<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
COMMISSION FILE NUMBER: 0-27000
ARGYLE TELEVISION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2717523
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 CONCORD PLAZA, SUITE 700 (210) 828-1700
SAN ANTONIO, TEXAS 78216 (Registrant's telephone number,
(Address of principal executive offices) including area code)
-------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
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 twelve 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 [ ]
As of July 31, 1997, the Registrant had 11,346,914 shares of common stock
outstanding, consisting of 11,310,914 shares of Series A Common Stock and 36,000
shares of Series B Common Stock.
===============================================================================
<PAGE>
ARGYLE TELEVISION, INC.
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at
December 31, 1996 and June 30, 1997
(Unaudited).............................................. 3
Condensed Consolidated Statements of
Operations for the three and six
months ended June 30, 1996 and 1997
(Unaudited).............................................. 5
Condensed Consolidated Statement of
Stockholders' Equity for the six
months ended June 30, 1997
(Unaudited).............................................. 6
Condensed Consolidated Statements
of Cash Flows for the six months
ended June 30, 1996 and 1997
(Unaudited).............................................. 7
Notes to Condensed Consolidated
Financial Statements
(Unaudited).............................................. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 18
Item 2. Changes in Securities....................................... 18
Item 3. Defaults Upon Senior Securities............................. 18
Item 4. Submission of Matters to a Vote of Security Holders......... 18
Item 5. Other Information........................................... 18
Item 6. Exhibits and Reports on Form 8-K............................ 18
SIGNATURES................................................................ 20
<PAGE>
ARGYLE TELEVISION, INC.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1997
DECEMBER 31, 1996 (UNAUDITED)
-----------------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 949 $ 2,160
Accounts receivable, net 14,936 17,413
Barter program rights 5,912 4,577
Program rights 3,934 2,476
Other 1,895 1,372
-----------------------------------
Total current assets 27,626 27,998
Property, plant and equipment, net 39,213 51,264
Intangible assets:
FCC licenses 126,009 201,037
Network affiliation agreements 121,272 43,961
Other 12,764 8,221
-----------------------------------
260,045 253,219
Less accumulated amortization (28,190) (19,147)
-----------------------------------
231,855 234,072
Other assets:
Deferred acquisition and financing 5,788 6,096
costs, net
Barter program rights, noncurrent 5,334 2,983
Program rights, noncurrent 3,580 1,657
Other 15,212 14,398
-----------------------------------
Total assets $328,608 $338,468
===================================
</TABLE>
-3-
<PAGE>
ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1997
DECEMBER 31, 1996 (UNAUDITED)
-----------------------------------
(In thousands)
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,001 $ 1,780
Accrued liabilities 5,612 4,656
Barter program payable 6,776 4,865
Program rights payable 4,251 1,724
Other 868 140
-----------------------------------
Total current liabilities 18,508 13,165
Barter program rights payable 5,333 2,983
Program rights payable 3,610 2,585
Long-term debt 171,500 199,000
Other liabilities 505 85
Stockholders' equity:
Series A preferred stock, 10,938
shares issued and outstanding 1 1
Series B preferred stock,
10,938 shares issued and
outstanding 1 1
Series A common stock, par
value $.01 per share,
35,000,000 shares
authorized and 3,846,914
and 4,010,914 shares issued
and outstanding in 1996 and
1997, respectively 38 39
Series B common stock, par
value $.01 per share,
200,000 shares authorized,
200,000 and 36,000 shares
issued and outstanding in
1996 and 1997, respectively 2 1
Series C common stock, par
value $.01 per share,
14,800,000 shares
authorized, 7,300,000
shares issued and
outstanding 73 73
Additional paid-in capital 159,454 159,247
Retained deficit (30,417) (38,712)
-----------------------------------
Total stockholders' equity 129,152 120,650
Total liabilities and stockholders'
equity $328,608 $338,468
===================================
</TABLE>
See accompanying notes.
-4-
<PAGE>
ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30
-------------------------------------------
1996 1997 1996 1997
-------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Total revenues $18,562 $21,886 $34,057 $39,765
Station operating expenses 9,474 10,586 18,372 21,367
Amortization of program rights 1,282 1,062 2,571 2,119
Depreciation and amortization 5,738 6,202 10,724 12,760
-------------------------------------------
Station operating income 2,068 4,036 2,390 3,519
Corporate general and administrative
expenses 884 896 1,867 1,904
Non-cash compensation expense 168 244 337 503
-------------------------------------------
Operating income 1,016 2,896 186 1,112
Interest expense, net 3,804 4,989 7,304 9,407
-------------------------------------------
Net loss $(2,788) $(2,093) $(7,118) $(8,295)
Less preferred stock dividends (118) (355) (118) (711)
Loss applicable to common stock $(2,906) $(2,448) $(7,236) $(9,006)
===========================================
Loss per common share $(0.26) $(0.22) $(0.65) $(0.79)
===========================================
Weighted average number of common
shares outstanding 11,169 11,347 11,144 11,347
===========================================
</TABLE>
See accompanying notes.
-5-
<PAGE>
ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED
AND PREFERRED PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
---------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Balances at December 31, 1996 $115 $159,454 $(30,417) $129,152
Compensation element of stock options - 504 - 504
Dividends paid on preferred stock - (711) - (711)
Net loss - - (8,295) (8,295)
---------------------------------------------------
Balances at June 30, 1997 $115 $159,247 $(38,712) $120,650
===================================================
</TABLE>
See accompanying notes.
-6-
<PAGE>
ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
--------------------
1996 1997
--------------------
OPERATING ACTIVITIES (In thousands)
<S> <C> <C>
Net loss $ (7,118) $ (8,295)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation 2,117 2,798
Amortization of intangible assets 8,607 9,962
Amortization of deferred financing
costs 372 325
Amortization of program rights 2,571 2,119
Program payments (1,909) (2,338)
Compensation element of stock options 337 504
Fair value adjustments of interest
rate protection agreements 1,021 (328)
Changes in operating assets and
liabilities, net (6,258) (3,146)
-------------------
Net cash provided by (used in)
operating activities (260) 1,601
INVESTING ACTIVITIES
Acquisition of stations (5,933) (23,088)
Purchases of property, plant and
equipment, net (3,590) (4,091)
Partial payment on relocation of studio (927) -
-------------------
Net cash used in investing activities (10,450) (27,179)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 15,500 33,000
Payment of long-term debt (4,000) (5,500)
Dividends paid on preferred stock (118) (711)
-------------------
Net cash provided by financing activities 11,382 26,789
Increase in cash and cash equivalents 672 1,211
Cash and cash equivalents at beginning of period 2,206 949
-------------------
Cash and cash equivalents at end of
period $ 2,878 2,160
===================
Businesses acquired in purchase
transaction:
Fair market value of assets acquired $ 38,303 $ 23,102
Liabilities assumed (4,773) 14
Issuance of preferred stock (21,876) -
Issuance of common stock (5,721) -
-------------------
Net cash paid for acquisitions $ 5,933 $ 23,088
===================
Supplemental Cash Flow Information:
Purchase price valuation adjustment
affecting equipment and FCC licenses $ 1,277 $ -
</TABLE>
See accompanying notes.
-7-
<PAGE>
ARGYLE TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
1. SUMMARY OF ACCOUNTING POLICIES
The condensed consolidated financial statements include the accounts of
Argyle Television, Inc. (the "Company") and its wholly owned subsidiaries. All
significant intercompany accounts have been eliminated in consolidation.
References herein to the Company include its subsidiaries, unless the context
requires otherwise.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
six-month period ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997.
2. ACQUISITIONS
In November 1996, the Company entered into a definitive agreement (the
Gannett Swap) with Gannett Co., Inc. (Gannett) to swap the Company's WZZM and
WGRZ for Gannett's WLWT, the NBC affiliate in Cincinnati, Ohio, and KOCO, the
ABC affiliate in Oklahoma City, Oklahoma. In connection with this transaction,
the Company agreed to pay Gannett $20 million in additional consideration,
funded by borrowings under the Company's credit agreement. This transaction
closed on January 31, 1997.
This acquisition was accounted for as a purchase and, accordingly, the
purchase price and related acquisition costs have been allocated to the acquired
assets and liabilities based upon their fair market values. The excess of the
purchase price over the net fair market value of the tangible assets acquired
and the liabilities assumed was allocated to identifiable intangible assets
including FCC licenses. The condensed consolidated financial statements include
the results of operations of the acquired stations since the date of the
acquisition.
On March 26, 1997, the Company entered into an agreement with The Hearst
Corporation (Hearst) to combine the television broadcast group of Hearst with
and into the Company, with the Company to be renamed "Hearst-Argyle Television,
Inc." upon completion of the transaction (the Hearst Transaction). The Hearst
Transaction has been approved by the boards of directors of both Hearst and the
Company and is being submitted to stockholders of the Company for approval at
the annual meeting to be held August 28, 1997. For more information about the
Hearst Transaction, including its anticipated effect on the Company, its
stockholders, directors, financial position, operations and management, and
other matters, reference is hereby made to the
-8-
<PAGE>
ARGYLE TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1997
Company's Proxy Statement/Prospectus dated July 31, 1997 (the Proxy Statement)
mailed to stockholders and filed with the Securities and Exchange Commission.
The following unaudited pro forma results of operations reflect combined
historical results for the Company's (i) WAPT, KITV, WLWT, KOCO and the Arkansas
Stations and the Company's share of the combined broadcast cash flows from the
Clear Channel Venture; (ii) the Hearst Stations, to be combined initially with
the Company's stations, which include WCVB, WTAE, WBAL, WISN, KMBC and WDTN; and
(iii) fees associated with Hearst-Argyle's management of certain properties
owned by Hearst, as if all acquisitions and transactions occurred at the
beginning of the respective periods. (See Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations.) In connection with
the Hearst Transaction and under FCC regulations, Hearst-Argyle will be required
to divest the Company's interest in the Clear Channel Venture and WDTN.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1997
-------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Total revenues $181,571 $185,332
Earnings from continuing operations
attributable to common stock $ 16,579 $ 19,975
Earnings from continuing operations per
share attributable to common stock $ 0.37 $ 0.45
Pro forma weighted average number of
shares used in calculations* 44,636 44,636
</TABLE>
* Gives effect to the issuance of shares in the Hearst Transaction assuming
Company stockholders elect to receive the maximum cash offered.
The above pro forma results are presented in response to applicable
accounting rules relating to business acquisitions and are not necessarily
indicative of the actual results that would be achieved had each of the stations
been acquired at the beginning of the periods presented, nor are they indicative
of future results of operations.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
--------------------------------
<S> <C> <C>
Bank Credit Agreement:
Revolving credit facility $ 21,500,000 $ 49,000,000
Senior Subordinated Notes 150,000,000 150,000,000
Less current maturities - -
--------------------------------
$171,500,000 $199,000,000
================================
</TABLE>
-9-
<PAGE>
ARGYLE TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1997
Under the terms of the Company's Bank Credit Agreement, the Company is
required to enter into interest rate protection agreements to modify the
interest characteristics of a portion (approximately 50%) of its outstanding
borrowings thereunder from a floating rate to a fixed rate.
The Company wrote two options that gave the option holder the right to enter
into two interest rate swap agreements with the Company during May and June
1996. Option premiums for these two options were $1,000,477. The option holder
exercised these options in May and June 1996, effectively fixing the Company's
base interest rate at approximately 7% on $35 million of its borrowings until
June 1999.
Additional information regarding these interest rate protection agreements in
effect at June 30, 1997 follows:
<TABLE>
<CAPTION>
AVERAGE AVERAGE ESTIMATED
NOTIONAL AMOUNT RECEIVE RATE PAY RATE FAIR VALUE
------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate swap agreements:
Fixed rate agreement $20,000,000 LIBOR 7.01% $(307,320)
Fixed rate agreement $15,000,000 LIBOR 6.98% $(231,338)
</TABLE>
The Company is exposed to credit loss in the event the other parties on the
above agreements do not perform, but the Company does not anticipate non-
performance by any of these counter parties, all of which are major financial
institutions.
The Company has received a financing commitment from Chase Manhattan Bank
to provide a $1.0 billion credit facility. (See Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations.)
4. INCOME TAXES
As a result of the losses incurred by the Company for the periods through
June 30, 1997, no federal income tax expense has been recorded.
At June 30, 1997, the Company has available net operating loss (NOL)
carryforwards for federal income tax purposes of approximately $13.3 million,
$16.5 million, and $6.4 million, which will expire in 2010, 2011, and 2012,
respectively. The Hearst Transaction will cause the Company to experience an
"ownership change" within the meaning of the Internal Revenue Code and
accordingly, such NOL carryforwards will be limited after and assuming such
transaction is consummated.
-10-
<PAGE>
ARGYLE TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1997
5. RELATED PARTY TRANSACTIONS
The Company has entered into separate agreements with one of its
shareholders, Argyle Television Investors, L.P., and the shareholder's general
partner, ATI General Partner, L.P. (the Partnerships), under which the Company
provides to the Partnerships personnel, office, property, services, expertise,
systems and other assets and amenities. In consideration for such, the
Partnerships are required to reimburse the Company for expenses and costs
allocated to providing these services to the Partnerships. During the three and
six months ended June 30, 1997, the Company recognized total reimbursements of
approximately $224,000 and $420,000, respectively, under these agreements. Such
reimbursements are offset against corporate general and administrative expenses
in the accompanying statements of operations.
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RECENT DEVELOPMENTS
- -------------------
On March 26, 1997, the Company entered into an agreement with The Hearst
Corporation (Hearst) to combine the television broadcast group of Hearst with
and into the Company, with the Company to be renamed "Hearst-Argyle Television,
Inc." upon completion of the transaction (the Hearst Transaction). The Hearst
Transaction has been approved by the boards of directors of both Hearst and the
Company and is being submitted to stockholders of the Company for approval at
the annual meeting to be held August 28, 1997. For more information about the
Hearst Transaction, including its anticipated effect on the Company, its
stockholders, directors, financial position, operations and management, and
other matters, reference is hereby made to the Company's Proxy
Statement/Prospectus dated July 31, 1997 (the Proxy Statement) mailed to
stockholders and filed with the Securities and Exchange Commission. The Proxy
Statement is hereby incorporated by reference.
The following discussion of results of operations, liquidity and capital
resources and income taxes does not include the pro forma or other effects of
the Hearst Transaction, except as specified.
RESULTS OF OPERATIONS
- ---------------------
In January 1995, the Company acquired three television stations -- WZZM, WNAC
and WAPT (Northstar Stations). The Company acquired KITV in June 1995 and WGRZ
in December 1995. In June 1996, the Company acquired KHBS and its S-2 satellite
KHOG (Arkansas Stations). On July 1, 1996, the Company entered into a Joint
Marketing and Programming Agreement (Clear Channel Venture) with Clear Channel
Communications, Inc. involving WNAC and WPRI, the CBS affiliate in Providence,
Rhode Island, owned by Clear Channel Communications, Inc. On January 31, 1997,
the Company swapped WZZM and WGRZ under the terms of an agreement (Gannett Swap)
for WLWT and KOCO with Gannett Co., Inc. (Gannett). (See Note 2 to the unaudited
condensed consolidated financial statements.)
The following discussion includes a comparison of 1997 results of operations,
which includes WAPT, KITV and the Arkansas Stations for the three and six months
ended June 30, 1997; WZZM and WGRZ for January 1997, only; WLWT and KOCO from
February 1 to June 30, 1997, and the Company's share of the Clear Channel
Venture for the three and six months ended June 30, 1997 to 1996 results of
operations, which includes the Northstar Stations, KITV and WGRZ for the three
and six months ended June 30, 1996 and the Arkansas Stations for June 1996 only.
The Company's share of the Clear Channel Venture broadcast cash flows is
included in total revenues, only.
-12-
<PAGE>
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
- -----------------------------------------------------------------------------
Total Revenues. Total revenues for the three months ended June 30, 1997 were
$21.9 million, as compared to $18.6 million for the three months ended June 30,
1996, an increase of $3.3 million, or 17.7%. The increase was primarily
attributable to (i) the acquisition of the Arkansas Stations, which added $1.4
million to total revenues for the 1997 period and (ii) the Gannett Swap, which
added $2.7 million, net to total revenues for the 1997 period. These revenue
gains were offset by the net effects of the Clear Channel Venture, which
accounted for a $1.1 million decrease in recorded total revenues, because only
the Company's share of the Clear Channel Venture broadcast cash flow is included
in total revenues.
Station Operating Expenses. Station operating expenses for the three months
ended June 30, 1997 were $10.6 million, as compared to $9.5 million for the
three months ended June 30, 1996, an increase of $1.1 million, or 11.6%. The
increase was primarily attributable to (i) the acquisition of the Arkansas
Stations, which added $0.9 million to station operating expenses during the 1997
period and (ii) the Gannett Swap, which added $1.1 million, net to station
operating expenses for the 1997 period. This was offset by the Clear Channel
Venture, which accounted for a $0.9 million decrease in station operating
expenses during the 1997 period as a result of WNAC expenses being eliminated
(netted with total revenues), and only the Company's share of the Clear Channel
Venture broadcast cash flow being included in total revenues.
Depreciation and Amortization. Depreciation and amortization of intangible
assets for the three months ended June 30, 1997 were $6.2 million, as compared
to $5.7 million for the three months ended June 30, 1996, an increase of $.5
million, or 8.8%. The increase was primarily attributable to the acquisition of
the Arkansas Stations and an increase in amortization related to the capitalized
amount paid under the Clear Channel Venture, included in other assets.
Station Operating Income. Station operating income for the three months ended
June 30, 1997 was $4.0 million, as compared to station operating income of $2.1
million for the three months ended June 30, 1996, an increase of $1.9 million,
or 90.5%. This increase was primarily attributable to the increase in total
revenues, which more than offset the increase in station operating expenses and
depreciation and amortization of intangible assets.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses were $0.9 million in both the three months ended June
30, 1997 and 1996. The corporate structure did not change period to period, and
expenses were maintained at a relatively constant level.
Non-cash Compensation Expense. Non-cash compensation expenses were $0.2
million in both the three months ended June 30, 1997 and June 30, 1996. This
represents stock option compensation expense recorded in compliance with FASB
Statement 123.
Interest Expense, Net. Interest expense, net was $5.0 million of the three
months ended June 30, 1997, as compared to $3.8 million for the three months
ended June 30, 1996, an increase of
-13-
<PAGE>
$1.2 million, or 31.6%. This increase in interest expense, net was primarily
attributable to a larger outstanding debt balance in 1997 than 1996, which was
the result of the acquisitions and related financings of the Arkansas Stations,
the Clear Channel Venture and the Gannett Swap. Interest expense, net for the
three months ended June 30, 1996 was reduced by $0.4 million, which reflects the
change in fair market value of interest rate protection agreements since March
31, 1996 recorded in compliance with FASB Statement 119. Interest rate
protection agreements were accounted for using hedge accounting during the three
months ended June 30, 1997 due to the increase in debt over the notional amounts
of the agreements.
Net Loss. As a result of the factors discussed above, the net loss for the
three months ended June 30, 1997 was $2.1 million, as compared to $2.8 million
for the three months ended June 30, 1996.
Broadcast Cash Flow. Broadcast cash flow is defined as station operating
income, plus depreciation and amortization, plus amortization of program rights,
minus program payments. Broadcast cash flow was $10.2 million for the three
months ended June 30, 1997 as compared to $8.0 million for the three months
ended June 30, 1996, an increase of $2.1 million, or 27.5%. The broadcast cash
flow increase resulted primarily from the inclusion of the Arkansas Stations
during the 1997 period, net of the effect of the Gannett Swap. The broadcast
cash flow margin increased to 46.6% for the three months ended June 30, 1997,
from 43.0% for the three months ended June 30, 1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------
Total Revenues. Total revenues for the six months ended June 30, 1997 were
$39.8 million, as compared to $34.1 million for the six months ended June 30,
1996, an increase of $5.7 million, or 16.7%. The increase was primarily
attributable to (i) the acquisition of the Arkansas Stations, which added $3.4
million to total revenues for the 1997 period and (ii) the Gannett Swap, which
added $4.2 million, net to total revenues for the 1997 period. These revenue
gains were offset by the net effects of the Clear Channel Venture, which
accounted for a $2.1 million decrease in recorded total revenues, because only
the Company's share of the Clear Channel Venture broadcast cash flow is included
in total revenues.
Station Operating Expenses. Station operating expenses for the six months
ended June 30, 1997 were $21.4 million, as compared to $18.4 million for the six
months ended June 30, 1996, an increase of $3.0 million, or 16.3%. The increase
was primarily attributable to (i) the acquisition of the Arkansas Stations,
which added $2.2 million to station operating expenses during the 1997 period;
(ii) the Gannett Swap, which added $2.2 million, net to station operating
expenses for the 1997 period; and (iii) a slight increase in trade and barter
expenses at WAPT and KITV. This was offset by the Clear Channel Venture, which
accounted for a $1.8 million decrease in station operating expenses during the
1997 period as a result of WNAC expenses being eliminated (netted with total
revenues), and only the Company's share of the Clear Channel Venture broadcast
cash flow being included in total revenues.
-14-
<PAGE>
Depreciation and Amortization. Depreciation and amortization of intangible
assets for the six months ended June 30, 1997 were $12.8 million, as compared to
$10.7 million for the six months ended June 30, 1996, an increase of $2.1
million, or 19.6%. The increase was primarily attributable to (i) the
acquisition of the Arkansas Stations, which added $1.1 million to depreciation
and amortization of intangibles during the 1997 period; (ii) the Gannett Swap,
which added $0.3 million, net to depreciation and amortization of intangibles
during the 1997 period; and (iii) a $0.7 million increase in amortization
related to the capitalized amount paid under the Clear Channel Venture, included
in other assets.
Station Operating Income. Station operating income for the six months ended
June 30, 1997 were $3.5 million, as compared to $2.4 million for the six months
ended June 30, 1996, an increase of $1.1 million, or 45.8%. This increase was
primarily attributable to the increase in total revenues, which more than offset
the increase in station operating expenses and depreciation and amortization of
intangible assets.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses were $1.9 million in both the six months ended June 30,
1997 and 1996. The corporate structure did not change period to period, and
expenses were maintained at a relatively constant level.
Non-cash Compensation Expense. Non-cash compensation expenses were $0.5
million in the six months ended June 30, 1997, as compared to $0.3 million in
the six months ended June 30, 1996. This represents stock option compensation
expense recorded in compliance with FASB Statement 123.
Interest Expense, Net. Interest expense, net was $9.4 million of the six
months ended June 30, 1997, as compared to $7.3 million for the six months ended
June 30, 1996, an increase of $2.1 million, or 28.8%. This increase in interest
expense, net was primarily attributable to a larger outstanding debt balance in
1997 than 1996, which was the result of the acquisitions and related financings
of the Arkansas Stations, the Clear Channel Venture and the Gannett Swap.
Interest expense, net for the six months ended June 30, 1997 and 1996 was
increased by $0.3 million and reduced by $1.0 million, respectively, which
reflects the change in fair market value of interest rate protection agreements
since December 31, 1997 and 1996, respectively, recorded in compliance with FASB
Statement 119.
Net Loss. As a result of the factors discussed above, the net loss for the
six months ended June 30, 1997 was $8.3 million, as compared to $7.1 million for
the six months ended June 30, 1996.
Broadcast Cash Flow. Broadcast cash flow is defined as station operating
income, plus depreciation and amortization, plus amortization of program rights,
minus program payments. Broadcast cash flow was $16.1 million for the six months
ended June 30, 1997 as compared to $13.8 million for the six months ended June
30, 1996, an increase of $2.3 million, or 16.7%. The broadcast cash flow
increase resulted primarily from the inclusion of the Arkansas Stations during
-15-
<PAGE>
the 1997 period, net of the effect of the Gannett Swap. The broadcast cash flow
margin was 40.4% for both the six months ended June 30, 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
Presently, the Company's primary sources of liquidity are current cash
balances, cash flow from operations and borrowing capacity under the existing
Bank Credit Agreement. Including the Company's initial public offering of its
Series A Common Stock in October 1995 and the November 1995 exercise by the
underwriters of an over-allotment option, the related Company has received
$131.2 million in net equity capital contributions since inception.
Upon completion of the Gannett Swap in January 1997, the Company amended and
restated its Bank Credit Agreement providing up to $65.0 million of borrowing
capacity of which $20.0 million was borrowed to fund the cash payment to
Gannett. As of June 30, 1997, there was $49.0 million outstanding under the Bank
Credit Agreement as compared to $11.5 million outstanding as of June 30, 1996.
The Company may borrow amounts under the Bank Credit Agreement from time to time
for additional acquisitions, capital expenditures and working capital, subject
to the satisfaction of certain conditions on the date of borrowing.
Under the terms of the Bank Credit Agreement, the Company is required to
enter into interest rate protection agreements covering approximately 50% of its
floating rate debt. Accordingly, the Company, in compliance with its covenant
obligations, entered into various appropriate swap and cap agreements in
February 1995. In response to subsequent acquisition and financing transactions,
modifications were made to the underlying agreements. See Notes 2. and 3. to the
Company's unaudited condensed consolidated financial statements included herein.
In October 1995, the Company issued in a public offering $150,000,000 of 9
3/4% Senior Subordinated Notes due 2005. Interest on the Notes is payable semi-
annually, and no principal payments on the Notes are due prior to their maturity
on November 1, 2005. The Notes are redeemable at the option of the Company, in
whole or in part, at any time after November 1, 2000 at specified redemption
prices. The annual interest expense associated with the Notes is $14.6 million.
In connection with the consummation of the Hearst Transaction, the Company will
be required, within 30 days of the closing, to make an offer to repurchase the
Notes for cash at 101% of their principal amount plus accrued and unpaid
interest to the date of repurchase. The Company is unable to predict whether or
not all or any holders of the Senior Subordinated Notes will accept this
repurchase offer.
Capital expenditures were $6.6 million in 1996 and are $4.1 million through
June 30, 1997. The Company expects to invest approximately $9.3 million in 1997
related to the construction of a new all-digital studio and station facility for
KITV, of which $1.8 million was escrowed in 1996. KITV will vacate its leased
facility at that time and terminate the lease.
To complete the Hearst Transaction, the Company is required to obtain
financing to refinance or fund (i) outstanding balances under the Bank Credit
Agreement; (ii) the Company's
-16-
<PAGE>
Senior Subordinated Notes discussed above; (iii) certain Hearst debt to be
assumed by Hearst-Argyle; and (iv) fees and expenses associated with the Hearst
Transaction. The Company has received a financing commitment from Chase
Manhattan Bank (Chase) to provide a $1.0 billion credit facility (the New
Credit Facility) for these purposes with excess available for future
acquisitions and general corporate purposes. The Company and Chase currently are
in the process of negotiating the terms of the definitive agreements for the New
Credit Facility.
The Company anticipates that its operating cash flow, together with amounts
available to it under the Bank Credit Agreement and the New Credit Facility
(assuming the Hearst Transaction is consummated), will be sufficient to finance
the operating and working capital requirements of its stations, the Company's
debt service requirements and anticipated capital expenditures for the Company
for the next 12 months.
The Company intends to register new shares of Hearst-Argyle Series A Common
Stock and debt securities for future public sale under the Securities Act of
1933. Any offering of such securities will be made only by means of a
prospectus.
INCOME TAXES
- ------------
The Company has gross deferred tax assets related to acquired intangible
assets and net operating loss carryforwards of approximately $2.6 and $36.4
million, respectively. These deferred tax assets are fully reserved at June 30,
1997. The Company sustained a net operating loss for tax purposes of
approximately $6.4 million in the six months ended June 30, 1997. Net operating
loss carryforwards of approximately $13.3 million, $16.5 million, and $6.4
million will expire in 2010, 2011, and 2012, respectively.
-17-
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - Not Applicable
-----------------
ITEM 2. CHANGES IN SECURITIES - Not Applicable
---------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Not Applicable
-------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable
---------------------------------------------------
ITEM 5. OTHER INFORMATION - Not Applicable
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit No.
2.1 Amended and Restated Agreement and Plan of Merger, dated as
of March 26, 1997 by and among The Hearst Corporation, HAT
Merger Sub, Inc., HAT Contribution Sub, Inc., and Argyle
Television, Inc. (Incorporated by reference to Appendix A to
the Proxy Statement/Prospectus included in the Company's
Registration Statement on Form S-4 [File No. 333-32487] filed
July 31, 1997.)
10.1(a) Third Amendment dated July 1, 1997 to Amended and Restated
Agreement of Limited Partnership of Argyle Television
Investors, L.P., dated as of May 10, 1995, as amended by
amendment dated June 13, 1995 and Second Amendment dated July
24, 1995.
10.1(b) Agreement of Limited Partnership of Argyle Television
Investors (Foreign), L.P. dated July 1, 1997.
10.3 Commitment letter dated June 17, 1997 issued by the Chase
Manhattan Bank. (Incorporated by reference to Exhibit 10.26
of the Company's Registration Statement on Form S-4 [File No.
333-32487] filed July 31, 1997.)
19.1 Proxy Statement/Prospectus of the Company dated July 31, 1997
mailed to stockholders in connection with the Company's
Annual Meeting of Stockholders to be held August 28, 1997.
(Included within the Company's Registration Statement on Form
S-4 [File No. 333-32487] filed July 31, 1997.)
27.1 Financial Data Schedule.
99.1 Press release issued July 17, 1997.
99.2 Press release issued August 5, 1997.
-18-
<PAGE>
(b) Reports on Form 8-K
On April 15, 1997, the Company filed a Form 8-K/A, which amended the
Company's Form 8-K dated as of January 31, 1997, relating to the
transaction with Gannett to exchange WZZM and WGRZ for WLWT and KOCO.
This Form 8-K/A reported information under Items 2 and 7 of Form 8-K,
including the financial statements more fully described therein.
______________
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Argyle Television, Inc.
-------------------------------------------------
Registrant
August 14, 1997 By: /s/ Harry T. Hawks
- --------------- ---------------------------------------------
Date Harry T. Hawks, Chief Financial Officer,
Assistant Secretary, and Treasurer
(Principal Financial Officer)
August 14, 1997 By: /s/ Teresa D. Lopez
- --------------- ---------------------------------------------
Date Teresa D. Lopez, Controller and
Assistant Secretary
(Principal Accounting Officer)
-20-
<PAGE>
EXHIBIT 10.1(A)
TO 10-Q
-------
THIRD AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF
ARGYLE TELEVISION INVESTORS, L.P.
Third Amendment, dated as of July 1, 1997, by ATI General Partner,
L.P., a Delaware limited partnership ("ATIGP"), as general partner (the
"Amendment") to the Amended and Restated Agreement of Limited Partnership of
Argyle Television Investors, L.P. (the "Partnership") dated as of May 10, 1995,
among ATIGP, as general partner, and those limited partners listed on Schedule A
thereto, as amended (the "Partnership Agreement"). Unless otherwise specified
herein, all capitalized terms herein shall have the meanings ascribed to them in
the Partnership Agreement.
WHEREAS, the Partnership is the holder of 6,600,000 shares of Series C
Common Stock of Argyle, par value $.01 per share ("ATI Series C Common Stock"),
which stock is non-voting stock of Argyle;
WHEREAS, the ATI Series C Common Stock is convertible into 6,600,000
shares of Series A Common Stock of Argyle, par value $.01 per share ("ATI Series
A Common Stock"), which stock is voting stock of Argyle;
WHEREAS, contemporaneously with Argyle's execution of the Merger
Agreement, the Partnership, ATIGP and Hearst entered into that certain Voting
Agreement dated as of March 26, 1997 (the "ATI Voting Agreement");
WHEREAS, the ATI Voting Agreement contemplates that the Partnership
will convert the ATI Series C Common Stock into ATI Series A Common Stock prior
to the record date for the shareholder vote approving the Merger Agreement (the
"Record Date");
WHEREAS, pursuant to Section 14.1 of the Partnership Agreement, the
Partnership is required to distribute to its current Foreign Limited Partners
certain shares of ATI Series C Common Stock prior to the conversion of the ATI
Series C Common Stock into ATI Series A Common Stock;
WHEREAS, the ATI Voting Agreement contemplates that the shares of ATI
Series C Common Stock distributed to the Foreign Limited Partners will be
contributed by such Foreign Limited Partners to Argyle Television Investors
(Foreign), L.P., a newly-formed Delaware limited partnership among ATIGP and the
Foreign Limited Partners (the "Foreign Partnership");
WHEREAS, the ATI Series C Common Stock contributed to the Foreign
Partnership will be converted into ATI Series A Common Stock prior to the Record
Date;
<PAGE>
WHEREAS, the ATI Voting Agreement provides that the Foreign
Partnership, ATIGP and Hearst will enter into a Voting Agreement in the form
attached as Exhibit A to the ATI Voting Agreement;
WHEREAS, ATIGP and the Partnership have adopted a plan of liquidation
of the Partnership providing for the distribution of the ATI Series A Common
Stock to the Partners of the Partnership in accordance with the terms of the
Partnership Agreement, which plan of liquidation applies to both the Partnership
and the Foreign Partnership (the "Liquidation Plan");
In consideration of the mutual covenants set forth herein and for
other good and valuable consideration, the adequacy, receipt and sufficiency of
which are hereby acknowledged, the Partners hereby agree as follows:
1. Amendment of Partnership Agreement. This amendment constitutes
----------------------------------
an amendment to the Partnership Agreement and the Partnership Agreement is
hereby amended as follows:
A. The Limited Partners listed on Appendix A hereby withdraw in
whole or in part from the Partnership and each such Limited Partner
shall receive upon such withdrawal the certificate and number of
shares set forth opposite such Partner's name in the column entitled
"Certificate Number" and "Number of Shares" on Appendix A.
B. Schedule A is amended to reflect the withdrawal of the Foreign
Limited Partners and the interests of certain other Partners from the
Partnership. Schedule A to the Partnership Agreement is hereby amended
to read in its entirety as set forth in Appendix B hereto.
2. Governing Law. This Amendment shall be governed by and
-------------
interpreted in accordance with the Revised Uniform Act and such other
substantive laws of the State of Delaware as may be applicable to contracts made
and to be performed entirely in the State of Delaware, without regard to choice
of law.
3. Remaining Provisions. Except as amended hereby, the Partnership
--------------------
Agreement shall continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first above written.
GENERAL PARTNER:
ATI GENERAL PARTNER, L.P.,
a Delaware limited partnership
By: ARGYLE TELEVISION PARTNERS, L.P.,
the sole general partner
By: ARGYLE COMMUNICATIONS, INC.,
the sole general partner
By: /s/
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
LIMITED PARTNERS:*
*By: ATI GENERAL PARTNER, L.P.,
a Delaware limited partnership,
as Attorney-in-Fact pursuant to
the Power-of-Attorney granted in
Section 13.3 of the Partnership
Agreement
By: ARGYLE TELEVISION PARTNERS, L.P.,
the sole general partner
By: ARGYLE COMMUNICATIONS, INC.,
the sole general partner
By: /s/
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
-3-
<PAGE>
EXHIBIT 10.1(B)
TO 10-Q
-------
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
ARGYLE TELEVISION INVESTORS (FOREIGN), L.P.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
FORMATION OF THE PARTNERSHIP.............................................. 2
Section 1.1 Formation of the Partnership.......................... 2
Section 1.2 Name.................................................. 2
Section 1.3 Business of the Partnership........................... 3
Section 1.4 Location of Principal Place of Business............... 3
Section 1.5 Name and Business Address of General Partner.......... 3
Section 1.6 Term.................................................. 3
ARTICLE II
DEFINITIONS................................................................ 4
ARTICLE III
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS................................. 14
Section 3.3 Additional Capital Contributions by Partners.......... 14
Section 3.4 Form of Contribution.................................. 18
Section 3.5 Interest on Capital Contributions..................... 18
Section 3.6 Withdrawal and Return of Capital Contributions........ 18
ARTICLE IV
ALLOCATION OF NET INCOME AND NET LOSS...................................... 18
Section 4.1 Allocation of Net Income and Net Loss................. 18
Section 4.2 Other Allocation Provisions........................... 21
Section 4.3. Allocations for Income Tax Purposes................... 24
Section 4.3 Withholding........................................... 24
ARTICLE V
DISTRIBUTIONS; WITHDRAWALS................................................. 25
Section 5.1 Distributions Generally............................... 25
Section 5.2 Tax Distributions..................................... 26
Section 5.3 Withdrawal Rights..................................... 26
Section 5.4 Limitations on Distributions.......................... 26
Section 5.5 Distributions Upon Withdrawal......................... 26
Section 5.6 Reserves.............................................. 27
<PAGE>
ARTICLE VI
BOOKS OF ACCOUNT, RECORDS AND REPORTS, INFORMATION
REGARDING THE HOLDING COMPANY, FISCAL YEAR................................. 27
Section 6.1 Books and Records..................................... 27
Section 6.2 Reports............................................... 28
Section 6.3 Fiscal Year........................................... 28
ARTICLE VII
POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS.......................... 28
Section 7.1 Limitations........................................... 28
Section 7.2 Liability............................................. 28
Section 7.3 Priority.............................................. 29
ARTICLE VIII
POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER........................... 29
Section 8.1 Authority............................................. 29
Section 8.2 Powers and Duties of General Partner.................. 29
Section 8.3 Partnership Funds..................................... 31
Section 8.4 Transactions with Affiliates.......................... 31
Section 8.5 Other Activities and Competition...................... 31
Section 8.6 Nature and Validity of Transactions with General
Partner and Affiliates............................... 32
Section 8.7 Exculpation........................................... 32
Section 8.8 Limits on General Partner's Powers.....................33
Section 8.9 Tax Matters Partner................................... 34
Section 8.10 Indemnification of General Partner.................... 34
Section 8.11 Expenses.............................................. 34
Section 8.12 Management Fee and Portfolio Fees..................... 35
Section 8.13 Advisory Committee.................................... 37
ARTICLE IX
TRANSFERS OF INTERESTS BY PARTNERS......................................... 38
Section 9.1 General............................................... 38
Section 9.2 Transfer of Interest of General Partner............... 38
Section 9.3 Transfer of Interest of Limited Partners.............. 39
Section 9.4 Further Requirements.................................. 40
Section 9.5 Consequences of Transfers Generally................... 41
Section 9.6 Capital Account....................................... 42
Section 9.7 Additional Filings.................................... 42
Section 9.8 Removal of General Partner............................ 42
<PAGE>
ARTICLE X
WITHDRAWAL OF PARTNERS; TERMINATION OF PARTNERSHIP;
LIQUIDATION AND DISTRIBUTION OF ASSETS..................................... 43
Section 10.1 Withdrawal of Partners................................ 43
Section 10.2 Dissolution of Partnership............................ 43
Section 10.3 Distribution in Liquidation........................... 45
Section 10.4 Final Reports......................................... 46
Section 10.5 Rights of Limited Partners............................ 46
Section 10.6 Deficit Restoration; General Partner Contribution;
General Partner Payment.............................. 47
Section 10.7 Termination........................................... 48
ARTICLE XI
ADMISSION OF ADDITIONAL LIMITED PARTNERS................................... 48
Section 11.1 Admission of Additional Limited Partners.............. 48
ARTICLE XII
NOTICES AND VOTING......................................................... 49
Section 12.1 Notices............................................... 49
Section 12.2 Voting................................................ 49
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
AND POWER OF ATTORNEY...................................................... 50
Section 13.1 Amendments............................................ 50
Section 13.2 Amendment of Certificate.............................. 50
Section 13.3 Power of Attorney..................................... 50
ARTICLE XIV
FCC PROVISIONS............................................................. 51
Section 14.1 Foreign Ownership..................................... 51
Section 14.2 Transfer of Partnership Interest...................... 52
Section 14.3 FCC Certifications.................................... 52
Section 14.4 Media Ownership....................................... 53
Section 14.5 Other Restrictions and Powers......................... 54
ARTICLE XV
MISCELLANEOUS.............................................................. 55
Section 15.1. Computations.......................................... 55
Section 15.2. Entire Agreement...................................... 55
Section 15.3. Governing Law......................................... 55
<PAGE>
Section 15.4. Effect................................................ 55
Section 15.5. Pronouns and Number................................... 55
Section 15.6. Captions.............................................. 55
Section 15.7. Partial Enforceability................................ 55
Section 15.8. Counterparts.......................................... 56
Section 15.9. Certain Indemnification............................... 56
Section 15.10. Waiver of Partition................................... 56
SCHEDULE A Names, Addresses, Initial Capital Contributions and Capital
Commitments of Partners
SCHEDULE B Instrument of Transfer
SCHEDULE C Initial Adjusted Capital Contribution Amounts
SCHEDULE D Initial Adjusted Capital Account Amount
SCHEDULE E Cash Contributions
<PAGE>
AGREEMENT
OF LIMITED PARTNERSHIP
OF
ARGYLE TELEVISION INVESTORS (FOREIGN), L.P.
AGREEMENT OF LIMITED PARTNERSHIP of Argyle Television Investors (Foreign),
L.P. ("Partnership"), dated as of July 1, 1997, among ATI General Partner,
-----------
L.P., a Delaware limited partnership ("ATIGP"), as general partner, and those
-----
persons listed as limited partners on Schedule A attached hereto this Agreement
----------
of Limited Partnership.
WHEREAS, Argyle Television, Inc., a Delaware corporation ("Argyle") entered
into an Agreement and Plan of Merger dated as of March 26, 1997, with The Hearst
Corporation, a Delaware corporation ("Hearst"), HAT Merger Sub, Inc., a Delaware
corporation and HAT Contribution Sub, Inc., a Delaware corporation (the "Merger
Agreement"); and
WHEREAS, Argyle Television Investors, L.P. (the "ATI Partnership") is the
holder of 6,600,000 shares of Series C Common Stock of Argyle, par value $.01
per share ("ATI Series C Common Stock"), which stock is nonvoting stock of
Argyle; and
WHEREAS, the ATI Series C Common Stock is convertible into 6,600,000 shares
of Series A Common Stock of Argyle, par value $.01 per share ("ATI Series A
Common Stock"), which stock is voting stock of Argyle; and
WHEREAS, Contemporaneously with Argyle's execution of the Merger Agreement,
the ATI Partnership, ATIGP and Hearst entered into that certain Voting Agreement
dated as of March 26, 1997 (the "ATI Voting Agreement"); and
WHEREAS, the ATI Voting Agreement contemplates that the ATI Partnership
will convert the ATI Series C Common Stock into ATI Series A Common Stock prior
to the record date for the shareholder vote approving the Merger Agreement (the
"Record Date"); and
WHEREAS, pursuant to Section 14.1 of the Amended and Restated Agreement of
Limited Partnership of Argyle Television Investors, L.P. (the "ATI Partnership
Agreement") the ATI Partnership is required to distribute to its current Foreign
Limited Partners (as such term is defined in the ATI Partnership Agreement) and
will distribute to certain other partners certain shares of ATI Series C Common
Stock (the "Foreign Series C Common Stock") prior to the conversion of the ATI
Series C Common Stock into ATI Series A Common Stock (the "Foreign Series A
Common Stock"); and
WHEREAS, the ATI Voting Agreement contemplates that the shares of ATI
Series C Common Stock distributed to the Foreign Limited Partners will be
contributed by such Foreign Limited Partners to the Partnership; and
<PAGE>
WHEREAS, the Foreign Series C Common Stock contributed to the Partnership
will be converted into Foreign Series A Common Stock prior to the Record Date;
and
WHEREAS, the ATI Voting Agreement provides that the Partnership, ATIGP and
Hearst will enter into a Voting Agreement in the form attached as Exhibit A to
the ATI Voting Agreement; and
WHEREAS, ATIGP and the ATI Partnership have adopted a plan of liquidation
of the ATI Partnership providing for the distribution of the ATI Series A Common
Stock to the partners of the ATI Partnership in accordance with the terms of the
ATI Partnership Agreement, which plan of liquidation applies to both the ATI
Partnership and the Partnership (the "Liquidation Plan"); and
WHEREAS, the Certificate of Limited Partnership of the Partnership was
filed with the Office of the Secretary of State of Delaware on June 30, 1997;
and
WHEREAS, the Partners desire to enter into this Partnership Agreement for
the purpose of holding the Foreign Series C Common Stock and the Foreign Series
A Common Stock, and voting such Foreign Series A Common Stock, until the
effectuation of the Liquidation Plan;
In consideration of the mutual covenants set forth herein and for other
good and valuable consideration, the adequacy, receipt and sufficiency of which
are hereby acknowledged, the Partners hereby agree as follows:
ARTICLE I
FORMATION OF THE PARTNERSHIP
Section 1.1 Formation of the Partnership. The Partnership is formed as a
----------------------------
limited partnership under the Revised Uniform Act (as defined below). The
Certificate (as defined below) was filed with the Office of the Secretary of
State of Delaware on June 30, 1997. The General Partner (as defined below),
for itself and as agent for the Limited Partners (as defined below), shall
accomplish all filing, recording, publishing and other acts necessary or
appropriate for compliance with all the requirements for operation of the
Partnership under this Agreement and the Revised Uniform Act and under all other
laws of the State of Delaware and such other jurisdictions in which the General
Partner determines that the Partnership may conduct business. Each Limited
Partner admitted to the Partnership by the General Partner shall promptly
execute all relevant certificates and other documents as the General Partner
shall request.
Section 1.2 Name. The name of the Partnership is "Argyle Television
----
Investors (Foreign), L.P.", as such name may be modified from time to time by
the General Partner following written notice to the Limited Partners. The
General Partner may adopt one or more fictitious names for use by the
Partnership.
2
<PAGE>
Section 1.3 Business of the Partnership. Subject to the limitations on
---------------------------
the activities of the Partnership otherwise specified in this Agreement and
consistent with the Liquidation Plan, the Partnership is organized for the
following objectives and purposes:
(a) To acquire direct or indirect interests in broadcast television
stations and in related businesses, including without limitation the acquisition
of direct or indirect equity, debt or other (including without limitation
general partner) interests in corporations, limited liability companies,
partnerships or other entities involved, directly or indirectly, in the
ownership of broadcast television stations and in related businesses; and,
(b) To enter into, make and perform all contracts and other
undertakings, and engage in all activities and transactions as the General
Partner may reasonably deem incidental to or necessary or advisable to the
carrying out of the foregoing objectives and purposes.
Section 1.4 Location of Principal Place of Business. The location of the
---------------------------------------
principal place of business of the Partnership shall be 200 Concord Plaza, Suite
700, San Antonio, Texas 78216, or such other location as may be determined by
the General Partner. The General Partner may change the location of the
principal place of business by notice in writing to the Limited Partners. In
addition, the Partnership may maintain such other offices as the General Partner
may deem advisable at any other place or places within or without the United
States.
Section 1.5 Name and Business Address of General Partner. The name,
--------------------------------------------
business address and telecopy number of the General Partner is:
ATI General Partner, L.P.
200 Concord Plaza
Suite 700
San Antonio, Texas 78216
Telecopy No.: (210) 828-7300
Attention: Bob Marbut
The General Partner may, from time to time, upon prior notice to the Limited
Partners, change its name, business address or telecopy number.
Section 1.6 Term. The term of the Partnership commenced on July 1, 1997
----
and shall terminate on March 31, 2005, unless extended, at the discretion of the
General Partner, for one or more additional periods, the last of which shall end
not later than March 31, 2007, or unless the Partnership is earlier dissolved
and terminated in accordance with this Agreement, including, but without
limitation, pursuant to the Liquidation Plan. If the General Partner elects to
extend the term of the Partnership, it shall give written notice of such
extension, specifying the date to which the term has been extended, to the
Limited Partners prior to the end of the current term.
3
<PAGE>
ARTICLE II
DEFINITIONS
"Accountants" means such "big six" accounting firm as shall be engaged from
-----------
time to time by the General Partner for the Partnership.
"Additional Limited Partner" means any Person admitted to the Partnership
--------------------------
as an additional Limited Partner under Article XI.
-----------
"Adjusted Capital Account" has the meaning set forth in Section 4.2.
------------------------ -----------
"Adjusted Capital Contribution Amount" means, as of any date with respect
------------------------------------
to any Partner, the amount set forth on Exhibit C opposite such Partner's name
in the column headed "Initial Adjusted Capital Contribution Amount", plus the
aggregate Net Capital Contributions (not including Capital Contributions
pursuant to Section 3.1) made by such Partner after the formation of the
-----------
Partnership and on or prior to such date, less all distributions after the
formation of the Partnership and previously made to that Partner pursuant to
Section 5.1(a) or deemed made to that Partner pursuant to Section 5.1(a)
- -------------- --------------
pursuant to the third sentence of Section 5.2, subject to adjustment pursuant to
-----------
Section 3.3(e)(ii), provided that if amounts are returned to any Partner
- ------------------
pursuant to Section 3.3(a) the Adjusted Capital Contribution Amount shall be
--------------
calculated taking into account any reduction in Net Capital Contributions.
"Adjusted Capital Credit Amount" means, as of any date with respect to any
------------------------------
Partner, the amount set forth on Exhibit D opposite such Partner's name in the
column headed "Initial Adjusted Capital Credit Amount", plus the aggregate Net
Capital Contributions (not including Capital Contributions pursuant to Section
-------
3.1) made by such Partner after the formation of the Partnership and on or prior
- ---
to such date, less all distributions after the formation of the partnership and
previously made to that Partner pursuant to Section 5.1(a) or deemed made to
--------------
that Partner pursuant to Section 5.1(a) pursuant to the third sentence of
--------------
Section 5.2, subject to adjustment pursuant to Section 3.3(e)(ii), provided that
- ----------- ------------------
if amounts are returned to any Partner pursuant to Section 3.3(a), the Adjusted
--------------
Capital Credit Amount shall be calculated taking into account any reduction in
Net Capital Contributions.
"Adjusted Unpaid Preferred Return Amount" means, as of any date after the
---------------------------------------
date of this Agreement with respect to any Partner, an amount equal to such
Partner's Unpaid Preferred Return as of the last day of the immediately
preceding Fiscal Year, less all distributions made to that Partner prior to the
date of computation pursuant to Section 5.1(b) or deemed made to that Partner
--------------
pursuant to Section 5.1(b) pursuant to the third sentence of Section 5.2 during
-------------- -----------
the Fiscal Year within which such date occurs, subject to adjustment pursuant to
Section 3.3(e)(ii); provided, however, that Adjusted Unpaid Preferred Return
- ------------------ -------- -------
Amount for the Fiscal Year that includes the date of this Agreement shall be
zero.
"Advisory Committee" has the meaning set forth in Section 8.13.
------------------ ------------
4
<PAGE>
"Affected Items" has the meaning set forth in Section 3.3(e)(ii).
-------------- ------------------
"Affiliate" means, with respect to any Person, any Person that directly or
---------
indirectly controls, is controlled by, or is under common control with such
Person, including, without limitation, any Person that directly or indirectly
owns, controls or holds with power to vote 10% or more of the outstanding voting
securities or other voting ownership interests of such Person, any Person 10% or
more of whose outstanding voting securities or other voting ownership interests
are directly or indirectly owned, controlled or held with power to vote by such
Person, any partnership in which the specified Person is a general partner, any
officer and director of the specified Person, and any entity of which such
Person is an executive officer, director or general partner.
"Affiliated Limited Partner" means each Limited Partner that is not a Non-
--------------------------
Affiliated Limited Partner.
"Agreement" means this Agreement of Limited Partnership, as amended from
---------
time to time.
"Argyle" has the meaning set forth in the forepart of this Agreement.
------
"ATIGP" has the meaning set forth in the forepart of this Agreement.
-----
"ATI Partnership" has the meaning set forth in the forepart of this
---------------
Agreement.
"ATI Partnership Agreement" has the meaning set forth in the forepart of
-------------------------
this Agreement.
"ATI Series A Common Stock" has the meaning set forth in the forepart of
-------------------------
this Agreement.
"ATI Series C Common Stock" has the meaning set forth in the forepart of
-------------------------
this Agreement.
"ATI Voting Agreement" has the meaning set forth in the forepart of this
--------------------
Agreement.
"ATP" means Argyle Television Partners, L.P., a Delaware limited
---
partnership and the general partner in ATIGP.
"Book Value" means, with respect to any Partnership Asset as of any date,
----------
such Partnership Asset's adjusted basis for Federal income tax purposes as of
such date, except as follows: (i) the initial Book Value of a Partnership Asset
contributed by a Partner to the Partnership (including a Partnership Asset
deemed contributed as a result of a constructive termination of the Partnership
under Code Section 708(b)(1)(B)) shall be the Value of such Partnership Asset on
the date of such contribution and (ii) if the Book Value of a Partnership Asset
has been determined under Clause (i) above, such Book Value shall thereafter be
adjusted by the depreciation, cost recovery and amortization attributable to
such Partnership Asset
5
<PAGE>
assuming that the adjusted basis of such Partnership Asset was equal to its Book
Value determined under the methodology described in Regulation (S)1.704-
1(b)(2)(iv)(g)(3).
"Broadcast Investments" means any direct or indirect investment by the
---------------------
Partnership in broadcast television stations or in related businesses, including
without limitation, any contribution of capital to the Holding Company to enable
the Holding Company to make additional investments in broadcast television
stations or in related businesses (including without limitation additional
investments for the purpose of paying-off debt incurred).
"Business Day" means any day other than a Saturday, Sunday or a day on
------------
which commercial banks are authorized or required to close in New York City, New
York or San Antonio, Texas.
"Capital Account" means, with respect to each Partner, a single account
---------------
established and maintained for such Partner in accordance with the principles of
Regulation (S)(S)1.704-1(b)(2)(iv) and 1.704-2, as amended. Subject to the
preceding sentence, each Capital Account will initially equal the amount of the
Capital Contribution made by such Partner at the time such Partner is admitted
as a Partner in the Partnership and, throughout the term of the Partnership,
will be (i) increased by the amount of (A) Net Income and income and gains
allocated to such Partner pursuant to Article IV and (B) the amount of any cash
----------
and the Value of any property (net of liabilities secured by the property that
the Partnership is considered to assume or take subject to pursuant to the
provisions of Section 752 of the Code) subsequently contributed by such Partner
to the Partnership and (ii) decreased by the amount of (A) Net Losses and
losses, deductions and Section 705(a)(2)(B) expenditures allocated to such
Partner pursuant to Article IV and (B) the amount of cash and the Value (net of
----------
liabilities secured by the property that the Partner is considered to assume or
take subject to pursuant to the provisions of Section 752 of the Code) of any
other property distributed to such Partner pursuant to Articles III and V, as
------------------
adjusted pursuant to Section 3.3(e)(ii).
------------------
"Capital Commitment" means, for any Partner, the total amount of capital
------------------
which such Partner has agreed to contribute to the Partnership or the ATI
Partnership, as set forth opposite each Partner's name in the column entitled
"Capital Commitment" on Schedule A.
----------
"Capital Contribution" means the amount of cash and the Value of any other
--------------------
property contributed to the capital of the Partnership; provided, however, that
-------- -------
the Capital Contributions of any Partner at any time shall be the Capital
Contributions of such Partner (as defined above) as adjusted pursuant to Section
-------
3.3(e)(ii).
- ----------
"Cause" has the meaning set forth in Section 9.8.
----- -----------
"Certificate" means the Certificate of Limited Partnership of the
-----------
Partnership, as amended from time to time.
"Chase" means The Chase Manhattan Bank, N.A.
-----
6
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time (or any succeeding law).
"Collection Costs" has the meaning set forth in Section 3.3(d).
---------------- --------------
"Commitment Period" means the period beginning on January 4, 1995 and
-----------------
ending on January 4, 2000.
"Communications Act" has the meaning set forth in Section 9.4(d)(iv).
------------------ ------------------
"Credit Agreement" means the Credit Agreement dated as of December 22,
----------------
1994, between the Holding Company, the Subsidiary Guarantors (as defined in the
Credit Agreement), the lenders named therein, Chase, as agent for such lenders,
and the Bank of Montreal, Banque Paribas and Union Bank, as co-agents for such
lenders, as the same shall be amended and modified from time to time.
"CSFB Investments" means CS First Boston Fund Investments 1994, L.P., a
----------------
Delaware limited partnership.
"CSFB Merchant Bank" means CS First Boston Fund Investments 1995, L.P., a
------------------
Delaware limited partnership.
"Default Interest" has the meaning set forth in Section 3.3(c).
---------------- --------------
"Default Loans" has the meaning set forth in Section 3.3(c).
------------- --------------
"Defaulting Partner" means any Partner who has failed to contribute any
------------------
amount called for in accordance with Section 3.3(a).
--------------
"Dissolution Date" means March 31, 2005, unless extended as provided in
----------------
Section 1.6.
- -----------
"ERISA" means the Employment Retirement Income Security Act of 1974,
-----
together with the rules and regulations promulgated thereunder, as amended from
time to time (or any successor law or regulations).
"Event of Withdrawal" has the meaning set forth in Section 10.2(a)(iii).
------------------- --------------------
"Excess Holding Company Expense Amount" for any Fiscal Year means the
-------------------------------------
excess of (a) the Holding Company Expense Amount for such Fiscal Year over (b)
an amount equal to the sum of (i) all amounts paid to the Holding Company during
such Fiscal Year pursuant to Section 8.11(c) and (ii) the Permitted Holding
---------------
Company Expense Amount for such Fiscal Year.
"Exempt Transaction Fees" means any transaction fees paid upon a completed
-----------------------
purchase or sale of a Broadcast Investment that when combined with any such fees
payable to a third-party
7
<PAGE>
broker or agent by the Holding Company or the Portfolio Company in connection
with such investment do not exceed the amount of transaction fees generally paid
in the television industry.
"FCC" means the Federal Communications Commission.
---
"First Boston Entities" means the Limited Partners CSFB Investments and
---------------------
CSFB Merchant Bank.
"Fiscal Year" has the meaning set forth in Section 6.3.
----------- -----------
"Foreign Partner" has the meaning set forth in Section 4.4(b).
--------------- --------------
"Foreign Series A Common Stock" has the meaning set forth in the forepart
-----------------------------
of this Agreement.
"Foreign Series C Common Stock" has the meaning set forth in the forepart
-----------------------------
of this Agreement.
"General Partner" means ATIGP and any successor to ATIGP as general partner
---------------
in the Partnership.
"Hearst" has the meaning set forth in the forepart of this Agreement.
------
"Holding Company" means Argyle Television, Inc., a Delaware corporation.
---------------
"Holding Company Expense Amount" has the meaning set forth in Section
------------------------------
8.11(c).
"Instrument of Transfer" means an instrument, substantially in the form of
----------------------
Schedule B hereto, evidencing a transfer by a Limited Partner of all or a
- ----------
portion of that Limited Partner's Interest in the Partnership.
"Interest" means, when used in reference to a Partner's interest in the
--------
Partnership at any time, the entire ownership interest of such Partner in the
Partnership at such time, including, without limitation, its interest in the
capital, profits, losses and distributions of the Partnership.
"Limited Partner" means each Person named as a Limited Partner on Schedule
--------------- --------
A hereto, each Person admitted as a Substituted Limited Partner under Article
- - -------
IX, and each Person admitted as an Additional Limited Partner under Article XI,
- -- ----------
and, with respect to those provisions of this Agreement concerning a Limited
Partner's rights to receive a share of profits or other distributions or the
return of a Limited Partner's contribution, any Transferee of a Limited
Partner's Interest in the Partnership (except that a Transferee that is not
admitted as a Limited Partner shall have only such of the rights of an assignee
under the Revised Uniform Act as are consistent with this Agreement).
"Liquidation Plan" has the meaning set forth in the forepart of this
----------------
Agreement.
8
<PAGE>
"Liquidator" has the meaning set forth in Section 10.2(b).
---------- ---------------
"Majority-in-Interest of the Non-Defaulting Limited Partners", at any time,
-----------------------------------------------------------
means Non-Defaulting Limited Partners whose aggregate Voting Percentages at such
time exceed 50% of all Non-Defaulting Limited Partners' Voting Percentages at
such time.
"Majority-in-Interest of the Limited Partners", at any time, means Limited
--------------------------------------------
Partners whose aggregate Voting Percentages at such time exceed 50% of all
Limited Partners' Voting Percentages at such time.
"Management Fee" means the management fee payable to the General Partner
--------------
pursuant to Section 8.12.
------------
"Member" means a member of the Advisory Committee as described in Section
------ -------
8.13.
- ----
"Minority Company" means any Person that is controlled by a member or
----------------
members of an ethnic minority group which would entitle a seller of a broadcast
station to that Person to a Code Section 1071 minority tax certificate, in which
or through which the Partnership, directly or indirectly, makes or acquires a
Broadcast Investment.
"Net Capital Contribution" means, as of any date with respect to any
------------------------
Partner, the aggregate amount of all Capital Contributions made by such Partner
on or prior to such date less all distributions previously made to that Partner
pursuant to Section 3.3(a).
--------------
"Net Income" and "Net Loss", respectively, for any period means the income
---------- --------
or loss of the Partnership for such period as determined in accordance with the
method of accounting followed by the Partnership for Federal income tax
purposes, including, for all purposes, any income exempt from tax and any
expenditures of the Partnership which are described in Code Section
705(a)(2)(B); provided, however, that in determining Net Income and Net Loss and
-------- -------
every item entering into the computation thereof, solely for the purpose of
adjusting the Capital Accounts of the Partners (and not for tax purposes), (i)
any income, gain, loss or deduction attributable to the taxable disposition of
any Partnership Asset shall be computed as if the adjusted basis of such
Partnership Asset on the date of such disposition equalled its Book Value as of
such date, (ii) if any Partnership Asset is distributed in kind to a Partner or
the Partnership Assets are revalued pursuant to Section 11.1, the difference
------------
between its Value and its Book Value at the time of such distribution shall be
treated as gain or loss, and (iii) any depreciation, cost recovery and
amortization as to any Partnership Asset shall be computed by assuming that the
adjusted basis of such Partnership Asset equalled its Book Value determined
under the methodology described in Regulation (S)1.704-1(b)(2)(iv)(g)(3); and
provided, further, that any item (computed with the adjustments in the preceding
- -------- -------
proviso) allocated under Section 4.2 shall be excluded from the computation of
-----------
Net Income and Net Loss.
Non-Affiliated Limited Partner" means each Limited Partner that is not an
------------------------------
Affiliate of the General Partner or any general partner in the General Partner.
9
<PAGE>
"Non-Defaulting Limited Partner" as of any date means each Limited Partner
------------------------------
on such date other than any Limited Partner that is a Defaulting Partner on such
date.
"Non-Defaulting Partner" as of any date means each Partner on such date
----------------------
other than any Partner that is a Defaulting Partner on such date.
"Offering and Organization Costs" means all costs and expenses incurred by
-------------------------------
or on behalf of the Partnership in connection with the offering of limited
partnership Interests in the Partnership and the organization of the
Partnership.
"Partners" means the General Partner and the Limited Partners, where no
--------
distinction is required by the context in which the term is used.
"Partnership" means the limited partnership created by this Agreement under
-----------
the name "Argyle Television Investors (Foreign), L.P."
"Partnership Asset" means any property of the Partnership, and "Partnership
----------------- -----------
Assets" means the aggregate of all of the property of the Partnership.
- ------
"Person" means any individual, partnership, association, corporation,
------
limited liability company, trust or other entity.
"Permitted Holding Company Expense Amount" has the meaning set forth in
----------------------------------------
Section 8.11(c).
"Portfolio Company" means any Person in which or through which the
-----------------
Partnership, directly or indirectly, makes or acquires a Broadcast Investment.
"Portfolio Company Fees" has the meaning set forth in Section 8.12(b).
----------------------
"Power of Attorney" means the Power of Attorney granted under Section 13.3.
----------------- ------------
"Preferred Return" means, for any Partner for any Fiscal Year or any
----------------
portion thereof, a 9% annual rate of return on an amount equal to the sum of (a)
the weighted average of such Partner's Adjusted Capital Contribution Amount
during such Fiscal Year or portion thereof (calculated by taking into account
the amount of such Partner's Adjusted Capital Contribution Amount on each day
during such Fiscal Year or portion thereof) and (b) the weighted average of such
Partner's Adjusted Unpaid Preferred Return Amount during such Fiscal Year or
portion thereof (calculated by taking into account the amount of such Partner's
Adjusted Unpaid Preferred Return Amount on each day during such Fiscal Year or
portion thereof), subject to adjustment pursuant to Section 3.3(e)(ii).
------------------
"Presumed Clawback Amount" as of any date means the amount that the General
------------------------
Partner would be required to contribute to the Partnership pursuant to Section
-------
10.6(b) as of such date if (a) the Partnership were liquidated as of such date,
- -------
(b) the assets of the Partnership had a fair
10
<PAGE>
market value and were disposed of as of such date for consideration equal to
their Book Value and (c) liquidation proceeds were distributed to the Partners
pursuant to Section 5.1.
-----------
"Presumed Tax Liability" means, for any Partner for any Fiscal Year, an
----------------------
amount equal to the product of (a) the amount of taxable income allocated to
such Partner for that Fiscal Year and (b) the Presumed Tax Rate.
"Presumed Tax Rate" means the highest effective combined Federal, state and
-----------------
local income tax rate applicable during such Fiscal Year to a natural person
residing in Los Angeles, California, taxable at the highest marginal Federal
income tax rate and the highest marginal California State and Los Angeles income
tax rates (after giving effect to the Federal income tax deduction for such
state and local income taxes and disregarding the effects of Code Sections 67
and 68).
"Principals" means Bob Marbut, Blake Byrne, Ibra Morales and Harry Hawks.
----------
"Record Date" has the meaning set forth in the forepart of this Agreement.
-----------
"Reg Y Institution" means any Limited Partner that is, or is controlled by
-----------------
a Person that is, subject to the provisions of Regulation Y of the Board of
Governors of the Federal Reserve System or any successor to such regulation.
"Regulation" means a Treasury Regulation promulgated under the Code.
----------
"Revised Uniform Act" means the Delaware Revised Uniform Limited
-------------------
Partnership Act, as amended from time to time (or any succeeding law).
"Securities" means any interests in any loans by banks and any foreign or
----------
domestic "securities", as defined in Section 2(1) of the Securities Act of 1933,
as amended, or Section 3(a)(10) of the Securities Exchange Act of 1934, as
amended, and shall include, without limitation, common or preferred stocks,
limited partnership interests, investment contracts, certificates of deposit,
trade acceptances and trade claims, convertible securities, fixed income
securities, certificates of beneficial interest, notes or other evidences of
indebtedness of other Persons, warrants, rights, synthetic securities, put and
call options on, or any other derivatives of, any of the foregoing, other
options related thereto, interests or participations therein or any combination
of any of the foregoing.
"Special Voting Capital Contribution" of a Limited Partner at any time
-----------------------------------
means (a) for each Limited Partner other than a Reg Y Institution or an
Affiliated Limited Partner, the amount of such Limited Partner's Capital
Contribution at such time, (b) for any Reg Y Institution except the First Boston
Entities, an amount equal to the lesser of (i) its Capital Contribution at such
time and (ii) 4.9% of the aggregate Special Voting Capital Contributions of all
Limited Partners at such time, (c) for CSFB Merchant Bank, an amount equal to
the lesser of (i) its Capital Contribution at such time and (ii) 15% of the
aggregate Special Voting Capital Contributions of all Limited Partners at such
time, (d) for CSFB Investments, an amount equal to the lesser of (i)
11
<PAGE>
its Capital Contribution at such time and (ii) 9.9% of the aggregate Special
Voting Capital Contributions of all Limited Partners at such time, (e) for the
First Boston Entities in the aggregate, an amount equal to the lesser of (i)
their Capital Contributions at such time and (ii) 24.9% of the aggregate Special
Voting Capital Contributions of all Limited Partners at such time and (f) for
any Affiliated Limited Partner, zero.
"Special Voting Percentage" of a Limited Partner at any time means the
-------------------------
ratio (expressed as a percentage) of such Limited Partner's Special Voting
Capital Contribution to the aggregate Special Voting Capital Contributions of
all Limited Partners at such time.
"Stockholders Agreement" means the Stockholders Agreement dated as of
----------------------
January 4, 1995 among the Holding Company, the Partnership and other
stockholders of the Holding Company, as amended from time to time.
"Substituted Limited Partner" means any Person admitted to the Partnership
---------------------------
as a substituted Limited Partner under Article IX.
----------
"Tax Distribution" has the meaning set forth in Section 5.2.
---------------- -----------
"TIP" means Television Investment Partners, L.P., a Delaware limited
---
partnership.
"Transfer", "Transferee" and "Transferor" have the respective meanings set
-------- ---------- ----------
forth in Section 9.1.
-----------
"Two-Thirds-in-Interest of the Non-Defaulting Limited Partners" at any
--------------------------------------------------------------
time means Non-Defaulting Limited Partners whose aggregate Voting Percentages at
such time exceed 66 2/3% of all Non-Defaulting Limited Partners' Voting
Percentages at such time.
"Uniform Commercial Code" has the meaning set forth in Section 3.3(b).
----------------------- --------------
"Unpaid Preferred Return" means, as of any date for any Partner, the sum of
-----------------------
such Partner's Preferred Return (a) for the period beginning on the first day of
the Fiscal Year within which such date occurs and ending on such date and (b)
for all prior Fiscal Years, less all distributions previously made to such
Partner pursuant to Section 5.1(b) or deemed made to that Partner pursuant to
--------------
Section 5.1(b) pursuant to the third sentence of Section 5.2, as adjusted
pursuant to Section 3.3(e)(ii).
------------------
"U.S. Person" means a Person who is a "United States Person" as defined in
-----------
Code Section 7701(a)(30), provided that such definition shall be applied by
omitting the phrase "or resident" in subparagraph (A) of such Code Section.
"Value" of any Partnership Asset as of any date, means the fair market
-----
value of such Partnership Asset as of such date, with the fair market value of
the type of assets described below being determined as follows:
12
<PAGE>
(a) goodwill, firm name or customers' lists and any similar intangible
asset of the Partnership shall be valued at zero;
(b) Securities listed on one or more national securities exchanges shall
be valued at their last reported sales prices on the consolidated tape on the
date of determination (or if the date of determination is not a Business Day, on
the last Business Day immediately prior to such date of determination). If no
such sales of such Securities occurred on such date, such Securities shall be
valued at the mean of the last "bid" and "ask" prices on the date of
determination on the national securities exchange which has the highest average
daily volume for such Security over the last 60 days on or prior to the date of
determination (or, if the date of determination is not a date upon which such
national securities exchange was open for trading, on the last prior date on
which such national securities exchange was so open);
(c) Securities for which no such market prices are available, or as to
which, in the sole judgment of the General Partner, any of the above market
prices are below or exceed (as the case may be) the amount realizable by the
Partnership upon a sale thereof, shall be valued at the fair value thereof as
determined upon a reasonable basis and in good faith by the General Partner; and
(d) the fair market value of other investments, assets, properties, debts,
obligations or liabilities shall be valued as determined by the General Partner
upon a reasonable basis and in good faith.
"Voting Capital Contribution" of a Limited Partner at any time means (a)
---------------------------
for each Limited Partner other than a Reg Y Institution, the amount of such
Limited Partner's Capital Contribution at such time, (b) for any Reg Y
Institution except the First Boston Entities, an amount equal to the lesser of
(i) its Capital Contribution at such time and (ii) 4.9% of the aggregate Voting
Capital Contributions of all Limited Partners at such time, (c) for CSFB
Merchant Bank, an amount equal to the lesser of (i) its Capital Contribution at
such time and (ii) 15% of the aggregate Voting Capital Contributions of all
Limited Partners at such time, (d) for CSFB Investments, an amount equal to the
lesser of (i) its Capital Contribution at such time and (ii) 9.9% of the
aggregate Voting Capital Contributions of all Limited Partners at such time and
(e) for the First Boston Entities in the aggregate, an amount equal to the
lesser of (i) their Capital Contributions at such time and (ii) 24.9% of the
aggregate Voting Capital Contributions of all Limited Partners at such time.
"Voting Percentage" of a Limited Partner at any time means the ratio
-----------------
(expressed as a percentage) of such Limited Partner's Voting Capital
Contribution to the aggregate Voting Capital Contributions of all Limited
Partners at such time.
"Withdrawing Limited Partner" has the meaning set forth in Section 9.3(d).
--------------------------- --------------
ARTICLE III
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
13
<PAGE>
Section 3.1 Initial Capital Contributions. The General Partner and each
-----------------------------
Limited Partner will make a Capital Contribution to the Partnership. The
General Partner hereby contributes $100.00 to the Partnership.
Contemporaneously with the execution of this Agreement, the ATI Partnership
distributed to the Limited Partners and the Limited Partners contributed to the
Partnership the Foreign Series C Common Stock, with each Limited Partner
receiving from the ATI Partnership and contributing to the Partnership the
certificate and the number of shares of Foreign Series C Common Stock described
opposite its name in the columns entitled "Certificate Number" and "Number of
Shares" on Schedule A hereto. In addition, each Limited Partner shall
contribute cash to the Partnership in an amount set forth opposite such
Partner's name on Schedule E. Such cash contribution shall consist of cash
distributed by ATI Partnership to the Partners.
Section 3.2 Additional Capital Contributions by the General Partner.
-------------------------------------------------------
Except as otherwise specifically provided herein, the General Partner shall not
be obligated to make any additional Capital Contributions to the Partnership.
Section 3.3 Additional Capital Contributions by Partners.
--------------------------------------------
(a) As and when at any time, in the opinion of the General Partner,
additional capital is necessary for the Partnership to make Broadcast
Investments, to provide the Holding Company or any Portfolio Company with
working capital, to pay costs and expenses of the Partnership, or to repurchase
a Defaulting Partner's Interest in the Partnership pursuant to Section
-------
3.3(e)(i), the Partners shall make additional Capital Contributions to the
- ---------
Partnership in cash; the amount of capital required to be contributed by each
Partner shall be equal to the total amount of additional Capital Contributions
called for by the General Partner, multiplied by a fraction, the numerator of
which shall be the amount of such Partner's Capital Commitment and the
denominator of which shall be the aggregate amount of all Partners' Capital
Commitments; provided, however, that (i) except for Capital Contributions deemed
-------- -------
necessary by the General Partner to pay costs and expenses of the Partnership
(including without limitation the Management Fee), no Partner shall be obligated
to contribute additional capital pursuant to this Section 3.3(a) after the end
--------------
of the Commitment Period, (ii) no Partner shall be required to make any
additional Capital Contribution pursuant to this Section 3.3(a) if and to the
--------------
extent that such additional Capital Contribution would cause that Partner to
have contributed to the Partnership or the ATI Partnership (without regard to
contributions of Imputed Interest Amounts (as such term is defined in the ATI
Partnership Agreement) other than contributions of cash to the Partnership
pursuant to Section 3.1, in the aggregate (after taking into account all prior
Capital Contributions to the Partnership or the ATI Partnership), an amount in
excess of the sum of (x) such Partner's Capital Commitment, (y) any amounts
refunded to such Partner pursuant to Section 11.1(c) of the ATI Partnership
---------------
Agreement (but specifically excluding the Imputed Interest Amount (as such term
is defined in the ATI Partnership Agreement)) and (z) any amounts returned to
such Partner pursuant to the following sentence of this paragraph (a) or the
-------------
corresponding provision of the ATI Partnership Agreement. If the General
Partner calls for any Capital Contributions pursuant to this paragraph (a) and,
-------------
following such Capital Contributions, the amounts contributed are not used to
make Broadcast Investments, to provide the Holding Company or any Portfolio
Company with working capital, to pay costs and expenses of the
14
<PAGE>
Partnership, or to repurchase a Defaulting Partner's Interest in the Partnership
pursuant to Section 3.3(e)(i), the General Partner shall have the right within
-----------------
thirty days of such Capital Contribution to return all or any portion of such
Capital Contributions to the Partners in the same proportions as such Capital
Contributions were made by the Partners. Such additional Capital Contributions
shall be made from time to time within 10 Business Days after notice from the
General Partner of the amounts to be contributed by each Partner and of the
general purposes to which such contributions will be applied. Each Capital
Contribution that is actually made on or prior to the tenth Business Day shall
be deemed made on the tenth Business Day following notice from the General
Partner unless returned within thirty days of such Capital Contribution.
(b) Each Limited Partner hereby pledges and assigns its Interest in
the Partnership to the Partnership as security for the performance of its
obligation to pay its Capital Commitment when called for by the General Partner
in accordance with Section 3.3(a) and does hereby grant to the Partnership all
--------------
rights available to a secured party under the Uniform Commercial Code of the
State of New York and the comparable laws of its state of residence (if
different) (hereinafter referred to collectively as the "Uniform Commercial
------------------
Code") and agrees, upon request, to deliver to the General Partner a duly
executed financing statement and any other document which the General Partner
may reasonably request with respect thereto. Each Partner hereby irrevocably
constitutes and appoints the General Partner as its attorney-in-fact to execute
any document necessary to carry out the terms of this paragraph (b). Each
-------------
Partner hereby acknowledges that such power of attorney is coupled with an
interest, is irrevocable and is transferable to any successor of the General
Partner.
(c) Any Capital Contribution not made when due and Collection Costs
(as defined below) incurred shall bear interest ("Default Interest") from the
----------------
dates due or incurred, as appropriate, until contributed or reimbursed to the
Partnership at a rate equal to the lesser of (x) two percentage points over the
prime commercial lending rate of interest announced from time to time by Chase
or its successor during such period and (y) the maximum interest that may be
charged by the Partnership on such amounts under applicable usury or other law.
Any distributions which a Defaulting Partner would otherwise receive during any
period in which such Partner is a Defaulting Partner shall be applied by the
Partnership against such Defaulting Partner's required Capital Contributions,
Default Interest and Collection Costs in such order as the General Partner may
determine. During any period in which a Defaulting Partner shall have failed to
make Capital Contributions required of it, the General Partner or its Affiliates
may, in addition to any of the actions provided in paragraphs (d) and (e) below,
-------------- ---
in the General Partner's sole discretion, take either of the following two
actions: (i) lend funds to the Partnership in an amount up to the sum of such
Limited Partner's defaulted Capital Contributions, Default Interest thereon and
Collection Costs in respect thereof; such loans (herein "Default Loans"),
-------------
together with interest thereon at the rate described above with respect to
Default Interest, shall be repaid by the Partnership to the General Partner
prior to any distributions pursuant to Section 5.1, or (ii) make the amount of
-----------
the Default Loan available to the Partnership and treat the Default Loan as a
loan to the Defaulting Partner, and the General Partner shall be entitled to
recover, on demand, from the Defaulting Partner the amount of the Default Loan
together with interest thereon at the rate described above with respect to
Default Interest. If at any time after the amount of the Default Loan was made
available to the Partnership, the Partnership receives from the Defaulting
15
<PAGE>
Partner all or any portion of such unpaid Capital Contributions so made
available, then the Partnership shall promptly pay the General Partner such
amounts. Any distribution to which a Defaulting Partner to whom a loan has been
deemed made by the General Partner is entitled shall, to the extent such deemed
loan has not been fully paid (with interest thereon) at the time of such
distribution, be distributed by the Partnership to the General Partner against
such Defaulting Partner's obligation to repay the amount of the deemed loan.
For purposes of this Agreement, any such distribution will be treated as a
distribution to the Defaulting Partner followed by a payment from the Defaulting
Partner to the General Partner.
(d) Upon failure of a Partner to make an additional Capital
Contribution when called for by the General Partner in accordance with Section
-------
3.3(a), the General Partner shall be entitled to exercise on behalf of the
- ------
Partnership all of the rights afforded to a secured party under the Uniform
Commercial Code, and may, upon such notice as may be required by the Uniform
Commercial Code (but in no event less than 15 Business Days' notice), cause the
Defaulting Partner's Interest in the Partnership to be sold at private or public
sale in accordance with the Uniform Commercial Code or any other applicable law;
provided, however, that the Defaulting Partner's Interest in the Partnership
- -------- -------
shall not be sold pursuant to the preceding sentence unless the purchaser of
such Interest agrees to assume the obligations of the Defaulting Partner to
contribute to the Partnership any portion of the Defaulting Partner's required
Capital Contribution together with Default Interest thereon and Collection Costs
in respect thereof then due and to pay to the Partnership any subsequent Capital
Contributions when called for by the General Partner in accordance with Section
-------
3.3(a). Any proceeds of the sale received in addition to the assumption
- ------
described above shall be applied first, to the reasonable expenses, including
without limitation attorneys' fees, accounting fees and placement fees, if any,
incurred by the Partnership and the General Partner in connection with the sale
or other exercise of remedies pursuant to this paragraph (d) (collectively,
-------------
"Collection Costs"), second, against any accrued and unpaid Default Interest in
- -----------------
respect of such Defaulting Partner's required Capital Contributions or said
Collection Costs, and then against the Defaulting Partner's required Capital
Contributions. Any remaining proceeds shall be paid to the Defaulting Partner.
(e) Upon failure of a Partner to make a Capital Contribution when
called for by the General Partner in accordance with Section 3.3(a), the General
--------------
Partner, in its absolute discretion, may, in lieu of or in addition to acting
pursuant to paragraphs (c) or (d) of this Section 3.3, take any or all of the
-------------- --- -----------
following actions on behalf of the Partnership:
(i) purchase the entire Interest in the Partnership of the Defaulting
Partner by payment in cash to the Defaulting Partner of an amount equal to
50% of such Defaulting Partner's Capital Account balance as of the date of
the default;
(ii) reduce the Defaulting Partner's Capital Account balance to an
amount equal to 50% of the Defaulting Partner's Capital Account balance as
of the date of the default, and upon such reduction, the Defaulting Partner
shall be deemed to have transferred 50% of its Interest in the Partnership
to the Partnership and, therefore, the Capital Contributions, Adjusted
Capital Contribution Amount, Net Capital Contribution, Adjusted Unpaid
Preferred Return Amount, Preferred Return for the Fiscal Year in which the
16
<PAGE>
default occurs and for all prior Fiscal Years, Unpaid Preferred Return, and
for purposes of computing allocations and distributions following such
reduction, all prior allocations and distributions and the Adjusted Capital
Account (collectively, the "Affected Items") of the Defaulting Partner
--------------
shall be deemed reduced by an amount equal to 50% of the amount of the
Affected Items as of the date of the default and (y) increase each Non-
Defaulting Partner's Capital Account balance by an amount equal to the
product of (I) the total amount of the reduction of the Defaulting
Partner's Capital Account balance, and (II) a fraction, the numerator of
which shall be the amount of such Non-Defaulting Partner's Net Capital
Contributions as of the date of the default and the denominator of which
shall be the aggregate amount of all Non-Defaulting Partners' Net Capital
Contributions as of such date, and upon such increase, each Non-Defaulting
Partner shall be deemed to have acquired a corresponding fractional portion
of 50% of the Defaulting Partner's Interest in the Partnership including
without limitation the corresponding fractional portion of 50% of each
Affected Item of the Defaulting Partner; provided that the Defaulting
Partner shall not be relieved of its obligations to make all of its
subsequent Capital Contributions pursuant to Section 3.3(a) and the Non-
--------------
Defaulting Partners shall not be deemed to assume any of the Defaulting
Partner's obligation to make subsequent Capital Contributions pursuant to
Section 3.3(a).
--------------
(iii) reduce or terminate the remaining unfunded Capital Commitment
of the Defaulting Partner;
(iv) commence legal proceedings against the Defaulting Partner to
collect the due and unpaid payment of Capital Contributions plus Default
Interest and Collection Costs; or
(v) exercise any other remedy available under applicable law that the
General Partner determines to be in the best interests of the Partnership.
(f) No Limited Partner shall at any time be required, and no Limited
Partner shall have any right, to make any additional Capital Contributions,
except as may be required by law or as set forth in Section 3.3(a).
--------------
Section 3.4 Form of Contribution. Unless otherwise approved by the
--------------------
General Partner, all Capital Contributions of cash shall be in U.S. dollars.
Section 3.5 Interest on Capital Contributions. No Partner shall be
---------------------------------
entitled to interest on or with respect to any Capital Contribution.
Section 3.6 Withdrawal and Return of Capital Contributions. Except as
----------------------------------------------
otherwise expressly provided in this Agreement, no Partner shall be entitled to
withdraw any part of that Partner's Capital Contributions or to receive
distributions from the Partnership.
17
<PAGE>
ARTICLE IV
ALLOCATION OF NET INCOME AND NET LOSS
Section 4.1 Allocation of Net Income and Net Loss. Except as provided in
-------------------------------------
Section 4.2, the Partnership's Net Income or Net Loss, as the case may be, and
- -----------
each item of income, loss and deduction entering into the computation thereof,
for each Fiscal Year shall be allocated as follows:
(a) Net Income for such Fiscal Year shall be allocated as follows:
(i) first, an amount of Net Income equal to the excess of (x) all Net
Loss previously allocated to the General Partner pursuant to Section
-------
4.1(b)(v) over (y) all Net Income previously allocated to the General
---------
Partner pursuant to this Section 4.1(a)(i) shall be allocated to the
-----------------
General Partner;
(ii) second, an amount of Net Income equal to the excess of (x) all
Net Loss previously allocated to the Partners pursuant to Section
-------
4.1(b)(iv) over (y) all Net Income previously allocated to the Partners
----------
pursuant to this Section 4.1(a)(ii) shall be allocated to the Partners in
------------------
proportion to each Partner's share of such excess of (x) over (y);
(iii) third, an amount of Net Income equal to the excess of (x) the
sum of (A) all Net Loss previously allocated to the Partners pursuant to
Section 4.1(b)(iii) and (B) the Partners' Preferred Return for such Fiscal
-------------------
Year and all prior Fiscal Years over (y) all Net Income previously
allocated to the Partners pursuant to this Section 4.1(a)(iii) shall be
-------------------
allocated to the Partners in proportion to each Partner's share of such
excess of (x) over (y);
(iv) fourth, an amount of Net Income equal to the excess of (x) the
sum of (A) all Net Loss previously allocated to the General Partner
pursuant to Section 4.1(b)(ii) and (B) 25% of the Partners' Preferred
------------------
Return for such Fiscal Year and all prior Fiscal Years over (y) all Net
Income previously allocated to the General Partner pursuant to this Section
-------
4.1(a)(iv) shall be allocated 100% to the General Partner;
----------
(v) fifth, any remaining Net Income shall be allocated 80% to all
Partners in proportion to the Partners' Net Capital Contributions and 20%
to the General Partner.
(b) Net Loss for such Fiscal Year shall be allocated as follows:
(i) first, an amount of Net Loss equal to the excess of (x) all Net
Income previously allocated to the Partners pursuant to Section 4.1(a)(v)
-----------------
over (y) all Net Loss previously allocated to the Partners pursuant to this
Section 4.1(b)(i) shall be allocated to the Partners in proportion to each
-----------------
Partner's share of such excess of (x) over (y);
18
<PAGE>
(ii) second, an amount of Net Loss equal to the excess of (x) all Net
Income previously allocated to the General Partner pursuant to Section
-------
4.1(a)(iv) over (y) all Net Loss previously allocated to the General
----------
Partner pursuant to this Section 4.1(b)(ii) shall be allocated 100% to the
------------------
General Partner;
(iii) third, an amount of Net Loss equal to the excess of (x) all Net
Income previously allocated to the Partners pursuant to Section 4.1(a)(iii)
-------------------
over (y) all Net Loss previously allocated to the Partners pursuant to this
Section 4.1(b)(iii) shall be allocated to the Partners in proportion to
-------------------
each Partner's share of such excess of (x) over (y);
(iv) fourth, an amount of Net Loss equal to the excess of (x) the sum
of (A) all Net Income previously allocated to the Partners pursuant to
Section 4.1(a)(ii) and (B) the Partners' aggregate Adjusted Capital
------------------
Contribution Amounts to the Partnership over (y) all Net Loss previously
allocated to the Partners pursuant to this Section 4.1(b)(iv) shall be
------------------
allocated to each Partner in proportion to each Partner's share of such
excess of (x) over (y); and
(v) fifth, any remaining Net Loss shall be allocated to the General
Partner.
(c) Notwithstanding the provisions of Sections 4.1(a) and 4.1(b), (i)
--------------- ------
the General Partner shall first be allocated items of income equal to the sum of
(x) the excess, if any, of (A) the Presumed Clawback Amount as of the last day
of the immediately preceding Fiscal Year over (B) the Presumed Clawback Amount
as of the last day of such Fiscal Year and (y) the excess of (I) the aggregate
of such excess of (A) over (B) for all prior years over (II) all amounts
allocated to the General Partner pursuant to this clause (i) of Section 4.1(c)
---------- --------------
for all prior years and (ii) items of loss or deduction equal to the sum of (x)
the excess, if any, of (A) the Presumed Clawback Amount as of the last day of
such Fiscal Year over (B) the Presumed Clawback Amount as of the last day of the
immediately preceding Fiscal Year and (y) the excess of (I) the aggregate of
such excess of (A) over (B) for all prior years over (II) all amounts allocated
to the General Partner pursuant to this clause (ii) of Section 4.1(c) for all
----------- --------------
prior years and the Net Income and Net Loss to be allocated pursuant to Sections
--------
4.1(a) and 4.1(b) shall be adjusted accordingly.
- ------ ------
(d) Notwithstanding the provisions of Sections 4.1(a), 4.1(b) and
--------------- ------
4.1(c), in the year in which the Partnership is liquidated, the General Partner
- ------
shall allocate Net Income, Net Loss and items of income, gain, loss and
deduction to the extent possible to cause distributions to the Partners pursuant
to Section 10.3 to equal the distributions the Partners would have received were
------------
liquidating distributions effected pursuant to Article V.
---------
(e)(i)Notwithstanding the provisions of Section 4.1(a), 4.1(b), 4.1(c)
-------------- ------ ------
and 4.1(d) but subject to Section 4.2, if the General Partner pays the
------ -----------
Partnership any Portfolio Company Fees pursuant to Section 8.12(b), any
---------------
gross income attributable to the payment of Portfolio Company Fees that
would be allocated to a Foreign Partner but for the provision of this
Section 4.1(e) shall, instead, be reallocated to the General Partner and to
--------------
ATP in proportion to such Partners' Net Capital Contributions. For
purposes of this provision,
19
<PAGE>
the gross income attributable to the payment of Portfolio Company Fees that
would be allocated to a Foreign Partner but for this provision shall equal
the excess of (x) the Net Income allocable to such Foreign Partner pursuant
to Section 4.1(a) taking into account the payment of the Portfolio Company
--------------
Fees over (y) the Net Income allocable such Foreign Partner without regard
to the payment of Portfolio Company Fees, with Net Loss being treated for
purposes of this computation as negative Net Income.
(ii) If any Net Income has been allocated from Foreign Partners to
the General Partner and ATP, pursuant to Section 4.1(e)(i), an amount of
-----------------
income or gain attributable to cash distributions from, or the proceeds of
sales of, any Broadcast Investments (or transactions giving rise to such
distributions or proceeds) on or after the date of the transaction that
gave rise to the payment by the General Partner to the Partnership that
gave rise to the allocation and that would otherwise be allocated to the
General Partner and ATP shall instead be reallocated to such Foreign
Partners, in proportion to the Net Income that has been allocated from each
Foreign Partner pursuant to Section 4.1(e)(i), until the total amount of
-----------------
income and gain reallocated from the General Partner to each Foreign
Partner shall equal the gross income allocated to the General Partner
pursuant to Section 4.1(e)(i) and the total amount of income and gain
-----------------
reallocated from ATP to each Foreign Partner shall equal the total gross
income allocated to ATP pursuant to Section 4.1(e)(i).
-----------------
(ii) Except as specifically provided in Sections 4.1(e)(i) and
------------------
4.1(e)(ii), all allocations of Net Income and Net Loss pursuant to Section
---------- -------
4.1 shall be effected as if the reallocations provided in Sections
--- --------
4.1(e)(i) and 4.1(e)(ii) hereof had not occurred. For example, the amount
--------- ----------
of Net Income allocable to the Partners with respect to the Partners'
Preferred Return pursuant to Section 4.1(a)(iii) shall be computed as if a
-------------------
Foreign Partner had received an allocation of Portfolio Company Fees and as
if no gross income or gains had been allocated to or from the General
Partner and ATP pursuant to Sections 4.1(e)(i) and 4.1(e)(ii).
------------------ ----------
Section 4.2 Other Allocation Provisions.
---------------------------
(a) If there is a net decrease in "partnership minimum gain" (within
the meaning of Regulation (S)1.704-2(d)) for a Fiscal Year, then there shall be
allocated to each Partner items of income and gain for that Fiscal Year equal to
that Partner's share of the net decrease in partnership minimum gain (within the
meaning of Regulation (S)1.704-2(g)(2)), subject to the exceptions set forth in
Regulation (S)1.704-2(f)(2), (3) and (5), provided, that if the Partnership has
--------
any discretion as to an exception set forth pursuant to Regulation (S)1.704-
2(f)(5), the General Partner may exercise such discretion on behalf of the
Partnership. The General Partner shall, if the application of the minimum gain
chargeback requirement would cause a distortion in the economic arrangement
among the Partners, ask the Commissioner of the Internal Revenue Service to
waive the minimum gain chargeback requirement pursuant to Regulation (S)1.704-
2(f)(4). The foregoing is intended to be a "minimum gain chargeback" provision
as described in Regulation (S)1.704-2(f) and shall be interpreted and applied in
all respects in accordance with that Regulation.
20
<PAGE>
If during a Fiscal Year there is a net decrease in partner nonrecourse debt
minimum gain (as determined in accordance with Regulation (S)1.704-2(i)(3)),
then, in addition to the amounts, if any, allocated pursuant to the preceding
paragraph, any Partner with a share of that partner nonrecourse debt minimum
gain (determined in accordance with Regulation (S)1.704-2(i)(5)) as of the
beginning of the Fiscal Year shall, subject to exceptions set forth in
Regulation (S)1.704-2(i)(4) (provided, that if the Partnership has any
--------
discretion as to an exception, the General Partner may exercise such discretion
on behalf of the Partnership), be allocated items of income and gain for the
Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal to that
Partner's share of the net decrease in the partner nonrecourse debt minimum
gain. The General Partner shall, if the application of the partner nonrecourse
debt minimum gain chargeback requirement would cause a distortion in the
economic arrangement among the Partners, ask the Commissioner to waive the
minimum gain chargeback requirement pursuant to Regulation (S)(S)1.704-2(f)(4)
and 1-704-2(i)(4). The foregoing is intended to be the "chargeback of partner
nonrecourse debt minimum gain" required by Regulation (S)1.704-2(i)(4) and shall
be interpreted and applied in all respects in accordance with that Regulation.
(b) If during any Fiscal Year of the Partnership a Partner
unexpectedly receives an adjustment, allocation or distribution described in
Regulation (S)1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a
- - - -
deficit balance in the Partner's Adjusted Capital Account, there shall be
allocated to the Partner items of income and gain (consisting of a pro rata
portion of each item of Partnership income, including gross income, and gain for
such year) in an amount and manner sufficient to eliminate such deficit as
quickly as possible. The foregoing is intended to be a "qualified income
offset" provision as described in Regulation (S)1.704-1(b)(2)(ii)(d) and shall
-
be interpreted and applied in all respects in accordance with that Regulation.
A Partner's "Adjusted Capital Account", at any time, shall equal the
------------------------
Partner's Capital Account at such time (x) increased by the sum of (A) the
amount of the Partner's share of partnership minimum gain (as defined in
Regulation (S)1.704-2(g)(1) and (3)), (B) the amount of the Partner's share of
partner nonrecourse debt minimum gain (as defined in Regulation (S)1.704-
2(i)(5)) and (C) any amount of the deficit balance in its Capital Account the
Partner is obligated to restore on liquidation of the Partnership pursuant to
Section 10.6(b) or other amount that the Partner is treated as obligated to
- ---------------
restore pursuant to Regulation (S)1.704-1(b)(2)(ii)(c) and (y) decreased by
reasonably expected adjustments, allocations and distributions described in
Regulation (S)1.704-1(b)(2)(ii)(d)(4), (5) and (6), subject to adjustment
- - - -
pursuant to Section 3.3(e)(ii). This definition shall be interpreted
------------------
consistently with Regulation (S)1.704-1(b)(2)(ii)(d).
(c) If any Partner has a deficit in its Adjusted Capital Account, such
Partner shall be specially allocated items of Partnership income and gain in the
amount of such deficit as rapidly as possible, provided that an allocation
--------
pursuant to this Section 4.2(c) shall be made if and only to the extent that
--------------
such Partner would have a deficit in its Adjusted Capital Account after all
other allocations provided for in this Agreement have been tentatively made as
if this Section 4.2(c) were not in this Agreement.
--------------
(d) Notwithstanding anything to the contrary in this Article IV,
----------
21
<PAGE>
(i) Partnership losses, deductions or Code Section 705(a)(2)(b)
expenditures that are attributable to a particular partner nonrecourse
liability shall be allocated to the Partner that bears the economic risk of
loss for the liability in accordance with the rules of Regulation (S)1.704-
2(i); and,
(ii) Partnership losses, deductions or Code Section 705(a)(2)(b)
expenditures that are attributable to partnership nonrecourse liabilities
shall be allocated to the Partners in proportion to their Net Capital
Contributions.
(e) Notwithstanding any provision of Section 4.1, no allocation of Net
-----------
Losses shall be made to a Partner if it would cause the Partner to have a
negative balance in its Adjusted Capital Account. Allocations of Net Losses
that would be made to a Partner but for this Section 4.2(e) shall instead be
--------------
made to other Partners pursuant to Section 4.1 to the extent not inconsistent
-----------
with this Section 4.2(e). To the extent allocations of Net Losses cannot be
--------------
made to any Partner because of this Section 4.2(e), such allocations shall be
--------------
made to the Partners in accordance with Section 4.1 notwithstanding this Section
----------- -------
4.2(e).
- ------
(f) To the extent that any item of income, gain, loss or deduction has
been specially allocated pursuant to Paragraphs (b), (c), or (e) of this Section
-------------- --- --- -------
4.2 and such allocation is inconsistent with the way in which the same amount
- ---
otherwise would have been allocated under Section 4.1, subsequent allocations
-----------
under Section 4.1 shall be made, to the extent possible and without duplication,
-----------
in a manner consistent with Paragraphs (a), (b), (c), and (e), which negate as
---------- --- ---- --- ---
rapidly as possible the effect of all such inconsistent allocations under said
Paragraphs (b), (c), and (e).
- ---------- --- --- ---
(g) [Intentionally deleted]
(h) Except to the extent otherwise required by the Code and
Regulations, if an Interest in the Partnership or part thereof is transferred in
any Fiscal Year, the Net Income, Net Loss and items of income, gain, loss,
deduction and credit allocable to the Interest in the Partnership for such
Fiscal Year shall be apportioned between the transferor and the transferee in
proportion to the number of days in such Fiscal Year such Interest is held by
each of them, except that, if they agree between themselves and so notify the
General Partner within 30 days after the transfer, then at their option and
expense, (i) all items or (ii) extraordinary items, including capital gains and
losses, may be allocated to the Person who held the Interest on the date such
items were realized or incurred by the Partnership.
(i) In determining the Partners' share of the excess nonrecourse
liabilities of the Partnership, if any, for purposes of Regulation (S)1.752-
3(a)(3), the Partners' share of Partnership profits shall be proportional to the
Partners' Net Capital Contributions.
(j) Any allocations made pursuant to this Article IV shall be made in
----------
the following order:
(i) Section 4.2(a);
22
<PAGE>
(ii) Section 4.2(b);
(iii) Section 4.2(d);
(iv) Section 4.2(f);
(v) Section 4.1; and
(vi) Section 4.2(c).
These provisions shall be applied as if all distributions and allocations were
made at the end of the Fiscal Year. Where any provision depends on the Capital
Account of any Partner, that Capital Account shall be determined after the
operation of all preceding provisions for the year. These allocations shall be
made consistently with the requirements of Regulation (S)1.704-2(j).
(k) The General Partner may vary the allocations provided for in
Article IV to the extent it believes it reasonably necessary to conform with the
- ----------
requirements of Regulation (S)1.704-1(b) and (S)1.704-2, provided any variations
--------
in the amounts allocated to a Partner shall not materially affect the amounts
distributed to such Partner.
Section 4.3. Allocations for Income Tax Purposes. The income, gains,
-----------------------------------
losses, deductions and credits of the Partnership shall be allocated in the same
manner as the items entering into the computation of Net Income and Net Loss
were allocated under Sections 4.1 and 4.2; provided, however, that solely for
------------ --- -------- -------
Federal, state and local income and franchise tax purposes -- and not for book
or Capital Account purposes -- income, gain, loss and deduction with respect to
any property properly carried on the Partnership's books at a Book Value other
than the tax basis of such property shall be allocated in a manner determined in
the General Partner's discretion, so as to take into account (consistently with
Code Section 704(c) and Regulation (S)1.704-3) the difference between such
property's Book Value and its tax basis.
Section 4.3 Withholding.
-----------
(a) The Partnership shall comply with withholding requirements under
Federal, state and local laws and shall remit amounts withheld to and file
required forms with the applicable jurisdictions. To the extent the Partnership
is required to withhold and pay over any amounts to any authority with respect
to distributions or allocations to any Partner, the amount withheld shall be
deemed to be a distribution in the amount of the withholding to that Partner.
In the event of any claimed over-withholding, Partners shall be limited to an
action against the applicable jurisdiction. If the amount withheld has not been
withheld from actual distributions, the Partnership may, at its option, (i)
require the Partner to reimburse the Partnership for such withholding, which
reimbursement shall be treated as a reduction in the deemed distribution to the
Partners referred to in the previous sentence by such Partner, or (ii) reduce
any subsequent distributions by the amount of such withholding. Each Partner
agrees to furnish the Partnership with any representations and forms as shall
reasonably be requested by the Partnership to assist it in determining the
extent of, and in fulfilling, its withholding obligations.
(b) Any Partner, that, for United States tax purposes, is a
nonresident alien individual, foreign corporation, foreign partnership or
foreign trust or estate (a "Foreign Partner") shall indemnify and hold harmless
---------------
the Partnership and the other Partners from and against any
23
<PAGE>
liability or loss with respect to withholding or other taxes, penalties,
additions to tax or interest with respect to income allocated to or amounts
distributed or paid to such Foreign Partner. This indemnity obligation shall
not be affected by the Partnership's failure to comply, pursuant to Section
-------
4.4(a), with any withholding requirements imposed by any jurisdiction. Under
- ------
current law and the anticipated operations of the Partnership, the Partners
agree that none of the income allocated to Foreign Partners shall be treated as
effectively connected with a United States trade or business.
ARTICLE V
DISTRIBUTIONS; WITHDRAWALS
Section 5.1 Distributions Generally. Subject to Sections 5.4 and 5.6, the
----------------------- ------------ ---
Partnership shall distribute any cash distributions it receives from any
Broadcast Investments (including the Holding Company) or any cash it realizes on
the sale of any Broadcast Investments (including stock in the Holding Company)
as soon as practicable after its receipt of such cash, provided, however, that
-------- -------
the Partnership need not make any distributions if the total amount distributed
would be less than $1,000,000. Except for any distributions expressly required
or permitted to be made under this Article V, and subject to Sections 5.4 and
--------- ------------
5.6, the amount and timing of all other distributions of cash and of property
- ---
other than cash will be at the sole discretion of the General Partner. All
distributions pursuant to this Section 5.1 should be made to the Partners as
-----------
follows:
(a) First, an amount equal to the aggregate Adjusted Capital Credit
Amounts of all Partners as of the date of such distribution shall be distributed
to all of the Partners in proportion to their Adjusted Capital Credit Amounts as
of the date of such distribution;
(b) Second, an amount equal to the aggregate Unpaid Preferred Returns
of all Partners as of the date of such distribution shall be distributed to all
of the Partners in proportion to their Unpaid Preferred Returns as of the date
of such distributions;
(c) Third, to the General Partner until the General Partner has
received an amount equal to 25% of all amounts distributed to the Partners
pursuant to Section 5.1(b) or deemed distributed pursuant to Section 5.1(b)
-------------- --------------
pursuant to the third sentence of Section 5.2;
-----------
(d) Fourth, (i) 80% to all of the Partners in proportion to their Net
Capital Contributions and (ii) 20% to the General Partner; and
(e)(i) Notwithstanding the provisions of Section 5.1(a), (b), (c) and
-------------- --- ---
(d), if the General Partner pays the Partnership any Portfolio Company Fees
---
pursuant to Section 8.12(b), the distributions to any Foreign Partner after
---------------
such payment shall be reduced by an aggregate amount equal to the gross
income that shall be reallocated to the General Partner and ATP from such
Foreign Partner pursuant to Section 4.1(e)(i) hereof as a result
-----------------
24
<PAGE>
of such payment, and the amount of such reduction shall instead be
distributed to the General Partner and ATP in proportion to such Partners'
Net Capital Contributions.
(ii) Notwithstanding the provisions of Section 5.1(a), (b), (c) and
-------------- --- ---
(d), if (i) the General Partner and ATP have received any distributions
---
pursuant to Section 5.1(e)(i) hereof that would otherwise have been
-----------------
distributed to a Foreign Partner and (ii) the Partnership has recognized
income or gain as a result of distributions or proceeds of sales referred
to in Section 4.1(e)(ii) hereof, the distributions to each of the General
------------------
Partner and ATP shall be reduced by an amount equal to the lesser of (x)
the distributions received by each such Partner pursuant to Section
-------
5.1(e)(i) hereof that would otherwise have been distributed to such Foreign
---------
Partner and (y) the income and gain that shall be reallocated to such
Foreign Partner pursuant to Section 4.1(e)(ii) hereof, and the amount of
------------------
such reduction shall instead be distributed to such Foreign Partner.
(iii) Except as specifically provided in Sections 5.1(e)(i) and
------------------
5.1(e)(ii), all cash distributions pursuant to Section 5.1 shall be
---------- -----------
effected as if the provisions of Sections 5.1(e)(i) and 5.1(e)(ii) had not
------------------ ----------
been operative.
Section 5.2 Tax Distributions. For each Fiscal Year, the Partnership
-----------------
shall, during such Fiscal Year or the immediately subsequent Fiscal Year, but
not later than 90 days following the end of such Fiscal Year, use its reasonable
best efforts to distribute to each Partner, with respect to such Fiscal Year, a
distribution in an amount equal to such Partner's Presumed Tax Liability for
such Fiscal Year (a "Tax Distribution"). Any amount distributed to a Partner
with respect to a Fiscal Year (including any distribution designated as a Tax
Distribution after such Fiscal Year but not later than 90 days after the end of
such Fiscal Year) shall (i) for purposes of Section 10.6(b), be treated as a Tax
Distribution to the extent such distribution does not exceed such Partner's
Presumed Tax Liability for such Fiscal Year and (ii) with respect to later
distributions made with respect to such Fiscal Year, reduce the amount
distributable to such Partner as a Tax Distribution for such Fiscal Year. Any
amount distributed pursuant to this Section 5.2 shall be deemed to be advance
-----------
distributions of amounts otherwise distributable to the Partners pursuant to
Section 5.1 and shall reduce the amounts that would subsequently otherwise be
- -----------
distributable to the Partners pursuant to Section 5.1 in the order they would
-----------
otherwise have been distributable. The General Partner may distribute Tax
Distributions on an estimated basis prior to the end of a Fiscal Year, provided
--------
that if the amounts distributed by the General Partner as estimated Tax
Distributions exceed the amount of Tax Distributions to which such Partner is
entitled to for such Fiscal Year, the excess shall be treated as a distribution
to such Partner pursuant to Section 5.1 and if any Partner receives amounts in
-----------
excess of the aggregate amount which such Partner is entitled to pursuant to
Sections 5.1 and 5.2, the Partner shall promptly after the end of the Fiscal
- ------------ ---
Year return such excess to the Partnership.
Section 5.3 Withdrawal Rights. Partners may not withdraw all or any part
-----------------
of the balance of their Capital Accounts.
25
<PAGE>
Section 5.4 Limitations on Distributions. Notwithstanding anything herein
----------------------------
contained to the contrary, no distribution under this Agreement shall be made if
such distribution would violate the Revised Uniform Act.
Section 5.5 Distributions Upon Withdrawal. Upon the withdrawal of all or
-----------------------------
a portion of any Limited Partner's Capital Account under 14.1, the Partnership
----
shall, subject to Section 5.6, distribute cash or property to such Partner, as
-----------
follows:
(a) for a withdrawal of less than 90% of a Limited Partner's Interest
in the Partnership, the full amount payable within 30 days after the effective
date of such withdrawal; and
(b) for a withdrawal of 90% or more of a Limited Partner's Interest in
the Partnership, then (i) within 30 days after the effective date of such
withdrawal, in an amount equal to at least 90% of the amount payable pursuant to
14.1, and (ii) as promptly as practicable, but not later than 30 days, after
- ----
completion of the audit required by Section 6.1(b) for the Fiscal Year in which
--------------
the effective date of such withdrawal falls, in an amount equal to the balance
of the amount payable.
Section 5.6 Reserves. In connection with any distribution to a Partner
--------
under this Article V or pursuant to Section 14.1, the General Partner shall be
--------- ------------
entitled to cause the Partnership to establish such reserves as it deems
reasonably necessary for any contingent or unforeseen Partnership liabilities,
and, at the expiration of such period as shall be deemed advisable by the
General Partner, the balance shall be distributed to such Partner (or such
Partner's legal representative).
ARTICLE VI
BOOKS OF ACCOUNT, RECORDS AND REPORTS, INFORMATION
REGARDING THE HOLDING COMPANY, FISCAL YEAR
Section 6.1 Books and Records.
-----------------
(a) Proper and complete records and books of account shall be kept by
the General Partner in which shall be entered fully and accurately all
transactions and other matters relative to the Partnership's business as are
usually entered into records and books of account maintained by Persons engaged
in businesses of a like character, including a Capital Account for each Partner.
The Partnership books and records shall be kept in accordance with generally
accepted accounting principles. The books and records shall at all times be
maintained at the principal office of the Partnership and shall be open to the
inspection and examination of the Partners or their duly authorized
representatives for a proper purpose during reasonable business hours and at the
sole cost and expense of the inspecting or examining Partner. The Partnership
shall maintain at its office and make available to any Limited Partner or any
designated
26
<PAGE>
representative of any Limited Partner a list of names and addresses of, and
Interests in the Partnership owned by, all Partners.
(b) The books of account and records of the Partnership shall be
audited as of the end of each Fiscal Year by the Accountants.
Section 6.2 Reports; Information Regarding Holding Company.
----------------------------------------------
(a) As soon as practicable, but in no event later than 45 days,
following the end of each of the first three quarters of each Fiscal Year, the
General Partner shall cause the Partnership to send to each Limited Partner
unaudited financial statements of the Partnership.
(b) As soon as practicable, but in no event later than 90 days, after
the end of each Fiscal Year, the General Partner shall cause the Partnership to
send to each Limited Partner (i) financial statements (which shall be prepared
in accordance with generally accepted accounting principles and shall be audited
by the Accountants), including a balance sheet and statements of income, cash
flow and Partners' equity showing the cash distributed in such Fiscal Year and
the balance of each Capital Account of such Partner at the end of such Fiscal
Year and the manner of its calculation, and (ii) a copy of Schedule K-1 to
Internal Revenue Service Form 1065 (or any successor form) prepared by the
Accountants, indicating such Partner's share of the Partnership's income, loss,
gain, expense and other items relevant for Federal income tax purposes.
(b) Promptly following the Partnership's receipt of any financial
information provided by the Holding Company in accordance with the Stockholders
Agreement, the General Partner shall cause the Partnership to send copies of
such financial information to each Limited Partner.
Section 6.3 Fiscal Year. The fiscal year of the Partnership (the "Fiscal
----------- ------
Year") shall be the calendar year; provided, however, that the last Fiscal Year
- ---- -------- -------
of the Partnership shall end on the date on which the Partnership is terminated.
ARTICLE VII
POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS
Section 7.1 Limitations. Except as otherwise expressly set forth in this
-----------
Agreement, the Limited Partners shall not (a) participate in the management or
control of the Partnership's business; (b) transact any business for the
Partnership; or, (c) have the power to act for or bind the Partnership, such
powers being vested solely and exclusively in the General Partner. The Limited
Partners shall have no interest in the properties or assets of the General
Partner, or any equity therein, or in any proceeds of any sales thereof (which
sales shall not be restricted in any respect), by virtue of acquiring or owning
an Interest in the Partnership.
27
<PAGE>
Section 7.2 Liability. Subject to the Revised Uniform Act and except as
---------
provided in Section 3.3(a), no Limited Partner shall be liable for the
--------------
repayment, satisfaction or discharge of any debts, liabilities or other
obligations of the Partnership in excess of such Limited Partner's Capital
Account balance.
Section 7.3 Priority. Except as otherwise expressly set forth in Article
-------- -------
IV, no Limited Partner shall have priority over any other Limited Partner as to
- --
Partnership allocations or distributions.
ARTICLE VIII
POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER
Section 8.1 Authority. Except as otherwise expressly set forth in this
---------
Agreement, the General Partner shall have exclusive and complete authority and
discretion to manage the operations and affairs of the Partnership and to make
all decisions regarding the business of the Partnership. Any action taken by
the General Partner shall constitute the act of and serve to bind the
Partnership. In dealing with the General Partner acting on behalf of the
Partnership, no Person shall be required to inquire into the authority of the
General Partner to bind the Partnership. Persons dealing with the Partnership
are entitled to rely conclusively on the power and authority of the General
Partner as set forth in this Agreement.
Section 8.2 Powers and Duties of General Partner. Except as otherwise
------------------------------------
expressly set forth in this Agreement, the General Partner shall have all rights
and powers of a general partner under the Revised Uniform Act and shall have all
authority, rights and powers in the management of the Partnership business to do
any and all other acts and things necessary, proper, convenient or advisable to
effectuate the objectives and purposes of this Agreement, including by way of
illustration but not by way of limitation, the following:
(a) To acquire, hold, sell, transfer, exchange, pledge, mortgage,
grant a security interest in, dispose of and otherwise deal with all or any part
of the Partnership Assets, and incident thereto, to liquidate Partnership Assets
at any time during the term of the Partnership and to reinvest the proceeds
thereof;
(b) To do such other acts as the General Partner may deem necessary or
advisable, or as may be incidental to or necessary for the conduct of the
business of the Partnership, including, without limitation, to enter into, make
and perform agreements, undertakings and transactions with the General Partner,
any other Partner or any shareholder, direct or indirect partner, Affiliate or
employee of any of them, or with any other Person having any business, financial
or other relationship with the General Partner, any other Partner or any direct
or indirect partner, Affiliate or employee of any of them;
(c) To consult with legal counsel, independent public accountants and
other experts selected by the General Partner on behalf of the Partnership;
28
<PAGE>
(d) To establish such reserves from Partnership funds as the General
Partner, in its sole discretion, may deem necessary or advisable for Partnership
operations and for the payment of Partnership obligations;
(e) To determine the Value of any or all of the Partnership Assets
when such determination is required under this Agreement, all of which
valuations and determinations shall be final and binding on the Partnership and
Partners;
(f) To resolve, in its sole discretion, any ambiguity regarding the
application of any provision of this Agreement in the manner it deems equitable,
practicable and consistent with this Agreement and applicable law;
(g) To exercise all rights, powers, privileges and other incidents of
ownership or possession with respect to any Partnership Assets, including,
without limitation, voting the shares of common stock or other equity securities
of the Holding Company, the institution and settlement or compromise of suits
and administrative proceedings and other similar matters;
(h) To open, maintain and close bank accounts and draw checks or other
orders for the payment of money;
(i) To employ or retain and dismiss accountants, consultants,
attorneys and such other agents and employees for the Partnership as it may deem
necessary or advisable, and authorize any such agent or employee to act for and
on behalf of the Partnership;
(j) To make such elections under the Code and other relevant tax laws
as to the treatment of items of Partnership income, gain, loss and deduction,
and as to all other relevant matters, as the General Partner deems necessary or
appropriate, including elections referred to in Code Section 754, determination
of which items of cash outlay are to be capitalized or treated as current
expenses and selection of the method of accounting and bookkeeping procedures to
be used by the Partnership;
(k) To bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the
Partnership;
(l) To deposit, withdraw, invest, disburse, retain and distribute the
Partnership funds in a manner consistent with this Agreement;
(m) To take all action which may be necessary or appropriate for the
continuation of the Partnership's valid existence as a limited partnership under
the laws of the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Limited Partners
or to enable the Partnership to conduct the business in which it is engaged;
and,
29
<PAGE>
(n) To execute and deliver any and all agreements, instruments or
other documents as are necessary or desirable to carry out the intentions and
purposes of the above duties and powers.
Section 8.3 Partnership Funds. Partnership funds shall be held in the
-----------------
name of the Partnership and shall not be commingled with those of any other
Person. Partnership funds shall be used by the General Partner only for the
business of the Partnership.
Section 8.4 Transactions with Affiliates.
----------------------------
(a) Subject to Section 8.8(b)(iv), nothing in this Agreement shall
preclude the General Partner from causing or permitting the Partnership, or the
Partnership from causing or permitting the Holding Company, to contract for the
performance of services by or purchase or lease any property from the General
Partner or any of its Affiliates, provided that (i) (x) such Person is engaged,
independently of the Partnership and as an ordinary and on-going business, in
the business of rendering such services or selling or leasing such property to a
substantial extent to other Persons, and (y) the compensation, price or rental
therefor is competitive with the compensation, price or rental paid to other
Persons in the area engaged in the business of rendering comparable services or
selling or leasing comparable property which could reasonably be made available
to the Partnership; (ii) such Person is not so engaged in such business, but the
compensation, price or rental is the cost (including carrying cost) of such
services or property to such Person or the competitive rate which could be
obtained in the area, whichever is less; or, (iii) such purchase, lease or
contract is otherwise specifically permitted by this Agreement. Nothing herein
shall be construed as a guarantee by the General Partner of the performance by
any Affiliate, designee or nominee of its obligations under any contract between
any such Affiliate and the Partnership.
(b) Except as otherwise provided in this Agreement and except for the
General Partner's interest in distributions, capital, profits, income, gain,
loss, deduction and credit of the Partnership and amounts paid to the General
Partner pursuant to Section 8.12, neither the General Partner nor any Affiliate
------------
of the General Partner shall receive compensation from the Partnership; it being
understood and acknowledged that any Portfolio Company Fees and Exempt
Transaction Fees paid to the General Partner or its Affiliates do not constitute
compensation from the Partnership.
Section 8.5 Other Activities and Competition.
--------------------------------
(a) Neither the General Partner nor any of its Affiliates shall be
required to manage the Partnership as its sole and exclusive function. The
General Partner and each of the Principals shall devote such time to the
Partnership's business as the General Partner, in its sole discretion, shall
deem to be necessary to manage and supervise the Partnership's business and
affairs in an efficient manner. Except as set forth in paragraph (b) of this
-------------
Section 8.5, the General Partner, its Affiliates and agents, officers, directors
- -----------
and employees of the General Partner and its Affiliates may engage in or possess
any interests in business ventures and may engage in other activities of every
kind and description independently or with others in addition to those
30
<PAGE>
relating to the Partnership. Each Limited Partner authorizes, consents to and
approves of such present and future activities by such Persons. Neither the
Partnership nor any Partner shall have any right by virtue of this Agreement or
the partnership relationship created hereby in or to other ventures or
activities of the General Partner or its Affiliates or to the income or proceeds
derived therefrom.
(b) Notwithstanding anything to the contrary in paragraph (a) of this
-------------
Section 8.5, prior to December 31, 1997, neither the General Partner, the
- -----------
general partner in the General Partner nor any of their respective Affiliates
(including without limitation the Principals) shall directly or indirectly,
other than (i) through the Partnership, (ii) as a result of the ownership by ATP
or TIP of securities of the Holding Company, (iii) an investment by Ibra Morales
through a Minority Company in which the Holding Company directly or indirectly
holds voting and/or non-voting securities which provide the Holding Company with
a substantial economic interest in the Minority Company or (iv) through the
Holding Company, invest in or engage in any business activities (including
without limitation, the organization or active participation in any partnership
or other investment fund) relating to the television broadcast business;
provided, however, that nothing in this Agreement, including this Section
- -------- ------- -------
8.5(b), shall adversely affect or limit the ability or authority of any
- ------
Affiliate of the General Partner, including the Principals, from (i) investing
in, owning, managing and actively participating in Argyle Television Holding,
Inc. and its Affiliates (collectively, "Argyle I"); (ii) making personal non-
--------
controlling passive investments in securities; (iii) serving as a director to
any Person involved in broadcast television or related businesses (and receiving
director fees and stock options in connection therewith); (iv) maintaining or
taking action in respect of the Principals existing investment in Katz Holding
Corporation and (v) undertaking any other activities approved from time to time
by the Advisory Committee. It is hereby understood and acknowledged that,
consistent with the foregoing, the General Partner or any of its Affiliates may
organize and/or actively participate in a partnership or other investment fund
formed for the purpose of investing in the cable television industry.
Section 8.6 Nature and Validity of Transactions with General Partner and
------------------------------------------------------------
Affiliates. Subject to Sections 8.4 and 8.8, the General Partner or any
- ---------- ------------ ---
Affiliate of the General Partner may be employed or retained by the Partnership
in any capacity. Except as provided in Section 8.4 or 8.8, the validity of any
----------- ---
transaction, agreement or payment involving the Partnership and the General
Partner or any of its Affiliates otherwise permitted by this Agreement shall not
be affected by reason of the relationship between the General Partner and such
Affiliate or the approval of such transaction, agreement or payment by the
General Partner.
Section 8.7 Exculpation. Subject to Section 10.6(b), (a) the General
----------- ---------------
Partner shall not be personally liable for the return of any portion of the
Capital Contributions (or any return thereon) of the Limited Partners; (b) the
return of such Capital Contributions (or any return thereon) shall be made
solely from assets of the Partnership; and, (c) the General Partner shall not be
required to pay to the Partnership or any Limited Partner any deficit in any
Capital Account of the General Partner or any Limited Partner upon dissolution
or otherwise. No Limited Partner shall have the right to demand or receive
property other than cash for its Interest in the Partnership. Neither the
General Partner nor any of its Affiliates shall be liable, responsible or
accountable in damages or otherwise to the Partnership or any Limited Partner
for
31
<PAGE>
any loss incurred as a result of any act or failure to act by the General
Partner on behalf of the Partnership unless such loss is finally determined by a
court of competent jurisdiction to have resulted solely from the General
Partner's bad faith, willful misconduct or gross negligence.
Section 8.8 Limits on General Partner's Powers. Anything in this
----------------------------------
Agreement to the contrary notwithstanding, the General Partner shall:
(a) Not, without the prior consent of the specific act by all the
Limited Partners given in this Agreement or by other written instrument executed
and delivered by all the Limited Partners subsequent to the date of this
Agreement, cause or permit the Partnership to
(i) Knowingly make, do or perform any act, or knowingly cause any
act to be made, done or performed, which would make it impossible to carry
on the ordinary business of the Partnership;
(ii) Possess Partnership property or assign Partnership property,
for other than a Partnership purpose;
(iii) Make any loans to the General Partner or its Affiliates;
(iv) Admit a Person as a Partner, except as provided in this
Agreement;
(v) Knowingly perform any act that would subject any Limited Partner
to liability as a general partner in any jurisdiction; or,
(vi) Except as provided in Section 3.3(c), incur any indebtedness,
--------------
provided, however, its is understood and agreed that this provision is not
-------- -------
intended to limit or restrict in any way the Holding Company or any
Portfolio Company from incurring debt; or,
(b) Not, without the prior consent of the specific act by the Advisory
Committee, cause or permit the Partnership to:
(i) Waive any rights the Partnership may have under the Stockholders
Agreement;
(ii) Provide any consent, pursuant to Section 2.3 of the
Stockholders Agreement, to any of the actions to be taken by the Holding
Company described in paragraphs (i), (ii), (iii), (iv) or (v) of Section
2.3 of the Stockholders Agreement;
(iii) Agree to any material amendment to the Stockholders
Agreement;
(iv) Enter into any transaction (other than the formation and
operation of any Minority Company or the payment of any fees, expenses or
other payments specifically provided for under this Agreement) between the
Partnership and any Affiliate of the
32
<PAGE>
Partnership (including without limitation any Principal and any Affiliate
of any Principal); or,
(c) Cause the Partnership to exercise any right it has to participate
in a Tag-Along Sale (as defined in the Stockholders Agreement) pursuant to
Section 5.1 of the Stockholders Agreement, unless the Advisory Committee
consents to the Partnership not exercising such right. For purposes of this
Section 8.8, an Affiliate of any Principal shall include any Person in which
- -----------
such Principal owns, directly or indirectly, 10% or more of the aggregate
economic interest in such Person.
Section 8.9 Tax Matters Partner. For purposes of Code Section 6231(a)(7),
-------------------
the "Tax Matters Partner" shall be the General Partner, as long as it remains
the general partner of the Partnership. The Tax Matters Partner shall keep the
Limited Partners fully informed of any inquiry, examination or proceeding,
including, without limitation, promptly notifying Limited Partners of the
beginning and completion of an administrative proceeding at the Partnership
level promptly upon such notice being received by the Tax Matters Partner.
Section 8.10 Indemnification of General Partner. The Partnership shall
----------------------------------
indemnify and hold harmless the General Partner, its partners, the officers,
directors and partners of the partners in the General Partner and the Affiliates
of the General Partner (and their respective officers, agents and employees)
from and against any claim, loss, expense, damage or injury suffered or
sustained by them, by reason of any acts, omissions or alleged acts or omissions
arising out of or in connection with the Partnership or this Agreement,
including, without limitation, any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, except that the
Partnership shall not be responsible under this Section 8.10 to an indemnified
------------
party for any claim, loss, expense, damage or injury to the extent it is finally
determined by a court of competent jurisdiction to have resulted solely from
such indemnified party's bad faith, wilful misconduct or gross negligence.
Section 8.11 Expenses.
--------
(a) The General Partner shall pay, and the Partnership will not be
obligated to pay, the following expenses related to Partnership activities:
salaries and fringe benefits of professional, administrative, clerical,
bookkeeping, secretarial and other personnel of the General Partner and the
Partnership; rent, office equipment, fire and theft insurance, heat, light,
cleaning, power, water and other utilities of any office space maintained by the
General Partner on its own behalf or on behalf of the Partnership; stationery,
postage, office supplies for the General Partner and the Partnership; and all
Offering and Organization Costs in excess of an amount equal to 2.5% of the
aggregate Capital Commitments of all Partners. To the extent that any payment
of expenses by the General Partner is treated as a capital contribution by the
General Partner to the Partnership, the General Partner shall be specially
allocated (for both book and income tax
33
<PAGE>
purposes) all deductions and other book and tax items and adjustments related to
such payment.
(b) The Partnership shall pay, and the General Partner shall not be
obligated to pay, all expenses of the Partnership other than those to be paid by
the General Partner pursuant to paragraph (a) of this Section 8.11, including,
------------- ------------
but not limited to, Offering and Organization Costs up to an amount equal to
2.5% of the aggregate Capital Commitments of all Partners, all expenses incurred
in connection with the acquisition by the Partnership of any Broadcast
Investment and legal, travel, accounting and appraisal expenses. The
Partnership shall reimburse the General Partner for any such costs advanced by
the General Partner on behalf of the Partnership.
(c) During the Commitment Period, the Partnership and the ATI
Partnership will also pay to the Holding Company an amount, not to exceed in any
one year an amount equal to .50% of the aggregate Capital Commitments of the
Partners of the Partnership and the partners of the ATI Partnership, equal to
the excess, if any, of (i) the amount of corporate general and administrative
expenses of the Holding Company (on a consolidated basis) ("Holding Company
---------------
Expense Amount") over (ii) the amount of such expenses permitted to be paid by
- --------------
the Holding Company (on a consolidated basis) pursuant to the covenants in
Article IX of the Credit Agreement, or any similar covenant contained in any
other credit or other financing agreement entered into by the Holding Company or
any of its subsidiaries ("Permitted Holding Company Expense Amount"). This
----------------------------------------
payment shall be allocated between the Partnership and the ATI Partnership on a
pro rata basis based on the Capital Commitments of the partners of the ATI
Partnership compared to the Capital Commitments of the Partners of the
Partnership.
Section 8.12 Management Fee and Portfolio Fees.
---------------------------------
(a) The Partnership recognizes that the ATI Partnership paid on
[APRIL 1, 1997] a management fee to ATIGP in an amount described in Section
8.12(a)(iii) of the ATI Partnership Agreement. On the date of this Agreement,
the unearned portion of such amount, determined by treating such amount as
earned evenly on a daily basis shall be allocated between the Partnership and
the ATI Partnership based on a comparison of the aggregate Capital Commitments
of the Partners of the Partnership compared to the aggregate Capital Commitments
of all partners of ATI Partnership. Further, the Partnership shall pay to the
General Partner as compensation for its management services, in advance, a
quarterly management fee as follows: (i) within five Business Days following the
date of an increase in the Capital Commitment of any existing Limited Partner,
the Partnership shall pay an amount equal to the product of (A) .375% of the
amount of increase in the Capital Commitments of all existing Limited Partners
and (B) a fraction, the numerator of which is the number of days remaining after
such date in the calendar quarter in which such date occurs and the denominator
of which is 90 and (ii) on the first day of each calendar quarter starting with
the quarter beginning on [JULY 1, 1997], the Partnership shall pay an amount
equal to (A) the sum of (I) .375% of the excess of (x) the aggregate Capital
Commitments of all Partners prior to such date over (y) the aggregate Net
Capital Contributions
34
<PAGE>
of cash made to the Partnership or ATI Partnership and (II) .125% of the
aggregate amount of Net Capital Contributions of cash made to the Partnership or
ATI Partnership made prior to such date, less (B) an amount equal to .25% of
each Capital Contribution of cash made to the Partnership or ATI Partnership
made to the Partnership during the immediately preceding calendar quarter
multiplied by a fraction, the numerator of which is the number of days remaining
in such immediately preceding calendar quarter after the date of such Capital
Contribution and the denominator of which is 90.
(b) The General Partner shall pay to the Partnership all Portfolio
Company Fees (as defined below) paid to the General Partner or its Affiliates at
any time. "Portfolio Company Fees" means (i) any advisory fees which are paid
----------------------
by a Portfolio Company or by the Holding Company for financial consulting or
management supervisory services provided to such Portfolio Company or the
Holding Company, (ii) any investment banking or other transaction fees which are
paid in connection with (A) negotiating the acquisition of a direct or indirect
Broadcast Investment by the Holding Company or the Partnership and/or arranging
the financing for such acquisition and (B) any refinancings or divestitures of
or undertaken by, or other investment banking services provided to, a Portfolio
Company in connection with any Broadcast Investment, other than Exempt
Transaction Fees, (iii) any break-up fees which are paid in connection with
transactions undertaken on behalf of the Partnership or the Holding Company,
(iv) any director fees which are paid to any Principal in his capacity as a
director of the Holding Company or any Portfolio Company and (v) any Exempt
Transaction Fees which are paid to the General Partner or its Affiliates related
to any sale of a Broadcast Investment which sale is in connection with the sale
of all or substantially all of the Partnership's assets.
(c) [Intentionally deleted]
(d) For purposes of maintaining Capital Accounts, the Management Fees
shall be deemed to accrue on a daily basis.
(e) In no event shall the aggregate Management Fees payable to the
General Partner for any Fiscal Year pursuant to Section 8.12(a) exceed the
---------------
Excess Holding Company Expense Amount for such Fiscal Year. Promptly after the
end of each Fiscal Year other than the Fiscal Year in which the Partnership is
terminated and, in the Fiscal Year in which the Partnership terminates,
immediately prior to the liquidation of the Partnership, the General Partner
shall compute the Excess Holding Company Expense Amount for such Fiscal Year.
To the extent the aggregate amount paid to the General Partner for such Fiscal
Year pursuant to Section 8.12(a) exceeds the Excess Holding Company Expense
---------------
Amount for such Fiscal Year, the General Partner shall pay such excess to the
Partnership. All payments of Management Fees to the General Partner pursuant to
Section 8.12(a) prior to the calculation of the Excess Holding Company Expense
- ---------------
Amount shall be deemed advances of the Management Fee payable to the General
Partner and the General Partner's payment of any amount pursuant to this Section
-------
8.12(e) shall be deemed a repayment of such advance. The provisions of this
- -------
Section 8.12(e) shall be coordinated with the provisions of Section 8.12(e) of
the ATI Partnership Agreement so that these
35
<PAGE>
provisions are applied on an aggregate basis, based on a comparison of the
aggregate Capital Commitments of the Partners of the Partnership, compared to
the Capital Commitments of the partners of the ATI Partnership.
Section 8.13 Advisory Committee.
------------------
(a) An Advisory Committee shall be established (i) to approve those
business activities in which the General Partner, the general partner in the
General Partner or any of their respective Affiliates may invest or engage
pursuant to Section 8.5(b)(v), (ii) to review conflicts of interest that may
-----------------
arise between the Partnership and the General Partner or any of its Affiliates,
(iii) generally to consult with the General Partner on the Partnership's
progress in achieving its investment objectives and (iv) to determine whether to
provide consent to the specific acts set forth in Section 8.8(b). The Advisory
--------------
Committee will not be responsible for making or selecting the Partnership's
Broadcast Investments and at any time the Partnership owns voting securities of
the Holding Company or otherwise obtains an attributable interest in a broadcast
station or a cable television system, will not communicate with the General
Partner or the Partnership on any matters pertaining to the day-to-day
operations of the Partnership's business. Notwithstanding anything contained in
this paragraph (a), the Advisory Committee shall be established and shall be
-------------
conducted pursuant to this Section 8.13 only to the extent consistent with FCC
------------
provisions regarding the criteria for the non-attribution of interests held by a
limited partnership to its limited partners, including without limitation, those
set forth in Section 14.5.
------------
(b) The Advisory Committee shall consist of up to three Members
designated by the General Partner (which Members will be unaffiliated with the
General Partner). Any Non-Defaulting Limited Partner whose Capital Commitment
equals or exceeds $25 million shall be entitled to designate a Member. Each
Member shall hold office until death, resignation, or removal by the Partner who
designated such Member.
(c) At each meeting of the Advisory Committee, the presence in person
or by telephone of at least two-thirds of the Members shall be necessary to
constitute a quorum for the transaction of business. Any action of the Advisory
Committee, including, without limitation, any consent or approval provided for
herein, shall require a two-thirds affirmative vote of the Members present that
are not Affiliates of the General Partner. Any action required or permitted to
be taken at the meeting of the Advisory Committee may be taken without a meeting
if each Member consents thereto in writing.
(d) The Advisory Committee shall hold meetings upon the request of the
General Partner or a majority of the Members of the Advisory Committee, but in
no event shall such meetings be held less frequently than once a year. Meetings
of the Advisory Committee shall be held at such times and places as reasonably
determined by the General Partner. Any meeting of the Advisory Committee may be
held by conference telephone call, or through similar communications equipment
by means of which all persons participating in the meeting can hear
36
<PAGE>
each other. Participation in a telephonic meeting held pursuant to this Section
-------
8.13 shall constitute presence in person at such meeting.
- ----
(e) Any Member may resign by giving the General Partner prior written
notice. Any Member designated by a Limited Partner that becomes a Defaulting
Limited Partner shall, immediately following such Limited Partner becoming a
Defaulting Limited Partner, be removed as a Member and such Defaulting Limited
Partner shall cease to have the right to designate a Member.
ARTICLE IX
TRANSFERS OF INTERESTS BY PARTNERS
Section 9.1 General. Subject to Section 3.3(b), no Partner may sell,
------- --------------
assign, pledge or in any manner dispose of or create or suffer the creation of,
a security interest in or any encumbrance on all or a portion of its Interest in
the Partnership (the commission of any such act being referred to as a
"Transfer", any person who effects a Transfer being referred to as a
--------
"Transferor" and any person to whom a Transfer is effected being referred to as
----------
a "Transferee"), except in accordance with the terms and conditions set forth in
----------
this Article IX and Article XIV. No Transfer of an Interest in the Partnership
---------- -----------
shall be effective until such time as all requirements of this Article IX and
----------
Article XIV in respect thereof have been satisfied and, if consents, approvals
- -----------
or waivers are required by the General Partner, all of same shall have been
confirmed in writing by the General Partner. Any Transfer or purported Transfer
of an Interest in the Partnership not made in accordance with this Agreement (a
"Void Transfer") shall be null and void and of no force or effect whatsoever.
-------------
Any amounts otherwise distributable under Article V in respect of an Interest in
---------
the Partnership that has been the subject of a Void Transfer may be withheld by
the General Partner until the Void Transfer has been rescinded, whereupon the
amount withheld shall be distributed without interest.
Section 9.2 Transfer of Interest of General Partner.
---------------------------------------
(a) The General Partner may not, directly or indirectly, Transfer all
or any portion of its Interest in the Partnership as the General Partner without
the prior written consent of Two-Thirds-in-Interest of the Non-Defaulting
Limited Partners.
(b) No Transferee of the General Partner's Interest in the Partnership
shall be admitted to the Partnership as a General Partner without the prior
written consent of Two-Thirds-in-Interest of the Non-Defaulting Limited
Partners. Unless a Transferee of the General Partner's Interest in the
Partnership is admitted as a General Partner under this Section 9.2(b), it shall
--------------
have none of the powers of a General Partner hereunder and shall have only such
rights of an assignee under the Revised Uniform Act as are consistent with this
Agreement.
37
<PAGE>
(c) Upon the Transfer of the entire Interest in the Partnership of the
General Partner and effective upon the admission of its Transferee as a General
Partner, the Transferor shall be deemed to have withdrawn from the Partnership
as a General Partner.
Section 9.3 Transfer of Interest of Limited Partners.
----------------------------------------
(a) A Limited Partner may not Transfer all or any portion of its
Interest in the Partnership, without the prior written consent of the General
Partner, which consent may be given or withheld in the General Partner's sole
discretion.
(b) The Transferee of a Limited Partner's Interest in the Partnership
may be admitted to the Partnership as a Substituted Limited Partner only upon
the prior consent of the General Partner, which consent may be given or withheld
in the General Partner's sole discretion. Unless a Transferee of a Limited
Partner's Interest in the Partnership is admitted as a Substituted Limited
Partner under this Section 9.3(b), it shall have none of the powers of a Limited
--------------
Partner hereunder and shall have only such rights of an assignee under the
Revised Uniform Act as are consistent with this Agreement. No Transferee of a
Limited Partner's Interest shall become a Substituted Limited Partner unless
such Transfer shall be made in compliance with Sections 9.3(a) and 9.4.
--------------- ---
(c) Upon the Transfer of the entire Interest in the Partnership of a
Limited Partner and effective upon the admission of its Transferee as a Limited
Partner, the Transferor shall be deemed to have withdrawn from the Partnership
as a Limited Partner.
(d) Upon the death, disability, dissolution, withdrawal in
contravention of Section 10.1 or the bankruptcy of a Limited Partner (the
------------
"Withdrawing Limited Partner"), the General Partner shall have the right to
- ----------------------------
treat such Partner's successor(s)-in-interest as assignee(s) of such Partner's
Interest in the Partnership, with none of the powers of a Limited Partner
hereunder and with only such rights of an assignee under the Revised Uniform Act
as are consistent with this Agreement. For purposes of this Section 9.3(d), if
--------------
a Withdrawing Limited Partner's Interest in the Partnership is held by more than
one Person (for purposes of this Paragraph, the "Assignees"), the Assignees
---------
shall appoint one Person with full authority to accept notices and distributions
with respect to such Interest in the Partnership on behalf of the Assignees and
to bind them with respect to all matters in connection with the Partnership or
this Agreement.
(e) Notwithstanding anything herein to the contrary, in no event may
an Interest in the Partnership be subdivided for transfer or resale into
Interests in the Partnership smaller than an Interest in the Partnership the
initial cost of which would have been at least $20,000.
Section 9.4 Further Requirements. In addition to the other requirements
--------------------
of Section 9.3 and any requirements relating to Transfer contained in Article
----------- -------
XIV, and unless waived in whole
- ---
38
<PAGE>
or in part by the General Partner, no Transfer of all or any portion of an
Interest in the Partnership may be made unless the following conditions are met:
(a) The Transferor shall have paid all reasonable costs and expenses,
including, without limitation, attorneys fees and disbursements and the cost of
the preparation, filing and publishing of any amendment to this Agreement or the
Certificate, incurred by the Partnership in connection with the Transfer;
(b) The Transferor shall have delivered to the General Partner a fully
executed copy of all transfer documents relating to the Transfer, including,
without limitation, an Instrument of Transfer, executed by both the Transferor
and the Transferee, and the agreement in writing of the Transferee to:
(i) Be bound by the terms imposed upon such Transfer by the
General Partner and by the terms of this Agreement; and,
(ii) Assume all obligations of the Transferor under this
Agreement relating to the Interest in the Partnership that is the subject
of such Transfer;
(c) The General Partner shall have been reasonably satisfied,
including at its option having received an opinion of counsel to the Partnership
reasonably acceptable to the General Partner, that:
(i) The Transfer will not cause the Partnership to be treated as
an association taxable as a corporation for Federal income tax purposes;
(ii) The Transfer will not result in the termination of the
Partnership for Federal income tax purposes;
(iii) The Transfer will not cause the Partnership to be treated
as a "publicly traded partnership" within the meaning of Code Section 7704;
and,
(iv) The Transfer will not violate the Securities Act of 1933, as
amended, or any other applicable Federal or state securities laws, rules or
regulations; and,
(d) The General Partner shall have been reasonably satisfied that:
(i) The prospective assignee or Transferee is a U.S. Person;
(ii) The Transfer will not cause some or all of the Partnership
Assets to be "plan assets" or the trading and investment activity of the
Partnership to constitute "prohibited transactions" under ERISA or the
Code;
39
<PAGE>
(iii) The Transfer will not cause the Partnership to be an
investment company required to be registered under the Investment Company
Act of 1940, as amended; and,
(iv) The Transfer will not violate or cause the Partnership or
any other Person in which the Partnership holds an interest to violate any
FCC rules, regulations or policies or the Communications Act of 1934, as
amended (the "Communications Act").
------------------
Any waivers from the General Partner under this Section 9.4 shall be given or
-----------
denied in the sole discretion of the General Partner. The General Partner shall
reflect each Transfer and admission authorized under this Article IX (including
----------
the terms and conditions imposed thereon by the General Partner) by preparing an
amendment to this Agreement dated as of the date of such Transfer. The form and
content of all documentation delivered to the General Partner under this Section
-------
9.4 shall be subject to the approval of the General Partner, which approval may
- ---
be granted or withheld in the General Partner's sole discretion.
Section 9.5 Consequences of Transfers Generally.
-----------------------------------
(a) In the event of any Transfer or Transfers permitted under this
Article IX, the Transferor and the Interest in the Partnership that is the
- ----------
subject of such Transfer shall remain subject to this Agreement, and the
Transferee shall hold such Interest in the Partnership subject to all
unperformed obligations of the Transferor and shall agree in writing to the
foregoing if requested by the General Partner. Any successor or Transferee
hereunder or any successor general partner shall be subject to and bound by this
Agreement as if originally a party to this Agreement.
(b) Unless a Transferee of a Limited Partner's Interest becomes a
Substituted Limited Partner, such Transferee shall have no right to obtain or
require any information or account of Partnership transactions, or to inspect
the Partnership's books or to vote on Partnership matters. Such a Transfer
shall, subject to the last sentence of Section 9.1, merely entitle the
-----------
Transferee to receive the share of distributions, Net Income, Net Loss and items
of income, gain, deduction and loss to which the transferring Limited Partner
otherwise would have been entitled. Each Limited Partner agrees that such
Limited Partner will, upon request of the General Partner, execute such
certificates or other documents and perform such acts as the General Partner
deems appropriate after a Transfer of that Limited Partner's Interest in the
Partnership (whether or not the Transferee becomes a Substituted Limited
Partner) to preserve the limited liability of the Limited Partners under the
laws of the jurisdictions in which the Partnership is doing business.
(c) The Transfer of a Limited Partner's Interest in the Partnership
and the admission of a Substituted Limited Partner shall not be cause for
dissolution of the Partnership.
40
<PAGE>
Section 9.6 Capital Account. Any Transferee of a Partner admitted as a
---------------
Partner under this Article IX shall succeed to the portion of the Capital
----------
Account and Affected Items so Transferred to such Transferee.
Section 9.7 Additional Filings. Upon the admission of a Substituted
------------------
Limited Partner under Section 9.3, the General Partner shall cause to be
-----------
executed, filed and recorded with the appropriate governmental agencies such
documents (including amendments to this Agreement) as are required to accomplish
such substitution.
Section 9.8 Removal of General Partner.
--------------------------
(a) Subject to Section 14.5, the General Partner may be removed from
------------
the Partnership only for Cause (as defined below) or as otherwise specifically
provided in this Section 9.8. "Cause" means the General Partner, the general
----------- -----
partner in the General Partner or any of the Principals (i) has been convicted
of a felony, (ii) has committed fraud against the Partnership or (iii) has acted
or omitted to take action on behalf of the Partnership which act or omission
constitutes gross negligence or wilful misconduct. Such removal shall be
automatically effective upon a final determination by a court of competent
jurisdiction that an event or circumstance constituting Cause has occurred or
exists; provided, that (A) at any time there are one or more Non-Affiliated
--------
Limited Partners that are Non-Defaulting Limited Partners and are not Reg Y
Institutions, any removal of the General Partner for Cause shall be effected by
a vote of the Non-Defaulting Limited Partners whose aggregate Special Voting
Percentages exceed 50% of all Non-Defaulting Limited Partners Special Voting
Percentages at such time; (B) notwithstanding anything to the contrary in clause
------
(A), at any time the aggregate Voting Percentages of all Non-Affiliated Limited
- ---
Partners that are Non-Defaulting Limited Partners exceeds 75% of all of the
Voting Percentages of all Non-Defaulting Limited Partners, then any removal of
the General Partner for Cause shall be effected by a vote of the Non-Defaulting
Limited Partners whose aggregate Voting Percentages at such time exceed 50% of
all of the Non-Defaulting Limited Partners' Voting Percentages at such time; and
(C) notwithstanding anything in the foregoing clauses (A) and (B), at any time
the Partnership owns voting securities of the Holding Company or otherwise
obtains an attributable interest in a broadcast station or a cable television
system, any determination of whether or not Cause has occurred shall be made by
an independent third party appointed by two Persons, one of which shall be
selected by the General Partner and one of which shall be selected by (i) at any
time there are one or more Non-Affiliated Limited Partners that are Non-
Defaulting Limited Partners and are not Reg Y Institutions, a vote of the Non-
Defaulting Limited Partners whose aggregate Special Voting Percentages exceed
50% of all Non-Defaulting Limited Partners Special Voting Percentages at such
time or (ii) subject to the foregoing clause (i) at any time the aggregate
----------
Voting Percentages of all Non-Affiliated Limited Partners that are Non-
Defaulting Limited Partners exceeds 75% of all of the Voting Percentages of all
Non-Defaulting Limited Partners, a vote of the Non-Defaulting Limited Partners
whose aggregate Voting Percentages at such time exceed 50% of all of the Non-
Defaulting Limited Partners' Voting Percentages at such time. In addition,
subject to Section 14.5, the General Partner may be removed at any time during
------------
the Commitment Period if none of Ibra Morales,
41
<PAGE>
Blake Byrne or Bob Marbut, or entities controlled directly or indirectly by one
or more of them, control, directly or indirectly, the General Partner. Any
removal of the General Partner pursuant to this Section 9.8 other than for Cause
-----------
shall be effected by a vote of Two-Thirds-in-Interest of the Non-Defaulting
Limited Partners.
(b) If the General Partner is removed from the Partnership pursuant to
this Section 9.8, the General Partner shall have none of the powers of a General
-----------
Partner and shall be admitted to the Partnership as a Substituted Limited
Partner.
ARTICLE X
WITHDRAWAL OF PARTNERS; TERMINATION OF PARTNERSHIP;
LIQUIDATION AND DISTRIBUTION OF ASSETS
Section 10.1 Withdrawal of Partners. Except as otherwise specifically
----------------------
permitted in this Agreement, no Partner shall at any time retire or withdraw
from the Partnership. Any Partner retiring or withdrawing in contravention of
this Section 10.1 shall indemnify, defend and hold harmless the Partnership and
------------
all other Partners from and against any losses, expenses, judgments, fines,
settlements or damages suffered or incurred by the Partnership or any other
Partner arising out of or resulting from such retirement or withdrawal.
Section 10.2 Dissolution of Partnership.
--------------------------
(a) The Partnership shall be dissolved, wound up and terminated as
provided herein upon the first to occur of the following:
(i) The Dissolution Date;
(ii) The sale or other disposition of all or substantially all of
the Partnership's assets including, but without limitation, the
distribution of the Foreign Series A Common Stock pursuant to the
Liquidation Plan;
(iii) The removal, withdrawal, resignation, dissolution or
bankruptcy of the General Partner ("Event of Withdrawal"); or,
-------------------
(iv) The occurrence of any event that renders it unlawful to
continue the business of the Partnership;
provided, however, that upon the occurrence of an Event of Withdrawal, the
- -------- -------
remaining Partners may, by written consent of the Limited Partners whose
aggregate Voting Capital Contributions at such time exceed 50% of the aggregate
Capital Contributions of all Limited Partners at such time (or such higher
percentage as may be required under the Revised Uniform Act at any such
42
<PAGE>
time) elect a successor general partner and continue the business of the
Partnership prior to application of the liquidation provisions of this Article
-------
X, such action to be taken within 90 days after such Event of Withdrawal, and
- -
further provided, that no Partner shall take any action that would cause the
- ------- --------
dissolution at any time of the Partnership (unless the Partnership reconstitutes
pursuant to the immediately preceding provision) until all necessary FCC
approvals, if any, have been obtained. If the Partnership is continued under
this Section 10.2(a), the successor general partner shall have the rights,
---------------
powers, and obligations of the General Partner under this Agreement (excluding,
however, obligations of the General Partner to the Limited Partners occasioned
by the General Partner's removal or wrongful resignation or withdrawal as
General Partner), and shall have such interest in the Net Income, Net Loss and
items of income, gain, deduction and loss and distributions of the Partnership
as shall be agreed upon by the successor general partner and Limited Partners
whose aggregate Voting Capital Contributions at such time exceed 50% of the
aggregate Capital Contributions of all Limited Partners at such time, upon
execution of a written acceptance of this Agreement. Except as otherwise
required by law, the Limited Partners shall have no power to dissolve the
Partnership without the consent of the General Partner.
(b) Subject to the exception provided by Section 10.2(a), upon the
---------------
dissolution of the Partnership, the General Partner or, if an Event of
Withdrawal has occurred with respect to the General Partner, then a liquidating
agent appointed by a Majority-in-Interest of the Non-Defaulting Limited Partners
(the General Partner or the liquidating agent appointed by the Limited Partners,
as the case may be, being referred to as the "Liquidator"), shall wind up the
----------
affairs of the Partnership and liquidate the Partnership's Assets. The Partners
shall continue to share all Net Income, Net Loss and items of income, gain,
deduction and loss and distributions during the period of liquidation in
accordance with Articles IV and V. The Liquidator shall have unlimited
----------- -
discretion to determine the time, manner and terms of any sale(s) of Partnership
Asset(s) pursuant to such liquidation, giving due regard to the activity and
condition of the relevant market and general financial and economic conditions.
(c) The Liquidator shall have all of the rights and powers with
respect to the assets and liabilities of the Partnership in connection with the
liquidation and termination of the Partnership that the General Partner would
have with respect to the assets and liabilities of the Partnership during the
term of the Partnership, and the Liquidator is hereby empowered to execute any
and all documents appropriate to effectuate the liquidation and termination of
the Partnership.
(d) Notwithstanding the foregoing, a Liquidator which is not the
General Partner shall not be deemed a Partner in the Partnership and shall not
have any of the economic interests in the Partnership of a Partner, and such
Liquidator shall be compensated for its services to the Partnership at customary
and competitive rates for its services to the Partnership as reasonably
determined by the Limited Partners.
Section 10.3 Distribution in Liquidation. The Partnership Assets shall be
---------------------------
applied in the following order of priority:
43
<PAGE>
(a) First, to pay the costs and expenses of the winding up,
liquidation and termination of the Partnership;
(b) Second, to creditors of the Partnership, in the order of priority
provided by law, including fees and reimbursements payable to the General
Partner or its Affiliates (including, without limitation, any accrued and unpaid
amounts payable pursuant to Section 8.12), but not including those liabilities
------------
(other than liabilities to the General Partner for any expenses of the
Partnership paid by the General Partner or its Affiliates, to the extent the
General Partner is entitled to reimbursement hereunder) to the Limited Partners
or to the General Partner in their capacity as Partners;
(c) Third, to establish reserves reasonably adequate to meet any and
all contingent or unforeseen liabilities or obligations of the Partnership,
provided that at the expiration of such period of time as the Liquidator may
deem advisable, the balance of such reserves remaining after the payment of such
contingencies or liabilities shall be distributed as hereinafter provided;
(d) Fourth, to the Partners for loans, if any, made by them to the
Partnership; and,
(e) Fifth, to the Partners in accordance with the Partners' Capital
Account balances. To accomplish this result pursuant to the Liquidation Plan, a
Limited Partner shall be distributed the same shares (subject to recognition
that such shares have been converted from Foreign Series C Common Stock to
Foreign Series A Common Stock) and the same certificate (subject to recognition
that such certificate for Foreign Series C Common Stock has been replaced with a
certificate for Foreign Series A Common Stock) that it contributed to the
Partnership, subject to reduction on a pro rata basis among the Limited Partners
for the shares that will be distributed to the General Partner to reflect the
General Partner's share of appreciation in Value of such shares after
contribution of such shares to the Partnership. In the case of a distribution
to the Partners pursuant to the Liquidation Plan where the General Partner is
entitled to a distribution pursuant to this Section 10.3(e) to reflect the
General Partner's share of appreciation in Value of the shares after
contribution of such shares to the Partnership, the Limited Partners shall
receive Foreign Series A Common Stock and no other assets.
If the Liquidator, in its sole discretion, determines that Partnership
Assets other than cash are to be distributed, then the Liquidator shall cause
the Value of the assets not so liquidated to be determined. Such assets shall
be retained or distributed by the Liquidator as follows:
(i) The Liquidator shall retain assets having an appraised value, net
of any liability related thereto, equal to the amount by which the net
proceeds of liquidated assets are insufficient to satisfy the requirements
of Subparagraphs (a), (b) and (c) of this Section 10.3; and,
----------------- --- --- ------------
44
<PAGE>
(ii) The remaining assets shall be distributed to the Partners in the
manner specified in Sections 10.3 (d) and (e).
-------------------------
If the Liquidator, in its sole discretion, deems it unfeasible or undesirable to
distribute to each Partner its allocable share of each asset, the Liquidator may
allocate and distribute specific assets to one or more Partners as the
Liquidator shall reasonably determine to be fair and equitable, taking into
consideration, inter alia, the Value of the assets and the tax consequences of
the proposed distribution upon each of the Partners (including both distributees
and others if any). Any distributions in kind shall be subject to such
conditions relating to the disposition and management thereof as the Liquidator
deems reasonable and equitable.
Section 10.4 Final Reports. Within a reasonable time following the
-------------
completion of the liquidation of the Partnership Assets, the Liquidator shall
supply to each of the Partners a statement audited by the Accountants which
shall set forth the assets and liabilities of the Partnership as of the date of
complete liquidation and each Partner's portion of distributions under Section
-------
10.3.
- ----
Section 10.5 Rights of Limited Partners. Each Limited Partner shall look
--------------------------
solely to the Partnership Assets for all distributions with respect to the
Partnership and such Partner's Capital Contribution (including return thereof),
and such Partner's share of profits or losses thereof, and shall have no
recourse therefor (upon dissolution or otherwise) against the General Partner or
any other Limited Partner. No Partner shall have any right to demand or receive
property, other than cash, upon dissolution and termination of the Partnership.
Section 10.6 Deficit Restoration; General Partner Contribution; General
----------------------------------------------------------
Partner Payment.
- ---------------
(a) Notwithstanding any other provision of this Agreement to the
contrary but subject to paragraph (b) of this Section 10.6, upon liquidation of
------------- ------------
a Partner's Interest in the Partnership (whether or not in connection with a
liquidation of the Partnership), no Partner shall have any liability to restore
any deficit in its Capital Account. In addition, no allocation to any Partner
of any loss, whether attributable to depreciation or otherwise, shall create any
asset of or obligation to the Partnership, even if such allocation reduces any
Capital Account of any Partner or creates or increases a deficit in such Capital
Account. Also, it is the intent of the Partners that no Partner shall be
obligated to pay any such amount to or for the account of the Partnership or any
creditor of the Partnership (however, if any court of competent jurisdiction
requires any Limited Partner to return to the Partnership or to pay to any
creditor any amount previously distributed to the Limited Partner by the
Partnership, such obligation shall be the obligation of such Limited Partner and
not of the General Partner or of the Partnership and if such court requires the
General Partner to return to the Partnership or to pay to any creditor any
amount previously distributed to the General Partner by the Partnership, such
obligation shall be the obligation of the General Partner and not of the
Partnership). The obligations of the Partners to make Capital Contributions
under Article III are for the exclusive benefit of the Partnership and not of
-----------
any creditor of the Partnership; neither is such creditor intended as a third-
party beneficiary
45
<PAGE>
of this Agreement nor shall any such creditor have any rights hereunder,
including, but without limitation, the right to enforce any capital contribution
obligations of the Partners.
(b) Upon the liquidation of the Partnership, the General Partner shall
contribute to the Partnership an amount equal to the lesser of (x) the aggregate
amount distributed to the General Partner pursuant to Section 5.1(c) and Section
-------------- -------
5.1(d)(ii) (without taking into account any amounts deemed distributed pursuant
- ----------
to such Sections pursuant to the third sentence of Section 5.2) and (y) the
-----------
excess of (A) the aggregate Net Capital Contributions of all Partners to the
Partnership plus all Partners' Preferred Return for all prior Fiscal Years and
for the portion of the Fiscal Year of the Partnership's liquidation ending with
the date of liquidation over (B) all amounts distributed to the Partners
pursuant to Article V (other than amounts distributed pursuant to Section 5.1(c)
--------- --------------
and Section 5.1(d)(ii) or deemed distributed pursuant to such Sections as a
------------------
result of the application of the third sentence of Section 5.2). Any amount
-----------
contributed to the Partnership pursuant to this paragraph (b) of Section 10.6
------------- ------------
shall be distributed to the Partners pursuant to Article V.
---------
(c) The Partners recognize that this Partnership was created solely
because of certain rules and regulations of the FCC and the Partners intend that
the creation of this Partnership not alter the economic arrangement currently
described in the ATI Partnership Agreement. Accordingly, notwithstanding any
indication in this Agreement to the contrary, the Partners agree that this
Agreement shall be interpreted to the maximum extent possible in a manner so
that the economic arrangement currently described in the ATI Partnership
Agreement is achieved by this Partnership as if the Partners continued to be
partners of the ATI Partnership instead of this Partnership. Consistent with
such intent, in the event that a Limited Partner receives pursuant to the
Liquidation Plan fewer shares of Foreign Series A Common Stock than such Limited
Partner would have received pursuant to the Liquidation Plan if such Limited
Partner had remained a partner of the ATI Partnership (the "Share Shortfall"),
ATIGP will transfer (from the shares of Foreign Series A Common Stock it
receives pursuant to the liquidation of the ATI Partnership) to such Limited
Partner shares of Foreign Series A Common Stock equal to such share Shortfall.
Section 10.7 Termination. The Partnership shall terminate when all
-----------
property owned by the Partnership shall have been disposed of and the assets
shall have been distributed as provided in Section 10.3. The Liquidator shall
------------
then execute and cause to be filed a Certificate of Cancellation of the
Partnership.
46
<PAGE>
ARTICLE XI
ADMISSION OF ADDITIONAL LIMITED PARTNERS
Section 11.1 Admission of Additional Limited Partners.
-----------------------------------------
(a) No Person may be admitted to the Partnership as an Additional
Limited Partner without the consent of the General Partner and a Majority-in-
Interest of the Limited Partners.
(b) No Person may be admitted as an Additional Limited Partner if such
admission would cause the Partnership to be treated as an association taxable as
a corporation for Federal income tax purposes, cause the Partnership to be
treated as a "publicly traded partnership" within the meaning of Code Section
7704, violate or cause the Partnership to violate any applicable Federal or
state law, rule or regulation including, without limitation, the Securities Act
of 1933, as amended, or any other applicable Federal or state securities laws,
rules or regulations, cause the Partnership to be an investment company required
to be registered under the Investment Company Act of 1940, as amended, or cause
some or all of the Partnership Assets to be "plan assets" or the trading and
investment activity of the Partnership to constitute "prohibited transactions"
under ERISA and the Code.
(c) [Intentionally deleted]
(d) Each Additional Limited Partner shall automatically be bound by
all of the terms and conditions of this Agreement applicable to a Limited
Partner. Each Additional Limited Partner shall execute such documentation as
requested by the General Partner pursuant to which such Additional Limited
Partner agrees to be bound by the terms and provisions of this Agreement.
(e) The General Partner shall reflect each admission authorized under
this Article XI by preparing an amendment to this Agreement, dated as of the
----------
date of such admission, including, without limitation, an amendment to Schedule
--------
A attached hereto, to reflect such admission.
- -
ARTICLE XII
NOTICES AND VOTING
Section 12.1 Notices. All notices, demands, consents or requests required
-------
or permitted under this Agreement must be in writing and shall be made by hand
delivery, certified mail, overnight courier service or telecopier (i) if to a
Partner other than the General Partner, to the address or telecopy number set
forth opposite such Partner's name on Schedule A attached hereto
----------
47
<PAGE>
and (ii) if to the General Partner or the Partnership, to the address or
telecopy number set forth in Section 1.5; but, any party may designate a
-----------
different address or telecopy number by a notice similarly given to the
Partnership. Any such notice or communication shall be deemed given (i) when
delivered by hand, if delivered on a Business Day, or the next Business Day
after delivery by hand, if delivered by hand on a day that is not a Business
Day; (ii) four Business Days after being deposited in the United States mail,
postage prepaid, return receipt requested, if mailed; (iii) on the next Business
Day after being deposited for next day delivery with Federal Express or a
similar overnight courier; (iv) when receipt is acknowledged, if telecopied on a
Business Day; and, (v) the next Business Day following the day on which receipt
is acknowledged if telecopied on a day that is not a Business Day.
Section 12.2 Voting. Any action requiring the affirmative vote of Limited
------
Partners under this Agreement, unless otherwise specified herein, may be taken
by vote at a meeting or, in lieu thereof, by consent of Limited Partners
delivered to the General Partner with the required percentage in Interest in the
Partnership, following notice to all the Limited Partners.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
AND POWER OF ATTORNEY
Section 13.1 Amendments. Amendments to this Agreement which do not
----------
adversely affect the right of any Limited Partner in any material respect may be
made by the General Partner without the consent of any Limited Partner through
use of the Power of Attorney, if those amendments are for the purpose of
admitting Additional Limited Partners or Substituted Limited Partners as
permitted by this Agreement, including, without limitation, amendments to
Schedule A hereto to reflect the admission of such Additional and Substituted
- ----------
Limited Partners and to reflect changes in the Capital Contributions of the
Partners. Amendments to this Agreement other than those described in the
foregoing sentence may be made only if embodied in an instrument signed by the
General Partner and a Majority-in-Interest of the Limited Partners; provided,
--------
however, that, unless otherwise specifically contemplated by this Agreement, no
- -------
amendment to this Agreement shall (i) without the prior consent of Limited
Partners whose aggregate Voting Capital Contributions equal at least 50% of the
aggregate Capital Contributions of all Limited Partners, amend the proviso in
Section 10.2(a), (ii) without the prior consent of all Partners, change or alter
- ---------------
this Section 13.1 or any provision requiring unanimous consent of Partners,
------------
(iii) without the prior written consent of Two-Thirds-in-Interest of the Non-
Defaulting Limited Partners, change or alter the objectives or purposes for
which the Partnership is organized as provided in Section 1.3 or (iv) without
-----------
the prior consent of each of the Partners adversely affected thereby, increase
the liability of any Limited Partner, decrease any Limited Partner's interest in
Net Income or items of income or gain and distributions or increase any Limited
Partner's interest in Net Loss or items of deduction or loss. The General
Partner shall send to each Limited Partner a copy of any amendment to this
Agreement.
48
<PAGE>
Section 13.2 Amendment of Certificate. In the event this Agreement shall
------------------------
be amended under Article XIII, the General Partner shall amend the Certificate
------------
to reflect such change if it deems such amendment of the Certificate to be
necessary or appropriate.
Section 13.3 Power of Attorney. Each Limited Partner hereby irrevocably
-----------------
constitutes and appoints the General Partner as its true and lawful attorney-in-
fact, with full power of substitution, in its name, place and stead to make,
execute, sign, acknowledge (including swearing to), verify, deliver, record and
file, on its behalf, the following: (i) any amendment to this Agreement which
complies with the provisions of this Agreement and (ii) the Certificate and any
amendment thereof required because this Agreement is amended, including, without
limitation, an amendment to effectuate any change in the membership of the
Partnership or in the Capital Contributions of the Partners. This power-of-
-------------
attorney is a special power-of-attorney and is coupled with an interest in favor
- ---------------------------------------
of the General Partner and as such (i) shall be irrevocable and continue in full
force and effect notwithstanding the subsequent death or incapacity of any party
granting this power-of-attorney, regardless of whether the Partnership or the
General Partner shall have had notice thereof; (ii) may be exercised for a
Partner by a facsimile signature of the General Partner or, after listing all of
the Limited Partners, including such Partner, by a single signature of the
General Partner acting as attorney-in-fact for all of them; and, (iii) shall
survive the delivery of an assignment by a Limited Partner of the whole or any
portion of its Interest in the Partnership, except that where the assignee
thereof has been approved by the General Partner for admission to the
Partnership as a Substituted Limited Partner, this power-of-attorney given by
the assignor shall survive the delivery of such assignment for the sole purpose
of enabling the General Partner to execute, acknowledge, and file any instrument
necessary to effect such substitution.
ARTICLE XIV
FCC PROVISIONS
Section 14.1 Foreign Ownership. The General Partner may from time to time
-----------------
require a written certification or other information from any Limited Partner
regarding the ownership of such Limited Partner. If in the opinion of the
General Partner based upon the written advice of FCC counsel to the Partnership,
the Partnership's right under the Communications Act to own, operate, hold or
acquire a direct or indirect interest in broadcast stations owned or proposed to
be acquired is jeopardized in any material respect (a "Jeopardization of Foreign
-------------------------
Ownership") by the citizenship of any Partner(s) (or the owners thereof) (a
- ---------
"Foreign Limited Partner"), the General Partner shall be entitled to take such
- ------------------------
action as it, in its sole and absolute discretion, deems necessary to protect
the Partnership's interests including, without limitation, the right to remove
such Limited Partner(s) from the Partnership and, subject to Sections 5.4, 5.5
------------ ---
and 5.6, require the withdrawal of all or a portion of such Limited Partner's
---
Capital Account balance. Notwithstanding anything to the contrary in this
Agreement,
49
<PAGE>
(a) if any Jeopardization of Foreign Ownership results from a
misrepresentation made by a Limited Partner with regard to the extent of foreign
ownership of such Limited Partner, the General Partner may distribute to such
Limited Partner, in connection with the required withdrawal of all or a portion
of such Limited Partner's Capital Account balance a non-interest bearing
promissory note of the Partnership payable not later than ten years after the
removal of such Limited Partner in an amount equal to the portion of such
Limited Partner's Capital Account that is being withdrawn; and
(b) if any Jeopardization of Foreign Ownership results from any event
other than as described in clause (a) of this Section 14.1, and the General
---------- ------------
Partner determines, in its sole discretion, to require the withdrawal of all or
any portion of the Interest of any Foreign Limited Partner in the Partnership,
the General Partner, (i) to the extent consistent with FCC rules or regulations,
shall distribute to such Foreign Limited Partner in connection with such
withdrawal a pro rata share (based on the Interest withdrawn) of all securities
held by the Partnership at the time of such withdrawal and (ii) to the extent
that such a distribution of securities is not consistent with FCC rules or
regulations, shall distribute to such Foreign Limited Partner in connection with
such withdrawal cash in an amount equal to the amount that would be distributed
to the Foreign Limited Partner with respect to the portion of the Foreign
Limited Partner's Interest in the Partnership withdrawn from the Partnership for
cash if the Partnership sold all of its assets for their fair market value (as
reasonably determined by the General Partner), allocated the resulting Net
Income and Net Loss in accordance with Article IV and liquidated the
----------
Partnership; provided, however, that if any such Jeopardization of Foreign
-------- -------
Ownership may, in the sole judgment of the General Partner, be remedied by
reducing the level of foreign ownership of the Partnership (as determined by FCC
rules and regulations), any action taken by the General Partner to reduce the
level of foreign ownership of the Partnership (as determined by FCC rules and
regulations), including without limitation the required withdrawal of a portion
of the Interest in the Partnership of all Foreign Limited Partners, in order to
comply with applicable law or regulation, shall be done on a pro rata basis
among the Limited Partners in proportion to the amount of foreign ownership
attributed to the Partnership as a result of each of their holdings in the
Partnership. Each Limited Partner that receives securities in connection with
any withdrawal required pursuant to this paragraph (b) shall, promptly following
-------------
the effective date of such withdrawal, enter into an agreement with the General
Partner pursuant to which the General Partner shall (x) have responsibility for
managing, on behalf of such Limited Partner, such securities on terms and
conditions similar to those contained herein, including without limitation, the
terms contained herein relating to management and incentive fees payable to the
General Partner and (y) agree to deal with such securities in a manner
substantially similar to the manner in which common stock held by the
Partnership is dealt with.
Section 14.2 Transfer of Partnership Interest. Notwithstanding any
--------------------------------
provision of this Agreement to the contrary, no Partner shall Transfer all or
any portion of its Interest in the Partnership without first consulting with FCC
counsel to the Partnership to determine whether (i) FCC prior consent is
required or (ii) the proposed transfer would be contrary to any FCC rule,
regulation or policy. Where FCC counsel advises that prior FCC consent is
required, the Transfer
50
<PAGE>
shall not occur until after such consent has been received. Where FCC counsel
advises that a Transfer would violate any FCC rule, regulation or policy, the
Transfer shall not occur without a waiver of such rule, regulation or policy by
the FCC.
Section 14.3 FCC Certifications. To the extent the Partnership is
------------------
required, pursuant to any agreement to which it is a party, to provide any
certification and other information relating to FCC matters, the Limited
Partners and the General Partner shall provide the Partnership with an
appropriate certification and such other information which will enable the
Partnership to provide the certification and such other information that is
required under its agreement. Any certification and such other information
provided by the Partners pursuant to this Section 14.3 shall be given to the
------------
Partnership no later than 10 days prior to the time the Partnership is required
to give its certification. The Partnership will use its best efforts to provide
the Partners with notification as to any certification required under this
Section 14.3 at least 15 days prior to the time the Partnership is required to
- ------------
give its certification.
Section 14.4 Media Ownership. Notwithstanding any provision of this
---------------
Agreement to the contrary, no Partner (or the owners thereof) shall acquire an
ownership interest or hold an official position (i.e. as an officer or director)
in connection with any other television station, radio station, cable television
system or daily newspaper that is inconsistent with the FCC's ownership rules
and policies. If in the opinion of the General Partner based upon the written
advice of FCC counsel to the Partnership, the Partnership's right under the
FCC's rules and policies to own, operate, hold or acquire an interest in any
broadcast station owned or proposed to be owned is jeopardized in any material
respect (a "Jeopardization of Media Ownership") by the interest of any Limited
---------------------------------
Partner(s) (or the owners thereof) (a "Media Limited Partner") in other
---------------------
broadcast, cable or publishing media, the General Partner shall be entitled to
take such action as it, in its sole and absolute discretion, deems necessary to
protect the Partnership's interests, including, without limitation, the right to
remove such Limited Partner(s) from the Partnership and, subject to Sections
--------
5.4, 5.5 and 5.6, require the withdrawal of all or a portion of such Limited
--- ---
Capital Account balance. Notwithstanding anything to the contrary in this
Agreement,
(a) if any Jeopardization of Media Ownership results from a knowing
misrepresentation, after due inquiry, made by a Limited Partner with regard to
the extent of the interest of such Limited Partner in other broadcast, cable or
publishing media, the General Partner may distribute to such Limited Partner, in
connection with the required withdrawal of all or a portion of such Limited
Partner's Capital Account balance a non-interest bearing promissory note of the
Partnership payable not later than ten years after the removal of such Limited
Partner in an amount equal to the portion of such Limited Partner's Capital
Account that is being withdrawn; and
(b) if any Jeopardization of Media Ownership results from any event
other than as described in clause (a) of this Section 14.4, and the General
---------- ------------
Partner determines, in its sole discretion, to require the withdrawal of all or
any portion of the Interest of any Media Limited Partner in the Partnership, the
General Partner, (i) to the extent consistent with FCC rules or
51
<PAGE>
regulations, shall distribute to such Media Limited Partner in connection with
such withdrawal a pro rata share (based on the Interest withdrawn) of all
securities held by the Partnership at the time of such withdrawal and (ii) to
the extent that such a distribution of securities is not consistent with FCC
rules or regulations, shall distribute to such Media Limited Partner in
connection with such withdrawal cash in an amount equal to the amount that would
be distributed to the Media Limited Partner with respect to the portion of the
Media Limited Partner's Interest in the Partnership withdrawn from the
Partnership for cash if the Partnership sold all of its assets for their fair
market value (as reasonably determined by the General Partner), allocated the
resulting Net Income and Net Loss in accordance with Article IV and liquidated
----------
the Partnership. Each Limited Partner that receives securities in connection
with any withdrawal required pursuant to this paragraph (b) shall, promptly
-------------
following the effective date of such withdrawal, enter into an agreement with
the General Partner pursuant to which the General Partner shall (x) have
responsibility for managing, on behalf of such Limited Partner, such securities
on terms and conditions similar to those contained herein, including without
limitation, the terms contained herein relating to management and incentive fees
payable to the General Partner and (y) agree to deal with such securities in a
manner substantially similar to the manner in which common stock held by the
Partnership is dealt with.
Section 14.5 Other Restrictions and Powers. At such time as the
-----------------------------
Partnership may own five percent or more of the voting securities in the Holding
Company or otherwise obtains an attributable interest in a broadcast station or
a cable television system, notwithstanding any other provision of this Agreement
to the contrary, the Limited Partners shall not:
(a) Act as employees of the Partnership if their functions, directly
or indirectly, relate to the media enterprises of the Partnership or any entity
in which the Partnership directly or indirectly owns an interest;
(b) Serve, in any material capacity, as independent contractors or
agents with respect to the media enterprises of the Partnership or any entity in
which the Partnership directly or indirectly owns an interest;
(c) Communicate with the General Partner, or any FCC licensee in
which the Partnership, directly or indirectly, has an interest, on the matters
pertaining to the day-to-day operations of such licensee's business;
(d) Vote on the removal of a General Partner, except (to the extent
otherwise provided herein) in situations where the General Partner is subject to
bankruptcy proceedings, as described in Sections 17-402(4) and 17-402(5) of the
Revised Uniform Act, is adjudicated incompetent by a court of competent
jurisdiction, or is removed for Cause, as determined by an independent party;
52
<PAGE>
(e) Perform any services for the Partnership or any entity in which
the Partnership directly or indirectly owns an interest materially relating to
its media activities, with the exception of making loans to, or acting as a
surety for, the business; or,
(f) Become actively involved in the management or operation of the
media businesses of the Partnership or any entity in which the Partnership
directly or indirectly owns an interest;
provided, however, that the foregoing shall not be deemed to preclude any
- -------- -------
Limited Partner from engaging in such activities as the FCC may allow consistent
with retention of "insulated" limited partnership status under FCC rules,
regulations and policies.
ARTICLE XV
MISCELLANEOUS
Section 15.1. Computations. For the purposes of computing Management
------------
Fees, Preferred Returns and Section 11.1, all amounts shall be computed on the
------------
basis of a year of 360 days comprised of twelve 30 day months and four 90 day
quarters.
Section 15.2. Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the parties with respect to the subject matter hereof. It
supersedes any prior agreement or understandings among them with respect to the
subject matter hereof, and it may not be modified or amended in any manner other
than as set forth herein.
SECTION 15.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
-------------
HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE REVISED
UNIFORM ACT AND SUCH OTHER SUBSTANTIVE LAWS OF THE STATE OF DELAWARE AS MAY BE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN THE STATE OF
DELAWARE, WITHOUT REGARD TO CHOICE OF LAW PROVISIONS.
Section 15.4. Effect. Except as otherwise specified herein, this
------
Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, successors and permitted assigns.
Section 15.5. Pronouns and Number. Wherever from the context it appears
-------------------
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine,
feminine or neuter shall include the masculine, feminine and neuter.
53
<PAGE>
Section 15.6. Captions. Captions contained in this Agreement are inserted
--------
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.
Section 15.7. Partial Enforceability. If any provision of this Agreement,
----------------------
or the application of such provision to any Person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of such
provision to Persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
Section 15.8. Counterparts. This Agreement may contain more than one
------------
counterpart of the signature page, and this Agreement may be executed by the
affixing of the signatures of each of the Partners to one of such counterpart
signature pages. All of such counterpart signatures pages shall be read as
though one, and they shall have the same force and effect as though all of the
signers had signed a single signature page.
Section 15.9. Certain Indemnification. The General Partner shall
-----------------------
indemnify the Partnership for any loss which may be incurred by the Partnership
as a result of any act or failure to act by the General Partner to the extent
that such loss is finally determined by a court of competent jurisdiction to
have resulted solely from the General Partner's fraud, bad faith, wilful
misconduct or gross negligence. In addition, each assigning Limited Partner,
Substituted Limited Partner and each assignee of any Interest in the Partnership
(or portion thereof) shall indemnify and hold harmless the Partnership, the
General Partner, each Affiliate of the General Partner and every other Limited
Partner who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of or arising from any
actual or alleged misrepresentation, misstatement of facts or omission to state
facts made (or omitted to be made) by such indemnifying party in connection with
any Transfer or admission of a new Partner of all or any part of any Interest in
the Partnership, against all losses, liabilities or expenses for which the
Partnership or such other Person has not otherwise been reimbursed (including
attorneys' fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the indemnified party in connection with such action,
suit or proceeding; provided, however, that the foregoing indemnification shall
-------- -------
not be valid as to any Partner who supplied the information which gave rise to
any actual material misrepresentation, misstatement of facts or omission to
state facts.
Section 15.10. Waiver of Partition. The Partners hereby agree that the
-------------------
Partnership Assets are not and will not be suitable for partition. Accordingly,
each of the Partners hereby irrevocably waives any and all rights (if any) that
such Partner may have to maintain any action for partition of any of such
assets.
54
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of June
___, 1997.
GENERAL PARTNER:
ATI GENERAL PARTNER, L.P.,
a Delaware limited partnership
By: ARGYLE TELEVISION PARTNERS, L.P.,
the sole general partner
By: ARGYLE COMMUNICATIONS, INC.,
the sole general partner
By: /s/
-----------------------------------
Name:
------------------------------
Title:
------------------------------
55
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND THE CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND IS
QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 0 2,160
<SECURITIES> 0 0
<RECEIVABLES> 0 17,413
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 27,998
<PP&E> 0 51,264
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 338,468
<CURRENT-LIABILITIES> 0 13,165
<BONDS> 0 199,000
0 0
0 2
<COMMON> 0 113
<OTHER-SE> 0 120,650
<TOTAL-LIABILITY-AND-EQUITY> 0 338,468
<SALES> 0 0
<TOTAL-REVENUES> 21,886 39,765
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 10,586 21,367
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,989 9,407
<INCOME-PRETAX> (2,093) (8,295)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,093) (8,295)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,093) (8,295)
<EPS-PRIMARY> (0.22) (0.79)
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
[ARGYLE LETTERHEAD APPEARS HERE]
NEWS FROM ARGYLE TELEVISION
- --------------------------------------------------------------------------------
FOR RELEASE: July 17, 1997 CONTACT: Bob Marbut
210-828-1700
FCC APPROVES HEARST-ARGYLE TELEVISION TRANSACTION:
RECORD DATE FOR STOCKHOLDERS MEETING SET
----------------------------------------
San Antonio, TX . . . Argyle Television, Inc. (NASDAQ: ARGL) today announced
that the Federal Communications Commission has granted its approval of the
pending combination of Argyle Television, Inc. and the television broadcast
group of The Hearst Corporation.
A record date of July 14, 1997 has been set for the Argyle stockholders meeting
to consider this transaction. The stockholders meeting is anticipated to occur
on August 26, 1997, with the closing of the transaction expected to occur at the
end of August or the beginning of September.
Today, Argyle Television, Inc. owns and operates network-affiliated television
stations WLWT-TV, the NBC affiliate in Cincinnati, OH; KOCO-TV, the ABC
affiliate in Oklahoma City, OK; WNAC-TV, the Fox affiliate in Providence, RI;
KITV-TV, the ABC affiliate in Honolulu, HI; WAPT-TV, the ABC affiliate in
Jackson, MS; and, KHBS-TV, the ABC affiliate in Fort Smith, AR, and its
satellite KHOG-TV, the ABC affiliate in Fayetteville, AR. Following completion
of the Hearst transaction, Argyle (which will be renamed "Hearst-Argyle
Television, Inc.") will also own WCVB-TV, the ABC affiliate in Boston, MA; WTAE-
TV, the ABC affiliate in Pittsburgh, PA; WBAL-TV, the NBC affiliate in
Baltimore, MD; KMBC-TV, the ABC affiliate in Kansas City, MO; WISN-TV, the ABC
affiliate in Milwaukee, WI; and, WDTN-TV, the ABC affiliate in Dayton, OH, as
well as Hearst Broadcast Productions. Hearst-Argyle will also provide
management services for WWWB, the WB affiliate in Tampa, FL; WPBF-TV, the ABC
affiliate in West Palm Beach, FL; KCWB-TV, the WB affiliate in Kansas City, MO;
and two radio stations (WBAL-AM and WIYY-FM, Baltimore, MD) - - these managed
stations (other than KCWB-TV) will continue to be owned by The Hearst
Corporation. Argyle's Series A Common Stock trades on the Nasdaq National
Market System under the symbol "ARGL".
<PAGE>
EXHIBIT 99.2
[ARGYLE TELEVISION, INC. APPEARS HERE]
NEWS FROM ARGYLE TELEVISION
- --------------------------------------------------------------------------------
FOR RELEASE: AUGUST 5, 1997 CONTACT: BOB MARBUT
210-828-1700
ARGYLE TELEVISION SETS DATE FOR STOCKHOLDERS MEETING
----------------------------------------------------
TO CONSIDER HEARST TRANSACTION
------------------------------
San Antonio, TX ... Argyle Television, Inc. (NASDAQ: ARGL) has set Thursday,
August 28, 1997 for a meeting of its stockholders to consider the combination of
the television broadcasting division of The Hearst Corporation with and into
Argyle, with Argyle to be renamed "Hearst-Argyle Television, Inc." If approved
at the stockholders' meeting, the transaction with Hearst is expected to close
on August 29, 1997. Certain Argyle stockholders representing an aggregate of
approximately 67% of the outstanding shares of Argyle common stock have agreed
to vote in favor of the transaction.
Argyle also announced that The Hearst Corporation has completed its acquisition
of WPBF-TV, the ABC affiliate in West Palm Beach, Florida. Following closing of
the Hearst transaction, Hearst-Argyle will provide management services for WPBF.
Today, Argyle Television, Inc. owns and operates network affiliated television
stations WLWT-TV, the NBC affiliate in Cincinnati, OH; KOCO-TV, the ABC
affiliate in Oklahoma City, OK; WNAC-TV, the Fox affiliate in Providence, RI;
KITV-TV, the ABC affiliate in Honolulu, HI; WAPT-TV, the ABC affiliate in
Jackson, MS; and, KHBS-TV, the ABC affiliate in Fort Smith, AR, and its
satellite KHOG-TV, the ABC affiliate in Fayetteville, AR. Following completion
of the Hearst transaction, Argyle (which will be renamed "Hearst-Argyle
Television, Inc."), will also own WCVB-TV, the ABC affiliate in Boston, MA;
WTAE-TV, the ABC affiliate in Pittsburgh, PA; WBAL-TV, the NBC affiliate in
Baltimore, MD; KMBC-TV, the ABC affiliate in Kansas City, MO; WISN-TV, the ABC
affiliate in Milwaukee, WI; and, WDTN-TV, the ABC affiliate in Dayton, OH, as
well as Hearst Broadcast Productions. Hearst-Argyle will also provide management
services for WWWB, the WB affiliate in Tampa, FL; WPBF-TV, the ABC affiliate in
West Palm Beach, FL; KCWB-TV, the WB affiliate in Kansas City, MO; and two radio
stations (WBAL-AM and WIYY-FM, Baltimore, MD) -- these managed stations (other
than KCWB-TV) will continue to be owned by The Hearst Corporation. Argyle Series
A Common Stock trades on the Nasdaq National Market System under the symbol
"ARGL".
200 Concord Plaza, Suite 700 San Antonio, Texas 78216
(210) 828-1700 Fax (210) 828-7300
