN WHICH INCORPORATED
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Registrant's Proxy Statement relating to Part III
the 1998 Annual Meeting of Stockholders
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YOUNG BROADCASTING INC.
FORM 10-K
Table of Contents
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Page
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PART I
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Item 1. Business............................................................... 1
Item 2. Properties............................................................. 23
Item 3. Legal Proceedings...................................................... 25
Item 4. Submission of Matters to a Vote of Security Holders.................... 26
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.. 28
Item 6. Selected Financial Data................................................ 29
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 30
Item 8. Financial Statements and Supplementary Data............................ 38
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................... 59
PART III
Item 10. Directors and Executive Officers of the Registrant..................... 59
Item 11. Executive Compensation................................................. 59
Item 12. Security Ownership of Certain Beneficial Owners and Management......... 59
Item 13. Certain Relationships and Related Transactions......................... 59
PART IV
Item 14. Exhibits, Financial Statement, Schedules, and Reports on Form 8-K...... 59
SIGNATURES ....................................................................... 64
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FORWARD-LOOKING STATEMENTS
THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT, CONCERNING, AMONG
OTHER THINGS, INCREASES IN NET REVENUES AND BROADCAST CASH FLOW (AS DEFINED) AND
REDUCTIONS IN OPERATING EXPENSES, INVOLVE RISKS AND UNCERTAINTIES, AND ARE
SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS, INCLUDING THE IMPACT OF
CHANGES IN NATIONAL AND REGIONAL ECONOMIES, SUCCESSFUL INTEGRATION OF ACQUIRED
TELEVISION STATIONS (INCLUDING ACHIEVEMENT OF SYNERGIES AND COST REDUCTIONS),
PRICING FLUCTUATIONS IN LOCAL AND NATIONAL ADVERTISING AND VOLATILITY IN
PROGRAMMING COSTS.
PART I
ITEM 1. BUSINESS.
All market rank, rank in market, station audience rating and share, and
television household data in this report are from the Nielsen Station Index
Viewers and Profile dated November 1997, as prepared by A.C. Nielsen Company
("Nielsen"). Nielsen data provided herein refers solely to the United States
television markets. As used herein, the "Company" means Young Broadcasting Inc.
and, where the context requires, its subsidiaries (the "Subsidiaries").
GENERAL
The Company owns and operates twelve television stations in geographically
diverse markets. Six of the stations are affiliated with American Broadcasting
Companies, Inc. ("ABC"), four are affiliated with CBS Inc. ("CBS"), one is
affiliated with National Broadcasting Company, Inc. ("NBC"), and one is an
independent station. Each of the Company's stations is owned and operated by a
direct or indirect Subsidiary. The Company is presently the seventh largest ABC
network affiliate group in terms of households reached and owns more ABC
stations than any single operator other than ABC. The Company's sole
independent television station, KCAL, Los Angeles, California ("KCAL"), is the
only independent VHF television station operating in the Los Angeles market,
which is ranked as the second-largest television market in terms of population
and the largest in terms of estimated television revenue.
The Company was founded in 1986 by Vincent Young and his father, Adam
Young. Vincent Young, the Company's Chairman, has over 25 years of experience
in the television broadcast industry, and Adam Young has over 50 years of
experience in the industry. Ronald Kwasnick, the Company's President, has over
25 years of experience in the industry.
The Company is a Delaware corporation that was formed in 1986. The
Company's principal offices are located at 599 Lexington Avenue, New York, New
York 10022, and its telephone number is (212) 754-7070.
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RECENT DEVELOPMENTS
Amended and Restated Senior Credit Facility. On November 25, 1997, the
Company amended and restated its then existing $500.0 million senior credit
facility to a reduced $300.0 million, five year non-reducing revolver senior
credit facility (the "Senior Credit Facility"). The amendment, among other
things, allows for more favorable interest rates and covenant flexibility. At
the time of the amendment, there were advances outstanding of $82.3 million and
commitments to make additional advances up to $217.7 million. See "Management's
Discussion and Analysis of Financial Condition and Results of Operation --
Liquidity and Capital Resources."
Stock Repurchase. During April and May 1997, the Company repurchased
459,000 shares of its Class A Common Stock in open market purchases pursuant to
a stock repurchase program for an aggregate price of approximately $12.3
million. The Company is authorized, subject to certain limitations, to effect up
to an aggregate of $70.0 million of such purchases.
June 1997 Notes Offering. On June 23, 1997, the Company completed the
offering (the "June 1997 Notes Offering") of $200.0 million principal amount of
its 8 3/4% Senior Subordinated Notes due 2007. The Company used the net proceeds
of the June 1997 Notes Offering (approximately $198.2 million) to repay a
portion of its then outstanding indebtedness, including accrued interest, under
the Company's then outstanding senior credit facility.
Adam Young Inc. Merger. On February 5, 1998, the Company entered into an
Agreement and Plan of Merger with Adam Young Inc. ("AYI") and AYI Acquisition
Corporation, a wholly-owned subsidiary of the Company ("Sub"), pursuant to which
AYI was merged with and into Sub and became a wholly-owned subsidiary of the
Company.
The acquisition of AYI has been accounted for as a combination of companies
under common control similar to a pooling-of-interests. The Company issued
476,307 shares of the Company's Class A Common Stock, with an approximate value
of $19.3 million, to Vincent Young, the Company's Chairman and Adam Young, the
Company's Treasurer, and his wife, in exchange for all of the outstanding stock
of AYI.
OPERATING STRATEGY
The Company continually seeks to increase its revenues and broadcast cash
flow, (as defined). The Company's operating strategy focuses on increasing the
cash flow of its stations through advertising revenue growth and strict control
of programming and operating costs. The components of this strategy include the
following:
Targeted Marketing. The Company seeks to increase its revenues and
broadcast cash flow by expanding existing relationships with local and national
advertisers and attracting new advertisers through targeted marketing techniques
and carefully tailored programming. The Company works closely with advertisers
to develop campaigns that match specifically targeted audience segments with the
advertisers' overall marketing strategies. With this information, the Company
regularly refines its programming mix among network, syndicated and locally-
produced shows in a focused effort to attract audiences with demographic
characteristics desirable to advertisers. The Company's success in increasing
local advertising revenues is also attributable, in part, to the upgrading of
its local sales staff, performance-based compensation arrangements and the
implementation of systems of performance accountability. Each station also
benefits from the ongoing exchange of ideas and experiences with the other
stations.
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The Company's stations utilize a variety of marketing techniques to
increase advertising revenues, including the following:
. Vendor Marketing. The Company's "vendor marketing" program has
experienced a great deal of success in the Company's markets. Under this
program, a station will contact the vendors of a particular store chain
and arrange for the vendors to purchase advertising for the store chain
in exchange for the store's commitment to purchase additional products
from the vendors. The result is that both the vendors' products and the
store chain are advertised, with the vendors collectively bearing the
cost of the advertisement.
. Live Remotes. Stations obtain premium advertising dollars by utilizing
live remotes on location at the offices or facilities of an advertiser.
The station will use its own staff and broadcasting equipment and, as a
result, the expense to the station is relatively low. Live
advertisements are broadcast continually over the course of a period of
the day and tend to show immediate results with viewers being attracted
to the live television event taking place within their community.
. Research. Each station designates personnel to research the amount of
advertising dollars expended in other media (such as radio, newspapers
and magazines) by advertisers within its market. The station will then
target individual advertisers seeking the same demographic groups sought
by the station for particular dayparts and will illustrate to the
advertisers the advantages of television advertising over other media
which do not target specific demographic groups.
An important element in determining advertising rates is the station's
rating and share among a particular demographic group which the advertiser may
be targeting. The Company believes that its success is attributable to its
ability to reach desirable demographic groups with the programs it broadcasts.
Strong Local Presence. Each station seeks to achieve a distinct local
identity principally through the quality of its local news programming and by
targeting specific audience groups with special programs and marketing events.
Each station's local news franchise is the foundation of the Company's strategy
to strengthen audience loyalty and increase revenues and broadcast cash flow for
each station. Strong local news generates high viewership and results in higher
ratings both for programs preceding and following the news.
Strong local news product helps differentiate local broadcast stations from
cable system competitors, which generally do not provide this service. The cost
of producing local news programming generally is lower than other sources of
programming and the amount of local news programming can be increased for very
modest incremental increases in cost. Moreover, such programming can be
increased or decreased on very short notice, providing the Company with greater
programming flexibility.
In each of its markets, the Company develops additional information-
oriented programming designed to expand the Company's hours of commercially
valuable local news and other news programming with relatively small increases
in operating expenses. In addition to local news, each station utilizes special
programming and marketing events, such as prime time programming of local
interest or sponsored community events, to strengthen community relations and
increase advertising revenues. The Company places a special emphasis on
developing and training its local sales staff to promote involvement in
community affairs and stimulate the growth of local advertising sales.
Programming. The Company continually reviews its existing programming
inventory and seeks to purchase the most profitable and cost-effective
syndicated programs available for each time period. In developing its selection
of syndicated programming, management balances the cost of available syndicated
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programs, their potential to increase advertising revenue and the risk of
reduced popularity during the term of the program contract. The Company seeks to
purchase only those programs with contractual periods that permit programming
flexibility and which complement a station's overall programming strategy and
counter competitive programming. Programs that can perform successfully in more
than one time period are more attractive due to the long lead time and multi-
year commitments inherent in program purchasing.
Cost Controls. Each station emphasizes strict control of its programming
and operating costs as an essential factor in increasing broadcast cash flow.
The Company relies primarily on its in-house production capabilities and
seeks to minimize its use of outside firms and consultants. The Company's size
benefits each station in negotiating favorable terms with programming suppliers
and other vendors. In addition, each station reduces its overhead costs by
utilizing the group benefits provided by the Company for all of the stations,
such as insurance and other employee group benefit plans. Through its strategic
planning and annual budget processes, the Company continually seeks to identify
and implement cost savings opportunities at each of its stations. The Company
closely monitors the expenses incurred by each of the stations and continually
reviews the performance and productivity of station personnel. The Company has
been successful in controlling its costs without sacrificing revenues through
efficient use of its available resources.
ACQUISITION STRATEGY
The Company believes that its ability to manage costs effectively while
enhancing the quality provided to station viewers gives the Company an important
advantage in acquiring and operating new stations. In assessing acquisitions,
the Company targets stations for which it has identified line item expense
reductions that can be implemented upon acquisition. The Company emphasizes
strict controls over operating expenses as it expands a station's revenue base
with the goal of improving a station's broadcast cash flow. Typical cost
savings arise from reducing staffing levels, substituting more cost-effective
employee benefit programs, reducing dependence on outside consultants and
research firms and reducing travel and other non-essential expenses. The
Company also develops specific proposals for revenue enhancement utilizing
management's significant experience in local and national advertising.
The Company plans to pursue favorable acquisition opportunities as they
become available. The Company is regularly presented with opportunities to
acquire television stations which it evaluates on the basis of its acquisition
strategy. The Company does not presently have any agreements to acquire or sell
any television stations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
THE STATIONS
The Company's stations are geographically diverse, which minimizes the
impact of regional economic downturns. One station is located in the west
region (KCAL-Los Angeles, California), six stations are located in the midwest
region (WBAY-Green Bay, Wisconsin, KWQC-Quad Cities, KELO-Sioux Falls, South
Dakota, WLNS-Lansing, Michigan, WKBT-La Crosse-Eau Claire, Wisconsin, and WTVO-
Rockford, Illinois), four stations are in the southeast region (WKRN-Nashville,
Tennessee, WRIC-Richmond, Virginia, WATE-Knoxville, Tennessee, and KLFY-
Lafayette, Louisiana), and one station is in the northeast region (WTEN-Albany,
New York).
Six of the Company's twelve stations are affiliated with ABC, four are
affiliated with CBS and one is affiliated with NBC. The Company believes that
this network diversity reduces the potential impact of a ratings decline
experienced by a particular network. KCAL is the only independent VHF television
station operating in the Los Angeles market.
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The following table sets forth general information for each of the Company's
stations:
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Station
Commercial Rank
Market Television Network Stations In In-Market Year
Rank(1) Households(2) Channel Affiliation in DMA(3) Market(4) Share(5) Acquired
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KCAL (Los Angeles, CA) 2 5,009,230 9 IND 11 6 9 1996
WKRN (Nashville, TN) 33 789,220 2 ABC 6 3 18 1989
WTEN (Albany, NY) 52 508,730 10(6) ABC 4 3 27 1989
WRIC (Richmond, VA) 59 457,980 8 ABC 5 3 27 1994
WATE (Knoxville, TN) 64 440,720 6 ABC 4 3 23 1994
WBAY (Green Bay, WI) 70 381,100 2 ABC 5 2 28 1994
KWQC (Quad Cities) 89 301,800 6 NBC 4 1 45 1996
WLNS (Lansing, MI) 105 236,150 6 CBS 4 1 44 1986
KELO (Sioux Falls, SD) 108 229,590 11(7) CBS 4 1 45 1996
KLFY (Lafayette, LA) 122 205,190 10 CBS 4 1 61 1988
WKBT (La Crosse-
Eau Claire, WI) 129 179,050 8 CBS 4 2 24 1986
WTVO (Rockford, IL) 135 166,510 17 ABC 4 3 26 1988
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(1) Refers to the size of the television market or Designated Market Area
("DMA") as used by Nielsen.
(2) Refers to the number of television households in the DMA as estimated by
Nielsen.
(3) Represents the number of television stations ("reportable stations")
designated by Nielsen as "local" to the DMA, excluding public television
stations and stations which do not meet minimum Nielsen reporting standards
(weekly cumulative audience of less than 2.5%) for reporting in the Sunday
through Saturday, 7:00 a.m. to 1:00 a.m. period ("sign-on to sign-off").
Does not include national cable channels. The number of reportable stations
may change for each reporting period. "Weekly cumulative audience" measures
the total number of different households tuned to a station at a particular
time during the week. "Share" references used elsewhere herein measure the
total daily households tuned to a station at a particular time during the
week.
(4) Station's rank relative to other reportable stations, based upon the DMA
rating as reported by Nielsen sign-on to sign-off during November 1997.
(5) Represents an estimate of the share of DMA households viewing television
received by a local commercial station in comparison to other local
commercial stations in the market ("in-market share"), as measured sign-on
to sign-off.
(6) WTEN has a satellite station, WCDC (Adams, Massachusetts), Channel 19,
operating under a separate license from the FCC.
(7) KELO has three satellite stations, KDLO (Florence, South Dakota), Channel 3,
KPLO (Reliance, South Dakota), Channel 6, and KCLO (Rapid City, South
Dakota), Channel 15, each of which operates under a separate license from
the FCC. KCLO operates in a separate DMA from that of KELO and the other two
satellites, wherein it ranks 172.
The following is a description of each of the Company's stations:
KCAL, Los Angeles, California. The Company acquired KCAL from KCAL
Broadcasting, Inc., a subsidiary of the Walt Disney Company ("Disney") on
November 22, 1996. KCAL has the distinction of being one of the first commercial
stations in the country. KCAL's first broadcast was on December 23, 1931. It is
now the only independent VHF station in the Los Angeles market. Los Angeles is
the second largest DMA with an estimated 5,009,230 television households and the
country's largest television market in terms of estimated advertising dollars
spent on the medium. There are eleven reportable stations in the DMA. For the
November 1997 ratings period, KCAL was ranked sixth after the local ABC, NBC,
CBS, WB and Fox affiliates, with an overall sign-on to sign-off in-market share
of 9%. KCAL ranked fifth in in-market revenue share in the fourth quarter of
1997.
KCAL is a prominent news provider in the market, presenting 27 1/2 hours
of such programming each week and up to 25 special one hour reports each year.
In 1995, the station won the prestigious Edward R. Murrow Award as the "Best
Local Newscast in the Country." In 1996, KCAL was honored with nine Golden
Mikes, including Best 30 Minute Newscast and Best Daytime Newscast, ten Emmys,
five Radio Television News Directors awards, ten New York Film Festival Awards,
17 Associated Press Awards and 31 Los Angeles Press Club Awards. In 1997, KCAL
won five Golden Mikes. Since 1991, KCAL has been the most honored local station
in Los Angeles for news.
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KCAL is also the broadcast station of choice for premier local sports
franchises with over 160 major televised sporting events each year. KCAL
currently has long term agreements with the Los Angeles Lakers (2 years
remaining), Anaheim Angels (3 years remaining), Mighty Ducks of Anaheim (5 years
remaining), Los Angeles Clippers (3 years remaining) and Los Angeles Kings (2
years remaining). The station also has agreements to broadcast PAC 10 Football
and certain boxing events. These contracts enable KCAL to offer advertisers
year-round sports packages aimed at very attractive audience categories.
As the largest market in the country's largest state, Los Angeles enjoys a
diverse industry makeup ranging from entertainment and manufacturing to
international trade and financial services. In addition to Los Angeles County,
KCAL reaches Orange, Santa Barbara and other counties in Southern California.
Orange County alone has ranked fifth, nationally, in both population and
population growth over the last five years. According to Investing in Television
Market Report '97 (4th Edition), published by BIA Publications, Inc. (the "BIA
Guide"), the average household income in the Los Angeles market in 1995 was
$43,390, with an effective buying income projected to grow at an annual rate of
0.9% through 2000. Historically, there has been a close correlation between
retail sales and expenditures on broadcast television advertising in a given
market. According to the BIA Guide, retail sales growth for the Los Angeles
market is projected to average 0.4% annually through 2000.
WKRN, Nashville, Tennessee. WKRN, acquired by the Company from Knight-
Ridder Broadcasting, Inc. in June 1989, began operations in 1953 and is
affiliated with ABC. The Nashville market is the 33rd largest DMA, with an
estimated 789,220 television households. There are six reportable stations in
the DMA. For the November 1997 ratings period, WKRN was rated third after the
CBS and NBC affiliates, with an overall sign-on to sign-off in-market share of
18%. The station's syndicated programs include The Cosby Show, Roseanne, Coach,
Full House, Jenny Jones, Entertainment Tonight, Live With Regis and Kathie Lee,
Family Matters, Step by Step, Extra and Rosie.
The quality of the station's newscasts has been regularly recognized by its
broadcasting peers, highlighted by its winning of the prestigious Peabody Award
for investigative journalism. During the last three years, the station won a
combined 33 regional Emmy Awards. The Tennessee Associated Press awarded the
station first place for Investigative, Feature and Spot News reporting. The
station also has won a number of regional awards from the Radio and Television
News Directors Association, including 1994 awards for Best Feature, Best News
Operation and Best Investigative Reporting.
Nashville is the capital of Tennessee and the center of local, state and
federal government with three of its five largest employers being government
related. Prominent corporations located in the area include Bridgestone-
Firestone, Nissan, Saturn, Columbia/HCA, Shoney's, Service Merchandise, First
American National Bank, Northern Telecom, Aladdin Industries and Willis Corroon
plc. Nashville is the home of several universities, including Vanderbilt and
Tennessee State. According to the BIA Guide, the average household income in the
Nashville market in 1995 was $39,346, with effective buying income projected to
grow at an annual rate of 6.5% through 2000. Historically, there has been a
close correlation between retail sales and expenditures on broadcast television
advertising in a given market. According to the BIA Guide, retail sales growth
for the Nashville market is projected to average 6.3% annually through 2000.
WKRN is a prime example of the Company's strategy to achieve a strong local
presence. Its community activities range from raising food for the hungry of
Middle Tennessee to focusing on the issues and concerns of children through its
"Kids 2 Kids" campaign and "Schools Now" half million dollar fund raising
effort.
ABC affiliates in Bowling Green, Kentucky and Jackson, Tennessee have
overlapping signals with WKRN on the north and west edges of the DMA, resulting
in some loss of viewers in those areas. The
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Company believes this overlap is responsible for the lower station share
compared to the NBC and CBS affiliates.
WTEN, Albany, New York. WTEN, acquired by the Company from Knight-Ridder
Broadcasting, Inc. in October 1989, began operations in 1953 and is affiliated
with ABC. WTEN added a satellite station, WCDC-TV Channel 19, in Adams,
Massachusetts in 1963 to serve more adequately the eastern edge of the market.
WCDC-TV was acquired concurrently with WTEN. (All references to WTEN include
WCDC-TV.)
The Albany market (which includes Schenectady and Troy) is the 52nd largest
DMA, with an estimated 508,730 television households. There are four reportable
stations in the DMA, three of which broadcast in the VHF spectrum. During the
November 1997 ratings period, WTEN was third in the ratings, with a sign-on to
sign-off in-market share of 27%, compared to 34% for WNYT, the NBC affiliate,
and 29% for WRGB, the CBS affiliate, and 12% for WXXA, the Fox affiliate. The
station's syndicated programs include Wheel of Fortune, Jeopardy, Rosie, and
Jenny Jones. WTEN has won numerous awards in recent years for both local news
and public affairs programming.
Albany is the capital of New York. The largest employers are the New York
State government, the State University of New York and the General Electric
Company. Other prominent corporations located in the area include Lockheed
Martin, Fleet Financial Group, State Farm Insurance, Metropolitan Life Insurance
and Quad Graphics. These employers, which are dependent upon a well-educated and
skilled labor force to remain competitive in their industries, are able to draw
upon the nation's largest concentration per capita of professionals with
doctoral and post-doctoral degrees. According to the BIA Guide, the average
household income in the Albany market in 1995 was $37,951, with effective buying
income projected to grow at an annual rate of 3.0% through 2000. Retail sales
growth in this market is also projected by the BIA Guide to average 2.9%
annually during the same period.
The station has focused on its local newscasts, selective syndicated program
acquisitions and client marketing programs to maximize revenues. Selective use
of client incentive programs has generated over $1.3 million of new revenue in
1997. During 1997, WTEN added newscasts at 5:30 a.m. and 5:00 p.m. The 5:00 p.m.
newscast was an immediate success with viewers, and has been the top rated show
in the time period since inception.
WRIC, Richmond, Virginia. WRIC, acquired by the Company in November 1994
from Nationwide Communications Inc. ("Nationwide"), began operations in 1955 and
is affiliated with ABC. The Richmond market (which also includes Petersburg,
Virginia) is the 59th largest DMA, with an estimated 457,980 television
households. There are five reportable commercial television stations in the DMA,
three of which are VHF stations. For the November 1997 ratings period, WRIC was
in third place in the ratings, one point behind WTVR and WWBT, the CBS and NBC
affiliates. In actual audience share, WRIC was slightly behind WTVR and WWBT,
with a sign-on to sign-off in-market share of 27%, compared to 30% for WTVR and
32% for WWBT. The station's syndicated programming includes Wheel of Fortune,
Jeopardy, Montel Williams, Rosie and Jerry Springer. WRIC has won numerous
awards in recent years from state journalism organizations for its news
operations.
Richmond is the capital of Virginia and home to numerous colleges and
universities, including the University of Richmond, Virginia Commonwealth
University (VCU) and the VCU Medical College of Virginia. Philip Morris is the
largest employer in the market, employing approximately 11,000 area residents.
According to the BIA Guide, the average household income in the Richmond market
in 1995 was $38,253, with effective buying income projected to grow at an annual
rate of 3.5% through 2000. Retail sales growth is also projected by the BIA
Guide to average 3.4% annually during the same period.
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WATE, Knoxville, Tennessee. WATE, also acquired by the Company in November
1994 from Nationwide, began operations in 1953 and is also affiliated with ABC.
The Knoxville, Tennessee market is the 64th largest DMA, with an estimated
440,720 television households. There are four reportable stations in the DMA,
three of which are VHF stations. During the November 1997 ratings period, WATE
ranked third, with a sign-on to sign-off in-market share of 23%. The station's
syndicated programming includes Home Improvement, People's Court, Coach, Extra
and Rosie. WATE has won numerous awards in recent years from state journalism
organizations for its news operations. It also recently received its second Emmy
Award for sports programming.
According to the BIA Guide, the average household income in the Knoxville
market in 1995 was $33,774 with effective buying income projected to grow at an
annual rate of 5.6% through 2000. Retail sales growth is also projected by the
BIA Guide to average 5.9% annually during the same period.
WBAY, Green Bay, Wisconsin. WBAY, the third station acquired by the Company
in November 1994 from Nationwide, began operations in 1953 and is also
affiliated with ABC. The Green Bay market (which also includes Appleton,
Wisconsin) is the 70th largest DMA, with an estimated 381,100 television
households. There are five reportable stations in the DMA, three of which are
VHF stations. For the November 1997 ratings period, WBAY was second in the
ratings behind WFRV, the CBS affiliate. In audience share, WFRV led WBAY in the
November 1997 ratings period, with a sign-on to sign-off in-market share of 30%,
compared to 28% for WBAY. The station's syndicated programming includes Home
Improvement, Seinfeld, Friends, Inside Edition, People's Court, Hard Copy and
Martha Stewart. WBAY has won numerous awards in recent years from state
journalism organizations for its news operations.
According to the BIA Guide, the average household income in the Green Bay
market in 1995 was $37,547, with effective buying income projected to grow at an
annual rate of 5.4% through 2000. Retail sales growth is also projected by the
BIA Guide to average 5.7% annually during the same period.
KWQC, Quad Cities. The Company acquired KWQC from Broad Street Television,
L.P. on April 15, 1996. The station began operations in 1949 and is affiliated
with NBC. The Davenport market, referred to as the Quad Cities Market, is the
89th largest DMA serving an estimated 301,800 television households in eastern
Iowa and western Illinois. There are four reportable stations in the DMA, three
of which are VHF. During the November 1997 ratings period, KWQC retained its
number one position in the market with a sign-on to sign-off in-market share of
45%. The station has retained the number one position for over twelve years and
continues to expand news programming and increase market share. The station's
syndicated programming includes Oprah, Jeopardy, Wheel of Fortune, Martha
Stewart, American Journal and Cheers.
KWQC places a strong emphasis on local news and community related events and
broadcasts. The station annually produces several news specials in addition to
providing 23 hours of local news and information programming per week. KWQC is
involved in a variety of community events including Race For The Cure, Toys For
Tots, Festival of Trees, The Student Hunger Drive, the United Way Drive, Bix 7
Race and Women's Lifestyle Fair.
John Deere Corporation and Eagle Country Markets are both headquartered in
the Quad Cities. Other major employers include the Rock Island Arsenal, Alcoa,
Trinity Medical Center, Oscar Mayer, J.I. Case and Modern Woodman. Riverboat
gambling has brought three boats to the market that have increased the tourism
business. The market has also experienced an increase in convention business.
According to the BIA Guide, the average household income in the Quad Cities
market in 1995 was $36,840, with effective buying income projected to grow at an
annual rate of 4.5% through 2000. Retail sales growth is also projected by the
BIA Guide to average 4.0% annually during the same period.
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WLNS, Lansing, Michigan. WLNS, acquired by the Company from Backe
Communications, Inc. in September 1986, began operations in 1950 and is
affiliated with CBS. The Lansing market is the 105th largest DMA, with an
estimated 236,150 television households. WLNS is one of only two VHF network
affiliates in the DMA. During the November 1997 ratings period, WLNS was the
highest-rated station out of four reportable stations in its DMA, with a sign-on
to sign-off in-market share of 44%. The station has consistently held the
highest rating for several ratings periods. The station's syndicated programming
includes Rosie, Entertainment Tonight, Hard Copy, Extra, The X-Files and Montel
Williams.
The station attributes its success to the experience of its local sales
staff, which focuses on developing strong relationships with local advertisers.
WLNS is also recognized as the dominant news station in the Lansing market. The
station consistently wins by wide margins against competitors in its noon and
6:00 p.m. newscasts. For the November 1997 ratings period, WLNS's newscasts
finished ahead of its closest competitor by 31 share points at noon and 18 share
points at 6:00 p.m. The station also won at 11:00 p.m. by 12 share points. WLNS
launched the market's first 5:30 p.m. newscast in 1989, which has since
developed a solid audience share and has consistently held the greatest share in
its time period. The station's recently added 6:00 a.m. newscast has surpassed
its competition by wide margins. The station recognizes local news programming
as the key to its success and produces 18 to 20 special news programs each year,
including live town hall meetings in prime time on community topics such as
youth violence and political debates in major election years. The quality of the
news broadcasts at WLNS has resulted in numerous state journalism and public
service awards.
The economy of Lansing is dominated by three employers, the State of
Michigan, General Motor's Buick-Oldsmobile-Cadillac Division ("B.O.C.") and
Michigan State University, giving Lansing an advantage over other Michigan
cities whose economies rely more heavily on, and are more prone to the cyclical
nature of, the domestic automobile industry. Lansing is the capital of Michigan
and its various government agencies employ an aggregate of approximately 15,500
people. B.O.C. has approximately 14,000 employees. Michigan State University has
over 12,000 employees with a student enrollment of over 42,000. Other
significant industry sectors in the area are plastics, non-electrical machinery,
fabricated metal products, food processing and printing. Companies represented
in these groups include Owens-Brockway, John Henry Co. and Dart Container.
According to the BIA Guide, the average household income in the Lansing market
in 1995 was $38,948, with effective buying income projected to grow at an annual
rate of 3.4% through 2000. Retail sales growth in this market is also projected
by the BIA Guide to average 3.5% annually during the same period.
KELO, Sioux Falls, South Dakota. On May 31, 1996, the Company acquired KELO
from a subsidiary of Midcontinent Media, Inc. The station began operations in
1953 and is affiliated with CBS. KELO added satellite station KDLO, Channel 3,
in Florence, South Dakota in 1955 to serve the northern South Dakota area, and
added satellite station KPLO, Channel 6, in Reliance, South Dakota in 1957 to
serve the central South Dakota area. In 1988, KCLO, Channel 15, then operating
as a translator facility, was added as a satellite station of KELO in Rapid
City, South Dakota. KELO fully serves two DMAs, as Rapid City is a separate
contiguous DMA. (All references to KELO include KDLO and KPLO. The following
information pertains only to the Sioux Falls DMA.)
The Sioux Falls market is the 108th largest DMA serving an estimated 229,590
television households encompassing counties in Minnesota, Iowa and Nebraska, as
well as 52 counties within South Dakota. There are four reportable stations in
the DMA, three of which are VHF. During the November 1997 ratings period, KELO
was first in the market with a sign-on to sign-off in-market share of 45%,
significantly ahead of the ABC, NBC and FOX/UPN affiliates, who had 28%, 17% and
10%, respectively. KELO's newscast finished ahead of each of the competing
stations for every weekday newscast time period. Recognizing the importance of
local news, the station presents live newscasts five times daily, with notable
ratings and sales
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success. The station's syndicated programming includes Entertainment Tonight,
The Maury Povich Show, FX: The Series, Geraldo and Matlock.
The largest employers in the market are Citibank and John Morrell. Sioux
Falls is the largest city in South Dakota, with a population of 112,000.
According to the BIA Guide, the average household income in the Sioux Falls
market in 1995 was $36,329, with effective buying income projected to grow at an
annual rate of 5.7% through 2000. Retail sales growth is also projected by the
BIA Guide to average 6.0% annually during the same period.
KLFY, Lafayette, Louisiana. KLFY, acquired by the Company from Texoma
Broadcasters, Inc. in May 1988, began operations in 1955 as the market's first
television station and is affiliated with CBS. KLFY is one of only two network-
affiliated VHF stations serving the Lafayette market. The third commercial
station in the market is a Fox affiliate operating on a UHF channel and a fourth
Station, KLAF, is a lower power station affiliated with the Warner Brothers
Network. The market is dominated by KLFY and the local ABC affiliate. The
signals from the NBC affiliates in Lake Charles, Baton Rouge and Alexandria,
Louisiana are available to households in the DMA. Currently the NBC affiliate in
Lake Charles is selling advertising in the Lafayette market with minimal
success.
The Lafayette market is the 122nd largest DMA, with an estimated 208,300
television households. KLFY ranks first in the November 1997 ratings period with
an overall sign-on to sign-off in-market share of 61%, and has ranked first in
those viewership measurements consistently for prior ratings periods. KLFY leads
its competition in audience share in 30 of 30 major Nielsen dayparts. KLFY is
ranked number one during prime-time (7:00 p.m.-10:00 p.m., Monday-Saturday and
6:00 p.m.-10:00 p.m., Sunday), the most sought after advertiser demographic time
period, with a sign-on to in-market share of 56%. The station's syndicated
programs include The Maury Povich Show, Home Improvement, Cosby, Coach, Rosie,
Sally Jessy Raphael, Hercules and Zena.
Historically, KLFY has placed a strong emphasis on local news and community-
related broadcasts. Each weekday begins with a 90-minute live production of
"Passe Partout," a family-oriented program offering early morning news, weather,
sports and interviews on subjects relevant to local residents. For the November
1997 ratings period, this program received a 6:00 - 7:00 a.m. in-market share of
62%. The first 30 minutes of "Passe Partout" are broadcast in French for the
large French-speaking Cajun population in the area; the balance is in English.
KLFY also has won numerous awards in recent years from state journalism
organizations, including the 1995 and 1997 "Station of the Year" award from the
Louisiana Broadcasters Association.
KLFY has made community involvement an important part of its operations. The
12:00 noon news show is called "Meet Your Neighbor" and, in addition to an
emphasis on local news reporting, is a platform for community service segments.
In addition to ongoing commitments to blood drives, food and clothing drives, a
big brother/big sister program and animal adoptions, the station has been the
motivating force behind some unusual projects. "Wednesday's Child" is a
nationally recognized weekly segment featuring a child in need of adoption, and
the effort has had a significant success rate in placing children. The station
has over the past eleven years raised over a thousand tons of food for the
hungry with its annual "Food for Families" all-day live remote from 17 locations
in the DMA. It has an annual "Coats for Kids" campaign to clothe needy children
and has raised over $7.5 million for the Muscular Dystrophy Association's
("MDA") annual telethon. For its efforts, the station has received awards from
state and national service organizations, including the MDA's special
recognition award and Media of the Year awards from the Louisiana Special
Olympics and the Black Advisory Adoption Committee.
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According to the BIA Guide, the average household income in the Lafayette
market in 1995 was $30,539, with effective buying income projected to grow at an
annual rate of 5.5% through 2000. Retail sales growth in this market is also
projected by the BIA Guide to average 5.8% annually during the same period.
WKBT, La Crosse, Wisconsin. WKBT, acquired (together with WLNS) by the
Company from Backe Communications Inc. in September 1986, began operations in
1954 and is affiliated with CBS. Although 90 miles apart, the cities of La
Crosse and Eau Claire are considered a single market by Nielsen, and WKBT's
signal covers both cities, reaching an eleven-county area that includes two
Minnesota counties and most of western Wisconsin. There are four reportable
stations in the DMA, but WKBT is one of only two local VHF stations.
The La Crosse-Eau Claire market is the 129th largest DMA, with an estimated
179,050 television households. The highest-rated local stations in the DMA are
WKBT and WEAU, the NBC affiliate. For the November 1997 ratings period, WKBT had
a sign-on to sign-off in-market share of 24%, which places WKBT second to WEAU,
which had a 37% share. The station's syndicated programming includes Hard Copy,
Roseanne, Married with Children, The Cosby Show, Sally Jessy Raphael, Baywatch,
The Simpsons and Montel Williams.
The station's newscasts, collectively broadcast as NewsChannel 8, focuses on
local coverage of news, weather and sports events. NewsChannel 8 offers 3 1/2
hours of local news each weekday.
Over the past several years, WKBT has won awards for news coverage from
state journalism organizations. Currently, WKBT is the only station in its
market to provide closed-captioning of its local newscasts for its hearing
impaired viewers. The station is also an active sponsor of many other local
community events and programs, including Toys for Tots, CrimeStoppers, Salvation
Army Operation Food Basket, Red Cross Disaster Relief, Weatherschool and
Friday's Child. WKBT regularly contributes public service announcements and
hundreds of hours of volunteer labor to the community throughout the year.
The economy in the La Crosse-Eau Claire region is centered on skilled
industry, medical services, agriculture and education. Prominent corporations
located in the area include The Trane Company, the area's largest employer with
approximately 2,600 employees, Fleming Foods, G. Heileman Brewing Company and La
Crosse Footwear. Lutheran Hospital, Franciscan Health Systems and Gunderson
Clinic have made La Crosse a health care hub for the entire western Wisconsin
region and, combined, employ approximately 4,400 area residents. Local
educational institutions draw a large student base to the market and include
branches of the University of Wisconsin in La Crosse and Eau Claire, as well as
Viterbo College and Western Wisconsin Technical College. According to the BIA
Guide, the average household income in the La Crosse-Eau Claire market in 1995
was $32,849, with effective buying income projected to grow at an annual rate of
4.7% through 2000. Retail sales growth in this market is also projected by the
BIA Guide to average 4.5% annually during the same period.
WTVO, Rockford, Illinois. WTVO, the ABC affiliate in Rockford, Illinois
began operations in 1953 under the ownership of Winnebago Television
Corporation. The Company purchased Winnebago Television Corporation in September
1988. WTVO switched its affiliation from NBC to ABC, effective as of August 14,
1995.
The Rockford market is the 135th largest DMA, with an estimated 166,510
television households. There are four reportable stations in the DMA, of which
one is a VHF station and the others, including WTVO, are UHF stations. In the
November 1997 ratings period, WTVO was number three in the market, with a sign-
on to sign-off in-market share of 26%, compared to 28% and 33% for the CBS and
NBC affiliates, respectively. The station's syndicated programs include Sally
Jessy Raphael, Jenny Jones, Rosie, Entertainment Tonight and The Simpsons. The
station produces local interest programs such as Spotlight 17.
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Each year, the Northern Illinois Council of Advertising recognizes the
production creativity of local advertising agencies and television stations by
awarding "Raddys." Since 1990, WTVO has been the recipient of 18 Raddy awards
which span the categories of broadcast division, original footage, and
promotional (news) campaign. WTVO has won more Raddys than any other station in
the Rockford market.
WTVO's DMA encompasses a five-county area of northern Illinois, northwest of
Chicago. Rockford is the second largest city in Illinois. Over 1,000
manufacturing firms employ a total of over 50,000 persons in the Rockford area,
specializing in machine tool, automotive, aerospace, and consumer product
industries. Prominent manufacturers in the area include Sundstrand Corporation,
the area's largest employer, Ingersoll Milling Machine Company and Chrysler
Corporation's new Neon subcompact facility. UPS has constructed a new $60.0
million midwestern freight hub at Rockford, and Motorola has begun construction
on a cellular phone plant in nearby Harvard, Illinois. According to the BIA
Guide, the average household income in the Rockford market in 1995 was $38,151,
with effective buying income projected to grow at an annual rate of 3.1% through
2000. Retail sales growth in this market is also projected by the BIA Guide to
average 2.9% annually during the same period.
INDUSTRY BACKGROUND
General. Commercial television broadcasting began in the United States on a
regular basis in the 1940s. Currently there are a limited number of channels
available for broadcasting in any one geographic area. Television stations can
be distinguished by the frequency on which they broadcast. Television stations
broadcast over the very high frequency ("VHF") band (channels 2-13) of the
spectrum generally have some competitive advantage over television stations
which broadcast over the ultra-high frequency ("UHF") band (channels above 13)
of the spectrum because the former usually have better signal coverage and
operate at a lower transmission cost. However, the improvement of UHF
transmitters and receivers, the complete elimination from the marketplace of
VHF-only receivers and the expansion of cable television systems have reduced
the VHF signal advantage. Any disparity between VHF and UHF is likely to
diminish even further in the coming era of digital television. See "Federal
Regulation of Television Broadcasting" below.
The Market for Television Programming. Television station revenues are
primarily derived from local, regional and national advertising and, to a lesser
extent, from network compensation and revenues from studio rental and commercial
production activities. Advertising rates are based upon a variety of factors,
including a program's popularity among the viewers an advertiser wishes to
attract, the number of advertisers competing for the available time, the size
and demographic makeup of the market served by the station, and the availability
of alternative advertising media in the market area. Rates are also determined
by a station's overall ratings and share in its market, as well as the station's
ratings and share among particular demographic groups which an advertiser may be
targeting. Because broadcast television stations rely on advertising revenues,
declines in advertising budgets, particularly in recessionary periods, adversely
affect the broadcast industry, and as a result may contribute to a decrease in
the revenues of broadcast television stations.
All television stations in the country are grouped by Nielsen, a national
audience measuring service, into approximately 210 generally recognized
television markets that are ranked in size according to various formulae based
upon actual or potential audience. Each DMA is determined as an exclusive
geographic area consisting of all counties in which the home-market commercial
stations receive the greatest percentage of total viewing hours. Nielsen
periodically publishes data on estimated audiences for the television stations
in the various television markets throughout the country. The estimates are
expressed in terms of the percentage of the total potential audience in the
market viewing a station (the station's "rating") and of the percentage of the
audience actually watching television (the station's "share"). Nielsen provides
such data on the basis of total television households and selected demographic
groupings in the market. Nielsen uses two methods of
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determining a station's ability to attract viewers. In larger geographic
markets, ratings are determined by a combination of meters connected directly to
selected television sets and weekly diaries of television viewing, while in
smaller markets only weekly diaries are completed. None of the Company's markets
are metered.
Whether or not a station is affiliated with one of the three major networks
(NBC, ABC or CBS) has a significant impact on the composition of the station's
revenues, expenses and operations. A typical network affiliate receives the
majority of its programming each day from the network. This programming, along
with cash payments ("network compensation"), is provided to the affiliate by the
network in exchange for a substantial majority of the advertising time during
network programs. The network then sells this advertising time and retains the
revenues. The affiliate retains the revenues from time sold during breaks in and
between network programs and programs the affiliate produces or purchases from
non-network sources. The Fox Broadcasting Company ("Fox") has established a
network of independent stations whose operating characteristics are similar to
the major network affiliate stations although the number of hours of network
programming for Fox affiliates is less than that of the three major networks. In
recent years, Fox has effectively evolved into the fourth network.
A fully independent station such as KCAL purchases or produces all of the
programming which it broadcasts, resulting in generally higher programming costs
than those of major-network affiliates in the same market. However, under
increasingly popular barter arrangements, a national program distributor may
receive advertising time in exchange for programming it supplies, with the
station paying a reduced fee or no cash fee at all for such programming. Because
the major networks regularly provide first-run programming during prime time
viewing hours, their affiliates generally (but do not always) achieve higher
audience shares, but have substantially less inventory of advertising time to
sell during those hours than independent stations, since the major networks use
almost all of their affiliates' prime time inventory for network shows. The
independent station is, in theory, able to retain its entire inventory of
advertising and all of the revenue obtained therefrom. The independent stations'
smaller audiences and greater inventory during prime time hours generally result
in lower advertising rates charged and more advertising time sold during those
hours, as compared with major affiliates' larger audiences and limited
inventory, which generally allow the major-network affiliates to charge higher
advertising rates for prime time programming. By selling more advertising time,
the independent station typically achieves a share of advertising revenues in
its market greater than its audience ratings.
Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations, and to a lesser extent, with radio
stations and cable system operators serving the same market. Traditional network
programming, and recently Fox programming, generally achieve higher audience
levels than syndicated programs aired by independent stations. However, since
greater amounts of advertising time are available for sale by independent
stations and Fox affiliates, they typically achieve a share of the television
market advertising revenues greater than their share of the market's audience.
Public broadcasting outlets in most communities compete with commercial
broadcasters for viewers.
Developments in the Television Market. Through the 1970s, network television
broadcasting enjoyed virtual dominance in viewership and television advertising
revenue, because network-affiliated stations competed only with each other in
most local markets. Beginning in the 1980s, however, this level of dominance
began to change as more local stations were authorized by the Federal
Communications Commission ("FCC") and marketplace choices expanded with the
growth of independent stations and cable television services. See "-Federal
Regulation of Television Broadcasting" below.
Cable television systems, which grew at a rapid rate beginning in the early
1970s, were initially used to retransmit broadcast television programming to
paying subscribers in areas with poor broadcast signal reception. In the
aggregate, cable-originated programming has emerged as a significant competitor
for viewers of broadcast television programming, although no single cable
programming network regularly
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attains audience levels amounting to more than any major broadcast network. With
the increase in cable penetration in the 1980s, the advertising share of cable
networks has increased. Notwithstanding such increases in cable viewership and
advertising, over-the-air broadcasting remains the dominant distribution system
for mass market television advertising. Basic cable penetration (the percentage
of television households which are connected to a cable system) in the Company's
television markets ranges from 54% to 67%.
In acquiring programming to supplement network programming, network
affiliates compete with independent stations and Fox affiliates in their
markets. Cable systems generally do not compete with local stations for
programming. Although various national cable networks from time to time have
acquired programs that would have otherwise been offered to local television
stations, such programs would not likely have been acquired by such stations in
any event. In the past, the cost of programming increased dramatically,
primarily because of an increase in the number of new independent stations and a
shortage of desirable programming. Recently, however, program prices have
stabilized as a result of increases in the supply of programming.
COMPETITION
Competition in the television industry takes place on several levels:
competition for audience, competition for programming (including news) and
competition for advertisers. Additional factors that are material to a
television station's competitive position include signal coverage and assigned
frequency. The broadcasting industry is continually faced with technological
change and innovation, the possible rise in popularity of competing
entertainment and communications media, and governmental restrictions or actions
of federal regulatory bodies, including the FCC and the Federal Trade
Commission, any of which could have a material effect on the Company's
operations.
Audience. Stations compete for audience on the basis of program popularity,
which has a direct effect on advertising rates. A majority of the daily
programming on the Company's stations is supplied by the network with which each
station is affiliated. In those periods, the stations are totally dependent upon
the performance of the network programs in attracting viewers. There can be no
assurance that such programming will achieve or maintain satisfactory viewership
levels in the future. Non-network time periods are programmed by the station
with a combination of self-produced news, public affairs and other entertainment
programming, including news and syndicated programs purchased for cash, cash and
barter, or barter only.
Independent stations, whose number has increased significantly over the past
decade, have also emerged as viable competitors for television viewership share.
Each of Time Warner, Inc. and Paramount Communications, Inc. has recently
launched a new television network and have entered into affiliation agreements
with certain independent commercial television stations. The programming made
available by these new networks is presently limited. The Company is unable to
predict the effect, if any, that such networks will have on the future results
of the Company's operations.
In addition, the development of methods of television transmission of video
programming other than over-the-air broadcasting, and in particular the growth
of cable television, has significantly altered competition for audience in the
television industry. These other transmission methods can increase competition
for a broadcasting station by bringing into its market distant broadcasting
signals not otherwise available to the station's audience and also by serving as
a distribution system for non-broadcast programming originated on the cable
system. Through the 1970s, network television broadcasting enjoyed virtual
dominance in viewership and television advertising revenues because network-
affiliated stations competed only with each other in most local markets.
Although cable television systems were initially used to retransmit broadcast
television programming to paid subscribers in areas with poor broadcast signal
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reception, significant increases in cable television penetration occurred
throughout the 1970s and 1980s in areas that did not have signal reception
problems. As the technology of satellite program delivery to cable systems
advanced in the late 1970s, development of programming for cable television
accelerated dramatically, resulting in the emergence of multiple, national-scale
program alternatives and the rapid expansion of cable television and higher
subscriber growth rates. Historically, cable operators have not sought to
compete with broadcast stations for a share of the local news audience.
Recently, however, certain cable operators have elected to compete for such
audiences, and the increased competition could have an adverse effect on the
Company's advertising revenues.
Other sources of competition include home entertainment systems (including
video cassette recorder and playback systems, videodisks and television game
devices), "wireless cable" service, satellite master antenna television systems,
low power television stations, television translator stations and, most
recently, direct broadcast satellite video distribution services which transmit
programming directly to homes equipped with special receiving antennas.
Further advances in technology may increase competition for household
audiences and advertisers. Video compression techniques, now under development
for use with current cable channels or direct broadcast satellites, are expected
to reduce the bandwidth required for television signal transmission. These
compression techniques, as well as other technological developments, are
applicable to all video delivery systems, including over-the-air broadcasting,
and have the potential to provide vastly expanded programming to highly targeted
audiences. Reduction in the cost of creating additional channel capacity could
lower entry barriers for new channels and encourage the development of
increasingly specialized "niche" programming. This ability to reach very
narrowly defined audiences is expected to alter the competitive dynamics for
advertising expenditures. The Company is unable to predict the effect that these
or other technological changes will have on the broadcast television industry or
the future results of the Company's operations.
Programming. Competition for programming involves negotiating with national
program distributors or syndicators which sell first-run and rerun packages of
programming. The stations compete against in-market broadcast station
competitors for exclusive access to off-network reruns (such as Roseanne) and
first-run product (such as Entertainment Tonight) in their respective markets.
Cable systems generally do not compete with local stations for programming,
although various national cable networks from time to time have acquired
programs that would have otherwise been offered to local television stations.
Competition for exclusive news stories and features is also endemic in the
television industry.
Time Warner, Inc. and Paramount Communications, Inc., each of which has
recently launched a new television network, also own or control a major
production studio. Outside production studios are the primary source of
programming for the networks. It is uncertain whether in the future such
programming, which is generally subject to short-term agreements between the
studios and the networks, will be moved to the new networks.
Advertising. Advertising rates are based upon the size of the market in
which the station operates, a program's popularity among the viewers that an
advertiser wishes to attract, the number of advertisers competing for the
available time, the demographic makeup of the market served by the station, the
availability of alternative advertising media in the market area, aggressive and
knowledgeable sales forces, and development of projects, features and programs
that tie advertiser messages to programming. In addition to competing with other
media outlets for audience share, the Company's stations also compete for
advertising revenues, which comprise the primary source of revenues for the
Subsidiaries. The Company's stations compete for such advertising revenues with
other television stations in their respective markets, as well as with other
advertising media, such as newspapers, radio stations, magazines, outdoor
advertising, transit advertising, yellow page directories, direct mail and local
cable systems. Competition for advertising
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dollars in the broadcasting industry occurs primarily within individual markets.
Generally, a television broadcasting station in the market does not compete with
stations in other market areas. The Company's television stations are located in
highly competitive markets.
NETWORK AFFILIATION AGREEMENTS
Each of the Company's network-affiliated stations is affiliated with its
network pursuant to an affiliation agreement (an "Affiliation Agreement"). WKRN,
WTEN, WRIC, WATE, WBAY and WTVO are affiliated with ABC. KELO, WLNS, KLFY and
WKBT are affiliated with CBS. The Quad Cities Station (KWQC) is affiliated with
NBC.
In October 1994, the Company and ABC entered into new Affiliation Agreements
for five of the Company's ABC-affiliated stations. Effective August 14, 1995,
the Company switched the affiliation of its then sole NBC affiliate to ABC. In
addition, in October 1994, the Company and CBS entered into new Affiliation
Agreements for three of the Company's CBS-affiliated stations. Such Affiliation
Agreements with ABC and CBS provide for contract terms of ten years. The
Affiliation Agreement for the Quad Cities Station provides for a ten-year term,
with an expiration date of November 1, 2004. On April 3, 1996, the Company and
CBS entered into new affiliation agreements for KELO and each of its satellite
stations which expire on October 2, 2000. Each Affiliation Agreement is
automatically renewed for successive terms subject to either party's right to
terminate at the end of any term after giving proper notice thereof. Under the
Affiliation Agreements, the networks also possess, under certain circumstances
(such as a transfer of control or adverse changes in signal, operating hours or
other mode of operation), the right to terminate the Affiliation Agreement on
prior written notice ranging between 15 and 45 days depending on the Affiliation
Agreement. In addition, ABC has the right upon 60 days prior notice to terminate
the Affiliation Agreement with respect to an ABC-affiliated station in a
particular market if it acquires a different station within such market.
Each Affiliation Agreement provides the affiliated station with the right to
broadcast all programs transmitted by the network with which it is affiliated.
In exchange, the network has the right to sell a substantial majority of the
advertising time during such broadcasts. In addition, for each hour that the
station elects to broadcast network programming, the network pays the station a
fee, specified in each Affiliation Agreement, which varies with the time of day.
Typically, "prime-time" programming (Monday through Saturday from 8:00 p.m.-
11:00 p.m., Eastern time, and Sunday from 7:00 p.m.-11:00 p.m., Eastern time)
generates the highest hourly rates. Management believes that programming costs
are generally lower for network affiliates than for independent television
stations and prime-time network programs generally achieve higher ratings than
non-network programs. Management believes that the Company's relationship with
the networks is excellent and that all of its stations are highly valued
affiliates.
As an independent station, KCAL purchases all of its programming, resulting
in proportionally higher programming costs for the station. In this regard, KCAL
retains its entire inventory of advertising and all of the revenue obtained
therefrom. Furthermore, KCAL enters into barter arrangements whereby program
distributors may receive advertising time in exchange for the programming they
provide.
FEDERAL REGULATION OF TELEVISION BROADCASTING
Existing Regulation. Television broadcasting is subject to the jurisdiction
of the FCC under the Communications Act of 1934, as amended (the "Communications
Act"), most recently amended in significant respects by the Telecommunications
Act of 1996 (the "1996 Act"). The Communications Act empowers the FCC, among
other things: to determine the frequencies, location and power of broadcast
stations; to issue, modify, renew and revoke station licenses; to approve the
assignment or transfer of control of broadcast licenses; to regulate the
equipment used by stations; and to impose penalties for violations of the
Communications Act or FCC regulations. The FCC has also adopted new children's
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programming regulations for television broadcasters that effectively require
most television broadcasters to air at least three hours per week of programming
designed to meet the educational and informational needs of children age 16 and
younger. Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures or, for
particularly egregious violations, the revocation of a license. The Company's
business will be dependent upon its continuing ability to hold television
broadcasting licenses from the FCC.
License Grant and Renewal. As a result of the 1996 Act, broadcast licenses
are now generally granted or renewed for terms of eight years, though licenses
may be renewed for a shorter period upon a finding by the FCC that the "public
interest, convenience and necessity" would be served thereby. The Company must
apply for renewal of each broadcast license. At the time an application is made
for renewal of a license, parties in interest may file petitions to deny, and
such parties, as well as other members of the public, may comment upon the
service the station has provided during the preceding license term and urge
denial of the application. While broadcast licenses are typically renewed by
the FCC, even when petitions to deny are filed against renewal applications,
there can be no assurance that the licenses for the Company's television
stations will be renewed at their expiration dates or, if renewed, that the
renewal terms will be for the maximum eight-year period. The non-renewal or
revocation of one or more of the Company's primary FCC licenses could have a
material adverse effect on the Company's operations. The main station licenses
for the Company's television stations expire on the following dates: WRIC,
October 1, 2004; KLFY, June 1, 2005; WKRN, August 1, 2005, WATE, August 1, 2005;
WLNS, October 1, 2005; WBAY, December 1, 2005; WKBT, December 1, 2005; WTVO,
December 1, 1997; KWQC, February 1, 2006; KCLO, April 1, 1998; KELO, April 1,
1998; KDLO and KPLO (satellites of KELO), April 1, 1998; KCAL, December 1, 1998;
WTEN, June 1, 1999; and WCDC, WTEN's satellite station, April 1, 1999.
Applications for renewal of the licenses for WTVO, KCLO, KELO, KDLO and KPLO are
now pending before the FCC; pursuant to Section 307(c)(3) of the Communications
Act, a station's license continues in effect pending final action on the renewal
application by the FCC.
Multiple Ownership Restrictions. FCC regulations and the 1996 Act govern the
multiple ownership of radio and television broadcast stations and certain other
media. These rules or statutory standards include limits on the number of radio
and television stations that may be owned both on a national and local basis.
The 1996 Act eliminates the FCC's national ownership limits in the form of caps
on the number of television and radio broadcast stations that may be commonly
owned. Additionally, it raises the national audience coverage restriction on
television station ownership from 25% to 35% of the national audience.
On a local basis, FCC rules currently allow an entity to have an
attributable interest (as defined below) in only one television station in a
market (the so-called TV "duopoly" rule). In addition, FCC rules generally
prohibit an individual or entity from having an attributable interest in a
television station and a radio station, daily newspaper or cable television
system that is located in the same local market area served by the television
station. The 1996 Act leaves the television duopoly ban in place but directs
the FCC to conduct a rulemaking to determine whether the restriction should be
retained, modified, or eliminated. It also directs the FCC to modify its waiver
policy with respect to the TV/radio cross-ownership restriction (the so-called
"one-to-a-market" rule) by extending it to radio-television combinations in the
top 50 markets. In a pending rulemaking proceeding, the FCC is considering,
among other things (i) whether to extend the presumptive waiver of the one-to-a-
market rule from the top 25 to the top 50 markets; (ii) whether to modify the
television duopoly rule to allow common ownership of two television stations in
separate DMAs as long as the stations do not have overlapping Grade A contours;
and (iii) whether to permit some exceptions to the duopoly rule in given markets
and under certain circumstances involving UHF/UHF and UHF/VHF stations. In that
same proceeding, the FCC also is considering whether to grandfather existing
television Local Marketing Agreements ("LMAs") if
17
<PAGE>
such agreements are deemed attributable in a companion proceeding (see below)
proposing changes to the FCC's attribution rules.
The FCC has promulgated rules that limit the ability of individuals and
entities to own or have an ownership interest above a certain level (known as an
"attributable" interest) in broadcast television stations and certain other
media entities. These rules include limits on the number of radio and
television stations in which an entity may have an "attributable" interest both
on a local and on a national basis. In the case of corporations holding
broadcast licenses, all officers and directors of a licensee, and stockholders
who, directly or indirectly, have the right to vote 5% or more of the
outstanding voting stock of a licensee, are generally deemed to have an
"attributable" interest. Certain institutional investors who exert no control
or influence over a licensee may own up to 10% of such outstanding voting stock
before attribution occurs. Under FCC regulations, debt instruments, non-voting
stock and certain limited partnership interests (where the licensee certifies
that the limited partners are not "materially involved" in the management or
operation of the subject media property), as well as voting stock held by non-
minority stockholders in situations where there is a single majority stockholder
are generally not subject to attribution. In addition, the FCC's cross-interest
policy, which precludes an individual or entity from having a "meaningful" but
not "attributable" interest in one media property and an "attributable" interest
in a broadcast, cable or newspaper property in the same area, may be invoked by
the FCC in certain circumstances to reach interests not expressly covered by the
multiple ownership rules.
In a rulemaking proceeding currently pending before the FCC regarding the
attribution rules, the FCC is considering: (1) whether to make non-voting stock
attributable in some instances; (2) whether to raise certain attribution
thresholds; (3) whether to change the insulation standards for non-attribution
of certain limited partnership interests or to develop new standards for certain
members of limited liability companies; (4) whether a combination of debt and
equity exceeding a certain threshold should be considered an attributable
interest; and (5) the circumstances, if any, in which an LMA should be
attributed to an entity holding the right to program more than 15% of the time
of a television station.
Alien Ownership Restrictions. The Communications Act restricts the ability
of foreign entities to own or hold interests in broadcast licensees. Foreign
governments, representatives of foreign governments, non-citizens,
representatives of non-citizens and corporations or partnerships organized under
the laws of a foreign nation are barred from holding broadcast licenses. Non-
citizens, collectively, may directly or indirectly own up to one-fifth of the
capital stock of a licensee. In addition, a broadcast license may not be
granted to or held by any corporation that is controlled, directly or
indirectly, by any other corporation of which more than one-fourth of its
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. Restrictions on alien ownership also apply, in
modified form, to other types of business organizations, including partnerships.
Proposed Legislation and Regulation. The U.S. Congress and the FCC
currently have under consideration, and may in the future adopt, new laws,
regulations and policies regarding a wide variety of matters which could,
directly or indirectly, affect the operation and ownership of the Company's
broadcast properties. In addition to the proposed changes noted above, such
matters include, for example, the following: spectrum use fees; political
advertising rates (including proposals for free time to some candidates);
potential restrictions on the advertising of certain products (such as beer,
wine and other alcoholic beverages); the rules and policies to be applied in
enforcing the FCC's equal employment opportunity regulations; the standards to
govern the evaluation of television programming and advertising directed toward
children; and violent and indecent programming. The Company is unable to
18
<PAGE>
predict the outcome of future federal legislation or the impact of any such laws
or regulations on the Company's operations.
The 1992 Cable Act. On October 5, 1992, Congress enacted the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"). Some of its provisions, such as signal carriage and retransmission
consent, have a direct effect on television broadcasting. Other provisions,
some of which have been changed or substantially modified by the 1996 Act, are
focused exclusively on the regulation of cable television but can still have an
indirect effect on the Company because of the competition between over-the-air
television stations and cable systems.
The signal carriage, or "must-carry", provisions of the 1992 cable Act and
FCC rules require cable operators to carry the signals of local commercial and
non-commercial television stations and certain low power television stations.
The 1992 Cable Act also includes a retransmission consent provision that
prohibits cable operators and other multichannel video programming providers
from carrying broadcast stations without obtaining their consent in certain
circumstances. The must carry and retransmission consent provisions are related
in that television broadcasters, on a cable system-by-system basis, must make a
choice once every three years whether to proceed under the must carry rules or
to waive that right to mandatory but uncompensated carriage and, instead, to
negotiate a grant of retransmission consent to permit individual cable systems
to carry their signals in exchange for some form of consideration. Under rules
adopted to implement these must carry and retransmission consent provisions,
local television stations were required to make their initial elections of must
carry or retransmission consent by June 17, 1993. Elections for the new three
year period commencing January 1, 1997 and ending December 31, 1999 were made on
or before October 1, 1996.
On March 31, 1997, in a 5-4 decision, the U.S. Supreme court upheld the
constitutionality of the must-carry provisions of the 1992 Cable Act. As a
result, the regulatory scheme promulgated by the FCC to implement the must-carry
provisions of the 1992 Cable Act will remain in effect. Whether and to what
extent such must-carry rights will extend to the new digital television signals
(see below) to be broadcast by licensed television stations (including those
owned by the Company) over the next several years is still a matter to be
determined in a rulemaking proceeding likely to be initiated by the FCC in 1998.
The 1992 Cable Act was amended in several important respects by the 1996
Act. Most notably, the 1996 Act repeals the cross-ownership ban between cable
and telephone entities and the FCC's former video dialtone rules (permitting
telephone companies to enter the video distribution services market under
several new regulatory options). The 1996 Act also (a) eliminates the broadcast
network/cable cross-ownership limitation and (b) lifts the statutory ban on
TV/cable cross-ownership (without, however, eliminating the separate FCC
regulatory restriction on TV/cable cross-ownership, which remains in place).
Advanced Digital Television Service. On April 3, 1997, the FCC adopted new
rules which will allow television broadcasters to provide advanced digital
television ("DTV") service in the United States. Implementation of DTV will
improve the technical quality of television signals receivable by viewers, and,
if implemented as anticipated, will enable television broadcasters the
flexibility to provide new services, including high-definition television
("HDTV") and data broadcasting. The FCC's action, affirmed and modified by
further orders released on February 23, 1998, includes a new table of allotments
for DTV by which all eligible existing broadcasters are assigned a second
channel on which to provide DTV service. The allotment plan is based on a so-
called "core spectrum" for DTV service, consisting of channels 2-51. However,
because it was not technically feasible, at the outset, to assign DTV channels
to all eligible stations within the "core spectrum", it will be necessary for
some TV stations to initiate DTV service on a channel other than 2-51. Then,
following the more complete
19
<PAGE>
implementation of DTV service (in the year 2006 or beyond, when the FCC reclaims
TV channels outside the core spectrum for other uses), such stations will have
to move their DTV service to another channel that is within the "core spectrum"
(i.e., either the channel on which they are currently broadcasting analog
service or a new channel assigned by the FCC). Four of the Company's stations
fall into this category (see chart below).
Under the new service rules for DTV, television broadcasters will be allowed
to use their DTV channels according to their best business judgment. Such uses
can include multiple standard definition program channels, data transfer,
subscription video, interactive materials and high-quality audio signals.
Television broadcasters will, however, be required to provide a free digital
video programming service that is at least comparable (in hours broadcast and in
picture quality) to today's analog service. Broadcasters will not be required
to air HDTV programming or, initially, to simulcast their analog programming on
the digital channel. Affiliates of ABC, CBS, NBC and FOX in the top television
markets will be required to be on the air with a digital signal by May 1, 1999 -
- - although certain television licensees in these large markets have voluntarily
committed to initiating DTV service by late 1998. Affiliates of the four major
networks in markets 11-30 will be required to be on the air with a digital
signal by November 1, 1999. For all remaining commercial television stations,
including all of the Company's stations, the FCC's new mandated timetable for
the construction of DTV facilities is May 1, 2002.
20
<PAGE>
<TABLE>
<CAPTION>
STATION (MARKET) ANALOG DTV FCC MANDATED
CHANNEL CHANNEL TIMETABLE FOR
CONSTRUCTION OF
DTV FACILITIES
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KCAL, Los Angeles, California 9 43 May 1, 2002
- --------------------------------------------------------------------------------------------------
WKRN, Nashville, Tennessee 2 27 May 1, 2002
- --------------------------------------------------------------------------------------------------
WTEN, Albany, New York 10 26 May 1, 2002
- --------------------------------------------------------------------------------------------------
WCDC, Adams, Massachusetts 19 36 May 1, 2002
(satellite of WTEN)
- --------------------------------------------------------------------------------------------------
WRIC, Richmond, Virginia 8 22 May 1, 2002
- --------------------------------------------------------------------------------------------------
WATE, Knoxville, Tennessee 6 26 May 1, 2002
- --------------------------------------------------------------------------------------------------
WBAY, Green Bay, Wisconsin 2 23 May 1, 2002
- --------------------------------------------------------------------------------------------------
KWQC, Quad Cities 6 56 May 1, 2002
- --------------------------------------------------------------------------------------------------
WLNS, Lansing, Michigan 6 59 May 1, 2002
- --------------------------------------------------------------------------------------------------
KELO, Sioux Falls, South Dakota 11 32 May 1, 2002
- --------------------------------------------------------------------------------------------------
KDLO, Florence, South Dakota 3 25 May 1, 2002
(satellite of KELO)
- --------------------------------------------------------------------------------------------------
KPLO, Reliance, South Dakota 6 14 May 1, 2002
(satellite of KELO)
- --------------------------------------------------------------------------------------------------
KCLO, Rapid City, South Dakota 15 16 May 1, 2002
(satellite of KELO)
- --------------------------------------------------------------------------------------------------
KLFY, Lafayette, Louisiana 10 56 May 1, 2002
- --------------------------------------------------------------------------------------------------
WKBT, La Crosse-Eau Claire, WI 8 53 May 1, 2002
- --------------------------------------------------------------------------------------------------
WTVO, Rockford, Illinois 17 16 May 1, 2002
- --------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Although the 1996 Act generally does not address the FCC's DTV transition
plan, it does direct the FCC to limit eligibility for DTV licenses to existing
television broadcast licensees (which it has done) and to adopt regulations to
permit licensees to offer ancillary or supplementary services on designated
frequencies. Such regulations, still to be adopted by the FCC, must preserve
DTV technology and quality and cover any ancillary or supplementary service
regulations applicable to analogous services (except that no auxiliary or
supplemental service shall have "must-carry" rights). Moreover, if a DTV
licensee is directly or indirectly compensated for the provision of ancillary or
supplementary services, the FCC is directed to collect an annual fee (or some
other method of payment) that (1) recovers an amount that would have been
recovered had such services been licensed pursuant to a spectrum auction and (2)
avoids unjust enrichment. The 1996 Act also states that if broadcasters are
issued a transition channel, either the original or additional license held by
the broadcaster must be surrendered to the FCC for reallocation, reassignment,
or both. Proposals have been advanced in Congress and within the current
Administration to auction the returned channels for other uses.
A further new development centers on whether the award of new DTV channels
to all television broadcasters should be accompanied by certain newly defined
public interest responsibilities. On March 11, 1997, President Clinton issued
an executive order establishing a special advisory panel to make recommendations
concerning specific public interest obligations that might be imposed on
television licensees in exchange for the awarding of digital television
licenses. The FCC's recent decision to assign DTV channels to all incumbent
television station licensees notes that a further, separate proceeding will be
undertaken to explore these issues. In the meantime, the FCC put all television
broadcasters on notice that (a) existing public interest requirements continue
to apply to all broadcast licensees and (b) the agency may adopt new or
additional public interest responsibility rules for digital television.
During the extended debate on these issues in Congress over the past two
years, some members proposed authorizing the FCC to auction DTV channels, which
would have required existing broadcasters to bid against other potential users
of the spectrum. The more recent focus, however, has been on proposals to
auction the analog channels once they have been returned by television
broadcasters, as well as on such matters as whether to impose any type of
spectrum fee on broadcasters for the use of the DTV channels and whether to
establish discrete guidelines for the eventual cessation of analog television
service. Such measures could be contained in budget legislation or a stand-
alone spectrum law. Even without such legislative actions, the Company will
incur significant costs in the conversion to DTV. The Company is unable to
predict the extent or timing of consumer demand for any DTV services or the
overall effect the transition to DTV might have on the Company's business.
Non-FCC Regulation. Television broadcast stations may be subject to a
number of other federal regulations, as well as numerous state and local laws,
that can either directly or indirectly impact their operations. Included in
this category are rules and regulations of the Federal Aviation Administration
affecting tower height, location and marking, plus federal, state and local
environmental and land use restrictions.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act, the 1996 Act, or the 1992 Cable Act, nor
of the regulations and policies of the FCC thereunder. Proposals for additional
or revised regulations and requirements are pending before and are being
considered by Congress and federal regulatory agencies from time to time. Also,
various of the foregoing matters are now, or may become, the subject of court
litigation, and the Company cannot predict the outcome of any such litigation or
the impact on its broadcast business.
22
<PAGE>
Employees
Approximately 200 of the Company's employees are represented by collective
localized bargaining agreements at various stations.
ITEM 2. PROPERTIES.
The Company's principal executive offices are located at 599 Lexington
Avenue, New York, New York 10022. The Company leases approximately 9,546 square
feet of space in New York (the "Master Lease"). The Master Lease expires in the
year 2000 with respect to 7,600 square feet and in 2002 with respect to 1,946
square feet.
The types of properties required to support television stations include
offices, studios, transmitter sites and antenna sites. A station's studios are
generally housed with its offices in downtown or business districts. The
transmitter sites and antenna sites are generally located in elevated areas so
as to provide maximum market coverage. The following table contains certain
information describing the general character of the Company's properties.
<TABLE>
<CAPTION>
Metropolitan Area Owned or
and Use Leased Approximate Size
--------------------- -------- ----------------
<S> <C> <C> <C>
KCAL................... Los Angeles, California
-----------------------
Office and studio Owned 30,000 sq. ft.
Office and studio Leased 16,432 sq. ft.
Transmission tower site Leased 60,000 sq. ft.
WKRN................... Nashville, Tennessee
--------------------
Office and studio Owned 43,100 sq. ft.
Land Owned 2.72 acres
Transmission tower site Owned 49.33 acres
WTEN................... Albany, NY
----------
Office and studio 39,736 sq. ft.
Land 2.56 acres
New Scotland, NY
-----------------
Transmission tower site
-Land Owned 5.38 acres
Mt. Greylock, Adams, MA
-----------------------
Transmission tower site
-Land Leased 15,000 sq. ft.
WRIC................... Richmond, VA
------------
Office and studio Owned 34,000 sq. ft.
Land Owned 4 acres
Petersburg, VA
--------------
Transmission site Lease of space --
on tower
Chesterfield Co., VA(1)
------------------------
Transmitter building Owned 900 sq. ft.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Area Owned or
and Use Leased Approximate Size
--------------------- -------- ----------------
<S> <C> <C> <C>
WATE................. Knoxville, TN
-------------
Office and studio Owned 34,666 sq. ft.
Land Owned 2.65 acres
Knox County, TN
---------------
Transmission tower site Owned 9.57 acres
House Mountain, TN
------------------
Prospective tower site Owned 5 acres
WBAY................. Green Bay, WI
-------------
Office and studio Owned 90,000 sq. ft.
Land Owned 1.77 acres
DePere, WI
-----------
Transmission tower site Owned 3.54 acres
KWQC................. Davenport, Iowa
---------------
Office and Studio Owned 59,786 sq. ft.
Land Owned 86,978 sq. ft.
Alternate satellite dish site Leased 900 sq. ft
Bettendorf, Iowa
----------------
Transmission tower site Owned 68.688 acres (2
parcels)
KELO................. Sioux Falls, South Dakota
-------------------------
Land, office and studio Owned 23,700 sq. ft.
Transmission tower site Owned 58.23 acres
Auxiliary transmission tower site Leased 26.42 acres
Reliance, South Dakota
----------------------
Transmission tower site Owned 5.83 acres
Rapid City, South Dakota
------------------------
Office and studio Leased 3,555 sq. ft.
Transmission tower site Owned 1 acre
Philip, South Dakota
--------------------
Transmission tower Leased 8.23 acres
Wall, South Dakota
------------------
Transmission tower site Leased 4 acres
Beresford, South Dakota
-----------------------
Transmission tower site Leased 2.1 acres
DeSmet Township, South Dakota
------------------------------
Doppler radar tower site Owned 0.55 acres
Garden City, South Dakota
-------------------------
Transmission tower site Owned 1 acre
Auxiliary transmission tower Owned 1 acre
Farmer, South Dakota
--------------------
Transmission tower site Owned 1 acre
Mt. Vernon, South Dakota
------------------------
Transmission tower site Owned 1 acre
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Metropolitan Area Owned or
and Use Leased Approximate Size
--------------------- -------- ----------------
<S> <C> <C>
White Lake, South Dakota
------------------------
Transmission tower site Owned 1 acre
New Underwood, South Dakota
---------------------------
Transmission tower site Leased 200 sq. ft.
Huron, South Dakota
-------------------
Doppler radar tower site Leased 480 sq. ft.
WLNS................. Lansing, Michigan
-----------------
Office and studio Owned 19,000 sq. ft.
Land Owned 4.75 acres
Meridian, Michigan
------------------
Transmission tower site Owned 40 acres
KLFY................. Lafayette, Louisiana
--------------------
Office and studio Owned 24,800 sq. ft.
Land Owned 3.17 acres
Maxie, Louisiana
----------------
Transmission tower site Leased 8.25 acres
WKBT................. La Crosse, Wisconsin
--------------------
Office and studio Owned 12,600 sq. ft.
Gailesville, Wisconsin
----------------------
Transmission tower site Owned 133,600 sq. ft.
WTVO................. Rockford, Illinois
------------------
Office and studio Owned 15,200 sq. ft.
Land Owned 14 acres
</TABLE>
- ----------------------
(1) Station owns tower structure and related building, with non-exclusive
easement for access to underlying property, which is owned by a third
party.
ITEM 3. LEGAL PROCEEDINGS.
The Company currently and from time-to-time is involved in litigation
incidental to the conduct of its business. There are no pending legal
proceedings to which the Company or any of the Subsidiaries is a party, or to
which any of their respective properties is subject, which, in the opinion of
Company management, is likely to have a material adverse effect on the Company's
business or financial condition.
25
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company are as follows:
Name Age Position
---- --- --------
Vincent J. Young 50 Chairman and Director
Adam Young 84 Treasurer and Director
Ronald J. Kwasnick 51 President and Director
James A. Morgan 49 Executive Vice President
and Secretary
Deborah A. McDermott 43 Executive Vice President-
Operations
Vincent J. Young has been the Chairman and a director of the Company since
its inception in 1986. Mr. Young is also a member of the Compensation and Audit
Committees of the Company. Mr. Young co-founded the Company with Adam Young.
Vincent Young is also a director and the Chairman of each of the corporate
Subsidiaries. Prior to becoming the Chairman of the Company, he worked at Adam
Young Inc. for ten years in various marketing and representative capacities,
including Vice-President, General Sales Manager, Eastern Sales Manager and
Manager of the Chicago office. Vincent Young is the son of Adam Young.
Adam Young has been the Treasurer and a director of the Company since its
inception. Mr. Young is also a director and an executive officer of each of the
corporate Subsidiaries. Mr. Young founded Adam Young Inc. in 1944 and has been
active in television station representation since that time. Prior to the
formation of the Company, Mr. Young owned minority interests in two radio
stations, and a 30% interest in a television station in Youngstown, Ohio. Mr.
Young served on the Board of Directors of the Television Advertising Bureau from
1977 to 1979 and has twice been President of the Station Representative
Association, initially from 1955 through 1957, then from 1978 through 1980.
Ronald J. Kwasnick has been the President of the Company since its inception
and became a director in December 1994. From 1986 to 1989, Mr. Kwasnick was
also the General Manager of WLNS, the Company's station in the Lansing, Michigan
market. Mr. Kwasnick joined the Company in 1986, after working as Executive
Vice President/Television for Adams Communications since 1984, where he served
as General Manager of a group of network-affiliated television stations.
Previously, since 1980, he had been the General Manager and President of WILX in
Lansing, Michigan. Prior to that, he spent ten years working in various
television sales management positions.
James A. Morgan joined the Company as its Executive Vice President in March
1993 and became the Secretary of the Company in September 1994. Mr. Morgan is
also the Executive Vice President and Secretary of each of the corporate
Subsidiaries. From 1984 until he joined the Company, he was a director and
Senior Investment Officer at J.P. Morgan Capital Corporation involved in
investing the firm's own capital in various leveraged and early growth stage
companies.
26
<PAGE>
Deborah A. McDermott became the Executive Vice President-Operations of the
Company in May 1996, and has been General Manager of WKRN, the Company's ABC
network affiliate serving the Nashville, Tennessee market, since 1990. From 1986
to 1989, when WKRN was acquired by the Company, and thereafter through February
1990, she was Station Manager of that station.
All executive officers serve at the discretion of the Board of Directors.
27
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Class A Common Stock is traded on the Nasdaq National Market
("Nasdaq") under the symbol YBTVA. The following table sets forth the range of
the high and low closing sales prices of the Class A Common Stock for the
periods indicated as reported by Nasdaq:
High Low
---- ---
Quarters Ended
March 31, 1996 $32.25 $25.00
June 30, 1996 38.25 27.75
September 30, 1996 41.50 29.00
December 31, 1996 36.00 26.25
March 31, 1997 $31.25 $22.13
June 30, 1997 34.63 24.00
September 30, 1997 38.50 30.50
December 31, 1997 41.25 32.00
At February 27, 1998, there were approximately 37 and 27 stockholders
of record of the Company's Class A and Class B Common Stock, respectively. Such
number does not include beneficial owners holding shares through nominee names.
RECENT SALE OF UNREGISTERED SECURITIES
On June 23, 1997, the Company sold $200.0 million aggregate principal
amount of 8 3/4% Senior Subordinated Notes (the "June 1997 Notes") due 2007 to
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchaser")
pursuant to a purchase agreement dated June 16, 1997 in a transaction not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an exemption under Section 4(2) of the Securities Act as a
transaction not involving a public offering. The Initial Purchaser subsequently
resold the June 1997 Notes to qualified institutional buyers in reliance upon
Rule 144A under the Securities Act of 1933. In July 1997, the June 1997 Notes
were exchanged for substantially identical notes registered pursuant to an
exchange offer filed under a Registration Statement on Form S-4 with the
Securities and Exchange Commission.
The net proceeds of the June 1997 Notes of approximately $198.2
million, after deducting the Initial Purchaser's discount, were used to repay
certain outstanding indebtedness including accrued interest under the Company's
then outstanding senior credit facility.
DIVIDEND POLICY
The Company has never paid a dividend on its Common Stock and does not
expect to pay dividends on its Common Stock in the foreseeable future. The terms
of the Senior Credit Facility and the Indentures relating to the Company's
outstanding Senior Subordinated Notes (the "Indentures") restrict the Company's
ability to pay cash dividends on its Common Stock. Under the Senior Credit
Facility, the Company's ability to pay dividends on its Common Stock is limited.
See Management's Discussion and Analysis-Liquidity. Under the Indentures, the
Company is not permitted to pay any dividends on its Common Stock unless at the
time of, and immediately after giving effect to, the dividend no default would
result under the Indentures and the Company would continue to have the ability
to incur indebtedness. In addition, under the Indentures, the dividend may not
exceed an amount equal to the Company's cash flow less a multiple of the
Company's interest expense, plus the net proceeds of the sale by the Company of
additional capital stock.
28
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected consolidated financial data of
the Company for the five years ended December 31, 1997, which have been derived
from the Company's audited consolidated financial statements.
The information in the following table should be read in conjunction
with "Management's Discussion and Analysis" and the Consolidated Financial
Statements and the notes thereto included elsewhere herein. The Company has not
paid dividends on its capital stock during any of the periods presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------ -------------- ----------- ------------- ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues (1)........................ $61,792 $78,788 $122,530 $154,343 $263,535
Operating expenses, including selling,
general and administrative expenses 28,460 33,800 51,614 64,689 106,708
Amortization of program license rights 3,969 4,400 6,418 11,034 38,279
Depreciation and amortization........... 13,859 15,280 24,572 30,946 46,941
Corporate overhead...................... 1,350 2,052 3,348 4,344 7,150
Non-cash compensation paid in
common stock (2)..................... - 6,497 1,167 848 967
------------ -------------- ----------- ------------- ------------
Operating income........................ 14,154 16,759 35,411 42,482 63,490
Interest expense........................ 17,778 19,105 32,644 42,838 64,103
Other expenses (income), net............ 141 3 233 (1,261) 493
------------ -------------- ----------- ------------- ------------
Net (loss) income before extraordinary
item and cumulative effect of change
in accounting principle.............. (3,765) (2,349) 2,534 905 (1,106)
Extraordinary loss on extinguishment
of debt (3).......................... - (6,027) (9,125) - (9,243)
Cumulative effect of change in
accounting principle (4)............. (1,520) - - - -
------------ -------------- ----------- ------------- ------------
Net (loss) income....................... $(5,285) $(8,376) $ (6,591) $905 $ (10,349)
============ ============== =========== ============= ============
Basic and diluted net (loss) income per
common share before extraordinary
item and cumulative effect of change
in accounting principle (5)......... $(3.82) $(3.62) $0.23 $0.08 $(0.08)
Basic and diluted net (loss) income per
common share(5)...................... (4.50) (5.42) (0.61) 0.08 (0.74)
Basic shares used in earnings per share
calculation.......................... 2,234,370 3,339,794 10,838,972 11,379,298 13,989,969
Diluted shares used in earnings per
share calculation.................... 2,234,370 3,339,794 11,071,154 11,783,122 13,989,969
OTHER FINANCIAL DATA:
Cash flow provided by operating
activities........................... $9,559 $8,527 $22,231 $24,707 $41,025
Payments for program license
liabilities.......................... 4,003 4,170 6,747 10,385 38,610
Broadcast cash flow (6)................. 29,329 40,818 64,169 79,269 118,217
Broadcast cash flow margin.............. 47.5% 51.8% 52.4% 51.4% 44.9%
Operating cash flow (7)................. 27,979 38,766 60,821 74,926 111,067
Capital expenditures.................... $686 $1,206 $4,484 $4,992 $9,034
BALANCE SHEET DATA (AS OF END OF
PERIOD):
Total assets............................ $158,231 $316,827 $296,098 $893,151 $845,966
Long-term debt (including current
portion)............................... 196,156 305,050 297,993 678,927 657,672
Stockholders' (deficit) equity.......... $(51,686) $(11,654) $(25,544) $80,504 $59,846
</TABLE>
29
<PAGE>
(1) Net revenues are total revenues net of agency and national representation
commissions.
(2) Represents non-cash charges for the issuance to key employees in 1994, 1996
and 1997 of shares of Common Stock and in 1995 of shares of Common Stock
and below-market options to purchase shares of Common Stock.
(3) Extraordinary loss for the years ended December 31, 1994, 1995 and 1997
resulted from the early extinguishment of debt. See Note 5 to Notes to
Consolidated Financial Statements.
(4) Cumulative effect of change in accounting principle for the year ended
December 31, 1993 resulted from a change in accounting principle for
amortization of program license rights.
(5) The earnings (loss) per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Standards No. 128, Earnings
per Share ("Statement No. 128"). For further discussion of Earnings per
Share and the impact of Statement No. 128, see Note 2 to Notes to the
Consolidated Financial Statements.
(6) "Broadcast cash flow" is defined as operating income before income taxes and
interest expense, plus depreciation and amortization (including amortization
of program license rights), non-cash compensation and corporate overhead,
less payments for program license liabilities. The Company has included
broadcast cash flow data because such data are commonly used as a measure of
performance for broadcast companies and are also used by investors to
measure a company's ability to service debt. Broadcast cash flow is not, and
should not be used as, an indicator or alternative to operating income, net
income or cash flow as reflected in the Consolidated Financial Statements,
is not intended to represent funds available for debt service, dividends,
reimbursement or other discretionary uses, is not a measure of financial
performance under generally accepted accounting principles and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
(7) "Operating cash flow" is defined as operating income before income taxes and
interest expense, plus depreciation and amortization (including amortization
of program license rights) and non-cash compensation, less payments for
program license liabilities. The Company has included operating cash flow
data because such data are used by investors to measure a company's ability
to service debt and are used in calculating the amount of additional
indebtedness that the Company may incur in the future under the Indentures.
Operating cash flow does not purport to represent cash provided by operating
activities as reflected in the Consolidated Financial Statements, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
The operating revenues of the Company's stations are derived primarily from
advertising revenues and, to a much lesser extent, from compensation paid by the
networks to the stations for broadcasting network programming. The stations'
primary operating expenses are for employee compensation, news gathering,
production, programming and promotion costs. A high proportion of the operating
expenses of the stations are fixed.
Advertising is sold for placement within and adjoining a station's network and
locally originated programming. Advertising is sold in time increments and is
priced primarily on the basis of a program's popularity among the specific
audience an advertiser desires to reach, as measured principally by periodic
audience surveys. In addition, advertising rates are affected by the number of
advertisers competing for the available time, the size and demographic makeup of
the market served by the station and the availability of alternative advertising
media in the market area. Rates are highest during the most desirable viewing
hours, with corresponding reductions during other hours. The ratings of a local
station affiliated with a national television network can be affected by ratings
of network programming.
Most advertising contracts are short-term, and generally run only for a few
weeks. The Company estimates that at least 64% of the 1997 annual gross revenue
of the Company's stations is generated from local advertising, which is sold by
a station's sales staff directly to local accounts, and the remainder of the
advertising revenue primarily represents national advertising, which is sold by
a national advertising sales representative. The stations generally pay
commissions to advertising agencies on local, regional and national advertising,
and, on national advertising, the stations also pay commissions to the national
sales representative.
30
<PAGE>
The advertising revenues of the Company's stations are generally highest in
the second and fourth quarters of each year, due in part to increases in
consumer advertising in the Spring and retail advertising in the period
leading up to and including the holiday season. In addition, advertising
revenues are generally higher during even numbered election years due to
spending by political candidates, which spending typically is heaviest during
the fourth quarter.
"Broadcast cash flow" is defined as operating income before income taxes and
interest expense, plus depreciation and amortization (including amortization of
program license rights), non-cash compensation and corporate overhead, less
payments for program license liabilities. The Company has included broadcast
cash flow data because such data are commonly used as a measure of performance
for broadcast companies and are also used by investors to measure a company's
ability to service debt. Broadcast cash flow is not, and should not be used as,
an indicator or alternative to operating income, net income or cash flow as
reflected in the Consolidated Financial Statements, is not intended to represent
funds available for debt service, dividends, reimbursement or other
discretionary uses, is not a measure of financial performance under generally
accepted accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
The following table sets forth certain operating data for the years ended
December 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1996 1997
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
Operating Income................................................. $35,411 $ 42,482 $ 63,490
Add:
Amortization of Program License Rights...................... 6,418 11,034 38,279
Depreciation and amortization............................... 24,572 30,946 46,941
Corporate Overhead.......................................... 3,348 4,344 7,150
Non-cash compensation paid in common stock.................. 1,167 848 967
Less:
Payments for Program License Liabilities.................... (6,747) (10,385) (38,610)
------------ ------------- ------------
Broadcast Cash Flow.............................................. $64,169 $ 79,269 $118,217
============ ============= ============
</TABLE>
TELEVISION REVENUES
Set forth below are the principal types of television revenues received by the
Company's stations for the periods indicated and the percentage contribution of
each to the Company's total revenues, as well as agency and national sales
representative commissions:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1996 1997
------------ ---- ----
Amount % Amount % Amount %
----------- ---------- ---------- ----------- ------------ ---------
(dollars in thousands) <C>
<S> <C> <C> <C> <C> <C>
Revenues
Local.......................... $ 77,980 54.3% $ 99,684 55.1% $197,519 63.7%
National....................... 51,546 35.9 57,298 31.6 95,106 30.6
Network compensation........... 9,873 6.9 11,335 6.3 12,600 4.1
Political...................... 1,835 1.3 9,791 5.4 1,322 0.4
Production and other........... 2,321 1.6 2,849 1.6 3,725 1.2
----------- ---------- ---------- ---------- ------------ ---------
Total......... 143,555 100.0 180,957 100.0 310,272 100.0
Agency and sales representative
commissions.................... (21,025) (14.6) (26,614) (14.7) (46,737) (15.1)
----------- ---------- ---------- ---------- ------------ ---------
Net Revenues...................... $122,530 85.4% $154,343 85.3% $263,535 84.9%
=========== ========== ========== ========== ============ =========
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
31
<PAGE>
Actual
------
The following historical financial information includes the results of KWQC-
TV, KELO-TV and KCAL-TV (the "Acquired Stations") which were acquired on April
15, 1996, May 31, 1996, and November 23, 1996, respectively, for the periods
commencing upon their respective acquisition dates by the Company.
Net revenues for the year ended December 31, 1997 were $263.5 million, an
increase of $109.2 million, or 70.8% compared to $154.3 million for the year
ended December 31, 1996, with the Acquired Stations accounting for $107.5
million of such increase. Local and national revenues were $197.5 million and
$95.1 million for the year ended December 31, 1997, compared to $99.7 million
and $57.3 million for the year ended December 31, 1996, increases of $97.8
million and $37.8 million, respectively. The Acquired Stations accounted for
$93.0 million and $34.6 million of the local and national increases,
respectively. Political revenue for the year ended December 31, 1997 was $1.3
million, a decrease of $8.5 million from the year ended December 31, 1996. The
decrease was attributable to 1996 being a national election year with more state
and local elections, while 1997 had only limited state and local elections.
Operating expenses, including selling, general and administrative expenses for
the year ended December 31, 1997 were $106.7 million, compared to $64.7 million
for the year ended December 31, 1996, an increase of $42.0 million, or 64.9%.
The Acquired Stations accounted for all of such increase.
Amortization of program license rights for the year ended December 31, 1997
was $38.3 million, compared to $11.0 million for the year ended December 31,
1996, an increase of $27.3 million, or 248.2% with the Acquired Stations
accounting for all of such increase.
Depreciation of property and equipment and amortization of intangibles was
$46.9 million for the year ended December 31, 1997, compared with $30.9 million
for the comparable period in 1996, an increase of $16.0 million or 51.8%. The
Acquired Stations accounted for all of such increase.
The Company made payments for program license liabilities of $38.6 million
during the year ended December 31, 1997, compared to $10.4 million for the year
ended December 31, 1996, an increase of $28.2 million, or 271.1%. The Acquired
Stations accounted for $27.8 million of this increase.
Corporate overhead for the year ended December 31, 1997 was $7.2 million,
compared to $4.3 million for the comparable period in 1996, an increase of $2.9
million, or 67.4%. This was the result of additional personnel, administrative
costs and incentive compensation programs.
Non-cash compensation paid in Common Stock for the year ended December 31,
1997 was $1.0 million, compared to $848,000 for the year ended December 31,
1996.
Net interest expense for the year ended December 31, 1997 was $64.1 million,
compared to $42.8 million for the comparable period in 1996, an increase of
$21.3 million, or 49.8%. The increase is primarily attributable to the Company's
higher debt level associated with the purchase of the Acquired Stations in 1996.
On June 23, 1997, the Company completed an offering (the "June 1997 Notes
Offering") of $200.0 million principal amount of its 8 3/4% Senior Subordinated
Notes due 2007. The Company used the net proceeds of the June 1997 Notes
Offering (approximately $198.2 million) to repay certain outstanding
indebtedness including accrued interest under the then outstanding senior credit
facility.
On November 25, 1997, the Company amended and restated its then outstanding
senior credit facility. Net deferred charges of $9.2 million were recorded as an
extraordinary loss on early extinguishment of debt.
As a result of the factors discussed above, the net loss for the Company was
$10.3 million for the year ended December 31, 1997, compared with net income of
$905,000 for the same period in 1996, a decrease of $11.2 million. The 1997 net
loss includes an extraordinary item of $9.2 million as discussed above.
32
<PAGE>
Broadcast cash flow for the year ended December 31, 1997 was $118.2 million,
compared with $79.3 million for the year ended December 31, 1996, an increase of
$38.9 million, or 49.1%. Broadcast cash flow margins (broadcast cash flow
divided by net revenues) for the year ended December 31, 1997 decreased to 44.9%
from 51.4% for the same period in 1996. The increase in broadcast cash flow was
a direct result of the Acquired Stations and continued expense controls. The
decrease in broadcast cash flow margins is attributable to the purchase of KCAL-
TV, an independent station. Independent stations generally operate at lower
margins than those associated with networks.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Actual
------
The following historical financial information include the results of the
Acquired Stations since their respective dates of acquisition.
Net revenues for the year ended December 31, 1996 were $154.3 million, an
increase of $31.8 million, or 26.0%, compared to $122.5 million for the year
ended December 31, 1995, with the Acquired Stations accounting for $29.4 million
of such increase. Political revenue for the year ended December 31, 1996 was
$9.8 million, compared to $1.8 million for the year ended December 31, 1995, an
increase of $8.0 million. The increase was attributable to 1996 being a national
election year with more state and local elections, while 1995 had only limited
state and local elections. Network compensation in 1996 increased $1.5 million,
or 14.8%, with $1.1 million attributable to the Acquired Stations.
Operating expenses, including selling, general and administrative expenses,
for the year ended December 31, 1996 were $64.7 million, compared to $51.6
million for the year ended December 31, 1995, an increase of $13.1 million, or
25.4%. The Acquired Stations accounted for $12.9 million and the remaining
increase was primarily attributed to higher local sales commissions resulting
from higher sales volume.
Amortization of program license rights for the year ended December 31, 1996
was $11.0 million, compared to $6.4 million for the year ended December 31,
1995, an increase of $4.6 million, or 71.9%, with the Acquired Stations
accounting for $3.9 million of such increase.
Depreciation of property and equipment and amortization of intangible assets
was $30.9 million for the year ended December 31, 1996, compared with $24.6
million for the comparable period in 1995, an increase of $6.3 million, or
25.6%. The increase results from depreciation and amortization at the Acquired
Stations of $5.6 million, and the remaining increase was primarily attributable
to increased capital expenditures in 1996.
The Company made payments for program license liabilities of $10.4 million
during the year ended December 31, 1996, compared to $6.7 million for the year
ended December 31, 1995, an increase of $3.7 million, or 55.2%. Payments
associated with the Acquired Stations were $3.5 million.
Corporate overhead for the year ended December 31, 1996 was $4.3 million,
compared to $3.3 million for the comparable period in 1995, an increase of $1.0
million, or 30.3%. This was the result of additional personnel, administrative
and incentive compensation programs.
Non-cash compensation paid in Common Stock for the year ended December 31,
1996 was $848,000 million, compared to $1.2 million for the year ended December
31, 1995.
Net interest expense for the year ended December 31, 1996 was $42.8 million,
compared with $32.6 million for the comparable period in 1995, an increase of
$10.2 million, or 31.3%. The increase is primarily attributable to the
Company's higher debt level following the January 1996 Senior Subordinated Note
Offering (as defined) and the higher debt associated with the purchase of the
Acquired Stations.
The Company held a $25 million interest rate swap agreement which expired on
April 18, 1996. The interest expense resulting from this swap agreement
amounted to $315,000 in 1996 and $952,000 in 1995.
33
<PAGE>
On June 12, 1995, the Company completed an offering (the "June 1995 Notes
Offering") of $125 million principal amount of its 10 1/8% Senior Subordinated
Notes due 2005. The Company used the net proceeds of the June 1995 Notes
Offering (approximately $120.0 million) to repay certain of its then outstanding
indebtedness under the Senior Credit Facility. Concurrently with the closing of
the June 1995 Notes Offering, the Company entered into an amendment to its
Senior Credit Facility. Net deferred charges of $9.1 million were recorded as an
extraordinary loss on early extinguishment of debt in 1995.
As a result of the factors discussed above, the net income for the Company was
$905,000 for the year ended December 31, 1996, compared with a net loss of $6.6
million for the same period in 1995, an increase of $7.5 million. The 1995 net
loss includes the extraordinary non-recurring loss of $9.1 million discussed
above.
Broadcast cash flow for the year ended December 31, 1996 was $79.3 million,
compared with $64.2 million for the year ended December 31, 1995, an increase of
$15.1 million, or 23.5%. Broadcast cash flow margins (broadcast cash flow
divided by net revenues) for the year ended December 31, 1996 decreased to 51.4%
from 52.4% for the same period in 1995. The increase in broadcast cash flow was
a direct result of the Acquired Stations and continued expense controls. The
decrease in broadcast cash flow margins is attributable to the purchase of KCAL,
an independent station. Independent stations generally operate at lower margins
than those associated with networks. Approximately $13.0 million of the
increased broadcast cash flow in 1996 is attributable to the Acquired Stations.
Pro Forma Financial Data
The following unaudited pro forma information gives effect to the acquisitions
of KWQC, KELO and KCAL (including annualized net expense reductions) and a new
affiliation agreement for WTVO as if they had been effected on January 1, 1996.
The pro forma information does not purport to represent what the Company's
results of operations would have been if such transactions had been effected at
such date and do not purport to project results of operations of the Company in
any future period.
Year Ended
----------
December 31,
1996(1) 1997(5)
---- ----
(in thousands)
Net revenues (2)............................. $261,542 $263,535
Operating expenses, including selling,
general and administrative expenses.......... 103,941 106,708
Amortization of program license rights....... 32,924 38,279
Depreciation and amortization................ 50,931 46,941
Corporate overhead........................... 4,643 7,150
Non-cash compensation paid in common stock... 848 967
-----------------------
Operating income............................. $ 68,255 $ 63,490
=======================
Broadcast cash flow (3)...................... $124,830 $118,217
Broadcast cash flow margin................... 47.7% 44.9%
Operating cash flow (4)...................... $120,187 $111,067
Capital expenditures......................... 10,424 9,034
(1) Pro forma adjustments to net revenues include additional annualized
network compensation payable to the Company under the new KELO affiliation
agreement and a programming change at KWQC in the aggregate amount of
$179,000 for the year ended December 31, 1996. Pro forma adjustments to net
revenues also include a decrease of $803,000 for the year ended December
31, 1996 relating to seven sitcoms not purchased in connection with the
KCAL Acquisition. Pro forma adjustments include expense reductions relating
to the KWQC, KELO and KCAL acquisitions of approximately $22.8 million for
the year ended December 31, 1996.
(2) Net revenues are total revenues of agency and national representation
commissions.
(3) "Broadcast cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights), non-cash compensation and
corporate overhead, less
34
<PAGE>
payments for program license liabilities. The Company has included
broadcast cash flow data because such data are commonly used as a measure
of performance for broadcast companies and are also used by investors to
measure a company's ability to service debt. Broadcast cash flow is not,
and should not be used as, an indicator or alternative to operating income,
net income or cash flow as reflected in the Consolidated Financial
Statements, is not intended to represent funds available for debt service,
dividends, reimbursement or other discretionary uses, is not a measure of
financial performance under generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(4) "Operating cash flow" is defined as operating income before income taxes
and interest expense, plus depreciation and amortization (including
amortization of program license rights) and non-cash compensation, less
payments for program license liabilities. The Company has included
operating cash flow data because such data are commonly used by investors
to measure a company's ability to service debt and will be used in
calculating the amount of additional indebtedness that the Company may
incur in the future under the Indentures relating to the Notes. Operating
cash flow does not purport to represent cash provided by operating
activities as reflected in the Consolidated Financial Statements, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
(5) Actual results of operations for the year ended December 31, 1997.
Impact of Year 2000
The Company is performing a review of its year 2000 compliance relative to all
of its computer hardware and software. Management believes that no material
costs will be incurred to become year 2000 compliant.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from operations and
funds available under its senior credit facility.
On November 25, 1997, the Company's senior credit facility was amended and
restated to provide the Company with the ability to borrow up to $300.0 million
in the form of five year revolving credit facility (the "Senior Credit
Facility"). As of December 31, 1997, there was $82.3 million outstanding under
the Senior Credit Facility.
The Senior Credit Facility has a $285.0 million sublimit (the "Sublimit") for
borrowings in connection with the acquisition of additional television stations
(and businesses, if any, incidental thereto) pursuant to transactions which meet
the following criteria: (i) each of the acquired stations will become a wholly-
owned subsidiary of the Company and will become a part of the lenders' security
package under the Senior Credit Facility, and (ii) the Company can demonstrate
that after giving pro forma effect to each such acquisition (based upon
assumptions, including identified cost savings, that the agents for the lenders
find reasonable), the Company will be in compliance with all of the terms and
conditions of the Senior Credit Facility.
Pursuant to the Senior Credit Facility, the Company is prohibited from making
investments or advances to third parties exceeding $7.5 million in the aggregate
unless the third party becomes a guarantor of the Company's obligations.
However, the Company may utilize up to $70.0 million of its borrowing
availability under the Sublimit for the purpose of repurchasing shares of Common
Stock and for paying dividends, subject to the limitations set forth in the
Indentures. In addition, the Company may utilize the undrawn amounts under the
Sublimit to retire or prepay subordinated debt, subject to the limitations set
forth in the Indentures. Undrawn amounts under the Senior Credit Facility are
available to the Company for working capital requirements and general corporate
purposes.
Interest under the Senior Credit Facility is payable at the LIBOR rate, "CD
Rate" or "Base Rate." In addition to the index rates, the Company pays a
floating percentage tied to the Company's ratio of total debt to operating cash
flow; ranging, in the case of LIBOR rate loans, from 0.75% based upon a ratio
under 4:1 to 2.00% based upon a 6:1 or greater ratio.
35
<PAGE>
Each of the Subsidiaries has guaranteed the Company's obligations under the
Senior Credit Facility. The Senior Credit Facility is secured by the pledge of
all the stock of the Subsidiaries and a first priority lien on all of the assets
of the Company and its Subsidiaries.
The Senior Credit Facility imposes restrictions on the Company's ability to
incur additional indebtedness. The Company will be permitted to incur, subject
to the terms of the Indentures and satisfaction of the financial covenants of
the Senior Credit Facility, unsecured subordinated debt, provided that the
subordination and mandatory redemption provisions and the maturity of such
indebtedness are comparable to the Company's existing Senior Subordinated Notes
and that the net proceeds in excess of any permitted acquisition are used to
repay the outstanding balance of the Senior Credit Facility by the amount of
such excess. The Company is also restricted as to the amount of its capital
lease obligations and guarantees. The Senior Credit Facility also restricts the
ability of the Company to amend material terms of the Indentures.
The Senior Credit Facility requires the Company to maintain certain financial
ratios. The Company is required to maintain a total debt/operating cash flow
ratio ranging from 6.25x to 5.00x depending on senior debt leverages. The
Company is also required to maintain a senior debt/operating cash flow ratio
ranging from 3.00x to 2.25x depending on senior debt leverages. Additionally,
the Company is required to maintain an operating cash flow/total interest
expense ratio ranging from 1.60x to 2.25x depending on senior debt leverages.
The Company is also required to maintain an operating cash flow minus capital
expenditures to pro forma debt service ratio of no less than 1.10x at any time.
Such ratios must be maintained as of the last day of the quarter for each of the
periods.
The Company is required to apply the proceeds from permitted equity issuances
and certain subordinated debt issuances, to the extent it exceeds the purchase
price for permitted acquisitions or permitted redemptions of Senior Subordinated
Debt, to reduce the Company's senior debt levels. The Senior Credit Facility
also contains a number of customary covenants including, among others,
limitations on investments and advances, mergers and sales of assets, liens on
assets, affiliate transactions and changes in business. The Company may, subject
to the financial covenants of the Senior Credit Facility, sell assets
constituting less than 15% of its operating cash flow.
Interest on the January 1996 Notes is payable semi-annually on January 15 and
July 15, interest on the June 1995 Notes is payable semi-annually on February 15
and August 15, interest on the Company's 11 3/4% Senior Subordinated Notes due
2004 (the "November 1994 Notes") is payable semi-annually on May 15 and November
15, and interest on the June 1997 Notes is payable semi-annually on June 15 and
December 15. The Indentures impose certain limitations on the ability of the
Company and certain of its Subsidiaries to, among other things, pay dividends or
make certain other restricted payments, consummate certain asset sales, enter
into certain transactions with affiliates, incur indebtedness that is
subordinate in right of payment to any Senior Debt and senior in right of
payment to the Notes, incur liens, impose restrictions on the ability of a
Subsidiary to pay dividends or make certain payments to the Company, merge or
consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company.
A $5.0 million portion of the purchase price in connection with the November
1994 acquisitions has been deferred (having a net present value as of December
31, 1997, discounted at 11.9%, of $1.7 million) and is payable over the
remaining two-year-period, without interest, in equal annual installments, with
three such installments having been paid on November 14, 1995, 1996 and 1997.
The Company paid a $3.0 million portion of the purchase price in connection
with the KELO Acquisition by delivery of a promissory note, which requires
quarterly payments of interest accruing at the prime rate, and the principal
amount of which will be payable in full on May 31, 1998.
The Company regularly enters into program contracts for the right to broadcast
television programs produced by others and program commitments for the right to
broadcast programs in the future. Such programming commitments are generally
made to replace expiring or canceled program rights. Payments under such
contracts are made in cash or the concession of advertising spots to the program
provider to resell, or a combination of both.
The Company anticipates that its operating cash flow, together with the
amounts available under the Senior Credit Facility, will be sufficient to
finance the operating requirements of its stations, debt service requirements
and anticipated capital expenditures.
36
<PAGE>
The Company is regularly presented with opportunities to acquire television
stations which it evaluates on the basis of its acquisition strategy. The
Company does not presently have any agreements to acquire any television
stations. See "Business-Acquisition Strategy."
INCOME TAXES
The Company and its Subsidiaries file a consolidated federal income tax return
and such state or local tax returns as are required. The Company has $185.0
million of net operating loss ("NOL") carryforwards which are subject to annual
limitations imposed by Internal Revenue Code Section 382. See Note 9 to Notes to
Consolidated Financial Statements.
37
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements
------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors 39
Consolidated Balance Sheets as of December 31, 1996 and 1997 40
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and 1997 41
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31,
1995, 1996 and 1997 42
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997 43
Notes to Consolidated Financial Statements 44
Schedule II - Valuation and Qualifying Accounts 58
</TABLE>
38
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Young Broadcasting Inc.
We have audited the accompanying consolidated balance sheets of Young
Broadcasting Inc. and subsidiaries as of December 31, 1996 and 1997, 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,
1997. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Young
Broadcasting Inc. and subsidiaries at December 31, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
New York, New York
February 6, 1998
39
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1996 1997
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 2) $ 7,004,744 $ 1,652,428
Trade accounts receivable, less allowance for doubtful accounts of
$2,210,000 in 1996 and $1,872,000 in 1997 60,152,494 60,192,889
Current portion of loans receivable - officers (Note 12) 391,862 311,358
Current portion of program license rights (Notes 2 and 4) 21,678,077 23,327,160
Prepaid expenses 1,852,728 1,996,406
-----------------------------
Total current assets 91,079,905 87,480,241
Property and equipment, less accumulated depreciation and amortization of $79,497,810 in
1996 and $98,731,094 in 1997 (Notes 2 and 11) 147,301,955 112,750,987
Program license rights, excluding current portion (Notes 2 and 4) 2,436,121 1,220,121
Deposits and other assets 457,354 1,171,852
Loans receivable - officers, excluding current portion (Note 12) 1,040,445 600,000
Broadcasting licenses and other intangibles, less accumulated amortization of
$73,462,193 in 1996 and $96,631,332 in 1997 (Note 2) 624,074,518 626,507,872
Deferred charges, less accumulated amortization of $4,338,888 in 1996
and $7,236,107 in 1997 (Notes 2, 3 and 5) 26,760,865 16,235,423
-----------------------------
Total assets $893,151,163 $845,966,496
=============================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 23,392,064 $ 18,997,702
Accrued interest (Notes 6 and 7) 13,359,133 12,806,872
Accrued expenses 5,802,974 6,114,268
Current installments of program license liability (Notes 2 and 4) 17,312,771 18,026,986
Current installments of long-term debt (Note 6) 11,913,237 3,907,834
Current installments of obligations under capital leases (Note 11) 802,851 470,981
-------------------------------
Total current liabilities 72,583,030 60,324,643
Program license liability, excluding current installments (Notes 2 and 4) 2,403,121 1,052,659
Long-term debt, excluding current installments (Note 6) 295,535,960 83,076,951
Senior Subordinated Notes (Note 7) 370,000,000 570,000,000
Deferred tax liabilities (Note 9) 71,450,273 71,450,273
Obligations under capital leases, excluding current installments (Note 11) 674,556 216,362
-------------------------------
Total liabilities 812,646,940 786,120,888
-------------------------------
Stockholders' equity (Note 8):
Class A Common Stock, $.001 par value. Authorized 20,000,000 shares; issued and
outstanding 12,208,127 shares at 1996 and 11,850,504 shares at 1997 12,209 11,851
Class B Common Stock, $.001 par value. Authorized 20,000,000 shares; issued and
outstanding 2,022,230 shares at 1996 and 1,997,340 shares at 1997 2,022 1,997
Additional paid-in capital 233,190,382 222,881,546
Accumulated deficit (152,700,390) (163,049,786)
-------------------------------
Total stockholders' equity 80,504,223 59,845,608
-------------------------------
Total liabilities and stockholders' equity $ 893,151,163 $ 845,966,496
===============================
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
----------------------------------------------------------
<S> <C> <C> <C>
Net operating revenue $122,529,927 $154,342,931 $263,534,581
----------------------------------------------------------
Operating expenses 28,033,649 35,614,209 64,700,352
Amortization of program license rights 6,418,181 11,033,812 38,279,226
Selling, general and administrative expenses 23,580,352 29,074,947 42,007,903
Depreciation and amortization 24,572,388 30,945,622 46,940,592
Corporate overhead 3,347,931 4,343,449 7,150,096
Non-cash compensation (Notes 8 and 10) 1,166,651 848,469 967,112
----------------------------------------------------------
Operating income 35,410,775 42,482,423 63,489,300
----------------------------------------------------------
Interest income 378,380 2,098,939 263,351
Interest expense (32,644,274) (42,837,629) (64,102,237)
Other expenses, net (611,138) (838,434) (756,682)
----------------------------------------------------------
(32,877,032) (41,577,124) (64,595,568)
----------------------------------------------------------
Income (loss) before extraordinary item 2,533,743 905,299 (1,106,268)
Extraordinary loss on extinguishment of debt (Note 5) (9,125,000) - (9,243,128)
----------------------------------------------------------
Net (loss) income $ (6,591,257) $ 905,299 $(10,349,396)
==========================================================
Income (loss) per common share-basic and diluted:
Income (loss) before extraordinary item $.23 $.08 $(.08)
Extraordinary loss on extinguishment of debt (.84) - (.66)
----------------------------------------------------------
Net (loss) income per common share-basic and diluted $(.61) $.08 $(.74)
==========================================================
Weighted average shares-basic 10,838,972 11,379,298 13,989,969
==========================================================
Weighted average shares - diluted 11,071,154 11,783,122 13,989,969
==========================================================
</TABLE>
See accompanying notes to consolidated financial statements.
41
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------------------- Paid-In Accumulated Stockholders'
Class A Class B Class C Capital Deficit Equity (Deficit)
--------- ------- ------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 4,825 $2,039 $ 3,955 $135,349,516 $(147,014,432) $(11,654,097)
Contribution of shares into Company's
defined contribution plan 22 - - 471,866 - 471,888
Issuance of stock options below market
value - - - 366,094 - 366,094
Exercise of stock options 19 - - 49,981 - 50,000
Conversion of Class B and C Common
Stock to Class A Common Stock 116 (10) (106) - - -
Repurchase and retirement of Class A
and C Common Stock (27) - (285) (8,186,433) - (8,186,745)
Net (loss) for 1995 - - - - (6,591,257) (6,591,257)
--------- ------- ------- ------------ ------------- ---------------
Balance at December 31, 1995 4,955 2,029 3,564 128,051,024 (153,605,689) (25,544,117)
Repurchase and retirement of Class A
Common Stock (111) - - (2,923,693) - (2,923,804)
Contribution of shares into Company's
defined contribution plan 28 - - 728,641 - 728,669
Exercise of stock options 16 - - 313,495 - 313,511
Issuance of stock options below market
value - - - 15,400 - 15,400
Conversion of Class C Common Stock to
Class A Common Stock 2,064 - (2,064) - - -
Issuance of Class A Common Stock 5,250 - - 161,772,765 - 161,778,015
Repurchase of Class C Common Stock - - (1,500) (54,767,250) - (54,768,750)
Conversion of Class B Common Stock to
Class A Common Stock 7 (7) - - - -
Net Income for 1996 - - - - 905,299 905,299
--------- ------- ------- ------------ ------------- ---------------
Balance at December 31, 1996 12,209 2,022 - 233,190,382 (152,700,390) 80,504,223
Contribution of shares into Company's
defined contribution plan 53 - - 1,574,958 - 1,575,012
Exercise of stock options 23 - - 454,227 - 454,249
Repurchase and retirement of Class A
Common Stock (459) - - (12,338,021) - (12,338,480)
Conversion of Class B Common Stock to
Class A Common Stock 25 (25) - - - -
Net Loss for 1997 - - - - (10,349,396) (10,349,396)
--------- ------- ------- ------------ ------------- ---------------
Balance at December 31, 1997 $11,851 $1,997 $ - $222,881,546 $(163,049,786) $ 59,845,608
========= ======= ======= ============ ============= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
42
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
1995 1996 1997
-----------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (6,591,257) $ 905,299 $ (10,349,396)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization of property and equipment 13,640,551 16,832,919 19,522,619
Amortization of program license rights 6,418,181 11,033,812 38,279,226
Amortization of broadcasting licenses, other intangibles
and deferred charges 10,931,837 14,112,703 27,417,973
Non-cash compensation paid in Common Stock 1,166,651 848,469 967,112
Non-cash interest expense on outstanding indebtedness 420,712 357,147 275,588
Loss on disposal of fixed assets - 106,601 467,920
Extraordinary loss on extinguishment of debt 9,125,000 - 9,243,128
Deferred acquisition and debt refinancing costs incurred (3,437,500) (13,125,000) (1,760,000)
Payments on programming license liabilities (6,747,028) (10,384,982) (38,609,618)
(Increase) decrease in trade accounts receivable (3,111,102) (4,367,243) 480,554
Increase in prepaid expenses (197,842) (703,641) (143,678)
(Decrease) increase in trade accounts payable (713,168) 6,067,699 (5,133,300)
Increase in accrued expenses 1,326,436 3,023,127 366,933
-----------------------------------------------
Net cash provided by operating activities 22,231,471 24,706,910 41,025,061
-----------------------------------------------
INVESTING ACTIVITIES
Purchase of KCAL-TV - (387,508,018) -
Purchase of KWQC-TV - (57,173,000) -
Purchase of KELO-TV - (48,281,308) -
Capital expenditures (4,484,478) (4,991,766) (9,033,690)
(Increase) decrease in deposits and other assets (1,315,839) 1,113,231 (214,498)
Increase in broadcast licenses and other intangibles - - (2,508,374)
-----------------------------------------------
Net cash used in investing activities (5,800,317) (496,840,861) (11,756,562)
-----------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt - 305,000,000 -
Proceeds from issuance of public subordinated debt 125,000,000 125,000,000 200,000,000
Borrowings from working capital facility 17,000,000 25,400,000 -
Principal payments on long-term debt (149,235,202) (79,164,798) (220,740,000)
Deferred acquisition and debt refinancing costs incurred (3,694,868) (4,872,776) (1,206,520)
Net proceeds from issuance of Class A Common Stock - 161,778,015 -
Repurchase of Class A and Class C Common Stock (8,186,745) (57,692,555) (12,338,480)
Proceeds from exercise of options 50,000 313,511 454,249
Principal payments under capital lease obligations (243,108) (48,335) (790,064)
-----------------------------------------------
Net cash (used in) provided by financing activities (19,309,923) 475,713,062 (34,620,815)
-----------------------------------------------
Net (decrease) increase in cash (2,878,769) 3,579,111 (5,352,316)
Cash and cash equivalents at beginning of year 6,304,402 3,425,633 7,004,744
-----------------------------------------------
Cash and cash equivalents at end of year $ 3,425,633 $ 7,004,744 $ 1,652,428
===============================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 29,199,781 $ 35,980,944 $ 63,930,212
</TABLE>
See accompanying notes to consolidated financial statements.
43
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. OPERATIONS OF THE COMPANY
The business operations of Young Broadcasting Inc. and subsidiaries (the
"Company") consist of eleven network affiliated (four with CBS, six with ABC,
and one with NBC), and one independent commercial television broadcasting
stations in the states of Michigan, Wisconsin, Louisiana, Illinois, Tennessee,
New York, Virginia, Iowa, South Dakota and California.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of Young
Broadcasting Inc., its wholly-owned subsidiaries and three limited partnerships.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
CONCENTRATION OF CREDIT RISK
The Company provides advertising air time to national, regional and local
advertisers within the geographic areas in which the Company operates. Credit is
extended based on an evaluation of the customer's financial condition, and
advance payment is not generally required. Credit losses are provided for in the
financial statements and have consistently been within management's
expectations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
The principal areas of judgment relate to the allowance for doubtful accounts
and the realizability of program license rights. Actual results could differ
from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
PROGRAM LICENSE RIGHTS
Program license rights are stated at cost, less accumulated amortization.
Program license rights acquired as part of a station acquisition are recorded at
their appraised value. Program rights with lives greater than one year, and when
the Company has the right to multiple showings, are amortized using an
accelerated method. Program rights expected to be amortized in the succeeding
year and amounts payable within one year are classified as current assets and
liabilities, respectively. Program rights with lives of one year or less are
amortized on a straight-line basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated on the basis of cost, less accumulated
depreciation. Equipment under capital leases is stated at the present value of
the future minimum lease payments at the inception of the lease, less
accumulated depreciation. Major renewals and improvements are charged to the
property and equipment accounts. Maintenance and repairs which do not improve or
extend the lives of the respective assets are expensed currently.
Depreciation and amortization of property and equipment are calculated on the
straight-line basis over the estimated useful lives of the assets. Equipment
held under capital leases is generally amortized on a straight-line basis over
the shorter of the lease term or estimated useful life of the asset. The
estimated useful lives of depreciable assets are as follows:
44
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
ESTIMATED
CLASSIFICATION USEFUL LIVES
-------------------------------------------------------------------
Land improvements 5-19 years
Buildings and building improvements 5-40 years
Broadcast equipment 3-10 years
Office furniture, fixtures and other equipment 5-8 years
Vehicles 3-5 years
Property and equipment at December 31, 1996 and 1997 consist of the following:
1996 1997
-------------------------
(in thousands)
Land and land improvements $ 6,169 $ 8,097
Buildings and building improvements 34,406 37,195
Broadcast equipment 174,108 152,096
Office furniture, fixtures and other equipment 8,175 10,174
Vehicles 3,942 3,920
-------------------------
$226,800 $211,482
========================
BROADCASTING LICENSES AND OTHER INTANGIBLES
Intangible assets, which include broadcasting licenses, network affiliation
agreements, and other intangibles are carried on the basis of cost, less
accumulated amortization. Cost is based upon appraisals. Intangible assets are
amortized over varying periods, not exceeding 40 years. It is the Company's
policy to account for broadcasting licenses and other intangibles at the lower
of amortized cost or estimated realizable value. As part of an ongoing review of
the valuation and amortization of broadcasting licenses and other intangibles of
the Company and its subsidiaries, management assesses the carrying value of the
broadcasting licenses and other intangibles if facts and circumstances suggest
that there may be impairment. If this review indicates that the broadcasting
licenses and other intangibles will not be recoverable as determined by a non-
discounted cash flow analysis of the operating assets over the remaining
amortization period, the carrying value of the broadcasting licenses and other
intangibles would be reduced to estimated realizable value.
DEFERRED CHARGES
Deferred charges incurred during 1995 consisted primarily of debt issuance costs
incurred in connection with the Company's 10 1/8% Senior Subordinated Notes
issued on June 12, 1995 (see Note 7), concurrent with an amendment to its Senior
Credit Facility (see Note 6). As a result of the amendment, approximately $9.1
million of net deferred charges incurred prior to 1995 were expensed in 1995
and included as part of the extraordinary item in the accompanying statements of
operations (see Note 5).
Deferred charges incurred during 1996 consisted primarily of debt issuance costs
incurred in connection with the Company's 9% Senior Subordinated Notes issued on
January 16, 1996 (see Note 7) and an amendment to and restatement of its Senior
Credit Facility on November 15, 1996 (see Note 6).
Deferred charges incurred during 1997 consisted primarily of debt issuance costs
incurred in connection with the Company's 8 3/4% Senior Subordinated Notes
issued on June 23, 1997 (see Note 7), and an amendment to its Senior Credit
Facility (see Note 6). As a result of the amendment, approximately $9.2 million
of net deferred charges incurred in 1996 were expensed in 1997 and included as
part of the extraordinary item in the accompanying statements of operations (see
Note 5).
45
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
REVENUE
The Company's primary source of revenue is the sale of television time to
advertisers. Revenue is recorded when the advertisements are broadcast.
BARTER ARRANGEMENTS
The Company, in the ordinary course of business, provides advertising air time
to certain customers in exchange for products or services. Barter transactions
are recorded on the basis of the estimated fair market value of the products or
services received. Revenue is recognized as the related advertising is broadcast
and expenses are recognized when the merchandise or services are consumed or
utilized. Barter revenue transactions related to the purchase of equipment
amounted to approximately $22,000, $36,000 and $681,000 in 1995, 1996, and 1997,
respectively, and are depreciated in accordance with Company policy as stated
above. The Company has entered into barter agreements with program syndicators
for television programs with an estimated fair market value, recorded as assets
and liabilities at December 31, 1996 and 1997, of $5.0 million and $5.7 million,
respectively.
INCOME TAXES
The Company and its subsidiaries file a consolidated federal income tax return
and separate state tax returns. In addition, partnership returns are filed for
its three limited partnerships. Since the partners are all participants in the
consolidation, all partnership income or losses are ultimately included in the
consolidated federal income tax return. The future utilization of a significant
portion of the Company's net operating losses for federal income tax purposes is
subject to an annual limitation (see Note 9).
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement No.
128, Earnings Per Share ("Statement 128"). Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the Statement 128 requirements.
RECLASSIFICATION OF ACCOUNTS
Certain prior year amounts have been reclassified to conform to current year's
presentation.
3. ACQUISITION OF STATIONS
On April 15, 1996, the Company acquired from Broad Street Television, L.P. the
assets of KWQC-TV ("KWQC"), Channel 6, in Davenport, Iowa, for approximately $55
million plus outstanding receivables of the station. The acquisition was
accounted for as a purchase. Based on the Company's allocation of the purchase
price, intangible assets amounted to $44.3 million and are being amortized over
their estimated lives which do not exceed 40 years. The KWQC acquisition was
financed with approximately $56.2 million of net proceeds from the January 1996
$125 million 9% Senior Subordinated Notes Offering ("the January 1996 Notes")
due 2006 (see Note 7). The operating results of KWQC are included in the
Company's consolidated results of operations from the date of acquisition.
On May 31, 1996, the Company acquired from Midcontinent Television of South
Dakota, a wholly owned subsidiary of Midcontinent Media, Inc., the assets of
KELO-TV ("KELO"), Channel 11, in Sioux Falls, South Dakota and its satellite
stations for $50 million plus outstanding receivables of the stations. This
acquisition was accounted for as a purchase. Based on the Company's allocation
of the purchase price, intangible assets amounted to $25.0 million and are being
amortized over their estimated lives which do not exceed 40 years. The KELO
acquisition was financed with approximately $15.7 million of net proceeds from
the January 1996 Notes, $25.4 million under the Senior Credit Facility, a $3.0
million promissory note and the remaining balance from cash
46
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
balances of the Company. The operating results of KELO are included in the
Company's consolidated results of operations from the date of acquisition.
On November 23, 1996, the Company acquired from a subsidiary of the Walt Disney
Company the assets of KCAL-TV ("KCAL"), Channel 9, in Los Angeles, California,
for $368 million plus working capital of approximately $19.5 million of the
station. The acquisition was accounted for as a purchase. Based on the Company's
final allocation of the purchase price, intangible assets amounted to
approximately $328.5 million and are being amortized over their estimated lives
which do not exceed 40 years. The final allocation resulted in an increase to
intangibles and a similar decrease to property and equipment amounting to $21.8
million from amounts previously reported. The KCAL acquisition was financed with
approximately $305.0 million under the Senior Credit Facility (see Note 6) and
the remaining from an equity offering in 1996 (see Note 8). The operating
results of KCAL are included in the Company's consolidated results of operations
from the date of acquisition.
The following unaudited pro forma information gives effect to the acquisitions
of KWQC, KELO and KCAL (including expense reductions) as if they had been
effected on January 1, 1996. The pro forma information for the year ended
December 31, 1996 does not purport to represent what the Company's results of
operations would have been if such transactions had been effected at such dates
and do not purport to project results of operations of the Company in any future
period.
Year Ended December 31,
---------------------------
(unaudited)
1996(1) 1997(3)
------- ----------
(dollars in thousands)
Net operating revenue (2) $261,542 $263,535
Operating income 68,255 63,490
Income before extraordinary item 3,512 (1,106)
Net income (loss) 3,512 (10,349)
Net income (loss) per common share:
Basic $0.31 $(0.74)
Diluted $0.30 $(0.74)
(1) Pro forma adjustments to net revenues include additional annualized network
compensation payable to the Company under the KELO affiliation agreement
and a programming change at KWQC in the aggregate amount of $179,000, for
the year ended December 31, 1996. Pro forma adjustments to net revenues
also include a decrease of $803,000, for the year ended December 31, 1996,
relating to seven sitcoms not being purchased in connection with the KCAL
acquisition.
Pro forma adjustments include expense reductions relating to the KWQC, KELO
and KCAL acquisitions of approximately $22.8 million, for the year ended
December 31, 1996.
(2) Net operating revenue is total revenue net of agency and national
representation commissions.
(3) Actual results of operations for the year ended December 31, 1997.
4. PROGRAM LICENSE RIGHTS AND LIABILITY
The Company entered into agreements for program license rights which became
available in 1996 and 1997 of approximately $7.4 million and $38.1 million,
respectively.
The unpaid program license liability, which is reflected in the December 31,
1997 balance sheet, is payable during each of the years subsequent to 1997 as
follows: 1998, $18.0 million; 1999, $814,000; 2000, $101,000; 2001, $47,000;
2002, $41,000 and thereafter $50,000.
47
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The obligation for programming that has been contracted for but not recorded in
the accompanying balance sheets because the program rights were not currently
available for airing aggregated approximately $12.8 million and $40.9 million at
December 31, 1996 and 1997, respectively.
5. REFINANCING AND EXTRAORDINARY ITEMS
Deferred financing costs, arising from the financing plan implemented in 1994,
with a net carrying value of $9.1 million were charged to 1995 earnings as an
extraordinary item in connection with the Company's completion of an amendment
and restatement of its Senior Credit Facility on June 12, 1995.
Deferred financing costs arising from an amendment to its Senior Credit Facility
in 1996 (see Note 6), with a net carrying value of $9.2 million were charged to
1997 earnings as an extraordinary item in connection with the Company's
completion of an amendment and restatement of its Senior Credit Facility.
6. LONG-TERM DEBT
Long-term debt (excluding Senior Subordinated Notes) at December 31, 1996 and
1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------------------------------------
<S> <C> <C>
(dollars in thousands)
Senior Credit Facility $302,000 $82,260
Nationwide Seller Note 2,449 1,725
Midcontinent Seller Note 3,000 3,000
-------------------------------------
Total long-term debt 307,449 86,985
Less:
Scheduled current maturities 908 908
Midcontinent Seller Note - 3,000
Additional payments of excess cash required 11,005 -
-------------------------------------
Long-term debt excluding all current installments $295,536 $83,077
=====================================
</TABLE>
On November 25, 1997, the Company amended and restated its Senior Credit
Facility ("Senior Credit Facility"). The amendment provides for borrowings of up
to an aggregate amount of $300.0 million consisting of a five year revolving
facility ("Revolver").
At December 31, 1997, the Company had outstanding borrowings of $82.3 million
under the Revolver, which approximates its fair value as its interest rate
floats with market conditions. The Company pays an annual commitment fee of
0.375% of the unused commitment.
The Senior Credit Facility provides, at the option of the Company, that borrowed
funds bear interest based upon the bank's base rate, London Interbank Offered
Rate (LIBOR), the customary "CD Rate" or "Base Rate." In addition to the index
rate, the Company pays a floating percentage on borrowings under the Revolver
tied to the interest rate option and the Company's ratio of total debt to
operating cash flow, ranging from 0.75% based upon a ratio under 4:1 to 2.00%
based upon a 6:1 or greater ratio. For the year ended December 31, 1997, this
floating percentage was 1.75%. At December 31, 1997, the effective interest rate
for amounts outstanding under the Senior Credit Facility was 7.95%.
The Senior Credit Facility contains, among other things, limitations on
dividends and investments, and requires the Company to maintain certain
financial ratios. At December 31, 1997, the Company was in compliance with all
such covenants. The Senior Credit Facility is secured by a pledge of all the
stock of the Company's subsidiaries and a first priority lien on substantially
all of the assets of the Company. Each of the Company's subsidiaries guarantee
the obligations under the Senior Credit Facility.
The Company had an outstanding swap agreement in 1995 and 1996 with a commercial
bank who was also a lender under the Senior Credit Facility. The net interest
rate differential paid or received was recognized as an adjustment
48
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
to interest expense and amounted to approximately $1.0 million and $315,000 in
additional interest expense for the years ended December 31, 1995, and 1996,
respectively. At December 31, 1997, the Company did not hold any derivative
instruments.
The Midcontinent Seller Note bears interest at 8.25%, payable quarterly and
matures in full on May 31, 1998.
The aggregate fixed maturities, including accreted non-cash interest, under the
Nationwide Seller Note for each year subsequent to December 31, 1997 are as
follows: 1998, $1.0 million, and $1.0 million in 1999.
7. SENIOR SUBORDINATED NOTES
Senior Subordinated Notes at December 31, 1996 and 1997 consisted of the
following:
1996 1997
--------------------------------
(in thousands)
11.75% Senior Subordinated Notes $120,000 $120,000
10.125% Senior Subordinated Notes 125,000 125,000
9% Senior Subordinated Notes 125,000 125,000
8.75% Senior Subordinated Notes - 200,000
--------------------------------
$370,000 $570,000
================================
On November 14, 1994, the Company issued 11 3/4% Senior Subordinated Notes due
2004 with an aggregate principal amount of $120.0 million (the "November 1994
Notes"). Interest on the November 1994 Notes is payable semi-annually on May 15
and November 15. The November 1994 Notes are redeemable, in whole or in part, at
the option of the Company on or after November 15, 1999, at the redemption
prices set forth in the Senior Subordinated Note Indenture ("Indenture")
pursuant to which the November 1994 Notes were issued plus accrued interest to
the date of redemption.
On June 12, 1995, the Company issued 10 1/8% Senior Subordinated Notes due 2005
with an aggregate principal amount of $125.0 million (the "June 1995 Notes").
Interest on the June 1995 Notes is payable semi-annually on February 15 and
August 15. 1995. The June 1995 Notes are redeemable, in whole or in part, at the
option of the Company on or after February 15, 2000, at the redemption prices
set forth in the Indenture pursuant to which the June 1995 Notes were issued
plus accrued interest to the date of redemption.
On January 16, 1996, the Company issued 9% Senior Subordinated Notes due 2006
with an aggregate principal amount of $125.0 million (the "January 1996 Notes").
Interest on the January 1996 Notes is payable semi-annually on January 15 and
July 15. The January 1996 Notes are redeemable, in whole or in part, at the
option of the Company on or after January 15, 2001, at the redemption prices set
forth in the Indenture, pursuant to which the January 1996 Notes were issued,
plus accrued interest to the date of redemption. In addition, at anytime before
January 15, 1999, the Company, at its option, may redeem up to $42 million of
the January 1996 Notes, with the net proceeds of one or more public equity
offerings, at a redemption price equal to 109% of the principal amount thereof,
plus accrued interest to the date of redemption.
On June 23, 1997, the Company issued 8 3/4% Senior subordinated Notes due 2007
with an aggregate principal amount of $200.0 million (the "June 1997 Notes").
Interest on the June 1997 Notes is payable semi-annually on June 15 and December
15, commencing December 15, 1997. The June 1997 Notes are redeemable, in whole
or in part, at the option of the Company on or after June 15, 2002, at the
redemption prices set forth in the Indenture, pursuant to which the June 1997
Notes were issued, plus accrued interest to the date of redemption. In addition,
at anytime before June 15, 2000, the Company, at its option, may redeem up to
$67 million of the June 1997 Notes, with the net proceeds of one or more public
equity offerings, at a redemption price equal to 108 3/4% of the principal
amount thereof, plus accrued interest to the date of redemption.
The Company's November 1994 Notes, June 1995 Notes, January 1996 Notes, and June
1997 Notes (collectively the "Notes") are general unsecured obligations of the
Company and subordinated in right of payment to all senior
49
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
debt, including all indebtedness of the Company under the Senior Credit
Facility. The Notes are guaranteed, jointly and severally, on a senior
subordinated unsecured basis by all of the Company's subsidiaries.
Upon a change of control, each holder of the Notes will have the right to
require the Company to repurchase such holder's Notes at a price equal to 101%
of their principal amount plus accrued interest to the date of repurchase. In
addition, the Company will be obligated to offer to repurchase Notes at 100% of
their principal amount plus accrued interest to the date of repurchase in the
event of certain asset sales.
At December 31, 1997, the November 1994 Notes, June 1995 Notes, January 1996
Notes, and the June 1997 Notes were trading in the public market with ask prices
of 111.3, 104.5, 100.0 and 99.0, respectively.
8. STOCKHOLDERS' EQUITY
Common Stock
------------
The Company's stockholders' equity consists of three classes of common stock
designated Class A, Class B and Class C which are substantially identical except
for voting rights. The holders of Class A Common Stock are entitled to one vote
per share. Holders of Class B Common Stock are entitled to ten votes per share.
Holders of Class C Common Stock are not entitled to vote. Holders of all classes
of Common Stock entitled to vote will vote together as a single class. Holders
of Class C Common Stock may at any time convert their shares into the same
number of shares of Class A Common Stock. At December 31, 1997, there were no
holders of Class C Common Stock outstanding.
Ownership of Class B Common Stock is restricted to members of management and by,
or in trust for family members of management ("Management Group"). In the event
any shares of Class B Common Stock held by a member of the Management Group are
transferred outside of the Management Group, such shares will automatically be
converted into shares of Class A Common Stock. In addition, if the total number
of shares of Common Stock held by members of the Management Group falls below
10% of the total number of shares of Common Stock outstanding, all of the
outstanding shares of Class B Common Stock automatically will be reclassified as
Class A Common Stock.
In any merger, consolidation or business combination, the consideration to be
received per share by holders of Class A and Class C Common Stock must be
identical to that received by holders of Class B Common Stock.
On October 4, 1996, the Company completed an additional public offering of its
Class A Common Stock, (the "Offering"). The Offering included 5,250,000 shares
sold by the Company and 2,111,398 shares sold by selling stockholders of the
Company. The net proceeds to the Company of $162.9 million were used to pay down
$20.0 million under the Senior Credit Facility, repurchase the stock and
warrants held by Capital Cities/ABC, Inc. for $54.8 million (see stock
repurchases below), and $1.1 million of other related expenses. The Company used
the remaining net proceeds, approximately $87.0 million, to partially finance
the KCAL-TV acquisition.
The terms of the Senior Credit Facility and the Indentures relating to the
Company's outstanding Senior Subordinated Notes (the "Indentures") restrict the
Company's ability to pay cash dividends on its Common Stock. Under the
Indentures, the Company is not permitted to pay any dividends on its Common
Stock unless at the time of, and immediately after giving effect to the
dividend, no default would result under the Indentures and the Company would
continue to have the ability to incur indebtedness. In addition, under the
Indentures, dividends may not exceed an amount equal to the Company's cash flow
less a multiple of the Company's interest expense, plus the net proceeds of the
sale by the Company of additional capital stock.
The Company regularly contributed Class A Common Stock into its defined
contribution plan (see Note 10) for the years ended 1995, 1996, and 1997.
50
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
STOCK OPTION PLANS
- ------------------
On May 22, 1995, the Company adopted the Young Broadcasting Inc. 1995 Stock
Option Plan ("1995 Stock Option Plan").
The 1995 Stock Option Plan was adopted to provide incentives for independent
directors, officers and employees. It may be administered by either the entire
Board of Directors of the Company or a committee consisting of two or more
members of the Board, each of whom is a disinterested person. The Board of
Directors or committee, as the case may be, is to determine, among other things,
the recipients of grants, whether a grant will consist of incentive stock
options ("ISOs"), non-qualified stock options or stock appreciation rights
("SARs") (in tandem with an option or free-standing) or a combination thereof,
and the number of shares to be subject to such options. ISOs may be granted only
to officers and key employees of the Company and its subsidiaries. Non-qualified
stock options and SARs may be granted to such officers and employees as well as
to agents and directors of and consultants to the Company, whether or not
otherwise employees of the Company.
The 1995 Stock Option Plan provides for the granting of ISOs to purchase the
Company's Common Stock at not less than the fair market value on the date of the
option grant and the granting of non-qualified options and SARs with any
exercise price. SARs granted in tandem with an option have the same exercise
price as the related option. The total number of shares with respect to which
options and SARs may be granted under the 1995 Stock Option Plan is currently
1,461,126. As of December 31, 1997, non-qualified and incentive stock options
for an aggregate of 1,351,635 shares at various prices from $19.75 to $39.88
have been granted to various individuals, including various executive officers.
Operating results for 1995 were charged $366,094 in connection with the non-
qualified options. The 1995 Stock Option Plan contains certain limitations
applicable only to ISOs granted thereunder. To the extent that the aggregate
fair market value, as of the date of grant, of the shares to which ISOs become
exercisable for the first time by an optionee during the calendar year exceed
$100,000, the option will be treated as a non-qualified option. In addition, if
an optionee owns more than 10% of the total voting power of all classes of the
Company's stock at the time the individual is granted an ISO, the option price
per share cannot be less than 110% of the fair market value per share and the
term of the ISO cannot exceed five years. No option or SAR may be granted under
the Stock Option Plan after February 5, 2005, and no option may be outstanding
for more than ten years after its grant.
The Company established a Directors Option Plan for its non-employee directors
as part of their compensation. Under this plan, each of the current directors
received an option to acquire 1,000 shares of Class A Common Stock on or before
December 1, 1999 at a purchase price of $20.70 per share (such price being 120%
of the closing price of the Company's stock on December 1, 1994, the initial
grant date for these options).
Those directors who are not also employees of the Company receive as an annual
retainer five-year options, having a fair market value exercise price, to
purchase 1,200 shares of Class A Common Stock, and also receive reimbursement of
out-of-pocket expenses incurred for each Board or committee meeting attended.
Non-employee directors also receive, upon becoming a director, a five-year
option to purchase up to 1,000 shares of Class A Common Stock at an exercise
price equal to 120% of the quoted price on the date of grant. No other directors
are compensated for services as a director.
Under the 1995 Stock Option Plan for the year ended December 31, 1997,
independent directors, officers and employees were not granted options to
purchase the Company's stock at less than the fair market value on the date of
the option grant. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No.123, (SFAS No. 123") "Accounting
for Stock-Based Compensations." Accordingly, no compensation cost has been
recognized for the stock option plans. Had compensation cost for the Company's
stock option plan been determined based on the fair market value at the grant
date for awards in 1995, 1996, and 1997, consistent with the provisions of SFAS
No. 123, the Company's net (loss) income and (loss) income per share would have
been the pro forma amounts indicated below:
51
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ---
<S> <C> <C> <C>
(dollars in thousands)
Net (loss) income - as reported $(6,591) $ 905 $(10,349)
Net (loss) income - pro forma $(9,057) $(1,274) $(12,531)
Net (loss) income per common share-as reported $ (0.61) $ 0.08 $ (0.74)
Net (loss) income per common share-pro forma $ (0.82) $ (0.11) $ (0.90)
</TABLE>
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years. The
fair value for these options was estimated at the date of grant using the Black-
Scholes model with the following assumptions:
Expected dividend yield 0%
Expected stock price volatility 25%
Risk-free interest rate:
1995 7.45%
1996 5.92%
1997 5.60%
Expected life of options 5 years
The weighted average fair value of options granted during 1995, 1996, and 1997
was $6.98, $10.41, and $11.58 respectively.
Changes during 1995, 1996 and 1997 in stock options are summarized as follows:
<TABLE>
<CAPTION>
Stock Options Weighted Average
Outstanding Exercise Price
----------- --------------
<S> <C> <C>
Outstanding at December 31, 1994 - $ -
Granted 668,825 19.80
---------
Outstanding at December 31, 1995 668,825 19.80
Granted 475,400 30.67
Exercised (15,874) 19.75
Forfeited (12,563) 19.75
---------
Outstanding at December 31, 1996 1,115,788 $ 24.45
Granted 245,057 36.16
Granted 13,790 39.88
Exercised (23,000) 19.81
---------
Outstanding at December 31, 1997 1,351,635 $ 26.81
=========
</TABLE>
Options for 93,137 shares, 446,937 shares, and 775,563 shares were exercisable
at December 31, 1995, 1996, and 1997, respectively.
52
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------- --------------------------------------
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Exercisable at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Prices 1997 Life Price 1997 Price
--------------- ---- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
$19.75-$21.73 614,188 8.0 19.80 614,188 19.80
$28.00-$31.75 478,600 9.0 30.63 126,850 30.59
$34.00-$36.25 245,057 10.0 36.20 33,146 35.91
$39.875 13,790 10.0 39.88 1,379 39.88
--------------- ---------- ----------- -------------- ---------------
1,351,635 9.09 26.81 775,563 22.29
=============== ========== =========== ============== ===============
</TABLE>
At December 31, 1997, the Company has reserved 19,200 shares of its Class A
Common Stock and 1,332,435 shares of Class B Common Stock in connection with
stock options.
STOCK REPURCHASES
- -----------------
On December 15, 1995, the Company reached an agreement with J.P. Morgan Capital
Corporation to repurchase 138,008 shares and 285,251 shares of the Company's
Class A and C Common Stock, respectively for approximately $11.1 million. On
December 31, 1995, the Company repurchased 26,625 shares of Class A and 285,251
shares of Class C Common Stock for an aggregate price of $8.2 million. The
remaining 111,383 shares of Class A Common Stock were repurchased on January 3,
1996 for an aggregate purchase price of $2.9 million.
The Company repurchased 1.5 million shares of the Company's Class C Common Stock
(the "ABC Stock") and warrants to purchase 750,000 shares of such Class C Common
Stock (the "ABC Warrants") from Capital Cities/ABC, Inc., a wholly owned
subsidiary of Disney, concurrently with the closing of the Offering. The Company
repurchased the ABC Stock at a per share price equal to the difference between
the public offering price per share ($32.50) of the Class A Common Stock, less
the underwriting discount per share. The Company repurchased the ABC Warrants at
a per share price equal to the difference between the public offering price per
share of the Class A Common Stock and the per share exercise price of the ABC
Warrants ($22.80), plus $2, less one-half of the underwriting discount per
share.
During April and May of 1997, the Company repurchased 459,000 shares of its
Class A Common Stock in open-market purchases pursuant to a stock repurchase
program for an aggregate price of approximately $12.3 million. The Company is
authorized, subject to certain limitations, to effect up to an aggregate of
$20.0 million of such purchases.
9. INCOME TAXES
At December 31, 1997, the Company had net operating loss ("NOL") carryforwards
for tax purposes of approximately $185.0 million expiring at various dates
through 2012. The availability of NOL carryforwards to offset future income is
subject to annual limitations imposed by Internal Revenue Code Section 382 as a
result of successive ownership changes.
These limitations are summarized as follows:
Annual Limitation
NOL Carryforwards or Usage
----------------- --------
$129 million $8.9 million
51 million $20.9 million
5 million No limit
------------
$185 million
============
53
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The amount of NOL carryforwards available to offset income in 1998 is
approximately $25.9 million based upon carryforwards of annual limitations and
NOLs with no limitations
To the extent that an annual NOL limitation is not used, it carries and
accumulates forward to future years. Significant components of the Company's
deferred tax assets and liabilities as of December 31, 1996 and 1997 are as
follows:
<TABLE>
<CAPTION>
1996 1997
-----------------------------------------
<S> <C> <C>
Deferred tax assets:
Accounts Receivable $ 884,000 $ 744,000
Other 221,591 58,392
NOL Carryforwards 59,295,496 73,852,347
Less: Valuation allowance (60,123,499) (51,660,603)
-----------------------------------------
Total deferred tax assets $ 277,588 $ 22,994,136
-----------------------------------------
Deferred tax liabilities:
Fixed Assets $ 410,113 $ 3,727,957
Intangibles 71,268,168 90,666,871
Other 49,580 49,580
-----------------------------------------
Total deferred tax liabilities 71,727,861 94,444,409
-----------------------------------------
Net deferred tax liabilities $(71,450,273) $(71,450,273)
=========================================
</TABLE>
Based upon the standards set forth in Statement No. 109, the benefit of $51.6
million for the above deferred tax asset has been offset by a valuation
allowance.
10. EMPLOYEE BENEFIT PLANS
The Company sponsors defined contribution plans ("Plan") which provide
retirement benefits for all eligible employees. Adam Young Inc. employees also
participate in this Plan (see Note 12). The Plan participants may make pretax
contributions from their salaries up to the maximum allowed by the Internal
Revenue Code.
For the year ended December 31, 1995, the Company accrued a non-matching
contribution (27,685 shares of Class A Common Stock) equal to 3% of eligible
employee compensation amounting to $729,000. The Company effected such
contributions by issuing the shares on January 5, 1996.
For the year ended December 31, 1996, the Company accrued a non-matching
contribution (28,481 shares of Class A Common Stock) equal to 3% of eligible
employee compensation amounting to approximately $833,000. The Company effected
such contributions by issuing the shares on January 10, 1997.
On January 1, 1997, the Company adopted and established a matching stock plan
("Matching Plan"). According to the Matching Plan, the Company will contribute
one-half of every dollar a participant contributes, up to the first 3% of the
participant's pay.
For the year ended December 31, 1997, the Company paid and accrued a matching
stock contribution (30,817 shares of Class A Common Stock) equal to 3% of
eligible employee compensation amounting to $967,000. The Company effected such
contributions by issuing the shares on a quarterly basis. The fourth quarter of
1997 was issued on January 16, 1998.
11. COMMITMENTS AND CONTINGENCIES
The Company is obligated under various capital leases for certain broadcast
equipment, office furniture, fixtures and other equipment that expire at various
dates during the next three years. At December 31, 1996 and 1997, the net amount
of property and equipment recorded under capital leases was $1,488,000 and
$1,259,000 respectively.
54
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Amortization of assets held under capital leases is included with depreciation
and amortization of property and equipment.
The Company also has certain non-cancelable operating leases, primarily for
administrative offices, broadcast equipment and vehicles that expire over the
next five years. These leases generally contain renewal options for periods up
to five years and require the Company to pay all costs such as maintenance and
insurance.
Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) and the present value of
future minimum capital lease payments as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
----------------------------------------
(dollars in thousands)
<S> <C> <C>
Year ending December 31:
1998 $471 $ 1,776
1999 216 761
2000 - 688
2001 - 648
2002 - 429
Thereafter - 39
----------------------------------------
Total minimum lease payments $ 687 $4,341
========================================
</TABLE>
See Note 12 regarding sublease income from a related party.
12. RELATED PARTY TRANSACTIONS
The Company has entered into agreements with Adam Young Inc. (a company owned by
certain stockholders of the Company) whereby Adam Young Inc. will provide
national sales representation for the Company's television stations. In return,
Adam Young Inc. is paid a commission which approximated $3.8 million, $3.9
million, and $5.3 million, for the years ended 1995, 1996, and 1997,
respectively. The Company believes that the commissions they pay Adam Young Inc.
are equal to rates that they would have paid to other third party national sales
representatives (See Note 14).
At December 31, 1996 and 1997, the Company had accrued commissions payable of
$718,000 and $494,000, respectively, to Adam Young Inc.
During 1990, the Company began subleasing to Adam Young Inc. certain office
space together with furnishings and equipment under an agreement which expires
in the year 2000. The lease is accounted for under the operating method. The
Company pays real estate taxes and maintenance while insurance is paid for by
Adam Young Inc. The cost of the leasehold improvements, furnishings, and
equipment subject to the sublease approximated $1.2 million, and related
accumulated depreciation and amortization approximated $979,000 and $1.0
million, at December 31, 1996 and 1997, respectively. The rent charged to Adam
Young Inc. exceeds the Company's cost of such facilities and improvements.
The Company received lease income payments in connection with the aforementioned
sublease arrangement of $537,000, $554,000 and $619,000, during 1995, 1996 and
1997, respectively.
The approximate minimum noncancelable lease payments to be received for each of
the years subsequent to December 31, 1997 if the Company does not recapture any
of the subleased space and improvements as permitted under the sublease are as
follows: 1998, $632,000; 1999, $632,000; 2000, $448,000; 2001 $78,000 and 2002,
$39,000.
During 1994 and 1995, the Company made loans to certain executive officers and
other employees of the Company to satisfy the federal tax withholding
requirements related to non-cash compensation paid in the form of shares of
55
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
the Company's Class B Common Stock. Such shares include shares issued pursuant
to the Program in August 1994 and November 1994 and shares issued in March 1994
as part of the compensation under employment arrangements (see Note 8). The
aggregate amount of such loans outstanding, including accrued interest at
December 31, 1997 was approximately $1.2 million. The principal amount of the
loans will bear interest, payable annually, at the rate of 7.21%. The loans are
secured by each employee's shares of common stock and the principal is payable
in five equal annual installments between 1995 and 1999.
On November 8, 1995, the Board of Directors approved a loan forgiveness program
(the "Loan Forgiveness Program") for the payment that was due on November 15,
1995 and the payments due in subsequent years. Under this program, participants
that chose to participate will have their annual installments forgiven over the
year following the scheduled payment date at the rate of one twelfth per month,
as long as the employee continues to be employed by the Company.
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summarizes the Company's results of operations for each quarter of
1997 and 1996 (in thousands, except per share amounts). The (loss) income per
common share computation for each quarter and the year are separate
calculations. Accordingly, the sum of the quarterly (loss) income per common
share amounts may not equal the (loss) income per common share for the year.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(dollars in thousands, except per share amounts)
1997
<S> <C> <C> <C> <C>
Net revenues $61,279 $71,100 $57,939 $73,217
Operating income 10,038 21,136 9,991 22,325
Net (loss) income before extraordinary
item (5,566) 5,212 (6,540) 5,788
Net (loss) income (5,566) 5,212 (6,540) (3,455)
Net (loss) income per common share:
Basic $ (0.39) $ 0.37 $ (0.47) $ (0.25)
Diluted $ (0.39) $ 0.37 $ (0.47) $ (0.24)
1996
Net revenues $27,699 $36,060 $35,387 $55,197
Operating income 5,462 11,977 9,403 15,640
Net (loss) income before extraordinary
item (3,338) 1,877 (1,043) 3,409
Net (loss) income (3,338) 1,877 (1,043) 3,409
Net (loss) income per common share:
Basic $ (0.32) $ 0.18 $ (0.10) $ 0.24
Diluted $ (0.32) $ 0.17 $ (0.10) $ 0.24
</TABLE>
Quarterly depreciation and amortization is provided based on estimates. The
results of the fourth quarter of 1997 are net of a year-end adjustment for
depreciation and amortization of $2.5 million.
The results for the fourth quarter of 1997 include an extraordinary loss of
approximately $9.2 million ($0.66 per share) related to the early extinguishment
of debt (See Note 5).
14. SUBSEQUENT EVENT
On February 5, 1998, the Company entered into an Agreement and Plan of Merger
with Adam Young Inc. ("AYI") and AYI Acquisition Corporation, a wholly-owned
subsidiary of the Company ("Sub"), pursuant to which AYI was merged with and
into Sub and became a wholly-owned subsidiary of the Company.
56
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The acquisition of AYI has been accounted for as a combination of companies
under common control similar to a pooling-of-interests. The Company issued
476,307 shares of the Company's Class A Common Stock, with an approximate value
of $19.3 million, to Vincent Young, the Company's Chairman and to Adam Young,
the Company's Treasurer and his wife in exchange for all of the outstanding
stock of AYI.
Historical information related to this acquisition was not included in the
Company's historical results as the impact of this acquisition was not deemed to
be material.
57
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YOUNG BROADCASTING INC.
<TABLE>
<CAPTION>
Column A COLUMN B Column C Column D COLUMN E
-------- -------- --------------------------------------- -------- --------
ADDITIONS
---------------------------------------
BAL. AT BEGINNING CHARGED TO CHARGED TO BAL. AT END
Description OF PERIOD COSTS AND EXPENSES OTHER ACCOUNTS (1) DEDUCTIONS (2) OF PERIOD
----------- --------- ------------------ ------------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Deducted from asset accounts:
Allowance for doubtful
accounts........... $ 665,000 751,000 - 631,000 $785,000
Year ended December 31, 1996
Deducted from asset accounts:
Allowance for doubtful
accounts........... $ 785,000 492,000 1,429,000 496,000 $2,210,000
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful
accounts............ $ 2,210,000 323,000 - 661,000 $1,872,000
</TABLE>
_______
(1) Amount relates to Acquired Stations
(2) Write-off of uncollectible accounts
58
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information called for by Item 10 is set forth under the heading "Executive
Officers of the Registrant" in Part I hereof and in "Election of Directors" in
the Company's Proxy Statement relating to the 1998 Annual Meeting of
Stockholders (the "1998 Proxy Statement"), which is incorporated herein by this
reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information called for by Item 11 is set forth under the heading "Executive
Compensation" in the 1998 Proxy Statement, which is incorporated herein by this
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information called for by Item 12 is set forth under the heading "Security
Ownership of Certain Beneficial Owners and Management" in the 1998 Proxy
Statement, which is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by Item 13 is set forth under the heading "Election
of Directors--Certain Transactions" in the 1998 Proxy Statement, which is
incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial statements and the schedule filed as a part of this report
are listed on the "Index to Consolidated Financial Statements" at page 42
herein. All other schedules are omitted because either (i) they are not
required under the instructions, (ii) they are inapplicable, or (iii) the
information is included in the Consolidated Financial Statements.
(b) The Company did not file any reports on Form 8-K during the fourth
quarter of the year ended December 31, 1997.
59
<PAGE>
EXHIBITS
Exhibit
Number Exhibit Description
- ------ -------------------
3.1(a) Restated Certificate of Incorporation of the Company*
3.1(b) Certificate of Amendment to Restated Certificate of Incorporation of the
Company**
3.1(c) Certificate of Amendment to Restated Certificate of Incorporation of the
Company***
3.2 Second Amended and Restated By-laws of the Company*
3.3 Certificate of Incorporation of Young Broadcasting of La Crosse, Inc.*
3.4 By-laws of Young Broadcasting of La Crosse, Inc.*
3.5 Certificate of Incorporation of Young Broadcasting of Lansing, Inc.*
3.6 By-laws of Young Broadcasting of Lansing, Inc.*
3.7 Certificate of Incorporation of Young Broadcasting of Albany, Inc.*
3.8 By-laws of Young Broadcasting of Albany, Inc.*
3.9 Certificate of Incorporation of Winnebago Television Corporation*
3.10 By-laws of Winnebago Television Corporation*
3.11 Certificate of Incorporation of Young Broadcasting of Nashville, Inc.*
3.12 By-laws of Young Broadcasting of Nashville, Inc.*
3.13 Certificate of Incorporation of YBT, Inc.*
3.14 By-laws of YBT, Inc.*
3.15 Certificate of Limited Partnership of WKRN, L.P.*
3.16 Agreement of Limited Partnership of WKRN, L.P.*
3.17 Certificate of Incorporation of Young Broadcasting of Louisiana, Inc.*
3.18 By-laws of Young Broadcasting of Louisiana, Inc.*
3.19 Certificate of Incorporation of LAT, Inc.*
3.20 By-laws of LAT, Inc.*
3.21 Certificate of Limited Partnership of KLFY, L.P.*
3.22 Agreement of Limited Partnership of KLFY, L.P.*
3.23 Certificate of Incorporation of Young Broadcasting of Knoxville, Inc.*
3.24 By-laws of Young Broadcasting of Knoxville, Inc.*
3.25 Certificate of Incorporation of YBK, Inc.*
3.26 By-laws of YBK, Inc.*
3.27 Certificate of Limited Partnership of WATE, L.P.*
3.28 Agreement of Limited Partnership of WATE, L.P.*
3.29 Certificate of Incorporation of Young Broadcasting of Richmond, Inc.*
3.30 By-laws of Young Broadcasting of Richmond, Inc.*
3.31 Certificate of Incorporation of Young Broadcasting of Green Bay, Inc.*
3.32 By-laws of Young Broadcasting of Green Bay, Inc.*
3.33 Certificate of Incorporation of Young Broadcasting of Davenport, Inc.**
3.34 By-laws of Young Broadcasting of Davenport, Inc.**
3.35 Certificate of Incorporation of Young Broadcasting of Sioux Falls,
Inc.****
3.36 By-laws of Young Broadcasting of Sioux Falls, Inc.****
3.37 Certificate of Incorporation of Young Broadcasting of Rapid City,
Inc.****
3.38 By-laws of Young Broadcasting of Rapid City, Inc.****
3.39 Certificate of Incorporation of Young Broadcasting of Los Angeles,
Inc.****
3.40 By-laws of Young Broadcasting of Los Angeles, Inc.****
3.41 Certificate of Incorporation of Fidelity Television, Inc.****
3.42 By-laws of Fidelity Television, Inc.****
60
<PAGE>
9.1(a) Voting Trust Agreement, dated July 1, 1991, between Adam Young, and
Vincent Young and Richard Young as trustees*
9.1(b) Amendment No. 1, dated as of July 22, 1994, to Voting Trust Agreement*
9.1(c) Amendment No. 2, dated as of April 12, 1995, to Voting Trust Agreement**
9.1(d) Amendment No. 3, dated as of July 5, 1995, to Voting Trust Agreement**
9.1(e) Amendment No. 4, dated as of September 11, 1996, to Voting Trust
Agreement****
9.1(f) Amendment No. 5, dated as of January 21, 1997, to Voting Trust
Agreement****
9.1(g) Voting Trust Agreement, dated October 1, 1996, between Adam Young, and
Vincent Young as trustee ****
10.1 Subscription and Shareholders Agreement, dated May 26, 1988, between the
Company and Ronald J. Kwasnick*
10.2(a) Employment Agreement, dated as of March 1, 1993, between the Company and
James A. Morgan*
10.2(b) Amendment, dated as of March 27, 1995, effective as of February 15,
1995, to Employment Agreement, dated as of March 1, 1993, between the
Company and James A. Morgan*****
10.3 Operating Agreement, dated December 29, 1989, between WKRN, L.P. and
Young Broadcasting of Nashville, Inc.*
10.4 Operating Agreement, dated December 29, 1989, between KLFY, L.P. and
Young Broadcasting of Louisiana, Inc.*
10.5 Operating Agreement between WATE, L.P. and Young Broadcasting of
Knoxville, Inc.*
10.6 Agreement, dated July 1, 1991, between Adam Young Inc. and Young
Broadcasting of Albany, Inc. (Agreement filed hereunder is
representative of five other substantially similar agreements. See
Schedule filed with this Exhibit)*
10.7 Affiliation Agreements, each dated October 10, 1994, between Young
Broadcasting of Albany, Inc. and ABC (for WTEN and WCDC)*
10.8 Affiliation Agreement, dated October 10, 1994, between WKRN, L.P. and
ABC*
10.9 Affiliation Agreement, dated September 19, 1994, between Young
Broadcasting of La Crosse, Inc. and CBS*
10.10 Affiliation Agreement, dated September 19, 1994, between KLFY, L.P. and
CBS*
10.11 Affiliation Agreement, dated May 17, 1995, between Winnebago Television
Corporation and ABC**
10.12 Affiliation Agreement, dated September 19, 1994, between Young
Broadcasting of Lansing, Inc. and CBS*
10.13 Affiliation Agreement, dated October 10, 1994, between Young
Broadcasting of Richmond, Inc. and ABC*
10.14 Affiliation Agreement, dated October 10, 1994, between WATE, L.P. and
ABC*
10.15 Affiliation Agreement, dated October 10, 1994, between Young
Broadcasting of Green Bay, Inc. and ABC*
10.16 Affiliation Agreement, dated February 3, 1995, between Broad Street
Television, L.P. and NBC**
10.17 Affiliation Agreement, dated April 3, 1996, between Young Broadcasting
of Sioux Falls, Inc. and CBS (KELO); Affiliation Agreements (satellite),
each dated April 3, 1996, between Young Broadcasting of Sioux Falls,
Inc. and CBS (KPLO and KDLO); and Affiliation Agreement, dated April 3,
1996, between Young Broadcasting of Rapid City, Inc. and CBS
(KCLO)******
10.18(a)Lease, dated March 29, 1990, between Lexreal Associates, as Landlord,
and the Company*
61
<PAGE>
10.18(b) First Amendment to Lease, dated January 14, 1997****
10.19(a) Master Equipment Lease Agreement, dated May 31, 1990, between First
Chicago Leasing Corporation and Young Broadcasting of Albany, Inc.*
10.19(b) Lease Supplement No. 1, dated May 31, 1990*
10.19(c) Lease Supplement No. 2, dated August 24, 1990*
10.19(d) Guaranty of the Company*
10.20(a) Master Equipment Lease Agreement, dated May 31, 1990, between First
Chicago Leasing Corporation and Young Broadcasting of Nashville, Inc.*
10.20(b) Supplement No. 1, dated May 31, 1990*
10.20(c) Supplement No. 2, dated August 24, 1990*
10.20(d) Guaranty of the Company*
10.21 Credit Agreement for the Senior Credit Facility
10.22 Asset Purchase and Sale Agreement, dated as of July 31, 1995, between
the Company and Broad Street Television, L.P. (schedules omitted;
Registrant agrees to furnish supplementally a copy of any schedule to
the Commission upon request)**
10.23 Asset Purchase and Sale Agreement, dated as of January 11, 1996,
between the Company and Midcontinent Television of South Dakota, Inc.
(schedules omitted; Registrant agrees to furnish supplementally a copy
of any schedule to the Commission upon request)*******
10.24 Acquisition Agreement, dated as of May 10, 1996, among the Company,
KCAL Broadcasting, Inc., KCAL-TV, Inc. and Disney Enterprises, Inc.
(schedules omitted; Registrant agrees to furnish supplementally a copy
of any schedule to the Commission upon request)******
10.25 Agreement and Plan to Merge, dated as of February 5, 1998, among the
Company, AYI Acquisition Corporation, and Adam Young Inc. and its
shareholders.
10.26 Subscription Agreement, dated October 10, 1994, between ABC and the
Company with the form of Warrant to be issued to ABC and the form of
Registration Rights Agreement attached thereto*
10.27 Indenture, dated November 14, 1994, among the Company, the Subsidiary
Guarantors and The First National Bank of Boston, as Trustee, relating
to the November 1994 Notes*
10.28 Indenture, dated June 1, 1995, among the Company, the Subsidiary
Guarantors and The First National Bank of Boston, as Trustee, relating
to the June 1995 Notes**
10.29 Indenture, dated January 1, 1996, among the Company, the Subsidiary
Guarantors and State Street Bank and Trust Company, as Trustee,
relating to the January 1996 Notes*******
10.30 Indenture, dated June 15, 1997, among the Company, the Subsidiary
Guarantors and First Union National Bank, as Trustee, relating to the
June 1997 Notes ***
10.31 Young Broadcasting Inc. 1995 Stock Option Plan*****
10.32 Purchase Agreement, dated June 6, 1995, among the Company, the
Subsidiary Guarantors and BT Securities Corporation and J.P. Morgan
Securities Inc.**
10.33 Registration Rights Agreement, dated as of June 12, 1995, among the
Company, the Subsidiary Guarantors and BT Securities Corporation and
J.P. Morgan Securities Inc.**
10.34 Purchase Agreement, dated January 6, 1996, among the Company, the
Subsidiary Guarantors and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc.*******
62
<PAGE>
10.35 Registration Rights Agreement, dated as of June 12, 1995, among the
Company, the Subsidiary Guarantors and Merrill Lynch, Pierce, Fenner &
Smith Incorporated and J.P. Morgan Securities Inc.*******
10.36 Purchase Agreement, dated June 16, 1997, among the Company, the
Subsidiary Guarantors and Merrill Lynch, Pierce, Fenner & Smith
Incorporated***
10.37 Registration Rights Agreement, dated June 23, 1997, among the Company,
the Subsidiary Guarantors and Merrill Lynch, Pierce, Fenner & Smith
Incorporated***
11.1 Statement re computation of per share earnings
18.1 Letter of Ernst & Young LLP regarding change in accounting principles*
21.1 Subsidiaries of the Company****
23.1 Consent of Ernst & Young LLP, Independent Auditors
27.1 Financial Data Schedule
- ---------
* Filed as an Exhibit to the Company's Registration Statement on Form S-1,
Registration No. 33-83336, under the Securities Act of 1933 and
incorporated herein by reference.
** Filed as an Exhibit to the Company's Registration Statement on Form S-4,
Registration No. 33-94192, under the Securities Act of 1933 and
incorporated herein by reference.
*** Filed as an Exhibit to the Company's Registration Statement on Form S-4,
Registration No. 333-31429, under the Securities Act of 1933 and
incorporated herein by reference.
**** Filed as an Exhibit to the Company's Annual Report Form 10-K for the
fiscal year ended December 31, 1996 under the Securities Exchange Act of
1934 and incorporated herein by reference.
***** Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1995 under the Securities Exchange
Act of 1934 and incorporated herein by reference.
****** Filed as an Exhibit to the Company's Registration Statement on Form S-3,
Registration No. 333-06241, under the Securities Act of 1933 and
incorporated herein by reference.
******* Filed as an Exhibit to the Company's Registration Statement on Form S-4,
Registration No. 333-2466, under the Securities Act of 1933 and
incorporated herein by reference.
63
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
YOUNG BROADCASTING INC.
Date: March 13, 1998 By /s/ Vincent J. Young
-------------------------------
Vincent J. Young
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures TITLE DATE
---------- ----- ----
/s/ Vincent J. Young
- --------------------
Vincent J. Young Chairman and Director March 13, 1998
(principal executive officer)
/s/ Adam Young
- --------------
Adam Young Treasurer and Director March 13, 1998
/s/ James A. Morgan
- -------------------
James A. Morgan Executive Vice President and March 13, 1998
Chief Financial Officer
(principal financial
officer and principal
accounting officer)
/s/ Ronald J. Kwasnick
- ----------------------
Ronald J. Kwasnick President and Director March 13, 1998
/s/ Bernard F. Curry
- --------------------
Bernard F. Curry Director March 13, 1998
/s/ Alfred J. Hickey, Jr.
- -------------------------
Alfred J. Hickey, Jr. Director March 13, 1998
/s/ Leif Lomo
- -------------
Leif Lomo Director March 13, 1998
64
<PAGE>
EXHIBIT 10.21 (a)
02. CONFORMED COPY
$300,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of November 25, 1997,
among
Young Broadcasting Inc.,
The Banks Listed Herein,
Bankers Trust Company,
as Administrative Agent and Issuing Bank,
Canadian Imperial Bank of Commerce,
as Documentation Agent,
and
Morgan Guaranty Trust Company of New York,
as Syndication Agent
Co-Arrangers:
Bankers Trust Company
Canadian Imperial Bank of Commerce
J.P. Morgan Securities Inc.
Managing Agent:
First Union National Bank of North Carolina
Co-Agents:
Bank of America National Trust and Savings Association
Bank of Tokyo - Mitsubishi Trust Company
Fleet Bank, N.A.
Heller Financial, Inc.
Internationale Nederlanden (U.S.) Capital Corporation
BankBoston, N.A.
<PAGE>
<TABLE>
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
SECTION 1.01. Certain Defined Terms...............................................................................................2
SECTION 1.02. Computation of Time Periods........................................................................................32
SECTION 1.03. Accounting Terms...................................................................................................32
ARTICLE 2
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances.......................................................................................................33
(a) The Revolving Facility Advances....................................................................................33
(b) The Swingline Advances.............................................................................................33
(c) Refunding of Swingline Advances....................................................................................34
SECTION 2.02. Method of Borrowing................................................................................................35
SECTION 2.03. Notes..............................................................................................................37
SECTION 2.04. Assignment and Assumption of Obligations under Existing
Credit Agreement; Recharacterization of Term Loan Advances
Under Existing Credit Agreement and Increase in Revolving
Facility Commitments..................................................................................................38
SECTION 2.05. Interest Rates.....................................................................................................41
SECTION 2.06. Fees...............................................................................................................43
(a) Commitment Fees....................................................................................................44
(b) Participation Fees.................................................................................................44
(c) Administrative Fees................................................................................................44
(d) Letter of Credit Fees..............................................................................................44
SECTION 2.07. Optional Termination or Reduction of Commitments...................................................................45
SECTION 2.08. Mandatory Termination of Commitments...............................................................................45
SECTION 2.09. Prepayments........................................................................................................45
(a) Optional Prepayments...............................................................................................45
(b) Mandatory Prepayments..............................................................................................45
(c) Notice of Prepayment...............................................................................................46
SECTION 2.10. Letters of Credit..................................................................................................47
SECTION 2.11. General Provisions as to Payments..................................................................................50
SECTION 2.12. Funding Losses.....................................................................................................51
SECTION 2.13. Computation of Interest and Fees...................................................................................51
SECTION 2.14. Taxes..............................................................................................................52
SECTION 2.15. Voluntary and Mandatory Conversion of Advances.....................................................................53
SECTION 2.16. Basis for Determining Interest Rate Inadequate or Unfair...........................................................54
</TABLE>
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SECTION 2.17. Illegality.........................................................................................................55
SECTION 2.18. Increased Cost and Reduced Return..................................................................................56
SECTION 2.19. Base Rate Advances Substituted for Affected Fixed Rate
Advances...................................................................................................................57
SECTION 2.20. Use of Proceeds....................................................................................................58
ARTICLE 3
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Closing Date...............................................................................58
SECTION 3.02. Conditions Precedent to Each Borrowing.............................................................................63
SECTION 3.03. Conditions Precedent to Borrowings in Connection with
Permitted Acquisitions.....................................................................................................64
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.....................................................................69
(a) Due Incorporation, Etc.............................................................................................69
(b) Due Authorization and Execution, Etc...............................................................................69
(c) Government Consents................................................................................................70
(d) Legal, Valid and Binding Nature....................................................................................70
(e) Capitalization and Subsidiaries....................................................................................71
(f) Financial Statements; No Material Adverse Change...................................................................71
(g) Solvency...........................................................................................................72
(h) Absence of Litigation; Litigation Description......................................................................72
(i) Ownership of Properties; Absence of Liens and
Encumbrances.......................................................................................................72
(j) No Burdensome Agreements...........................................................................................73
(k) Payment of Taxes..........................................................................................73
(l) Accuracy of Information Given to Lenders...........................................................................74
(m) ERISA..............................................................................................................74
(n) List of Debt.......................................................................................................75
(o) Not a Purpose Credit...............................................................................................75
(p) Prohibited Securities Transactions.................................................................................75
(q) Investment Company Act.............................................................................................75
(r) Casualties.........................................................................................................75
(s) Executive Compensation Agreements..................................................................................75
(t) Collateral, Etc....................................................................................................76
(u) Consents...........................................................................................................76
(v) Security Agreements................................................................................................77
(w) Mortgages..........................................................................................................77
(x) Status Under Communications Act....................................................................................77
</TABLE>
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(y) Compliance with Environmental Requirements; No
Hazardous Materials................................................................................................77
(z) Compliance with Laws.........................................................................................79
(aa) Obligations are Senior Debt and Designated Senior Debt.............................................................79
ARTICLE 5
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants..............................................................................................80
(a) Compliance with Laws, Etc..........................................................................................80
(b) Conduct of Business; Preservation of Corporate
Existence..........................................................................................................80
(c) Visitation Rights..................................................................................................80
(d) Keeping of Books...................................................................................................81
(e) Maintenance of Insurance...........................................................................................81
(f) Payment of Taxes, Etc..............................................................................................81
(g) Maintenance of Properties, Etc.....................................................................................82
(h) Maintenance of FCC Licenses, Affiliation Agreements, Etc...........................................................82
(i) Arm's-Length Transactions..........................................................................................82
(j) Solvency...........................................................................................................83
(k) Plan Contribution..................................................................................................83
(l) Pro Forma Debt Service Coverage....................................................................................83
(m) Interest Coverage..................................................................................................83
(n) Senior Debt to Operating Cash Flow Ratio...........................................................................84
(o) Debt to Operating Cash Flow Ratio..................................................................................84
(p) Accuracy of Information Given to Lenders...........................................................................85
(q) Management.........................................................................................................85
(r) Further Assurances.................................................................................................85
(s) Management of Partnerships.........................................................................................85
(t) Hazardous Materials; Remediation...................................................................................86
(u) FCC Filings........................................................................................................86
SECTION 5.02. Negative Covenants.................................................................................................86
(a) Liens, Etc.........................................................................................................86
(b) Debt...............................................................................................................87
(c) Mergers............................................................................................................87
(d) Sales, Etc., of Assets.............................................................................................88
(e) Maintenance of Ownership of Subsidiaries; Issuance of
Stock and Partnership Interests, Etc...............................................................................88
(f) Investments in Other Persons and Asset Purchases...................................................................88
(g) Restricted Payments................................................................................................89
(h) Prepayment of Debt.................................................................................................90
(i) Change in Business; Cease Broadcasting.............................................................................90
(j) Change of Accountants..............................................................................................90
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
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(k) Amendment of Charter or By-Laws....................................................................................91
(l) Termination of Licenses............................................................................................91
(m) Amendment, Etc. of Subordinated Debt Documents.....................................................................91
(n) Trade Debt.........................................................................................................91
(o) Employee Benefit Costs and Liabilities.............................................................................91
(p) Plan Amendments....................................................................................................92
(q) Limited Partners...................................................................................................92
(r) Limitation on Payment Restrictions Affecting Subsidiaries..........................................................92
(s) Interest Rate Protection...........................................................................................92
SECTION 5.03. Reporting Requirements.............................................................................................92
ARTICLE 6
EVENTS OF DEFAULT
SECTION 6.01. Events of Default..................................................................................................97
SECTION 6.02. Cash Cover........................................................................................................102
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization.....................................................................................102
SECTION 7.02. Agents and Affiliates.............................................................................................102
SECTION 7.03. Actions by Agents.................................................................................................102
SECTION 7.04. Consultation with Experts.........................................................................................103
SECTION 7.05. Liability of Agents...............................................................................................103
SECTION 7.06. Indemnification...................................................................................................103
SECTION 7.07. Credit Decision...................................................................................................103
SECTION 7.08. Successor Agent...................................................................................................104
SECTION 7.09. Managing Agent and Co-agents......................................................................................104
SECTION 7.10. Notice of Default; Collateral Documents...........................................................................104
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Amendments, Etc...................................................................................................105
SECTION 8.02. Notices, Etc......................................................................................................107
SECTION 8.03. No Waiver; Remedies...............................................................................................108
SECTION 8.04. Costs and Expenses; Indemnities...................................................................................108
SECTION 8.05. Right to Set-off..................................................................................................109
SECTION 8.06. BINDING EFFECT; GOVERNING LAW.....................................................................................110
SECTION 8.07. Successors and Assigns............................................................................................111
SECTION 8.08. Headings..........................................................................................................114
SECTION 8.09. Execution in Counterparts; Integration............................................................................114
</TABLE>
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<TABLE>
<CAPTION>
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SECTION 8.10. Severability of Provisions........................................................................................114
SECTION 8.11. WAIVER OF JURY TRIAL..............................................................................................114
SECTION 8.12. Submission to Jurisdiction; Consent to Service of Process.........................................................114
SECTION 8.13. Consent to Amendment..............................................................................................115
SECTION 8.14. Survival..........................................................................................................115
</TABLE>
<PAGE>
Appendix I - Commitments
Appendix II - Old Lender Term Loans and Revolving Facility Commitments
SCHEDULES
Schedule 1.01-1 - Collateral Documents
Schedule 1.01-2 - Programming Cost Savings
Schedule 4.01(a) - Subsidiaries of the Borrower
Schedule 4.01(e) - Agreements Relating to Capital Stock
Schedule 4.01(h) - Disclosed Litigation
Schedule 4.01(m) - Plans and Multiemployer Plans
Schedule 4.01(n) - Existing Debt
Schedule 4.01(s) - Executive Compensation Agreements
Schedule 4.01(t) - Descriptions and Locations of Real
Property and Leasehold Interests
Schedule 4.01(u) - Government and Third Party Consents
Schedule 4.01(y) - Environmental Matters
<PAGE>
EXHIBITS
Exhibit A-1 - Form of Revolving Facility Note
Exhibit A-2 Form of Swingline Note
Exhibit B - Form of 1997 Global Collateral Documents and Guaranty
Agreement Amendment
Exhibit C - Form of Mortgage
Exhibit D - Form of Mortgage Amendment
Exhibit E - Form of Assignment and Assumption Agreement
Exhibit F - Form of Opinion of Cooperman Levitt Winikoff Lester &
Newman, P.C.
Exhibit G - Form of Local Counsel Opinion
Exhibit H - Form of Opinion of Special FCC Counsel
Exhibit I - Form of Opinion of Davis Polk & Wardwell
Exhibit J - Form of Compliance Certificate
Exhibit K - Form of Request for Issuance
Exhibit L - Form of Borrower's Solvency Certificate
Exhibit M - Form of Guarantor's Solvency Certificate
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 25, 1997
among YOUNG BROADCASTING INC., a Delaware corporation (the "BORROWER"), the
banks and other financial institutions (the "BANKS") listed on the signature
pages hereof, BANKERS TRUST COMPANY ("BTCO"), as Administrative Agent for the
Lenders and the Issuing Bank hereunder, CANADIAN IMPERIAL BANK OF COMMERCE
("CIBC"), as Documentation Agent for the Lenders hereunder, and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK ("MORGAN GUARANTY"), as Syndication Agent for the
Lenders hereunder.
W I T N E S S E T H:
WHEREAS, the Borrower and certain financial institutions are parties
to a $500,000,000 Credit Agreement dated as of November 15, 1996, as amended (as
so amended and in effect on the date of this Amended Agreement immediately
before the effectiveness of this Amended Agreement, the "EXISTING CREDIT
AGREEMENT"); and
WHEREAS, pursuant to the Existing Credit Agreement, the Old
Lenders (as defined herein) have Term Loan Advances in the aggregate principal
amount of $82,260,000 outstanding to the Borrower (the "Existing Term Loans")
and have Revolving Facility Commitments to make Revolving Facility Advances in
the aggregate amount of up to $200,000,000 ("Existing Revolving Facility
Commitments") to the Borrower; and
WHEREAS, at the request of the Borrower, the Banks have agreed
to refinance the credit facilities provided under the Existing Credit Agreement,
including the Existing Term Loans, by making available to the Borrower, subject
to the terms and conditions of this Amended Agreement , Revolving Facility
Commitments to make Revolving Facility Advances in the aggregate amount of up to
$300,000,000; and
WHEREAS, in order to effect such refinancing, the Old Lenders
and the Banks have agreed that pursuant hereto and immediately prior to the
occurrence of the Closing Time (as defined herein), the Old Lenders will assign,
and the Banks will acquire and assume, all of their rights and obligations under
the Existing Credit Agreement; and
WHEREAS, the parties hereto, in addition to providing for the
foregoing, wish to amend certain of the other provisions of the Existing Credit
Agreement; and
<PAGE>
WHEREAS, in order to set forth in one document, for the convenience
of the parties, the text of the Existing Credit Agreement as amended by the
amendments to be made upon the effectiveness hereof, the parties wish to amend
and restate the Existing Credit Agreement in its entirety as set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACQUISITION" means the Borrower's acquisition of television
broadcast station KCAL-TV in Los Angeles, California.
"ADJUSTED CD RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.05(B).
"ADMINISTRATIVE AGENT" means BTCo in its capacity as Administrative
Agent for the Lenders hereunder, and its successors in such capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means (i) with respect to each Lender
listed on the signature pages hereof, the administrative questionnaire in the
form submitted to such Lender by the Administrative Agent and submitted to the
Administrative Agent (with a copy to the Borrower) duly completed by such Lender
on or before the Closing Date and (ii) with respect to each other Lender, the
Assignment and Assumption Agreement for such Lender as an Assignee.
"ADVANCE" means (i) a Revolving Facility Advance, each of which may
be an Adjusted CD Rate Advance, a Base Rate Advance or a Eurodollar Rate Advance
(each of which shall be a "TYPE" of Advance), or (ii) a Swingline Advance, each
of which shall be a Base Rate Advance.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person. The term "CONTROL" means the possession, directly or indirectly, of
the power, whether or not exercised, to direct or cause the direction of the
management or policies of any Person, whether through ownership of voting
securities, by contract or otherwise.
2
<PAGE>
"AGENTS" means the Administrative Agent, the Documentation Agent and
the Syndication Agent, or any combination of the foregoing as the context may
require, and "AGENT" means any one of the foregoing.
"AGREEMENT" means the Existing Credit Agreement, as amended by this
Amended Agreement and as amended or otherwise modified from time to time.
"AMENDED AGREEMENT" means this Amended and Restated Credit
Agreement.
"AMENDMENT DOCUMENTS" means this Agreement, the 1997 Global
Collateral Documents and Guaranty Agreement Amendment and the Mortgage
Amendments.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance, such
Lender's CD Lending Office in the case of an Adjusted CD Rate Advance, and such
Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
"ASSET OPERATING CASH FLOW" means, with respect to each Asset Sale,
the portion of Operating Cash Flow for the twelve months immediately preceding
such Asset Sale that is attributable to the asset, property or business being
disposed of pursuant to such Asset Sale.
"ASSET PURCHASE" means an acquisition by the Borrower or any of its
Subsidiaries of (i) all or substantially all of the assets of any Person (other
than the Borrower or any of its Subsidiaries) or (ii) property and assets of any
Person (other than the Borrower or any of its Subsidiaries), in each case
comprising a television station or a business incidental thereto.
"ASSET SALE" means any sale, lease, assignment, transfer or other
disposition by the Borrower or any of its Subsidiaries of any asset, property or
business (including, without limitation, receivables and leasehold interests)
whether now owned or hereafter acquired, but excluding dispositions of inventory
in the ordinary course of business.
"ASSIGNEE" has the meaning specified in Section 8.07(C).
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an Assignment and
Assumption Agreement entered into by a Lender and an Assignee, and accepted by
the Administrative Agent and consented to by the Borrower (if required), in
substantially the form of Exhibit E.
3
<PAGE>
"BANKS" has the meaning specified in the preamble to this Agreement.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.05(A).
"BASE RATE MARGIN" means, for any day, the percentage set forth
below opposite the applicable range for the Debt to Operating Cash Flow Ratio as
specified in the most recent Notice of Debt to Operating Cash Flow Ratio
received by the Administrative Agent on or before such day:
<TABLE>
<CAPTION>
Debt to Operating Cash Flow Ratio
- ---------------------------------
Greater than But Base Rate
or equal to less than Margin
----------- --------- ------
<S> <C> <C> <C>
6.0 N/A 1.000%
5.5 6.0 0.750%
5.0 5.5 0.500%
4.0 5.0 0.000%
0.0 4.0 0.000%
</TABLE>
provided, however, that during any period in which an Event of Default shall
have occurred and be continuing, the Base Rate Margin shall be the Base Rate
Margin indicated in the above table plus 2% per annum.
"BORROWER PLEDGE AGREEMENT" means the Borrower Pledge Agreement
dated as of November 14, 1994 between the Borrower and the Administrative Agent,
and each other pledge agreement entered into by the Borrower pursuant thereto or
hereto, in each case as the same has been or may be amended or otherwise
modified from time to time, including as amended by the 1997 Global Collateral
Documents and Guaranty Agreement Amendment on the Closing Date.
"BORROWER SECURITY AGREEMENT" means the Borrower Security Agreement
dated as of November 14, 1994 between the Borrower and the Administrative Agent
and each other security agreement entered into by the Borrower pursuant thereto
or hereto, in each case as the same has been or may be amended or otherwise
modified from time to time, including as amended by the 1997 Global Collateral
Documents and Guaranty Agreement Amendment on the Closing Date.
4
<PAGE>
"BORROWING" means a borrowing consisting of Revolving Facility
Advances made or Converted on the same day by the Lenders.
"BTCo" has the meaning specified in the preamble to this Agreement.
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures by the Borrower and its Subsidiaries for property, plant and
equipment (including renewals, improvements, replacements and capitalized
repairs) during such period, and all Capital Leases entered into during such
period, which would be reflected as additions to property, plant or equipment
(other than as a result of a Permitted Acquisition) on a consolidated balance
sheet of the Borrower and its Subsidiaries prepared in accordance with generally
accepted accounting principles.
"CAPITAL LEASE" means any lease which is or should be, in accordance
with generally accepted accounting principles, recorded as a capital lease.
"CAPITAL LEASE OBLIGATIONS" means, with respect to any lease of
property which in accordance with generally accepted accounting principles
should be capitalized on the lessee's balance sheet or for which the amount of
the assets and liabilities thereunder, if so capitalized, should be disclosed in
a note to such balance sheet, the amount of the liability which should be so
capitalized or disclosed.
"CD LENDING OFFICE" means, with respect to any Lender, the office of
such Lender specified as its "CD LENDING OFFICE" opposite its name in its
Administrative Questionnaire (or, if no such office is specified, its Domestic
Lending Office) or such other office of such Lender as such Lender may from time
to time specify to the Borrower and the Administrative Agent.
"CD RATE MARGIN" means, for any day during any Interest Period, the
percentage set forth below opposite the applicable range for the Debt to
Operating Cash Flow Ratio as specified in the most recent Notice of Debt to
Operating Cash Flow Ratio received by the Administrative Agent on or before such
day:
<TABLE>
<CAPTION>
Debt to Operating Cash Flow Ratio
- ---------------------------------
Greater than But CD Rate
or equal to less than Margin
------------ --------- ------
<S> <C> <C> <C>
6.0 N/A 2.125%
5.5 6.0 1.875%
5.0 5.5 1.625%
4.0 5.0 1.125%
0.0 4.0 0.875%
</TABLE>
5
<PAGE>
provided, however, that during any period in which an Event of Default shall
have occurred and be continuing, the CD Rate Margin shall be the CD Rate Margin
indicated in the above table plus 2% per annum.
"CD REFERENCE BANKS" means BTCo, CIBC and Morgan Guaranty.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as
amended from time to time, and regulations promulgated thereunder.
"CIBC" has the meaning specified in the preamble to this Agreement.
"CLOSING DATE" means the date on which the conditions set forth in
Section 3.01 shall have been satisfied or waived in accordance with Section
8.01; provided that such date shall be no later than December 31, 1997.
"CLOSING DATE TRANSACTIONS" means, collectively, the effectiveness
of this Agreement and the other Amendment Documents.
"CLOSING TIME" means the time on the Closing Date at which the
amendment and restatement of the Existing Credit Agreement to be effected by
this Amended Agreement shall become effective, in accordance with the provisions
of Section 3.01.
"CO-ARRANGERS" means BTCo, CIBC and J.P. Morgan Securities Inc.
"CODE" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"COLLATERAL" means, collectively, the "COLLATERAL" as defined in the
Security Agreements, the "COLLATERAL" as defined in the Pledge Agreements, the
"TRUST PROPERTY" and "MORTGAGED PROPERTY" described in the Mortgages and all
other property and assets of the Borrower or any Guarantor to which any
Collateral Document relates.
"COLLATERAL DOCUMENTS" means the Security Agreements, the Pledge
Agreements and the Mortgages, including without limitation the agreements,
documents and instruments listed on Schedule 1.01-1.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as
amended from time to time, and the regulations promulgated thereunder.
6
<PAGE>
"CONSOLIDATED" refers to the consolidation of accounts of the
Borrower and its Subsidiaries in accordance with generally accepted accounting
principles, including principles of consolidation.
"CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion
of Advances of one Type into Advances of another Type pursuant to Section 2.15
or 2.17.
"CTSI" means Community Television Service, Inc., a South Dakota
corporation.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money or to pay the deferred purchase
price of property or services (including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with letter of credit
facilities, acceptance facilities or other similar facilities and in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any capital stock of such Person, but excluding all amounts payable
with respect to Programming Liabilities), (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (iii) all
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (iv)
all obligations of such Person under Capital Leases, (v) all Debt of any other
entity of the type referred to in clause (i), (ii), (iii) or (iv) above secured
by (or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Debt, (vi) all
equity securities of such Person subject to repurchase or redemption other than
at the sole option of such Person, valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (vii) all
Guaranteed Debt of such Person, (viii) all liabilities incurred by the Borrower
or any ERISA Affiliate to the PBGC upon the termination under Section 4041 or
Section 4042 of ERISA of any Plan, (ix) all Withdrawal Liabilities of such
Person or any of its ERISA Affiliates, (x) all increases in the amount of
contributions required to be made by the Borrower and its ERISA Affiliates in
each fiscal year of the Borrower to Multiemployer Plans, due to the
reorganization or termination of any such Multiemployer Plan within the meaning
of Title IV of ERISA, over the average annual amount of such contributions
required to be made during the last 3 years preceding such reorganization or
termination and (xi) the aggregate amount of Derivatives Obligations of such
Person; provided that for the purposes of calculating Debt to
7
<PAGE>
determine the Debt to Operating Cash Flow Ratio and of calculating Senior
Debt to determine compliance with Section 5.01(N), Debt shall be reduced by the
aggregate amount of Temporary Cash Investments held by the Borrower or any
Guarantor (excluding Permitted Acquisition Deposits) on the date of
determination, to the extent that such amount exceeds the greater of (A)
$5,000,000 and (B) the product of (x) $400,000 and (y) the sum of (X) the number
of television broadcast stations owned by the Subsidiaries of the Borrower as of
such date and (Y) the number one.
"DEBT TO OPERATING CASH FLOW RATIO" means, as of any day, the ratio
of (i) the aggregate unpaid Consolidated principal amount of all Debt of the
Borrower and its Subsidiaries on such day to (ii) Operating Cash Flow of the
Borrower and its Subsidiaries for the twelve consecutive calendar months then
most recently ended or ending on such day.
"DEFAULT" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DISCLOSED LITIGATION" has the meaning specified in Section 4.01(H).
"DOCUMENTATION AGENT" means CIBC in its capacity as Documentation
Agent for the Lenders hereunder, and its successors in such capacity.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "DOMESTIC LENDING OFFICE" opposite its
name in the Administrative Questionnaire or such other office of such Lender as
such Lender may from time to time specify to the Borrower and the Administrative
Agent.
8
<PAGE>
"ENVIRONMENTAL LAWS" means any and all applicable federal, state,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, whether now or hereafter in effect, relating to human health, the
environment or to emissions, discharges or releases of pollutants, contaminants,
Hazardous Materials or wastes into the environment, including ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Materials or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder. References to sections or parts of ERISA as in effect on the date
hereof include corresponding successor provisions after the date hereof.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which is a member of a group of which the Borrower is a member or
which is under common control with the Borrower within the meaning of Section
414 of the Code, and the regulations promulgated and rulings issued thereunder.
"EURODOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "EURODOLLAR LENDING OFFICE" opposite its
name in its Administrative Questionnaire (or, if no such office is specified,
its Domestic Lending Office) or such other office of such Lender as such Lender
may from time to time specify to the Borrower and the Administrative Agent.
"EURODOLLAR MARGIN" means, for any day during any Interest Period,
the percentage set forth below opposite the applicable range for the Debt to
Operating Cash Flow Ratio as specified in the most recent Notice of Debt to
Operating Cash Flow Ratio received by the Administrative Agent on or before such
day:
<TABLE>
<CAPTION>
Debt to Operating Cash Flow Ratio
- ---------------------------------
Greater than But Eurodollar
or equal to less than Margin
----------- --------- ------
<S> <C> <C> <C>
6.0 N/A 2.00%
5.5 6.0 1.75%
5.0 5.5 1.50%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
4.0 5.0 1.00%
0.0 4.0 0.75%
</TABLE>
provided, however, that during any period in which an Event of Default shall
have occurred and be continuing, the Eurodollar Margin shall be the Eurodollar
Margin indicated in the above table plus 2% per annum.
"EURODOLLAR RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.05(C).
"EURODOLLAR REFERENCE BANKS" means the principal London offices of
BTCo, CIBC and Morgan Guaranty.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXISTING CREDIT AGREEMENT" has the meaning specified in the
preamble to this Agreement.
"EXISTING FINANCING STATEMENTS" has the meaning specified in Section
3.01(f)(6)(A).
"EXISTING GUARANTORS" means all of the Guarantors on the Closing
Date.
"EXISTING NOTES" means the "TERM LOAN NOTES", the "REVOLVING
FACILITY NOTES" and the "SWINGLINE NOTES" (each such term as defined in the
Existing Credit Agreement), delivered by the Borrower pursuant to the Existing
Credit Agreement to the Old Lenders before the Closing Date.
"EXISTING SUBORDINATED DEBT" means the 1994 Subordinated Notes, the
1995 Subordinated Notes, the 1996 Subordinated Notes and the 1997 Subordinated
Notes.
"FCC" means the Federal Communications Commission and any successor
thereto.
"FCC LICENSE" means any license, permit, certificate of compliance,
franchise, approval or authorization granted or issued by the FCC and owned or
held by the Borrower or any of its Subsidiaries in order to conduct the
broadcast operations of a television station.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
10
<PAGE>
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day and so published on the next
succeeding Domestic Business Day, and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to the Administrative Agent on such day on such
transactions as determined by the Administrative Agent.
"FIDELITY" means Fidelity Television, Inc., a California
corporation.
"FILM EXPENSE" means, with respect to any accounting period, all
amounts which become due and payable by the Borrower or any of its Subsidiaries
during such period in respect of Programming Liabilities of the Borrower or any
of its Subsidiaries, as determined in accordance with generally accepted
accounting principles.
"FISCAL QUARTER" means a fiscal quarter of the Borrower consisting
of a calendar quarter ending on March 31, June 30, September 30 or December 31,
as the case may be.
"FISCAL YEAR" means a fiscal year of the Borrower consisting of a
calendar year ending on December 31.
"FIXED RATE ADVANCES" means Adjusted CD Rate Advances or Eurodollar
Rate Advances or any combination thereof.
"FIXED RATE BORROWING" means a borrowing consisting of Adjusted CD
Rate Advances or Eurodollar Rate Advances made on the same day by the Lenders.
"GUARANTEED DEBT" of any Person means all Debt referred to in clause
(i), (ii), (iii) or (iv) of the definition of "DEBT" in this section guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Debt or to advance or supply funds for the payment or purchase of
such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor to
make payment of such Debt or to assure the holder of such Debt against loss,
(iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services irrespective of whether
such property is received or such services are rendered) or (iv) otherwise to
assure a creditor against loss.
11
<PAGE>
"GUARANTOR" means each of the Subsidiaries of the Borrower listed on
Schedule 4.01(a) and each of the Subsidiaries of the Borrower which shall become
a Guarantor in accordance with this Agreement (including Section 5.02(F)).
"GUARANTOR PLEDGE AGREEMENTS" means, collectively (i) the Guarantor
Pledge Agreement dated as of November 15, 1996 between YB of Los Angeles and the
Administrative Agent, (ii) the Guarantor Pledge Agreement dated as of May 31,
1996 between YB of Sioux Falls and the Administrative Agent and (iii) each other
pledge agreement entered into by any Guarantor pursuant thereto or hereto (which
shall be substantially in the form of the other Guarantor Pledge Agreements as
in effect at such time), in each case as the same has been or may be amended or
otherwise modified from time to time, including as amended by the 1997 Global
Collateral Documents and Guaranty Agreement Amendment on the Closing Date.
"GUARANTOR SECURITY AGREEMENTS" means, collectively (i) the
Guarantor Security Agreements dated as of November 15, 1996 between each of YB
of Los Angeles and Fidelity, respectively, and the Administrative Agent, (ii)
each of the Guarantor Security Agreements dated as of April 15, 1996 between
each of YB of Davenport, YB of Sioux Falls and YB of Rapid City, respectively,
and the Administrative Agent and (iii) each of the Guarantor Security Agreements
dated as of November 14, 1994, between each of the Existing Guarantors other
than YB of Davenport, YB of Sioux Falls, YB of Rapid City, YB of Los Angeles and
Fidelity, and the Administrative Agent and (iv) each other security agreement
entered into by any of the Guarantors pursuant thereto or hereto (which shall be
in substantially the form of the other Guarantor Security Agreements as in
effect at such time), in each case as the same has been or may be amended or
otherwise modified from time to time, including as amended by the 1997 Global
Collateral Documents and Guaranty Agreement Amendment on the Closing Date.
"GUARANTY AGREEMENT" means the Amended and Restated Guaranty
Agreement dated as of April 15, 1996, among the Borrower, each of the Existing
Guarantors and the Administrative Agent, as the same has been or may be amended
or otherwise modified from time to time, including as amended by the 1997 Global
Collateral Documents and Guaranty Agreement Amendment on the
Closing Date.
"HAZARDOUS MATERIALS" means (i) any "HAZARDOUS SUBSTANCE" as defined
in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) petroleum, its
derivatives, by-products and other hydrocarbons; and (v) any other toxic,
radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.
12
<PAGE>
"INDEPENDENT PUBLIC ACCOUNTANTS" means (i) Ernst & Young LLP, (ii)
another 'Big Six' independent public accounting firm or (iii) another
independent public accounting firm of nationally recognized standing reasonably
acceptable to the Majority Lenders.
"INSUFFICIENCY" means, with respect to any Plan, the amount, if any,
by which the present value of the accrued benefits under such Plan, as
determined using the actuarial assumptions then used for the purpose of
determining the contributions to be made to such Plan, exceeds the fair market
value of the assets of such Plan allocable to such benefits.
"INTEREST PERIOD" means: (i) with respect to each Eurodollar Rate
Advance, the period commencing on the date of such Borrowing and ending 1, 3, 6
or, if the Administrative Agent determines that deposits in such maturity are
available in the London interbank market for such period, 12 months thereafter,
as the Borrower may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day unless such Eurodollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Eurodollar Business Day; and
(b) any Interest Period which begins on the last
Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(ii) with respect to each Adjusted CD Rate Advance, the period commencing on the
date of such Borrowing and ending 30, 90, 180 or, if the Administrative Agent
determines that certificates of deposit in such maturity are available in
accordance with the definition of CD Base Rate for such period, 360 days
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that any Interest Period which would otherwise end on a day which is
not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day.
"INTEREST RATE PROTECTION AGREEMENT" means any interest rate cap
agreement, interest rate swap agreement and any other interest rate protection
agreement between the Borrower and any Person that is a Lender or any Affiliate
of any Lender on conditions acceptable to the Agents (such acceptance of the
Agents not to be unreasonably denied) and in accordance with Section 5.02(S), as
13
<PAGE>
such agreement may be amended from time to time with the consent (not to be
unreasonably withheld) of the Agents.
"ISSUING BANK" means BTCo, as the issuer of a Letter of Credit.
"KLFY PARTNERSHIP" means KLFY, L.P., a Delaware limited partnership
of which YB of Louisiana is the sole general partner and of which LAT is the
sole limited partner and which is governed by the KLFY Partnership Agreement.
"KLFY PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of KLFY, L.P. dated as of December 29, 1989 by and among YB of
Louisiana and LAT, as the same may be amended from time to time.
"LAT" means LAT, Inc., a Delaware corporation and wholly owned
subsidiary of the Borrower.
"LEASEHOLDS" means all of the right, title and interest of the
Borrower or any of its Subsidiaries in, to and under any leases, licenses or
other agreements granting to the Borrower or any of its Subsidiaries, directly
or indirectly, rights to enter, occupy or use any land, improvements and
fixtures, including, without limitation, the "GROUND LEASES" as described in
certain of the Mortgages.
"LENDER SHARE" means, with respect to any Lender, an amount equal to
such Lender's Revolving Facility Commitment or, if the Revolving Facility
Commitment shall have been terminated, the aggregate outstanding amount of such
Lender's Revolving Facility Advances and Letter of Credit Obligations.
"LENDERS" means the Banks listed on the signature pages hereof and
each Assignee that shall become a party hereto pursuant to Section 8.07,
including without limitation the Swingline Lender.
"LETTER OF CREDIT OBLIGATIONS" means, for any Lender and at any
time, the sum of (x) the amounts then owing to such Lender (including in its
capacity as the Issuing Bank) under Section 2.10 to reimburse it in respect of
amounts drawn under Letters of Credit and (y) such Lender's ratable
participation in the aggregate amount then available for drawing under all
Letters of Credit, calculated in accordance with Section 2.10.
"LETTERS OF CREDIT" has the meaning specified in Section 2.10.
"LIEN" means, with respect to any asset, any mortgage, deed of
trust, pledge, lien, charge, security interest or encumbrance of any kind, or
any other type of preferential arrangement that has the practical effect of
creating a security interest in respect of such asset. For the purposes of this
Agreement, the
14
<PAGE>
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under a conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LOAN DOCUMENTS" means this Agreement, the Amendment Documents, the
Notes, the Guaranty Agreement, the Collateral Documents, any Interest Rate
Protection Agreements and all agreements, documents and instruments executed and
delivered in connection with any Letters of Credit, in each case as the same may
hereafter be amended or otherwise modified from time to time, including without
limitation the Amendment Documents.
"LOAN PARTY" means the Borrower and each Guarantor.
"MAJOR CASUALTY PROCEEDS" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Borrower or any of
its Subsidiaries under any insurance policy maintained to cover losses with
respect to tangible real or personal property or improvements or losses from
business interruption or (ii) any award or other compensation with respect to
any condemnation of property (or any transfer or disposition of property in lieu
of condemnation) received by the Borrower or any of its Subsidiaries, if the
amount of such aggregate insurance proceeds or award or other compensation
exceeds $1,000,000.
"MAJORITY LENDERS" means Lenders having at least 51% of the
aggregate amount of the Lender Shares for all Lenders.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of
Debt and/or payment obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $1,000,000.
"MORGAN GUARANTY" has the meaning specified in the preamble to this
Agreement.
"MORTGAGE AMENDMENT" means, with respect to each Mortgage executed
pursuant to the Existing Credit Agreement, an amendment thereto dated as of the
Closing Date substantially in the form of Exhibit D.
"MORTGAGES" means the mortgages and deeds of trust listed on
Schedule 1.01-1, in each case as amended on the Closing Date by the relevant
Mortgage Amendment, and any other mortgages, deeds of trust or similar
instruments in substantially the form of Exhibit C executed from time to time
pursuant hereto, as the same may be amended or otherwise modified from time to
time.
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"MULTIEMPLOYER PLAN" means a "MULTIEMPLOYER PLAN" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions,
including for these purposes any Person that ceased to be an ERISA Affiliate
during such five year period.
"MULTIPLE EMPLOYER PLAN" means an employee benefit plan, other than
a Multiemployer Plan, subject to Title IV of ERISA to which the Borrower or any
ERISA Affiliate, and at least one employer other than the Borrower or an ERISA
Affiliate, are making or accruing an obligation to make contributions or, in the
event that any such plan has been terminated, to which the Borrower or any ERISA
Affiliate made or accrued an obligation to make contributions during any of the
five plan years preceding the date of termination of such plan, including for
these purposes any Person that ceased to be an ERISA Affiliate during such five
year period.
"NET INCOME" means, for any accounting period, net income (or net
deficit, as the case may be), as determined in accordance with generally
accepted accounting principles.
"NET PROCEEDS" means, with respect to any issuance by the Borrower
of any equity securities or Permitted Subordinated Debt or any Permitted Asset
Sale by any Loan Party, an amount equal to the net cash proceeds received by the
Borrower or such Loan Party with respect to such equity securities or Permitted
Subordinated Debt or pursuant to such Permitted Asset Sale, as the case may be,
less (without duplication) any expenses relating thereto reasonably incurred by
the Borrower or such Loan Party in connection therewith.
"NET WORKING INVESTMENT" means at any date (x) the Consolidated
current assets of the Borrower and its Subsidiaries (excluding cash, short-term
investments and Television Film Exhibition Rights) minus (y) the Consolidated
current liabilities of the Borrower and its Subsidiaries (excluding Programming
Liabilities and principal of and interest on Debt), all determined as of such
date. Net Working Investment at any date may be a positive or negative number.
Net Working Investment increases when it becomes more positive or less negative
and decreases when it becomes less positive or more negative.
"1995 SUBORDINATED NOTE DOCUMENTS" means the 1995 Subordinated Notes
and the Indenture dated as of June 1, 1995, as supplemented, among the Borrower,
as issuer, each of the Subsidiaries of the Borrower named therein as the Initial
Guarantors, as guarantors thereunder, and State Street Bank and Trust Company,
as successor trustee.
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"1995 SUBORDINATED NOTES" means the Borrower's 10-1/8% Senior
Subordinated Notes due 2005.
"1994 SUBORDINATED NOTE DOCUMENTS" means the 1994 Subordinated Notes
and the Indenture dated as of November 14, 1994, as supplemented, among the
Borrower, as issuer, each of the Subsidiaries of the Borrower named therein as
the Initial Guarantors, as guarantors thereunder, and State Street Bank and
Trust Company, as successor trustee.
"1994 SUBORDINATED NOTES" means the Borrower's 11-3/4% Senior
Subordinated Notes due 2004.
"1997 GLOBAL COLLATERAL DOCUMENTS AND GUARANTY AGREEMENT AMENDMENT"
means the 1997 Global Collateral Documents and Guaranty Agreement Amendment
among the Borrower, the Existing Guarantors and the Administrative Agent
substantially in the form of Exhibit B.
"1997 SUBORDINATED NOTE DOCUMENTS" means the 1997 Subordinated Notes
and the Indenture dated as of June 15, 1997, as supplemented, among the
Borrower, as issuer, each of the Subsidiaries of the Borrower named therein as
the Initial Guarantors, as guarantors hereunder, and First Union Nation Bank, as
trustee.
"1997 SUBORDINATED NOTES" means the Borrower's 8-3/4% Senior
Subordinated Notes due 2007.
"1996 SUBORDINATED NOTE DOCUMENTS" means the 1996 Subordinated Notes
and the Indenture dated as of January 1, 1996, as supplemented, among the
Borrower, as issuer, each of the Subsidiaries of the Borrower named therein as
the Initial Guarantors, as guarantors thereunder, and State Street Bank and
Trust Company, as trustee.
"1996 SUBORDINATED NOTES" means the Borrower's 9% Senior
Subordinated Notes due 2006.
"NON-CASH CHARGES" means, for any accounting period, charges
properly attributable to such period for depreciation, amortization and other
non-cash items as determined in accordance with generally accepted accounting
principles; provided that Non-Cash Charges shall include amortization of
transaction fees and expenses incurred in connection with the Closing Date
Transactions (as defined herein and in the Existing Credit Agreement) and
non-cash compensation provided to employees of the Borrower or any of its
Subsidiaries.
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"NONPERMITTED SWINGLINE ADVANCE" means an advance made by the
Swingline Lender to the Borrower that purports to be a Swingline Advance but
which advance (i) does not comply with the limitations contained in the proviso
to the first sentence of Section 2.01(B), or (ii) was made during a period
described in Section 2.01(C)(V). For purposes of determining compliance with the
limitations contained in the proviso to the first sentence of Section 2.01(B),
the Swingline Lender may rely on information received by it from the
Administrative Agent; provided that the Administrative Agent shall have no
obligation (except upon a request made by the Swingline Lender) to inform the
Swingline Lender with respect to such limitations.
"NOTES" means the Revolving Facility Notes and the Swingline Note.
"NOTICE OF BORROWING" has the meaning specified in Section 2.02.
"NOTICE OF DEBT TO OPERATING CASH FLOW RATIO" means (i) until the
Borrower delivers a Notice of Debt to Operating Cash Flow Ratio pursuant to
Section 5.03(A), the certificate delivered by the Borrower pursuant to Section
3.01(F)(17) and (ii) thereafter, a Notice of Debt to Operating Cash Flow Ratio
delivered pursuant to Section 5.03(A).
"NOTICE OF SWINGLINE REFUNDING" has the meaning specified in Section
2.01(C)(II).
"OBLIGATIONS" means all obligations described in any Loan Document.
"OLD LENDERS" means the Lenders under the Existing Credit Agreement
as in effect immediately before the effectiveness of this Amended Agreement; the
principal amount of the Existing Term Loans and the Existing Revolving Facility
Commitment of each Old Lender on the date of this Amended Agreement are as set
forth in Appendix II hereto.
"OPERATING CASH FLOW" means, for any accounting period, the amount
calculated as follows:
Consolidated Net Income for such period,
plus to the extent deducted in determining such
Consolidated Net Income, Consolidated
Non-Cash Charges and any other extraordinary
non-cash losses (including any losses from
the sale of assets) for such period,
plus Consolidated interest expense, net of
interest income, for such period (after
giving effect to all costs of, and savings
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realized by, each interest rate cap or other
interest rate protection agreement which the
Borrower may enter into with respect to
interest payable on any Debt or any portion
thereof),
plus Consolidated income tax expense for such
period,
plus if such accounting period includes any one
or more of the first twelve consecutive
calendar months, following the Original
Closing Date, the amount identified as
"TOTAL COST SAVINGS" opposite the latest
such month on Schedule 1.01- 2 (each, a
"TOTAL COST SAVINGS ADD-BACK"),
minus all cash payments in respect of income taxes by the
Borrower or any of its Subsidiaries during such period,
minus to the extent included in Consolidated Net Income for
such period, any extraordinary non-cash gains (including
gains from the sale of assets) for such period,
minus Consolidated cash payments of Film Expense made during
such period,
all determined in accordance with generally accepted accounting principles;
provided that if any Permitted Acquisition (including for purposes of this
definition the Acquisition) occurs during such accounting period, the
calculation of Operating Cash Flow for such accounting period shall give effect,
on a Pro Forma Basis, to the items set forth above for periods during such
accounting period but prior to the closing date for such Permitted Acquisition,
to the extent such items are properly attributable to the acquired assets or
properties, related costs or expenses or the financing therefor; and provided
further that in calculating Operating Cash Flow on a Pro Forma Basis for any
period which includes a period prior to the Original Closing Date, the following
Television Film Exhibition Rights shall be deemed not to be attributable to the
assets and properties acquired in the Acquisition or related costs or expenses:
(i) the Television Film Exhibition Rights of YB of Los Angeles relating to Empty
-----
Nest, Golden Girls and Perfect Strangers (because the liability related to such
- ------------------ -----------------
Television Film Exhibition Rights shall be retained by KCAL Broadcasting, Inc.
and not assumed by the Borrower or any of its Subsidiaries in the Acquisition)
and (ii) the Television Film Exhibition Rights relating to George/Alana and
------------
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Marilyn Kagan (because these television shows have been canceled prior to the
- -------------
Original Closing Date).
"ORIGINAL CLOSING DATE" means the Closing Date under the Existing
Credit Agreement, November 21, 1996.
"PARENT" means, with respect to any Lender, any Person controlling
such Lender.
"PARTICIPANT" has the meaning specified in Section 8.07(B).
"PAYMENT DATE" means the last day of each March, June, September and
December (or, if such day is not a Domestic Business Day, the next succeeding
Domestic Business Day), commencing with the first such date occurring after the
Closing Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED ACQUISITION" means an acquisition by any one or more
wholly-owned Subsidiaries of the Borrower of any one or more television stations
or of any one or more businesses incidental to the ownership and operation of
television stations (which shall include any television representation
business), or an acquisition by the Borrower or any one or more wholly-owned
Subsidiaries of the Borrower of all of the capital stock of a corporation owning
one or more television stations or one or more businesses incidental to the
ownership and operation of such television stations; provided that:
(a) at least ten (10) days prior to the closing date for
such acquisition, the Borrower shall have delivered to each of the
Lenders (i) a compliance certificate, substantially in the form of
Exhibit J, certifying the Borrower's compliance with the provisions
of this Agreement set forth in Exhibit J, as of the most recent date
for compliance prior to the date of such certificate, after giving
effect on a Pro Forma Basis to such acquisition, and (ii) a report
of the chief financial officer of the Borrower, in a form and
providing sufficient detail and justification for the information
provided therein, including assumptions, as shall be found to be
reasonable by each of the Agents in its sole good faith discretion,
after completion of reasonable due diligence, establishing that,
after giving effect to such acquisition and the financing therefor,
the Borrower shall be in compliance at the end of each fiscal year
until the Termination Date with the covenants contained in Sections
5.01(L), 5.01(M), 5.01(N), 5.01(O), 5.02(A), 5.02(B), 5.02(D),
5.02(F), 5.02(G) and 5.02(H);
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<PAGE>
(b) at the time of such acquisition, no Default is then
continuing or would result therefrom; and
(c) at the time of such acquisition, the stock of any
new Subsidiaries of the Borrower acquired or created in connection
therewith or resulting therefrom shall be pledged to the
Administrative Agent for its benefit and the benefit of the Lenders,
each of such new Subsidiaries shall become a Guarantor hereunder and
each of such new Subsidiaries shall grant liens and security
interests in all of its assets to the Administrative Agent for its
benefit and the benefit of the Secured Parties.
"PERMITTED ACQUISITION DEPOSIT" means a deposit made by the Borrower
or any of its Subsidiaries pursuant to any purchase agreement to which it is or
is to be a party in connection with an acquisition that it proposes to make as a
Permitted Acquisition; provided that at the time of the making of such deposit,
no Default is then continuing or would result therefrom.
"PERMITTED ACQUISITION MORTGAGE" has the meaning specified in
Section 3.03(e)(5).
"PERMITTED ASSET SALE" means any Asset Sale by the Borrower or any
of its Subsidiaries (a) where the Net Proceeds of such Asset Sale, when added to
the Net Proceeds of any related Asset Sales, are less than $500,000, unless such
Asset Sale is the disposition of property and assets comprising a television
station or a business incidental thereto; or (b) where the Net Proceeds of such
Asset Sale are greater than or equal to $500,000 or such Asset Sale is the
disposition of property and assets comprising a television station or a business
incidental thereto, if (x) before and after giving effect thereto no Default
shall have occurred and be continuing; (y) except in the case of a Qualifying
FCC-Mandated Sale, the aggregate total amount of the Asset Operating Cash Flow
with respect to all such Asset Sales since the Closing Date (excluding any
Qualifying FCC-Mandated Sale) constitutes less than fifteen percent (15%) of the
greatest amount of Operating Cash Flow for any consecutive twelve-month period
commencing after the Original Closing Date; and (z) at least ten (10) days prior
to the date of each such Asset Sale, the Borrower shall have delivered to each
of the Lenders (i) a compliance certificate, substantially in the form of
Exhibit J, certifying the Borrower's compliance with the provisions of this
Agreement set forth in Exhibit J, as of the most recent date for compliance
prior to the date of such certificate, after giving effect on a Pro Forma Basis
to such Asset Sale, and (ii) a report of the chief financial officer of the
Borrower, in a form and providing sufficient detail and justification for the
information provided therein, including assumptions, as shall be found to be
reasonable by each of the Agents in its sole good faith discretion, after
completion of reasonable due diligence, establishing that after
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<PAGE>
giving effect to such Asset Sale, the Borrower shall be in compliance at the end
of each fiscal year until the Termination Date with the covenants contained in
Sections 5.01(L), 5.01(M), 5.01(N), 5.01(O), 5.02(A), 5.02(B), 5.02(D),5.02(F),
5.02(G) and 5.02(H).
"PERMITTED HOLDERS" means (i) any of Adam Young or Vincent Young;
(ii) the spouse, ancestors, siblings, descendants (including children or
grandchildren by adoption) of any such siblings or the spouse of any of the
Persons described in clause (i); (iii) in the event of the incompetence or death
of any of the Persons described in clauses (i) and (ii), such Person's estate,
executor, administrator, committee or other personal representative, in each
case who at any particular date shall beneficially own or have the right to
acquire, directly or indirectly, capital stock of the Borrower; (iv) any trusts
created for the benefit of the Persons described in clause (i), (ii) or (iii) or
any trust for the benefit of any such trust; or (v) any Person controlled by any
of the persons described in clause (i), (ii), (iii), or (iv).
"PERMITTED LIENS" means:
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not at the time required by Section
5.01(F);
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business for sums not yet due or being contested in good
faith and by appropriate proceedings promptly initiated and
diligently conducted, if a reserve or other appropriate provision,
if any, as shall be required by generally accepted accounting
principles shall have been made therefor;
(iii) Liens, other than Liens created by Section 4068 of
ERISA, incurred or deposits made in the ordinary course of business
in connection with workmen's compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety, customs and appeal bonds,
bids, leases, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(iv) Liens, in an aggregate amount existing from time to time
not to exceed $2,000,000, which Liens (A) arise in the ordinary
course of business, (B) do not secure Debt or Derivatives
Obligations and (C) do not in the aggregate materially detract from
the value of its assets or materially impair the use thereof in the
operation of its business;
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<PAGE>
(v) leases or subleases granted to others in the ordinary
course of business or existing on property at the time acquired and
not interfering with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(vi) Permitted Encumbrances, as defined in each Mortgage, with
respect to the Real Property covered thereby;
(vii) purchase money Liens upon or in any property acquired or
held by the Borrower or any of its Subsidiaries in the ordinary
course of business to secure the purchase price of such property or
to secure Debt incurred solely for the purpose of financing the
acquisition of such property, or Liens existing on such property at
the time of its acquisition, or extensions, renewals or replacements
of any of the foregoing for the same or a lesser amount; provided
that (A) the aggregate amount of Liens described in this clause
(vii) that are outstanding or existing at any time shall not exceed
$25,000,000 and (B) no such Lien shall extend to or cover any
property other than the property being acquired, and no such
extension, renewal or replacement shall extend to or cover any
property not theretofore subject to the Lien being extended, renewed
or replaced; provided further that Liens on property acquired or
held by the Borrower or any of its Subsidiaries to secure the
purchase price of any Asset Purchase or Permitted Acquisition or to
secure Debt incurred for the purpose of financing any Asset Purchase
or Permitted Acquisition are understood not to be Liens described of
a type in this clause (vii);
(viii) Liens existing on the Original Closing Date and set
forth in Schedule 4.01(i) of the Existing Credit Agreement;
(ix) Liens created by the Collateral Documents;
(x) one or more attachments or judgment Liens not exceeding
$1,000,000 in the aggregate unless the judgment such Lien secures
shall not, within 30 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not
have been discharged within 30 days after the expiration of any such
stay; and
(xi) Liens created after the Original Closing Date upon any
Real Property owned by the Borrower or any of its Subsidiaries;
provided that (A) such Liens shall be junior and subordinate to the
Liens created by or pursuant to the Loan Documents, (B) the
aggregate amount of the obligations secured by such Liens shall not
at any time exceed $5,000,000
23
<PAGE>
and (C) each of such Liens and such Liens in the aggregate must not
interfere with the ordinary conduct of business of the Borrower or
any of its Subsidiaries;
provided, however, that no Lien in favor of the PBGC shall, in any event, be a
"PERMITTED LIEN"; and provided further that no Lien shall constitute a Permitted
Lien on and after the commencement in respect thereof of any enforcement,
collection, execution, levy or foreclosure proceeding where such Lien secures
any obligation in an amount equal to or exceeding $50,000.
"PERMITTED SUBORDINATED DEBT" means Debt other than Existing
Subordinated Debt for which the Borrower is directly and primarily liable, but
which may be guaranteed by any one or more Guarantors (provided that any
obligations of any Guarantor in respect thereof are subordinate to such
Guarantor's obligations under the Guaranty Agreement to the same extent and on
similar terms as such Guarantor's obligations in respect of the Existing
Subordinated Debt), and which (v) is subordinated in right of payment to the
prior payment in full in cash of all of the obligations of the Borrower and the
Guarantors to pay principal of and interest on the Notes, all Letter of Credit
Obligations and all fees and other amounts payable hereunder or under any other
Loan Document, pursuant to subordination provisions that are no less favorable
to the Lenders than the subordination provisions for any Existing Subordinated
Debt; (w) contains no mandatory redemption provisions which would require any
redemption in circumstances in which the mandatory redemption provisions for any
Existing Subordinated Debt would not require redemption of any Existing
Subordinated Debt; (x) contains financial covenants and events of default that
are no more onerous to the Borrower and its Subsidiaries than the financial
covenants and events of default for any Existing Subordinated Debt; (y) has a
maturity date no earlier than June 15, 2007; and (z) is not secured by any Lien;
provided that at least fifteen (15) days prior to the incurrence of such Debt,
the Borrower shall have delivered to each of the Lenders (i) a compliance
certificate, substantially in the form of Exhibit J, certifying the Borrower's
compliance with the provisions of this Agreement set forth in Exhibit J, as of
the most recent date for compliance prior to the date of such certificate, after
giving effect on a Pro Forma Basis to the incurrence of such Debt, and (ii) a
report of the chief financial officer of the Borrower, in a form and providing
sufficient detail and justification for the information provided therein,
including assumptions, as shall be found to be reasonable by each of the Agents
in its sole good faith discretion, after completion of reasonable due diligence,
establishing that after giving effect to the incurrence of such Debt, the
Borrower shall be in compliance at the end of each fiscal year until the
Termination Date with the covenants contained in Sections 5.01(L), 5.01(M),
5.01(N), 5.01(O), 5.02(A), 5.02(B), 5.02(D), 5.02(F), 5.02(G) and 5.02(H).
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<PAGE>
"PERMITTED SUBORDINATED DEBT REPURCHASE" means a prepayment,
redemption, defeasance or purchase of any Existing Subordinated Debt or
Permitted Subordinated Debt to the extent permitted by clause (iv) of Section
5.02(H).
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"PLAN" means an employee benefit plan, other than a Multiemployer
Plan, (i) which is maintained for employees of the Borrower or any ERISA
Affiliate and subject to Title IV of ERISA or (ii) which could subject the
Borrower or any ERISA Affiliate to liability under Section 4069 of ERISA in the
event that such plan has been or was to be terminated.
"PLEDGE AGREEMENTS" means the Borrower Pledge Agreement and the
Guarantor Pledge Agreements.
"PLEDGED INSTRUMENTS" means the Pledged Instruments as defined in
the Pledge Agreements and all Instruments as defined in the Security Agreements.
"PLEDGED STOCK" has the meaning specified in the Pledge Agreements.
"PRIME RATE" means the rate of interest publicly announced by BTCo
in New York City from time to time as its Prime Rate.
"PRO FORMA BASIS" means, at any time, a pro forma basis as agreed
among the Borrower and the Agents at such time.
"PRO FORMA DEBT SERVICE" means, at any date, the sum of (i) Total
Interest Expense for the four consecutive Fiscal Quarters then most recently
ended plus (ii) the aggregate amount of all scheduled principal payments
(including mandatory principal payments (to the extent reasonably foreseeable)
required by Section 2.09(B) on all Debt of the Borrower or any of its
Subsidiaries, including the portion of any payments under Capital Leases that is
allocable to principal, for the four consecutive Fiscal Quarters immediately
following the Fiscal Quarter during which such date occurs.
"PROGRAMMING LIABILITIES" means, as to any Person, all obligations
of such Person under contracts for the acquisition of broadcast rights to
television programs and films, as determined in accordance with generally
accepted accounting principles.
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"QUAD CITIES JOINT VENTURE" means PCI/RIBCO, the joint venture
formed pursuant to the Joint Venture Agreement dated as of September 30, 1981,
between YB of Davenport, as successor to Palmer Communications Incorporated, and
Coronet Communications Company, as successor to Rock Island Broadcasting Co.
"QUALIFYING FCC-MANDATED SALE" means an Asset Sale by the Borrower
or any of its Subsidiaries (a) which is the disposition of property and assets
comprising a television station or a business incidental thereto, (b) which is
required by the FCC as a condition to or otherwise in connection with a
Permitted Acquisition and (c) where Operating Cash Flow on a Pro Forma Basis for
the twelve-month period immediately after the consummation of both such Asset
Sale and the related Permitted Acquisition is at least ninety-five percent (95%)
of the greatest amount of Operating Cash Flow for any consecutive twelve-month
period commencing after the Original Closing Date (but prior to the earlier of
such FCC- Mandated Sale and such related Permitted Acquisition).
"REAL PROPERTY" means all of the Borrower's and its Subsidiaries'
right, title and interest (including Leaseholds) in and to land, improvements
and fixtures, including, without limitation, the "PROPERTY" described in each of
the Mortgages.
"REFERENCE BANKS" means the CD Reference Banks or the Eurodollar
Reference Banks, as the context may require, and "REFERENCE BANK" means any one
of such Reference Banks.
"REFINANCING PERMITTED SUBORDINATED DEBT" means Permitted
Subordinated Debt incurred by the Borrower, the Net Proceeds of which shall be
used at the time of issuance thereof solely for the prepayment, redemption,
defeasance or purchase of any Existing Subordinated Debt or Permitted
Subordinated Debt to the extent permitted by clause (iv) of Section 5.02(H).
"REGISTER" has the meaning specified in Section 8.07(E).
"REGULATION G" means Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUEST FOR ISSUANCE" has the meaning specified in Section 2.10.
"RESTRICTED PAYMENT" means, (i) any dividend or other distribution
on any shares of the Borrower's capital stock (except dividends payable solely
in shares
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of its capital stock of the same class) or (ii) any payment on account of the
purchase, redemption, retirement, defeasance, acquisition, return or
distribution with respect to (a) any shares of the Borrower's capital stock or
(b) any option, warrant or other right to acquire shares of the Borrower's
capital stock.
"REVOLVING FACILITY ADVANCE" has the meaning specified in Section
2.01(A).
"REVOLVING FACILITY COMMITMENT" means, with respect to each Lender,
the amount set forth opposite such Lender's name on the Appendix hereto under
the caption "REVOLVING FACILITY COMMITMENT", in each case as such amount may be
reduced or terminated pursuant to Section 2.07, 2.08 or 6.01; provided that if
at any time a Lender shall have entered into one or more Assignment and
Assumption Agreements, such Lender's Revolving Facility Commitment thereafter
shall be the amount set forth for such Lender as its Revolving Facility
Commitment in the Register maintained by the Administrative Agent pursuant to
Section 8.07(E), as such amount may be reduced or terminated pursuant to Section
2.07, 2.08, 2.09(B) or 6.01.
"REVOLVING FACILITY NOTE" means the promissory note issued by the
Borrower payable to the order of a Lender, in substantially the form of Exhibit
A-1, evidencing the indebtedness of the Borrower to such Lender in respect of
the Revolving Facility Advances made by such Lender.
"REVOLVING FACILITY PERCENTAGE" means, with respect to each Lender
at any time, the percentage that its Revolving Facility Commitment represents of
the aggregate amount of the Revolving Facility Commitments of all Lenders at
such time.
"SECURED PARTIES" means the Secured Parties as defined in the
Collateral Documents.
"SECURITY AGREEMENTS" means the Borrower Security Agreement and the
Guarantor Security Agreements.
"SENIOR DEBT" means, as of any date, the aggregate unpaid principal
amount on such date of all Debt of the Borrower and its Subsidiaries other than
the Existing Subordinated Debt and Permitted Subordinated Debt.
"SENIOR DEBT TO OPERATING CASH FLOW RATIO" means, as of any day, the
ratio of Senior Debt as of the last day of the then ending or most recently
ended Fiscal Quarter to Operating Cash Flow for the four consecutive Fiscal
Quarters ending on such last day.
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"SOLVENCY CERTIFICATE" has the meaning specified in Section
3.01(f)(12).
"SOLVENT" means, with respect to any Person on a particular date,
that on such date (i) the fair value of the property of such Person is greater
than the total amount of its liabilities (including, without limitation,
liabilities on all claims, whether or not reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured) of such Person, (ii) the present fair
salable value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its existing debts
as they become absolute and matured, (iii) such Person is able to realize upon
its assets and pay its debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business, (iv) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in each respective industry in which
such person is engaged.
"SUBORDINATED DEBT DOCUMENTS" means the 1994 Subordinated Note
Documents, the 1995 Subordinated Note Documents, the 1996 Subordinated Note
Documents, the 1997 Subordinated Note Documents and any notes, indentures and
other documents governing any other Permitted Subordinated Debt, and, in
each case, all amendments thereto.
"SUBSIDIARY" of any Person means (i) any corporation of which more
than 50% of the outstanding capital stock having ordinary voting power to elect
a majority of the Board of Directors of such corporation (irrespective of
whether or not at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries, or by one or more other Subsidiaries
and (ii) any partnership, joint venture or similar entity of which the Borrower
or any Subsidiary is, directly or indirectly, a general partner or of which the
Borrower or any Subsidiary has the right, directly or indirectly, by law,
contract or otherwise, to control or to manage the business and affairs,
including without limitation the KLFY Partnership, the WKRN Partnership and the
WATE Partnership; provided that no Tower Affiliate shall be deemed to be a
Subsidiary of the Borrower or of any of its Subsidiaries.
"SWINGLINE ADVANCE" has the meaning specified in Section 2.01(B).
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"SWINGLINE COMMITMENT" means the commitment of the Swingline Lender
to make Swingline Advances to the Borrower hereunder, in an aggregate amount not
to exceed $10,000,000, as such amount may be reduced or terminated pursuant to
Section 2.07, 2.08 or 6.01.
"SWINGLINE LENDER" means First Union National Bank of North Carolina
in its capacity as Swingline Lender hereunder, and its successors in such
capacity.
"SWINGLINE NOTE" means the promissory note issued by the Borrower
payable to the order of the Swingline Lender, in substantially the form of
Exhibit A-2, evidencing the indebtedness of the Borrower to the Swingline Lender
in respect of the Swingline Advances made by the Swingline Lender.
"SYNDICATION AGENT" means Morgan Guaranty in its capacity as
Syndication Agent for the Lenders hereunder, and its successors in such
capacity.
"TELEVISION FILM EXHIBITION RIGHTS" means the asset on the
Borrower's Consolidated balance sheet which, in accordance with generally
accepted accounting principles, should represent contract rights of the Borrower
and its Consolidated Subsidiaries relating to television film exhibition.
"TEMPORARY CASH INVESTMENTS" means (i) commercial paper of any
corporation incorporated under the laws of the United States of America or any
State thereof rated (x) at least P-1 or its equivalent by Moody's Investors
Service, Inc. or A1 or its equivalent by Standard and Poor's Corporation or
(y)at least A3 or its equivalent by Moody's Investors Services, Inc. or P-3 or
its equivalent by Standard and Poor's Corporation if the Senior Debt to
Operating Cash Flow Ratio for the date of acquisition is less than 2.0, in
either case maturing within 270 days, (ii) direct obligations of, or obligations
the principal of or any interest on which are unconditionally guaranteed by, the
United States of America, in each case maturing within one year from the date of
acquisition thereof by the Borrower or any Subsidiary (as the case may be) and
(iii) any time deposit with, including certificates of deposit issued by, a
commercial bank of recognized standing operating in the United States of America
having combined capital and surplus of at least $50,000,000.
"TERMINATION DATE" means the earliest to occur of (i) September 30,
2002, (ii) the date of termination in whole of the Revolving Facility
Commitments pursuant to Section 2.07 or 6.01 and (iii) the date when all
Revolving Facility Advances and Letter of Credit Obligations shall have
terminated or been repaid in full.
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"TERMINATION EVENT" means (i) a "REPORTABLE EVENT", as such term is
described in Section 4043 of ERISA (other than a "REPORTABLE EVENT" as to which
the 30-day notice requirement has been waived by the PBGC), or an event
described in Section 4068(f) of ERISA, or (ii) the withdrawal of the Borrower or
any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it
was a "SUBSTANTIAL EMPLOYER", as such term is defined in Section 4001(a)(2) of
ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate
under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or
(iii) providing notice of intent to terminate a Plan pursuant to Section
4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a
Plan by the PBGC under Section 4042 or ERISA, or (v) any other event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
"TOTAL INTEREST EXPENSE" means, for any accounting period, the
Consolidated amount of all interest charges, whether expensed or capitalized,
including the portion of any obligation under Capital Leases allocable to
interest expense in accordance with generally accepted accounting principles
(after giving effect to all costs of, and savings realized by, each interest
rate swap or cap agreement which the Borrower may enter into with respect to
interest payable on any Debt or any portion thereof) and all premiums and other
amounts that are amortized (other than interest charges and principal), in each
case with respect to any Debt of the Borrower or any of its Subsidiaries during
such period.
"TOWER AFFILIATE" means (i) the Quad Cities Joint Venture, (ii) CTSI
and (iii) any other Person (A) of which the Borrower or any Guarantor shall
acquire an ownership interest as a result of a Permitted Acquisition and (B) of
which the sole activity is the ownership and operation of a transmission tower
or towers.
"TRADE DEBT" means, for any accounting period, accounts payable
accrued during such period for the deferred purchase price of property or
services (but excluding Film Expense) to the extent such payables and
obligations are not overdue by more than 6 months.
"TYPE" has the meaning specified in the definition of the term
"ADVANCE" contained in this Article 1.
"VOTING STOCK" of any Person means stock of any class or classes (or
equivalent interests), if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies, entitled
to vote for the election of a majority of the directors (or persons performing
similar
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functions) of such Person, even though the right so to vote has been
suspended by the happening of such a contingency.
"WATE PARTNERSHIP" means WATE, L.P., a Delaware limited partnership
of which YB of Knoxville is the sole general partner and of which YBK is the
sole limited partner and which is governed by the WATE Partnership Agreement.
"WATE PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of WATE, L.P. dated as of November 10, 1994 between YB of Knoxville
and YBK, as the same may be amended from time to time.
"WITHDRAWAL LIABILITY" shall have the meaning given such term under
Part I of Subtitle E of Title IV of ERISA.
"WKRN PARTNERSHIP" means WKRN, L.P., a Delaware limited partnership
of which YB of Nashville is the sole general partner and of which YBT is the
sole limited partner and which is governed by the WKRN Partnership Agreement.
"WKRN PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of WKRN, L.P. dated as of December 29, 1989 by and among YB of
Nashville and YBT, as the same may be amended from time to time.
"YB OF DAVENPORT" means Young Broadcasting of Davenport, Inc., a
Delaware corporation.
"YB OF KNOXVILLE" means Young Broadcasting of Knoxville, Inc., a
Delaware corporation.
"YB OF LOS ANGELES" means Young Broadcasting of Los Angeles, Inc., a
Delaware corporation.
"YB OF LOUISIANA" means Young Broadcasting of Louisiana, Inc., a
Delaware corporation.
"YB OF NASHVILLE" means Young Broadcasting of Nashville, Inc., a
Delaware corporation.
"YB OF RAPID CITY" means Young Broadcasting of Rapid City, Inc., a
Delaware corporation.
"YB OF SIOUX FALLS" means Young Broadcasting of Sioux Falls, Inc., a
Delaware corporation.
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"YBK" means YBK, Inc., a Delaware corporation and wholly owned
subsidiary of the Borrower.
"YBT" means YBT, Inc., a Delaware corporation and wholly owned
subsidiary of the Borrower.
SECTION 1.2. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "FROM" means "FROM AND INCLUDING" and the words "TO" and "UNTIL" each
mean "TO BUT EXCLUDING".
SECTION 1.3. Accounting Terms. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes concurred in by the Independent Public
Accountants) with the most recent audited consolidated financial statements of
the Borrower and its Consolidated Subsidiaries delivered to the Lenders;
provided that, if there is a change in generally accepted accounting principles
at any time and the Borrower notifies the Administrative Agent that the Borrower
wishes to amend any covenant in Article 5 (or the definition of any term used
therein) to eliminate the effect of such change on the operation of such
covenant (or if the Administrative Agent notifies the Borrower that the Majority
Lenders wish to amend Article 1 or 5 for such purpose), then the Borrower's
compliance with such covenant shall be determined on the basis of generally
accepted accounting principles in effect immediately before the relevant change
in generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Majority Lenders.
ARTICLE 2
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances.
(a) The Revolving Facility Advances. Each Lender severally agrees,
on the terms and conditions set forth herein, to make one or more advances (each
such advance, a "REVOLVING FACILITY ADVANCE") to the Borrower from time to time
during the period from the Closing Date until the Termination Date pursuant
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to this Section 2.01(A); provided that immediately after each Revolving Facility
Advance, the sum of the aggregate outstanding principal amount of all Revolving
Facility Advances for such Lender, all Letter of Credit Obligations for such
Lender and such Lender's Revolving Facility Percentage of the aggregate
outstanding principal amount of all Swingline Advances (excluding any portion of
the Swingline Advances to be repaid with the proceeds of such Revolving Facility
Advance) does not exceed at any time such Lender's Revolving Facility
Commitment. Each Borrowing shall be in an aggregate amount not less than
$1,000,000 or an integral multiple of $100,000 in excess thereof and shall
consist of Revolving Facility Advances of the same Type made or Converted on the
same day by the Lenders ratably according to their respective Revolving Facility
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section 2.01(A), and repay or, to the extent permitted by Section 2.09, prepay
Revolving Facility Advances and reborrow under this Section 2.01(A) at any time
until the Termination Date.
(b) The Swingline Advances. The Swingline Lender agrees, on the
terms and conditions set forth herein, to make one or more advances (each such
advance, a "SWINGLINE ADVANCE") to the Borrower from time to time during the
period from the Closing Date until the Termination Date pursuant to this Section
2.01(B); provided that, immediately after each Swingline Advance, (i) the
aggregate principal amount of all Swingline Advances shall not exceed the
Swingline Commitment and (ii) the sum of the aggregate principal amount of all
Swingline Advances plus the aggregate principal amount of all Revolving Facility
Advances and all Letter of Credit Obligations shall not at any time exceed the
aggregate amount of the Revolving Facility Commitments. Each Swingline Advance
shall be a Base Rate Advance and shall be in an aggregate amount not less than
$50,000 or an integral multiple thereof. Within the foregoing limits, the
Borrower may borrow under this Section 2.01(B), and repay or, to the extent
permitted by Section 2.09, prepay Swingline Advances and reborrow under this
Section 2.01(B) at any time until the earlier of the Termination Date and the
date when the Swingline Commitment shall have been reduced to zero or terminated
pursuant to Section 2.07, 2.08 or 6.01.
(c) Refunding of Swingline Advances. (i) The Borrower shall pay to
the Swingline Lender, on demand, the amount of any outstanding Swingline
Advances.
(ii) At any time and from time to time the Swingline Lender
may, by written notice to the Administrative Agent, which the
Administrative Agent shall promptly forward to each Lender with a
Revolving Facility Commitment, require each Lender with a Revolving
Facility Commitment
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to pay to the Swingline Lender an amount equal to such Lender's
Revolving Facility Percentage of the aggregate unpaid principal
amount of the Swingline Advances (excluding any Nonpermitted
Swingline Advances) then outstanding. Any such notice (a "NOTICE OF
SWINGLINE REFUNDING") shall specify the date on which such payments
are to be made, which date shall be the next Domestic Business Day
after such Notice of Swingline Refunding is delivered to the
Administrative Agent, the aggregate unpaid principal amount of such
Swingline Advances and payment instructions for such payments.
(iii) Not later than 3:00 p.m. (New York City time) on the
date specified in the Notice of Swingline Refunding, each Lender
with a Revolving Facility Commitment shall pay such Lender's
Revolving Facility Percentage of the aggregate unpaid principal
amount of the Swingline Advances (excluding any Nonpermitted
Swingline Advances) then outstanding to the Swingline Lender in
accordance with the payment instructions set forth in the Notice of
Swingline Refunding, in Federal or other funds immediately available
in Charlotte, North Carolina. The amount so paid by each Lender with
a Revolving Facility Commitment shall constitute a Revolving
Facility Advance to the Borrower which shall be a Base Rate Advance;
provided that, if the Lenders with Revolving Facility Commitments
are prevented from making such Revolving Facility Advances to the
Borrower by the provisions of the United States Bankruptcy Code or
otherwise, the amount so paid by each such Lender shall constitute a
purchase by it of an assignment in the unpaid principal amount of
the Swingline Advances (and interest accruing thereon after the date
of such payment), and the Swingline Lender and each Lender with a
Revolving Facility Commitment shall promptly execute and deliver to
the Administrative Agent an Assignment and Assumption Agreement to
evidence such assignment.
(iv) Each Lender with a Revolving Facility Commitment
acknowledges and agrees that its obligations to refund Swingline
Advances in accordance with the terms of this Section 2.01(C) are
absolute and unconditional and shall not be affected by any
circumstance whatsoever, including, without limitation, (i) any set-
off, counterclaim, recoupment, defense or other right which such
Lender or any other Person may have against the Swingline Lender or
the Borrower, (ii) the occurrence or continuance of a Default or an
Event of Default or the termination of the Revolving Facility
Commitments, (iii) any adverse change in the condition (financial or
otherwise) of the Borrower or any other Person, (iv) any breach of
this Agreement by the Borrower or any other Lender (other than the
Swingline Lender, in such capacity) or (v) any
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other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided that no Lender shall be
obligated to make any payment to the Swingline Lender under this
Section 2.01(C) with respect to any portion of any Nonpermitted
Swingline Advance.
(v) If at any time the Swingline Lender is given written
notice by the Administrative Agent or the Borrower that any
condition set forth in Section 3.02 is not then satisfied, the
Lenders shall not have any obligations pursuant to this Section
2.01(C) to refund (or purchase any assignment in) any Swingline
Advances made by the Swingline Lender during the period after it has
received such written notice until the time when it receives written
notice from the Administrative Agent that such condition has been
satisfied.
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give the
Administrative Agent notice (a "NOTICE OF BORROWING") of (i) each Borrowing to
be made on the Closing Date no later than the Domestic Business Day prior to the
Closing Date, (ii) each Borrowing thereafter (other than Borrowings made to
refund Swingline Advances pursuant to Section 2.01(C)(III)) not later than 10:00
A.M. (New York City time) on the third Eurodollar Business Day before each
Eurodollar Rate Advance, the third Domestic Business Day before each Adjusted CD
Rate Advance and the Domestic Business Day before each Base Rate Advance and
(iii) each Swingline Advance not later than 11:00 A.M. (New York City time) on
the date of each Swingline Advance, specifying:
(i) the date of such Borrowing or Swingline Advance, which
shall be a Domestic Business Day in the case of an Adjusted CD Rate
Advance or a Base Rate Advance or a Eurodollar Business Day in the
case of a Eurodollar Rate Advance,
(ii) the aggregate amount of such Borrowing or Swingline
Advance,
(iii) the Type of Advances comprising such Borrowing or that
the advance will be a Swingline Advance, and
(iv) in the case of a Fixed Rate Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
The Borrower shall deliver a copy of each Notice of Borrowing for a
Swingline Advance to the Swingline Lender not later than 11:00 A.M. (New York
City time) on the date of such Swingline Advance.
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(b) Upon receipt of a Notice of Borrowing, the Administrative
Agent shall promptly notify each Lender of the contents thereof and of such
Lender's share of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(c) Not later than Noon (New York City time) on the date of each
Borrowing, each Lender with a Revolving Facility Commitment shall make available
its share of such Borrowing, in Federal or other funds immediately available in
New York City, to the Administrative Agent at its address specified in or
pursuant to Section 8.02. Unless the Administrative Agent determines that any
applicable condition specified in Article 3 has not been satisfied, the
Administrative Agent will make the funds so received from the Lenders available
to the Borrower at the Administrative Agent's aforesaid address.
(d) Not later than Noon (New York City time) on the date of each
Swingline Advance, the Swingline Lender will make available the amount of such
Swingline Advance, in Federal or other funds immediately available to the
Borrower at the Swingline Lender's address specified in or pursuant to Section
8.02.
(e) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (c) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such share available to the Administrative Agent, such Lender and the
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable thereto pursuant to Section 2.05 and (ii) in the case
of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Advance included in such Borrowing for purposes of this
Agreement. Nothing herein shall affect any rights that the Borrower may have
against such defaulting Lender.
(f) The failure of any Lender to make the Advance to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any,
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hereunder to make its Advance on the date of such Borrowing,but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Notes. (a) On the Closing Date, each "TERM LOAN NOTE"
(as defined in the Existing Credit Agreement) issued pursuant to the Existing
Credit Agreement shall be of no further force and effect, each "REVOLVING
FACILITY NOTE" (as defined in the Existing Credit Agreement) issued pursuant to
the Existing Credit Agreement shall be amended and restated by a Revolving
Facility Note substantially in the form of Exhibit A-1 and the "Swingline Note"
(as defined in the Existing Credit Agreement) issued pursuant to the Existing
Credit Agreement shall be amended and restated by a Swingline Note substantially
in the form of Exhibit A-2. From and after the Closing Date, the Revolving
Facility Advances and Swingline Advances of each Lender shall be evidenced,
respectively, by a Revolving Facility Note and Swingline Note payable to the
order of such Lender for the account of its Applicable Lending Office in an
amount equal to the aggregate unpaid principal amount of such Lender's Revolving
Facility Advances and Swingline Advances, respectively.
(b) Upon receipt of each Lender's Notes from the Borrower pursuant
to Section 3.01, the Administrative Agent shall mail such Notes to such Lender.
Each Lender shall record the date, amount and maturity of each Advance made by
it and the date and amount of each payment of principal made by the Borrower
with respect thereto, and prior to any transfer of its Note shall endorse on the
schedule forming a part thereof appropriate notations to evidence the foregoing
information with respect to each such Advance then outstanding; provided that
the failure of any Lender to make any such recordation or endorsement, or any
error in such recordation or endorsement, shall not affect the obligations of
the Borrower hereunder or under the Notes. Each Lender is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.04. Assignment and Assumption of Obligations under
Existing Credit Agreement; Recharacterization of Term Loan Advances Under
Existing Credit Agreement and Increase in Revolving Facility Commitments. (a)
Each Old Lender and each Bank hereby agrees (subject, in the case of each Old
Lender, to receipt by such Old Lender of any payments required under Section
2.04(g)) that immediately prior to (and subject to the condition subsequent of)
the occurrence of the Closing Time (such immediately prior moment being referred
to herein as the "TIME OF ASSIGNMENT"), each Old Lender hereby sells and assigns
to each Bank, and each Bank hereby purchases and assumes from each Old Lender,
an interest in and to all of such Old Lender's rights and obligations under the
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Existing Credit Agreement at the Time of Assignment (including without
limitation, an interest in each Old Lender's Revolving Facility Commitment under
the Existing Credit Agreement and all outstanding Advances owing to each Old
Lender under the Existing Credit Agreement), pro rata in accordance with such
Bank's Revolving Facility Percentage (determined by reference to its Revolving
Facility Commitment under this Amended Agreement), such that from and after the
Time of Assignment, (i) each Bank will have a pro rata interest (based on such
Bank's Revolving Facility Percentage) in each Term Loan Advance outstanding (if
any) at the Time of Assignment (which will, as provided herein, become an amount
of Revolving Facility Advance outstanding for such Bank as of the Closing Time)
and (ii) each Bank will have a pro rata interest (based on such Bank's Revolving
Facility Percentage) in each Revolving Facility Advance outstanding (if any)
under the Existing Credit Agreement at the Time of Assignment. Immediately after
the occurrence of the foregoing, upon the occurrence of the Time of Closing, (a)
the principal amount of each Bank's interest in such Term Loan Advance shall be
recharacterized for all purposes of the Agreement as an amount of Revolving
Facility Advance outstanding pursuant to such Bank's Revolving Facility
Commitment under this Amended Agreement, (b) the principal amount of each Bank's
interest in such Revolving Facility Advances shall continue outstanding as
Revolving Facility Advances pursuant to such Bank's Revolving Facility
Commitment under this Amended Agreement and (c) the interests of the Banks in
the Revolving Facility Commitments of the Old Lenders under the Existing Credit
Agreement shall be reconstituted as the Revolving Facility Commitments of the
Banks under this Amended Agreement. In furtherance of the foregoing, the
Borrower agrees that at, and as a further condition to the occurrence of, the
Time of Assignment and the Time of Closing the aggregate principal amount of
Term Loan Advances and Revolving Facility Advances outstanding under the
Existing Credit Agreement will not exceed $300,000,000 and there will be no
outstanding Letters of Credit or Letter of Credit Obligations.
(b) As consideration for the assignment and sale contemplated by
Section 2.04 (a), each Bank shall pay to the Administrative Agent, for the
account of each Old Lender, an amount equal to the aggregate amount of the Term
Loan Advances and Revolving Facility Advances assigned to such Bank (net of the
aggregate amount to be received by such Bank in its capacity as an Old Lender
hereunder), in immediately available funds by no later than 11:00 A.M. (New York
City time) on the Closing Date. Upon receipt of such funds from the Banks, the
Administrative Agent shall promptly pay the aggregate amount that each Old
Lender is entitled to receive from the Banks to such Old Lender in immediately
available funds. It is understood that commitment and all other fees and
interest accrued under the Existing Credit Agreement to the Closing Date are
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for the account of the Old Lenders and such fees and interest accruing from and
including the Closing Date under the Existing Credit Agreement, as amended and
restated by this Amended Agreement, are for the account of the Banks. Each of
the Old Lenders and each of the Banks hereby agrees that if it receives any
amount under the Existing Credit Agreement or this Amended Agreement which is
for the account of another party, it shall receive the same for the account of
such other party to the extent of such other party's interest therein and shall
promptly return the same to the Administrative Agent for distribution to such
other party.
(c) The Administrative Agent hereby waives the processing fee
referred to in Section 8.07(c) of the Existing Credit Agreement that would
otherwise be payable in connection with the assignments made pursuant to this
Section 2.04.
(d) Each Old Lender: (i) represents and warrants that it is the
legal and beneficial owner of the interests being assigned by it hereunder and
that such interests are free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Existing Credit Agreement or this Amended Agreement, the other Loan Documents or
the execution, legality, validity, enforce ability, genuineness, sufficiency or
value of the Existing Credit Agreement or this Amended Agreement, the other Loan
Documents or any other instrument or document furnished pursuant thereto; (iii)
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or any of its Subsidiaries or the
performance or observance by the Borrower and its Subsidiaries of their
respective obligations under the Existing Credit Agreement or this Amended
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant thereto; and (iv) is selling all interest being sold
hereunder without recourse and, except as provided in the foregoing clause (i),
without representation or warranty.
(e) Each Bank that is not an Old Lender confirms (solely for the
benefit of the Old Lenders and the Agents) that it has received a copy of the
Existing Credit Agreement, together with such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Amended Agreement.
(f) From and after the Time of Assignment, each Old Lender shall
relinquish its rights and be released from its obligations under the Existing
Credit Agreement (as distinct from those rights and obligations that it acquires
by virtue of being an Bank under this Amended Agreement). Notwithstanding the
foregoing, the obligations of the Borrower to each Old Lender contained in
Sections 2.10(e), 2.12, 2.14, 2.18 and 8.04(b) of the Existing Credit Agreement
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and as set forth in Section 2.04(g) shall survive the occurrence of the Time of
Assignment, but only as they relate to the period when such Old Lender was, or
to such Old Lender's former status as, a Lender under the Existing Credit
Agreement.
(g) By its execution hereof, the Borrower agrees that on the
Closing Date it will pay to each Old Lender (i) all interest, commitment and all
other fees and any expenses that are accrued but unpaid to the Closing Date and
payable to such Old Lender at any time under the terms of the Existing Credit
Agreement and (ii) to the extent (1) any Old Lender's Fixed Rate Advances under
the Existing Credit Agreement exceed the Advances assumed by such Old Lender as
a Bank pursuant to this Section 2.04 and (2) the Closing Date is not the last
day of the Interest Period applicable to such Fixed Rate Advances, the Borrower
shall reimburse such Old Lender promptly after the Closing Date for any
resulting loss or expense incurred by it (or by any existing Participant in the
related Advance), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment or failure to borrow; provided that
such Old Lender shall have delivered to the Borrower a certificate as to the
amount of such loss or expense, which certificate shall be conclusive absent
manifest error.
(h) From and after the Time of Assignment, the Administrative
Agent shall make all payments under the Existing Credit Agreement in respect of
the interests assigned hereby (including, without limitation, all payments of
principal, interest, letter of credit fees and commitment fees (if applicable)
with respect thereto) to each Bank, as appropriate.
SECTION 2.05. Interest Rates. (a) Each Base Rate Advance (including
each Swingline Advance) shall bear interest on the outstanding principal amount
thereof, for each day from the later of the Closing Date and the date such
Advance is made until it becomes due, at a rate per annum equal to the sum of
(i) the applicable Base Rate Margin plus (ii) the Base Rate for such day. Except
as provided in Section 3.01(B) or 2.05(F), such interest shall be payable in
arrears on each Payment Date and, with respect to the principal amount of any
Base Rate Advance converted to a Fixed Rate Advance, on the date when such Base
Rate Advance is so converted.
(b) Each Adjusted CD Rate Advance shall bear interest on the
outstanding principal amount thereof, for each day from and after the Closing
Date during the Interest Period applicable thereto, at a rate per annum equal to
the sum of (i) the applicable CD Rate Margin plus (ii) the applicable Adjusted
CD Rate; provided that if any Adjusted CD Rate Advance or any portion thereof
shall,
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as a result of clause (ii)(b)(i) of the definition of Interest Period, have an
Interest Period of less than 30 days, such portion shall bear interest during
such Interest Period at the rate applicable to Base Rate Advances during such
period. Except as otherwise provided in Section 3.01(B) or 2.05(F), such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than 90 days, at intervals of 90 days after
the first day thereof.
The "ADJUSTED CD RATE" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
- ---------------------------
* The amount in brackets being rounded upwards, if
necessary, to the next higher 1/100 of 1%
The "CD BASE RATE" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the unpaid principal amount of the Adjusted CD Rate Advance of
such CD Reference Bank to which such Interest Period applies and having a
maturity comparable to such Interest Period.
"DOMESTIC RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
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<PAGE>
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"ASSESSMENT RATE" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Eurodollar Rate Advance shall bear interest on the
outstanding principal amount thereof, for each day from and after the Closing
Date during the Interest Period applicable thereto, at a rate per annum equal to
the sum of (i) the applicable Eurodollar Margin plus (ii) the applicable
Adjusted London Interbank Offered Rate. Except as otherwise provided in Section
3.01(B) or 2.05(F), such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than three months,
at intervals of three months after the first day thereof.
The "ADJUSTED LONDON INTERBANK OFFERED RATE" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Eurodollar
Reserve Percentage.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Eurodollar Reference Banks in the London interbank market
at approximately 11:00 A.M. (London time) two Eurodollar Business Days before
the first day of such Interest Period in an amount approximately equal to the
principal amount of the Eurodollar Rate Advance of such Eurodollar Reference
Bank to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"EURODOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
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Reserve System in New York City with deposits exceeding five billion dollars in
respect of
"EUROCURRENCY LIABILITIES" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Eurodollar Rate Advances is determined or any category of extensions of credit
or other assets which includes loans by a non-United States office of any Lender
to United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
(d) The Administrative Agent shall determine each interest rate
applicable to the Advances hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the Lenders by telex or cable of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated hereby. If any Reference
Bank does not furnish a timely quotation, the Administrative Agent shall
determine the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of Section 2.16 shall
apply.
(f) Any overdue interest on any Advance shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the rate
of interest borne by such Advance for such day.
SECTION 2.06. Fees.
(a) Commitment Fees. The Borrower shall pay to the Administrative
Agent, for the account of the Lenders ratably in proportion to their respective
Revolving Facility Commitments on each day, a commitment fee for each day on the
amount by which the aggregate amount of the Revolving Facility Commitments
exceeds the sum of the aggregate outstanding principal amount of the Revolving
Facility Advances and the aggregate amount of Letter of Credit Obligations on
such day, at the rate of (i) if the Debt to Operating Cash Flow Ratio as
specified in the most recent Notice of Debt to Operating Cash Flow Ratio
received by the Administrative Agent on or before such day is greater than 4.0,
3/8 of 1% per annum, (ii) otherwise, 1/4 of 1% per annum. Such commitment fee
shall accrue from the Closing Date to the Termination Date and shall be payable
quarterly in arrears on each Payment Date.
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(b) Participation Fees. On the Closing Date, the Borrower shall
pay to the Administrative Agent, for the account of the Co-Arrangers and the
Lenders as previously agreed among them, amendment fees in the amounts
previously agreed among the Borrower and the Co-Arrangers
(c) Administrative Fees. On each anniversary of the Original
Closing Date, the Borrower shall pay to the Administrative Agent for its own
account annual administrative fees in the amounts previously agreed between the
Borrower and the Administrative Agent.
(d) Letter of Credit Fees. The Borrower shall pay to the
Administrative Agent a letter of credit fee at a rate per annum equal to the
Letter of Credit Fee Rate in effect from time to time on the aggregate amount
available for drawing under any Letters of Credits issued from time to time,
such fee to be payable for the account of the Lenders with Revolving Facility
Commitments ratably in proportion to their participation therein. The "LETTER OF
CREDIT FEE RATE" in effect on any day, for any Letter of Credit, shall be the
rate set forth below opposite the applicable range for the Debt to Operating
Cash Flow Ratio as specified in the most recent Notice of Debt to Operating Cash
Flow Ratio received by the Administrative Agent prior to such day:
<TABLE>
<CAPTION>
Debt to Operating Cash Flow Ratio
- ---------------------------------
Greater than But Letter of Credit
or equal to less than Fee Rate
------------ --------- ----------------
<S> <C> <C> <C>
6.0 N/A 2.00%
5.5 6.0 1.75%
5.0 5.5 1.50%
4.0 5.0 1.00%
0.0 4.0 0.75%
</TABLE>
provided, however, that during any period in which an Event of Default shall
have occurred and be continuing, the Letter of Credit Fee Rate shall be the
Letter of Credit Fee Rate indicated in the above table plus 2% per annum. Such
fee shall be payable in arrears on each Payment Date for so long as any Letter
of Credit is outstanding. The Borrower shall also pay to the Issuing Bank
fronting fees and issuance, payment, amendment and extension charges in the
amounts and at the times as agreed between the Borrower and the Issuing Bank.
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<PAGE>
SECTION 2.7. Optional Termination or Reduction of Commitments. The
Borrower may, upon at least three Domestic Business Days' notice to the
Administrative Agent, (i) terminate the Revolving Facility Commitments if no
Revolving Facility Advances, Swingline Advances or Letter of Credit Obligations
are outstanding at such time, (ii) terminate the Swingline Commitment at any
time if no Swingline Advances are outstanding at such time, (iii) ratably reduce
from time to time, by an aggregate amount of $500,000 or any larger multiple of
$100,000, the aggregate amount of the Revolving Facility Commitments in excess
of the aggregate outstanding principal amount of the Revolving Facility
Advances, Swingline Advances and Letter of Credit Obligations or (iv) reduce
from time to time, by an aggregate amount of $50,000 or any integral multiple
thereof, the amount of the Swingline Commitment in excess of the aggregate
outstanding principal amount of the Swingline Advances.
SECTION 2.8. Mandatory Termination of Commitments. The Revolving
Facility Commitments and the Swingline Commitment shall terminate on the
Termination Date, and any Revolving Facility Advances and Swingline Advances
then outstanding (together with accrued interest thereon) shall be due and
payable on such date.
SECTION 2.9. Prepayments.
(a) Optional Prepayments. The Borrower may, upon notice to the
Administrative Agent in accordance with Section 2.09(C), prepay any Advance in
whole at any time, or from time to time in part, in amounts aggregating $100,000
or any larger multiple thereof in the case of Revolving Facility Advances and in
amounts aggregating $50,000 or any larger multiple thereof in the case of
Swingline Advances by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment and all amounts then owing
under Section 2.12 in respect of such prepayment. Each such prepayment in
respect of Revolving Facility Advances shall be applied to prepay ratably the
Revolving Facility Advances of the several Lenders.
(b) Mandatory Prepayments.
(i) If on any date the Borrower has received the Net Proceeds from
any issuance of equity securities (including, without limitation, any common
stock, preferred stock, rights to subscribe for or to purchase, or any warrants
or options to acquire any equity security or any instrument convertible into any
equity security), and the aggregate amount of such Net Proceeds exceeds the
amount, if any, of (A) the cash portion of the purchase price of any Permitted
Acquisition and (B) the amount applied to redeem any Permitted Subordinated Debt
(other than by application of the proceeds of any Refinancing Permitted
Subordinated
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Debt), in each case paid on or before the date 12 weeks after such date of
issuance, then no later than such later date, the Borrower shall repay an
outstanding principal amount of the Revolving Facility Advances equal to such
excess. The Borrower shall pay the principal amount to be repaid together with
accrued interest thereon to the date of prepayment and all amounts then owing
under Section 2.12 in respect of such prepayment.
(ii) If on any date the Borrower has received the Net Proceeds of
the issuance of any Permitted Subordinated Debt (other than any Refinancing
Permitted Subordinated Debt) , and the aggregate amount of such Net Proceeds
exceeds the amount, if any, of the cash portion of the purchase price of any
Permitted Acquisition paid on or before the date 12 weeks after such date of
issuance, then no later than such later date the Borrower shall repay an
outstanding principal amount of the Revolving Facility Advances by the amount of
such excess. The Borrower shall pay the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment and all amounts then
owing under Section 2.12 in respect of such prepayment.
(iii) If at any time the Borrower shall be required by clause (i) or
(ii) of this subsection to repay Revolving Facility Advances by an amount that
exceeds the amount of Revolving Facility Advances then outstanding, the Borrower
shall forthwith, without any notice or demand or any other act by the
Administrative Agent or any Lender, pay to the Administrative Agent in
immediately available funds an amount equal to the lesser of such excess and the
aggregate amount then available for drawing under all outstanding Letters of
Credit, which amount shall be held as collateral for the benefit of the Lenders
pursuant to arrangements satisfactory to the Administrative Agent; provided that
if the amount of funds so held shall at any time exceed the Letter of Credit
Obligations at such time, the Administrative Agent shall, if no Default has
occurred and is continuing, promptly refund such excess to the Borrower.
(c) Notice of Prepayment. In the case of any optional or mandatory
prepayment pursuant to this Section 2.09, the Borrower shall give the
Administrative Agent prior notice, of one Domestic Business Day in the case of
the prepayment of Base Rate Advances and of three Domestic Business Days in the
case of the prepayment of Eurodollar Rate Advances or Adjusted CD Rate Advances,
stating the proposed date and aggregate principal amount of such prepayment.
Upon receipt of a notice of prepayment pursuant to this Section 2.09, the
Administrative Agent shall promptly notify each Lender of the contents thereof
and of such Lender's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
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<PAGE>
SECTION 2.10. Letters of Credit. (a) Subject to the terms and
conditions hereof, the Issuing Bank agrees to issue trade or standby letters of
credit hereunder from time to time before the 30th day before the Termination
Date upon the request of the Borrower (the "LETTERS OF CREDIT"); provided that,
immediately after each Letter of Credit is issued, (i) the aggregate amount of
the Letter of Credit Obligations shall not exceed the lesser of $5,000,000 and
the aggregate amount of all Revolving Facility Commitments and (ii) the
aggregate amount of the Letter of Credit Obligations plus the aggregate
outstanding amount of all Revolving Facility Advances and Swingline Advances
shall not exceed the aggregate amount of the Revolving Facility Commitments of
all Lenders. Upon the date of issuance by the Issuing Bank of a Letter of
Credit, the Issuing Bank shall be deemed, without further action by any party
hereto, to have sold to each Lender with a Revolving Facility Commitment, and
each Lender with a Revolving Facility Commitment shall be deemed, without
further action by any party hereto, to have purchased from the Issuing Bank, a
participation in such Letter of Credit and the related Letter of Credit
Obligations in proportion to its Revolving Facility Percentage. All Letters of
Credit will be denominated in U.S. Dollars and will be issued on a sight basis
only.
(b) The Borrower shall give the Issuing Bank and the
Administrative Agent written notice, in substantially the form of Exhibit K, at
least two Domestic Business Days, or such shorter period as may be agreed to by
the Issuing Bank in any particular instance, prior to the requested issuance of
a Letter of Credit specifying the date such Letter of Credit is to be issued,
and describing the terms of such Letter of Credit and the nature of the
transactions to be supported thereby (such notice, including any such notice
given in connection with the extension of a Letter of Credit, a "REQUEST FOR
ISSUANCE"). Promptly after issuing a Letter of Credit, the Issuing Bank shall
deliver to the Administrative Agent a copy of the Letter of Credit, and the
Administrative Agent shall promptly deliver a copy of the Letter of Credit to
each Lender with a Revolving Facility Commitment, and notify each such Lender of
its participation in such Letter of Credit. The issuance by the Issuing Bank of
each Letter of Credit shall, in addition to the conditions precedent set forth
in Article 3, be subject to the conditions precedent that such Letter of Credit
shall be in such form and contain such terms as shall be satisfactory to the
Issuing Bank and that the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letter of Credit as the Issuing Bank
shall have reasonably requested. The extension or renewal of any Letter of
Credit shall be deemed to be an issuance of such Letter of Credit for all
purposes of this Agreement. If any Letter of Credit contains a provision
pursuant to which it is deemed to be extended unless notice of termination is
given by the Issuing Bank, the Issuing Bank (i) shall not be required to give
such notice of termination unless the Borrower has timely requested such
termination and (ii) may timely give such notice of termination unless it has
theretofore timely received a Request for
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<PAGE>
Issuance and the other conditions to issuance of a Letter of Credit have also
theretofore been met with respect to such extension. No Letter of Credit shall
have a term of more than one year; provided that a Letter of Credit may contain
a provision pursuant to which it is deemed to be extended for successive periods
of up to one year unless notice of termination is given by the Issuing Bank;
provided further that no Letter of Credit shall have a term extending or be so
extendible beyond the Termination Date.
(c) Upon receipt from the beneficiary of any Letter of Credit of
any notice of a drawing under such Letter of Credit, the Issuing Bank shall
notify the Administrative Agent and the Borrower, and the Administrative Agent
shall promptly notify each Lender with a Revolving Facility Commitment, as to
the amount to be paid as a result of such demand or drawing and the payment
date. The Borrower shall be irrevocably and unconditionally obligated forthwith
to reimburse the Issuing Bank on such payment date for any amounts paid by the
Issuing Bank upon any drawing under any Letter of Credit issued by it, without
presentment, demand, protest or other formalities of any kind. All such amounts
paid by the Issuing Bank and remaining unpaid by the Borrower shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the sum of 2% plus the rate that would be applicable to a Revolving Facility
Advance bearing interest at the Base Rate for such day. In addition, each Lender
with a Revolving Facility Commitment will pay to the Administrative Agent, for
the account of the Issuing Bank, immediately upon the Issuing Bank's demand at
any time during the period commencing after such drawing until reimbursement
therefor in full by the Borrower, an amount equal to such Lender's ratable share
of the amount of such drawing remaining unpaid by the Borrower (in proportion to
its participation therein), together with interest on such amount for each day
from the date of the Issuing Bank's demand for such payment (or, if such demand
is made after Noon (New York City time) on such date, from the next succeeding
Domestic Business Day) to and including the date of payment by such Lender of
such amount at a rate of interest per annum equal to the rate that would be
applicable to a Revolving Facility Advance bearing interest at the Base Rate for
such period. The Issuing Bank will pay to the Administrative Agent for the
account of each Lender with a Revolving Facility Commitment ratably all amounts
received from the Borrower for application in payment of its reimbursement
obligations in respect of any Letter of Credit, but only to the extent such
Lender has made payment to the Issuing Bank in respect of such Letter of Credit
pursuant hereto and the Administrative Agent will promptly distribute such
amounts to such Lender in accordance with Section 2.11.
(d) The obligations of the Borrower and each Lender with a
Revolving Facility Commitment under Section 2.10(C) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of
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<PAGE>
this Agreement, under all circumstances whatsoever, including without limitation
the following circumstances:
(i) any lack of validity or enforce ability of this Agreement
or any Letter of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of this Agreement or any Letter of
Credit or any document related hereto or thereto;
(iii) the use which may be made of the Letter of Credit by, or
any acts or omission of, a beneficiary of a Letter of Credit (or any
Person for whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other
rights that the Borrower may have at any time against a beneficiary
of a Letter of Credit (or any Person for whom the beneficiary may be
acting), the Lenders (including the Issuing Bank) or any other
Person, whether in connection with this Agreement or any Letter of
Credit or any document related hereto or thereto or any unrelated
transaction;
(v) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(vi) payment under a Letter of Credit against presentation to
the Issuing Bank of a draft or certificate that does not comply with
the terms of such Letter of Credit; provided that the Issuing Bank's
determination that documents presented under such Letter of Credit
comply with the terms thereof shall not have constituted gross
negligence or willful misconduct (as determined by a court of
competent jurisdiction) of the Issuing Bank; or
(vii) any other act or omission to act or delay of any kind by
any Lender (including the Issuing Bank), the Administrative Agent or
any other Person or any other event or circumstance whatsoever that
might, but for the provisions of this subsection (vii), constitute a
legal or equitable discharge of the Borrower's or the Lender's
obligations hereunder.
(e) The Borrower hereby indemnifies and holds harmless each
Lender (including the Issuing Bank) and the Administrative Agent from and
against any and all claims, damages, losses, liabilities, costs or expenses
which such Lender or the Administrative Agent may incur, and none of the Lenders
(including the
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<PAGE>
Issuing Bank) nor the Administrative Agent nor any of their Affiliates or their
respective officers or directors or employees or agents shall be liable or
responsible therefor, by reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay under any Letter of Credit,
including without limitation any of the circumstances enumerated in subsection
(d) above, as well as (i) any error, omission, interruption or delay in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, (ii) any error in interpretation of technical terms, (iii) any loss
or delay in the transmission of any document required in order to make a drawing
under a Letter of Credit, (iv) any consequences arising from causes beyond the
control of the Issuing Bank, including without limitation any government acts,
or any other circumstances whatsoever in making or failing to make payment under
such Letter of Credit; provided that the Borrower shall not be required to
indemnify the Issuing Bank for any claims, damages, losses, liabilities, costs
or expenses, and the Borrower shall have a claim for direct (but not
consequential) damage suffered by it, to the extent found by a court of
competent jurisdiction to have been caused by (x) the willful misconduct or
gross negligence (as determined by a court of competent jurisdiction) of the
Issuing Bank in determining whether a request presented under any Letter of
Credit issued by it complied with the terms of such Letter of Credit or (y) the
Issuing Bank's willful failure to pay under any Letter of Credit issued by it
after the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit. Nothing in this subsection (e) is intended
to limit the obligations of the Borrower under any other provision of this
Agreement.
SECTION 2.11. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Advances, of each
Letter of Credit Obligation, and of all fees, expenses and other amounts payable
hereunder, not later than Noon (New York City time) on the date when due, in
Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 8.02. Payments
received by the Administrative Agent on such date but after such time shall be
deemed to have been received on the next Domestic Business Day. The
Administrative Agent will promptly distribute to each Lender its ratable share
of each such payment received by the Administrative Agent for the account of the
Lenders. Whenever any payment of principal of, or interest on, the Base Rate
Advances or Adjusted CD Rate Advances or of any Letter of Credit or other fees
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Eurodollar Rate Advances shall
be due on a day which is not a Eurodollar Business Day, the date for payment
thereof shall be extended to the next succeeding Eurodollar Business Day unless
such Eurodollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Eurodollar
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<PAGE>
Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment, each Lender shall
repay to the Administrative Agent forthwith on demand such amount distributed to
such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Funding Losses. If the Borrower makes any payment
(including any prepayment) of principal with respect to any Fixed Rate Advances
(pursuant to this Article 2, Article 6 or otherwise) on any day other than the
last day of the Interest Period applicable thereto, or if the Borrower fails to
borrow or Convert any Fixed Rate Advances after notice has been given to any
Lender in accordance with Section 2.02(B) or Section 2.15, as the case may be,
the Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Advance), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or failure to
borrow; provided that such Lender shall have delivered to the Borrower a
certificate as to the amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error.
SECTION 2.13. Computation of Interest and Fees. Interest based on
the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual number of days elapsed (including the
first day but excluding the last day). All other interest and commitment and
letter of credit fees hereunder shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed (including the first day but
excluding the last day).
SECTION 2.14. Taxes. (a) For purposes of this Section 2.14, the
following terms have the following meanings:
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"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Lender and the Administrative
Agent, taxes imposed on its net income, and franchise or similar taxes imposed
on its net income, by a jurisdiction under the laws of which such Lender or the
Administrative Agent (as the case may be) is organized or in which its principal
executive office is located or, in the case of each Lender, in which its
Applicable Lending Office is located and (ii) in the case of each Lender, any
United States withholding tax imposed on such payments but only to the extent
that such Lender is subject to United States withholding tax at the time such
Lender first becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
the execution or delivery of, or otherwise with respect to, this Agreement or
any Note.
(b) Any and all payments by the Borrower to or for the account of
any Lender or the Administrative Agent hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if the Borrower
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.14) such Lender or the Administrative Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 8.02, the original or a certified copy of a receipt evidencing
payment thereof.
(c) The Borrower agrees to indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 2.14) paid by such Lender or
the Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be paid within 15 days after such Lender or the
Administrative Agent (as the case may be) makes demand therefor.
(d) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
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Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying that
such Lender is entitled to benefits under an income tax treaty to which the
United States is a party which exempts the Lender from United States withholding
tax or reduces the rate of withholding tax on payments of interest for the
account of such Lender or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States.
(e) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form pursuant to Section 2.14(D)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Lender shall not be entitled to indemnification under Section
2.14(B) or (c) with respect to Taxes imposed by the United States; provided that
if a Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Lender shall
reasonably request to assist such Lender to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or
for the account of any Lender pursuant to this Section 2.14, then such Lender
will change the jurisdiction of its Applicable Lending Office if, in the
judgment of such Lender, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Lender.
SECTION 2.15. Voluntary and Mandatory Conversion of Advances. (a) On
any Domestic Business Day after the third Domestic Business Day following the
Closing Date, the Borrower may, upon notice given to the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Domestic Business
Day prior to the date of the proposed Conversion and subject to the provisions
of Sections 2.15(B) and (c), 2.16 and 2.17, Convert all or a portion of each
Lender's ratable share of Revolving Facility Advances of one Type comprising the
same Borrowing into one or more Borrowings, each comprised of a ratable share of
each Lender's Revolving Facility Advances of another Type; provided, however,
that any Conversion of any Fixed Rate Advances into Advances of another Type
shall be made on, and only on, the last day of an Interest Period for such Fixed
Rate Advances; and provided further that during the three months prior to any
date when any principal prepayment or repayment is payable, the Borrower may
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Convert a portion of all Revolving Facility Advances comprising the same
Borrowing into Base Rate Advances such that the aggregate principal amount of
such Borrowing shall equal the principal prepayment or repayment payable on such
date. Each such notice of a Conversion shall, within the restrictions specified
above, specify (i) the date of such Conversion, (ii) the Advances to be
Converted, and (iii) if such Conversion is into Fixed Rate Advances, the
duration of the Interest Period for each such Advance.
(b) If the Borrower shall fail to select the duration of any
Interest Period for any Adjusted CD Rate Advances or any Eurodollar Rate
Advances in accordance with the provisions contained in the definition of
"INTEREST PERIOD" in Section 1.01, the Administrative Agent will forthwith so
notify the Borrower and the Lenders and such Advances will automatically, on the
last day of the then existing Interest Period therefor, Convert into Base Rate
Advances.
(c) If the aggregate unpaid principal amount of Revolving Facility
Advances comprising any Borrowing or Borrowings shall be reduced, by payment or
prepayment or otherwise (including but not limited to a Conversion permitted by
the second proviso of Section 2.15(A)), to less than $500,000, such Revolving
Facility Advances shall, if they are Fixed Rate Advances, automatically Convert
into Base Rate Advances on the last day of the Interest Period for such Fixed
Rate Advances, and on and after such date the right of the Borrower to Convert
such Advances into Revolving Facility Advances of a Type other than Base Rate
Advances shall terminate; provided, however, that if and so long as each such
Revolving Facility Advance shall be of the same Type and have the same Interest
Period as any other Revolving Facility Advances comprising another Borrowing and
other Borrowings, and the aggregate unpaid principal amount of all such
Revolving Facility Advances shall equal or exceed $500,000, the Borrower shall
have the right to continue all such Revolving Facility Advances as, and to
Convert all such Revolving Facility Advances into, Revolving Facility Advances
of such Type having such Interest Period.
SECTION 2.16. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Administrative Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts) are not being
offered to the Reference Banks in the relevant market for such
Interest Period, or
(b) any Lender advises the Administrative Agent that the
Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as
the case may be, as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Lender of funding its
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Adjusted CD Rate Advance or Eurodollar Rate Advance, as the case may
be, for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Lenders to make Adjusted CD Rate Advances or Eurodollar Rate
Advances, as the case may be, shall be suspended. Unless the Borrower notifies
the Administrative Agent at least two Domestic Business Days before the date of
any Fixed Rate Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, such Borrowing shall instead be
a Base Rate Advance Borrowing.
SECTION 2.17. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Lender (or its Eurodollar Lending Office)
to make, maintain or fund its Eurodollar Advances and such Lender shall so
notify the Administrative Agent, the Administrative Agent shall forthwith give
notice thereof to the other Lenders and the Borrower, whereupon until such Bank
notifies the Borrower and the Administrative Agent that the circumstances giving
rise to such suspension no longer exist, the obligation of such Lender to make
Eurodollar Advances shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Lender shall designate a
different Eurodollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. If such Lender shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Eurodollar
Advances to maturity and shall so specify in such notice, (i) the obligation of
such Lender to make Eurodollar Rate Advances and to Convert Advances into
Eurodollar Rate Advances shall terminate and (ii) the Borrower shall forthwith
prepay in full all Eurodollar Rate Advances of such Lender then outstanding,
together with accrued interest thereon, unless the Borrower, within five
Domestic Business Days of such notice and demand, Converts all Eurodollar Rate
Advances of all Lenders then outstanding into Base Rate Advances in accordance
with Section 2.15(A), except that such Conversion may occur, notwithstanding
Section 2.15(A), other than on the last day of the respective Interest Periods
for such Eurodollar Rate Advances, if the Borrower has paid any amounts payable
under Section 2.12.
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SECTION 2.18. Increased Cost and Reduced Return. (a) If on or after
the date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding (i) with respect to any Adjusted CD Rate Advance any such
requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Eurodollar Rate Advance any such requirement included in an
applicable EuroDollar Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any Adjusted CD Rate Advance, any such requirement
reflected in an applicable Assessment Rate) or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender (or its Applicable Lending Office) or shall impose on any Lender (or its
Applicable Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting its Fixed
Rate Advances, its Note or its obligation to make Fixed Rate Advances and the
result of any of the foregoing is to increase the cost to such Lender (or its
Applicable Lending Office) of making or maintaining any Fixed Rate Advance, or
of issuing or maintaining any Letter of Credit or its obligations with respect
thereto as the Issuing Bank or as a Lender participating therein, or to reduce
the amount of any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or under its Note with respect thereto, by
an amount deemed by such Lender to be material, then, within 15 days after
demand by such Lender (with a copy to the Administrative Agent), the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender on an after-tax basis for such increased cost or reduction.
(b) If any Lender shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Lender (or its Parent) as a consequence of such Lender's
obligations hereunder to a level below that which such Lender (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material,
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then from time to time, within 15 days after demand by such Lender (with a copy
to the Administrative Agent), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender (or its Parent) on
an after-tax basis for such reduction.
(c) Each Lender will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Lender to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise disadvantageous to
such Lender. A certificate of any Lender claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, such Lender may use any reasonable averaging and attribution
methods.
SECTION 2.19. Base Rate Advances Substituted for Affected Fixed Rate
Advances. If (i) the obligation of any Lender to make Eurodollar Rate Advances
had been suspended pursuant to Section 2.17 or (ii) any Lender has demanded
compensation under Section 2.14 or 2.18(A) and the Borrower shall, by at least
five Eurodollar Business Days' prior notice to such Lender through the
Administrative Agent, have elected that the provisions of this Section shall
apply to such Lender, then, unless and until such Lender notifies the Borrower
that the circumstances giving rise to such suspension or demand for compensation
no longer apply:
(a) all Advances which would otherwise be made by such Lender as
Adjusted CD Rate Advances or Eurodollar Rate Advances, as the case may be, shall
be made instead as Base Rate Advances (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Advances of the other
Lenders), and
(b) after each of its Adjusted CD Rate Advances or Eurodollar Rate
Advances, as the case may be, has been repaid, all payments of principal which
would otherwise be applied to repay such Fixed Rate Advances shall be applied to
repay its Base Rate Advances instead.
SECTION 2.20. Use of Proceeds. The Borrower will use the proceeds of
Borrowings and Swingline Advances on and after the Closing Date for working
capital needs, Capital Expenditures, and general corporate purposes of the
Borrower and the Guarantors; provided that (x) for this purpose, "GENERAL
CORPORATE PURPOSES" includes Restricted Payments to the extent permitted by
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clause (iii) or (iv) of Section 5.02(G) hereof, Permitted Acquisitions and
Permitted Subordinated Debt Repurchases and (y) the aggregate amount of
Borrowings that shall have been used for Capital Expenditures, Restricted
Payments, Permitted Acquisitions, and Permitted Subordinated Debt Repurchases on
and after the Closing Date shall not, in the aggregate, exceed $285,000,000
outstanding at any time minus the aggregate amount of all reductions in the
Revolving Facility Commitments pursuant to Section 2.07 hereof. None of the
proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "MARGIN STOCK"
within the meaning of Regulation G or Regulation U, other than proceeds of
Advances used to purchase shares of common stock of the Borrower to the extent
permitted by Section 5.02(G) hereof.
ARTICLE 3
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Closing Date. Notwithstanding
the execution and delivery of this Amended Agreement by all parties hereto, the
Existing Credit Agreement shall remain in full force and effect and shall not be
amended hereby unless and until the Closing Date occurs. The effectiveness of
the amendment and restatement of the Existing Credit Agreement to be effected by
this Amended Agreement, and the obligation of each Lender to make any Revolving
Facility Advance and any Swingline Advance, if any, on the Closing Date shall
occur at the Closing Time on the Closing Date and shall be subject to the
conditions precedent that:
(a) The Administrative Agent shall have received certified copies of
the respective certificates of incorporation and bylaws of the Borrower and its
corporate Subsidiaries and the respective certificates of limited partnership
and agreements of limited partnership for the partnership Subsidiaries;
(b) The Borrower shall have paid or caused to be paid, or the
Administrative Agent shall have received evidence satisfactory to it in its sole
good faith discretion that on the Closing Date the Borrower shall pay, or cause
to be paid, (i) all interest and commitment fees that are accrued but unpaid to
the Closing Date under the Existing Credit Agreement (whether or not then
payable under the terms thereof), (ii) all fees and expenses (if any) payable
under Section 8.04 of the Existing Credit Agreement, (iii) all accrued fees and
expenses of the Administrative Agent, the Documentation Agent, the Syndication
Agent, the Co- Arrangers and the Lenders, including without limitation the
amendment fees
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payable under Section 2.06(B), (iv) all amounts payable pursuant to Section
2.04(G) and (v) all fees and expenses of Davis Polk & Wardwell, in connection
with the preparation, execution and delivery of this Agreement, the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby, in each case for which the Borrower has received a statement on or
before the Closing Date;
(c) There shall not have been any material adverse change in the
business, condition (financial or otherwise), operations, properties or
prospects of the Borrower or any of its Subsidiaries since December 31, 1996;
(d) Except for the Disclosed Litigation, there shall exist no
pending or threatened action, suit, investigation, litigation or proceeding in
any court or before any arbitrator or governmental instrumentality which, in the
reasonable opinion of the Lenders, could have a material adverse effect on the
condition (financial or otherwise), operations, properties or prospects of the
Borrower or any of its Subsidiaries or which, in the reasonable opinion of the
Majority Lenders, may adversely affect the legality, validity or enforce ability
of this Agreement, any other Loan Document or any Related Document, the ability
of any Loan Party to perform its obligations hereunder or thereunder, or the
rights of any Lender hereunder or thereunder or the ability of any Lender to
exercise such rights;
(e) All material governmental and third party consents and
approvals necessary or, in the opinion of the Majority Lenders, desirable or
appropriate in connection with the Closing Date Transactions shall have been
obtained (without the imposition of any conditions other than conditions that
have been satisfied or waived on or before the Closing Date) and shall be in
effect (it being understood that all Federal governmental consents and approvals
are material);
(f) The Administrative Agent shall have received the following,
each effective on the Closing Date (unless otherwise indicated below), in form
and substance satisfactory to the Administrative Agent and in sufficient copies
for each Lender (except for the Notes):
(1) A Notice of Borrowing as required by Section 2.02(A) in
respect of each Borrowing and Swingline Advance to be borrowed on
the Closing Date, dated the date of its delivery;
(2) Evidence of receipt by the Administrative Agent from each
Lender of all amounts payable by such Lender pursuant to Section
2.04(B);
(3) The Revolving Facility Notes and Swingline Note to the
order of the respective Lenders;
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(4) Duly executed counterparts of this Amended Agreement,
signed by each of the parties hereto (or, in the case of any Lender
as to which an executed counterpart shall not have been received,
receipt by the Administrative Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such Lender of
execution of a counterpart hereof by such Lender);
(5) Duly executed counterparts of the 1997 Global Collateral
Documents and Guaranty Agreement Amendment; and
(6) Evidence
(A) reasonably satisfactory to the Administrative Agent
that financing statements (the "EXISTING FINANCING
STATEMENTS") have previously been duly filed under the Uniform
Commercial Code of all jurisdictions as may be necessary or,
in the opinion of the Administrative Agent, desirable or
appropriate to perfect the security interests created by the
Security Agreements, the Pledge Agreements and the Mortgages,
as such agreements relate to the Borrower or any Existing
Guarantors; and
(B) that all other actions necessary or, in the opinion
of the Administrative Agent, desirable or appropriate to
perfect and protect the security interests and liens created
by, and to reflect the fact that the Administrative Agent is
the secured party under, the Pledge Agreements and the
Security Agreements have been taken;
(7) Duly executed counterparts of the Mortgage Amendments and:
(A) with respect to each Mortgage an endorsement to the
policy of title insurance issued under the Existing Credit
Agreement with respect thereto confirming the insurance of the
Lien of such Mortgage, as amended by the relevant Mortgage
Amendment, and continuing the coverage of such policy to the
Closing Date, in each case issued by the title company
insuring the Lien of such Mortgage under the Existing Credit
Agreement; and
(B) evidence satisfactory to the Administrative Agent
that arrangements shall have been made for the recording of
each Mortgage Amendment;
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(8) Certified copies of the resolutions of the Board of
Directors of the Borrower approving each Amendment Document to which
it is or is to be a party and of the resolutions of the Board of
Directors of each Guarantor approving each Amendment Document to
which it is or is to be a party;
(9) A certificate of the Secretary or an Assistant Secretary
of the Borrower and each Guarantor certifying the names and true
signatures of the officers of such Loan Party authorized to sign
each Amendment Document to which it is or is to be a party and the
other documents to be delivered by it hereunder;
(10) Copies of all authorizations, consents and approvals of,
evidence of other actions by, notices to and filings with all
governmental authorities and regulatory bodies required for the due
execution, delivery and performance by each of the Borrower and the
Guarantors of the Amendment Documents;
(11) Copies of the financial statements described in Section
4.01(F);
(12) Evidence of insurance for the business and properties of
the Borrower and its Subsidiaries, in form and substance
satisfactory to the Administrative Agent (and if requested by the
Administrative Agent, naming the Administrative Agent as insured and
loss payee) with responsible and reputable insurance companies or
associations satisfactory to the Majority Lenders in such amounts
and covering such risks as are satisfactory to the Majority Lenders;
(13) To the extent not previously delivered to the
Administrative Agent under the Existing Credit Agreement, copies of
each agreement, note, instrument or other document evidencing Debt
listed on Schedule 4.01(n) having an unpaid principal amount in
excess of $100,000, together with copies of all consents of the
obligees of the Debt listed on Schedule 4.01(n) (regardless of
principal amount) necessary or, in the judgment of the Majority
Lenders, desirable;
(14) A favorable opinion of Cooperman Levitt Winikoff Lester &
Newman, P.C., counsel for the Borrower and each Guarantor, in
substantially the form of Exhibit F and as to such other matters as
any Lender through the Administrative Agent may reasonably request,
and a favorable opinion of special FCC counsel for the Borrower, in
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substantially the form of Exhibit H, and such other opinions as any
Lender through the Administrative Agent may reasonably request;
(15) An opinion of Davis Polk & Wardwell, in substantially the
form of Exhibit I;
(16) A letter, in form and substance satisfactory to the
Administrative Agent and the Lenders, from the Borrower to the
Independent Public Accountants, advising such accountants that the
Agents and the Lenders have been authorized to exercise all rights
of the Borrower to require such accountants to disclose any and all
financial statements and any other information of any kind that they
may have with respect to the Borrower and each of its Subsidiaries,
directing such accountants to comply with any request of any Agent
or any Lender for such information and advising such accountants
that the Lenders will rely on such information in making credit
decisions with respect to the Borrower;
(17) A certificate of the chief financial officer of the
Borrower, in substantially the form of Exhibit J, determining the
Debt to Operating Cash Flow Ratio as of September 30, 1997 and
certifying the Borrower's compliance as of September 30, 1997 with
the provisions of this Agreement set forth therein;
(18) A certificate of the chief financial officer of the
Borrower to the effect that both before and immediately after the
making of the Borrowings to be made on the Closing Date, (i) no
Default shall have occurred and be continuing and (ii) the
representations and warranties of the Borrower made in this
Agreement are true;
(19) A copy of (i) a written notice delivered by the Borrower
to the trustee under each of the indentures governing the Existing
Subordinated Debt, that all of the obligations of the Borrower and
the Guarantors under this Agreement, the Guaranty Agreement and the
other Loan Documents are "DESIGNATED SENIOR DEBT" under each such
indenture and (ii) written confirmation by each such trustee of
receipt of such notice;
(20) All Existing Notes, each of which shall be canceled and
returned to the Borrower on the Closing Date; and
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(21) Such other financial and non-financial information
regarding the Borrower or any of its Subsidiaries and such other
approvals, opinions or documents as any Lender through the
Administrative Agent may reasonably request.
SECTION 3.2. Conditions Precedent to Each Borrowing. The obligation
of each Lender to make an Advance on the occasion of each Borrowing (including
on the Closing Date), of the Issuing Bank to issue a Letter of Credit and of the
Swingline Lender to make a Swingline Advance shall be subject to the further
conditions precedent that on the date of such Borrowing, Letter of Credit
issuance or Swingline Advance, the following statements shall be true (and each
of the giving of the applicable Notice of Borrowing or Request for Issuance and
the acceptance by the Borrower of the proceeds of such Borrowing or Swingline
Advance or the issuance of the Letter of Credit on behalf of the Borrower shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing or of such Letter of Credit issuance, such statements are true):
(a) the Administrative Agent shall have received a Notice of
Borrowing with respect to such Borrowing or Swingline Advance (with a copy to
the Swingline Lender, in the case of a Swingline Advance) as required by Section
2.02(A) or the Issuing Bank shall have received a Request for Issuance with
respect to such Letter of Credit issuance as required by Section 2.10.
(b) immediately after such Borrowing or Letter of Credit issuance
or Swingline Advance, the aggregate outstanding principal amount of all
Revolving Facility Advances, Swingline Advances and Letter of Credit Obligations
will not exceed the aggregate amount of all Revolving Facility Commitments and
the aggregate outstanding principal amount of all Swingline Advances will not
exceed the Swingline Commitment;
(c) the representations and warranties contained in this
Agreement, the Guaranty Agreement, each Security Agreement, each Pledge
Agreement and each Mortgage are correct on and as of the date of such Borrowing,
Swingline Advance or Letter of Credit issuance, before and after giving effect
to such Borrowing, Swingline Advance or Letter of Credit issuance, and to the
application of the proceeds therefrom, as though made on and as of such date;
(d) no event shall have occurred and be continuing, or would
result from such Borrowing or Letter of Credit issuance or Swingline Advance, or
from the application of the proceeds therefrom, which constitutes a Default or
an Event of Default;
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(e) if such Borrowing, Letter of Credit issuance or Swingline
Advance is to be secured, directly or indirectly, by any "MARGIN STOCK" (within
the meaning of Regulation G or Regulation U), the Administrative Agent shall
have received (i) a duly executed Federal Reserve Form FR U-1 for each Lender
that is a bank, for the Issuing Bank or for the Swingline Lender, as the case
may be, and (ii) a duly executed Federal Reserve Form FR G-3 for each Lender
that is not a bank, in each case signed and accepted by a duly authorized
representative of the applicable Lender, the Issuing Bank or the Swingline
Lender, as the case may be; and
(f) the Administrative Agent, or the Issuing Bank in the case of a
Letter of Credit issuance, shall have received such other approvals, opinions or
documents as any Lender through the Administrative Agent may reasonably request.
SECTION 3.3. Conditions Precedent to Borrowings in Connection with
Permitted Acquisitions. The obligation of each Lender to make an Advance on or
after the date of any Permitted Acquisition shall be subject to the conditions
precedent that:
(a) The Borrower shall have demonstrated to the satisfaction of
the Agents that the acquisition constitutes a Permitted Acquisition;
(b) The Borrower shall have demonstrated to the satisfaction of
the Agents in their sole good faith discretion that the closing of such
Permitted Acquisition shall occur on such date;
(c) Except for the Disclosed Litigation, there shall exist no
pending or threatened action, suit, investigation, litigation or proceeding in
any court or before any arbitrator or governmental instrumentality which, in the
reasonable opinion of the Agents, could have a material adverse effect on the
condition (financial or otherwise), operations, properties or prospects of the
Borrower or any of its Subsidiaries, whether before or after giving effect to
such Permitted Acquisition, or which, in the reasonable opinion of the Agents,
may adversely affect the legality, validity or enforce ability of this Agreement
or any other Loan Document, the ability of any Loan Party to perform its
obligations hereunder or thereunder, or the rights of any Lender hereunder or
thereunder or the ability of any Lender to exercise such rights;
(d) All material governmental and third party consents and
approvals necessary or, in the opinion of the Agents, desirable or appropriate
in connection with the consummation of such Permitted Acquisition shall have
been obtained (without the imposition of any material adverse conditions) and
shall be in effect (it being understood that all Federal governmental consents
and approvals are
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material), and the Administrative Agent shall have received evidence
satisfactory to it that the station licenses issued by the FCC relating to the
television broadcasting operations of any television stations to be acquired
pursuant to such Permitted Acquisition shall have been validly assigned to one
or more Subsidiaries of the Borrower, and shall be in full force and effect;
(e) The Administrative Agent shall have received the following,
each dated the closing date for such Permitted Acquisition (unless otherwise
indicated below), in form and substance satisfactory to the Administrative Agent
and in sufficient copies for each Lender (except for the certificates
representing any Pledged Stock to be pledged to the Administrative Agent, the
stock powers delivered in connection with such Pledged Stock, and any
instruments representing Pledged Instruments to be pledged to the Administrative
Agent):
(1) A Notice of Borrowing as required by Section 2.02(A) in
respect of any Borrowing to be borrowed on the closing date for such
Permitted Acquisition, dated the date of its delivery;
(2) Duly executed counterparts of an agreement pursuant to
which each Subsidiary created or acquired in connection with such
Permitted Acquisition shall become obligated as a Guarantor under
the Guaranty Agreement;
(3) Certificates and instruments representing any Pledged
Stock or Pledged Instruments required to be delivered by the
Borrower or any Subsidiary on or before the closing date for such
Permitted Acquisition, including certificates representing all
shares of capital stock of each Subsidiary created or acquired in
connection with such Permitted Acquisition, accompanied by duly
executed instruments of transfer or assignment in blank, in form and
substance satisfactory to the Administrative Agent;
(4) Duly executed counterparts of a Guarantor Security
Agreement, and, if applicable, of a Guarantor Pledge Agreement with
respect to each Subsidiary created or acquired in connection with
such Permitted Acquisition, together with:
(A) financing statements signed by each
Subsidiary created or acquired in connection with such
Permitted Acquisition, with evidence reasonably satisfactory
to the Administrative Agent that such financing statements
will be duly filed under the Uniform Commercial Code of all
jurisdictions as may be necessary or, in the opinion of the
Administrative Agent, desirable or appropriate to
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perfect the security interests created by the Security
Agreements and the Mortgages, and
(B) evidence that all other actions necessary
or, in the opinion of the Administrative Agent, desirable or
appropriate to perfect and protect the security interests and
liens created by, and to reflect the fact that the
Administrative Agent is the secured party under, the Borrower
Pledge Agreement, any applicable Guarantor Pledge Agreement
and the Security Agreements shall have been taken;
(5) Duly executed counterparts of Mortgages (each, a
"PERMITTED ACQUISITION MORTGAGE") with respect to any Real Property
to be acquired by the Borrower or any of its Subsidiaries in
connection with such Permitted Acquisition and, with respect to each
Permitted Acquisition Mortgage:
(A) a policy of title insurance dated the closing date
for such Permitted Acquisition (or irrevocable commitments to
issue such policy, with all conditions marked satisfied, dated
and recertified the closing date for such Permitted
Acquisition) insuring the perfection, enforce ability and
first priority of the Lien created under such Permitted
Acquisition Mortgage as a valid first mortgage Lien on the
Real Property described therein in form and substance and in
an amount satisfactory to the Administrative Agent (with all
premiums, expenses and fees paid or caused to be paid by the
Borrower), each of which policy or policies shall (w) be
issued by a title company reasonably satisfactory to the
Administrative Agent, (x) include such reinsurance
arrangements (with provisions for direct access) as shall be
reasonably acceptable to the Administrative Agent, (y) have
been supplemented by such endorsements, or, where such
endorsements are not available at commercially reasonable
premium costs, opinion letters of special counsel, architects
or other professionals, which counsel, architects or other
professionals shall be reasonably acceptable to the
Administrative Agent, as shall be requested by Administrative
Agent (including, without limitation, endorsements or opinion
letters on matters relating to usury, contiguity, variable
rate, revolving credit, doing business, and so-called
comprehensive coverage over covenants and restrictions) and
(z) contain only such exceptions to title as shall be
reasonably satisfactory to the Administrative Agent;
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(B) with respect to the Real Property encumbered by each
Permitted Acquisition Mortgage, an ALTA survey with respect to
such Real Property, in form and substance reasonably
satisfactory to the Administrative Agent; and
(C) evidence satisfactory to the Administrative
Agent that arrangements shall have been made for the
recording of each Permitted Acquisition Mortgage;
(6) Certified copies of the resolutions of the Board of
Directors of the Borrower and each Subsidiary party hereto and
thereto approving each agreement to which it is or is to be a party
in connection with such Permitted Acquisition;
(7) A certificate of the Secretary or an Assistant Secretary
of the Borrower and each Subsidiary certifying the names and true
signatures of the officers of the Borrower or such Subsidiary who
shall be authorized to sign each agreement to which it is or is to
be a party in connection with such Permitted Acquisition and the
other documents to be delivered by it hereunder or thereunder;
(8) Copies of all authorizations, consents and approvals of,
evidence of other actions by, notices to and filings with all
governmental authorities and regulatory bodies required for the due
execution, delivery and performance by the Borrower or any
Subsidiary of each agreement to which it is or is to be a party in
connection with such Permitted Acquisition and the other documents
to be delivered by it thereunder;
(9) Certificates of the chief financial officer of the
Borrower and of each Subsidiary created or acquired in connection
with such Permitted Acquisition in substantially the form of Exhibit
L or M, as the case may be;
(10) Evidence of insurance for the business and properties of
each Subsidiary created or acquired in connection with such
Permitted Acquisition, in form and substance satisfactory to the
Administrative Agent (and if requested by the Administrative Agent,
naming the Administrative Agent as additional insured and loss
payee) with responsible and reputable insurance companies or
associations satisfactory to the Co-Arrangers in such amounts and
covering such risks as are satisfactory to the Agents;
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(11) A favorable opinion of Cooperman Levitt Winikoff Lester &
Newman, P.C., counsel for the Borrower and each Guarantor, in
substantially the form of Exhibit F (but expressing opinions with
respect to such Permitted Acquisition) and as to such other matters
as any Lender through the Administrative Agent may reasonably
request.
(12) Favorable opinions of local counsel for the Borrower with
respect to each jurisdiction where any Real Property to be acquired
in connection with such Permitted Acquisition shall be located, in
each case in substantially the form of Exhibit G (but expressing
opinions with respect to such Permitted Acquisition), and a
favorable opinion of special FCC counsel for the Borrower, in
substantially the form of Exhibit H (but expressing opinions with
respect to such Permitted Acquisition), and such other opinions as
any Lender through the Administrative Agent may reasonably request;
(13) An environmental report, in each case in form and
substance satisfactory to the Agents, with respect to properties to
be acquired, leased or operated by the Borrower or any of its
Subsidiaries in connection with such Permitted Acquisition;
(14) The written consent of each party (other than the
Borrower or any of its Subsidiaries) to any agreement to which it is
or is to be a party in connection with such Permitted Acquisition to
the assignment by the Borrower or any Guarantor of its rights and
claims under such agreement to the Administrative Agent under the
Borrower Security Agreement or a Guarantor Security Agreement;
(15) A certificate of the chief financial officer of the
Borrower, in substantially the form of Exhibit J, certifying the
Borrower's compliance as of the most recent date for compliance
prior to the date of such certificate, after giving effect on a Pro
Forma Basis to such Permitted Acquisition, with the provisions of
this Agreement set forth therein; and
(16) Such other financial and non-financial information
regarding the Borrower or any of its Subsidiaries and such other
approvals, opinions or documents as any Lender through the
Administrative Agent may reasonably request.
ARTICLE 4
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REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) Due Incorporation, Etc. Each of the Borrower and its
Subsidiaries that is a corporation is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction indicated next
to such corporation's name on Schedule 4.01(a) and has all requisite corporate
powers and all FCC and all other material governmental licenses, authorizations,
consents and approvals required to own or lease and operate its properties and
to carry on its business as now conducted and as proposed to be conducted and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents to which it is or will be a party. Each of the Borrower and each of
its Subsidiaries that is a corporation is duly qualified or licensed to do
business as a foreign corporation in good standing in all jurisdictions in which
it owns or leases assets and property or in which the conduct of its business
requires it to so qualify or be licensed, except for such jurisdictions in which
the failure to so qualify or be licensed would not have a material adverse
effect on the business, condition (financial or otherwise), operations,
properties or prospects of the Borrower or such Subsidiary, as the case may be.
Each of the Borrower's Subsidiaries that is a partnership is a partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction under which it is organized and has all requisite power and
authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted and to execute and
deliver, and to perform all of its obligations under, the Loan Documents to
which it is or will be a party. Each of the Borrower's Subsidiaries that is a
partnership is duly qualified or licensed to do business and has complied with
all fictitious name statutes and other similar laws in all jurisdictions in
which it owns or leases assets and property or in which the conduct of its
business requires it to so qualify or be licensed or comply, except for such
jurisdictions in which the failure to so qualify or be licensed or comply would
not have a material adverse effect on the business, condition (financial or
otherwise), operations, properties or prospects of such Subsidiary.
(b) Due Authorization and Execution, Etc. The execution, delivery
and performance by the Borrower and each of its Subsidiaries of each Loan
Document to which it is or will be a party and the transactions contemplated by
the Loan Documents are within the Borrower's and such Subsidiary's corporate
powers (or its partnership powers, in the case of each Subsidiary that is a
partnership), have been duly authorized by all necessary corporate action (or
all necessary action of the partners, in the case of each Subsidiary that is a
partnership) and do not and
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will not (i) require any consent or approval of the stockholders or partners of
the Borrower or such Subsidiary except such consents and approvals as shall have
been duly obtained and shall be in full force and effect, (ii) contravene the
Borrower's or such Subsidiary's certificate of incorporation or by-laws, in the
case of each Subsidiary that is a corporation, or the partnership agreement
governing such Subsidiary, in the case of each Subsidiary that is a partnership,
(iii) violate any law, rule, regulation (including, without limitation,
Regulations G, U and X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination or award or any
contractual restriction binding on or affecting the Borrower or such Subsidiary,
or any of their respective properties, or (iv) result in or require the creation
or imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature (other than pursuant to the Loan
Documents) upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower or any of its Subsidiaries. Neither the Borrower nor
any of its Subsidiaries is in default under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or
restriction.
(c) Government Consents. No authorization, consent, approval or
other action by, and no notice to or filing with, any governmental,
administrative or judicial authority or regulatory body is currently, or is
reasonably expected to be, required for the due execution, delivery or
performance by the Borrower or any of its Subsidiaries of any Loan Document to
which it is or will be a party and the operation of the television broadcasting
business of the Borrower and its Subsidiaries other than the filing of the
Existing Financing Statements and the recording of the Mortgages, all of which
have been made and are in full force and effect, and except for the filing of
certain of the Loan Documents with the FCC within 30 days of their execution
pursuant to 47 C.F.R. Section 73.3613.
(d) Legal, Valid and Binding Nature. This Agreement is, and each
other Loan Document and each Related Document to which the Borrower or any of
its Subsidiaries is or will be a party will, when delivered, be a legal, valid
and binding obligation of the Borrower and such Subsidiaries as are or will be
parties thereto, enforceable against the Borrower and such Subsidiaries in
accordance with its respective terms, except (other than in the case of Article
X of the indentures governing the Existing Subordinated Debt and any similar
provisions of any indentures governing any other Permitted Subordinated Debt) as
such enforcement may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors'
rights generally and general principles of equity.
(e) Capitalization and Subsidiaries. On the Closing Date, the
authorized capital stock of the Borrower will consist of: 20,000,000 shares of
Class A Common Stock, par value $.001 per share; 20,000,000 shares of Class B
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Common Stock, par value $.001 per share; and 20,000,000 shares of Class C Common
Stock, par value $.001 per share. Set forth on Schedule 4.01(a) is a complete
and accurate list of all of the Borrower's Subsidiaries as of the Closing Date,
showing as of such date (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of capital stock authorized,
the number of shares of each class of capital stock outstanding on the date
hereof, the direct owner of the outstanding shares of each such class owned and
the jurisdictions in which such Subsidiary is qualified to do business as a
foreign corporation. All of the general and limited partnership interests of
each Subsidiary that is a partnership are owned, legally and beneficially, by
the Borrower or a wholly owned Subsidiary of the Borrower, in each case free and
clear of all liens, security interests and other charges or encumbrances other
than the liens and security interests under the Security Agreements. Except as
set forth in Schedule 4.01(e), there are no outstanding options, warrants,
rights of conversion or purchase, or similar rights to acquire capital stock or
partnership interests of the Borrower or any of its Subsidiaries or other
agreements of any character whatsoever relating to any shares of capital stock
or partnership interests of the Borrower or any such Subsidiaries; all of the
issued and outstanding capital stock of the Borrower and each of its
Subsidiaries that is a corporation has been duly authorized, validly issued and
is fully paid and non-assessable; all of the partnership interests of each
Subsidiary that is a partnership have been validly issued pursuant to the terms
of the applicable partnership agreement; all of the issued and outstanding
capital stock of each Subsidiary of the Borrower that is a corporation is
directly owned, legally and beneficially, by the Borrower, in each case free and
clear of all liens, security interests and other charges or encumbrances other
than the Liens created by the Pledge Agreements and Security Agreements.
(f) Financial Statements; No Material Adverse Change. The
consolidated balance sheet of the Borrower and its Subsidiaries as at December
31, 1996 and the related consolidated statements of income and shareholders'
equity and statement of changes in cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, fairly present, respectively, the
consolidated financial condition of the Borrower and its Subsidiaries as at such
date and the consolidated results of operations of the Borrower and its
Subsidiaries for the period ended on such date, all in accordance with generally
accepted accounting principles. Copies of each of the financial statements
described in this Section 4.01(F) have been furnished to each Lender. Since
December 31, 1996 there has been no material adverse change in the business,
condition (financial or otherwise), operations, properties or prospects of the
Borrower or of any of its Subsidiaries or of the Borrower and its Subsidiaries
taken as a whole.
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(g) Solvency. Each of the Borrower and the Borrower and its
Subsidiaries taken as a whole and each Guarantor individually and taken as a
whole with its Subsidiaries is and, after receipt and application of the
Advances in accordance with the terms of this Agreement, will be Solvent.
(h) Absence of Litigation; Litigation Description.
(i) No actions, suits, investigations, litigation or
proceedings are pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of its
Subsidiaries or the properties of the Borrower or any such
Subsidiary before any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, (A) which may materially adversely affect the business,
condition (financial or otherwise), operations, properties or
prospects of the Borrower or any such Subsidiary, except as
disclosed in Schedule 4.01(h) (the "DISCLOSED LITIGATION"), or (B)
which purports to affect the legality, validity or enforce ability
of this Agreement or any other Loan Document, the ability of any
Loan Party to perform its obligations hereunder or thereunder, or
the rights of any Lender hereunder or thereunder or the ability of
any Lender to exercise such rights.
(ii) Except for the Disclosed Litigation, no action, suit,
investigation, litigation or proceeding is pending or, to the
knowledge of the Borrower, threatened in any court or before any
arbitrator or governmental entity specified above in connection with
the Closing Date Transactions or in connection with the use of the
proceeds hereof or thereof.
(iii) On the Closing Date and at all times thereafter, there
shall have been no change since the date of this Agreement in the
status of any of the actions, suits, investigations, litigation or
proceedings referred to in Schedule 4.01(h) that is materially
adverse to the Borrower or any of its Subsidiaries, the Closing Date
Transactions or the Loan Documents.
(i) Ownership of Properties; Absence of Liens and Encumbrances.
The Borrower and its Subsidiaries have good and marketable title to and are in
lawful possession of, or have valid leasehold interests in, or have the right to
use pursuant to valid and enforceable agreements or arrangements, all of their
respective properties and other assets (real or personal, tangible, intangible
or mixed), except where the failure to have or possess the same with respect to
such properties or other assets would not, in the aggregate, have a material
adverse effect on the business, condition (financial or otherwise), operations,
properties or
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prospects of the Borrower or any of its Subsidiaries. Except as disclosed on
Schedule 4.01(i) of the Existing Credit Agreement, there are no material Liens
on any property or asset of the Borrower or any of its Subsidiaries except for
the security interests created under the Pledge Agreements, the Security
Agreements and the Mortgages, it being understood that, for purposes only of
this Section 4.01(I), any Lien having a value of $250,000 or more on property or
assets is material.
(j) No Burdensome Agreements. Neither the Borrower nor any of its
Subsidiaries is a party to any indenture, loan or credit agreement or any lease
or other agreement or instrument or subject to any charter or corporate
restriction or partnership agreement or other partnership restriction that would
have a material adverse effect (i) on the business, condition (financial or
otherwise), operations, properties or prospects of the Borrower or any of its
Subsidiaries, or (ii) on the ability of the Borrower or any of its Subsidiaries
to carry out its obligations under any of the Loan Documents to which it is or
will be a party; provided that it is agreed that the indentures governing the
Existing Subordinated Debt and any other indentures in substantially the same
form as such indentures, do not have any such effect.
(k) Payment of Taxes. The Borrower and each of its Subsidiaries
has filed or caused to be filed all Federal, state and franchise tax returns and
information and other similar filings, and all material other tax returns and
information and other similar filings, required to be filed, and paid all
amounts of taxes, including interest and penalties, which have become due
pursuant to such returns or pursuant to any assessments received by the Borrower
or any of its Subsidiaries, except to the extent of any taxes being contested by
or on behalf of the Borrower or such Subsidiary in good faith and by proper
proceedings and for which adequate provision for payment has been made and
adequate reserves are being maintained in accordance with generally accepted
accounting principles consistently applied by the Borrower or such Subsidiary,
as the case may be, and so long as the proceedings referred to above could not
subject any Agent or any Lender to any civil or criminal penalty or liability or
involve any risk of loss, sale or forfeiture of any material item of Collateral.
The Borrower has no knowledge of any actual or proposed additional tax
assessments against it or any of its Subsidiaries which, singly or in the
aggregate, could have a material adverse effect on the Borrower or any of its
Subsidiaries.
(l) Accuracy of Information Given to Lenders. No information,
exhibit, report, document, certificate or written statement, including without
limitation this Agreement, furnished in writing to any Lender by or on behalf of
the Borrower in connection herewith contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
contained therein, in light
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of the circumstances under which such information, exhibit, report or other
written information was or is to be used, not misleading, nor do such
information, exhibits, reports, documents, certificates and statements, taken as
a whole, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no fact known to the Borrower or any officer of the
Borrower which the Borrower has not disclosed to the Lenders in writing which in
the reasonable judgment of the Borrower and its officers would materially
adversely affect the business, condition (financial or otherwise), operations,
properties or prospects of the Borrower or any of its Subsidiaries or the
ability of the Borrower or any of its Subsidiaries to perform its respective
obligations under any Loan Document or any document contemplated hereby or
thereby. The financial projections and forecasts of the Borrower delivered by
the Borrower to any of the Agents, the Co-Arrangers and the Lenders were
prepared on the basis of the assumptions stated therein and represented, at the
time of delivery, the Borrower's best estimate of its future financial
performance and such assumptions were fair in the light of business conditions
existing at the time of such delivery of such projections and forecasts; and any
such financial projections and forecasts, if prepared as of the date hereof,
would contain estimates of the Borrower's future financial performance which
would not materially adversely differ from the respective estimates contained in
the financial projections and forecasts delivered by the Borrower to any of the
Agents, the Co-Arrangers and the Lenders.
(m) ERISA. Except as described in Schedule 4.01(m), no Plan or
Multiemployer Plan exists as of the date of this Agreement. On and after the
Closing Date with respect to each Plan described in Schedule 4.01(m), and on and
after the first date on which any other Plan shall exist with respect to such
other Plan: (i) no Termination Event has occurred or is reasonably expected to
occur with respect to any Plan and (ii) no event requiring notice to the PBGC
under Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected to
occur with respect to any Plan. On and after the Closing Date with respect to
each Multiemployer Plan described in Schedule 4.01(m), and on and after the
first date on which any other Multiemployer Plan shall exist with respect to
such other Multiemployer Plan: (i) neither the Borrower nor any ERISA Affiliate
of the Borrower has incurred, or is reasonably expected to incur, any Withdrawal
Liability to any Multiemployer Plan and (ii) neither the Borrower nor any ERISA
Affiliate of the Borrower has received any notification that any Multiemployer
Plan is in reorganization or has been terminated, within the meaning of Title IV
of ERISA, and no Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated within the meaning of Title IV of ERISA.
(n) List of Debt. Set forth on Schedule 4.01(n) is a complete and
accurate list of all Debt of the Borrower and its Subsidiaries that will be
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outstanding as of the Closing Date following the Borrowings hereunder and the
application of the proceeds thereof as contemplated hereby, other than (i) Debt
arising under the Loan Documents and the Subordinated Debt Documents and (ii)
Debt having a principal amount of less than $500,000.
(o) Not a Purpose Credit. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying "MARGIN
STOCK" (within the meaning of Regulation G or Regulation U), and no proceeds of
any Advance, other than proceeds of Advances used to purchase shares of common
stock of the Borrower to the extent permitted by Section 5.02(G) hereof, will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock; none of the Pledged Stock
constitutes margin stock.
(p) Prohibited Securities Transactions. No proceeds of any Advance
will be used by the Borrower or any of its Subsidiaries to acquire any security
in any transaction that is subject to Section 12 of the Securities Exchange Act
of 1934, as amended, other than proceeds of Advances used to purchase shares of
common stock of the Borrower to the extent permitted by clause (iv) of Section
5.02(G) hereof.
(q) Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "INVESTMENT COMPANY" or a company "CONTROLLED" by an
"INVESTMENT COMPANY", within the meaning of the Investment Company Act of 1940,
as amended.
(r) Casualties. Neither the business nor the properties of the
Borrower or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty,
materially adversely affecting the business, condition (financial or otherwise),
operations, properties or prospects of the Borrower or any such Subsidiary.
(s) Executive Compensation Agreements. Set forth in Schedule
4.01(s) is a complete and accurate list of all compensation arrangements in
effect as of the date of this Amended Agreement between the Borrower or any of
its Subsidiaries and the five most highly compensated executive officers of the
Borrower and its Subsidiaries.
(t) Collateral, Etc.
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(i) Schedule 4.01(t) contains a complete and accurate
description and list as of the Closing Date of the location, by
state, county and street address and operating division, of all of
the Real Property of the Borrower and its Subsidiaries, together
with the lessors thereof, the status of any consent from the lessor
with respect to any such Leasehold obtained or proposed to be
obtained in connection with any Loan Document.
(ii) The Borrower or a Guarantor is the record and beneficial
owner of all of the presently existing Collateral covered by (A) the
Security Agreements, (B) the Pledge Agreements and (C) the
Mortgages, in each case free and clear of all mortgages, deeds of
trust, pledges, liens, security interests, options and other charges
or encumbrances, except for those created or permitted by this
Agreement and the Collateral Documents.
(iii) The Borrower or a Guarantor has good, marketable and
insurable fee simple title to all Real Property and a valid and
indefeasible leasehold interest in all Leaseholds, free and clear of
all liens, charges and encumbrances of every kind and character,
except for those created or permitted by this Agreement and the
Collateral Documents.
(iv) Each Ground Lease (as defined in the Mortgages) is a
valid and subsisting lease in full force and effect in accordance
with the terms thereof; the Borrower or a Guarantor, as the case may
be, is in possession of all Real Property and the Leaseholds
constituting part of the Collateral and no material default by the
Borrower or such Guarantor, as the case may be, exists and neither
the Borrower nor any Guarantor has knowledge of any other default
under such Ground Lease or other agreement relating to any Real
Property or Leaseholds constituting part of the Collateral; and no
lien, charge or encumbrance of any kind or character exists on or
with respect to the Borrower's or the Guarantor's, as the case may
be, interest in any such Real Property or Leasehold, other than
Permitted Liens.
(u) Consents. Set forth in Schedule 4.01(u) is a complete and
accurate list of all consents required in connection with the Closing Date
Transactions and the Loan Documents (including, but not limited to, consents
relating to all network affiliation contracts, power site leases and FCC
matters), all of which will have been duly obtained and shall be in full force
and effect on the Closing Date and at all times thereafter, except where the
failure to obtain such consents will not have a material adverse effect, alone
or in the aggregate, on the business, condition (financial or otherwise),
operations, properties or prospects of the Borrower or any of its Subsidiaries.
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(v) Security Agreements. As of the Closing Date and at all times
thereafter, each Security Agreement will create valid and perfected first
priority security interests in and liens on the Collateral covered thereby
(except as provided therein), such security interests and liens being in each
case enforceable against all third parties and securing the payment of all
obligations purported to be secured thereby, and all filings and other actions
necessary or advisable to perfect and protect such security interests shall have
been duly made or taken.
(w) Mortgages. From and after the recording of the Mortgage
Amendments, each Mortgage will create a valid and enforceable first priority
mortgage lien on and security interest in the Real Property covered thereby,
enforceable against the Borrower or the Guarantor granting such Mortgage, as the
case may be, and all third parties, and securing the payment of all obligations
purported to be secured thereby, and all filings and other actions necessary or
desirable to perfect and protect such mortgage lien and security interest will
have been duly taken.
(x) Status Under Communications Act. Each material license, permit
and other authority issued, granted, approved or otherwise authorized by the FCC
for the benefit of the Borrower or any of its Subsidiaries is in good standing,
unimpaired by any act or omission of the Borrower or any of its Subsidiaries or
any of their respective officers, directors, employees or agents. Neither the
Borrower nor any of its Subsidiaries is the subject of any outstanding citation,
order or, to the knowledge of the Borrower, investigation by the FCC which would
have a material adverse effect on the business, condition (financial or
otherwise), operations, properties or prospects of the Borrower or any of its
Subsidiaries, and no such citation, order or investigation to the knowledge of
the Borrower or any of its Subsidiaries is contemplated by the FCC. The Borrower
and each of its Subsidiaries has filed all material reports and applications
required to be filed by the FCC or the Communications Act and has paid all fees
required to be paid by the FCC or the Communications Act.
(y) Compliance with Environmental Requirements; No Hazardous
Materials. Except as described on Schedule 4.01(y) and except to the extent the
matters referred to below would result in liabilities for the Borrower and its
Subsidiaries of less than $100,000 in the aggregate;
(i) Other than in compliance with all applicable Environmental
Laws, no Hazardous Materials are located on any properties now or
previously owned, leased or operated by the Borrower or any of its
Subsidiaries or have been released into the environment, or
deposited, discharged, placed or disposed of at, on or under any of
such properties. No portion of any such property is being used, or
has been used at any
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previous time, for the disposal, storage, treatment, processing or
other handling of Hazardous Materials (other than processing or
handling incidental to the generation of Hazardous Materials in
compliance with all applicable Environmental Laws).
(ii) No asbestos or asbestos-containing materials in airborne
or friable form are present on any of the properties now or
previously owned, leased or operated by the Borrower or any of its
Subsidiaries.
(iii) No polychlorinated biphenyls are located on or in any
properties now or previously owned, leased or operated by the
Borrower or any of its Subsidiaries, in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils
or any other device or form.
(iv) No underground storage tanks are located on any
properties now or previously owned, leased or operated by the
Borrower or any of its Subsidiaries, or were located on any such
property and subsequently removed or filled.
(v) No notice, notification, demand, request for information,
complaint, citation, summons, investigation, administrative order,
consent order and agreement, litigation or settlement with respect
to Hazardous Materials has been received by the Borrower or any of
its Subsidiaries or, to the Borrower's knowledge, is proposed,
threatened or anticipated with respect to or in connection with the
operation of any properties now or previously owned, leased or
operated by the Borrower or any of its Subsidiaries. All such
properties and their existing and prior uses comply and at all times
have complied with any applicable governmental requirements relating
to environmental matters or Hazardous Materials. There is no
condition on any of such properties which is in violation of any
applicable governmental requirements relating to Hazardous
Materials, and neither the Borrower nor any of its Subsidiaries has
received any communication from or on behalf of any governmental
authority that any such condition exists. None of such properties
nor any property to which the Borrower has, directly or indirectly,
transported or arranged for the transportation of any material is
listed or, to the Borrower's knowledge, proposed for listing on the
National Priorities List promulgated pursuant to CERCLA, on CERCLIS
(as defined in CERCLA) or on any similar federal, state or foreign
list of sites requiring investigation or cleanup, nor, to the
knowledge of the Borrower, is any such property anticipated or
threatened to be placed on any such list.
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(vi) There has been no environmental investigation, study,
audit, test, review or other analysis conducted of which the
Borrower has knowledge in relation to the current or prior business
of the Borrower or any property or facility now or previously owned,
leased or operated by the Borrower or any of its Subsidiaries which
has not been delivered to the Lenders or will not have been
delivered to the Lenders at least five days prior to the Closing
Date.
For purposes of this Section 4.01(Y), (x) the terms "BORROWER" and
"SUBSIDIARY" shall include any business or business entity (including a
corporation) which is, in whole or in part, a predecessor of the Borrower or any
Subsidiary if the Borrower or such Subsidiary, as a successor to such business
or business entity, is or could be subject to successor liability under
applicable law and (y) any representation made with respect to properties not
presently owned, leased or operated by the Borrower or any of its Subsidiaries
shall be limited to conditions, activities or requirements at or in connection
with such properties for which the Borrower or any of its Subsidiaries is or
could be subject to liability.
(z) Compliance with Laws. The Borrower and its Subsidiaries are in
compliance in all material respects with all applicable laws, rules and
regulations, other than such laws, rules or regulations (i) the validity or
applicability of which the Borrower or such Subsidiary is contesting in good
faith or (ii) the failure to comply with which would not have a material adverse
effect on the business, condition (financial or otherwise), operations,
properties or prospects of the Borrower or any of its Subsidiaries
(aa) Obligations are Senior Debt and Designated Senior Debt. All
obligations of the Borrower and the Guarantors under this Agreement, the Notes,
the Letters of Credit, the Guaranty Agreement, the other Loan Documents and any
Interest Rate Protection Agreements are "SENIOR DEBT" and "DESIGNATED SENIOR
DEBT" within the meaning of, and are entitled to the benefits of, Article X of
the indentures governing the Existing Subordinated Debt and of any indentures
governing any other Permitted Subordinated Debt.
ARTICLE 5
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Obligation
hereunder or under any Loan Document shall remain unpaid, or any Letter of
Credit shall be outstanding, or any Lender shall have any Revolving Facility
Commitment
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hereunder, the Borrower will, unless the Majority Lenders otherwise consent in
writing:
(a) Compliance with Laws, Etc. Perform and promptly comply, and
cause each of its Subsidiaries to perform and promptly comply, in all material
respects, and cause all property of the Borrower and each such Subsidiary to be
maintained, used and operated in all material respects in accordance with all
(i) present and future laws, ordinances, rules, regulations, orders and
requirements (including, without limitation, the Communications Act,
Environmental Laws and ERISA) of every duly constituted governmental or
quasi-governmental authority or agency applicable to the Borrower, any of its
Subsidiaries or any of their properties, (ii) similarly applicable orders, rules
and regulations of any regulatory, licensing, accrediting, insurance
underwriting or rating organization or other body exercising similar functions,
and (iii) similarly applicable duties or obligations of any kind imposed under
any certificate of occupancy, Leasehold or otherwise by law, covenant,
conditions, agreement or easement, public or private, in each case except where
the failure to perform and promptly comply would not result in a material
adverse affect on the business, condition (financial or otherwise), operations,
properties or prospects of the Borrower, of any of its Subsidiaries or of the
Borrower and its Subsidiaries taken as a whole.
(b) Conduct of Business; Preservation of Corporate Existence.
Continue, and cause each of its Subsidiaries to continue, to engage only in
business of the same general type as now conducted by the Borrower and its
Subsidiaries, and preserve and maintain, and cause each of its Subsidiaries that
is a corporation to preserve and maintain, its corporate existence and corporate
rights (charter and statutory), and those corporate franchises material to the
business or operations of the Borrower or such Subsidiary and to cause each of
its Subsidiaries that is a partnership to preserve and maintain its existence as
a partnership and its rights (both under law and pursuant to its partnership
agreement) as such, and those franchises material to the business or operations
of such partnership.
(c) Visitation Rights. At any reasonable time and from time to
time, upon reasonable notice permit any Agent or any of the Lenders or any
agents or representatives thereof to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, the
Borrower and any of its Subsidiaries, and to discuss the business and financial
affairs, finances and accounts of the Borrower and any of its Subsidiaries with
any of their officers or directors and with its independent certified public
accountants and advise such accountants that the Agents and the Lenders have
been authorized to exercise all rights of the Borrower to require such
accountants to disclose any and all financial statements and other information
of any kind that they may have with respect to
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the Borrower and any of its Subsidiaries and direct such accountants to comply
with any requirements of any Agent or any Lender for such information.
(d) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Borrower and each of its Subsidiaries in accordance with generally accepted
accounting principles.
(e) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts, with such deductibles and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower or
such Subsidiary operates. If the Borrower or any Subsidiary receives any Major
Casualty Proceeds, notwithstanding any requirements contained in the Collateral
Documents requiring that Major Casualty Proceeds must be paid directly to the
Administrative Agent, the Borrower shall deliver, and shall cause each of its
Subsidiaries to deliver, such Major Casualty Proceeds to the Administrative
Agent, to be held, applied and distributed in accordance with Section 5 of the
Security Agreement. Until so delivered, any such Major Casualty Proceeds shall
be held in trust for the benefit of the Administrative Agent, the Documentation
Agent, the Lenders and the Issuing Bank, and shall not be commingled with any
other funds or property of the Borrower or any of its Subsidiaries.
(f) Payment of Taxes, Etc. (i) File, and cause each of its
Subsidiaries to file, all tax returns and information and other similar filings
(Federal, state, local and foreign) required to be filed; (ii) pay and
discharge, and cause each of its Subsidiaries to pay and discharge, before the
same shall become delinquent, (A) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property and (B) all lawful claims
that, if unpaid, might by law become a Lien upon its property; provided,
however, that neither the Borrower nor any such Subsidiary shall be required to
pay or discharge any such tax, assessment, charge or claim that is being
contested in good faith and by proper proceedings and in respect of which
adequate provision for payment has been made and adequate reserves are being
maintained in accordance with generally accepted accounting principles and as
long as the proceedings referred to above could not subject any Agent or any
Lender to any civil or criminal penalty or liability or involve any risk of the
sale, loss or forfeiture of any item of Collateral and, where applicable, in
accordance with the Mortgages; and provided further that in the case of any item
of the foregoing description involving in excess of $250,000, the
appropriateness of the proceedings shall be supported by an opinion of the
independent counsel responsible for such proceedings and the adequacy of such
reserves, if any, shall
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be supported by an opinion of the independent accountants of the contesting
Person (which opinions shall be delivered to the Lenders); and (iii) maintain,
and cause each of its Subsidiaries to maintain, appropriate reserves in respect
of all taxes, assessments, governmental charges and levies imposed on it or upon
its property.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, in good working order
and condition, ordinary wear and tear excepted, all of its properties with
respect to which failure to so maintain and preserve would have a material
adverse effect on the business, condition (financial or otherwise), operations,
properties or prospects of the Borrower or any Subsidiary or on the value or
utility to the Borrower or such Subsidiary of any property material to its
business.
(h) Maintenance of FCC Licenses, Affiliation Agreements, Etc.
Maintain and preserve, and cause each of its Subsidiaries to maintain and
preserve, each license, franchise, permit and other authorization necessary or
desirable under the Communications Act or otherwise with respect to which the
failure to so maintain and preserve would have a material adverse effect on the
business, condition (financial or otherwise), operations, properties or
prospects of the Borrower or any such Subsidiary or on the value or utility to
the Borrower or such Subsidiary of any such authorization, including, but not
limited to, performing and observing (except as otherwise provided by law) each
term and provision of each network affiliation agreement to which it is a party
and maintaining each such agreement in full force and effect, it being
understood that failure to maintain any such network affiliation agreement in
full force and effect shall be deemed to result in such a material adverse
effect, such material adverse effect being deemed to occur at such time as
programming ceases to be provided pursuant to such network affiliation
agreement; provided that such material adverse effect shall not be deemed to
occur if, prior to the time that such programming ceases, the Borrower or such
Subsidiary shall have entered into a network affiliation agreement with another
network which agreement and network are reasonably satisfactory to the Majority
Lenders.
(i) Arm's-Length Transactions. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the Loan
Documents with any of its Affiliates (including Adam Young Inc.) on terms that
are fair and reasonable and no less favorable to the Borrower or such Subsidiary
than it would obtain in a comparable arm's-length transaction with a Person not
an Affiliate of the Borrower or any such Subsidiary, as the case may be, and, in
each case in which Adam Young Inc. or another Affiliate of the Borrower acts as
sales representative, commission agent or the like on behalf of the Borrower or
any of its Subsidiaries, cause the arrangements with respect thereto to provide
that such
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Affiliate (i) shall not receive, directly or indirectly, compensation (including
percentage of the sales price to be paid, time and terms of payment) or other
benefits greater than that which is then typical in the industry for similar
transactions, and (ii) shall deal at all times with the Borrower and its
Subsidiaries at arm's length; provided that, so long as the Borrower owns
(directly or indirectly) 100% of the capital stock or partnership interests of
each Guarantor, transactions between the Borrower and any Guarantor or between
any two Guarantors need not be on terms no less favorable than any such party
would obtain in a comparable arm's-length transaction.
(j) Solvency. Continue to be Solvent and cause each of its
Subsidiaries to continue to be Solvent.
(k) Plan Contribution. Make, and cause each Subsidiary to make,
when due, all contributions required by law to be made to all Plans.
(l) Pro Forma Debt Service Coverage. Cause, at all times, the
ratio of (i) the excess of Operating Cash Flow over Capital Expenditures, in
each case for the four consecutive Fiscal Quarters then most recently ended, to
(ii) Pro Forma Debt Service at such time to be not less than 1.10 to 1.
(m) Interest Coverage. Cause, (i) as of the Closing Date, the
ratio of Operating Cash Flow to Total Interest Expense, in each case for the
four consecutive Fiscal Quarters then most recently ended, to be not less than
1.60 and (ii) as of the last day of each Fiscal Quarter during any year set
forth below, the ratio of Operating Cash Flow to Total Interest Expense, in each
case for the four consecutive Fiscal Quarters ending on such day, to be not less
than the required ratio set forth below opposite such year:
<TABLE>
<CAPTION>
FISCAL QUARTER REQUIRED
-------------------------- ----------------
<S> <C> <C>
1997 1.60
1998 1.80
1999 1.95
Thereafter 2.25
</TABLE>
provided that if as of the last day of any Fiscal Quarter the Senior
Debt to Operating Cash Flow Ratio is less than 2.0, the required ratio for such
day is 1.75.
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(n) Senior Debt to Operating Cash Flow Ratio. Cause, (i) as of the
Closing Date, the Senior Debt to Operating Cash Flow Ratio to be not greater
than 3.00 and (ii) as of the last day of each Fiscal Quarter during any year set
forth below, the Senior Debt to Operating Cash Flow Ratio to be not greater than
the required ratio set forth below opposite the last day of such Fiscal Quarter:
<TABLE>
<CAPTION>
FISCAL QUARTER REQUIRED
-------------------------- ----------------
<S> <C> <C>
1997 3.00
1998 2.75
1999 2.75
Thereafter 2.25
</TABLE>
(o) Debt to Operating Cash Flow Ratio. Cause the Debt to Operating
Cash Flow Ratio (i) as of the Closing Date to be equal to or less than 6.25 and
(ii) as of the last day of each Fiscal Quarter during any year set forth below,
to be equal to or less than the required ratio set forth below opposite the last
day of such Fiscal Quarter:
<TABLE>
<CAPTION>
FISCAL QUARTER REQUIRED
-------------------------- ----------------
<S> <C> <C>
1997 6.25
1998 6.00
1999 5.50
Thereafter 5.00
</TABLE>
provided that if as of the last day of any Fiscal Quarter the Senior
Debt to Operating Cash Flow Ratio is less than 2.0, the required ratio for such
day is 6.25.
(p) Accuracy of Information Given to Lenders. Use its best efforts
to ensure that all written information, exhibits or reports furnished by the
Borrower or any of its Subsidiaries to any Agent or any Lender will contain no
untrue
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statement of a material fact and will not omit to state any material fact
or any fact necessary to make the statements contained therein not misleading.
(q) Management. Retain as its chief executive officer its present
Chairman. Notwithstanding anything to the contrary in this Agreement, all policy
and operational decisions relating to the operations of any television
broadcasting stations now or hereafter owned or operated by the Borrower or any
of its Subsidiaries will remain within the exclusive control of the Borrower or
its Subsidiaries.
(r) Further Assurances. Promptly, upon request by any Agent or any
Lender through the Administrative Agent, correct, and cause each party to a Loan
Document to promptly correct, any defect or error that may be discovered in any
Loan Document or in the execution, acknowledgment or recordation thereof.
Promptly, upon request by any Agent or any Lender through the Administrative
Agent, the Borrower also will, and will cause each Guarantor to, do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, pledge
agreements, security agreements, mortgages, deeds of trust, trust deeds,
assignments, estoppel certificates, financing statements and continuations
thereof, notices of assignment, transfers, certificates, assurances and other
instruments (including but not limited to subleases or other grants of rights
with respect to the Leasehold interests) as any Agent or any Lender through the
Administrative Agent may require from time to time in order (i) to carry out
more effectively the purposes of this Agreement or any other Loan Document, (ii)
to subject to the Liens created by any of the Loan Documents any of the
Borrower's and its Subsidiaries' properties, rights or interests covered or now
or hereafter intended to be covered by any of the Loan Documents, (iii) to
perfect and maintain the validity, effectiveness and priority of any of the
Collateral Documents and the Liens intended to be created thereby, and (iv) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm to
the Agents and the Lenders the rights granted or now or hereafter intended to be
granted to the Agents and/or the Lenders under any Loan Document or under any
other instrument executed in connection with any Loan Document to which the
Borrower or any of its Subsidiaries is or may become a party.
(s) Management of Partnerships. Cause the KLFY Partnership, the
WKRN Partnership and the WATE Partnership to be managed and operated, and cause
their respective affairs to be conducted, in accordance with the terms and
conditions of the KLFY Partnership Agreement, the WKRN Partnership Agreement and
the WATE Partnership Agreement, respectively.
(t) Hazardous Materials; Remediation. Promptly give notice to the
Lenders in writing of any complaint, order, citation, notice or other written
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communication from any Person with respect to, or if the Borrower becomes aware
of, (x) the existence or alleged existence of a violation of any applicable
Environmental Law or the incurrence of any material liability, obligation, loss,
damage, cost, expense, fine, penalty or sanction or the requirement to commence
any material remedial action resulting from or in connection with any air
emission, water discharge, noise emission, Hazardous Material or any other
environmental, health or safety matter at, upon, under or within any of the
properties now or previously owned, leased or operated by the Borrower or any of
its Subsidiaries, or due to the operations or activities of the Borrower, any
Subsidiary or any other Person on or in connection with any such property or any
part thereof, in each case if the Borrower or any of its Subsidiaries is or
could be subject to liability therefor or (y) any release on any of such
properties of Hazardous Materials in a quantity that is reportable under any
applicable Environmental Law; and (i) promptly comply with any governmental
requirements requiring the removal, treatment or disposal of such Hazardous
Materials and provide evidence satisfactory to the Majority Lenders of such
compliance.
(u) FCC Filings. Within 30 days of the execution hereof and
thereof, file with the FCC a copy of this Agreement and of each other Loan
Document required to be filed with the FCC pursuant to 47 C.F.R. Section
73.3613, and confirm in writing to the Administrative Agent that such copies
have been duly and timely filed.
SECTION 5.2. Negative Covenants. So long as any Obligation hereunder
or under any Loan Document shall remain unpaid, or any Letter of Credit shall be
outstanding, or any Lender shall have any Revolving Facility Commitment
hereunder, the Borrower will not, without the written consent of the Majority
Lenders or, in the case of Section 5.02(C) or Section 5.02(D), without the
written consent of each Lender:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien upon or with respect to any of its assets or properties of any character
(including, without limitation, accounts and shares of capital stock and
partnership interests of the Borrower's Subsidiaries), whether now owned or
hereafter acquired, or assign any right to receive income, or sign or file, or
permit any of its Subsidiaries to sign or file, under the Uniform Commercial
Code or any comparable statute of any jurisdiction a financing statement that
names the Borrower or any of its Subsidiaries as debtor, or sign, or permit any
of its Subsidiaries to sign, any security agreement authorizing any secured
party thereunder to file such a financing statement, or assign, or permit any of
its Subsidiaries to assign, any
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accounts; excluding, however, from the operation of the foregoing restrictions
--------- -------
the Liens created by or pursuant to the Loan Documents and Permitted Liens.
(b) Debt. Create, incur, assume, guarantee or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume, guarantee or suffer to
exist, any Debt, other than (i) Debt under the Loan Documents, (ii) Debt
existing on the Original Closing Date and listed on Schedule 4.01(n) of the
Existing Credit Agreement, (iii) Debt existing on the date of this Amended
Agreement and not listed on Schedule 4.01(n) in an aggregate principal amount
not to exceed $250,000, (iv) Existing Subordinated Debt, and (v) Debt incurred
after the Original Closing Date when no Default is then continuing or would
result therefrom as follows:
(A) Debt incurred by the Borrower or any Subsidiary of
the Borrower in the ordinary course of business, consistent
with past practice, for the deferred purchase price of goods
or services;
(B) Permitted Subordinated Debt;
(C) Debt of the Borrower or any Subsidiary of the
Borrower secured by a Lien described in clause (vii) of the
definition of Permitted Liens , in an aggregate principal
amount outstanding at any time not to exceed $25,000,000;
(D) Obligations of the Borrower or any
Subsidiary under Capital Leases;
(E) Guaranteed Debt in an aggregate principal
amount outstanding at any time not to exceed $1,000,000;
and
(F) Obligations of the Borrower under any
Interest Rate Protection Agreements and other
Derivatives Obligations to the extent permitted by
Section 5.02(S).
(c) Mergers. Merge or consolidate with or into any Person, or
permit any of its Subsidiaries to do so or agree to any such transaction;
provided that if no Default shall have occurred and be continuing, and the
Borrower or such Subsidiary is the surviving entity, the prior written consent
of each Lender shall not be required but the prior written consent of the
Majority Lenders shall be required.
(d) Sales, Etc., of Assets. Unless the Borrower obtains the prior
written consent of each Lender, sell, lease, transfer or otherwise dispose of,
or permit any
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of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any
assets, except (i) sales, leases, transfers and other dispositions of inventory
and used, surplus or worn-out equipment (including abandonment of assets having
no further useful life to the Borrower or such Subsidiary, as the case may be)
made in the ordinary course of business of the Borrower or such Subsidiary, as
the case may be, (ii) transfers by the Borrower or a Guarantor to another
Guarantor or the Borrower so long as the Borrower owns directly 100% of the
capital stock of each Guarantor that is a corporation and directly or through
one or more wholly owned Subsidiaries 100% of the partnership interests of each
Guarantor that is a partnership, and (iii) Permitted Asset Sales.
(e) Maintenance of Ownership of Subsidiaries; Issuance of Stock
and Partnership Interests, Etc. Sell or otherwise dispose of, or commit to sell
or otherwise dispose of, any shares of capital stock of or any partnership
interests in any of its Subsidiaries unless such disposition constitutes a
Permitted Asset Sale, or permit any of its Subsidiaries to issue, sell or
otherwise dispose of, or commit to issue, sell or otherwise dispose of, any
shares of its capital stock or any partnership interests or capital stock of or
partnership interests in any other Subsidiary of the Borrower.
(f) Investments in Other Persons and Asset Purchases. Make, or
permit any of its Subsidiaries to make, any loan or advance to, or investment
in, any other Person, or purchase or otherwise acquire, or permit any of its
Subsidiaries to purchase or otherwise acquire, any shares of capital stock,
obligations or other securities of, make any capital contribution to, or
otherwise invest in, any other Person (an "INVESTMENT"), or make any Asset
Purchase except for (i) Temporary Cash Investments, (ii) trade receivables
created in the ordinary course of the business of the Borrower or its
Subsidiaries, (iii) Investments in the Borrower by any Guarantor, Investments in
any Guarantor by the Borrower or by any other Guarantor and purchases of shares
of common stock of the Borrower to the extent permitted by clause (iv) of
Section 5.02(G) hereof, (iv) Asset Purchases and Investments made after the date
hereof in any one or more Persons, other than the Borrower or any Guarantor, in
an aggregate amount of all Asset Purchases made since the Closing Date, together
with Investments outstanding at any time, not exceeding $7,500,000, (v)
Permitted Acquisitions, (vi) Permitted Acquisition Deposits and (vii)
Investments in Tower Affiliates, to the extent incidental to the ownership and
operation of the transmission towers owned by such Tower Affiliates. Without
limiting the generality of the foregoing, the Borrower will not, and will not
permit any Subsidiary to, acquire or create any Subsidiary, unless (x)
arrangements satisfactory to the Agents shall have been made for (A) the pledge
of the stock of such Subsidiary to the Administrative Agent for its benefit and
the benefit of the Secured Parties, (B) such Subsidiary to become a Guarantor
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hereunder and (C) the granting of liens and security interests in
substantially all of the assets of such Subsidiary to the Administrative Agent
for its benefit and the benefit of the Secured Parties or (y) such Subsidiary is
created in anticipation of a Permitted Acquisition and, prior to the time of
such Permitted Acquisition, neither the book value nor the fair market value of
the assets of such Subsidiary (disregarding its rights, if any, under the
related acquisition agreement) exceeds $50,000; provided that the provisions of
clause (c) of the definition of "PERMITTED ACQUISITION" must be satisfied at the
time of such Permitted Acquisition.
(g) Restricted Payments. Declare or make any Restricted Payment,
or return any capital to its stockholders as such, or make any distribution of
assets, stock, warrants, rights, obligations or securities to its stockholders
as such, or permit any of its Subsidiaries to declare or make any Restricted
Payment, or return any capital to any of their stockholders or to any of the
Borrower's stockholders, or make any distribution of assets to any of their
stockholders or any of the Borrower's stockholders as such, except that (i) the
Borrower's Subsidiaries may pay cash dividends to the Borrower, (ii) any
Subsidiary of the Borrower that is a partnership may make distributions to its
partners in accordance with the provisions of the partnership agreement
governing such partnership, (iii) the Borrower may purchase shares of (or
options to purchase shares of) its common stock from employees of the Borrower
or any Subsidiary of the Borrower so long as (x) before and after giving effect
to any such purchase, no Default shall have occurred and be continuing and (y)
the aggregate number of shares (including the equivalent number of shares in the
case of options) purchased by the Borrower from all employees since the Original
Closing Date shall not exceed 2% of the aggregate number of shares of the
Borrower's Class A Common Stock, Class B Common Stock and Class C Common Stock
outstanding on the Original Closing Date and (iv) the Borrower may purchase, or
make distributions of cash dividends on, shares of its common stock so long as
before and after giving effect to any such purchase or distribution, (A) no
Default shall have occurred and be continuing, (B) the aggregate amount paid by
the Borrower for all such purchases and distributions pursuant to this clause
(iv) from and after the Closing Date shall not exceed, (1) at any time when, as
of the last day of the immediately preceding month (provided that the
Administrative Agent shall have received a certificate of the Borrower's chief
financial officer for such period, substantially in the form of Exhibit J), the
Senior Debt to Operating Cash Flow Ratio was less than or equal to 1.0,
$70,000,000 and (2) at any other time, $35,000,000 , provided that any amount so
paid by the Borrower in excess of $35,000,000 when the immediately preceding
clause (1) was applicable shall not constitute a Default, and (C) before and
after giving effect to any such purchase or distribution, the Borrower shall be
in compliance with Section 4.05(a) of the indenture governing any Existing
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Subordinated Debt as in effect on the Closing Date, and of any equivalent
provisions of any indentures governing any Permitted Subordinated Debt.
(h) Prepayment of Debt. Prepay, redeem, defease (whether actually
or in substance) or purchase, in any manner (or deposit or set aside funds for
the purpose of any of the foregoing), make any payment in respect of principal
of or premium on, or make any payment in respect of interest on any Debt
(including, without limitation, any Existing Subordinated Debt and any Permitted
Subordinated Debt), or permit any of its Subsidiaries to prepay, redeem, defease
(whether actually or in substance) or purchase in any manner, make any payment
in respect of principal of or premium on, or make any payment in respect of
interest on any Debt (including, without limitation, any Existing Subordinated
Debt and any Permitted Subordinated Debt), in each case other than:
(i) regularly scheduled repayments of principal or payments of
interest required in accordance with the terms of the instruments
governing the respective Debt;
(ii) any repayments or prepayments of principal and any
payments of interest in respect of the Notes;
(iii) regularly scheduled rental payments in respect of
Capital Leases; and
(iv) any prepayment, redemption, defeasance or purchase of any
Existing Subordinated Debt or Permitted Subordinated Debt in an unlimited
amount, so long as before and after giving effect thereto, (A) no Default shall
have occurred and be continuing and (B) the Borrower shall be in compliance with
all Subordinated Debt Documents;
(i) Change in Business; Cease Broadcasting. Engage, or permit any
of its Subsidiaries to engage, in any business other than over-the-air
television broadcasting and activities incidental or reasonably related thereto;
or permit any broadcast station operated by the Borrower or any of its
Subsidiaries to cease broadcasting for a period in excess of 10 consecutive
days.
(j) Change of Accountants. Replace its then current Independent
Public Accountants unless the successor independent public accountants qualify
as an Independent Public Accountant as defined in this Agreement and the
Borrower shall have delivered to the successor independent public accountants a
letter complying with the provisions of Section 3.01(F)(19).
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(k) Amendment of Charter or By-Laws. Amend, modify or change in
any manner, or permit any of its Subsidiaries to amend, modify or change in any
manner, the provisions of its certificate of incorporation or by-laws or any
agreement entered into by it or any of its Subsidiaries with respect to its
capital stock or partnership interests, including the KLFY Partnership
Agreement, the WKRN Partnership Agreement and the WATE Partnership Agreement,
unless in each case such amendment, modification or change would not be
disadvantageous to the Lenders and the Borrower shall have delivered prior
written notice to the Lenders of such amendment, modification or change, with a
copy thereof.
(l) Termination of Licenses. Terminate, lose, fail to hold or fail
to renew, or permit any of its Subsidiaries to terminate, lose, fail to hold or
fail to renew, any license, permit or authorization granted by the FCC if such
termination, loss or failure to hold or failure to renew would have a materially
adverse effect upon the business, condition (financial or otherwise),
operations, properties or prospects of the Borrower or any such Subsidiary.
(m) Amendment, Etc. of Subordinated Debt Documents. Without the
express prior written consent of the Majority Lenders, (i) cancel or terminate
any Subordinated Debt Document or consent to or accept any cancellation or
termination thereof (other than in connection with the repayment in full of the
related Subordinated Notes in compliance with the provisions hereof), (ii) amend
or otherwise modify any material term or provision of any Subordinated Debt
Document or give any consent, waiver or approval with respect thereto (provided
that the provisions of Article X of the indentures governing the Existing
Subordinated Debt, any similar provisions of any indentures governing any other
Permitted Subordinated Debt and the definitions of any defined terms used
therein shall be deemed to be material), or (iii) take or fail to take any other
action in connection with the Subordinated Debt Documents that would impair the
interests or rights of any Agent or any Lender.
(n) Trade Debt. Create, incur, assume, guarantee, or suffer to
exist Trade Debt other than in the ordinary course of business.
(o) Employee Benefit Costs and Liabilities. Create, incur, assume,
guarantee or suffer to exist, or permit any ERISA Affiliate to create, incur,
assume, guarantee or suffer to exist, (i) any Insufficiency with respect to a
Plan or any obligation with respect to a Multiemployer Plan or (ii) any
liability with respect to welfare plans (as defined in Section 3(1) of ERISA,
but excluding medical plans established for the benefit of employees of the
Borrower or any Subsidiaries) if, immediately after giving effect to such
liability, the aggregate annualized cost (including, without limitation, the
cost of insurance premiums)
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with respect to such plans for which the Borrower is or may become liable in any
fiscal year of the Borrower would exceed $250,000.
(p) Plan Amendments. Adopt an amendment with respect to which
security is required under Section 307 of ERISA to any Plan.
(q) Limited Partners. Permit LAT, YBT or YBK (i) to conduct any
business other than to acquire and hold a limited partnership interest in,
respectively, the KLFY Partnership, the WKRN Partnership and the WATE
Partnership and to exercise their rights and perform their obligations under the
KLFY Partnership Agreement, the WKRN Partnership Agreement and the WATE
Partnership Agreement, respectively, (ii) to cause or permit, or agree to cause
or permit in the future (upon the happening of a contingency or otherwise), any
consensual security interest, lien or other encumbrance upon any of its assets
or (iii) to hold any interest whatsoever in any asset other than (A) a limited
partnership interest in the KLFY Partnership, the WKRN Partnership or the WATE
Partnership and (B) cash; provided that any cash in excess of $10,000 is
distributed to the Borrower or paid to the KLFY Partnership, the WKRN
Partnership or the WATE Partnership within 30 days of receipt thereof by LAT,
YBT or YBK.
(r) Limitation on Payment Restrictions Affecting Subsidiaries.
Permit to exist, directly or indirectly, or create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary in existence on the Closing Date to: (i) pay any dividends or
make any other distributions on its capital stock or partnership or other equity
interests owned by the Borrower or any Subsidiary of the Borrower; (ii) pay any
obligations owed to the Borrower or any other Subsidiary; (iii) make loans or
advances to the Borrower or any other Subsidiary; or (iv) transfer any of its
properties or assets to the Borrower or any other Subsidiary, except for
encumbrances or restrictions existing under applicable law.
(s) Interest Rate Protection. Enter into, or permit any of its
Subsidiaries to enter into, interest rate cap agreements or other interest rate
protection, except (i) Interest Rate Protection Agreements or (ii) other
interest rate cap agreements or other interest rate protection that do not
require or provide for the imposition of any Lien on any asset of the Borrower
or any of its Subsidiaries, and which contain conditions and are with financial
institutions acceptable to the Agents (such acceptance of the Agents not to be
unreasonably denied).
SECTION 5.03. Reporting Requirements. So long as any Obligation
hereunder or under any Loan Document shall remain unpaid, or any Letter of
Credit shall be outstanding, or any Lender shall have any Term Loan Commitment
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or Revolving Facility Commitment hereunder, the Borrower will furnish to each
Lender (and, in the case of the Notice of Debt to Operating Cash Flow Ratio,
also to the Administrative Agent) the following:
(a) In a form reasonably acceptable to the Majority Lenders (i) on
or before the 25th day after the end of each month that is not the last month of
a Fiscal Quarter, Consolidated balance sheets of the Borrower and its
Subsidiaries as of the last day of such month and Consolidated statements of
income and retained earnings (including the sales and Operating Cash Flow
components thereof) and Consolidated statements of changes in cash flow
(including, without limitation, cash payments in respect of Capital Expenditures
and Film Expense) of the Borrower and its Subsidiaries for such month and for
the period commencing on the first day of such Fiscal Year and ending on the
last day of such month (and, in the case of such statements of income, comparing
the actual amounts thereof with the amounts budgeted therefor and with the
actual amounts thereof in the equivalent periods of the immediately preceding
Fiscal Year), in each case certified by the chief financial officer of the
Borrower, together with (A) a certificate of the chief financial officer of the
Borrower stating that no Default has occurred and is continuing or, if a Default
has occurred and is continuing, a statement as to the nature thereof and the
action that the Borrower has taken or proposes to take with respect thereto and
(B) a schedule (each, a "NOTICE OF DEBT TO OPERATING CASH FLOW RATIO") prepared
by the chief financial officer of the Borrower, in form satisfactory to the
Lenders, of the computations used by the Borrower to determine the Debt to
Operating Cash Flow Ratio as of the last day of such month.
(b) As soon as available and in any event within 45 days after the
end of each of the first three quarters of each Fiscal Year of the Borrower, the
Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of
such quarter, and the related Consolidated statements of income and retained
earnings and Consolidated statements of changes in cash flow of the Borrower and
its Subsidiaries for each of such quarters and the period commencing at the end
of the previous Fiscal Year and ending with the end of such quarter, in each
case in form and substance satisfactory to the Lenders, certified by the chief
financial officer of the Borrower as having been prepared in accordance with
generally accepted accounting principles, together with (i) a certificate of the
chief financial officer of the Borrower, substantially in the form of Exhibit J
and (ii) a schedule prepared by the chief financial officer of the Borrower, in
form satisfactory to the Lenders, of the computations used by the Borrower in
determining, as of the end of such fiscal quarter, compliance with the
limitations contained in Sections 5.01(L), 5.01(M), 5.01(N), 5.01(O), 5.02(A),
5.02(B), 5.02(D), 5.02(F), 5.02(G), 5.02(H), 6.01(D), 6.01(G), 6.01(K), 6.01(M),
6.01(N) and 6.01(O).
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(c) As soon as available and in any event within 90 days after the
end of each Fiscal Year of the Borrower, a copy of the annual report for such
year for the Borrower and its Subsidiaries, including therein a Consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal
Year and a Consolidated statement of income and retained earnings and a
Consolidated statement of changes in cash flow, of the Borrower and its
Subsidiaries for such Fiscal Year, certified in a manner acceptable to the
Lenders by the Independent Public Accountants, together with (i) a certificate
of such accounting firm to the Lenders stating that, in the course of the
regular audit of the business of the Borrower and its Subsidiaries, which audit
was conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that a
Default has occurred and is continuing, or if, in the opinion of such accounting
firm, a Default has occurred and is continuing, a statement as to the nature
thereof, (ii) a certificate of the chief financial officer of the Borrower
substantially in the form of Exhibit J, (iii) a schedule prepared by the chief
financial officer of the Borrower, in form satisfactory to the Lenders, of the
computations used by the Borrower in determining, as of the end of such Fiscal
Year, compliance with limitations contained in Sections 5.01(L), 5.01(M),
5.01(N), 5.01(O), 5.02(A), 5.02(B), 5.02(D), 5.02(F), 5.02(G), 5.02(H), 6.01(D),
6.01(G), 6.01(K), 6.01(M), 6.01(N) and 6.01(O) and the calculation of the Debt
to Operating Cash Flow Ratio as of the last day of such Fiscal Year, and (iv)
unaudited consolidating balance sheets as of the end of such Fiscal Year and
statements of income and retained earnings and statements of the sources and
uses of funds for such Fiscal Year for the Borrower and each of its
Subsidiaries, certified by the chief financial officer of the Borrower;
(d) As soon as available and in any event by the end of each
Fiscal Year, a copy of the annual business and financial plan of the Borrower
and its Consolidated Subsidiaries for the next ending Fiscal Year on a monthly
basis (for each fiscal month) and for the subsequent Fiscal Year on an annual
basis, in form and substance satisfactory to the Administrative Agent, which
plan will include (i) projected Consolidated balance sheets of the Borrower for
the next ending Fiscal Year; (ii) projected Consolidated cash flow analyses of
the Borrower and each of its Subsidiaries for each of the twelve months
following the end of such Fiscal Year, on a monthly basis, and for the next
ending Fiscal Year on an annual basis; and (iii) projected Consolidated income
statements of the Borrower and each of its Subsidiaries for each of the twelve
months following the end of such Fiscal Year, on a monthly basis, and for the
next ending Fiscal Year on an annual basis;
(e) Promptly after the sending or filing thereof, copies of all
proxy statements, financial statements and reports which the Borrower or any of
its Subsidiaries sends to their respective shareholders and copies of all
registration statements and reports on Forms 10-K, 10-Q and 8-K (or their
equivalent) which
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the Borrower or any of its Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange;
(f) Promptly after the commencement thereof, notice of all
actions, suits, hearings and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any of its Subsidiaries of the type described
in Section 4.01(H) or in Section 6.01(G);
(g) As soon as possible and in any event within five days after
the occurrence of any Default, a statement by the chief financial officer of the
Borrower setting forth details of such Default and the action which the Borrower
has taken or proposes to take with respect thereto;
(h) Promptly upon becoming aware that any Termination Event with
respect to any Plan has occurred, a statement by the chief financial officer of
the Borrower describing such Termination Event and each action, if any, which
the Borrower and each such ERISA Affiliate proposes to take with respect
thereto;
(i) Promptly and in any event within two Domestic Business Days
after receipt thereof by the Borrower or any ERISA Affiliate from the PBGC,
copies of each notice received by the Borrower or any ERISA Affiliate from the
PBGC stating the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(j) Promptly and in any event within 30 days after the filing
thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each Plan
(k) At the time notice is given or required to be given to the
PBGC under Section 302(f)(4)(A) of ERISA of the failure to make timely payments
to a Plan, a copy of any such notice filed and a statement of the chief
financial officer of the Borrower setting forth (A) sufficient information
necessary to determine the amount of the lien under Section 302(f)(3), (B) the
reason for the failure to make the required payments and (C) the action, if any,
which the Borrower or its ERISA Affiliates proposes to take with respect
thereto;
(l) Promptly and in any event within five Domestic Business Days
after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of
a Multiemployer Plan, a copy of each notice received by the Borrower or any
ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by a
Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of ERISA, (C)
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the termination of a Multiemployer Plan within the meaning of Title IV of ERISA
or (D) the amount of liability incurred, or expected to be incurred, by the
Borrower or any ERISA Affiliate in connection with any event described in clause
(A), (B) or (C) above;
(m) Promptly notify, and cause each of its Subsidiaries to
promptly notify, the Administrative Agent (i) of any lapse, termination or
relinquishment of any station license, permit or other authorization from the
FCC held by the Borrower or any of its Subsidiaries or any failure by the FCC to
renew or extend any such license, permit or other authorization for other than
the usual period thereof, which lapse, termination, relinquishment, failure to
renew or extend would have a material adverse effect on the business, condition
(financial or otherwise), operations, properties or prospects of the Borrower or
any of its Subsidiaries; and (ii) of any complaint or other matter filed with or
communicated to the FCC, of which the Borrower or any of its Subsidiaries has
knowledge and which might have a materially adverse effect upon the renewal or
extension of any station license, permit or other authorization held by the
Borrower or any of its Subsidiaries, including, without limitation, (A) any
complaint to which the FCC has requested an answer, (B) any petition to deny, or
informal objection filed with regard to, an application filed by the Borrower or
any of its Subsidiaries with the FCC or any mutually exclusive competing
application filed for authority to broadcast on the frequencies or channels
licensed to the Borrower or any of its Subsidiaries and (C) any citation or
notice of violation or order to show cause or order to become a party to a
proceeding issued by the FCC against the Borrower or any of its Subsidiaries;
(n) Promptly after any significant change in accounting policies
or reporting practices, notice and a description in reasonable detail of such
change
(o) Copies of any statement or report to be furnished to any other
holder of the securities of the Borrower or any of its Subsidiaries pursuant to
the terms of any indenture, loan or credit or similar agreement and not
otherwise required to be furnished to the Lenders pursuant to any other clause
of this Section 5.03, at such time as such statement or report is to be
furnished to such other holder pursuant to such terms;
(p) As soon as possible after the end of each Fiscal Year, a
statement certified by the chief financial officer of the Borrower setting forth
in reasonable detail any changes since the date of this Agreement, not
previously reported pursuant to this paragraph (p), in the information set forth
in Schedules 4.01(h), 4.01(m), 4.01(t) and 4.01(y), or stating that no such
changes have occurred;
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(q) Such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as the
Administrative Agent or any Lender may from time to time reasonably request;
(r) Promptly after (i) the Borrower shall fail to make any payment
when due under the Subordinated Debt Documents, (ii) there shall have been an
acceleration of the maturity of any Existing Subordinated Debt or any Permitted
Subordinated Debt, (iii) the trustee under the indenture for any Existing
Subordinated Debt or any Permitted Subordinated Debt or any holder thereof shall
have asserted in writing that an "EVENT OF DEFAULT" as defined therein shall
have occurred and (iv) the commencement of any enforcement proceeding with
respect to any Existing Subordinated Debt or any Permitted Subordinated Debt,
notice thereof, including a description in reasonable detail of the
circumstances, and a statement of the chief financial officer of the Borrower
setting forth the action the Borrower has taken or proposes to take with respect
thereto; and
(s) Promptly after the expiration or any termination of any
network affiliation agreements of the Borrower or any Subsidiary, notice
thereof, including a description in reasonable detail of the circumstances, and
a statement of the chief financial officer of the Borrower setting forth the
action the Borrower has taken or proposes to take with respect thereto.
ARTICLE 6
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Borrower shall fail to pay within two days of the due date
any interest on any Note, shall fail to reimburse when due any drawing under any
Letter of Credit or shall fail to pay when due any principal on any Note, any
fees or other amounts payable under any Loan Document; or
(b) Any representation or warranty made by any Loan Party in or in
connection with any Loan Document or any amendment thereto to which it is a
party or any certificate or financial information delivered pursuant to any Loan
Document or any amendment thereto shall prove to have been incorrect in any
material respect when made; or
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(c) Any Loan Party (i) shall fail to perform or observe any term,
covenant or agreement contained in Section 2.20, 5.01, 5.02 or 5.03(G) of this
Agreement, in any Mortgage, in Sections 4, 6, 7, 8, 9 or 10 of any Security
Agreement or in any other provision of any Collateral Document that is
comparable to any such Section of any Security Agreement or (ii) shall fail to
perform or observe any other term, covenant or agreement contained in any Loan
Document on its part to be performed or observed if such failure shall remain
unremedied for 10 days after written notice thereof shall have been given to the
Borrower by the Administrative Agent or any Lender; or
(d) The Borrower or any Subsidiary shall fail to make when due or
within any applicable grace period any payment in respect of any Material
Financial Obligations (other than the Notes); any event or condition shall occur
which results in the acceleration of the maturity of any Debt (excluding Debt
evidenced by the Notes) of the Borrower or any of its Subsidiaries (as the case
may be) having an aggregate unpaid principal amount in excess of $1,000,000 or
enables (or, with the giving of notice or lapse of time or both, would enable)
the holder of such Debt or any Person acting on such holder's behalf to
accelerate the maturity thereof; the Borrower or any of its Subsidiaries shall
fail to pay when the same becomes due any rental payments in respect of any
leases (other than payments with respect to Capital Lease Obligations) requiring
in the aggregate, annual lease payments in excess of $1,000,000, and such
failure shall continue after the applicable grace period, if any, specified in
the lease or leases relating to such rental payment; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(e) Any "EVENT OF DEFAULT" as defined in any Subordinated Debt
Document; or
(f) The Borrower or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Borrower
or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 30
days or any of the actions sought in
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such proceeding (including, without limitation, the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or other similar
official for it or any substantial part of its property) shall occur; or the
Borrower or any of its Subsidiaries shall take any corporate action to authorize
any of the actions set forth above in this subsection (f); or
(g) One or more judgments or orders for the payment of money
aggregating more than $1,000,000 shall be rendered against the Borrower or any
of its Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment(s) or order(s) or (ii) there shall
be any period of 10 consecutive days (or, if such proceedings are in a state
court, such longer period (not to exceed 30 days) following the entry of such
judgement or order during which the Borrower shall be entitled under applicable
state law to file an appeal as of right) during which a stay of enforcement of
such judgment(s) or order(s), by reason of a pending appeal or otherwise, shall
not be in effect; or
(h) Any non-monetary judgment or order shall be rendered against
the Borrower or any of its Subsidiaries that is materially adverse to the
Borrower and its Subsidiaries taken as a whole, and either (i) enforcement
proceedings shall have been commenced by any Person upon such judgment or order
or (ii) there shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) Any provision of any Loan Document after delivery thereof
shall for any reason cease to be valid and binding on any Loan Party, or any
Loan Party shall so state in writing;
(j) Any Collateral Document after delivery thereof shall for any
reason cease to create a valid and perfected first priority security interest in
any Collateral purported to be covered thereby; or
(k) Any Termination Event with respect to a Plan shall have
occurred and, 30 days after notice thereof was required by the terms hereof to
have been given to the Administrative Agent by the Borrower, (i) such
Termination Event shall still exist and (ii) the sum (determined as of the date
of occurrence of such Termination Event) of the Insufficiency of such Plan and
the Insufficiency of any and all other Plans with respect to which a Termination
Event shall have occurred and then exist (or, in the case of a Plan with respect
to which a Termination Event described in clause (ii) of the definition of
Termination Event shall have occurred and then exist, the liability related
thereto) is equal to or greater than $250,000; or
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(l) The Borrower shall cease to own directly 100% of the issued
and outstanding Voting Stock of each Subsidiary that is a corporation or shall
cease to own, directly or through one or more wholly owned Subsidiaries, 100% of
the partnership interests of each Subsidiary that is a partnership, except in
the case of any Subsidiary of which the Borrower shall have disposed of all
Voting Stock and all partnership interests pursuant to a Permitted Asset Sale;
or
(m) The Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability
to such Multiemployer Plan in an amount which, when aggregated with all other
amounts required to be paid to Multiemployer Plans in connection with Withdrawal
Liabilities (determined as of the date of such notification), exceeds $250,000;
or
(n) The Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
if as a result of such reorganization or termination the aggregate annual
contributions of the Borrower and its ERISA Affiliates to all Multiemployer
Plans which are then in reorganization or being terminated have been or will be
increased over the average annual amounts contributed to such Multiemployer
Plans for the three most recent plan years which include the date hereof by an
amount exceeding $250,000; or
(o) The Borrower or any ERISA Affiliate shall have committed a
failure described in Section 302(f)(1) of ERISA and the amount determined under
Section 302(f)(3) of ERISA is equal to or greater than $250,000; or
(p) The FCC shall designate for hearing any station license or
permit held by the Borrower or any of its Subsidiaries (i) to determine whether
the station license or permit should be revoked or modified in a materially
adverse manner, (ii) to determine whether the station license should be renewed
or (iii) to determine whether an application for renewal of a license for a
station operated by the Borrower or any of its Subsidiaries should be granted or
whether the application of another party for said frequency or channel should be
granted and in each such case there is a reasonable possibility of an adverse
decision which could adversely affect the condition (financial or otherwise),
operations or properties of the Borrower or such Subsidiary; or
(q) There shall occur a material adverse change in the condition
(financial or otherwise), operations or properties of (i) the Borrower or (ii)
any of its Subsidiaries or (iii) the Borrower and its Subsidiaries taken as a
whole; or
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(r) Vincent Young, Adam Young, members of their respective
immediate families, Persons controlled (as defined in the definition of
Affiliate) by Vincent Young, Adam Young or members of their respective immediate
families and members of management of the Borrower shall fail to hold, in the
aggregate for all such individuals and other Persons, record and beneficial
title to at least 51% (by number of votes) of the Voting Stock of the Borrower;
or
(s) Either (i) any "person" or "group" (as such terms are used in
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended),
other than Permitted Holders, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 and 13d-5 promulgated by the Securities and Exchange Commission
under said Act, except that a Person shall be deemed to have beneficial
owernership of all shares that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 30% of the total outstanding Voting Stock
of the Borrower; provided that the Permitted Holders "beneficially own" (as so
defined) a lesser percentage of such Voting Stock than such other Person and do
not have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of the Borrower; or
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of the Borrower
(together with any new directors whose election to such board of directors, or
whose nomination for election by the stockholders of the Borrower, was approved
by a vote of 662/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) shall cease for any reason to constitute a
majority of the board of directors of the Borrower then in office;
then, and in any such event, the Administrative Agent (i) shall at
the request, or may with the consent, of the Majority Lenders, by notice to the
Borrower, declare the obligation of each Lender to make Advances and the
obligation of the Issuing Bank to issue Letters of Credit to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Notes, all interest thereon, all Letter of Credit Obligations, all
Letter of Credit fees and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all interest thereon, all Letter
of Credit Obligations, all Letter of Credit fees and all such other amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower; provided, however, that in the event of the acceleration of the
maturity of any Permitted Subordinated Debt or the commencement of any voluntary
proceeding
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or the taking of any corporate action referred to in subsection (f) above, or
the actual or deemed entry of an order for relief with respect to the Borrower
or any of its Subsidiaries under the Bankruptcy Reform Act of 1978, as amended,
(A) the obligation of each Lender to make Advances (including Swingline
Advances) and the obligation of the Issuing Bank to issue Letters of Credit
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 6.02. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the
Administrative Agent upon the instruction of Lenders having more than 50% in
aggregate amount of the Revolving Facility Commitments (or, if the Revolving
Facility Commitments shall have been terminated, holding at least 50% of the
Letter of Credit Obligations), pay to the Administrative Agent an amount in
immediately available funds equal to the aggregate amount available for drawing
under all Letters of Credit then outstanding at such time, and such funds shall
be held as collateral pursuant to arrangements satisfactory to the
Administrative Agent; provided that, upon the occurrence of any Event of Default
specified in clause (f) of Section 6.01 with respect to the Borrower, the
Borrower shall pay such amount forthwith without any notice or demand or any
other act by the Administrative Agent or any Lender.
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Lender appoints
and authorizes each Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement, the Notes and the Collateral
Documents as are delegated to such Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Each Agent shall have the same
rights and powers under this Agreement as any other Lender and may exercise or
refrain from exercising the same as though it were not an Agent. Each Agent and
each of their respective affiliates may accept deposits from, lend money to,
acquire equity interests in and generally engage in any kind of business with
the Borrower or any Subsidiary or affiliate of the Borrower as if it were not an
Agent hereunder.
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SECTION 7.03. Actions by Agents. The obligations of the Agents
hereunder are only those expressly set forth herein and neither the Agents nor
the Co-Arrangers shall have or be deemed to have any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
with respect to the Agents or the Co-Arrangers. Without limiting the generality
of the foregoing, no Agent shall be required to take any action with respect to
any Default, except as expressly provided in Article 6 or Section 7.10.
SECTION 7.04. Consultation with Experts. Each of the Agents may
consult with legal counsel (who may be internal counsel or counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agents. No Agent or any of such Agent's
affiliates nor any of their respective directors, officers, agents, or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Majority Lenders or (ii) in the
absence of its own gross negligence or willful misconduct. No Agent nor any of
their respective directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of the Borrower; (iii) the satisfaction of any condition specified
in Article 3, except receipt of items required to be delivered to the
Administrative Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished in connection
herewith. No Agent shall incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other writing (which may be a bank
wire, telex or similar writing) believed by it to be genuine or to be signed by
the proper party or parties.
SECTION 7.06. Indemnification. Each Lender shall, ratably in
accordance with its Lender Share, indemnify each of the Agents, their respective
affiliates and the directors, officers, agents and employees of each of the
Agents or of their respective affiliates (each an "INDEMNITEE") (to the extent
not reimbursed by the Borrower) against any cost, expense (including reasonable
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from the Indemnitee's gross negligence or willful
misconduct) that the Indemnitee may suffer or incur in connection with this
Agreement or any action taken or omitted by the Indemnitee hereunder. The
provisions of this Section 7.06 shall survive any termination of this Agreement.
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SECTION 7.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon any Agent, any Co-Arranger, any Agent's
affiliate, any Co-Arranger's affiliate, any other Lender or any of their
respective directors, officers, agents or employees, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon any Agent, any Co-Arranger, any
Agent's affiliate, any Co-Arranger's affiliate, any other Lender or any of their
respective directors, officers, agents or employees, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under this Agreement.
SECTION 7.08. Successor Agent. Any Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Majority Lenders shall have the right to appoint a successor to
such Agent. If no such successor for such Agent shall have been so appointed by
the Majority Lenders, and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, which shall be a
Lender organized or licensed under the laws of the United States of America or
of any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as an Agent hereunder by a
successor Agent in the same capacity, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder, the
provisions of this Article shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Agent.
SECTION 7.09. Managing Agent and Co-agents. None of the Banks listed
on the cover page hereof as Managing Agent or as Co-Agent, in its capacity as
Managing Agent or Co-Agent, as the case may be, shall have any rights or
responsibilities under this Agreement or any other Loan Documents in such
capacity. This Section 7.09 shall not affect in any way the rights and
responsibilities of any such Bank as a Lender (including as a Swingline Lender)
hereunder.
SECTION 7.10. Notice of Default; Collateral Documents. (a) The
Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrower or any
Guarantor referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "NOTICE OF DEFAULT". If the
Administrative
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Agent receives such a notice, it shall give prompt notice thereof to each of the
Lenders.
(b) Subject to Section 8.01, as to any matters not expressly
provided for in the Collateral Documents (including the timing and methods of
realization upon any Collateral), the Administrative Agent shall act or refrain
from acting in accordance with written instructions from the Majority Lenders
or, in the absence of such instructions, in accordance with its discretion;
provided that the Administrative Agent shall not be obligated to take any action
if the Administrative Agent believes that such action is or may be contrary to
any applicable law or might cause the Administrative Agent to incur any loss or
liability for which it has not been indemnified to its reasonable satisfaction.
(c) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any Collateral or for the validity,
perfection, priority or enforce ability of the security interests in any
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part under any Collateral Document. The Administrative
Agent shall have no duty to ascertain or inquire as to the performance or
observance of any terms of any Collateral Document by any Person.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. (a) No amendment or waiver of any
provision of this Agreement or of any Note, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Majority Lenders (and, if the rights or duties of any
Agent or the Issuing Bank are affected thereby, by such Agent or the Issuing
Bank, as the case may be), and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such amendment, waiver or consent shall, unless in
writing and signed by all Lenders, do any of the following:
(a) waive any of the conditions specified in Article 3,
(b) change the percentage of the Lender Shares or the percentage
of any of the Revolving Facility Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Lenders, which shall be required
for the Lenders or any of them to take any action hereunder,
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(c) amend this Section 8.01, or
(d) change the definition of Majority Lenders;
and provided further that no such amendment, waiver or consent shall, unless in
writing and signed by all Lenders with Revolving Facility Commitments, do any of
the following:
(x) increase the Revolving Facility Commitments or
subject such Lenders to any additional obligations,
(y) reduce the principal of, the interest rate or
accrued interest on, the Revolving Facility Advances or the amount
of any Letter of Credit Obligations or any fees or other amounts
payable to any such Lenders under any Loan Document, or
(z) postpone the Termination Date or any date fixed for
any payment of interest or fees in respect of any Revolving Facility
Advance;
and provided further that no such amendment, waiver or consent shall, unless in
writing and signed by all Lenders with Revolving Facility Commitments and the
Swingline Lender, do any of the following:
(1) increase the Swingline Commitment or subject the
Swingline Lender to any additional obligations,
(2) reduce the principal of, the interest rate or
accrued interest on, the Swingline Advances or any fees or other
amounts payable to the Swingline Lender under any Loan Document, or
(3) postpone any date fixed for any payment of
principal, interest or fees in respect of any Swingline Advance;
and provided further that no such amendment, waiver or consent shall postpone
any date fixed for any repayment or prepayment of principal of any Revolving
Facility Advance or Letter of Credit Obligation, or for any reduction in the
Revolving Facility Commitments, or reduce the amount of any mandatory repayment
or prepayment of any Revolving Facility Advance, unless it is in writing and
signed by Lenders with at least 75% of the aggregate amount of the Revolving
Facility Commitments; provided that no such date shall be postponed beyond the
Termination Date unless it is in writing and signed by all Lenders with
Revolving Facility Commitments.
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(b) No amendment or waiver of any provision of any Mortgage, nor
consent to any departure by the applicable Guarantor therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
applicable Guarantor and the Administrative Agent with the written consent of
the Majority Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided
that, except as provided in Section 7.02 of the applicable Mortgage, no such
amendment, waiver or consent shall release any of the Collateral unless in
writing and signed by the applicable Guarantor and the Administrative Agent with
the written consent of all of the Lenders; and provided further that no such
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent with the written consent of all of the Lenders, amend
Section 7.02 of any Mortgage, Section 7.04 of any Mortgage that is a mortgage or
Section 7.05 of any Mortgage that is a deed of trust.
(c) No amendment or waiver of any provision of any other Loan
Document, nor consent to any departure by the applicable Loan Party therefrom,
shall be effective except in accordance with the terms thereof.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder or under any other Loan Document shall be in writing
(including telegraphic, telecopy, telex or cable communication) and mailed
(prepaid registered or certified mail, return receipt requested), telegraphed,
telecopied, telexed, cabled or delivered (by hand or other courier service): if
to the Borrower, at its address at 599 Lexington Avenue, New York, New York
10022, Attention: Vincent J. Young, Chairman, with a copy to Cooperman Levitt
Winikoff Lester & Newman, P.C., 800 Third Avenue, New York, New York, 10022,
Attention: Robert L. Winikoff, Esq.; if to any Guarantor, at its address c/o the
Borrower, 599 Lexington Avenue, New York, New York 10022, Attention: Vincent J.
Young, Chairman, with a copy to Cooperman Levitt Winikoff Lester & Newman, P.C.,
800 Third Avenue, New York, New York 10022, Attention: Robert L. Winikoff, Esq.;
if to any Bank, at its Domestic Lending Office specified in its Administrative
Questionnaire; if to any other Lender, at its Domestic Lending Office specified
in the Assignment and Assumption Agreement pursuant to which it became a Lender;
if to the Syndication Agent, at its address at 60 Wall Street, New York, New
York 10260, Attention: R. Blake Witherington; if to the Documentation Agent, at
its address at 425 Lexington Avenue, New York, New York 10017, Attention: Lorain
C. Granberg; and if to the Administrative Agent, at its address at 130 Liberty
Street, Mail Stop 2144, New York, New York 10006, Attention: Agency Services
Group, Attention: Paul Raghunandan or, as to each party, at such other address
as shall be designated by such party in a written notice to the other parties.
All such notices and communications shall, when mailed, be effective three days
after being mailed and, when telegraphed, telecopied, telexed
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or cabled, be effective when delivered to the telegraph company, sent by
telecopy, confirmed by telex answer back or delivered to the cable company,
respectively, except that notices and communications to the Administrative Agent
pursuant to Article 2 shall not be effective until received by the
Administrative Agent.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender or any Agent to exercise, and no delay in exercising, any right under any
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.04. Costs and Expenses; Indemnities. (a) The Borrower
agrees to pay on demand all reasonable costs and expenses incurred by any Agent
or any Affiliate of an Agent or by a Person acting upon the request or on behalf
of any Agent or any Affiliate of an Agent in connection with the preparation,
execution, delivery, filing, recording, administration, modification and
amendment of the Loan Documents and the other documents to be delivered
thereunder (such administration costs and expenses shall include, without
limitation, reasonable costs incurred in connection with any audits of the
Borrower and its Subsidiaries, all costs and expenses incurred in connection
with appraisals, audits and search reports, all filing fees, and the fees and
expenses of counsel that any Agent or any Affiliate of an Agent may consult,
from time to time, in connection with the Loan Documents), including, without
limitation, the reasonable fees and out-of-pocket expenses of Davis Polk &
Wardwell, local counsel who may be retained by any of said counsel or by any
Agent or any Affiliate of an Agent with respect thereto and with respect to
advising any Agent or any Affiliate of an Agent as to its rights and
responsibilities under the Loan Documents, and all reasonable costs and
expenses, if any (including reasonable fees and out-of-pocket expenses of
counsel to any Agent or Affiliate of an Agent, or any Lender or Affiliate of a
Lender (including in-house counsel of any Lender or of such Affiliate of a
Lender) and all other FCC fees), incurred by any Agent, any Affiliate of an
Agent, any Lender or any Affiliate of a Lender or any Person acting upon the
request or on behalf of any Agent, any Affiliate of an Agent, any Lender or any
Affiliate of a Lender in connection with the enforcement of the Loan Documents
and the other documents to be delivered under the Loan Documents.
(b) The Borrower agrees to indemnify, pay and hold harmless each
Agent, each Affiliate of an Agent, each Lender, each Affiliate of a Lender and
their respective officers, directors, employees and agents (collectively called
the "INDEMNITEES") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the fees and
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disbursements of counsel for such Indemnitee) in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnitee shall be designated a party thereto, and the expenses of
investigation by engineers, environmental consultants and similar technical
personnel and any commission, fee or compensation claimed by any broker (other
than any broker retained by or on behalf of any Agent or any Lender) asserting
any right to payment for the transactions contemplated hereby, which may be
imposed on, incurred by or asserted against such Indemnitee as a result of or in
connection with the transactions contemplated hereby or by the other Loan
Documents (including (i) (A) as a direct or indirect result of the presence on
or under, or escape, seepage, leakage, spillage, discharge, emission or release
from, any property now or previously owned, leased or operated by the Borrower
or any of its Subsidiaries of any Hazardous Materials, (B) arising out of or
relating to the offsite disposal of any materials generated or present on any
such property or (C) arising out of or resulting from the environmental
condition of any such property or the applicability of any governmental
requirements relating to Hazardous Materials, whether or not occasioned wholly
or in part by any condition, accident or event caused by any act or omission of
the Borrower or any of its Subsidiaries, and (ii) proposed and actual extensions
of credit under this Agreement) and the use or intended use of the proceeds of
any Borrowing, except that the Borrower shall have no obligation hereunder to an
Indemnitee with respect to any liability resulting from the gross negligence or
wilful misconduct of such Indemnitee. To the extent that the undertaking set
forth in the immediately preceding sentence may be unenforceable, the Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all such indemnified
liabilities incurred by the Indemnitees or any of them. Without limiting the
generality of any provision of this Section, to the fullest extent permitted by
law, the Borrower hereby waives all rights for contribution or any other rights
of recovery with respect to liabilities, losses, damages, costs and expenses
arising under or relating to Environmental Laws that it might have by statute or
otherwise against any Indemnitee.
SECTION 8.05. Right to Set-off. (a) Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Notes and the Letter of Credit
Obligations due and payable pursuant to the provisions of Section 6.01, each
Lender (and a Participant thereof) is hereby authorized, subject to the
provisions of Section 8.05(B), at any time and from time to time, to the fullest
extent permitted by law (without penalty, sanction or loss of collateral), to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
to such Lender to or for the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or hereafter existing
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under any Loan Document, irrespective of whether or not such Lender shall have
made any demand under such Loan Document and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after such set-off
and application made by such Lender; provided that such failure to give such
notice shall not affect the validity of such set-off and application. The rights
of each Lender under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Lender may
have. Each Lender agrees that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of the aggregate
amount of principal and interest due with respect to any Note held by it and
Letter of Credit Obligations owed to it which is greater than the proportion
received by any other Lender in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Lender and Letter of
Credit Obligations owed to such other Lender, such adjustments shall be made as
may be required so that all such payments of principal and interest with respect
to the Notes held by the Lenders and Letter of Credit Obligations owed to all
Lenders shall be shared by the Lenders pro rata.
(b) The Lenders agree among themselves that, except upon the
written consent of the Majority Lenders, no Lender shall, with respect to any
Note or other obligation under any Loan Document, exercise any right described
in Section 8.05(A). If a Lender breaches its obligation under the foregoing
sentence, then such Lender shall be deemed to have waived any right to the
benefits of the Collateral Documents, as against any other Lender. Each Lender
waives all rights to enforce any rights under this Agreement, under the Notes or
under any other Loan Document without the prior written consent of the Majority
Lenders. Each Lender further agrees that all rights under the Collateral
Documents shall be exercised only through the Administrative Agent.
SECTION 8.06. BINDING EFFECT; GOVERNING LAW. THIS AGREEMENT SHALL
BECOME EFFECTIVE WHEN IT SHALL HAVE BEEN EXECUTED BY THE BORROWER, EACH EXISTING
GUARANTOR, THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE DOCUMENTATION
AGENT AND THE SWINGLINE LENDER AND WHEN THE ADMINISTRATIVE AGENT SHALL HAVE BEEN
NOTIFIED BY EACH BANK (OTHER THAN THE SWINGLINE LENDER) THAT SUCH BANK HAS
EXECUTED IT (WHICH NOTIFICATION MAY BE IN THE FORM OF DELIVERY OF AN EXECUTED
SIGNATURE PAGE TO THE ADMINISTRATIVE AGENT BY FACSIMILE TRANSMISSION) AND
THEREAFTER SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE BORROWER, THE
ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE DOCUMENTATION AGENT AND EACH
LENDER AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS,
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EXCEPT THAT THE BORROWER SHALL NOT HAVE THE RIGHT TO ASSIGN ITS RIGHTS HEREUNDER
OR ANY INTEREST HEREIN WITHOUT THE PRIOR WRITTEN CONSENT OF ALL LENDERS. IF THE
CLOSING DATE SHALL NOT HAVE OCCURRED BY DECEMBER 31, 1997 THIS AGREEMENT SHALL
TERMINATE AND CEASE TO BE OF ANY FORCE OR EFFECT. THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 8.07. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Lenders.
(b) Any Lender may at any time grant to one or more commercial
banks, mutual funds, financial institutions or other "ACCREDITED INVESTORS" (as
defined in Regulation D of the Securities Act of 1933, as amended) (each a
"PARTICIPANT") participating interests in its Revolving Facility Commitment or
any or all of its Advances. In the event of any such grant by a Lender of a
participating interest to a Participant, whether or not any notice thereof is
given to the Borrower or the Administrative Agent, such Lender shall remain
responsible for the performance of its obligations hereunder, and the Borrower
and the Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement pursuant to which any Lender may grant such a
participating interest shall provide that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
agreement may provide that such Lender will not agree to any modification,
amendment or waiver of this Agreement described in clause (x) of the second
proviso or clause (1) of the third proviso, to Section 8.01(A) (unless the
participant's share of such Lender's Revolving Facility Commitment would not be
increased and any additional obligations imposed on the Lenders would not be
imposed upon the participant) or in clauses (y) or (z) of the second proviso or
clauses (2) and (3) of the third proviso, of Section 8.01(A) without the consent
of the Participant. The Borrower agrees that each Participant shall, to the
extent provided in its participation agreement, be entitled to the benefits of
Sections 2.10(E), 2.12, 2.14, 2.16, 2.17, 2.18, 2.19 and 8.04 with respect to
its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
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(c) Any Lender may at any time assign to one or more commercial
banks, mutual funds, financial institutions or other "ACCREDITED INVESTORS" (as
defined in Regulation D of the Securities Act of 1933, as amended) (each an
"ASSIGNEE") all or any part (equivalent, except when the Assignee is either an
Affiliate of such transferor Lender or already a Lender prior to such
assignment, to at least $5,000,000) of its rights and obligations under this
Agreement, and such Assignee shall assume such rights and obligations, in
respect of its Revolving Facility Commitment, all of its outstanding Revolving
Facility Advances, all of its outstanding Letters of Credit and all of its
outstanding Letter of Credit Obligations. In addition, the Swingline Lender may
at any time assign its rights in respect of outstanding Swingline Advances to
Lenders with Revolving Facility Commitments in accordance with Section 2.01(C).
When all of the following conditions shall have been satisfied, such Assignee
shall be a Lender party to this Agreement and shall have all the rights and
obligations of a Lender with a Revolving Facility Commitment and/or Swingline
Advances, as the case may be, as set forth in such Assignment and Assumption
Agreement, and the transferor Lender shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required:
(x) delivery of an Assignment and Assumption Agreement
executed by such Assignee and such transferor Lender, with the
subscribed consent of the Borrower and the Administrative Agent,
which consents shall not be unreasonably withheld or delayed;
provided that (i) if the Assignee is either an Affiliate of such
transferor Lender or was a Lender immediately prior to such
assignment, no such consents shall be required and (ii) if such
assignment is made while any Default is continuing, the consent of
the Borrower shall not be required;
(y) payment by such Assignee to such transferor Lender
of an amount equal to the purchase price agreed between such
transferor Lender and such Assignee (or, in the case of the
assignment of Swingline Advances, payment of the purchase price as
set forth in Section 2.01(C)); and
(z) except in the case of the assignments pursuant to
Section 2.04 and assignments of Swingline Advances pursuant to
Section 2.01(C), payment to the Administrative Agent of a non-
refundable administrative fee for processing such assignment in the
amount of $1,000 if the Assignee was a Lender immediately prior to
such assignment, or $3,500 otherwise.
112
<PAGE>
If the Assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall deliver to the Borrower and the
Administrative Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 2.14.
(d) Any Lender may at any time assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank. No such
assignment shall release the transferor Lender from its obligations hereunder.
(e) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and Assumption Agreement
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the Revolving Facility Commitment and Swingline
Commitment of, and principal amount of the Advances owing to, each Lender from
time to time (the "REGISTER"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(f) Upon its receipt of a completed Assignment and Assumption
Agreement that has been executed and consented to in accordance with Section
8.07(C), together with any Note or Notes subject to such assignment, the
Administrative Agent shall (i) accept such Assignment and Assumption Agreement,
(ii) record the information contained therein in the Register and (iii) give
prompt notice thereof to the Borrower. Except in the case of assignments
pursuant to Section 2.04, within five Domestic Business Days after its receipt
of such notice, the Borrower, at its own expense, shall execute and deliver to
the Administrative Agent in exchange for the surrendered Note or Notes,
appropriate new Note or Notes, to the order of such Assignee and, if the
assigning Lender has retained any Revolving Facility Commitment or any Advances,
appropriate new Note or Notes to the order of the assigning Lender. Except in
the case of the assignments pursuant to Section 2.04, as described in Section
2.03(A), and except in the case of assignments of Swingline Advances, such new
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the effective
date of such Assignment and Assumption Agreement and shall otherwise be in
substantially the form of Exhibit A-1 or Exhibit A-2, as the case may be.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information
113
<PAGE>
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender.
SECTION 8.08. Headings. Article and Section headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 8.09. Execution in Counterparts; Integration. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 8.10. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforce ability of such provision in any other jurisdiction.
SECTION 8.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
SYNDICATION AGENT, THE DOCUMENTATION AGENT, THE ADMINISTRATIVE AGENT, THE
ISSUING BANK AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY
OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 8.12. Submission to Jurisdiction; Consent to Service of
Process. The Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State court sitting in New York City for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. The Borrower irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum. Each of the parties hereto irrevocably consents to service of process in
the manner provided for notices in Section 8.02 (except that process may not be
served by telecopy).
114
<PAGE>
Nothing in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.
SECTION 8.13. Consent to Amendment. Each Lender hereby consents to,
and hereby authorizes the Administrative Agent to execute and deliver, the 1997
Global Collateral Documents and Guaranty Agreement Amendment and the Mortgage
Amendments.
SECTION 8.14. Survival. The obligations of the Borrower under
Sections 2.10(E), 2.12, 2.14, 2.18 and 8.04 hereof and the obligations of the
Lenders under Section 7.06 hereof shall survive the repayment of the Advances
and the Letter of Credit Obligations and the termination of the Revolving
Facility Commitments, the Swingline Commitment and the Letters of Credit.
115
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
YOUNG BROADCASTING INC.
By: /s/ James A. Morgan
--------------------------------
Title: Executive Vice President
and Chief Financial Officer
BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT AND AS
ISSUING BANK
By: /s/ Anthony Lo Grippo
--------------------------------
Title: Vice President
CANADIAN IMPERIAL BANK OF COMMERCE, AS
DOCUMENTATION AGENT
By: /s/ Lorain C. Granberg
--------------------------------
Title: Authorized Signatory
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS
SYNDICATION AGENT
By: /s/ R. Blake Witherington
--------------------------------
Title: Vice President
116
<PAGE>
BANKS
- -----
BANKERS TRUST COMPANY
By: /s/ Anthony Lo Grippo
--------------------------------
Title: Vice Present
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By: /s/ Carl F. Salas
--------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Debra L. McGarry
--------------------------------
Title: Assistant Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Glenn B. Eckert
--------------------------------
Title: Vice President
117
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Lorain C. Granberg
--------------------------------
Title: Authorized Signatory
COMMERCIAL LOAN FUNDING
TRUST I
By: Lehman Commercial Paper Inc.,
not in its individual capacity but
solely as administrative agent
By: /s/ Michele Swanson
--------------------------------
Title: Authorized Signatory
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
By: /s/ Brian O'Leary
--------------------------------
Title: Vice President
By: /s/ Marcus Edward
--------------------------------
Title: Vice President
118
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH
By: /s/ M. Christina Debler
--------------------------------
Title: Vice President
/s/ Ian Reece
--------------------------------
Title: Senior Credit Officer
CREDIT AGRICOLE INDOSUEZ
By: /s/ Craig Welch
--------------------------------
Title: First Vice President
By: Richard Manix
--------------------------------
Title: First Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ Frank A. Bertelle
--------------------------------
Title: Assistant Vice President
BANKBOSTON, N.A.
By: /s/ Robert F. Milordi
--------------------------------
Title: Managing Director
119
<PAGE>
FIRST UNION NATIONAL BANK, AS
SWINGLINE LENDER AND AS A
BANK
By: /s/ Bruce W. Loftin
--------------------------------
Title: Senior Vice President
FLEET BANK, N.A.
By: /s/ Adam Bester
--------------------------------
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Janet Williams
--------------------------------
Title: Duly Authorized Signatory
HELLER FINANCIAL, INC.
By: /s/ Patrick Hayes
--------------------------------
Title: Vice President
IMPERIAL BANK
By: /s/ Ray Vadalma
--------------------------------
Title: Senior Vice President
120
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By: /s/ Tetsuo Kushiya
--------------------------------
Title: Vice President
LTCB TRUST COMPANY
By: /s/ Shuichi Tajima
--------------------------------
Title: Senior Vice President
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By: /s/ Gregory D. Knudsen
--------------------------------
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ R. Blake Witherington
--------------------------------
Title: Vice President
121
<PAGE>
NATEXIS BANQUE BFCE
By: /s/ Evan Kraus
--------------------------------
Title: Associate
By: /s/ Frederick K. Kammler
--------------------------------
Title: Vice President
THE SANWA BANK, LIMITED, NEW
YORK BRANCH
By: /s/ Shayn P. March
--------------------------------
Title: Assistant Vice President
SOCIETE GENERALE, NEW YORK
BRANCH
By: /s/ Aamer Shahab
--------------------------------
Title: Vice President
SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION
By: /s/ Janet P. Sammons
--------------------------------
Title: Vice President
122
<PAGE>
OLD LENDERS
-----------
BANK OF IRELAND GRAND
CAYMAN
By: /s/ Michael G. Doyle
--------------------------------
Title: A.V.P. Corporate Banking
BANQUE PARIBAS
By: /s/ Lynne S. Randall
--------------------------------
Title: Director
By: /s/ William B. Schink
--------------------------------
Title: Director
MELLON BANK N.A.
By: /s/ Nathan H. Kehm
--------------------------------
Title: Assistant Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisors
By: /s/ Scott H. Page
--------------------------------
Title: Vice President
123
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Kathleen A. Zarn
--------------------------------
Title: Vice President
EACH OF THE UNDERSIGNED GUARANTORS HEREBY CONSENTS
TO THE FOREGOING AMENDED AGREEMENT:
YOUNG BROADCASTING OF LANSING, INC.
YOUNG BROADCASTING OF LOUISIANA, INC.
YOUNG BROADCASTING OF LA CROSSE, INC.
YOUNG BROADCASTING OF NASHVILLE, INC.
YOUNG BROADCASTING OF ALBANY, INC.
WINNEBAGO TELEVISION CORPORATION
KLFY, L.P.
BY: YOUNG BROADCASTING OF LOUISIANA, INC., ITS GENERAL PARTNER
WKRN, L.P.
BY: YOUNG BROADCASTING OF NASHVILLE, INC., ITS GENERAL PARTNER
LAT, INC.
YBT, INC.
YOUNG BROADCASTING OF RICHMOND, INC.
YOUNG BROADCASTING OF GREEN BAY, INC.
YOUNG BROADCASTING OF KNOXVILLE, INC.
WATE, L.P.
BY: YOUNG BROADCASTING OF KNOXVILLE, INC., ITS GENERAL PARTNER
YBK, INC.
YOUNG BROADCASTING OF DAVENPORT, INC.
YOUNG BROADCASTING OF SIOUX FALLS, INC.
YOUNG BROADCASTING OF RAPID CITY, INC.
YOUNG BROADCASTING OF LOS ANGELES, INC.
FIDELITY TELEVISION, INC.
By: /s/ James A. Morgan
--------------------------------
Title: Executive Vice President
and Chief Financial Officer
124
<PAGE>
EXHIBIT 10.25
EXECUTION COPY
--------------
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 5, 1998, by and among
YOUNG BROADCASTING INC., a Delaware corporation ("Parent"), AYI ACQUISITION
CORPORATION, a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Sub"), and ADAM YOUNG INC., a New York corporation ("Target", and
together with Merger Sub, the "Constituent Corporations"), and Adam Young,
Vincent J. Young and Margaret Young (collectively, the "Shareholders").
RECITALS
--------
A. The Boards of Directors of Merger Sub and Target have approved the
acquisition by Merger Sub of the business of Target through the merger of Target
with and into Merger Sub (the "Merger"), as described more fully below.
B. The Shareholders, as the owners of all of the outstanding shares of
Common Stock, $5.00 par value ("Target Common Stock"), of Target, have approved
and wish to consummate the Merger.
C. Pursuant to authority conferred by its Board of Directors, Parent, as
the sole shareholder of Merger Sub, has approved and wishes to consummate the
Merger.
D. For federal income tax purposes, it is intended by the parties hereto
that the Merger qualify as a reorganization within the meaning of Section
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code").
E. Each of the parties hereto desires to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions thereto.
F. Capitalized terms not defined in text are used as defined in Article
VIII.
AGREEMENT
---------
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
<PAGE>
ARTICLE I
THE MERGER
----------
I.1 The Merger. (a) At the Effective Time (as defined in Section
----------
1.2), and subject to the terms and conditions of this Agreement, Target shall be
merged with and into Merger Sub and the separate existence of Target shall
thereupon cease, in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL") and the Business
Corporation Law of the State of New York (the "NYBCL").
(b) Merger Sub will be the surviving corporation in the Merger
(sometimes referred to herein as the "Surviving Corporation") and will continue
to be governed by the laws of the State of Delaware, and the separate corporate
existence of Merger Sub and all of its rights, privileges, immunities and
franchises, public or private, and all its duties and liabilities as a
corporation organized under the DGCL, will continue unaffected by the Merger.
(c) The Merger will have the effects specified by the DGCL and the
NYBCL.
I.2 Effective Time. Subject to and in accordance with the laws of
--------------
the State of Delaware and the State of New York, the Merger will become
effective upon the later to occur of (a) the filing of this Agreement or a
certificate of merger with the office of the Secretary of State of the State of
Delaware pursuant to Section 252 of the DGCL and (b) the filing of a certificate
of merger with the office of the Department of State of the State of New York
pursuant to Section 907 of the NYBCL (the later to occur of such filings being
the "Effective Time"). Each of the parties will use its reasonable commercial
efforts to cause the Merger to be consummated as soon practicable following the
execution and delivery hereof.
ARTICLE II
THE SURVIVING CORPORATION
-------------------------
II.1 Certificate of Incorporation. The Certificate of Incorporation
----------------------------
of Merger Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time.
II.2 By-Laws. The By-Laws of Merger Sub as in effect immediately
-------
prior to the Effective Time shall be the By-Laws of the Surviving Corporation
after the Effective Time.
2
<PAGE>
II.3 Board of Directors. From and after the Effective Time, the
------------------
Board of Directors of Merger Sub shall be the Board of Directors of the
Surviving Corporation.
ARTICLE III
CONVERSION OF SHARES
--------------------
III.1 Conversion of Target Shares in the Merger. Target is authorized
to issue 50,000 shares of Target Common Stock. There are outstanding 25,000
shares of Target Common Stock. The Target Common Stock is the only outstanding
class of capital stock of Target. The number of outstanding shares of Target
Common Stock is not subject to change prior to the Effective Time. At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder of any capital stock of Target, each issued and outstanding share of
Target Common Stock shall, subject to Section 3.3(c), be converted into, and
become exchangeable for, the number of shares of validly issued, fully paid and
nonassessable Common Stock, $.001 par value, of Parent ("Parent Common Stock")
equal to a fraction, the numerator of which shall be an amount (the "Aggregate
Merger Consideration") equal to the sum of (i) $19,350,000, divided by an
amount, no less than $40.00, equal to the average closing sale price of a share
of Class A Parent Common Stock, as quoted by the Nasdaq National Market, for the
five full trading days immediately preceding the third full trading day prior to
the date hereof, plus (ii) the number of shares of Parent Common Stock owned by
Target; and the denominator of which is equal to the number of shares of Target
Common Stock issued and outstanding.
III.2 Status of Merger Sub Shares. At the Effective Time, by virtue of
---------------------------
the Merger and without any action on the part of any holder of any capital stock
of Merger Sub, each issued and outstanding share of Common Stock, $.01 par
value, of Merger Sub shall continue unchanged and remain outstanding as a share
of common stock of the Surviving Corporation.
3
<PAGE>
III.3 Exchange of Stock Certificates. (a) Concurrently with the
------------------------------
execution and delivery hereof, each Shareholder shall surrender to Parent
certificate(s) ("Target Certificates") which represent such Shareholder's
outstanding shares of Target Common Stock and, in exchange therefor, Parent
shall (i) issue to each Shareholder a certificate or certificates representing
the number of whole shares of Parent Common Stock into which such Shareholder's
shares of Target Common Stock shall be converted pursuant to Section 3.1 and
(ii) transfer cash in lieu of any fractional shares of such Parent Common Stock
pursuant to Section 3.3(c).
(b) Upon the surrender of Target Certificates as provided above, the
Target Certificates so surrendered shall forthwith be canceled.
(c) Notwithstanding any other provision of this Agreement, no
certificates or scrip for fractional shares of Parent Common Stock shall be
issued upon the surrender for exchange of Target Certificates pursuant to this
Article III in the Merger. Each Shareholder who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Target Certificates for exchange pursuant to this Article III shall be entitled
to receive from Parent a cash payment in lieu of such fractional share equal to
such fraction multiplied by the closing sale price of a share of Class A Parent
Common Stock, as quoted by the Nasdaq National Market, for the trading day
immediately preceding the date hereof.
III.4 Closing of Transfer Books. From and after the Effective Time,
-------------------------
the stock transfer books of Target shall be closed and no transfer of shares of
Target Common Stock shall thereafter be made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
IV.1 Representations and Warranties of Parent and Merger Sub. Parent
-------------------------------------------------------
and Merger Sub, jointly and severally, represent and warrant to each of Target
and the Shareholders, as of the date hereof and as of the Effective Time, as
follows:
IV.1.1 Corporate Status. Each of Parent and Merger Sub is a
----------------
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own
or lease its properties and to carry on its business as presently conducted.
There is no pending or threatened proceeding for the dissolution, liquidation
4
<PAGE>
or insolvency of either Parent or Merger Sub.
IV.1.2 Power and Authority. Each of Parent and Merger Sub has
-------------------
the corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. Each of Parent and Merger Sub has taken all corporate
action necessary to authorize the execution and delivery of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby.
IV.1.3 Enforceability. This Agreement has been duly executed
--------------
and delivered by each of Parent and Merger Sub, and constitutes the legal, valid
and binding obligation of them, enforceable against them in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
IV.1.4 No Violation. The execution and delivery of this
------------
Agreement by Parent and Merger Sub, the performance by Parent and Merger Sub of
their respective obligations hereunder and the consummation by Parent and Merger
Sub of the transactions contemplated by this Agreement will not: (i) contravene
any provision of their Organizational Documents; (ii) violate or conflict with
any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or of any arbitration award
which is either applicable to, binding upon or enforceable against either of
them; (iii) conflict with, result in any breach of, constitute a default (or an
event which would, with the passage of time or the giving of notice or both,
constitute a default) under, require any consent under, or give rise to a right
of payment under or the right to terminate, amend, modify, abandon or
accelerate, or adversely affect the rights and privileges under, any Contract
which is applicable to, binding upon or enforceable against Parent or Merger
Sub; (iv) result in or require the creation or imposition of any Lien upon or
with respect to any of the properties or assets of Parent, Merger Sub or any
subsidiary of either of them; (v) give to any individual or entity a right or
claim against Parent, Merger Sub or any subsidiary of either of them; or (vi)
require the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any other
Person other than (a) pursuant to the Securities Act and the Exchange Act and
applicable listing requirements of The Nasdaq Stock Market, Inc. and (b) as have
been obtained.
5
<PAGE>
IV.1.5 No Brokers. Neither of Parent nor Merger Sub has
----------
incurred any obligation for any finder's, broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
IV.1.6 Reports and Financial Statements. Since January 1, 1997,
--------------------------------
Parent has filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with the SEC under the
Securities Act and the Exchange Act, including, but not limited to, any Forms
10-K, Forms 10-Q, Forms 8-K and proxy statements (collectively, the "Parent
Reports"). As of their respective dates (but taking into account any amendments
filed prior to the date of this Agreement), the Parent Reports complied in all
material respects with all the rules and regulations promulgated by the SEC and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated herein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
IV.1.7 Opinion of Financial Advisors. Parent has received an
-----------------------------
opinion from Bear, Stearns & Co. Inc. to the effect that the consideration to be
paid by Parent in the Merger is fair to Parent's stockholders from a financial
point of view and such opinion has not been modified or withdrawn.
IV.2 Representations and Warranties of Target and Shareholders.
---------------------------------------------------------
Target and the Shareholders, jointly and severally, represent and warrant to
each of Parent and Merger Sub, as of the date hereof and as of the Effective
Time, as follows:
IV.2.1 Corporate Status. Target is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the State of New York
and has the requisite power and authority to own or lease its properties and to
carry on its business as presently conducted. Target is legally qualified to do
business as a foreign corporation in each of the jurisdictions where the nature
of the properties and the conduct of its business require such qualification and
is in good standing in each of the jurisdictions in which it is so qualified,
except where the failure to so qualify would not cause a Material Adverse Effect
to Target. There is no pending or threatened proceeding for the dissolution,
liquidation or insolvency of Target.
IV.2.2 Power and Authority. Target has the corporate power and
-------------------
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Target has
taken all
6
<PAGE>
corporate action necessary to authorize its execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. Each of the Shareholders has the requisite
capacity and the power and authority to execute and deliver this Agreement, to
perform such Shareholder's obligations hereunder and to consummate the
transactions contemplated hereby.
IV.2.3 Enforceability. This Agreement has been duly executed and
--------------
delivered by Target and each of the Shareholders and constitutes the legal,
valid and binding obligation of each of them, enforceable against each of them
in accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
IV.2.4 Capitalization. The authorized capital stock of Target
--------------
consists solely of 50,000 shares of Target Common Stock, of which 25,000 shares
are validly issued and outstanding, fully paid and non-assessable, and no shares
are held in treasury. There are no (i) preemptive rights, rights of first
refusal or similar rights with respect to the shares of capital stock of Target,
and no such rights shall arise or become exercisable by virtue of or in
connection with the transactions contemplated hereby; (ii) no outstanding or
authorized rights, options, warrants, convertible securities, subscription
rights, conversion rights, exchange rights or other agreements or commitments of
any kind that could require Target to issue or sell any shares of its capital
stock (or securities convertible into or exchangeable for shares of its capital
stock); (iii) no outstanding stock appreciation, phantom stock, profit
participation or other similar rights with respect to Target; (iv) no proxies,
voting rights or other agreements or understandings with respect to the voting
or transfer of the capital stock of Target; and (v) no outstanding agreements,
arrangements or understandings pursuant to which Target is obligated to redeem
or otherwise acquire any of its outstanding shares of capital stock. A correct
and complete copy of the Organizational Documents of Target, as amended to date,
were previously delivered to Parent and Merger Sub, and no changes therein will
be made subsequent to the date hereof and prior to the Effective Time.
IV.2.5 No Subsidiaries. Target does not own or hold, directly or
---------------
indirectly, any shares of stock or any other securities, or otherwise have any
interest, in any Person, other than 50,450 shares of Parent Common Stock, which
upon
7
<PAGE>
consummation of the Merger shall neither be entitled to vote nor be counted for
quorum purposes in accordance with the DGCL.
IV.2.6 No Violation. The execution and delivery of this
------------
Agreement by Target and the Shareholders, the performance by Target and the
Shareholders of their respective obligations hereunder and the consummation by
Target and the Shareholders of the transactions contemplated by this Agreement
will not: (i) contravene any provision of the Organizational Documents of
Target; (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment, ruling or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against Target or any Shareholder; (iii)
conflict with, result in any breach of, constitute a default (or an event which
would, with the passage of time or the giving of notice or both, constitute a
default) under, require any consent under, or give rise to a right of payment
under or the right to terminate, amend, modify, abandon or accelerate, or
adversely affect the rights and privileges under, any Contract which is
applicable to, binding upon or enforceable against Target or any Shareholder;
(iv) result in or require the creation or imposition of any Lien upon or with
respect to any of the property or assets of Target; (v) give to any individual
or entity a right or claim against Target, which would have a Material Adverse
Effect on Target; or (vi) require the consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person, except such filings as may be required to be made
by Parent or Merger Sub.
IV.2.7 Financial Statements. The financial statements of Target
--------------------
attached hereto as Schedule 4.2.7 have been prepared in accordance with GAAP
consistently applied during the periods presented (except as noted therein) and
fairly present (subject, in the case of the unaudited statements, to normal
audit adjustments) in all material respects the financial position of Target as
of the date thereof and the results of its operations and its cash flows for the
periods shown therein.
IV.2.8 Material Developments; Absence of Undisclosed Liabilities;
----------------------------------------------------------
Title to Assets. Except as disclosed on Schedule 4.2.8, since December 31,
- ---------------
1997, (i) there has been no Material Adverse Change with respect to Target, and
(ii) Target does not have any liabilities or obligations, whether accrued,
absolute, contingent or otherwise, except liabilities incurred in the ordinary
course of business consistent with past practice, or other liabilities which
would not have a reasonable likelihood of having a Material Adverse Effect on
Target. Target has good and marketable title to all of its assets reflected in
the balance sheet on Schedule 4.2.7 and all assets which were acquired
8
<PAGE>
subsequent to the date thereof, which have not been disposed of in the ordinary
and regular course of its business since the date thereof or since the date of
acquisition of such assets, respectively, free and clear of all Liens.
IV.2.9 Tax Matters. With respect to Taxes (as defined below):
------------
(a) Target has filed, within the time and in the manner prescribed by
law, all returns, declarations, reports, estimates, information returns and
statements ("Returns") required to be filed under federal, state, local or any
foreign laws by Target, and all such Returns are true, correct and complete in
all material respects.
(b) Target has within the time and in the manner prescribed by law,
paid all Taxes that are due and payable.
(c) Except for certain deferred taxes amounting to not more than
$65,000 related to the conversion of Target from a "C Corporation" to an "S
Corporation" on April 1, 1996, Target has established on its books and records
reserves (to be specifically designated as an increase to current liabilities)
that are adequate for the payment of all Taxes not yet due and payable.
(d) There are no Liens for Taxes upon the assets of Target except
Liens for Taxes not yet due.
(e) Target has not filed any consent agreement under Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of the subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by Target.
(f) The statute of limitations for the assessment of federal income
taxes has expired for all federal income tax returns of Target or such returns
have been examined by the Internal Revenue Service for all periods through March
31, 1995; the statute of limitations for the assessment of state, local and
foreign income taxes has expired for all applicable Returns of Target or such
Returns have been examined by the appropriate tax authorities for all periods
through March 31, 1995; and no deficiency for any Taxes has been proposed,
asserted or assessed against Target which has not been resolved and paid in
full.
(g) There are no outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or
Returns that have been given by Target.
9
<PAGE>
(h) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Returns.
(i) Target is not a party to any tax-sharing or allocation agreement,
nor does Target owe any amount under any tax-sharing or allocation agreement.
(j) No amounts payable under any Employee Benefit Plan (as defined in
Section 4.2.11) will fail to be deductible for federal income tax purposes by
reason of Section 280G of the Code.
(k) Target has complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441
or 1442 of the Code or similar provisions under any foreign laws) and has,
within the time and in the manner prescribed by law, withheld from employee
wages and paid over to the proper Governmental Authorities all amounts required
to be so withheld and paid over under all applicable laws.
(l) Target has never been (or has any liability for unpaid Taxes
because it once was) a member of an "affiliated group" within the meaning of
Section 1502 of the Code.
(m) Target was an "S Corporation" within the meaning of Section 1361
et seq. of the Code for the fiscal year ended December 31, 1997 and is and will
- -- ----
continue to be an "S Corporation" until the Effective Time. At all times since
April 1, 1996, Target has filed its tax returns as an "S Corporation" and Target
has never received any notice that its "S Corporation" election is invalid.
(n) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments of whatever kind or nature,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, estimated, severance, stamp, occupancy or property
taxes, customs duties, fees, assessments or charges of any kind whatsoever
(together with any interest and any penalties, additions to tax or additional
amounts) imposed by any taxing authority (domestic or foreign) upon or payable
by Target.
IV.2.10 Representation Agreements. (a) Schedule 4.2.10 hereto
-------------------------
sets forth a list of the Representation Agreements. Each Representation
Agreement is in full force and effect and is a legal, valid and binding
obligation of Target, and there is not
10
<PAGE>
(i) any breach by Target or, to their knowledge, any other party, in the
performance of any obligation to be performed under any such Representation
Agreement; (ii) to their knowledge, any written notice of cancellation or
termination of any such Representation Agreement except as set forth on Schedule
4.2.10; or (iii) any Representation Agreement that has been canceled or
terminated since December 31, 1997 (except as set forth on Schedule 4.2.10).
(b) Except in each case where the failure would have no reasonable
likelihood of having a Material Adverse Effect, (i) the information on Schedule
4.2.10 is true and correct in all respects; and (ii) true and correct copies of
all Representation Agreements pertaining to the television broadcast companies
listed on Schedule 4.2.10 have been made available to representatives of Parent.
(c) Target makes no representation in this Section 4.2.10 regarding
representation agreements with Parent or its Affiliates and the term
"Representation Agreements" as used herein shall be deemed to exclude
representation agreements with Parent or its Affiliates.
IV.2.11 Employment Matters. Except as disclosed on Schedule
------------------
4.2.11 and other than those Employee Benefit Plans of Parent which cover the
employees of Target, there are no employee benefit plans or arrangements
maintained, contributed to or sponsored by the Target or any ERISA Affiliate or
under which Target or any ERISA Affiliate may incur any liability, including,
but not limited to, employee pension benefit plans, as defined in Section 3(2)
of ERISA, multiemployer plans, as defined in Section 3(37) or 4001(a)(3) of
ERISA, employee welfare benefit plans, as in Section 3(1) of ERISA, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, employment or consulting
or termination agreements, severance or termination pay plans and policies,
whether or not described in Section 3(3) of ERISA ("Employee Benefit Plans").
Except as disclosed on Schedule 4.2.11, the employment of all persons presently
employed or retained by Target is terminable at will. There is no contract,
agreement, plan or arrangement covering any employee or former employee of
Target that, individually or collectively, provides for the payment of any
amount (i) that is not deductible under Section 162(a)(1) or 404 of the Code or
(ii) that is an "excess parachute payment" pursuant to Section 280G of the Code.
None of Target or any ERISA Affiliate has any announced plan or legally binding
commitment to create any Employee Benefit Plan or other benefit arrangement
which is intended to cover employees or former employees of Target.
11
<PAGE>
IV.2.12 Environmental. Target is currently and has in the past
-------------
been in compliance with all Environmental Laws, except where the failure to be
or have been in compliance would not be reasonably likely to have a Material
Adverse Effect on Target. There are no existing, and Target is not aware of any
potential or threatened, Environmental Claims against Target which are
reasonably likely to have a Material Adverse Effect on Target. There are no
consent decrees, consent orders, judgments, judicial or administrative orders,
agreements with (other than permits) or liens by, any Governmental Authority or
quasi-governmental authority relating to any Environmental Laws which regulate,
obligate or bind Target.
IV.2.13 Litigation. There is no action, suit or other legal or
----------
administrative proceeding or governmental investigation pending, or, to their
knowledge, threatened, anticipated or contemplated against, by or affecting
Target or any of Target's properties or assets which question the validity or
enforceability of this Agreement or the transactions contemplated hereby. There
are no outstanding orders, decrees or stipulations issued by any Governmental
Authority in any proceeding to which Target is or was a party which have not
been complied with in full or which continue to impose any obligations on Target
(other than those that would not be reasonably likely to have a Material Adverse
Effect).
IV.2.14 Patents, Trademarks, Etc. To their knowledge, Target
------------------------
owns, or is licensed or otherwise has adequate right to use, all patents, patent
rights, trademarks, trademark rights, service marks, service mark rights, trade
names, trade name rights, copyrights, know-how, technology, trade secrets and
other proprietary information (collectively, the "Intellectual Property") which
are material to the conduct of the business of Target. To their knowledge, no
claims have been asserted by any Person, and Target has not asserted a claim
against any Person, with respect to any of the Intellectual Property owned or
used by Target, challenging or questioning the validity or effectiveness of any
license or agreement relating thereto to which Target is a party, in any case
that would be reasonably likely to have a Material Adverse Effect on Target.
IV.2.15 Compliance with Law. The business of Target is being
-------------------
conducted and the properties and assets of Target are currently owned or
operated in all material respects in compliance with all laws, ordinances,
regulations, orders, judgments, injunctions, awards and decrees of Governmental
Authorities.
IV.2.16 Absence of Liens. Except for Liens that would not
----------------
interfere in any material respect with the use and
12
<PAGE>
operation of Target's business, there are no Liens on any of the assets of
Target to secure indebtedness for borrowed money.
IV.2.17 No Brokers. Neither Target nor any of the Shareholders
----------
has incurred any obligation for any finder's, broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
ARTICLE V
COVENANTS
---------
V.1 Conduct of Business of Target Pending the Merger. Target agrees
------------------------------------------------
that, from the date hereof and prior to the Effective Time, the business of
Target shall be conducted only in, and Target shall not take any action except
in, the ordinary course of business consistent with past practice. Target shall
use its reasonable commercial efforts to preserve intact Target's present lines
of business, maintain its respective rights and preserve its respective present
relationships with customers, suppliers and other persons with which it has
significant business relations.
V.2 Further Assurances. Each party shall execute and deliver such
------------------
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
V.3 Cooperation. Each of the parties agrees to cooperate with the
-----------
other in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by this
Agreement and to use their respective reasonable commercial efforts to agree
jointly on a method to overcome any objections by any Governmental Authority to
any such transactions.
V.4 Other Actions. Each of the parties hereto shall use its
-------------
reasonable commercial efforts to take, or cause to be taken, all appropriate
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated herein as soon as possible, including, without
limitation, using its reasonable commercial efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of any
Governmental Authority and parties to Contracts with Target as are necessary for
the consummation of the transactions contemplated hereby; provided,
13
<PAGE>
however, in no event shall either party be required to divest or forfeit
material incidents of control of any material assets in order to obtain approval
of a Governmental Authority. Each of the parties shall make on a prompt and
timely basis all governmental or regulatory notifications and filings required
to be made by it for the consummation of the transactions contemplated hereby.
V.5 Access to Information. From the date hereof to the Effective
---------------------
Time, Target shall afford the officers, employees, auditors, counsel,
representatives and agents (the "Representatives") of Parent and Merger Sub
reasonable access at all reasonable times to its officers, employees, agents,
properties, offices and other facilities, books, records and tax returns, and
shall furnish such Representatives with all financial, operating and other data
and information as may be reasonably requested.
V.6 Notification of Certain Matters. Each of the parties to this
-------------------------------
Agreement shall give prompt notice to the other parties of the occurrence or
non-occurrence of any event which would likely cause any covenant, condition or
agreement contained herein not to be complied with or satisfied; provided,
however, that, any such disclosure shall not in any way be deemed to amend,
modify or in any way affect the representations, warranties and covenants made
by any party in or pursuant to this Agreement.
V.7 Publicity. The parties hereto will consult with each other
---------
before issuing, and provide each other the opportunity to review, comment upon
and concur with, any press release or other public statements with respect to
the transactions completed by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
either party may determine is required by applicable law, court process or by
obligations pursuant to any listing agreement. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form agreed upon by the parties.
V.8 FCC Filings. The parties shall make such filings as may be
-----------
required to reflect changes in ownership as a result of the transactions
contemplated hereby, as may be required by the rules and regulations of the
Federal Communications Commission.
5.9 Listing of Additional Parent Shares. Parent shall take such
-----------------------------------
actions as are necessary (including the filing with The Nasdaq Stock Market,
Inc. of a notice for the listing of additional shares and payment of the
requisite fee) for the
14
<PAGE>
issuance of shares of Parent Common Stock pursuant to this Agreement.
5.10 Qualification as Reorganization. Each party agrees to refrain
-------------------------------
from taking any action that could increase the likelihood of the transactions
contemplated hereby becoming taxable to any party.
15
<PAGE>
ARTICLE VI
INDEMNIFICATION
---------------
16
<PAGE>
VI.1 General Indemnification Covenants. Subject to the last sentence
---------------------------------
of this Section 6.1, Target and the Shareholders, jointly and severally, agree
to indemnify and hold harmless Parent and Merger Sub from and against, and to
reimburse Parent and Merger Sub with respect to, any and all loss, damage,
liability, cost and expense, including reasonable attorneys' fees (collectively,
"Losses"), incurred by Parent or Merger Sub by reason of or arising out of or in
connection with (i) a breach of any representation or warranty contained in
Sections 4.2, 7.3 or 7.10 or in any certificate delivered to Parent or Merger
Sub pursuant to the provisions of this Agreement, (ii) the failure of Target or
the Shareholders to perform any agreement required by this Agreement to be
performed by them, unless such performance was or is prohibited by law or by
court order, (iii) the alleged existence by any third party of any liability,
obligation, lease, agreement, contract, other commitment or state of facts which
if it existed would constitute a breach of any representation or warranty
contained in said Sections 4.2, 7.3 or 7.10 or in any certificate delivered to
Parent or Merger Sub pursuant to the provisions of this Agreement, or (iv) any
actions, suits, proceedings or investigations involving Target arising out of
any matter occurring or accruing prior to the Effective Time. Target and the
Shareholders, jointly and severally, also agree (subject to the last sentence of
this Section 6.1) to pay Parent or Merger Sub (as the case may be) interest on
any amount paid by Parent or Merger Sub pursuant to this Section 6.1 from the
date when such damage, liability, cost or expense was paid by Parent or Merger
Sub or such loss was incurred by Parent or Merger Sub, at a rate per annum equal
to the so-called "prime rate" as announced from time to time by Citibank N.A.,
but not higher than the maximum interest rate legally payable under the laws of
the State of New York. Parent and Merger Sub agree to give prompt notice to the
Shareholders of the alleged existence by any third party of any liability,
obligation, lease, agreement, contract, other commitment or state of facts
referred to in clause (iii) or clause (iv) above and the Shareholders shall have
the right to participate in, and, with the consent of Parent and Merger Sub,
which consent shall not be unreasonably withheld or delayed, to control the
contest and defense of any such claim at their own cost and expense, including
the cost and expense of attorneys' fees in connection with such contest and
defense. Notwithstanding the foregoing, Target and the Shareholders shall not be
liable for or with respect to such Losses (a) until the aggregate amount of all
such Losses incurred by Parent and Merger Sub exceeds $100,000, at which point
Target and the Shareholders shall be required to indemnify Parent and Merger Sub
from any and all such Losses, including the first $100,000 of such Losses and
(b) to the extent that the aggregate amount of all such Losses incurred by
Parent and Merger Sub exceed the Aggregate Merger Consideration.
17
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
------------------
VII.1 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage pre-
paid) or guaranteed overnight delivery, to the following addresses and telecopy
numbers (or to such other addresses or telecopy numbers which such party shall
designate in writing to the other party):
(a) if to Target or any of the Shareholders to:
Adam Young Inc.
599 Lexington Avenue
New York, NY 10022
Attn: Adam Young
Telecopy: (212) 758-5090
with a copy to:
Kelly Drye & Warren
101 Park Avenue
New York, NY 10178
Attn: Eugene D'Ablemont, Esq.
Telecopy: (212) 808-7879
(b) if to Parent or Merger Sub to:
Young Broadcasting Inc.
599 Lexington Avenue
New York, NY 10022
Attn: Vincent J. Young
Telecopy: (212) 758-1229
with a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, NY 10022
Attn: Robert L. Winikoff, Esq.
Telecopy: (212) 755-2839
VII.2 Entire Agreement. This Agreement, the Schedules
----------------
18
<PAGE>
hereto and other documents delivered pursuant hereto contain the entire
understanding of the parties in respect of its subject matters and supersedes
all prior agreements and understanding (oral or written) between or among the
parties with respect to such subject matter.
VII.3 Expenses. Each of the parties hereto shall pay all the fees and
--------
expenses incurred by it incident to preparing for, entering into and carrying
into effect this Agreement and the transactions contemplated herein; provided
that Target covenants and represents and warrants that such fees and expenses
incurred by Target for services of attorneys, accountants and other advisors to
Target associated with the transactions contemplated herein, will not exceed
$150,000.
VII.4 Amendment; Waiver. This Agreement may not be modified, amended,
-----------------
supplemented, canceled, or discharged, except by written instrument executed by
all parties. No failure to exercise and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts.
VII.5 Binding Effect; Assignment. The rights and obligations of this
--------------------------
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by Parent and Merger Sub, on the one hand, and
Target and the Shareholders, on the other hand, without the prior written
consent of the other.
VII.6 Representations and Warranties. All of the representations and
------------------------------
warranties contained in this Agreement or any instrument or other document
delivered pursuant to this Agreement shall survive the Effective Time and,
except with respect to the representations and warranties set forth in Section
4.2.9 which shall terminate on the fourth anniversary of the date hereof, shall
terminate on the first anniversary of the date hereof.
VII.7 Counterparts. This Agreement may be executed in
------------
19
<PAGE>
any number of counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
VII.8 Interpretation. When a reference is made in this Agreement to an
--------------
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever, the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
VII.9 Governing Law; Interpretation. This Agreement shall be construed
-----------------------------
in accordance with and governed for all purposes by the laws of the State of New
York without giving effect to the principles of conflicts of laws thereunder
which would specify the application of the law of another jurisdiction.
VII.10 Arm's length Negotiations. Each party hereto expressly
-------------------------
represents and warrants to all other parties hereto that (i) before executing
this Agreement, said party has fully informed himself or itself of the terms,
contents, conditions, and effects of this Agreement; (ii) said party has relied
solely and completely upon his or its own judgment in executing this Agreement;
(iii) said party has had the opportunity to seek and has obtained the advice of
counsel before executing this Agreement; (iv) said party has acted voluntarily
and of his or its own free will in executing this Agreement; (v) said party is
not acting under duress, whether economic or physical, in executing this
Agreement; and (vi) this Agreement is the result of arm's length negotiations
conducted by and among the parties and their respective counsel.
ARTICLE VIII
DEFINITIONS
-----------
VIII.1 Defined Terms. As used herein, the following terms shall have
-------------
the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
Exchange Act, as in effect on the date hereof.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment agreement,
license, instrument, purchase and sales order, commitment, undertaking,
obligation, whether written
20
<PAGE>
or oral, express or implied.
"Environmental Claims" means all accusations, allegations, notices of
violation, Liens, claims, demands, suits, or causes of action for any damage,
including, without limitation, personal injury, property damage (including,
without limitation, any depreciation or diminution of property values), lost use
of property or consequential damages, arising directly or indirectly out of (i)
Environmental Laws; or (ii) the presence, use, handling, storage, treatment,
recycling, generation, transportation, release, spilling, leaking, pumping,
pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping
or threatened release of Hazardous Substances at any location, whether or not
owned, leased or operated by Target.
"Environmental Laws" means all applicable federal, state, district,
local and foreign laws, all rules or regulations promulgated thereunder, and all
orders, consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata), including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, the Toxic Substances Control Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Safe
Drinking Water Act, the Clean Air Act, the Atomic Energy Act of 1954, the
Occupational Safety and Health Act and the Emergency Planning and Community-
Right-to-Know Act, each as amended, and all analogous laws promulgated or issued
by any Governmental Authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is (or at any relevant time
was) (i) a Subsidiary of Target, or (ii) a member of a "controlled group of
corporations" with, under "common control" with, or a member of an "affiliated
service group" with, Target, as set forth in Section 414(b), (c), (m) or (o) of
the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or
21
<PAGE>
government, any state, regional, local or other political subdivision thereof,
and any entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
and any other materials or substances subject to regulation, control or
remediation under Environmental Laws.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any conditional sale
or other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects. With respect to any Person, a Material Adverse Change (or Effect)
refers to such Person and its Subsidiaries.
"Organizational Documents" means, as to any entity, the certificate of
incorporation, by-laws or other organizational documents of such entity.
"Person" means any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Representation Agreement" means any agreement (including, without
limitation, any agreement applicable to a specific television broadcast station
(each, a "Station Agreement") or any master agreement, mutual agreement or
letter agreement (each, a "Master Agreement") applicable to one or more
television broadcast stations or Station Agreements) now in effect or hereafter
entered into between Target and owners and operators of broadcast television
stations pursuant to which Target sells advertising on such media, as such
agreements may be
22
<PAGE>
amended, supplemented or otherwise modified from time to time.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" shall mean, as to any Person, any corporation, joint
venture, limited liability company, partnership, other business entity or Person
of which at least a majority of voting securities or other ownership interests
are, at the time as of which any determination is being made, owned directly or
indirectly by such Person.
[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURES TO FOLLOW]
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger on the date first above written.
PARENT:
YOUNG BROADCASTING INC.
By:/s/ James A. Morgan
-------------------------------
Name: James A. Morgan
Title: Executive Vice President
MERGER SUB:
AYI ACQUISITION CORPORATION
By:/s/ James A. Morgan
-------------------------------
Name: James A. Morgan
Title: Executive Vice President
TARGET:
ADAM YOUNG INC.
By:/s/ Adam Young
-------------------------------
Name: Adam young
Title: Treasurer
SHAREHOLDERS:
/s/ Adam Young
- ----------------------------------
ADAM YOUNG
/s/ Vincent J. Young
- ----------------------------------
VINCENT J. YOUNG
/s/ Margaret Young
- ----------------------------------
MARGARET YOUNG
24
<PAGE>
EXHIBIT 11
YOUNG BROADCASTING INC. AND SUBSIDIARIES
RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------
DEC. 31, DEC. 31, DEC. 31,
1995 1996 1997
---------------------------------------------
<S> <C> <C> <C>
SHARES OF COMMON STOCK OUTSTANDING FOR THE ENTIRE PERIOD.......................
10,819,049 10,548,181 14,230,357
ISSUANCE OF 21,696, 27,685 AND 53,487 SHARES OF COMMON STOCK
TO THE COMPANY'S DEFINED CONTRIBUTION PLAN IN 1995, 1996
AND 1997, RESPECTIVELY....................................................... 17,357 27,382 39,798
ISSUANCE OF 19,312, 15,874 AND 23,000 SHARES OF COMMON STOCK
UPON EXERCISE OF OPTIONS IN 1995, 1996 AND 1997 RESPECTIVELY 11,111 10,398 10,304
REPURCHASE OF 311,876 AND 111,383 SHARES OF COMMON STOCK
FROM J.P. MORGAN CAPITAL CORPORATION IN 1995 AND 1996........................ (8,545) (110,773) -
ISSUANCE OF 3,750,000 PUBLICLY OFFERED STOCK................................... - 904,110 -
REPURCHASE OF 459,000 SHARES OF COMMON STOCK IN 1997............................ - - (290,490)
---------------------------------------------
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING.................................................................. 10,838,972 11,379,298 13,989,969
DILUTIVE EFFECT OF 688,937 OPTIONS AND 750,000 WARRANTS IN
1995 AND 1996 EXPECTED TO BE EXERCISED UNDER THE
TREASURY STOCK METHOD USING THE WEIGHTED AVERAGE
MARKET PRICE OF THE COMPANY'S SHARES OF COMMON
STOCK........................................................................ 232,182 403,824 -
---------------------------------------------
TOTAL DILUTIVE WEIGHTED AVERAGE SHARES OF COMMON
STOCK FOR THE PERIOD......................................................... 11,071,154 11,783,122 13,989,969
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ 2,533,743 $ 905,299 $ (1,106,269)
============ ============ ============
NET INCOME (LOSS) ($6,591,257) $ 905,299 $(10,349,397)
============ ============ ============
INCOME (LOSS) PER COMMON SHARE
BASIC
BEFORE EXTRAORDINARY ITEM................................................ $ 0.23 $ 0.08 $ (0.08)
============ ============ ============
NET INCOME (LOSS)....................................................... $ (0.61) $ 0.08 $ (0.74)
============ ============ ============
DILUTED
BEFORE EXTRAORDINARY ITEM............................................... $ 0.23 $ 0.08 $ (0.08)
============ ============ ============
NET INCOME (LOSS)...................................................... ($0.61) $ 0.08 $ (0.74)
============ ============ ============
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8, No. 333-26997) pertaining to the Young Broadcasting Inc. 1995 Stock Option
Plan and 401(k) Plan of our report dated February 6, 1998, with respect to the
consolidated financial statements and the financial statement schedule included
in this Form 10-K of Young Broadcasting Inc.
ERNST & YOUNG LLP
New York, New York
March 16, 1998
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<RECEIVABLES> 60193
<ALLOWANCES> 1872
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<CURRENT-ASSETS> 87480
<PP&E> 211482
<DEPRECIATION> 98731
<TOTAL-ASSETS> 845966
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<COMMON> 0
<OTHER-SE> 59,845
<TOTAL-LIABILITY-AND-EQUITY> 845966
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<INCOME-CONTINUING> (1106)
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<EXTRAORDINARY> (9243)
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<NET-INCOME> (10349)
<EPS-PRIMARY> (.74)
<EPS-DILUTED> (.74)
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